SMM News: Vanke A (000002.SZ) released its interim performance report on the evening of August 27th, showing that in the first half of this year, its contract sales were 320.48 billion yuan, down 4.0% from the same period last year; operating income was 146.35 billion yuan, up 5.1% from the same period last year; net profit was 12.51 billion yuan, up 5.6% from the same period last year; and basic profit per share was 1.11 yuan, up 4.0% from the same period last year.
At the 2020 interim performance promotion meeting held on August 28, Zhu Jiusheng, president of Vanke Group, said, "from the point of view of preventing financial risks, the regulatory authorities intend to tighten housing enterprise financing through the" three red lines ". The key enterprise fund monitoring and financing management rules have been issued, and we will seriously study them and adapt to them as soon as possible. This rule may continue to be refined, and we need to keep track of these refinement requirements. "
In addition, Vanke management responded for the first time to Vanke's "firefighting" Taihe, Zhu Jiusheng said that the success of the strategy to buy a stake in Taihe depends on Taihe's desire for survival, the attitude of financial institutions and the response plan of the Fujian provincial government and the financial office.
At the performance meeting, the organization questioned that it was too "conservative".
According to the semi-annual report, affected by the epidemic, the scale of new construction of Vanke declined in the first half of the year, with a new construction area of 18.356 million square meters, down 6.0 per cent from the same period last year. "We achieved a completed area of 10.745 million square meters in the first half of the year, accounting for 32.4% of the annual completion plan, and 34.5% in the first half of 2019. It is expected that the completed area for the whole year will be basically the same as that planned at the beginning of the year." Zhu Xu, secretary of Vanke's board of directors, said at the performance promotion meeting.
At the same time, Vanke's gross profit margin and return on equity (hereinafter referred to as "ROE") levels fell. After a year-on-year decline in 2019, the settlement gross profit margin of Vanke's real estate development and related asset management business continued to fall to 24.1% X ROE 6.39%, down 0.96 percentage points from the same period last year.
"2019 is the high point of our gross profit margin, because most of the items settled in 2019 are carried forward at the high points of sales in 2017 and 2018. In recent years, the whole market has stabilized, and the ratio of land price to selling price has actually continued to rise. the decline in gross profit margin of the real estate industry as a whole is a long-term trend, and we expect a small decline by the end of the year." Han Huihua, financial director of Vanke, said, "the ROE of the industry is in the downward direction, under the situation that the profit space of the industry is compressed, how to maintain profitability at a certain level is a very critical ability."
By the end of June 2020, Vanke had held 194.29 billion yuan in monetary funds, an increase of nearly 30 billion yuan over the end of 2019. The net debt ratio was only 27.02%, 6.85% lower than at the end of 2019 and far below the industry average.
At the performance meeting, some institutional representatives questioned that the reduction of Vanke's net debt ratio may be too conservative. In response, Han Huihua responded, "Vanke has always maintained a net debt ratio of less than 40%, while operating cash flow in the first half of this year still maintained a relatively high historical level of 22.6 billion yuan." The biggest lesson from this year's epidemic is that cash flow is the lifeline of an enterprise, and having cash on hand is very beneficial to capture business development opportunities in the future. "
"conservative" is also reflected in Vanke's project investment. Vanke obtained 55 new projects in the first half of this year, with a total planned construction area of 9.802 million square meters, and the total equity land premium was about 32.13 billion yuan, an increase of 1 over the same period last year, but the total construction area decreased by 28.6%. The total land premium of rights and interests has been reduced by half.
It is worth noting that Vanke disclosed the revenue data of commercial and "parking" and other operating businesses in its financial report for the first time. According to its semi-annual performance report for 2020, the operating income from property services was 6.7 billion yuan, accounting for 4.6% of the total operating income; the operating income from commercial (including non-consolidated items) business was 3.05 billion yuan; and the operating income from rental housing business was 1.05 billion yuan.
The success of investing in Taihe depends on three factors.
In the first half of this year, Vanke twice cut the interest rate on issued corporate bonds, reducing the annual interest rates of "170000 division 01" and "170000 division 02" bonds from 4.5 per cent and 4.54 per cent to 1.9 per cent and 2.3 per cent, respectively. It also made use of the short financing window in the first half of the year to issue six corporate bonds totaling 7 billion yuan, with an average cost of 3.28%. The ABS priority of issuing accounts receivable totaled 2.258 billion yuan, with an average cost of 2.56%. Inli issued 3.37 billion yuan of CMBS products with a coupon of 3.8%, and logistics issued 573 million yuan of REITs-like products.
At the end of the reporting period, Vanke's interest-bearing liabilities accounted for 15.21% of total assets. Among the interest-bearing liabilities, 64.5% are interest-bearing liabilities over one year, and 35.5% are interest-bearing liabilities due within one year.
Vanke plans to buy a stake in Taihe in 2.43 billion, becoming the second largest shareholder of the latter, which has recently aroused widespread concern in the market.
At the performance meeting, a reporter from the Financial Associated Press asked about the logic and progress of Vanke's strategy to buy a stake in Taihe. In response, Zhu Jiusheng responded, "Taihe's problems are more about capital and financing, and its production capacity and basic capacity are still very good. When Taihe is facing debt maturity, it has indeed found different institutions, including Vanke, to discuss how to do it. Even if Vanke can eventually become its second largest shareholder, it will only operate normally under the authority of the new board of directors, which may invite people from Vanke or from the society. people who have expertise in fund management, operation management and financing management. "
Zhu Jiusheng believes that the final success of Vanke's stake in Taihe depends on three factors: the first is Taihe's own desire for survival; the second is the understanding of financial institutions; and the third is the response plan of Fujian provincial government and Fujian financial office.
"Taihe is indeed excessively indebted. If everyone (creditors) demands to repay principal and interest now, it will lead to the rupture of capital flow and the depletion of cash flow. From my personal point of view, it is up to the financial institutions to decide whether to sink the ship collectively or go ashore collectively. We will participate in the whole process, the bottom line is that it will not affect the income level of Vanke, the rights and interests of Vanke shareholders and the perception of this matter. " Zhu Jiusheng said.
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