Hangzhou real estate company Binjiang Property Group Co., Ltd. into (Binjiang Group) general manager recently said that the group will “strive to achieve a net profit level of 1%-2%.
According to the first financial report, in the Binjiang Group held on May 14 online results briefing, an investor to the company’s chairman Qi Jinxing question: “recently Hangzhou concentrated land, Binjiang Group shot a few pieces of land, net profit can have a few points?”
Qi Jinxing said that the company recently acquired a total of five pieces of land in Hangzhou concentrated land sale, will strive to achieve a net profit level of 1% to 2%.
This level of net profit is low, but it is not an easy task to achieve. According to the calculations of CITIC Construction Investment Securities, among the land plots acquired by Binjiang, three of them have a land-to-housing ratio (the ratio between the floor price level at the time of land acquisition and the house price at the time of housing opening sodium announcement) of more than 80%; the implied gross profit margin of the Ningwei unit plot jointly acquired with Rongxin is only 1.5%; the land-to-housing ratio of the Shankou unit plot acquired by Chengxiang Street alone is 81.9%, and the implied gross profit margin is -1.9%.
Since last year, the trend of lower profitability of mainland real estate enterprises has been increasingly recognized by the industry.
According to YIHAN Intelligence, as of 2020, the average net profit margin of the 50 typical real estate enterprises it tracked was 11.6%, 2.3 percentage points lower than in 2019, with 37 enterprises experiencing a decline in net profit margin; a total of 28 had net profits of 10% and above, 9 fewer than in 2019. During the same period, the average gross profit margin of 50 real estate enterprises was 24.7%, 5.1 percentage points lower than the same period in 2019, with 47 real estate enterprises experiencing a decline in gross profit margin.
KRC Research Center also predicted from the declining cargo-to-land ratio that the industry’s profit would continue to be under pressure. According to China Housing News, a report by KRC Research Center on April 19 this year shows that the cargo-to-land ratio (the ratio of the total expected future saleable value of real estate development projects to the total amount of current land transactions, which can reflect the investment value of land parcels.) It has become an important indicator in the process of land selection and investment calculation for real estate enterprises in the early stage.
The goods-to-land ratio in first-tier cities is the lowest, with the average and median value around 2.0. Overall, the land price base (the denominator of land-to-value ratio) is higher in Tier 1 and Tier 2 cities. From the data of the top 100 companies in the new land value list, the median of new investment land-to-value ratio of real estate enterprises in 2020 is 2.47. Nearly 70% of real estate enterprises’ land-to-value ratio is concentrated in the range of 2 to 3. At the same time, the number of real estate enterprises located in the low zone in 2020 has increased significantly, and some real estate enterprises’ new investment to land ratio in 2020 has plummeted from the high zone to the low zone.
According to Kerry Research Center, the current trend of a general decline in the ratio of new investment in land to property by enterprises and the overall industry trend of profit margins under pressure and downward profitability are in line with each other. Overall, as projects with high land prices and low land-to-property ratios continue to enter settlement, the industry will continue to face downward pressure on profit margins, and profitability indicators will also maintain a downward trend.
The declining earnings performance of real estate enterprises directly affects the trend of real estate stocks. East Finance Choice data show that in July 2020, the real estate (Shenwan) sector had stood at a high of over 4,700 points, and has since shaken lower, hitting a low of 3,506 points in February this year.
Since the beginning of 2021, the share prices of leading real estate companies such as Vanke A, Poly Real Estate, China Merchants Shekou and Greentown China have been on a downward trend, with cumulative declines of 4.91%, 13.21%, 11.21% and 18.78% as of the close of trading on May 18, respectively.
Recent Comments