In 2023, the profitability of real estate development enterprises will weaken and the industry as a whole will suffer losses. In 2023, when the sales are sluggish and the financing environment for real estate enterprises shrinks, the overall profit performance of the industry continues to be under pressure, with the first sector level loss in recent years. In 2023, 174 real estate development enterprises will achieve an overall revenue of 5.87 trillion yuan (RMB,+1.3% year-on-year, the same below); The total profit was 226.99 billion yuan (- 32.8%); Realized net profit of - 101.3 billion yuan (- 112.0%); The net profit attributable to the parent company was -58.70 billion yuan (- 3413.7%). In terms of profit margin, the overall gross profit margin of real estate development enterprises will be 16.8% in 2023, down 2.35 pct year on year; The net profit rate attributable to the parent company was - 1.0%, down 1.03 pct year on year.
The performance of head and non head, state-owned enterprises and private enterprises is constantly differentiated. The revenue performance of head state-owned enterprises is relatively stable, the provision is relatively sufficient, and the profitability is leading. The future performance is expected to continue to lead. We selected the top 15 real estate enterprises for key analysis, including 10 sample state-owned enterprises and 5 sample private enterprises. In 2023, the revenue of the sample state-owned enterprises will increase by 7.5% year on year, while that of private enterprises will increase by - 9.9% year on year. After the total sales peaked, the overall carry forward income of the real estate enterprises will be under pressure. With steady sales, the state-owned enterprises have relatively stable revenue performance in recent years. We believe that the revenue growth of state-owned enterprises will also gradually bear pressure in the future, but it will still be significantly better than that of private enterprises. In 2023, the gross profit rate of the sample state-owned enterprises and private enterprises will be 16.3%, with a significant decline in recent years. The high price land in the hot period of land auction in the past few years entered the settlement cycle, which led to the compression of gross profit margin space of real estate enterprises to the extreme. The difference in the proportion of low gross profit projects leads to the difference between real estate enterprises. For real estate enterprises that continue to acquire land to renew their land reserves and focus on core cities, the impact of housing price decline is relatively small. These real estate enterprises still retain the absolute advantage of gross profit margin, and are expected to take the lead in stabilizing and repairing gross profit margin in the future. Continue to accrue asset impairment on a large scale, and gradually clear the historical burden of the head real estate enterprises. Inventory depreciation is the main reason for asset impairment. The scale of asset impairment withdrawn by the central enterprises of the sample countries is 28.39 billion yuan, accounting for 22.2% of the net profit.
The scale of asset impairment withdrawn by the sample private enterprises was 19.06 billion yuan, accounting for 73.7% of the profits.
In 2023, real estate enterprises will generally increase the scale of impairment, which is a very important factor to drag down the annual profit performance. The net profit attributable to the parent company of real estate enterprises continued to decline, with the central enterprises and private enterprises of the sample countries respectively - 16.8% and - 52.0% year on year; The net profit rate attributable to the parent company was 4.9% and 3.3% respectively, both of which declined further than the previous year, and the decline of sample private enterprises was more obvious. The peak drop in sales affects the scale of carry over income, and the weak housing price affects the level of profit margin. Superimposed by the large-scale provision for impairment of most real estate enterprises, the profit scale of real estate enterprises will continue to decline significantly in 2023. We believe that the real estate enterprises with continuous land acquisition, smooth financing and core layout will benefit from the competition pattern in this cycle and are expected to lead the industry to stabilize. However, at present, factors such as downward sales scale, low gross profit margin, and impairment pressure caused by house price uncertainty still exist, and profit scale is under pressure. In addition, whether the historical burden is cleared through settlement or impairment, the real estate enterprises with more clearing will see the bottom faster.
The industry as a whole has turned to deleveraging, the financing of state-owned enterprises is relatively stable and smooth, and private enterprises generally shrink their balance sheets. The open debt financing channels of the central enterprises in the sample countries are basically unblocked, and their financial performance is stable. In 2023, the interest bearing liabilities will slightly decrease by 0.5% year on year. However, the financing environment of private enterprises is more difficult under the background of continuous risks of real estate enterprises. Most private enterprises passively shrink their balance sheets, and the scale of interest bearing liabilities decreased by 15.1% year on year. Since 2024, under the background that the central and local governments continue to promote the urban real estate financing coordination mechanism, the financing environment of real estate development enterprises is expected to be marginally improved, but the market's pessimism towards private enterprises and even mixed ownership real estate enterprises is unlikely to be completely reversed in the short term; In combination with the current depressed industry environment, the industry as a whole may continue the trend of deleveraging.
Sales differentiation has intensified, leading state-owned enterprises continue to outperform the industry, and they are optimistic about real estate enterprises focusing on core cities.
According to Kerui, in 2023, the full range sales amount of the top 100 real estate enterprises will decline by 17.7% year on year, the amount of the central enterprises in the 10 sample countries we have counted will decline slightly by 1.9% year on year, and the sample private enterprises will decline by 19.2% year on year.
From January to May 2024, the sales scale of the industry will generally fall sharply, and the sales of the leading state-owned enterprises will continue to outperform the industry. Land acquisition: in 2023, the amount of land acquired by central enterprises in the sample countries increased by 11.0% against the trend, with an investment to sales ratio of 46.0%, still maintaining a considerable intensity of land acquisition; However, private enterprises almost lose the ability to access land. From the perspective of urban population and economic fundamentals, the first tier, two-thirds of the second tier, and a small number of third tier cities are the main markets for future sales transactions, and also the direction of leading the country to stabilize. Therefore, we believe that the sales of real estate enterprises that lay out land reserves in core cities and maintain the land acquisition strength in core cities will continue to outperform the industry.
Investment suggestion: maintain the industry's "overweight" rating. We believe that there are the following reasons for focusing on real estate related stocks: 1. The policy is pushed into the deep water area by the fundamentals. For example, we have repeatedly stated in our reports in 2022 and 2023 that the final policy strength of this round exceeds that of 2008 and 2014, and is still on the way. 2. As an early cycle indicator, real estate plays a directional role, and the allocation of real estate is equivalent to the allocation of economic indicators. 3. The logic for improving the industrial competition pattern is still applicable, and the number of real estate enterprises that have been involved in accidents is increasing. The top state-owned enterprises and a small number of mixed ownership and private enterprises still have outstanding land acquisition and sales performance. Quality real estate enterprises are expected to benefit more in the future pattern. 4. The "only optimistic about the first tier+2/3 second tier+a small number of cities" proposed by us last year still works, which is also confirmed by the better performance of this city combination in the occasional rebound in early sales. 5. The supply side policies, such as the purchase and storage of idle land and the proper disposal of idle land, have become the most important direction for observation and landing in the next stage, and it can be predicted that the first and second lines will still benefit more. Based on the above configuration logic, we recommend several dimensions at the stock level:
Fundamentals related stocks: 1) Development: Poly Development, CCB Development, China Merchants Shekou, Huafa, Binjiang Group; H-share Greentown China, Yuexiu Real Estate, China Resources Land, China Overseas Development, China Construction Development International Group, etc; 2) Property: A-share investment attraction surplus. H-share focuses on China Resources Vientiane Life, Zhonghai Property, Poly Property, All Things Cloud, Green City Services, etc; 3) Intermediary: shell; 4) Local urban investment undertakes more tasks such as housing guarantee and affordable housing, which is beneficial to major local urban investment enterprises.
Risk tip: policy implementation is less than expected, demand recovery is less than expected, and risk of real estate enterprises' risk spread.
