Management of China Resources Land： M&A focuses more on projects and will not consider the equity of the company’s platform.
At the performance meeting of China Resources Land (01109.HK) in 2021 on March 31, Xin Li, president of China Resources Land, said, "It is a consensus that the gross profit margin level will return to around 20% or more, but it has not returned to the past 30% or even higher."
China Resources Land (01109.HK) 2021 Performance Meeting SiteIn the future, the gross profit margin of shopping centers can be maintained above 70%.According to the sales data of China Resources Land in 2021, the company signed a contract of 315.76 billion yuan in 2021, up 10.8% year-on-year, and the contracted area reached 17.55 million square meters, up 23.7% year-on-year. East China contributed the highest signing amount, reaching 73.648 billion yuan, accounting for 23.3%. The annual comprehensive turnover was about 212.11 billion yuan, up 18.1% year-on-year; Among them, the turnover of developed properties was 183.86 billion yuan, a year-on-year increase of 17%; Rental income from investment properties (including hotel operations) was 17.43 billion yuan, up 36.3% year-on-year. The comprehensive gross profit margin was 27%, a year-on-year decrease of 3.9%. Among them, the gross profit margin of development properties decreased from 29.1% in 2020 to 23.7%; The gross profit margin of investment properties (including hotel operations) increased from 66.4% in 2020 to 68.2%; The net profit attributable to core shareholders after deducting the appreciation of investment properties was 26.6 billion yuan, a year-on-year increase of 10.2%; The net profit attributable to shareholders included in the appreciation of investment properties was 32.4 billion yuan, up 8.7% year-on-year. The net profit of China Resources Land during the year was 37.395 billion yuan, up 9.6% year-on-year; Gross profit was 57.199 billion yuan, up 3.2% year-on-year.
In terms of business, the contracted amount of developing and selling business reached 315.8 billion yuan in 2021, a year-on-year increase of 10.8%. The retail sales of shopping centers in 2021 was 107.2 billion yuan, a year-on-year increase of 45%; Rental income was 13.9 billion yuan, up 38.1% year-on-year.
In 2021, China Resources Land opened 9 shopping centers and acquired 12 new shopping center projects. By the end of 2021, there were 54 Vientiane series shopping centers in operation and about 61 reserve projects.
At the 2021 performance meeting, the management of China Resources Land said that according to the current development progress and rhythm, the reserve projects will be released one after another in the next four to five years. At present, even if there is no new reserve, it can meet the rhythm of opening 10-12 projects every year. According to the management’s forecast, it is feasible to maintain the gross profit rate of shopping centers above 70% and the comprehensive gross profit rate above 20% in the future.
In addition, the office revenue of China Resources Land was 1.9 billion yuan, a year-on-year increase of 20%; The hotel’s operating income was 1.6 billion yuan, a year-on-year increase of 43.9%.
By the end of 2021, the annual settlement area of China Resources Land was 14.76 million square meters, up 41.5% year-on-year. In addition, the contracted amount of China Resources Land that has been sold but not settled is 217.1 billion yuan, which needs to be settled one after another. Among them, the turnover of development properties that have been locked in 2022 has reached 141.1 billion yuan.
In terms of land reserve, as of the end of 2021, the company’s land reserve reached 68.73 million square meters, and its equity land reserve area was 48.89 million square meters. China Resources Land said that it could guarantee the company’s development needs in the next three years or more. In 2021, the company added 61 land reserve projects with a total land price of 148.96 billion yuan, with a new land reserve area of 14.39 million square meters.
In terms of loans, the loan amount of China Resources Land in 2021 was 197.4 billion yuan, the cash and bank balance was about 108.7 billion yuan, and the shareholders’ equity ratio of net interest-bearing liabilities was about 30.4%. By the end of 2021, China Resources Land’s exposure to non-RMB net liabilities accounted for 17.1%. Of the interest-bearing liabilities, about 28% will be due within one year, and the rest are long-term interest-bearing liabilities. At the end of 2021, the weighted average financing cost of the company was about 3.71%, which was lower than 4.08% at the end of 2020. In 2021, the company’s financing totaled 20.5 billion yuan.
Will not consider the acquisition and merger of the company’s platform equity, the company is not only about scale.
When talking about this year’s sales target, Xin Li said that this year’s sales target will be improved on the basis of last year’s contracted amount. "We still pay more attention to the ranking of the industry and hope that the ranking can also be improved. Everyone may pay more attention to the return of gross profit margin to around 20% or above. It is a consensus that the gross profit margin of the industry will return to around 20%. The main reason is the high land price brought by the rapid development of real estate in 2017 and 2018. In the future, it is expected that the gross profit margin of the industry will return to more than 20%, but it has not returned to the state of 30% or even higher in the past. For China Resources Land, the gross profit margin of developed properties is confident to remain at 22% or 23%, and the overall gross profit margin level is expected to remain above 25%. "
In terms of mergers and acquisitions, Xie Ji, chief strategy officer of China Resources Land, said that the government explicitly encouraged central state-owned enterprises to participate in mergers and acquisitions. As far as China Resources Land is concerned, it also takes a positive attitude towards mergers and acquisitions.On the one hand, it improves the quality and efficiency of work; on the other hand, it provides tens of billions of M&A loans, which creates conditions for the Group to acquire. Under the current circumstances, China Resources Land will take a positive view of the opportunities of investment acquisition and merger, and will also guard against risks in the face of the opportunities brought by acquisition and merger.Xie Ji emphasized that China Resources Land pays more attention to the acquisition and merger of the project, and will not consider the acquisition and merger of the company’s platform equity.
Regarding the overall view of the real estate market, Xin Li said, "The policy level has definitely bottomed out, especially since March, the loose policy orientation and introduction have been relatively obvious, the market downturn should basically bottom out, and consumer confidence has basically bottomed out. How long will it take to be at this bottom? It needs some confidence-boosting forces to improve this market. Since the middle and late March, the signs of market recovery have been obvious, especially in first-and second-tier cities. The first-tier and core strong second-tier cities are already in a state of recovery, and the number of visitors to sales offices has increased significantly. At the same time, the transaction volume of second-hand houses in first-tier cities and strong second-tier cities is also picking up. It is expected that the property market will open lower in the first half of the year and will pick up in the second half. " In addition, Xin Li emphasized that China Resources Land never focuses on scale, nor does it rush to scale. What the company hopes is to maintain its ranking and position in the industry. "What China Resources Land wants is a quality scale growth, and the scale is two different things."
As of the close of March 31st, China Resources Land reported a decrease of 1.48% to HK$ 36.5 per share.
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