Viewpoint This is the first time Wan Yuqing has appeared at Poly Real Estate’s performance meeting as chairman of the board since Zhang Bingnan’s retirement.
On March 24, Poly Real Estate held the 2021 annual performance meeting online. Wan Yuqing, Chairman of the Board of Directors, Wang Jian, Managing Director, Liu Chen, Deputy General Manager, Peng Yi, Deputy General Manager, and Pan Zhiping, Chief Financial Officer attended the meeting and interpreted the enthusiastic questions from investors and the media.
Data show that during the reporting period, Poly Real Estate achieved revenue of HK$36.513 billion, a year-on-year increase of 16.7%; gross profit of approximately HK$12.362 billion, a year-on-year increase of approximately 17%; profit attributable to shareholders was HK$2.481 billion, a year-on-year increase of 32.0%; The share profit was 67.35 Hong Kong cents, and a final dividend of 13.5 Hong Kong cents per share was proposed.
In terms of operating data, as of December 31, 2021, Poly Real Estate achieved a contracted sales amount of 56.6 billion yuan, a year-on-year increase of 9%; the return amount was 53.4 billion yuan, and the return rate reached 94%; the contracted sales area was 3.138 million square meters.
Among the 56.6 billion yuan of contracted sales, 18 projects with a single-disc contracted sales value of more than 1 billion yuan, including Harbin Guangxin Project, Shenzhen Poly Qinchengda Yudu, Nanning Poly Lingxiu Front City, Ningbo Poly Jiang Shangyin, Ningbo Junlan Splendid Garden, Shanghai Poly Mingyue Huguang, Guangzhou Poly Xiyue Bay, Foshan Guangfo Poly City, Hangzhou Jiangyu Yuncheng, Kunming Poly City and Hong Kong Tuen Mun Zhenyu, etc.
It is worth noting that the average contracted sales price of Poly Real Estate in 2021 is 18,038 yuan/square meter, of which the average contracted sales price in the mainland market is 17,469 yuan/square meter, which is basically the same as last year. This means that, in the face of the relatively bleak property market in the past year, Poly Real Estate did not choose to cut prices as much as other real estate companies.
Such a move has enabled Poly Real Estate to maintain a high gross profit margin in the industry. By the end of 2021, Poly Real Estate achieved a gross profit of regarding 12.362 billion yuan, with a gross profit margin of 33.9%.
However, general manager Wang Jian pointed out that the decline in the gross profit margin level of the real estate industry is a major trend. Judging from the company’s current sales, the gross profit margin level will likely return to the range of 23%-26% in the long run. .
In this annual report season with pre-loss announcements, sharp declines in net profit, and a large number of delayed releases, Poly Land undoubtedly delivered a performance report that satisfies investors.
Regarding this report card, Wan Yuqing said, “If you have been watching Poly Real Estate in the past few years, you can know that compared with other companies, Poly Real Estate may have been a little slower in the past few years, but we are still walking relatively. Steady. So hopefully in the next round we can go faster and faster and go further.”
Previously, at the 2020 performance meeting, the management had stated that the goal of building another Poly Real Estate during the “14th Five-Year Plan” period will not be shaken, and the “14th Five-Year Plan” will strive to achieve sales of 100 billion.
To this end, for the sales target for 2022, the management gave a clear answer – an increase of 15% and a guaranteed bottom line of 65 billion.
According to Poly Real Estate’s forecast, the company will push 140 billion yuan in 2022, of which 57 billion is the stock at the beginning of the year, while the new opening and additional sales will be around 83 billion. Compared with the sales target of 65 billion yuan, the expected sale rate is 46%, which is 4 percentage points lower than the actual sale rate in 2021.
In addition, these projects are mainly concentrated in the Yangtze River Delta and Pearl River Delta, where sales have performed better. According to the management, the company’s volume distribution in the Yangtze River Delta and Pearl River Delta regions has reached 66%, an increase of 10% compared to 2021.
At the same time, the cities where the project is located are also relatively focused, mainly in Shanghai, Suzhou, Ningbo, Shenzhen, Guangzhou, Hong Kong, Wuhan, and Nanning. In 2022, the sales volume of these eight cities will reach 62 billion, accounting for 30% of the total. 75%.
Therefore, considering the above factors, in the face of completing the sales target, the management showed great confidence, and even suggested that it may exceed the sales target.
If you want to achieve the goal of selling 100 billion yuan during the “14th Five-Year Plan”, it is naturally inseparable from the active investment and expansion of the land side.
According to Wan Yuqing, in 2022, Poly Real Estate’s equity land fund will strive to remain at 25 billion to 30 billion yuan, and maintain an increment on the basis of the 23 billion equity land reserve fund in 2021, laying a good foundation for the future.
He pointed out that in recent years, Poly Real Estate’s land layout has been continuously adjusted, and it is entering some first- and second-tier cities in the Yangtze River Delta and the Greater Bay Area, and is also gradually withdrawing from some cities.
According to the annual report, during the period, Poly Real Estate added a total land reserve of 3.609 million square meters and an equity land reserve of 2.722 million square meters, with an equity ratio of 75%.
As of the end of 2021, the company’s total land reserve has reached 22.65 million square meters, with an average land cost of 8,324 yuan per square meter, of which 12.69 million square meters are under construction, 9.96 million square meters are under construction, and the group holds equity land reserves of 11.6 million square meters , the equity ratio is 73%.
Among them, the company holds 83% of the equity land bank in first- and second-tier cities, an increase of 3 percentage points from the end of 2020; the equity land bank in the Yangtze River Delta and the Greater Bay Area accounts for 40%, an increase of 6 percentage points from the end of 2020 percentage point.
Regarding the way of investment and development, Wan Yuqing said that Poly Real Estate mainly uses several main channels such as bidding, auction and listing, land acquisition, mergers and acquisitions. As for the old renovation projects, the company will be relatively more cautious, mainly because the old renovation cycle is generally long, and the room for housing price increases is relatively limited.
However, with the accelerated expansion in recent years, Poly Real Estate’s debt has also come under pressure. As of the end of 2021, the data shows that the cash-to-short-term debt ratio is 1.57, the debt ratio excluding advance receipts is 76.5%, and the net debt ratio is 103.4%, stepping on two lines.
In this regard, Deputy General Manager Liu Chen believes that although the three red lines have stepped on two, the three indicators have improved significantly in the past year. Among them, the net debt ratio has dropped by 6.1 percentage points compared with the end of 2020, excluding the advance receipts. The debt-to-payment ratio fell by 0.9 percentage points.
He pointed out, “At present, the three red lines are a measure of everyone’s view of real estate companies. But from the actual work experience, the three red lines have no impact on our operations or on our financing channels.”
In addition, according to the annual report, in 2021, the company will reduce the average cost of capital from 4.72% at the end of 2020 by 0.2 percentage points to 4.52% by issuing corporate bonds and CMBS in Shanghai Securities Building, and replacing overseas syndicated loans. better level.
In this regard, Liu Chen said, “This year, the company has issued 2 billion corporate bonds, and the 3+2-year interest rate is 2.99%, which is the lowest level among similar issuances at the beginning of the year. If the follow-up fixed notes are issued, the overall debt structure will be reduced. It will be further optimized, and financial costs are expected to decline further in 2022.”
The following is the live Q&A transcript of Poly Real Estate’s 2021 annual results meeting:
On-site question: May I ask Poly Real Estate’s business expansion plan in terms of investment, mergers and acquisitions in 2022?
Wan Yuqing:In recent years, our expansion layout has been continuously adjusted. Newly entered cities are mainly first- and second-tier cities, concentrated in cities with economic growth and population growth, and some cities are gradually withdrawing. Especially the Yangtze River Delta, and the layout of the Greater Bay Area, we will continue to strengthen.
In 2021, Poly Real Estate’s equity land reserve fund will be 23 billion. This year, we will strive to maintain a normal 25-30 billion, and maintain an increment on the basis of last year, laying a good foundation for our next step.
On the other hand, while doing a good job in the main business of real estate, we are also looking for further investment opportunities in upstream and downstream industries, including hotel management, which is gradually improving control, as well as business management and property management.
In the past few years, if you have been watching Poly Real Estate, you can know that compared with other companies, Poly Real Estate may have been a little slower in the past few years, but we are still walking relatively steadily, so I hope that in the next round, we will be able to move faster. Get up, and faster and faster, while being able to go further.
I also hope that investors have confidence in us, we will continue to give shareholders a good return, and we hope that shareholders can hold our shares for a longer time and wait for long-term returns.
On-site question: Can the management introduce the main driving force for this year’s performance growth? In addition, the company’s gross profit margin still maintains a very high level in the industry. May I ask the company’s outlook for the future gross profit margin level?
Wan Yuqing:The driving force for performance growth actually comes from the “14th Five-Year Plan” target set by the management, striving to reach 100 billion during the “14th Five-Year Plan” period.
Wang Jian:The growth of our company’s performance in the first half of last year was due to market reasons. The growth rate in the first half of the year was obviously larger than that in the second half of the year. In the second half of the year, there was a round of tighter regulation and market changes across the country.
In 2021, the company’s overall gross profit margin is 33.9%, which is still a relatively high gross profit margin level, which benefits from the difference in projects carried over from previous years. The decline in the gross profit margin level of the real estate industry may be a major trend. Judging from the company’s current sales, the gross profit margin level will likely return to the range of 23%-26% in the long run.
Wan Yuqing:We judge that it is normal for the gross profit margin of the entire industry to be around 20% in the future. If it can be above 20%, it is a good gross margin level.
On-site question: What is the company’s guidance for the full-year sales in 2022? And the company’s land acquisition plan?
Peng Wei:In 2022, we have a volume of 140 billion that can be sold in the market, of which 57 billion is the stock at the beginning of the year, and the newly opened and additional sales are regarding 83 billion.
These distributions are mainly concentrated in the Yangtze River Delta and the Pearl River Delta. At present, the distribution of the Yangtze River Delta and the Pearl River Delta has reached 66%, which will increase by 10 percentage points compared with 2021. And the cities that are focused will be relatively focused, mainly in Shanghai and Suzhou, including Kunshan, Ningbo, Shenzhen, Guangzhou, Hong Kong, Wuhan, and Nanning. The 22-year new supply and new push in these eight cities reached 62 billion, accounting for 75% of the annual proportion.
The goal in 2022 is to guarantee a minimum of 65 billion yuan. Compared with the supply of 140 billion yuan, the sale rate is regarding 46%. This sale rate is also 4 percentage points lower than the actual sale rate in 2021.
So in fact, we are also very confident in this goal. Whether it is from the consideration of the supply and depletion of cargo volume, and the distribution structure of cargo volume is more inclined to the direction of the Yangtze River Delta, the Pearl River Delta, and the Greater Bay Area, we Should be able to complete such a goal, or even exceed.
Wan Yuqing:Regarding the land acquisition plan, in terms of the way of expansion, we have been in contact with some real estate developers recently to do some merger and acquisition projects, but they are all in the process of negotiation, and announcements will be made in due course.
In addition, because the entire economic environment, including the industry is not very prosperous, there will be certain opportunities in terms of land acquisition with local governments, including some industrial cooperation, and there are several main channels such as bidding, auction and listing.As for the old reform, we will be more cautious, because the old reform project generally has a long cycle, and the room for housing prices to rise is limited
In general, I hope that there will be a new breakthrough in investment expansion this year.
On-site question: What is the current situation of the company’s three red lines? What are your plans for reducing debt and adjusting debt structure in the future? When is it expected to be transferred to a green enterprise?
Liu Chen:The company is in the process of continuous improvement in terms of the three red lines, that is, the debt ratio. The cash-to-short-term debt ratio increased from 1.53 to 1.57, the debt ratio excluding accounts received in advance dropped from 77.4% to 76.5%, and the net debt ratio dropped from 109.5 to 103.4, which shows a substantial improvement.
We have a balance between short-term and long-term. In the short-term, we still hope to seize market opportunities and do some high-quality land development to provide a better foundation for future development. At the same time, we will gradually improve the indicators such as net debt ratio through rapid recovery and turnover mitigation. Our plan still hopes that the absolute value of our overall liabilities will not increase in size.
On the other hand, from the perspective of finance itself, we are still constantly adjusting the financial structure and reducing the financial cost. The current financial cost has dropped from 4.72 in 202 to 4.52 in 2021, which should be a relatively good level in the industry. We expect to see further declines in financial costs in 2022.
In addition, from the perspective of debt structure, we will also continue to increase some direct debt financing channels, including corporate bonds and term notes. In these aspects, we will optimize the debt structure in terms of cost structure, and it should be more stable to further release debt repayment.
From the aspect of operation, create some space for reducing the debt ratio, continuously optimize from the actual financing point of view, control the overall debt scale, and hope to achieve a return to green status in the near future.
But I also want to explain that the current three red lines are a measure of everyone’s views on real estate companies. However, from the actual work experience, the three red lines did not have any impact on our operations or on our financing channels, and it should be said that we have not seen them at present.
On-site question: Did this round of housing price and land market adjustments lead to a significant impairment of the company’s land bank?
Wan Yuqing:This time, all parts of the country, regardless of the first-, second- and third-tier cities, were affected, and the transactions were not good. Many real estate developers have dropped significantly, but in terms of actual sales, it may be helpful in stages, but on the whole it is buying up and not buying down.
Although house prices have declined at this stage, we did not dump or exchange price for quantity. At the same time, thanks to the direction of our expansion in recent years, the direction of expansion in the past three years is mainly concentrated in the first- and second-tier cities in the Yangtze River Delta and the Pearl River Delta. The economy of these cities is relatively good, and the relative local housing prices are relatively strong. Therefore, this round of housing price adjustments and land market adjustments will not have much impact on our land reserves in recent years.
In addition, in the past two years, we have also strengthened our checks on investment expansion, emphasizing investment discipline. In order to obtain projects in a relatively safe situation, it is still necessary to ensure profitable sales and profitable turnover.
On-site question: Does Poly Real Estate have any plans to split and go public in the future?
Wan Yuqing:In recent years, the property has become the outlet. The company’s property management scale is now more than 40 million square meters, nearly 50 million. The entire income is regarding 1 billion a year, and the profit is almost 10%.
For us, the property is a long-term plan, so we will further strengthen the operation and control of the property, which we have been strengthening in the past two or three years.
At the same time, in terms of expansion, property companies continue to expand third-party management business, including in some places last year, the management of government properties, including some scenic spots, including third-party property management, in addition to our own property management, property projects , In addition to the services of office buildings, we are still expanding to the third party, and we hope that the proportion of the third party’s business will gradually increase.
For the future development of the property, we will also consider it according to the actual situation and the overall development plan, and will not consider splitting it for the time being.
On-site question: Will the company consider repurchase, including whether there is room for improvement in the company’s distribution ratio now?
Wan Yuqing:Now the company’s funds are relatively rich, and the cash flow safety factor is still relatively high, so we are also considering whether to consider repurchase. But because now is in the stage of market uncertainty, it is still necessary to balance.
Especially this year, because the market needs to stabilize and the industry logic can be re-established, it will take some time to reshape the structure, so safety is the first priority at this stage. will be considered in due course.
As for the increase in dividends, we also hope to improve our operations. This year, you have seen that the management of Poly Real Estate has made great adjustments. Under the leadership of the new management, I believe that through continuous efforts, we will be able to provide shareholders with long-term and ideal returns, and there is room for further improvement in dividend distribution.Return to Sohu, see more
