reporter: Liu Mingtao Editor: Peng Shuiping
Last week, the A-share market appeared relatively turbulent. The two major stock indexes of Shanghai and Shenzhen both fluctuated and consolidated, while the GEM index continued to rebound, driven by photovoltaic energy storage and other track stocks, and ran sharply. Win the Shanghai and Shenzhen majors The stock index, the Meridian Brand 100 Index, is consistent with the Shanghai and Shenzhen Index. It fell slightly by 0.56% last week and closed at 901.5 points. Some market participants said that the Meridian Brand 100 Index is still in an adjustment cycle, but judging from industry performance , the real estate trend is extremely strong, and its new round of investment income cycle may arrive in the third quarter.
Drawing by Yang Jing
Real estate led the index constituent stocks
The index fluctuated and consolidated last week. The GEM index performed strongly, and stocks and the sector were mixed. At the beginning of the week, the Shanghai Stock Index maintained a sideways and volatile trend. In the middle of the week, the Shanghai Stock Index fluctuated higher and approached 3,300 points. However, towards the weekend, the index weakly pulled back, and the three major indexes collectively closed in the green. Judging from the weekly K-line, the Shanghai Composite Index fell by 0.57%, the Shenzhen Stock Exchange Component Index fell by 0.49%, the GEM Index rose by 1.61%, and the Meridian Brand 100 Index fell slightly by 0.56%.
From the perspective of the market environment, despite the recurrence of the epidemic, insufficient demand and confidence are still the main contradictions in the current economic development. The economy showed a weak recovery trend in July, and real estate investment is at the bottom stage. However, the management and relevant departments emphasized that macro policies must To actively expand demand, provinces with major economies must take the lead and tap their own policy potential to stabilize the economy. As interest rates are cut to stimulate end-entity demand and policies to stabilize growth continue to increase, economic data in August is expected to be better than in July.
" Daily Economic News " reporter noticed that although the index continued to adjust, the constituent stocks of the Brand 100 Index frequently showed bright spots. Last week, against the background of the rise of less than 30 stocks, almost all real estate stocks were in the red, among which ,dragon Lake Group (HK00960, stock price HK$25, market value HK$157 billion) soared 13.38%, China Merchants Shekou , Seazen Holdings, Poly Development , and C&D Shares all also rose by more than 5%, ranking at the top of the gainer list. These rising real estate stocks currently have low price-to-earnings ratios. The price-to-earnings ratio of Longfor Group is only 5.38 times, which is significantly lower than the average price-to-earnings ratio of 9.7 times for the EBay Brand 100 Index. The value is underestimated.
Northeast Securities analysis pointed out that there are significant excess returns between the real estate sector from the loose turning point to the tightening turning point. The current market situation is currently in the stage of policy easing and sales improvement. Therefore, under the expectation of stable growth and stable real estate in the second half of the year, the loose real estate policy environment is expected to continue throughout the year, and the stable green-grade real estate companies will accelerate their concentration, leading in investment and financing. The advantages of central state-owned enterprises have emerged. In the future, as the financing, sales, and land acquisition of high-quality private real estate enterprises gradually return to normal, allocations can be moderately reduced to waist-elastic targets.
Sales pick up and excess returns can be expected
Judging from the real estate sales situation, in the first four weeks of June this year, high-frequency data sales improvement in sample cities was more obvious, and it can be determined that the current fundamental bottom has been formed. The contribution of post-epidemic data replenishment is not worth questioning the reliability of the data recovery. It happens to prove that the demand for home purchases is "non-disappearable".
China Merchants Securities predicts that sales will continue to improve marginally in the third quarter of 2022, and single-month sales are expected to turn positive year-on-year around October. Maintaining the wide U-shaped trend of overall sales in 2022, judging from the first low and then high, sales in the second half of the year may be better than the first half, and the full year may have double-digit negative growth. On the other hand, due to the particularity of this cycle, at the global level, the relatively slow recovery slope of a wide U-shaped recovery is more difficult to trigger a sharp increase in housing prices. In the short term, there may be no possibility of policy tightening.
And when sales pick up, excess returns in the real estate sector may usher in the second period of growth in this round. Judging from the laws of historical cycles, a complete period of excess return realization includes three stages. The first-stage rise is usually driven by expectations of policy improvements, followed by a wait-and-see stage that leads to a second-stage retracement. When sales improve year-on-year, especially when they enter a positive growth range, a "third wave" of rises usually occurs.
Looking back at this cycle, the policy game has driven the increase in excess returns in the first stage. Investors' concerns about the uncertainty of recovery, the epidemic, and the credit damage of real estate companies have realized the retracement in the second stage of this cycle. Currently, At this point, the sales bottom may have been established, and recovery will be a supporting factor for the subsequent upward rise in excess returns of real estate stocks. It is expected that the upward slope of this round of real estate excess returns will be lower, but the growth will be more stable and sustained. "Improvement of the competitive landscape" is the dominant logic behind the rise of a few stocks.
Guosheng Securities also pointed out that unlike 2008 and 2014, there are many obstructions at both ends of supply and demand in this cycle, which requires more policies to bloom. From the second half to the end of the year, we are expected to see a second wave of strong policy easing, and both real estate and property management have room for absolute returns.
The value of "high-quality" real estate companies highlights
Judging from the Meijing Brand 100 Index, the index constituent stocks all belong to the "high-quality" turnover real estate companies and have strong brand value.
Such as Vanke , Poly, China Resources , Longfor , etc. They mainly achieve stable growth through "high-quality" turnover (similar to manufacturing), the overall capital chain fluctuates little, and structurally operating cash inflows Contribution to funding sources is stable and higher than financing cash in the long term The inflow of cash means that this type of real estate companies have strong endogenous hematopoietic ability, strong ability to control cycles, do not rely too much on financing activities to maintain cash flow , and have the ability to reasonably operate leverage . In the past, they have experienced unilateral cycles The times lack flexibility, and in the current and future "management dividend era", these real estate companies have stronger competitiveness.
Take Longfor Group, which had the largest increase last week, as an example. It insists on deepening its development in core cities. From January to July, the proportion of land acquired for construction in first-tier cities accounted for 3% (it acquired a plot of land in Beijing in May), and the proportion of land acquired in second-tier cities accounted for 3%. 97%, mainly in strong second-tier cities such as Hangzhou, Hefei, Chengdu, and Nanjing. The company's strong ability to hold properties and operate them is a strong guarantee for crossing the cycle. High-quality assets provide the company with stable operating cash flow during industry downturns, while leaving room for improvement in fair value. On the other hand, the company insists on deeply cultivating core cities, adheres to the principle of financial stability, has the ability to survive the cycle, and is expected to usher in more opportunities in the future.
Let’s look at A-share representative China Merchants Shekou (SZ001979, stock price 14.91 yuan, market value 115.4 billion yuan). Under the company’s urban-deep development strategy, the scale of single cities has gradually expanded, sales have grown with high quality, and management expense rates have declined. China Merchants Shekou's land acquisition intensity has increased against the trend in the past three years, with a high proportion of high-quality land reserves in core cities, laying the foundation for the company's future increase in total sales volume and stable disposal rate . Under the current background of industry supply-side reform, the company is expected to become the ultimate beneficiary. The current increase in financing concentration has been transmitted to the land acquisition end. Coupled with the recovery of potential profit margins in the land market, the company's market concentration, and profit margins are expected to rise in the future. During the "14th Five-Year Plan" period, with the gradual implementation of the Double Hundred Strategy, the number and proportion of self-owned properties in the company's core cities increased steadily. The improvement of the industry structure has brought about an increase in the market concentration and profit margins of leading companies, as well as an increase in the proportion of sustainable businesses, which will improve the company's long-term valuation level.
Daily Economic News
