The real estate industry has entered a period of deep adjustment, and the decline in sales and profits has become a sad hurdle for Xincheng Holdings and most real estate companies.
htmlOn September 2, Xincheng Holdings held a semi-annual performance briefing for 2022. The management said at the meeting: "The development business is the ballast for the company's regional cultivation, and commercial management provides cash flow that travels through cycles and stable revenue." However, under the dual-wheel drive operation model of "residential + commercial", Xincheng Holdings' revenue and net profit attributable to shareholders both declined in the first half of the year, and contract sales fell by more than 40%.In the second half of the year, in the face of complex and changing situations such as lack of market confidence and reshuffle of the industry structure, can this real estate company with a 100 billion yuan maintain sufficient resilience?
revenue declined by more than 45%, rights protection incidents frequently
Xincheng Holdings' 2022 semi-annual report shows that Xincheng Holdings' operating income in the first half of the year was 42.803 billion yuan, a decrease of about 45.89% compared with the same period last year; net profit attributable to shareholders was 3.01 billion yuan, a decrease of about 30.11% compared with the same period last year; net profit attributable to shareholders fell by 32.50% year-on-year.
Regarding the reasons for the decline in revenue, Xincheng Holdings Chairman Wang Xiaosong responded at the performance briefing that it was caused by the decrease in the company's property delivery area in the first half of 2022 compared with the same period last year. The semi-annual report shows that in the first half of the year, Xincheng Holdings delivered nearly 40,000 properties, achieving completion and delivery of 60 sub-projects, with a completed area of 6.535,600 square meters (including joint venture projects), a decrease of about 57.70% compared with the completed area of 15.45 million square meters in the same period last year.
According to sales data, Xincheng Holdings completed contract sales of 65.16 billion yuan during the reporting period, a decrease of 44.62% over the same period last year; and achieved a contract sales area of 6.572 million square meters, a decrease of 39.54% over the same period last year. Regarding the decline in performance, Wang Xiaosong attributed it to the market, pointing out that industry sales are generally under pressure in 2022, and July and August are the traditional off-seasons of the industry.
In the past, Xincheng Holdings was a real estate "dark horse" that quickly rushed to hundreds of billions of yuan, but its radical expansion path was when its founder and former chairman Wang Zhenhua was imprisoned for child molestation. In the market conditions where sales performance of most real estate companies declined this year, Xincheng Holdings has not become an exception. In June this year, a project in Xincheng Holdings Nanjing also launched the "Watermelon Change House" activity, which some industry insiders believe shows the greater pressure on the company to sell.
As sales decline exceeded expectations, S&P lowered the credit ratings of Xincheng Development and Xincheng Holdings in August, looking for "negative", and expected its liquidity buffer to be further reduced, not only the reduction in cash generated by real estate sales, but also because the company has to use internal resources to repay debts. Moody's also downgraded the rating of Xincheng Holdings and included its rating on the watch list for further downgrading.
It is also worth noting that Xincheng Holdings has recently encountered rights protection incidents in some projects in Tianjin, Chongqing and Beijing. In August, according to media reports, the owners of Chongqing Yubei Wuyue Plaza were violently treated by developers, which caused heated discussions. In July this year, the Beijing Xiyue Xuefu project was summoned by the Shijingshan District Housing and Urban-Rural Development Committee because the buyer reported the slow construction progress. The Daxing New City Xihongyin project was asked by the Beijing Municipal Housing and Urban-Rural Development Commission to rectify the violations last year and suspended the online signing of the project. However, this year, some netizens reported on the leader message board that the project developers illegally collected pre-sale funds and suspected of misleading publicity on planned or constructed transportation, commercial, cultural and educational facilities and other municipal conditions. The pre-sale funding issue of Daxing District Housing and Urban-Rural Development Commission has ordered the company to rectify the problem. Xincheng Holdings North China Region Company responded to reporters that the Daxing District Market Supervision and Administration Bureau has come to the project to investigate and collect evidence and learn about the relevant situation in detail. The company actively cooperates with the work, but also pointed out that "the materials for our company's external publicity come from the transportation plan announced by the government website. Our company has issued obvious tips and instructions, and the final government's instructions shall prevail."
The gross profit margin of the commercial management exceeds 72%, and the country has 189 Wuyue Plaza
real estate development business has shown a "tired state", and another link of commercial real estate driven by the "dual-wheel drive" is entrusted with high hopes of "providing time-travel cycles and stabilizing income cash flow."
Wang Xiaosong revealed that from January to June 2022, the gross profit of commercial management accounted for 34.14% of the company's gross profit, with a gross profit margin of 72.22%, while the gross profit margin of its real estate development and sales business during the same period was only 16.12%.
△Photo source: Xincheng Holdings' 2022 semi-annual report, China Radio and Television issued
. While the profit margin of real estate development declines, more competitors have begun to deploy in the business management track, which means that Xincheng Holdings will face more fierce market competition and challenges.
However, Xincheng Holdings has a certain first-mover advantage. According to the semi-annual report, as of the end of June 2022, Xincheng Holdings has laid out 189 Wuyue Plazas nationwide, with 131 Wuyue Plazas open and commissioned, ranking first among listed companies at home and abroad in my country.
first completed the national layout and connected it with the business model and commercial development and operation capabilities. Qu Dejun , director and co-president of Xincheng Holdings, believes that this is the company's core competitiveness.
He pointed out that the company adopts a "residential + commercial" dual-wheel drive business model and a Wuyue Plaza expansion model that combines light and heavy weight. The development business is the ballast for the company's regional deep cultivation, and business management provides cash flow that travels through cycles and stabilizes revenue. The coordinated development between various business departments and promotes each other. This is the most basic premise for the core advantages of New City . In addition, Xincheng Holdings has a complete commercial real estate development and operation industry chain from development to operation, effectively ensuring that the project will be fully opened in about two years; it accurately optimizes the commercial positioning based on the characteristics of different cities and creates the operating characteristics of Wuyue Plaza; the "Headquarters-Region-Project" three-level structure, and has a commercial operation and management team with comprehensive commercial resource coordination and management capabilities.
In the first half of the year, Xincheng Holdings achieved a total commercial operation revenue of approximately RMB 4.7 billion, a year-on-year increase of 20%. Qu Dejun said that the company will continue to promote the operation of the square in the second half of the year, striving to achieve a total annual commercial operation revenue target of 10.5 billion yuan. Regarding the scale expansion plan, he said that considering the current industry situation, the company will take the recovery of operations and stable operations as the focus of business management work, and maintain stable scale growth under the plan of both severity and severity.
Multiple measures to reduce debt, temporarily suspend land acquisition and shrink investment scale
At present, the liquidity of real estate companies has become the focus of investors' attention. Xincheng Holdings made many attempts to reduce interest-bearing liabilities and optimize debt structure in the first half of the year.
htmlIn July, Xincheng Development issued an announcement stating that it plans to sell the independently incubated theater brand Xingyi Cinema for 3 billion yuan. Some industry insiders pointed out that as one of the non-core businesses of the new city, the sale of cinemas can bring more financial guarantees to it; at the same time, cinema revenue has been affected by the epidemic in recent years, and if it continues to operate, it will still consume a lot of costs.While selling assets to recover assets, Xincheng Holdings continued to issue new bonds. In May, Xincheng Holdings successfully completed the issuance of US$100 million in priority green notes; during the same period, it completed the issuance of 1 billion yuan of medium notes, which was the first interbank real estate company credit risk mitigation certificate. On September 5, Xincheng Holdings released the second medium-term notes prospectus for 2022, intending to raise 1 billion yuan of funds for the development and construction of ordinary commercial housing projects, repurchase and repayment of overseas US dollar bonds, repurchase and repayment of issuers' debt financing tools, and other laws and regulations.
Wuyue Plaza has also become an important tool for Xincheng Holdings' financing. According to its director and president, Liang Zhicheng, the company holds 116 heavy assets Wuyue Plaza. From January to August this year, 20 Wuyue Plaza operating property loans including Huangyan Wuyue Plaza in Taizhou and Taishan Wuyue Plaza in Tai'an Taishan Wuyue Plaza were implemented, and a total of about 6.2 billion yuan of financing was obtained. At the same time, he pointed out that the debt duration of commercial property loans is about 8-10 years and the financing cost is about 6-8%, which is in line with the company's long-term plan to optimize the debt structure.
This year, Xincheng Holdings’ open market debt matured by 12.6 billion yuan, and it has been repayed from January to August or may be repaid in advance. Among them, in terms of US dollar bonds, three total bonds were paid in 2022, with a total of US$700 million, and no US dollar bonds due this year. Management said that the company will continue to adhere to the bottom-line thinking, arrange funds well, and actively ensure that each bond is paid when maturity.
In the first half of the year, it focused on alleviating debt pressure, and Xincheng Holdings' book cash fell to 44.8 billion yuan.At the same time, the net cash flow generated by its operating activities rebounded to 11.5 billion yuan from -7.5 billion yuan in the same period last year. The main reason is that Xincheng Holdings has shrunk its investment scale and land acquisition expenditure has decreased. Wang Xiaosong said at the performance briefing that as of the end of June, Xincheng Holdings had a total land reserve of 131 million square meters nationwide, which can meet the development and operation needs in the next 2-3 years.
However, from the perspective of the land reserve structure, about 37% of Xincheng Holdings' land reserves are located in first- and second-tier cities, 29% are located in third- and fourth-tier cities in the Yangtze River Delta region, and 34% are located in third- and fourth-tier cities in other regions. Is it an opportunity or a hidden concern for Xincheng Holdings' heavy holdings? Many investors also asked about the prospects of the residential and Wuyue Plaza projects in third- and fourth-tier cities.
, and Wang Xiaosong responded that the company is located in the most economically vibrant and most populous regions in the country, among which the third and fourth-tier areas outside the Yangtze River Delta are mainly complexes and have strong market competitiveness. At the same time, he also pointed out that the company will not deliberately choose a specific energy level city as its target market. There are differences in the investment models of the first and second tiers and third and fourth tiers. The first and second tiers pay more attention to liquidity, and the third and fourth tiers pay more attention to return.
Regarding whether land acquisition will resume in the second half of the year, Wang Xiaosong said that the company will fully consider changes in the industry and market, and combine its own operating conditions to carry out new project expansion in a timely manner.
Source: China Radio International
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