Viewpoint Real Estate Network It is very rare that Sunac China released its interim results the night before the investor meeting, so many investors ridiculed “that should be good” without reading the data.
From the data point of view, Sunac China has delivered a good result. During the period, Sunac China achieved revenue of approximately 95.82 billion yuan, a year-on-year increase of approximately 23.9%; the profit attributable to company owners reached approximately 11.99 billion yuan, a year-on-year increase of approximately 9.4%. At the same time, it recorded a gross profit of approximately 19.98 billion yuan, a year-on-year increase of approximately 12.5%.
Policies continue to tighten, and some companies in the real estate industry are experiencing liquidity shortages and even debt defaults. The market has become more concerned about the safety and liquidity of a company.
In the half-year performance, in addition to the increased performance, the more important thing is the “safe” signal released by Sunac.
Data show that during the period, Sunac China’s three red lines and two have met regulatory requirements and continue to improve trends; cash in hand reached 123.2 billion yuan, an increase of 2.4% from the end of last year; interest expenses were about 13.056 billion yuan, compared with the same period last year 15.179 billion yuan decreased by more than 2 billion yuan.
Sunac’s development focus is also changing, and it is no longer scale growth.
“The goal of reducing financing costs and improving ratings is unswerving. Under this goal, we must reduce the debt ratio, reduce the scale of debt, reduce the scale of land acquisition, and even reduce the overall scale. We hope to achieve investment in about three years. Grade rating, the financing cost is reduced to less than 5%.”
An investor who participated in the performance meeting told Viewpoint Real Estate New Media that based on its own strategic choices and judgment on the market, Sunac will reduce the scale of land acquisition and reduce debt indicators in the second half of the year.
Prudent investment
In terms of performance, during the period, Sunac, together with its joint ventures and associated companies, achieved contracted sales of approximately 320.76 billion yuan, a year-on-year increase of approximately 64.3%, and equity contracted sales of 200.8 billion yuan, a year-on-year increase of 51%.
From the perspective of sales contribution cities, Sunac’s contracted sales in 9 cities including Wuhan, Hangzhou, Chongqing, Shanghai, Xi’an, Wenzhou, Suzhou, and Beijing in the first half of the year exceeded 10 billion yuan, of which the contracts in Wuhan and Hangzhou The sales amount exceeds 20 billion yuan.
Sunac disclosed in the announcement that it expects total saleable resources in the second half of the year to be 667.5 billion yuan. Among them, 29% are located in the Yangtze River Delta region, 25% are located in the western core urban area, 20% are located in the Bohai Rim area, 13% are located in the central core urban area and 13% are located in South China.
The focus of the market is still Sunac’s land investment in the first half of the year.
According to the announcement, during the period, Rong Chuangxin increased its equity land reserves of approximately 17.08 million square meters, and the value of new equity was approximately 213.5 billion yuan, 62% of which was land acquisition in the open market, 24% of land acquisitions for mergers and acquisitions, and 14% of industrial cooperation. Way to get. As of the end of June, the accumulated equity land sales ratio for 12 consecutive months was approximately 28.5%, of which the equity land sales ratio in the first half of 2021 was approximately 37.9%.
As of the first half of the year, Sunac, together with its joint ventures and associates, had a total land bank area of approximately 278 million square meters, and an equity land bank of approximately 164 million square meters. The value of its equity land bank is expected to be approximately RMB 2.0 trillion.
In the second half of the year, Sunac has set a prudent target for land investment: the sales ratio of equity acquisition land will be controlled within 20%, and the annual equity acquisition land sales ratio will be controlled within 30%.
Behind the goal, it comes from Sunac’s market judgment in the second half of the year. In Sun Hongbin’s view, under the central bank’s “two red lines” for banks and the “three red lines” for financing real estate companies, the decline in the size of the entire market is an inevitable process.
“If you want to maintain the current market volume, there must be a gap in funding.” On the one hand, because of the balance of funds, on the other hand, some real estate companies will actively or passively withdraw from the market.
He believes that the financing market, credit market, and sales market will be under greater pressure in the second half of the year: “On the one hand, some companies have cut prices due to greater pressure. The impact of purchasing power.”
Moreover, in Sun Hongbin’s view, with the limitation of total liabilities, the current merger and acquisition market has disappeared: “Any company that has problems has a large amount of stock debt. After you acquire it, you will acquire its stock debt, so the debt scale will be reduced. It is possible to exceed the target. Although the policy does not have clear requirements for the reduction of the total debt of real estate companies, it does impose requirements on the upper limit of the debt.”
However, controlling investment at this stage is more based on the consideration of Sunac’s own strategic choices. “Liability optimization and reduction of financing costs are ranked before investment, which is our strategic choice at this stage.”
The above-mentioned investor stated that Sunac will closely focus on the profit scale as the core business objective, make up for the shortcomings of high debt ratio and high financing cost left by the rapid development stage, and establish a strong ability to resist various risks. , Enhance comprehensive competitiveness.
New strategic goal
For a long time in the past, scale was the most important indicator to measure a real estate company, but now it is far from enough. Sunac is also adjusting to this change and proposing the “four changes” operating principles: safer, more calm, longer-term, More valuable.
“Safer” in Sun Hongbin’s eyes is embodied in three dimensions: “First, it is in line with the policy and in line with the orientation; second, others think you are safe, that is, you have reached the three red lines of the standard, the interest is low, and the rating is improved; third, yourself It is really safe, and the three green lines are not necessarily risk-free.”
The management of Sunac stated in the investor performance meeting that the next step will be to systematically adjust the development model and internal control mechanism to support the achievement of the new strategic goals.
Based on this, Sunac put forward specific requirements for the next stage, including continuing to promote the reduction of financing costs, striving to reach the level of outstanding private real estate enterprises within three years, continuing to promote the continuous improvement of international credit ratings, and achieving investment grade as the medium-term goal, and Continuously optimize the financing structure and so on.
In terms of financing costs, Sunac’s current average financing costs are still at a relatively high level among leading real estate companies. In accordance with the target, Sunac will strive to reduce financing costs to 5% within three years and achieve investment-grade credit ratings.
This goal requires Sunac to control the total debt. Sun Hongbin said that in the past, Sunac’s main goal was to reduce the debt ratio, not to reduce the debt scale. It was able to reduce the debt ratio by increasing its own funds. Now reducing the debt ratio also reduces the debt scale, so as to reduce financing costs.
“The first priority is to reduce financing costs and improve credit ratings. The debt ratio, debt scale, and land acquisition scale must be reduced.” He said frankly that before this goal, Sunac’s scale can even make concessions.
Viewpoint Real Estate New Media learned that after two years of debt reduction, two of Sunac’s three red lines have met regulatory requirements.
Data show that as of June 30, 2021, Sunac’s unrestricted cash short-term debt ratio was approximately 1.11, an increase of approximately 0.03 percentage points from the end of last year; the net debt ratio was approximately 86.6%, a decrease of approximately 9.4 percentage points from the end of last year ; The debt-to-asset ratio after excluding advance receipts is approximately 76.0%, a decrease of approximately 2.3 percentage points from the end of last year.
In the first half of the year, many international rating agencies comprehensively upgraded Sunac’s rating: Standard & Poor’s upgraded Sunac’s subject rating to BB with a stable outlook; Moody’s and Fitch raised their rating outlook to positive.
In addition, the investment in Shell and Wanda Commercial Management is also one of the focuses of investors.
It is understood that under the influence of regulation and market sentiment, the price of Shell Search for Real Estate has fallen from close to US$80 at the end of last year to the lowest of HK$15.35 in the near future. Wanda Commercial Management is also seeking to list in Hong Kong. It is reported that the IPO valuation may reach US$30 billion.
“Sunac is optimistic about Shell for a long time, and most of its equity is still in its hands. If the stock price returns to less than 40 yuan in the second half of the year, it will have some impact on the book profit in the second half of the year, but it will have no impact on the core profit.” Gao Xi, the financial officer, said that Wanda Commercial Management is also a financial investment, and the liquidity of assets will be optimized to a certain extent after the listing.
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