As a leading real estate company’s risk exposure gradually comes to an end, policy and capital market expectations for real estate have quietly changed.
In terms of policies, in the third quarter of 2021 (94th) regular meeting of the Monetary Policy Committee of the People’s Bank of China held in Beijing on September 24, it was proposed to “maintain the healthy development of the real estate market and safeguard the legitimate rights and interests of housing consumers.” .
Shen Wanhongyuan said that this is the rare mention of the real estate industry in the regular meetings of the central bank from 2003 to the present, and clearly stated that it will maintain the healthy development of the industry and housing consumption, or to avoid industry and financial risks caused by excessive regulation.
Earlier, the central bank stated in the “China Financial Stability Report” that “implementing differentiated housing credit policies and supporting reasonable demand for home purchases” may mean that the central bank will pay more attention to supporting reasonable demand for home purchases in the future, and avoid Excessive control policies have accidentally hurt buyers who just need and improve homes.
In view of the accelerated weakening of investment and sales in the real estate industry since the second half of 2021, the rapid increase in land market flow rate, and the rapid increase in capital chain risks of real estate enterprises, Shen Wanhongyuan believes that for the stability of the real estate and financial markets, industry policy regulation is urgently needed Normalize repair. This means that the industry’s pessimistic expectations will be reversed, and policy regulation is expected to relax marginally.
From the perspective of the capital market, thanks to the improvement of industry expectations and the extremely low valuation of the entire real estate industry, funds have begun to gradually intervene in real estate companies. For example, since the ETF of the A-share real estate industry bottomed out on August 2, it has recorded a rise of more than 15% to September 28, which may represent the start of a new market in the real estate industry after the end of the risk storm.
In this context, digging deep into the value target of the industry is the key to obtaining excess investment income. China Tianbao Group (01427) in the Hong Kong stock market may be the target worthy of investors’ attention. The company’s “construction + real estate” The two-wheel drive model is highly defensive when the industry is in a downturn, and its performance is more resilient when the industry picks up. On the basis of improving performance, China Tianbao Group will benefit from changes in industry expectations, which may drive the company’s share price to gradually strengthen.
Construction business continues to grow rapidly
China Tianbao Group has deep accumulation in the construction industry. The company has been engaged in construction contracting business since 1998. As of 2017, the company has obtained the special grade qualification of general contracting enterprise for construction engineering. As of August 2020, there are only 11 companies with special qualifications in Hebei Province. China Tianbao Group is one of them, showing the company’s strength in the industry.
The outstanding performance of the construction business in the first half of 2021 is the latest interpretation of the company’s strength. According to the interim financial report, China Tianbao Group’s construction business revenue during the reporting period was 770 million yuan, an increase of 13.4% year-on-year, which was higher than the national construction industry’s 8.6% industry growth rate.
Among them, the revenue from Beijing-Tianjin-Hebei was 619 million yuan, a year-on-year increase of 43.4%, and the proportion of total construction business revenue rose from 63.5% in the same period last year to 80%. This shows that the company’s strategy of deepening Beijing-Tianjin-Hebei has achieved significant results.
From the perspective of the types of projects contracted by construction business, the income of industrial, commercial and infrastructure construction was 303 million yuan, almost doubled year-on-year, which shows the high prosperity of industrial, commercial and infrastructure construction.
However, compared with the growth rate of revenue, the two indicators of unfinished contracts and newly signed contracts can better reflect the true development of China Tianbao Group’s construction business. Zhitong Finance APP learned that as of the first half of 2021, the contract value of the unfinished projects of China Tianbao Group’s construction business was 4.083 billion yuan, an increase of 21.92% year-on-year; at the same time, the value of newly signed contracts was 919 million yuan, compared with 2020. The 337 million in the same period increased by 172.7% year-on-year, which laid a solid foundation for the rapid growth of the company’s construction business revenue in the next one to two years.
It is worth noting that the substantial increase in the value of newly signed contracts is not due to the low base. In fact, even in the first half of 2019, which was not affected by the epidemic, the value of newly signed contracts was only 583 million yuan, compared with the first half of 2021. 919 million yuan is 36% lower, which is enough to show that China Tianbao Group’s construction business continues to grow rapidly.
Compared with the development level of the industry, this conclusion can also be corroborated. According to data from the National Bureau of Statistics, in the first half of 2021, the value of newly signed contracts for the construction industry nationwide was RMB 14.41 trillion, a year-on-year increase of 14.4%, which was significantly lower than the 172.7% of China Tianbao Group.
From the analysis of the location and type of the newly signed project, we can find the secret of the substantial increase in the value of the newly signed contract for China Tianbao Group’s construction business. According to the 2021 interim financial report, the value of the company’s newly signed contracts from the Beijing-Tianjin-Hebei region is 729 million yuan, an increase of 137.46% year-on-year. This is the result of the company’s continuous deepening of the Beijing-Tianjin-Hebei region. At the same time, the value of newly signed contracts in other regions was 190 million yuan, an increase of 5.38 times year-on-year. This was mainly due to the company’s strengthening of market expansion and accelerated national deployment.
Zhitong Finance APP learned that while the construction contracting business of China Tianbao Group has been cultivating Beijing-Tianjin-Hebei, it has also expanded into markets such as Jiangxi, Jiangsu, and Inner Mongolia. The Northwest and Southwest covers the national market layout of 18 provinces.
From the perspective of the types of newly signed projects, the contract value of building construction is 322 million yuan, which has been restored to 87.68% in the same period in 2019; the contract value from industrial, commercial and infrastructure construction is 597 million yuan, an increase of 146.67% year-on-year , Which also increased by 175.87% compared with the first half of 2019.
From the above analysis, it is not difficult to see that the continuous high growth of China Tianbao Group’s construction business is mainly due to two factors. Under the dual stimulus, the construction industry has ushered in a new round of business cycle, and China Tianbao Group has benefited from it. Therefore, the income from industry, commerce and infrastructure construction and the value of new contracts have increased significantly.
The boom in the construction industry will continue. In the “Fourteenth Five-Year Plan and 2035 Vision Goal Outline” released in March this year, development requirements were put forward in terms of carbon emission reduction, smart construction, transportation power, PPP and REITs, old community renovation, and ecological protection. This means that the construction industry will still maintain a certain strength during the 14th Five-Year Plan period; and “new infrastructure” as the basic investment at the starting point of a new round of technology cycle, steady progress is a high probability event. At the same time, traditional infrastructure + new infrastructure, as a key industry that plays a “counter-cyclical adjustment” role in economic development, is expected to continue to strengthen under economic pressure. Based on the above three factors, China Tianbao Group will continue to benefit from the boom in the construction industry.
Delivery affects short-term performance, and the real estate business segment is stable in the long-term
Real estate development is a new business launched by China Tianbao Group in 2001 to achieve synergy with the construction business. In the past two decades, the real estate business of China Tianbao Group has concentrated in the Beijing-Tianjin-Hebei region to develop and build many residential buildings such as Tianbao Lijing, Tianbao·Lingyun City, Tianbao Greentown, Tianbao·Xinyue Bay, Tianbao Qinghua Mansion, Tianbao New City, etc. The residential area also has commercial projects such as Baoxin International and Tianbao Plaza, forming a diversified portfolio of over 20 projects.
In the first half of 2021, China Tianbao Group’s real estate development business income was 107 million yuan, a decline from the same period in 2020. However, it is worth noting that the decline in revenue is mainly due to the fact that in the first half of 2020, Tianbao Greentown, Tianbao New Town Phase III and Fuxin Garden all achieved delivery, but there were no large-scale project deliveries in the first half of 2021, which led to The delivery area dropped from 116,758 square meters to 17,106 square meters, resulting in a decline in revenue.
Obviously, the decline in real estate development business revenue during the reporting period was caused by non-recurring factors and could not reflect the company’s true business strength. With the subsequent delivery of new projects, the real estate development business is expected to return to growth.
In fact, in order to achieve the long-term and stable development of the real estate development business, China Tianbao Group has made various preparations. First, in the context of the continuous differentiation of the real estate industry, the company has focused its real estate development business on the long-term and deep cultivation of Beijing-Tianjin-Hebei It has accumulated abundant land reserves, laying a solid foundation for the long-term development of real estate development business.
According to the 2021 mid-term financial report, as of June 30, the company’s land bank during the reporting period was 1,954,400 square meters, of which the completed area was 125,900 square meters and the area under construction was 1,061.6 million square meters. The area is 722,500 square meters. The area under construction of more than one million square meters guarantees the company’s project delivery in the next three to five years.
At the same time, the company continues to pay attention to high-quality land in the market. On September 17, Yuxian Tianbao Real Estate, a subsidiary of China Tianbao Group, successfully seized a residential land in Yuxian County, Zhangjiakou City, with a total area of 43,242 square meters, and continued to expand the company’s land bank.
Second, under the industry’s main tone of “no speculation in housing and housing, and implementation of policies in accordance with the city”, China Tianbao Group actively explores diversified business operations around “real estate +” and intends to create a second growth curve for the real estate development business. Multi-format operation is a key step for China Tianbao Group to move beyond traditional residential buildings to the new demands of the market.
In addition to residential projects, China Tianbao Group has launched commercial projects including Tianbao Smart Building Technology Park, Baoxin International Building, Zhangbei Zhongdu Ginza, etc. Among them, Tianbao Smart Building Technology Park is a high-end complex integrating business office, corporate headquarters office, commerce, micro-shadow bar, and catering. The project has 4,100 housing units and is currently in the main construction stage. As of June 30, 2021, the project has launched 1,816 units and sold 296 units. The Zhongdu Ginza project is a comprehensive high-end commercial building integrating shopping malls, cinemas, restaurants, conferences, offices, hotels, leisure and business functions. Among them, Tianbao Plaza has been grandly opened in December 2020.
The strategy of focusing on the Beijing-Tianjin-Hebei region, abundant land reserves and multi-business operations ensures that China Natural Forest Protection Group can still seize structural opportunities under the background of industry differentiation and achieve steady growth. In fact, there are not many institutions that are optimistic about the real estate industry in the current market, and Industrial Securities is one of them.
Industrial Securities believes that the “three bottoms” of the real estate industry have already appeared. Among them, the “policy bottom” is the proposal of “two dimensions”; the industry “fundamental bottom” is the second batch of centralized land supply methods ushered in adjustments, and the land market has cooled down significantly. At the end, the gross profit margin is expected to gradually rise to stability in the future; the “market bottom” is that the risk of a leading real estate company has triggered a sharp market adjustment after the risk of the industry sector has fallen to the lowest level in history. Based on the above-mentioned “three bottoms” logic, it believes that the current window period for actively deploying core real estate targets.
Once the market’s expectations for the real estate industry change, China Tianbao Group, which has high growth in its construction business and stable real estate development business, is expected to be favored by market funds, and its highly flexible performance may push the company’s stock price higher.