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Original Title: Sunac Sold 570 Billion Homes, But Still Has a Red Debt Line
Sun Hongbin, Chairman of the Board of Sunac China Source: Sunac Official Website
“I support regulation. Without regulation, this industry cannot be done. Housing and land prices will skyrocket.
On the morning of March 12, Sunac China held an annual results conference. The chairman of the board of directors, Sun Hongbin, spoke openly about regulating the housing market.
On the same day, Sunac revealed its full-year performance for 2020. By multiple indicators, the report card was beautiful: revenue 230.59 billion yuan, net profit 35.64 billion yuan, revenue, net profit, earnings per share. and dividends. per share More than 30%.
Surprisingly, the company’s annual contract sales amounted to approximately 575.26 billion yuan, maintaining its position as the fourth largest in the industry, but failed to meet its annual sales target of 600 billion yuan, with a completion rate of 95.88%. real estate companies, the only company that achieved an objective. In the past, Sunac’s management has stated that there is definitely no problem in achieving more than 600 billion sales in 2020.
Sun Hongbin didn’t care: “With the epidemic in control and situation, last year we lost 20 billion in sales. There is no need to get 600 billion. I can reach 650 billion.”
Sunac’s main goal is to reduce debt. From the performance of the financial report, the effect is immediate: In contrast to the “three red lines” standard, Sunac dropped two speeds in one year and entered the yellow speed level.
Sunac, who is willing to open and close, and play with high leverage, has slowed to stability in the last two years. However, in the home sales business, can you really be a “time friend”?
Slow down for stability, the most difficult obstacle still exists
“We don’t care much about sales.” After two consecutive years of performance meetings, Hongbin Sun made this statement.
In fact, the rules of the game have changed.
The general tone of “housing for living without speculation” has been lowered Since 2021, real estate adjustments in various regions have cumulatively reached more than 70 times. In mid-2020, the “three red lines” of the new real estate financing regulations have been put to the test, and the effects of the strong earthquake have not disappeared.
The “three red lines” refer to three criteria: the debt / asset ratio after excluding advance receipts is greater than 70%, the net debt ratio is greater than 100%, and the short-term cash debt ratio is less than 1 hour. For real estate companies touching red lines 2, 1, and 0, the annual growth rate of interest-bearing debt should be controlled below 5%, 10%, and 15%. If all three red lines are hit, the developer can no longer borrow money.
In the first half of 2020, the three Sunacs stepped forward. At the end of June last year, total debt reached 862.521 million yuan, a record.
Sunac is a typical “top three” player: high leverage, high turnover, and high growth. Through multiple tens of billions of mergers and acquisitions, Sunac has acquired a great deal of land reserve resources and managed to get ahead on corners. Sun Hongbin is not stingy in investing in land, putting aside his rhetoric: “Who can borrow more money, cheaper money, longer money and money that can cross the cycle, has a great advantage. If there is this opportunity, don’t go. Instead, it’s wrong to reduce leverage. “
The tightening of the financing supply quickly spread to commercial real estate operations. In 2020, Sunac adjusted its strategic design and the company focused on three things: reducing financing costs, optimizing the asset structure, and acquiring land wisely.
For all of 2020, Rongxin increased its land reserve by approximately 58.77 million square meters, a drop of around 40% from 99.7 million square meters the previous year.
Under pressure from the epidemic, Sunac’s sales volume in the first eight months of last year just completed half of its target. To withdraw funds quickly, the company will not hesitate to discount to accelerate home sales. In 2020, the cumulative average contracted sales price was approximately 14,020 yuan / square meter, which continued to decline from 14,530 yuan / square meter in 2019 and 15,070 yuan / square meter in 2018.
In addition, Sunac sold some of its shares in hotels and cultural tourism companies, and the real estate sector was spun off and listed to accelerate the reduction in leverage.
At the end of 2020, Sunac’s two red lines turned green: the net debt ratio fell to about 96%, a year-on-year decrease of 76.3 percentage points; the short-term cash debt ratio reached approximately 1.08, an increase of approximately 0.51 year-on-year.
Next, Sunac still has a red line, that is, after excluding advance receipts, the debt / asset ratio should fall below 70%, the current indicator is 78.3%. Wang Mengde, CEO of Sunac China, said the latest goal will be completed ahead of schedule in 2022.
The total amount of loans in 2020 is about 303.4 billion yuan. The pressure on the debt side is not small. For Sunac, a process is needed to increase profits, and the last red line will be the most difficult obstacle.
Taking land one after another, the logic of high leverage is no longer
Heading into 2021, Sun Hongbin’s strategic actions have undergone subtle changes.
From January to February this year, Sunac’s contracted sales amounted to approximately 68.42 billion yuan, an increase of 122% year-on-year. In February, the amount of contracted sales increased 172% year-on-year. Sunac won several successively in Shanghai, Wuxi, Chongqing and other places. According to incomplete statistics, the amount of land transactions in that month reached 18 billion yuan.
The “Tres Reinos” land acquisition in which Sunac participated is particularly interesting. The company cooperated with C&D to bid for a house in Shiquan community, Putuo district, Shanghai with a total price of 6.452 million yuan, defeating the other two entities of land acquisition, investment promotion and Poly. Because the parcel has a premium rate of 36.15% and a unit price of more than 80,000 yuan per square meter, he was interviewed by the Putuo district government.
The minimum price is almost 85,000 yuan per square meter. If you want to make a profit, the price of a new house must reach at least 120,000 yuan per square meter. Obviously, this goes against the principle of preventing land auctions and overheating the real estate market. .
At the acting meeting on the 12th, Hongbin Sun believed that the land supply in the hotspot cities was still insufficient. “Competition for land in hotspot cities will continue to be fierce. I think the impact on land may be greater in the second half year or next year.” This may explain their enthusiasm for land acquisition in first- and second-tier cities.
He also said that Sunac’s land acquisition comes primarily from the three sources of open market, mergers and acquisitions and industrial projects. Among them, the open market has the greatest advantage. There are 58 city companies that manage 120 cities and can seize the plate. Rotation opportunity.
For Sunac, 2021 is still a year of general stabilization. An important manifestation is that its annual sales target is initially set at 640 billion yuan, which is a “safe” level.
Today, the “crazy” Sun Hongbin has become convergent. He is still optimistic about the development prospects for the real estate industry. He believes that cultural tourism with only 1.7% of revenue will be good business in the future, but he also regrets that the development logic of property developers has changed.
At the performance meeting, he did not say what Sunac’s new logic was. He believed that there was only one principle collectively recognized. “The logic of high leverage is definitely not there. The era of rapid growth and overcoming through higher leverage is over.” “
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