High Growth And Debt Reduction Parallel Hengda Plan Sales Broke Trillion In 2022

In March, the atmosphere of heavy and anxious Real Estate Company's earnings season was reversed by Hengda's performance on the last day.

Xu Jiayin, chairman of Hengda, who appeared in March 31st, is in a good mood. He announced the sales target of trillion yuan in 800 billion or three years this year. He also avoided the problem of net profit decline and high debt in 2019. He said, "even if profits fall, Evergrande is still the top three housing companies." "there is no cash flow problem in Hengda".

Hengda became the first public housing company to make a trillion dollar sale. Previously, Vanke also proposed "trillion Vanke", but mainly refers to the market value and value.

To bring confidence to Xu Jiayin is the online "nationwide" sale launched by Hengda in February this year, which helped Hengda achieve 45 billion yuan sales in February. It is the only leading housing company that has achieved sales growth under severe epidemics.

Up to 290 million square meters of land reserve is the source of Hengda's performance and profits. Xu Jiayin said that in order to achieve the goal of high growth and debt reduction, Hengda will strive to convert in the next three years, so that land reserves will grow negatively and control at 200 million square meters, while interest bearing liabilities will be reduced by 150 billion yuan per year.

Xu Jiayin said that 2020 was a very important year for Hengda because the development mode should be changed. Close to Hengda people said that this means Hengda should transform from the aggressive Housing enterprises focusing on scale growth to the stable housing enterprises, and hope to achieve steady growth in performance and profits in the future.

Optimism under epidemic situation

A week ago, Hengda issued a profit warning. In 2019, the company's core net profit was about 40 billion 800 million yuan, down by about 48% compared with the same period last year. Net profit is expected to be about 33 billion 500 million yuan, down about 50% from the same period last year.

In this regard, management has not evaded. The first is that the base in 2018 increased by 100% over the same period.

Secondly, Xia Haijun, President of Hengda, said that the decline in profits throughout the year was mainly due to the fact that the sale of low priced and clear sales buildings was carried out in 2019, resulting in a decline in the unit price.

Xu Jiayin further added that net profit can be adjusted through the settlement of buildings. In 2017 and 2018, Hengda's net profit increased substantially, fulfilling its commitment to strategic investors. In January of this year, the restructuring of Shenzhen housing continued to postpone, Hengda and some war voted signed a contract extension for a year, the company hopes to ensure that the net profit pledge in 2020 (not less than 60 billion) is fully assured.

"Our net profit this year and next year should still be in the forefront of the industry." Xu Jiayin said.

In the performance meeting, Xu Jiayin stressed that 2020 is the year of Hengda's strategic turning point. The new development strategy is "high growth, control scale and reduce liabilities". This is also the deepening of the shift from scale to scale and efficiency in 2017.

High debt is a long-standing problem of Evergrande. According to the financial report, as at the end of 2019, Hengda's net debt ratio was 159.3%. In this regard, Xu Jiayin admitted that Hengda debt ratio is indeed high, the company's next three years of the theme, the core is to reduce liabilities.

In order to achieve this goal, Hengda first announced the goal of breaking trillion yuan in three years. "We announced 650 billion yuan this year, the internal index is 800 billion, and reached 1 trillion in 2022." Xu Jiayin revealed.

According to this calculation, Hengda sales growth will exceed 30% this year.

At the same time, Hengda will strictly control the scale of land reserve. By the end of 2019, Hengda's land reserve was 293 million square meters. In the future, it hopes to reduce 30 million square meters per year and reduce 90 million square meters in three years. The total land reserve will be controlled at 200 million square meters. According to this goal, the annual land reserve in the next three years is about 40 million square meters, compared with 60 million -8000 square meters in the past.

That is to say, Hengda will realize the requirement of reducing liabilities by speeding up the sales refund and reducing the investment and expenditure to buy land.

According to Xia Haijun estimates, in accordance with the rate of return of seventy or eighty per cent, there will be about two hundred billion cash balance each year in the next three years, with a plan to reduce interest bearing liabilities by 150 billion yuan per year, and strive to reduce 200 billion yuan this year. Finally, in 2022, the scale of total liabilities was reduced to less than 400 billion yuan, and the debt rate dropped to a low level in the industry.

If realized, it is expected that the net debt ratio of Hengda will be reduced to around 70%.

"Road overtaking" is in progress.

Outside the real estate industry, the diversification of developers is also the focus of attention. Hengda has invested heavily in new energy vehicles in the past two years, attracting much attention.

Xu Jiayin said that last year, Hengda established the industrial structure based on real estate, cultural tourism, healthy health as the two wings, new energy vehicles as the leading industry, and announced that no new industries will be entered within five years.

Therefore, the new energy vehicle is the top priority of Hengda transformation. "From the real estate to the car, our" road overtaking "has been laid out. Xu Jiayin said that in the new track, Hengda's goal is to achieve the strongest and largest world new energy vehicle group in three to five years.

Xu Jiayin disclosed that after investing 20 billion cars last year, it also plans to invest no more than 10 billion yuan this year, but not more than 10 billion yuan next year.

In addition to cars, Hengda has entered into health and other industries. In 2019, there were 24 health industry projects. In the next three years, 70 plans for Hengda health valley were planned.

Hengda Tourism Group has completed the layout of the 15 projects of Hengda Tong world, and is expected to open in 2022. The Hengda water world will have 20-30 projects in the country in the next three years.

However, like all housing companies, Hengda's new energy vehicle industry is not profitable yet. Hengda health still recorded a loss in 2019.

Pan Darong, chief financial officer of Evergrande, said that such a loss is phased and temporary. In the next two years, the company will continue to invest and improve its operation.

Hengda health Valley and Wen brigade project also need to cooperate with the main industry to achieve profitability and development. At present, this industry driven project mode is in the exploratory stage in the real estate industry, and the profit model has not yet been formed.

In 35 years, or even ten or eight years, all developers will fight in the red sea of business development. After this year's epidemic, the market is concerned about the prediction of the epidemic by leading housing companies. Previously, other housing prices passed the message is not very optimistic.

Xia Haijun said that the real estate sales and sales area basically declined by 40% in February, and investment fell by 40%. Mainly sales offices across the country are completely closed, and can not sell houses. The impact is expected to continue for some time.

In such a situation, he believes that this year the world is large-scale quantitative easing, China is now gradually relaxed, "small step to run", but the real estate industry "housing do not stir" the established national policy will not change, then think back to the past 1996-2016 years of gold twenty years is impossible, we must remove the financial attributes of real estate.

For developers, about 16 trillion of the market sales "big cake" has peaked, the market concentration will only continue to improve, small and medium developers will be a large number of mergers and acquisitions.

Hengda had a market share of 3.8% last year, and the top three developers accounted for 12.6%, which is expected to increase to 20% in the next three to five years.

After reaching trillion sales, the super large developers will enter a stage of steady growth. This is also the goal pursued by Hengda.