【英文】瑞信报告：中国房地产业报告：增长放缓但质量提高China Property Sector Slower growth but better quality（93P）

英文研究报告 2019年12月23日 06:49 管理员

If the developer is to expand its sales by 20% p.a. and keep its net debt scale unchanged, the land acquisition will account for 45% of its sales proceeds. As such, no external financing is required, and the net gearing will be lowered to 68% in three years. The land total saleable resources will increase by only 3% p.a. and the land bank duration will be further trimmed to 2.5 years.Despite more complexities, the M&A enables the leading developers to expand their saleable resources at more attractive costs and flexible payment term arrangements (i.e., instalment payment) can effectively alleviate their cash flow pressure, in our view. Currently, the M&A accounts for ~25% of the land bank for the developers under our coverage. We expect the ratio to rise at a faster pace amid the changing competitive landscape. Given the increasingly unfavourable operating environment for the small/local developers, we believe they will be more incentivised to line up with leading developers to better monetise their quality land assets. There are two exit routes for small/local developers. First, is to exit via the disposal of full stakes. This will enable them to fetch the proceeds and realise the disposal gain on sales. Second, is to retain some stakes with a longer partnership with the acquirers. With this model, the smaller/local developers can leverage the edge of leading players (i.e., stronger pricing power, better cost control, faster asset churn rate, etc.) and enjoy heftier development profit on top of the disposal gains. A more flexible payment term has been introduced in practice given the ongoing partnership. We see more incentive for the small/local developers is to adopt the second model.

Our simplified investment/gearing/land bank duration model shows that theoretically the developers can deliver a 20% sales growth with no requirement for external financing, whereas the land bank duration will be trimmed from 4.0 years to 2.5 years. This implies the necessity for Chinese developers to change their ‘three highs’ business model, which they have been adopting for the past decade. We believe the regulators’ financing controls prohibit developers from overly leveraging and sustaining a large-sized land bank. Meanwhile, with a much more moderate home price growth expectation, it is more rational for the developers to keep a shorter land bank duration with a faster asset churn rate to drive ROE expansion. Amid the changing operating environment, we see more divergent sales growth performances among developers as execution capability will count more with the land acquisition potential capped. Previously, developers were able to expand their sales scale by raising debt to acquire more new saleable resources. For players with weaker execution capabilities, a faster sales growth was also possible, although this could have been at the expense of more inventories (i.e., a lower sell-through rate) and an even higher net gearing level (i.e., more saleable resources required to stimulate sales). Going forward, with the regulators’ financing controls in place, developers will be forced to control the net debt scale, and sales growth will require improvement in capital utilisation efficiency, in our view. That said, a lower sell-through rate will trap more capital on inventory and constrain the potential for new land acquisition, which will eventually impair sales growth prospects for the developers.