The Zhitong Finance App learned that Zhongtai Securities released a research report saying that property and real estate were further decoupled, the share of revenue and profit from real estate-related businesses in financial reports declined further, and impairment from real estate business also declined marginally. Furthermore, leading property companies are gradually increasing their dividend distribution rates. As the property industry reduces large-scale mergers and acquisitions and enters a period of steady growth, the distribution rate is expected to increase further. Concerns: 1) Property companies with a central state-owned enterprise background are expected to maintain their original performance promises with the support of strong developers, and at the same time, they are optimistic that high-quality properties will have higher upward flexibility after the industry has bottomed out.
The views of Zhongtai Securities are as follows:
Review of the performance of the property sector in 2023:
1) Strongly affected by external markets and the real estate industry: Since the beginning of 2023, the Hong Kong stock property sector has been affected by factors such as capital outflows due to the US dollar rate hike and the downturn in the real estate industry, and the stock price has declined sharply; 2) The market has had stricter corporate governance: CNOOC Property plans to carry out related acquisitions, and the stock price fell by more than 30% in the short term; 3) Buyback and increased holdings have not had a significant impact on stock prices.
2023 property sector business summary:
1) Slowing revenue growth: mainly due to a sharp decline in mergers and acquisitions and delays in real estate delivery. Looking ahead, the revenue of central enterprises is expected to continue to grow due to stable delivery and strong expansion; 2) Stable profitability: property companies began to drastically reduce real estate-related businesses in 2022, causing the sector's revenue share and gross margin to drop rapidly. The gross margin of property services-related businesses is generally stable, and profit margin fluctuations are expected to decrease in the future. Among them, high-quality companies are expected to continue to optimize expenses, net profit margins, or slight improvements; 3) The increase in receivables turnover days is generally manageable: due to rapid growth in non-residential business and non-residential business Increased proportion, customers There are objective reasons for the lengthening of payment cycles.
Property sector outlook for 2024:
1) Further decoupling from real estate: The share of revenue and profit from real estate-related businesses in property financial reports declined further, and impairment from real estate business also decreased marginally; 2) Increase dividends to give back to shareholders: Leading property companies are gradually increasing their dividend distribution rates. As the property industry reduces large-scale mergers and acquisitions and enters a period of steady growth, the distribution rate is expected to increase further.
Investment advice:
Property companies with a central state-owned enterprise background are expected to maintain their original performance promises with the support of strong developers: recommend CNOOC Property (02669), China Resources Vientiane Life (01209), Investment Savings (001914.SZ), and Poly Real Estate (06049).
At the same time, I am optimistic that high-quality properties will have higher upward flexibility after the industry bottoms up: I recommend Xindazheng (002968.SZ), Greentown Service (02869), and Xincheng Yue Service (01755). It is recommended to focus on Wanwuyun (02602), Yuexiu Service (06626), Binjiang Service (03316), and C&D Property (02156).
Risk warning: Real estate industry completion falls short of expectations; real estate market sales fall short of expectations; property fee marketization progress falls short of expectations; property management industry penetration rate falls short of expectations; risk of untimely use of research information; risk of data measurement bias.