This year, the term “new quality productivity” was included in the “Report on the Work of the Government” for the first time, which not only marks the country's firm commitment to innovation-driven development strategies, but also reflects the urgent need to accelerate the development of new quality productivity.
In the real estate sector in particular, Zhang Yadong, vice president of the China Real Estate Association and president of the Construction Agency Association, emphasized at the recent China Real Estate Agency Construction Summit”The contract construction business model is not only a new model for real estate development, but also a new type of productivity with high technology, high efficiency, and high quality. The rapid development of the contract construction industry in recent years has fully confirmed the superiority of contract construction as a new model for developing new quality productivity.”
From an investment perspective, the focus on new quality productivity at the national level has injected new development vitality and innovation impetus into the construction industry, while also guiding investors in a promising investment direction.
As a leading benchmark construction company, Greentown Management is a good observation sample. Through its recent latest strategic actions and results, we can clearly see the growth potential of a leading generation company.
1. The contract construction industry is an inevitable product, and there is plenty of room for long-term growth
First, examine it from the perspective of industry development. Currently, the real estate industry is undergoing a period of deep adjustment. The rise of the contract construction model not only responds to the immediate needs of the market, but also indicates the long-term transformation path of real estate companies through the cycle.
By observing the real estate development process in mature markets such as Europe, America, and Japan, it can be found that with the growing maturity of the market and the increasing diversification of consumer needs, real estate services have gradually evolved from the traditional single developer model to more segmented and specialized. The rise of the proxy construction model is a concrete manifestation of this evolving trend.
For example, in the European and American markets, asset-light operation services with “management” as the core have developed quite mature, and the market penetration rate of contract construction services can reach 20% to 30% in the overall real estate service market; in Japan, the cases where the three major real estate giants, Mitsui, Sumitomo, and Mitsubishi successfully overcome the economic crisis through asset-light models such as contract construction, have an important enlightening effect on the transformation of Chinese real estate companies in the current period of deep adjustment.
Drawing on these international experiences, ChinaThe growth path of the contract construction industry is very clear, and there is huge room for growth.
On the demand sideDriven by the continuous promotion of the “Three Major Projects” and the “Document No. 14” policy guidelines, service demand from the government, state-owned enterprises, and capitalists has increased significantly.
This growing trend has spawned many emerging proxy construction opportunities, including but not limited to insufficient project initiation by urban investment companies, preparation of affordable housing, comprehensive renovation of urban villages, “insurance” plans of troubled real estate companies, and the treatment of non-performing assets by financial institutions in the real estate sector.
For example, it is planned to build 9 million affordable rental housing units during the “14th Five-Year Plan” period; a third party agency predicts that the renovation of urban villages will be about 1 billion square meters.
More importantly, the proxy construction model provides a new cooperation model for various entities such as local governments, urban investment companies, state-owned enterprises, and financial institutions. Through proxy construction, these entities can share resources, complement each other's advantages, and jointly promote the smooth implementation of the project. With their professional technology, rich experience and efficient management, contract construction enterprises can provide a full chain of services from early planning to late operation, ensure high-quality completion of the project and achieve a win-win situation for all parties.
On the market side,Against the backdrop of the continued contraction of the domestic real estate industry,The rapid growth of the contract construction industry is evidentCountercyclical propertiesAt the same time, it also indicates that its market penetration rate is expected to continue to rise, and the industry generally expects the contract construction market to reach 100 billion dollars.
According to data from Yihan Think Tank, in 2023, the overall construction area of the contract construction industry was nearly 170 million square meters, an increase of 53% over the previous year. This remarkable growth trend has also attracted nearly 100 real estate brands to enter the field of contract construction one after another, further boosting the rapid development of the industry.
Data source: Yihan Think Tank
The cumulative number of contract construction projects that have been bid on also confirms the rapid growth trend of the contract construction industry.
According to research by Kerui Real Estate, the total number of contract construction projects won in 2023 reached 357, an increase of 50% over the previous year. In particular, in the first quarter of this year, the number of successful contract construction projects reached 118, an increase of 32.6% compared with the same period last year, setting a new high in recent years in a single quarter.
From the perspective of growth, the China Index Research Institute predicts that the share of the contract construction market in the industry will grow rapidly at an average annual rate of 21.3%. The market penetration rate is expected to increase from 4.8% in 2021 to 12.5% in 2025. Compared with the current share of European and American contract construction businesses of 20%-30%, if estimated at an average value of 25%, the penetration rate of the domestic contract construction industry still has room to grow 5.2 times, showing huge market potential and development prospects.
Overall,As a new model for the transformation of the real estate industry and a new quality of productivity, the contract construction model can guarantee the scale of development, maintain the size of the economy, and protect the stability of the entire industrial chain，It is gradually becoming a stabilizer of the Chinese real estate market, and its long-term growth potential is unquestionable.
Well, in the next stage of development, how to quickly adapt to new technologies and new ideas and achieve deep integration with new quality productivity has become a problem that needs to be solved urgently in the contract construction industry. This requires workers in the contract construction industry not only to have keen market insight, but also to have the ability to continuously learn and innovate to adapt to changing market needs and technological progress.
We might as well focus our perspective on Greentown management.
2. Grasp the pulse of the industry and continue to consolidate growth certainty and leading edge
With its first-mover advantage, Greentown Management has grown to the forefront of the industry in terms of scale, continuing to maintain the leading position in the real estate development service sector, and maintained a market share of more than 20% in the contract construction industry for eight consecutive years.
Financial reports show that as of December 31, 2023, the contract construction projects managed by Greentown have been deployed in 122 major cities in 29 provinces, municipalities and autonomous regions across the country, with a total construction area of 119.6 million square meters, an increase of 17.9% over the same period last year.
Of course, behind achieving such results, Greentown management must have a forward-looking vision and timely strategic adjustments.
First, Greentown managementAdapt to changes in the industry situation, continuously optimize the diversified customer structure, and continuously deepen business opportunities for the government, state-owned enterprises, financial institutions, etc.
Financial reports show that the government, state-owned enterprises and financial institutions accounted for 74.7% of the new development project construction in 2023. Based on contract project construction, the government, state-owned enterprises, private enterprises and financial institutions accounted for 26.8%, 34.2%, 31.7%, and 7.3%, respectively. It not only reflects the balanced development of Greentown Management among various customers, but also reveals its deep penetration in key market areas.
At the same time, the company continues to broaden its business boundaries, expanding its business scope from traditional residential development to diversified businesses such as industrial parks, public rental housing, talent apartments, shared property houses, future communities, municipal facilities, commerce, hotels and offices. This diversification of business types not only brought new growth points to the company, but also demonstrated the flexibility and innovation ability of Greentown management in the face of market changes.
Second, Greentown management alsoCombining a diversified customer structure with a nationalized business layout to promote business model upgrading,Take the leadApply informatization tools to expand the content of the contract construction business，devotesBuild a platform-based enterprise.
Specifically, the company carried out in-depth dismantling and restructuring of the contract construction business, refining the contract construction service into 6 major steps and 23 key touchpoints, forming a unique “M mountaineering model”, which provided clear guidance and guarantee for the smooth implementation of the project.
Source: Company Information
At the same time, through the promotion and use of the “Greentown M” app, it has also successfully simplified the management decision-making process, optimized the evaluation mechanism, and significantly improved the company's operational efficiency and per capita efficiency. This technology- and data-driven management method not only improved the operating efficiency of B-side customers, but also created beautiful life scenarios for C-side customers through the “M True Happiness Community” and maximized customer value.
Furthermore, in the process of building a platform-based enterprise, Greentown Management not only focuses on integrating internal resources, but also actively seeks opportunities for external cooperation. The “Baichuan Plan” launched by the company aims to introduce city partners through multiple cooperation models, attract excellent teams and high-quality construction projects, and inject new vitality into the development of the entire industry.
As reflected in financial data, the steady growth performance is sufficient to verify the correctness and growth of Greentown's management business model and various strategic initiatives, and also highlights the company's potential for continuous release of intrinsic value and growth.
Financial reports show that in 2023, the scale of the company's Xintuo business grew steadily, and revenue and profit continued to increase, achieving revenue of 3.302 billion yuan, up 24.3% year on year, and net profit to mother of 970 million yuan, up 30.8% year on year, maintaining the absolute leading position in the contract construction industry.
It is particularly worth mentioning that the company also has sufficient cash reserves. By the end of 2023, the company's net operating cash inflow reached 955 million yuan, an increase of 31.8% over the previous year. The strong increase in cash flow provided a solid financial guarantee for its continued investment and operation. Cash and equivalents reached $2,044 billion, an increase of 5.8% year over year, further enhancing the company's financial security and flexibility.
In terms of shareholder returns, Greentown Management maintains a high dividend policy, with a final dividend of 0.4 yuan per share, compounded by a special dividend of 0.1 yuan per share. The corresponding dividend ratio is about 100%, demonstrating the importance the company attaches to shareholders' interests and confidence in future profitability.
Source: Company Information
3. Summary
Today, under the trend of standardization and diversification in the contract construction industry, Greentown Management has shown a strong development momentum, whether in terms of scale expansion, increase in market share, or business development, showing new growth potential. It is believed that as profitability continues to be unleashed, the market will also give it new recognition and value evaluation.
Similarly, a number of brokerage institutions have also recently expressed positive expectations for the growth of Greentown management. For example, brokerage firms including Morgan Stanley, Citibank International, Haitong International, CICC, Societe Generale Securities, Dongwu Securities, and Guoxin Securities have rated the company “buy” and “outperform the industry.” We should probably pay more attention to it.