Country Garden posted record earnings last year, up 13%, with 181.3 billion yuan in cash on hand

2022-06-20 0 By

On March 30, Country Garden (02007.HK) released its 2021 results.In the whole year of 2021, Country Garden achieved a total contractual sales amount of about 558 billion yuan attributable to shareholders’ equity, and the contractual sales area of equity was about 66.41 million square meters.The company’s sales scale remains the industry’s leading, the debt scale and financing cost have achieved “double reduction”, and the debt structure has been further optimized.After the report, country Garden’s shares rose nearly 9% in the afternoon on March 30 and closed 6.29% higher.In the middle Finger Research Institute, Clarice and other third-party statistics of the annual sales ranking, Country Garden is the only full-caliber sales of 700 billion class of real estate enterprises, is the only equity sales of 500 billion real estate enterprises, continues to lead the industry.Statistics show that during the period from 2015 to 2021, the compound growth rate of contract sales amount of rights and interests of Country Garden reached 29%.Mo Bin, president and executive director of Country Garden, said at the company’s earnings conference on The afternoon of March 30 that there is still a lot of room for improvement in China’s urbanization level, and the urbanization process will continue to advance during the 14th Five-Year Plan period.”We are cautious about the macro market, but we will still monitor the micro market, flexibly adjust the supply and sales strategy, and actively grasp the market opportunities.”Data showed that 75 percent of Country Garden’s total equity sales of 558 billion yuan in 2021 came from the five metropolitan areas and 68 percent from third – and fourth-tier cities.From the perspective of core earnings indicators, during the reporting period, Country Garden’s operating revenue increased by 13% year-on-year to 523.06 billion yuan, while gross profit, net profit and core net profit attributable to shareholders were 92.78 billion yuan, 40.98 billion yuan and 26.93 billion yuan, respectively.Enterprise operation has maintained a solid advantage.At present, the industry capital surface continues to tighten, coupled with a number of real estate enterprises bond maturity to meet the debt repayment peak, abundant cash flow has become the cornerstone of enterprises to resist risks.During the reporting period, country Garden’s equity property sales cash recovery of about 502.2 billion yuan, equity recovery rate reached 90%, has reached 90% or above for six consecutive years, greatly ensuring the safety of corporate operating cash flow.In 2021, Country Garden achieved positive net operating cash flow of 10.86 billion yuan, and its hematopoietic capacity remained strong.In the first two months of 2022, Country Garden achieved a total of 65.68 billion yuan in equity sales, with an equity recovery rate of over 95%, further improving the recovery rate.In addition, Country Garden continued to optimize its debt structure in 2021, further enhancing its financial soundness.As of December 31, 2021, the cash balance of the company is about 181.3 billion yuan, and the available cash reserve is sufficient;The balance of total interest-bearing liabilities dropped 2.6 percent year on year to 317.92 billion yuan, among which the proportion of short-term debt dropped to 25 percent and the ratio of cash to short-term debt was about 2.3 times.Net debt ratio of 45.4%, compared with the end of the previous year optimization 10.2 percentage points;The weighted average cost of financing fell 36 basis points from the end of last year to 5.2 percent.As for the three red lines, Country Garden is still in a healthy yellow zone, with a good net debt ratio and short cash debt ratio. The asset-liability ratio excluding prepaid accounts has also dropped to 74% from 80% at the end of 2020.Management said in its earnings release that the company would naturally move from yellow to green by mid-2023.In view of its continuously optimized operating and financial fundamentals, Country Garden has been recognized by rating companies and major financial institutions and maintained a stable rating during the downtrend of the industry.Since the mainland real estate industry entered a downward cycle in the second half of 2021, the three major international rating agencies have successively lowered the rating or outlook of the evaluated real estate enterprises for more than 250 times, reflecting the impact of the downward industry on the credit qualification of real estate enterprises.Against this backdrop, Moody’s and Fitch still maintain their “investment grade” ratings on Country Garden, while STANDARD & Poor’s maintained the company’s “BB+” rating with a “positive” outlook.Restart domestic and foreign financing channels Steady operating strength, better solvency, country Garden has won the recognition and support of the capital market.Currently, Country Garden is one of the few private real estate companies in the industry that has successfully restarted financing channels at home and abroad.Before September 2021, Country Garden will seize the market opportunity to issue long-term, low-cost financing instruments in both domestic and overseas markets.Since September, country Garden has successfully issued a variety of direct financing instruments at home and abroad, including 1 billion yuan of corporate bonds, 1.5 billion yuan of ABS and 3.9 billion Hong Kong dollars of convertible bonds, with the support of multiple regulators and investors.In March 2022, Country Garden was approved by the Association of Interbank Dealers for the first time a 5 billion yuan quota, which is expected to be issued after the earnings release.At the same time, The development of Country Garden has been fully supported by the banking institutions.By the end of 2021, the company’s unused credit line was about 261.5 billion yuan.In March 2022, the company successively signed strategic cooperation agreements of 15 billion yuan and 40 billion yuan with China Merchants Bank and Agricultural Bank of China Guangdong Branch.Country Garden has also been buying back US dollar bills in the open market recently.As of December 30, 2021 and as of March 13, 2022, the Company has repurchased a cumulative principal amount of $45.7 million in senior notes.On March 22, Country Garden Group announced that all directors, supervisors and senior management would purchase corporate bonds of up to 100 million yuan in the secondary market.Analysts believe that country Garden’s core management has invested in the company’s bonds to show its confidence in the company’s future ability to continue operations and repay its debts.As of December 31, 2021, country Garden had 3,216 projects in 299 prefecture-level administrative divisions and 1,425 districts and counties in 31 provinces in mainland China, according to the report.Among the cities in which the company operates, 161 prefecture-level cities occupy more than 5% of the city, among which 13 cities occupy more than 20%, and 55 cities occupy between 10% and 20%.In terms of land storage resources, by the end of 2021, Country Garden’s saleable resources of rights and interests in mainland China are about 1.484.6 billion yuan, and the potential saleable resources of rights and interests that are basically locked but not yet signed are about 336.5 billion yuan, totaling about 1.8 trillion yuan, which can maintain the company’s sales demand in the next three years or so.98% of available sales by the end of 2021 will be in areas with more than 500,000 permanent residents;93% are located in areas of population inflow;75% are located in the Yangtze River Delta, Pearl River Delta, Bohai Rim, middle Reaches of Yangtze River and Chengdu-Chongqing metropolitan areas, in line with the national major regional development strategy and population mobility trend.In the whole year of 2021, Country Garden acquired 333 pieces of land with a total equity cost of about 141.6 billion yuan and corresponding goods value of about 420 billion yuan, with an equity ratio of more than 85%.In terms of value, 66% of newly acquired land was distributed in third-tier and fourth-tier cities, and 29% acquired land through diversified means, leveraging 37% of the value of equity.In terms of goods promotion, Country Garden expects that the annual sales volume of equity will reach 650 billion yuan in 2022. The company will carry out closed-loop management according to the principle of “determining supply based on sales”, and the annual deletion rate is expected to be no less than 70%.The company will timely adjust the supply and sales arrangement according to the market situation, and it is expected that the overall annual sales remain stable.In addition, Cheng Guangyu, executive vice president of Country Garden, said at the results presentation that acquisition and acquisition has been an important means of land acquisition for Country Garden.Since the second half of last year, market fluctuations and industry differentiation have increased the acquisition opportunities, and Country Garden will also increase some deployment in this aspect.”Since the fourth quarter of last year, we have communicated with more than a dozen partners on more than 80 projects. So far, we have completed the acquisition and acquisition of 35 projects, and about 30 of them have been basically confirmed.”