20211111-招银国际-China_Property_Sector_What_is_the_end_game__A_detailed_analysis_of_chairpersons__possible_bailout_8页_1mb

报告摘要

China Property Sector Summary

Core Content

The China property sector is undergoing a critical phase, with a focus on the potential for chairpersons to bailout struggling developers. The report suggests that while the industry as a whole faces challenges, certain developers may survive due to the personal wealth of their chairpersons, even under tight regulations. Investors are advised to consider accumulating short-term survivors and long-term winners.

Main Views

Market Recovery Signs: The property sector has shown signs of recovery with mortgage loans increasing YoY in October 2021 for the first time since April 2021. The M2 growth also improved, reaching 8.7% YoY, higher than market expectations.
Sales and Earnings Trends: Despite some improvement, developers are still facing significant challenges. October sales for most companies declined YoY, with an average of -21% and only 5.2% of 2021 targets achieved in the first ten months.
Development Strategy: Quality developers such as Longfor and COLI have been proactive in land acquisition, especially in Tier 1-2 cities, indicating a long-term strategy to strengthen their positions.
Chairpersons' Role in Bailout: Chairpersons are seen as the most likely source of bailout due to their significant personal wealth, which is often tied to the company's performance. The report evaluates whether their personal wealth can cover the cash needs in extreme scenarios.

Key Information

Valuation and Financial Metrics

Company	Chairperson's Wealth (RMB Bn)	Worth of its Listco (RMB Bn)	Personal Wealth (RMB Bn)	Cash Shortage (RMB Bn)
Evergrande	204	126	78	-75
Shimao	102	46	56	61
Country Garden	215	177	38	63
R&F	41	18	23	-8
Agile	45	22	23	17
Longfor	110	97	13	53
Sunac	59	50	9	4
CIFI	24	21	3	20
Aoyuan	13	10	2	0
Redsun	7	5	2	-1
Sinic	11	10	1	-1

Sales and Earnings Forecast (2022E)

Metric	Value (RMB Bn)	YoY Change
Residential GFA Sold	1,558	-2%
Residential Sold	16,281	0%
REI (Real Estate Investment)	11,702	5%

Market Comparisons

Company	Last Price (LC)	Mkt Cap (LC mn)	P/E (20A)	P/E (21E)	P/E (22E)	PB	Dividend Yield (20A)	Dividend Yield (22E)
Vanke - H	18.22	249,851	3.9	3.4	3.3	0.8	8%	8%
COLI	17.16	187,813	3.6	3.4	3.0	0.4	7%	8%
Country Garden	7.31	164,329	3.7	2.8	2.5	0.8	8%	7%
CR Land	30.30	216,067	6.0	5.6	5.2	0.9	4%	5%
Longfor	37.80	229,553	9.2	6.3	6.0	1.8	5%	5%
Shimao	12.24	43,252	2.7	2.3	2.0	0.4	13%	13%
Agile	6.12	23,972	2.1	2.0	1.9	0.4	18%	16%
KWG	6.80	21,644	2.7	2.2	1.9	0.4	16%	18%
China Aoyuan	3.07	8,608	1.0	0.9	0.8	0.4	38%	29%
Times China	5.31	10,536	1.7	1.2	1.0	0.5	17%	19%
China SCE	2.43	10,260	2.2	1.9	1.5	0.4	14%	15%
Redsun	2.24	7,479	3.7	2.9	2.5	0.5	8%	8%
Vanke - A	18.21	205,579	4.6	4.1	3.9	0.9	7%	8%
Radiance	4.07	16,464	3.8	3.3	2.7	0.8	7%	8%
Dafa	5.04	4,173	10.2	5.5	4.8	1.0	2%	3%
Shinsun	4.60	14,000	3.6	3.1	2.8	1.7	4%	5%
Dexin	2.61	7,051	5.9	5.2	4.5	1.2	6%	7%

Ratings and Recommendations

OUTPERFORM (Maintain): The China Property Sector is expected to outperform the relevant broad market benchmark over the next 12 months.
BUY: For companies with strong fundamentals and potential for recovery.
HOLD: For companies with moderate potential for returns.
Recommendations: Investors are advised to long the names mentioned as short-term survivors (Shimao/Sunac) and long-term winners (Longfor/COLI/CRL).

Conclusion

The report concludes that valuation-distressed developers like Shimao and Sunac can survive even in extreme conditions due to the personal wealth of their chairpersons. However, companies like Evergrande and Sinic may require additional support. The property sector is expected to continue its long-term recovery, with quality developers benefiting from strategic land acquisitions and the government's potential policy shifts, such as property tax reforms.

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