Since the beginning of this year, with the introduction of a series of favorable policies aimed at stabilizing demand, reducing inventory, and lowering supply, the real estate industry has been continuously adjusting and beginning to release positive signals.
From the improving momentum shown by a series of industry prosperity indicators, it is not difficult to judge that the real estate market has bottomed out and stabilized, which also indicates that the industry is welcoming new opportunities.
As the industry bids farewell to the high-debt, high-leverage, and high-turnover model, how to achieve high-quality development has become a topic that major real estate companies need to continuously think about and practice. Among them, China Resources Land has set a good example and model.
Recently, China Resources Land has once again delivered a robust mid-term report card, with the company's solid performance continuously proving to the market its resilience and underlying quality through the cycle.
1. Delivering a robust mid-term report card, with core performance indicators showing steady progress
Looking at the company's mid-term financial report, the following performance highlights of China Resources Land are worth noting.
a. Revenue and net profit performance are robust, with a solid profit base
Firstly, looking at the overall performance.
In the first half of the year, the company achieved a comprehensive operating income of 79.13 billion yuan, a year-on-year increase of 8.4%; net profit attributable to shareholders was 10.25 billion yuan; core net profit was 10.74 billion yuan, a slight year-on-year decrease of 4.7%; among them, regular income increased by 9.0% year-on-year, accounting for 25.3% of total revenue, an increase of 0.2 percentage points. In the first half of the year, the company's earnings per share were 1.44 yuan; an interim dividend of 0.20 yuan per share (equivalent to 0.219 Hong Kong dollars per share) was distributed, a year-on-year increase of 1.0%.
In terms of gross margin, in the first half of the year, the company's comprehensive gross margin was 22.3%, remaining relatively stable. Among them, the gross margin of the development and sales business was 12.4%; the gross margin of the operational real estate business was 71.5%, and the gross margin of the operational real estate business (excluding hotels) was 77.4%. China Resources MixC Lifestyle's gross margin was 34.0%.It is not difficult to observe that China Resources Land has maintained a stable overall operation. Despite the challenging macroeconomic environment, the company has managed to sustain a relatively good operational state. Concurrently, through measures such as optimizing product structure, enhancing operational efficiency, and strengthening cost management, the company has effectively maintained the stability of its gross margin, thereby solidifying its profit foundation.
b. Revenue and profit structure continue to optimize, with the cyclical resistance attribute being continuously reinforced
Focusing on the specific performance of the company's core business.
In terms of recurring income business, in the first half of the year, the recurring income business increased by 9.0% year-on-year to 20 billion yuan, with the revenue contribution ratio increasing by 0.2 percentage points year-on-year to 25.3%, and the profit contribution increasing by 8.6 percentage points year-on-year to 51.4%. It is expected that the annual recurring income can cover dividends and interest twice.
In terms of development and sales business, in the first half of the year, it continued to maintain stable revenue and profit contributions. In the first half of the year, the company achieved a settlement turnover of 59.13 billion yuan for development properties, an increase of 8.3% year-on-year.
Overall, all core business segments of the company have maintained a trend of moving forward together. Especially from the rapid growth of recurring income business and the improvement of profitability, it is not difficult to see that the company has achieved significant results in the business of operational real estate and light asset management. The growth of such businesses with stable cash flow advantages not only helps to diversify the company's revenue structure but also further enhances the company's risk resistance, aiding in the stability of the company's profits.
c. Recurring income business performs strongly, with multiple formats continuously contributing cash flow
The company's recurring income business covers operational real estate business, light asset management business, and ecosystem element-based business. In the first half of the year, several major business segments moved forward together.In the first half of the year, the business of commercial real estate, including shopping centers, office buildings, and hotels, achieved a turnover of 11.47 billion yuan, a year-on-year increase of 7.0%. Specifically, during the period, China Resources Land's 82 operating shopping centers achieved a turnover of 9.48 billion yuan, a year-on-year increase of 9.7%, with an average occupancy rate of 97.3%, an increase of 1.1 percentage points year-on-year.
Despite the increased competitive pressure in the office building business, the company continuously optimizes the tenant structure and stabilizes the occupancy rate. In the first half of the year, it achieved a turnover of 950 million yuan, with an office building occupancy rate of 75.0%.
In the hotel business, benefiting from the recovery of consumption and the tourism economy, the company's 17 operating hotels achieved a turnover of 1.04 billion yuan, with an average hotel occupancy rate of 62.5%.
Next, in the light asset management business, including China Resources Mixc Life, the turnover in the first half of the year reached 5.89 billion yuan, continuing to maintain high-quality performance growth.
As of the end of June this year, the company's commercial operation and management business managed 108 projects, of which 23 were management output projects for third parties, and the brand competitiveness continued to strengthen. The property management business covers 164 cities across the country, with a managed business contract area of 446 million square meters, and the growth momentum continues to be strong.
Finally, in the business of ecological circle elements, including urban construction on behalf of others, rental housing, and the operation of cultural and sports venues, the turnover in the first half of the year reached 2.64 billion yuan, a year-on-year increase of 0.8%. Among them, the urban construction business on behalf of others achieved a turnover of 390 million yuan, the rental housing business achieved a turnover of 380 million yuan, and the operation of cultural and sports venues achieved a turnover of 300 million yuan.
d. Development business continues to be consolidated, with abundant and high-quality land reserves
In the first half of the year, although the real estate market is still in an adjustment cycle, the company still showed good resilience in the development and sales business, and the subsequent growth momentum is also worth watching.
Thanks to the company's good market strategy and positioning of its development products, the company's signed amount and signed area have remained stable. Data shows that the company achieved a property signed sales amount of 124.7 billion yuan in the first half of the year, and the signed area was 5.21 million square meters. Looking at the performance of the entire industry, China Resources Land's data not only reflects the competitiveness of the company's products in the market but also shows its ability to capture customer needs and grasp market trends.It is worth mentioning that as of the end of June 2024, China Resources Land has secured a contracted sales amount of 321.45 billion yuan that has been sold but not yet settled. It is expected that 166.12 billion yuan of this will be settled in the second half of this year, which also brings a good expectation for the growth of subsequent performance.
From a longer-term perspective, high-quality and abundant land reserves also provide a solid foundation for the steady development and future growth of China Resources Land in the real estate market. The financial report shows that as of the end of June this year, the total land reserve area of China Resources Land reached 56.99 million square meters.
Overall, thanks to the company's diversified strategy and effective management in operational real estate business, light asset management business, and ecological circle element business, the stable growth of these businesses not only provides the company with continuous cash flow, but also achieves organic business ecological collaboration, continuously consolidating the company's core competitive advantage.
e. Financially sound and recognized by the market, with significant financing cost advantages
In the first half of the year, on the one hand, China Resources Land continued to promote sales contracts, and on the other hand, it firmly grasped sales collection, continuously strengthening the company's liquidity and debt repayment ability, maintaining a controllable debt scale and a sound debt structure.
As of June 30, 2024, the company's total borrowings were 251.13 billion yuan. The net interest-bearing debt ratio was 33.6%.
In addition, the company has ample cash on hand. As of the end of June 2024, it held cash and bank deposits of 118.33 billion yuan, which provides ample protection for the company's daily operations and short-term debt repayment.
The company's financing cost is in the lowest echelon in the industry. As of the end of June 2024, the company's weighted average financing cost was about 3.24%, and the financing cost advantage is significant.China Resources Land's sound financial position has also been recognized by international credit rating agencies. In the first half of the year, the three international rating agencies, S&P, Moody's, and Fitch, maintained their ratings of "BBB+", "Baa1", and "BBB+" for China Resources Land, respectively.
2. Focusing on Diversified Growth Curves and Leveraging Large-scale Asset Management to Reach New Heights of Growth
It is not difficult to see from this financial report that while China Resources Land maintains a steady business posture in its development and sales operations, its recurring income business has shown even stronger growth momentum.
Looking at the characteristics of recurring income businesses, their operating assets can often provide the company with predictable and stable cash inflows, which will also help to strengthen the company's overall risk resistance. Asset management actions centered around these recurring income businesses are also quite interesting. Especially in the current context where the country is actively promoting the development of the REITs industry, it will also help to activate existing assets and better promote a virtuous cycle of investment.
It can be seen that China Resources Land is also actively deploying large-scale asset management.
In 2023, China Resources Land completed the construction of a commercial REITs platform. Its China Resources Huaxia Commercial Asset Closed-End Infrastructure Securities Investment Fund, as one of the first batch of consumer infrastructure REITs projects, was approved by the China Securities Regulatory Commission and was listed on the Shenzhen Stock Exchange in March this year.
With the successful launch of this commercial REITs platform, China Resources Land has also achieved a closed-loop system of investment, financing, construction, and management, which not only lays a solid foundation for its gradual transformation to large-scale asset management business but also will drive the company to usher in a new round of growth.
At present, China Resources Land is actively promoting the transformation of asset management business and steadily establishing a large-scale asset management platform and capabilities. It is worth mentioning that the launch of the Huaxia China Resources Commercial REIT has won a warm market response, laying a good start for the company's efforts in large-scale asset management.
Thanks to the excellent operation and management of the asset manager, the fund's performance has steadily achieved, with both fund income and distributable amounts exceeding the budget for the same period. As of June 30th this year, the Huaxia China Resources Commercial REIT fund has achieved a cumulative income of 274 million yuan, and the cumulative distributable amount of the fund has reached 138 million yuan, achieving 102% of the forecast value in the fund's prospectus for the same period.At the same time, in terms of dividends, Huaxia CR Commercial REIT continues to surprise investors. It announced its first dividend less than a hundred days after its establishment, and announced its second dividend less than six months after its establishment. The total dividend amount has reached 138 million yuan, with an annualized distribution rate of 5.04%, exceeding the forecast value in the fund's prospectus for the same period.
These achievements not only demonstrate CR Land's strong capabilities in asset management and operations, but also indicate the company's huge development potential in the field of large-scale asset management. As the company continues to promote strategic transformation and deepen reforms, the development prospects of CR Land in large-scale asset management are worth looking forward to. It is expected to continue to play a leading role in the industry, creating more value for investors.
The current real estate industry is facing a new development situation. Through CR Land's diversified layout, it is not difficult to see the company actively and continuously exploring new growth points, especially in the layout of large-scale asset management business, showing the company's sustainable growth under the closed-loop system of investment, financing, construction, management, and exit. This will also make it a model and benchmark for industry transformation.
With the continuous advancement of a new round of state-owned enterprise reforms, CR Land has obviously entered a new round of development under the reform guidance of "strengthening and optimizing the main business, enhancing core functions, and improving core competitiveness." The company actively responds to national strategies, achieves high-quality development through a combination of industrial layout and competitive strategies, and creates greater value for shareholders.
3. Drive sustainable operations with "high-quality development" as the core.
As an important part of the value judgment of listed companies, ESG, by the end of April this year, state-owned enterprise-controlled listed companies have achieved full coverage of ESG information disclosure.
As a pioneer in the field of ESG, CR Land has achieved significant results in promoting the company's high-quality development, focusing on ESG-related layouts.
Specifically, in terms of corporate governance, CR Land is committed to improving governance structures and enhancing management levels. The company continues to focus on six major areas of "corporate governance, employee development, product services, partner win-win, environmental benefits, and community contributions," fully integrating ESG into the company's development strategy and production operations. At the same time, working with shareholders, it continuously strengthens the identification and management of risks and opportunities, enhances the transparency of business operations, and ensures efficient and transparent decision-making.
In terms of the ecological environment, CR Land actively implements the national dual-carbon strategy and formulates and implements an action plan for carbon peaking. It continuously improves the environmental management system and promotes the development of green buildings. At the same time, it carries out continuous exploration and practice in urban environmental improvement and the practice of environmental protection concepts. Among them, in terms of green financing, last year, an additional 9.9 billion yuan of ESG loans were added, effectively expanding financing channels and reducing financing costs. In addition, the company continues to obtain internationally high-standard certifications, with a total of 12 projects obtaining WELL health and safety evaluations.In terms of social responsibility, China Resources Land strategically develops rental housing business to meet the multi-level housing needs of new citizens and young people. At the same time, the company actively plays its role in rural revitalization, national key project construction, ensuring national major events, and helping to improve people's livelihoods. The company participates in the construction of China Resources Hope Towns in Yimeng, Shandong and Arxan, Inner Mongolia, with a total of 14 Hope Towns completed and under construction, and another 4 are in the planning stage. In the first half of this year, the construction area of affordable housing undertaken was 16.19 million square meters, and 56,000 rental housing units were managed.
China Resources Land's ESG actions have also been continuously affirmed and recognized by authoritative institutions and all sectors of society. Previously in July, the company was rated 10th in the "China Listed Companies ESG Pioneer 100" list by CCTV. In addition, the company has maintained an A rating in the MSCI-ESG rating and is listed in the Hang Seng Sustainable Enterprise Index and the ESG50 Index constituent stocks.
While adhering to sustainable development, China Resources Land is also actively improving shareholder returns, promoting the growth of dividend rates and dividends, and showing concern for stakeholders. Data shows that the company has returned a total of 83.8 billion Hong Kong dollars to shareholders in the past decade.
From the above, it is not difficult to see the positive results of China Resources Land's sustainable development. This not only highlights its sense of responsibility and mission as an industry leader but also wins more recognition and support for the company in the capital market.
In particular, with the continuous heating up of the current ESG investment boom, China Resources Land's series of achievements will further enhance its attractiveness in the capital market and provide strong support for the company's future healthy and sustainable development.
4. Conclusion
Overall, China Resources Land has shown a good business performance in the new stage faced by the real estate industry. Whether it is the solid operation of the basic business, diversified exploration, or transformation around the direction of large-scale asset management, these have brought more imagination space for the company's future development.
At the same time, the company insists on the path of sustainable development, continuously practices ESG practices, wins widespread recognition from the market, and sets a benchmark for the industry's sustainable development.
The company's stable operating ability, high-quality asset layout, and continuous transformation steps provide a solid foundation for its growth during the industry adjustment period. With the continuous realization of performance growth and transformation results, the high-quality asset attributes of China Resources Land that steadily go through the market cycle are continuously established, and it is believed that the company's valuation will also have the possibility of revaluation.
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