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our reporters guo yangchen and zhang jiazhen reported from shanghai

(among the four strategic sectors of zhongan group, real estate is the core business. image source: company official website)

“it’s been a long time since i’ve seen zhongan group in hangzhou’s land auction market. in the past two years, this company was still spending a lot of money to aggressively acquire land. now its top priority is to accelerate the launch of the market while ensuring a certain profit. "recently, the twelfth batch of land auctions in hangzhou, zhejiang province ended peacefully, but local real estate company zhongan group (00672.hk) was still missing. a senior local real estate industry person said with emotion. .

"china business news" reporters learned that from 2021 to 2022, when most private real estate companies were shrinking their fronts, zhongan group spent about 16 billion yuan to acquire 19 land parcels. this kind of expansion strategy against the trend has also made zhongan group, which has always been low-key, famous.

zhongan group, which bucked the trend and "surged wildly", soon felt the "sequelae" caused by radical expansion. financial report data shows that in the first half of 2024, zhongan group’s real estate contract sales amount was approximately 2.875 billion yuan, a year-on-year decrease of approximately 61.4%; its profit was approximately 118 million yuan, a decrease of approximately 24.5% compared with the same period in 2023; the profit was only 62.509 million yuan, a year-on-year decrease of 68.2%.

in addition, zhongan group has also proposed a development strategy that focuses on both light and heavy tasks. it has been deploying construction agency business since 2016, but the development trend is not satisfactory. from 2024 to now, zhongan group has not only failed to gain anything, but its comprehensive capabilities are also ranked outside the top 30 in the construction agency industry.

in response to the difficulties in the construction agency business, existing land reserve development plans and future development strategies, the reporter called the headquarters and investor relations department of zhongan group and sent an interview outline by email. zhongan group staff stated that they have informed relevant departments of the interview requirements. however, as of press time, the reporter has not received any further reply.

financial report data "makes an own mistake"

due to a printing error, the total construction area of ​​the land bank in zhongan group's 2024 interim results announcement was enlarged a hundred times to 810 million square meters. zhongan group, which recognized its mistake, later issued a clarification announcement, stating that it determined that the total construction area of ​​the revised land bank was approximately 8.1 million square meters.

in fact, this is not the first time zhongan group has been careless. in the 2023 interim financial report, the land reserve area disclosed by zhongan group was an unreasonable 964 million square meters, but the company did not issue a clarification announcement on this.

zhongan group's financial report data has repeatedly "made mistakes", which has also brought this zhejiang-based real estate company into public attention again. public information shows that shi zhongan, the founder and chairman of the board of directors of zhongan group, was a civil servant in the finance and taxation bureau of xiaoshan district, hangzhou. he served as the general manager of xiaoshan galaxy real estate development company and presided over the development of bank galaxy apartments, galaxy business center, galaxy well-known projects such as residential areas.

time forwarded to 1997, shi zhongan decided to start a business overseas and established zhongan real estate company, the predecessor of zhongan group. he soon won a residential land in xiaoshan district and successfully developed his first project, zhongan garden. expand to zhejiang province with hangzhou city as the center.

under shi zhongan's "helm", zhongan group has become a large enterprise group in zhejiang province that also owns real estate, commercial and property management listed companies. among them, zhongan group is responsible for real estate development business, china new city (01321.hk) is mainly engaged in commercial project operations, including businesses, hotels, industrial parks, office buildings, etc. zhongan smart life (02271.hk) focuses on residential properties management services.

although it has been 26 years since its establishment, zhongan group became a blockbuster in 2021. this year, zhongan group spent a total of about 11.1 billion yuan to acquire 12 land parcels, with an additional land area of ​​about 1.93 million square meters; in the first half of 2022, zhongan group spent about 4.9 billion yuan to acquire 7 land parcels. , the newly added land construction area is approximately 524,000 square meters, becoming a veritable real estate "dark horse".

soon, zhongan group’s “wild surge” in the local auction market came to an abrupt end. from the second half of 2022, zhongan group will no longer add new land reserves.

in response to this, zhongan group ceo zhang jiangang responded at the 2024 annual performance report meeting that the reason for not acquiring land in the land market in hangzhou and other cities in 2023 was out of consideration for stable operations, and the company’s current land reserves are also limited. enough for development in the next few years. "while maintaining a sound financial position of the group, we will appropriately purchase some land that meets development requirements."

zhongan group also revealed in its financial report that as of the end of the first half of 2024, the existing land reserves will be sufficient to support the company's development in the next five years.

repeatedly emphasize the word "stable"

expanding against the trend during the downturn in the real estate industry has also allowed zhongan group's performance to increase significantly from 2022 to 2023.

financial report data shows that in 2022, zhongan group achieved operating income of 9.25 billion yuan, a year-on-year increase of 86%; net profit attributable to the parent company was 187 million yuan, a year-on-year increase of 155%. in 2023, the company's operating income was 14.49 billion yuan, a year-on-year increase of 56.6%; profit was 287 million yuan, a year-on-year increase of 1240.5%; net profit attributable to the parent company was 479 million yuan, a year-on-year increase of 156.8%.

since the beginning of this year, although zhongan group’s operating income has maintained high growth, its profits have declined significantly. financial report data shows that in the first half of 2024, zhongan group achieved operating income of 9.283 billion yuan, a year-on-year increase of approximately 127.6%; gross profit was approximately 1.830 billion yuan, a year-on-year increase of approximately 161.7%; but profit was approximately 118 million yuan, a year-on-year increase of approximately 127.6%. a decrease of approximately 24.5%; the profit attributable to owners of its parent company was only 62.509 million yuan, a year-on-year decrease of 68.2%.

specific to the real estate business, zhongan group’s real estate sales also declined significantly. financial report data shows that in the first half of 2024, zhongan group had more than 40 projects for sale, mainly distributed in multiple cities in the yangtze river delta region, and recorded contracted sales of approximately 2.875 billion yuan, a year-on-year decrease of approximately 61.4%.

affected by the previous expansion against the trend, zhongan group’s cash flow situation is not optimistic. financial report data shows that from 2021 to 2023, zhongan group’s net operating cash flow was -269 million yuan, 546 million yuan, and 2.781 billion yuan respectively, and its net financing cash flow was 2.040 billion yuan, -1.880 billion yuan, and -4.969 billion yuan, and the net investment cash flows were -1.327 billion yuan, -920 million yuan, and -26 million yuan respectively.

for this reason, the other two major listed company platforms controlled by shi zhongan began to frequently provide "blood transfusions" to zhongan group, among which china new city was the most prominent. in june 2022, china new city entered into a financial advance framework agreement with zhongan group and will provide recurring advances to zhongan group. according to the agreement, the upper limits of advances china new city can make to zhongan group from 2022 to 2024 are 1.2 billion yuan, 1.5 billion yuan and 1.8 billion yuan respectively.

despite this, zhongan group's short-term debt repayment pressure is still relatively high. financial report data shows that as of the end of the first half of 2024, zhongan group's total asset-liability ratio and net debt ratio were 69.1% and 44.8% respectively; it held cash and cash equivalents of 588 million yuan and restricted cash of 1.326 billion yuan. however, the total amount of borrowings is approximately 7.787 billion yuan, of which debt due within one year accounts for nearly 50%, reaching 3.588 billion yuan.

in this context, shi zhongan repeatedly emphasized the word "stable" at the 2024 performance conference. shi zhongan said that zhongan group will continue to promote sales and reduce debt in the real estate sector, adhere to the strategic plan of "deeply cultivating the yangtze river delta, with the core in zhejiang", and become a healthy enterprise.

according to shi zhongan, although there will be insufficient momentum for the recovery of the property market in the first half of 2024, as real estate policies begin to be continuously optimized, it is expected that homebuyers' confidence and expectations will gradually be restored, and sales are expected to gradually pick up in the second half of 2024.

transformation and construction of "wanwanji"

located at the intersection of xuefeng west road and fuxing road, beiyuan street, the main urban area of ​​yiwu city, zhejiang province, zhongan lakeside mansion has an average price of over 45,000 yuan/square meter for large flat-floor products, giving the project a place in the local high-end market. this is exactly the real estate construction project under zhongan group.

it is understood that as early as 2016, zhongan group established a professional platform for agency construction, forming a development strategy of “emphasis on both light and heavy tasks, and using heavy ones to promote light ones”. up to now, zhongan group has accumulated 36 construction projects, with a total contracted construction area of ​​approximately 5.6 million square meters. in addition to yiwu city, zhongan group's construction projects are also distributed in key cities such as hangzhou and ningbo in zhejiang province.

not long ago, guan jian, chairman of zhongan group's construction agency company, publicly stated that the current real estate market is still bottoming out, and more and more companies are transforming into agency construction companies. judging from the project experience negotiated, operational safety is definitely the top priority of the client. one of the indicators examined. "among private enterprises, zhongan group has always adhered to the business strategy of steady development, which provides us with sufficient transformation time and space to explore new models of agency construction."

according to guan jian, zhongan group always maintains the inertial mindset of sound management when choosing construction projects. in terms of project selection, in addition to operating indicators, zhongan group pays more attention to the mid- to long-term value of projects. for projects with short-term profits but medium- and long-term market risks or brand risks, zhongan group still has to give up; for projects with controllable risks, zhongan group prefers areas with larger market capacity. if there are only one or two projects in the opportunity area, team placement will be a big problem after the project is completed, and brand influence will not be formed.

"therefore, zhongan group pays more attention to whether the regions and cities where the projects are located have conditions for deep cultivation." guan jian said that zhongan group's construction agency business will maintain a high degree of fit with the real estate layout, and take zhejiang province as the base to take root in the yangtze river delta. for example, in yiwu city, where zhongan group has been intensively cultivating for 6 years, its product strength and delivery capabilities have gained market recognition.

in addition, zhongan group also stated that nowadays, agency construction projects are generally deeply tied to agency sales and agency operations. zhongan group has accumulated many years of experience in commercial, hotel and other fields, which is a plus when expanding its construction agency business.

although it has a complete methodology, zhongan group’s construction agency business can be described as “getting up early and arriving late.” according to statistics from the zhongzhi research institute, in the first half of 2024, the newly contracted construction area of ​​zhongan group was "zero".

at the same time, in the "ranking of comprehensive capacity of chinese real estate enterprises in construction agency for the first half of 2024" just announced by cric, zhongan group is not among the top 30, and "rookies" longfor longzhi manufacturing and xuhui construction agency are not among the top 30. construction management and investment promotion construction management are among the best.

under the pressure of competition in the construction agency market, how zhongan group can achieve new breakthroughs in its asset-light transformation is worth looking forward to.

(editor: zhang jiazhen review: tong haihua proofreader: zhai jun)