Sunac China’s results released this time, and peers are different.
First, the time was very early. When everyone was preparing to make a fortune in the end of March and April, Sunac released its financial results half a month in advance, which showed that it was quite confident about its performance last year.
The annual report data shows that in 2020, Sunac China’s operating revenue is about 230.59 billion yuan, an increase of about 36.2% compared with last year. Gross profit was about 48.4 billion yuan, an increase of about 16.9% over last year; Profits attributable to the owners of the Company amounted to about RMB35.64 billion, representing an increase of about 36.9% over the previous year; Core net profit was about 30.26 billion yuan, up about 11.8% from last year.
The capital market also responded, as of press time, Sunac China intraday up 11%, Hong Kong shares of many leading property companies also rose.
During the earnings call that followed, Sun Hongbin, Sunac’s chairman, was upbeat about the industry. “Ten years ago our sales were only 8 billion yuan,” says Sun Hongbin. “Now it’s the prime time for good companies.”
Good performance is inseparable from their own struggle, but also thanks to the course of history. The stock market and the appreciation of the yuan in 2020 are behind Sunac’s earnings surge.
Fry a good stock, rely on national fortune to make money?
On the premise that the gross profit increased about 16.9% last year, Sunac’s net profit increased about 40.4% last year. How can such high growth rate come from?
The answer is: the investment made money and the yuan appreciated.
Due to the large amount of US dollar bonds issued by Sunac, the exchange loss of Sunac in 2019 is about 870 million RMB due to exchange rate fluctuations. By 2020, Sunac earned 4.16 billion yuan in foreign exchange earnings.
There are 50 more small targets.
In addition, Sunac recorded 9.65 billion yuan of income from financial assets in 2020, mainly from the income obtained from the listing of Shell and the sale of financial assets such as gold branch. The number was 780 million in the same period last year.
Combined with a gain of about 2.57 billion yuan from the sale of joint ventures and associates (up from 14 million yuan last year), these three items alone generated 16.38 billion yuan in revenue this year, or 28.4 percent of profit before income taxes.
The stock market and the renminbi exchange rate in 2020 have created Sunac’s shining earnings numbers.
In terms of sales performance, the contracted sales amount of Sunac China is about 575.26 billion yuan, which has achieved 95.88% of the annual target and is still a little short of the annual target of 600 billion yuan.
Sun Hongbin responded at the performance meeting: “Such regulation and the epidemic, 20 billion less sales, there is no need to get 600 billion, I can get 6500.” He is very optimistic about the prospect of the industry, believing that the urbanization rate should be 20 points, the demand is very large, the industry development is still early, and in the future, there will be 3 enterprises over 1 trillion yuan.
“People are underestimating how good the real estate sector is.” Sun Hongbin said.
From the perspective of the revenue of each sector, in 2020, Sunac China Property Development achieved revenue of 218.8 billion yuan, accounting for 94.9%; The income of cultural tourism city construction and operation was 3.88 billion yuan, accounting for only 1.7%; Property management was 3.34 billion yuan, accounting for 1.5%.
According to the 2020 annual financial report, Sunac China Cultural Tourism Project has been implemented in 39 cities in China. Sun Hongbin believes that with the approaching of the Winter Olympics, the ice and snow industry will have better development in the future, and the cultural and tourism industry will also usher in a new period of development.
Continue to take the land, optimistic about the land plate wheel
“There are still a lot of opportunities in China. The small cities in Jiangsu and Zhejiang are very good. We need to see where the purchasing power is strongest and where hot money will go. We should not look at how much more expensive land we buy this time than others or the last time. We need to make a judgment about cities.” At the performance meeting, Sun Hongbin on part of the third – tier cities full of confidence.
In 2020, Sunac slightly increased the land reserve in third-tier and fourth-tier cities, and the cost of land storage decreased slightly. By the end of the reporting period, Sunac China’s land reserve is about 258 million square meters, of which the value is estimated to be about 3.1 trillion yuan, of which about 78% is located in first – and second-tier cities, with an average land cost of about 4,270 yuan/square meter.
In comparison, in 2019, Sunac’s land storage value was 3.07 trillion yuan, of which more than 82% was located in first-tier and second-tier cities, with an average land cost of 4,306 yuan/square meter.
For the policy of centralized land supply in key cities, Sun Hongbin thinks it is a good thing. “One of the policies is to make sure that the land supply is growing, to increase the land supply, but also to make sure that the land is transparent. This will give people an idea of how much land will be provided this year. This policy is good for enterprises in the core cities.”
In terms of land taking strategy, Sun Hongbin said Sunac 58 cities responsible for 120 cities can seize the opportunity of plate rotation, in the open market has a relatively large advantage.
Double reduction of debt ratio, “three red lines is a good thing”
From the perspective of this annual report, business revenue, profit achieved high growth, financial data also made a lot of progress. Sunac’s net debt ratio was about 96.0%, down about 76.3 percentage points from the end of last year. Unrestricted cash short debt ratio is about 1.08; The debt-to-asset ratio, excluding advances, was about 78.3%, down about 5.6 percentage points from the end of last year. The two red lines meet the standards, Sunac’s financial situation further improved.
Wang said the company’s debt target will continue to be optimized by 2023, and the last one will be completed ahead of schedule in 2022.
At the end of the reporting period, Sunac China had a cash balance of about 132.65 billion yuan and total loans fell to 303.4 billion yuan from 322.2 billion yuan at the end of 2019.
The increase in cash and the decline in total loans benefited from Sunac’s strong operating business hematopoietic ability. The net cash flow of Sunac China’s operating business was 73.71 billion yuan, the net cash flow of its investment business was 17.23 billion yuan, and the net cash flow of its financing business was 35.38 billion yuan. Cash inflows from operating operations exceeded the cash outflows from investment and financing by $21.1 billion.
“The total debt has not increased in three years, and sales have increased so much that the debt ratio must have come down. Regulation has made the industry safe.” Sun Hongbin said.
article links：The revaluation of the yuan makes 4.1 billion yuan
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