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Real Estate Firms Diversify for Wider Profit Margins

Recently, several listed real estate companies have successively released their sales data for September. Looking at the data for the first nine months, the real estate sales market remains sluggish, and listed real estate companies adopt a cautious strategy in land acquisition and investment. On the other hand, real estate companies are also actively expanding into new businesses such as integrated circuits and new energy to broaden their profit channels.

Institutional analysis believes that as the recent policy benefits continue to emerge, market expectations are gradually stabilizing. The competitive landscape of the real estate industry will continue to diverge, and companies need to find their own advantageous project types for more precise investment.

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Some companies have seen growth in their September performance, while real estate companies are cautious about investing in new projects.

On October 8, Sunac China announced on the Hong Kong Stock Exchange that the group achieved a contract sales amount of about 1.41 billion yuan in September, with a contract sales area of about 129,000 square meters. As of the end of September, the group has achieved a cumulative contract sales amount of about 36.45 billion yuan, with a cumulative contract sales area of about 1.792 million square meters.

On October 7, Greentown China released sales data, showing that in September, Greentown Group's self-invested projects achieved a sales area of about 310,000 square meters, with a sales amount of about 10.6 billion yuan. From January to September 2024, the group has achieved a total contract sales amount of about 187.2 billion yuan (including agency construction), with a total contract sales area of about 9.25 million square meters. In addition, CIFI Group also announced recently that from January to September, the group delivered nearly 41,000 new houses.

Looking at the sales data for the first nine months of this year, institutional data shows that the overall sales performance of the top 100 real estate companies in the industry is still on a downward trend, but some companies have seen a significant increase in their September single-month performance.

Data released by the China Index Academy on the 8th shows that from January to September this year, the total sales amount of the top 100 real estate companies was 2969.94 billion yuan, a year-on-year decrease of 38.8%, with the decline increasing by 0.3 percentage points compared to the previous month. In September alone, the sales amount of the top 100 real estate companies decreased by 38.81% year-on-year, and decreased by 2.20% month-on-month. In terms of sales performance scale, from January to September, there were a total of 6 real estate companies with sales amounts exceeding 100 billion yuan, 8 less than the same period last year, and 65 real estate companies with sales amounts exceeding 10 billion yuan, 31 less than the same period last year.

At the same time, affected by factors such as tight cash flow, the overall willingness of real estate companies to invest is low, and the scale of investment is contracting. According to statistics from the CRIC Research Center, in the first nine months of 2024, the average monthly land acquisition amount of the top 100 real estate companies with investment scale was only 69.6 billion yuan.

Taking the new land acquisition amount of the top 100 real estate companies monitored by CRIC as the sample data, the average monthly new land acquisition amount of these real estate companies was 315.9 billion yuan in 2021, 137.5 billion yuan in 2022, and 129 billion yuan in 2023, declining year by year. In the first nine months of 2024, the average monthly investment amount further decreased to 69.6 billion yuan.

CRIC analysis believes that at present, the investment strategy of the vast majority of real estate companies has shifted from the "active expansion" during the industry's upward cycle to "investment based on sales". Overall, the enthusiasm for land acquisition by companies continues to decline. From the perspective of real estate companies, this is also confirmed. Many real estate companies, in their mid-year report performance releases in 2024, mainly used stable and cautious expressions for investment and land acquisition, and in terms of city layout, they tend to focus on first and second-tier core cities.Actively Explore New Business and Expand Profit Channels

In recent years, as the real estate industry has continued to undergo in-depth adjustments, listed real estate companies have generally sought transformation to find new growth poles. Since September, several real estate companies have announced progress in their transformation, with new business directions including integrated circuits and new energy.

On September 26, Wan Ye Enterprise announced that the company had previously subscribed to the "Shanghai Semiconductor Equipment and Materials Phase II Private Equity Investment Fund" with its own funds of 400 million yuan. Currently, the total subscribed capital of the fund partnership enterprise has been adjusted to 2.1245 billion yuan, and the industrial and commercial change registration procedures have been completed, and the business license has been obtained.

It is reported that Wan Ye Enterprise mainly operates two core businesses: on the one hand, it focuses on the research and development, production, sales, and technical services of core equipment for integrated circuits; on the other hand, it is the sales and liquidation of existing real estate business. In the first half of this year, the company has continuously developed cutting-edge technologies and products through R&D investment. From 2024 to now, Kaisheng Tong and Jia Xin Semiconductor under the company have received integrated circuit equipment orders of about 220 million yuan. On the other hand, the company's real estate business has entered the final stage. While accelerating the liquidation of inventory, it will strengthen the transformation synergy and superposition effect, do a good job in the construction and operation of the integrated circuit transformation industry base, and help the core equipment business of integrated circuits to develop well.

On September 20, Hua Lian Holdings disclosed the progress of the company's production project production, showing that the company used its own funds of 480 million yuan to participate in the establishment of the Shenzhen Qianhai "Zhong Bao Qingyuan Huihai Industry Fund". The fund invested in two new energy companies, "Shenzhen Ju Neng" and "Zhuhai Ju Neng". Among them, the Zhuhai Ju Neng annual production of 5,000 tons of enriched material production project has been officially put into production after the previous debugging and trial operation, and the product quality is stable, and the product sales promotion is underway.

Hua Lian Holdings stated that new energy technology is causing a green revolution worldwide, and lithium is a key strategic resource, known as the "white oil" and "green energy metal" that will change the world pattern in the 21st century. The successful production of the Zhuhai Ju Neng adsorbent project may help increase the company's investment income and have a positive impact on the company's future financial situation, which is in line with the company's development strategy of "real estate to maintain stability, transformation to promote development", and is conducive to promoting the steady expansion of the company's industrial transformation work.

In addition, there are also many voices actively seeking transformation in the mid-term performance meeting of listed real estate companies and recent investor research activities. Qixia Construction said at the performance explanation meeting held on September 25 that the company will continue to adhere to the development model of real estate as the main business in the future, continue to improve the core competitiveness of the main business, and be cautious in preventing risks. At the same time, the company is also focusing on expanding the business scale of the engineering construction and property service sectors; continue to actively seek investment opportunities in the upstream and downstream of the industry chain, and expand profit channels.

Fuxing Shares introduced the company's future transformation and development direction in the investor relations activity records disclosed on September 19, saying that under the overall downward trend of the real estate market, while the company insists on steady operation, it is also actively trying to develop new businesses and explore the second growth curve. In July this year, the company and Rong Han Gongjin jointly established the Fuxing New Quality Productivity Transformation Fund, which will invest in fields such as biomedicine, new energy, new materials, and other industries that meet the company's industrial upgrading and transformation needs.

Good policies continue to be implemented, and market expectations are stable

Recently, there have been continuous positive signals on the policy front. At the press conference held by the State Council Information Office on October 8, Zheng Shanjie, the director of the National Development and Reform Commission, introduced the specific measures to systematically implement a package of incremental policies. In terms of real estate, it is proposed to promote the real estate market to stop falling and stabilize. This includes increasing the loan investment intensity of "white list" projects, using special bonds to support the revitalization of idle land, adjusting housing purchase restrictions, releasing rigid and improved housing demand, accelerating the improvement of land, finance, and financial policies, and accelerating the construction of a new model for real estate development. At the end of September, the central bank and other departments announced a series of favorable measures. Before and after the National Day holiday, many banks introduced specific plans to reduce the interest rates of existing housing loans.CRIC Research Institute analysis suggests that, from a policy perspective, there is still room for optimization in the regulatory policies of first-tier cities in the future; second-tier and third and fourth-tier cities are also expected to increase housing subsidies to further promote market stabilization in terms of volume and price. On the market front, the current "Silver October" has started with a performance that is "beyond expectations," with a clear "stabilization" trend in the core city markets, and residents' confidence in home buying is beginning to recover. It is anticipated that the favorable policies will continue to take effect in the short term, and the significant rebound in holiday subscription data will gradually be reflected in the online signing data. Market sales data for October may show a noticeable increase. Moving forward, improving the fundamentals remains key to stabilizing real estate and expectations. If policies continue to be effective and the economy accelerates its recovery in the fourth quarter, the housing market in core cities may gradually stabilize.

Regarding the corporate level, CRIC analysis points out that the current low investment situation is still in the process of bottoming out. In the future, high-quality land resources will accelerate their concentration towards leading real estate companies, and the competitive landscape of the industry will continue to diverge. Changes in investment attitudes also indicate that the era of market growth in the real estate sector has passed, and the future will mainly focus on revitalizing existing stock and selecting the best new projects for development. Furthermore, real estate companies need to identify their own advantageous project types and make more precise investments under a cautious investment strategy that focuses on high-energy cities.

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