A number of construction departments are central state-owned enterprises, and they are speeding up their investment.
In the past two years, under the low temperature, the central state-owned enterprises of the "construction department", including China State Construction, China Railway Construction, Beijing Construction Engineering and other "construction departments", have taken land in the land market on a large scale, accelerated their layout, and are active in the land auction market in first- and second-tier key cities and hot areas.
According to the CRIC new value list, from January to November 2022 and 2023, a number of "construction" central state-owned enterprises have been continuously listed.
In terms of sales performance, 12 central state-owned enterprises of the construction department have been ranked among the top 100, and some of the "construction-based" central state-owned enterprises have become more and more influential in the real estate development business, and have formed a standardized product system. In view of the market activity and development trend, this paper will take the "architecture" central state-owned enterprises as the main research object, and analyze the current situation and prospects of their real estate development business from multiple dimensions such as sales, land acquisition, finance and operation.
It is worth noting that in the face of the economic downturn, the sluggish growth of the main construction business, and the continued downturn in the real estate market, the real estate development business of the "construction department" is also facing many challenges such as pressure on operating capacity and weakening of the momentum of real estate development and expansion, and the medium and long-term development is facing a great test.
1. Builders set up real estate development platforms to promote rapid business expansion.
"Developer" refers to a construction enterprise, which is mainly engaged in housing construction and infrastructure engineering, and is also involved in real estate development business.
According to the nature of the enterprise, it is divided into three categories: "Zhongzitou" infrastructure central enterprises, such as China State Construction, China Railway Construction and China Railway;Provincial or local construction engineering groups, such as Shanghai Construction Engineering, Beijing Construction Engineering, Chongqing Construction Engineering and other state-owned enterprises;Private construction enterprises, such as Zhongtian Holdings, Zhongnan Construction, etc.
Some builders also have a dedicated real estate development platform. For example, China State Construction, the country's largest construction and real estate comprehensive enterprise and housing construction contractor, its real estate development business can be traced back to the 80s of the 20th century, and currently has two major real estate brands: China Overseas Real Estate and China Construction Real Estate. There is China Railway, as early as the 90s of the 20th century began to get involved in the real estate development business, in 2006 the State-owned Assets Supervision and Administration Commission identified the real estate industry as the company's main business, providing a "access card" for the company to fully enter the real estate industry, in 2007 the establishment of China Railway Real Estate, is its main real estate development platform.
2. The construction and real estate business are synergistic, and the transformation of profit increase is the main driving force.
Based on the consideration of business synergy and thickening corporate performance, many builders have developed cross-border real estate early, and basically grown together with China's real estate industry.
The gross profit margin of the real estate industry has always been significantly higher than that of the construction industry (including housing construction and infrastructure), with the average gross profit margin of the industry peaking at 30%, while the construction industry is only a dozen percent, and the gross profit margin of the construction business of a typical large state-owned enterprise is basically at the level of 6%-8%.
During the period of rapid growth of the real estate market, a small number of "construction" private enterprises have also shown their prominence in the industry, such as Zhongnan Construction. However, under this round of downward cycle, private real estate enterprises have lost a large area, and "construction" private enterprises are no exception, and more and more "construction" central state-owned enterprises have broken through against the trend.
The central state-owned enterprises of the construction department are among the top 100, and the central enterprise giants have hit the head camp.
In the past two years, the central state-owned enterprises of the "Department of Architecture" have continued to make efforts, and the status and influence of the industry have been continuously improved.
In CRIC's "Top 100 Sales of China's Real Estate Enterprises from January to November 2023", there are 12 state-owned enterprises in the construction department, including China Overseas Real Estate, China Railway Construction, China Railway, China Construction Yipin, China Construction Dongfu, Shanghai Construction Engineering, etc., while there are only 5 and 7 respectively in the year.
From the perspective of the competition pattern, the "construction department" central state-owned enterprises are separated from each echelon, and the central enterprise giants are gradually attacking the head camp of the industry. In addition to China Overseas Real Estate, China State Construction has 4 platform companies on the listChina Railway Construction will enter the TOP20 in 2022 and rank 16th from January to November 2023CCCC Real Estate, a subsidiary of China Communications Construction Co., Ltd., also ranked among the top 20, ranking up 8 places from the end of 2022.
2. Some of them have formed a standardized product system to build core competitiveness.
In addition, the residential product series of the "construction department" central state-owned enterprises has been continuously enriched, the product details have been improved day by day, and the product quality has been improved day by day.
Among the eight major construction central enterprises, in addition to China Chemical, the remaining seven (China State Construction, China Railway, China Railway Construction, China Communications Construction, China Energy Construction, China Metallurgical Corporation, and China Power Construction) have created different standardized product lines for various types such as rigid demand, improved and high-end luxury houses.
In addition, some "construction-based" state-owned enterprises are also becoming more and more influential in the real estate development business, covering more and more product types and gradually expanding product series. For example, Shanghai Construction Engineering, in response to the needs of different regional markets and various types of home buyers, has formed a mid-to-high-end "Haiyue" brand, and the existing product series such as "Du", "Di", "Ting" and "Fu" have laid the foundation for standardized construction and precision marketing.
In the face of the economic downturn, the sluggish growth of the main construction business, and the continued downturn in the real estate market, the real estate development business of the "construction department" is also facing many challenges.
1. The operating capacity of the builder is under pressure and the credit risk is differentiated.
The construction department of "central state-owned enterprises counter-cyclical force, and has formed a certain influence in the industry, especially the construction of central enterprises represented by China State Construction, China Railway Construction, China Railway Construction, China Railway against the trend to replenish the position, the sales scale jumped to the head camp.
Affected by factors such as the downturn in the real estate industry, the growth rate of the main business of builders has declined significantly, especially in the recent past, the liquidity risk of real estate enterprises and local ** has continued to be released, and the operating pressure and credit risk have shown a rising trend.
2. The momentum of real estate development and expansion is weakened, and builders still need to practice "internal strength".
"The construction department of real estate enterprises is highly leveraged, liquidity is tight, and some weakly qualified enterprises are facing a greater risk of liquidation, and in this context, the overall motivation of construction enterprises to expand their real estate business downstream has weakened.
In addition to financial factors, there are three reasons:
1) The real estate industry is deeply regulated, and the real estate sales side continues to build a bottom, even if the core cities continue to release good news on the demand side in the recent stage, it still has not changed the sluggish trend of transactions, and the development of the industry has been "not what it used to be." ”
2) Construction enterprises lack experience in refined development projects, and the efficiency of capital turnover is weaker than that of real estate enterprises. The real estate industry is a capital-intensive industry, involving a long industry chain and many subjects, and has high requirements for the scale of investment funds, so the overall leverage ratio is high, which is similar to the construction industry. After years of development, the leading and stable real estate enterprises have formed their own project refinement management system, which puts forward higher requirements for capital turnover efficiency, while the scale of accounts receivable in the core business of construction enterprises is high, and there is a risk of loss of bad debts, with little experience in real estate development, weak project management capabilities, and weak overall capital turnover efficiency.
3) The trend of state-owned enterprise reform has allowed state-owned enterprises to return to their main business and gradually divest inefficient assets within the group. For example, in the past few years, central enterprises have accelerated the divestment of real estate business, and central state-owned enterprises with real estate development advantages have begun to promote internal resource integration and acquire real estate business, including the restructuring of Poly Development and Poly Real Estate, COFCO Real Estate and Joy City Real Estate, Nanguo Real Estate and Power Construction Real Estate. This trend will continue in the future. However, due to the attributes of the local first-class platform, the construction central state-owned enterprises are still positioned to undertake local first-class related affordable rental housing, urban renewal and other projects in the future, and they are less involved in market-oriented development business.
The real estate market continues to be sluggish, the road to rebuilding home buying confidence is long, the input-output expectations are still uncertain, and the liquidity test for developers continues.
The real estate industry has bid farewell to the era of high growth and extensiveness, and has increasingly relied on the internal strength of developers to produce performance, which is also the most severe test in the medium and long term.
Therefore, the construction engineering group should do what it can in real estate development, invest cautiously, and avoid "taking care of one or the other" or "falling short at both ends".
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Article**: Ding Zuyu commented on the property market