$LONGFOR GROUP (00960.HK)$ According to incomplete statistic...

$LONGFOR GROUP(00960.HK)$ According to incomplete statistics from China Real Estate News, as of August 18, nearly 80 A-share and Hong Kong housing enterprises have disclosed their performance forecasts for the first half of 2023. Of these, more than 60% of housing enterprises expect losses. The total losses range from 1 billion yuan to 55 billion yuan, and the cumulative total loss amount exceeds 100 billion yuan. However, amid the downturn in the industry, Longhu Group (00960.HK) handed over a report card boosting industry confidence in the first half of this year. Net profit was 8.06 billion yuan, and the core profit attributable to shareholders after excluding changes in fair value was 6.59 billion yuan, an increase of 0.6% over the previous year.

Judging from the changes in the real estate industry in recent years, the previous development model with high leverage and high turnover has not adapted to the development of the times. The industry has returned to rationality, and housing enterprises have begun to explore and adapt to new development models. How does Longhu Group survive in a complex and severe environment and maintain steady financial performance?

The three major businesses developed collaboratively, and net profit grew steadily

Recently, Longhu Group announced its mid-2023 results. In the first half of the year, Longhu Group achieved a turnover of 62.04 billion yuan and net profit of 8.06 billion yuan. Excluding changes in fair value, the core profit attributable to shareholders reached 6.59 billion yuan, an increase of 0.6% over the previous year. With about 60% of listed real estate companies in the industry expecting losses, it is not easy for Longhu Group to maintain a positive increase in net profit.

Looking at the split business, we can see the underlying factors behind Longhu Group's steady growth in performance. Against the backdrop of increasing industry differentiation, as real estate development leaves the model of high leverage and high growth, Longhu Group has already begun to lay out and build a diversified business structure to maintain a steady development model. In recent years, Longhu Group has focused on the three major businesses of development, operation and service, forming a “1+2+2” business pattern of the five major channels of real estate development, commercial investment, long-term rental apartments, property management, and smart construction. Under the collaborative development of the three major businesses, the Group's profit structure has been gradually optimized.

In the first half of this year, Longhu Group's operating revenue from operations and service businesses reached 12.2 billion yuan, an increase of 10.4% over the previous year. Among them, operating revenue reached 6.33 billion yuan, up 8% year on year, and gross margin was 77.3%. Meanwhile, service business and other revenue reached 5.84 billion yuan, up 13% year on year, and gross margin was 31.9%.

Real estate development is the main business of Longhu Group. In the first half of this year, it achieved a turnover of 49.87 billion yuan, a total construction area of 3.832 million square meters of delivered properties, and a gross margin of 14.3% for the development business settlement. Furthermore, in the first half of this year, Longhu Group achieved real estate development contract sales of 98.52 billion yuan, an increase of 15% over the previous year, and a sales repayment rate of over 100%, maintaining a high position in the industry. By region, sales in the Yangtze River Delta, Western China, Bohai Rim, South China and Central China regions accounted for 29.5%, 26.4%, 22.7%, 12.3%, and 9.1% of the Group's sales volume, respectively. Among them, Tier 1 and 2 cities account for 95% of sales. As of the end of June 2023, Longhu Group's sold but unsettled contract sales amounted to 246.5 billion yuan, covering an area of about 15.7 million square meters.

With the debt crisis of real estate companies, whether to secure the property has become a concern for many buyers. Judging from the delivery situation, in the first half of the year, Longhu Group delivered 84 projects, 62,000 apartments, and 100% as scheduled. At the same time, Longhu has launched services such as “cloud delivery” and “hand over the house and submit the certificate”. “With new communication”, the user experience has been continuously upgraded, and delivery satisfaction has reached more than 90%.