Author | Anjou Cao

Editor | Zhou Zhiyu

Shortly after the Shenzhen Railway, the majority shareholder of the state-owned company, helped Vanke get out of the shorting crisis, Vanke handed over a steady financial report and proved its safety with financial data.

On March 28, Vanke released its 2023 financial report. Financial reports show that in 2023, Vanke achieved operating income of 465.74 billion yuan and net profit of 12.16 billion yuan to mother. Revenue and net profit remain at the top of the industry.

In the financial report, Vanke also proposed a number of specific measures for how to overcome the current storm that the market is most concerned about. Vanke said it will maintain positive cash flow at the operating level, increase safety cushions on a large scale, and firmly reduce leverage. The plan is to cut interest-paying debt by more than 100 billion yuan over the next two years.

Furthermore, following Vanke's board chairman Yu Liang's salary cut by 10 million yuan in 2022, management, including Yu Liang, CEO Zhu Jiusheng, and Supervisory Board Chairman Xie Dong, will voluntarily receive a monthly salary of 10,000 yuan before the announcement of the 2023 financial report.

In terms of financial data, Vanke's overall performance in 2023 was good, achieving full-caliber sales of 375.54 billion yuan, ranking 2nd in the industry. Under pressure from sales and revenue, Vanke still achieved positive cash flow.

By the end of 2023, Vanke had monetary capital of 99.81 billion yuan, which could cover interest-bearing liabilities due within one year; the balance ratio excluding housing payments received in advance was 65.5%, down for 5 consecutive years from a high of 76% in 2018, and the operating cash flow has been positive for 15 consecutive years.

At the same time, despite the significant contraction of overall financing in the industry, Vanke still received the trust and support of major financial institutions.

In 2023, Vanke obtained a total of nearly 90 billion yuan in new financing at home and abroad, of which 76.6 billion yuan was added domestically, and the comprehensive cost of additional financing was 3.61%.

What is worth looking forward to is that in recent years, Vanke has closely followed the national real estate finance support policy guidelines and actively expanded new financing channels.

Since 2024, Vanke, including its subsidiary Yinli Group, has added a total of 10.9 billion yuan in operating property loans to achieve continuous optimization of the capital and debt structure.

Currently, Vanke is at the forefront of housing companies' financing through operating businesses.

The CICC Yinli REIT is in the inquiry stage. Wanwei Logistics REIT has been officially released on the exchange, and the long-term rental apartment REIT is currently being actively declared.

This means that Vanke is expected to become the only company in the industry to achieve breakthroughs in three operating REITs.

According to industry insiders, the breakthrough in REITs in the operating business not only reflects the market's recognition of Vanke's transformation achievements over the years, but will also help Vanke open up a closed loop in the “investment, financing, management, and withdrawal” business model of operational real estate, achieve more efficient and healthy operation of assets and capital, and ensure the sustainable development of the operating business.

In fact, along with the expansion and development of REITs, Vanke's operational business capability advantages will become more apparent, providing a richer source of short-term liquidity and long-term value growth.

In 2023, Vanke's commercial business achieved revenue of 9.11 billion yuan, an increase of 4.6% over the previous year. A total of 203 commercial projects were opened, with a construction area of 1.58 million square meters, accounting for more than 90% of commercial projects located in Tier 1 and 2 cities.

Vanke's logistics business has also performed well. Since the launch of the national warehousing network layout in 2015, the scale of cold chain storage has remained the largest in the country. In 2023, revenue reached 4.18 billion yuan, an increase of 17.2% over the previous year. Among them, cold chain revenue increased by 33.9% year on year.

Industry insiders believe that at present, the risk of housing companies' default is spreading further to mixed ownership housing enterprises. Market concerns are strong, and even Vanke, which has always been steady, has faced confidence challenges. However, judging from the results of the annual report, Vanke has maintained a safe bottom line and has built core capabilities for a new real estate development model around products and services, which is really not easy.

In addition to Vanke's own efforts, Vanke's ability to get through 2023 smoothly and has abundant financing is inseparable from the strength of its major shareholders.

In November 2023, when Vanke faced a shorting crisis, the Shenzhen State-owned Assets Administration Commission's positive statement played a key role in stabilizing market confidence. Afterwards, the Shenzhen State-owned Assets Administration Commission also coordinated a number of state-owned enterprises to connect with Vanke to promote the implementation of various specific support measures through market-based and rule-of-law methods.

Shenzhen Railway's strong support continued until this year.

In January, Shenzhen Investment Control, an investment platform owned by Shenzhen's state-owned investment platform, acquired 6.16% of Shenzhen Hi-Tech Investment's shares from Vanke's subsidiary; in March, Shenzhen Railway plans to subscribe to CICC Yinli Consumer REIT through a strategic placement. The subscription share is 29.8% of the fund's total share, with a subscription amount of about 1 billion yuan, for a blood transfusion for Vanke.

In a market environment where recovery is weak, Vanke will still adhere to the principles of “stability is king” and “cash is king” in order to continue to safely overcome the current industry downturn cycle.

Looking ahead to 2024, Vanke said it will focus on pushing the company to smoothly overcome the model transformation and ensure a safe bottom line.

On the sales side, Vanke will stick to the goal of outperforming the general trend, maintain positive cash flow at the operating level, and cash out the “reservoir” through bulk asset and equity transactions to further strengthen the safety cushion. Vanke expects to achieve transaction repayment of no less than 30 billion yuan in 2024.

In addition to the debt reduction plan of more than 100 billion yuan, Vanke also stated that it will fully and actively integrate into the urban real estate financing coordination mechanism to promote the transformation of the financing model. At that time, Vanke will also be able to stabilize creditors' and investors' confidence.

As the leading mixed ownership housing enterprise in the industry, Vanke is also expected to stop the spread of the industry's credit crisis and promote a steady recovery in industry confidence.