Recently, the real estate market has ushered in a series of policy springs, which not only quickly activated the market, but also caused real estate-related concept stocks in the capital market to show significant gains.
According to Futubull Niu Niu data, since mid-April, the Hong Kong domestic housing stock sector once rose by more than 50%, which undoubtedly injected a dose of strength into the market.
In response to this, many institutions have also begun to give some guidance to the market.
For example, in the contract construction industry, Dongwu Securities pointed out that the financialization and specialization of real estate agency construction and development is the general trend. The contract construction industry is expected to maintain steady growth over the next 5 years, and the scale of the industry is impressive. Since the contract construction business has high requirements for the company's product reputation, credit qualifications, service awareness, and standardized knowledge systems, leading companies in the industry have a clear first-mover advantage, and it is expected that they will gain a higher market share in the future.
According to the author, the contract construction industry, as one of the important links in the industrial chain, has also shown its unique advantages with its asset-light operating model, high profit margin advantages, and stable returns from government construction projects, and has shown strong performance in the market.
Specifically, in terms of individual stocks, Greentown Management is a leading agency. According to data from Futubull Niuniu, its stock price also recently climbed to HK$7.98, a new high since listing.
This phenomenon not only reflects the market's recognition of Greentown's management business development, but also reflects investors' optimistic expectations for the future development of the contract construction industry.
Let's discuss this further. Does the contract construction industry have sustainable right-side opportunities? What kind of opportunities and development potential does Greentown management face?
1. Policy packages continue to increase, injecting fresh water into the construction industry
At the macro level of the industry, all levels, from the central government to the local authorities, have introduced specific implementation plans to promote the steady and healthy development of the real estate industry. The intensive introduction of these policies not only shows that the country attaches great importance to the steady and healthy development of the real estate market, but also shows its determination to regulate the market.
Specifically, at the central bank level, the central bank announced a reduction in the minimum down payment ratio for housing loans by 5 percentage points, the minimum down payment for the first home loan to 15%, and the minimum down payment for the second home to 25%; abolish the lower interest rate policy for first and second home loans at the national level; lower interest rate interest rates on provident fund loans by 0.25 percentage points; and plan to establish an affordable housing reloan with a scale of 300 billion yuan, which can drive 500 billion yuan in bank loans.
At the local level, Chengdu relaxed settlement conditions; Shenzhen introduced free supervision services for second-hand housing interbank “secured transfers” funds; Nanjing lowered the first loan interest rate by 0.15 percentage points; Lin'an District of Hangzhou plans to buy commercial housing as guaranteed housing; Beijing plans to optimize the criteria for determining the number of family housing loans; many places such as North Shanghai and Shenzhen have lowered interest rates on personal housing provident fund loans by 0.25 percentage points; Hefei and Foshan launched trade-in activities.
In addition, several hot cities, such as Beijing, Tianjin, Chengdu, and Nanjing, are also spreading good news about purchase restriction policies one after another. According to data from Central Plains Real Estate, since last year, all parts of the country have issued adjustments to purchase restriction policies more than 80 times.
In the author's opinion, the impact of policy adjustments on the real estate sector is particularly remarkable. The implementation of these policies not only establishes a comprehensive policy support framework and directly improves the fundamentals of the industry, but more importantly, they also help restore market confidence. Whether it is consumers' buying behavior or investors' investment decisions, it has injected a positive signal into the market and helped the real estate market gradually recover.
Some industry insiders said that by increasing innovative policies and reducing restrictive measures, it is possible to effectively stimulate the market's potential demand for home purchases, enhance market sentiment, and accelerate the recovery of the real estate market. This balanced policy regulation strategy has laid a solid foundation for the long-term development of the industry.
In such a general environment, the contract construction industry has also ushered in more business development opportunities. In particular, leading contract construction companies are expected to achieve double growth in scale and efficiency.
According to the data, the “Real Estate Agency Construction Research Report from January to March 2024" released by the China Index Research Institute indicates that the scale of new contracts for modern construction in 2023 grew by more than 50% year-on-year, fully demonstrating the strong growth momentum of the contract construction industry. Furthermore, industry concentration is concentrated on leading companies. In the first quarter of this year, the TOP5 contract construction companies added 58% of the new contract construction scale.
Kerry's statistics also confirm this. In the first quarter of this year, the total number of contract construction projects won the bid reached 118, an increase of 32.6% compared with 89 in the same period in 2023. This increase set a record for the highest single quarter in recent years. In particular, compared with the second half of 2023, there was a clear recovery in market popularity.
2. Pioneering advantages lay the foundation for growth, and seek high-quality growth by upgrading the business model
Looking further, is Greentown Management, as a leading enterprise in the domestic construction field, worthy of investors' attention? The author believes it can be discussed from two dimensions.
On the one hand, Greentown Management occupies a high market share, and its profitability continues to grow, laying a solid foundation for its own sustainable growth.
Based on central enterprise endorsements, leading effects, diversified customer structure and national layout, combined with the company's high-quality products, service capabilities, and innovation capabilities, Greentown Management's market share exceeded 20% for 8 consecutive years.
Under the first-mover advantage, the company will also have the opportunity to benefit from scale effects, gain more market share and resources, and continue to achieve high growth, thus forming a virtuous cycle of wheel effect and consolidating its leading position in the industry.
Financial reports show that in 2023, Greentown Management exceeded the annual operating target, and net profit to the mother increased by more than 30%, maintained a basic dividend of 80% and a special dividend of 20%, and distributed a final dividend of RMB 0.40 per share and a special dividend of RMB 0.10 per share to shareholders. It not only shows that the company attaches great importance to shareholders' interests, but also highlights Greentown's well-managed profitability and strong cash flow situation.
The continued release of profitability directly proves the correctness and growth potential of Greentown's management business model. As the company continues to expand in size and accumulate industry experience, its business model will also become more mature and stable, and continue to innovate and optimize to achieve better profits and continuous growth.
It is worth mentioning that the vast majority of projects undertaken by the government are focused on the construction and development of public housing properties and various types of public infrastructure. They occupy almost half of the entire scale of the contract construction industry, and have become an important driving force for most generation construction enterprises at present.
As the largest government construction service provider in the country, Greentown Management has been deeply involved in various types of affordable housing construction since 2005, covering a wide range of demolition and resettlement housing, shared property housing, public rental housing, talent apartments, etc., providing professional, efficient and win-win solutions for various parties such as local governments, urban investment, central state-owned enterprises, and financial institutions.
By the end of 2023, the company government had delivered a total of 53 million square meters of construction, improving the living environment for nearly 350,000 Aboriginal households, demonstrating its positive role in promoting urban development and improving people's livelihood.
As the government continues to pay attention to and invest in affordable housing construction, Greentown Management is expected to continue to play a leading role in the field of government agency construction and occupy more market share.
On the other hand, Greentown Management has also cleverly integrated a diversified customer structure with a nationalized business layout, promoted business model upgrading, expanded contract construction business content, empowered the industry ecosystem, and strengthened the company's growth.
Simply put, the company uses the “M mountaineering model” to improve business fulfillment for B-side customers, and the “M True Happiness Community” to create a beautiful life scenario for C-end customers.
At the B-side customer service level, Greentown Management focused on operational implementation, and carried out in-depth dismantling and restructuring of the contract construction business, refining the contract construction service into 6 major steps and 23 key touchpoints, forming an “M mountaineering model”, and standardized, systematized, and processed the service.
The full-network open source of the “M Mountain Model” has also promoted knowledge equality and technology inclusiveness in the construction industry. This move not only enhances the “yield rate” of the entire industry, but will also lead real estate development services into a new era of standard industrialization, opening up a new situation for the development of the industry.
In terms of C-side customer service, Greentown Management launched the “M Lucky Community” service system to dig deeper into the lifestyle habits and emotional needs of owners of different age groups and create a full-age and age-appropriate living space, reflecting the company's deep insight into customer needs and relentless pursuit of beautiful life scenarios.
In order to better serve C-side customers, Greentown Management also released the “2023 Greentown Management and Construction C-End Customer Research White Paper” based on customer research data from 36 cities, 58 projects, and 4,419 groups across the country. This white paper focuses on third- and fourth-tier cities. Through in-depth understanding of the value needs of C-side customers, it not only drives the company's product development and service improvement, but also creates performance growth for B-side clients.
In addition, Greentown Management is also actively strengthening its leading position in the industry and promoting the standardized and specialized development of the contract construction industry through open source knowledge systems and top-level designs such as preparations for the establishment of the China Construction Industry Association.
3. Summary
Overall, after more than 30 years of development, the business model of the contract construction industry has gradually matured and stabilized. With the continuous introduction of affordable rental housing policies in recent years and the special environment of the downturn in the real estate market, the penetration rate and market share of government construction, commercial construction, and capital construction services have continued to increase.
Greentown Management's leading performance in various aspects such as business development and profitability has not only laid a solid foundation for its own sustainable development, but also demonstrated strong investment value and growth potential. Under the active impetus of the current real estate policy, Greentown Management is expected to further benefit from the recovery and recovery of the market, and with its continuous performance growth and profitability, it is expected to reap its own “alpha” returns in the market.