Increase in revenue but not profit! Poly Development's revenue in the first half

Due to the stable growth in property management business, the leading real estate company Poly Development experienced a slight increase in revenue in the first half of the year. However, due to the decline in equity ratio, the company's net profit decreased by more than 39%. The business accelerated its recovery in the second quarter, with sales increasing by 75% quarter-on-quarter, and the market share slightly improved.

On August 19, Poly Development announced the financial report for the first half of 2024.

1) Main financial data

Revenue: In the first half of 2024, the company delivered 73,000 units, achieving a total operating revenue of 139.249 billion yuan, a year-on-year increase of 1.66%. The second quarter sales reached 110.4 billion yuan, a quarter-on-quarter increase of 75%, reversing the downward trend.

Profit: The gross margin was 16.0%, consistent with the level of the whole year of 2023; affected by the decline in the settlement equity ratio, the net profit attributable to shareholders of the listed company was 7.42 billion yuan, a year-on-year decrease of 39.29%; the basic earnings per share were 0.62 yuan, a year-on-year decrease of 38.89%.

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Cash flow: The net cash flow from operating activities was -17.1 billion yuan, a decrease of 24.3 billion yuan compared to the same period last year. The cash balance was 146.4 billion yuan, accounting for more than 10% of total assets.

Debt-to-asset ratio: At the end of the report period, the debt-to-asset ratio excluding advance payments was 65.67%, the net debt ratio was 66.18%, and the cash-to-short-term debt ratio was 1.22, maintaining a stable debt structure.

2) Shareholder returns

As of June 30, 2024, the company's repurchase special security account held 105 million shares of repurchased shares.

The contracted amount decreased by 26.81% year-on-year, and the market share was slightly improved.In the first half of the year, the company achieved a contracted amount of 173.336 billion yuan, a year-on-year decrease of 26.81%, and a contracted area of 9.5425 million square meters. The sales equity ratio in the first half of the year was 77%, an increase of 9 percentage points compared to the previous year. The equity sales amount was approximately 133 billion yuan, a 17% decrease compared to the same period last year, which is lower than the decline in the total sales amount.

Poly Development stated that in response to the rapid downturn in the market, the company actively adjusted its sales strategy, seized the market window since the second quarter with frequent policy releases and a surge in customer visits. On one hand, the company actively increased the push for goods, with a push of 125.4 billion yuan in the second quarter, a 181% increase compared to the first quarter. On the other hand, the company strengthened comprehensive inventory reduction measures in line with policy hotspots.

In the first half of the year, the company's market share increased by 0.06 percentage points to 3.68% compared to the end of 2023, with the market share in 38 core cities increasing by 0.3 percentage points to 7.1%.

Financing costs decreased, and the overall cash flow was reasonably ample.

In the first half of the year, the average cost of new financing for Poly Development decreased by 21 basis points to 2.93% compared to 2023. As of the end of June, the company's total interest-bearing debt was 373.5 billion yuan, with the comprehensive cost reduced to 3.31%, a decrease of 25 basis points from the beginning of the year.

The company's new financing increased the debt by 93.8 billion yuan, with a cumulative net increase in interest-bearing debt of 19.3 billion yuan. At the same time, the company increased the proportion of direct financing, with 19.9 billion yuan in direct financing, accounting for 21% of the new financing.

As of the mid-year, the proportion of interest-bearing debt due within one year accounted for 19.82%, a decrease of 0.99 percentage points from the beginning of the year; the proportion of interest-bearing debt due in more than three years accounted for 33.12%, an increase of 1.52 percentage points from the beginning of the year; the proportion of direct financing increased by 1.52 percentage points to 17.82%. As of the disclosure date of the report, the company has approved the registration of 10 billion yuan in corporate bonds and launched a plan to issue 9.5 billion yuan in convertible corporate bonds to specific objects.

In the first half of the year, due to the high proportion of sales in the second quarter and the short cash recovery cycle, the company achieved a cumulative cash recovery amount of 146.6 billion yuan in the first half of the year, with a recovery rate of 84.6%. With the continuous disbursement of bank mortgages, the annual contract cash recovery rate is expected to steadily increase. At the end of the report, the cash balance was 146.4 billion yuan, accounting for more than 10% of total assets; the consolidated statement of funds to be recovered from sales (including sales tax) was 103.3 billion yuan, and the overall cash flow was reasonably ample.

At the end of the report, the net cash flow from operating activities was -17.1 billion yuan, a decrease of 24.3 billion yuan compared to the same period last year, mainly due to the company's payment of 106.2 billion yuan for the purchase of goods and acceptance of labor services, including 36.6 billion yuan for the payment of land payments for the expansion projects of 2023, a year-on-year increase of 16 billion yuan. Poly Development stated that it is expected that with the completion of land payments from previous years, the company's cash flow from operating activities will continue to improve.

Property revenue and net profit increases are both over 10%.As of the end of the reporting period, Poly Property's contract management area reached 950 million square meters, with a managed area of 757 million square meters. The company achieved a total operating revenue of 7.871 billion yuan, with a net profit attributable to the parent company of 846 million yuan, representing year-on-year increases of 10.2% and 10.8%, respectively.

The company's marketization capabilities have been continuously strengthened, with the managed area of third-party properties reaching 491 million square meters, accounting for 64.9% of the total. The revenue from third-party property management services amounted to 2.318 billion yuan, marking a year-on-year growth of 17.7%.

Among these, the advantage in public service has been further reinforced, with the managed area for public services reaching 422 million square meters, and property management revenue amounting to 1.435 billion yuan, with a year-on-year increase of 17.2%. In terms of asset management, the company's commercial asset projects, including hotels, shopping centers, office buildings, and rental housing, increased by 16 to a total of 151, with an additional 7 million square meters of managed area, bringing the total to 50.5 million square meters as of the end of 2023.

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