Vanke just hosted its March results conference. Below are major questions and answers from management:
Impact of recent mortgage tightening? Short-term impact may be limited to developers’ collection rate. As of March, the Company has not seen any effect on market activity or sell-through on new projects (58% sell-through rate on new projects in March, within normal range)。
Impact of land supply reform? For Vanke, concentrated land supply provides incentive to accelerate turnover. Under similar turnover rates, developers who gained land in the same batch would pre-sale their projects at the same time so Vanke’s fast move would make it appealing. Further impact of land supply reform include 1) potential increase in project profitability, given potentially less competition for land plots, but offset by 2) greater challenge for developers in terms of using capital.
Guidance on sales and scale expansion? Vanke will still adopt a “depth over width” strategy in terms of scale expansion, and will only enter single- digit new cities per year. The Company seeks to expand in scale through 1) increasing saturation and striving to become Top 3 in covered cities, and 2) riding macro tailwinds. Vanke targets RMB790bn sellable projects in 2021, and assuming stable sell-through rate, this should provide double-digit sales growth for the year.
Future outlook for Vanke’s commercial business? Vanke’s commercial projects has reached 14mn sq m, of which 10mn sq m are under SCPG. Commercial segment was flat in 2020 due to COVID-19, but the Company is confident in double-digit growth in 2021. Looking at the bigger picture, management foresees greater competition in shopping malls as new openings (Company est. malls to double by 2030) create larger supply- demand disparity, and will favor top commercial operators in the long term. Vanke’s strategy is to improve brand by increasing concentration in key cities like Shanghai through project pipeline and asset-light gains, and unveiling new mall series.