Equity Research in HK and Mainland China

Li Tang

Highly experienced sell-side analyst with more than ten years of experience in the field of China’s in-depth policy-driven macro research in China (Beijing) .
Covering in equity research in HK and Mainland market mainly real estate, construction,steel sector.
The Ideas generation based on an analysis of China’s future direction and policy decisions fundamental analysis on sector impact, market drivers, timing and scale, combined with quantitative analysis.

Thematic (Sector/Industry)

Macau Real estate management and development / Thematic (Sector/Industry)

<p>China has planned to renovate over 39,000 old urban residential communities nationwide this year, which was estimated to benefit about 7 million households this year, doubling last year's total, according to <a href="http://www.gov.cn/premier/2020-04/14/content_5502345.htm" target="_blank" rel="noopener">State Council Executive Meeting</a> on 14 April 2021.</p>
<p>Urban renovation, though large in scope, is likely to have a smaller economic impact than peak shantytown redevelopment. According to MOHURD preliminary estimates, the scope of urban renovation is about 170,000 communities/neighbourhoods nationwide with "hundreds of millions" of residents. According to the survey, the average cost of the renovation of old communities is about RMB 95,000  per unit.</p>
<p>The market space for urban renovation is relatively large, estimated total investment for future renovation and value-added services for old urban residential communities is more than RMB 4tn.The urban renovation has accelerated and has become an important channel to stabilise investment growth.</p>
<p><em>Table 1: Estimated total construction investment required for the renovation in 2020</em></p>
<table class="table table-striped">
<colgroup> <col span="3"> <col> </colgroup>
<tbody>
<tr>
<td style="text-align: left; width: 36px;">Year</td>
<td style="width: 126px;">Total number of old communities needed to be renovated</td>
<td style="width: 176px;">Total number of old communities needed to be renovated  (units :1,0000)</td>
<td style="width: 305.333px;">The estimate of total investment required for the future renovation of existing old communities (Units: 100m)</td>
</tr>
<tr>
<td style="text-align: left; width: 36px;">2019</td>
<td style="text-align: left; width: 126px;">19,000</td>
<td style="text-align: left; width: 176px;">352</td>
<td style="text-align: left; width: 305.333px;">3,344</td>
</tr>
<tr>
<td style="width: 36px;">2020</td>
<td style="width: 126px;">39,000</td>
<td style="width: 176px;">700</td>
<td style="width: 305.333px;">6,650</td>
</tr>
</tbody>
</table>
<p>We believe sectors that stand to benefit moderately include building materials, construction and redecoration services. The listed developers with property management subsidiary  such as <a href="https://www.smartkarma.com/entities/china-vanke-co-ltd" target="_blank" data-smartkarma-citation="entities:26076:1" rel="noopener">China Vanke (000002 CH)</a>, <a href="https://www.smartkarma.com/entities/country-garden-holdings-co" target="_blank" data-smartkarma-citation="entities:5225:1" rel="noopener">Country Garden Holdings Co (2007 HK)</a><a href="https://www.smartkarma.com/entities/greentown-china-holdings" target="_blank" data-smartkarma-citation="entities:8954:1" rel="noopener">Greentown China (3900 HK)</a><a href="https://www.smartkarma.com/entities/greentown-china-holdings" target="_blank" data-smartkarma-citation="entities:8954:1" rel="noopener"></a>are more likely to benefit from urban renovation projects as central govenrment will take more steps to boost old community-based elderly care, childcare and household services, including greater policy incentives in taxes and fee cuts. In addition,the advantages for developers to participate in old community renovation with excellent architectural design and product quality, and the ability to provide funds and reduce renovation cost.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/645/original/image_17500825721587306613435.png?1587306615" class="editor-image img-responsive" data-smartkarma-image-id="128645"></figure>

China has planned to renovate over 39,000 old urban residential communities nationwide this year, which was estimated to benefit about 7 million households this year, doubling last year's total, according to State Council Executive Meeting on 14 April 2021.
Urban renovation, though large in scope, is likely to have a smaller economic impact than peak shantytown redevelopment. According to MOHURD preliminary estimates, the scope of urban renovation is about 170,000 communities/neighbourhoods nationwide with "hundreds of millions" of residents. According to the survey, the average cost of the renovation of old communities is about RMB 95,000  per unit.
The market space for urban renovation is relatively large, estimated total investment for future renovation and value-added services for old urban residential communities is more than RMB 4tn.The urban renovation has accelerated and has become an important channel to stabilise investment growth.
Table 1: Estimated total construction investment required for the renovation in 2020

   


Year
Total number of old communities needed to be renovated
Total number of old communities needed to be renovated  (units :1,0000)
The estimate of total investment required for the future renovation of existing old communities (Units: 100m)


2019
19,000
352
3,344


2020
39,000
700
6,650



We believe sectors that stand to benefit moderately include building materials, construction and redecoration services. The listed developers with property management subsidiary  such as China Vanke (000002 CH), Country Garden Holdings Co (2007 HK)Greentown China (3900 HK)are more likely to benefit from urban renovation projects as central govenrment will take more steps to boost old community-based elderly care, childcare and household services, including greater policy incentives in taxes and fee cuts. In addition,the advantages for developers to participate in old community renovation with excellent architectural design and product quality, and the ability to provide funds and reduce renovation cost.


China Real Estate :State Council Strength Urban Renovation as the New Stimulus Option