Category: Money tips Release Date: 2006-11-28
Real estate: value-added tax with limited negative impact on the maintenance of Overweight
January 16 SAT reiterated that settlement of land value-added tax administration (see enclosure 1 and 2). Former are mostly pre-warning sings of income 1-2%, the final liquidation of the basic no further.
The last one does not consider tax deductible pessimistic estimates, ordinary standard residential value-added did not exceed the amount of deduction will not pay 20% of the land value-added tax, or value-added rate of more than 16.7% before being submitted to the land value-added tax that is higher than 17% of the net profit rate is to pay land value increment tax; 2005 listed real estate companies on average 6% rate of income tax revenue, the average development cost rate of 12%, so it can be said more than 35% of the gross profit margin was required to pay land value increment tax.
Based on the normal tax calculation, the last item is a net premium and 20% of development costs, if we consider that factor, and assume that land and development costs accounted for 40% of sales revenue, it means that value-added rate of 16.7% must be coupled with eight %, or net profit margin higher than 25% of the project before being submitted to income tax, while the majority engaged in the development of ordinary residential real estate company net profit rate should be 25% or less, or about. Coupled with the income tax and development costs, while gross margin at 43% of land value increment tax was paid. We believe that the policy conclusions should be based on 25% net profit margin, 43% gross margin basis.
The sensitivity of the normal tax calculation based on the analysis showed that (Table 1), 43-59% gross profit between the companies, to pay land value increment tax revenue will fall 5-10%, net profit fell 1-3.3%. China Vanke, the real development of most of the companies gross margin at 59% or less, therefore, less negative impact. Even if the pessimistic assumptions, the sensitivity analysis in Table 2 also shows that less affected.
More than 55% gross margin and net profit rate of more than 25% of the companies will be a larger negative impact, particularly non-ordinary-based developer of high-end residential development. For example: OCT A and so on.
Most property management companies or zone type company, its development projects do not sell, so do not pay the land value increment tax. For example: China World Trade, Zhangjiang Hi-Tech, Pudong Jinqiao, Lujiazui and other development projects for the vast majority of operations, North Star Industrial, Finance Street part of the development projects for the business. This kind of tax benefits will stimulate the conditional developer's own property holdings, which will benefit large developers improve the product structure.
This policy does not mention whether it back before the development project income, from past experience, we are inclined to think that will not be retroactive. Even if the back, as far as we know, Vanke, Finance Street, Merchants, and many other major real estate project developer retains the land value-added tax reserve fund.
The phased project participants, tax policies and regulations, general domestic and non-ordinary residential developers to separate the previous tax avoidance compressed space, increased funding pressures; warning sings of liquidation will be transferred directly reduce the land value-added revenue, which will enable the project company and viability of the SMEs getting smaller and smaller, further intensified competition in the industry, strong market share in large and medium enterprises will increase, its growth will be better.
Pre-license three years after the project has not sold the land value-added tax must be liquidated, will restrict a lot of plans to launch the market as represented by medium and small developers to cover their plate acts to accelerate the industry reshuffle, to increase sales of commercial housing.
On maintaining an "overweight" investment rating, the market fell sharply today, with early or excessive accumulation also related to, our fundamentals are still bullish on the industry. The overall performance of the market has oversold the suspect, and victimizes some basic no negative effect or a small negative impact on quality stock, it is recommended attention and overweight. (Yu)
Deal of the impact of listed real estate companies focus on details of the analysis table: (Photo if not clear, please click on the picture can be enlarged effect diagram)
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