Why are Evergrande and Country Garden responsible for this thunderstorm?

The stock prices of Evergrande and Country Garden plummeted due to the debt crisis, declining performance and declining valuation.

1, debt crisis:

Evergrande and Country Garden are both highly indebted enterprises, and their debt scale and debt ratio are in the forefront of the industry.

2. Performance degradation:

The performance of Evergrande and Country Garden has also been affected by the epidemic situation and regulatory policies, showing a significant decline.

3. Lower valuation:

Due to the debt crisis and declining performance of Evergrande and Country Garden, the market's expectations for their future development have also been greatly lowered, resulting in a significant decline in their share price valuations.

By August 20, 2023, the P/E ratio of Evergrande is 3.37 times, and that of Country Garden is 4. 12 times, both of which are far below the average level of the same industry. This shows that the market's confidence and love for Evergrande and Country Garden has been greatly reduced, leading to their stock prices plummeting.

This is an inevitable result:

Thunderstorms in Evergrande and Country Garden are also the inevitable result of their long-term high-speed expansion, high-leverage operation and high-risk investment. In the past ten years, the two companies have achieved rapid growth and scale expansion by constantly acquiring land, developing projects, issuing bonds and expanding business, and become the largest real estate developers in China and even the world.

However, this growth model has also brought huge debt pressure and risk exposure, making it difficult for the two companies to cope with and adjust when they encounter external environmental changes or internal management problems. Therefore, it is necessary to reflect on the development strategy and business philosophy of these two enterprises, as well as the development model and competition rules of the real estate industry.