China Vanke Co reported a 25% gain in half-year net income as the nation’s seemingly unstoppable housing market buoyed sales.
Net earnings at China’s second-largest publicly trader residential developer increased to 9.1bn yuan ($1.3bn) from 7.3bn yuan a year earlier, the company said in an exchange filing yesterday.
Core profit, excluding one-off gains was almost the same. Shenzhen-based Vanke has been intensifying its land replenishing efforts having ended an 18-month-long ownership tussle that resulted in a state entity emerging as its largest shareholder.
In the first seven months of 2018, it snapped up 25bn yuan in land plots, 18 % more than the same period a year earlier, analysts at Haitong Securities Co said.
“Vanke is one of the few leading developers armed with low gearing,” Hua Tai Securities Co property analysts led by Xie Haoyu wrote in a July report. “So they’re in a better position over competitors to replenish land under the funding constraints.”
Revenue for the first half soared 52% from a year earlier to 106bn yuan. Gross margins for property sales gained to 27.2%, the highest in at least four years, while earnings per share increased to 0.83 yuan a share from 0.66 yuan a share a year earlier. Vanke’s foothold in second- and third-tier cites is also strengthening.
New-home prices in China’s smaller hubs jumped 1.2% in July, the most in data going back to 2009.
The gain was 1.4% for second-tier cities and 0.3% in the biggest centres of Beijing, Shanghai, Shenzhen and Guangzhou.
While robust contracted sales in the past two years should pave the way for strong earnings growth through 2019, Vanke’s “sustainability is in question,” according to Bloomberg Intelligence analysts Kristy Hung and Patrick Wong.
Sales growth slowed to 12% this year through July, from 40% or above in 2016-17.
“Diversification will likely continue to be Vanke’s focus,” they said in a note ahead of the earnings announcement.
Down the track, more importance will be placed on contributions from recurring-income businesses “such as logistics, property management and investment properties.”
Vanke’s Hong Kong-traded shares, which have tumbled 20% since January, closed up 0.8% yesterday.




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