Companies

Demand in small cities lifts Vanke sales profit

By Bonnie Cao (China Daily)
Updated: 2011-04-21 13:17

China Vanke Co's booth at a property expo in Beijing. Vanke's contracted sales more than doubled to 35.5 billion yuan ($5.44 billion) in the first three months of 2011 from the same period last year. [Photo / China Daily]

First quarter net income hits $185m despite measures to cool property market

shanghai - China Vanke Co, the country's biggest developer by market value, posted a 7 percent increase in first-quarter profit as it sold more homes in smaller cities that were shielded from the effects of property curbs.

Its net income climbed to 1.21 billion yuan ($185 million), or 0.11 yuan a share, in the three months ended March 31, from 1.13 billion yuan, or 0.1 yuan, a year earlier, the company said in a Shenzhen Stock Exchange filing on Wednesday. Its revenue rose by 6 percent to 7.97 billion yuan.

Related readings:  Demand in small cities lifts Vanke sales profit  China Vanke reports 7% rise in Q1 net profits  Vanke to build govt-subsidized homes  Rising sales push Vanke shares to 3-month high

"I'm not worried about big companies such as Vanke, even if the government measures continued," said Danny Bao, a Hong Kong-based analyst for Daiwa Securities Capital Markets Ltd, who rates the stock "outperform". "The company may get more market share if it cuts prices," Bao said.

Vanke, which said that it will adopt a "flexible" sales strategy, recorded higher earnings as China's property curbs were aimed at speculators who invest mainly in larger cities such as Beijing and Shanghai. In the past three months, the government intensified its measures to rein in prices, raising the minimum down payment for second-home purchases and levied taxes on residences in Shanghai and Chongqing. Beijing and Guangzhou imposed restrictions on housing purchases in February, while the central bank raised interest rates twice this year.

"Vanke will focus on new-home sales and keep up the sales pace," Vanke's Board Secretary Tan Huajie said on late Tuesday. "The effect from the property curbs is clear in the market as transactions have slowed down."

"The current market changes haven't yet exceeded the company's expectations," Tan said. "We will keep a quick and flexible sales strategy."

Vanke declined 1.71 percent to 8.63 yuan on Wednesday in Shenzhen trading.

China's new-home price growth slowed in Beijing and Shanghai in March as the government intensified property curbs.

"Against the background of property curbs, the whole sector will be affected, but Vanke will do better than other competitors because they have better exposure in third-tier cities," said Du Jinsong, a Hong Kong-based analyst for Credit Suisse Group AG.

Vanke's contracted sales, based on bookings of apartments before they are built, more than doubled to 35.5 billion yuan in the first three months from a year earlier. Developers typically sell their homes before construction begins and book earnings from the sales progressively. Vanke has no plans to lower its annual construction target, Tan said.

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