China Vanke Co., the country’s biggest developer by market value, said first-quarter profit rose 7 percent as it sold more homes in smaller cities that were shielded from the effects of government curbs.
Net income climbed to 1.21 billion yuan ($185 million), or 0.11 yuan a share, from 1.13 billion yuan and 0.1 yuan a year ago, the company said in a filing at Shenzhen stock exchange today. Revenue gained 6.2 percent from a year earlier to 7.97 billion yuan.
“Against the background of property curbs, the whole sector will be affected, but Vanke will do better than its competitors because they have better exposure in third-tier cities,” said Du Jinsong, a Hong Kong-based analyst for Credit Suisse Group AG, who rates the stock “outperform.”
Vanke’s earnings increased as China’s property curbs were aimed at speculators who mainly invest in first-tier cities such as Beijing and Shanghai. In the past three months, the government intensified measures to rein in prices, raising the minimum down payment for second-home purchases and levying taxes on residences in Shanghai and Chongqing. Beijing and Guangzhou imposed restrictions on home buying in February and the central bank raised interest rates twice this year.
“Vanke will focus on new-home sales and maintain the pace of sales,” Board Secretary Tan Huajie said in an e-mailed statement. “The impact of the property curbs is clear in the market as transactions have slowed down.”
The company’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 fell 2 percent to 8.78 yuan at the close of trading in Shenzhen today before the results were released. The stock has gained 6.8 percent this year, compared with a 5.4 percent gain in the broader CSI 300 Index and a 15 percent advance in the gauge of property stocks on the benchmark Shanghai Composite Index.
--Bonnie Cao. Editors: Linus Chua, Nerys Avery
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