March 31 (Bloomberg) -- Evergrande Real Estate Group Ltd., China’s third-biggest developer by area sold, said 2013 earnings rose 66 percent after it sold and completed more properties as the government didn’t add to nationwide curbs.
Profit excluding valuation gains or losses rose to 10.31 billion yuan ($1.66 billion) from 6.2 billion yuan a year earlier, the company said in a statement to the Hong Kong stock exchange today. That compares with the 8.6 billion yuan average estimate of 18 analysts surveyed by Bloomberg. Revenue jumped 44 percent to 93.67 billion yuan.
Evergrande’s earnings rose after it sold the third-most homes by area among Chinese developers, according to China Real Estate Information Corp., or CRIC, a property data and consulting firm. China’s Premier Li Keqiang last year refrained from adding new nationwide property curbs to rein in prices.
“Evergrande targeted mid-end buyers, which helped turn around sales quickly,” Duan Feiqin, a Shenzhen-based property analyst at China Merchants Securities Co., who rated the stock buy, said before today’s release. “The company is also doing well on cost control.”
Evergrande’s contracted sales rose 8.8 percent in 2013 to 100.4 billion yuan, representing a gross floor area of 14.89 million square meters (160.26 million square feet), it said.
“In 2014, although it is widely expected that the growth of transaction volumes and prices in the market may narrow and local regions may experience short-term market fluctuations, the policy and market environment generally remains stable, which provides a solid base for the group,” Chairman Hui Ka Yan said in the statement today.
The developer reaffirmed its sales target of 110 billion yuan for the year, compared with 100 billion yuan in 2013.
Evergrande shares rose 1.7 percent to HK$3.66 at the close in Hong Kong. They have gained 24 percent this year.
The majority of Evergrande’s properties are in second- and -third cities, where China has experienced a construction boom. Sales from China’s four first-tier cities accounted for 1.4 percent of the company’s property revenue last year, while second-tier cities made up 43 percent and third tier 56 percent, Evergrande Chief Executive Officer Xia Haijun said at a press conference after the earnings today.
After the annual meeting of the National People’s Congress in Beijing earlier this month, Li said the government will control the residential market “differently in different cities,” taking into account local conditions. He didn’t provide more details.
“We entered big cities last year, but it doesn’t mean we are bearish on smaller cities,” Xia said. “Small cities will be the future of the property market on China’s urbanization.”
While the nation’s top 10 to 20 developers had good sales in the January-February period, smaller ones are not doing so well, Xia said.
Cases of individual cities with an oversupply of properties and developers cutting prices was normal because there are so many developers and more than 600 small cities in China, Hui said at the press conference.
“It is wrong to be pessimistic about property in China’s third-tier cities,” Hui said. “Our sales in third-tier cities has proven that wrong. Only a few cities have an oversupply issue. Only one company went insolvent. Can you say China’s property industry overall will crash?”
China has almost 90,000 developers nationwide, National Bureau of Statistics data show.
Zhejiang Xingrun Real Estate Co. became insolvent this month with 3.5 billion yuan in debt, according to an official in the eastern Chinese city of Fenghua. Authorities detained founder Shen Caixing and his son for illegal fundraising, Xu Mengting, director of the government information office, said in a March 21 interview.
Evergrande will pay a final dividend of 0.43 yuan per share.
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