Photographer: Tomohiro Ohsumi/Bloomberg

Evergrande Shares Jump 15% as Half-Year Profit Set to Triple

  • Redeeming perpetual securities to also boost profit: Company
  • Evergrande posted core profit of 7.8 billion yuan in 1H, 2016

Shares of China Evergrande Group, China’s largest developer, surged as much as 15 percent after the company said half-year profit may triple from a year earlier, driven by soaring property prices and rising sales of homes.

The stock was up 13 percent at HK$20.00 in Hong Kong as of 9:40 a.m., the biggest gain since May. In the year to date, the company’s market value has more than quadrupled.

The developer also said its full repayment of perpetual securities will help boost profit attributable to shareholders, according to a Tuesday regulatory filing. Evergrande’s core profit had declined in the year-earlier period, driven by higher costs to market its properties and service its debt.

Controlled by billionaire Hui Ka Yan, Evergrande’s strategy of focusing on third- and fourth-tier cities paid off as China stepped up home-buying curbs in top cities to rein in property prices. Morgan Stanley analysts led by John Lam estimated that one gauge of Evergrande’s core profit was likely to show a nine-fold jump to 9.9 billion yuan in the first half from 1.1 billion yuan a year earlier.

Evergrande’s redemption of all 113 billion yuan in perpetual capital instruments will “significantly ” boost net income, the company said. Evergrande’s moves to cut its debt load spurred a rally in bonds and shares last month, even though it continues to rank among China’s most-indebted developers.

— With assistance by Emma Dong

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