China

China Vanke Posts a 5% YOY Decrease in 1Q14 Net Profit at RMB 1.5 Bln; Misses Estimates

This article was originally published on April 28, 2014 at 12:42 pm EST

Summary:

  • China’s leading real estate developer China Vanke (CH: 000002) reports that its net profits for the first quarter of 2014 were down 5% from same period in 2013 at RMB 1.53 billion, missing the consensus of RMB 2.2 billion.
  • The firm reports net revenues of RMB 9.5 billion on the same basis of comparison, down 32% from the same quarter last year.
  • EPS decreased by 5% from the first quarter of 2013 to RMB 0.14, missing a RMB 0.203 estimate.

Why It Matters:

  • Despite the poor performance, China Vanke expects the business to continue growing throughout 2014. The company says its unfavorable first quarter outcome is mainly due to seasonal factors. Most of the company’s business is recorded in the second half of the year, especially in the fourth quarter and as a result first quarter performance is more volatile. China Vanke says China’s real estate market grew rapidly in the first quarter of 2013, which also set a very high comparison base for the 2014 quarter.
  • China Vanke says that its gross profit margin for its real estate segment increased from 26.7% to 30.5%. China Vanke attributes this growth to sales from cities such as Shanghai and Shenzhen, where profit margins were higher. The firm also posted a RMB 730 million investment income, much larger than the RMB 35 million investment income during the same period last year.