Vanke reports sharp growth on property price rebound

China's top home builder China Vanke Co Ltd on Wednesday reported sharp earnings growth in 2012, as property prices started rebounding in the nation.

The Shanghai-listed company said profit jumped 30.4 percent to 12.55 billion yuan ($2 billion) on sales of 141.23 billion yuan, up 16.2 percent year-on-year.

However, its gross margin dropped 3.03 percentage points to 27.4 percent, as tightening measures last year put a damper on prices.

The company declared a dividend of 0.18 yuan per share, and its shares rallied 4.62 percent, or 0.5 yuan, to 11.32 yuan on Wednesday in Shanghai.

"Vanke has strong sales capabilities and plenty of land stock. It's almost certain that its growth will continue over the next two to three years," said Xu Shengli, a property analyst with Essence Securities Co Ltd.

This year could prove even better for Vanke, as property prices started rising again in 2012 after remaining stagnant for two years.

Home sales in China's 27 major cities jumped six-fold year-on-year during the recent Spring Festival holiday, according to SouFun Holdings, one of China's leading real estate Web portals.

Land sales increased nearly three-fold in February, with land remise fees hitting 56.2 billion yuan. New home prices rose 1 percent in January from a month earlier.

Vanke said the rise in profit was driven by a recovery in residential sales in major cities in late 2012.

Bei Fu, an analyst with ratings agency Standard & Poor's, said last week that she expected home prices to rise by up to 5 percent in 2013.

"China's residential real estate developers are on less shaky ground in 2013," said Fu.

Vanke, for its part, had around 150 billion yuan in unearned revenue at the end of 2012, making it almost certain that its sales will stay strong in 2013.

Last week, the State Council, China's cabinet, vowed to strictly implement tightening measures to check faster-than-expected price rises, raising fears that new measures would hurt developers.

S&P said in a report last week that the government appears unlikely to introduce much tougher cooling measures, as the existing ones are already "tough".

Even if the curbs were to get tougher, major developers such as Vanke would not be greatly affected, analysts said.

Vanessa Chan, an analyst with Fitch Ratings, said: "Players with greater landbank diversity, and therefore the flexibility to alter the sales mix to suit changing market demand, will continue to outperform."

Ratings agency S&P recently upgraded Chinese property developers' outlook from "negative" to "stable".

Vanke President Yu Liang told a news conference on Wednesday that it is seeking opportunities to enter more overseas markets, after it entered the US market earlier this month through a partnership with Tishman Speyer, the owner of New York's Rockefeller Center, to develop two high-rise residential condominium towers in San Francisco.

To facilitate its overseas expansion, Vanke is awaiting regulatory approval to transfer its mainland-traded, foreign-currency-denominated B shares into Hong Kong-listed H shares.

The plan would give Vanke a toehold in global financial markets and improve the financial prospects of its offshore business.