Evergrande shares soar on forecast its profit would triple

Shares of China Evergrande Group jumped by the most in almost two months on the Hong Kong stock exchange, after the developer said its first-half profit would triple, driven by China’s soaring property prices and increasing sales.

Evergrande shares jumped as much as 15.2 per cent to an intraday high of HK$20.40 in Hong Kong. The stock price had quadrupled in the past year, boosting the company’s market valuation to HK$260 billion (US$33.3 billion).

Guangzhou-based Evergrande’s profit may have tripled in the six months ended June, due to a “strong” increase in the average selling price of its properties and “substantial” increase in the total gross floor area delivered, according to its stock exchange filings, without giving a figures. It also said its full repayment of perpetual securities will help boost profit attributable to shareholders.

The forecast makes the June interim the second consecutive six-month period that Evergrande had reported profit gains. Its second-half net profit tripled to 3.07 billion yuan last year, based on GAPP accounting standards, and soared 13-fold in adjusted terms to 13 billion yuan.

Evergrande’s shares have outperformed their peers, leading the 2.8 per cent gain in the Hang Seng Mainland Properties Index. Shares of China Vanke, a larger developer that Evergrande was attempting to take over last year, fell as much as 1.4 per cent, while Country Garden rose as much as 6.3 per cent.

While property market curbs are biting sale in China’s top cities, sale in China’s vast third- and fourth-tier cities staged a strong rebound, due to lax curbs and capital flee from top cities.

Evergrande’s bet on these cities have been proven right so far. China’s market is also forcing more small developers out, leaving a larger slice of the market to bigger companies like Evergrande.

The sales value of China’s 10 largest developers have surged 40 per cent in the first half from a year ago, with combined 26.6 per cent of the industry’s sales, up from 18.7 per cent a year earlier, according to China Real Estate Information Corp.