China Resources Land posts 11.7% profit increase, sees stability ahead for property sector thanks to policy support

China’s troubled property market is on track for a gradual return to stability despite the many challenges it still faces, China Resources Land said as it posted another profitable year in 2023, extending its streak through all crises since at least 1997.

Earnings at the nation’s fourth-largest developer rose 11.7 per cent to 31.4 billion yuan (US$4.4 billion) compared with 2022, according to a filing with the Hong Kong stock exchange on Tuesday.

“In 2024, although the property market will continue to face many challenges, with the implementation of supportive government policies to mitigate risks and city-specific measures, the confidence of enterprises and residents will gradually recover,” chairman Li Xin said in the results announcement. “The real estate industry will also gradually return to stable development and transition towards new development models.”

Li’s remark echoed comments by the People’s Bank of China that some “positive signals” have emerged from the country’s property market, which has a solid foundation for healthy and stable development in the long term.

04:49

Anger mounts as China’s property debt crisis leaves flats unfinished

Anger mounts as China’s property debt crisis leaves flats unfinished

Shenzhen-based China Resources Land saw its revenue jump 21 per cent year on year to 251.1 billion yuan, driven mainly by growth in its property development business. That business, which accounted for 84 per cent of total revenue, grew 20.4 per cent year on year, while revenue from recurring businesses – chiefly investments and management – jumped 26.4 per cent.

The results come after the company posted the slowest annual sales growth since at least 2015 in January, as low homebuyer confidence and concerns about defaults dampened demand. The firm sold 307 billion yuan worth of homes last year, a 2 per cent annual increase.

“For the property-development business, the group will continue to implement strategically focused investment, with further penetration in key regions, whilst promoting comprehensive reshaping and enhancement of the organisational capacities across the value chain so as to further solidify our industry position,” Li said.

China property: rate of decline in investment slows, official statistics show

The company declared a final dividend of 1.243 yuan per share for 2023. Together with an interim dividend of 0.198 yuan per share, this makes the total dividend for 2023 1.441 yuan per share, up 2.9 per cent year on year.

Overall, the company’s gross profit margin for 2023 came in at 25.2 per cent, a 1 per cent decrease from the previous year, mainly due to the impact of product mix change and provision for inventory impairment in the development business, where gross profit margin declined by 2.3 percentage points to 20.7 per cent, the company said.

Nonetheless, core net profit – core net profit attributable to the owners excluding revaluation gain from investment properties – rose 3 per cent year on year to 27.8 billion yuan.

03:12

A look into China’s real estate market: unpaid workers and silent construction sites

A look into China’s real estate market: unpaid workers and silent construction sites

The company said its capital structure is improving. Net gearing, a ratio of debt relative to equity, decreased 6.2 percentage points to 32.6 per cent compared with the end of 2022, while weighted average cost of debt, a gauge of borrowing costs, declined 19 basis points to 3.56 per cent, the lowest level in 10 years.

China Resources Land rose 1.9 per cent to HK$24.75 in morning trading.