China Vanke Shares Hit Record Low After Disappointing 2023 Results
By Sherry Qin
China Vanke's Hong Kong-listed shares fell sharply Tuesday after the property developer reported a sharp profit decline and declared no dividend payout for the first time in 31 years.
Vanke's shares fell 11% to 4.8 Hong Kong dollars (61 U.S. cents), a record low since the company was listed in Hong Kong in 2014, in their first day of trading since reporting annual results. Vanke's China-listed shares dropped 4.2%.
The Chinese developer reported net income of 12.16 billion yuan (US$1.68 billion) for 2023, down 46% from 2022, it said in an exchange filing last Thursday.
Vanke's core profit fell 51% as a result of worsened gross profit margin, wider impairment losses and lower investment income, Nomura analysts said in a research note.
Founded in 1984, Vanke was China's second-largest developer by sales last year but has been battered by falling home prices and lackluster demand.
As a result, the company decided to not pay a dividend for 2023 as "the industry is undergoing an in-depth adjustment," it said.
"During the period of excessive scale expansion, some investment judgments were over-optimistic, and it will take some time for these projects to be digested," Vanke said.
Jefferies analysts said Vanke's decision to not pay a dividend was "a key [negative] surprise," after an around 40% dividend payout for 2022.
The main challenge ahead for Vanke is to address its balance sheet risks. The company said after reporting 2023 earnings that it aims to reduce its interest-paying debt by CNY100 billion in the next two years.
Vanke's largest shareholder, state-owned Shenzhen Metro, has demonstrated some support for it in recent weeks, including by subscribing to a Vanke-sponsored real estate investment trust to inject liquidity into the developer.
However, Nomura reckons these measures aren't enough. More actions by the government and commercial banks are needed to restore market and homebuyer confidence.
Jefferies analysts also remain cautious on Vanke. Its "underperformance in contracted sales, sustained [gross profit margin] pressure and earnings risk would continue to drag performance ahead," they added.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
April 02, 2024 01:52 ET (05:52 GMT)
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