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China Vanke Co Ltd Class A 000002

Morningstar Rating
CNY 6.88 −0.22 (3.10%)
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Company Report

China Vanke Earnings: Results Lackluster and High Uncertainty Lingering; Valuation Cut by 36%

We cut our fair value estimate for no-moat China Vanke to CNY 13.50 per A-share (HKD 15.00 per H-share) from CNY 21.00 (HKD 23.90) as it delivered disappointing 2023 results due to subdued bookings and margins for its property development business. Given sluggish home sales for the year to February 2024, we expect muted top-line growth for Vanke’s residential projects in 2024-25. As we also foresee slower home price upticks, we lower our gross margin forecasts through 2028, with our midcycle estimate down to 15.8% from 22.6%. As such, our five-year operating profit compound annual growth rate for Vanke drops to 5.9% from 8.4%. We also lift our weighted average cost of capital assumption to 10.4% from 9.6%.

Price vs Fair Value

000002 is trading at a 49% discount.
Price
CNY 6.88
Fair Value
CNY 97.70
Uncertainty
Very High
1-Star Price
CNY 48.86
5-Star Price
CNY 2.99
Economic Moat
Xvbd
Capital Allocation
Wpylklk

Bulls Say, Bears Say

Bulls

Vanke’s focus on higher-tier cities could translate to stronger sales as housing demand in wealthy areas may prove more resilient amid policy easing.

Bears

A more structural economic slowdown with declining population of China may further compress Vanke’s long-run sales prospect.

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News

Trading Information

Previous Close Price
CNY 7.10
Day Range
CNY 6.877.05
52-Week Range
CNY 6.8715.94
Bid/Ask
CNY 6.88 / CNY 6.89
Market Cap
CNY 82.08 Bil
Volume/Avg
306.9 Mil / 141.9 Mil

Key Statistics

Price/Earnings (Normalized)
5.23
Price/Sales
0.17
Dividend Yield (Trailing)
9.58%
Dividend Yield (Forward)
9.58%
Total Yield
9.88%

Company Profile

China Vanke is a large real estate developer in China with residential property sales among the top three of all peers through the past five years. While property development accounts for most of its revenue and earnings, it has expanded its business presence in investment properties such as commercial retail complexes, long-term leasing apartments, and leasable logistical assets. China Vanke also owns an over-60% equity interest in its property management division Onewo, which manages the second-largest gross floor area in China. It is dual-listed in Shenzhen and Hong Kong, and state-owned Shenzhen Metro is the largest shareholder with a 27.2% stake.
Sector
Real Estate
Industry
Real Estate - Development
Stock Style Box
Large Value
Total Number of Employees
131,097

Competitors

Valuation

Metric
000002
00688
00817
Price/Earnings (Normalized)
5.235.36
Price/Book Value
0.330.310.17
Price/Sales
0.170.560.09
Price/Cash Flow
2.3842.62
Price/Earnings
000002
00688
00817

Financial Strength

Metric
000002
00688
00817
Quick Ratio
0.460.48
Current Ratio
2.191.07
Interest Coverage
27.112.23
Quick Ratio
000002
00688
00817

Profitability

Metric
000002
00688
00817
Return on Assets (Normalized)
2.32%0.97%
Return on Equity (Normalized)
5.93%8.59%
Return on Invested Capital (Normalized)
3.15%1.97%
Return on Assets
000002
00688
00817
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DWAHF
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CAOVF
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