With the Area Under Construction Ranking First in China, Evergrande Gains Sharp Increase in Profits Thanks to Large-scale and Rapid Development

BEIJING, Aug. 30 /PRNewswire-Asia/ -- On August 30, Evergrande issued its interim performance report for 2010 in Hong Kong. According to the report, Evergrande achieved a revenue of 20.37 billion yuan in the macro-control in the first half of the year and a net profit of 2.5 billion yuan with its forward-looking development strategy, strong capability in cost control and interest concessions by its partners.

Soaring Revenues and Sharply-increasing Profits

According to the interim report of Evergrande: In the first half of this year, the contracted sales amount of Evergrande rose to 20.98 billion yuan from 10.239 billion yuan in the same period of last year, increasing by 104.9%. The contracted sales area rose to 3.339 million square meters from 2.159 million square meters in the same period of last year, ranking the first in China. In the first half of this year, the contracted average sales price of the Group rose to 6,282 yuan/square meter from 4,743 yuan/square meter in the same period of last year. Its revenue reached 20.37 billion yuan, ranking the first in the industry, and increasing by 11 times of that (which was 1.64 billion yuan) in the same period of last year. Its gross profit reached 4.95 billion yuan, increasing by 8 times of that (which was 0.55 billion yuan) in the same period of last year. Its net profit rose to 2.5 billion yuan from 0.52 billion yuan in the same period of last year, and its profit of main business rose to 1.94 billion yuan from 0.15 billion yuan in the same period of last year, increasing by 12 times.

Rapid Development with No Land Hoarded

According to the interim report, the land reserve of Evergrande at present has reached 72.38 million square meters. "The land reserve is so large it may misleadingly make you think of land hoarding," said an analyst from the Scientific Socialism Research Institute of Guangzhou, "In fact, there is a substantial difference between land hoarding and normal land reserve for real estate enterprises." The analyst also said, "Land hoarding means that the enterprise seeks exorbitant profits by hoarding the land and waiting for the land value to increase, which has the following four features: the enterprise gets the land but does not develop it; the enterprise does not carry out construction but pretends to be constructing; the enterprise gets the license for pre-sales but does not sell the houses; and the enterprise sells the houses at extremely high prices. Land reserve means the production resources that the enterprise requires for its normal operations."

For Evergrande, land is reserved rather than hoarded," the analyst continued, "Each project of Evergrande is featured by rapid development, large-scale development, rapid sales and low-price sales. According to the information at hand, the land reserves of Evergrande in each of the 36 cities in China is only 2 million square meters on average. Such land reserve is sufficient for the rolling development of 3-5 years for Evergrande.

Three Major Sources of Profits for Evergrande

Where is the profit from since no land is hoarded? At the achievement presentation on that day, Hui Ka Yan, Chairman of the Board of Directors of Evergrande disclosed for the first time the sources of profits of the Company. "The profits of Evergrande mainly come from its forward-looking development strategy, from its strong capability in cost control, and from the interest concessions made by its partners," said Hui Ka Yan.

It is reported that in order to boost the healthy development of the real estate market, the central government has repeatedly introduced policies to support large-scale real estate enterprises to merge medium-and-small enterprises. It is with the guidance and support of the policies that Evergrande enters, in a forward-looking way, the second- and third-tier cities where there are substantial development potentials. It integrates resources and gets the land of high quality and low cost by merging the medium-and-small real estate enterprises through a number of channels. According to the interim report, the average cost for Evergrande is only 519 yuan/square meter, which is relatively low in the industry.

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SOURCE Sina Leju