(Yicai Global) March 24 -- Shares in Greentown China Holdings advanced today after the Chinese property developer reported a 33.4 percent leap in net profit last year from the year before and that it has met its sales target for 2021 despite a sluggish real estate market.

Greentown China’s share price [HKG:3900] closed up 4.54 percent at HKD13.82 (USD1.73).

Greentown China logged profit of almost CNY7.7 billion (USD1.2 billion) in 2021, according to the developer’s annual report released yesterday. Revenue soared 52.4 percent to CNY100.2 billion (USD15.7 billion). It should be noted that due to the difficult financing and sales environment, almost 10 developers have postponed the release of their annual reports.

The firm achieved sales of CNY350.9 billion (USD 55.1 billion) in 2021, a jump of 21 percent from 2020, and beating its target of CNY350 billion for the year, the Hangzhou, eastern Zhejiang province-based developer said.

The company has set a cautious sales goal of CNY330 billion for this year.

Meanwhile its property service arm Greentown Management Holdings posted a 31.9 percent jump in net profit to CNY565 million (USD88.7 million) and a 23.7 percent surge in revenue to CNY2.2 billion (USD345.4 million) in its earnings report also released yesterday.

Sound Finances

Greentown China is in a good financial state with CNY71.5 billion (USD11.2 billion) in the bank or in cash equivalents as of the end of 2021, according to the report. Its net gearing ratio narrowed 11.8 percentage points from the year before to 52.

The relatively low debt-to-equity ratio and a state-backed majority shareholder has helped provide the financial guarantees needed for Greentown China to secure financing more easily, Yicai Global noted. The firm’s financing costs have declined each year since China Communications Construction took control in 2014, falling to 4.6 percent last year from 7.3 percent in 2015.

Greentown China spent CNY93.8 billion (USD14.7 billion) last year on land use rights in major cities such as Beijing, Shanghai, Shenzhen and Hangzhou, the report said. As of the end of 2021, it had 256 land reserve projects with a total floor area of 58.8 million square meters.

Shrinking Margins

However, the company’s gross profit margin shrank last year from the year before by 5.6 percentage points to 18.1 percent, the report said. And the profit margin attributable to shareholders was only 4.46 percent, a drop of 1.31 percentage point from 2020 and low compared to other real estate developers of the same size.

Higher land costs were one of the reasons for the shrinking gross profit margin, Executive President Geng Zhongqiang said at the earnings call yesterday.

“On one hand, the changing landscape of the real estate sector resulted in a decrease in profit margins across the industry, and on the other hand, the dwindling margins were due to insufficient reflection of the company’s brand value premium due to price curbs in recent years,” the company said.

Editor: Kim Taylor