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Morningstar | China Vanke's Sales Slower Year to Date, but Reasonable Performance Compared With Peers

China Vanke’s contract sales slowed during the first two months of 2019 and were down more than 10% year on year. The slowdown was broadly expected, but we believe the company is likely to fare better than its other large-cap peers. Coupled with its relatively quick pace of land acquisition during the second half of 2018, the company should have adequate amount of salable resources in 2019 and benefit from the continuing consolidation trend in an overall weakening property market. At this point, we maintain our fair value estimates of HKD 38 and CNY 30 along with our no-moat rating.

During 2018, China Vanke achieved full-year contract sales of CNY 607 billion and gross floor area of 40 million square meters, up 15% and 12% year on year. During the first two months of 2019, the company saw contract sales decline 18% and 11% by volume and value, respectively. The slowdown in volume was broadly seen across the sector. Other large-scale mass residential developers saw sales off by 30%-40%. Nationwide sales numbers are not yet available. We believe developers with offerings at higher price points should see a smaller decline. The 9% price growth seen year to date showed underlying strength in the market segment of the company. The company’s land acquisition pace quickened during the second half of 2018, boosting the full-year total to near 30 million square meters, outpacing that of 2017, albeit the land premium was one fourth less owing to lower accommodation value.