On the afternoon of August 6, Evergrande Group (3333.HK) issued a positive profit forecast that as of June 30, 2018, the net profit after tax in the first half of the year increased by more than 125% compared with the same period of last year, and the profit of core business increased by 100% compared with the same period of last year. Above 100%, the net gearing ratio has further dropped sharply, and is expected to fall from 184% at the end of last year to below 130%.
Performance against the market
Economic Daily - China Economic Net reporter found that Evergrande's net profit for the first half of last year was 23.1 billion, and its core business profit was 27.3 billion. According to this estimate, Evergrande's net profit after tax in the first half of this year exceeded 52 billion, and its core business profit exceeded 54.6 billion, both of which set a record high in the industry.
Since the beginning of this year, real estate regulation has been increasing. According to the statistics of the Central Plains Real Estate Research Center, the property market regulation in the first half of the year was as high as 192 times, refreshing the historical record and regulating it to the second and third tier cities.
In the first half of the year, Evergrande achieved sales of 304.18 billion, a year-on-year increase of 24.6%, and became a small number of housing companies with a strong performance against the market. At the same time, a number of investment banks expect Evergrande's annual sales to exceed 600 billion.
Why can Evergrande achieve anti-market growth? It is understood that at the beginning of this year, Xu Jiayin, chairman of the board of directors of Evergrande Group, announced that Evergrande has entered a new stage of development, and “New Evergrande†has arrived. The "New Evergrande" strategy emphasizes the need to adhere to the "scale + efficiency" development model and adhere to the "three low and one high" business model with low debt, low leverage, low cost and high turnover.
In terms of cost control, Evergrande adopts standardized operation mode of unified planning, unified bidding and unified distribution, which greatly reduces the three major costs of marketing, management and finance. The annual report shows that the three major expenses in 2017 decreased by 2.5 percentage points.
The core of the new Evergrande strategy is to significantly reduce the debt ratio. By reducing costs, increasing product added value, and enhancing profitability, Evergrande's net gearing ratio will drop by 30% in just half a year. In the first half of the year, profits rose sharply, increasing Evergrande's net assets, pushing its net gearing ratio further down. In addition, it introduced three rounds of 130 billion strategic investments and paid off 121.9 billion perpetual bonds. Evergrande's net gearing ratio has been from the end of last year. 184% fell below 130%.
Entering the high-tech industry
According to the strategy of the new Evergrande, it is proposed to actively explore high-tech industries, and gradually form an industrial structure based on people's livelihood real estate, cultural tourism, health and wellness as the two wings, and high-tech industries as the leading.
Thus, in April this year, Evergrande and the Chinese Academy of Sciences signed a comprehensive cooperation agreement. Evergrande plans to invest 100 billion yuan in the next ten years. In the key fields of life sciences, aerospace, integrated circuits, quantum technology, new energy, and the Chinese Academy of Sciences, The three major bases are the science and technology research base, the research incubation base, and the scientific research achievement industrialization base.
Another news that has caused widespread market attention is that Evergrande has entered the US new energy auto company Faraday Future (hereinafter referred to as FF). In June this year, Evergrande Health indirectly acquired 45% of FF's shares for HK$6.7 billion, becoming the largest shareholder of FF. Subsequently, Evergrande Health's share price has risen all the way. According to Wind data, Evergrande Health's share price has increased by 43.5% since the end of June.
While a number of business interests are good, Evergrande actively practices social responsibility. In 2017, Evergrande paid 42 billion yuan, exceeding the net profit of 37.05 billion that year. Since its listing in 2009, Evergrande has paid a total of 182.7 billion yuan. Up to now, Evergrande has donated more than 100 times to 11.3 billion.
When Xu Jiayin announced the arrival of Xinhengda, he also proposed the development goal of “new blueprintâ€. By the end of 2020, Evergrande will realize total assets of 3 trillion yuan, annual sales scale of 800 billion yuan, annual profit and tax of 150 billion yuan, and the debt ratio will drop to the same industry. Low level, become the world's top 100 companies.
Industry sources pointed out that as the market enters the adjustment period, the industry sales growth rate will be reduced. The small-scale and under-capacity housing enterprises will gradually withdraw, the leading advantage of leading enterprises will be highlighted, and the sales scale and profitability will continue to increase steadily.
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