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Uncover the Secrets of Evergrande, the New Real Estate Leader: How It has Taken the Place of Vanke

 Date:2016.10.14   Publisher:Southern Weekly

Evergrande was then a local property company that focused its business in Guangdong Province in 2003 when Sunco claimed to become the leader in China’s real estate market. Out of Sunco’s expectations, the unimpressive newly incorporated company at that time would fulfill the ambition in thirteen years – surpass Vanke as the industry leader.

According to the September Sales Presentations released by China Evergrande (03333.HK) on October 10th, the cumulative sales this year has reached 280 billion 580 million, exceeding Vanke by 17 billion 700 million, and a number of other core business data also surpasses Vanke’s, which makes Evergrande the world's leading property company.

Vanke has firmly held the throne of the leading property company over the last 10 years, despite the challenges from Sunco, Hopson, Greentown. Why has Evergrande, started up 12 years later and being listed in market 18 years later than Vanke, managed to pull down the long-standing overlord Vanke from the throne?

Twenty years: from catching up to surpassing

As China's real estate industry benchmark over the last ten years, Vanke is the target for almost every competitive property company to strive to exceed. In addition to Sunco and Hopson, Greentown China also announced its determination in 2009 to transcend Vanke in three or five years.

But all these challengers failed in frustration. Sunco has already disappeared from the scene, Hopson is still at the scale of ten-billion for more than 10 years, and Greentown has been out of the first camp after rounds of equity and projects sales.

This is why Evergrande’s surpassing over Vanke in sales this year has become an iconic event in China's real estate market.

Founded in 1996, Evergrande started up its business 12 years later than Vanke, there used to be a huge gap between the strength of both companies, and Evergrande’s sales was half less than Vanke’s when the former was listed in Hong kong market in 2009. But surprisingly, Evergrande thereafter showed a momentum of high growth that went beyond all its peer companies and continued to narrow the gap, with less than 30% last year compared to Vanke. Evergrande finally surpassed Vanke this year and became the leading company in the domestic or even the global real estate market.

“Of course, sales is just one of the indicators which measure the strength of a property company and it can not decide as an index of transcendence in the real sense," as analysts said, unlike other challengers, Evergrande overtakes Vanke in comprehensive strength, which basically depends whether Evergrande will continue its leading in the long run.

According to the interim performance in 2016, Evergrande ‘s total assets, turnover, net profit and cash reserve were higher than Vanke by 287 billion 600 million yuan, 12 billion 700 million yuan, 2 billion 480 million yuan, 140 billion 100 million yuan, which means that Evergrande has completely surpassed vanke regardless of capital scale, profitability and fiscal solvency.

How to make a miracle the norm

It only took Mr. Hui Ka Yan 20 years to develop a small business of seven or eight employees into the global leading real estate company whose sales are nearly 300 billion yuan in nine months. Chemism of Evergrande’s strategy, management products and other multiple advantages lie behind the miracle, analysts told the reporters.

Strategy is the foundation of the enterprise’s development. Mr Hui Ka Yan once revealed that Evergrande carries out its development strategies at different stages and formulates a Three-year Plan every three years to ensure the steady and rapid development of the company.

"Take Evergrande’s nationwide expansion for instance, Evergrande is always at the forefront of the industry whether it is to seize the opportunities in the market in the second or third-tier cities or to return to the first-tier ones, which exactly embodies the company’s forward-looking strategy”, as analysts said.

The intensively collectivized management model and standardized operation mode has established Evergrande as a company with competitive advantages. “It’s well known that Evergrande’s super efficient velocity of turnover is incomparable in the country, its real estate projects can be opened for sale in 4 to 6 months after the land has been purchased. 18 were opened in the same year when the land has been purchased among the newly opened 38 projects in the first half of this year”, as the analyst said, the teams of Evergrande are also known to be motivated, efficient and orderly with amazing executive force, thanks to its unique mode of operation and management.

Besides, the products of Evergrande adhere to rigid demand, its products are of high quality and cost-effective owing to rigorous standards for quality engineering and cost control, and it is the only property enterprise in the country that delivers the houses of refined decoration and recalls the houses at the customer’s request out of no reason, which greatly enhances the buyers’ confidence and makes Evergrande seize the chances in the market of rigid demand quickly.

As the Group’s Chairman, Hui Ka Yan does well in grasping the market trend and leads Evergrande to break through the market trend more than once. For example, against the backdrop of the adjustment in the market last year, Evergrande acquired 15 quality projects in second or third tier cities at $45 billion yuan from Hong Kong-invested property companies such as New World, which greatly contributed to Evergrande’s sales boom this year and once again proved Mr. Hui’s forward-looking visions.

According to the announcement released by Evergrande on October 3rd, the company is expected to reach the sales amount of 550 billion yuan in 2019 which seemingly may be over estimated, however, the possibility can not ruled out that the sales goal will be achieved ahead of time in view of the annual growth of 50% or more in recent years, as it’s generally believed in the real estate circle. "After surpassing Vanke, Evergrande should never stop transcending itself in the future since the miracle now will be the norm tomorrow".

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