March 26, 2019 / 12:56 PM / 8 months ago

China Evergrande says diversification complete, eyes top electric vehicle spot

HONG KONG (Reuters) - China Evergrande Group wants to be a big player in the electric vehicle industry because of its potential huge market size worth trillions of yuan, matching the big scale of its real estate business, its chairman said on Tuesday.

A company logo of China Evergrande is displayed at the entrance to China Evergrande Centre in Hong Kong, China March 26, 2018. REUTERS/Bobby Yip

The country’s third-largest property developer by total sales is aggressively expanding into the automotive sector as it searches for new growth drives amid a slowdown in the Chinese property market.

Chairman Hui Ka Yan made the latest comments about Evergrande’s new energy vehicle (NEV) ambitions at a conference on earnings where he also said the company had completed its diversification plans, and would not go into new sectors in the next five years.

Other than property and NEVs, the property developer is also in tourism and health industries.

Evergrande had also diversified into dairy, cooking oil and mineral water businesses, but disposed of them in 2016.

“We had to do a large amount of R&D and exploring in the process of diversification, and then we realized the sales of these businesses were a few billion yuan, disproportionate to the 600 billion yuan sales our property business is making today,” Hui said.

“That’s why the industry we invest in has to be big.”

The company has to build the world’s top NEV production line to make the business work, and hence the series of acquisitions so far, he added.

FIRST EV

Evergrande’s subsidiary, Evergrande Health, has made several deals in the sector since last year, including acquiring a stake in electric vehicle developer Faraday Future.

Last week, the company said it would start producing its first electric vehicles in June as part of a goal to become the world’s largest NEV company within the next three to five years.

In the high-tech sector, the developer’s investments include supercomputers, surgical robotics, unpiloted aircraft and health engineering.

Evergrande reported a 93.3 percent jump in 2018 core profit earlier on Tuesday to 78.32 billion yuan ($11.67 billion), the highest amongst its peers in the country, thanks to an increase in properties delivered and slashed costs.

The company’s total borrowings at end-December slightly rebounded from the end of June, despite the company’s vow to deleverage. Chief Financial Officer Pan Darong attributed the rise to investments in NEVs, but added he expected the debt ratio would decline to an industry average soon.

Also on Tuesday, Vanke, the country’s No.2 property developer by total sales, told an earnings conference the new businesses it diversified into were not expected to be as profitable as property.

It also said the age of general housing shortage had ended and China was facing the challenge of a declining infant population trend.

Reporting by Clare Jim; Editing by Himani Sarkar and Emelia Sithole-Matarise

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