KWG reported outstanding sales in the first quarter of this year. Due to increasingly tightened regulation of China’s property market, however, KWG will intensify efforts to market office buildings in addition to its traditional development and sales of residential properties.

Besides a growing business scale, KWG is striving to maintain its high gross profit margin to ensure a high profitability in the real estate industry.

According to announcements, KWG’s gross pre-sales value from January to March amounted to RMB2,181 million, RMB1,810 million and RMB3,753 million, respectively. The gross pre-sales value in the first quarter amounted to RMB7,744 million.

KWG was also engaged in a financing activity in the first quarter.

As announced by KWG on 27 March, the Company would issue US$100 million 6% senior notes due 2022, which would be consolidated with US$400 million 6% senior notes due 2022 on 15 March forming a single series. As disclosed in the announcement, the Company intended to apply the net proceeds of the Additional Notes Issue to refinance certain debts.

As per Industrial Securities, by the end of March 2017, KWG’s 68 projects had a total attributable land bank of 11.8 million square meters, covering 14 cities in Mainland China and Hong Kong.

Always known for its smooth and robust profitability, KWG’s gross profit margin amounted to 34.6% in 2016. Depsite its facilitated expansion in 2017, KWG continues its efforts to maintain a high gross profit margin.

KWG’s land pipeline focused on tier-one and tier-two cities may help to secure impressive revenue. KWG indicates that the Group will launch more projects in 2017, which are concentrated on Guangzhou, Shanghai, Foshan, Nanning and Hangzhou.

According to Phillip Securities, affected by the population and economic development, Guangzhou, Beijing, Shanghai and other tier-one cities witness higher housing demand and profit margin contribution. Due to the strategic positioning in tier-one and tier-two cities, KWG’s gross profit margin is expected to remain at current level.

In addition, low land costs will significantly reduce its overall costs. According to the statistics from Industrial Securities, KWG’s average land costs are only RMB 4,460 per square meter.

Save as the aforementioned factors, its advantages in commercial properties will also improve its gross profit margin.

According to Mr. Kong Jianmin, chairman of KWG, uncertainties continue to loom over the property market in the PRC. In respond to the regulations over residential properties in Mainland China, the Group switched to the sales of office buildings, especially in blocks. It is believed to be feasible to address changing policies.

According to South China Financial, KWG’s office building projects in Shanghai, Guangzhou, Beijing and Chengdu will be fully completed, which are located in core commercial areas of respective cities such as Yangpu District and Houtan District in Shanghai and Tongzhou in Beijing. Due to scarce supply, entire office buildings in these locations are highly attractive.

As further commented by South China Financial, these land parcels for office buildings, which were purchased in 2010 to 2014 at quite low prices, will generate considerable revenue and earnings for KWG and therefore maintain its overall gross profit margin in 2017.

A number of brokerage institutions hold a positive attitude towards KWG’s gross profit margin in 2017. According to a report published by Daiwa Securities, KWG’s gross profit margin is believed to remain at a high position and expected to range from 33% to 35% from 2017 to 2019.