Soochow: Real estate sector bottoming out, repair becoming clear, high-quality real estate companies welcoming opportunities for reevaluation.

Soochow released a research report stating that the supply-demand relationship in the real estate industry has entered a new stage, with continued efforts from policy combinations. Directions such as urban renewal, inventory acquisition and clear-out, and the construction of "good houses" are expected to jointly drive demand release and inventory clearing. High-quality real estate companies, with stable credit, core city resources, product strength, and operational capabilities, have advantages in financing, land acquisition, inventory turnover, and cash flow management, with the potential for operational quality and profitability to be restored first. The bank is optimistic about leading real estate companies with high-quality asset reserves, commercial operation cash flow support, and diverse growth capabilities, seizing the opportunity for value reassessment under industry restructuring. Soochow's main points include: Performance bottoming out and resilience of high-quality real estate companies is evident By 2025, 47 sample real estate companies: 1) Operating income of 2.7766 trillion yuan, a year-on-year decrease of 18.4%, with central, private, and mixed ownership enterprises seeing year-on-year decreases of 2.5%, 35.6%, and 26.4% respectively, showing stronger resilience in operating income for central enterprises; 2) Net profit attributable to shareholders loss of 146.9 billion yuan, a year-on-year decrease in loss of 46.5%, with marginal improvement in profit, but some real estate companies are heavily affected by non-operational factors such as debt restructuring and impairment provision pace; 3) Gross margin is 9.0%, a year-on-year decrease of 2.5 percentage points, still at the bottom stage, Seazen Holdings and CHINA RES LAND have leading gross margins, with outstanding contributions from commercial operation and income structure optimization; 4) Sales and administrative expense ratio is 5.9%, a year-on-year increase of 0.9 percentage points, with expenses rising under revenue contraction, but Hangzhou Binjiang Real Estate Group, Zhuhai Huafa Properties, China Merchants Shekou Industrial Zone Holdings have better expense control performance; 5) The total asset and credit impairment losses of 20 A-share real estate companies by 2025 amount to 135 billion yuan, the pressure from historical high-price inventory and low-efficiency assets continues to be released, with CHINA JINMAO, Seazen Holdings, and C&D INTL GROUP having relatively sufficient impairment provisions; 6) The coverage ratio of contract liabilities to revenue has decreased to 0.76 times, entering a period of structural adjustment for settlement resources. The resilience of leading operations is evident, and investment and sales shares are concentrated in the top tier 1) On the sales side, the total sales amount of the top 100 real estate companies in 2025 is 3.5481 trillion yuan, a year-on-year decrease of 18.5%, narrowing the decline by 9.0 percentage points compared to 2024, showing marginal improvement in sales. Central enterprises maintain a relative advantage in sales scale due to financing capability, brand credit, core city resources, and delivery certainty, with Poly Developments and Holdings Group, GREENTOWN CHINA, CHINA OVERSEAS, and CHINA RES LAND among the top in sales scale. In terms of market share, sales share continues to be concentrated in central enterprises with stable financing channels, better core city layout, and stronger delivery certainty, with CHINA RES LAND and GREENTOWN CHINA continuing to increase their market share. 2) On the investment side, the land acquisition intensity of key real estate companies has risen from 0.22 in 2024 to 0.35 in 2025, with land investment being concentrated in high-credit top-tier real estate companies, such as C&D INTL GROUP, CHINA JINMAO, GREENTOWN CHINA, Hangzhou Binjiang Real Estate Group, China Merchants Shekou Industrial Zone Holdings, and CHINA OVERSEAS maintaining relatively high replenishment intensity. Continuous optimization of the balance sheet, continuous decline in interest-bearing debt By 2025, the 16 key real estate companies achieved the following: 1) The rebalancing of the balance sheet continues to progress, with a total asset size of 9.3425 trillion yuan, a year-on-year decrease of 11.0%; the asset-liability ratio has dropped to 70.4%, with the industry's balance sheet continuing to be rebalanced, and CHINA OVERSEAS, LONGFOR GROUP, and CHINA RES LAND having lower asset-liability ratios in the industry. 2) The scale of interest-bearing debt is 2.5642 trillion yuan, a year-on-year decrease of 5.2%, entering a stage of continuous debt reduction, with central enterprises such as CHINA RES LAND, China Merchants Shekou Industrial Zone Holdings, and CHINA OVERSEAS maintaining good financing and replenishment capabilities due to their credit advantages. 3) The ratio of short-term interest-bearing debt to total interest-bearing debt has fallen to 27.3%, improving the debt maturity structure, with C&D INTL GROUP, LONGFOR GROUP, CHINA OVERSEAS, CHINA RES LAND, and GREENTOWN CHINA having short-term debt ratios below 20%. 4) The average cost of financing has decreased to 3.42%, with Poly Developments and Holdings Group, CHINA RES LAND, China Merchants Shekou Industrial Zone Holdings, and CHINA OVERSEAS having lower financing costs in the industry. 5) There is differentiation in the coverage of sales amounts to repayable debts, with Hangzhou Binjiang Real Estate Group having the leading coverage ratio, and GREENTOWN CHINA and C&D INTL GROUP still having relatively good coverage capabilities. 6) Asset liquidity becomes an important variable for recovery resilience, with C&D INTL GROUP and Hangzhou Binjiang Real Estate Group leading in asset turnover, while C&D INTL GROUP, YUEXIU PROPERTY, GREENTOWN CHINA have relatively low completed inventory, and their inventory structure is relatively better. Risk Warning: Policy effects falling short of expectations; sales and receipts falling short of expectations; industry liquidity risks intensifying.