招商 Group delivers a "difficult" answer sheet, with both real estate and property management sectors experiencing simultaneous declines in performance

Zhongshan Shekou performance meeting on-site. Attending investors provided

Reporter: Zhang Bei, Huang Zhinan, reporting from Shenzhen

New leadership struggles to “recruit” growth, with both real estate and property sectors under the China Merchants system experiencing a decline.

From March 17 to 18, China Merchants Shekou and China Merchants Jiyu held their respective performance meetings following the disclosure of their 2025 annual results. This report, which showed record low performance for both companies in recent years, coincides with a critical transition period for the management teams of these two major listed platforms within the China Merchants system, marking the first significant test in the capital market for the new leadership.

The market had previously placed strong expectations on the new leaders of these two platforms to break through transformation barriers and stabilize the fundamentals. However, the actual performance, which starkly contrasted with market expectations, revealed simultaneous pressure on both the real estate and property sectors right at the onset of the new leadership’s tenure.

China Merchants Shekou struggles to “recruit” growth

For Zhu Wenkai, who experienced a significant performance downturn in his first year as the new leader, the key challenge after clearing historical burdens will be how to fulfill the promise of performance recovery and transformation under the constraints of weak sales, pressured debts, and shrinking liquidity safety nets.

In September 2025, Zhu Wenkai succeeded Jiang Tiefeng as Chairman of China Merchants Shekou. The first complete annual report he delivered since taking office marked the worst profit performance since the company went public, breaking the capital market’s expectations for the resilience of profits from leading central enterprise real estate companies.

From the performance report, it is evident that for the fiscal year 2025, both total revenue and net profit attributed to shareholders of the parent company for China Merchants Shekou saw a significant year-on-year decline. During the period, the company achieved revenue of 154.728 billion yuan, a year-on-year decrease of 13.53%; net profit attributable to shareholders of the listed company was 1.024 billion yuan, a staggering drop of 74.65%; and the non-recurring net profit was merely 169 million yuan, plummeting by 93.10% from 2.449 billion yuan in 2024.

Looking at the quarterly performance, the shift from profit to loss in operating results occurred precisely in the fourth quarter after Zhu Wenkai took office. In the first three quarters of 2025, the net profit attributable to shareholders was 445 million yuan, 1.003 billion yuan, and 1.049 billion yuan, respectively. In the third quarter alone, the non-recurring net profit exceeded 1 billion yuan.

However, entering the fourth quarter, despite a nearly 70% sequential increase in revenue, the profit turned to a loss, with a single-quarter net profit attributable to shareholders recording a loss of 1.473 billion yuan, and a non-recurring loss approaching 1.8 billion yuan, with both figures declining sequentially by over 240% and 278%, respectively.

China Merchants Shekou’s Chief Financial Officer and Secretary of the Board, Yu Zhiliang, stated during the meeting that although short-term profits are under pressure, the company has maintained profitability in an extremely challenging market environment, and its operating fundamentals remain solid, with cash flow being secure.

Zhu Wenkai, Managing Director of China Merchants Shekou, attributed the decline in performance to the widespread downward pressure in the industry. “Firstly, we prudently recognized asset impairments. Based on the principle of caution, in 2025, China Merchants Shekou recognized impairment losses of 4.41 billion yuan, with 3.7 billion yuan in depreciation on investment properties. Although this impacts the current profit, it consolidates the company’s asset quality in the long run, preparing for future light operations. Secondly, the scale of settlements decreased cyclically, leading to a reduction in settlement revenue due to the overall market impact, with the scale of property development projects concentrated in delivery declining year-on-year. Thirdly, the investment income and equity sale gains from joint ventures and associates decreased compared to the previous period.”

In 2025, the recognition of asset impairment provisions by China Merchants Shekou directly led to a reduction of 2.918 billion yuan in net profit attributable to shareholders. Among these, inventory write-down provisions accounted for the majority, amounting to 3.269 billion yuan. For instance, in the Chongqing China Merchants Yutianfu project, the newly recognized inventory write-down provision in 2025 reached 879 million yuan, ranking first among all projects.

“The new management’s concentrated recognition of historical project impairments and cleaning up financial excesses to achieve light operations in the new term is a typical financial operation routine following management transitions in domestic central enterprise real estate listed companies.” Analysts in the Hong Kong-listed mainland property sector further explained to the “Huaxia Times” reporter that essentially, the new team releases concentrated historical asset impairment burdens and inefficient project risks in the first year of their tenure. This allows them to attribute core reasons for performance volatility to past cyclical market downturns and historical legacy issues, while also completely shedding historical burdens, paving the way for performance recovery and operational transformation in the subsequent term after the “performance deep squat.”

Beyond the one-time clean-up of short-term profits, what the market and investors truly need to verify is the “solid operating fundamentals and secure cash flow” claimed by the management, including the actual cash-generating capacity, debt structure health, and long-term risk resilience.

According to our observations, in the fiscal year 2025, China Merchants Shekou has seen asset scale shrink for three consecutive years, with total assets declining from 908.5 billion yuan in 2023 to 835.4 billion yuan in 2025, a cumulative reduction of over 8% within two years, reflecting the typical industry characteristics of “de-leveraging and reducing scale.”

Chairman Zhu Wenkai of China Merchants Shekou candidly stated that during the 14th Five-Year Plan period, China Merchants Shekou will adhere to a path of differentiation, content innovation, and specialized operations. The company classifies operating assets into categories of “can be put on the balance sheet, sustainable operation, and need to be liquidated,” strictly controlling new held properties and gradually reducing holdings in non-core cities.

A healthy reduction of balance sheets and de-leveraging should synchronize asset and liability decreases by divesting inefficient assets and repaying rigid debts to optimize the quality of the balance sheet. However, from its financial data, the balance sheet reduction process presents an abnormal pattern of “continuous shrinkage on the asset side and rigid increases on the liability side.”

As of the end of 2025, China Merchants Shekou’s current liabilities due within one year have risen for two consecutive years, increasing by 18.68% year-on-year to 58.93 billion yuan, indicating an ongoing rise in short-term repayment pressure; meanwhile, long-term borrowings have not decreased with the balance sheet reduction process but have instead increased by 12% year-on-year to 140.9 billion yuan, showing a clear “borrowing long and repaying short, replacing old debts with new ones” debt substitution characteristic.

The strategy of “investment based on sales,” which has been a keyword for China Merchants Shekou’s responses to external investment strategies in recent years, seems to have failed in 2025. In the fiscal year 2025, the number of new land acquisitions rose from 26 to 43, with total land costs increasing from 48.6 billion yuan to 93.8 billion yuan, and equity land costs rising from 33.5 billion yuan to 54.3 billion yuan. During the same period, the total contracted sales amount was 196.009 billion yuan, dropping back to levels seen in 2017, breaking the annual sales scale of 200 billion yuan that had been maintained since the fiscal year 2019.

Accompanying the rise in land investment is the fluctuation of advance payments, which saw a significant year-on-year increase of 81.42% to 8.285 billion yuan in fiscal year 2025. Correspondingly, the liquidity safety net has shrunk.

Financial report data shows that China Merchants Shekou’s cash reserves had steadily increased for three consecutive years, reaching a peak of 100.4 billion yuan in 2024, but in 2025, it saw a rare decline, dropping 14.17% year-on-year to 86.13 billion yuan, directly reverting to levels seen in 2022. The liquidity safety net accumulated over three years of industry cycles has diminished within a year.

Regarding the investment strategy for 2026, China Merchants Shekou’s Deputy General Manager Wu Bin stated during the meeting that it is difficult to set a fixed investment ratio, and the overall strategy will be based on sales, adapting to market conditions and cash inflows while meeting the “three red lines” requirements and balancing scale with profit. The company will continue to maintain sales-based investments in key areas and cities, following a selective investment principle.

China Merchants Jiyu struggles to “retain” profits

On March 18, at the headquarters of China Merchants Jiyu in Shenzhen, the annual performance release and investor communication meeting was held, where Chairman Lu Bin presented his first complete fiscal year report since taking the helm of this property platform under the China Merchants system.

During the reporting period, China Merchants Jiyu achieved annual revenue of 19.273 billion yuan, a year-on-year increase of 12.23%, marking four consecutive years of positive growth; however, the net profit attributable to shareholders was only 654 million yuan, a year-on-year decline of 22.12%, ending a five-year streak of double-digit growth.

From the core data of the financial report, it is evident that the revenue growth of China Merchants Jiyu in 2025 was primarily supported by the property management sector, which achieved external transaction revenue of 18.603 billion yuan, accounting for over 96% of total revenue; the asset management sector generated external transaction revenue of 666 million yuan, showing a slight decline compared to the previous year.

The two sectors collectively propelled China Merchants Jiyu’s revenue to a new level of 19.2 billion yuan, demonstrating the scale resilience of a leading central enterprise amid an overall slowdown in the property management industry.

However, profit performance starkly contrasted with revenue growth. In 2025, net profit attributable to shareholders fell by 22.12%, and the non-recurring profit dropped by 24.39%, with net profit growth rate turning from double-digit positive growth in 2024 to negative; the gross profit margin dropped to 11.05%, marking a new low in nearly four years, indicating that the profit space for the main business is facing compression.

One of the core factors for the profit decline was the recognition of a long-term equity investment impairment provision of 489 million yuan for the project of Hengyang Zhonghang Real Estate Co., Ltd.; in addition, the industry’s rigid increase in labor and material costs and intensified low-price competition further compressed China Merchants Jiyu’s profit margins.

During the performance release meeting, Chairman Lu Bin candidly stated that the current property industry is undergoing profound changes, shifting from extensive growth based on scale to refined and detailed cultivation of quality, with effective supply shrinking, prices generally declining, and competitive tactics becoming more aggressive, highlighting the ongoing Matthew effect in the industry. The core of future competition will be the comprehensive strength of enterprises.

According to reporter observations, in fiscal year 2025, China Merchants Jiyu saw a rise in accounts receivable scale, a significant increase in credit impairment losses, clear signs of a heavy asset structure, and a high increase in payables and operating liabilities, reflecting not only its own operational pressures but also exposing common risks in the property management industry in the era of stock competition.

Financial report data shows that as of the end of 2025, China Merchants Jiyu’s accounts receivable balance reached 2.441 billion yuan, an increase of 11.32% from 2.193 billion yuan at the beginning of the year, rising against the backdrop of overall receivable pressure in the property management industry.

Correspondingly, its total credit impairment losses for the entire year of 2025 amounted to 231 million yuan, a staggering year-on-year increase of 492.3% from 39 million yuan in 2024.

On the cash flow front, the net cash flow generated from operating activities in 2025 was 1.641 billion yuan, a year-on-year decrease of 10.55% from 1.834 billion yuan in 2024.

China Merchants Jiyu’s Chief Financial Officer Jiang Xia explained during the performance meeting that the core reason for the narrowing of net cash flow is that the increase in operating cash outflows of 9% exceeds the increase in operating cash inflows of 7%, mainly due to strict enforcement of regulations related to payment for small and medium-sized enterprises, which increased the payment efforts towards suppliers.

Meanwhile, the scale of operating liabilities for China Merchants Jiyu has continued to rise. As of the end of 2025, the balance of accounts payable reached 3.642 billion yuan, an increase of 22.47% from the beginning of the year; the balance of other payables reached 1.618 billion yuan, an increase of 12.69% from the beginning of the year.

Regarding the market’s concern about accounts receivable impairment risks, Jiang Xia stated that the company has established a normalized dynamic list and management mechanism for high-risk projects, achieving a slight increase in overall collection rate against the trend in 2025, with the overall structure of accounts receivable being controllable and having made sufficient provisions for bad debts in strict accordance with accounting policies.

As a core light asset operation platform under China Merchants Shekou, China Merchants Jiyu has consistently emphasized a development direction of “lightweight, large-scale, technological, and market-oriented.”

However, from the asset structure perspective, as of the end of 2025, investment properties of 5.458 billion yuan combined with goodwill of 3.194 billion yuan totaled 8.652 billion yuan, accounting for 43.1% of total assets; while fixed assets stood at only 563.6 million yuan, making up less than 3% of total assets. The low proportion of fixed assets under a light asset attribute is typical in the industry, but having over 40% of assets concentrated in heavy assets of real estate holdings and acquisition goodwill contrasts with the light asset strategy.

The current pressure on profits for China Merchants Jiyu stems from the impairment provisions on investment properties, and the risk of impairment is not limited to just Hengyang Zhonghang.

Lu Bin clearly stated at the performance meeting that making the light asset business stronger and larger is one of the core tasks of the “14th Five-Year Plan.” As its core light asset management platform, China Merchants Jiyu’s medium and long-term goal is to rank among the top in the industry in terms of comprehensive strength, achieving “maintaining fifth and striving for third.”

To achieve this goal, the management team of China Merchants Jiyu proposed that in 2026, efforts will focus on three core directions: refining operations to reduce costs and increase efficiency, deeply empowering with technology, and integrating supply chains to enhance efficiency, while also increasing the expansion of market-oriented residential, IFM, and university sectors to offset industry downward pressure.

Editor: Zhang Bei Chief Editor: Zhang Yuning