Holding 1.4 billion in contract liabilities, Binjiang Services' 5S value-added services become a key driver for increased revenue

What are the driving factors behind the 5S business gross profit margin of Binhai Service rising to 28.5%?

21st Century Business Herald Reporter Tang Shaokui

On March 26, Binhai Service (03316.HK) disclosed its 2025 performance, showing annual revenue of approximately 4.101 billion yuan (RMB, the same below), a year-on-year increase of 14.1%. The three core business segments each exhibited different growth trajectories. Among them, property management service revenue was approximately 2.441 billion yuan, a year-on-year increase of 26.3%; non-owner value-added service revenue was approximately 471 million yuan, a year-on-year decrease of 16.6%; and 5S value-added service revenue was approximately 1.188 billion yuan, a year-on-year increase of 8.3%.

It is noteworthy that within a few years, 5S value-added services have become the second-largest revenue-generating business segment for Binhai Service. According to the 2025 annual report data, the contract liabilities for this business segment were approximately 1.4 billion yuan. Contract liabilities represent customer prepayments, which also means that this business is expected to become a revenue “reservoir” for Binhai Service in 2026.

The 5S value-added service is a one-stop service system built by Binhai Service around the full lifecycle needs of homeowners’ property assets, including housekeeping services, brokerage services, home decoration services, sales of home furnishings, parking spaces, and storage rooms to homeowners, as well as other community value-added services.

Public information shows that in September 2020, Binhai Service first proposed the concept of 5S value-added services and elevated it to a corporate strategy in October of the same year. In the first half of 2021, Binhai Service officially renamed and upgraded the original owner value-added services to 5S value-added services, and for the first time disclosed it as an independent business segment in the semi-annual report. With the official launch and operation of its direct property brokerage platform, Binhai Youjia, in 2021, the 5S services of Binhai Service achieved large-scale normalized operations, generating annual revenue of 139 million yuan, exceeding the original target of 100 million yuan.

By 2024, the gross profit from Binhai Service’s 5S value-added services was 260 million yuan, with a gross profit margin of 23.9%. In 2025, the gross profit for this business was approximately 340 million yuan, with the gross profit margin rising to 28.5%, not only higher than Binhai Service’s overall gross profit margin (22.2%) but also the only business segment to achieve a growth in gross profit margin. In terms of revenue, the 5S value-added services accounted for 29% of Binhai Service’s revenue in 2025, becoming the second growth curve, next to property management services.

At the performance meeting held on March 26, the management of Binhai Service pointed out that the significant improvement in the gross profit margin of 5S value-added services is attributed to two factors: on one hand, the cost dilution brought by the large-scale implementation of the Youjia hard decoration business and refined project management; on the other hand, it stems from the company’s selection of high-gross-profit quality orders, optimization of the supply chain procurement system, and the enhancement of the brokerage and community retail light asset model, which collectively drive the continuous opening of profit margins for value-added services.

Binhai Service Executive Director and Vice President Qi Jiaqi admitted that the company has achieved a breakthrough in the core bottleneck of property price increases in the industry: in 2025, the company completed price adjustments for 14 managed project properties and won bids for 9 second-hand properties at a premium, with a total of 23 projects having price increases throughout the year; to date, the company has completed over 60 price increase projects, accounting for more than 10% of managed projects. Management expects that as homeowners’ perceptions of property fees change and the company’s service quality continues to upgrade, the proportion and speed of price increases will further accelerate in the future.

In addition, Qi Jiaqi also mentioned the current status of the parent company, Binhai Group: the current ratio of cash to interest-bearing debt remains stable at 1:1, and this ratio will be used as a long-term core control indicator to prevent blind debt expansion. In terms of regional layout, the company firmly sticks to the two core cities of Hangzhou and Shanghai, with significant market recovery in both cities after the Lunar New Year, confirming the foresight of the group’s strategic contraction. In 2026, although Binhai Group has lowered its sales target to 80 billion yuan, with the market recovering, the group will participate more actively in land auctions in Shanghai and Hangzhou, and as the scale of land acquisition expands, the sales targets are expected to be adjusted upward with the market recovery.