Annual Report Review | Evergrande Property's Difficult "De-Hengda-ization"

Opinion Network: Evergrande Group officially delisted from the Hong Kong Stock Exchange on August 25, 2025, but the overdue accounts receivable that have become harder to collect as a result are still bringing continuous negative effects to Evergrande Properties, making “de-Evergrande” one of the tasks that cannot be avoided.

The 2025 annual performance results released by Evergrande Properties on March 27 show that overall performance in 2025 recorded a slight growth trend. Given the impact from the parent company “holding it back” and the adjustment period in the property management industry, achieving this result is not easy.

Data show that in 2025, Evergrande Properties achieved operating revenue of approximately RMB 13.678 billion, an increase of about 7.2%. This was mainly due to growth in managed area and improvements in the collection of basic property services.

As of the end of 2025, the managed area for 2025 was approximately 601 million square meters. During the year, the cumulative amount of newly contracted third-party area was approximately 45 million square meters. Contractual full-year saturated revenue exceeded RMB 1.1 billion, representing an increase of about 7.3%. Among them, the entry rate for new projects was 92.1%, quickly contributing cash flow and profit.

Profit under pressure; cash flow improves

Operating revenue grew year over year, but profitability faced pressure.

During the reporting period, Evergrande Properties’ gross profit was approximately RMB 2.505 billion, recording a 2.5% year-over-year increase. Gross profit margin fell from 19.2% in 2024 to 18.3%; net profit was approximately RMB 1.009 billion, down about 2.2% year over year; profit attributable to the company’s owners was approximately RMB 987 million, down about 3.4% year over year.

The decline in profit was mainly affected by the increase in selling costs, the sharp decrease in revenue from value-added services for non-property owners, and the exclusion of revenue from vacant properties of related parties, among other factors.

The report shows that in 2025, Evergrande Properties’ selling costs were RMB 11.173 billion, an increase of 8.3% year over year. Revenue from value-added services for non-property owners dropped sharply from RMB 97.615 million in the prior year to RMB 28.483 million, a decline of 70.8%.

Adhering to a prudent principle, Evergrande Properties removed during the year from its books revenue from property management services for vacant properties related to related parties of approximately RMB 510 million. For third-party customers whose credit risk significantly increased, related revenue was not recognized when the amounts were overdue.

As to this portion, Evergrande Properties described it in the report under the section “Risk of major losses that cannot be recovered” as follows: “Given that China Evergrande Group is currently in a liquidation process, the management of the Group expects that the outlook for the economic benefits to be obtained from China Evergrande Group is not optimistic and that there is a high degree of uncertainty…… The Group expects the service revenue amount for the year ending December 31, 2025 to be approximately RMB 510,060,000. The Group will not recognize revenue for such property management services delivered. Meanwhile, the Group will, in accordance with relevant laws and applicable agreements, make every reasonable effort to recover the accounts receivable from relevant parties and actively protect the Group’s interests.”

The stance has been made clear, but whether the related revenue can be recovered as hoped remains unknown. Because based on data disclosed in the past, China Evergrande’s liabilities total as much as RMB 2.4 trillion, while net assets are negative RMB 644.2 billion? It is already in a severe state of being unable to pay debts with assets.

Although Evergrande Properties has been owed large sums of money, its cash flow still recorded improvement.

The report mentions that since 2021, due to the influence of related-party violations involving the misappropriation of large amounts of funds and other issues, Evergrande Properties has faced substantial operational pressure. In the face of challenges, Evergrande Properties has pushed forward a profound transformation in operations. Under the leadership of management, it adjusted its business structure, strengthened cash/funds controls, and improved operational efficiency. It successfully defused risks, with the company’s cash flow becoming more stable and its operating condition continuing to improve.

At the end of the reporting period, Evergrande Properties’ cash and cash equivalents were approximately RMB 4.19 billion, a substantial year-over-year increase of about 55.3%. More importantly, net current assets increased by approximately RMB 5.538 billion from the end of 2021, recovering to approximately RMB 875 million, successfully turning negative to positive.

Four segments: entries and exits

Evergrande Properties’ revenue mainly comes from four business lines. The differentiation among segments may also reflect the direction of strategic adjustments.

First, in “core” property management services, Evergrande Properties achieved revenue of approximately RMB 11.498 billion in 2025, accounting for 84.1% of total revenue, up 7.6% year over year.

Among them, revenue from basic property management services was approximately RMB 11.47 billion, up 8.3%, resulting from an increase in managed area and the effectiveness of the service-to-collection strategy. Revenue from value-added services for non-property owners fell sharply from RMB 97.62 million in the prior year to RMB 28.48 million, down 70.8% year over year. This is directly related to the downturn in the real estate industry and the shrinkage of related-party businesses.

Second, community life services, as a “growth engine,” generated revenue of approximately RMB 1.009 billion during the period, up 10.7%. This includes: at-home service revenue focused on owners’ needs, nearly RMB 100 million, up about 39.9% year over year; expansion of scale around demand for direct drinking water and new energy charging, with related revenue of nearly RMB 150 million, up 36.8%; and community tourism services rolled out comprehensively, with over 90,000 service customers throughout the year, generating revenue of nearly RMB 40 million, becoming a new growth point.

Third, asset management services made a steady contribution to full-year revenue growth, with full-year revenue of approximately RMB 798 million, up 2.7% year over year. In its annual report, Evergrande Properties stated that relying on community resources, it deepened its home sales and leasing business. During the year, it facilitated transaction volume exceeding RMB 6.9 billion cumulatively, with revenue exceeding RMB 100 million, up 42.1% year over year.

Compared with the above three segments, community operation services recorded full-year revenue of nearly RMB 373 million, down 1.9% year over year. Evergrande Properties believes that community operation services face cyclical pressure, mainly affected by external market conditions, with demand for merchants’ community marketing and venue cooperation shrinking.

Based on the existing businesses, Evergrande Properties has obviously extricated itself to a large extent from “related-party transactions.”

The revenue mix shows that the share of third-party revenue has already reached 99.8%, while related-party revenue accounts for only 0.2%. During the year, the cumulative newly contracted third-party area was approximately 45 million square meters, with contractual full-year saturated revenue exceeding RMB 1.1 billion, up about 7.3% year over year; new projects achieved an entry rate in the 2025 fiscal year as high as 92.1%.

Among the newly signed projects, full-year saturated revenue from non-residential projects was approximately RMB 880 million, accounting for about 80%. Of these, full-year saturated revenue from the rail transit format was about RMB 100 million, up 248.6% year over year, successfully landing benchmark projects such as the Fujian and Guizhou highway service areas of rail transit; for the hospital and school formats, full-year saturated revenue was approximately RMB 170 million, up 54.0% year over year, successfully landing representative projects such as Ningbo Institute of Technology, Tongli, and the Second People’s Hospital of Jingdezhen……

There are still issues to be solved

While performance has improved, Evergrande Properties still faces multiple challenges.

First, related-party risk continues to transmit. The announcement clearly points out that related-party issues affected the conversion of some projects and the profitability of related businesses, and also imposed constraints on brand development and market expansion.

Specific impacts include: full impairment provisions were recorded for accounts receivable from related parties for trade receivables and other receivables; because, in the past, related parties may have involved some of the company’s subsidiaries and employees in the promotion of wealth management products to owners, and there were issues such as property service fee commitments not being fulfilled in the related parties’ property promotions, directly affecting owners’ willingness to pay and the collection of accounts receivable.

Second, pressure on accounts receivable collection. The annual report shows that as of the end of 2025, Evergrande Properties’ accounts receivable for trade receivables were approximately RMB 2.651 billion, with a relatively poor aging structure, in which the proportion of receivables more than 1 year old exceeded 40%.

Third, uncertainty in recovering material losses. In response to the incident in 2021 involving bank deposit pledge of as much as RMB 13.4 billion that was forcibly executed, although the company has obtained some effective court judgments in its favor, the announcement frankly states that “subject to the current conditions of China Evergrande and the related responsible parties, there are still major uncertainties regarding the amount of losses the Group can recover.”

Potential changes in controlling ownership are also a major issue. The announcement discloses that the liquidators of China Evergrande and CEG Holdings are still negotiating with relevant bidders for the sale of their shares in Evergrande Properties. Liquidation of the controlling shareholder may lead to changes in the company’s controlling interest, which could affect the stability of the company’s management team.

Beyond internal issues, industry-wide common pressures also pull at Evergrande Properties, such as challenges including adjustments in the upstream real estate market, ongoing increases in rigid costs, and upgrades in owners’ demand. These also test the quality of profitability and the ability for sustainable development.

In the face of multiple difficulties, Evergrande Properties’ strategy is to proceed from three aspects: quality, technology, and market orientation.

The annual report shows that the company focuses on three main lines—“facility renewal of homes, service standardization, and communication at zero distance”—through the “Home Renewal” program, iterative updates to a standardized service system, and a normalized owners’ communication mechanism. At the same time, it continues to optimize the management compliance for public revenues, adhering to the principles of “transparent and clear, and used in compliance,” in an effort to rebuild trust between the company and owners.

In terms of technology, digital transformation is a high-frequency term in Evergrande Properties’ annual report. According to the introduction, the company has already built an integrated platform covering all scenarios of property services. These applications have covered more than 90% of managed area. Based on this, the company has also established a technology services company to standardize and productize internal systems and empower external parties. In the first year of external enablement, it signed contracts with nearly 150 external property service enterprises.

In market expansion, it adheres to the principle of “quality first over scale,” and relies on the “1+4+N” brand strategy to deeply develop high-value submarkets such as hospitals, schools, industrial parks, and rail transit. Among the newly signed projects during the year, full-year saturated revenue from non-residential projects accounts for about 80% of the total. Of these, revenue from the rail transit format grew about 248.6% year over year, while revenue from the hospital and school formats grew about 54.0% year over year. At the same time, it makes prudent adjustments to low-quality and low-efficiency projects.

With more and heavier historical burdens remaining, taking a path of “de-Evergrande” may be the best solution Evergrande Properties can find today.

Disclaimer: The content and data in this article are compiled by Opinion Network based on publicly available information and do not constitute investment advice. Please verify before use.

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