China Resources Land's profits decline, and it is predicted that the most difficult period in the real estate industry has passed.

Ask AI · Recurring business profits overtake development and sales more often—will a new real estate model rise?

In an industry in a period of turbulence, even China Resources Land (01109.HK), a central SOE with multiple business channels running in parallel, is also hard to keep completely insulated.

On March 30, China Resources Land disclosed its 2025 performance. During the reporting period, it achieved operating revenue of CNY 281.44 billion, up 0.9%; gross profit was CNY 59.74B, down slightly by about 1% year over year; net profit attributable to shareholders was CNY 25.42 billion, down slightly by 0.5% year over year; core net profit was CNY 22.48 billion, down 11.4% year over year, marking a second consecutive year of decline, with the decline幅 exceeding that of the same period last year.

The decline in profit was driven by the ongoing drag from the development and sales segment. The financial report shows that in 2025, China Resources Land’s development and sales–oriented business recorded revenue of CNY 238.16 billion, up slightly by 0.4% year over year. This segment accounted for nearly 85% of total revenue, but it contributed only CNY 10.83 billion of core net profit, down sharply by over 28% year over year.

Behind this is a continuously falling settlement gross margin. “In development and settlement income, the revenue contribution from first- and second-tier cities accounts for 88%, and the settlement price per unit also rose by 10%,” China Resources Land’s Chief Financial Officer Zhao Wei said. “However, under the impact of the overall industry downturn, the settlement gross margin fell by 1.3 percentage points.”

According to the disclosure, China Resources Land’s average settlement price in 2025 rose 10.5% to 24,599 yuan per square meter. Meanwhile, affected by land cost rising by about 14%, its settlement unit cost increased by 12.3%, pulling the settlement gross margin down to 15.5%.

The reporter, after sorting through financial reports across multiple years, found that China Resources Land’s development and sales business gross margin hit a historical high of 42.9% in 2018. Since then, it kept falling, dropping below 20% in 2024 to 16.8%, and this year it reached a new low again.

The continued weakening of the profitability of this business segment has also driven down China Resources Land’s consolidated gross margin. As of end-2025, this metric was 21.1%, down another 0.5 percentage points from the prior year, also setting a new low in recent years.

By comparison, recurring business—which includes operating real estate rental income-type operations and light-asset asset management fee-based operations—has been more stable. In the reporting period, this business segment totaled revenue of CNY 43.28 billion. Although the revenue scale is relatively smaller, it delivered core net profit of CNY 11.65 billion, which already exceeded the development and sales segment. Its share of total core net profit is close to 52%.

At the same time, the two business lines demonstrate strong profitability. The gross margin of the operating real estate rental income-type business was 71.8%, up 1.8 percentage points year over year; for the light-asset asset management fee-based business with the property segment as the core, the gross margin rose 2.5 percentage points year over year to 35.5%.

Although during the current industry adjustment period, development and sales performance has been continuously hit, as the company’s business “basic盤” for performance, China Resources Land still holds high expectations for it.

Based on data from the first three weeks of this March, Chen Wei, China Resources Land’s Chief Operating Officer and Vice President, believes the market already shows characteristics of structural recovery. On the one hand, new home transactions increased month-over-month in January and February; on the other hand, both month-over-month and year-over-year second-hand home transactions rose by a relatively large margin, and some cities have seen highs not reached in recent years.

“We are closely monitoring the ongoing release of policies and the structural signals the market is showing. Especially in the second-hand housing market, price repairs of some old and established listings in certain core cities have driven a rebound in transaction volumes.” Chen Wei judges that the industry’s most difficult period has already passed and the industry has officially entered a period of stabilizing at the bottom and recovering, along with deep differentiation: core cities and high-quality segments will stabilize first, while other cities will achieve slow recovery on the basis of gradually digesting existing inventory.

China Resources Land currently has relatively sufficient inventory value on hand. Chen Wei revealed that the company’s overall sellable resources are about CNY 450 billion, not including the resources contributed by newly acquired land in 2026. Structurally, the company also focuses on core cities, with the proportion of first- and second-tier cities at 92%. He expects that China Resources Land’s 2026 sales scale will basically be in line with 2025. In 2025, China Resources Land achieved property contracted sales of CNY 233.6 billion, maintaining its position as the industry’s third-largest player. Contracted area was 9.22 million square meters, down 18.6% year over year.

Li Xin, Chairman of the board of China Resources Land, said that in 2026–2027, development and sales–oriented business will still face certain market pressure. However, with improvements in investment quality and the realization of “delivering what you commit to,” the sustained release of incremental volume will help the development business stabilize and rebound.

“By the end of the ‘15th Five-Year Plan’ period, we expect the revenue scale of development and sales–oriented business to remain around CNY 200 billion to CNY 250 billion, and the revenue share will remain at about 70%–75%; the profit share will be nearly 40%.” When discussing performance guidance, Li Xin mentioned that in the same period, revenue from operating real estate rental income-type business is expected to remain stable above CNY 30 billion, with a revenue share close to 15% and a profit share close to 50%. Revenue from light-asset asset management fee-based business is expected to be over CNY 20 billion, with a profit share of around 10%–15%.

(This article comes from First Financial)