First in land acquisition, declining profits—can China Overseas maintain its title as the "Profit King" among housing companies?

Ask AI · Strong sales but declining profits—how should strategy balance expansion?

Jiemian News reporter | Wang Yuhan

Under in-depth industry restructuring, China Overseas Development (hereinafter referred to as “COG”), long known as the “profit king,” also saw its 2025 earnings scale contract.

On March 31, COG disclosed its 2025 annual performance. The company achieved full-year revenue of 168.09 billion yuan, down 9.2% year over year. Revenue from real estate development was 156.8 billion yuan, down 10.3% year over year; revenue from commercial operations was 7.2 billion yuan, up slightly 1.0% year over year.

On the profit side, 2025 profit attributable to shareholders was 12.69 billion yuan, down 18.8% year over year; core profit attributable to shareholders was 13.01 billion yuan, down 17.2% year over year. The main reasons for the decline in profits were a reduction in delivery/recognition volume, and the gross margin was 15.5%, down 2.2 percentage points year over year.

Despite the decline in profitability, the company’s dividend payout ratio remained stable. For the full year, dividends were 50 HK cents per share, accounting for 38.6% of the core net profit attributable to shareholders.

Annual report selected financial data summary Jiemian News screenshot from the original filing

Amid the in-depth industry adjustment, COG’s sales performance has still been outstanding. According to statistics from the China Index Academy, in 2025 COG’s equity contracted sales rose to first place in the industry.

Chairman Yan Jianguo said in the financial report that this mainly stems from the company’s development strategy—highly focusing on first-tier cities with higher safety and certainty, while also seizing structural opportunities in other key cities.

Data show that during the reporting period, COG’s series companies (excluding China Overseas Hongyang) achieved contract sales of 125.44 billion yuan across Hong Kong and five core cities: Beijing, Tianjin, Guangzhou, Shenzhen, and Shenzhen. This accounted for as much as 57.3%. Of this, Beijing contributed 50.26 billion yuan, the Hong Kong market delivered 22.23 billion yuan, rising to the fifth place locally for the first time. On the product side, the Shenzhen Bay Yinxu project located in Shenzhen opened with sales exceeding 10 billion yuan, setting a national record for a single annual opening.

The strong performance on the sales side has provided COG with sustained cash flow. Full-year sales cash receipts were 170.49 billion yuan, with net operating cash inflow of 16.73 billion yuan. There were four cities with sales cash receipts exceeding 10 billion yuan: Beijing, Shanghai, Guangzhou, and Shenzhen. Among them, Beijing exceeded 30 billion yuan, while Shanghai and Shenzhen each exceeded 20 billion yuan.

Running parallel to sales is COG’s nearly “aggressive” posture in the land market last year.

According to the financial report, in 2025, COG acquired a total of 35 land parcels across 15 cities on the mainland and Hong Kong, with total new land bank reserves of 4.99 million square meters of total GFA, and an equity land price of 92.42 billion yuan. This figure not only far exceeded the same period in 2024, but also made the company’s amount spent on acquiring land rank first in the industry.

Even in 2025’s third quarter alone, COG’s single-quarter equity land price reached 4.47B yuan, up nearly 5 times year over year. This trend did not slow down over the full year. In late October, COG also took another land parcel in the Xuhui District of Shanghai for 12.69B yuan. From the perspective of investment cities, the equity land acquisition amount across Hong Kong and the five core cities of Beijing, Tianjin, Guangzhou, and Shenzhen accounted for about 73.9%.

As of end-2025, the company’s (excluding China Overseas Hongyang) total land bank stood at 25.28 million square meters. The share of value attributable to first-tier and strong second-tier cities was 86.5%.

Strong sales and fierce land acquisitions, but the profit data reveals hidden concerns.

In 2025, COG’s net profit attributable to shareholders after deducting non-recurring items was 15.64B yuan, down 18.83% year over year. While this level still remains higher than most peers, Jiemian News’ compilation of the company’s financial reports in recent years shows that the company’s net profit attributable to shareholders has declined for two consecutive years: 2024 net profit was 8B yuan, and in 2023 it was 25.61 billion yuan.

Meanwhile, the sales gross margin has also narrowed compared with the industry’s peak period. In 2025, COG’s sales gross margin was 15.51%, whereas in 2023 and 2024 it was 20.32% and 17.7%, respectively.

COG’s financial snapshot over the past five years Jiemian News compiled and illustrated

An Eversec Securities research report pointed out that, considering the company’s amount sold but not yet delivered/recognized has begun to decline, it is expected there will be near-term downward pressure on the revenue side. However, with improvements in the delivery/recognition mix, the gross margin is expected to improve. The institution expects core net profit for 2026 to 2028 to be 11.7 billion yuan, 11.4 billion yuan, and 11.1 billion yuan, respectively, with year-over-year declines of 10.0%, 2.6%, and 2.7%.

Despite pressure on earnings, COG’s overall financial position remains sound. As of end-2025, the company’s net debt ratio was 34.2%, far below the “green tier” standard; average financing cost was 2.8%, staying at a low level in the industry. For 2025, net operating cash flow was 16.73 billion yuan, exceeding 10 billion yuan for three consecutive years.

In addition, in 2025, COG’s commercial operations revenue fully covered the company’s total interest expense. The combined revenue contribution from shopping malls and office buildings accounted for 81%.

In October last year, the 华夏中海 commercial REIT successfully listed on the SZSE, becoming the industry’s first consumption REIT under the “acquire—renovate—enhance—exit” model, achieving a closed loop of “invest, finance, build, manage, and exit,” and taking the company’s asset management capability and capital operations to a new level.

In the financial report, Yan Jianguo attributed the company’s confidence in its future to three major driving forces: steady economic growth at the macro level, policy support and improvement in supply-demand relationships, and the company’s endogenous动力 with both offense and defense capabilities. He noted that Beijing and Shanghai have relaxed purchase restrictions. The Ministry of Natural Resources has clarified that newly added construction land principles will no longer be used for for-profit real estate development, and supply-demand relationships are expected to improve. Major projects in prime locations will continue to deliver sales and profits.

Overall, in 2025 COG maintained extremely low financing costs and a sound leverage level, providing a margin of safety for subsequent development. However, whether high land costs will continue to compress gross margins, and whether fierce competition for core land parcels in first-tier cities can translate into corresponding profits, remain key issues for the future.