Rental income covers interest expenses nearly 4 times: How deep is the commercial "moat" of Xincheng Holdings?

(Source: Caixin)

The commercial sector has shifted from being a “supporting role” to the “main character,” becoming the true ballast for this established real estate company to navigate the cycle.

While most private real estate companies are still struggling in the quagmire of performance losses, China Xincheng Holdings (601155.SH) tells a different story with its 2025 annual report: the commercial sector has transformed from “supporting role” to “main character,” becoming the real ballast for this veteran developer to cross cycles.

On the evening of March 27, China Xincheng Holdings disclosed its 2025 annual report, showing the company achieved an operating revenue of 53.01B yuan for the year, with a net profit attributable to shareholders of listed companies of 680 million yuan, and an overall gross profit margin of 27.42%, up 7.62 percentage points year-on-year. Notably, against the backdrop of shrinking development business revenue, the contribution of the commercial sector has for the first time reached “half the sky”—the gross profit from property leasing and management accounted for 63% of the company’s total gross profit, soaring from 47.89% in the same period last year.

Behind these figures is a true reflection of China Xincheng Holdings’ transformation from “developer” to “commercial operator.”

Shrinkage in development is not a defeat but a proactive choice

In 2025, China Xincheng Holdings’ contracted sales amount in real estate development was 19.27 billion yuan, a slight decline year-on-year, which is not surprising amid industry-wide adjustments. But a closer look at the financial report reveals that this “shrinkage” is not passive but a strategic decision.

A key indicator is the receivables collection rate. In 2025, China Xincheng Holdings achieved a receivables amount of 21.28B yuan, with a collection rate of 110.41%. This means the company did not sacrifice cash flow quality for scale expansion but achieved “sales with receivables.” In industry terms, this is “doing subtraction” while ensuring the subtraction is clean.

Meanwhile, the company actively slowed down the pace of commercial openings, adding only five Wuyue Plaza centers in the year, four of which are light-asset projects. This “not blindly expanding and focusing on deepening existing assets” strategy has made the company’s commercial portfolio more solid and once again demonstrated the company’s core corporate culture—“Camel Spirit”—facing current challenges, not retreating but steady and resilient, crossing cycles in a complex market environment.

Chairman and CEO Wang Xiaosong stated that the company adheres to the overarching theme of “deep cultivation, integrity, and innovation,” maintaining a bottom line of cash flow safety, focusing on dual-driven development of commercial and development businesses, and achieving stable operational fundamentals, fulfilling commitments to delivery, stable operations, and risk control.

Huatai Securities analysts Liu Lu and Chen Shen also pointed out in recent research reports that, although China Xincheng Holdings’ development business revenue further contracted, “sector gross profit margin has begun to recover, impairment scales are gradually decreasing, and the marginal impact of development profits is improving.” In other words, the “drag” from the development business is easing, while the “pull” from the commercial sector is strengthening.

Commercial sector not only sustains revenue but also shapes profit structure

In 2025, China Xincheng Holdings’ total commercial operation revenue reached 14.09 billion yuan, a year-on-year increase of 10%, with its proportion of overall revenue rising to about 26%.

Focusing solely on revenue share might underestimate the true value of the commercial sector, but from the perspective of gross profit margin, it’s a different story. The annual report shows that gross profit from property leasing and management was 9.1B yuan, with a gross profit margin of 70%, accounting for 63% of the company’s total gross profit, up from 48%. This indicates that over 60% of China Xincheng’s gross profit now comes from commercial operations rather than real estate development.

GF Securities pointed out in a recent research report that China Xincheng’s same-store commercial operation revenue grew by 5%, maintaining a gross profit margin of 70%, with occupancy rates consistently above 95% for many years. “Asset operation performance is outstanding, the company’s profit rotation has actively shifted, and there is significant room for long-term value revaluation.”

CICC also believes that China Xincheng’s commercial operation revenue is steadily increasing, with a structural upward trend in gross profit margin. The “profit rotation” is beginning to materialize.

It is also noteworthy that the cash flow contribution from the commercial sector has formed a “moat.” In 2025, China Xincheng’s net operating cash flow was 1.43B yuan, the eighth consecutive year of positive cash flow, and the ratio of ongoing commercial income to current interest expenses further increased to 3.94 times. This means that just rental income from the commercial sector can fully cover nearly four times the company’s interest expenses, which is rare among real estate companies.

Senior Vice President Pan Mingzhong said that in commercial operations, the company insists on refined management, optimizing business formats, improving space efficiency, promoting “Mall+X” scene innovation, strengthening membership systems and digital operations, consolidating the core commercial position of Wuyue Plaza; accelerating expansion of light-asset projects, exporting standardized operational capabilities, and increasing the proportion of non-self-operated income.

Where does the “half the sky” confidence come from?

China Xincheng’s commercial portfolio was not built overnight. By the end of 2025, the company had deployed 207 Wuyue Plazas across 141 cities nationwide, with 178 centers already open and operating, and a leasing rate of 97.86%.

Operational data is equally impressive. The annual report revealed that in 2025, Wuyue Plaza’s total foot traffic reached 2 billion visits, up 13.31% year-on-year; membership numbers reached 54.97 million, up 25.82%. This online-offline user engagement lays a solid foundation for further deepening commercial value.

Moody’s recent report pointed out that “growing recurring income increasingly impacts developers’ profitability stability and financial resilience.” Real estate companies with higher recurring income have demonstrated higher profitability and more stable leverage levels over recent years.

China Xincheng is a beneficiary of this trend. On the financing side, relying on high-quality assets like Wuyue Plaza, the company added about 12.5 billion yuan in operating property loans and other financing secured by Wuyue Plaza in 2025, with an average weighted principal interest rate of only 4.93%. In November 2025, the company successfully issued 616 million yuan of interbank Reits backed by Wuyue Plaza, achieving China’s first consumer-related interbank Reits and the first A-share private real estate company interbank Reits, with significant industry demonstration significance.

Ping An Securities pointed out in a recent research report that the company’s good commercial operation, orderly expansion, smooth financing channels, and steadily easing debt pressure—“residential + commercial” dual-wheel drive—are expected to safeguard future development, maintaining a “Buy” rating.

Looking back at China Xincheng’s development history, it’s clear that “residential + commercial” dual-wheel drive has always been the core strategy. But in the current industry cycle shift, the roles of these two wheels are changing: development is the “stability” foundation, while the commercial sector is the “growth” engine.

In 2026, China Xincheng plans to achieve a total commercial operation revenue of 14.5 billion yuan and open five new Wuyue Plazas. This growth rate seems steady, but considering the company’s near-complete nationwide layout, future growth will mainly come from operational efficiency of existing assets and the value realization of asset securitization.

From this perspective, China Xincheng is gradually transforming from a “real estate developer” into a “commercial asset operation platform,” and the recognition from capital markets of this shift will ultimately be reflected in a redefinition of valuation logic—shifting from “PB-land reserves” to “P/FFO-operating cash flow.”

In the new industry cycle, what truly determines how far a real estate company can go is no longer how many houses it sells, but how many assets it holds that can generate sustainable cash flow. In this sense, China Xincheng’s “half the sky” may just be the beginning.

Wang Xiaosong stated that in 2025, China Xincheng maintained its safety bottom line and stabilized its basic operations, with commercial becoming the core ballast. The initial results of the transformation are evident. In 2026, we will continue to uphold the “Camel Spirit,” focusing on cash flow, using commercial as the foundation, and breaking new ground in development and management, strictly controlling risks, improving quality and efficiency, and making every effort to ensure operational safety and deliver long-term shareholder returns.