Can Yuexiu Property recover profits under the reality of tiny margins in a trillion-yuan scale?

In 2025, Yuexiu Property achieved contracted sales of RMB 106.21 billion, ranking ninth on the CRIC national sales ranking for property developers. For three consecutive years, it has held its ground in the “billion-yuan” sales tier, and during a period of deep industry adjustment it saw its ranking rise steadily.

This scale performance appears impressive. However, if you look through the financial statements, the billion-yuan scale and the profit attributable to shareholders are severely misaligned—this is the most accurate picture of Yuexiu Property’s operations in 2025.

For the full year, Yuexiu Property’s operating revenue was RMB 86.46 billion, up slightly by 0.1% year over year. However, profit attributable to equity holders was only RMB 0.55 billion, plunging 94.7% year over year. Core net profit was RMB 0.26 billion, down sharply 83.5% year over year. On one side is a leading position in the industry with billion-yuan sales. On the other is shareholder profit nearing the breakeven line—an internal dilemma of steady scale growth and sudden profit contraction.

■ Profits scrutinized through a magnifying glass: behind RMB 0.55 billion

In 2025, Yuexiu Property recorded only RMB 0.55 billion in profit attributable to the parent company, even falling short of the annual earnings of a large number of mid-sized consumer services enterprises, creating a stark contrast with its identity as a billion-yuan property developer.

More worth noting is the structural divergence in the financial statement figures. Yuexiu Property’s total after-tax profits were RMB 1.78 billion, up 21.4% year over year—this stands in sharp contrast to the significant declines in profit attributable to shareholders and core net profit.

The core of this gap comes from an increase in the proportion of non-controlling interests. During the period, many of Yuexiu Property’s projects adopted cooperative development models. Equity-method and joint-venture projects contributed substantial profits, but the profits attributable to shareholders of the listed company were greatly diluted. The annual report shows that in 2025, profit attributable to non-controlling interests reached RMB 1.723 billion, far exceeding profit attributable to shareholders of the parent company, becoming the main body of the profit.

Judging from industry patterns, the real estate settlement cycle typically lags behind land acquisition by 2–3 years. The settlement profits in 2025 correspond to the high-priced land acquisition costs in 2022–2023. Combined with the industry’s deep adjustment, Yuexiu Property’s full-year gross margin was only 7.8%, down 2.7 percentage points year over year— the era of high gross margins has truly come to an end.

At the performance meeting on March 31, Yuexiu Property’s management acknowledged that over the past two or three years, due to industry adjustments, the company’s gross margin has also been affected to some extent. Going forward, on the one hand, the company expects the industry to continue to recover, driving overall profitability through already invested projects. On the other hand, it will adhere to cost reduction and efficiency improvement, using its product premium capability to raise the overall gross margin level.

Dividend-related figures also expose earnings pressure. In 2025, the company’s total dividend per share was HK$0.166, and the total dividend amount as a proportion of core net profit was as high as 231%. In substance, it relies on retained profits accumulated in prior years to maintain the stability of dividends. This “prepayment-style dividend” may stabilize shareholders’ expectations in the short term, but if core earnings do not improve, in the long run it will face a two-choice dilemma: either reduce dividends or consume capital.

■ “Good Homes” strategy: product upgrades show results, gross margin recovery still needs verification

In 2025, Yuexiu Property was among the first to respond to the “Good Homes” policy. It launched the “4×4 Good Product” concept, promoting standardized product upgrades and healthy-living residential R&D, attempting to break through the market with product strength.

From the sales side, the strategy has started to show initial effectiveness. For the full year, the average contracted sales price was RMB 36,000 per square meter, up 23.3% year over year. High-end projects in core cities such as Beijing and Shanghai performed excellently in terms of sell-through. Sales of the core six cities (Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, and Chengdu) were RMB 90.9 billion, accounting for 85.6% of total sales. The resource share in first- and second-tier cities reached 94.4%, supporting the rise in average selling prices.

But whether “Good Homes” can become a long-term moat still needs to be proven. First, the strong sales performance of high-end projects is highly dependent on the resilience of improvement demand in core cities, rather than being driven by the product concept alone. After moving down to weaker second- and third-tier cities, the premium and sell-through capability will need to be tested.

Second, in the real estate industry, the settlement projects in the current period are still mainly based on high-cost land acquired in earlier years. The product premium brought by “Good Homes” typically requires a 2–3 year settlement cycle to be reflected in the financial statements. Management stated that the expected gross margin for newly added projects could rebound to above 15%, but in the short term it is difficult to reverse the overall low gross margin situation.

Yuexiu Property’s vice chairman and general manager, Zhu Huisong, said that based on operating results, products that meet the “Good Homes” standards are more likely to gain market recognition, achieve higher gross margins and faster sell-through, and thus confirm that the “Good Homes” strategy aligns with residential needs.

■ Financial safety is the final trump card: but it isn’t easy either

The biggest highlight on Yuexiu Property’s financial side in 2025 is its steady cash flow and high-quality credit, which has become the company’s core safety barrier during a period when the industry is at a low point.

As of the end of the period, Yuexiu Property had cash and bank balances of RMB 46.76 billion, net operating cash inflows of RMB 13.94 billion, and has maintained net inflows for four consecutive years. The weighted average borrowing interest rate was 3.05%, down 44 basis points year over year, staying at a low level in the industry. After excluding advance receipts, the company’s asset-liability ratio was 65.5%, its net gearing ratio was 54.9%, and its cash-to-short-term-debt ratio was 1.7x—its “three red lines” have continued to remain in the green tier.

Thanks to its sound financial structure, Yuexiu Property received an S&P BBB- investment-grade rating. The Fitch BBB rating outlook was upgraded to “Stable,” and its recognition in the capital markets has continued to strengthen.

However, despite this steadiness, hidden concerns cannot be ignored. The company’s net gearing ratio of 54.9% increased by 3.2 percentage points compared with 2024. With continued land investment and maintenance of its scale, there is pressure for the liability ratio to rise further. At the same time, as a Guangzhou state-owned enterprise, its financing costs are lower than those of private property developers, but lower than those of central SOEs such as CNOOC, and Poly—when industry financing tightens, the cost advantage faces certain challenges.

More importantly, financial safety is a “bottom line,” not a “highlight.” A normally operating company should not treat “no defaults” as its core competitive advantage. Yuexiu Property needs to prove itself on the earnings side, not just by being “non-defaulting.”

■ 2026: the test has just begun

In 2026, Yuexiu Property will focus on “stabilizing scale, improving efficiency, and optimizing structure” as its core. Its full-year saleable value will be RMB 221.3 billion, with the goal of maintaining billion-yuan sales scale. It will focus on deepening its presence in core cities, with an equity investment budget of about RMB 300 billion, and will advance coordinated development of the “one main and two wings” business model.

Yuexiu Property’s management believes that in 2026, the real estate industry will still be in a continuous period of bottoming out, and the market will be in a stage of differentiation. Yuexiu Property will adhere to a strategy of making progress while staying steady. The company will sell high-quality spot and quasi-spot assets, control the growth of inventory scale, enhance market judgment and respond more agilely, further strengthen marketing controls on marketing expense ratios, increase the proportion of transactions from its own channels and existing customers, and achieve sales with quality.

To outside observers, Yuexiu Property’s two key variables will determine its future direction.

Among them, in February this year, Yuexiu Group acquired the Zhujiang New Town “Maching” plot for RMB 23.6 billion and plans to introduce SKP operations. Currently, this land is held by the parent company. Chairman Lin Zhaoyuan stated clearly, “If it is in the interests of the listed company, there is no exclusion of an injection.” If this project is injected, it could potentially become a long-term growth engine. However, the 3–4 year development cycle means it will be difficult for it to contribute settlement profits in 2026–2027, so it will not be able to ease earnings pressure in the short term.

In addition, Yuexiu Property has been advancing the “one main and two wings” layout for its development core business plus operation-oriented businesses such as property management and commercial operations. Yuexiu Services and Yuexiu REIT-related products will contribute stable cash flow, but the scale gap compared with the development core business is substantial. In 2025, rental income was RMB 0.506 billion, down 24.3% year over year (affected by the disposal of Guangzhou ICC). Operating businesses are currently unable to offset the decline in development profits, meaning this second growth curve still needs long-term cultivation.

■ Conclusion: no need for a perfect narrative

Yuexiu Property is not a “perfect” property developer. It has a billion-yuan scale, but only generates marginal profits. It has a product strategy, but it still needs to be validated across the cycle. It has a financial safety cushion, but it relies on credit backing. Its ranking improvement in 2025 is more of a relative advantage of “selecting a leader among the small ones” during the industry downturn.

For Yuexiu, the core in 2026 and beyond is not to continue chasing scale, but to repair profitability, stabilize cash flow, and keep the financial bottom line. As the industry gradually reaches the bottom, whether profitability recovery can arrive as scheduled will be Yuexiu’s most critical test.