Guolian Minsheng Securities: The turning point for profit margin improvement in the real estate industry in H1 2025 may see a glimmer of hope, with structural adjustments and optimizing land reserves becoming mainstream

According to the Zhitong Finance APP, Guolian Minsheng Securities released a research report stating that, according to statistics, in the first half of 2025, the operating income of 50 sample real estate companies was 1,204.9 billion yuan, a year-on-year decrease of 16.1%. Among them, state-owned enterprises, private enterprises, and mixed-ownership real estate companies experienced year-on-year changes of +4.9%, -32.1%, and -26.1%, respectively; the gross profit margin was 11.68%, a decrease of 0.29 percentage points compared to the entire year of 2024. It is expected that the industry's gross profit margin has exited the rapid decline channel and entered a bottoming phase. On the sales side, real estate companies continue to differentiate, with leading improvement real estate companies showing resilience against the trend. On the investment side, real estate companies are determining investments based on sales, focusing on core cities and core areas, with land acquisition intensity showing some recovery.

The main viewpoints of Guolian Minsheng Securities are as follows:

Performance: Real estate companies' performance continues to differentiate, and the turning point for gross profit margin may be approaching

In the first half of 2025, the 50 sample real estate companies: ① Operating income was 1,204.9 billion yuan, a year-on-year decrease of 16.1%, with state-owned enterprises, private enterprises, and mixed-ownership real estate companies showing year-on-year changes of +4.9%, -32.1%, and -26.1%, respectively; ② Net profit attributable to shareholders was a loss of 87 billion yuan, a year-on-year increase in loss of 39.0%. State-owned enterprises still maintained positive profitability, while private enterprises lost 97.7 billion yuan and mixed-ownership real estate companies lost 9.8 billion yuan; ③ The gross profit margin was 11.68%, a decrease of 0.29 percentage points compared to the entire year of 2024. It is expected that the industry's gross profit margin has exited the rapid decline channel and entered a bottoming phase; ④ The sales and management expense ratio was 4.89%, a decrease of 0.62 percentage points compared to the entire year of 2024, continuously reducing costs and increasing efficiency; ⑤ Based on cautious principles, real estate companies continue to make impairment provisions, with Vanke A, Greentown China, and Huafa Properties each making inventory impairment provisions exceeding 1 billion yuan in the first half of 2025.

Operations: Core city markets are good, leading real estate companies focus on investment and sales

On the sales side, in the first half of 2025, the sales amount of the TOP 100 real estate companies continued to decline, with a total sales amount of 1,782 billion yuan, a year-on-year decrease of 11%; real estate companies continue to differentiate, with leading improvement real estate companies showing resilience against the trend, such as CIFI Group and China Jinmao, which experienced positive growth year-on-year; the number of private enterprises among the TOP 30 decreased from 21 in 2020 to 7 in the first half of 2025. On the investment side, real estate companies are determining investments based on sales, focusing on core cities and core areas, with land acquisition intensity showing some recovery. The land acquisition intensity of 14 typical real estate companies from 2021 to the first half of 2025 was 0.47, 0.31, 0.29, 0.21, and 0.36, among which China Jinmao, CIFI Group, Binjiang Group, and Greentown China all had land acquisition intensities exceeding 0.6.

Assets: Real estate companies control the scale of assets and liabilities, enhancing asset liquidity

In the first half of 2025, 16 typical real estate companies: ① The balance sheet continues to shrink, with total assets of 10,187.5 billion yuan, a decrease of 2.9% compared to the end of 2024; interest-bearing liabilities amounted to 2,714.6 billion yuan, an increase of 0.4% compared to the end of 2024; the asset-liability ratio was 71.5%, a decrease of 0.8 percentage points compared to the end of 2024. ② There is still some pressure on short-term debt repayment, with overall short-term interest-bearing liabilities at 30.4%, a decrease of 1.8 percentage points compared to the end of 2024. ③ The average financing cost was 3.63%, a decrease of 30 basis points compared to the entire year of 2024, with the financing costs of Cmsk, PDH, China Overseas Development, and China Resources Land in the lowest range of the industry ④Improved property companies have higher asset liquidity. Jianfa International Group (8.0%), Binjiang Group (12.8%), and Greentown China (14.9%) have a completion inventory ratio of less than 15% of total inventory in 1H2025; Jianfa International Group, Binjiang Group, Poly Development, and Huafa Properties all have asset turnover rates exceeding 65% in 1H2025.

Investment Recommendation: Recommend leading central state-owned enterprises and improved property companies.

Guolian Minsheng Securities points out that the current real estate market shows a divergence between new and second-hand housing. High-quality new housing projects in core urban areas perform well in terms of sales volume and price, putting pressure on old projects and second-hand housing; second-hand housing often relies on "price for volume," with prices in a downward trend. Property companies that are operating normally actively reduce old inventory and replenish high-quality land reserves with good liquidity, balancing turnover and profit. In the context of housing entering the stock era, competition among property companies lies in asset quality, product quality and service, and brand influence. It is recommended to continue acquiring land in core urban areas by leading property companies such as Greentown China (03900), Jianfa International Group (01908), Binjiang Group (002244.SZ), China Overseas Development (00688), and Jianfa Co., Ltd. (600153.SH).

Risk Warning

Policy effects may not meet expectations, liquidity risks for property companies may intensify, and market confidence may fall short of expectations