Annual Report Observation | China Merchants Shekou: Sales Ranking Rises Against the Trend, Profits Under Pressure

The annual report season has arrived, and we have launched the TOP 10 real estate company performance review, aiming to glimpse the true nature of the industry through these companies’ financial data.

On March 17, China Merchants Shekou was the first to announce its 2025 annual results during this reporting season. The key highlights are as follows:

• Contract sales decreased by 10.6% year-over-year, industry ranking rose to fourth

• Achieved a total of 43 land parcels in the year, with new land reserve rights increasing land costs by 62.1% year-over-year, and increased inventory de-stocking during the period

• Revenue and net profit both declined year-over-year, with impairment provisions and joint venture losses reducing profit margins to 0.45%

• The three red lines remain in the green zone, with further reduction in financing costs

• Asset operation income reached 7.63 billion yuan, up 2.2% year-over-year, indicating the initial formation of a second growth curve, with plans to issue the 4th REIT in 2026

In 2025, China Merchants Shekou achieved a total contracted sales area of 7.1612 million square meters, down 23.5% year-over-year; contracted sales amounted to 196.009 billion yuan, down 10.6%, with the industry ranking improving by one to fourth place.

The improved ranking is driven by focused and precise deployment in core cities. Among China Merchants Shekou’s 30 key cities nationwide, 15 cities ranked in the top 5 in local sales, including Shanghai, Shenzhen, Chengdu, Xi’an, Changsha, Nanjing, Zhengzhou, Suzhou, Foshan, and Nantong, which all ranked in the top three for total sales.

The combined sales in Shanghai, Beijing, Hangzhou, Shenzhen, and Chengdu contributed over 60% of the company’s performance. Shanghai alone achieved a total sales volume exceeding 50 billion yuan, ranking first among Shanghai real estate companies.

In 2026, China Merchants Shekou expects to have approximately 340 billion yuan of salable assets, with 81% in the “6+10” core cities and 94% in the “Strong Heart 30 Cities.” The company’s full-caliber sales target for 2026 is expected to be similar to 2025.

At the earnings conference, management stated that in 2026, they will adhere to the principles of “sales-driven production and investment,” not blindly pursuing scale, but focusing on quality and cash flow-driven sales growth.

In 2025, China Merchants Shekou made significant efforts on the investment side.

They acquired 43 land parcels totaling approximately 4.4 million square meters of gross floor area, with a total land price of about 93.8 billion yuan, and equity land costs of approximately 54.3 billion yuan, up 62.1% year-over-year.

From a deployment perspective, investment in the “Strong Heart 30 Cities” reached 100%, with nearly 90% in the top 10 core cities, continuing the strategy of deepening core city layouts with high-quality land.

China Merchants Shekou is increasing project cooperation efforts. The proportion of equity in new land reserves decreased from 68.9% in 2024 to 57.9% in 2025, with most project partners being state-owned enterprises like China Resources, China Railway, and China Overseas.

Meanwhile, the company is intensifying project de-stocking efforts. As of the end of the period, inventory book balance was 362.324 billion yuan, a 1.9% decrease from the beginning of the year. Completed development projects had a book value of 71.69 billion yuan, down 17% year-over-year.

However, some projects still face significant de-stocking pressure. China Merchants Shekou has made impairment provisions for certain projects, including Chongqing China Merchants Yutianfu, a multi-phase development with a total investment of 4.064 billion yuan, with the earliest phase started in 2021, and an additional impairment of 878 million yuan in 2025. Other projects like Yancheng Yonghua Mansion and Shanghai Siping Road have impairment provisions exceeding 500 million yuan. Tianjin Jiufang City Plaza, under construction since 2011, has no completion plan yet, and future de-stocking and further impairment risks for such projects warrant attention.

In 2025, China Merchants Shekou’s operating revenue was 154.727 billion yuan, down 13.5% year-over-year. Gross profit was 21.287 billion yuan, down 18.6%. Gross profit margin was 13.76%, a decrease of 0.85 percentage points; development business gross margin was 15.33%, down 0.25 percentage points, with overall stability.

Net profit for 2025 was 700 million yuan, a sharp decrease of 83.2% year-over-year; net profit margin was 0.45%, down 1.89 percentage points.

The significant decline in net profit is mainly due to three reasons:

1. An increase in the “three red lines” indicator ratios, with the asset-liability ratio excluding pre-received accounts at 64.17%, net debt ratio at 72.46%, and the non-restricted cash to short-term debt ratio at 1.19.

2. Impairment provisions of 4.41 billion yuan, including 3.269 billion yuan of additional inventory write-downs.

3. Losses from joint ventures, with investment income from joint ventures decreasing by 2.3 billion yuan.

At the end of the period, China Merchants Shekou held 86.127 billion yuan in cash and equivalents, a 14.2% decrease. Total interest-bearing liabilities were 242.4 billion yuan, up 8.9%, with 56 billion yuan due within one year.

The three red lines remain in the green zone: excluding pre-received accounts, the asset-liability ratio is 64.17%, net debt ratio 72.46%, and the non-restricted cash to short-term debt ratio is 1.19.

In 2025, the company raised 17.94 billion yuan through public market financing, with an overall annual financing cost of 2.44%. The weighted average cost of existing financing at year-end decreased to 2.74%, a further reduction of 25 basis points from the previous year.

China Merchants Shekou stated at the earnings conference that future financing efforts will focus on “reducing costs, matching assets and liabilities, and controlling risks.” Notably, “matching” involves optimizing the structure of assets and liabilities based on asset characteristics.

Compared to development, asset operation and property services are relatively stable.

In 2025, the company’s consolidated revenue from asset operation reached 23.899 billion yuan, accounting for 15.4% of total revenue, up 2.8 percentage points year-over-year, indicating the initial formation of a second growth curve. Asset operation income was 7.63 billion yuan, up 2.2%.

The company added approximately 828,000 square meters of light asset management area, managing projects in core cities like Shanghai, Hangzhou, Chengdu, and Shenzhen. The largest segment, commercial properties, had 54 projects in operation at year-end, with a total leasing area of about 3.4 million square meters, and ongoing or planned projects totaling about 1.85 million square meters. Commercial operation revenue for the year was 1.96 billion yuan, with a leasing rate of 93% for projects open for over three years.

It is worth noting that some of China Merchants Shekou’s rental properties are experiencing operational pressure. The average occupancy rate in commercial properties declined from 91.06% to 87.5%, and the average rent per square meter per month decreased to 99.53 yuan.

Meanwhile, the company is accelerating the development of REIT exit channels. Currently, it has three REIT platforms: the domestic Shekou Industrial Park REIT, the China Merchants Leasing Housing REIT, and the Hong Kong-listed China Merchants Commercial REIT, covering industrial parks, apartments, and office buildings.

At the earnings conference, China Merchants Shekou announced plans to speed up three upgrades: upgrading operational models, focusing on increasing holding returns, and leveraging the advantages of multiple REIT platforms.

In property services, China Merchants Property Services achieved revenue of 19.273 billion yuan, up 12.23%; net profit attributable to the parent was 655 million yuan, down 22.12%. As of year-end, it managed 2,473 projects covering 377 million square meters.

In construction management, the company added 80 new projects in 2025, with a contracted area of 11.39 million square meters and over 800 million yuan in new contract revenue. Over the years, it has undertaken more than 620 projects, totaling over 35 million square meters.

Looking ahead to 2026, China Merchants Shekou plans to bring approximately 1 million square meters of new projects to market. The company aims to strengthen its operational capabilities, achieve high-quality multi-asset synergy, and implement meticulous cost control to develop flagship projects and enhance asset value. It also plans to actively promote the issuance of the 4th commercial REIT, creating exit channels for domestic consumer infrastructure and community commercial projects.

At the earnings conference, management emphasized a cautious optimism: the policy bottom has been established, but the market bottom will still take time to confirm. Overall, the market is expected to shift from stabilization to gradual recovery in 2026, though city-level differentiation may continue. As the industry gradually recovers, the company’s future profit pressures are expected to ease.

In 2026, whether China Merchants Shekou can successfully transition from “maintaining the basic stability” to “profit recovery” will be a key focus for the market.