Core Insights - The report by Goldman Sachs highlights the transition of China's real estate market from new development to existing property management, driven by policy and housing upgrade demands, predicting a total addressable market (TAM) of 5.7 trillion RMB by 2035, a 70% increase from 2024 [1] Group 1: Key Conclusions for the Real Estate Industry by 2035 - Housing demand is expected to reach 60% of the peak level in 2017, with necessity, improvement, and renewal demands contributing equally. The share of demand from first and second-tier cities will rise from 60% in 2024 to approximately 70% [4] - Government and developers will adjust land supply based on demand, leading to further consolidation in the developer industry. The top ten developers are projected to capture about 50% of the national market share by sales by 2035, with new housing market size significantly shrinking, averaging 40% lower than 2024 levels [5] - The second-hand housing market will account for 66% of total sales volume and 64% of total value due to reduced new housing supply, aligning with levels seen in developed markets [6] - Renovation will emerge as a key driver, with an expected renovation rate of about 1% by 2035, leading to a total building area of over 110 billion square meters, with renovated areas nearly doubling to represent about 60% of total building area [7] Group 2: Four Core Trends Reshaping the Industry Landscape - A structural shift in housing demand is anticipated, with total demand expected to fall to 60% of the 2017 peak, but with a significant change in demand structure, where improvement and old housing renewal demands will rise, contributing to 70% of the demand from first-tier and new first-tier cities [8] - Both land supply and developer concentration are expected to increase, with government land supply favoring high-demand areas and leading developers accelerating expansion into T-1/2 cities. The market share of the top ten developers is projected to rise from 21% in 2024 to 50% by 2035 [10] - The rise of the second-hand housing market will counterbalance the decline in new housing, with second-hand transactions expected to account for 66% of total transactions and 64% of total transaction value by 2035, aligning with developed market standards [11] - Renovation will become a core driver, with an annual renovation rate increasing to 1%, leading to a demand for the renovation of over 20 billion square meters by 2035, driven by policies promoting upgrades and quality of living [12] Group 3: Opportunities and Challenges in the Industry Chain - Demand for construction products will diversify, with strong cyclical categories like glass and ceramics facing short-term pressure, while demand for energy-saving materials and aging-friendly renovations will partially offset declines, with market size expected to decrease by 10%-15% by 2035 [14] - The renovation market is projected to experience explosive growth, driven by existing property renovations and second-hand transactions, with the home decoration industry expected to exceed 3 trillion RMB, accounting for 32% of the total industry chain [14] - The expansion of property management and brokerage services is anticipated, with active second-hand transactions and asset preservation needs leading to an expected revenue scale of 2.7 trillion RMB in property management and brokerage, representing 30% of the industry chain [14]

Group 1: Company Restructuring and Financial Health - The company plans to complete its restructuring by 2025, aiming for a positive net asset value to apply for "delisting risk removal" [2][4] - The company has seen a significant decline in stock value, dropping over 60% since last year, prompting a focus on maintaining market value through improved operational performance and governance [2][4] - The restructuring involves transferring real estate-related debts to a more creditworthy real estate group, ensuring better protection for creditors [3][4] Group 2: Business Strategy and Market Position - Post-restructuring, the company will focus on property services and asset management, transitioning from traditional heavy asset development to light asset operations [5][6] - The company aims to leverage its unique competitive advantages in the property management sector, emphasizing differentiated competition strategies and expanding its service scale [2][5] - The property management industry is expected to face increased competition, with a focus on high-quality services and sustainable business models [6] Group 3: Market Outlook and Industry Trends - The real estate market is showing signs of stabilization, with a projected recovery in 2025, supported by government policies aimed at maintaining market stability [5][6] - Recent data indicates a mixed performance in the housing market, with sales area changes of -3.04%, +28.50%, and +8.63% in the first quarter of 2025, alongside a price decline of 5.15% [5][6] - The property management sector is expected to evolve, with a shift towards high-quality service offerings and the integration of smart technology [6]

Core Viewpoint - Shenzhen Zhenye A (深振业A) reported significant revenue growth in 2024, but also faced substantial net losses due to the ongoing challenges in the real estate market [4]. Financial Performance - The company achieved operating revenue of 6.06 billion yuan in 2024, a year-on-year increase of 115.79% [4]. - The net loss attributable to shareholders was 1.57 billion yuan, representing a 95.40% decline compared to the previous year [4]. - The net profit after deducting non-recurring gains and losses was also a loss of 1.57 billion yuan, worsening from a loss of 805 million yuan in 2023 [2]. - The basic and diluted earnings per share were both -1.1618 yuan, compared to -0.5 yuan in 2023 [2]. - The weighted average return on equity was -25.35%, a significant drop from -10% in the previous year [2]. Asset and Inventory Management - Total assets at the end of 2024 were approximately 17.23 billion yuan, down from 25.92 billion yuan at the end of 2023 [2]. - The net assets attributable to shareholders decreased to about 5.40 billion yuan from 6.97 billion yuan [2]. - The company recorded a provision for inventory impairment of 1.57 billion yuan, contributing to the net loss [3]. - Inventory levels decreased by 36.72% to 10.78 billion yuan compared to the beginning of the year [3]. Strategic Adjustments - In response to the challenging market, the company has adjusted its strategic direction, successfully winning four urban village renovation projects in 2024 [3]. - The company’s subsidiary, Huashe Apartment, was recognized as a benchmark project for "New Era Urban Builders," indicating a focus on expanding affordable housing operations [3]. - The company has also engaged in a light-asset transformation, acquiring 22 construction and consulting projects [3]. Industry Context - The performance of Shenzhen Zhenye A reflects the broader transformation pains within the real estate industry, highlighting the need for a balance between inventory reduction and the expansion of new business ventures [5]. - The ongoing support from policies is acknowledged, but the management emphasizes that restoring market confidence will take time [3].

Investment Rating - The report indicates a positive outlook for the real estate industry, suggesting a recovery trend supported by policy effectiveness and structural improvements in supply and demand [4][22]. Core Insights - The real estate market continues to stabilize, with signs of recovery evident in key indicators such as new housing sales and investment levels. The report highlights a dual engine of recovery driven by policy support and a stabilizing housing price environment [4][5][22]. - In the first two months of 2025, new residential sales area and sales amount in 40 monitored cities increased by 1.3% and 7.1% year-on-year, respectively, indicating a narrowing decline in core indicators [5][9]. - The report emphasizes the importance of government policies aimed at stabilizing the housing market, including measures to boost demand and improve financing conditions for developers [11][22]. Summary by Sections Macroeconomic Overview - The macroeconomic environment shows signs of improvement, with industrial production and retail sales growth accelerating in early 2025. Industrial added value increased by 5.9% year-on-year, while retail sales grew by 4.0% [6]. - The monetary policy remains accommodative, with M2 growth at 7.0% and M1 showing a slight increase, reflecting a stable financial environment conducive to recovery [7][8]. Market Transactions - The new housing market transaction volume has shown a positive trend, with significant increases in major cities like Shanghai and Shenzhen, where transaction areas rose to three times and two times the previous year's levels, respectively [9]. - Nationally, the sales area of new commercial housing reached 1.07 million square meters, with sales amounting to 1.03 trillion yuan, marking the lowest decline in this adjustment cycle [9][10]. Construction and Investment - The report notes a significant reduction in new construction starts, with a 29.6% year-on-year decline in new housing starts, indicating a rapid decrease in inventory pressure [13][19]. - Real estate development investment in early 2025 was 1.072 trillion yuan, down 9.8% year-on-year, but the decline is less severe than in previous periods, suggesting a recovery in developer confidence [19][20]. Future Outlook - The report anticipates continued policy support for the real estate sector throughout 2025, with a focus on stabilizing asset prices and enhancing housing supply and demand dynamics [22][23]. - It is expected that the sales area and amount of commercial housing will accelerate in the first half of 2025, with major cities likely to see positive signals in housing prices and transaction volumes [23][25].

Core Insights - Leading real estate companies, China Overseas Land & Investment (COLI) and China Resources Land, are facing challenges in achieving expected growth despite their market positions as top players in the industry [1][2] - Both companies are exploring growth opportunities beyond traditional development, focusing on operational business and service quality [2][6] Financial Performance - In 2024, COLI reported a contract sales amount of 310.69 billion yuan, a slight increase of 0.3% year-on-year, with a sales area of 11.49 million square meters, down 14% [1] - COLI's net profit for 2024 was approximately 17.787 billion yuan, a decline of 34.24% year-on-year, with attributable net profit down 38.95% to about 15.636 billion yuan [1] - China Resources Land achieved contract sales of approximately 261.1 billion yuan in 2024, a decrease of 15% year-on-year, while its total revenue reached 278.799 billion yuan, an increase of 11% [1][3] - The attributable net profit for China Resources Land was 25.577 billion yuan, down 18.45% year-on-year [1][3] Profitability Trends - Both companies have seen significant fluctuations in profitability, with COLI's operating revenue dropping from 202.52 billion yuan in 2023 to 185.15 billion yuan in 2024, and a gross margin decline of 2.62 percentage points to 17.7% [3][4] - China Resources Land's gross margin also decreased by 3.6 percentage points to 21.6%, with its development sales gross margin at 16.8%, down 3.9% [3][4] Strategic Focus - Both companies are maintaining investment intensity while focusing on high-tier cities, with China Resources Land emphasizing a strategy of urban concentration and optimization of resources [4][6] - COLI plans to continue its investment strategy in first-tier and strong second-tier cities, with a focus on project certainty and cash flow [4][7] Transition to Operational Business - China Resources Land has established a strong operational business model, contributing significantly to its profits, with recurring revenue reaching 41.6 billion yuan in 2024, up 6.6% year-on-year [6][7] - COLI is in the process of developing its operational business, with commercial revenue of 7.13 billion yuan in 2024, a year-on-year increase of 12.1% [6][7] Future Outlook - China Resources Land aims for its recurring income to contribute over 45% to core net profit by 2025, with a long-term goal of achieving a balanced contribution of around 50% from both development and operational businesses [6][7] - COLI is expected to enhance its operational income and profit levels as quality properties come into operation, while also planning to establish public REITs [7][8]