China Securities Co., Ltd.: Operating service performance pressure gradually released, dividend payment is attractive.

China Securities Co., Ltd. releases a research report stating that by 2025, high-quality development will become the core theme of the property management and business management industries. Enterprises will refocus on their main business of property management services, and with the emergence of cost reduction and efficiency improvement, as well as the gradual release of impairment pressure, there will be a positive change in overall corporate performance. There is a differentiation in performance among companies, with some high-quality property management and business management companies seeing continued growth in performance. Generally, operating service companies choose to give out a high proportion of dividends, actively returning to shareholders. Against the background of expanding domestic demand, the overall development of the real estate industry continues to be supported by policies. The company continues to be optimistic about the property management and operating service tracks, recommending leading trade intermediaries, construction service providers with high service quality and operating efficiency. Key points of China Securities Co., Ltd.: Property Management and Business Management: High-quality development becomes the core theme, with high dividend payouts Returning to the main business, corporate profitability is increasing, and the performance of some high-quality property management companies continues to grow. In 2025, 22 key property management and business management companies collectively achieved operating income of 241.3 billion yuan, a year-on-year increase of 5.1%, with the growth rate decreasing slightly by 0.3 percentage points year-on-year; the proportion of basic property management service revenue increased by 1.4 percentage points year-on-year to 70.2%, with enterprises gradually returning to the main business of property management services. In 2025, the net profit attributable to shareholders was 11.4 billion yuan, a year-on-year increase of 9.4%, compared to a year-on-year decrease of -21.8% in 2024. The effectiveness of cost reduction and efficiency improvement is evident, with a combined sales and management expense ratio of 7.2% in 2025, a year-on-year decrease of 0.6 percentage points; the pressure of impairment continued to decrease, with the proportion of impairment of goodwill and financial assets to revenue in 2025 at 3.8%, a year-on-year decrease of 1.1 percentage points. The net profit attributable to shareholders was 4.7%, a slight increase of 0.1 percentage points year-on-year, and profitability is stabilizing and recovering. There is significant differentiation among companies, with only a few high-quality companies maintaining continuous growth in performance. Property management companies generally choose to give out a high proportion of dividends, with some companies paying out dividends exceeding 100%. Trading and Construction: Leading companies maintain a stable position and continue to actively return to shareholders (1) Trading intermediaries: Marginal improvement in profitability. Affected by the decline in real estate transaction activity in the fourth quarter, Beike's total GMV in 2025 was 3,183.3 billion yuan, a year-on-year decrease of 5.0%, achieving revenue of 94.6 billion yuan for the full year, a year-on-year increase of 1.2%. Adjusted non-GAAP net profit attributable to shareholders was 5 billion yuan, a year-on-year decrease of 30.4%. The company actively reduced costs, with the contribution profit margin of existing housing business in the fourth quarter increasing by 1.4 percentage points to 40.4% compared to the third quarter; the contribution profit margin of new housing business increased by 4.2 percentage points to 28.3%, reaching the highest level since going public. In addition, according to company disclosures, the company's home decoration business significantly narrowed its operating losses in 2025, and the leasing business achieved profitability for the full year, with continuous improvement in operations. (2) Construction service providers: Optimization of the new expanded project structure, improvement in cash flow and profitability. GREENTOWN MGMT achieved operating income of 3.1 billion yuan in 2025, a year-on-year decrease of 9.3%; achieving a net profit attributable to shareholders of 420 million yuan, a year-on-year decrease of 47.7%, primarily due to intensified industry competition, declining rates, and rigid labor costs, resulting in a year-on-year decrease in gross profit margin by 9.9 percentage points to 39.7%. The construction fees for new expanded projects in 2025 were 9.35 billion yuan, a year-on-year increase of 0.4%, ranking first in the industry, with significantly improved project quality, with 55% of projects in first and second-tier cities. In 2025, there was a net inflow of operating cash flow of 420 million yuan, a year-on-year increase of 42%; by the end of 2025, the bank balance and cash (excluding pledged bank deposits) was 1.40 billion yuan, maintaining a healthy level. The balance of trade and other receivables at the end of 2025 was 1.04 billion yuan, a decrease of 6.7% from the end of 2024, indicating an improvement in the collection situation. In 2025, the company announced a mid-term dividend of 0.076 yuan per share since going public, and also declared a final dividend of 0.0916 yuan per share and a special dividend of 0.0419 yuan per share, with a full-year dividend payout ratio of 100%. Investment recommendations Optimistic about property-based enterprises, trading intermediaries, and leading construction service providers with stable performance and active dividend payments. (1) Property management and business management: The overall industry is returning to rational operations, no longer pursuing blind expansion of scale and diversification of business, shifting towards high-quality development, where project quality and operational efficiency are the core factors to guarantee performance and stable dividends for property-based enterprises. Recommended companies include CHINA RES MIXC, POLY PPT SER, GREENTOWN SER, BINJIANG SER. (2) Trading intermediaries: The company is optimistic about the continued release of core urban housing demand under policy support and recommends leading trading intermediaries in key cities, such as BEKE-W. (3) Construction service providers: With the current shift in residential housing demand from "having" to "good," the company is optimistic about the top construction service providers with outstanding product and brand strength under the construction of "good houses," such as GREENTOWN MGMT. Risk analysis 1. Operating service providers: If the real estate market recovery is slower than expected, it will not only reduce the growth of contracted area supplied by the parent company but also directly affect non-owner value-added services such as marketing and consultancy services for property-based enterprises. Increased competition in the market and rising labor costs will put pressure on the profit margins of property management companies, posing a risk of lower-than-expected profitability. In addition, a continuous increase in accounts receivable size for property-based enterprises with lower-than-expected collection rates could adversely affect their liquidity. 2. Construction service providers: There is uncertainty in the construction market and risks of brand value impairment. Construction businesses include commercial construction and government construction projects, and their prospects depend on many factors, such as China's macroeconomic performance, the real estate market's vitality, and public housing construction policy objectives, leading to operational uncertainties; the brand value of construction service providers is their core competitiveness, and if the contracting parties fail to fulfill obligations to the construction service provider, resulting in impairment of brand value, it may have a negative impact on reputation, business, financial condition, and performance.