Revenue increased 40-fold, yet net profit attributable to shareholders falls short of levels from 19 years ago.

Recently, Greentown China (03900.HK) announced its 2025 interim results, marking the first "report card" delivered after China Communications Construction veteran Liu Chengyun took over as chairman.

The interim results report showed that Greentown China's revenue and gross profit both declined during the period, with net profit attributable to shareholders reaching only 210 million yuan, compared to 2.045 billion yuan in the same period last year, representing a drop of nearly 90%.

The 210 million yuan figure represents Greentown China's lowest interim net profit record since its listing on the Hong Kong Stock Exchange in 2006.

In Greentown China's first year as a public company in 2006, the company's interim revenue was 1.21 billion yuan, with net profit attributable to shareholders at 257 million yuan. Today, Greentown's half-year revenue is more than 40 times that of 2006, yet its net profit remains below the level of 19 years ago.

Sharp Decline in Net Profit Attributable to Shareholders

Greentown China's recently disclosed interim results report showed that for the half-year ended June 30, 2025, revenue was 53.368 billion yuan, down 23% year-on-year; gross profit was 7.159 billion yuan, down 21% year-on-year; net profit for the period was 1.211 billion yuan, down 64% year-on-year; and net profit attributable to shareholders was 210 million yuan, down nearly 90% year-on-year.

Regarding the comprehensive decline in revenue, gross profit, and net profit, Greentown China explained in its results report that the decrease was due to uneven settlement, mainly affected by the uneven distribution of delivery schedules in the first half of 2025. The settlement area in the first half decreased by 22.7% year-on-year, leading to the year-on-year decline in revenue.

Additionally, Greentown China stated that the company actively promoted the clearance of long-term inventory this year, making provisions for related asset impairment losses of 1.933 billion yuan in the 2025 interim period, which consequently affected profit attributable to shareholders.

Last year, in the final year under former chairman Zhang Yadong's leadership, the company's net profit had already been halved. Despite annual revenue reaching 158.5 billion yuan, profit attributable to shareholders was only 1.596 billion yuan, down 49% year-on-year.

On the eve of the annual results announcement held on March 31 this year, Greentown China suddenly changed leadership. Liu Chengyun, from the China Communications Construction system and serving as Party Committee Standing Committee member and Deputy General Manager of CCCC Group, replaced Zhang Yadong as chairman of Greentown China.

Based on the interim report data, the leadership change has not yet reversed Greentown's declining performance and plummeting net profit.

However, setting aside profitability issues and looking solely at the sales side, Greentown, which has been aggressively acquiring "land kings" in recent years, remains one of the few representatives in the residential development industry still capable of executing high-turnover models.

Interim data showed that in the first half of this year, Greentown achieved total contract sales of approximately 122.2 billion yuan, jumping to second place in the industry. Self-invested project sales were approximately 80.3 billion yuan, with equity sales of about 53.9 billion yuan, ranking fifth in the industry. In the first half, the company added 35 new projects with a total construction area of 3.55 million square meters and an estimated saleable value of 90.7 billion yuan, ranking third in the industry.

Greentown China stated that the collection rate in the first half reached 96%, strongly supporting project reinvestment. The average clearance rate for first-phase projects in the first half was 80%, up 2 percentage points from the same period last year.

From a financial perspective, cash and bank deposits (including mortgaged bank deposits) totaled approximately 66.795 billion yuan, 2.9 times the balance of borrowings due within one year. In terms of debt structure, short-term debt accounted for 16.3%. With the backing of a central enterprise major shareholder, the weighted average interest cost of total borrowings was 3.6%, down 40 basis points from 4.0% in the same period of 2024.

Minority Shareholders Take Most of the Profits

In recent years, the real estate industry has undergone dramatic changes, with significant shifts in the rankings of leading developers. Based on full-scale sales, Greentown China, known as the "land king harvester," has secured a stable position in the industry's top three.

However, despite sales revenue, new land reserves all ranking among the industry's top performers, and financing costs comparable to central enterprise levels, Greentown's net profit levels have consistently failed to match its scale and industry position.

When Greentown China went public on the Hong Kong Stock Exchange in 2006, its first interim results showed revenue of 1.21 billion yuan and net profit attributable to shareholders of 257 million yuan. Now, Greentown's half-year revenue is more than 40 times that figure, yet net profit attributable to shareholders is actually tens of millions less than 19 years ago.

Why is Greentown's net profit so low?

From this year's interim report, Greentown's selling expenses, administrative expenses, finance costs, and taxes not only failed to grow but all declined significantly. Administrative expenses were 1.523 billion yuan, down 9.9% year-on-year; selling expenses were 1.057 billion yuan, down 6.1% year-on-year; interest expenses were 2.953 billion yuan, down 745 million yuan year-on-year; and taxes decreased by more than 300 million yuan from 1.349 billion yuan to 1.026 billion yuan.

Logically, Greentown should have seen its net profit rise given the savings from these areas. However, this was not the case.

The decline in net profit can be attributed to several factors visible in the half-year report.

First, the share of losses from joint ventures was 419 million yuan, while the share of profits from associates was 149 million yuan, resulting in a combined loss of 270 million yuan, an increase in losses of 60 million yuan from the same period last year. However, this is only a minor factor.

In the item of impairment losses and reversals on certain assets, Greentown China stated that based on the principle of prudence, the company conducted impairment tests on some properties. Based on the test results, non-financial asset impairment losses of 1.717 billion yuan were provided for in the current period, nearly 300 million yuan more than the same period last year.

Additionally, the company combined the expected credit loss impairment model with factors such as receivables counterparties and aging to provide impairment losses of 216 million yuan. This was mainly due to the real estate market downturn, leading to impairment provisions on receivables from joint ventures and associates.

Furthermore, the fact that net profit attributable to shareholders was only 210 million yuan is also related to Greentown China's excessively high proportion of non-controlling shareholder interests.

The interim report showed that Greentown China's profit for the period was 1.211 billion yuan, but non-controlling shareholder interests took away 1.001 billion yuan of net profit, leaving only 210 million yuan in net profit attributable to listed company shareholders. This means non-controlling shareholders took away 83% of net profits.

In the same period last year, the proportion of net profit taken by non-controlling shareholders was 38%.

This year, amid declines in Greentown China's revenue, gross profit, and net profit, non-controlling shareholders took away a larger proportion of net profits.

As of June 30, 2025, Greentown China's net assets were 119.323 billion yuan, of which equity attributable to ordinary shareholders of Greentown China was 35.571 billion yuan, slightly down year-on-year, while non-controlling shareholder interests were 83.752 billion yuan, up 8.5% year-on-year.

The non-controlling shareholder interests here refer to minority shareholder interests. Minority shareholders taking away most of the profits has long been common in the real estate industry. Industry insiders believe that minority shareholder interests and minority shareholder profit and loss items are often overlooked by investors, but they harbor risks such as disguised debt and profit manipulation.

Minority shareholder interests represent the portion of net assets in consolidated balance sheets that belongs to minority shareholders. From 2017 to present, due to increased phenomena of joint development, small equity operation, or introduction of investors in projects by property developers, minority shareholder interests have generally grown. When minority shareholder interests account for an excessively large proportion, minority shareholders can take away substantial profits according to their equity ratios during project profit distribution, thereby affecting net profit attributable to company shareholders.

According to institutional statistics, since the real estate market downturn began in 2024, profit margins have been compressed. However, minority shareholders in some projects, protected by equity protection mechanisms or cooperation agreements, have relatively stable profit distributions, while company shareholders' attributable profits have declined more significantly. In the first half of 2024, minority shareholders of 71 mainland property stocks collectively took away 9.546 billion yuan in profits, while the total net profit of these 71 property companies was -65.597 billion yuan. Many property companies experienced operational losses while minority shareholders still achieved positive returns.

From Greentown's interim profit distribution this year, minority shareholders also took away most of the listed company's profits.

However, at the interim results meeting, Greentown China's Executive Director and Executive President Geng Zhongqiang attributed the sharp decline in profit attributable to shareholders to provisions for related asset impairment losses. He stated that in the first half, the company actively promoted long-term inventory clearance, making interim provisions for related asset impairment losses of 1.933 billion yuan.

This is indeed one of the important reasons for poor profit performance among many property companies in recent years. Regarding whether there will be further large impairment provisions in the future, Geng Zhongqiang responded that specific figures are difficult to estimate because market conditions change, and the company's own operational strategies will be adjusted accordingly. He believes that long-term inventory impairment pressure is an unavoidable challenge for every property company.