Goldman Sachs has upgraded A-LIVING (03319) from "Sell" to "Neutral" rating, raising the target price from HK$2.45 to HK$3.00, according to a research report.

The investment bank lowered its 2025 revenue forecast by 5% to reflect the impact of exiting underperforming projects, while expecting revenues to remain flat for 2026-2027. Goldman Sachs also adjusted its core net profit forecasts for 2025-2027, ranging from a 1% decrease to a 4% increase.

Goldman Sachs noted that following years of business portfolio optimization and restructuring, the company has exited underperforming property management projects and city service contracts. It has also reduced exposure to highly leveraged affiliated developers AGILE GROUP (03383) and Greenland Holdings (600606.SH), as well as government clients with lower payment visibility. The firm expects recurring revenue and profitability to improve starting next year, supporting stable free cash flow generation and shareholder return prospects.

A-LIVING turned around from losses to profits in the first half of the year, recording a net profit of RMB 350 million compared to a net loss of RMB 1.6 billion in the first half of 2024, primarily benefiting from reduced impairment losses on receivables.

Goldman Sachs expects the company's earnings to bottom out and recover, with controllable downward pressure on profit margins for both property management and city services businesses. Management has also indicated that it may consider distributing special dividends in the future.