During the real estate sector adjustment, CHINA RES LAND achieved positive growth primarily due to two factors: first, its development and sales business maintained counter-cyclical growth in sales scale, attributed to the company's continuous strategic positioning in high-tier cities and enhanced product competitiveness; second, the company's operating real estate business contributed stable profit and cash flow growth, maintaining relative operational stability during the industry adjustment.

Recently, CHINA RES LAND (01109.HK) released its 2025 interim results: the company achieved operating revenue of 94.92 billion yuan in the first half of 2025, with profit attributable to shareholders reaching 11.88 billion yuan, representing a year-on-year increase of 16.2%. Against the backdrop of ongoing real estate sector adjustments, the company's performance successfully navigated through the cycle.

As of September 16, CHINA RES LAND's stock price closed at HK$32.28, representing a 62% increase from the year's low of HK$19.913, approaching its historical high of HK$34.482. This stands in stark contrast to most major property developers in the industry, whose stock prices remain at relatively low levels.

CHINA RES LAND's ability to traverse the cycle stems from its excellent fundamental performance: on one hand, the company's development and sales business has maintained its position among the top three in sales since 2024, which relates to its continuous strategic positioning in high-tier cities and enhanced product competitiveness; on the other hand, the company's operating real estate business has contributed stable profit and cash flow growth, maintaining relative operational stability during the industry adjustment.

**Performance Outpacing Peers**

The company achieved operating revenue of 94.92 billion yuan in the first half of 2025, up 19.9% year-on-year. Development and sales business revenue reached 74.36 billion yuan, up 25.8% year-on-year; recurring business revenue totaled 20.56 billion yuan, up 2.5% year-on-year (including operating real estate business revenue of 12.11 billion yuan, up 5.5% year-on-year).

Notably, CHINA RES LAND's gross margin improved: the company's comprehensive gross margin reached 24.0% in the first half of 2025, up 1.8 percentage points year-on-year. Development and sales business gross margin increased 3.2 percentage points year-on-year to 15.6%; operating real estate business gross margin rose 1.4 percentage points to 72.9%; and asset-light management business gross margin increased 3.1 percentage points to 37.1%.

As the company's core business, real estate development achieved contract sales of 110.30 billion yuan and contract area of 4.12 million square meters in the first half of 2025, down 11.6% and 21.0% year-on-year respectively, but still outperforming the overall industry level. Development and sales business revenue reached 74.36 billion yuan, up 25.8% year-on-year.

According to statistics, major property developers achieved total revenue of 810.9 billion yuan in the first half of 2025, down 0.8% year-on-year, with net profit attributable to shareholders of 19.47 billion yuan, down 37.7% year-on-year. CHINA RES LAND's performance clearly outpaced major property developers.

As of the end of June 2025, the company had signed but unrecognized development property revenue of 251.37 billion yuan, with approximately 159.53 billion yuan planned for settlement in the second half. Since first entering the industry's top three in sales at the end of 2024, the company has maintained its industry position.

The continuous increase in recurring business proportion reflects outstanding shopping center performance: the company's shopping centers achieved revenue of 10.42 billion yuan in the first half of 2025, up 9.9% year-on-year; retail sales increased 20.2% year-on-year to 110.15 billion yuan, with overall occupancy rate maintaining a high level of 97.3%.

**Active Land Acquisition and Asset Optimization**

As mentioned, CHINA RES LAND's residential development segment's gross margin recovery was mainly driven by the rapid increase in first-tier city revenue contribution. According to Guosheng Securities, the company's first-tier city sales proportion increased 8 percentage points year-on-year, correspondingly driving average selling price up 11.9% year-on-year to 26,777 yuan per square meter, optimizing the product structure.

This reflects the company's maintained high land acquisition intensity in high-tier cities in recent years. In 2022, affected by industry adjustments, the company reduced land acquisition. Starting from 2023, it increased land acquisition efforts, with total land acquisition amount reaching 173 billion yuan, up 20% year-on-year, significantly higher than the 8% and -3.2% year-on-year growth rates in 2021-2022.

Overall, CHINA RES LAND's land acquisition in first and second-tier cities accounted for over 90% from 2021-2023. Since 2022, first-tier city land acquisition proportion increased significantly while second-tier city proportion decreased. In 2023, first-tier, second-tier, and third/fourth-tier city land acquisition proportions were 46%, 47%, and 7% respectively.

In the first half of 2024, first-tier city land acquisition proportion further increased to 60%, and in the first half of 2025, all land acquisition focused on first-tier and strong second-tier cities.

As of the end of June 2025, CHINA RES LAND's total land bank reached 48.95 million square meters, including 7.76 million square meters for investment properties and 41.19 million square meters for development properties, with equity area of 28.84 million square meters, approximately 70% located in first and second-tier cities.

Zheshang Securities noted that the current real estate industry is in a "new model" transformation stage, transitioning from incremental to stock markets. Comparing with mature markets like Hong Kong, Japan, and Singapore, real estate developers have all moved from traditional development models to "development + operation" stages, transitioning from sales models to "sales + perpetual cash business" dual-drive models. Therefore, under the promotion of the "dual-track" new model, rental and sales combination and asset management are main directions for future expansion of Chinese property companies.

Currently, operating real estate business has become a new growth engine for CHINA RES LAND's performance.

**Commercial Real Estate Building Moats**

As a leading comprehensive development and operation service provider in China, CHINA RES LAND's operating real estate business (recurring business) includes shopping centers, office buildings, and hotels held for rental operations, serving as the main source of performance and operating cash flow. In the first half of 2025, this business contributed 60.2% of core net profit.

CHINA RES LAND's shopping center business has formed strategic positioning with three major commercial product lines: MIXC, MixV, and MixTown, mainly focusing on first and second-tier cities and provincial capital core cities. In the first half, nearly 90% of operating shopping centers ranked among the top three locally in retail sales.

As of the end of June 2025, the company operated 94 shopping centers, with the total expected to reach 114 by the end of 2028.

In terms of operating performance, the company's shopping centers achieved retail sales of 110.1 billion yuan in the first half of 2025, up 20.2% year-on-year. While not matching the 43.8% growth rate in 2023, this growth rate remains relatively high in recent years. The overall occupancy rate increased 0.2 percentage points from the end of 2024 to 97.3%, with continuous improvement since 2023.

For rental income, the first half achieved rental income of 10.4 billion yuan, up 9.9% year-on-year. Except for a slight 0.7% decline in 2022, all other years maintained growth. Shopping center gross margin and operating profit margin rose to 78.4% and 65.9% respectively in the first half, continuing to increase. The company expects full-year EBITDA cost return rate of 9.7%, with rental yield maintaining a reasonable level of 12.0%.

Unlike traditional real estate developers, commercial real estate has built high moats for CHINA RES LAND. Its stable rental income provides support to the main business, reducing the impact of industry downturns on performance volatility and providing strong support for sustainable profitability.

Additionally, commercial real estate possesses strong financing capabilities due to asset quality, adding important risk resistance capabilities for enterprises in a market environment of tightening industry financing.

Guosheng Securities noted that under the steady growth driving model of operating cash flow, such enterprises maintain operational stability during industry adjustments and are therefore more favored by financial institutions. They can obtain financing quotas and debt instruments like domestic guarantee for overseas loans through relatively robust asset collateral, achieving liquidity supplementation. The quality of their premium commercial assets also brings possibilities for subsequent exit through C-REITs channels.

As of the end of June 2025, the company obtained financing quotas of 129.82 billion yuan through asset mortgages, with loan balance under this quota at 101.71 billion yuan.

CHINA RES LAND's asset management scale continues to expand, having established two REIT platforms for long-term rental apartments and commercial properties. The company successfully issued YouChao REIT in December 2022, the first market-oriented institutionally operated affordable rental housing public REIT with issuance scale of 1.21 billion yuan. Subsequently, it issued MIXC Lifestyle and Huaxia CHINA RES LAND Commercial REIT, consumer infrastructure REITs with issuance scale of 6.90 billion yuan.

Driven by steady operation of underlying assets and policies stimulating "rental and sales combination" and consumption promotion, CHINA RES LAND REITs have achieved significant gains compared to issuance prices. As of the end of June 2025, MIXC Lifestyle and Huaxia CHINA RES LAND Commercial REIT market value exceeded 10 billion yuan, ranking first among consumer infrastructure REITs with cumulative stock price gains of 52.2%. YouChao Public REIT achieved cumulative price gains of 73.9%.

Zheshang Securities believes that operating held assets like shopping centers belongs to heavy asset categories, with the main characteristic of long recovery cycles. CHINA RES LAND explores multi-level products like Pre-REIT and private REITs, gradually improving the "investment-financing-construction-management-exit" capital loop, possessing the capability to make "heavy" assets "light." Its full-cycle asset operation capabilities provide industry advantages.

Diversified enterprises often possess stronger capabilities to traverse industry cycles. Since 2024, new consumption has gradually emerged. Since 2025, with continuous rises in consumer REITs, the value revaluation space for commercial real estate has become increasingly prominent.

According to Huatai Securities, commercial real estate possesses complex tri-dimensional attributes of "commerce + real estate + finance." While commercial real estate's monetization model based on real estate attributes is gradually declining, commercial and financial attributes determine its valuation foundation centered on commerce. Therefore, it is mostly valued using income approach, with leading operators' shopping center assets exceeding book fair value of investment properties. More crucially, C-REITs channels make this value realization path smoother, with enhanced liquidity making this valuation more meaningful.

Guosheng Securities believes CHINA RES LAND combines excellent development business with high commercial operation proportion, while possessing expansion capabilities under commercial asset-ization, demonstrating stronger anti-cyclical capabilities and development resilience.