As the real estate sector enters a period of deep adjustment, the property management industry has moved beyond its previous phase of rapid expansion and fully entered a new stage characterized by competition for existing assets and refined operations. YUEXIU SERVICES, a property services company backed by YUEXIU PROPERTY, released its 2025 annual results on March 26, which serve as a clear reflection of this industry cycle shift. In terms of overall revenue, YUEXIU SERVICES barely maintained growth in 2025, with total revenue reaching approximately RMB 3.902 billion, a slight increase of 0.9% year-on-year. However, beneath the surface of stable revenue, the company faced substantial downward pressure on profitability. Financial reports show that YUEXIU SERVICES' net profit attributable to shareholders was about RMB 270 million in 2025, a decline of 22.5% compared to the previous year. At the same time, the gross profit margin, a key indicator of core profitability, also experienced a significant drop, falling by 8.5 percentage points from 23.3% in 2024 to 14.8% in 2025. This situation of increased revenue without corresponding profit growth highlights the profitability challenges currently facing property management firms.

A detailed analysis reveals that the primary reason for YUEXIU SERVICES' sharp profit decline is the downturn in high-margin businesses closely tied to the real estate development cycle. Due to the direct impact of the real estate sector's deep adjustment, the gross profit margin from non-property-owner value-added services, such as brokerage services, decreased by 12.2 percentage points. The gross profit margin for community value-added services also fell by 9.7 percentage points, as phased hard decoration services for properties were successively completed. Meanwhile, in basic property management services, continuous increases in investment, combined with rigid growth in labor and outsourcing costs due to policy adjustments, further squeezed the gross profit margin, which declined by 3.7 percentage points last year. Under the combined effect of these factors, the gross profit margin for YUEXIU SERVICES' non-commercial property management and value-added services segment dropped significantly from 21.9% in 2024 to 13.4% in 2025.

Additionally, fluctuations in the macroeconomic environment have affected the operation of commercial properties. In 2025, occupancy rates for commercial projects generally declined. To stabilize customer traffic and occupancy, YUEXIU SERVICES had to increase cost investments against the trend, which directly led to a decrease in the segment gross profit margin for commercial property management and operational services from 29.3% to 20.7%. The pressure on profitability at the fundamental level has inevitably impacted the secondary market. Over the past year, amid low developer sentiment, the entire property management sector has undergone a significant valuation reassessment. Investors have applied stricter scrutiny to the growth expectations and risk resilience of property management companies, resulting in considerable volatility and downward pressure on YUEXIU SERVICES' stock performance. Following the release of its 2025 profit warning, YUEXIU SERVICES' stock price experienced a sharp drop, falling by 18.18% on February 16 alone. As of the market close on March 26, YUEXIU SERVICES' stock price was approximately HKD 1.79 per share, with a total market capitalization of about HKD 2.689 billion.

YUEXIU SERVICES' Chief Financial Officer, Li Huiting, believes that the current stock price does not reflect the company's actual value. In 2026, the focus for market value management will be on fulfilling commitments through improved performance, with an emphasis on expanding non-residential business and restructuring value-added services. While not directly addressing whether share buybacks would be used to boost the stock price in the future, the company has not remained silent in the secondary market over the past year. In 2025, YUEXIU SERVICES repurchased a total of 8.2595 million ordinary shares at a total cost of approximately HKD 24.6 million, with the highest repurchase price reaching HKD 3.29 per share. In addition to substantial buybacks, YUEXIU SERVICES has also sought to bolster long-term investor confidence through generous dividends. In 2025, the company's dividend payout ratio increased to 60%, with a dividend per share of RMB 0.11. During a period of industry uncertainty, such high-certainty cash returns serve as a strong vote of confidence to the market.

The ability of YUEXIU SERVICES to conduct dividends and buybacks with such ease in the secondary market stems from its healthy balance sheet and ample cash flow. As of the end of last year, the company held cash and cash equivalents, along with term deposits, totaling approximately RMB 4.906 billion, with no bank borrowings on its books. In terms of scale, YUEXIU SERVICES maintained its consistent prudence. In 2025, the company's contracted area saw a slight increase of only 1.4% to 90 million square meters, while the area under management grew by 6% to 73.5 million square meters. Behind this slowdown in growth is YUEXIU SERVICES' proactive "slimming down" of its management portfolio, having exited a total of 6.5 million square meters of low-quality, inefficient projects during the year. It is worth noting that, of the funds raised during its IPO in 2021, approximately RMB 495 million earmarked for mergers and acquisitions remains unused. Regarding this, YUEXIU SERVICES' management stated that, given the changes in the industry over the past few years, the company's cautious approach to mergers and acquisitions is particularly valuable. The company has been actively monitoring and pursuing market opportunities, but focuses on targets that offer high synergies, high operational quality, sustainability, financial compliance, and relatively reasonable valuations.

At the crossroads of deep restructuring in the real estate and property management industries, YUEXIU SERVICES experienced the challenges of a downturn in high-margin businesses in 2025, but also demonstrated rationality in financial control and decisiveness in strategic adjustments. Short-term volatility in the secondary market may be unavoidable. However, in the accelerated phase of industry survival of the fittest, those with healthier cash flows and successful transformations will have the power to redefine the market landscape.