While the industry struggles to survive, Longfor Group has executed a textbook counter-cyclical operation. A major shareholder has donated shares worth nearly 8 billion yuan free of charge, solely to reward employees who have adhered to long-term principles during adversity. This act is not just generosity; it is the ultimate bet on people as the core asset. Simultaneously, Longfor announced it will fully repay all its domestic debt by next year and plans for its operational income to surpass development business revenue by 2028.

As the era of "shareholder primacy" wanes, Longfor is answering a fundamental question through action: for whom does a corporation truly exist? This analysis examines how Longfor is building its strongest moat through shared value creation amidst the industry's winter.

Longfor's Principled Breakthrough: How can a company navigate cycles when shareholders choose to "cede benefits"?

In the still-chilly spring of 2026 for the real estate sector, Longfor Group chose not to retract for self-preservation but did something seemingly "counter-intuitive": it distributed wealth.

1. A 7.75 Billion Yuan "Vote of Confidence" On March 30, an announcement from Longfor Group shook the market: a major shareholder donated 100 million company shares free of charge to an employee trust. Valued at approximately 7.75 billion yuan based on the previous day's closing price, this "gift" included 60 million shares donated by Charm Talent, controlled by Wu Yajun's daughter Cai Xinyi, and 40 million shares donated by Junson Development, controlled by Cai Kui.

These shares will be incorporated into a "Restricted Share Incentive Plan." The wording of the announcement was particularly telling—the donation aims to "recognize and incentivize Longfor Group's core talent who have firmly made correct choices based on the company's long-term value during the industry's downturn."

At a time when the industry widely resorts to layoffs and pay cuts, Longfor's shareholders chose not to cash out but instead injected personal wealth into the employee incentive pool. This affirms the core team's achievements in "holding the fort" during tough times and signals strongly that the founding family's confidence in the company's future and management remains unshaken.

2. A Long-Term Commitment for "2028" If the share donation is an investment in "people," then optimizing the debt structure is a plan for the "future."

At the 2025 annual results presentation on March 27, management provided a clear deleveraging timetable: all domestic bonds and medium-term notes will be repaid by January next year. This means Longfor will be a standout private developer率先摆脱境内信用债包袱.

More notably is the top-level design for its business model. Management revealed that operational and service business revenue is expected to exceed property development revenue by 2028. In 2025, operational and service business already accounted for 27.5% of revenue, contributing nearly 8 billion yuan in profit. These figures underscore Longfor's determined shift from "developer" to "operator and service provider."

3. Bottom-Line Thinking Amidst a "First Loss" Transformation, however, comes at a cost. In 2025, Longfor recorded a rare "first loss in core profit," with core profit after tax, excluding fair value changes, expected to show a loss of 1.5 to 2 billion yuan. Addressing queries, management candidly explained this as "growing pains" from pressured development business settlement gross margins due to market declines in volume and price.

Longfor's safety net lies in its financials. It has achieved positive operating cash flow after capital expenditure for three consecutive years, maintained a net gearing ratio of 52.2%, and kept the average financing cost low at 3.51%. Faced with honoring obligations versus new investments, Longfor unhesitatingly chose the former. As management stated: "We always prioritize safety first and maintain positive operating cash flow."

This is a calculated strategy of "trading space for time"—using a reduction in the development business to gain financial safety, while increasing the operational service business to secure future growth drivers.

Principled Enterprise Insight: Longfor's Shared Value Logic Viewed Through "Shareholder Benefit Concession"

Placing Longfor's actions under the microscope of business theory reveals they align perfectly with the characteristics of a "Principled Enterprise" and a "Five-Dimensional Shared Value Model."

1. Breaking the Fate of "Shareholder Primacy": Placing Employees at the Start of the Value Chain In traditional "shareholder primacy," employees are seen as costs, and shareholder利益 is the sole purpose. Longfor's donation challenges this fate.

In the "Five-Dimensional Model," the five dimensions (clients, employees, partners, society, shareholders) are not a zero-sum game but a positively reinforcing system. Longfor's "principled" understanding is that employee well-being is the key to breaking the deadlock during a downturn.

By converting shareholder personal wealth into employee incentives during widespread industry pessimism, Longfor significantly enhances employees' sense of belonging and "feeling valued." The positive cycle logic is: Employee Happiness → High-Quality Service → Client Trust → Brand Premium → Performance Growth → Profit Sharing. For Longfor, this donation rewards the past and invests in the future, ensuring the core team delivers "exceeding expectation" service quality even in a downturn, thereby protecting client trust—the most valuable intangible asset.

2. The Institutional Rationality of Long-Termism: Using "Structural Transformation" to Counter Cycles A core feature of a principled enterprise is "institutional rationality" and "replicability." Longfor's target for "2028 operational income exceeding development" essentially builds a new profit model independent of land红利.

Operational and service businesses (malls, rental apartments, property management, etc.) possess typical "principled" attributes: they build long-term client relationships, provide sustained value to urban communities, and their profits stem not from transactional information asymmetry but from trust-based long-term service. This model naturally acts as a "ballast."

As Chen Xuping stated, the company did not sell or dilute these core assets during this deleveraging phase because they are the foundation of the future income transformation.

This resolve to "protect core assets" is the best footnote for "long-termism." It pursues long-term value maximization, not short-term profit maximization. When operational service income surpasses development income in 2028, Longfor's "shared value" will transform from slogan to reality—enterprise growth will then rely not on high leverage and turnover but on employee service, client trust, and societal recognition.

3. The "Principled" Solution to Shareholder Returns: Letting Profit Be the Outcome of Symbiosis In the Five-Dimensional Model's base weighting, shareholders account for only 10%. This doesn't mean shareholders are unimportant, but signifies that shareholder returns should be the "natural outcome" after the enterprise creates social value.

Longfor experienced a "first core profit loss" in 2025, yet shareholders not only refrained from withdrawing capital but increased their投入 (donating shares). This reflects a profound business insight: when a company prioritizes safety and creates value for employees, clients, and society, shareholders' long-term interests are ultimately most secure.

Zhao Yi mentioned the profit low point is in 2025-2026, with growth resuming in 2027. This forecast is based on operational and service businesses maintaining double-digit annual growth. Once Longfor completes the dual transformation of its "income structure" and "debt structure," it will enter a new phase: it won't need to刻意 pursue profit; profit will come naturally.

4. Three Revelations for the Industry Viewing Longfor through the lens of a "Principled Enterprise" yields at least three key insights:

First, a downturn is the touchstone for testing values. Employee incentives in good times add icing on the cake; shareholders choosing to "cede benefits" during adversity provides help in need. Longfor proves that at critical moments, the cost of trust is lowest, and the value of loyalty is highest.

Second, debt management is not merely a technical issue but one of strategic resolve. Longfor's ability to "repay all domestic debt next year" stems from its early abandonment of a scale mindset and adherence to living within its means. This caution of "producing based on sales, investing based on sales" is principled in itself—not earning money beyond one's understanding, not taking risks beyond acceptable levels.

Third, genuine transformation means moving from "zero-sum game" to "value symbiosis." Longfor's goal for operational service income to surpass development income by 2028 signifies a shift from a singular cycle of "acquire land-build-sell" to an ecological loop of "serving people, serving the city." In this loop, clients become lifetime users, employees become career partners, and society becomes a co-beneficiary.

In business history, great enterprises often emerge from industry troughs. Longfor's response lacks flashy marketing rhetoric or aggressive expansion pledges. Instead, it features shareholders' generous concession of benefits to employees and meticulous refinement of the debt structure.

This is precisely the power of being "principled." It demonstrates that when a company stops treating profit as the goal but as the outcome; when it is willing to share its core wealth with its core talent; when it dares to坚守 safety bottom lines and重构 its business model amidst turmoil—then it is not far from navigating cycles and achieving enduring success.

Longfor is conducting a business experiment in being "principled." If successful, it will light a beacon named "Shared Value" for the transformation path of China's private enterprises.