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Ask AI · How should the new management respond to plunging profits and strategic transformation challenges?

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In front of the new management, besides the proposition of strategic transformation, there is also a performance report that has hit a recent low in the past few years.

Shanghai Securities News reporter Fu Shanshan | Shanghai report

“Doing it the right way matters—effort only has meaning.” On the afternoon of March 17, at the招商蛇口 2025 annual results briefing, newly appointed Chairman Zhu WenKai—having been in the role for less than half a year—opened with those words.

This was the company’s first public appearance after management adjustments. In September 2025, 招商蛇口 completed a reshuffle of key positions; Zhu WenKai became chairman, and Nie Liming was appointed general manager.

The new team took over an annual track record with a significant slide in profit. According to the annual report, in 2025 招商蛇口 achieved operating revenue of RMB 154.728 billion, down 13.53% year over year; net profit attributable to shareholders of listed companies was RMB 1.024 billion, down 74.65% year over year; and after deducting non-recurring items, net profit was RMB 169 million, with a year-over-year decline of 93.1%.

Without question, in front of this new chairman and new leadership team is a market exam that is not easy to answer.

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Aftermath of “high-priced land grabs”

Inventory impairment as a profit black hole

All profit indicators fell across the board, making it the most glaring problem in 招商蛇口’s annual report.

For all of 2025, 招商蛇口’s net profit attributable to shareholders of listed companies was only RMB 1.024 billion, with a year-over-year drop as high as 74.65%. Gross margin fell to 13.76%, down 0.85 percentage points year over year, and net profit margin was just 0.45%.

In responding to investor concerns, the company’s general manager Nie Liming attributed the performance decline to three factors: first, industry-cycle adjustments causing a simultaneous fall in both volume and price; second, provisioning for impairment losses of RMB 4.41 billion; third, recording depreciation of investment real estate of RMB 3.7 billion on a cost-basis accounting treatment, further squeezing the profit space for the period.

Among these, 招商蛇口 stated that, under a prudent principle, it made total provisions for asset impairment of RMB 4.41 billion, directly impacting the company’s profit for the period. At the same time, this also exposes the company’s aggressiveness in land acquisition in prior years.

The annual report shows that in 2025 the company acquired a cumulative 43 land parcels, up 17 parcels compared with 2024; total land price was RMB 93.8 billion, up 93% year over year—its land acquisition amount was nearly doubled compared with 2024.

From the perspective of investment layout, although core cities remain the main direction for 招商蛇口, for some projects the floor price paid was too high. Especially for high-priced land in core cities acquired between 2020 and 2022, when the market turned downward, these high land-price projects faced significant sales pressure and even the risk of prices turning “upside down.” As a result, the company had to recognize huge provisions for inventory price declines, turning them into a “profit black hole.”

According to annual report data, in 2025 alone 招商蛇口’s provisions for inventory price declines totaled as much as RMB 3.268 billion. Among them, just one project—Chongqing 招商渝天府—accounted for provisions of RMB 879 million. That project was acquired by 招商蛇口 in 2021, when the premium rate was about 130%. The Xiamen 湾湖臻境 project also made provisions of RMB 433 million in 2025, directly impacting the company’s profit for the year.

By observation, projects with high levels of impairment provisions are not all concentrated in tier-three or tier-four cities. Some projects in core cities such as Chongqing, Shenzhen, and Xiamen also saw sizable impairment. This indicates that even in high-tier cities, if a project’s positioning is wrong, costs are too high, or competition in the surrounding area is intense, it still faces inventory digestion pressure and the risk of losses.

More importantly, when these inventories that have been provided for impairment are later sold and revenue is recognized, because their carrying costs have already been reduced through the impairment provisions, the gross margin reflected at that time may be very low (or even 0 or negative). In other words, the profit from this portion of projects was “consumed” in advance in 2025, and in the future it can no longer contribute to 招商蛇口’s profit growth.

Even so, 招商蛇口 did not stop acquiring land at high prices. In March 2025, 招商蛇口 secured a land parcel in Chengdu Hi-tech Zone with a premium rate of over 70%, setting a new record for Chengdu’s floor price. In Shenzhen, it then won a residential parcel in Qianhai with a premium rate of 86%, setting a new record for Shenzhen’s unit-price “land king.”

Against the backdrop that the industry overall is dealing with slow inventory digestion and compressed profit margins, how will these newly acquired “land kings” by 招商蛇口 be digested—and will they again become a new drag?

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Mismatch between quality and branding

Sales revenue down about 10% year over year

As is well known, the operating revenue figures in listed real-estate companies’ financial reports reflect the delivery and revenue recognition of projects signed in prior periods. In 2025, 招商蛇口’s development business operating revenue fell 16.33% year over year, directly confirming that the sales digestion of the company in the previous few years had already been weak.

At the results briefing, management of 招商蛇口 said that the company ranked fourth in full-coverage sales in 2025, and its industry standing further improved. But judging by the absolute value of sales, 招商蛇口 achieved full-coverage sales of about RMB 196 billion for the year, still down more than 10% year over year.

Behind the sales pressure lies, in fact, a mismatch between the quality of 招商蛇口’s products and the company’s corporate branding.

According to management of 招商蛇口, in the top five sales cities in 2025, full-coverage sales by the company all exceeded RMB 10 billion. Shanghai regained the #1 market position with over RMB 50 billion; Beijing entered the top five for the first time with RMB 19.3 billion; Hangzhou created a record for entering the top four with RMB 16.9 billion; Shenzhen stayed in third place with over RMB 15 billion; and Chengdu broke through RMB 10 billion to enter the top five.

Deputy general manager Lü Bin repeatedly emphasized at the briefing: “This set of results was hard-won.”

The problem is that customers have built 招商蛇口’s market position with hard cash, but the houses returned to customers repeatedly trigger complaints due to quality issues.

When positioning its major stronghold in Shanghai, 招商蛇口’s “Hong-plate” 招商时代 arc of greenery was complained about by owners for issues like mismatched promises. During sales, it vigorously promoted “forest-style residences” and “a home in the park,” but at delivery the landscaping was watered down into a “flat airfield.” Even the originally promised “separation of people and vehicles” was not delivered, leading owners to question it as false advertising. In the after-sales stage, when facing owners’ requests for rectification, the developer either did not respond for a long time or dodged, avoided, and stalled. Such an almost “shoddy” attitude thoroughly intensified the conflict and harmed the company’s brand reputation.

In Hangzhou, owners reported that the 招商翠印府 project did not conduct flood/waterlogging risk assessments. Moreover, during the sales process the developer closed off discussion about major unfavorable factors such as the 1.7-meter height difference on the west side and the residential area being surrounded by a “flooding circle.” In the pre-sale disclosures, it also intentionally blurred the relevant reminders, suggesting possible intentional misrepresentation to customers. In addition, the project is touted as a quality benchmark within the sub-market, yet the actual handover was not aligned with what was promised; quality issues also drew attention from local government departments.

For the sales outlook for 2026, Lü Bin believes that with the policy tone of “stabilizing to halt the decline and return to steadiness” taking shape, the market is expected to move toward stabilization, but city-level divergence will continue. He revealed that the company’s 2026 full-coverage sales plan will be basically in line with last year. It will continue to adhere to the prudent principle of “sell to determine production and sell to determine investment,” not blindly pursuing scale, but pursuing growth with quality and good cash collections.

In line with the industry trend shifting from “scale first” to “products and services,” at the results briefing Zhu WenKai clearly defined 招商蛇口’s strategic direction for the 15th Five-Year period (“十五五”): to improve development quality, strengthen operations, expand services, and do a good job in risk control—driving the company’s transformation from a traditional developer into a “developer + operator + service provider.” He said that in the future it will strengthen its focus on core strategies, with the “good homes” system as the core to enhance product and delivery quality.

For the new management team, how to repair profit metrics while also outperforming the broader sales market and delivering investment returns is a challenge they must face.

Duty editors: Su Zhiyong

Responsible editor: Li Hongmei Wen Hongmei