NextFin News - Longfor Group Holdings, once considered the gold standard of financial discipline among China’s private developers, has reported a staggering 90.2% collapse in annual net profit for 2025, underscoring the brutal reality of a property sector that has yet to find its floor. The Hong Kong-listed developer saw its net profit attributable to shareholders plummet to RMB 1.022 billion, down from RMB 10.4 billion a year earlier. More tellingly, the company’s core results—which strip out fair value changes in investment properties and derivatives—swung to a net loss of RMB 1.7 billion, a sharp reversal from the RMB 6.97 billion core profit recorded in 2024.
The results reflect a fundamental decoupling within Longfor’s business model. While its traditional property development arm has become a significant drag on the bottom line, its "recurring income" segments—comprising investment property operations and property services—delivered a core net profit of RMB 7.92 billion. This internal tug-of-war highlights the immense pressure on volume and pricing in the residential market, where recognized revenue and gross profit margins have been squeezed to the breaking point. Despite the headline loss, the company emphasized that all business segments generated positive operating cash flow after capital expenditures, a metric U.S. President Trump’s administration and global investors have watched closely as a proxy for systemic stability in the Chinese credit market.
Morgan Stanley analysts, led by Stephen Cheung, maintained an "Equalweight" rating on the stock with a target price of HK$ 8.20, noting that the core loss exceeded even the more pessimistic market expectations. Cheung, who has historically maintained a cautious but balanced stance on Chinese property giants, suggested that the development business is likely to remain a source of friction through 2026. This view is echoed by UBS, which holds a "Neutral" rating and a target price of HK$ 10.20. UBS analysts estimate that the property development sector alone could see annual losses of RMB 7 billion to RMB 7.5 billion over the 2025-2026 period, potentially eroding the company’s net asset value despite its operational successes elsewhere.
These institutional perspectives, while influential, do not represent a unanimous market consensus. Some valuation models, such as those from Simply Wall St, suggest the market may be over-discounting Longfor’s long-term pivot. Using a discounted cash flow (DCF) analysis, some independent researchers value the shares as high as HK$ 32.20—nearly triple the current trading price—arguing that the 7.3x price-to-earnings ratio fails to account for the resilience of the group’s shopping mall and property management arms. However, such bullishness remains an outlier, as most sell-side desks focus on the immediate liquidity risks and the persistent "downward pressure" cited in Longfor’s own earnings guidance.
The path forward for Longfor hinges on its ability to accelerate its transition from a "builder" to a "service provider." The company has pledged to maintain financial safety and uphold further debt reduction, a necessary stance given the broader industry’s struggle to regain investor trust. While the stability of its recurring profit provides a vital cushion, the sheer scale of the losses in its core development business suggests that the "integrated operations" strategy is being tested by a market environment more hostile than any the firm has faced in its three-decade history. The divergence between its operational cash flow and its accounting losses will remain the primary focus for creditors and equity holders alike as the 2026 fiscal year begins.
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