Key Takeaways:
Longfor Group expects first-half profit to fall to RMB1.8-2 billion, with core profit plunging over 90% as China's property market adjusts.
The developer blamed the drop on the market's adjustment period, where inventory destocking has cut settlement revenue from development and squeezed gross margins, Longfor said in its profit warning.
Core profit, which strips out fair-value changes on investment properties, is seen at RMB50-100 million versus RMB1.38 billion a year earlier. Revenue from operations and services rose 3.24% to about RMB13.7 billion, with operations contributing RMB7.3 billion and services RMB6.4 billion. Contracted sales fell 52.73% to RMB16.55 billion in the first half, with contracted area of 1.75 million square meters. In June alone, sales reached RMB2.88 billion across 299,000 square meters.
Land purchases were limited to four parcels worth RMB1.36 billion in the first half, a conservative stance as developers hoard cash. In June, Longfor added one site in Lanzhou, Gansu province, with a gross floor area of 45,300 square meters and an attributable premium of RMB121 million.
The warning adds to a string of profit alerts from Chinese developers as a multi-year downturn in the sector drags on. Longfor shares fell 1.22% on Friday, leaving the company with a market value of about HK$48 billion. The stock carries a Buy rating with a HK$11.40 price target, according to TipRanks.
Longfor said it achieved positive operating cash flow including capital expenditures in the first half, steadily reduced debt and extended borrowing tenors, and will keep cutting leverage while supporting growth in its operations and services businesses. The company declared no final dividend for fiscal 2025 in March, after paying an interim dividend of RMB0.07 per share in August 2025.
The operations and services arm has become Longfor's main earnings buffer as development margins compress, a shift that mirrors the strategy of peers such as China Resources Land and China Overseas Land & Investment, which have also leaned on rental and property-management income during the downturn.
The profit warning shows development margins remain under pressure even as Longfor's non-development businesses cushion the blow. Investors will watch second-half contracted sales and the interim results for updated guidance on debt reduction and dividend policy.
This article is for informational purposes only and does not constitute investment advice.
