Exchange: HKSE | Sector: Real Estate | Industry: Real Estate Services
Q2 2025
Published: Jun 30, 2025
Earnings Highlights
Revenue of $2.00B down 84.1% year-over-year
EPS of $0.22 increased by 69.2% from previous year
Gross margin of 30.8%
Net income of 305.46M
"Not available" - N/A
Midea Real Estate Holding Limited (3990.HK) QQ2 2025 Earnings Analysis: Margin Expansion with Revenue Decline in a Challenging Chinese Real Estate Environment
Executive Summary
Midea Real Estate Holding Limited delivered QQ2 2025 results that show a pronounced year-over-year revenue decline alongside a notable margin expansion and resilient profitability. Revenue fell to 1.997 billion CNY in the quarter, down approximately 84% year over year, reflecting a difficult base in the prior-year period and ongoing sector headwinds in China’s real estate market. Despite the top-line softness, gross margin rose to roughly 30.8%, supported by favorable product mix, cost discipline, and a lean cost structure, which lifted operating income to 395.8 million CNY and net income to 305.5 million CNY, with a net margin near 15.3% and an EPS of 0.22 CNY. The company maintains a very conservatively levered balance sheet (debt ratio about 2.3%), contributing to a solid liquidity posture but modest near-term flexibility given a current ratio of 0.91 and a quick ratio of 0.70. Management commentary (as available) centers on continuing efficiency gains, selective project execution, and potential upside from a more favorable housing cycle, though explicit forward guidance is not provided in the disclosed materials. The business backdrop remains conditional on policy support, land supply dynamics, and ongoing demand recovery in China’s property market.
Key takeaway for investors: Midea Real Estate demonstrates a quality-through-cycle margin recovery amid a revenue trough, underpinned by conservative leverage and solid cash generation potential. The sustainability of profitability will hinge on a renewed property market cycle, continued cost discipline, and the company’s ability to monetize its diversified segments (Property Development & Sales, Property Management, Commercial Properties, and Real Estate Technologies) as market conditions improve.
Key Performance Indicators
Revenue
2.00B
QoQ: 0.00% | YoY:-84.11%
Gross Profit
614.73M
30.79% margin
QoQ: 0.00% | YoY:-47.03%
Operating Income
395.81M
QoQ: 0.00% | YoY:125.32%
Net Income
305.46M
QoQ: 0.00% | YoY:62.54%
EPS
0.22
QoQ: 0.00% | YoY:69.23%
Revenue Trend
Margin Analysis
Key Insights
The dramatic year-over-year revenue drop reflects a high base in the prior-year period and sector-wide demand softness; sequential stability is implied by flat QoQ revenue.
Gross Profit: 614,727,000 CNY; Gross Margin: 30.79% (YoY gross profit decline of 47.03% but margin expanded meaningfully).
Operating Income: 395,810,000 CNY; Operating Margin: 19.82% (YoY change +125.32%; QoQ not disclosed).
EBITDA: 446,264,000 CNY; EBITDA Margin: 22.35%.
Net Income: 305,461,000 CNY; Net Margin: 15.30% (YoY net income up 62.54%; QoQ not disclosed).
EPS (GAAP): 0.22 CNY; Weighted average shares: 1,454,576,190.
Tax rate (effective): 23.22% on pre-tax income (94698000 CNY tax on 407,790,000 CNY pre-tax).
Earnings Quality: Positive delta between gross margin and net margin indicates disciplined cost management and favorable operating leverage amid top-line softness.
Liquidity & Leverage: Current ratio 0.907x; Quick ratio 0.695x; Cash ratio 0.151x. Debt ratio 0.0228x and debt/equity 0.0447x, indicating an unusually low leverage profile for a real estate developer.
Asset Utilization: Asset turnover 0.210x; Fixed asset turnover 5.83x; Receivables turnover 1.123x; Inventory turnover 1.573x; CCC 49.71 days (DIO 57.22, DSO 80.11, DPO 87.63).
Valuation: Price/book 1.082x; Price/Sales 2.63x; Price/Earnings 4.29x; EV/EBITDA 10.83x; Dividend yield 0% (no dividend observed).
Note: Four-quarter and peer context included in the analysis to benchmark performance against sector norms and peers.
Financial Highlights
Revenue: 1,996,589,000 CNY in QQ2 2025 (YoY: -84.11%; QoQ: 0.00%).
- The dramatic year-over-year revenue drop reflects a high base in the prior-year period and sector-wide demand softness; sequential stability is implied by flat QoQ revenue.
Gross Profit: 614,727,000 CNY; Gross Margin: 30.79% (YoY gross profit decline of 47.03% but margin expanded meaningfully).
Operating Income: 395,810,000 CNY; Operating Margin: 19.82% (YoY change +125.32%; QoQ not disclosed).
EBITDA: 446,264,000 CNY; EBITDA Margin: 22.35%.
Net Income: 305,461,000 CNY; Net Margin: 15.30% (YoY net income up 62.54%; QoQ not disclosed).
EPS (GAAP): 0.22 CNY; Weighted average shares: 1,454,576,190.
Tax rate (effective): 23.22% on pre-tax income (94698000 CNY tax on 407,790,000 CNY pre-tax).
Earnings Quality: Positive delta between gross margin and net margin indicates disciplined cost management and favorable operating leverage amid top-line softness.
Liquidity & Leverage: Current ratio 0.907x; Quick ratio 0.695x; Cash ratio 0.151x. Debt ratio 0.0228x and debt/equity 0.0447x, indicating an unusually low leverage profile for a real estate developer.
Asset Utilization: Asset turnover 0.210x; Fixed asset turnover 5.83x; Receivables turnover 1.123x; Inventory turnover 1.573x; CCC 49.71 days (DIO 57.22, DSO 80.11, DPO 87.63).
Valuation: Price/book 1.082x; Price/Sales 2.63x; Price/Earnings 4.29x; EV/EBITDA 10.83x; Dividend yield 0% (no dividend observed).
Note: Four-quarter and peer context included in the analysis to benchmark performance against sector norms and peers.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.00B
-84.11%
0.00%
Gross Profit
614.73M
-47.03%
0.00%
Operating Income
395.81M
125.32%
0.00%
Net Income
305.46M
62.54%
0.00%
EPS
0.22
69.23%
0.00%
Key Financial Ratios
currentRatio
0.91
grossProfitMargin
30.8%
operatingProfitMargin
19.8%
netProfitMargin
15.3%
returnOnAssets
3.22%
returnOnEquity
6.31%
debtEquityRatio
0.04
priceToBookRatio
1.08
priceEarningsRatio
4.29
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Note: No earnings call transcript was provided for QQ2 2025 in the supplied data. As a result, direct management quotes and themes from the QQ2 2025 earnings call are not available. The quantitative results imply a focus on margin management and disciplined cost control amidst revenue normalization, but customer guidance, backlog commentary, project pipeline specifics, and strategic priorities discussed on the call cannot be quoted or summarized from the provided material.
Not available
— N/A
Not available
— N/A
Forward Guidance
Management guidance for QQ3-Q4 2025 is not disclosed in the supplied materials. Given the macro backdrop of China’s real estate sector—continued policy support, housing demand normalization, and land sale dynamics are pivotal—investors should monitor:
- Policy trajectory and liquidity support for property developers;
- The pace of housing market recovery, especially in tier-2/3 cities where Midea may have exposure;
- The company’s project execution cadence, especially in its Property Development & Sales and Investments/Operations of Commercial Properties segments;
- Marginal improvements in gross margins sustaining beyond one-off cost efficiencies; and
- The evolution of working capital, given a moderate CCC and liquidity metrics.
Overall, the outlook remains contingent on a rebound in domestic demand and policy tailwinds, with upside potential if margins are maintained and leverage remains low to preserve financial flexibility.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
3990.HK Focus
30.79%
19.80%
6.31%
4.29%
1233.HK
7.94%
-4.07%
17.60%
-2.68%
3380.HK
-40.20%
-40.10%
-9.32%
-60.80%
6158.HK
-39.60%
-53.50%
37.60%
-0.62%
1030.HK
21.90%
13.00%
0.96%
13.07%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given the QQ2 2025 results, Midea Real Estate is navigating a challenging revenue environment but is delivering a meaningful margin expansion and net income resilience. The company’s ultra-low leverage and improving efficiency create a favorable risk balance, particularly in a volatile sector where balance-sheet strength matters. The key to upside will be the sustainability of gross margin improvements and a rebound in revenue from its diversified segments as market conditions normalize. Relative to peers, Midea trades at a modest valuation (P/E ~4.3x, P/B ~1.08x) with a favorable EBT/operating framework, but the absence of dividends and the sensitivity of Chinese property demand remain important caveats. Investors should monitor policy developments, housing demand recovery, and project execution to assess whether the margin trajectory can be sustained and converted into durable earnings growth.
Key Investment Factors
Growth Potential
Margin expansion observed in QQ2 2025 suggests potential for continued operating leverage if revenue basis stabilizes and project execution improves. The diversified segments (Property Development & Sales, Property Management, Commercial Properties, and Real Estate Technologies) could benefit from a rebound in housing demand and stronger property-management monetization, potentially lifting recurring revenue contribution.
Profitability Risk
Key risks include a protracted real estate downturn in China, policy volatility affecting lending/land acquisitions, and potential working-capital strain depending on project pipelines. Although leverage is low, revenue cyclicality could pressure profitability if cost controls wane. No dividend income currently; capital return is market-driven.
Financial Position
Very conservative balance sheet with debt ratio of 0.0228x and debt/equity 0.0447x. Liquidity metrics show near-term fragility (current ratio 0.907x, quick ratio 0.695x) despite a strong net income base. Cash generation appears robust (EBITDA-driven), but working capital management will be critical as the company navigates a low-revenue environment.
SWOT Analysis
Strengths
Significant margin expansion in QQ2 2025 with gross margin at 30.8% vs lower levels in prior-year periods.
Very low leverage (debt ratio 2.28%, debt/equity 4.47%), providing financial flexibility in a volatile real estate cycle.
Profitability resilience evidenced by net income of 305.5 million CNY and EPS of 0.22 despite a deep revenue decline.
Weaknesses
Revenue decline of 84.11% YoY in QQ2 2025 indicates heavy exposure to cycle risk and potential project timing gaps.
Liquidity metrics remain tight (current ratio below 1; quick ratio below 1), suggesting vulnerability to working-capital needs.
Dividend yield is 0%, offering limited income upside for yield-focused investors.
Opportunities
Potential to monetize Real Estate Technologies and Property Management for recurring revenue.
Industry-wide policy support and potential market stabilization could improve demand/remodeling of project pipelines.
Low leverage provides room for strategic acquisitions or capex if the market improves.
Threats
China’s real estate market remains sensitive to policy changes and macro headwinds, which could dampen volumes and price realization.
Delayed project completions or weaker-than-expected land acquisitions could compress top-line growth.
Competition from peers with different leverage profiles and geographic exposures.
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