Commercial biz to ride the trend, residential biz to upgrade quality

Commercial biz to ridethetrend,residential bizto upgrade quality Target PriceHK$53.58(Previous TPHK$53.96)Up/Downside15.4%Current PriceHK$46.42 CR MixC's FY25 revenue increased by 5.1% YoY to RMB 18.0bn,belowBloomberg consensus by 2% and inline with CMBI estimate.The residentialsegment is flat YoY, dragged byVAS biz,andthe commercial segmentgrew10% YoY,slowingfrom 21% in FY24 due to a high base inshoppingmallbiz.Net profit(NP)rose 10.3% YoY to RMB4.0bn, underpinned by stableGPmarginin basicPM, improvedGPmarginofshoppingmalls, and lowerSG&Aratiodriven by digitalization, exit of low-quality projects, and cross-business synergy.Theseefforts are also evidenced by a 10%decrease in the number ofemployees.Weslightlytrimour TP by 0.7% to HK$53.58 to reflect earningsrevision, with the new TPstillbased on25x 2026E P/E (unchanged).Given itslower reliance on residential business, superior mall operatingcapabilities,100% dividend payout ratio,and its appeal to both property and consumerinvestors due to its exposure to the service consumption theme, we maintainBUYon the stockand view it as our top pick in thePMsector. China PropertyManagement Miao ZHANG(852) 3761 8910zhangmiao@cmbi.com.hk FY26Eguidance beats expectations.The company guided for double-digitgrowth in both revenue and coreNP for FY26E, which is beyond ourexpectations given that most peers have not provided quantitative FY26guidance due to high economic uncertainty.This reflects thecompany'sconfidence in its relative operational alpha, particularly in its commercialsegment.We are optimistic aboutthecommercialsegment,forecasting 10-12% revenue growth for FY26-28E, but cautious on theresidentialsegmentwith5-6%growth forecast amid intensifying competition in third-partyexpansion.Implications of the new five-year plan.The company targets 100 new third-party mall expansionsduringthe15thfive-yearplan(FYP)period(20per year vs. 12 annually in the past3years). However,SSSGis expectedto only outpace retail sales growth(3-5% in FY24-25),much lower than12.2% in FY25,and it also projected ahigh single-digit growth for FY26E.Our views:1)The 100-new-mall target is not aggressive but in line withindustry trends, as the company viewsexisting mallrenovation as a keysector theme.Declining new commercial land supply, fewer high-qualityprojects, and intense homogenized competition will lift penetration ofasset-lightoperation to improve profitability of existing malls.2)The conservativelong-term same-store growth outlook, paired with mid-to-high single-digitgrowthin FY26E,implies a gradual growth slowdown,reflecting thecompany’s view that consumption will normalize with moderating growththrough the 15thFYPperiod.Risks:1)weaker-than-expected macroeconomics;2)slower-than- Source: FactSet Related Reports1.GreentownService (2869 HK)- Continuetobearfruitfromefficiency gains expected third party expansion; 3) slower VAS growth etc.. 2.BinjiangService(3316 HK)-FY25: Showingstrength in toughtimes Source:Company data,Wind,CMBIGMestimates(data as of1Apr2026) Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities orissuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealtin or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected tooutperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperformthe relevant broad market benchmark over next 12 months CMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”)is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholl