On the evening of August 28th, China Merchants Shekou (001979. SZ) released its 2026 semi annual report. During the reporting period, the company achieved a revenue of 54.784 billion yuan and a net profit attributable to shareholders of the listed company of 528 million yuan; The net cash flow from operating activities was 24.135 billion yuan, and the ending balance of monetary funds was 98.449 billion yuan, both reaching historical highs. The "three red lines" of China Merchants Shekou remain green and continue to improve. The scale of interest bearing liabilities has continued to decline compared to the beginning of the year, the debt structure has been further optimized, and financing costs have also continued to be optimized.

In the first half of the year, facing the complex environment of deep adjustment in the real estate industry, China Merchants Shekou promoted the transformation from "developer" to "developer+operator+service provider" around three types of businesses: development, asset operation, and property services. The temporary pressure on the profit side is essentially the result of the combination of industry settlement cycles and historical centralized delivery of land reserves. Behind this semi annual report, five major value bases are taking shape simultaneously - deepening the collaboration of three types of businesses, building a product moat with the full chain capability of "good houses", releasing the synergy effect of production and finance in the full cycle of asset management, deepening the cultivation of property services for institutional customers entering a new cycle of professional development, and strengthening the safety bottom line of financial stability crossing the cycle - the five major capabilities are working together to present a clear outline of long-term value growth for the market.

Collaboration among three types of businesses and deep implementation of strategic transformation

On the business side of development, China Merchants Shekou adheres to focusing on core cities and investing based on sales. In the first half of the year, the total contracted sales amount was 96.245 billion yuan, a year-on-year increase of 8.3%, ranking fourth in the industry. Against the backdrop of the overall adjustment channel of the top 100 real estate companies, this growth is mainly due to the effectiveness of the strategy of continuously focusing on high-energy cities. The company has entered a total of 15 TOP5 cities, ranking first in cities such as Xi'an, Changsha, Nantong, and Wenzhou, entering the top three in cities such as Shanghai, Shenzhen, Chengdu, Nanjing, Foshan, Zhengzhou, and Xuzhou, and ranking in the top five in cities such as Suzhou, Chongqing, and Wuhan. The investment side has also continued its focus strategy, with newly added land reserves concentrated in high-energy level cities in the first half of the year. The investment proportion of the core ten cities is close to 100%, with the first tier cities of Beijing and Shanghai accounting for 37%. In the Hong Kong market, China Merchants Shekou, in collaboration with six other companies including China Shipping, China Resources Land (Overseas), China Tourism Group, JD Group, and Xinhua Real Estate, has won the bid for the first "zone development" pilot project in the northern metropolitan area. This is another important milestone for China Merchants Shekou in the Hong Kong market, following Ma Shi Road in Fanling and Kam Sheung Road in Yuen Long.

On the asset operation side, the full chain capability of "investment, financing, construction, management, and return" is gradually being realized as operating results. In the first half of the year, the total income from holding properties was 3.91 billion yuan, a year-on-year increase of 7.0%. Eight new projects entered the market, covering core cities such as Shanghai and Shenzhen. Centralized commercial operation revenue of 1.02 billion yuan, with 55 operating projects and an operating area of approximately 3.47 million square meters; The operating income of the industrial park is 610 million yuan, and it has been ranked first in the "Top 50 Chinese Industrial Park Operators" at the Fangsheng Park Conference for seven consecutive years; The operating income of the apartment is 800 million yuan, and the rental rate of boutique apartments that have been in operation for more than one year is 95.2%. The operational value of existing assets is gradually being released.

In the first half of the year, the property management service achieved a revenue of 9.77 billion yuan, a year-on-year increase of 6.64%, and a net profit attributable to the parent company of 498 million yuan, with a year-on-year increase of 5.23% in non recurring net profit. The newly signed annual contract amount is 2.093 billion yuan, of which third-party projects have increased by 28% year-on-year, and the contribution of 10 million level projects accounts for 58%. The project quality and structure continue to be optimized. The management area has increased to 407 million square meters. The non residential track continues to deepen its cultivation of high barrier industries such as IFM, universities, and hospitals. The newly signed annual contract amount of universities and hospitals has increased by over 60% year-on-year, and the newly signed annual contract amount of market-oriented residential projects has increased by 17% year-on-year. The three types of business structures are becoming more balanced, and the transformation is moving from strategy to implementation.

Full chain capability of 'good houses', building a product moat

The concept of 'good houses' has been included in the government work report for the second consecutive year and in the' 15th Five Year Plan for Urban Renewal ', moving from top-level design to specific implementation. China Merchants Shekou's layout on this track has shifted from standard construction to full chain organization and implementation. The Investment Promotion Good House Center was established within the year, and a complete technical system covering 7 dimensions, 28 modules, and 485 technical details is gradually being constructed. Good House has risen from a single product standard to a comprehensive management system covering the entire business chain.

The Shenzhen Good House Experimental Base will officially open for operation in January 2026. Unlike traditional model rooms, China Merchants Shekou has partnered with 42 top suppliers to implement 22 indoor related scenarios, some of which are jointly researched or applied for the first time in the industry. The base has received over a hundred batches and more than a thousand visitors from government departments, industry associations, peers, and investors, and has been reported by CCTV Finance Channel. It has become a designated site for visiting good houses by the Shenzhen Housing and Urban Rural Development Bureau.

The market performance on the product side is also commendable. Nearly 90% of Beijing Chaotang's reading materials have been removed from circulation; Shenzhen Haiyan Mansion's first recommendation is to remove 90% of the 108 sets of chemicals; Shanghai Kangding achieved three victories with a score of 193; Xi'an Merchants Xi'an Bay has sold 2.3 billion yuan three times in 45 days. The sustained hot sales of the multi city project reflect the market's recognition of the product strength of China Merchants Shekou. In the first half of 2026, China Merchants Shekou ranked first in terms of the number of awards in the top ten works selection of CRIC, and five projects were selected for the TOP20 list of China's good house works, ranking first in both the number and scope of awards in the industry. The full chain capability of "Good House" has taken shape, from standard system to organizational guarantee and then to value transformation.

Asset management full cycle closed-loop, highlighting the advantages of industry finance synergy

The asset management sector is an important growth pole for transformational development. China Merchants Shekou started its layout in the REITs field early and has a sustained pace. In 2019, China Merchants Commercial REIT went public in Hong Kong, becoming the first overseas REIT of a central enterprise; In June 2021, Shekou Industrial Park REIT was listed on the Shenzhen Stock Exchange as the only state-owned enterprise project among the first nine publicly offered REITs in China; In October 2024, Shekou Rental Housing REIT was listed on the Shenzhen Stock Exchange. At present, several major types of holding assets have corresponding capital channels.

In the first half of 2026, the company will initiate preparations for the investment promotion of commercial real estate REITs in Shekou, with plans to promote REITs application through Suzhou Kunshan Garden City Shopping Center and Shenzhen Taizi Plaza. If successfully issued, this will be the fourth REIT of China Merchants Shekou, and the three major holding formats of "industrial park+rental housing+commercial real estate" REITs matrix will be basically formed at that time. At the same time, the second round of expansion of Shekou Industrial Park REIT is being promoted, and it is planned to be installed in the B plot of Guangming Science and Technology Park of China Merchants Group in Guangming District, Shenzhen, as well as the W6 and W7 warehouses and auxiliary buildings in Qianhai Yibao Park in Nanshan District, Shenzhen. If implemented, it will become the first REIT product in the market with two rounds of expansion and a mixed format of industrial park and warehousing. This means that the high-quality warehousing and logistics assets in the Qianhai area will be the first to achieve capitalization and exit, further opening up the path for the release of the value of existing assets. At the same time, preparations for the first expansion of rental housing REIT in Shekou have also begun.

Since 2019, China Merchants Shekou has been laying out in the REITs field for seven years, accumulating not only the quantity of products, but also a complete system from asset screening, compliance review, pricing issuance to continuous operation and management after listing. Relying on REITs to achieve capitalization and exit of existing assets, the recovered funds are invested in new project development and stock transformation, and the closed-loop of "investment, financing, construction, management, and exit" is gradually taking shape. As a result, China Merchants Shekou has become one of the few domestic enterprises with complete capabilities in development, operation, and REITs exit.

Qianhai Strategic Resources: Value Release of Core Assets in the Greater Bay Area

In the asset map of China Merchants Shekou, the core city of Shenzhen in the Guangdong Hong Kong Macao Greater Bay Area, including Qianhai, Shekou, and Taiziwan, has particularly prominent value. China Merchants Shekou holds a large amount of undeveloped high-quality resources in the above-mentioned areas. With the continuous promotion of the construction of the Qianhai Shenzhen Hong Kong Modern Service Industry Cooperation Zone and the sustained development of the Guangdong Hong Kong Macao Greater Bay Area economy, the value of these strategic resources is increasingly prominent.

Specifically, China Merchants Group and Qianhai Management Bureau have established a joint venture to promote the development, construction, and operation of approximately 2.9 square kilometers of land in Mawan. This is one of the largest projects in the Shenzhen Special Economic Zone, led by China Merchants Shekou. The W6 and W7 warehouses in Qianhai Yibao Park have been included in the second round of expansion for Shekou Industrial Park REIT, indicating that the capitalization channel for Qianhai's warehousing and logistics assets has been opened. In addition, China Merchants Shekou has also laid out multiple residential, apartment, and commercial projects in Qianhai, forming a complete business coverage from industrial parks to rental housing and commercial supporting facilities. The strategic resources in the Qianhai area not only provide sustained development value for China Merchants Shekou, but also achieve stock revitalization through capitalization paths such as REITs, forming a virtuous cycle of "development operation capitalization reinvestment".

Property services deeply cultivate institutional clients and build solid barriers with professional service capabilities

Among the three types of businesses, property services are both fundamental and growth drivers. The core competitiveness of investment accumulation is rooted in the profound service accumulation for institutional clients such as government, enterprises, schools, and hospitals. During the reporting period, more than 200 new projects were added across all business formats, with an additional management area exceeding 40 million square meters. The office track has added a service area of over 4 million square meters and has landed benchmark projects such as the Agricultural Bank of China Headquarters and Hunan Chuangda Data Intelligence Center. CMB has adopted a dual drive model of residential and non residential formats, customized exclusive service solutions for different formats, and released the "White Paper on Banking Services", continuously enhancing its professional voice in the industry. The company is among the top companies in the industry, ranking third in the "2026 China Property Service Enterprise Comprehensive Strength Top 500" and "TOP1 in the Excellence Index · 2026 Property Service Enterprise Management Capability Excellence Performance".

Compared to residential properties, institutional formats have higher entry barriers, and customers have strict requirements for service providers' historical performance, professional qualifications, and brand credit. Once a cooperation is established, the replacement cost is higher. Relying on the central enterprise credit endorsement of China Merchants Group and more than 30 years of institutional service accumulation, CMB has formed a relatively stable competitive barrier in this field. The current property industry is transitioning from extensive expansion to a new cycle of specialized development, with investment accumulation extending from basic property management to high value-added areas such as comprehensive facility management and urban services, creating a differentiated competitive landscape distinct from low price competition.

Financial stability crosses cycles, and a secure foundation is established to strengthen the bottom line

China Merchants Shekou has maintained a stable and prudent financial management style for a long time. At the end of the reporting period, the asset liability ratio excluding advance receipts was 62.98%, the net debt ratio was 64.93%, and the cash short debt ratio was 1.10. The "three red lines" remained green and continued to improve. The net cash flow from operating activities in the first half of the year was 24.135 billion yuan, and the ending balance of monetary funds was 98.449 billion yuan, both reaching historical highs.

In terms of interest bearing liabilities, in the first half of the year, non-standard financing such as pressure reduction, replacement trust loans, and debt protection plans amounted to 5.1 billion yuan, and operational property loans amounted to 4.9 billion yuan. The scale of interest bearing liabilities steadily decreased compared to the beginning of the year, and the debt structure continued to optimize, further reducing financing costs. At the end of the reporting period, the comprehensive cost of funds for China Merchants Shekou was 2.61%, a year-on-year decrease of 23BP. The comprehensive cost of funds for new financing in the first half of the year was only 2.28%, a year-on-year decrease of 38BP, maintaining a leading level in the industry.

Compared to the short-term fluctuations on the profit side, the funding situation is at its most abundant level in history. The net cash flow from operating activities of 24.1 billion yuan and the monetary funds of 98.4 billion yuan provide sufficient safety margins for China Merchants Shekou's strategic investment at the bottom of the cycle. Relying on the credit advantages and diversified financing system of the central enterprise platform, the company has obvious strategic space in acquiring high-quality land, promoting REITs fundraising, accelerating the revitalization of existing assets, and has also bought more time for the industry to build a bottom and repair stage.

From the depth of collaboration among three types of businesses, to the product moat of "Good House", to the closed-loop industry finance collaboration of asset management REITs, to the professional barriers of property services in the institutional customer field, and to the financial security base that crosses cycles - the five value bases are interrelated, together forming the systematic support for China Merchants Shekou's transformation into a "developer+operator+service provider". Short term fluctuations in profits are a common phenomenon in the process of transformation, and the synchronous consolidation of the five major foundations is the key to crossing cycles and building long-term competitiveness. It can be foreseen that China Merchants Shekou will continue to accelerate its transformation pace while consolidating its foundation, and good houses, good operations, and good services should be the main themes of its long-term value.