After two consecutive years of declining core net profit attributable to the parent company, Country Garden Services has managed to "stop the decline and start to recover."

Summary of Key Highlights

Against the backdrop of overall performance pressures in the property management industry, Country Garden Services delivered a positive result in the first half of 2026: its core net profit (excluding non-recurring losses) increased by 3.2% year-on-year, reversing the downward trend of the previous two years, with both revenue and gross profit also showing steady growth. However, the net profit attributable to the parent company (including non-recurring losses) still decreased by 4.6%, mainly due to the lingering impact of historical mergers and acquisitions. In terms of business operations, the "Large Property Management" segment has become the main driver, with nearly zero related-party transactions. The company has also entered the new market of serving older communities with lower property management fees. Although cash flow was temporarily negative due to seasonal factors, it has improved compared to last year.

1. Core Profit Finally Turns Positive: The Previous Burdens Have Been Alleviated

In the previous two years, Country Garden Services' core profit had been declining consecutively (by 22.9% in 2024 and 17.1% in 2025), primarily due to the impairment of goodwill acquired from other companies, as well as the inability to collect payments from risky customers and the hesitation to recognize revenue from such customers, which dragged down profits. In the first half of this year, these negative factors have largely been eliminated: long-standing debts have been cleared, and revenue from risky customers has been more accurately estimated to avoid future bad debts. Additionally, the company has adopted more efficient operations (e.g., using machines instead of manual labor), which has increased gross profit, and it has optimized its management structure, reducing administrative expenses. These factors combined have led to a turnaround in core profit.

However, the net profit attributable to the parent company still decreased by 4.6% due to some non-recurring losses, such as the amortization of intangible assets from acquired companies, the possibility of not recovering loans secured by third-party equity, and potential losses from external guarantees. These are not part of the company's regular operations, so the core profit provides a more accurate reflection of its actual financial performance.

2. Major Adjustment in Business Structure: Large Property Management Becomes the Pillar, with Nearly Zero Related-Party Transactions

Previously, Country Garden Services may have relied on the business of its parent company, Country Garden. Now, the situation has changed significantly:

• Large Property Management Segment (Property Management + Community Value Enhancement): This segment accounts for nearly 70% of revenue and contributes over 90% of growth. Both property management services (charging property fees) and community value enhancement services (such as selling groceries and providing household services) are seeing growth, indicating that the company's regular services are becoming more stable.
• Non-Owner Value Enhancement Services: Revenue from these services decreased by more than 20%, with their share dropping to just 1% due to the company's proactive reduction of transactions with related parties (such as the parent company). The revenue from related parties has plummeted from 20% in 2018 to 0.6% now, meaning the company is no longer dependent on its parent company for support and is now fully independent.

3. Selective Focus on Business Units: Some Are Growing, While Others Are Being Cuts

The company's incubated businesses (such as "Three Supplies and One Service," environmental services, and commercial operations) have shown mixed results:

• "Three Supplies and One Service" (water, electricity, gas, heating + property management): Revenue increased by 10.8%, as this segment involves stable operations from state-owned enterprise residential areas acquired by the company.
• Environmental and Commercial Operations: Revenue decreased by 12.2% and 9%, respectively, as the company actively withdrew from unprofitable or loss-making projects. For example, it discontinued unprofitable waste management projects in the environmental sector and cut back on less popular mall management services. This selective focus helps avoid wasting resources on unprofitable areas.

4. New Market Entry: Focusing on Older Communities with the "Yue Bai Jia" Brand

While property management companies typically target new communities with higher property management fees, Country Garden Services took a different approach. In 2025, it launched the "Yue Bai Jia" brand to serve older communities with lower fees. In the first half of the year, the brand served over 200 older communities and 200,000 households, generating revenue of 200 million yuan. Although the profit margin was low, there were several benefits: it solved the problem of neglected older communities, assisted local governments (which may be more willing to cooperate), and opened up new opportunities for providing lifestyle services (such as delivering groceries to the elderly and repairing household appliances). This strategy has not only improved the company's reputation but also identified new areas for growth.

5. Temporary Cash Flow Challenges, but Improvement Expected in the Second Half

The company's operating cash flow in the first half was -749 million yuan, indicating that it spent more than it earned. Management attributed this to industry-specific factors, such as the timing of property fee collection (fees are usually lower in the first half of the year). Additionally, cash flow was 130 million yuan lower compared to the same period last year, suggesting an improvement in the situation. The company's focus for the second half is to collect property fees more effectively and improve capital efficiency, which should lead to a positive cash flow.

Conclusion

The biggest highlight of Country Garden Services' half-year report is the turnaround in its core profit, indicating that the company has overcome the negative effects of previous mergers and acquisitions. Its business structure is now healthier (more independent and focused on the large property management segment), and it has entered new markets. Although there are still some issues (a slight decrease in net profit attributable to the parent company and temporary negative cash flow), the overall trend is positive, representing a remarkable turnaround in a challenging industry environment.