China Vanke's FY25 results missed expectations on impairments; Goldman Sachs maintains Sell

Overview

This report is Goldman Sachs' commentary on China Vanke's FY25 results. The report says the company's 2025 performance was weaker than expected, with the main reasons being large inventory and related asset impairments, while slower sales, lower unsettled resources, shrinking delivery scale and debt maturity pressure together are reducing visibility on future earnings and cash flow. Goldman Sachs maintains its Sell rating on Vanke A/H shares.

Core views

The key views are as follows: first, FY25 net loss was Rmb88.6bn, mainly driven by Rmb56bn of impairments, including Rmb41bn booked in 4Q25. Second, the sales outlook remains weak, with 3M26 sales down 53% year on year to Rmb17bn; new starts and saleable resources are constrained and there is no incremental land bank. Third, the balance sheet continues to deteriorate, with gross leverage, net gearing and the cash-to-short-term debt ratio all indicating rising liquidity pressure. Fourth, although 4Q25 gross margin stayed at 5.8% and inventory impairment coverage is gradually moving closer to the peer average, lower average selling prices on contracted but undelivered sales suggest further downside risk to gross margins.

Analysis framework

The report mainly compares actual results with Goldman Sachs' prior forecasts, Wind consensus estimates and peer coverage averages, and evaluates the investment case for China Vanke A/H shares based on NAV discount, P/B valuation, sales absorption, unsettled resources, delivery plans, leverage metrics and debt maturity profile.

Methodology notes

• Valuation methodNAV discount valuation

  12-month target price based on 2026E year-end NAV discount

  China Vanke's A-share target price of Rmb3.9 is based on a 10% discount to 2026E year-end NAV; China Vanke's H-share target price of HK$3.0 is based on a 35% discount to 2026E year-end NAV.

• Risk and factor analysisGS Factor Profile

  growth, financial returns, valuation multiples and composite percentile

  Goldman Sachs uses its factor framework to compare a stock's growth, return and valuation attributes relative to the market and sector peers.

• Event probability frameworkM&A Rank

  M&A probability score

  The report discloses Vanke's M&A Rank as 3, indicating a low probability of being acquired and usually not included in the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China Vanke (A) 000002.SZ

  Core coverage name

  Strengths

  4Q25 gross margin remained stable, asset revitalization and disposal accelerated somewhat, and inventory provision coverage is gradually moving closer to the peer average.

  Weaknesses

  FY25 loss missed expectations, visibility on sales and revenue recognition is declining, leverage metrics are deteriorating, and short-term debt pressure is high.

  Comparison

  Currently trades at about a 6% discount to 2026E NAV and 0.5x 2026E P/B; Goldman Sachs' mainland property coverage averages a 23% discount to NAV and 0.4x P/B.

  Risks

  If government financing support, asset disposals or sales recovery in higher-tier cities are better than expected, the share price could rise.

• China Vanke (H) 2202.HK

  Same-company H-share covered name

  Strengths

  Target price is based on a larger NAV discount, and the current valuation already reflects some of the pressure.

  Weaknesses

  Shares the same fundamental pressures as the A share, including slower sales, weaker profitability and liquidity pressure.

  Comparison

  Currently trades at about a 36% discount to 2026E NAV and 0.3x 2026E P/B; Goldman Sachs' offshore coverage average is a 35% discount to NAV and 0.5x P/B.

  Risks

  Financing support, asset sales, refinancing progress or a recovery in industry demand could improve market expectations.

Key data

• FY25 net lossRmb88.6bnWorse than the company's prior warning of a Rmb82bn loss, mainly driven by impairments, taxes and losses from associates/joint ventures.
• FY25 impairment chargesRmb56bnOf which Rmb41bn was booked in 4Q25.
• 2026 public debt maturitiesRmb14.7bnOf which Rmb11.3bn matures between Apr and Jul 2026.
• 3M26 salesRmb17bn, -53% YoYWeaker than peers under coverage and top 100 developers.
• FY25 revenueRmb231.3bn, -32% YoY19% below Wind consensus.
• FY25 gross margin5.5%Up 0.6ppt YoY and 0.7ppt above Goldman Sachs' prior forecast.
• Net gearing112%Up 21ppt QoQ and 30ppt YoY.
• Cash/short-term debt ratio38%Down 14ppt YoY, indicating an insufficient near-term liquidity buffer.
• China Vanke A target priceRmb3.9Down 13% from prior, implying about 3.5% downside.
• China Vanke H target priceHK$3.0Down 14% from prior, implying about 0.7% upside.

Impact & implications

The report's investment implication for Vanke is negative: in the short term, the large impairment brings inventory provisions closer to the peer average, but it does not remove the pressure from declining sales, shrinking deliveries and cash flow. Over the medium term, if contracted sales remain weak, unsettled resources continue to decline and shareholder support weakens at the margin, visibility on deleveraging and valuation recovery remains limited.

Risks

• The government provides more comprehensive and targeted financing support.
• Asset disposals and refinancing plans are executed better than expected, driving debt down.
• The real estate market in higher-tier cities recovers more strongly than expected, supporting inventory absorption and ASP improvement.
• If debt negotiations or shareholder support fall short of expectations, liquidity pressure could intensify further.
• Continued declines in unsettled sales ASP could prolong pressure on gross margin and impairments.

What to watch

• Repayment or extension arrangements for the Rmb11.3bn of public debt maturing between April and July 2026.
• The scale of follow-on funding support for Vanke from SZMC and other shareholders and creditors.
• Trends in 2026 contract sales, absorption rates and ASP.
• Progress on asset revitalization, asset disposals and exits from non-core cities.
• Whether deliveries can proceed on schedule and stabilize operating cash flow.