Vanke's FY25 loss was larger than warned, and liquidity and sell-through pressure remain the core contradiction

Overview

This report is Goldman Sachs' commentary on Vanke's FY25 results. The report points out that the company's FY25 net loss was Rmb88.6bn, below the earlier warning of an Rmb82bn loss, mainly due to Rmb56bn of inventory and related impairments, higher-than-expected taxes, and wider losses from joint ventures, associates, and minority-interest projects. Although 4Q25 gross margin and asset revitalization showed some positive signals, sales, revenue recognition, leverage, and liquidity metrics are still deteriorating, so Goldman Sachs maintains Sell on Vanke A/H.

Core views

The core view is that Vanke still lacks clear visibility of a near-term turnaround. On the sales side, sales for the first three months of 2026 fell 53% YoY to Rmb17bn, and new sellable resources and land acquisition replenishment were constrained. On the revenue side, prepayments and unsettled sales declined 51% and 49% YoY, respectively, and the delivery plan also contracted significantly. On the balance sheet side, total liabilities ratio, net debt ratio, and cash/short-term debt ratio all show rising pressure. Goldman Sachs believes that destocking, stabilizing ASP, controlling impairments, and addressing debt maturities are prerequisites for valuation recovery.

Analysis framework

The report combines earnings decomposition, sales and delivery outlook, balance sheet indicators, debt maturity structure, changes in shareholder support, and NAV valuation methodology to assign Sell ratings and target prices to Vanke A shares and H shares, respectively.

Methodology notes

• Valuation methodsNAV discount valuation

  12-month target price based on estimated NAV at end-2026 discount

  Vanke A's target price of Rmb3.9 is based on a 10% discount to end-2026 NAV; Vanke H's target price of HK$3.0 is based on a 35% discount to end-2026 NAV, with the discount assumptions unchanged.

• Stock selectionGS Factor Profile

  Growth, financial returns, valuation multiples, and composite factors

  Goldman Sachs' factor framework compares forward revenue, EBITDA, and EPS growth; ROE, ROCE, and CROCI; and valuation metrics such as P/E and P/B against the market and industry peers.

• M&A probabilityM&A Rank

  Probability score of being an acquisition target

  The report discloses an M&A Rank of 3, indicating a low probability of being acquired and generally not included in the target price.

Asset mapping & comparison

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

• 000002.SZ

  Covered company A shares

  Strengths

  Accelerated asset revitalization, 4Q25 gross margin held up, and inventory provision coverage is approaching the industry average.

  Weaknesses

  Sales are declining, unsettled resources are shrinking, leverage is rising, and short-term debt maturities are concentrated.

  Comparison

  Vanke A currently trades at about a 6% discount to 2026E NAV and 0.5x 2026E P/B, versus the domestic coverage average of a 23% NAV discount and 0.4x P/B.

  Risks

  Government financing support, asset disposal, and refinancing progress may exceed expectations, or a stronger-than-expected recovery in high-tier city markets could create upside risk.

• 2202.HK

  Covered company H shares

  Strengths

  Shares the operating improvement factors seen in A shares, including better provision coverage after impairments and asset revitalization.

  Weaknesses

  Fundamental pressure is the same as for A shares, and the offshore market is more sensitive to liquidity and credit risk.

  Comparison

  Vanke H currently trades at about a 36% discount to 2026E NAV and 0.3x 2026E P/B, versus the offshore coverage average of a 35% NAV discount and 0.5x P/B.

  Risks

  If external financing support, debt negotiations, or sector demand recovery prove better than expected, the H-share valuation discount could narrow.

Key data

• FY25 net lossRmb88.6bnBelow the earlier warning guidance of an Rmb82bn net loss.
• FY25 impairmentsRmb56bnOf which Rmb41bn was recognized in 4Q25.
• 2026 public debt maturitiesRmb14.7bnOf which Rmb11.3bn matures from April to July.
• Sales in the first 3 months of 2026Rmb17bn, YoY -53%Below the performance of covered peers and the top 100 developers over the same period.
• Cash/short-term debt ratio38%Down 2 percentage points sequentially and 14 percentage points year over year.
• Net debt ratio112%Up 21 percentage points sequentially and 30 percentage points year over year.
• Vanke A target priceRmb3.9Cut by 13% from the prior target, implying 3.5% downside from the current price.
• Vanke H target priceHK$3.0Cut by 14% from the prior target, implying 0.7% upside from the current price.

Impact & implications

From an investment perspective, Goldman Sachs believes that although Vanke has already made substantial impairment provisions and accelerated asset revitalization, operating cash flow, sales destocking, revenue recognition, and debt-servicing pressure remain the main constraints. Without stronger external financing support, asset disposals, or a recovery in the physical real estate market, the company's earnings recovery and valuation rebound will remain limited.

Risks

• More targeted and comprehensive financing support from the government.
• Asset disposal and refinancing plans are executed better than expected and reduce debt.
• A stronger-than-expected recovery in the real estate market in high-tier cities boosts sell-through and ASP.
• If debt negotiations or shareholder support fall short of expectations, liquidity pressure could rise further.
• If inventory ASP keeps declining, future gross margin and impairments may remain under pressure.

What to watch

• Debt repayment and rollover arrangements for the Rmb11.3bn maturities between April and July 2026.
• Progress on long-term debt solutions with creditors.
• Whether support from SZMC and other state-owned shareholders resumes or strengthens.
• Whether sales, sell-through rates, new starts, and replenishment of sellable resources improve.
• Whether asset revitalization, disposal proceeds, and operating cash flow can cover debt pressure.
• Whether unsettled sales ASP and gross margin remain stable.