Everbright Securities has reaffirmed its "Overweight" rating on A-LIVING (03319). The company's profit recovery in H1 2025 is primarily attributed to a temporary easing of impairment pressures, while its operations remain in an adjustment phase focused on "quality and collections first." Looking ahead, the basic property management business shows resilience, but the recovery pace of value-added services for property owners and external business segments continues to be affected by the post-property cycle. Additionally, the collection of trade receivables requires further monitoring. Under prudent assumptions, the firm has revised down its net profit attributable to shareholders forecasts for 2025-2026 to 600 million/700 million yuan, from previous estimates of 890 million/1.18 billion yuan, and introduced a new 2027 forecast of 810 million yuan. This corresponds to a P/E ratio of 4.4x/3.8x/3.3x, indicating attractive valuations. Key points from Everbright Securities are as follows.

The group's operational performance in the first quarter was generally stable, with core indicators largely meeting expectations. A-LIVING Group held its "First Meeting of the New Year," where CFO Huang Jiayi noted that Q1 operational results were solid and key metrics were broadly in line with forecasts. President Li Dalong emphasized that collections are the foundation for the full year's operations, urging all business units to focus on targets and act swiftly to ensure healthy and stable cash flow.

Profit metrics showed significant recovery, but trade receivables collection still needs further observation. 1) Profitability improved noticeably, yet operations are still in a "quality-first" stage. In H1 2025, the company reported revenue of 6.465 billion yuan, down 8.3% year-on-year; gross profit of 939 million yuan, down 21.2% year-on-year; a gross margin of 14.5%, down 2.4 percentage points; and net profit attributable to shareholders of 350 million yuan (compared to a loss of 1.646 billion yuan in the same period last year, impacted by significant impairments). An interim dividend of 0.062 yuan per share was proposed, up 106.7% year-on-year. The year-on-year profit improvement stems mainly from reduced credit impairment pressures. Net impairment losses on financial assets in H1 2025 were 104 million yuan, a significant decrease from 2.884 billion yuan in H1 2024, contributing to the recovery in net profit. 2) Business structure continues to adjust, with a stable core base. H1 2025 revenue from property management/value-added services for property owners/urban services/external value-added services was 5.328 billion/520 million/577 million/41 million yuan, with year-on-year growth rates of -0.8%/-32.7%/-14.6%/-82.4%, respectively. Structurally, the share of basic property management revenue increased to 82.4%, indicating relative stability in the core business. Value-added services for owners and external segments continued to decline, mainly due to weak post-property cycle demand and the company's proactive scaling back of low-collection businesses. The operational focus has shifted from "scale expansion" to "quality operations." In terms of profitability, the gross margin for property management was 13.8% (down 2.6 ppts year-on-year), constrained by quality investments and limited pricing flexibility; the gross margin for owner value-added services was 21.7% (up 2.2 ppts year-on-year), reflecting business structure optimization; and the gross margin for urban services was 14.5% (down 3.5 ppts year-on-year). 3) Trade receivables collection still requires further monitoring. According to company disclosures, net impairment losses on financial assets in 2024 were 4.329 billion yuan, comprising 3.032 billion yuan from trade receivables and 1.297 billion yuan from other receivables. As of July 31, 2025, through cash collections and asset offsets, the balance of Group 3 trade receivables (receivables from related parties and their affiliates/joint ventures, excluding Greenland Holdings) decreased to 3.553 billion yuan, while Group 4 trade receivables (receivables from Greenland Holdings and its affiliates/joint ventures) are expected to fall to 313 million yuan. Continued tracking is necessary, but overall, the company may have passed the peak impairment pressure, with future receivables impairments likely to gradually ease their impact on profits.

Risks include ongoing effects from property-related businesses; uncertainty regarding receivables impairments; and slower-than-expected external business expansion.