On March 25, Hong Kong-listed property developer Kaisa Group (HK01638) saw its share price surge by more than 60% during intraday trading, closing up 27.27% at HK$0.098 per share, with a market capitalization of HK$942 million.

The rally followed an announcement by Kaisa on the evening of March 24, in which the company projected a net profit attributable to shareholders of no less than 50 billion yuan for 2025, marking a significant turnaround from a loss of 28.5 billion yuan in the same period of 2024.

This development comes amid a wave of similar forecasts from other distressed Chinese developers. Recently, CIFI Holdings, Sino-Ocean Group, and Country Garden have each issued 2025 earnings guidance, attributing expected profits to gains from debt restructuring. Combined, these four companies anticipate book profits ranging from 74 billion to 78.7 billion yuan.

Kaisa's projection of over 50 billion yuan in profit signals the start of a concentrated wave of "restructuring-driven turnarounds" among financially troubled developers. An analysis of the disclosed data reveals three key characteristics of this trend: the profit figures are substantial, the announcements are closely timed, and the method of achieving profitability is uniform—primarily through debt restructuring. The collective book profit exceeding 74 billion yuan is set to be a major highlight of the 2025 annual report season for China's real estate sector.

According to Kaisa's announcement, the scale of its offshore debt restructuring is approximately $13.372 billion. Through the issuance of new notes and mandatory convertible bonds, the company achieved debt reduction of about $8.6 billion. The maturity of the restructured debt was extended by an average of five years, with no mandatory principal repayment pressure before the end of 2027. The coupon rate for the new notes was reduced to a range of 5% to 6.25%. The substantial non-cash gain from this restructuring forms the basis of Kaisa's projected profit of no less than 50 billion yuan for 2025.

Kaisa is not the first developer to project a turnaround via restructuring this year. On the evening of March 23, Country Garden announced it expects a net profit between 1 billion and 2.2 billion yuan for 2025, primarily due to non-cash gains from debt restructuring. On March 20, Sino-Ocean Group forecast a profit attributable to owners of 6 billion to 7.5 billion yuan for 2025, also citing non-cash gains from its domestic and offshore debt restructuring. Earlier, on March 16, CIFI Holdings projected a net profit attributable to equity holders of 17 billion to 19 billion yuan for 2025, largely resulting from a one-time gain of approximately 40 billion yuan linked to the completion of its offshore debt restructuring at the end of 2024.

Notably, the debt restructurings for these four companies were largely finalized in the second half of 2025. Kaisa's offshore debt restructuring plan was approved in September 2025. The restructurings for CIFI and Country Garden took effect on December 29-30, 2025. Sino-Ocean Group's offshore debt restructuring became effective on March 27, 2025, while a key scheme for its domestic debt restructuring was approved on November 26, 2025.

Some industry insiders caution that these "turnarounds" primarily reflect improvements on paper and do not necessarily indicate a fundamental recovery in the companies' operational health.

"The profit turnarounds achieved by these distressed developers through debt restructuring mainly reflect accounting adjustments rather than operational improvements," said Fu Yifu, a special researcher at Sushang Bank, on March 25. "While these paper profits can temporarily alleviate delisting pressures and boost market sentiment in the short term, the core property development, sales, and cash flow generation businesses of these four companies remain loss-making when restructuring gains are excluded, indicating that their fundamental operational capabilities have not yet recovered."

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, explained the accounting rationale behind this "collective turnaround." "Under accounting standards, when a developer reaches a debt restructuring agreement with creditors, the difference between the present value of the restructured debt and its book value—resulting from reductions in principal, interest, or payment extensions—must be recognized as a one-time gain in the current period's profit and loss statement," Bai stated. "Taking Kaisa as an example, its 50 billion yuan profit almost entirely comes from debt reduction, not from sales revenue or asset appreciation."

According to China's Accounting Standards for Business Enterprises No. 12 - Debt Restructuring, such restructuring involves renegotiating the terms of debt repayment—such as timing, amount, or method—with existing creditors, either by agreement or court ruling. When terms are modified, the debtor recognizes a new financial liability based on the revised terms, and the difference between the book value of the original debt and the fair value of the new liability is recorded as an investment gain or other income, impacting current net profit.

Bai Wenxi pointed out that this "paper wealth" is distinctly non-cash in nature and unsustainable. "These are one-time gains that will not recur in the following year. Overemphasizing this 'collective turnaround' could mislead the market into believing the industry has fully recovered. In reality, core operational metrics for these developers—such as gross margin, cash flow, and the quality of land reserves—still need to be evaluated separately."

"Financial restructuring alone cannot solve the underlying problems; companies must achieve substantive improvements in operations, management, and strategy," Fu Yifu emphasized. He noted that for developers to genuinely escape distress, several conditions must be met: a recovery in sales to achieve positive cash flow cycles, the disposal of non-core assets to optimize the balance sheet, the establishment of a healthy financial system that controls debt levels, and a business transformation aligned with the new market paradigm.

Bai Wenxi added that distressed developers currently face a crisis of confidence among homebuyers, leading to slower sales velocity compared to healthier peers. "A true operational recovery will only be evident when financing channels are substantially restored, gross margins rebound to above 15%, and return on equity turns positive. This recovery process is likely to require another two to three years."