Key takeaway

The company has shifted from a dual-engine model led by property development to a business model in which commercial operations serve as the anchor of profitability, contributing 80% of gross profit. Since the first Wuyue Plaza opened in 2012, the company has opened 181 Wuyue Plazas across 147 cities, with 67% of the projects located in lower-tier cities where competition is less intense and consumer spending is more resilient. The company's commercial operations generate annual rental income of RMB14.1bn, with a GPM of 70% and an overall occupancy rate of 98.4%, making it a leading commercial real estate company. The company has shifted its commercial operations from the previous asset-heavy model to a strategy combining asset-light and asset-heavy approaches. It has also established an asset management strategy and developed a multi-tier REITs system comprising Pre-REITs, inter-institutional REITs, and commercial real estate REITs. To date, it has unlocked assets worth approximately RMB8bn.

Thesis

Shift from a development-led, dual-engine growth model to one in which commercial operations serve as the anchor of profitability. Seazen’s business is driven by the dual engines of commercial operations and property development. In recent years, the commercial segment’s profit contribution has continued to increase. It currently contributes 37% of revenue and 80% of gross profit. The company’s commercial property business has evolved through four stages: 1) The start-up and exploration stage from 2008 to 2012, when the opening of Wujin Wuyue Plaza marked the launch of the “Wuyue” brand; 2) the business model validation stage from 2013 to 2016, when the home + shopping mall development model was first replicated across the Yangtze River Delta and then expanded beyond the region; 3) the rapid expansion stage from 2017 to 2021, when the number of Wuyue Plazas opened reached 120, ushering in the era of operating more than 100 malls; and 4) the adjustment and transformation stage since 2022, when new openings began adopting a balanced asset-heavy and asset-light approach, with the company developing its asset management business after strengthening its commercial property management capabilities.

Commercial leader in lower-tier markets, with steadily improving operating performance. The company has established a presence in 147 cities nationwide with 212 Wuyue Plazas, of which 181 are operational, including 32 under an asset-light model. It ranks 3rd nationwide by number of operational properties and 1st among listed property developers. 67% of its operating projects are located in lower-tier cities, where the consumer market is characterized by less intense competition and stronger consumer resilience. The company's commercial operations generated rental income of RMB14.1bn, with a GPM of 70% and an overall occupancy rate of 98.4%. Among listed companies, it ranked 1st by occupancy rate and 2nd by rental income.

Balanced development of asset-light and asset-heavy commercial operations, with asset management gaining momentum. The company has shifted its commercial property operations from an asset-heavy ownership model to a strategy combining asset-light and asset-heavy models. On the asset-light side, the company expands the influence of the “Wuyue” brand through commercial management services. 6 of the 8 projects opened since 2025 are asset-light projects. On the asset-heavy side, the company has shifted from incremental expansion to improving the quality and efficiency of existing assets. In 2025, it invested RMB400mn to renovate and reposition 88 commercial projects and upgraded its Wujin project into a “Gold Standard” Wuyue Plaza. It has also established an asset management strategy and developed a multi-tier REITs system to unlock the value of existing asset-heavy projects. Since issuing its 1st quasi-REITs product in 2016, the company has built a comprehensive asset securitization portfolio over the past decade. It now has a multi-tier system comprising Pre-REITs, inter-institutional REITs, and commercial real estate REITs, revitalizing approximately RMB8bn in assets.

Maintain earnings forecasts and "Buy" rating unchanged. We are optimistic about the stable cash flow profile of the company's core commercial operations and the long-term growth potential behind its strategic transformation into an active real estate asset management platform. We maintain our earnings forecasts and expect the company's EPS to be RMB0.44/RMB0.53/RMB0.62 in 2026-2028, respectively. Maintain Buy rating.

Risks:

1. Risk of performance decline. If the overall real estate markets in the regions where the company’s development projects are located continue to weaken, the company’s sales pace will be significantly affected, leading to a further decline in settlement revenue from its development segment. In addition, if housing prices fall more than expected, it would negatively impact both the selling and settlement prices of the company's development business and may trigger more inventory write-downs, further weighing on its performance.

2. Risk of sharper-than-expected consumption decline in lower-tier cities. Most of the company’s shopping malls are located in lower-tier (third- and fourth-tier) cities. If consumption levels in these cities decline more than expected, it could negatively impact mall occupancy rates and rental prices, thereby hurting overall rental income.

3. Risk of failure to repay debt and accounts payable on schedule. The company currently has public market credit debt and construction payables outstanding. If it fails to make timely repayments in the future, it could damage its reputation, which in turn may adversely affect its property sales, mall operations, and refinancing ability.