A financial institution has issued a research report on ONEWO (02602), adjusting its forecasts for the company's business gross margin and impairments. Consequently, it has lowered its core net profit forecasts for 2026 and 2027 by 8% and 9% respectively, to 2.20 billion yuan and 2.27 billion yuan, representing year-on-year growth of 3% for both periods. The forecast for net profit attributable to shareholders has been reduced by 35% for both years, to 760 million yuan and 800 million yuan, indicating growth rates of 10% and 5% year-on-year, respectively. The brokerage maintains an Outperform industry rating but has lowered the target price by 23% to HK$21.2 per share. This adjustment reflects revisions to profit forecasts and uncertainties surrounding dividend distributions. The new target price corresponds to a 10x target 2026 core P/E multiple and implies a potential 21% upside. ONEWO's shares currently trade at 8.3x its 2026 core P/E.
The institution's key views are as follows: ONEWO's 2025 core net profit met market expectations, while its net profit attributable to shareholders fell short. The company reported its 2025 annual results, showing a 3% year-on-year increase in revenue to 37.27 billion yuan. Core net profit grew 1% year-on-year to 2.13 billion yuan, aligning with market consensus. However, net profit attributable to shareholders declined 39% to 690 million yuan, missing market expectations. This underperformance was primarily attributed to further impairments on receivables from related parties and a decrease in the gross margin of residential property management services. The company plans to distribute a total annual dividend of 1.73 billion yuan, representing a payout ratio of 81% of its core net profit.
ONEWO's recurring businesses demonstrated organic growth in 2025. Revenue from its recurring businesses, which include residential and commercial enterprise property management, as well as BPaaS services, increased by 8.5% year-on-year. The gross profit from these businesses grew by 3.8%. Specifically, the net new contract annualized saturated revenue for both residential and commercial property management reached 2.1 billion yuan each, with the company maintaining a healthy project win rate. The gross margin for residential property management decreased by 0.7 percentage points year-on-year in 2025, while the margin for commercial property management declined by 0.4 percentage points. Key factors contributing to this margin pressure included challenges in collection rates amid a difficult operating environment, new projects still in their ramp-up phase, and intense competition in the commercial property management market.
The company's cash flow position remained broadly stable, with ongoing efforts to mitigate risks associated with related-party receivables. In 2025, net operating cash flow was 1.69 billion yuan, a decrease of 12% year-on-year, but it remained largely comparable to the core net profit figure excluding impacts from property developers. Revenue from related-party transactions in 2025 was 2.24 billion yuan, accounting for 6.0% of total revenue, a decrease from previous periods. Throughout the year, the company recovered 2.85 billion yuan in receivables from related parties, including 1.89 billion yuan in cash repayments. This effort helped reduce the outstanding balance of related-party receivables by 380 million yuan year-on-year to 2.06 billion yuan. The company has also cumulatively provided 800 million yuan in impairment provisions for these related-party receivables.
Looking ahead, ONEWO aims to keep its core profit stable in 2026 and will focus on shareholder returns. According to the earnings conference, the company's target for 2026 is to maintain overall stability in its core net profit. It plans to counter environmental pressures through strategies focused on stabilizing cash flow, improving operational efficiency, and optimizing its business structure. Regarding shareholder returns, the company intends to maintain a reasonable dividend level based on its cash flow situation and market conditions. Furthermore, in December 2025, the company announced a share repurchase program of 500 million yuan. Given the decline in the company's accumulated retained earnings available for distribution, it is anticipated that future dividends will be more closely aligned with the scale of net profit attributable to shareholders. Investors are advised to monitor the progress and trends in the company's shareholder return initiatives.
Key risks include a potential greater-than-expected decline in the gross margin of residential property services and a larger-than-anticipated negative impact on performance from related-party transactions.
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