In-Depth Analysis of the Impact of Electronics City's Severe Losses on the Valuation of Park Development Stocks

According to the performance forecast released by Electronics City (600658) on January 19, 2025, the company expects 2025 net profit attributable to shareholders to be a loss of RMB 1.45-1.9 billion, with a loss of RMB 1.48-1.93 billion after deducting non-recurring gains and losses [1]. This marks the company’s second consecutive year of severe losses, with cumulative losses exceeding RMB 1.7 billion from 2023 to 2025, and its financial situation continues to deteriorate.

Loss Factor	Specific Performance	Degree of Impact
Asset Impairment Loss	Provision for impairment on certain real estate assets	Expected RMB 800 million - 1 billion
Volume-through-Pricing Strategy	Accelerated capital recovery leading to declining gross profit margin	Sharp decline in sales profits
Increased Expenditures	Rising operating expenses for commercial office products	Eroding profit margins

Electronics City’s losses are not an isolated incident, but a typical microcosm of the in-depth adjustment of the park development industry. According to information disclosed in the 2025 semi-annual report, the company faces core challenges including [2]:

1. Large market inventory
   : The industrial park market is in a phase of in-depth adjustment, with commercial and office products facing pressure from large market inventory and long destocking cycles
2. Downward price pressure
   : Weakened product pricing power, forcing price reduction strategies to boost sales
3. Rigid costs and shrinking revenue
   : Expenditures increase with project completion and acceptance, while revenue faces a downturn

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From the financial data of A-share listed companies in the park development sector, the industry shows a significant differentiation pattern [3]:

Indicator	Electronics City	Zhangjiang Hi-Tech	Suzhou High-Tech	Industry Average
Market Capitalization (RMB 100 million)	45.2	185.6	48.7	75.4
Asset-Liability Ratio (%)	78.5	62.3	71.2	71.2
Gross Profit Margin (%)	12.5	45.2	22.4	24.8
Net Profit Margin (%)	-85.2	18.5	5.6	-3.2
PE (x)	Loss-making	21.8	18.2	18.5*
PB (x)	1.2	2.5	1.4	1.6

Note: PE is the average of profitable enterprises

Asset impairment pressure has had a systemic impact on the valuation of park development stocks, mainly transmitted through the following paths:

Asset Impairment → Profit Erosion → Net Asset Shrinkage → Valuation Center Downward
    ↓
Declining Risk Appetite → Institutional Deleveraging → Liquidity Discount
    ↓
Widening Credit Spreads → Rising Financing Costs → Increased Operational Pressure

1. PE valuation under pressure
   : Electronics City’s PE has lost reference value due to consecutive losses; the PE of profitable enterprises is also suppressed by rising risk premiums
2. PB valuation differentiation
   : High-quality enterprises (such as Zhangjiang Hi-Tech) maintain a PB of 2.5x, while underperforming enterprises (such as Shanghai Industrial Development) only have a PB of 0.9x
3. NAV discount
   : The net asset value (NAV) of park development enterprises generally has a discount of 10-30% [4]

The performance of the public REITs market in 2025 further verifies the valuation dilemma of park development assets [5]:

Asset Type	2025 Average Return	Number of Issues	Average Occupancy Rate
Industrial Parks	-12.5%	15	82.5%
Warehousing & Logistics	+8.2%	8	88.2%
Consumer Infrastructure	+25.6%	12	92.5%
Rental Housing	+18.3%	10	95.2%
Data Centers	+22.4%	5	96.8%

Industrial park REITs have performed the worst among all types, with as many as 5 products falling more than 10% year-to-date, reflecting the market’s cautious attitude towards such assets.

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From industry data, the asset impairment losses of real estate enterprises show a trend of first rising then stabilizing [6]:

Year	Asset Impairment Loss (RMB 100 million)	Proportion of Enterprises with Impairment Provisions	Proportion of Park-Related Impairments
2021	320	45%	15%
2022	680	62%	22%
2023	844	75%	28%
2024	780	78%	32%
2025E	650	70%	35%

• Asset impairment losses peaked at RMB 84.4 billion in 2023 and then began to decline
• It is expected to drop to around RMB 65 billion in 2025, a year-on-year decrease of about 17%
• The proportion of asset impairments related to park development has continued to rise, from 15% to 35%

1. Sufficient provisions
   : After concentrated provisioning from 2022 to 2024, the risk of existing impairments has been largely released
2. Gross profit margin expected to stabilize
   : The industry average gross profit margin is expected to rebound from 24.5% to around 26% in 2025
3. Marginal policy improvements
   : The pilot scope of public REITs has been expanded to commercial real estate, providing an exit channel for existing assets [7]

1. Long destocking cycle
   : The average destocking cycle of park-related products exceeds 3 years
2. Rent pressure
   : The average occupancy rate of industrial parks is only 82.5%, lower than that of other asset types
3. Tail risks
   : Some real estate enterprises still face debt default risks, which may trigger a chain reaction

Evaluation Dimension	Current Status	Marginal Change	Investment Rating
Profitability	Under pressure	Signs of stabilization	Neutral
Asset Quality	Differentiated	High-quality assets stand out	Focus
Valuation Level	Low	Rising attractiveness	Focus
Policy Environment	Improving	Beneficial from REITs expansion	Positive

1. Obvious location advantages
   : Located in first-tier cities or core industrial parks
2. Outstanding operational capabilities
   : Occupancy rate maintained above 90%
3. Sound financial conditions
   : Asset-liability ratio lower than the industry average, no debt default risks
4. Abundant REITs reserves
   : Possess high-quality assets eligible for securitization

1. Enterprises with high asset impairment risks
2. Enterprises with high debt pressure and prominent short-term debt repayment pressure
3. Projects concentrated in third- and fourth-tier cities or areas with weak industrial agglomeration effects

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Based on the above analysis, the investment recommendations for park development stocks are as follows:

Strategy Type	Recommendation	Rationale
Defensive Strategy	Focus on leading central SOEs	Strong financing advantages, brand endorsement, and risk resistance
Growth Strategy	Focus on enterprises with abundant REITs reserves	Asset securitization boosts valuation; focus on Zhangjiang Hi-Tech, etc.
Risk Hedging	Allocate consumer-related REITs	Avoid downside risks of park development and capture consumption recovery

The valuation repair of park development stocks requires attention to the following catalysts:

1. Stabilizing sales
   : Year-on-year growth in commercial housing sales area and value turns positive
2. Stabilizing rents
   : Industrial park occupancy rate rebounds to above 85%
3. REITs expansion
   : More high-quality park assets exit through REITs
4. Policy benefits
   : Introduction of supportive policies related to industrial park development

• Downside risks in the macro economy may further suppress demand for industrial parks
• Credit risk events in the real estate industry may spread to park development enterprises
• Rising interest rates may pressure the heavy asset operation model

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The case of Electronics City’s severe losses profoundly reveals the dual dilemmas of asset impairment pressure and volume-through-pricing strategies faced by park development real estate enterprises. From a valuation perspective, this dilemma has been fully reflected in industry valuation levels - PE and PB are both at historical lows, with widespread NAV discounts.

However,

. As impairment provisions become sufficient, gross profit margins stabilize and rebound, and with the asset securitization opportunities brought by the expansion of public REITs, the park development industry is undergoing growing pains during its transformation from ‘development and sales’ to ‘existing asset operation’. Enterprises with location advantages, operational capabilities, and sound financial conditions are expected to stand out in industry reshuffling, while REITs also provide a more market-oriented valuation and pricing mechanism for such assets.

For investors, it is currently advisable to

, focusing on park development enterprises with high-quality asset reserves and sound financial structures. Meanwhile, investors can hedge the downside risks of park development assets by allocating consumer-related and rental housing REITs.

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[1] Sina Finance - “Electronics City: Expects a loss of RMB 1.9 billion to 1.45 billion in 2025” (https://finance.sina.com.cn/stock/zqgd/2026-01-19/doc-inhhvwpr7883077.shtml)

[2] Tencent News - “Electronics City expects increased losses in the first half of the year, with multiple pressures such as large market inventory hanging over it” (https://news.qq.com/rain/a/20250715A03YD100)

[3] Jinling AI Financial Database - “Financial data of listed companies in the park development sector”

[4] China Institute of Finance - “Characteristic Analysis and Valuation Pricing Discussion of China’s Industrial Park REITs” (https://www.chinaifs.org.cn/upload/1/editor/1722398615091.pdf)

[5] Securities Times - “Review of 2025: Public REITs Show Resilience Amid Volatility” (https://www.stcn.com/article/detail/3558700.html)

[6] Guosen Securities - “Summary of 2023 Annual Reports and 2024 Q1 Reports of the Real Estate Industry” (https://pdf.dfcfw.com/pdf/H3_AP202405131632946566_1.pdf)

[7] The Beijing News - “20 new REITs added last year with a scale of RMB 210 billion, consumption and guaranteed rental housing become highlights” (https://m.bjnews.com.cn/detail/1768439910169448.html)

[8] Fitch Bohua - “2025 Credit Outlook: Real Estate Development” (https://www.fitchbohua.cn/sites/default/files/2024-11/惠誉博华2025年信用展望-房地产开发-FV.pdf)