Questioning AI · During the down cycle of the real estate market, how does Red Star Macalline enhance its competitiveness through asset revaluation?

Produced by | Bullet Finance

Author | Bai Yang

Editor | Fang Fang

Design | Qian Qian

Review | Song Wen

On March 31, Red Star Macalline released its 2025 annual report. During the reporting period, the company achieved revenue of 6.58B yuan, with a net loss attributable to shareholders of 23.72B yuan. The main reason still stems from fair value adjustments of investment properties and related asset impairments.

This aligns with the logic of previous earnings forecasts, but the annual report provides a clearer structural breakdown: Approximately 23.44B yuan of this is due to fair value changes in investment properties, which are typical non-cash items.

Excluding this part, the company’s operational side continues to improve. In 2025, the net operating cash flow for the full year reached 816 million yuan, a significant increase of 277.34% compared to 216 million yuan in 2024. The gross profit margin of the core home furnishing commercial services segment increased by 2 percentage points to 61.9%.

The core “self-sustaining” ability has been clearly restored. Since the establishment of the new controlling shareholder, the company’s financial and debt structures have been gradually improving. As the company’s asset side is gradually cleared, operations have stabilized significantly, and financial flexibility is continuously strengthening.

1. Strengthening assets to highlight core business quality

The valuation logic of investment properties essentially involves discounting “future rental cash flows.” For Macalline, the past few years of the real estate downturn and sluggish housing market have led to a decline in the valuation of its shopping malls.

During the recent years of the real estate downturn, commercial property valuations faced overall pressure. Macalline chose to conduct a relatively thorough revaluation during this cycle. As a result, although this “water extraction” temporarily pressured the financial statements, it also brought the balance sheet closer to reality.

Most of Macalline’s properties are located in core areas of first- and second-tier cities, typical heavy-asset operation platforms. The core assets themselves have not undergone structural changes; the downward adjustment of book values is more influenced by cyclical factors.

From this annual report, it is evident that Macalline’s core business has stabilized significantly. As of December 31, 2025, the company’s 74 self-operated malls and 218 entrusted management malls both saw improved average occupancy rates compared to 2024. Among them, the self-operated malls’ average occupancy rate increased by 2 percentage points to 85.0%.

2. Offering concessions/support to merchants and new business formats

Over the past two years, home furnishing consumption and merchant operations have generally been under pressure. Macalline did not simply pass this pressure downstream but instead provided temporary concessions, flexible lease arrangements, and adjusted leasing policies to give small and medium-sized merchants some operational buffer space. For brands most impacted, the platform offered longer adjustment windows and more flexible cooperation methods to maintain overall mall operation stability.

Macalline’s malls are essentially important infrastructure for the home furnishing industry, supporting numerous small and medium-sized merchants and local employment. During industry lows, prioritizing stabilizing merchant networks and service capabilities helps preserve the foundation for industry recovery. This “shared cycle” approach, although it may not immediately reflect in short-term profits, is a vital part of the long-term competitiveness of platform-type enterprises, demonstrating Macalline’s sense of responsibility as a platform company during cyclical downturns.

Beyond offering concessions, Macalline actively seeks new growth scenarios for merchants. By introducing new formats such as new energy vehicles, smart appliances, home design, and lifestyle services, home furnishing malls are evolving into comprehensive home life scenes. This extends consumers’ dwell time, improves customer flow structure, reduces merchant customer acquisition costs, and helps existing furniture and building materials merchants achieve more stable foot traffic and conversions.

The annual report discloses that in 2025, Macalline’s appliance pavilion’s operating area reached 1.41M square meters, accounting for 10.1%; automotive operation area doubled from 160k to 320k square meters, covering 46 cities nationwide.

3. Improving financial indicators, signs of operational turning point

First, look at cash flow. In 2025, the net operating cash flow reached 816 million yuan, an increase of 277.34% year-over-year.

Focusing solely on the net cash flow indicator, the previous multiple-quarter outflow situation was indeed uncomfortable. Now, with daily operations stabilizing and improving, especially in recent quarters, quarterly operating cash flow has been positive.

Next, examine costs and expenses. The mature state-owned asset management experience brought by Jianfa Group has helped the company reduce costs and improve efficiency across the board. In 2025, the company’s operating costs, selling expenses, and management expenses decreased by 18.95%, 18.59%, and 24.22%, respectively, all exceeding the decline in operating income.

Net profit performance: If we exclude the new fair value change losses, the company has been approaching breakeven or even slightly profitable on a quarterly basis since Q3, based on estimates of non-recurring net profit. The book profit is not as bleak as it seems.

Financing side is also improving. In 2025, the company’s overall financing cost rate decreased from 5.1% in 2024 to 4.4%, and interest expenses dropped from 160k yuan to 2.16 billion yuan.

Additionally, by the end of 2025, Macalline’s accounts payable and notes payable combined decreased by 43.79% from the previous year-end, with ongoing debt reduction.

Putting these indicators together, Macalline’s core business has already returned to the right track, and the operational inflection point is gradually forming based on the annual report.

4. Proactive change within industry adjustments

“Proactive change” is a key phrase introduced by the new management, including the previously mentioned cost reduction and efficiency enhancement, and asset layout optimization. Last September, they announced a new five-year strategy, aiming to become a “new home furnishing lifestyle operator” and “home furnishing industry ecosystem service provider.”

Despite impacts from e-commerce and industry cycle fluctuations, Macalline’s main track remains home building materials—this is in its DNA. However, this main track needs upgrading; future malls will be more diverse, intelligent, and youthful, offering not just furniture but comprehensive home life solutions and experiences.

For example, ensuring that core home furnishing categories occupy no less than 70% of the operating area; building excellent home furnishing commercial operation capabilities; introducing trendy formats, digital marketing, and improving service quality to cater to young consumers’ preferences.

(图 / Red Star Macalline Shanghai Global No.1 Store Mega-E Smart Electric Oasis Scene Photo)

Additionally, the company is promoting integration of upstream and downstream resources in the industry chain, focusing on unlocking business value through ecological collaboration. This is somewhat similar to how many internet giants talk about ecosystems, but Macalline’s ecosystem leans more toward real industry and services.

Leveraging the major shareholder Jianfa Group, collaborating in real estate, supply chain, property management, and decoration. Buying a house and getting free renovation, connecting furniture sales with property services—such integrated services are expected to increase customer stickiness and order value. Jianfa Real Estate and Lianfa Group have rich experience in real estate development; working with Macalline, they can consider integrating home furnishing into land acquisition and building from the start, achieving synergy between real estate and home furnishing businesses.

Currently, through Jianfa/Lianfa’s real estate ecosystem, Macalline extends marketing to 20 cities and 76 projects, with over 14k customer groups engaged, directly driving about 150 million yuan in conversions, building a “real estate + home furnishing” traffic loop.

Moreover, Macalline is exploring a second growth curve, such as supply chain financial services, franchise branding, and overseas market expansion. The potential is vast; although still in early stages, the direction is clear: around home life, providing value-added services. Home design, smart home, even auto supermarkets—any space or customer flow advantage from existing malls is being boldly tested.

As a traditional mall upgrades into a platform company controlling scene traffic and industry chain resources, its ceiling will be much higher than before, and it is entirely possible to enter a new cycle of high-quality development.