Investment Rating - The report assigns a "Buy" rating for Ke Holdings with a target price of $21.50, slightly adjusted from the previous target of $22.00, reflecting a potential upside of 53.2% from the current price of $14.03 [2]. Core Insights - Ke Holdings reported a 20% year-over-year revenue growth in Q2, reaching RMB 23.4 billion, exceeding both the forecast and consensus estimates by 9% [2]. - Non-GAAP net income for the quarter was RMB 2.7 billion, surpassing expectations by 48%, attributed to revenue growth and optimized operating expenses [2]. - The company is expected to maintain its market share growth in core business segments due to strong industry demand and an efficient agency network [2]. Summary by Sections Financial Performance - Q2 revenue reached RMB 23.4 billion, a 20% increase year-over-year, driven by new home transactions (NHT) and existing home transactions (EHT) [2]. - Non-GAAP net income was RMB 2.7 billion, exceeding expectations by 48% [2]. - The company anticipates a revenue growth of 44% year-over-year in the home renovation and furniture business for 2024 [2]. Market Share and Business Outlook - Ke Holdings experienced significant market share growth in both EHT and NHT segments, with EHT online registrations increasing by 16% year-over-year in major cities [2]. - The company’s NHT gross transaction value (GTV) declined by 20% year-over-year, while the overall industry saw a 35% decline, indicating strong competitive positioning [2]. - Management is shifting focus from rapid scale expansion to profit margin improvement in the home renovation segment, with profit margins increasing to 31% in Q2 2024 [2]. Shareholder Returns - The management has repurchased shares worth $480 million, representing 2.75% of shares outstanding as of the end of 2023, and has expanded the buyback program to $3 billion [2]. - The company aims to maintain a shareholder return target of 6-7% annually through buybacks and dividends [2]. Real Estate Market Trends - The report notes a slowdown in sales momentum during the typical summer sales lull, with new home sales in July and August showing a month-over-month decline of 24% and 19%, respectively [2]. - Leading indicators suggest a narrowing decline in new home sales, with expectations for increased project launches in September and October [4].

13 Aug 2024 CMB International Global Markets | Equity Research | Company Update Ke Holdings (BEKE US) Solid market share gains amid uncertain environment Beike reported (12 Aug) 2Q24 results: revenue increased 20% YoY to RMB23.4bn, and was 9% ahead of both our forecast and Bloomberg consensus estimates, thanks to a beat on GTV of both new home transactions (NHT) and existing home transactions (EHT), and stronger-than-expected expansion of NHT aided by strong industry demand. Non-GAAP net income was RMB2.7bn ...

Financial Data and Key Metrics - Total GTV reached RMB839 billion, up 7.5% YoY [20] - Net revenue was RMB23.4 billion, representing a YoY increase of 19.9% [20] - Gross margin improved by 0.5 percentage points YoY to 27.9% [20] - GAAP net income reached RMB1.9 billion, rising by 46.2% YoY [20] - Non-GAAP net income grew by 13.9% YoY to RMB2.69 billion [20] Business Line Data and Key Metrics - Revenue from existing home transactions reached RMB7.3 billion, up 14.3% YoY [21] - GTV for existing home transactions was RMB570.7 billion, increasing 25% YoY [21] - New home GTV reached RMB235.3 billion, growing by 28.2% YoY [22] - Revenue from home renovation and furnishing business grew by 53.9% YoY to RMB4 billion [24] - Home rental services revenue reached RMB3.2 billion, up 167.1% YoY [25] Market Data and Key Metrics - Existing home transactions on the platform grew by 40% YoY in Q2 2024 [8] - New home GTV contraction narrowed to 20% YoY in Q2 2024 [8] - Home renovation and furnishings business revenue grew close to 60% YoY in H1 2024 [10] - Home rental services revenue grew by 177% YoY in H1 2024 [10] Company Strategy and Industry Competition - The company is transforming into a technology-powered, one-stop residential services platform model [6] - Focus on community-based business to leverage in-depth community knowledge and understanding of residents' needs [14] - Expansion of store and agency networks, with a net increase of over 2,400 active stores and 40,000 active agents since the end of 2023 [9] Management Commentary on Operating Environment and Future Outlook - The external macro environment will continue to pose challenges in H2 2024 [16] - The company aims to build capabilities to keep the organization moving forward from one success to the next [16] - The company is committed to cost efficiency under refined operational measures [30] Other Important Information - The company repurchased around $480 million worth of shares, accounting for about 2.7% of the company's total shares outstanding at the end of 2023 [31] - The Board approved an expansion of the existing share repurchase program from $2 billion to $3 billion, extended until August 31, 2025 [32] Q&A Session Question: Changes in the real estate market after supportive policies - The housing market showed steady month-by-month improvement in Q2 2024, with existing home transactions rebounding sharply, especially in first-tier cities [35] - The new home market remains subdued, with year-over-year sales decline narrowing month-by-month [35] Question: Performance of new home business - The new home business outperformed the industry, with GTV reaching RMB235.3 billion, up 55% QoQ [40] - The company expanded cooperation with top-tier developers, doubling the number of strategic collaborations to 25 [40] Question: Growth strategy for home transaction services - The company added 48 new major brands and over 6,500 new stores in H1 2024, with a six-month retention rate of 93% [43] - Lianjia explored innovative store formats, including low-cost convenience stores and flagship stores with home-related elements [44] Question: Focus on home renovation and rental business - The home renovation business focused on upgrading digitalized capabilities and optimizing construction delivery [47] - The home rental business improved unit economics by enhancing service quality and leasing efficiency, with revenue reaching RMB3.19 billion, up 167% YoY [48]

KE Holdings Inc. Announces Second Quarter 2024 Unaudited Financial Results and Upsizing and Extension of Share Repurchase Program BEIJING, China, August 12, 2024 - KE Holdings Inc. ("Beike" or the "Company") (NYSE: BEKE and HKEX: 2423), a leading integrated online and offline platform for housing transactions and services, today announced its unaudited financial results for the second quarter ended June 30, 2024 and upsizing and extension of the share repurchase program. Business and Financial Highlights fo ...

Core Viewpoint - KE Holdings Inc. has approved an increase in its share repurchase program from US$2.0 billion to US$3.0 billion and extended it until August 31, 2025, reflecting the company's commitment to returning value to shareholders [2]. Group 1: Share Repurchase Program - The existing share repurchase program was initially established in August 2022 and was upsized in August 2023, allowing the company to purchase up to US$2.0 billion of its Class A ordinary shares and/or American depositary shares (ADSs) until August 31, 2024 [1]. - As of the announcement date, the company has repurchased approximately 95.0 million ADSs, equivalent to about 285.0 million Class A ordinary shares, for a total consideration of approximately US$1,389.8 million [1]. - The board of directors has now approved modifications to increase the repurchase authorization to US$3.0 billion and extend the program until August 31, 2025 [2]. Group 2: Company Overview - KE Holdings Inc. operates as a leading integrated online and offline platform for housing transactions and services in China, focusing on various aspects such as home sales, rentals, renovations, and furnishing [3]. - The company is known for its Lianjia brand, which has over 22 years of operational experience and is a key component of the Beike platform [3].

Financial Performance - Total transaction volume for the first half of 2024 was RMB 1,468.9 billion, a decrease of 16.2% compared to RMB 1,752.1 billion in the same period of 2023[3] - Net income for the first half of 2024 was RMB 39.7 billion, remaining relatively flat compared to RMB 39.8 billion in the same period of 2023[3] - Net profit for the first half of 2024 was RMB 2,333 million, a decrease from RMB 4,049 million in the same period of 2023[4] - Adjusted net profit for the first half of 2024 was RMB 4,086 million, down from RMB 5,925 million in the same period of 2023[4] - Gross profit decreased by 9.0% to RMB 10.6 billion in the first half of 2024, with the gross margin declining to 26.8% from 29.4% in the same period of 2023[17] - Operating profit decreased to RMB 2.0 billion in the first half of 2024, with the operating profit margin dropping to 5.1% from 10.2% in the same period of 2023[19] - Adjusted operating profit declined to RMB 3.8 billion in the first half of 2024, with the adjusted operating profit margin falling to 9.5% from 15.0% in the same period of 2023[19] - Net profit decreased to RMB 2.3 billion in the first half of 2024, compared to RMB 4.0 billion in the same period of 2023[20] - Net revenue for the first half of 2024 was RMB 39.75 billion, a slight decrease of 0.04% compared to RMB 39.76 billion in the same period of 2023[45] - Gross profit for the first half of 2024 was RMB 10.64 billion, down 9.0% from RMB 11.69 billion in the first half of 2023[45] - Operating profit for the first half of 2024 was RMB 2.03 billion, a significant decrease of 50.1% compared to RMB 4.06 billion in the same period of 2023[46] - Net profit attributable to KE Holdings Inc. for the first half of 2024 was RMB 2.32 billion, down 42.7% from RMB 4.06 billion in the first half of 2023[46] - Basic earnings per share for the first half of 2024 was RMB 0.68, a decrease of 40.4% compared to RMB 1.14 in the same period of 2023[47] - Operating profit for the six months ended June 30, 2024, was RMB 2,026,973 thousand, a decrease from RMB 4,058,929 thousand in the same period in 2023[48] - Adjusted operating profit for the six months ended June 30, 2024, was RMB 3,772,085 thousand, compared to RMB 5,977,459 thousand in the same period in 2023[48] - Net profit for the six months ended June 30, 2024, was RMB 2,332,526 thousand, down from RMB 4,049,251 thousand in the same period in 2023[48] - Adjusted net profit for the six months ended June 30, 2024, was RMB 4,085,555 thousand, compared to RMB 5,925,391 thousand in the same period in 2023[48] - Adjusted EBITDA for the six months ended June 30, 2024, was RMB 5,037,594 thousand, down from RMB 7,129,765 thousand in the same period in 2023[48] - Net profit for the six months ended June 30, 2024, was RMB 2,332,526 thousand, compared to RMB 4,049,251 thousand for the same period in 2023[53] - Pre-tax profit for the six months ended June 30, 2024, was RMB 3,588,315 thousand, down from RMB 5,450,773 thousand in the same period in 2023[68] - Net profit attributable to Beike Holdings Ltd. was RMB 2,323,835 thousand for the six months ended June 30, 2024, compared to RMB 4,055,577 thousand in the same period in 2023[74] - Basic earnings per share decreased to RMB 0.68 for the six months ended June 30, 2024, from RMB 1.14 in the same period in 2023[75] - Diluted earnings per share decreased to RMB 0.66 for the six months ended June 30, 2024, from RMB 1.11 in the same period in 2023[75] - Net profit attributable to Beike Holdings Limited reached RMB 3,053,390, showing a strong financial performance[78] - Net profit before tax was RMB 4,346,929, indicating strong pre-tax profitability[78] - Net profit attributable to ordinary shareholders of Beike Holdings Limited was RMB 3,053,390, showing strong returns for shareholders[78] Business Segments Performance - The company's home renovation and furnishing business saw a total transaction volume of RMB 7.6 billion in the first half of 2024, an increase of 24.0% compared to RMB 6.1 billion in the same period of 2023[3] - The company's new business and other segments had a total transaction volume of RMB 50.3 billion in the first half of 2024, a decrease of 3.9% compared to RMB 52.3 billion in the same period of 2023[3] - New home business achieved strong performance with a 49% net income contribution from the "fast commission" projects and increased state-owned enterprise developer commission income from 47% in Q2 2023 to 55% in Q2 2024[8] - Home decoration and furnishing business saw a 24.0% YoY increase in total transaction volume and a 59.9% YoY increase in revenue, with a profit margin of 31.0% in H1 2024[9] - Rental housing service expanded rapidly with over 300,000 units under management for decentralized rental housing and over 14,000 units for centralized long-term rental apartments by Q2 2024[10] - Existing home business net revenue decreased by 16.3% YoY to RMB 13.1 billion in H1 2024, with a 8.7% decrease in total transaction volume to RMB 1,023.8 billion[13] - Commission income from existing home business decreased by 17.5% YoY to RMB 10.6 billion in H1 2024, driven by a 11.9% decrease in transaction volume through Lianjia stores[13] - Platform services, franchise services, and other value-added services revenue decreased by 10.5% to RMB 2.5 billion in the first half of 2024, compared to RMB 2.7 billion in the same period of 2023, primarily due to a 6.3% decline in the total transaction value of existing home transactions facilitated by Beike-linked agents to RMB 611.5 billion[14] - New home business net revenue decreased by 24.9% to RMB 12.9 billion in the first half of 2024, driven by a 32.4% decline in the total transaction value of new home transactions to RMB 387.1 billion[14] - Home renovation and furnishing net revenue increased by 59.9% to RMB 6.4 billion in the first half of 2024, driven by increased order volume, higher contributions from new retail, and improved delivery capabilities[14] - Rental services net revenue surged by 176.7% to RMB 5.8 billion in the first half of 2024, primarily due to the expansion of the managed rental property portfolio under the "Worry-Free Rent" model[14] - Home renovation and furnishing revenue grew by 59.9% year-over-year to RMB 6.45 billion in the first half of 2024[45] - Rental services revenue increased by 176.7% year-over-year to RMB 5.81 billion in the first half of 2024[45] - Emerging businesses and other revenue grew by 69.0% year-over-year to RMB 1.57 billion in the first half of 2024[45] - Net revenue for the existing home business decreased to RMB 13,061,919 in the first half of 2024, down from RMB 15,597,087 in the same period of 2023[62] - Net revenue for the new home business declined to RMB 12,850,320 in the first half of 2024, compared to RMB 17,099,714 in the first half of 2023[62] - Home renovation and furnishing business revenue increased significantly to RMB 6,449,072 in the first half of 2024, up from RMB 4,032,830 in the same period of 2023[62] - Housing rental services revenue more than doubled to RMB 5,812,743 in the first half of 2024, compared to RMB 2,100,888 in the first half of 2023[62] - Emerging businesses and others revenue grew to RMB 1,573,690 in the first half of 2024, up from RMB 931,482 in the same period of 2023[62] - Total net revenue remained stable at approximately RMB 39.7 billion in the first half of both 2024 and 2023[62] - Contribution profit for the housing rental services turned positive at RMB 330,921 in the first half of 2024, compared to a loss of RMB 147,997 in the same period of 2023[62] - Revenue from housing rental services increased to RMB 3,650,300, up from RMB 1,617,200 in the previous period, reflecting significant growth in this segment[78][79] Operational Metrics - The number of active stores as of June 30, 2024, was 44,423, an increase of 8.1% compared to 41,076 as of June 30, 2023[4] - The number of active agents as of June 30, 2024, was 411,478, showing a slight increase of 0.6% compared to 409,054 as of June 30, 2023[4] - The average monthly active users for the three months ending June 30, 2024, was 49.7 million, up from 48.0 million in the same period of 2023[4] - Non-real estate transaction service revenue accounted for 34.8% of total net revenue in the first half of 2024, a significant increase of 17 percentage points compared to the same period in 2023[6] - Home SaaS 2.5 version was launched, improving BIM shared service center and material fulfillment integration, enhancing designer efficiency and reducing error rates[9] - The company has 122,599 employees as of June 30, 2024, with 96,440 in brokerage and support roles and 1,992 in R&D[32] - The company has reorganized its reporting segments, with housing rental services now reported as a separate segment due to its increased scale and business importance[58] Share Repurchase and Dividends - The company repurchased approximately $4.8 billion worth of ADS in 2024, representing about 2.75% of the total shares outstanding at the end of 2023[12] - The company expanded its share repurchase program from $2 billion to $3 billion and extended the program until August 31, 2025[12] - The company has repurchased 95,012,729 American Depositary Shares (ADS) for a total consideration of $1,389,782,786.29 under its share repurchase program[34] - In the reporting period, the company repurchased 26,995,560 ADS for a total consideration of $380,000,306.80[34] - The company's share repurchase program has been expanded to $3 billion and extended to August 31, 2025[34] - A total of 80,986,680 Class A ordinary shares represented by repurchased ADS were canceled during the reporting period[36] - 3,248,679 Class B ordinary shares were converted to Class A ordinary shares to comply with dual-class share structure regulations[36] - The company has not recommended an interim dividend for the six months ended June 30, 2024[40] - The company declared a final cash dividend of USD 0.117 per ordinary share, totaling approximately USD 400 million[76] Financial Position and Cash Flow - The company's cash, cash equivalents, restricted funds, and short-term investments totaled RMB 59.7 billion as of June 30, 2024, compared to RMB 60.1 billion as of December 31, 2023[21] - Operating cash flow for the six months ended June 30, 2024, was RMB 3.86 billion, a decrease from RMB 7.43 billion in the same period in 2023[22] - Net cash used in investing activities for the six months ended June 30, 2024, was RMB 6.84 billion, compared to net cash generated of RMB 7.63 billion in the same period in 2023[22] - The company's debt-to-asset ratio increased to 42.3% as of June 30, 2024, from 40.0% as of December 31, 2023[25] - The company held RMB 55.6 billion in cash, cash equivalents, restricted funds, and short-term investments denominated in RMB, and USD 600 million in USD-denominated equivalents as of June 30, 2024[27] - Capital expenditures for the six months ended June 30, 2024, amounted to RMB 462 million[29] - The company's total financial debt as of June 30, 2024, was RMB 20.21 billion, up from RMB 17.99 billion as of December 31, 2023[22] - The RMB depreciated approximately 2.4% against the USD during the six months ended June 30, 2024[26] - The company's short-term investments included RMB 2.3 billion in wealth management products as of June 30, 2024, exposing it to interest rate risk[28] - The company's cash, cash equivalents, and restricted funds decreased by RMB 8.33 billion during the six months ended June 30, 2024[22] - Total contractual obligations as of June 30, 2024, amount to RMB 20,575,485 thousand, with RMB 6,642,671 thousand due in the remainder of 2024 and RMB 8,577,458 thousand due in 2025[31] - Operating lease and other commitments as of June 30, 2024, total RMB 1,119,600 thousand, including RMB 734.4 million in operating lease commitments and RMB 301.7 million in capital commitments[31] - Cash and cash equivalents as of June 30, 2024, were RMB 9,409,071 thousand, a decrease from RMB 19,634,716 thousand as of December 31, 2023[50] - Short-term investments as of June 30, 2024, were RMB 42,222,652 thousand, up from RMB 34,257,958 thousand as of December 31, 2023[50] - Total assets as of June 30, 2024, were RMB 122,497,997 thousand, compared to RMB 120,331,931 thousand as of December 31, 2023[50] - Total liabilities as of June 30, 2024, were RMB 51,794,889 thousand, up from RMB 48,130,826 thousand as of December 31, 2023[51] - Current liabilities as of June 30, 2024, were RMB 43,376,360 thousand, compared to RMB 39,523,983 thousand as of December 31, 2023[51] - Operating cash flow for the six months ended June 30, 2024, was RMB 3,857,678 thousand, down from RMB 7,431,689 thousand in the same period in 2023[53] - Total cash, cash equivalents, and restricted funds decreased by RMB 8,330,808 thousand in the six months ended June 30, 2024, compared to an increase of RMB 12,217,833 thousand in the same period in 2023[54] - Total equity attributable to shareholders of KE Holdings Inc. was RMB 70,569,240 thousand as of June 30, 2024, down from RMB 72,099,824 thousand as of December 31, 2023[52] - The company repurchased ordinary shares worth RMB 2,701,210 thousand in the six months ended June 30, 2024[54] - Total liabilities and equity increased to RMB 122,497,997 thousand as of June 30, 2024, from RMB 120,331,931 thousand as of December 31, 2023[52] - The company issued 3,529,562,630 Class A ordinary shares as of June 30, 2024, compared to 3,571,960,220 as of December 31, 2023[52] - Accumulated deficit decreased to RMB 3,349,081 thousand as of June 30, 2024, from RMB 5,672,916 thousand as of December 31, 2023[52] - The company's total cash and cash equivalents were RMB 9,409,071 thousand as of June 30, 2024, down from RMB 19,634,716 thousand as of the beginning of the period[55] - Restricted funds decreased to RMB 8,117,582 thousand as of June 30, 2024, from RMB 6,222,745 thousand as of the beginning of the period[55] - Total assets increased to RMB 123,013,087 thousand as of June 30, 2024, up from RMB 120,221,596 thousand at the end of 2023[80][81] - Total liabilities decreased slightly to RMB 51,792,333 thousand as of June 30, 2024, compared to RMB 48,023,046 thousand at the end of 2023[80][81] - Shareholders' equity rose to RMB 71,220,754 thousand as of June 30, 2024, from RMB

[Performance Summary and Management Commentary](index=1&type=section&id=Performance%20Summary%20%26%20Management%20Commentary) KE Holdings reported strong Q2 2024 performance, with GTV up 7.5% and net revenue up 19.9%, driven by existing home transactions and emerging businesses, alongside an expanded share repurchase program [Key Business and Financial Highlights](index=1&type=section&id=Key%20Business%20and%20Financial%20Highlights) In Q2 2024, KE Holdings' total GTV reached RMB 839 billion, up 7.5%, primarily driven by a 25.0% increase in existing home transactions, partially offsetting a 20.2% decline in new home transactions, with net revenue growing 19.9% to RMB 23.4 billion and adjusted net profit at RMB 2.693 billion Q2 2024 Gross Transaction Value (GTV) Overview | Business Segment | GTV (RMB Billion) | YoY Change | | :--- | :--- | :--- | | **Total GTV** | **839.0** | **+7.5%** | | Existing Home Transactions | 570.7 | +25.0% | | New Home Transactions | 235.3 | -20.2% | | Home Renovation and Furnishing | 4.2 | +22.3% | | Emerging and Other Businesses | 28.8 | +12.2% | Q2 2024 Core Financial Metrics | Metric | Amount (RMB Million) | YoY Change | | :--- | :--- | :--- | | Net Revenue | 23,400 | +19.9% | | Net Profit | 1,900 | +46.2% | | Adjusted Net Profit | 2,693 | +13.9% | Q2 2024 End Operating Metrics | Metric | Quantity | YoY Change | | :--- | :--- | :--- | | Number of Stores | 45,948 | +6.9% | | Number of Active Stores | 44,423 | +8.1% | | Number of Agents | 458,690 | +5.2% | | Number of Active Agents | 411,478 | Relatively Stable | | Average Mobile Monthly Active Users | 49.7 Million | +3.5% | [Management Commentary](index=2&type=section&id=Management%20Commentary) Management attributed the strong Q2 performance to deepened operations and scientific management, with the CEO emphasizing building a sustainable growth organization and the CFO highlighting improved profitability and an expanded share repurchase program - CEO Peng Yongdong stated that the company achieved market-outperforming results through deepened operations and scientific management, with the core goal for the future being to build an organization capable of sustained growth[2](index=2&type=chunk)[4](index=4&type=chunk) - CFO Xu Tao emphasized excellent Q2 performance, significant improvement in existing home transaction contribution margin, rapid growth in non-real estate transaction services, and enhanced profitability[4](index=4&type=chunk) - The company announced an expanded and extended share repurchase program, increasing authorization from **$2 billion to $3 billion** and extending the term to August 31, 2025, to continuously return value to shareholders[4](index=4&type=chunk) [Financial Results Analysis](index=3&type=section&id=Financial%20Results%20Analysis) KE Holdings demonstrated robust financial performance in Q2 2024, with net revenue increasing 19.9% to RMB 23.4 billion, gross margin improving to 27.9%, and operating profit significantly growing to RMB 2.0 billion, reflecting strong profitability and cost control [Net Revenue](index=3&type=section&id=Net%20Revenue) Q2 2024 net revenue increased 19.9% to RMB 23.4 billion, driven by growth in existing home, home renovation and furnishing, and home rental services, which offset a decline in new home business revenue Q2 2024 Net Revenue Composition (by Business Segment) | Business Segment | Net Revenue (RMB Billion) | YoY Change | | :--- | :--- | :--- | | **Total Net Revenue** | **23.4** | **+19.9%** | | Existing Home Business | 7.3 | +14.3% | | New Home Business | 7.9 | -8.8% | | Home Renovation and Furnishing | 4.0 | +53.9% | | Home Rental Services | 3.2 | +167.1% | | Emerging and Other Businesses | 0.9 | +57.8% | - Existing home business revenue growth was primarily due to a **25.0% YoY increase in GTV**, partially offset by a lower commission rate for Beijing Lianjia[6](index=6&type=chunk) - New home business revenue decline was due to a **20.2% YoY decrease in GTV**, partially offset by improved monetization capabilities[7](index=7&type=chunk) - Home renovation and furnishing revenue growth benefited from increased orders, greater new retail contributions, and improved delivery capabilities[7](index=7&type=chunk) - The surge in home rental services revenue was mainly due to an increase in the number of rental properties under the 'Carefree Rental' model[8](index=8&type=chunk) [Cost of Revenue and Gross Profit](index=5&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Profit) Q2 2024 total cost of revenue increased 19.2% to RMB 16.9 billion, with gross profit growing 22.0% to RMB 6.5 billion and gross margin improving from 27.4% to 27.9%, driven by higher contribution margins from home renovation and home rental services Q2 2024 Cost of Revenue Composition | Cost Item | Amount (RMB Billion) | YoY Change | | :--- | :--- | :--- | | **Total Cost of Revenue** | **16.9** | **+19.2%** | | External Commissions | 5.4 | -6.9% | | Internal Commissions and Compensation | 4.4 | +7.9% | | Home Renovation and Furnishing Costs | 2.8 | +50.2% | | Home Rental Services Costs | 3.0 | +138.2% | | Store Costs | 0.681 | -6.7% | | Other Costs | 0.511 | +18.6% | - Gross margin improved from **27.4% in Q2 2023 to 27.9%**, primarily driven by higher contribution margins from home renovation and furnishing and home rental services, and a decrease in store costs as a percentage of revenue[10](index=10&type=chunk) [Operating Expenses and Profit](index=6&type=section&id=Operating%20Expenses%20and%20Profit) Q2 2024 total operating expenses grew moderately by 5.6% to RMB 4.5 billion, while operating profit significantly increased to RMB 2.015 billion, with operating margin improving from 5.5% to 8.6%, reflecting effective cost control Q2 2024 Operating Expenses | Expense Item | Amount (RMB Million) | YoY Change | | :--- | :--- | :--- | | **Total Operating Expenses** | **4,500** | **+5.6%** | | Sales and Marketing Expenses | 1,882 | +14.1% | | General and Administrative Expenses | 2,079 | -1.2% | | Research and Development Expenses | 505 | +6.3% | Q2 2024 Operating Profit Performance | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Operating Profit (RMB Million) | 2,015 | 1,081 | | Operating Margin | 8.6% | 5.5% | | Adjusted Operating Profit (RMB Million) | 2,813 | 2,148 | | Adjusted Operating Margin | 12.0% | 11.0% | [Net Income and EPS](index=7&type=section&id=Net%20Income%20and%20EPS) In Q2 2024, net profit reached RMB 1.9 billion, a 46.2% increase YoY, with adjusted net profit at RMB 2.693 billion, and basic and diluted EPS for ADS both showing improvement over the prior year Q2 2024 Net Profit Performance | Metric | Q2 2024 (RMB Million) | Q2 2023 (RMB Million) | | :--- | :--- | :--- | | Net Profit | 1,900 | 1,300 | | Adjusted Net Profit | 2,693 | 2,364 | | Net Profit Attributable to Ordinary Shareholders | 1,892 | 1,309 | | Adjusted Net Profit Attributable to Ordinary Shareholders | 2,685 | 2,373 | Q2 2024 Net Earnings Per American Depositary Share (ADS) | Metric | Q2 2024 (RMB) | Q2 2023 (RMB) | | :--- | :--- | :--- | | Basic Net Earnings Per ADS | 1.67 | 1.10 | | Diluted Net Earnings Per ADS | 1.61 | 1.08 | | Adjusted Basic Net Earnings Per ADS | 2.36 | 2.00 | | Adjusted Diluted Net Earnings Per ADS | 2.28 | 1.96 | [Capital Management and Shareholder Returns](index=8&type=section&id=Capital%20Management%20and%20Shareholder%20Returns) As of June 30, 2024, KE Holdings maintained a strong financial position with RMB 59.7 billion in cash and equivalents, and enhanced shareholder returns by expanding its share repurchase program to $3 billion [Cash Position](index=8&type=section&id=Cash%20Position) As of June 30, 2024, the company held substantial cash reserves totaling RMB 59.7 billion (approximately $8.2 billion) in cash, cash equivalents, restricted cash, and short-term investments - As of June 30, 2024, the company's total cash, cash equivalents, restricted cash, and short-term investments amounted to **RMB 59.7 billion ($8.2 billion)**[15](index=15&type=chunk) [Share Repurchase Program](index=8&type=section&id=Share%20Repurchase%20Program) The company announced an expansion and extension of its share repurchase program, increasing the authorization from $2 billion to $3 billion and extending its validity to August 31, 2025, having already repurchased approximately $1.39 billion in shares - Since the inception of the existing share repurchase program, the company has cumulatively repurchased approximately **95 million ADSs** for a total consideration of approximately **$1.39 billion** as of the announcement date[15](index=15&type=chunk) - The board approved increasing the share repurchase authorization from **$2 billion to $3 billion** and extending the program's term to August 31, 2025[16](index=16&type=chunk) [Appendix: Unaudited Financial Statements](index=14&type=section&id=Appendix%3A%20Unaudited%20Financial%20Statements) This section provides detailed unaudited financial statements for KE Holdings Inc., including consolidated balance sheets, statements of operations, cash flows, GAAP to non-GAAP reconciliations, and segment contribution profit metrics as of and for the three and six months ended June 30, 2024 [Consolidated Balance Sheets](index=14&type=section&id=Consolidated%20Balance%20Sheets) The statement presents the company's assets, liabilities, and shareholders' equity as of June 30, 2024, and December 31, 2023, showing total assets of RMB 122.5 billion, total liabilities of RMB 51.8 billion, and total shareholders' equity of RMB 70.7 billion as of June 30, 2024 Balance Sheet Key Items (As of June 30, 2024) | Item | Amount (RMB Billion) | | :--- | :--- | | Total Assets | 122.5 | | Total Liabilities | 51.8 | | Total Shareholders' Equity | 70.7 | [Consolidated Statements of Operations](index=17&type=section&id=Consolidated%20Statements%20of%20Operations) This statement details the company's revenue, costs, expenses, and profit for the three and six months ended June 30, 2024, providing the foundational data for the preceding financial analysis - This section provides detailed income statement data, including net revenue for each business line, detailed costs and expenses, ultimately leading to net profit and comprehensive income[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [Reconciliation of GAAP and Non-GAAP Results](index=20&type=section&id=Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Results) This section provides a detailed reconciliation process for adjusting GAAP operating profit and net profit to non-GAAP metrics, with key adjustments including share-based compensation expenses, intangible asset amortization, and fair value changes in investments - This section details the calculation process from GAAP net profit to Adjusted Net Profit and Adjusted EBITDA, excluding non-cash or non-operating items such as share-based compensation expenses[31](index=31&type=chunk)[32](index=32&type=chunk) [Consolidated Statements of Cash Flows](index=22&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The statement illustrates the company's cash inflows and outflows from operating, investing, and financing activities for the three and six months ended June 30, 2024, with Q2 2024 showing net cash inflow from operating activities of RMB 4.77 billion, net cash outflow from investing activities of RMB 8.13 billion, and net cash outflow from financing activities of RMB 3.93 billion Q2 2024 Cash Flow Overview | Activity Category | Net Cash (RMB Billion) | | :--- | :--- | | Net Cash Provided by Operating Activities | 4.773 | | Net Cash Used in Investing Activities | (8.134) | | Net Cash Used in Financing Activities | (3.931) | [Segment Contribution Profit](index=23&type=section&id=Segment%20Contribution%20Profit) This section provides contribution profit metrics segmented by business (existing home, new home, home renovation and furnishing, home rental), showing Q2 2024 contribution profits of RMB 3.48 billion for existing home, RMB 1.99 billion for new home, RMB 1.26 billion for home renovation and furnishing, and RMB 0.186 billion for home rental services, which achieved positive contribution profit for the first time Q2 2024 Contribution Profit by Business Segment | Business Segment | Contribution Profit (RMB Billion) | | :--- | :--- | | Existing Home Business | 3.483 | | New Home Business | 1.986 | | Home Renovation and Furnishing Business | 1.264 | | Home Rental Services | 0.186 | [Other Information](index=9&type=section&id=Other%20Information) This section provides details on the earnings conference call, company profile, a safe harbor statement regarding forward-looking statements, and investor relations contact information, offering avenues for further information and understanding potential risks [Conference Call Information](index=9&type=section&id=Conference%20Call%20Information) The company held its earnings conference call on August 12, 2024, Beijing time, with the announcement providing registration links for participation and details for accessing the replay - The announcement provided details for participating in the earnings conference call, including online registration links for English and Chinese simultaneous interpretation lines, and information for accessing the conference replay[17](index=17&type=chunk)[18](index=18&type=chunk) [About the Company & Safe Harbor Statement](index=11&type=section&id=About%20the%20Company%20%26%20Safe%20Harbor%20Statement) This section introduces KE Holdings as a leading online and offline integrated real estate transaction and service platform and includes a US-compliant 'Safe Harbor Statement' cautioning investors that forward-looking statements involve inherent risks and uncertainties - Company Profile: KE Holdings is a leading online and offline integrated real estate transaction and living services platform, owning and operating Lianjia, a leading real estate brokerage brand in China[22](index=22&type=chunk) - Safe Harbor Statement: The announcement contains forward-looking statements, and actual results may differ materially from expectations due to various risks and uncertainties[23](index=23&type=chunk)

Core Viewpoint - KE Holdings Inc. reported strong financial results for the second quarter of 2024, with significant growth in net revenues and net income, driven by operational enhancements and market recovery in existing home transactions [1][3][4]. Financial Performance - Gross transaction value (GTV) reached RMB839.0 billion (US$115.5 billion), a 7.5% increase year-over-year, with existing home transactions growing by 25.0% to RMB570.7 billion (US$78.5 billion) [2][8]. - Net revenues increased by 19.9% to RMB23.4 billion (US$3.2 billion) compared to RMB19.5 billion in the same period of 2023 [8][21]. - Net income rose by 46.2% year-over-year to RMB1,900 million (US$262 million), while adjusted net income grew by 13.9% to RMB2,693 million (US$371 million) [5][21]. Business Segments - Revenues from existing home transaction services increased by 14.3% to RMB7.3 billion (US$1.0 billion), supported by a 25.0% rise in GTV [9][11]. - New home transaction services saw a decline of 8.8% in revenues to RMB7.9 billion (US$1.1 billion), with GTV decreasing by 20.2% [11][12]. - Home renovation and furnishing revenues surged by 53.9% to RMB4.0 billion (US$0.6 billion), driven by increased orders and enhanced delivery capabilities [12][13]. - Home rental services revenues increased significantly by 167.1% to RMB3.2 billion (US$0.4 billion) due to a rise in rental units under the Carefree Rent model [12][13]. Operational Metrics - The number of stores increased by 6.9% year-over-year to 45,948, while active stores rose by 8.1% to 44,423 [2][5]. - The number of agents reached 458,690, marking a 5.2% increase, although the number of active agents remained relatively flat [2][5]. - Mobile monthly active users averaged 49.7 million, up from 48.0 million in the same period of 2023 [2][5]. Shareholder Returns - The company has repurchased shares totaling approximately US$480 million in 2024, representing about 2.75% of total issued shares at the end of 2023 [6][27]. - The share repurchase program has been upsized from US$2 billion to US$3 billion and extended until August 31, 2025 [6][27]. Cash Position - As of June 30, 2024, the company reported a combined balance of cash, cash equivalents, restricted cash, and short-term investments amounting to RMB59.7 billion (US$8.2 billion) [25].

Investment Rating - The report assigns a "Buy" rating for the company, Beike-W (2423.HK), with a market price of HKD 34.35 [1]. Core Insights - Beike is the largest real estate transaction and service platform in China, leveraging its ACN network infrastructure to efficiently provide various real estate services [4][9]. - The residential market is expanding, with the market size growing from CNY 25.4 trillion in 2016 to CNY 39.6 trillion in 2021, and projected to reach CNY 55.7 trillion by 2026 [25]. - The company is expected to benefit from the increasing penetration of real estate brokerage services, which rose from 43.2% in 2016 to 49.8% in 2021, and is forecasted to reach 61.6% by 2026 [4][28]. Financial Performance - In 2023, the total transaction volume reached CNY 31,429 billion, a year-on-year increase of 20.4%, with operating revenue of CNY 777.8 billion, up 28.2% [5][31]. - The net profit attributable to the parent company was CNY 51.2 billion, reflecting a significant year-on-year growth of 349.2% [5]. - The company’s gross margin improved to 27.9%, an increase of 5.2 percentage points from the previous year [5]. Business Segments - The company’s core businesses include existing home transactions, new home transactions, home decoration, and emerging businesses, with significant growth in home decoration and rental management [4][31]. - The revenue from existing home transactions grew by 15.9% in 2023, while new home transactions saw a 6.7% increase [31]. - Home decoration and emerging businesses contributed significantly to revenue growth, with their shares rising to 14.0% and 10.8% of total revenue, respectively [5][31]. Market Outlook - The report anticipates that the company’s net profit will reach CNY 78.1 billion, CNY 99.0 billion, and CNY 112.8 billion for the years 2024 to 2026, respectively [5]. - The current price corresponds to a P/E ratio of 14.8x for 2024, 11.7x for 2025, and 10.2x for 2026, indicating a favorable valuation [5].

Core Viewpoint - KE Holdings Inc. will report its unaudited financial results for Q2 2024 on August 12, 2024, before the U.S. market opens [1] Group 1: Financial Reporting - The earnings conference call is scheduled for 8:00 A.M. Eastern Time on August 12, 2024 [1] - Participants must register online at least 20 minutes prior to the call to receive dial-in numbers and access PIN [1][2] Group 2: Company Overview - KE Holdings Inc. is a leading integrated online and offline platform for housing transactions and services in China [3] - The company operates Lianjia, a prominent real estate brokerage brand, and has over 22 years of experience since its inception in 2001 [3]