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]

Group 1 - KE Holdings Inc. (BEKE) is experiencing significant activity in the options market, particularly with the Nov 15, 2024 $2.50 Call option showing high implied volatility, indicating potential for a major price movement [1] - Implied volatility reflects market expectations for future stock movement, suggesting that investors anticipate a significant event that could lead to either a rally or a sell-off [2] - KE Holdings currently holds a Zacks Rank 4 (Sell) in the Real Estate - Operations industry, which is in the bottom 36% of the Zacks Industry Rank, with no analysts increasing earnings estimates for the current quarter and one analyst revising estimates downward from 23 cents to 22 cents per share [3]

Core Viewpoint - KE Holdings Inc. has successfully adopted all proposed resolutions during its annual general meeting, which includes the re-election of key directors and the granting of mandates for share issuance and repurchase [1][2]. Company Overview - KE Holdings Inc. operates as a leading integrated online and offline platform for housing transactions and services in China, known for its Lianjia brand, which has over 22 years of operational experience [3]. - The company aims to enhance the efficiency of housing transactions and services, covering areas such as home sales, rentals, renovations, and furnishings [3]. Corporate Actions - The annual general meeting resulted in the re-election of Mr. Yongdong Peng and Mr. Yigang Shan as executive directors, and Mr. Jun Wu as an independent non-executive director [2]. - The directors were granted a general unconditional mandate to allot and issue additional Class A ordinary shares and to repurchase the company's own shares [2].

Investment Rating - The investment rating for the company is "Outperform the Market" [4][12] Core Insights - The company's revenue decreased by 19% year-on-year, with adjusted net profit margin remaining stable quarter-on-quarter. In Q1 2024, the company achieved a total GTV of 629.9 billion yuan, down 35% year-on-year, and operating revenue of 16.4 billion yuan, down 19% year-on-year. The revenue performance was significantly better than GTV, mainly due to the increase in the contribution of the "two wings" business to 35%, with home decoration and emerging businesses, including housing rental services, continuing to grow rapidly [1][5][10] - The main business segment is currently affected by industry downturns. In Q1 2024, the GTV for existing housing business was 453.2 billion yuan, down 32% year-on-year, and revenue was 5.7 billion yuan, down 38% year-on-year. The monetization rate for existing housing business dropped to 1.26% due to aggressive store expansion and the decline in the proportion of transactions from the Lianjia system [7][10] - New business segments are maintaining high growth rates. In Q1 2024, the home decoration and furniture business generated revenue of 2.4 billion yuan, up 71% year-on-year, with a monetization rate of 71% and a contribution margin of 31%. The newly disclosed housing rental service generated revenue of 2.6 billion yuan, up 189% year-on-year, with a contribution margin of 5.5% [10][11] Financial Performance Summary - The company expects adjusted net profits of 9.8 billion yuan for 2024 and 9.9 billion yuan for 2025, with earnings per share of 2.67 yuan and 2.69 yuan respectively. The corresponding PE ratios are 14.5 and 14.4 times [2][12] - The company maintained a strong position in the real estate agency industry, with a rebound in the number of agents. As of Q1 2024, the number of stores reached 44,000, up 7% year-on-year, and the number of agents was 443,000, up 2% year-on-year [11][12]

Core Viewpoint - KE Holdings Inc. (BEKE) shows a significantly improving earnings outlook, making it a strong investment choice as analysts continue to raise earnings estimates [1][6] Earnings Estimates - Analysts have reached a strong consensus in raising earnings estimates for KE Holdings, leading to a notable increase in consensus estimates for the upcoming quarter and the full year [2] - For the current quarter, KE Holdings is expected to earn $0.31 per share, reflecting a year-over-year increase of +14.81% [4] - The Zacks Consensus Estimate for KE Holdings has risen by 7.32% over the last 30 days, with no negative revisions [4] Current-Year Estimate Revisions - For the full year, KE Holdings is projected to earn $1.09 per share, indicating a year-over-year decline of -5.22% [5] - There has been a positive trend in estimate revisions for the current year, with two estimates moving up and no negative revisions, resulting in a 6.49% increase in the consensus estimate [5] Zacks Rank - KE Holdings currently holds a Zacks Rank 1 (Strong Buy) due to favorable estimate revisions, which is a reliable indicator for investors [6] - Research indicates that stocks with Zacks Rank 1 and 2 significantly outperform the S&P 500 [6] Stock Performance - The stock has gained 12.3% over the past four weeks, driven by solid estimate revisions, suggesting potential for further price increases [7]

Core Viewpoint - KE Holdings Inc. (BEKE) has seen a 12.3% increase in share price over the past four weeks, closing at $16.66, with a potential upside indicated by Wall Street analysts' mean price target of $21.23, suggesting a 27.4% increase from the current price [1] Price Targets and Analyst Consensus - The mean price target consists of eight short-term estimates with a standard deviation of $3.45, indicating variability among analysts [1] - The lowest estimate is $17, suggesting a 2% increase, while the highest estimate predicts a 68.1% surge to $28 [1] - A low standard deviation indicates a high degree of agreement among analysts regarding the stock's price movement direction and magnitude [4] Earnings Estimates and Analyst Optimism - Analysts have shown increasing optimism about BEKE's earnings prospects, as evidenced by a 6.5% increase in the Zacks Consensus Estimate for the current year, with two estimates revised higher and no negative revisions [5] - BEKE holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimate factors, indicating strong potential for upside [5] Caution on Price Targets - While price targets are commonly used by investors, they can often mislead, as empirical research shows that they rarely indicate actual stock price movements [3] - Analysts may set overly optimistic price targets due to business incentives, which can inflate expectations [3]

Investment Rating - The investment rating for the company is "Buy" (maintained) [2] Core Views - The report highlights that intensive real estate policies are stabilizing the main business, while new business expansions are expected to drive secondary growth [6] - The company is experiencing pressure on property transaction growth, leading to a downward revision of non-GAAP net profit forecasts for 2024-2026 to 7.92 billion, 9.92 billion, and 11.27 billion CNY respectively, with corresponding year-on-year growth rates of -19.3%, +25.3%, and +13.7% [6] - The current stock price of 43.9 HKD corresponds to a price-to-earnings ratio of 18.1, 14.5, and 12.7 for 2024-2026 [6] Summary by Sections Financial Performance - In Q1 2024, the company reported revenue of 16.4 billion CNY, slightly above Bloomberg's consensus estimate of 16.3 billion CNY, driven by better-than-expected performance in the existing housing transaction segment [7] - Non-GAAP net profit for Q1 2024 was 1.39 billion CNY, exceeding expectations of 1.03 billion CNY, primarily due to better cost management [7] - The existing housing GTV (Gross Transaction Value) declined by 35.8% year-on-year, while revenue fell by 37.6% [7] Business Segments - The home decoration and furnishing segment saw revenue growth of 71% year-on-year, reaching 2.4 billion CNY, with 43% of the contracts in 2023 coming from this segment [7] - The rental business generated 2.6 billion CNY in revenue, marking a 189% increase year-on-year, with managed rental units exceeding 240,000 [7] Market Outlook - The company is actively expanding its store network and franchise brands to enhance market share, with a focus on improving service quality in the home decoration and rental businesses [8] - The report anticipates that the second-hand housing market transaction volume will stabilize in the short term, with a 14% year-on-year increase in transaction units in April 2024 [8] - The new business segments are expected to continue their rapid expansion, contributing to overall growth [8]

Financial Performance - Gross transaction value (GTV) decreased by 35.2% year-over-year to RMB629.9 billion (US$87.2 billion) in Q1 2024, with existing home transactions down 31.8% and new home transactions down 45.4%[3]. - Net revenues fell by 19.2% year-over-year to RMB16.4 billion (US$2.3 billion), primarily due to declines in existing and new home transaction services[5][16]. - Net income was RMB432 million (US$60 million), while adjusted net income reached RMB1,392 million (US$193 million)[5][13]. - Total net revenues for the three months ended March 31, 2024, were RMB 16,377,314, a decrease of 19.0% compared to RMB 20,278,080 for the same period in 2023[68]. - Net income attributable to KE Holdings Inc. was RMB 431,774 for the three months ended March 31, 2024, a decrease of 84.3% from RMB 2,746,844 in the prior year[71]. - Adjusted net income for the three months ended March 31, 2024, was RMB 1,392,217, down from RMB 3,561,263 in the same period of 2023[76]. - The company reported a total comprehensive income of RMB 493,788 for the three months ended March 31, 2024, compared to RMB 2,424,671 in the previous year[71]. Revenue Breakdown - Revenue from home renovation and furnishing surged by 71.1% year-over-year to RMB2.4 billion (US$0.3 billion), driven by increased orders and enhanced delivery capabilities[21]. - Revenue from home rental services skyrocketed by 189.3% year-over-year to RMB2.6 billion (US$0.4 billion), attributed to the growth in rental units under the Carefree Rent model[21]. - Existing home transaction services generated RMB 5,577,030 in revenue, down 39.0% from RMB 9,181,199 year-over-year[68]. - Home rental services saw a significant increase in revenue, reaching RMB 2,625,203, up 189.5% from RMB 907,354 in the previous year[68]. - Home renovation and furnishing services saw an increase in net revenues to RMB 2,408,848, up 70.83% from RMB 1,407,931 in the same period of 2023[84]. Expenses and Margins - Total operating expenses increased by 21.9% to RMB4.1 billion (US$0.6 billion) in Q1 2024 from RMB3.4 billion in Q1 2023, driven by a 24.5% increase in general and administrative expenses and a 25.5% increase in sales and marketing expenses[28]. - Gross profit decreased by 35.1% to RMB4.1 billion (US$0.6 billion) in Q1 2024 from RMB6.3 billion in Q1 2023, with a gross margin of 25.2% compared to 31.3% in the same period last year[27]. - Income from operations was RMB12 million (US$2 million) in Q1 2024, down from RMB2,978 million in Q1 2023, resulting in an operating margin of 0.1% compared to 14.7% in the same period last year[31]. - Adjusted income from operations was RMB960 million (US$133 million) in Q1 2024, compared to RMB3,830 million in Q1 2023, with an adjusted operating margin of 5.9% versus 18.9% in the same period last year[32]. Shareholder Returns and Repurchases - The company allocated approximately US$220 million to share repurchases in Q1 2024, emphasizing its commitment to enhancing shareholder returns[14]. - The company has established a share repurchase program allowing for the purchase of up to US$2 billion of its Class A ordinary shares and/or ADSs until August 31, 2024, with approximately 76.6 million ADSs purchased for a total consideration of approximately US$1,129.8 million[44]. Cash and Assets - As of March 31, 2024, the combined balance of cash, cash equivalents, restricted cash, and short-term investments amounted to RMB60.8 billion (US$8.4 billion)[39]. - The company's cash and cash equivalents decreased to RMB 17,845,299 thousand from RMB 19,634,716 thousand over the same period[59]. - KE Holdings Inc. reported a decrease in total shareholders' equity to RMB 69,124,976 thousand as of March 31, 2024, down from RMB 72,201,105 thousand as of December 31, 2023[65]. - The company’s accumulated deficit improved slightly from RMB (5,672,916) thousand to RMB (5,241,142) thousand, indicating a reduction in losses[65]. - The total current assets increased to RMB 70,543,525 thousand as of March 31, 2024, from RMB 69,753,623 thousand as of December 31, 2023, showing a growth of approximately 1.1%[59]. User Engagement - Mobile monthly active users (MAU) averaged 47.7 million in Q1 2024, up from 45.4 million in the same period of 2023[5]. - The weighted average number of ordinary shares used in computing net income per share, basic and diluted, was 3,439,606,429 for the three months ended March 31, 2024[74]. Foreign Currency and Cash Flow - The company experienced a foreign currency exchange loss of RMB 17,748 for the three months ended March 31, 2024, compared to a gain of RMB 34,707 in the previous year[68]. - The company experienced a net cash used in operating activities of RMB 915,276 for the three months ended March 31, 2024, compared to a net cash provided by operating activities of RMB 7,627,833 in the same period of 2023[81]. - KE Holdings Inc. had cash, cash equivalents, and restricted cash of RMB 24,783,312 at the end of the period on March 31, 2024, down from RMB 38,454,355 at the end of the same period in 2023[81].

Investment Rating - The report maintains a "Buy" rating for Ke Holdings with a target price adjusted to $22.00 from the previous $23.00, reflecting a potential upside of 16.6% from the current price of $18.87 [2][3]. Core Insights - The report highlights a rebound in sentiment and a gradual recovery in the fundamentals of Ke Holdings, despite a 19% year-over-year decline in revenue to RMB 16.4 billion in Q1 2024. This decline was less severe than expected, aided by stronger-than-anticipated growth in new business revenues [2][6]. - The existing home transaction (EHT) gross transaction value (GTV) fell by 32% year-over-year to RMB 453 billion, while new home transaction (NHT) GTV dropped 45% to RMB 152 billion. However, the report anticipates a recovery in GTV starting in Q2 2024, driven by supportive policies [2][6]. - New business segments, particularly home renovation and furniture, showed significant growth, with revenues reaching RMB 2.4 billion in Q1 2024, a 71% increase year-over-year. The management expects operational efficiency to improve in 2024, leading to a reduction in net loss margins from -10% in 2023 to -5% in 2024 [2][6]. Financial Summary - For FY24E, total revenue is projected to be RMB 90.2 billion, reflecting a 15.9% year-over-year growth. Adjusted net profit is expected to be RMB 9.4 billion, with a decrease of 13.1% compared to the previous year [7][9]. - The report outlines a gradual improvement in profitability metrics, with gross profit margins expected to stabilize around 26.1% in FY24E, while operating profit margins are projected at 5.6% [9][10]. - The company has committed to enhancing shareholder returns, having allocated $220 million for stock buybacks in Q1 2024, representing approximately 1% of its market capitalization [2][6]. Market Outlook - The report suggests that recent policy changes regarding down payment ratios and mortgage rates may stimulate real estate sales, although challenges remain due to high housing inventory and a long-term demographic outlook that may not support significant price recovery [2][6]. - The anticipated total GMV for Ke Holdings in Q2 2024 is projected at RMB 79.6 billion, with a 2% year-over-year increase, and total revenue expected to reach RMB 21.5 billion, a 10% increase [2][6].