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].

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%[2]. - Net revenues fell by 19.2% year-over-year to RMB16.4 billion (US$2.3 billion) in Q1 2024, primarily due to declines in existing and new home transaction services[9]. - Net income was RMB432 million (US$60 million) in Q1 2024, with adjusted net income at RMB1,392 million (US$193 million)[2]. - Total net revenues for the three months ended March 31, 2024, were RMB 16,377,314, down from RMB 20,278,080 for the same period in 2023, representing a decline of approximately 19%[51]. - The gross profit for the three months ended March 31, 2024, was RMB 4,122,086, compared to RMB 6,349,798 for the same period in 2023, indicating a decrease of about 35%[51]. - KE Holdings Inc. reported a net income of RMB 432,122 for the three months ended March 31, 2024, compared to RMB 2,749,746 for the same period in 2023, reflecting a significant decline[51]. - Adjusted net income for the three months ended March 31, 2024, was RMB 3,561,263 thousand (approximately US$ 192,818 thousand), compared to RMB 2,749,746 thousand in the same period of 2023[59]. Revenue Breakdown - Revenue from home renovation and furnishing increased by 71.1% year-over-year to RMB2.4 billion (US$0.3 billion), driven by synergies with home transaction services[13]. - Revenue from home rental services surged by 189.3% year-over-year to RMB2.6 billion (US$0.4 billion), attributed to the growth of rental units under the Carefree Rent model[14]. - Net revenues from existing home transaction services for the three months ended March 31, 2024, were RMB 9,181,199 thousand, with a contribution of RMB 4,501,720 thousand[66]. - New home transaction services generated net revenues of RMB 8,404,084 thousand, contributing RMB 2,272,348 thousand for the same period[66]. - Home renovation and furnishing services reported net revenues of RMB 1,407,931 thousand, with a contribution of RMB 431,012 thousand[66]. - Home rental services generated net revenues of RMB 907,354 thousand, with a contribution of RMB (81,490) thousand, indicating a loss in this segment[66]. Operating Expenses - 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[19]. - General and administrative expenses rose by 24.5% to RMB2,019 million (US$280 million) in Q1 2024 compared to RMB1,621 million in Q1 2023[20]. - Sales and marketing expenses increased by 25.5% to RMB1,624 million (US$225 million) in Q1 2024 from RMB1,294 million in Q1 2023[20]. Cash and Investments - As of March 31, 2024, the combined balance of cash, cash equivalents, restricted cash, and short-term investments was RMB60.8 billion (US$8.4 billion)[26]. - Cash and cash equivalents decreased to RMB 17,845,299 as of March 31, 2024, from RMB 19,634,716 as of December 31, 2023[45]. - The company’s long-term investments decreased to RMB 20,658,437 as of March 31, 2024, from RMB 23,570,988 as of December 31, 2023[45]. - The company reported a net increase in cash and cash equivalents of RMB 12,860,096 thousand for the three months ended March 31, 2024[64]. Shareholder Returns - The company allocated approximately US$220 million to share repurchases in Q1 2024, aiming to enhance shareholder returns[7]. - 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[29]. - Approximately 76.6 million ADSs (representing about 229.8 million Class A ordinary shares) have been purchased under the share repurchase program for a total consideration of approximately US$1,129.8 million[30]. Strategic Initiatives - The "one body, three wings" strategy is being actively advanced to adapt to the evolving market environment[6]. - The company will separately report the financials of home rental services starting Q1 2024 to enhance understanding of revenue structure and margin trends[27]. Assets and Liabilities - As of March 31, 2024, KE Holdings Inc. reported total assets of RMB 119,021,436, a decrease from RMB 120,331,931 as of December 31, 2023[45]. - Total current liabilities increased to RMB 41,755,435 as of March 31, 2024, from RMB 39,523,983 as of December 31, 2023, representing an increase of approximately 6%[46]. - The company’s total shareholders' equity decreased to RMB 69,124,976 as of March 31, 2024, from RMB 72,201,105 as of December 31, 2023[50].

Investment Rating - Maintain BUY rating for Beike with a target price of US$22.00, down from the previous US$23.00, indicating a potential upside of 16.6% from the current price of US$18.87 [2][3]. Core Insights - Beike reported a 19% year-over-year decline in revenue for Q1 2024, totaling RMB16.4 billion, but this was better than both the forecast and consensus estimates due to strong performance in new business segments [2]. - The company is expected to see growth in Gross Transaction Value (GTV) starting from Q2 2024, driven by supportive policies and a rebound in market sentiment [2]. - Beike's core business continues to gain market share, supported by its established ACN ecosystem, while new business areas like home renovation and rental services are growing rapidly [2]. - The management has committed approximately US$220 million for share repurchase, representing about 1% of the market cap, to enhance shareholder returns [2]. Financial Performance - In Q1 2024, Beike's existing home transaction GTV fell 32% year-over-year to RMB453 billion, while new home transactions dropped 45% to RMB152 billion, compared to a 50% decline for the top 100 developers [2]. - The company generated RMB2.4 billion in revenue from home renovation and furnishing, marking a 71% year-over-year increase [2]. - Forecasts for Q2 2024 include total GTV of RMB796 billion, up 2% year-over-year, and total revenue of RMB21.5 billion, up 10% year-over-year [2]. Earnings Summary - Revenue projections for Beike are set to increase from RMB77.8 billion in FY23 to RMB90.2 billion in FY24, reflecting a year-over-year growth of 15.9% [6]. - Adjusted net profit is expected to reach RMB6.9 billion in FY24, down from RMB10.8 billion in FY23, indicating a decline of 13.1% [6]. - The company anticipates a gradual recovery in profitability, with adjusted net profit margins stabilizing around 10.4% in FY24 [8]. Market Outlook - Recent policy changes regarding down payment ratios and mortgage interest rates are expected to provide a marginal boost to property sales, although the impact may be less significant than in previous downturns [2]. - The overall property market is projected to show positive signs of recovery in the latter half of 2024, supported by demand-side easing and financing policy implementations [5].

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% within the next 6-12 months [1][6]. Core Views - The company's Q1 2024 performance showed a decline in both revenue and profit, with revenue at 16.4 billion yuan, down 19.2% year-on-year, and adjusted net profit at 1.39 billion yuan, down 60.9% year-on-year [1]. - The decrease in revenue is attributed to reduced income from existing and new housing businesses, although growth in home decoration and rental services helped mitigate the overall revenue decline [1]. - The company's gross margin fell by 6.1 percentage points to 25.2%, with gross profit decreasing by 35.1% to 4.1 billion yuan [1]. - The "One Body, Three Wings" strategy is being effectively implemented, with significant growth in home decoration and rental services, which now account for 35.0% of total revenue, up 21.7 percentage points year-on-year [1]. - Despite a challenging market environment, the company expects Non-GAAP net profits to grow from 10.79 billion yuan in 2024 to 11.62 billion yuan in 2026, with respective growth rates of 10.2%, 1.6%, and 6.0% [1]. Summary by Sections Performance Analysis - Q1 2024 revenue was 16.4 billion yuan, down 19.2% year-on-year; adjusted net profit was 1.39 billion yuan, down 60.9% year-on-year; net profit attributable to shareholders was 430 million yuan, down 84.3% year-on-year [1]. - The decline in revenue was primarily due to decreased income from existing and new housing businesses, while home decoration and rental services saw revenue growth [1]. Business Strategy - The company is focusing on its "One Body, Three Wings" strategy, which has led to rapid growth in home decoration and rental services, contributing significantly to overall revenue [1]. - Home decoration GTV reached 3.4 billion yuan, up 26.1% year-on-year, and rental income surged to 2.63 billion yuan, up 189.3% year-on-year [1]. Financial Forecast - The company maintains its profit forecast, expecting Non-GAAP net profits of 10.79 billion yuan in 2024, 10.96 billion yuan in 2025, and 11.62 billion yuan in 2026, with respective growth rates of 10.2%, 1.6%, and 6.0% [1]. - The stock's closing price corresponds to a PE ratio of 15.6x for 2024, 15.4x for 2025, and 14.5x for 2026 [1].

Financial Data and Key Metrics Changes - In Q1 2024, revenue reached RMB 16.4 billion, down from RMB 20.3 billion in the same period last year, representing a year-over-year decline of 19.2% [18] - Gross margin decreased to 25.2% from 31.3% year-over-year [18] - GAAP net income was RMB 432 million, a significant drop from RMB 2.75 billion in Q1 2023 [28] - Non-GAAP net income also fell to RMB 1.39 billion from RMB 3.56 billion year-over-year [28] Business Line Data and Key Metrics Changes - Revenue from existing home transactions was RMB 5.7 billion, down 37.6% year-over-year, with GTV at RMB 453.2 billion, down 31.8% [19] - New home transaction revenue was RMB 4.9 billion, a decline of 41.5% year-over-year, with GTV at RMB 151.8 billion, down 45.4% [21] - Home renovation and furniture business revenue grew by 71.1% year-over-year to RMB 2.4 billion, with contracted sales reaching RMB 3.4 billion, up 26.1% [22] - Home rental services revenue surged by 189.3% year-over-year to RMB 2.6 billion, with over 250,000 units managed [25][63] Market Data and Key Metrics Changes - The overall housing market saw a year-over-year decline in Q1, but some cities experienced transaction volume increases compared to the same period last year [17] - The new home market remains sluggish, with sales from the top 100 developers down nearly 50% year-over-year [21] - Existing home transaction volume on the platform increased by 14% year-over-year in April, indicating a recovery trend [35] Company Strategy and Development Direction - The company is focusing on enhancing the quality and efficiency of its housing transaction business, actively connecting with high-quality brands and agents [46] - A strategic expansion of connected stores is underway, with over 1,000 new stores added, maintaining a high retention rate [46] - The company aims to improve customer acquisition through innovative online content and service models, including live streaming and short videos [40][42] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the existing home market, while acknowledging the ongoing challenges in the new home market [33] - Positive government policies aimed at stimulating demand and reducing inventory are expected to support market recovery [34][56] - The company anticipates improved liquidity in the new home market and a gradual recovery in market confidence [33] Other Important Information - The company has allocated USD 220 million towards share repurchase in Q1 2024, with total cash liquidity reaching RMB 75.6 billion [29] - The company is committed to enhancing shareholder returns and optimizing capital operations despite challenging market conditions [30] Q&A Session Summary Question: Views on recent policies and market outlook - Management noted that despite price adjustments, transaction volumes in the existing home market remain stable, with some cities exceeding expectations [33] - The new home market is sluggish, but policies aimed at inventory reduction are expected to improve liquidity and market sentiment [34] Question: Customer acquisition channels and online traffic efficiency - The company is focusing on building online infrastructure and enhancing customer connection methods through live streaming and short videos [40] - New service models are being developed to better understand and meet customer needs [40] Question: Investments in core home transition business - The company is focused on growth with enhanced quality and efficiency, connecting with more high-quality brands and agents [46] - The number of active stores increased by 1.4% compared to the previous quarter, with a high retention rate for newly connected stores [46] Question: Outlook for new home sales - The new home market remains tough, but the company believes it will show resilience due to improved channel service capabilities and strategic partnerships with developers [50][51] Question: Home replacement policies and overall housing demand - Management views the government’s destocking policies as positive for market sentiment and liquidity, with Beike actively promoting old-for-new models [56][58] Question: Progress in decoration and window home services - The home renovation and furniture business achieved strong growth, with significant improvements in customer acquisition and delivery capabilities [60][62]