Ke Holdings：贝壳（BEKE）：1Q25 results beat, but moderate outlook guidance raised concerns-20250516

Investment Rating - The report maintains a "BUY" rating for Ke Holdings (BEKE US) with a target price of US$24.60, down from the previous target of US$26.30, indicating a potential upside of 21.6% from the current price of US$20.23 [1][3][20]. Core Insights - Ke Holdings reported 1Q25 results that exceeded expectations, with revenue rising 42% year-over-year to RMB 23.3 billion, driven by new home transactions (+64% YoY) and emerging business (+46% YoY). Non-GAAP net profit was RMB 1.4 billion, flat YoY, surpassing estimates by 22% and 30% [1][2]. - The company's guidance for 2Q25 and FY25 raised concerns, projecting a non-GAAP net profit of approximately RMB 7.3 billion for FY25, which is below market expectations of RMB 8 billion. This cautious outlook reflects uncertainty regarding the effectiveness of property policy support [1][2][6]. - The home renovation business achieved a significant milestone, with contribution margins reaching an all-time high of 32.6% in 1Q25, driven by procurement optimization that reduced raw material prices by about 20% [1][5]. Financial Performance - For FY25, revenue is estimated at RMB 108.7 billion, representing a 16.3% growth compared to FY24. The adjusted net profit is projected to be RMB 7.3 billion, reflecting a slight increase of 1.2% YoY [2][7]. - The report indicates a decline in non-GAAP net profit margin to 6.0% in 1Q25 from 8.5% in 1Q24, attributed to margin pressures in the existing home business and the exit from high-margin collaborations [1][5][6]. - The company’s total market capitalization is approximately US$23.93 billion, with an average turnover of US$141.3 million over the past three months [3][4]. Valuation Metrics - The target price of US$24.60 implies a price-to-earnings (P/E) ratio of 28.5x for 2025E non-GAAP earnings [1][10]. - The SOTP (Sum of the Parts) valuation indicates a total valuation of RMB 207.73 billion for Ke Holdings, with the core business valued at RMB 199.73 billion and Shengdu at RMB 8 billion [10]. Share Performance - The stock has shown a 4.6% increase over the past month, although it has underperformed relative to the market by 8.1% [5]. - The 52-week high and low for the stock are US$25.80 and US$13.23, respectively [3]. Shareholding Structure - The major shareholders include Propitious Global with a 23.3% stake and Tencent Mobility with a 10.0% stake [4].