BEKE(US:BEKE) HTSC·2025-05-16 07:45Investment Rating - The report maintains a "Buy" rating for the company with a target price of $27.02 [6][22]. Core Insights - The company reported a significant revenue increase of 42% year-on-year to RMB 23.3 billion in Q1, exceeding consensus expectations by 4% [1][11]. - The growth in revenue was driven by substantial increases in the new home and renovation segments, with new home revenue rising 64% and renovation revenue increasing 22% year-on-year [1][2]. - The company anticipates that the renovation business will achieve breakeven profitability in Q2, supported by improved operational efficiency and AI tools [2][12]. Financial Performance - In Q1, the gross profit margin decreased by 4.5 percentage points to 20.7%, primarily due to a rise in fixed salary costs [1][4]. - Adjusted net profit for Q1 was RMB 1.4 billion, reflecting a slight year-on-year increase of 0.1% [1][4]. - The company expects adjusted net profits to rise to RMB 82 billion, RMB 99 billion, and RMB 119 billion for the years 2025, 2026, and 2027 respectively, driven by operational leverage and AI efficiency improvements [4][18]. Business Segments - The existing home segment saw a revenue increase of 20% year-on-year, with a gross transaction value (GTV) growth of 28% [2][11]. - The new home segment outperformed expectations with a GTV increase of 53%, while the renovation segment's GTV also showed strong growth [2][11]. - The company is leveraging AI technology to enhance efficiency across its operations, with significant improvements in transaction conversion rates reported [3][13]. Market Position - The company continues to outperform the broader real estate market, with its GTV growth of 34% in Q1 compared to the national average of 16% for existing homes [11][12]. - The report highlights the company's expanding market share in the existing home sector, supported by improved agent productivity and AI-driven tools [3][11]. Valuation - The target price of $27.02 corresponds to a 27x price-to-earnings (PE) ratio for 2025, which is above the industry average of 24.7x [4][22]. - The report indicates that the company's valuation premium is justified by its superior growth prospects compared to the overall real estate market [22][23].