Core Viewpoint - The controversy surrounding the high executive salaries at Beike has intensified public scrutiny, particularly in light of the company's fluctuating profits and the significant income disparity between executives and employees [1][3][20]. Executive Compensation - Beike's CEO and major shareholder, Peng Yongdong, has a reported salary of 400 million RMB for 2024, while co-founder Shan Yigang earns 299 million RMB, which is significantly higher than typical executive compensation in other companies [1]. - Over the past four years, Peng's salary has increased from 8.478 million RMB to 400 million RMB, while Shan's has risen from 6.853 million RMB to 299 million RMB [1]. - The company's net profit has been volatile, with losses in 2021 and 2022, a recovery in 2023, but a projected decline of 30% in 2024 [1][20]. Public Reaction and Employee Concerns - The public's focus has shifted from executive salaries to the relationship between executive compensation, company profits, and employee wages, especially given that Beike employs nearly 500,000 agents with an average annual income of 74,200 RMB [3][9]. - The disparity in income is stark, with Peng's salary being approximately 5,399 times that of the average agent [3]. - Discussions around labor relations have been reignited, highlighting the need for better employee compensation and welfare [3][9]. Corporate Response - In an attempt to mitigate the backlash, Beike announced that Peng would donate 9 million shares, valued at approximately 440 million RMB, to support healthcare for industry workers and rental assistance for graduates [1][17]. - However, this gesture has not significantly alleviated public concern regarding the income gap and the company's treatment of its employees [3][9]. Business Performance and Strategy - Beike's revenue is primarily derived from five business segments, with the core business of existing home transactions seeing a decline in profit margin from 47.2% to 43.2% in 2024 [20][22]. - The company has been actively seeking new growth avenues, introducing a "one body, three wings" strategy to expand into home decoration and rental services, which contributed approximately 31.6 billion RMB in revenue, a 64.2% increase year-on-year [22]. - Despite these efforts, the overall profitability remains a concern, and the company faces pressure to stabilize both its financial performance and employee morale [22][23].

Investment Rating - The investment rating for the company is "Buy" with a maintained rating for the next six months [6] Core Views - The company achieved a revenue of 93.5 billion yuan in 2024, representing a year-on-year increase of 20.2%, while net profit decreased by 30.8% to 4.078 billion yuan [1] - The company reported a significant increase in Q4 performance, with revenue reaching 31.1 billion yuan, up 54.1% year-on-year, driven by total transaction volume growth and expansion in the rental business [1] - The company initiated a cash dividend plan, proposing a dividend of $0.12 per share, with an expected total payout of approximately $400 million [1] Summary by Sections Revenue and Profitability - In 2024, the company generated a total revenue of 93.5 billion yuan, with a gross profit margin of 24.6%, a decrease of 3.3 percentage points compared to the previous year [1] - The adjusted net profit (non-GAAP) for 2024 was 7.211 billion yuan, down 26.4% year-on-year [1] Business Segments - The existing housing business generated a net income of 28.2 billion yuan in 2024, remaining stable year-on-year, contributing a profit of 12.18 billion yuan with a profit margin of 43.2% [2] - The new housing segment reported a net income of 33.7 billion yuan in 2024, an increase of 10.1% year-on-year, with a profit margin of 24.8% [3] - The non-housing business, including home decoration and rental services, showed significant growth, with home decoration revenue increasing by 36.1% to 14.8 billion yuan and rental income soaring by 135% to 14.3 billion yuan [4] Future Projections - The company expects revenue growth to continue, with projected revenues of 106.7 billion yuan in 2025 and 126.4 billion yuan in 2026, reflecting growth rates of 14.21% and 18.39% respectively [5] - The forecasted non-GAAP net profit for 2025 is 8.221 billion yuan, with a growth rate of -8.82% [5]

Investment Rating - The investment rating for the company is "Buy" with a maintained rating for the next six months [6]. Core Views - The company achieved a revenue of 93.5 billion RMB in 2024, representing a year-on-year growth of 20.2%, while net profit decreased by 30.8% to 4.078 billion RMB [1]. - The fourth quarter of 2024 saw a significant revenue increase of 54.1% year-on-year, reaching 31.1 billion RMB, driven by total transaction volume growth and expansion in the rental business [1][2]. - The company's "One Body Three Wings" strategy is progressing steadily, with notable growth in both existing and new housing transaction businesses [5]. Summary by Sections Financial Performance - In 2024, the company reported a non-GAAP adjusted net profit of 7.211 billion RMB, down 26.4% year-on-year, with a gross margin of 24.6%, a decrease of 3.3 percentage points compared to the previous year [1]. - The fourth quarter of 2024 saw a gross profit of 7.2 billion RMB, a 39.4% increase year-on-year, with a gross margin of 23%, down 2.5 percentage points from the same period last year [1]. Existing Housing Business - By the end of 2024, the number of active stores increased by 18.3% year-on-year to 49,700, and the number of active agents reached 445,000, up 12.1% year-on-year [2]. - The net income from existing housing for the entire year was 28.2 billion RMB, remaining stable year-on-year, contributing a profit of 12.18 billion RMB with a profit margin of 43.2%, down 4.0 percentage points from the previous year [2]. New Housing Business - The new housing segment generated a net income of 33.7 billion RMB in 2024, a year-on-year increase of 10.1%, contributing a profit of 8.35 billion RMB with a profit margin of 24.8%, down 1.8 percentage points from the previous year [3]. - In the fourth quarter of 2024, new housing net income reached 13.1 billion RMB, a 72.7% increase year-on-year, with a gross transaction volume (GTV) of 355.3 billion RMB, up 49.3% year-on-year [3]. Non-Housing Growth Engines - The home decoration business generated 14.8 billion RMB in revenue for 2024, a 36.1% increase year-on-year, with a profit margin of 30.7%, up 1.7 percentage points from the previous year [4]. - The rental business saw a revenue increase of 135% year-on-year to 14.3 billion RMB, with a profit margin of 5%, turning positive from a negative margin in the previous year [4]. - Emerging businesses and others contributed 2.5 billion RMB in revenue, an 8.8% increase year-on-year, primarily due to increased net income from financial services [4].

Investment Rating - The report initiates coverage with a "Buy" rating for the company, setting a target price of HKD 77.9, indicating a potential upside of 21% from the current price of HKD 64.50 [2][4]. Core Insights - The company is recognized as the largest real estate transaction and residential service platform in China, with a comprehensive business model that includes second-hand and new housing transactions, rental services, and home decoration [22][39]. - The company has a strong market presence, with 43,817 stores and 427,700 agents, achieving a total transaction volume of CNY 3.14 trillion in 2023, comprising CNY 1 trillion from new homes and CNY 2.03 trillion from existing homes [22][39]. - The report highlights the company's innovative business model, which includes the ACN network and the "Building Dictionary" to enhance resource control and transaction efficiency, positioning it as a leader in the industry [5][6]. Financial Data and Profit Forecast - Revenue projections show a recovery from CNY 60.67 billion in 2022 to CNY 77.78 billion in 2023, with expected growth to CNY 89.95 billion in 2024 and CNY 95.51 billion in 2025, reflecting a compound annual growth rate (CAGR) of 16% from 2023 to 2024 [3][4]. - The net profit attributable to the parent company is forecasted to rebound from a loss of CNY 1.39 billion in 2022 to a profit of CNY 5.88 billion in 2023, with further growth to CNY 5.73 billion in 2024 and CNY 6.99 billion in 2025 [3][4]. - Earnings per share (EPS) are projected to improve from a loss of CNY 0.39 in 2022 to CNY 1.63 in 2023, remaining stable in 2024 before increasing to CNY 1.99 in 2025 [3][4]. Business Structure and Growth Potential - The company operates under a "One Body, Three Wings" strategy, focusing on real estate transactions while expanding into home decoration, rental services, and the "Beihome" platform, which is expected to drive future growth [4][39]. - The second-hand housing market is identified as a significant growth area, with a market share of 29% in 2023, while the new housing market is anticipated to stabilize with a market share of 10% [4][39]. - The home decoration segment is expected to benefit from increased contract contributions, with the real estate brokerage contributing 43% to the home decoration contract volume in 2023 [4][39]. Market Position and Future Outlook - The company is positioned as a leader in the vast existing housing market, which is projected to enter a new phase of growth as the market shifts towards existing properties [4][39]. - The transition from a direct operation model to a platform-based model is expected to enhance profitability and operational certainty, with future business expansion anticipated beyond transactions to include emerging services [4][39]. - The report emphasizes the company's potential to leverage big data and AI to further explore customer needs and expand its business ecosystem around "people, houses, and money" [4][39].