BEIJING, Feb. 28, 2025 (GLOBE NEWSWIRE) -- KE Holdings Inc. ("Beike" or the "Company") (NYSE:BEKE), a leading integrated online and offline platform for housing transactions and services, is pleased to announce today a significant upgrade in its Environmental, Social and Governance (ESG) rating by Morgan Stanley Capital International ("MSCI") from "BBB" to "A." This achievement marks the second consecutive year of improvement for Beike, reflecting its steadfast commitment to excellence in ESG practices with ...

Core Insights - KE Holdings Inc. ("Beike") has achieved a significant upgrade in its ESG rating from "BBB" to "A" by MSCI, marking the second consecutive year of improvement [1][2] - The company scored 7.2 in the ESG social category, significantly higher than the global industry average of 4.3, due to its focus on human capital development and data security [2][3] - Beike is committed to creating long-term sustainable value in China's residential services industry through infrastructure transformation and technology-driven innovation [4][5] ESG Performance - Beike's ESG environmental category score increased by 1.8 points from the previous year, reflecting its initiatives in eco-friendly practices, such as the "Lianjia Green Store Standard" [2] - The company's efforts in vocational training and structured career paths for service providers have contributed to its strong performance in the social category [2] Company Overview - KE Holdings Inc. operates as an integrated online and offline platform for housing transactions and services, including home sales, rentals, and renovations [5] - The company is known for its leading real estate brokerage brand, Lianjia, which has over 23 years of operational experience [5]

Group 1 - The core viewpoint is a bullish outlook on KE Holdings Inc. (NYSE: BEKE) as signs of stabilization emerge in China's property market [1] - The analysis acknowledges that while the housing market in China is showing some stabilization, it is expected to remain challenging due to primary market conditions [1] Group 2 - Astrada Advisors specializes in delivering actionable recommendations that enhance portfolio performance and uncover alpha opportunities, backed by a strong track record in investment research [1] - The firm has expertise across technology, media, internet, and consumer sectors in North America and Asia, allowing it to identify high-potential investments and navigate complex industries [1] - Astrada Advisors integrates rigorous fundamental analysis with data-driven insights to provide a nuanced understanding of key trends, growth drivers, and competitive landscapes [1]

Company Overview - KE Holdings Inc. (BEKE) shares increased by 5.4% to close at $20.52, with notable trading volume compared to typical sessions, and a total gain of 17.5% over the past four weeks [1][2] Growth Drivers - The company is benefiting from the recovery of China's real estate market, increased transaction volumes, strategic expansion of its agent network, technology-driven efficiencies, supportive government policies, and improved corporate governance [2] Earnings Expectations - BEKE is projected to report quarterly earnings of $0.31 per share, reflecting a year-over-year increase of 55%. Revenue is expected to reach $4.01 billion, which is a 41% increase from the same quarter last year [2] Stock Performance Insights - Trends in earnings estimate revisions are strongly correlated with near-term stock price movements, indicating that the current earnings growth expectations may signal potential strength in the stock [3] Consensus and Market Position - The consensus EPS estimate for BEKE has remained unchanged over the last 30 days, suggesting that the stock's price may not continue to rise without changes in earnings estimates [4] - KE Holdings holds a Zacks Rank of 3 (Hold), indicating a neutral outlook in the market [4]

Investment Rating and Strategy - The analyst gives a hold rating for KE Holdings (NYSE: BEKE) due to the need for more evidence that the current demand improvement trend is sustainable [1] - The analyst seeks growth acceleration supported by improving macroeconomic demand before reconsidering the rating [1] Analyst Background and Approach - The analyst is an individual investor managing personal capital accumulated over the years [1] - The analyst employs a diversified investment approach, including fundamental investing, technical investing, and momentum investing [1] - The analyst uses Seeking Alpha as a platform to track investment ideas and connect with like-minded investors [1] Disclosure and Independence - The analyst has no stock, option, or derivative positions in the mentioned companies and no plans to initiate such positions within the next 72 hours [2] - The article reflects the analyst's personal opinions and is not influenced by compensation or business relationships with the mentioned companies [2]

Investment Rating - The report maintains a "Buy" rating for the company, citing its strong market position and expected growth in adjusted net profit for 2024/2025/2026 [3][6] Core Views - The company benefits from favorable real estate policies, which are expected to drive market recovery and enhance its market share [6] - The company's new home GTV monetization rate reached a historical high in 2024Q3, with a GTV of 227.6 billion yuan, up 18.5% YoY, outperforming the industry [5] - The company's rental service business revenue grew 118% YoY in 2024Q3, driven by the rapid expansion of its "Worry-Free Rent" managed properties [6] - The company has consistently delivered on its shareholder return commitments, with $5.8 billion used for share repurchases in the first three quarters of 2024 [6] Financial Performance - The company's revenue for 2024Q3 was 22.6 billion yuan, up 26.8% YoY, with a gross margin of 22.7%, down 5.2 percentage points QoQ due to increased fixed costs [7] - Adjusted net profit for 2024Q3 was 1.78 billion yuan, down 17.5% YoY, but exceeded Bloomberg consensus expectations [7] - The company's existing home GTV in 2024Q3 was 477.8 billion yuan, up 8.8% YoY, with expectations of significant YoY and QoQ growth in Q4 due to policy tailwinds [7] Business Segments - The home decoration and furnishing segment saw a GTV of 4.1 billion yuan in 2024Q3, up 24.6% YoY, with a contribution margin increase of 2.1 percentage points to 31% [9] - The rental service business contributed a profit margin of 4.4% in 2024Q3, down 1.4 percentage points QoQ due to seasonal cost increases [6] Market Data - The company's closing price was $19.98 per ADS, with a total market capitalization of $24.1 billion and total assets of 1,227.96 billion yuan as of November 21, 2024 [1] - The company's net assets were 707.75 billion yuan, with a net asset per share of 19.5 yuan [1]

Financial Performance - Gross transaction value (GTV) reached RMB736.8 billion (US$105.0 billion), a 12.5% year-over-year increase[4] - Net revenues increased by 26.8% to RMB22.6 billion (US$3.2 billion) compared to RMB17.8 billion in the same period of 2023[5][15] - Net income was RMB1,168 million (US$167 million), with adjusted net income at RMB1,782 million (US$254 million)[6] - Total net revenues for the three months ended September 30, 2024, increased to RMB 22,584,647, representing a 27.5% growth compared to RMB 17,810,705 for the same period in 2023[68] - Net income attributable to KE Holdings Inc. for the three months ended September 30, 2024, was RMB 1,171,073, compared to RMB 1,158,042 for the same period in 2023, reflecting a 1.1% increase[70] - The company reported a total comprehensive income of RMB 1,049,224 for the three months ended September 30, 2024, up from RMB 927,825 in the same quarter of 2023[70] - The net income for the nine months ended September 30, 2024, was RMB 3,500,932, representing a decrease of 32.9% from RMB 5,219,541 in the same period of 2023[75] Revenue Breakdown - Net revenues from home renovation and furnishing grew by 32.6% to RMB4.2 billion (US$0.6 billion) year-over-year[21] - Net revenues from home rental services surged by 118.4% to RMB3.9 billion (US$0.6 billion) compared to RMB1.8 billion in the same period of 2023[22] - Contribution from new home transaction services net revenues increased to RMB 7,726,316 for the three months ended September 30, 2024, compared to RMB 5,901,966 in the same period of 2023, representing a growth of approximately 30.9%[84] - Home renovation and furnishing net revenues for the nine months ended September 30, 2024, reached RMB 10,662,113, up from RMB 7,209,569 in the same period of 2023, indicating a growth of about 48.5%[84] - Home rental services net revenues for the three months ended September 30, 2024, were RMB 3,941,234, significantly higher than RMB 1,804,374 for the same period in 2023, reflecting an increase of approximately 118.5%[84] - Total contribution from existing home transaction services for the three months ended September 30, 2024, was RMB 2,549,227, down from RMB 3,069,848 in the same period of 2023, indicating a decline of approximately 17%[84] Expenses and Costs - Total cost of revenues increased by 35.0% to RMB17.4 billion (US$2.5 billion) in Q3 2024[23] - Gross profit increased by 5.2% to RMB5.1 billion (US$0.7 billion) in Q3 2024, with a gross margin of 22.7%, down from 27.4% in Q3 2023[30] - Total operating expenses rose by 11.0% to RMB4.4 billion (US$0.6 billion) in Q3 2024, with sales and marketing expenses increasing by 18.6% to RMB1.9 billion (US$0.3 billion)[32][33] - Research and development expenses increased by 21.5% to RMB573 million (US$82 million) in Q3 2024, driven by higher headcount and technical service costs[34] - Operating expenses for the three months ended September 30, 2024, totaled RMB 4,407,769, an increase from RMB 3,969,722 in the same period last year[68] Cash and Assets - As of September 30, 2024, the combined balance of cash, cash equivalents, restricted cash, and short-term investments was RMB59.5 billion (US$8.5 billion)[45] - Cash and cash equivalents were reported at RMB 9,576,948 as of September 30, 2024, a decrease from RMB 19,634,716 as of December 31, 2023[64] - Short-term investments increased significantly to RMB 43,654,035 as of September 30, 2024, up from RMB 34,257,958 as of December 31, 2023, representing a growth of approximately 27%[64] - The company reported a net decrease in cash and cash equivalents of RMB 1,706,229 for the three months ended September 30, 2024[82] Shareholder Information - The company allocated approximately US$200 million to share repurchases in Q3 2024[14] - The company has repurchased approximately 102.2 million ADSs (representing approximately 306.5 million Class A ordinary shares) for a total consideration of approximately US$1,493.4 million under its share repurchase program[46] - Basic and diluted net income per ADS attributable to KE Holdings Inc.'s ordinary shareholders were RMB1.04 (US$0.15) and RMB1.00 (US$0.14) in Q3 2024, compared to RMB0.99 and RMB0.97 in Q3 2023[41] - The weighted average number of ADS used in computing net income per ADS, diluted, for the three months ended September 30, 2024, was 1,167,050,588[72] Liabilities and Equity - Current liabilities increased to RMB 43,147,206 as of September 30, 2024, compared to RMB 39,523,983 as of December 31, 2023, reflecting a growth of approximately 6.5%[65] - Total shareholders' equity decreased to RMB 70,893,663 as of September 30, 2024, down from RMB 72,201,105 as of December 31, 2023, indicating a decline of about 1.8%[66] - Total non-current liabilities increased to RMB 8,754,843 as of September 30, 2024, from RMB 8,606,843 as of December 31, 2023, marking an increase of approximately 1.7%[65] - The company’s accumulated deficit improved to RMB (2,178,008) as of September 30, 2024, from RMB (5,672,916) as of December 31, 2023, showing a significant reduction in losses[66]

Financial Data and Key Metrics Changes - In Q2 2024, total GTV reached RMB 839 billion, up 7.5% year-over-year, while net revenues were RMB 23.4 billion, representing a year-over-year increase of 19.9% [9][10] - Gross margin increased by 0.5 percentage points year-over-year to 27.9%, and GAAP net income reached RMB 1.9 billion, rising by 46.2% year-over-year [9][14] - Non-GAAP net income grew by 13.9% year-over-year to RMB 2.69 billion, exceeding market consensus [9][10] Business Line Data and Key Metrics Changes - Revenue from existing home transactions reached RMB 7.3 billion, up 14.3% year-over-year, with PTV at RMB 570.7 billion, increasing 25% year-over-year [10][11] - New home GTV reached RMB 235.3 billion, growing by 20.2% year-over-year and 55% quarter-over-quarter, despite a market downturn [10][11] - Revenue from home renovation and furnishings grew by 85.3% year-over-year, while home rental services revenue surged by 167.1% year-over-year [12][13] Market Data and Key Metrics Changes - The existing home market saw a notable recovery, with transaction volumes in first-tier cities increasing significantly, particularly in June [19][20] - The proportion of national GTV from existing home transactions increased from around 40% last year to approximately 44% in the first half of this year [18][19] - The new home market's year-over-year sales decline narrowed month by month in Q2, but overall performance remained subdued [21][22] Company Strategy and Development Direction - The company is focusing on enhancing operational capabilities, expanding store and agent networks, and improving customer acquisition strategies [4][5] - Emphasis is placed on community-based business models to better meet customer needs and differentiate from traditional residential industry practices [6][7] - The company aims to balance scale, quality, and efficiency while investing in infrastructure and technology to support growth [15][16] Management's Comments on Operating Environment and Future Outlook - Management noted that supportive policies have contributed to market recovery, particularly in first-tier cities, and expressed optimism about the second half of the year [9][18] - The company anticipates challenges in the new home market but remains committed to improving operational efficiency and service quality [21][22] - Management highlighted the importance of adapting to changing customer needs and market dynamics to sustain growth [24][25] Other Important Information - The company has expanded its share repurchase program from US$2 billion to US$3 billion, reflecting a commitment to returning value to shareholders [15][16] - The number of active stores increased by over 2,400, or 6%, and the number of active agents rose by 40,000, indicating growth in operational capacity [3][4] Q&A Session Summary Question: Changes in the real estate market post-policy implementation - Management noted steady month-by-month improvement in the housing market, particularly in existing home transactions, with significant recovery in first-tier cities [18][19] Question: Performance of new home business compared to the industry - The new home business significantly outperformed the industry, with a notable increase in contracted transaction volume and revenue, indicating strong operational capabilities [23][24]

Investment Rating - Maintains a **Buy** rating with a target price raised to **USD 23.3** (previously USD 21.5), reflecting a 15.2% upside from the current price of USD 20.23 [1][5] Core Views - **Revenue Growth**: Q3 2024 revenue increased by 27% YoY to RMB 22.6 billion, slightly below Bloomberg consensus and CICC estimates by 1.5% and 4.7%, respectively, due to weak existing home transaction (EHT) sentiment [1] - **Non-GAAP Net Income**: Q3 2024 non-GAAP net income was RMB 1.8 billion, with a gross margin of 7.9%, in line with expectations, driven by cost control measures [1] - **Market Share Expansion**: Continued market share gains in both existing home transactions (EHT) and new home transactions (NHT), along with successful new business expansion, support a positive outlook [1] - **Q4 2024 Outlook**: EHT and NHT gross transaction value (GTV) are expected to grow over 40% YoY, supported by strong performance in October and November, though additional expenses of RMB 1-1.5 billion may reduce Q4 non-GAAP net income to RMB 220 million [2] Business Performance - **EHT Performance**: EHT GTV grew 9% YoY but declined 17% QoQ due to slowing transaction sentiment post-June peak, with contribution margin dropping 7 percentage points to 41% due to increased fixed costs from agent expansion [2] - **NHT Performance**: NHT GTV grew 18.5% YoY, significantly outperforming the industry's 19% decline, driven by partnerships with state-owned developers [2] - **Policy Impact**: Policy Package 924 and subsequent measures have significantly boosted transaction sentiment, with better sustainability compared to previous policy supports [2] Financial Projections - **Revenue Growth**: FY2024E revenue is projected at RMB 91.0 billion, growing 17.1% YoY, with FY2025E and FY2026E revenues expected at RMB 107.7 billion (+18.3% YoY) and RMB 121.8 billion (+13.0% YoY), respectively [4] - **Non-GAAP Net Profit**: FY2024E non-GAAP net profit is estimated at RMB 8.1 billion, with FY2025E and FY2026E projections of RMB 9.4 billion (+16.7% YoY) and RMB 10.9 billion (+16.0% YoY), respectively [4] - **Valuation Metrics**: The target price implies a 2025E non-GAAP P/E of 21.4x, with core business valued at USD 22.3 per ADS and Shengdu at USD 0.9 per ADS [1][10] Corporate Social Responsibility - **Employee Welfare**: Plans to invest RMB 1.2 billion over the next 3-4 years in employee welfare, including transitioning to fixed salary structures and providing social insurance for brokers, enhancing long-term value [3] Valuation Summary - **DCF Valuation**: The discounted cash flow (DCF) valuation for the core business is RMB 193.7 billion, with a total enterprise value of RMB 201.7 billion, translating to a valuation of USD 23.3 per ADS [9][10] - **SOTP Valuation**: The sum-of-the-parts (SOTP) valuation includes RMB 193.7 billion for the core business and RMB 8.0 billion for Shengdu, resulting in a total valuation of RMB 201.7 billion (USD 28.0 billion) [10]

Investment Rating - The report maintains a "BUY" rating for Ke Holdings (BEKE US) with a target price raised to US$23.30 from US$21.50, indicating a potential upside of 15.2% from the current price of US$20.23 [3]. Core Insights - Ke Holdings reported a revenue increase of 27% year-over-year (YoY) to RMB22.6 billion for Q3 2024, although this was slightly below consensus estimates due to mixed performance in existing home transactions [1]. - The company is expected to benefit from favorable policies in Q4 2024, with guidance indicating over 40% YoY growth in both existing and new home transaction volumes [1]. - The report highlights the company's proactive expansion strategy, which has led to an increase in fixed costs but is expected to enhance long-term value through improved employee compensation and social responsibility initiatives [1]. Financial Performance Summary - Revenue for FY24E is projected at RMB91.0 billion, with a YoY growth of 17.1%, and net profit is expected to be RMB5.19 billion [2]. - Non-GAAP net profit for Q3 2024 was RMB1.8 billion, with a margin of 7.9%, aligning with estimates [1]. - The company anticipates a non-GAAP net profit of RMB2.2 billion for Q4 2024, reflecting a margin of 7.7% [1]. Business Segment Performance - Existing home transaction (EHT) gross transaction value (GTV) rose 9% YoY but fell 17% quarter-over-quarter (QoQ), while new home transaction (NHT) GTV increased by 18.5% YoY, outperforming the industry [1]. - The report notes a divergence in performance between EHT and NHT businesses, with EHT facing challenges due to low transaction sentiment [1]. Future Outlook - The report projects continued growth in both EHT and NHT segments, driven by recent policy support and market share gains [1]. - The company plans to invest RMB1.2 billion over the next 3-4 years in staff welfare and social insurance for agents, which is expected to enhance its long-term value [1].