Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>KE Holdings’ (BEKE) reported C4Q23 revenue 6.2%/7.5% above our est./cons.. Its non-GAAP net income miss our est. by 8.3%, due to bad debt write-off and year-end bonus</li>
<li>Although recovery in new home market remains muddy, we view Beike’s commitment to deliver 5% yield through dividend and stock buyback as investor friendly. </li>
<li>We reiterate BUY rating and maintain TP at US$24/ADS . </li>
</ul>


KE Holdings’ (BEKE) reported C4Q23 revenue 6.2%/7.5% above our est./cons.. Its non-GAAP net income miss our est. by 8.3%, due to bad debt write-off and year-end bonus
Although recovery in new home market remains muddy, we view Beike’s commitment to deliver 5% yield through dividend and stock buyback as investor friendly. 
We reiterate BUY rating and maintain TP at US$24/ADS . 


[KE Holdings (BEKE US, BUY, TP US$24) Review]: Investor Friendly & Best-In-Class…Reiterate BUY

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Beike reported (15 Mar) 4Q23 results: revenue grew 20.6% YoY on a low base to RMB20.2bn, 7% better than Bloomberg consensus estimates, mainly on better-than-expected GTV generation from existing home transactions (EHT), and stronger-than-expected revenue growth in home renovation business.</li><li>NonGAAP net income was RMB1.7bn, 9.5% better than consensus, thanks to betterthan-expected gross profit generation aided by better-than-expected cost optimization.</li><li>For 2023, total revenue grew 28% YoY to RMB77.8bn, and nonGAAP net income was RMB9.8bn, translating into a 12.6% NPM (2022: 4.7%). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Beike reported (15 Mar) 4Q23 results: revenue grew 20.6% YoY on a low base to RMB20.2bn, 7% better than Bloomberg consensus estimates, mainly on better-than-expected GTV generation from existing home transactions (EHT), and stronger-than-expected revenue growth in home renovation business.NonGAAP net income was RMB1.7bn, 9.5% better than consensus, thanks to betterthan-expected gross profit generation aided by better-than-expected cost optimization.For 2023, total revenue grew 28% YoY to RMB77.8bn, and nonGAAP net income was RMB9.8bn, translating into a 12.6% NPM (2022: 4.7%). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Ke Holdings (BEKE US) - Positive Sign Showed Amid Bumpy Recovery

<ul>
<li>We expect KE Holdings (Beike) C4Q23 revenue to be in-line with consensus, with non-GAAP NI 15.6% higher than consensus, mainly due to better existing home sales.</li>
<li>Although overall home living demand remains lukewarm in 2023, the structural substitution from purchasing new home to existing home has accelerated, benefiting Beike, in our view.</li>
<li>We maintain the stock as BUY rating and trim down TP by US$0.5 to US$24.0/ADS to factor in the weak new home sales.</li>
</ul>


We expect KE Holdings (Beike) C4Q23 revenue to be in-line with consensus, with non-GAAP NI 15.6% higher than consensus, mainly due to better existing home sales.
Although overall home living demand remains lukewarm in 2023, the structural substitution from purchasing new home to existing home has accelerated, benefiting Beike, in our view.
We maintain the stock as BUY rating and trim down TP by US$0.5 to US$24.0/ADS to factor in the weak new home sales.


[KE Holdings (BEKE US, BUY, TP US$24) Target Price Change]: Benefiting from Structural Change

Thematic (Sector/Industry)

<ul><li>Relaxation of demand-related policies continued with Beijing further optimizing mortgage loan requirement for divorced people and multiple cities removing the lower limit on mortgage rate for first-home buyers.</li><li>Around 35 cities joined the group of adopting “trade in old house for new” policies through 3 approaches (Figure 1).</li><li>These moves may not bring a surge in property sales but could prevent a sharp decline by marginally boosting demand in our view. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Relaxation of demand-related policies continued with Beijing further optimizing mortgage loan requirement for divorced people and multiple cities removing the lower limit on mortgage rate for first-home buyers.Around 35 cities joined the group of adopting “trade in old house for new” policies through 3 approaches (Figure 1).These moves may not bring a surge in property sales but could prevent a sharp decline by marginally boosting demand in our view. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Property - Weekly highlight: +ve progress on policy implementation, no remarkable recovery on sales

<ul>
<li>A new draft measure suggested Shenzhen is planning to accelerate its shantytown renovation and offer more Affordable Houses to meet demand of low-income groups, mimicking Singapore’s HDB flat policy.</li>
<li>As China’s property market gradually heading to the Singapore model, we expect the existing home market to enlarge and new home market to shrink.</li>
<li>We expect Beike existing home business and renovation business to benefit, while new home business hurts. We maintained the stock as BUY rating and TP at US$24.5/ADS.</li>
</ul>


A new draft measure suggested Shenzhen is planning to accelerate its shantytown renovation and offer more Affordable Houses to meet demand of low-income groups, mimicking Singapore’s HDB flat policy.
As China’s property market gradually heading to the Singapore model, we expect the existing home market to enlarge and new home market to shrink.
We expect Beike existing home business and renovation business to benefit, while new home business hurts. We maintained the stock as BUY rating and TP at US$24.5/ADS.


[KE Holdings(BEKE US, BUY, TP US$24.5) Update]: Singaporization of Real Estate Has LT Plus, ST Minus

China

KE Holdings Inc. operates as an integrated online and offline platform for housing transactions and services. The Company offers existing and new home sales, home rentals, home renovation, real estate financial solutions, and other services. KE Holdings conducts businesses in China.

KE Holdings (BEKE US)