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 C1Q24 revenue/non-GAAP NI in-line/35% above consensus and guided a modest revenue growth of 10% YoY in C2Q24</li>
<li>We maintain our view that C1Q24 would be the trough as subsequent improvement, albeit at slower magnitude, should happen from C2Q24</li>
<li>We maintain the stock as BUY rating but lower TP to US$21 to reflect a postponed recovery schedule.</li>
</ul>


KE Holdings (BEKE) reported C1Q24 revenue/non-GAAP NI in-line/35% above consensus and guided a modest revenue growth of 10% YoY in C2Q24
We maintain our view that C1Q24 would be the trough as subsequent improvement, albeit at slower magnitude, should happen from C2Q24
We maintain the stock as BUY rating but lower TP to US$21 to reflect a postponed recovery schedule.


[KE Holdings (BEKE US, BUY, TP US$21) TP Change]: New Stimulus Might Be Needed to Spur the Market

<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

<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

<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

<ul>
<li>Beijing and Shanghai laid out long waited stimulus policies on property market, include 1) lower property down payments ratio;2) lower mortgage loan rate;</li>
<li>3) lower recognition standard for ordinary home. The key is to encourage households to add leverage.</li>
<li>We treat the financial stimulus as one-off positive shock to the home transaction markets in the two cities,  especially benefiting 1Q24 sales for Beike due to...</li>
</ul>


Beijing and Shanghai laid out long waited stimulus policies on property market, include 1) lower property down payments ratio;2) lower mortgage loan rate;
3) lower recognition standard for ordinary home. The key is to encourage households to add leverage.
We treat the financial stimulus as one-off positive shock to the home transaction markets in the two cities,  especially benefiting 1Q24 sales for Beike due to...


[KE Holdings Inc. (BEKE US, BUY, TP US$24.5) TP Change]: Policy Stimulus Drive up near Term Sales

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.

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KE Holdings (BEKE US)