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机构：中信证券
研究员：ZHANG Quanguo/CHEN Cong/XU Yingbo/LIAO Yuan
The revenue and profit of Ke Holdings （Beike） declined significantly in 1Q22, and we estimate that the Company will experience a substantial loss in 2Q22. However, the pandemic resurgence in Beijing and Shanghai, as well as the most dramatic restructuring of the real estate development segment over the past two decades could all be one-off factors that may be fully reflected in the 2Q22 results. After 3Q22, we expect that the second-hand housing market in core cities will recover faster than the new housing market, new home sales will rely more on channels, Beike's gross transaction value （GTV）， revenue and profitability will improve, and its home renovation business revenue will also increase. We believe that Beike's repurchase is not only the best option for cash utilization now, but also happens at a time of an obvious improvement in the operating environment.
Abstract:
Revenue declined YoY as the industry hit the bottom. In 1Q22, Beike achieved revenue of Rmb12.5bn （-39.4% YoY） and an adjusted net profit of Rmb30mn. The revenue declined as the real estate market has been in a significant downturn since 2H21. In the meantime, the Company expects that the revenue in 2Q22 will be Rmb10bn-10.5bn, with a YoY decrease of 56.6% to 58.6%, which we believe could be caused by the impact of the pandemic on store operations in Beijing and Shanghai in 2Q22.
Existing home sales contributed to an increase in profit margin. In 1Q22, Beike achieved GTV of Rmb374.1bn （-44.5% YoY） and revenue of Rmb6.2bn （-39.7% YoY） from existing home transactions. The profit margin of existing home transactions increased from 28.4% in 3Q21 to 33.7% in 4Q21 and 37.8% in 1Q22. In 1Q22, Beike achieved GTV of Rmb192.7bn （-43.9% YoY） in new home sales. However, the receivables fell sharply by 25% from the beginning of the year, reaching Rmb7bn, a 49% drop from the peak in 1H21. This shows that Beike is customer-oriented （rather than project-oriented） and is relatively competitive during market adjustments.
A substantial loss is likely in 2Q22, but could be one-off. We believe that Beike may experience a larger loss in 2Q22, dragging down the full-year performance significantly （but still able to achieve positive adjusted profits）。 We believe the loss is the result of a combination of one-off factors. First, the two super metropolises of Beijing and Shanghai experienced different degrees of static management in 2Q22. During the static management period, the transaction volume was far worse than that during normal cyclical adjustments, while the cost of rent and other costs did not drop significantly. However, the long static management under the pandemic is unlikely to recur. Second, the most serious credit risk event occurred in the development segment over the past two decades, and many private enterprises with a national presence have experienced debt rollovers or defaults, which was never seen during 2008-2020. Therefore, Beike may still suffer significant loss provisions in 2Q22. But we firmly believe that these two factors are one-off factors, not cyclical, even from a decade-long perspective.
Policies have driven market recovery, and new business exploration has achieved initial results. We believe that this round of real estate cycle not only has historical common features such as lower interest rates, lower down payments, and loosening of purchase restrictions, but also has individual characteristics such as that the market is concerned about delivery issues, that second-hand housing transactions are stronger than new home sales, and that new home sales rely more on channels. We believe that with the initial control of the pandemic and the effect of policies, Beike's revenue will rebound significantly from 3Q22 onward. The Company still had 42,994 active stores at the end of Mar, down just 13% from its all-time high. The key business personnel have been retained, the competitiveness of the agent cooperation network （ACN） system remains, and the Company has obvious earnings elasticity during the market recovery period. In addition, Beike chooses to crack the most difficult part of the business by tapping into integrated whole-house decoration services rather than opting for the easier way of relying on platform traffic and trying partial home renovation or selling single products （like most other real estate service companies do）。 We predict that although Beike's second growth curve is built with large initial investments （including M&As） and small short-term profits, it will likely contribute to rapid top-line growth starting from 2022.
Potential risks: Since the second quarter, the cost of many of Beike's stores has been relatively fixed while revenue has fallen significantly, and the recovery time of home transaction activities remains uncertain due to the impact of the pandemic. The Company's home renovation business may fail to make a lot of profits in the short term.