Guosheng Securities: First initiated Buy rating on BEKE-W (02423), a restructurer of brokerage service formats.

Guosheng Securities released a research report stating that they are initiating coverage on BEKE-W (02423) with a buy rating. As a leading residential service platform in China, Beike has built a strong competitive barrier with its unique ACN cooperation network and extensive "property dictionary" database. The company's market share in both existing and new housing businesses continues to increase, showing superior growth during industry downturns. Leveraging its strong platform ecosystem and efficiency advantages, Beike maintains a dominant position in the real estate transaction service sector. Key points from Guosheng Securities: Performance Born from Lianjia, Beike is the top residential service platform in China. Beike is a leading integrated real estate transaction and service platform in China, with a wide range of business including existing home transactions, new home transactions, home furnishing, home rental, emerging businesses, etc. In 2024, the revenue composition was 30%, 36%, 16%, 15%, 3%, and the profit contribution was 44%, 30%, 16%, 3%, 8% respectively. Since the establishment of Lianjia in Beijing in 2001, the company has accumulated over 24 years of industry operation experience and has grown into a leading enterprise in the real estate brokerage services sector in China. In 2024, the company's total transaction volume reached 3.3 trillion yuan, achieving operating income of 93.5 billion yuan, with a three-year CAGR of 24%. The adjusted net profit attributable to the parent company in 2022-2024 was 2.9 billion, 9.8 billion, and 7.2 billion yuan, respectively. Building competitive barriers with "property dictionary" By constructing the ACN network and "property dictionary" to reshape the industry ecosystem and create competitive barriers with weak replicability. In response to the problem of vicious competition in the traditional brokerage industry, the company has dismantled the complete existing housing transaction process into multiple steps through the construction of the ACN network, allowing cross-brand and cross-store cooperation among brokers, based on the different roles assumed by brokers in transactions for commission distribution, turning brokers from zero-sum games to win-win cooperation and significantly improving transaction efficiency and professionalism of brokers. In response to the issue of false listings in the industry, the company has been accumulating and refining the "property dictionary" since 2008. As of 2024, the number of real housing units recorded in the database has exceeded 289 million, serving as the cornerstone of industry data and laying the foundation for the company's platformization. Since the construction of the ACN network and "property dictionary" requires a lot of time and financial investment, and the larger the scale, the stronger the participant stickiness, it is difficult for competitors to replicate in the short term. Improving total volume of second-hand housing transactions, increasing penetration rate in new housing distribution channels Combined with the expansion of the platform coverage network, the company's GTV achieved superior performance compared to the industry, and its market share continued to increase. (1) Existing home transaction services: the company's total GTV for existing homes in 2023/2024/2025H1 were 2/2.2/1.2 trillion yuan, with year-on-year growth rates of 28.6%/10.8%/13.7%. The market share reached 31.1% in 2024, with a year-on-year increase of 2.5 percentage points. The growth of the existing home business is due to the fact that the real estate industry has entered the era of existing housing, with the center of second-hand housing transactions continuously moving up, laying the market foundation for the company's GTV growth. On the other hand, with its huge network of people and stores and massive source of housing resources, the company continuously attracts new broker brands, accelerates the expansion of non-Lianjia stores, and steadily increases its market share. (2) New home transaction services: the company's GTV for new homes in 2023/2024/2025H1 were 1/0.97/0.49 trillion yuan, with year-on-year growth rates of 6.6%/-3.3%/26%, superior to the national sales growth rates of 18.4%/14.3%/31.8%, with market share increasing to 9.7%/11.4%/12.6% during the same period. The Chinese new home sales market is still in a long downward trend, with developers facing difficulty in selling new homes and pressure from inventory accumulation. Distribution channel distribution has become an important way to sell, and the proportion of cooperation with the company has increased. Meanwhile, the company's information infrastructure and customer resources have enhanced its selling ability, continuously driving GTV growth for new homes to outperform the industry. Rapid expansion of home furnishing business, scale effect lowering procurement costs Brokerage business leads to lower customer acquisition costs than peers and is more likely to achieve profitability. In 2024/2025H1, the company's home furnishing business GTV was 16.9/7.5 billion yuan, with year-on-year growth rates of 27%/16.5%, and profit contribution margins increased to 30.7%/32.3%. With the synergy between the real estate transaction business in customer acquisition and conversion, the company's home furnishing business has grown into a leading player in the industry. Its core advantages lie in precise customer acquisition through the brokerage business, significantly reducing customer acquisition costs; the scale effect lowers material costs through centralized procurement, coupled with operational optimization to improve efficiency, jointly strengthening profitability. In the first half of 2025, the company's home furnishing business achieved profitability at the city level before deducting central expenses. With the increase in business layout density, more cities are expected to achieve profitability in the future. Investment recommendation It is expected that the company's operating income will be 94.6/95.3/100.5 billion yuan in 2025/2026/2027, with year-on-year growth rates of 1.2%/0.8%/5.5%; net profit attributable to the parent company will be 3.71/5.28/6.1 billion yuan, with year-on-year growth rates of -8.7%/42.4%/15.5%. The current stock price corresponds to PE multiples of 37.5/26.3/22.8 for 2024/2025/2026. The target price of the company is calculated to be 61.3 yuan/share using a DCF model, corresponding to a PE multiple of 40.7 times for 2026 performance, with a potential upside of 54.5% from the current stock price. First coverage, giving the company a "buy" rating. Risk factors Risk of macroeconomic policies in the real estate industry, lower-than-expected penetration rate in the new housing market, commission rate policy regulation, errors in assumptions and calculations in the report.