Beike Earnings: Raising Valuation by 7% on Higher Earnings Projection, Upsized Repurchase Plan

We raise our fair value estimate on narrow-moat KE Holdings, or Beike, to USD 16.00 per ADR (HKD 41.60 per share) from USD 15.00 (HKD 39.00) as second-quarter 2024 revenue and operating profit topped our prior forecasts. The outperformance mainly comes from more resiliency in new home transaction commission income, stronger-than-expected growth in home renovation, furnishing and rental service revenue, as well as better operating leverage. Management reaffirmed that a recovery in domestic homebuying sentiment and cost efficiency improvements could drive up profitability in the near term. As a result, we increase our assumptions for Beike’s 2024 revenue and operating profit by 8% and 36%, respectively.