UBS Group released a research report stating that Ke Holdings-W (02423.HK) will have a better quarterly performance than the first quarter due to low base, improved second-hand property transactions, and operational leverage. The bank expects the company's revenue for the second quarter of 2024 to increase by 15% year-on-year to RMB 22.3 billion (the same below), and adjusted net profit to decrease by 4% year-on-year to RMB 2.27 billion. The bank lowered the company's H-share target price from HKD 56 to HKD 52.5, with a "buy" rating.
Due to valuation based on market price, UBS has lowered its adjusted net profit forecast for the full year of 2024 to RMB 8.55 billion, which means a year-on-year decrease of 13%. The bank predicts that Ke Holdings' GTV for second-hand property transactions in the second quarter of 2024 will increase by 20% year-on-year and 21% quarter-on-quarter. Second-hand transaction volume saw a year-on-year increase of 10% and 20% in April and May this year, respectively.
The bank also predicts that due to higher broker penetration, Ke Holdings' GTV for new properties in the second quarter of 2024 will decrease by 20% year-on-year, which is a relatively mild decrease compared to the Top 100 real estate developers' contract sales revenue, which is expected to decrease by 37% in the same quarter of 2024. Due to seasonal factors, the bank expects home renovation revenue in the second quarter of 2024 to increase by 52% year-on-year, higher than the predicted 30% increase in total transaction volume growth.
UBS pointed out that due to a weaker-than-expected second-hand property market in the first half of 2024, the bank has lowered its GTV forecast for second-hand properties from 2024 to 2026 by 8% to 9%, and revenue growth has been lowered by 22% to 26%. Due to weaker-than-expected new property market this year, GTV and revenue forecasts for new properties from 2024 to 2026 have been lowered by 17% to 22% and 7% to 13%, respectively. In terms of home renovation, revenue in 2024 is expected to increase by 43% year-on-year, and by 30% in 2025, as the penetration rate of its renovation business continues to increase in Shenzhen New Land Tool Planning & Architectural Design City. Due to a decrease in revenue growth, the bank has lowered its gross margin forecast for the company from 2024 to 2026 by 1.8 to 2.2 percentage points. Overall, UBS has lowered its adjusted net profit forecast for the company from 2024 to 2026 by 16% to 20%, and the new profit forecast is in line with market expectations.