According to Zhitung Finance APP, First Shanghai released a research report maintaining a "buy" rating on ke holdings-W (02423), remaining bullish on the company's stable development in the "integrated" business and the improvement of industry penetration rate, as well as the ability of the "three wings" business to consolidate the company's resilience in the post-cycle of real estate. It is expected that the company's adjusted net income for the next three years will be 8 billion, 9.6 billion and 10.9 billion yuan, with a target price of 66.9 Hong Kong dollars.

Looking ahead to the fourth quarter, benefitting from policies regarding real estate crediting adjustments, transaction tax adjustments, and the easing of purchase restrictions in first-tier cities implemented since the end of September, the company's overall transaction volume is expected to see significant growth, while driving the profit margin recovery of the company's "integrated" business. The company has solid cash reserves and actively returns value to shareholders. Since the buyback project was initiated in September 2022, the cumulative buyback amount is approximately 1.49 billion dollars, with the number of shares bought back accounting for about 8.1% of the total capital issued before the buyback project started.

First Shanghai's main points are as follows:

Adjusted net income for Q3 2024 is 1.78 billion yuan, a year-on-year decrease of 18%.

In Q3 2024, the company's total transaction volume was 736.8 billion yuan, a year-on-year increase of 12.5%. The period recorded net income of 22.6 billion yuan, a year-on-year increase of 26.8%. The gross margin for the period was 22.7%, a year-on-year decrease of 4.7 percentage points, mainly due to the increase in fixed salary costs leading to a decline in the profit margin contributed by existing property and a decrease in the proportion of income from high-margin existing property business. During the period, overall operating expenses increased by 11.0% year-on-year due to increased marketing expenses for home decoration and furniture business and increased R&D expenses. Adjusted net income for the period was 1.78 billion yuan, a year-on-year decrease of 18%.

The profit margin contributed by existing property business has declined, but the performance of new property business has exceeded expectations.

In Q3 2024, the company's existing property transaction volume was 477.8 billion yuan, a year-on-year increase of 8.8%, achieving net income of 6.2 billion yuan, unchanged year-on-year, with revenue growth rate lower than the transaction volume growth rate mainly due to the increase in the proportion of non-Lianjia transactions. The profit margin contribution was 41%, down 7.7 percentage points year-on-year, mainly due to the increase in the number of Lianjia agents and improvements in benefits driving fixed costs up. The transaction volume for new property was 227.6 billion yuan, a year-on-year increase of 18.4%, significantly outperforming the sales growth rate of the top 100 real estate companies in the same period according to CR. It achieved net income of 7.7 billion yuan, a year-on-year increase of 30.9%. The revenue growth rate exceeded the transaction volume growth rate mainly due to the improvement in monetization rate. During the period, the transaction fee rate for new property business was 3.4%, setting a new historical high. The proportion of commission income from state-owned developers rose to 58%, while the proportion of fast commission accounts for 44%. The accounts receivable turnover days for new property business stood at 47 days, maintaining a low level, reflecting the company’s excellent risk management.

The revenue from home decoration and house rental business increased by 62.0% year-on-year, accounting for a historical high of 35.8% of total revenue:

During the period, the company's home decoration business trade volume was 4.1 billion yuan, an increase of 24.6% year-on-year. Revenue was 4.2 billion yuan, a year-on-year increase of 32.6%, mainly due to the customer acquisition and conversion effects from one track driving order increases, increased contributions from new retail business, and shortened delivery cycles. The revenue from house rental business was 3.9 billion yuan, a year-on-year increase of 118.4%, with the worry-free rental business expanding to 360,000 units. The revenue from non-property transaction service business reached a historical high, accounting for 38.3% of total revenue, increasing by 6.8 percentage points year-on-year, with the revenue share from home decoration and rental business increasing by 7.7 percentage points to 35.8%. The diversified business supports the company's long-term stable revenue growth. The contribution profit margins from home decoration and house rental businesses were 31.2% and 4.4%, respectively, increasing by 2 percentage points and 1.3 percentage points year-on-year.