2024Q3's adjusted net profit was 1.78 billion yuan, down 18% year on year: the total transaction volume of 2024Q3 was 736.8 billion yuan, up 12.5% year on year. Net revenue of $22.6 billion was recorded during the period, up 26.8% year-on-year. The gross margin for the period was 22.7%, down 4.7 percentage points from the previous year. Mainly due to the increase in fixed remuneration costs, the profit margin contributed by stock housing declined and the share of revenue from the high-margin stock housing business declined. Overall operating expenses increased 11.0% year-on-year during the period due to increased marketing expenses and R&D expenses in the home improvement and home furnishing business.

Adjusted net profit for the period was 1.78 billion yuan, a year-on-year decrease of 18%.

The profit margin contributed by the stock housing business declined, but the performance of the new housing business exceeded expectations: 2024Q3's stock housing transaction volume was 477.8 billion yuan, up 8.8% year on year, achieving net revenue of 6.2 billion yuan, which was the same year on year. The revenue growth rate was lower than that of the transaction volume growth rate mainly due to the increase in the share of non-chain home transactions. The contribution margin was 41%, down 7.7 percentage points from the previous year, mainly due to the increase in fixed costs driven by the increase in the number of chain brokers and improved benefits. The transaction volume of new housing was 227.6 billion yuan, up 18.4% year on year, significantly outperforming the sales growth rate of the top 100 real estate companies in the same period; achieving net revenue of 7.7 billion yuan, up 30.9% year on year. The higher revenue growth rate than the transaction volume growth rate was mainly due to an increase in the monetization rate. During the period, the transaction rate for the new housing business was 3.4%, another record high. Central enterprise developers increased their share of commission revenue to 58%, and fast commissions accounted for 44%. The receivables turnover for the new housing business remained at a low level of 47 days, reflecting the company's excellent risk management.

Revenue from the home improvement and home rental business increased 62.0% year on year, accounting for a record high of 35.8% of total revenue: the company's home improvement business transaction volume during the period was 4.1 billion yuan, up 24.6% year on year.

Achieved revenue of 4.2 billion yuan, an increase of 32.6% over the previous year, mainly due to the customer acquisition and conversion effects of a track leading to an increase in orders, increased contributions to the new retail business, and a shortened delivery cycle. The revenue from the housing rental business was 3.9 billion yuan, an increase of 118.4% over the previous year. Among them, the number of affordable rental business units increased to 0.36 million units. The share of revenue from the non-real estate transaction service business reached a record high of 38.3%, an increase of 6.8 percentage points over the previous year. Among them, the revenue from the home improvement business and the rental business increased 7.7 percentage points to 35.8%, and diversified businesses supported the long-term steady development of the company's revenue. The profit margins contributed by the home improvement and home rental businesses were 31.2% and 4.4%, respectively, up 2 percentage points and 1.3 percentage points, respectively, from the previous year.

The target price is HK$66.9/$25.6, maintaining the purchase rating: Looking ahead to the fourth quarter, benefiting from policies introduced since the end of September on real estate credit adjustments, transaction tax adjustments, and a new round of purchase restrictions in first-tier cities, the company's overall transaction volume is expected to increase significantly, while driving the company's “integrated” business to contribute to the restoration of profit margins. The company has solid cash reserves and actively gives back to shareholders. Since the launch of the repurchase project in September '22, the company's cumulative repurchase amount is about 1.49 billion US dollars, and the number of repurchased shares accounts for about 8.1% of the total share capital issued before the repurchase project began. We are still optimistic about the steady development of the company's “integrated” business and the increase in industry penetration, and the “tri-wing” business to consolidate the company's resilience through the post-real estate cycle. The company's adjusted net profit for the next three years is expected to be 8 billion, 9.6 billion and 10.9 billion dollars, respectively, giving 15 times PE in 2025, plus the target price of 66.9 HKD/25.6 US dollars after holding generalized cash, maintaining the purchase rating.