Multiple factors increased current profit, and the performance turned loss into profit. Maintaining the “increase in holdings” rating, I love my family released the 2024 semi-annual performance forecast. The company expects to turn loss into profit in the 2024 semi-year, and is expected to achieve net profit of +24 million yuan to +35 million yuan, compared to -48.8106 million yuan for the same period in 2023. Net profit after deducting non-recurring profit and loss was -30 million yuan to -49 million yuan, compared to -57.9124 million yuan for the same period in 2023. Basic earnings per share were 0.0102 yuan/share — 0.0149 yuan/share, compared to -0.0207 yuan/share for the same period in 2023. While the company focused on reducing costs and increasing efficiency in the first half of the year, brokerage business turnover showed a good recovery trend. We therefore maintain profit forecasts. We expect the company's net profit to be 0.12, 0.21, and 0.33 billion yuan respectively in 2024-2026, and EPS is 0.05, 0.09, and 0.14 yuan respectively. The PE valuation corresponding to the current stock price is 48.1, 27.2, and 17.6 times, respectively, maintaining the “increase in holdings” rating.

Deeply involved in the rise in second-hand housing transactions in cities, driving a high half-year performance increase. Since the second quarter of 2024, domestic real estate policies have continued to be strengthened, and second-hand housing transactions in core cities where the company does business (such as Beijing, Hangzhou, Shanghai, etc.) have shown a good recovery trend. Beijing, Hangzhou, and Shanghai introduced property market relaxation policies on June 26, May 27, and May 9, respectively. According to local official data, the number of second-hand housing units sold in Beijing, Hangzhou, and Shanghai in May was -0.5%, +1.7%, and +6.3%, respectively. The number of second-hand housing units sold in June was +9.9%, +17.7%, and +44.0%, respectively. June all recorded the highest monthly second-hand housing transaction level in a year. Among them, Shanghai also set the highest monthly transaction record since June 2021 with over 0.026 million units. Thanks to improvements in second-hand housing data in various regions, it has made a positive contribution to the company's performance.

Cost control and efficiency increase profit levels. Profitability is expected to gradually improve. In addition to improving brokerage business, the company has raised profit levels through multiple measures, including: (1) The company continues to strictly control various expenses to further reduce operating costs. The 2024Q1 company's expense ratio for the period was 20.65%, down 1.05 percentage points from the end of 2023; (2) the company sold assets related to the New Era Hotel in Kunming, Yunnan in the first quarter, with a total transaction price of 0.168 billion yuan, which is expected to contribute about 80 million yuan to 2024H1 net profit; (3) 2024H1 confirmed the share payment fee for the second phase of the employee shareholding plan was 8.85 million yuan (2023H1 was 22.13 million yuan) As the ban on employee shareholding is lifted, share payment fees will gradually be reduced.

Risk warning: The sales scale of the industry fell short of expectations, and the expansion of Xiang Yu's business fell short of expectations.