KE Holdings, a housing transaction and services platform that operates the Lianjia platform in major Chinese cities, has garnered the attention of analysts as China’s property development giants navigate a real estate slump. The company, traded in the U.S. under the ticker “BEKE,” has seen its U.S.-traded shares rise by 38% in 2024, outperforming the Chinese property stock index in Hong Kong. Analysts at Jefferies are optimistic about BEKE’s future prospects, citing government support measures and the company’s expansion into renovations, home rentals, and connecting consumers to home contractors. They rate the stock a buy with a price target of $30, representing a potential upside of nearly 34%.
Chinese President Xi Jinping’s announcement in late September to halt the real estate market decline and promote stable recovery, coupled with the People’s Bank of China’s decision to cut rates for existing mortgage holders, has provided a boost to the real estate sector. Four major Chinese cities, including Beijing, have relaxed home purchase restrictions, leading to an increase in real estate transactions during the recent holiday period. However, Chinese property developers are facing challenges in a market that is shifting towards existing inventory and an aging population. Analysts caution that the recovery of China’s property market may be prolonged, despite potential fiscal support.
Bank of America Securities analysts suggest that home prices could decline by another 10% before stabilizing, while an expert from a large property agency chain predicts a similar trend. KE Holdings, with its significant market share in existing and new home brokerage channels in China, is viewed as a major player in the industry. BofA Securities raised its price target for the company to $24, highlighting concerns about sustainable growth but maintaining a neutral rating. They point out that future stock market changes could potentially impact the stock in the near term.
Goldman Sachs analysts see KE Holdings as a clear beneficiary of recent policy easing, particularly as the company has a strong presence in major Chinese cities contributing to a significant portion of its gross transaction volume. The company’s average transaction price for existing homes remained relatively stable despite the market conditions, indicating resilience. With net cash reserves of US$10.5 billion as of June 2024, KE Holdings is committed to shareholder return yield through buybacks and dividends. Goldman Sachs has set a price target of 54 Hong Kong dollars ($6.95) and $21 for the company’s U.S.-listed shares, emphasizing the attractive valuation relative to historical levels and strong profit growth outlook.
In conclusion, KE Holdings appears to be well-positioned to capitalize on the recovery of China’s property market, leveraging its market share and diverse range of services. Analysts remain cautiously optimistic about the company’s future, citing potential challenges in the industry and market dynamics. Despite the uncertainties, KE Holdings’ ability to adapt to changing market conditions and government policies may prove beneficial in the long run. Investors are advised to closely monitor developments in the Chinese real estate sector and the performance of companies like KE Holdings to make informed investment decisions.
