KE Holdings Inc Reports Mixed Q3 Results Amid Market Shifts

KE Holdings Inc Reports Q3 Financial Results

Shares of KE Holdings Inc BEKE experienced a decline during premarket trading after the company announced its third-quarter earnings for the fiscal year.

Revenue Growth and Challenges

The company's net revenue grew by 26.8% year-over-year, amounting to RMB22.6 billion (approximately $3.2 billion). This growth fell short of the market's expectation of RMB23.46 billion, signifying challenges in meeting investor projections.

User Engagement Decline

A notable point in the report was the decrease in mobile monthly active users (MAU), which averaged 46.2 million during the quarter, down from 49.2 million in the same period a year ago. This decline raises concerns about user engagement and retention strategies moving forward.

Transaction Value Insights

Despite the decline in mobile users, the gross transaction value (GTV) achieved remarkable growth, reaching RMB736.8 billion (around $105.0 billion), an increase of 12.5% from the previous year. This growth was driven by impressive performance across multiple segments.

Home Transactions Review

Within the GTV, existing home transactions grew by 8.8% to RMB477.8 billion (approximately $68.1 billion), while new home transactions saw a larger increase of 18.4% to RMB227.6 billion (about $32.4 billion). These numbers indicate a resilient demand in the housing market, despite external challenges.

Profit Margins and Expense Dynamics

Gross profit for KE Holdings rose by 5.2% year-over-year to RMB5.1 billion (around $0.7 billion), although the gross margin decreased to 22.7% from 27.4%. This decline is attributed to a reduced contribution from higher-margin existing home transaction services and increased fixed compensation costs within this segment.

Adjusted Earnings Performance

Adjusted EBITDA showed a downward trend, declining to RMB2.154 billion ($307 million) compared to RMB2.515 billion during the same quarter last year. Additionally, adjusted earnings per American Depositary Share (ADS) stood at RMB1.53 ($0.22), falling short of the expectations of RMB1.57.

Expansion and Cash Reserves

As of the end of the third quarter, the number of KE Holdings' stores increased to 48,230, a year-over-year growth of 12.1%, with active stores rising 14.6% to 46,857. The company held cash, cash equivalents, restricted cash, and short-term investments totaling RMB59.5 billion ($8.5 billion), providing a strong liquidity position.

Share Repurchase Initiatives

Under its share repurchase program, KE Holdings repurchased approximately 102.2 million ADSs for around $1.49 billion as of September 30, 2024. This initiative reflects the company's commitment to returning value to its shareholders.

Management's Strategic Outlook

Stanley Yongdong Peng, Chairman and CEO, emphasized a focus on growth in housing transaction services while enhancing the ecosystem for store owners. Initiatives like the 'store point-based system' are aimed at improving returns and overall satisfaction.

Market Performance Overview

Tao Xu, CFO, noted that the third quarter experienced a gradual market retreat after a rebound driven by supportive policies. The existing home market remained stable, while new home transactions are still in a recovery phase, highlighting the ongoing adjustments within the industry.

Investment Opportunities

Investors seeking exposure to KE Holdings can consider related funds such as the Global X PropTech ETF PTEC and the KraneShares CSI China Internet ETF KWEB, which mirror the dynamics within the technology and real estate sectors.

Price Movement Observations

In the latest trading session, shares of KE Holdings BEKE reported a decrease of 6.62%, trading at $18.89 in premarket checks.

Frequently Asked Questions

What were KE Holdings' recent revenue figures?

KE Holdings reported a net revenue of RMB22.6 billion in the latest quarter.

How did mobile user activity change for KE Holdings?

The company experienced a decline in mobile monthly active users, averaging 46.2 million.

What is the status of KE Holdings' transaction values?

Gross transaction value rose to RMB736.8 billion, showing growth across segments.

What does the decrease in gross margin indicate?

The decrease was due to reduced contributions from higher-margin services and rising fixed compensation costs.

How does KE Holdings plan to enhance its market position?

The company is focusing on growth and fostering ecosystem satisfaction through new initiatives and governance updates.

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