Beike Likely to Benefit From Strong Demand for Existing Homes, Ongoing Policy Easing

KE Holdings, or Beike, is a leading real estate brokerage company in China with an over 30% share in gross transaction value, or GTV, for existing homes. It charges commissions on housing transactions through self-owned agents and collects service fees on existing-home transactions of connected third-party or franchise realtors. We think Beike has successfully combined the network reach of its online platform with an enhanced offline store experience to retain leadership in a competitive brokerage market. A continuing top-line growth, coupled with improved store efficiency, should translate to stronger operating leverage for Beike as well, in our view. That said, we expect slower turnover for lived-in homes and mounting competition to weigh on its commission rate. As the company cuts fee rates in main cities to ramp up GTV, we foresee a tempered uptick in margins over time.