Beike: Initiating Coverage on China’s Leading Real Estate Brokerage Platform; Shares Fairly Valued

We initiate coverage on KE Holdings, or Beike, with a narrow moat rating and a fair value estimate of USD 17.00 per ADS (HKD 44.20 per share), which falls in Morningstar 3-star territory. With over 48 million monthly active users, or MAU, as of June 2023, Beike is one of the largest housing brokerage companies in China with both an online marketplace and physical stores. While Beike’s commission revenue growth should moderate amid normalizing home demand, we like the firm’s online-offline integrated business model and strong brand reputation. This should also be reinforced by robust expansion of Beike’s home renovation services via acquisitions. As such, we model a 10.8% top-line CAGR for Beike in 2022-27.