Beike Shares Weaken Despite Earnings Beat

By Bingyan Wong

Shares of KE Holdings are slumping in Asian trading despite better-than-expected quarterly earnings and upbeat outlooks by several analysts.

The Hong-Kong Listed shares of China's largest residential property broker, also known as Beike, were down 6.0% at the midday break Friday, trimming their year-to-date gains to 6.1%. The Hang Seng Index is down 1.0%.

Beike said Thursday that its net profit reached 2.75 billion yuan ($390.9 million) in the first quarter, reversing from a CNY618.0 million loss in the same period last year, while revenue rose 63% on year to CNY20.28 billion. Both metrics beat consensus expectations.

Chief Executive Stanley Yongdong Peng said the company is "pleased to see a strong rebound emerging in the real estate market in China along with improving macroeconomic conditions." He added the Beike "significantly outpaced the industry" in gross transaction value growth for both existing and new home transactions.

Citi analysts Harry Chen and Griffin Chan kept their Top Pick status for Beike while raising their target price about 3% to $26.00 for ADRs and HK$68.20 for the Hong Kong-listed shares. In a research note they highlighted better-than-expected margin and revenue, and said that based on positive GAAP profits, "we estimate it would able to declare dividends from FY 2023."

They also described second-quarter revenue guidance as "prudent," with "room for a beat."

Nomura analyst Jizhou Dong took a slightly less sanguine view, saying in a note that the results were solid but "likely not enough."

"We are concerned on the growing uncertainties from the weakening broader property sales sentiment," he wrote. "We expect concerns to remain unless a more proactive property policy is introduced in [the second or third quarters] -- something not very likely to take place, in our view."

The analyst also described guidance as "relatively conservative" for second-quarter revenue growth of 34%-38% from a low base a year ago. Nomura maintained a buy rating, however, noting significant upside to its unchanged price target on U.S.-listed ADRs of US$27.23.

ADRs fell 8.2% in Thursday trade in New York, to $14.97.

Write to Bingyan Wong at bingyan.wong@wsj.com

(END) Dow Jones Newswires

May 19, 2023 00:22 ET (04:22 GMT)

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