Bank of America Securities raises KE's target price to 52 yuan, reiterates "Buy" rating

Bank of America Securities' research report indicates that KE-W (02423.HK) had a revenue of 23.1 billion yuan in the third quarter, a year-on-year increase of 2%, in line with market consensus; adjusted net profit was 1.3 billion yuan, better than expected; for this quarter, both home renovation and rental businesses began to generate significant profits. It is predicted that fourth-quarter revenue will decrease by 29% year-on-year due to a weak housing market, but Bank of America Securities has raised the forecast for KE's adjusted net profit margin for the last quarter to 4.5%, a slight year-on-year increase, reflecting a decline in operating expenses.

In response to the weak housing market, Bank of America Securities slightly lowered KE's adjusted net profit for 2026 to 7.4 billion yuan but reiterated a "Buy" rating, as it expects the company's earnings visibility to improve next year; it anticipates that the year-on-year profit growth next year will come from the company's own cost-saving measures, including a reduction in the direct cost ratio and operating expenses in the property transaction business; the home renovation and rental businesses will improve profit margins against a backdrop of weak revenue.

Due to the better-than-expected performance in the third quarter and the upward revision of the fourth-quarter forecast, Bank of America Securities has raised the target price for KE's U.S. stock (BEKE.US) from $19 to $20, based on a 2025 enterprise value multiple of 20 times, and reiterated a "Buy" rating; the target price for the Hong Kong stock has been raised from HKD 49 to HKD 52