KE Holdings (02423) Report Interpretation

Overview

The report argues that recent property-policy changes can favor KE Holdings by shifting housing activity toward secondary transactions and supporting housing-related consumption. JPMorgan maintains Overweight, citing the company’s market leadership, scope for share gains, operating leverage and rising profit contribution from renovation and rental businesses.

Core views

JPMorgan argues that lower supply of primary homes should redirect activity toward secondary-home transactions, where KE Holdings has meaningful exposure. Secondary transactions accounted for 26% of 2025 revenue and 39% of contribution profit. Although primary transactions generate higher unit economics and GTV than secondary transactions, KE Holdings’ secondary-market GTV share is about 30%, substantially above its 12% share in primary transactions. The institution therefore expects faster secondary-market growth to more than offset pressure from the primary market over the longer term. The primary-home market remains the key offsetting risk. New-home transactions supplied 32% of 2025 revenue and 30% of contribution profit, and JPMorgan forecasts more than a 20% decline in FY27E market contracted sales. However, it expects KE Holdings to soften the financial impact through further share gains. The company’s new-home transaction share has risen from 9% in 2022 to 12% currently even as overall market transaction value fell by more than 40%. JPMorgan attributes this resilience to KE Holdings’ agency network and buyer and seller resources across both primary and secondary markets. It argues that developers, especially in suburban and tier-2/3-city markets, still need major channel partners to accelerate cash collection. The report also identifies housing provident fund easing as support for rental, renovation and furnishing demand. These newer segments together represented 28% of 2026E contribution profit and had only become profitable over the preceding 6-12 months. JPMorgan expects their increasing contribution, along with agency-network optimization, to expand margins in 2026-27. Its profit case assumes lower store-related fixed costs as a percentage of revenue and higher transaction volume per agent, contributing to estimated operating-profit growth of 16% in 2027E-28E. In the near term, JPMorgan expects BEKE’s share price to remain highly correlated with China property data and policy, including monthly property-sales data. Over the longer term, it sees company-specific drivers in expected annual market-share gains of 3-4% in China’s existing- and new-home transaction markets, expansion into additional property-market verticals, and improved profitability in renovation and rental services. JPMorgan maintains Overweight on market leadership and profit upside. The HK$59 target price through December 2027 is derived from the US$23 BEKE US target, using an 18x 2027E P/E multiple, an HK$/US$ exchange rate of 7.75 and an ADS-to-ordinary-share conversion rate of three. JPMorgan considers the multiple justified by KE Holdings’ leading position among China housing transaction and service platforms and the faster growth of its newer businesses. The report notes that BEKE was trading at 14x 2026E P/E.

Analysis framework

JPMorgan assesses the effects of policy-driven changes in primary versus secondary housing activity, then compares KE Holdings’ revenue, contribution-profit exposure and market shares across those channels. It tests whether share gains, cost leverage and newer service businesses can offset primary-market weakness, and values the shares using a forward P/E multiple with cross-listing and currency conversion assumptions.

Methodology notes

• Industry AnalysisSupply-demand framework

  Primary-to-secondary housing transaction shift

  The report links reduced primary-home supply and weaker new-home sales to stronger secondary transaction volumes, then assesses KE Holdings’ relative exposure to each market.

• Valuation methodsP/E and PEG Valuation

  Forward P/E valuation

  JPMorgan bases the US$23 target on an 18x 2027E P/E multiple and converts that valuation into the HK$59 Hong Kong target using exchange-rate and ADS conversion assumptions.

• Industry AnalysisVolume-price decomposition

  Market-share and transaction-volume analysis

  The report evaluates how higher transaction volumes and further market-share gains can counter a decline in the overall primary-housing market.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• KE Holdings - H (2423.HK)

  Primary covered Hong Kong-listed share; expected to benefit from policy-driven transaction shifts, market-share gains and newer service-business growth.

  Strengths

  Leading agency network, broad buyer and seller resources, rising new-home market share, and growing renovation and rental profit contribution.

  Weaknesses

  Material exposure to a weakening new-home market.

  Comparison

  Its secondary-market GTV share of about 30% is materially higher than its 12% primary-market share.

  Risks

  China property cyclicality and regulation, Agent Cooperation Network operating history, new-home distribution competition, market correction and distressed-developer provisions.

• KE Holdings (BEKE US)

  Primary covered US-listed ADS; its US$23 target provides the basis for the Hong Kong-listed target conversion.

  Strengths

  Dominant market share among China housing transaction and service platforms and fast growth in newer businesses.

  Weaknesses

  Exposure to primary-home transaction declines and policy-sensitive property conditions.

  Comparison

  Valued at 18x 2027E P/E for the US$23 target, compared with 14x 2026E P/E cited for BEKE.

  Risks

  China property cyclicality and regulation, Agent Cooperation Network operating history, new-home distribution competition, market correction and distressed-developer provisions.

Key data

• Secondary-home transaction exposure26% of 2025 revenue; 39% of 2025 contribution profitShows KE Holdings’ exposure to the segment expected to benefit from lower primary-home supply.
• New-home transaction exposure32% of 2025 revenue; 30% of 2025 contribution profitThis is the business exposed to anticipated primary-market weakness.
• New-home market share9% in 2022 to 12% currentlyShare increased while overall market transaction value declined by more than 40%.
• FY27E market contracted sales>20% declineJPMorgan’s forecast for the overall primary-market decline.
• Renovation and rental contribution profit28% of 2026E contribution profitThe two newer businesses are expected to become larger growth contributors.
• Operating-profit growth forecast16% in 2027E-28EJPMorgan estimate supported by share gains, operating leverage and newer growth segments.
• Valuation14x 2026E P/E; 18x 2027E P/E target multipleThe 18x multiple underpins the US$23 target price.

Impact & implications

JPMorgan’s conclusion is that the mix shift toward secondary transactions, ongoing new-home share gains and profitable expansion of renovation and rental services can make KE Holdings more resilient than the broader primary-property market. Near-term trading remains sensitive to property data and policy developments, while the longer-term case rests on execution of share and margin expansion.

Risks

• Cyclicality and regulatory risk in China’s property market could weaken transaction activity.
• The Agent Cooperation Network has a relatively short operating history.
• Competition in new-home distribution could constrain market-share gains.
• A broader stock-market correction could pressure the shares.
• Worse-than-expected provisions for distressed developers could create further downside.

What to watch

• Monthly China property-sales data and policy developments, which JPMorgan expects to drive near-term share-price performance.
• Progress in annual market-share gains in China’s existing- and new-home transaction markets.
• Margin improvement from agency-network optimization and the profitability of renovation and rental services in 2026-27.
• The pace of primary-home market contraction and developers’ continued use of key distribution channels.