Everbright Securities released a research report stating that considering the continued pressure in the real estate sector and BEKE-W's (02423) pragmatic adjustments to strengthen internal operations, it has revised down its net profit forecasts for 2025-2027 to RMB 3.718 billion, RMB 4.774 billion, and RMB 5.820 billion (down 11%, 8%, and 4% from previous estimates, respectively). As a leading real estate brokerage firm, BEKE-W is expected to benefit from a potential recovery in the property market, with long-term growth opportunities in home renovation and leasing businesses. The "Buy" rating is maintained. Key highlights from Everbright Securities' report are as follows:

**Performance Overview**: BEKE-W reported its Q3 2025 results, with revenue/net profit/Non-GAAP net profit reaching RMB 23.1 billion, RMB 750 million, and RMB 1.29 billion, respectively, representing year-on-year growth of +2.1% but declines of -36.1% and -27.8% in net profit metrics.

**Secondary Housing Market**: Q3 secondary housing GTV/revenue stood at RMB 505.6 billion and RMB 60 billion, up +5.8% and down -3.6% YoY, respectively. The weaker revenue performance relative to GTV was attributed to a decline in Lianjia's GTV share from 41% to 38% YoY. Monetization rates for Lianjia and Beilian remained stable at 2.53% and 0.38%, respectively, compared to Q2. The contribution margin for secondary housing was 39.0%, down 2.0 ppts YoY, mainly due to lower revenue amid relatively stable fixed labor costs.

**New Home Sales**: Q3 new home GTV/revenue were RMB 196.3 billion and RMB 66 billion, down -13.8% and -14.1% YoY, respectively. The monetization rate remained flat at 3.38% YoY, while the contribution margin declined slightly by 0.7 ppts to 24.1%, reflecting the continued profit-sharing strategy implemented in 2024, which increased variable costs.

**Home Renovation & Leasing**: Both segments achieved profitability for two consecutive quarters (before allocating headquarters expenses at the city level). Q3 revenue for home renovation/leasing reached RMB 4.3 billion and RMB 5.7 billion, up +2.1% and +45.3% YoY, though growth has decelerated quarter by quarter in 2025. The contribution margin for home renovation improved by 0.8 ppts to 32.0%, driven by lower procurement costs due to increased centralized purchasing and reduced labor costs from improved dispatching efficiency. Leasing contribution margin rose by 4.3 ppts to 8.7%, primarily due to higher gross margins in the hassle-free rental business.

**Profitability & Expenses**: Q3 gross margin declined by 1.3 ppts to 21.4%, mainly due to a lower revenue share from the higher-margin new home business. Sales/management/R&D expense ratios were 7.5%, 8.1%, and 2.8%, down 1.1 ppts, 0.3 ppts, and up 0.3 ppts YoY, respectively. The reduction in sales expenses was attributed to lower labor and marketing costs under operational efficiency initiatives. Non-GAAP net margin fell by 2.3 ppts to 5.6%. Additionally, the company strengthened shareholder returns, repurchasing USD 280 million worth of shares in Q3, the highest quarterly buyback in nearly two years.

**Risks**: Potential declines in monetization rates, slower-than-expected recovery in the property market, and challenges in new business expansion.