On November 8th, Shell (NYSE: BEKE; HKEX: 2423) released its financial results for the third quarter of 2023. The total transaction volume (GTV) in the third quarter was 655.2 billion yuan (RMB, the same below), and Q3 net income was 17.8 billion yuan, a year-on-year increase of 1.2%, exceeding the performance guidelines and going online. The gross profit margin further increased to 27.4%, with a net profit of 1.17 billion yuan, an increase of 63.4% year-on-year. After adjustment, the net profit increased by 14.4% year-on-year to 2.159 billion yuan.
Since July, Shell has actively promoted the "One Body, Three Wings" strategy, moving towards a new stage of one-stop new residential services, while continuously verifying its stable business capabilities.
Co founder and chairman of Shell CEO Peng Yongdong said, "People have returned from the era of focusing on 'buying a house' to the focus on 'living' itself. We also need to evolve from focusing on 'trading' to 'how to make everyone live better', which is a blue ocean. Therefore, we have upgraded our corporate strategy to 'one body, three wings', which is an important step towards becoming a one-stop new living service platform
CITIC Securities stated in its latest research report that Shell cannot be seen as a traditional real estate service company that fluctuates with the fluctuations of real estate development activities. Shell always maintains foresight, actively seeks new profit growth points, and leverages the company's unique advantages in empowering workers, standardizing and digitizing low-frequency service industry processes, understanding the development trend of Chinese residents' housing needs, and timely responding to policy calls. Colleagues acknowledge the company's patience in consolidating the foundation.
Refined operation promotes stable performance development
According to data from China Real Estate Research Association, the national real estate market continued to adjust in the third quarter of 2023. Against the backdrop of overall poor market performance, Beike bucked the trend and delivered a brilliant transcript. The total trading volume (GTV) of shells in the third quarter was 655.2 billion yuan, with a cumulative increase of 23% year-on-year in the first three quarters.
The GTV of the stock housing business in the third quarter was 439 billion yuan, which decreased by only 2.2% compared to the same period last year due to the high base of first tier cities. The net income was 6.3 billion yuan, and the profit margin contributed by the stock housing business rose to a high level of 48.7%, an increase of 2.6 percentage points year-on-year and 3.1 percentage points month on month. The GTV of existing housing in the first three quarters increased by 28% year-on-year.
The GTV of the new housing business in the third quarter was 192.1 billion yuan, with a year-on-year contraction smaller than the market. The net income was 5.9 billion yuan, and the contribution profit margin slightly increased to 25.1% year-on-year. The GTV of new housing business in the first three quarters increased by 13% year-on-year.
Although the overall environment is under pressure, Shell has also shown its ability to cope. From the first three quarters, the overall GTV still maintains growth. Xu Tao, Executive Director and Chief Financial Officer of Shell, stated in the 2023Q3 Shell Performance Conference call: "With the active promotion of our 'One Body, Three Wings' business growth strategy, we achieved stable revenue performance in the third quarter of our overall financial performance. We achieved stronger profitability performance on the basis of similar revenue scale compared to the same period last year
Xu Tao also stated that Shell's ability to balance scale, efficiency, and financial security has been effectively validated in market fluctuations over the past few years, achieving continuous growth in business, profitability, and cash.
As Xu Tao mentioned, the growth of shells is a high-quality growth curve. The net income of shells in the third quarter reached 17.8 billion yuan, a year-on-year increase of 1.2%; The gross profit margin is 27.4%, a year-on-year increase of 0.4 percentage points; Net profit increased by 63.4% year-on-year to 1.17 billion yuan, and adjusted net profit increased by 14.4% year-on-year to 2.159 billion yuan.
It can be seen that, based on the prudent cost optimization conducted in the past two years, the continuously enhanced operational capabilities have helped to push the gross profit margin to a high point. On the basis of similar revenue scale compared to the same period last year, Shell achieved stronger profitability performance, with significant breakthrough growth in both net profit and adjusted net profit.
Meanwhile, in the third quarter, in Shell's own new home business, the proportion of commission income from state-owned enterprise developers remained at 46%. The proportion of "fast commission" projects prepaid by developers remains high at 54%. The cash to income ratio of new houses in the third quarter further increased to 1.21, with payments exceeding new house income for nine consecutive quarters. The turnover days of accounts receivable for new houses in the first three quarters were 52 days.
In addition to stable performance development, Shell continued to deepen its platform's refined operation ability in the third quarter, with stable growth in the number of platform stores and brokers. At the end of the third quarter, Shell had 40903 active stores, a year-on-year increase of 3.0%, and the number of active brokers was 399048, a year-on-year increase of 7.1%.
Prioritize delivery capacity optimization for home decoration
In the context of achieving refined management, Shell's diversified business has been able to go further. The home decoration and home furnishing business remains on the fast track of development and has a strong potential for spontaneous growth that is not linked to the trend of real estate transaction services. In the third quarter, the contract value of home decoration and home furnishing business reached 3.3 billion yuan, a year-on-year increase of 65.6%. With the accelerated pace of completion delivery and revenue recognition, the net revenue of the business has achieved a year-on-year increase of 72.1%, reaching 3.2 billion yuan, which is also a 21% increase compared to the previous period. The contribution profit margin of the home decoration and home furnishing business in the third quarter remained at 29.1%.
At the urban level, the management of leading cities is constantly advancing in a circular manner. In the third quarter, Shanghai had two months of revenue exceeding 100 million yuan, becoming the third city with a single month revenue exceeding 100 million yuan after Beijing and Hangzhou. Cities such as Wuhan, Chengdu, and Guangzhou also achieved a month on month revenue growth rate of over 50% in the third quarter. Ten cities, including Beijing, Shanghai, and Hangzhou, have made profits at the city level for the second and third consecutive quarters, with 7 out of the top ten cities with positive operating profits in terms of contract size.
After clarifying the development goals of the home decoration strategy and investing a large amount of funds in mergers and acquisitions to enhance supply chain capabilities, the company prioritizes optimizing delivery capabilities, reshaping the relationship between industrial workers and platforms, and consolidating the positive cycle of satisfaction and labor dignity, rather than prioritizing the rapid growth of GTV, "CITIC Securities said in a research report.
In terms of rental business, as of the end of the third quarter, the number of "worry free rental" properties under management in the shell rental business increased from 50000 units in the same period last year to 160000 units, with an occupancy rate of 95.9%. On November 7th, Jinan Housing Provident Fund Center signed a strategic cooperation agreement with Shell, officially launching the "provident fund direct payment rent" model in Jinan, once again lowering the rental threshold for new urban citizens and young people, and jointly promoting the development of the housing rental market.
Due to the growth in the scale of rental housing management and operation business, the net income of Shell Emerging Business and other businesses increased by 202.7% year-on-year to 2.4 billion yuan during the reporting period. Overall, the revenue from non real estate transaction services in the third quarter increased by 112% year-on-year, further increasing to over 30%, compared to 15% in the same period last year.
Whether it's the basic set or the new track, Shell has come out with its own characteristics. Looking ahead, Xu Tao stated that Shell will also maintain prudence in financial management and continue to improve capital allocation efficiency. It will first focus on investing in areas that can bring key business outputs and value, investing in growth, and investing in the future; We will also share the dividends of development with shareholders at the same time.