Striving for progress while maintaining stability, Beike achieved a net income of 77.8 billion yuan in 2023
On March 14th, Beike (NYSE: BEKE; HKEX: 2423), a technology driven one-stop new residential service platform, released its financial results for the fourth quarter and full year of 2023. In the past year, the real estate market has continued to deepen its transformation, and houses have returned to their residential properties. Thanks to its advantages in quality and efficiency, Beike has demonstrated strong resilience in its performance.
In 2023, the total trading volume (GTV) of shells was 3.14 trillion yuan (RMB), with a net income of 77.8 billion yuan, a year-on-year increase of 28.2%; The net profit reached 5.89 billion yuan, with an adjusted net profit of 9.798 billion yuan. In the fourth quarter of 2023, Beike achieved a GTV of 735.6 billion yuan, a year-on-year increase of 13.7%; The net income was 20.2 billion yuan, a year-on-year increase of 20.6%, with a net profit of 670 million yuan and an adjusted net profit of 1.714 billion yuan.
Peng Yongdong, co-founder, chairman, and CEO of Beike, said, "In the past year, we have achieved tremendous breakthroughs in the integration of one body, three wings, and development. Our organization has become more centripetal, and we are more confident in the road ahead. In the face of external changes, we have made a series of strategic and business operation adjustments, sounded the horn of 'crossing the second mountain', actively embraced the promising residential market, and become a technology driven one-stop new residential service platform, creating more hope for our future. Faced with new problems in the future, we need new solutions, including technology and model upgrades, and make long-term choices around quality and efficiency."
Xu Tao, Executive Director and Chief Financial Officer of Beike, said, "In 2023, we achieved excellent business performance, with steady growth in our real estate transaction services business and breakthroughs in new businesses such as home decoration and rental. Over the past two years, we have taken a series of measures to improve quality and efficiency, guard against risks, and released dividends last year. Our profitability and profit quality have significantly improved, with a net operating cash inflow of 11.16 billion yuan for the whole year, which is 1.14 times the adjusted net profit. At the same time, we attach great importance to shareholder returns and hope to share the company's long-term value with our shareholders. We believe that our excellent financial management capabilities will safeguard the healthy growth of the organization and achieve more organic and efficient growth."
Shift from scale dividend to efficiency dividend, build a safe margin for business development through business resilience
From the perspective of the operating rhythm of the whole year in 2023, the real estate market has experienced a pulse like recovery from the concentrated release of accumulated demand at the beginning of the year, to a gradual return in the middle of the year, and finally to the intensive introduction of policies in the second half of the year. Faced with the ever-changing external environment, Shell's series of measures under the theme of "high-quality growth" in the past two years have brought huge operational leverage, creating more safety margins for "crossing the second mountain".
According to data from the Ministry of Housing and Urban Rural Development, the proportion of second-hand housing transactions in China was close to 40% in 2023, and the market is accelerating its transition to second-hand housing. The scale of the existing housing market is expanding, and there are more options for customers to choose from. The demand for "sell one buy one" housing exchange is becoming more prominent. This requires service providers to shift from a "house to house" approach to more refined services for both homeowners and homebuyers.
In 2023, the GTV of Beike's existing housing business reached 2028 billion yuan, a year-on-year increase of 28.6%, and net income increased by 15.9% to 28 billion yuan, contributing a profit margin increase of 7.3 percentage points to 47.2% year-on-year. Behind this is the efforts of Beike to connect and retain high-quality service providers, supporting more industry partners to enhance their management and professional service capabilities in market transformation. Starting from improving customer service quality, Beike has established the ability to focus on "good houses" on the housing supply side, formulated professional sales plans for owners, deepened customer demand analysis and understanding on the customer supply side, and matched customer preferences through digital tools such as AI intelligent house selection. At the same time, in response to the problem of high transaction amounts and consumer anxiety in real estate transactions, Beike has promoted the cooperation of new brokerage brands to fulfill their "reassuring service commitments" and provide consumers with every "real gold and silver" compensation as a bottom line.
At the same time, the current new housing market and the existing housing market exhibit differentiated characteristics and are still in the process of adjustment. According to data from the National Bureau of Statistics, the sales of new residential properties in China decreased by 6% year-on-year in 2023. In 2023, Beike adopted a more proactive new housing strategy, such as establishing an online live streaming platform, increasing coverage of high-quality housing sources, launching the "Youxian Sell" model in multiple locations to support "trade in old for new", continuously focusing on customer housing demand points, and achieving performance beyond the market.
In 2023, the GTV of Shell's new housing business reached 1003 billion yuan, a year-on-year increase of 6.7%, with a net income of 30.6 billion yuan, a year-on-year increase of 6.7%. The profit margin contributed by the new housing business increased by 2.9 percentage points year-on-year, reaching 26.6%. Together with the existing housing business, it forms a stable foundation for the Beike real estate transaction service business.
On this basis, Beike continues to strengthen risk management and safeguard safety boundaries. In the fourth quarter of 2023, in Beike's own new house business, the commission income ratio of state-owned enterprise developers increased from 46% in the third quarter to 53% in the fourth quarter. The "fast commission" projects prepaid by developers accounted for a high proportion of new house commission income at 53%. The turnover days of accounts receivable for new houses in the fourth quarter were only 43 days, decreasing for the first time to within 50 days.
Beike also attaches great importance to the sustainable development of the ecosystem of service providers. As of the end of 2023, there were 42000 active stores in Beike, a year-on-year increase of 12.2%. There were 397100 active brokers, a year-on-year increase of 13.6%. Platform service providers have also achieved improvements in efficiency and revenue. In 2023, the average GTV of shell stores increased by 29% year-on-year, and the average GTV per person increased by 25%. Beike strengthens the service and empowerment of its stores, promotes competitive advantages, and at the same time helps improve the efficiency of its tail end stores; Establish and promote the joint governance council for the store's eastern region, increase the sense of fairness in operations, and significantly improve merchant satisfaction.
Turning from "object oriented" to "person oriented", upgrading quality to build a new model of residential services
With the return of residential properties and the highlighting of usage value, the values of housing are being changed, and the era of new housing has just begun. Centered around the "One Body, Three Wings" strategy, Beike has not only achieved breakthroughs in scale in home decoration and rental business, but also deepened industry understanding and cognitive reserves, driving process restructuring and business logic evolution from the perspective of customer real needs.
In 2023, the contract value of Beike Home Decoration Home Furnishing Business was 13.3 billion yuan, a year-on-year increase of 93% in comparable caliber; The net income achieved a comparable year-on-year growth rate of 74%, reaching 10.9 billion yuan. The home decoration and home furnishing business has shown a positive cycle in more cities, with 11 cities achieving positive operating profits throughout the year.
In 2023, the contract value of home decoration and home furnishing business in Beijing and Hangzhou exceeded 2 billion yuan, while in Shanghai, the total contract value exceeded 1 billion yuan. There are a total of 6 cities with contract values exceeding 500 million yuan. In 2023, the new retail contract value, including customized furniture, soft furnishings, home appliances, etc., was about 3.6 billion yuan, accounting for 27% of the total contract value, a comparable increase of 5.8 percentage points compared to last year.
In terms of industry understanding, the starting point for the iteration of Beike home decoration and home furnishing business is shifting from "starting from goods" to "starting from people". The iteration of agents becoming residential consultants, providing richer package products and backend delivery capabilities, drives the conversion rate of customer signing and experience upgrading. By reshaping and digitizing processes, we can further enhance the standardization and certainty of delivery. Taking schedule management as an example, the average construction period in 2023 has decreased from 129 days in 2022 to 111 days.
Due to the increase in net income from rental business, in 2023, the net income of Shell's emerging business and other businesses increased by 194.8% year-on-year to 8.4 billion yuan. Beike actively and steadily expanded the scale of rental housing management and operation services, with worry free rentals exceeding 200000 units and long-term rental apartments exceeding 10000 units. Beike also improves asset operation efficiency and service quality through various underlying capacity construction. At the end of 2023, the occupancy rate of worry free rent further increased by 6 percentage points compared to the end of 2022, reaching 95.1%. Beike has upgraded its worry free rental product model to better withstand the risks brought by market fluctuations.
Overall, home decoration and emerging and other businesses have become new growth engines for Beike, with a revenue contribution of 24.7% for the entire year of 2023, an increase of 11.7 percentage points compared to last year. In the fourth quarter of 2023, the above-mentioned business revenue increased by 106.6% year-on-year, accounting for 32.6%.
In terms of shareholder returns, for the entire year of 2023, Beike invested approximately $719 million in a large-scale stock repurchase and all of them were cancelled. The total number of repurchased shares for the year accounted for 3.7% of the company's total issued share capital before the repurchase project was launched. Beike will also distribute a special cash dividend of approximately $200 million in 2023. On this basis, Beike announced the distribution of final cash dividends, with an expected total dividend payment of approximately $400 million.
The horn of "crossing the second mountain" has sounded, the era of "new residence" is coming, and Beike is also entering a new stage of development. In 2024, Beike will continue to maintain an optimistic attitude, firmly increase investment in quality, grasp the two important variables of "quality" and "efficiency", enhance the happiness of consumers and the sense of achievement of service providers, and welcome more possibilities for development.
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