Citi bullish on KE Holdings stock, eyes growth in home sales and renovation sectors

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On Tuesday, Citi reaffirmed its Buy rating on KE Holdings stock (NYSE: BEKE), holding the price target steady at $21.10. The firm launched a 90-day positive catalyst watch for the company, anticipating a series of favorable developments. Citi expects the company to benefit from a positive trend in existing home sales, particularly noting recent performance in key cities such as Shenzhen.

The analyst pointed to a turnaround in Gross Transaction Value (GTV) year-over-year, which is expected to become positive in April, following a significant month-over-month increase in March. This growth is projected to continue, with market share gains of approximately two to three percentage points by the year 2024.

In addition to the existing home market, KE Holdings is also poised to see improvements in the new home segment. The company is likely to gain from an increase in property launches, higher customer visitations, and a growing reliance on its platform by developers. Citi predicts that subscription sales for new homes will show a year-over-year increase by May, with data to be released in early June.

The analyst also highlighted the potential in the home renovation sector, forecasting a compound annual growth rate (CAGR) of 30-40% in renovation GTV through 2024, potentially reaching around 40%. This growth is expected to be accompanied by a reduction in losses, thanks to better gross profit margins (GPM) and increased cost efficiency.

Finally, Citi’s outlook for KE Holdings includes a commitment to delivering a total shareholder return of over 5%, net of Employee Stock Ownership Plan (ESOP) costs. The firm’s positive stance on KE Holdings reflects expectations of sustained contribution margins and a strong growth trajectory across the company’s various business segments.

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