On November 8th, the residential industry digital service platform Shell (NYSE: BEKE; HKEX: 2423) released its financial results for the third quarter of 2023. With the intensive implementation of a series of optimization policies, market sentiment has improved. 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.
The total trading volume (GTV) of Shell in the third quarter was 655.2 billion yuan (RMB, the same below), with a cumulative GTV increase of 23% year-on-year in the first three quarters. Q3 net income was 17.8 billion yuan, a year-on-year increase of 1.2%, exceeding the performance guidance limit. 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.
Co founder and chairman of Shell CEO Peng Yongdong stated: People have returned from the era of paying attention to 'buying a house' to the issue of 'living' itself. We also need to evolve from a core focus 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. Based on the talent we have accumulated in the industry, we look forward to working with the industry Connect with more partners within the industry, enhance deep understanding of the industry in the process of rapid growth, continuously iterate service capabilities, and establish a lasting harmonious ecosystem with all industry participants. We will always take 'making the industry better' as the core driving force, committed to improving industry standards, making greater efforts to meet consumers' needs for service and quality, and promoting the quality improvement of the residential industry
Executive Director of Shell Chief Financial Officer Xu Tao stated: With the active promotion of our 'One Body, Three Wings' business growth strategy, we achieved stable performance in the third quarter and further highlighted profitability resilience. Shell's ability to balance scale, efficiency, and financial security has been effectively verified in market fluctuations over the past few years, achieving continuous growth in business, profitability, and cash. Looking ahead, we will also maintain prudence in financial management and continue to improve capital allocation efficiency Prioritize investment in areas that can bring key business outputs and value, while also sharing the dividends of development with shareholders
Continuously iterate infrastructure to support efficient operations and promote the improvement of scientific management capabilities
From the overall perspective of the national market, due to the significant difference in market operation pace compared to previous years, the market bottomed out and consolidated in the third quarter. Since the end of August, many regions have introduced policies such as "buying a house but not a loan", lowering the down payment ratio, lowering mortgage interest rates, and relaxing purchase restrictions, driving the gradual recovery of second-hand housing trading volume, and the more obvious month on month repair in high-end cities.
Thanks to the long-term operational efficiency measures of Shell in the real estate transaction service business, the GTV of Shell's stock housing business reached 439 billion yuan in the third quarter, even though it only decreased by 2.2% compared to the same period last year due to the high base of first tier cities, and the GTV of stock housing in the first three quarters increased by 28% year-on-year. The revenue from the stock housing business in the third quarter exceeded expectations, reaching 6.3 billion yuan. The profit margin contributed by the stock housing remained at a high level of 48.7% in the third quarter, an increase of 2.6 percentage points year-on-year and 3.1 percentage points month on month, demonstrating the excellent profitability of Shell under the streamlined cost structure.
The new housing market is currently in a process of continuous risk clearance, with differentiated demand between cities. Shell adopts an active channel cooperation strategy while controlling the bottom line of risks. Shell hopes to establish a new partnership with developers, strengthen refined operational management based on urban policies, and create incremental value together with developers through a deeper understanding of customers, achieving a leap in future residential experience.
In the third quarter, the GTV of shell new houses was 192.1 billion yuan, with a year-on-year contraction smaller than the market. The GTV of new houses in the first three quarters increased by 13% year-on-year. The revenue from the new house business in the third quarter was 5.9 billion yuan, and the profit margin contributed by the new house still slightly increased to 25.1% year-on-year despite the decrease in revenue, fully demonstrating its business resilience. In the third quarter, in Shell's own new home business, the proportion of commission income from state-owned enterprise developers remained stable at 46%, and the proportion of "fast commission" projects prepaid by developers also remained high at 54%.
On the basis of ACN (Broker Cooperation Network), Shell continues to link high-quality production capacity in the industry, promoting agile and efficient business development. At the end of the third quarter, the number of active stores in Shell was 40903, a year-on-year increase of 3.0%, and the number of active brokers was 399048, a year-on-year increase of 7.1%. With the expansion of the scale of the store, Shell will adjust its business orientation and mobilize platform capabilities in a timely manner. By establishing a store owner autonomy committee and other measures to assist store owners in their development, we will jointly promote the implementation of higher standards for people, goods, and services.
Focusing on the quality supply of one-stop new residential services, the growth of new businesses is further evident
Compared to the previous stage with the goal of "buying a house", "living well" has gradually become a market consensus, and the trend of quality first is forming. "Human experience" has become the core concern of consumers. Therefore, the supply of packaged, leased, and even higher quality residential products will bring new development opportunities to the market, and the "one-stop new residential service platform" is becoming an important force to meet the demand for residential consumption.
The shell 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, and a month on month increase of 21%. The contribution profit margin of the home decoration and home furnishing business in the third quarter remained at 29.1%.
At the urban level, with the strengthening of basic capabilities such as product design and assembly in the home decoration and home furnishing business, the leading city's business is continuously 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.
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.
Based on solid cash reserves and robust financial management, Shell conveys the company's efficient capital allocation and the determination and ability to provide investors with returns through active stock repurchases and dividends. In September alone, the total amount of stock repurchases by Shell exceeded 130 million US dollars. Since the launch of the repurchase project in September 2022, as of the end of September this year, the cumulative number of shares repurchased by Shell has accounted for approximately 3.91% of the total issued share capital of the company before the launch of the repurchase project in 2022. Meanwhile, Shell has recently completed a special dividend of approximately $200 million.
The supply and demand relationship in the real estate market has undergone significant changes, ushering in a new era in China's real estate market. The contradiction between consumers hoping for a better living and the insufficient supply of industry quality services is the starting point of Shell's thinking for the next decade. In the future, Shell will continue to think and explore around the core propositions related to housing, along the path of "one body, three wings", and make continuous efforts to help consumers settle down and service providers work happily. With full confidence and a steady attitude, it will "climb the second mountain".