From a net loss of 1.397 billion yuan to a profit of 5.89 billion yuan, Beike (02423. HK; BEKE. US) only took one year.
Red Star Capital Bureau has noticed that recently, Beike released its financial results for the fourth quarter and full year of 2023, with a net income of 77.8 billion yuan in 2023, 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.
This financial report, Beike can be said to be "proud".
Due to the impact of the overall environment in 2022, the net income of shells decreased by 24.9%, resulting in a net loss of 1.397 billion yuan; At that time, the management of Beike stated in a performance conference call, "The company has faced tremendous challenges."
In 2023, despite the overall improvement of the domestic real estate industry, Beike achieved rapid performance growth. This makes people curious, how did Beike manage to turn losses into profits in this year?
(1)
Leading the banner of second-hand housing business
In recent years, China's real estate industry has entered a period of deep adjustment, which is influenced by various factors such as changes in supply and demand, financial environment, buyer expectations, and the global economic situation.
According to data released by the National Bureau of Statistics, in 2023, the investment in real estate development in China reached 11.09 trillion yuan, a year-on-year decrease of 9.6%; The sales area of commercial housing in China was 1.117 billion square meters, a year-on-year decrease of 8.5%, with residential sales area decreasing by 8.2%; The sales revenue of commercial housing reached 11.66 trillion yuan, a year-on-year decrease of 6.5%, with residential sales down 6%.
In this situation, Beike's performance has experienced a "counter trend" increase.
According to the financial report, the total trading volume (GTV) of Beike for the whole year of 2023 was 3.14 trillion yuan, an increase of 20.4% year-on-year; The annual revenue is 77.8 billion yuan, and the net profit is 5.89 billion yuan.
From the perspective of revenue structure, in 2023, the annual GTV of Shell's existing housing business reached 2028 billion yuan, a year-on-year increase of 28.6%; Net income also increased by 15.9% year-on-year to 27.954 billion yuan, and the contribution profit margin increased by 7.3 percentage points year-on-year to 47.2%.
In terms of new housing business, the GTV of new housing business reached 1003 billion yuan in 2023, a year-on-year increase of 6.7%; The net income was 30.576 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%.
Source: Corporate financial report, Red Star Capital Bureau
In 2023, among the transaction volume of over 3 trillion yuan for shells, the proportion of stock housing transactions reached 2/3; At the same time, the net income growth and contribution profit margin achieved by the existing housing business are also higher than those of the new housing business.
That is to say, Beike's performance improvement in 2023 is inseparable from its second-hand housing business.
In addition, the number of stores and agents of Beike has rebounded in 2023. The financial report shows that as of the end of 2023, the number of stores and agents of Beike was 43800 and 428000, respectively, an increase of 8.1% and 8.5% year-on-year.
In fact, last year the domestic second-hand housing market was indeed more lively, mainly due to the transformation of the market supply and demand structure, the expansion of the stock housing market, and the preference of homebuyers towards second-hand housing.
According to data from the Ministry of Housing and Urban Rural Development, the proportion of second-hand housing transactions in China in 2023 is close to 40%, and the market is accelerating its transformation towards second-hand housing. According to data from key cities monitored by E-House Real Estate Research Institute and China Index Research Institute, the transaction volume of second-hand houses increased by over 36% year-on-year last year.
Meanwhile, Shell Research shows that from June 2022 to December 2023, the proportion of customers who prioritize purchasing second-hand houses has increased from 23% to 35%, and second-hand products have fully taken on the demand for "getting on the car" that is essential.
(II)
Can Home Decoration and Home Furnishing Become the Second Curve
In addition to its new and existing housing business, Beike is actively expanding into the home decoration and home furnishing industry, aiming to use it as its second revenue curve.
According to the financial report, the net revenue of Beike Home Decoration and Home Furnishing Business in 2023 was 10.9 billion yuan, accounting for 14% of the total revenue of the enterprise.
In fact, as early as 2015, Lianjia had cooperated with Vanke to establish Vanke Lianjia Decoration Co., Ltd., which was the first trial in the field of home decoration.
In April 2020, Beike launched its self operated home decoration brand "Quilt Nest". In July 2021, Beike announced an agreement with Shengdu Home Decoration to acquire 100% equity of Shengdu Home Decoration for a total consideration of 8 billion yuan.
Source: Beike Zhaofang Official Website
At the end of 2021, Beike proposed the "One Body, Two Wings" strategy, in which "One Body" refers to the second-hand and new housing transaction service track, and "Two Wings" respectively refer to the integrated home furnishing business group and the affordable housing business group. The home furnishing business is the focus of Beike's strategic upgrade.
The reason for Beike's layout in home decoration and home furnishing business is also very simple.
There is a strong correlation between home decoration business and real estate transaction services, often accompanied by decoration needs after purchasing a house. As a real estate trading and service platform, Beike has a large user resource, and entering the home decoration business can further extend its business chain.
From the perspective of the overall environment, the market space for the entire home decoration industry still exists.
According to the Beike Research Institute, the total demand for housing decoration in China will be between 3 billion to 5 billion square meters per year from 2022 to 2030. The overall scale of the home decoration and home furnishing market will reach around 5 trillion yuan in 2025 and 7 trillion yuan in 2030, with an average annual growth rate of over 6%.
However, in the eyes of the outside world, there are still many uncertainties in using shells for home decoration and home furnishings.
Firstly, there are still some non-standard and opaque phenomena in the home decoration industry, with low standardization and intense competition in the dispersed market.
Secondly, the difficulty of industry supply chain management is high, and home decoration business involves multiple links such as materials, equipment, and labor. It is very difficult to establish an efficient supply chain management system to ensure material quality and construction progress.
Overall, although Beike has many years of experience in renting and selling houses, it still faces significant challenges and uncertainties before truly touching and transforming the pain points of the home decoration industry.
(III)
Marching into real estate development business
Entering the real estate development business is another attempt by Beike in the industry.
In July 2023, Beike launched the Beihaojia business and announced the upgrade of its original "one body, two wings" strategy to "one body, three wings": "one body" refers to the transaction business of new and second-hand houses, and "three wings" refers to the home decoration business, rental business, and Beihaojia business.
In order to strengthen the business of this sector, Beike not only transferred its Chief Operating Officer Xu Wangang to the position of CEO of Beihaojia's business line, but also continuously recruited personnel in the industry.
On March 15, 2023, Beijing publicly sold two plots of land, and Beihao Jia (Beijing) Real Estate Co., Ltd. (hereinafter referred to as Beijing Beihao Jia), a subsidiary of Beike, participated in the bidding.
Public information shows that over thirty real estate companies, including traditional real estate companies such as Longhu Group and China Overseas Development, have signed up for the land project being auctioned by Beike this time.
In the end, the above-mentioned land was won by a subsidiary of Beijing Construction Engineering Group, with a transaction price of 1.167 billion yuan. Beijing Beihao Home quoted 1.1323 billion yuan, which is 35 million yuan lower than the highest bid.
Although Beike did not ultimately acquire the land this time, it also gained a lot of attention from its initial land auction, which was a crucial step for Beike to enter the real estate development industry.
Beike insiders responded to media reports that Beike has always been cautious when doing new business. Currently, Beihao's business is still in the exploration stage, and Shunyi's registration for land acquisition is also a test of the water.
The next land auction shows Beike's ambition, but for inexperienced Beike, entering real estate development is still a huge test. After all, the demand in the real estate industry is constantly changing, and heavier businesses pose challenges to Shell's cash flow and profitability.
Summary
Looking at the business layout of Beike in recent years, its intention is to take on all stages of buying a house from development, buying and selling, to decoration in a "one-stop" manner. However, the current business of buying and selling houses is still affected by the overall environment. In terms of real estate development and house decoration, Beike still has a long way to go.
Red Star News reporter Liu Mi
