Goldman Sachs: KE Holdings (BEKE.US) 1Q26 Review — Thesis Validated; Raise PT and Reiterate Buy
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Goldman Sachs reaffirms its Buy rating on KE Holdings (BEKE.US/2423.HK), raising its 12-month target price from US$21/HK$55 to US$23/HK$59, implying 29% upside. Following broadly in-line first-quarter revenue and gross merchandise volume, profitability metrics including gross margin, adjusted operating margin, and adjusted net margin exceeded expectations. This validates the investment logic behind the early May upgrade.
The existing home market demonstrated a robust recovery, with first-quarter transaction volume increasing 12% year-over-year. This momentum accelerated in April, surpassing 30% growth. Housing prices are stabilizing, as the average rental yield across 50 cities rose 40 basis points to 2.8%. Operational efficiency improvements are notable, with Lianjia agent productivity climbing 26% despite a 29% workforce reduction.
New business segments showed meaningful unit economics improvement. Home decoration contribution margin reached 36.2%, while housing rental contribution margin hit a record 14.8%. Management is prioritizing unit economics over scale expansion. Consequently, Goldman Sachs lifted its 2026 to 2028 earnings per share estimates by 3% to 6% through lower operating expense projections, while keeping revenue and GTV forecasts essentially unchanged. The existing home GTV is projected to turn positive in the second quarter, driven by sustained volume growth.
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