JPMorgan has released a research report stating that it has raised the H-share target price of KE Holdings Inc. (ASX: 02423) from HK$59 to HK$65, and the US-listed target price from US$23 to US$25, maintaining an "Overweight" rating, and has listed KE Holdings as one of the top picks in China's entertainment and vertical internet stock sector.
The bank is more bullish on the company's growth prospects in existing home, rental, and renovation businesses, raising its 2027 net profit forecast by 7% and expecting 2026 net profit to grow 77% year-on-year.
The bank noted that KE Holdings' 2026 net profit growth is expected to be supported by rental service expansion and intermediary network and store cost optimization. The company's share price has risen 13% year-to-date, outperforming the China overseas internet ETF (KWEB) which has fallen 31% over the same period.
Second-hand home transaction volume remains resilient, with a year-on-year increase of 11% in the first nine months, and cumulative October transaction volume up 26% year-on-year as of October 18. JPMorgan expects KE Holdings' operating profit compound annual growth rate from 2026 to 2028 to be approximately 25%, mainly benefiting from the improvement in the second-hand housing market, rental services, and home decoration business development.
Among these, approximately 40% of the company's profits come from second-hand housing transactions, and recent property market policies are favorable to related businesses; rental services are expected to generate approximately 1 billion yuan in profit in 2026, with business volume growth exceeding 30%; the home decoration business is expected to reach break-even in the third quarter.
The bank believes that artificial intelligence can help KE Holdings provide better housing services to developers and buyers, expand market share, and improve the work efficiency of top brokers. The related positive factors are expected to offset the pressure from a potential decline in new home transactions.
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