Goldman Sachs Downgrades KE Holdings (BEKE) to Neutral

Goldman Sachs analyst Timothy Zhao downgraded KE Holdings (NYSE: BEKE) from Buy to Neutral with a price target of $19.00 (from $18.60).

The analyst comments: "KE Holdings’ share price rallied +19%/17% for ADR/H-share YTD (vs. +3% for our China internet coverage), primarily due to 1) stronger investor sentiment on China property sector policy support (e.g. removal of 3 Red Lines), which also led to strong YTD share performance of GS China property developer coverage +18% on average; 2) recent strengths in secondary home market with transaction volume +13% mom or 8% above the 1Q25 level (Exhibit 6) and avg. transaction price turning positive mom in most of 40 cities we track (Exhibit 8) following c.15% ASP decline in 2025; 3) flow support from onshore investors since southbound inclusion in Mar 2025, who hold c.15% of equity stake vs. c.9% three months ago.

That said, the implied 12m-fwd P/E multiple has climbed to c.23x (Exhibit 2), which is more than 1.5x standard deviation above the average 18x level (based on Bloomberg consensus) since Sep 2024 when a coordinated policy stimulus package to revive the property sector was unveiled. We are now below Visible Alpha Consensus Data on 2025-27E EPS following our estimate revisions (details below), considering 1) one-off severance costs in 4Q25E post KE’s headcount cut to boost operating efficiency, which resulted in GSe c.Rmb600mn adj. net profit in 4Q25E (vs. consensus Rmb990mn) and may lower adj. OPEX in 2026E to Rmb14.5bn; 2) likely continued topline pressure against the weak housing market with -8% yoy industry primary home sales decline in 2026E as per GS property team forecasts, and mid-teen % yoy industry secondary home ASP decline in 4Q25 and Jan 2026 based on our tracker."

For an analyst ratings summary and ratings history on KE Holdings click here. For more ratings news on KE Holdings click here.

Shares of KE Holdings closed at $18.40 yesterday.

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