KE Holdings, which operates a network of well-known green “Lianjia” property brokerage shops, suffered in the resulting slowdown due to its dependence on transactions to drive revenue.

The Latest: Residential real estate broker KE Holdings Inc. (BEKE.US; 2423.HK) on Thursday reported its revenue fell 19.2% year-on-year to 16.4 billion yuan ($2.27 billion) in this year’s first quarter, while its non-GAAP profit dropped 60.9% to 1.39 billion yuan.

Looking Up: Revenue from the company’s non-real estate transaction services surged 112.9% during the period, lifting it by 21.7 percentage points to 35% of the company’s total revenue, reflecting progress for its diversification strategy.

Take Note: Lower revenue from existing and new home transaction services, together with higher sales and administrative expenses, were the main factors behind the company’s profit decline.

Digging Deeper: China’s curbs on housing speculation, coupled with its economic slowdown, have caused debt-ridden developers to teeter on the brink of bankruptcy and many housing projects to go unfinished, depressing sales in China’s overbuilt real estate market. As operator of one of China’s largest property brokers, known for its green Lianjia shops, KE Holdings has also suffered in the resulting slowdown due to its dependence on transactions to drive revenue. To cope with the predicament, the company has expanded its business to home renovation and rental services, helping to offset some of the revenue losses from its core home transaction business.

Market Reaction: KE Holdings shares tumbled on Friday, closing down 10.5% to HK$44.25 by the midday break. The stock now trades in the middle of its 52-week range.

Translation by A. Au

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