Maintain SouFun Stock "neutral" rating

In response to recent stock price fluctuations, SouFun yesterday convened a conference call. The company's management said that E-commerce and listings issued in the next 2 to 3 quarters will be under pressure, mainly by the housing market downturn drag. Lower prices for listings are a temporary strategy aimed at easing tensions with real estate agents, which will depend on products/services for long-term growth in the revenue of the listings service. We are cautious about the recent performance of the house search and the initial performance of the new business and continue to maintain the "neutral" rating of the stock.

E-commerce and listings continue to be under pressure in the short term: Search Room management said that due to the housing market downturn, the company's listings and E-commerce business will face short-term challenges. Management said the downturn would continue into the second half of the year.

Lowering the price of a house-issuing service is a temporary strategy: reducing the price of a house-issuing service is a temporary strategy aimed at easing tensions with real estate agencies. At the same time, it will strengthen the affordability of the listings service, but the management does not believe that the price reduction will be a long-term behavior to maintain customers. In the long term, the main goal of house search is to provide better and more powerful tools/services that will enhance user viscosity and interaction.

Expanding the new commercialization strategy: House search management says business and financial services based on transactions will be the core of the company's next two major businesses. In the next 1 to 2 quarters, the take Rate of E-commerce (excluding marketing spending as a percentage of gross income) will continue to decline. But the house management said it would raise take Rate by "closer to the deal". To this end, the search room needs to be adjusted to the following three types of E-commerce business model: 1 AD-derived mode, 2-oriented to end users of the direct marketing model; 3 current e-business model. Search room management that, for the first two models, search room can get 100% of gross revenue economic benefits. Currently, search houses are testing new e-business models in Beijing and Shanghai, and will expand to more cities in the future.

Investment plans remain unchanged: despite the pressure on listings and E-commerce, SouFun Management says it will continue to invest in the company's future growth. Core investment areas include: 1 mobile; 2 Marketing; 3 transfer related investment to trading platform. We believe that these investments may affect the short-term profit margin of the house search.

Valuation: We continue to maintain the "neutral" rating of soufun stocks. (Li Ming)