Revenue was in line with expectations, and new business expansion led to a further increase in net loss. The company achieved revenue of 48.8 billion yuan in 2021/Q3 (YoY +37.9%, two-year CAGR of 33.2%), which is basically in line with Bloomberg's unanimous expectations. The rapid year-on-year growth was mainly driven by the rapid expansion of retail business. The adjusted net loss of 2021Q3 was 5.5 billion yuan, higher than the agreed forecast loss of 5.2 billion yuan. Operating costs increased 54.8% year on year, mainly due to rising food and beverage distribution costs and retail business expansion; the absolute value of the company's three fees and the cost rate increased sharply year over year, and the cost rate of 37.9% (YOY+9.0pcts) was mainly due to the increase in personnel brought about by business expansion.
Takeaway growth has remained resilient against the backdrop of repeated epidemics and weak overall consumption. Due to repeated epidemics, the impact of flood conditions, and overall weak consumption, the number of takeout orders in Q3 was 4.01 billion (QoQ +13.3%), an increase of 25% over the previous year. Compared with the 59% growth rate in Q2, the two-year CAGR still reached 26.5%. Takeaway transactions amounted to 1971 billion yuan (YoY +29.5%), revenue of 26.5 billion yuan, monetization rate of 13.4% (of which advertising monetization rate was 1.7%), and Q3 operating profit margin was 3.3% (YOY-0.4pcts, QoQ-7.3pcts). The decline in profit margins was mainly due to increased subsidies for riders due to abnormal weather.
High growth in the advertising business is driving increased profitability in the in-store and wine travel sectors. 2021Q3's in-store and wine travel revenue was 8.6 billion yuan (YoY +33.1%), operating profit was 3.8 billion yuan, and operating profit margin was 43.9%, up 0.9 pcts from the previous year. Mainly due to the high contribution of high-margin advertising business, the share of advertising revenue increased to 52.0% from 48.6% in the same period in 2020. Q3 The hotel business was deeply affected by the epidemic. The number of overnight nights declined month-on-month, and the number of domestic hotel nights was 120 million (YoY +5.2%, QoQ -14.3%).
New businesses such as community group purchases and flash sales have continued to increase, and operating losses have further increased. 2021Q3's new business and other revenue was 13.7 billion yuan, an increase of 66.7% over the previous year. The operating profit margin fell 2.7 percentage points from month to month to -79.5%, mainly due to the expansion of retail business. On the Meituan Preferred side, long-term capabilities in supply chain, warehousing, logistics and operations have been further enhanced. In terms of Meituan flash sales, it has now covered 2,800 cities and counties, with more than 100 million trading users.
Investment advice: The implementation of anti-monopoly penalties has released the company's short-term weaknesses; the takeaway business has maintained steady growth under a weak consumer market; there is room for the subsidy rate to decline, and the monetization rate still has some room for improvement; the community group buying business has a remarkable effect of draining the company in the short term. There is cross-sales space with takeout and in-store businesses in the long run. The construction of a warehousing network and cold chain logistics helps the company win in long-term competition. Maintaining the company's “buy” rating corresponds to the 22-year target price of HK$346.85 per share, a 41.6% increase from the closing price on November 29. The target price corresponds to PS in 2022 by 7 times.
Risk Alerts: 1) Policy Risks; 2) Market Competition Intensifies; 3) Foodservice Industry Sentiment Declines; 4) New Business Losses Fall Short of Expectations