Futu News reported on January 22 that after opening the market, Meituan once fell by more than 6%, mainly due to being sold out. The target was HK$40, which was lower than yesterday's closing price of HK$45.65.

As of 10:28, down 5.37%, the price was HK$43.2, and the turnover was 78.9 million:

Source: Futu Securities

Yamato pointed out that competition in the industry would hinder Meituan's profits. Coupled with the failure to monetize advertising revenue, the initial target price was HK$40, which was “inferior to that of the market.”

Yamato said that by transforming users in the takeout business, it may bring Meituan more revenue per household and develop in the direction of a “super app” in the mainland. However, Meituan recorded losses due to subsidy expenses and noticed that its 2020 profits may face downside risks. The bank believes that Meituan's in-store, hotel and travel businesses drive the commission rate (Take Rate) and can further offset losses in its takeout business, but it is expected that its profitability may continue to be compressed until Meituan mitigates subsidies. However, intense competition in the industry may affect the market's readjustment of the outlook for Meituan's net profit margin.

The bank believes that in the face of Ali's “are you hungry?” competition, Meituan's market share in the relevant market will drop from 59.3% in 2018 to 51.7% in 2020, and the benefits of the takeaway business may remain weak, or further drag down Meituan's net profit margin.

However, Meituan also has highlights. Yamato expects that in terms of in-store, hotel and travel business, Meituan's in-store business may generate potential advertising revenue, while its hotel business will drive transaction value (GMV) growth. In addition, its in-store and travel business may drive an increase in its commission rate, and it is predicted that its compound revenue growth rate (CGAR) for the full year 2018-2020 will be 33%.