Incidents:
On March 22, 2024, the company released 2023Q4 financial report. 2023Q4 achieved revenue of 73.7 billion yuan (YoY +23%, QoQ -4%), operating profit of 1.8 billion yuan (corresponding loss of 700 million yuan in 2022Q4), net profit of 2.2 billion yuan (corresponding loss of 1.1 billion yuan in 2022Q4), non-GAAP EBITDA37 billion yuan (YoY +26%, QoQ -40%), and non-GAAP net profit of 4.4 billion yuan (YoY +428%, QoQ -24%) .
Core views:
Overall performance: 2023Q4 revenue slightly exceeded expectations, mainly due to a rebound in offline consumption and the company's optimized marketing and subsidy strategies driving core local business growth. Both 2023Q4 operating profit and non-GAAP net profit surpassed Bloomberg's agreed expectations, mainly due to core local commercial operating profits exceeding expectations.
Core local business: 2023Q4 core local commercial revenue increased 27% year over year to 55.1 billion yuan, operating profit margin was -2pct to 15% year over year, and instant delivery orders increased 25% to 6 billion orders year over year, of which 1) Food and beverage takeout business: 2023Q4 food and beverage takeout business grew steadily. We estimate that 2023Q4 takeout orders increased 25% year over year, mainly due to the company's continuous optimization of marketing and subsidy strategies, driving the continuous growth of annual transaction users. The steady increase in medium- and high-frequency users and purchasing frequency combined with continuous improvement of the shelf model and hot marketing The campaign further stimulated the growth of consumer demand; 2) Meituan flash sales business: The 2023Q4 Meituan flash business performed well, with an average daily order volume of 8.3 million. The core user profile is becoming younger, and the frequency of user transactions increased by more than 20% over the same period last year. Looking at the whole year, the number of Meituan flash sales orders increased by more than 40% year on year, and the number of active merchants increased by nearly 30% year over year; 3) In-store wine travel business: 2023Q4 The on-site wine travel business maintained strong growth. We estimate that 2023Q4 wine tour revenue increased 64% year over year, and GTV increased 162% year over year, mainly benefiting from the rebound in offline consumption and diversified marketing activities such as special group purchases and live streaming promotions launched by the platform. Looking at the whole year, the GTV of Taodian Wine Travel in 2023 increased by more than 100% year over year, annual trading users increased by more than 30% year over year, and annual active merchants increased by more than 60% year over year, all of which reached record highs.
New business and others: 2023Q4's new business revenue increased 11% year-on-year to 18.6 billion yuan, operating profit of 4.8 billion yuan (2022Q4 loss of 6.4 billion yuan), and operating profit margin -26% (YoY+12pct). The improvement in operating loss ratio was mainly due to improved business operating efficiency. 1) Meituan Preferred Business: In 2023, the scale of Meituan Preferred's business growth fell short of expectations, leading to significant business losses; in 2024, the company will make strategic adjustments to the Meituan Preferred Business, focusing on drastically reducing business losses rather than expanding market share. It plans to increase product price increases and reduce subsidies, and focus on long-term growth in the natural retention rate of users. 2) Meituan grocery shopping business: The business was upgraded to a new brand, the transaction amount increased by about 30% year-on-year in 2023. The user size, customer unit price and purchase frequency all achieved steady growth, and the share of private brand sales continued to increase; the company will continue to optimize the supply chain to reduce contract fulfillment costs.
Profit forecast and investment rating: Long-term optimism about the company's core barriers in the field of instant delivery and high resilience in the local lifestyle business, and considering the new business's 2024 sharp loss reduction forecast, we raised the company's 2024-2026 revenue forecast to RMB 3,309/3859/437.4 billion yuan, and raised the 2024-2026 net profit forecast to RMB 265/393/49.3 billion yuan, and the non-GAAP net profit forecast to RMB 363/502/61.6 billion, corresponding diluted EPS to 4.16/ 6.12/7.60; According to the SOTP valuation method, we gave Meituan a total target market value of RMB 703 billion in 2024, corresponding to a target price of RMB 113 /HK$123, maintaining a “buy” rating.
Risk warning: Macroeconomic growth falls short of expectations; consumption recovery falls short of expectations; competition in the local lifestyle and retail industry intensifies, industry growth falls short of expectations; UE, new businesses such as Meituan Choice, have fallen short of expectations, etc.