The home delivery business performance may be steady, and the in-store profit margin is expected to stabilize. The new business is expected to reduce losses, and the average order price is pressured by the macroeconomic environment; the profit margin is expected to stabilize under continuous investment in the in-store business and focus on GTV performance after write-off, and the community group buying business is expected to reduce losses drastically. We raised 2024 and lowered the 2025 non-IFRS net profit forecast to 317.44.4 billion yuan (previous value: 315/49.3 billion yuan), adding a 2026 forecast of 61.6 billion yuan, corresponding to the year-on-year growth rate/ 40.0%/38.7%, 2024-2026 corresponds to diluted EPS 5.1/7.1/9.9 yuan, and the current stock price of 93.3HKD corresponds to 16.6/11.8/8.5 times PE.
The company's takeout barriers are stable, and the flash sales business is still flexible. Waiting for the macro environment to recover, the profit margin of the in-store business to rise steadily, and the reduction in losses in the new business to drive overall profit release, it has medium- to long-term allocation value, and maintains a “buy” rating.
2023Q4 profit exceeded expectations, mainly due to wealth management revenue and gross margin exceeding expectations of the 2023Q4 company's revenue of 73.7 billion yuan, up 22.6% year on year, slightly exceeding Bloomberg's agreed expectations (72.7 billion yuan); non-IFRS net profit of 4.37 billion yuan, up 427.6% year on year, significantly exceeding Bloomberg's agreed expectations (2.9 billion yuan), due to wealth management income and gross margin exceeding expectations. (1) Core business: Revenue increased 26.8% year over year, the number of instant delivery transactions increased 25.2% year over year, and the average amount of food and beverage takeout and express delivery orders declined year over year due to the high base and macro environment. The operating profit margin was 14.5%, down 2.1 pct year on year. Faced with the competitive environment and the impact of increased takeout subsidies, the average delivery cost benefited from sufficient labor supply; (2) New business: revenue increased 11.5% year over year, operating profit margin was -26.0% year over year, narrowing by 1.2pct month-on-month.
The home delivery business is expected to grow steadily in 2024. The store is focusing on GTV after write-off. The new business is expected to see a sharp loss reduction in 2024. (1) Home delivery business: the number of takeout orders is expected to grow steadily, customer unit prices are affected by the macro environment or decline year-on-year, and profit margins may decline slightly. Follow up on whether the recovery in consumption can drive order volume growth and customer unit price expectations to rise. (2) In-store business: Priority attention is given to GTV's performance after write-off in 2024. Profit margins are expected to stabilize, and market confidence is restored when the pattern becomes more clear and the recovery in operating profit margins brings about a recovery in market confidence. (3) New business: The community group buying business prioritizes user experience rather than share expansion. Losses are actively reduced by increasing the average unit price and reducing subsidies. Other new businesses are expected to achieve break-even. In the long run, the growth rate of takeout is stable, and in-store delivery is gradually being repaired. Waiting for new businesses such as flash shopping and grocery shopping to consolidate user mentality and stabilize market share, it is expected to open up overall profit margins.
Risk warning: Consumption recovery falls short of expectations, increased competition, regulatory changes, and new business expansion falls short of expectations.