Incident Overview
In the fourth quarter of 2023, the company achieved revenue of 73.7 billion yuan, +22.6% year-on-year, and adjusted net profit of 4.38 billion yuan, +427.6% year-on-year. The company achieved revenue of 276.74 billion yuan for the full year of 2023, +25.8% year-on-year, and adjusted net profit of 23.3 billion yuan, compared to 2.83 billion yuan for the full year of last year.
The core local business grew steadily. In the fourth quarter of 2023, the core local commercial revenue increased by more than 40% year over year, with advertising revenue of +26.8 billion yuan, of which advertising revenue was 10.9 billion yuan, +40.8% year over year. We believe that the competitive impact was manageable; that is, allocation revenue was about 21.9 billion yuan, +10.9% year over year. We judge that this was an active reduction after delivery costs fell; commission revenue was 19.4 billion yuan, +32.7% year over year. The operating profit margin was 14.5%, compared to -2.1 pct. We judge that it was mainly due to increased marketing investment under in-store competition.
In the fourth quarter of 2023, the number of instant delivery transactions reached 6.05 billion, +25.2% over the same period, with an average daily order volume of about 65.9 million orders, mainly due to the continuous growth of transaction users and the increase in the frequency of purchases by medium- and high-frequency users. The core competitive position of the takeout business is stable, and the scale of meal preparation coverage has been expanded; the flash shopping business continues to grow at a high rate. In 2023, flash order volume increased by more than 40% year over year, and annual active merchants increased nearly 30% year over year. At the same time, lightning warehouses covered more than 200 cities.
In terms of in-store wine travel, transaction amounts increased by more than 100% in 2023, and annual trading users and annual active merchants increased by more than 30% and 60%, respectively. Among them, the amount of domestic hotel transactions increased by more than 100% year over year. The company's marketing efforts increased during the reporting period, and the number of night reservations reached a record high during the holidays. We judge that the competitive pattern in the industry is gradually stabilizing, and the company's countermeasures are strong.
New businesses continue to reduce losses and anchor high-quality growth
In the fourth quarter of 2023, the revenue growth rate of the new business segment slowed to +11.6% year over year to 18.6 billion yuan, and the operating loss rate improved by 12pct to 26% year over year. On the preferential side, the company announced that it will make strategic adjustments, with the main goal of drastically reducing operating losses, reducing subsidies, and paying more attention to natural growth in user retention rates. In terms of grocery shopping, the annual turnover was +30%. In December 2023, Meituan Grocery Shopping was upgraded to a small elephant supermarket and officially switched to an online supermarket business. The user size, average customer unit price, and purchase frequency all grew steadily. We believe the new business will continue to reduce losses, and the company will pay more attention to return on investment.
Investment advice
We are optimistic about the stabilizing trend of the competitive landscape under differentiated platform endowments. Considering the impact of loss reduction trends on revenue and profit, we expect to achieve revenue of 3314/3660/407.1 billion yuan in 2024-2026 (previous value of 3315/407.1 billion yuan) and achieve net profit of 307/424/53.1 billion yuan (2024-2025 previous value: 375/49 billion yuan), corresponding to EPS 4.93/6.80/8.52 yuan (pre-2024-2025 value) ($6.01/7.85), with reference to the closing price of HK$93.4 per share on March 26, 2024, the RMB exchange rate was 1.08 and PE was 19/14/11 times, respectively, maintaining the “buy” rating.
Risk warning
Risk of the pandemic disrupting retail and in-store operations; risk of performance growth falling short of expectations; policy risk.