Revenue growth was steady, with an adjusted profit margin of 5.9%. With 2023Q4, Meituan achieved revenue of 73.7 billion yuan, an increase of 23% over the previous year. By revenue type, instant delivery service/transaction commission/marketing service revenue increased +11%/+33%/+41% year-on-year, respectively, this quarter. Sales rates have increased due to competitive investment, and gross profit margins and R&D rates have been significantly optimized. In 23Q4, Meituan achieved adjusted net profit of 4.4 billion yuan, up 428% year on year; adjusted net profit margin was 5.9%, up 4.5 pct year on year.
Core local area: Average profit from takeout orders declined slightly, focusing on the impact of organizational adjustments on operating efficiency.
2023Q4, core local businesses achieved revenue of 55.1 billion yuan, an increase of 27% over the previous year. We estimate that in 2023Q4, the revenue from the takeout/flash shop/in-store wine travel business increased by 18%/27%/65% year-on-year, respectively.
1) The total number of orders delivered instantly increased by 25% year-on-year, and average order profit decreased slightly. In 23Q4, the number of food and beverage takeout orders increased 25% year on year, and the average profit per order decreased due to the increase in subsidies. Flash sale orders increased 27% year over year. In terms of profit, the average loss of flash sales in 23Q4 improved significantly year over year, mainly due to lower brand marketing budgets.
Considering the good recovery in consumption during the Spring Festival, the growth rate of immediate delivery orders is expected to be 23% in 24Q1.
2) In-store wine tourism GTV grew by more than 160%, and the operating profit margin due to competitive investment was 29%. We estimate that GTV's on-site wine tourism business grew by more than 160% in 23Q4. With competitive investment, the profit margin of on-site wine tourism operations declined year-on-year, mainly due to increased marketing efforts and strategic investment in low-tier cities.
Considering investment during the Spring Festival, we expect the operating profit margin of the 24Q1 on-site wine tour to be flat compared to the previous month.
3) In February '24, Meituan adjusted its organizational structure, integrated its core local commercial business, and reported to Meituan's senior vice president Wang Puzhong. We recommend focusing on the optimization of operational efficiency brought about by organizational adjustments.
New business: 2024 Preferred will significantly reduce losses. In 23Q4, new business revenue increased 11% year over year to 18.6 billion yuan. The increase was mainly due to the development of the retail business, which was partially offset by the contraction of the self-operated online car-hailing business.
In 23Q4, operating losses from new businesses narrowed slightly to 4.8 billion yuan month-on-month. According to the results conference, Meituan Premium's operating loss ratio narrowed this quarter, mainly due to improvements in operating efficiency. The company said the community group buying market is more difficult than expected, and strategic adjustments will be made in 2024 with the goal of drastically reducing operating losses. We expect losses from new businesses to narrow to $3 billion in 24Q1.
Investment advice: Considering the company's adjustment of the community group buying strategy and focusing on loss reduction, we have raised our profit forecast for 2024 and expect adjusted net profit of 363/493/643 billion yuan for 24-26 (adjustment range +14%/-3% /-). Maintaining a target price of HK$125-144, we are still optimistic about the competitive advantage of the company's core business and continue to maintain a “buy” rating.
Risk warning: competitive risk; risk of business adjustments brought about by policy regulation, etc.