Incidents:
The company announced results for the fourth quarter and full year of fiscal year 2023. In 2023, the company achieved operating income of 276.7 billion yuan, an increase of 25.8% over the previous year, and achieved adjusted net profit of 23.3 billion yuan.
Thanks to the rapid recovery of local commerce, the core local business achieved steady growth throughout 2023. The revenue of the company's core local business division was 206.9 billion yuan, up 28.7% year on year; operating profit was 38.7 billion yuan, up 31.2% year on year, and operating profit margin increased to 18.7% from 18.4% in 2022.
Takeout business: The food and beverage takeout business will continue to maintain its leading market position and core competitiveness in 2023. Annual transaction users will continue to grow, and the number of medium- and high-frequency users and purchase frequency will increase;
In-store, hotel and travel business: Thanks to the positive capture of the rebound in offline consumption, the in-store and wine tourism business grew rapidly in 2023. The transaction amount increased by more than 100% year over year, the number of annual transaction users increased by more than 30% year on year, and the number of active merchants increased by more than 60% year on year;
Flash sales business: In 2023, the flash sales business maintained strong growth. The number of orders increased by more than 40% year on year, and the purchase frequency and spending amount of flash sales users continued to increase; on the merchant side, the number of active merchants in the flash business increased by nearly 30% year on year.
Thanks to improvements in operating efficiency, new business losses narrowed significantly in 2023. The company's new business segment revenue was 69.8 billion yuan, an increase of 18% over the previous year; operating losses narrowed to 20.2 billion yuan, which is a significant reduction from the loss scale of 28.4 billion yuan in 2022, and the operating loss rate improved to 28.9% from 47.9% in 2022. In 2024, it will continue to improve operating efficiency to reduce losses. For Meituan's preferred business, the company will make strategic adjustments, improve the business model, increase product price increases and reduce subsidies, and pay more attention to long-term growth in the natural retention rate of users to achieve the goal of drastically reducing operating losses.
Profit Forecasts, Valuations, and Ratings
Taking into account the steady growth of the company's core local commercial business and significant loss reduction in new business segments, we have raised our estimates of the company's revenue and adjusted net profit. The estimated revenue for 2024-2026 is 3328/3907/444 billion yuan respectively, corresponding growth rates are 20.3%/17.4%/13.7%, and adjusted net profit is 340/492/60.1 billion yuan respectively, corresponding growth rates are 46.1%/44.9%/22.2%, respectively. Considering that Meituan is still growing rapidly, referring to comparable company valuation multiples, we gave the company 18 times PE in 2024 (based on adjusted net profit), then the company's reasonable market value was 611.4 billion yuan/HK$674 billion, and the target price was 97.91 yuan/107.94 HK$107.94 (exchange rate 0.90706), maintaining the “gain” rating.
Risk warning: economic downturn risk; local lifestyle business competition increases risk; company operation risk;