Overall performance: 23Q4 profit performance exceeded market consensus expectations
Meituan's 23Q4 revenue was 73.70 billion yuan, surpassing Bloomberg's unanimous expectations of 1%; EBIT of 1.76 billion yuan, surpassing Bloomberg's agreed expectations by 32%. The adjusted net profit was about 4.37 billion yuan, surpassing Bloomberg's unanimous expectations by 51%. By business, core local commercial revenue was 55.13 billion yuan, surpassing Bloomberg's agreed forecast of 2%; revenue from new business was 18.57 billion yuan, exceeding Bloomberg's unanimous forecast of 1%.
Core local business: 23Q4 revenue was basically in line with expectations. Profit continued to release 23Q4 revenue of 55.13 billion yuan, of which distribution service revenue was 21.93 billion yuan, lower than Bloomberg's agreed forecast of 1%; commission revenue of 19.43 billion yuan, exceeding Bloomberg's agreed expectations of 4.4%; and online marketing revenue of 10.91 billion yuan, exceeding Bloomberg's agreed forecast of 8.7%.
23Q4 operating profit of 8.02 billion yuan surpassed Bloomberg's unanimous expectations of 5%.
Food and beverage takeout: We predict a 20% year-on-year increase in food and beverage takeout revenue in 23Q4. Annual transaction users in the takeout business will continue to grow, and medium- and high-frequency users and their purchasing frequency will steadily increase. The company optimizes operations in terms of products, marketing, and supply chains, and expands the scale of “packed meals” and the operation of high-order value products, such as “sought-after”, “one-person meals”, and “must-order lists.”
Meituan Flash Sale: We expect 23Q4 flash sales revenue to increase 30% year on year, 23 order volume will increase by more than 40% year over year, active merchants will increase by about 30% year over year, and users' purchase frequency and consumption will continue to increase. As more offline retailers accept instant channels, the platform's supply quality and diversity have also improved. Affected by continued subsidies to attract customers, we expect the Meituan flash sales business to maintain a slight loss as a whole, but benefiting from the strong tripartite network effect built by Meituan Takeaway, we expect the Meituan flash sales business to continue to be profitable in the future.
In-store wine travel: 23. GTV increased by more than 100% year over year, with annual trading users and annual active merchants growing by more than 30% and 60%, respectively. We forecast a 63% year-on-year increase in revenue from Meituan's on-site wine tourism business in Q4.
The company further strengthens its influence in the field of high-star hotels and deepens cooperation with merchants through joint marketing activities and joint membership programs with high-star hotels. We believe that the accumulation of Meituan's in-store business lies in a strong merchant base and a store-seeking mentality associated with strong offline traffic.
New business: 23Q4 operating loss narrowed to 4.8 billion yuan year on year, slightly higher than Bloomberg's expected 23Q4 new business revenue of 18.57 billion yuan; operating loss was 4.83 billion yuan, better than Bloomberg's agreed forecast of 4%, and the operating loss rate improved to 26% month-on-month.
Meituan Choice's growth slowed in '23 because the size of the community e-commerce market remained basically the same year on year. Reasons for Meituan Preferential's losses in '23:1) Scale growth was slower than expected, making it difficult to significantly reduce the cost of fulfillment for each product; 2) competition made it difficult to increase the price bonus ratio and reduce subsidies. The company will make strategic adjustments and optimize its business model in 24 years to reduce operating losses; it will prioritize building key capabilities and improving the user experience; and plans to increase the price bonus ratio and reduce subsidies in the future.
Meituan Grocery Shopping was upgraded to a new brand in December '23, transforming from a grocery store to an online supermarket. In '23, GTV in the Little Elephant supermarket increased by about 30% year-on-year. The sales contribution of private brands continues to grow. The user base, average order value, and purchase frequency have all been growing steadily.
Investment advice: Meituan's core competitiveness lies in its strong merchant base and decades of accumulated real user reviews. At this stage, its moat is still stable. Looking at this stage, barriers to the takeout business are stable, and the external competition pattern is gradually becoming clear. It is expected that the profitability of Meituan's core local businesses will continue to increase in the future. Considering that the macro environment is still uncertain, we forecast Meituan's revenue for 2024-2026 to be RMB 3167/3773/427.7 billion (RMB 3338/405 billion before 24/25) and net profit (non-IFRS) of RMB 239/384/45 billion (RMB 416./71.7 billion before 24/25), respectively, maintaining a “buy” rating.
Risk warning: The growth rate of takeout is slowing; competition for local lifestyle services is intensifying; there is uncertainty about the continuation of offline consumption recovery; and there is uncertainty about the pace of loss reduction in new businesses.