Incidents:
On June 6, 2024, the company released its 2024Q1 financial report. 2024Q1 achieved revenue of 73.3 billion yuan (YoY +25%, QoQ -1%), operating profit of 5.2 billion yuan (YoY +45%, QoQ +196%), net profit of 5.4 billion yuan (YoY +60%, QoQ +142%), non-GAAP EBITDA of 8.1 billion yuan (YoY +29%, QoQ +116%), and non-GAAP net profit of 7.5 billion yuan (YoY +36%, QoQ +71%) ).
Core views:
Overall performance: 2024Q1 revenue exceeded expectations, mainly due to the company's refined marketing and subsidy strategies driving core local business growth exceeding expectations. Both 2024Q1 operating profit and non-GAAP net profit surpassed Bloomberg's unanimous expectations, mainly due to increased advertising monetization rates and optimization of subsidies, which led to core local commercial operating profits exceeding expectations.
Core local business: 2024Q1's core local business revenue increased 27% year over year to 54.6 billion yuan, and instant delivery order volume increased 28% year over year to 5.5 billion orders, mainly driven by continuous supply-side optimization combined with refined marketing strategies. 2024Q1's core local commercial operating profit increased 3% year over year to 9.7 billion yuan, exceeding Bloomberg's agreed estimate of 8.4 billion yuan. It mainly benefited from improved advertising monetization capacity and optimization of subsidy efficiency, partially offsetting the impact of the AOV decline.
① Food and beverage takeout business: The 2024Q1 takeout business is growing steadily. We estimate that the number of takeout orders increased by 24% year on year in 2024Q1, mainly due to the company's continuous optimization of marketing and subsidy strategies, expanding business coverage through various models such as popular, packed meals, and branded satellite stores to meet the diverse needs of users, driving the continuous growth in merchant size, user size and transaction frequency. The number of active users of Meituan Takeaway grew to close to 500 million.
② Meituan flash sales business: The 2024Q1 Meituan flash sales business maintained strong growth, with an average daily order volume of 8.4 million. The year-on-year growth rate of orders was more than double the year-on-year growth rate of takeout, mainly driven by an annual increase of more than 10% year-on-year active users and a significant increase in transaction frequency. The penetration rate of flash sales among takeaway users continued to increase. As of 2024Q1, there were about 7,000 Meituan Lightning warehouses, and the share of orders continued to increase, accelerating penetration into the low-tier market.
③ In-store wine tourism business: 2024Q1's on-site wine tourism business performed well. GTV increased by more than 60% year over year, annual transaction users increased by more than 37% year over year, and annual active merchants reached a record high. We estimate that 2024Q1 inbound wine tourism revenue increased 33% year on year, mainly benefiting from the company's continuous optimization of marketing and operation strategies. The nationwide implementation of a direct management model accelerated the penetration rate of the low-tier market. The number of domestic hotel nights and transaction amounts all achieved strong year-on-year growth in the first quarter. The 2024Q1 in-store wine travel business revenue growth rate is lower than GTV's growth rate mainly due to increased platform incentives for merchants and lower subscription service fees, but the gap between revenue and GTV's growth rate has narrowed month-on-month.
New business and others: 2024Q1's new business revenue increased 19% year over year to 18.7 billion yuan, operating profit -2.8 billion yuan (corresponding to 2023Q1 loss of 5 billion yuan), and operating profit margin -15% (YoY+17pct). The improvement in operating loss ratio was mainly due to improved business operating efficiency.
The operating efficiency of 2024Q1 Meituan Preferred's business has improved markedly. By increasing the product price increase rate and marketing efficiency, and reducing the cost of contract performance, the company has driven a sharp contraction in operating losses both month-on-month and year-over-year. It is expected that business losses will continue to narrow in the second quarter and second half of 2024.
Profit forecast and investment rating: Long-term optimism about the company's core barriers in the field of instant delivery, and considering the return of competition in the local lifestyle industry to rationality and loss reduction expectations for new businesses, we adjusted the company's 2024-2026 revenue forecast to 3,298/3845/436.9 billion yuan, raised the 2024-2026 net profit forecast to 297/414/54.7 billion yuan, and the non-GAAP net profit forecast to 375/541/66.9 billion yuan, corresponding diluted EPS to 66/4.6.44/8.42 Yuan; According to the SOTP valuation method, we gave Meituan a total target market value of 800.9 billion yuan in 2024, corresponding to a target price of 128 yuan/HK$138, maintaining a “buy” rating.
Risk warning: Macroeconomic growth falls short of expectations; consumption recovery falls short of expectations; competition in the local lifestyle and retail industry intensifies, industry growth falls short of expectations; UE, new businesses such as Meituan Choice, have fallen short of expectations, etc.