Core view: In the short term, macroeconomic factors have put some pressure on the growth of takeout, but UE shows resilience, reflecting the company's market competitiveness. In terms of in-store wine travel, the boundary between the company and Douyin is gradually becoming clear, and profit margins are expected to gradually rise. The company's long-term competitive advantage is remarkable, the industry pattern has improved marginally, and the current valuation is worth laying out.
Adjust profit forecasts to maintain a “buy” rating. Considering the rapid loss reduction in the new business, we adjusted the profit forecast. The company's revenue for 2024-2026 is 3275.4/3844.6/441.29 billion yuan, respectively, up 18.4%/17.4%/14.8%; net profit to mother is 281.1/451.5/55.85 billion yuan (239.1/42.47 billion yuan in the previous 24-25 years), up 102.8/ 60.6%/23.9% year on year; EPS is 4.5/7.1/8.8 yuan, corresponding PE is 22.5 /14.1/11.5 Among them, core commercial operating profit was 448.1/569.8/68.52 billion yuan, and market capitalization/core business operating profit was 14.0/11.0/9.1 times in 24-26, respectively. We are optimistic about the company's long-term growth potential in local life, as well as the pricing ability brought about by competitive advantages, and maintain a “buy” rating.
24Q1 revenue was in line with expectations, and profit exceeded expectations. The 24Q1 company's revenue was 73.276 billion yuan, up 25.0% year on year, including core local commercial revenue of 54.626 billion yuan, up 27.4% year on year; new business revenue was 18.65 billion yuan, up 18 percent year on year.
At 5%, revenue side performance was in line with expectations. 24Q1's net profit to mother was 5.369 billion yuan, up 59.9% year on year, of which core local commercial profit was 9.699 billion yuan, up 2.7% year on year, exceeding expectations; new business operating profit was 2,757 million yuan, in line with expectations.
Instant delivery business: (1) Takeout UE improvements; (2) flash sales continue to grow at a high rate. According to our estimates, takeout orders increased by 24% in 24Q1, and UE (average operating profit) reached 1.18 yuan, down 0.12 yuan from 23Q1, but 0.28 yuan higher than 23Q4. The company's short-term UE fluctuates due to macroeconomics and its own growth strategy, but in the longer term, the company's UE depends on its competitive advantage over peers, and it is expected that there is potential for long-term improvement. Flash sales increased 60% in 24Q1, becoming an important driving force for the growth of instant delivery. Instant retail is still rapidly penetrating. In the long run, flash sales will become an important source of revenue and profit growth for the company.
In the on-site wine tourism business, Douyin's competitive pressure has eased somewhat, and operating profit margins have stabilized. In 24Q1, GTV's on-site wine tourism business grew by more than 60%, and the operating profit margin reached 31%, an increase of more than 2 pcts over the previous month. After experiencing fierce competition, Meituan and Douyin's market share stabilized as Meituan's competitive response and Douyin's own adjustments to Douyin's own local lifestyle business management strategy. Now that the difference in traffic attributes between the two is gradually showing, we expect that the market boundary between Meituan and Douyin will gradually become clear, which is expected to drive the company's in-store wine travel profit margin to gradually rise.
Preferred businesses have entered a rapid loss reduction cycle. With the gradual clarification of the company's positioning and management strategy for the community group buying business, the business has entered a relatively obvious loss reduction cycle. The 24Q1 new business lost 2,757 billion yuan in revenue, with year-on-year and month-on-month losses of 2,272 billion yuan and 2,076 billion yuan, respectively. We believe that in the long run, community group buying, as an attempt at new retail in the sinking market, is still likely to run through, and we will continue to observe in the future.
Risk warning: (1) the risk of macroeconomic downturn; (2) the risk of competition exceeding expectations; (3) the risk of information lag behind.