Incident Overview
In the first quarter of 2024, the company achieved operating income of 73.276 billion yuan, a year-on-year increase of 25.01%, and achieved adjusted net profit of 7.488 billion yuan, an increase of 36.36% over the previous year.
The profit of the core local business exceeded expectations. Instant delivery showed impressive growth. During the reporting period, core local commercial revenue increased 27% year over year to 54.6 billion yuan, operating profit increased 2.7% year over year to 9.7 billion yuan, and operating profit margin increased 6 pct to 8.5% month-on-month. We judge that the impact caused by external competition has stabilized.
During the reporting period, the number of instant delivery transactions by the company was 5.465 billion, an increase of 28.1% over the previous year. Among them, 1) The number of annual transaction users and transaction frequency in the food and beverage takeout business increased significantly. During the reporting period, the company launched a “branded satellite store”, even if the merchant did not provide dine-in, but only food and beverage takeout services; the peak daily order volume of “packed meals” reached a new high; and “Divine Hand” launched more popular food chains. 2) The flash sales business continued to grow at a high rate, leading to a sharp increase in the number of trading users and a faster increase in transaction frequency. By the end of the first quarter, the company had about 7,000 “Meituan Lightning Stores”, and their share of orders had further increased.
In terms of in-store wine travel, domestic hotels have achieved strong year-on-year growth in overnight volume and transaction amounts. The market share of low-star hotels is stable, and the share of high-star hotels has also made good progress.
Significant progress in reducing losses in new businesses, and high-quality growth continues
During the reporting period, revenue from the new business segment increased 18.5% year on year to RMB 18.7 billion, operating losses narrowed by 45.2% year on year to RMB 2.8 billion, and the operating loss ratio improved to 14.8%. The company optimized Meituan's preferred business strategy, paid more attention to operational improvement and high-quality growth, increased the product price increase rate, reduced the average cost of contract fulfillment by improving warehouse operations, and improved marketing efficiency. As a result, operating losses narrowed sharply both month-on-month and year-over-year. We are optimistic that the company will further improve operational efficiency and enhance its capabilities in product selection and contract fulfillment, and high-quality growth is expected to continue.
Investment advice
We are optimistic about the stabilizing competitive landscape under the differentiated endowment of platforms. We expect to achieve revenue of 3314/3660/407.1 billion yuan in 2024-2026, and achieve net profit of 307/424/53.1 billion yuan, corresponding to EPS of $4.93/6.80/8.52. Referring to the closing price of HK$115.3 per share on June 11, 2024, the RMB HKD exchange rate is 1.08, and PE is 22/16/13 times, respectively, maintaining the “buy” rating.
Risk warning
Risk of the pandemic disrupting retail and in-store operations; risk of performance growth falling short of expectations; policy risk.