Incident: The company achieved revenue of 73.3 billion yuan in 1Q24 (v.S. Bloomberg's agreed estimate of 69 billion yuan), +25.0% year over year, and adjusted net profit of 7.5 billion yuan (vs. Bloomberg's agreed forecast of 5.8 billion yuan), or +36.4% year over year.
Revenue and profit both exceeded expectations.
Core local businesses are recovering steadily. The core local commercial division of 1Q24 achieved revenue of 54.6 billion yuan, +27% year over year, operating profit margin of 17.8%, -4.3 pct year on year, and the number of instant delivery transactions increased 28% year over year to 5.5 billion. By business, 1) Takeout business: the number of active takeout users grew to nearly 500 million, and the frequency of transactions also increased significantly. On the merchant side, the company strengthened marketing solutions, and the number of annual advertising merchants increased by more than 30%; 2) Flash shopping business: By the end of Q1, the number of “Meituan Lightning Stores” reached about 7,000, the supply side led to improved user experience, and the share of orders increased further, with an average daily order volume of 8.4 million; 3) The business grew strongly, GTV increased by more than 60% year on year. Over 37% Active mergers and acquisitions reached a record high in the year, and the live streaming business made significant progress. More than 400,000 merchants from more than 200 cities participated in the Meituan live broadcast in Q1.
Revenue from the new business grew steadily, and losses were drastically reduced. 1Q24's new business revenue was 18.7 billion yuan, +18.5% year-on-year. The operating loss rate was 14.8%, a year-on-year narrowing of 17.2 pcts. This is mainly due to Meituan's preferred business strategy paying more attention to operational improvement and high-quality growth, including increasing the product price increase rate during the Spring Festival, reducing the average cost of contract fulfillment through improving warehouse operations, and improving marketing efficiency. In addition, new businesses such as bike sharing and power banks have also made good progress in Q1. While maintaining a leading position in the market, operational efficiency has been improved. Looking forward to the future, the operating efficiency of the new business will continue to improve, which will further develop synergies with core local businesses and is expected to contribute to a new growth curve.
Profit forecast and investment advice: Meituan's competitive advantage in the local lifestyle sector is stable. We are optimistic about the long-term improvement of the company's industry penetration rate and operating efficiency. The adjusted net profit for 24/25/26 is estimated to be 372/539/68.3 billion yuan, +60%/45%/27% year-on-year, maintaining a “buy” rating.
Risk warning: Policy and regulatory risks; new business development falls short of expectations; industry competition intensifies.