Overall performance: 24Q1 profit performance exceeded the unanimous expectations of the market
Meituan's 24Q1 revenue was 73.28 billion yuan, surpassing Bloomberg's consensus estimate of 6.0%; EBIT of 5.21 billion yuan, surpassing Bloomberg's agreed forecast of 25.2%. The adjusted net profit was approximately $7.49 billion, exceeding Bloomberg's unanimous expectations of 25.4%. By business, core local commercial revenue was 54.63 billion yuan, exceeding Bloomberg's agreed forecast of 7.7%; revenue from new business was 18.65 billion yuan, exceeding Bloomberg's agreed forecast of 2.3%.
Core local business: The 24Q1 revenue side and profit side both exceeded expectations of 24Q1 revenue of 54.63 billion yuan, including distribution service revenue of 210.7 billion yuan, commission revenue of 20.03 billion yuan, and online marketing revenue of 10.31 billion yuan. Operating profit for 24Q1 was 9.70 billion yuan, exceeding Bloomberg's unanimous expectations of 14.9%.
Food and beverage takeout: The number of annual transaction users and transaction frequency have increased significantly. The company optimizes operations in terms of products, marketing and supply chain: 1) launched “branded satellite stores” to improve the efficiency of well-known restaurant chains; 2) expanded the coverage of “packed meals” to more cities, and the number of daily orders for “packed meals” reached a new high in 24Q1; 3) improving “popular” supply and improving online marketing strategies 4) carrying out marketing activities during the holidays to stimulate consumer demand and provide a variety of coupon packages and discounts to promote popular products.
Meituan Flash Sale: The number of trading users increased dramatically in 24Q1, and the transaction frequency achieved high growth. During the Spring Festival, GTV in categories such as beverages, holiday gifts, and daily necessities all recorded significant growth. Merchants' willingness to advertise on the platform has increased, and the company is also cooperating with brands and merchants to launch promotional activities. The company continues to expand new supply formats. By the end of 24Q1, the company had about 7,000 Meituan Lightning warehouses, and the share of orders further increased. Meituan Lightning Warehouse has accelerated its online penetration in the low-tier market, and the range continues to expand.
In-store wine tourism: In terms of in-store business, the company improves marketing capabilities and enriches content products. The company launched a dedicated live streaming event during the holidays. Live streaming on the Meituan platform has expanded to more regions and further increased the frequency of live broadcasts. Furthermore, the company is implementing a direct management model throughout the country to enter the low-tier market. The company actively attracts low-tier market merchants, including famous online stores, chain stores and local specialty stores, and provides them with efficient operating solutions and marketing tools. In terms of hotels and tourism, the number of domestic hotel room nights and GTV both achieved strong year-on-year growth in 24Q1. The company continues to strengthen platform supply, pricing, product capabilities and marketing strategies. Niche destinations performed strongly, growing faster than the industry average. 24Q1 is consolidating the market share of low-star hotels, while also making progress in the high-star hotel sector. 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: 24Q1 operating loss narrowed year-on-year to $2.76 billion.
24Q1 new business revenue of 18.65 billion yuan; operating loss of 2.76 billion yuan, better than Bloomberg's agreed forecast of 14.7%. The operating margin continued to improve, to negative 14.8%.
Meituan Preferred: Improve business strategies, pay more attention to operational improvement and high-quality growth: increase the price increase rate; reduce the average cost of fulfillment for each product while strengthening warehouse operations; and improve marketing efficiency. Operating losses narrowed sharply both month-on-month and year-over-year. Looking ahead, the company will further improve operational efficiency and enhance product selection and fulfillment capabilities.
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 Meituan's revenue side and profit side exceeded expectations in the current quarter, and profitability increased as new business losses continued to narrow, we forecast Meituan's 2024-2026 revenue of 3292/3809/429.3 billion yuan (previous value of 3167/3773/427.7 billion yuan), and net profit (non-IFRS) of 364/53/65 billion yuan (previous value of 328.472/54.2 billion yuan), 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.