2Q24 Performance Forecast: Under pressure, the company's resilience is highlighted, and the “buy” rating is maintained

In the second quarter of 2024, the domestic macro trend was still fluctuating. The growth rate of social zero food and beverage consumption slowed, and the company linked home and store business through members of God, while reducing losses in the new business accelerated. We believe that with years of refined operation, the company's profits are still resilient under pressure. We expect 2Q24's revenue to reach 79.92 billion yuan, yoy +17.6%; non-IFRS net profit 8.92 billion yuan, QOQ +16.4%. We expect revenue for 24-26 to be 325.2/383.7/450.1 billion yuan, yoy +17.5%/18.0%/17.3%, and the non-IFRS net profit forecast is 37.9/53.4/70 billion yuan, yoy +63.1%/40.8%/31.1%. According to the closing price on July 26, the 24-26 PE is 16.1/11.4/8.7x, respectively. The exchange rate assumption (RMB to HKD) is 1.09, based on the SOTP model's target The price is HK$150.7, maintaining a “buy” rating.

Home delivery business: Consumption pressure may fluctuate, and the profit side is still resilient. In April to 2024, the year-on-year growth rate of social zero food and beverage consumption slowed to 4.4% 5.0%/5.4% (12.5%/6.9% growth rate in January-2/3). Against the backdrop of fluctuations in the overall domestic economy, the company actively launched the “Magic Coupon Festival” campaign to stimulate demand and satisfy consumers seeking cost performance by preparing good meals. We expect Meituan's 2Q24 takeout order volume yoy +13%; 2Q24 food and beverage takeout revenue yoy +11%, mainly due to a slight decline in AOV under the cost-effective consumption trend. Profit side companies are actively hedging the impact of AOV decline by improving subsidy efficiency and advertising monetization rates. The 2Q24 takeout UE is estimated to be 1.6 yuan, and profits are still resilient. 1Q24 flash purchase orders maintained a high growth rate, and the company continued to lose slightly by improving user mentality through new category subsidies and traffic procurement. We believe that despite external pressure, Meituan still has strong control over profits through years of refined operations, and is optimistic about its profitability.

In-store business: “God members” are linked to the home to the store, and the OPM slope is upward or higher than the guide. We expect GTV in the 2Q24 retail sector to increase 35% year-on-year, and the impact of organizational structure adjustments will gradually be implemented. Under a strategy that focuses more on post-write-off GTV, the gap between revenue and GTV narrows. We expect 2Q24 in-store revenue to increase 22% year over year. Meituan uses “God Members” to link the home and in-store business. The synergy effect further enhances its competitiveness and is expected to increase the market share of the in-store business. On July 11, '24, Meituan recruited elevator advertising franchisees in the sinking market to promote a closed loop of online and offline marketing channels, and effectively promote the penetration rate and business scope of the in-store business in the sinking market. Considering that the second quarter is a time for Meituan's business collaboration and in-store competition to slow release, we believe that the recovery slope for in-store OPM will maintain an upward trend. It is expected that 2Q24OPM will reach 32.8%, or higher than the company's guidelines. In the context of business collaboration and easing competition, we are optimistic that the 2H24 profit margin of Meituan's in-store business continues to improve.

Risk warning: Competition in the local lifestyle market has intensified; profits of core business divisions have fallen short of expectations.