Key points of investment
Meituan released its 24Q2 earnings report, and both revenue and profit exceeded expectations. 24Q2 achieved revenue of 82.251 billion yuan, +21.0% year over year, exceeding Bloomberg's agreed expectations of 2.28%. The adjusted net profit was 13.606 billion yuan, +77.6% year over year, exceeding Bloomberg's agreed expectations of 28.22%. The adjusted net profit margin was 16.5%, +5.3 pct year on year.
Look at it by business:
In other words, the growth in distribution order volume and advertising revenue is driving a high increase in core local commercial revenue. The 24Q2 core local commercial revenue was 60.682 billion, +18.5% year-on-year, exceeding Bloomberg's consensus forecast of 1.30%. In terms of revenue, delivery/commission/online marketing/other service sales revenue was 230.21/22.108/12.263/3.289 billion yuan respectively, up 13.0%/20.1%/19.7%/51.0%, respectively. Core local commercial operating profit of 15.234 billion yuan, +36.8% year over year, surpassed Bloomberg's agreed expectations of 23.57%, and operating margin was 25.1%, +3.3 pct year over year. The 24Q2 instant delivery order volume was 6.167 billion orders, +14.2% year-on-year.
Food and beverage takeout: The high increase in the number of “packed meals” orders leverages small and medium-sized merchants. Increased takeout penetration rate combined with effective operation of segmented scenarios attracts merchants to advertise, improving advertising monetization capacity or driving significant growth in takeout UE.
In 24Q2, the average daily order volume peak reached a record high of 800w, helping users lower the ordering threshold, significantly increasing user retention and order frequency, and driving small to medium businesses to usher in new growth. In addition, the platform takes into account product quality and continues to cooperate with more restaurants to expand “branded satellite stores” and provide quality and price ratio options. Satellite stores can reduce rent costs and streamline personnel, so investment is low, returns are fast, and flexibility is very high. Thanks to the launch of such new product forms, the increase in the penetration rate of the takeaway industry, and home+in-store collaboration to help merchants expand their service radius and new traffic exposure, we judge that Meituan Catering's takeout advertising monetization capacity will continue to improve. Coupled with sufficient rider-side supply and further improvements in delivery efficiency, takeout UE may be expected to grow even more significantly.
Meituan Flash Sale: 24Q2 saw results in exploring potential categories and scenarios such as alcohol/drug purchases. Annual trading users grew steadily and order frequency grew faster. According to the company's financial report, the 24Q1 Meituan Lightning Store already has 7,000. The 24Q2 Lightning Store will expand to more regions and provide merchants with online operation support such as user traffic, product selection recommendations, and pricing strategies. Alcohol and pharmaceuticals have become potential categories in Meituan flash sales. In the size of the instant retail market in 20-22, beer grew by 83%, foreign liquor increased by 628%, and liquor increased by 554%, far higher than the overall growth in the alcohol category. The 24Q2 Meituan self-operated brand “Weishima Liquor Delivery” continues to expand. The pharmaceutical category meets seasonal demand, strengthens the supply capacity of health products, and opens online medical insurance payment channels for non-prescription drugs in some cities.
In-store wine travel: 24Q2 low-tier GMV grew significantly, mainly due to Q2 orders YOY +60%, which reached new highs for annual trading users and active merchants. The merchant side is active mainly because “God members” accumulate high-quality user assets and new product forms such as “instant delivery” to attract traffic. 24Q2 “God Member” expanded to include more categories of in-store wine tours and was launched nationwide in July, deepening cooperation with more businesses. The pilot “instant delivery” function for food delivery mainly covers high-frequency consumer categories such as tea, coffee, etc., with more than 0.08 million cooperative brand stores spread across 360+ counties, regions and cities across the country, and has served more than 20 million users since its launch. Wine Tourism expands the supply capacity of low-star hotel merchants and provides comprehensive online solutions such as traffic acquisition. YOY +60% and 50% for GMV for Zongzhong Leisure and Beauty GMV, respectively.
Since new businesses that take on seasonal demand are reducing losses faster than expected, it is preferable to improve operating efficiency by increasing the average price of parts and the price increase rate of products, and fast donkeys and elephants drive rapid revenue growth. 24Q2 new business revenue of 21.569 billion yuan, higher than Bloomberg's agreed forecast of 4.98%, and operating losses narrowed to 1.314 billion yuan, a year-on-year reduction of 74.7%, higher than Bloomberg's agreed forecast of 37.94%. Little Elephant Supermarket has made remarkable progress in terms of products, operations, and contract fulfillment, leading the industry in growth. Other new businesses, such as B2B catering supply chain services, bike sharing, and power banks, have all achieved healthy growth and efficiency improvements. The overall growth of the new business reduced losses and improved, helping to strengthen the platform ecosystem collaboratively.
The cost-side sales expense ratio has been effectively reduced, and overall fee control is good, helping to release profits. The 24Q2 company's gross margin was +6.1pct year over year to 41.2%, and the profit level was continuously optimized. In 24Q2, sales expenses reached 14.832 billion yuan, +1.9% year over year, sales expenses ratio 18.0%, year-on-year -3.4 pct. The main reason was the reduction in transaction user incentives, promotion and advertising expenses as a share of revenue due to optimization of marketing strategies. R&D expenses were 5.34 billion yuan, -1.2% year-on-year, and the R&D expenditure ratio was 6.5%, or -1.5pct year-on-year, mainly due to improved operating leverage. Management expenses were 2.695 billion yuan, +26.0% year-on-year, and the management fee ratio was 3.3%, which remained stable year-on-year.
Profit forecast: The company is expected to achieve revenue of 334.402 billion yuan/393.22 billion/ 452.964 billion yuan in 2024/2025/2026, up 20.8%/17.6%/15.2%; adjusted net profit of 41.815 billion yuan/55.647 billion yuan/68.938 billion yuan, up 79.8%/33.1%/23.9%, corresponding PE is 15.79X/ 11.87X/9.58X, maintaining a “buy” rating.
Risk warning: Consumption recovery falls short of expectations, competition falls short of expectations, and new business losses fall short of expectations.