Overall performance: Revenue and profit both exceeded Bloomberg's unanimous expectations. Meituan's 24Q2 revenue was 82.3 billion yuan, surpassing Bloomberg's agreed forecast of 2%; EBIT of 11.3 billion yuan, surpassing Bloomberg's agreed forecast of 29%. The adjusted net profit was approximately 13.6 billion yuan, surpassing Bloomberg's agreed expectations by 28%. By business, core local commercial revenue of 60.7 billion yuan surpassed Bloomberg's agreed expectations of 1%; new business revenue of 21.6 billion yuan, surpassed Bloomberg's unanimous forecast of 5%.

Core local business: The 24Q2 revenue side and profit side both exceeded expectations. 24Q2 revenue was 60.7 billion yuan, including delivery service revenue of 23 billion yuan, commission revenue of 22.1 billion yuan, and online marketing revenue of 12.3 billion yuan. 24Q2 operating profit of 15.2 billion yuan surpassed Bloomberg's agreed expectations of 24%.

Food and beverage takeout: Maintaining steady growth, continuous improvement in operational efficiency, and significant improvement in user retention rate and order frequency.

1) In terms of food delivery, the company further focuses on improving the operation of the shelf model to improve “cost-effective” products. Refined operations and strategies have enhanced user stickiness, user size, and frequency of purchases. 2) On the supply side, the company explores new product forms. The average number of orders for packed meals per day surpassed 8 million orders. The company continues to expand the brand's satellite stores and partner with more restaurants to provide quality choices at lower prices. 3) Looking forward to the future, the company will continue to innovate supply forms, deepen supply chain penetration, and provide more cost-effective products.

Meituan Flash Sale: Achieving strong growth, a steady increase in annual trading users, and a faster increase in order frequency. 1) The company deepens cooperation with various leading brands, connects to a large number of brand stores, and implements a number of merchant support measures to increase transaction conversion rates and promote incremental sales for merchants. 2) The company expanded the Meituan Lightning Store to a wider area. 3) The company goes deep into the supply chain and implements self-operated procurement.

In-store wine travel: In terms of in-store visits, the number of orders this quarter increased by more than 60% year over year. Annual trading users and annual active merchants hit new highs. 1) The company launched Meituan Group Purchase, which uses a shelf model to meet consumer demand for cost-effective products. 2) Promote popular products and increase the trading user base and order volume through special offers and various operating strategies.

3) This quarter, the God membership program was expanded to more categories of stores, hotels, and pilot cities in the travel sector, and promoted nationwide in July. 4) Continued investment in the sinking market, and GTV in the sinking market achieved significant growth.

In terms of wine tourism, domestic room nights and GTV have achieved steady growth. 1) The company expanded the “Hotel+X” package to provide consumers with cost-effective products and help merchants cross-sell other services. 2) The company further enhances its supply capacity in the low-star field and provides comprehensive online solutions for low-star hotel merchants. 3) For high-star hotels, the company launched the 2024 “Must-Stay List”, strengthened joint membership programs with high-star hotel groups, increased exclusive discounts and privileges, and launched joint marketing activities.

New business: 24Q2 operating losses narrowed to 1.3 billion yuan year over year. 24Q2 new business revenue of 21.6 billion yuan; operating loss of 1.3 billion yuan, better than Bloomberg's agreed forecast of 38%. By improving product quality and strengthening supplier cooperation, the company has improved the operational efficiency of Meituan Preferred Choice, which has led to an increase in the price increase ratio of individual product prices and price increases. The company further optimized execution, improved marketing efficiency, and optimized resource allocation, thereby significantly reducing losses. Little Elephant Supermarket has made significant progress in products, operations, and fulfillment, achieving higher growth than industry peers and improving efficiency. Other new businesses, including B2B food delivery services, RMS, bike sharing, and power banks, are growing healthily and improving efficiency.

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, and the new business will smoothly reduce losses.

Considering that the company's performance exceeded expectations and profitability continued to be released, we forecast Meituan's 2024-2026 revenue of 334.7/384.3/433.3 billion yuan (previous value of 329.2/380.9/429.3 billion yuan) and net profit (non-IFRS) of 40.8/60.6/72.4 billion yuan (previous value 36.4/53/65 billion yuan), respectively, to maintain the “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.