Bocom Intl released the third-quarter performance preview of Meituan (03690), expecting a 21% year-on-year increase in total revenue, compared to Bloomberg/VisibleAlpha (VA) expectation of 20% increase, and a 98% increase in net income to 11.4 billion yuan. 1) Local commercial (CLC): Expected revenue to increase by 20%, with on-demand delivery volume up by 14%, revenue up by 18%, and profit up by 36%. In-store hospitality and travel (IHT) revenue up by 20%, profit up by 32%, profit margin at 35%. 2) New business: Expected revenue to increase by 25%, narrowing quarterly losses to 1.86 billion yuan.

For the 2024-25 expectations: Predicted local commercial revenue growth rates for 2024/25 at 21%/18%, adjusted operational profit to increase by 30%/27% year-on-year, with profit growth > revenue growth > volume trends. Competitive pressure on in-store hospitality and travel business is easing, with revenue and profit growth accelerating in 2025, expected revenue growth for 2024/25 at 23%/30%, profit margin recovery to 35%. New business trend towards narrowing losses in the latter half of 2024 and potential further narrowing in 2025.

Bocom Intl believes that Meituan still holds a leading position in the instant retail and delivery industry in mainland China, facing competition in flash sales business but with a large market space. Platform monetization improvement relies on scale effects and diversified categories. Competition impact in the local life service market is relatively under control for Meituan, with limited profit impact from community group buying and overseas delivery expansion. Expected adjusted net income growth rates for 2024/25 at 78%/25%, corresponding to a 1x PEG in 2025, 25x PE ratio. Meituan's target price is raised to 228 Hong Kong dollars (from 136 Hong Kong dollars), 0.8x PEG, 20% net income growth rate, maintaining a buy rating.