The bank believes that Meituan still holds a leading position in the instant retail and delivery industry in mainland China, while dining delivery has already achieved a high online penetration rate.
According to the Financial and Economic Intelligence APP, Bocom Intl released a report stating a reasonable target price adjustment for Meituan-W (03690) to 228 Hong Kong dollars, maintaining a "buy" rating. The bank believes that the current price of Meituan corresponds to a PE ratio of 25 times/20 times in 2024/25, leading the industry, and still holding a leading position in the instant retail and delivery industry in mainland China with high online penetration of dining delivery.
Bocom International's main points are as follows:
Preview of performance in the third quarter of 2024
Expected total revenue to increase by 21% year-on-year, compared to institutional/VisibleAlpha (VA) expectations of 20% increase; expected net income to increase by 98% to 11.4 billion yuan (RMB, the same below), with a net profit margin of 12.3%, compared to institutional/VA expectations of 106%/109% increase. Local business (CLC) expects revenue to increase by 20% year-on-year (VA expected +18%), with instant delivery order volume increasing by 14%/revenue by 18%/profit by 36% (VA expected 14%/15%/33%), in-store hotel and travel (IHT) revenue increasing by 20%/profit by 32%/profit margin 35% (VA expected 28%/37%/34%), and new business revenue expected to increase by 25% year-on-year.
Expectations for 2024-25
Expect local business revenue growth rates of 21%/18% in 2024/25, with adjusted operating profit increasing by 30%/27% year-on-year. Instant delivery order volume is expected to continue steady growth, with profit growth > revenue growth > consistent trend in order volume. Competition pressure in the in-store hotel and travel business is easing, with accelerated revenue and profit growth in 2025; expected revenue growth of 23%/30% in 2024/25, adjusted operating profit increase of 20%/33%, and profit margin returning to 35%.
Investment insight.
The current price of the company corresponds to a PE ratio of 25 times / 20 times for 2024/25, leading the industry. The bank believes that Meituan still occupies a leading position in the real-time retail and delivery industry in mainland China, although dining delivery has achieved a relatively high online penetration rate, it can still meet diverse user needs through multiple product lines like Pindao Fan. Flash sales business still faces competition, but there is a large market space, and scale effects and product diversification are still important prerequisites for platform monetization. The competition in the local life service market has been basically controllable for Meituan's impact, consistent with the bank's previous judgment. Currently, investment in emerging industries in the local life service market is still in the early stage, where Meituan also has advantages. The impact of community group buying and overseas expansion investment on profit is limited, and it is expected that the adjusted net profit growth rate for 2024/25 will be 78% / 25%, corresponding to a PEG of 1 times in 2025 and a PE ratio of 25 times.
