Forecast of main financial indicators: We expect Meituan to achieve total revenue of 92.1 billion yuan (YoY +20.5%, QoQ +12%); core local commercial revenue of 68.7 billion yuan (YoY +19%, QoQ +13%), of which the food and beverage takeout business is estimated revenue of 45.9 billion yuan (YoY +15%, QoQ +13%), operating profit margin 17.8% (YoY+2.9pct); flash sales business estimated revenue of 6.7 billion yuan Yuan (YoY +42%), operating profit margin 0.3% (YoY+2.4pct); estimated revenue of 15.4 billion yuan (YoY +25%, QoQ +11%), operating margin 35% (QoQ+1pct); new business estimated revenue of 23.5 billion yuan (YoY +25%, QoQ +9%), operating margin -8% (YoY+20pct).

Core local business - food and beverage takeout business: Actively expand new supply to help increase order volume, and multi-dimensional optimization unleash profit elasticity. We expect the 2024Q3 food and beverage takeout business revenue to increase 14.6% year over year to 45.9 billion yuan, GTV up 11% year on year, and operating profit margin up 2.9 pct to 17.8% year on year. (1) On the single-volume side, we expect the number of takeout orders to increase by 12% to 6.12 billion in 2024Q3, and the overall increase is expected to show steady growth, mainly due to ① the platform's accelerated layout contribution increase in the low price food preparation model. According to a late LatePost report, as of August 2024, 0.12 billion users had used the takeout package, close to 1/4 of Meituan takeout users; ② continue to develop the Shenzhen takeout supply chain through new supply models such as “brand satellite stores” and “food collection stores”; ③ August 2024 Meituan Takeout achieved a single-day peak order exceeding 90 million orders through the “First Cup of Milk Tea in Autumn” marketing campaign. (2) On the profit side, the average OP for 2024Q3 is expected to be about 1.34 yuan/order. The year-on-year increase in 2024Q3 is expected to be lower than the 2024Q2 year-on-year performance, mainly considering the decline in delivery costs due to sufficient rider resources and improved contract performance efficiency, which may only partially offset the negative impact of lower customer unit prices and increased seasonal subsidies. In the long run, we are optimistic about the core commercial barriers and social values of the takeout business. The platform drives long-term order volume growth by actively adapting to current changes in consumption power and deepening the supply chain. It is also expected to improve average profit per order by improving advertising monetization, improving the efficiency of refined operations, and reducing average order subsidies, etc., to release long-term profit flexibility.

Core local business - flash sales business: The instant retail industry is growing resilient, focusing on the long-term driving force of new business formats. We expect 2024Q3 flash sales revenue to increase 42% year over year to 6.7 billion yuan, and orders are expected to increase 37% year over year to 0.96 billion orders, and the instant retail industry maintains resilient growth. Among them, the lightning warehouse business has become one of the core driving forces (according to Wang Puzhong, CEO of Core Local Life at the “2024 Meituan Instant Retail Industry Conference” officially held by Meituan on October 15, 2024, said that the number of Meituan Lightning warehouses has now exceeded 0.03 million. 0.1 million units, and the market size will reach 200 billion yuan); the operating profit of the 2024Q3 flash sale is expected to be about 0.019 billion yuan, and the operating profit margin will drop 4.8 pct from month to month, mainly considering the increase in quarterly sales of holiday marketing activities (Olympics/European Cup/Tanabata, etc.) and the increase in seasonal delivery costs.

Core local business - retail, hotel and travel business: God members open up and unleash synergy, and the long-term competitive landscape remains optimistic. We expect the revenue of the on-site wine tourism business to increase 25% year-on-year to 15.4 billion yuan in 2024Q3, and the operating profit margin is expected to increase to 35% month-on-month, mainly due to:

1) We expect GTV in the wine travel sector to increase 35% year on year in 2024Q3, mainly considering the summer vacation driving in-store consumption and the release of synergy after “God members” arrive at the store. Although the growth of the wine tourism business is expected to be weaker than the arrival store due to high base issues, overall consumption continues to pick up. According to the “Eleventh” Golden Week data officially released by Meituan, the national daily consumption of lifestyle services increased by 41.2% year-on-year, and the average daily consumption of tourists increased 69.6% year-on-year compared to the previous year's vacation; according to Ministry of Culture and Tourism data, the 7-day national holiday The number of domestic travelers compared to 2019 The year-on-year increase was 10.2%, and the total travel expenses of domestic tourists increased by 7.9% compared to the same period in 2019; 2) Considering the improved efficiency of subsidies driven by God members and the continuous optimization of categories, we expect the operating profit of the 2024Q3 sector to increase 37% year-on-year to 5.4 billion yuan. Overall, the online penetration rate of the local lifestyle industry is still low. There is room for market growth, and Meituan actively responds to competition and actively exploits home-to-store synergy. We remain optimistic about the competitive pattern of Meituan's door-to-door wine travel sector. We expect the sector's revenue to be around 21% for 2023-2026.

New business: Preferably continue to reduce losses and focus on high-quality growth. We expect the revenue of the new business to increase 25% year-on-year to 23.5 billion yuan in 2024Q3, mainly considering the continued drive of the Little Elephant supermarket; we expect the overall loss of the new business to increase slightly to 1.8 billion yuan month-on-month in 2024Q3, of which the preferred forecast loss is 1.8 billion yuan, mainly considering seasonal cold chain investment.

Profit forecasts and investment ratings have long been optimistic about the company's core barriers in the field of instant delivery. Considering the return of competition in the local lifestyle industry to rationality and the acceleration of losses in new business, we adjusted the company's 2024-2026 revenue forecast to 332.8/386.3/438.9 billion yuan, 2024-2026 net profit forecast to 33.2/44.1/55.1 billion yuan, and the non-GAAP net profit forecast to mother is 41.5/57.3/68.3 billion yuan, corresponding dilution EPS was 5.22/6.86/8.48; according to the SOTP valuation method, we gave Meituan a total target market value of 1397.8 billion yuan in 2025, corresponding to a target price of 230 yuan/HK$250, maintaining a “buy” rating.

Risks suggest that macroeconomic growth falls short of expectations; competition in the local lifestyle and retail sector increases risks; UE improvements in new business fall short of expectations; the opening results of members of God fall short of expectations; forward-looking performance forecasts are for reference only, subject to company announcements, etc.