Incident Overview

In the third quarter of 2024, the company's revenue was 93.6 billion yuan, up 22% year on year; achieved adjusted net profit of 12.829 billion yuan, up 124% year on year; gross profit margin was 39.3%, up 4 pcts year on year.

The core local business grew 20%, and the average distribution revenue improved. In the third quarter of 2024, the company's revenue from core local businesses increased 20.2% year over year to 69.4 billion yuan, operating profit increased 44.4% year on year to 14.6 billion yuan, and operating profit margin increased 3.5 percentage points year on year to 21.0% year on year. During the reporting period, the average number of orders in the instant delivery business was 78.64 million orders per day, an increase of 14.5% over the previous year. Among them, logistics revenue increased 20.9% year-on-year, and average delivery revenue increased 6%. This is mainly due to more merchants switching to using platform delivery services. Changes in order structure are also driving the increase in delivery revenue. We judge that delivery UE has improved significantly. The on-site wine tourism business once again achieved steady growth. The number of orders increased by more than 50% year on year, the number of annual trading users and annual active merchants all reached record highs, and the number of domestic hotel nights continued to grow steadily.

New business losses exceeded expectations, Keeta launched in Riyadh, Saudi Arabia

In the third quarter of 2024, revenue from the new business segment increased by 28.9% year on year to 24.2 billion yuan, segment operating losses narrowed by 79.9% year on year to 1 billion yuan, and the operating loss rate improved 1.9 percentage points from month to month to 4.2%. During the reporting period, Meituan Choice's losses continued to narrow month-on-month. Thanks to improved efficiency and healthy growth, new businesses other than Meituan Preferred have been profitable. In October, Keeta officially launched in Riyadh, the capital of Saudi Arabia, marking an important step in international expansion of the new business.

Cost efficiency improved significantly. The gross margin increased by 4pct to 39% year on year. The results of the company's high-quality development strategy were remarkable. The gross margin increased by 4 pct to 39.3%, higher than the 3.8 pct increase in the previous quarter, mainly due to the company's efforts to improve cost efficiency; the cost ratio for the period was 28.11%, down 4.73 pct year on year, mainly due to increased marketing efficiency (especially retail business) and improved operating leverage.

Investment advice

We are optimistic about the stabilizing competitive pattern under the platform's differentiated endowments. We expect to achieve revenue of 331.4/366/407.1 billion yuan in 2024-2026, and achieve net profit of 30.7/42.4/53.1 billion yuan, corresponding to EPS of 5.05/6.97/8.73. Refer to the closing price of HK$167.4 per share on December 2, 2024. The RMB HKD exchange rate is 1.07 and PE is 33/24, respectively /19 times, maintaining the “buy” rating.

Risk warning

Risk of the pandemic disrupting retail and in-store operations; risk of performance growth falling short of expectations; policy risk.