According to Zhitong Finance APP, Orient released a research report stating that it maintains a 'buy' rating on Meituan-W (03690). Considering the resilience of Meituan's business under the macroeconomic environment, the core local business synergy is expected to be released, with new business developments progressing well, raising the company's eps for 2024-2026 to 6.42/7.65/9.26 yuan (previously 6.15/7.43/8.21 yuan for 2024-2026), with a target price of 215.76 HKD. The company's revenue for Q3 2024 was 93.6 billion yuan (yoy +22.4%), with adjusted operating profit of 13.6 billion yuan and operating margin of 14.5%, significantly exceeding expectations.

Orient Securities' main points are as follows:

Core local business: both revenue and profit exceeded expectations.

In Q3 2024, revenue was 69.4 billion yuan (yoy +20.2%), while institutional consensus expected 68.3 billion yuan; adjusted operating profit was 14.6 billion yuan, with institutional consensus expectation at 12.9 billion yuan; operating margin was 21.0%, yoy +3.5pp. Looking at specific businesses:

1) Food delivery: the number of orders has grown steadily, with the average operating profit per order continuing to improve year-on-year. On the operational side, in Q3 2024, the total number of orders for food delivery and flash purchase was 7.078 billion (yoy +14.5%); it is estimated that food delivery orders increased by nearly 12% year-on-year. On the demand side, consumer frequency and consumer ARPU trends are positive. On the supply side, the company is continuously optimizing product models, providing high cost-performance offerings represented by Pinhao Fan, Shenqiangshou, and brand satellite stores, actively adapting to changes in dining consumption. In terms of revenue, delivery income and advertising monetization efficiency are improving. On the profit side, it is determined that the aggregated order effects of Pinhao Fan, improvements in user experience from replacing low-priced main site orders, and optimization of the average delivery cost contribute to the year-on-year increase in average operating profit per order, but considering the increase in summer seasonal subsidies, the average operating profit per order has decreased quarter-on-quarter. Looking ahead, although the growth rate of food delivery order volume is slowing due to macro challenges, new supply such as Pinhao Fan is expected to bring structural opportunities for order quantity growth; as the decline in AOV narrows, it is anticipated that revenue growth will outpace order volume growth. From the perspective of costs and expenses, optimism about the company’s delivery network's core barriers is noted, with the aggregation and scale effects of Pinhao Fan further leveraging operational leverage, leading to an expectation that profit growth will surpass revenue and order volume.

2) Flash purchase: user scale and frequency drive the order volume to maintain high growth. On the operational side, it is estimated that the year-on-year growth of flash purchase orders in Q3 2024 exceeded 35%. On the demand side, the number of users and transaction frequency for flash purchases both achieved double-digit year-on-year growth. On the supply side, thanks to supply expansion and improved service quality, non-food categories are experiencing rapid growth, with transaction frequencies of fresh and food-related categories continuing to increase; the quantity and order contribution of Meituan's lightning warehouses have also increased. In terms of revenue and profit, it is estimated that the revenue growth in Q3 2024 may be comparable to the order volume growth, and profitability has been achieved. Looking ahead, it is expected that flash purchase order volume will continue to grow at a high rate; on one hand, as the lightning warehouses accelerate their expansion across various categories, the breadth of consumed categories will expand; in addition, large retailers such as Miniso and Watsons opening warehouses will provide better supply quality and a more efficient supply chain, enhancing coverage for flash purchase users. Furthermore, the relatively higher average order value and the increased willingness of branded chain merchants to advertise for flash purchases suggest promising long-term profit elasticity.

3) Store hotel and travel: God members continue to advance, looking forward to long-term synergy effects. On the operational side, in Q3 2024, order volume for store, hotel, and travel businesses increased by over 50% year-on-year, with both annual transaction users and active merchants reaching historical highs. In strategy, the product side continues to offer live broadcasts, discounted group purchases, customized marketing strategies, and online operation tools to help merchants operate more precisely; on the platform side, the upgraded God member plan will be extended nationwide in the third quarter, and currently more than 50% of participating merchants in the store hotel and travel sectors; the proportion of orders using 'Meituan God Coupons' is continuously increasing. In terms of revenue and profit, it is estimated that the gap between revenue growth and GTV growth continues to narrow, and as competition in the store sector eases, OPM year-on-year rebounds; it is determined that this is mainly due to changes in category structure, an increase in income share from hotel and travel, and low-tier city expansion. Looking ahead, optimism remains about the synergy effects of core local businesses after organizational restructuring; in the future, 0.1 billion God members will be directed towards the store hotel and travel business, effectively promoting customer acquisition and transaction frequency for the latter. On the profit side, short-term OPM may still show volatility, but the absolute value of operating profit is expected to steadily increase.

A series of measures will support ecological partners and assist in sustainable growth.

In September 2024, Meituan announced the upgrade of the 'Prosperity Plan', specific measures include investing hundreds of billions to promote consumer spending, through brand marketing to jointly promote products with merchants; upgrading the 'Brand Satellite Store' commission return plan for 10,000 dining merchants, providing a commission return for 6 to 12 months; shortening group buying operation account periods to improve merchant cash flow efficiency; launching a digitalization initiative, etc. In October, the Lightning Warehouse 'Star Plan' was released, providing merchants with a full-link empowerment for opening Lightning Warehouses, including precise site selection, operational guidance, ramp resources, morning glory system, and exclusive delivery solutions, as well as daily special prices, special coupons, commodity cubes, smart distribution, and precise marketing support resources. In November, the dining merchant support action was launched, investing 1 billion to support quality dining merchants' innovative development.