The company upgraded its strategy to “retail+technology” in September 2021, deeply integrating technological capabilities into local lifestyle services and retail business, and using technology to connect people with products and services. It focuses on areas such as instant retail, smart supply chain, and unmanned delivery. We believe that in line with the company's long-term strategy, in the context of DeepSeek leading breakthroughs in the efficiency and cost of large domestic models, the AI big model's empowerment for the company is worth paying attention to.

B-side SaaS: Since 2016, Meituan has accelerated the deployment of catering SaaS and reused it in other local service industry categories to provide full-link solutions for merchants in many aspects such as management, marketing, supply chain, etc. The real-time retail sector lays out the Morning Glory SaaS Middle Taiwan Meituan Catering System to provide one-stop solutions for catering companies. Online drainage includes takeout, group buying, reservation, queuing, payment, evaluation, etc.; offline experience includes front and back kitchen management, sales inventory, business analysis, financial management, membership marketing, etc. Referring to overseas, there is huge room for AI to empower food and beverage SaaS and improve merchant operating efficiency from many aspects. Overseas catering SaaS platform Toast uses AI to improve profit margins, improve employee satisfaction, increase user stickiness, and increase the conversion rate of marketing activities for stores by reducing inventory loss, generating optimal store schedules, personalized intelligent recommendations, dynamic pricing strategies, and menu optimization design; Doordash has improved restaurant operation efficiency through AI. Help merchants write marketing copy, automatically respond to customer reviews, optimize menu descriptions, produce employee training manuals, etc., significantly reducing administrative burdens. It also helps merchants conduct market analysis, competitor research, and provide personalized operation suggestions.

The Meituan Morning Glory System provides a full-process digital retail solution for local retailers. Starting with merchant business processes such as product management, fulfillment management, inventory management, employee management, financial management, user management, and supply chain management, the full link and scenario helps merchants reduce costs and increase efficiency, improve operating efficiency, and provide consumers with a home shopping experience. AI also has the ability to optimize resource allocation and improve efficiency through stronger data processing and understanding capabilities.

Reviewing the development process of overseas AI empowering SaaS. Starting with 23Q1-Q2, SaaS companies such as Salesforce and Servicenow began experimenting with incorporating AI functions into products and continued to iterate.

In 2024, we experienced the development from “AI Assist” to “AI Agent”, and AI was fully empowered.

As an efficiency improvement product for business operations, SaaS is highly sensitive to efficiency, so it is an important scenario for implementing generative AI. From the end of 24Q3 to the beginning of 24Q4, the BVP Nasdaq Emerging Cloud Index, which includes major US SAAS companies, rebounded 35% due to the accelerated application of generative AI commercialization and macroeconomic improvements.

C-side interaction enhances experience: Reviewing DoorDash, AI can improve customer experience in terms of personalized recommendations, service process guarantee, customer service, etc. in the field of takeout

DoorDash has significantly improved the C-side customer experience through a number of AI technologies, including:

1.AI Voice Ordering Service: In August 2023, DoorDash launched an AI voice ordering system to improve the operating efficiency and revenue of restaurants. During peak traffic periods, the AI system automatically answers phone calls, provides customers with personalized meal suggestions through voice interaction, and supports multi-language services.

2. Chatbot “DasHai”: In 2023, DoorDash launched the chatbot “DasHai”. Customers only need to enter keywords to get personalized restaurant and menu recommendations to speed up the ordering process.

3.AI tool “SafeChat+”: In March 2024, DoorDash launched an AI tool called “SafeChat+” to detect bad comments in communication between users and delivery agents. The tool can review more than 1,400 messages per minute and supports multiple languages including English, French, and Chinese.

4. Generative AI Contact Center: DoorDash collaborated with Amazon Web Services (AWS) to build a generative AI self-service contact center solution. Through a self-service interactive voice response (IVR) experience, the system reduces the number of agent transfers, increases the first-time contact resolution rate, and brings a better experience to users.

Technical reserves: Strategy upgrade to “technology+retail”, where instant retail, smart supply chain, and unmanned delivery ecology go hand in hand

Meituan's strategic layout in the field of unmanned delivery reflects the importance it attaches to scientific and technological innovation.

Since 2018, Meituan has begun in-depth research and development of autonomous driving technology, especially for urban terminal delivery scenarios, and has achieved many core technical achievements; in terms of drone delivery, Meituan has also made significant progress. By the end of 2024, Meituan drones had opened 53 routes in many parts of the country, with cumulative delivery orders exceeding 0.45 million.

In terms of investment, Meituan actively lays out the fields of robotics and automation technology. Starting in 2021, Meituan's strategic investment department will focus on fields such as robots, large models, power batteries, and chips. The layout of the robotics industry is particularly prominent. As of December 2024, Meituan has invested in more than 30 robotics and related upstream, downstream, and large model companies, including leading robotics companies in various segments.

Operational efficiency improvement: Referring to overseas industries, AI has significantly improved advertising efficiency. According to the company's 2024Q3 financial report, the company's core local business division, commission and distribution marketing services account for 57% of the revenue in this segment. From the perspective of overseas companies, AI has improved ad conversion rate and efficiency through real-time feedback optimization, intelligent recommendation engines, and automated ad creative generation, and has boosted advertising efficiency and revenue for Meta, AppLovin, Pinterest, and Snapchat.

Investment advice

We maintain the company's 2024-2026 revenue forecast of 336.7/385.7/435.2 billion, with growth rates of 22%, 15% and 13% respectively; maintain the adjusted net profit forecast of 42.3/52.2/70.8 billion yuan, with growth rates of 82%, 23% and 36%, respectively. We have long been optimistic about Meituan's operating, organizational and business barriers, and are optimistic about its “ultimate execution” organization's long-term exploration in the retail field, and suggest focusing on its comprehensive AI empowerment of the business under the long-term strategy of “retail+technology” to maintain a “buy” rating.

Risk Alerts

Policy risk; risk of user penetration falling short of expectations; risk of deteriorating competitive landscape; risk of new business falling short of expectations; risk of operating efficiency optimization falling short of expectations; risk of technological innovation and implementation falling short of expectations.