vested
Earnings First Take: Earnings beat market expectations by 68% on higher margin of core local commerce (+ve)2Q23 revenue grew by 33% y-o-y to Rmb57bn, with core local commerce increasing by 39%
Adjusted net profit was Rmb7.7bn, 68% higher than market expectations due to stronger margin of core local commerce
Strong earnings performance demonstrates that impact from competition with Douyin is less severe than market feared
2Q23 revenue in line, earnings beat market expectations by 68%.
Meituan (3690 HK) announced its 2Q23 results on 24 Aug 2023 after market close.
Revenue increased by 33% y-o-y to Rmb68bn, in line with market expectations.
Segment-wise, core local commerce revenue increased by 39% y-o-y to Rmb51.2bn; revenue for the new businesses segment increased by 18% y-o-y to Rmb16.8bn.
Gross margin increased by 6.8ppt to 37% in 2Q23, from 2Q22’s 30.6%, mainly driven by lower rider cost due to sufficient supply and revenue mix change.
Operating profit of local commerce surged by 35% y-o-y to Rmb11.1bn, with the operating margin reaching 22%, mainly driven by strong order volume growth in food delivery.
Operating loss of the new businesses segment (including Meituan Select) narrowed by 24% y-o-y to c.Rmb5bn, mainly due to less subsidies for user acquisitions.
Adjusted net profit was Rmb7.7bn in 2Q23 (vs. Rmb2.5bn in 2Q22), beating market expectations by 68%, with net margin reaching 6.4% in 2Q23. (vs. 4% adjusted net margin in 2Q22).
Strong growth momentum to sustain in 2H23, competition better than feared. We expect a positive share price reaction to the strong 2Q23 results.
The strong beat in earnings was mainly due to the better-than-expected improvement in the core commerce margin, led by a strong rebound in order volume of food delivery and larger revenue contribution of high-margin in-store business.
In 2Q23, GTV of in-store hotel and travel business surged by 120% y-o-y and annual active merchants and transacting users hit new highs. We believe Meituan will continue to benefit from the sustained recovery in catering and offline consumption scenarios in 2H23.
We reiterated our view that competition in food delivery and the local service industry is moderating and less severe than what the market feared.
This is supported by Meituan's 35% operating profit growth of core commerce this quarter, which showcases its strong capability to effectively navigate the competitive landscape.
The company is trading at an undemanding valuation of 2.9x P/S, 1.2 S.D. below the historical average. We currently rate BUY with TP of HK$230.
Source: DBS
https://www.dbs.com/insightsdirect/comp ... cid=15780#
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