Meituan 3690

[winston]

not vested

Earnings First Take: 3Q22 earnings beat market expectations (+ve)

3Q22 Revenue grew by 28% y-o-y to Rmb62.6bn, with core local commerce increasing by 25%

Adjusted net profit was Rmb3.6bn, beating market expectations of c.Rmb760m

The outperformance in earnings was mainly due to narrower-than-expected operating loss of new businesses

Expect positive share price reaction on the robust 3Q22 earnings

What’s New
- Meituan (3690 HK) announced its 3Q22 results on 25 Nov after market close.
- Revenue increased by 28% y-o-y to Rmb62.6bn, in line with market expectations
- Segment-wise, core local commerce revenue increased by 25% y-o-y to Rmb46.3bn; New businesses revenue increased by 40% to Rmb16.3bn.

- Operating profit of local commerce grew by 125% to Rmb9.3bn, mainly driven by higher order value and increased purchase frequency.

Operating loss of new businesses segment (including Meituan Select) was c.Rmb6.8bn, better than market expectations, mainly due to less subsidies for user acquisitions.

- The Opex ratio contracted by 15ppt from 43% in 3Q21 to 28% in 3Q22.

- Adjusted net profit was Rmb3.6bn, beating market expectations of c.Rmb760m. The outperformance in earnings was mainly due to narrower-than-expected operating loss of new businesses.

- As of Sep 2022, number of transacting users increased by 3% y-o-y to 687m and annual average transaction frequency increased by 15%.

Our View:
- We expect positive share price reaction to the robust 3Q22 earnings .
- The growth momentum of food delivery and on-demand delivery service remained strong amid weak consumption environment. We believe the company can deliver mid-to-high teens revenue growth in 4Q22 despite the covid disruption, driven by resilient demand for local accommodation and consumption service.
- We currently rate BUY with TP of HK$296.

Source: DBS

[winston]

not vested

MEITUAN (3690 HK)

Recommendation : BUY
Fair Value : HKD 252.00

STRONG EARNINGS MOMENTUM MEETS MACRO HEADWINDS.
• Strong 3Q22 results beats on both strong revenue growth and good margins
• Near-term headwinds likely to persist pressuring Meituan’s operating trends
• Long-term positive on business franchise, but near-term weakness ensues;

Tencent’s Meituan stake distribution to create technical headwinds for share price

Meituan’s 3Q22 results saw a stronger-than-expected beat, driven by a strong recovery on revenue and tight cost control improving margins quarter-on-quarter (QoQ).

Total order volume of their food delivery and Meituan Instashopping businesses grew by 16% year-on-year (YoY).

Despite similar earnings drivers as peers for the earnings beat, the ability to grow revenues at more than 20% YoY while maintaining and growing underlying profitability highlights the strength of the franchise.

Management highlighted during the conference call that while food delivery orders for 3Q22 recovered from the lows in 2Q22, the trading environment turned weaker again in Sep 2022 and into 4Q22.

For Meituan Instashopping, underlying sales trends were similar to peers, with supermarkets and pet care outperforming other segments in the quarter.

When asked about the sustainability of their margins and profitability going forward, management commented that while they are still focused on investing for growth in both core businesses and new initiatives, they will try to balance between budgeting for growth and cost reductions.

Together with macro headwinds, we think the share price could also be pressured in the near-term as Tencent has announced the distribution of their Meituan’s stake to shareholders.

While near-term headwinds could weigh on the operating metrics, we think that Meituan should continue to outperform peers on growth given that they have multiple growth drivers based on a relatively asset-light business model in delivery services, e-commerce and domestic hospitality segments.

Source: OCBC

[winston]

not vested

Brokers│Views

DBS│New business loss was smaller than expected, resulting in better performance than expected

Credit Suisse│4Q outlook was eclipsed by the pandemic

Jefferies│Last quarter's performance met expectations

BOCI│Increased risk of social security costs

Daiwa│Food business profitability remained resilient

CMS│Revenue growth rate improved QoQ; efficiency improvement drove profit to exceed expectations

JPMorgan│Highly visible earnings growth in coming years, despite weaker short-term revenue outlook

China Securities│Quarterly profit beat; market eyed changes in epidemic prevention policies in 4Q

BOCOMI│Growth was resilient

UBS│Cost controls drove quarterly earnings beat

Haitong International│Short-term stock price volatility was triggered by intensified epidemic

CICC│Quarterly profit topped expectations; in-store, hotel and tourism continued to be under pressure

CMBI│Long-term development trend persisted, despite short-term headwinds

Goldman Sachs│Core earnings were stable; the impact of short-term pandemic prevention deepened until the final restart

CCBI│Pandemic uncertainty may affect revenue growth in the short term; cost savings maintained profitability improvement

Citigroup│Quarterly results significantly beat expectations; the long-term growth prospect was maintained despite the short-term pandemic headwinds

Nomura│Long-term outlook was still stable; epidemic rebound would affect the recovery

UOBKH | Core earnings beat; 4Q outlook was weak

BofA Securities│Effective measures were adopted amid the epidemic resurgence

Morgan Stanley│Short-term epidemic dragged business development

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... t-news/HK6

[winston]

not vested

MEITUAN(3690)

Analysis：

Competitors have been in the adjustment period, Meituan's refined management has been in the leading position, the number and proportion of high-quality merchants have increased, and the quality of income has been improved by increasing the purchase frequency and the amount of each transaction, and the market share has continued to increase.

In addition, losses from bike sharing and online car hailing services narrowed, and synergies were developed.

With the deregulation of epidemic control and economic recovery, consumer confidence has gradually recovered, and consumption growth has returned to the right track. Meituan is the first to benefit, and its performance has improved significantly.

Strategy：
Buy-in Price: $177.00, Target Price: $207.00, Cut Loss Price: $161.00

Source: Phillips

[winston]

not vested

MEITUAN UAV Launches 1st Normalized Route in Shanghai

Following the normalized trial operation in Shenzhen, Meituan UAV, a subsidiary of MEITUAN-W (03690.HK), announced the official launch of the first normalized route at the East China UAV Base in Jinshan District, Shanghai.

This route will serve as the first stop for Meituan’s drones to land in Shanghai, and will become a key supplement to the delivery capacity in the region.

The drones will cooperate with the delivery staff to complete daily tasks and serve the local citizens.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... t-news/HK6

[winston]

vested

MEITUAN: CNY Travel Bookings Rally Over 350% WoW

As of 11 January, travel bookings of accommodation, tourists spots and transportation for Spring Festival hailed peaks, notching an over 350% spike weekly, according to the latest data of MEITUAN-W (03690.HK).

Simultaneously, booking cycle, travel time and accommodation duration lengthened, forming new characteristics of Spring Festival travel.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... t-news/HK6

[winston]

vested

Meituan Left Out of China Tech Rally as Competition Heats Up

by Henry Ren

ByteDance is reportedly planning to double its gross merchandise value target for local life service business this year, a segment that connects consumers with the best-rated shops. That comes after TikTok’s local app Douyin teamed up with Alibaba Group Holding Ltd.’s Ele.me to send meals ordered on the video platform.

High valuation is another drag. Priced at 6.8 times its book value, the stock is much pricer than Tencent, and three times as expensive as Alibaba.

Source: Bloomberg

https://finance.yahoo.com/news/meituan- ... 47003.html

[winston]

vested

CICC Foresees MEITUAN-W 4Q22 Rev. to Burgeon 19% with Adj. NP of RMB788M

MEITUAN-W (03690.HK)'s 4Q22 revenue was forecast to mushroom 19% YoY to RMB58.7 billion, 2% above the market consensus, with an adjusted net profit of RMB788 million, which also beat the market forecast of RMB608 million, CICC reported.

The rosy business performance was likely attributable to the strong demand for food delivery business and in-store business, as a result of China's opimitization of the pandemic-prevention measures, the broker added.

As such, the 2022E revenue for the group was kept largely unchanged, while the 2022E adjusted net profit was hiked by 3.6% to RMB3.5 billion. The 2023E revenue and adjusted net profit were lifted by 5.9% and 30%, to RMB277.5 billion and RMB14.8 billion, respectively. The 2024E revenue and adjusted net profit were set at RMB349.5 billion and RMB31.5 billion, respectively.

CICC maintained the Outperform rating for MEITUAN-W, with a target price of $226.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... t-news/HK6

[winston]

Douyin Sources Deny Launching Nationwide Food Delivery Service on 1 Mar: CN Media

Sources close to Douyin expressed that the company has no plan to launch food delivery services across different parts of China on 1 March, the Beijing News reported.

In fact, the sources pointed out that Douyin described its delivery project as "group-purchase delivery" instead of "food delivery".

At the moment, said project is still being piloted, with no concrete timeframe for an official launch, the report added.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... t-news/HK6

[winston]

vested

Meituan buffeted as challenger rises

Chinese food delivery company Meituan (3690) dived by as much as 9 percent yesterday - the most in two months - after Douyin started a trial of a food delivery operation to challenge it.

Still, Meituan has just unveiled plans to hire as many as 10,000 people this quarter as it tries to fend off the challenge from the ByteDance-related Douyin, which is testing a grocery and food delivery service in Beijing, Shanghai and Chengdu.

It is considering expanding the trial to more cities, though it does not have a timetable to roll out the service nationally.

"Douyin seems to be expanding its ambition beyond cooperation with [Alibaba delivery operation] Ele.me and wants to do it nationwide," said Willer Chen, a senior research analyst at Forsyth Barr Asia. "This will lead to more head-to-head competition between Meituan and Douyin."

If Douyin forges ahead with full-fledged delivery services it could re-ignite a money-sapping, 12-month-long battle for control of the delivery market before Beijing began to crack down on "reckless expansion of capital."

Meituan, which continues to report losses, saw revenue surge 28 percent in last year's third quarter as demand held up during the downturn. China's reopening is expected to spur economic activity and benefit Meituan in the longer run

Source: Bloomberg

https://www.thestandard.com.hk/section- ... nger-rises