Meituan: Sound Fundamentals Despite A Weak Macro Backdrop

Core Viewpoint - Meituan is expected to maintain robust growth in the coming years, supported by strong fundamentals and a potential recovery in the macro environment, with significant improvements in profitability driving stronger EBITDA growth ahead [2]. Company Overview - Meituan operates a platform providing various consumer services, including on-demand food delivery, hotel booking, travel services, and in-store dining services, with 100% of its revenue generated in China [3]. Earnings Results Update - In Q2 2024, Meituan's total revenue increased by 21% year-over-year to RMB 82.3 billion, driven by local commerce revenue growth of 18.5% to RMB 60.68 billion and new initiatives revenue growth of 28.7% to RMB 21.56 billion. Adjusted EBIT grew by 126% year-over-year to RMB 12.98 billion, with adjusted net profit rising by 78% to RMB 13.6 billion [4]. Strong Fundamentals in Food Delivery Segment - Despite a challenging macro environment, Meituan's food delivery segment reported a 15% year-over-year growth, outperforming competitors in Europe. The Pinhaofan group meal buying feature has gained significant traction, achieving over 8 million peak daily orders and accounting for 11% of Q2 2024 orders. The adjusted EBIT margin improved from 20.2% in Q2 2023 to 25.1% in Q2 2024, indicating strong unit economics [5][6]. Positive Growth Outlook for Other Segments - Non-food delivery segments, particularly Instashopping, are experiencing solid growth with daily order volume increasing by over 30%. The domestic travel industry is robust, with flight volumes surpassing pre-COVID levels, which is expected to drive hotel demand. Meituan's overall segment revenue grew by 21% year-over-year in Q2 2024, indicating strong underlying demand [7][8]. Valuation - Meituan is valued at 10x forward EBITDA, with a target price reflecting a 37% upside from the current share price. The company is expected to achieve a 20% revenue growth rate, supported by improving EBITDA margins and a rational competitive landscape in the second half of 2024 [9][10].