Meituan: Q1 Earnings Beat Overshadowed By Cautious Order Volume Guidance

Financial Performance - The company's Q1 2024 revenue grew by +25% YoY to RMB73,276 million, surpassing the consensus estimate of RMB69,622 million by +5% [4] - Normalized net income for Q1 2024 was RMB7,488 million, beating the consensus forecast of RMB6,052 million by +24% and representing a +36% YoY increase [11] - Gross margin expanded by +130 basis points YoY to 35.1% in Q1 2024, driven by improved operating efficiency in goods retail businesses [11] - Operating loss for the New Initiatives segment narrowed from -RMB5,029 million in Q1 2023 to -RMB2,757 million in Q1 2024, due to profitability enhancement measures in Meituan Select [11] Operational Highlights - On-demand delivery order volume increased by +28% YoY to 5,465 million in Q1 2024, attributed to a refined marketing strategy and increased transaction frequency of high-frequency users [4] - The company expects order volume growth rate in Q2 2024 to trend down to a normal level, reflecting the current consumption environment [12] - The company will no longer benefit from a low order base of last year starting in Q2 2024, with on-demand delivery order volume growth rates of +15%, +32%, +23%, and +25% for the four quarters of 2023, respectively [12] Market and Valuation - The company's Hong Kong-listed shares rose by +39% year-to-date in 2024, but corrected by -2% on June 7, 2024, following the Q1 results announcement [8][12] - The company's OTC shares with the MPNGF ticker symbol corrected by -9% on June 7, 2024 [12] - The company's consensus next twelve months' normalized P/E multiple is 16.6 times, higher than peers such as Tencent (16.1 times), PDD (11.8 times), Alibaba (9.5 times), and JD.com (8.7 times) [8][13] - The company's relatively more expensive valuations compared to peers might limit its capital appreciation potential, despite its above-expectations Q1 results [13] Outlook - The company's YoY top line expansion is expected to moderate from +25% in Q1 2024 to +18%, +17%, and +16% for Q2 2024, Q3 2024, and Q4 2024, respectively, consistent with order volume guidance [12] - Expectations of slower revenue growth ahead make it unrealistic to anticipate meaningful valuation multiple expansion for the company [13]