Investment Rating - The report assigns a "Buy" rating for Meituan (3690.HK) with a target price of HK$172.00, representing an upside of 32.9% from the current price of HK$129.40 [1]. Core Insights - The report highlights a solid profit beat for Meituan in 1Q25, driven by strong local commerce profits, although it anticipates mixed reactions due to increased competition in the food delivery sector leading to higher subsidies [1][7]. - Meituan is aggressively defending its leadership in food delivery, expecting a healthy growth in food delivery volume into 2Q25, with a forecast of 9% year-over-year growth [7][20]. - The competitive landscape is becoming more fragmented, with expectations of a three-player market, which may impact future profitability [22]. Financial Forecasts - Revenue forecasts for Meituan have been adjusted, with 2025 estimates showing a revenue of Rmb382,513.3 million, reflecting a growth of 11% year-over-year [3][20]. - The adjusted EBIT for the core local commerce segment is projected at Rmb44.7 billion for 2025, down from previous estimates due to increased competition and subsidies [20][22]. - The report anticipates a decline in food delivery EBIT by 33% for 2025 due to increased user subsidies [20]. Market Position and Strategy - Meituan maintains a leading position with over 14.5 million local service merchants and a strong user base, supported by membership programs [7][15]. - The company is focusing on expanding its Instashopping segment, which is expected to grow by 27% in 2Q25, driven by improved purchase frequency among users [17][20]. - Meituan's strategy includes significant investments in AI to enhance operational efficiency and drive growth, with a projected capex of Rmb14 billion for FY25 [20][22]. Valuation Metrics - The report provides various valuation metrics, including a P/E ratio of 15.9 for 2024 and a projected P/B ratio of 4.0 [3][9]. - The estimated free cash flow yield for 2024 is 6.6%, indicating a strong cash generation capability [9][10]. - The report reflects a downward adjustment in the target price from HK$200 to HK$172, considering the competitive pressures and revised profit expectations [22][28].
高盛：美团