Investment Rating - The report maintains a "Buy" rating for Meituan with a target price adjusted to HK$192 from HK$204, indicating an expected return of 48.4% from the current price of HK$129.40 [6][13]. Core Insights - Meituan's 1Q25 results exceeded expectations, with total revenues of RMB86.6 billion, reflecting an 18.1% year-over-year growth [15]. - Management anticipates a deceleration in core local commerce revenue growth for 2Q25 due to increased competition and counter-revenue subsidies [3][25]. - The company is expanding its Keeta brand into Brazil with a US$1 billion investment over five years, capitalizing on the strong partnership between China and Brazil [5][42]. Summary by Sections Financial Performance - In 1Q25, core local commerce revenue grew 17.8% year-over-year to RMB64.3 billion, with an operating profit of RMB13.5 billion, achieving a margin of 21.0% [19]. - The new initiatives segment reported revenues of RMB22.2 billion, with an operating loss of RMB2.3 billion, improving from a loss of RMB2.8 billion in 1Q24 [19]. Competitive Landscape - Management acknowledges the current irrational competition characterized by high subsidies, which is not sustainable long-term [18][25]. - Meituan's management is committed to defending market share through increased investments while adhering to fair competition principles [3][25]. Growth Strategies - Meituan Instashopping has seen significant growth, with transacting users exceeding 500 million in 1Q25, particularly in non-food categories [4][29]. - The company plans to enhance its service offerings and expand product categories to meet diverse consumer needs, especially targeting younger consumers [27][34]. Expansion Plans - The launch of Keeta in Brazil is expected to leverage the country's vibrant economy and large population, with management confident in the growth potential of global food delivery [5][42]. - Meituan is also focusing on enhancing its AI capabilities to improve operational efficiency and support merchants in their digital transformation [44][46]. Future Outlook - Management expects short-term volatility in financial results due to ongoing high subsidy ratios from competitors, but remains confident in solidifying market leadership [25][49]. - The company has revised its revenue and profit estimates for 2025-2027, reflecting anticipated challenges in core local commerce revenue growth [53][54].
花旗：美团