Investment Rating - The investment rating for the specific company is reiterated as BUY with a price objective of HK$155, down from HK$180 [1][3]. Core Insights - The company reported a solid first quarter with total revenues growing 18% year-over-year to RMB86.6 billion, exceeding consensus estimates [4]. - The core local commerce (CLC) revenues also grew 18% year-over-year, driven by a 22% increase in delivery revenues and a 20% increase in commissions [4]. - However, competition has intensified in the second quarter, leading to a forecasted slowdown in growth and profitability due to increased spending to maintain market share [2][3]. - The company is committing to a three-year RMB100 billion ecosystem upgrade program to support high-quality growth for merchants and improve rider benefits [2]. - The overseas expansion into the Middle East is progressing better than expected, with plans to enter Brazil with a US$1 billion budget [2]. Financial Estimates - Adjusted net income is projected to grow from RMB13.9 billion in 2023 to RMB54.4 billion by 2027, with a significant increase in EPS from 2.23 in 2023 to 9.00 in 2027 [5]. - The adjusted net profit for 2025 is estimated at RMB43.6 billion, reflecting a revenue growth of 14% [3]. - The operating margin for the CLC segment improved to 21% in the first quarter, up from 18% in the previous year [4]. Market Position and Strategy - The company is recognized as a leader in the multi-category service eCommerce sector in China, providing a wide range of services including food delivery, travel, and lifestyle services [13][14]. - The large user base is seen as a competitive advantage, with opportunities for cross-selling across high-frequency categories [14]. - The company’s strong execution amid intense competition and growth potential from overseas expansion are highlighted as key strengths [3].
美银：美团