First Shanghai Securities·2024-06-12 05:31Investment Rating - The report maintains a "Buy" rating for Meituan with a target price of 135 HKD, based on a valuation of 23x PE for the food delivery business and 15x PE for the in-store and travel business for the year 2024 [2][15][37]. Core Insights - Meituan's profitability is expected to further improve, with new business ROI gradually increasing. The report highlights strong revenue growth driven by a 28% increase in food delivery orders and significant reduction in losses from community group buying [2][4][15]. - The company reported a total revenue of 733 billion RMB for Q1 2024, a year-on-year increase of 25%, with adjusted net profit reaching 75 billion RMB, up 36.4% year-on-year [4][19]. - The core local commerce segment showed resilience, with revenue of 546 billion RMB in Q1 2024, reflecting a 27.4% year-on-year growth, and operating profit of 97 billion RMB, up 2.7% year-on-year [22][19]. Financial Summary - Total operating revenue (in million RMB) for the fiscal year ending December 31 is projected to grow from 219,955 in 2022 to 326,097 in 2024, representing a 25.8% increase [3]. - Adjusted net profit is expected to rise significantly from 2,828 million RMB in 2022 to 31,508 million RMB in 2024, marking a 722.4% increase in 2023 [3]. - The company anticipates a reduction in operating losses for new businesses, with Q1 2024 losses narrowing to 28 billion RMB, down from previous periods [9][11]. Business Segments - The food delivery business is projected to maintain a market share of 70%, leveraging operational efficiencies and reduced subsidies to enhance profitability [29]. - The in-store, hotel, and travel business is expected to grow significantly, with transaction values increasing over 60% year-on-year, driven by holiday demand and competitive pricing strategies [19][23]. - New initiatives, including shared services like power banks and bikes, are showing promising growth, with the company focusing on high-quality development and operational improvements [9][25]. Operational Efficiency - The report notes a significant improvement in gross margin, which reached 35.1% in Q1 2024, up 1.26 percentage points year-on-year, attributed to the recovery of local commerce and strong performance in both core and new business segments [12][19]. - The company has optimized its cost structure, with R&D expenses stable at 50 billion RMB, but as a percentage of revenue decreasing to 6.8% due to improved operational leverage [12][26].