Investment Rating - The report maintains a "Buy" rating for Meituan with a target price of HKD 230 [2][4][32] Core Insights - In Q1 2025, Meituan's revenue reached RMB 86.6 billion, a year-on-year increase of 18.1%, with operating profit significantly rising to RMB 10.6 billion, up 102.8% year-on-year [3][9][25] - The core local commerce segment generated revenue of RMB 64.3 billion, reflecting a 17.8% year-on-year growth, while the operating profit for this segment was RMB 13.5 billion, up 39.1% year-on-year [4][14][22] - New business revenue grew by 19.2% year-on-year to RMB 22.2 billion, with operating losses narrowing to RMB 2.3 billion, improving the loss rate to 10.2% [4][22][25] Summary by Sections Financial Performance - Q1 2025 saw a significant increase in operating cash flow, amounting to RMB 10.1 billion, with cash and cash equivalents totaling RMB 115 billion and short-term investments at RMB 65.4 billion as of March 31, 2025 [3][10][25] - The gross margin improved to 37.45%, a 2.4 percentage point increase year-on-year, with operating profit margin at 12.2%, up 5.1 percentage points year-on-year [25][26] Business Segments - Core local commerce continues to grow, with a focus on enhancing user engagement and frequency through refined operations in the food delivery sector [4][15][18] - The new initiatives segment is expanding, with a focus on grocery retail and international market penetration, particularly in Hong Kong, Saudi Arabia, and plans for Brazil [22][23][24] Strategic Outlook - The CEO expressed strong confidence in the future of the food delivery and flash purchase businesses, emphasizing a commitment to winning the competitive landscape at all costs [4][32] - Meituan plans to maintain a disciplined approach to overseas expansion while controlling losses, with a focus on sustainable growth and operational efficiency [4][32]

Core Insights - The company reported Q1 2025 revenue of 86.6 billion RMB, an 18% year-on-year increase, aligning with market expectations [1] - Adjusted net profit rose 46% year-on-year to 10.9 billion RMB, with a net profit margin of 13%, up 2.4 percentage points from the previous year [1] - Core business operating profit margin improved to 21%, exceeding expectations of 19%, while new business incurred an operating loss of 2.3 billion RMB, with a loss rate of 10% [1] Business Performance - Core business: Estimated daily orders for food delivery increased by 9-10% year-on-year, with average order value (AOV) experiencing a low single-digit decline due to increased contributions from "拼好饭" and "神枪手" [1] - Flash purchase daily orders reached nearly 11 million, a year-on-year increase of approximately 30%, with non-food categories like 3C, home appliances, and beauty products seeing over 60% growth [1] - In-store travel and accommodation gross transaction value (GTV) grew over 30% year-on-year, with stable operating profit margins [1] New Business Developments - New business segment showed a slight reduction in losses, with the pace of loss narrowing due to ongoing long-term capability building [1] - "Keeta" has rapidly grown to become the largest food delivery platform in Hong Kong and is expanding into Saudi Arabia, covering nine major cities, with plans to enter Brazil and invest $1 billion over the next five years [1] Market Outlook - Increased competition in the food delivery market is expected to lead to higher subsidies, potentially impacting revenue and profit growth in Q2 [2] - Forecasts suggest mid-single-digit year-on-year growth in food delivery order volume, while flash purchase order volume is expected to maintain slightly above 30% growth [2] - New business revenue growth is projected at 22%, with losses expected to widen to approximately 2.6 billion RMB due to overseas investments [2] Valuation - Despite the lower entry barriers in the food delivery market due to increased subsidies, operational and scheduling capabilities for merchants and riders will take time to improve [2] - The company is expected to maintain a leading market share, with a projected profit growth of about 7% in 2025, leading to a target price adjustment to 165 HKD, while maintaining a buy rating [2]

Core Viewpoint - The company's Q1 2025 financial performance exceeded market expectations, with significant growth in core local business and new business revenues [1] Group 1: Overall Performance - Q1 2025 revenue reached 86.6 billion yuan, representing a year-over-year increase of 18% but a quarter-over-quarter decrease of 2% [1] - Operating profit for Q1 2025 was 10.6 billion yuan, up 103% year-over-year and 58% quarter-over-quarter [1] - Net profit for Q1 2025 was 10.1 billion yuan, reflecting an 87% year-over-year increase and a 62% quarter-over-quarter increase [1] - Non-GAAP EBITDA for Q1 2025 was 12.3 billion yuan, a 52% year-over-year increase and a 7% quarter-over-quarter increase [1] - Non-GAAP net profit attributable to shareholders was 10.9 billion yuan, up 46% year-over-year and 11% quarter-over-quarter [1] Group 2: Core Local Business - Core local business revenue grew 18% year-over-year to 64.3 billion yuan, driven by increased transaction volume and reduced subsidy deductions [2] - Operating profit for core local business increased 39% year-over-year to 13.5 billion yuan, surpassing Bloomberg's consensus estimate of 12.2 billion yuan [2] - The company anticipates a slowdown in revenue growth for Q2 2025 due to intensified industry competition [2] Group 3: Business Segments - **Food Delivery Business**: Q1 2025 food delivery orders increased by 9.3% year-over-year, with over 480 brands launching more than 3,000 high-quality satellite stores [2] - **Meituan Flash Purchase**: Q1 2025 saw strong growth in flash purchase business, with over 500 million cumulative transaction users and daily order volume exceeding 18 million [3] - **In-store Travel Business**: Q1 2025 in-store travel revenue grew 20% year-over-year, with active merchants increasing by over 25% [3] Group 4: New Business and International Expansion - New business revenue grew 19% year-over-year to 22.2 billion yuan, with operating losses narrowing to 2.3 billion yuan [4] - Keeta has become the largest food delivery platform in Hong Kong and is expanding into Saudi Arabia and Brazil, with a commitment to invest 1 billion USD over five years [4] Group 5: Profit Forecast and Valuation - Long-term outlook remains positive for the company's core competencies in instant delivery and international expansion, despite increased competition [5] - Revenue forecasts for 2025-2027 are projected at 387.3 billion, 447.7 billion, and 510.6 billion yuan respectively, with Non-GAAP net profit estimates of 40.9 billion, 54.7 billion, and 67.6 billion yuan [5] - The target market capitalization for 2025 is set at 830.2 billion yuan, with a target price of 136 yuan per share [5]

Investment Rating - The report maintains a "Buy" rating for Meituan (3690 HK) with a target price adjusted to HKD 165.00, indicating a potential upside of 27.5% from the current price of HKD 129.40 [1][4][15]. Core Insights - The report highlights the increasing competition in the food delivery market, but remains optimistic about Meituan's operational capabilities in this sector. The company is expected to enhance its market share despite the competitive landscape [2][7]. - Financial projections indicate significant revenue growth, with expected revenues of RMB 388.9 billion in 2025, reflecting a year-on-year growth of 15.2% [3][16]. - The adjusted net profit for 2025 is projected to be RMB 47.0 billion, with a notable increase in earnings per share (EPS) to RMB 7.58, representing an 8.4% growth compared to the previous year [3][16]. Financial Overview - Revenue Forecast: - 2023: RMB 276.7 billion - 2024: RMB 337.6 billion - 2025E: RMB 388.9 billion - 2026E: RMB 436.1 billion - 2027E: RMB 472.5 billion - Year-on-year growth rates are projected to decline gradually from 25.8% in 2023 to 8.3% in 2027 [3][16]. - Net Profit Forecast: - 2023: RMB 23.3 billion - 2024: RMB 43.8 billion - 2025E: RMB 47.0 billion - 2026E: RMB 60.4 billion - 2027E: RMB 68.7 billion - The net profit growth rate is expected to be particularly high in 2023 at 715.5%, tapering to 13.8% by 2027 [3][16]. - Earnings Per Share (EPS): - 2023: RMB 3.71 - 2024: RMB 7.00 - 2025E: RMB 7.58 - 2026E: RMB 9.73 - 2027E: RMB 11.08 - The EPS is expected to show a significant increase in 2024, followed by more moderate growth in subsequent years [3][16]. - Valuation Metrics: - The price-to-earnings (P/E) ratio is projected to decrease from 32.0 in 2023 to 10.7 by 2027, indicating an improving valuation as earnings grow [3][16]. Business Segment Performance - Core Business: - The core local business is expected to generate substantial revenue, with a projected revenue of RMB 283.4 billion in 2025, growing at a rate of 10% year-on-year [10][16]. - New Business: - The new business segment is anticipated to grow at a rate of 22% in 2025, although it is expected to incur losses of approximately RMB 26 billion due to increased investments in overseas markets [7][10]. Market Position and Strategy - Meituan is expected to increase its investment in the food delivery segment to maintain its market share amidst rising competition. The report anticipates a mid-to-high single-digit growth in food delivery order volume [7][10]. - The company is also expanding its international presence, particularly in markets like Saudi Arabia and Brazil, with plans to invest USD 1 billion over the next five years [7][10].