Summary of Meituan Conference Call Company Overview - **Company**: Meituan - **Industry**: Local services and e-commerce Key Points Stock Performance and Market Dynamics - Meituan's stock price has been influenced by both alpha and beta factors, underperforming the market from early 2023 to early 2024, but expected to outperform from May to September 2024 due to fundamental improvements [2][3] - During the rebound phase of Chinese concept stocks, Meituan typically shows greater elasticity compared to the Hang Seng Tech Index [2][4] - Since Q4 2024, Meituan has underperformed the Hang Seng Tech Index, primarily due to AI becoming the main theme for tech valuation reassessment, which Meituan has not directly benefited from [2][5] Valuation Changes - Meituan's valuation methodology has shifted from various methods to a focus on PE (Price to Earnings) valuation, with PE multiples fluctuating significantly, ranging from 10x to 25x in 2024 [2][6] - The long-term valuation floor is considered to be around 10x PE, with expectations of losses in 2025 necessitating a focus on future profit scenarios to assess current valuation [2][6][7] Financial Projections - Under pessimistic scenarios, Meituan's adjusted post-tax profit is projected to be around 50 billion yuan, with contributions from various segments: 10 billion from food delivery, 10 billion from flash sales, and 30 billion from in-store and travel services [2][7] - The current stock price corresponds to less than 12x PE, indicating it is nearing historical valuation lows from a long-term perspective [2][7] Historical Development Stages - Meituan has undergone five significant development phases since late 2019, including profitability in food delivery, pandemic-driven user habit changes, and regulatory pressures impacting the internet sector [2][8] - Each phase has shown that positive fundamental changes can lead to independent stock performance, while policy uncertainties can significantly impact the company [2][8] Competitive Landscape - In 2022 and 2023, Meituan faced challenges from macroeconomic conditions and intensified competition, particularly from Douyin, which has rapidly gained market share in local services [2][9][10] - Despite a doubling of GMV in the in-store travel business to 700 billion yuan, profitability has been pressured by commission reductions and consumer subsidies [2][10] Future Outlook - Meituan's stock price surged from around 60 HKD to approximately 210 HKD in early 2024, driven by prior overselling, improvements in core business margins, and organizational restructuring [2][11][12] - The company is expected to maintain strong growth potential, particularly in the food delivery sector and flash sales, leveraging its leading position in local services [2][17] Risks for Investors - Investors should be aware of potential EPS volatility from in-store business performance and the evolving competitive landscape [2][18] - Continuous monitoring of product innovation and member system development is crucial for assessing the effectiveness of business synergy and future industry trends [2][18]

Investment Rating - The investment rating for Meituan-W (3690.HK) is "Buy" and is maintained [9]. Core Views - In FY2025Q2, the company achieved revenue of 91.84 billion yuan, which was below Bloomberg's consensus estimate of 93.69 billion yuan, representing a year-on-year increase of 11.7%. The adjusted net profit totaled 1.49 billion yuan, significantly lower than the expected 9.85 billion yuan, marking a year-on-year decline of 89.0%. The report suggests that the company is sacrificing short-term revenue performance for long-term strategic choices, reflecting its determination to gain market share. Although short-term profitability may fluctuate due to increased investments, the reliance on subsidies for competition is not sustainable, and such performance disturbances do not alter the long-term growth trend. The current intensified competition is accelerating the overall penetration of instant retail, opening up upward space for the company. Attention should be paid to the marginal turning point of subsidy investments, which could lead to a return of company value [2][6][9]. Summary by Sections Overall Performance - The core local business revenue was 65.3 billion yuan, below the consensus estimate of 67.5 billion yuan, with an operating profit of 3.7 billion yuan, also below the expected 12 billion yuan, reflecting a year-on-year decline of 75.6%. New business revenue was 26.5 billion yuan, slightly above the expected 26 billion yuan, but the operating loss expanded by 43.1% to 1.9 billion yuan, compared to the expected 2.4 billion yuan. The significant decline in performance was mainly due to the impact of subsidies starting in Q2, which affected the profitability of the food delivery business [9]. Core Local Business - Short-term subsidies are disrupting profitability, and losses are expected to widen in Q3. With the current subsidy pace, following Alibaba's entry into the food delivery market in May, subsidies have increased. It is anticipated that Meituan's food delivery losses will primarily occur in June, with further expansion of subsidies in July and August. The average loss per order is expected to exceed that of June, and the future subsidy trend will depend on Alibaba's investments. The company has indicated that significant losses will occur in Q3 for food delivery and core local business, but the gap in advantages over competitors will further widen. The flash purchase business has expanded to over 50,000 locations nationwide, with a year-on-year growth rate exceeding 50% in lower-tier markets, which is expected to create new growth for the company [9]. New Business - The company is accelerating the expansion of its Xiaoxiang supermarket and steadily advancing its overseas business. By the end of the reporting period, approximately 1,000 front warehouses for Xiaoxiang supermarkets had been established in nearly 20 cities. With adjustments to Meituan's preferred offerings, more resources will be allocated to Xiaoxiang's expansion, which is expected to cover all first- and second-tier cities in the country, aiming for a long-term profit margin target of 3%. In terms of overseas business, Keeta has expanded to 20 cities in Saudi Arabia, achieving a market share of first in Hong Kong and second in Saudi Arabia, with an expected GMV of 100 billion yuan by 2033 [9]. Investment Recommendations and Profit Forecasts - Looking ahead, the report emphasizes that the company is making a long-term strategic choice by sacrificing short-term revenue performance to gain market share. Due to increased subsidies and operational expenses, profitability may experience unexpected fluctuations in the short term. However, the reliance on subsidies for competition is not sustainable, and such performance disturbances do not alter the long-term growth trend. Under a neutral assumption, it is expected that Meituan's average loss per order in Q3 will be 1.44 yuan, corresponding to an adjusted net loss of 5.351 billion yuan. If subsequent subsidy reductions are better than expected, the average profit per order for food delivery could recover to 0.37 yuan in 2026, leading to an adjusted net profit of 38.6 billion yuan for the year. The projected overall revenue for Meituan from 2025 to 2027 is 373.966 billion, 418.687 billion, and 465.337 billion yuan, with adjusted net profits of 12.11 billion, 38.646 billion, and 57.476 billion yuan, respectively. The corresponding PE ratios for 2026 and 2027 at the current stock price are 15x and 10x, maintaining a "Buy" rating [9].

Group 1 - The report highlights the growth trend in the treatment of hemorrhoids products and the potential for expanding into wet wipes business, with a focus on the company's strong performance in the first half of 2025 [5][6][7] - The company achieved a revenue of 1.949 billion yuan in H1 2025, a year-on-year increase of 1.11%, and a net profit of 343 million yuan, up 10.04% year-on-year [6][7] - The company is extending its product line into the field of anal health, with rapid growth in wet wipes, leveraging its established brand recognition and user base [7] Group 2 - The report discusses the strategic focus on financial technology and the acceleration of AI model applications by the company, which reported a revenue of 1.208 billion yuan in H1 2025, a decrease of 48.55% year-on-year [8][9] - The company is narrowing its business focus to financial technology, reducing non-financial IT business, while maintaining investment in core technology and product areas [9][10] - The new generation of core products is being developed to enhance self-operated technology services, with significant investments in AI [11][12] Group 3 - The report indicates that the secondary market is under pressure, with new infrastructure turnover rates leading the market, as evidenced by the issuance of 14 public REITs in 2025, a decrease from the previous year [13][14] - The REITs index has faced declines, with the market's total value dropping to 215.894 billion yuan, while the trading activity has increased slightly [14][15] - New infrastructure sectors are showing higher turnover rates, particularly in park infrastructure, which is leading in transaction volume [15] Group 4 - The report notes that competition in the food delivery sector is intensifying, leading to significant pressure on profits, with the company reporting a revenue of 91.8 billion yuan in Q2 2025, a year-on-year increase of 12% [18][19] - The core local business revenue grew by 8% to 65.3 billion yuan, but operating profits fell sharply due to increased delivery subsidies and marketing expenses [19][20] - The company is optimistic about its long-term growth potential in instant delivery and overseas expansion despite short-term profit pressures [21][22] Group 5 - The report highlights the company's investments in digital and cultural sectors, with a stable revenue of 1.179 billion yuan in H1 2025, and a focus on expanding its digital technology and cultural offerings [23][24] - The online gaming segment showed a revenue increase of 9% to 706 million yuan, while the digital marketing services revenue grew by 14% [24][25] - The company is actively investing in various innovative business areas, including digital sports and arts, to enhance its market presence [25][26] Group 6 - The report indicates that the company achieved a revenue of 13.38 billion yuan in H1 2025, a year-on-year increase of 27.9%, with a significant rise in overseas sales [31][32] - The company is focusing on expanding its IP matrix and targeting a broader age demographic, with a notable increase in sales from online channels [33][34] - The company is adjusting its revenue forecasts for 2025-2027, expecting revenues of 34.18 billion yuan, 47.16 billion yuan, and 57.25 billion yuan respectively [36]

Core Insights - The company reported Q2 2025 revenue of 91.8 billion yuan, a year-over-year increase of 12% but below market expectations, with significant declines in operating and net profits due to intensified competition in the food delivery sector and losses from overseas expansion [1] Group 1: Core Local Business - Core local business revenue grew by 8% year-over-year to 65.3 billion yuan, with delivery service revenue growth lagging behind the increase in instant delivery transaction volume due to increased delivery subsidies [2] - Operating profit for the core local business fell by 76% year-over-year to 3.7 billion yuan, significantly below the market expectation of 12 billion yuan, primarily due to declining gross margins and increased user incentives and marketing expenses [2] - The company plans to continue strategic investments in Q3 2025, which may pressure profit metrics, while maintaining a long-term profit assumption of 1 yuan per order and a profit margin of approximately 3% for 2025 [2] Group 2: Business Segments Performance - The food delivery business saw a steady growth with a 10% year-over-year increase in order volume, driven by various models enhancing food supply and user engagement [3] - The Meituan Flash Purchase business experienced strong growth in order volume and transaction value, with significant increases in high-ticket item sales during the "618" shopping festival [3] - The in-store travel and accommodation business performed well, with order volume growing over 40% year-over-year and revenue increasing by 15% [3] Group 3: New Business and International Expansion - New business revenue grew by 23% year-over-year to 26.5 billion yuan, driven by retail and overseas business growth, although operating losses expanded to 1.9 billion yuan due to increased costs in overseas operations [4] - Keeta maintained strong growth in order volume and gross transaction value, solidifying its leading position in Hong Kong and expanding into 20 cities in Saudi Arabia and launching services in Qatar [4] - The company remains optimistic about Keeta's long-term growth potential, aiming for a gross merchandise value of 100 billion USD within 10 years [4] Group 4: Financial Forecast and Valuation - The company is optimistic about its core barriers in instant delivery and growth opportunities from overseas expansion, but has revised down its profit forecasts due to irrational competition and increased short-term investments [5] - Revenue projections for 2025-2027 are set at 370.2 billion, 417.9 billion, and 475.5 billion yuan, with Non-GAAP net profit forecasts of 5 billion, 32.3 billion, and 48.8 billion yuan respectively [5] - The company has set a target market value of 735.1 billion yuan for 2026, corresponding to a target price of 120 yuan per share [5]

Core Insights - The company reported total revenue of 91.8 billion RMB in Q2 2025, a year-on-year increase of 12%, slightly below market expectations by 1% and 2% [1] - Adjusted net profit decreased by 89% to 1.5 billion RMB, resulting in a net profit margin of 1.6% [1] - Core business adjusted operating profit fell by 76% to 3.7 billion RMB, with a profit margin of 5.7%, down 19 percentage points year-on-year, primarily due to irrational competition in the industry [1] Business Performance - Core business revenue growth lagged behind order volume growth, attributed to intensified industry competition and increased user subsidies to enhance price competitiveness and ensure delivery efficiency [1] - Estimated year-on-year growth in takeaway order volume is approximately 10%, with a significant decline in Average Order Value (AOV) [1] - The in-store travel and accommodation Gross Transaction Value (GTV) increased by nearly 30% year-on-year, but revenue growth was slower than GTV due to changes in category structure and market penetration [1] New Business Developments - The company is undergoing a strategic transformation in its new business segment, exiting loss-making areas [1] - The "Xiaoxiang Supermarket" is experiencing strong growth and plans to accelerate expansion into first- and second-tier cities [1] - Keeta's order volume and GTV are rapidly increasing, with coverage in 20 cities in Saudi Arabia as of the end of July [1] Future Outlook - Increased takeaway subsidies are expected to impact performance in the coming quarters, with a forecast of core business turning to losses in Q3 [2] - Q3 takeaway competition is expected to intensify, with projected daily order volume growth of 16% year-on-year, but a potential revenue decline of 6% due to subsidies and strategic adjustments [2] - New business revenue is expected to grow by 18% year-on-year, with anticipated losses of approximately 2.3 billion RMB [2] Valuation and Market Position - The company maintains a leading market position, with a high probability of sustaining market share despite short-term profit adjustments [2] - The target price has been adjusted to 147 HKD, with a maintained buy rating based on long-term projections for takeaway and in-store business profits [2]

Investment Rating - The report maintains a "Buy" rating for Meituan with a target price of HKD 134 [7]. Core Views - The report emphasizes that market share is prioritized over short-term profits, indicating that the competition in the instant retail sector will eventually return to rational levels, focusing on service quality, ecosystem balance, and operational efficiency [1][4]. - The report anticipates significant losses in the core local business for Q3 due to increased industry subsidies and competitive pressures, with a projected adjusted net profit decline of 89% year-on-year [2][4]. Financial Performance Summary - In Q2, total revenue reached RMB 91.8 billion, a year-on-year increase of 12%, while the core local business operating profit fell by 76% to RMB 3.7 billion, reflecting a decrease of RMB 11.5 billion [2][3]. - The adjusted net profit for Q2 was RMB 1.5 billion, down 89% year-on-year, with an operating profit margin dropping to 5.7% compared to 25.1% in Q2 2024 and 21.0% in Q1 2025 [2][4]. - The report projects a 7% reduction in the 2025 revenue forecast for the core local business, with expectations of a significant recovery in profit margins by 2026 as competition stabilizes [4][6]. Business Segment Analysis - The core local business saw a 3% increase in delivery revenue, a 13% increase in commission revenue, and a 10% increase in online marketing revenue in Q2 [3]. - Instant retail is expected to require substantial time to capture user mindset, with product quality, service, and fulfillment efficiency being critical factors for long-term success [3]. - The new business segment reported a loss of RMB 1.9 billion in Q2, with a slight narrowing of losses compared to previous quarters [4][6]. Valuation and Market Outlook - The report adjusts the valuation benchmark to 2026, with a sum-of-the-parts (SOTP) target price of HKD 134, down from HKD 177, reflecting the increased uncertainty in 2025 profits [4][6]. - The strategic priority remains on market share over short-term profitability, with expectations that industry subsidies will gradually decrease starting in Q4 2025 [4][6].

Investment Rating - The report maintains a "Buy" rating for Meituan-W (3690.HK) [1] Core Insights - The report highlights that intensified competition in the food delivery sector has pressured profits, while the company is expected to release long-term value [2][6] - Meituan's Q2 2025 revenue reached 91.8 billion RMB, reflecting a year-on-year growth of 12% and a quarter-on-quarter growth of 6% [11] - The report anticipates that the company's core local business will continue to face challenges due to increased competition and overseas expansion losses [10][18] Summary by Sections Recent Performance - In Q2 2025, Meituan achieved a revenue of 91.8 billion RMB, with operating profit of 200 million RMB (YoY -98%, QoQ -98%) and net profit of 400 million RMB (YoY -97%, QoQ -96%) [11] - Non-GAAP EBITDA was 2.8 billion RMB (YoY -81%, QoQ -77%), and Non-GAAP net profit attributable to shareholders was 1.5 billion RMB (YoY -89%, QoQ -86%) [11] Business Segments - **Food Delivery Business**: Q2 2025 saw a steady growth in food delivery, with estimated order volume increasing by 10% YoY. The company is enhancing supply through various models to boost user engagement [7] - **Flash Purchase Business**: Strong growth in order volume and transaction value was noted, with significant increases during promotional periods. The establishment of over 50,000 flash warehouses supports local store digital transformation [7] - **In-store and Travel Business**: This segment performed well, with order volume growing over 40% YoY and revenue increasing by 15% YoY [7] Financial Forecasts - The report revises revenue forecasts for 2025-2027 to 370.2 billion RMB, 417.9 billion RMB, and 475.5 billion RMB respectively, with Non-GAAP net profit estimates of 5 billion RMB, -5.02 billion RMB, and 26.2 billion RMB [10][18] - The target market capitalization for 2026 is set at 735.1 billion RMB, corresponding to a target price of 120 RMB per share [10][19]

Investment Rating - The report assigns a "Buy" rating for Meituan (3690 HK) with a target price adjusted to HKD 147.00, indicating a potential upside of 44.5% from the current price of HKD 101.70 [1][4][14]. Core Insights - The report highlights that short-term profits are significantly impacted by intense competition in the food delivery sector, while emphasizing the importance of long-term core competitiveness in this area [2]. - Financial projections indicate a revenue growth trajectory, with expected revenues of RMB 276,745 million in 2023, increasing to RMB 455,566 million by 2027, reflecting a compound annual growth rate [3][16]. - The adjusted net profit is projected to decline sharply in 2025 to RMB 556 million, following a substantial increase in 2024 [3][16]. Financial Overview - Revenue (in million RMB) is forecasted as follows: 2023: 276,745, 2024: 337,592, 2025E: 369,226, 2026E: 415,920, 2027E: 455,566, with year-on-year growth rates of 25.8% in 2023 and 22.0% in 2024, tapering to 9.4% in 2025 [3][16]. - The net profit (in million RMB) is expected to be 23,253 in 2023, 43,772 in 2024, and a significant drop to 556 in 2025, before recovering to 31,500 in 2026 and 41,418 in 2027 [3][16]. - The report notes a significant decline in adjusted net profit margin, dropping to 1.6% in 2Q25, down from 16.5% in 2Q24, due to increased competition and marketing expenses [9][11]. Market Position and Strategy - Meituan's core local business is projected to face challenges with revenue growth slowing down due to increased user subsidies aimed at maintaining competitive pricing and delivery efficiency [7][11]. - The report anticipates that the ongoing subsidy war will continue to affect profitability in the coming quarters, with expectations of a loss in the core business segment in Q3 [7][11]. - The new business segment is expected to show strong growth, particularly in the small supermarket sector, with plans for rapid expansion in first- and second-tier cities [7][11]. Valuation and Outlook - The report maintains a long-term positive outlook for Meituan, suggesting that despite short-term profit adjustments, the company's market share and competitive advantages are likely to be sustained [7][11]. - The target price of HKD 147.00 reflects a valuation based on a long-term outlook of 1 billion daily orders in the food delivery segment and a price-to-earnings ratio of 15 times [7][11].

Core Viewpoint - Meituan reported a revenue of 91.84 billion yuan for Q2 2025, marking an 11.7% year-on-year growth, but adjusted net profit fell approximately 89% to 1.493 billion yuan, raising concerns about the sustainability of its revenue growth without profit increase [1][5] Financial Performance - Revenue for Q2 2025 reached 91.84 billion yuan, with a year-on-year growth of 11.7% [1] - Adjusted net profit was about 1.493 billion yuan, showing a significant decline of 89% compared to the previous year [1] - The core local commerce segment generated revenue of 65.3 billion yuan, reflecting a 7.7% year-on-year increase [3] Market Reaction - Following the earnings report, Meituan's ADR opened significantly lower, dropping over 10% [1] - The market expressed concerns regarding the prolonged period of "increased revenue without increased profit" [1] Management Insights - Meituan's management indicated that they would continue to increase subsidies in Q3 to combat the intensifying price competition in the food delivery sector, predicting substantial losses in the core local business [2][5] - CEO Wang Xing emphasized the company's commitment to maintaining market position amidst fierce competition, focusing on quality supply, stable fulfillment, and reasonable pricing [3] Business Developments - The instant delivery segment saw peak daily orders exceeding 150 million in July, with an average delivery time of 34 minutes, indicating improved user engagement [3] - The flash purchase business experienced high growth, expanding its product categories and achieving a doubling of transaction volume for high-ticket items during the 618 shopping festival [4] - The hotel and travel sector showed a recovery with order volume increasing over 40% year-on-year, and the number of active merchants reaching a new high [4] New Initiatives - Meituan is advancing its "Internet + Bright Kitchen" model, with over 117,000 merchants having adopted the "Bright Kitchen Live" feature since February, aiming for over 200,000 by year-end [5] - The company has invested 6.3 billion yuan in R&D for the quarter, a 17.2% increase year-on-year, and has launched 64 drone delivery routes across multiple cities [5] Future Outlook - The management expressed confidence in the long-term growth potential of all business segments despite the current challenges, indicating that maintaining market share while rationalizing competition will be crucial for valuation recovery in the next two years [5]

Investment Rating - The investment rating for Meituan-W (03690) is "Buy" (maintained) [2][7]. Core Views - Meituan, as a leader in local lifestyle services, is expected to maintain its core competitive advantages despite short-term competition in the food delivery sector. The company is projected to achieve revenues of CNY 390.41 billion, CNY 445.04 billion, and CNY 507.46 billion in 2025, 2026, and 2027 respectively, with year-on-year growth rates of 15.65%, 13.99%, and 14.03% [2][7]. Financial Performance Summary - In Q1 2025, Meituan's revenue increased by 18.1% year-on-year to CNY 86.557 billion, exceeding Bloomberg consensus estimates by 1.3%. Non-IFRS net profit rose by 46.2% to CNY 10.948 billion, also above expectations by 12.56% [6]. - The core local business revenue grew by 17.8% to CNY 64.325 billion, surpassing Bloomberg's consensus by 1.49%. Operating profit increased by 39.1% to CNY 13.491 billion, exceeding expectations by 10.21% [6]. - New business revenue rose by 19.2% to CNY 22.232 billion, also above consensus by 1.54%, with operating losses reduced by 17.54% to CNY -2.273 billion [6]. Expense Management - Sales expenses increased by 11.96% to CNY 15.55 billion, primarily due to promotional and advertising costs. The sales expense ratio decreased by 1 percentage point to 18% due to improved operational efficiency [6]. - R&D expenses rose by 15.44% to CNY 5.772 billion, reflecting increased investment in AI, while the R&D expense ratio slightly decreased by 0.16 percentage points to 6.67% [6]. Business Segments - The food delivery segment is expected to see healthy growth with significant investments planned for the next three years, totaling over CNY 100 billion to support various merchants [6]. - The flash purchase segment continues to show strong growth, particularly in low-tier markets, with a significant increase in order volume during key promotional periods [6]. - The in-store travel segment is experiencing robust growth in lower-tier markets, with the launch of a membership program aimed at increasing transaction frequency and cross-selling efficiency [6]. Future Outlook - For Q2 2025, the company is expected to maintain its core advantages and solidify its platform ecosystem, despite potential short-term profit fluctuations due to intensified competition in the food delivery sector [6].