Meituan (3690.HK)_ Highlights from Post-3Q24 Management Investor Group Call

Company and Industry Highlights 1. Company Overview - Meituan (3690.HK): China's leading e-commerce platform for services, focusing on mass-market, essential, and high-frequency service categories. - Business Segments: Food delivery, in-store hotel & travel, new initiatives, and others. - Growth: Meituan has experienced significant growth, with its total gross transaction volume reaching Rmb515.6bn in 2018, a 44.3% increase year-over-year. 2. Post-3Q24 Management Investor Call Takeaways - Shen Hui Yuan and Pin Hao Fan: Successful redirection of Shen Hui Yuan membership from food delivery to other segments like in-store, hotel, and travel. - Core Local Commerce Unit Economics (UE): Significant improvement in UE due to economies of scale, increased 1P orders, and improving ad revenue as a percentage of GTV. - Instashopping: Order volume growth outgrew food delivery, reflecting management's efforts to increase purchase frequency. - Instore, Hotel, and Travel: Healthy growth in transaction frequency, particularly in lower-tier cities. - New Initiatives: Operating loss of new initiatives narrowed in 3Q24, with potential fluctuations in 4Q24E due to increased investments in overseas expansion and other factors. - Overseas Expansion: Management maintains an open-minded approach to overseas expansion, particularly in the Saudi market. 3. Valuation and Investment Strategy - Buy Rating: Citi maintains a Buy rating on Meituan, citing its value proposition, technology-centric infrastructure, data capabilities, unique platform position, and attractive valuation. - Catalysts: Expected profitability of the food delivery business, scale-back of investments in new initiatives, and faster growth of higher-margin businesses. - Valuation: Citi uses a sum-of-the-parts (SOTP) approach to value Meituan, resulting in a target price of HK$203 per share. 4. Risks - Competition: Intense competition in the food delivery market. - Labor Costs: Rising labor costs. - COVID-19: Resurgence of COVID-19 cases in China. - Economic Activities: Weaker economic activities affecting consumer consumption. - User Behavior: Changes in user behavior and threats of mini programs. - Strategic Partnerships: Shifts in the nature of collaborations with strategic partners.