Meituan (3690.HK)_ 4Q24E Preview_ Expect In-line Q; 1Q25E Outlook Key On Sentiment

Meituan (3690.HK) Conference Call Summary Company Overview - Company: Meituan (3690.HK) - Market Cap: HK$940,204 million (US$120,748 million) - Current Price: HK$154.10 - Target Price: HK$200.00 (revised down from HK$203.00) - Recommendation: Buy Key Financial Estimates - 4Q24 Estimates: - Total Revenues: Rmb88.3 billion (+19.8% YoY) - Non-GAAP Net Profit: Rmb10.78 billion - Core Local Commerce (CLC) Revenues: Rmb65.6 billion (+18.9% YoY) - CLC Operating Profit: Rmb11.67 billion (+45.5% YoY) - New Initiatives Revenues: Rmb22.7 billion (+22.4% YoY) with an operating loss of Rmb2.19 billion - 1Q25 Estimates: - Total Revenues: Rmb84.5 billion (+15.3% YoY) - Adjusted Net Profit: Rmb10.5 billion - Operating Loss for New Initiatives: Rmb2.07 billion - Revisions for 2024-2026: - 2024E Revenues: Rmb337.4 billion (unchanged) - 2024E Non-GAAP NP: Rmb44.7 billion (-3.3%) - 2025E Revenues: Rmb389.5 billion (-0.7%) - 2025E Non-GAAP NP: Rmb57.7 billion (-4.0%) - 2026E Revenues: Rmb443.9 billion (-1.4%) - 2026E Non-GAAP NP: Rmb71.7 billion (-1.3%) [2][42][44] Core Business Insights - On-Demand Delivery Concerns: Investors are worried about growth in delivery volume and unit economics due to high competition and margin pressures from overseas expansion initiatives [1][3]. - Keeta Expansion: Keeta has rapidly gained traction in Saudi Arabia, with plans to expand into other GCC countries. A projected loss of Rmb2-3 billion is expected from new initiatives related to Keeta in 2025 [1][18]. - Domestic Measures: Continued support for merchants and riders is anticipated, with reinvestment of operating leverage to enhance cross-selling opportunities in lower-tier cities [1][3]. Industry Dynamics - Food Delivery Measures: Meituan has implemented measures to avoid destructive competition in the food delivery sector, including algorithm transparency, rider incentives, and a Rmb1 billion investment for merchant subsidies [10][12]. - CNY Promotions: Major promotions were launched during the Chinese New Year, including a gifting function on the Meituan app [11]. - Commission Structure: Post-2021 reform, Meituan's monetization is split into technology service fees (6-8% commission) and fulfillment service fees, with a focus on supporting SMEs [12][13]. User Engagement Metrics - App Performance: - Monthly Active Users (MAU) reached 501.8 million (+7% YoY) in December 2024 - Daily Active Users (DAU) reached 188.0 million (+22% YoY) - Total time spent on the app grew to 78.7 billion minutes (+7% YoY) [23][26]. New Initiatives - InstaMart Expansion: Meituan is expanding its InstaMart network to meet instant retail demands, partnering with various merchants for a diverse product offering [30]. - Drone Delivery: Meituan has received approval to operate drone delivery in Dubai, marking its first overseas expansion in this area [38][39]. Conclusion - Meituan is positioned for growth with a strong focus on local services and strategic expansions. However, challenges in delivery volume growth and competition remain critical areas to monitor. The company's proactive measures in supporting merchants and riders, along with innovative service offerings, are expected to enhance its market position moving forward.