20221128-招银国际-美团-W-03690.HK-Long-term_development_intact_despite_short-term_headwinds_7页_1mb

Meituan (3690 HK) Summary

Core Content

Meituan, a leading player in the local consumer services market, reported its third-quarter 2022 (3Q22) results, showing revenue of RMB62.6bn, a 28.2% year-over-year (YoY) increase, slightly exceeding both the analyst's and consensus estimates. Adjusted net profit for the quarter reached RMB3.5bn, significantly outperforming the forecasted RMB1.5/0.8bn, driven by improved profitability in its core local commerce (CLC) business and reduced losses from new initiatives.

Despite a recent nationwide resurgence of the pandemic, which may bring short-term headwinds, Meituan remains optimistic about its long-term development prospects due to its strong competitive position and established local fulfillment network. The analyst maintains a "BUY" rating, with a revised target price of HK$216.4, down 2% from the previous HK$220.00, due to the impact of the pandemic on revenue growth expectations.

Main Points

• Revenue Growth:

  • 3Q22 revenue: RMB62.6bn (+28.2% YoY)
  • Revenue growth forecast for 2022E: 21.5%, 2023E: 29.3%, 2024E: 27.2%
  • Revenue growth for CLC segment in 3Q22: 25% YoY to RMB46.3bn, with FD business growing 27% YoY to RMB33.7bn and ISHT revenue up 14% YoY to RMB10bn.

• Profitability:

  • Adjusted net profit in 3Q22: RMB3.5bn (vs. 3Q21: RMB-5.5bn)
  • Segmental operating profit (OP) for CLC: RMB9.3bn (+16% YoY), with OPM of 20.1% (vs. 3Q21: 11.2%)
  • FD business OPM improved to 14% in 3Q22, up 11 percentage points YoY, driven by optimized user subsidies.
  • ISHT segment OP declined 16% YoY to RMB7.5bn in 4Q22, with OPM at 42% (vs. 4Q21: 43%), due to pandemic-related impacts.

• New Initiatives:

  • Revenue from new initiatives in 3Q22: RMB16.3bn (+40% YoY), outperforming the estimate.
  • Operating loss for the segment: RMB6.8bn (vs. estimate of RMB7.6bn), with a loss margin of 42% (vs. 86% in 3Q21), indicating improved cost efficiency.
  • Forecast for 4Q22E: Revenue to grow 31% YoY to RMB16.4bn, with operating loss remaining flat at RMB6.8bn, but Meituan Select's operating loss is expected to narrow to RMB5.0bn.

• Valuation:

  • DCF-based target price: HK$216.4, based on a WACC of 11.0% and terminal growth of 2.5%, implying a 5.5x 2022E PS and 4.3x 2023E PS.
  • Reversed SOTP valuation suggests a total valuation of HK$1.3tn, with new initiatives and others valued at 0.9x 2023E PS.
  • Analyst’s forecast for 2022E revenue is RMB217.6bn, with OP at RMB-6.3bn, and Non-IFRS NP at RMB2.3bn.

Key Information

• Market Capitalization: HK$846,697.3 million

• Average 3-Month Turnover: HK$157.9 million

• 52-Week High/Low: HK$263.60 / HK$106.00

• Total Issued Shares: 6,198.4 million

• Share Performance:

  • 1-month: +10.6%
  • 3-month: -23.0%
  • 6-month: -14.5%

• Analyst Rating: BUY (Maintain)

• Target Price: HK$216.40

• Previous Target Price: HK$220.00

• Up/Downside: 58.4%

• Current Price: HK$136.60

Future Catalysts

• Consumption Recovery: Expected to boost demand for Meituan’s services.
• User Experience (UE) Improvement: Continued optimization of user subsidies and efficient business operations.
• Business Model Evolution: Potential improvements in Meituan Select and other new initiatives.

Financial Highlights

Shareholding Structure

• Huai River Investment Limited: 10.1%
• Crown Holdings Asia Limited: 7.9%

Analyst Certifications & Disclosures

• The analyst certifies that the views expressed in the report reflect personal opinions and that compensation is not tied to the report’s content.
• No trading in covered stocks occurred within 30 days before the report’s release.
• The report is not an offer to buy or sell any security and is intended solely for informational purposes.

CMBIG Ratings

• BUY: Potential return of over 15% over next 12 months.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark over next 12 months.

Conclusion

Meituan is expected to maintain its long-term growth trajectory despite short-term challenges from the pandemic. The company's strong market position and efficient cost management in new initiatives suggest a solid foundation for future profitability. The revised target price reflects adjusted growth expectations, but the analyst remains positive on the company's long-term potential.