20221102-招银国际-美团-W-03690.HK-Balancing_growth_and_efficiency_11页_1mb

Meituan (3690 HK) Summary

Core Content and Key Information

Meituan, a leading Chinese online platform, has demonstrated resilience in its core business despite a challenging environment, particularly with the resurgence of the pandemic in September 2021. The company is focusing on balancing growth and efficiency, especially through cost optimization and reduced subsidies for food delivery (FD), which are expected to improve profitability on a year-over-year basis. The long-term monetization potential of Meituan remains strong as it continues to facilitate consumption, leisure, and lifestyle needs, leveraging its large user base, high user stickiness, and frequent usage.

Main Business Segments

Food Delivery (FD)

• Market Share: Meituan holds approximately 70% of the FD market in China.
• GMV Growth: FD GMV reached RMB1.0036tn in 2021 and is projected to grow to RMB1.7126tn by 2024E, with a CAGR of 19.5%.
• Penetration Rate: FD penetration in the catering market is expected to rise from 21.4% in 2021 to 31.8% in 2024E.
• Monetization Rate: The monetization rate is forecasted to increase from 13.7% in 2021 to 14.8% in 2024E.
• Operating Profit: FD operating profit is expected to grow at a CAGR of 54.8%, with the operating margin increasing from 6.4% in 2021 to 12.9% in 2024E.
• Operating Profit per Order: Projected to rise from RMB0.43 in 2021 to RMB0.99 in 2024E.
• Q3 2022 Performance: FD revenue was RMB33.3bn (up 25.9% YoY), and operating profit was RMB3.6bn (up to 10.9% margin).

In-Store, Hotel, and Travel (ISHT)

• Market Share: Meituan's in-store business accounts for 9% of the total L&E market in China.
• Revenue Growth: ISHT is expected to achieve 26.6% revenue CAGR and 28.8% operating profit CAGR from 2021 to 2024E.
• CPC Ads Penetration: Expected to increase from ~30% in 2021 to ~40% in 2024E.
• Q3 2022 Performance: ISHT revenue grew 12.2% YoY to RMB9.7bn, and operating profit reached RMB4.4bn (45.5% margin).

Core Local Commerce

• Definition: Includes FD, ISHT, and other local commerce segments.
• Growth Forecast: 2021–2024E revenue CAGR of 25.5%, and operating profit CAGR of 42.5%.
• Revenue Breakdown: FD and ISHT are the primary contributors to growth, with FD expected to grow at 22.5% and ISHT at 26.6%.

New Initiatives

• Performance: Losses from new businesses narrowed both YoY and QoQ in 2Q22, with an estimated operating loss of RMB28.9bn in 2022E.
• Meituan Select: A key focus area with potential for UE improvement and business model evolution. The total addressable market for community group buy (CGB) is estimated at RMB8.6tn, with Meituan Select expected to capture 2.2% of the CGB TAM by 2025E, translating to RMB255.6bn GTV.
• Operating Loss per Piece: Estimated at RMB1.6 in 2022E.

Earnings Forecast (2021–2024E)

Valuation and Target Price

• DCF-Based Target Price: HK$220.0.
• Valuation Metrics: Based on a WACC of 11.0% and terminal growth of 2.5%, the valuation implies a 5.5x 2022E PS and 4.3x 2023E PS.
• Reverse SOTP Valuation: Implies a total valuation of HK$1.4tn, with RMB71.3bn left for new initiatives and others, translating into 0.8x 2023E PS.

Sensitivity Analysis

Revenue Sensitivity

• A 1–8pp increase in FD and ISHT growth could result in a 0.5–4.2% revenue upside in 2023E.
• A 1–8pp decrease in FD and ISHT growth could result in a 0.5–4.2% revenue downside in 2023E.

Non-IFRS Net Income Sensitivity

• A 1–8pp reduction in S&M and G&A expenses growth could result in a 2.9–23.6% increase in non-IFRS net income in 2023E.
• A 1–8pp increase in S&M and G&A expenses growth could result in a 2.9–23.6% decrease in non-IFRS net income in 2023E.

Shareholding and Performance

• Market Cap: HK$773.56bn.
• Share Performance (12M): -27.4% absolute, +4.2% relative.
• Shareholding Structure:
  • Huai River Investment Limited: 10.1%
  • Crown Holdings Asia Limited: 7.9%

Conclusion

• Investment Recommendation: Maintain BUY.
• Reasoning: Strong long-term monetization potential, solid business recovery, and improved UE in core segments like FD and ISHT.
• Stock Catalysts: Expected quicker recovery of core business, better-than-expected UE improvement, and potential business model evolution of Meituan Select.