In order to improve efficiency, Wang Puzhong is responsible for the core local business of Meituan (03690) to achieve seamless integration of in-store and at-home business. The bank believes that Wang Puzhong, the hero of Meituan, will exceed expectations in leading the expansion of Meituan's instant retail process, and as of July 4, the number of merchants participating in Meituan's "God Member" has reached 5 million. With the synergistic effect of in-store and at-home business, Meituan is expected to achieve above-expectation growth.
The bank pointed out that the competition margin of the at-store and at-home business has eased, and new business has released elasticity. At the store end: the bank expects that the operating profit margin of Meituan at-store business in FY24Q2 will be 31%, which will rebound from the bottom of 30% in FY2023Q4, and is expected to rise to 34% in FY2024Q4. At the home end: the bank expects that the number of instant trading and delivery orders for Meituan's Q2 take-out flash purchase will increase by 13.5% year-on-year, and the operating profit margin of the average order will reach 1.48, a 24% increase month-on-month. Since July, Meituan in Beijing has allowed the use of medical insurance for drug purchases, and the bank expects that the order volume will increase significantly after Meituan expands to more cities covered by medical insurance. 3) New business end: The bank expects that the revenue of Q2 new businesses will increase by 24% year-on-year to 20.7 billion yuan, and the operating profit will reduce its loss year-on-year by 11%, further releasing profit elasticity.
The bank continued to state that after announcing a $1 billion share buyback plan at the end of November 2023, Meituan once again announced a whopping $2 billion share buyback plan, with a return rate of approximately 2% for investors. The bank believes that Meituan is confident in the development of its local business and has sufficient financial resources to support share buybacks while maintaining a sound financial situation.
The bank maintains its expected revenue for FY2024E/FY2025E/FY2026E to be RMB 327.7/384.1/437.1 billion respectively. The adjusted net income for FY2024E/FY2025E/FY2026E is expected to be RMB 32.1/44.2/56.8 billion (previously RMB 37.3/50.7/66.4 billion). The target price for Meituan is set at HKD 140.4, and the rating is maintained as "shareholding".