King's Financial News | Bocom Intl releases a preview of Meituan's (03690) third-quarter performance, expecting a 21% year-on-year increase in total revenue, compared to Bloomberg/VisibleAlpha's (VA) expected 20% increase, with a 98% increase in net income to 11.4 billion yuan. 1) Local Commerce (CLC): Expected revenue to increase by 20%, with immediate delivery order volume up 14%, revenue up 18%, and profit up 36%, in-store wine and travel (IHT) revenue up 20%, profit up 32%, profit margin 35%. 2) New Business: Expected revenue to increase by 25%, with quarterly losses narrowing to 1.86 billion yuan.
For expectations for 2024-25: Expected local commerce revenue growth rates for 2024/25 at 21%/18%, adjusted operating profit to increase by 30%/27% year-on-year, with profit growth > revenue growth > order trend unchanged. The competitive pressure in the in-store wine and travel business is easing, with accelerated revenue and profit growth in 2025, expected revenue growth of 23%/30% in 2024/25, profit margin recovering to 35%. Based on the trend of narrowing losses in the second half of 2024, there is still room for narrowing in 2025 for new business.
The bank believes that Meituan still holds a leading position in the instant retail and delivery industry in mainland China, with competition in the flash sale business industry but with a large market space, and scalability and category diversification are important prerequisites for improving the platform's monetization capabilities. The competitive impact on Meituan from the local life service market is largely manageable, with limited profit impact from community group buying and overseas delivery expansion. Expected adjusted net income growth rates for 2024/25 are 78%/25%, corresponding to a 1x PEG for 2025, 25x PE ratio, Meituan's reasonable target price raised to HK$228 (originally HK$136, 0.8x PEG, 20% net income growth), maintaining a buy rating.
