Orient Securities published a research report stating to maintain Meituan-W (03690) "buy" rating, considering the resilience of Meituan's business in the macroeconomic environment, the core local business synergy effect is expected to be released, and new business progress is good. The company's eps for 2024-2026 is adjusted to 6.42/7.65/9.26 yuan (originally 6.15/7.43/8.21 yuan for 2024-2026), with a target price of 215.76 Hong Kong dollars. The company's Q3 2024 revenue is 93.6 billion yuan (yoy +22.4%), with adjusted operating profit of 13.6 billion yuan and an operating margin of 14.5%, overall performance exceeding expectations.

Orient Securities' main points are as follows:

Core local business: both revenue and profit exceeded expectations.

In Q3 2024, revenue was 69.4 billion yuan (up 20.2% year-on-year), while the consensus forecast from institutions was 68.3 billion yuan; adjusted operating profit was 14.6 billion yuan, with institutions expecting 12.9 billion yuan; operating margin was 21.0%, an increase of 3.5 percentage points year-on-year. Looking at specific businesses:

1) Takeout: Order volume shows steady growth, with average operating profit per order continuing to improve year-on-year. In operation, the total orders for the takeout and flash shopping business were 7.078 billion (up 14.5% year-on-year), with this bank estimating takeout order growth nearly hitting 12%. On the demand side, consumer frequency and consumer ARPU are observing positive trends. On the supply side, the company is continuously optimizing its product model, providing high value-for-money offerings represented by Pinhao Fan, Shenqiangshou, and brand satellite stores, proactively responding to changes in dining consumption. On the revenue side, delivery income and advertising monetization efficiency have improved. On the profit side, this bank determines that the order aggregation effect of Pinhao Fan, the improvement in user experience brought by replacing lower price orders from the main site, and the optimization of average delivery costs have collectively boosted average operating profit year-on-year. However, considering increased seasonal subsidies during summer, the average operating profit has seen a quarter-on-quarter decrease. Looking ahead, even though order volume growth in takeout is slowing due to macro challenges, proactive operations of new offerings like Pinhao Fan are expected to bring structural opportunities for order volume growth; as the decline in AOV narrows, this bank anticipates revenue growth will outpace order volume growth. From the perspective of costs and expenses, confidence is placed in the company’s delivery network as a core barrier, with Pinhao Fan's order aggregation and scale effects further leveraging operational leverage, leading to anticipated profit growth that will outpace revenue and order volume.

2) Flash shopping: User scale and frequency together drive high volume growth. In operation, this bank estimates that in Q3 2024, flash shopping orders increased by over 35% year-on-year. On the demand side, both the number of users and trading frequency in flash shopping have achieved double-digit year-on-year growth. On the supply side, benefiting from expanded supply and improved service quality, non-food categories are growing rapidly, while the transaction frequency of fresh and food-related categories continues to increase; the number of Meituan flash warehouses and their contribution to orders have also improved. On the revenue and profit side, this bank estimates that the revenue growth in Q3 2024 may match the growth in order volume, achieving profitability. Looking ahead, this bank expects flash shopping order volume to maintain rapid growth; on one hand, as the flash warehouses in various categories accelerate expansion, the breadth of categories for user consumption will increase; additionally, large retailers represented by Miniso and Watsons opening warehouses can provide higher quality supply and more efficient supply chains, enhancing flash shopping user coverage. Furthermore, the higher average order value compared to takeout and the increased advertising willingness of brand chain merchants suggest the long-term profit elasticity will be promising.

3) In-store accommodations and travel: The Shen membership program continues to promote, with positive expectations for long-term synergy effects. In operation, Q3 2024 orders for in-store, hotel, and travel businesses increased by over 50% year-on-year, with both annual transactional users and active merchants reaching historical highs. On the strategy side, product offerings continue to provide live streaming, discounted group buying, customized marketing strategies, and online operational tools to assist merchants in refined operations. On the platform side, the upgraded Shen membership program will be expanded nationwide in the third quarter, currently involving over 50 merchants in the in-store accommodations and travel sector, with the proportion of orders using "Meituan Shen Coupons" consistently increasing. On the revenue and profit side, this bank calculates that the gap between revenue growth and GTV growth continues to narrow, while operating profit margin has rebounded year-on-year amid easing competition in-store, mainly due to changes in category structure and the increased revenue share from accommodations, expansion into lower-tier cities, and discounted group buying. Looking ahead, this bank is optimistic about the synergy effects from the adjustment of the organizational structure of core local business, projecting that the 0.1 billion Shen memberships will effectively drive customer acquisition and transaction frequency for in-store accommodations and travel. On the profit side, short-term operating profit margin may still exhibit fluctuating trends, but the absolute value of operating profit is expected to steadily increase.

A series of measures will support ecological partners and assist in sustainable growth.

In September 2024, Meituan announced the upgrade of the "Prosperity Plan", with specific measures including an investment of hundreds of billions to promote user consumption, collaborating with merchants on brand marketing to promote products; upgrading the "Brand Satellite Store" rebate program for restaurant businesses with commission returns for 6 to 12 months; shortening the group buying business payment period to improve merchant cash flow efficiency; and initiating a digitalization initiative. In October, the Lightning Warehouse "Star Plan" was launched, providing merchants with full chain empowerment for opening warehouses, including precise site selection, operation guidance, ramp-up resources, morning glory system, and exclusive delivery solutions, as well as daily special prices, special coupons, product cubes, smart distribution, and precise marketing platform support resources. In November, an action to support dining merchants was launched, investing 1 billion yuan in support funds to aid the innovative development of quality dining merchants.