Quarterly Performance Outlook: Securities firms expect Meituan's adjusted net profit to increase by 40% YoY in the third quarter, focusing on in-store business and industry competition.

Meituan-W (03690.HK) will announce its third-quarter performance next Tuesday (28th). Although the volume of takeout orders may be affected by macroeconomic factors and subsidy measures, the seasonal travel during the summer vacation, improvement in rider costs (abundant supply of riders leading to cost optimization), growth in in-store business, and the market forecast of a gross profit margin of 30% to 35% support the company. According to the comprehensive analysis of 8 securities firms, Meituan's adjusted non-IFRS net profit is expected to be between RMB 4.823 billion and RMB 5.695 billion, an increase of 36.7% to 61.5% compared to RMB 3.527 billion in the second quarter of 2022. The median is RMB 4.929 billion, an increase of 40% year-on-year. According to the comprehensive analysis of 3 securities firms, Meituan's net profit for the third quarter of 2023 is expected to be between RMB 2.4 billion and RMB 3.502 billion, an increase of 97.2% to 187.8% compared to RMB 1.217 billion in the third quarter of 2022. According to the comprehensive analysis of 9 securities firms, Meituan's revenue for the third quarter of 2023 is expected to be between RMB 75.5 billion and RMB 76.231 billion, an increase of 20.6% to 21.7% compared to RMB 62.619 billion in the same period last year. The median is RMB 76.073 billion, an increase of 21.5% year-on-year. Investors are concerned about the latest business guidance from Meituan's management, including the competition in the in-store business (operating profit margin of the in-store business), the growth of takeout orders and unit economic efficiency, and the progress of loss reduction in the preferred category.【In-store growth drives industry competition】UBS pointed out that Meituan's third-quarter revenue may slightly exceed market expectations. The unit economic efficiency of food delivery in the favorable rider cost environment is strong, and the operating profit margin of the in-store business will be at the upper end of the market expectation range of 30% to 35%. The loss in new businesses is expected to be in line with market expectations, based on more investment in grocery e-commerce during the summer quarter. The bank expects the market to focus on the competition brought by Douyin, the unit economic efficiency of food delivery, and the narrowing of losses in new businesses. UBS predicts that Meituan's adjusted non-IFRS net profit for the third quarter will increase by 38% to RMB 4.9 billion year-on-year, and revenue will increase by 22% to RMB 76.1 billion year-on-year, with an overall gross profit margin of 32.1%. Citigroup predicts that Meituan's adjusted non-IFRS net profit for the third quarter will increase by 51% to RMB 5.3 billion year-on-year, and revenue will increase by 22% to RMB 76.2 billion year-on-year. The bank pointed out that Meituan's adjusted EBITDA and adjusted net profit under non-IFRS may exceed market expectations, benefiting from the seasonal support of tourism and in-store business during the summer, and the revenue from food delivery is in line with market expectations, but there is room for improvement in unit economics. The narrowing of losses in new businesses may also be better than expected, with a gross profit margin of 32.8%. The bank expects a quarterly loss of RMB 4.9 billion and RMB 5.1 billion for community group buying and new businesses, and predicts that core local business revenue and operating profit will increase by 23% and 7% year-on-year, respectively, to RMB 57 billion and RMB 9.97 billion. Nomura predicts that Meituan's adjusted non-IFRS net profit for the third quarter will increase by 56% to RMB 5.514 billion year-on-year, and revenue will increase by 22% to RMB 76.1 billion year-on-year. The bank predicts that the revenue from food delivery in the quarter will increase by 18% YoY, driven by a 19% YoY increase in order volume, but the average value per order will decrease by 3% YoY. The unit economic cost is 1.1 RMB per order, higher than last year's 1.05 RMB. On-site revenue is expected to increase by 34% YoY, while the adjusted net profit margin under non-international financial reporting standards is expected to decrease by 16 percentage points to 33% YoY, due to promotional activities. The loss from new business in the quarter is expected to narrow by 24% YoY to 5.2 billion RMB. The bank also pointed out that Meituan has provided relatively clear quarterly guidance, and based on past performance, it is expected that the quarterly results will not have too many negative surprises. The market will pay more attention to the management's outlook for the fourth quarter, including the performance of the food delivery business and the competition in the on-site business.

According to the analysis of 8 securities firms, the adjusted net profit under non-international financial reporting standards for Meituan is estimated to be between 4.823 billion and 5.695 billion RMB, an increase of 36.7% to 61.5% YoY, compared to 3.527 billion RMB in the second quarter of 2022. The median is 4.929 billion RMB, an increase of 40% YoY. Securities firms │ Forecast for adjusted net profit in the third quarter of 2023 under non-international financial reporting standards (RMB) │ YoY change Dongfang Securities │ 5.695 billion │ +61.5% Nomura │ 5.514 billion │ +56.3% Citi │ 5.308 billion │ +50.5% AXI International │ 4.94 billion │ +40.1% CICC │ 4.918 billion │ +39.4% UBS │ 4.87 billion │ +38.1% CMB International │ 4.848 billion │ +37.5% Daiwa │ 4.823 billion │ +36.7% Meituan's adjusted net profit under non-international financial reporting standards for the third quarter of 2022 is calculated as 3.527 billion RMB.

According to the analysis of 3 securities firms, Meituan's net profit for the third quarter of 2023 is estimated to be between 2.4 billion and 3.502 billion RMB, an increase of 97.2% to 187.8% YoY, compared to 1.217 billion RMB in the third quarter of 2022. Securities firms │ Forecast for net profit in the third quarter of 2023 (RMB) │ YoY change Citi │ 3.502 billion │ +187.8% AXI International │ 2.779 billion │ +128.3% CICC │ 2.4 billion │ +97.2% Meituan's net profit for the third quarter of 2022 is calculated as 1.217 billion RMB.

According to the analysis of 9 securities firms, Meituan's revenue for the third quarter of 2023 is estimated to be between 75.5 billion and 76.231 billion RMB, an increase of 20.6% to 21.7% YoY, compared to 62.619 billion RMB in the same period last year. The median is 76.073 billion RMB, an increase of 21.5% YoY. Brokerage Firms│2023 Q3 Revenue Forecast (RMB)│YoY Change Citi│76.231 billion│+21.7% Orient Securities│76.189 billion│+21.7% Nomura│76.078 billion│+21.5% UBS│76.073 billion│+21.5% Guotai Junan International│76.102 billion│+21.5% Daiwa│76.024 billion│+21.4% China International Capital Corporation│75.822 billion│+21.1% CITIC Securities│75.668 billion│+20.8% Huatai Securities│75 billion│+20.6% Meituan's Q3 2022 revenue was calculated at 62.619 billion RMB. (fc/w)