The fastest growing among China's internet giants! Morgan Stanley: Meituan aims for HKD 300

Morgan Stanley stated that Meituan's Hong Kong stock still has to rise by 75%.

On November 21, Morgan Stanley stock analyst Richard Yu and his team released a report stating that currently, there is uncertainty in China's consumption outlook. Under the baseline scenario, with the government launching stimulus plans of RMB 2-3 trillion each year, Meituan's operating profit compound annual growth rate (CAGR) from 2024 to 2026 is expected to reach 35.7%, making it the fastest-growing company among China's internet giants.

If the situation is more optimistic, with the government launching consumption stimulus plans of RMB 10 trillion each year, Meituan's operating profit CAGR from 2024 to 2026 is expected to reach 39.4%; if the government launches consumption stimulus plans of RMB 1 trillion each year, this figure would be 26.9%.

Morgan Stanley believes that with China's excellent delivery capabilities, cheap and high-quality stock-keeping units (SKUs), and innovative business models, by 2030, the scale of China's instant retail market will grow to RMB 2 trillion at a CAGR of 20%.

Currently, Alibaba and JD.com are losing market share in instant retail, and Meituan is the company most likely to seize this opportunity. Therefore, under the baseline scenario, the instant retail business will bring Meituan an additional operating profit of RMB 20 billion, while in an optimistic scenario, it will bring RMB 30 billion.

Currently, Morgan Stanley maintains a target price of HKD 215 per share for Meituan's Hong Kong stock, but by 2025, according to the sum-of-the-parts (SOTP) valuation method, Morgan Stanley believes that the price ceiling for Meituan's Hong Kong stock could reach HKD 300 per share, and this probability is higher.

Morgan Stanley expects that in 2025, the valuations for Meituan's businesses will be USD 110 billion (HKD 135 per share) for food delivery and in-store, hotel and travel (IHT), and USD 32 billion (HKD 40 per share) for instant retail (Meituan Flash Purchase and Xiaoxiang Supermarket), plus USD 28 billion (HKD 35 per share) in discounted net cash and investments, totaling exactly HKD 300 per share.

If Meituan's overseas expansion business and Meituan Preferred business achieve results, there is further upside potential for the stock price.

As of the time of publication, Meituan's Hong Kong stock is reported at HKD 170.80 per share, needing to rise by 75.64% to reach Morgan Stanley's predicted HKD 300 per share. So far this year, Meituan's Hong Kong stock has already risen over 115%.

Article authors: Richard Yu, Liu Song'en, Fei Yifan, Source: Morgan Stanley, Original title: "Towards the Road of HKD 300"