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LB Select
2023.05.26 07:23
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Xiao Mo: Optimistic about Meituan's takeaway business! Why are in-store revenue and operating profit mixed?

MEITUAN-W's current stock price is only 5% higher than Morgan Stanley's target price of HKD 120, indicating that investors are overly concerned about the long-term risks of in-store revenue, or that market factors have significantly compressed MEITUAN-W's valuation multiples.

Revenue stabilizes and profits soar, MEITUAN-W delivered a better-than-expected financial report yesterday.

In terms of specific businesses, highlights summarized by CICC are as follows:

  1. Daily orders for food delivery reached 42 million, a YoY increase of 13%, with revenue increasing by 22%. Estimated average revenue per order is about 1.3 yuan;

  2. Flash sales orders increased by 35% YoY. The increase in AOV (average order value) and advertising revenue drove revenue growth faster than order volume, and the average loss per order improved;

  3. GTV (gross transaction value) for in-store travel increased by 52% YoY. The growth of in-store travel was stronger than that of in-store, but revenue growth was slower than GTV;

  4. The losses of new businesses continued to narrow YoY.

After the impressive financial report, does MEITUAN-W have room for upward growth?

JP Morgan believes that MEITUAN-W's stock price is attractive and is expected to have a positive reaction to the financial report!

The bank also stated that MEITUAN-W's current stock price is only 5% higher than the lower limit of the bank's target price of HKD 120, indicating that investors are overly concerned about the long-term risks of in-store revenue or that market factors have significantly compressed MEITUAN-W's valuation multiples.

JP Morgan now believes that MEITUAN-W's Q2 revenue growth may significantly exceed the bank's assumed compound annual growth rate (25%), but the growth rate of operating profit margin (OPM) may be lower than the bank's assumed 35%.

In addition, considering the low base effect, MEITUAN-W's Q2 and 2023 in-store revenue growth rates are expected to be 57% and 38%, respectively, and the operating profit margin may decrease from 40% in Q1 to 30% and 35%, respectively.

Regarding the food delivery business, the bank is becoming increasingly optimistic, stating that MEITUAN-W has obtained all cost benefits from oversupply, and Q1 revenue exceeded market expectations.

JP Morgan believes that this indicates that MEITUAN-W's food delivery market position is stable and has a positive long-term revenue outlook.

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