MEITUAN-W plunges 8%! Despite good performance, the market is not buying and is still selling.

Last week, MEITUAN-W released its first-quarter financial report. Overall, MEITUAN-W's first-quarter revenue increased by 27% year-on-year, and the profit side was greatly optimized.

However, on Monday, MEITUAN-W performed weakly, falling more than 8%, far weaker than the index and other Internet stocks.

Review of Q1 Performance

MEITUAN-W achieved operating revenue of RMB 58.6 billion in the first quarter, a year-on-year increase of 27%, and the core local business entered the recovery cycle. The adjusted net profit was RMB 5.5 billion, and the adjusted net profit margin was 9.4%, a year-on-year increase of 17.1 percentage points.

The core local business achieved revenue of RMB 42.9 billion, a year-on-year increase of 25%. The operating profit of the core local business was RMB 9.45 billion, and the loss of new businesses narrowed to RMB 5.03 billion.

Thanks to the optimization of catering takeout and flash purchase business UE and the continued reduction of losses in new businesses, as well as the fact that MEITUAN-W has not yet made large-scale expenses and subsidies in this quarter.

MEITUAN-W's performance falls short of analysts' expectations

However, on Monday, MEITUAN-W's stock price performed weakly, hitting a seven-month low since October 2022.

Nomura lowered MEITUAN-W's target price from HKD 200 to HKD 184, and Daiwa lowered its target price for MEITUAN-W from HKD 205 to HKD 170.

Although 80% of analysts are optimistic about MEITUAN-W, with a minimum target price of HKD 170, MEITUAN-W's stock price continues to decline.

China International Capital Corporation pointed out that MEITUAN-W has been under pressure recently due to macroeconomic factors, large shareholders' reduction of holdings, and competition from short video platforms. The current price corresponds to a core business profit of only 22 times in 2023 (2022-25 compound growth rate of 23%, PEG <1). Assuming the worst-case scenario, the value per share is HKD 121.

What are the market concerns?

In addition to the macro trend, the market's concerns are mainly about the market competition encountered by MEITUAN-W.

Nomura stated that MEITUAN-W's in-store business comes from ByteDance's aggressive competition, and its profitability may decline in the short term. MEITUAN-W will launch a new round of promotional activities in the second and third quarters, which is a preemptive move to prevent ByteDance from quickly entering this field.

Daiwa stated that it is expected that the operating profit margin of MEITUAN-W's in-store business in the second and third quarters will drop to the level of 30%, and there is a further downside risk in the future.