How to understand the long-term moat of Meituan, which did not rise but fell after its performance report?

Last week, Meituan delivered an earnings report for the second quarter that exceeded expectations, with adjusted net profit reaching 7.66 billion yuan, a nearly 300% year-on-year increase.

Despite experiencing market volatility after the release of the report, Meituan's stock price did not rise significantly due to the impressive financial figures. However, analysts remain optimistic about Meituan, believing that its profitability can withstand competitive challenges and that its long-term value path is clear!

The team of analysts at Xinda Securities pointed out that Meituan's overall revenue growth and adjusted net profit in the second quarter exceeded expectations, demonstrating the company's ability to seize market opportunities in the post-pandemic consumption recovery. All business segments have shown strong growth momentum.

In the face of intense competition in the in-store travel industry, the company has increased its investment in this business, further consolidating its market share. While strengthening consumer mindshare, Meituan has maintained a relatively stable profitability.

The bank also believes that Meituan has made decisive and effective decisions in maintaining its market share in the in-store travel business. Although this move may lead to a temporary decline in the profit margin of this business, the company is doing the "difficult but right thing" and is expected to actively turn the current passive situation around, further strengthening the long-term moat of the platform. The company's market share in the in-store travel business has remained stable and even increased, indicating that this move may have achieved preliminary results.

In the medium and long term, Meituan's core local businesses, such as food delivery, in-store travel, and flash sales, have obvious competitive advantages, and the upward trend in medium and long-term growth momentum and profitability is expected to continue. New businesses such as Meituan Select are also developing well and continuously optimizing profitability, which is expected to drive steady revenue growth and sustained profit improvement for the company as a whole.

In summary, Xinda Securities is optimistic about Meituan's solid competitive advantages and broad industry space in the food delivery and in-store travel business, as well as its active exploration of new retail businesses.

Outlook for the Third Quarter

• Food Delivery Business

It is expected that Meituan's food delivery business will continue to maintain steady growth in the third quarter. The growth rate of business orders and revenue may slow down compared to the high base of the same period last year, but it will still remain at a healthy level. At the same time, due to the current favorable labor conditions, it is expected that the cost of delivery riders may further decrease, and the average operating profit per order in the third quarter is expected to be slightly better than the same period last year.

It is expected that Meituan's food delivery business will achieve a daily average order volume of 60 million, a year-on-year increase of 19.4%; achieve revenue of 39.5 billion yuan, a year-on-year increase of 17.3%; and the operating profit margin will be 15.1%, slightly better than the same period last year.

• In-Store Hotels and Travel Business

It is expected that the local life industry will continue to recover in the third quarter, and with the company's continued efforts in operations, the growth rate of GTV (Gross Transaction Value) and revenue in the in-store travel business will remain fast. It is expected that Meituan's GTV in the in-store travel business will achieve a year-on-year growth of over 90% in the third quarter, and the GTV for the first three quarters is expected to exceed 500 billion yuan.But due to the company's active response to competition and increased subsidies for merchants and users, it is expected that the revenue growth rate of this business will still be significantly lower than the GTV growth rate, while the MoM operating profit margin will remain stable.

It is expected that Meituan's in-store hotel and travel business will achieve a revenue of 12.7 billion yuan in the third quarter, a YoY growth of 33%; achieve an operating profit of 4.35 billion yuan, a slight YoY decrease, but an improvement QoQ, with an operating profit margin of approximately 34%. The YoY decrease in operating profit indicates that the company will continue to increase investment to maintain its market share in the in-store hotel and travel business.

The operating profit margin of this business will be dynamically adjusted based on competition, and it may stabilize at around 35% by 2025.