MEITUAN(3690.HK)：SOLID CORE BUSINESS EARNINGS GROWTH TO PROVIDE SUPPORT FOR OVERSEAS EXPANSION-格隆汇

机构：招银国际
研究员：Saiyi HE/Ye TAO/Wentao LU/Joanna Ma

　　Meituan reported (22 Mar) its 4Q24 results: revenue was RMB88.5bn, up 20% YoY, 1% higher than Bloomberg consensus estimate, while adj. NP reached RMB9.8bn, largely inline with consensus. The RMB12.9bn OP for core local commerce (CLC) segment was 11% better than consensus, mainly attributable to the beat in OP of food delivery (FD) business aided by optimization in user subsidy, in our view. For 2024, CLC delivered 21%/35% YoY revenue/OP growth, and loss generated from new initiatives narrowed to RMB7.3bn (2023: RMB20.2bn), driven by loss reduction of Meituan Select (c. RMB10bn YoY loss reduction contribution) and improvement in profitability of other new businesses. Looking into 2025, we expect Meituan to step up investment in international expansion, while to continue driving for operating efficiency gains in CLC, Meituan Select, and other new businesses. We expect the solid core business earnings growth to provide support for overseas expansion, with 17.6% YoY growth for CLC OP in 2025E. Our DCF-based TP is nudged up to HK$200.2 (previous: HK$199.2) due to better-than-expected earnings growth prospects of CLC, although this was offset by likely wider-than-expected loss generation from new business to support international expansion in the near term. Maintain BUY.
CLC to maintain solid earnings growth in 2025E. CLC segment rev/OP was RMB65.6bn/12.9bn in 4Q24, up 19%/61% YoY, 1%/11% better than consensus, thanks to better-than-expected UE expansion of FD aided by optimization in user subsidy. Looking into 2025E, we are looking for 16.2%/17.6% YoY growth for CLC, driven by: 1) 12% YoY growth in on- demand delivery order volume growth, with Instashopping order volume growth to maintain 3x that of FD; 2) 26/23% YoY growth in revenue/OP of in-store, hotel and travel (ISHT) business, driven by strong order growth aided by category expansion and lower-tier city expansion. The 65% YoY growth in in-store order volume in 2024 has proved that online penetration still has abundant room to increase, in our view, and we believe order volume growth could sustain as a strong growth driver for ISHT in 2025E.
　　Financial impact from driving overseas expansion to emerge. Revenue generated from new initiatives was RMB22.9bn in 4Q24, up 23.5% YoY, driven by grocery retail businesses and the development of overseas business. Operating loss was RMB2.2bn, representing a YoY loss reduction of RMB2.7bn aided by loss reduction of Meituan Select. We estimate that operating loss generated from Meituan Select was RMB1.6bn, narrowed from RMB4.4bn in 4Q23. For 1Q25, we are estimating 17% YoY revenue growth for new initiatives, the sequential decline in YoY growth rate was due to high-base of Meituan Select in 1Q24. Accounting for the incremental investment to drive for overseas expansion of FD, we are forecasting RMB2.3bn operating loss for the segment, among which we are expecting a sequential loss reduction of Meituan Select to RMB1.5bn. For 2025, we are estimating RMB9.4bn operating loss for new initiatives (2023: RMB7.3bn), and the widening YoY loss was mainly due to incremental investment to drive for overseas expansion. For other business pillars within new initiatives, we are forecasting RMB5.4bn operating loss from Meituan Select in 2025E, implying a further YoY loss reduction of RMB2.8bn, and we are expecting further improvement in profitability of all other new businesses on a combined basis.