MEITUAN(3690.HK)：COVERAGE EXPANSION TO CAPTURE INCREMENTAL DEMAND-格隆汇

机构：中银国际
研究员：Michael MENG/Constance ZHANG

　　Adjusted net profit increased 125% YoY to RMB9.8bn in 4Q24, in line with market expectation, driven by improved operating profit of core businesses while offset by overseas investments. Average order value (AOV) drop continued to narrow QoQ. We expect further market share gain through lower-tier cities and overseas expansion. Reiterate BUY with TP of HK$207/share.
　　Key Factors for Rating
　　In 4Q24, total revenue increased by 20.1% YoY to RMB88.5bn, largely in line with market consensus. Adjusted net profit increased by 125% YoY to RMB9.8bn in 4Q24, largely in line with market expectation, thanks to improved profitability for CLC businesses but partially offset by investment in overseas.
　　New initiatives revenues increased by 23.5% YoY to RMB22.9bn, mainly driven by the grocery retail and overseas businesses. In 4Q24, Keeta (overseas food delivery service) was officially launched in Saudi Arabia. Keeta has been on track and showing a very good growth momentum. For overseas business, the company would only focus on food delivery business first. In the long run, the company plans to roll out more business formats in overseas markets which have higher margins than domestic markets, such as Middle East. The company would allocate more resources in overseas markets in 2025, and plans to scale up the food delivery business and ramp up the market share.
　　Key Risks for Rating
　　Intensifying competition in food delivery and in-store market that might need incremental marketing expenditure with margin pressure; (ii) regulatory risk related to social security expenses associated with new type of employment (riders); and (iii) softer consumer spending due to macro weakness resulting in lower ticket value.
　　Valuation
Reiterate BUY with DCF based TP lowered to HK$207/share from HK$207.09 after factoring in lower earnings in 2025/26 from increased overseas investment, implying 18x P/E FY25.