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Meituan Class B 03690

Morningstar Rating
HKD 116.20 −3.70 (3.09%)
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Company Report

Meituan Earnings: Raising Fair Value by 4% on Loss Improvement but Long-Term Competition Still Looms

We raised our fair value estimate for Meituan to HKD 106 per share from HKD 102 after it reported first-quarter 2024 results with significantly improved operating losses in its new initiatives business. Results were mixed as revenue of CNY 73.3 billion, an increase of 25% year on year, topped our estimates by 4%. The new initiative business narrowed its operating loss to CNY 2.75 billion this quarter and loss margin to 15%, with improvements expected. We estimate it will further decline to CNY 2 billion next quarter, equating to an operating loss margin of 10%. This is already better than our previous loss margin forecast of midteens in 2025 and has prompted us to raise profitability assumptions, mainly contributing to our fair value change. Meituan cited that the improvement in loss was caused by shutting inefficient warehouses, raising price mark-ups, and lowering user subsidies. While we are encouraged by Meituan’s progress in narrowing its losses, the company still faces long-term headwinds as there is continuous pressure on operating margins for its food delivery and in-store businesses due to looming competition and lower average value per order. We recommend investors wait for margins to stabilize before taking a long position in Meituan.

Price vs Fair Value

03690 is trading at a 677% premium.
Price
HKD 116.20
Fair Value
HKD 856.00
Uncertainty
Very High
1-Star Price
HKD 232.20
5-Star Price
HKD 14.00
Economic Moat
Bqhl
Capital Allocation
Nwhh

Bulls Say, Bears Say

Bulls

CGB could become successful and operating margin-positive in three to five years.

Bears

CGB could end up being an unsuccessful business where Meituan exits or generates low-single-digit margins.

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News

Trading Information

Previous Close Price
HKD 119.90
Day Range
HKD 114.00121.00
52-Week Range
HKD 61.10150.00
Bid/Ask
HKD 116.20 / HKD 116.30
Market Cap
HKD 718.90 Bil
Volume/Avg
40.6 Mil / 38.7 Mil

Key Statistics

Price/Earnings (Normalized)
28.45
Price/Sales
2.39
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield

Company Profile

Meituan is the largest food delivery service in China, with a 70.7% share of the market in 2020 per the Chinese government. For the year-ended 2023, the firm generated 58% of revenue from on-demand services, 17% from hotel booking, coupon sales, advertising, and 25% from new initiatives. In the long term, its new initiatives business may transform the company into an all-encompassing grocer and logistics business involving community group buying, nonfood delivery, and online grocery, overtaking food delivery as its main business.
Sector
Consumer Cyclical
Industry
Internet Retail
Stock Style Box
Large Growth
Total Number of Employees
114,860

Competitors

Valuation

Metric
03690
PDD
TCOM
Price/Earnings (Normalized)
28.4517.1115.45
Price/Book Value
4.336.501.75
Price/Sales
2.395.074.92
Price/Cash Flow
24.9913.2216.88
Price/Earnings
03690
PDD
TCOM

Financial Strength

Metric
03690
PDD
TCOM
Quick Ratio
1.571.680.96
Current Ratio
1.822.091.15
Interest Coverage
10.272,526.815.21
Quick Ratio
03690
PDD
TCOM

Profitability

Metric
03690
PDD
TCOM
Return on Assets (Normalized)
8.68%28.43%6.64%
Return on Equity (Normalized)
16.49%52.61%12.07%
Return on Invested Capital (Normalized)
11.89%41.99%8.43%
Return on Assets
03690
PDD
TCOM
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