【Company Research】Meituan Dianping (3690 HK) – Faster recovery ahead with expanding TAM

Meituan Dianping (“MD”) delivered upbeat 1Q20 results, with revenue 7% above consensus, and net loss largely below consensus. Given its better-than-expected recovery pace and above-peer performance, we turn more bullish on its 2Q20E outlook and secular growth. We raised its revenue by 2%/3%/6%, and adj. net profit by 69%/8%/6% in FY20/21/21E, with higher TP of HK$147 (from HK$120).

 

  • 1Q20 all-round beat. 1Q20 revenue dropped 12.6% YoY, 7%/7% above consensus/our estimate. Adj. net loss reached –RMB216mn, largely better than consensus of -RMB1.1bn, mainly on lower S&M and narrowing loss of initiatives. By segment, revenue of food delivery/ in-store, hotel and travel/ new initiatives -11%/-31%/+5% YoY (vs. our estimate of -13%/-35%/+0% YoY). OPM of food delivery/ in-store, hotel and travel/ new initiatives came in at -1%/+22%/-33% in 1Q20, better than our estimate of -3%/+20%/-40%.We are impressed by this eye-catching results with upbeat margin and better-than-feared growth of all segments.  

 

  • Faster recovery with better outlook. Despite short-term challenges from epidemic, MD performed more resilient than market expectation and peers. Food delivery GTV -5% YoY (vs. our estimate of -7% YoY), orders -17% YoY, with take rate at 13.3% (vs. 14% in 4Q19). AOV +14.4% YoY in 1Q20, a positive signal for users’ rising demand. Supply side had recovered to 100% of pre-epidemic level, with higher mix of brand merchants. We expect food delivery GTV to achieve positive YoY growth from 2Q20E, and benefit from COVID-19, in terms of user adoption and merchant expansion. In-store, hotel and travel segment would still decline YoY in 2Q20E, in which hotel to see slower recovery with both decreasing room nights and ADR. Mgmt stated that competition was more moderate in the epidemic, thus hotel OPM would perform better than FY19. MD would step up its investment in new initiatives, to seize structural opportunities.

 

  • Maintain BUY. Given its strong 1Q20 results, we turn more bullish on MD’s recovery pace and secular growth with margin improvement.  We raised its revenue by 2%/3%/6%, and adjusted its bottom line by 69%/8%/6% in FY20/21/21E. Our new SOTP-based TP is HK$147 (implying 5.0x FY21E P/S, or 54x FY21E P/E). We see high visibility for MD to long-term benefit from structural changes in this epidemic, including online consumption tailwinds , grocery business and digital operation.
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