Meituan Dianping (“MD”) delivered eye-catching 4Q19 result, with revenue 6% above consensus, and strong earnings upbeat. 1Q20E guidance was better than feared, with 15% revenue YoY decline and net loss of RMB1.2bn. We expect MD to face near-term pressure in 1H20E, but long-term intact. We cut its revenue by 5%/2% in FY20/21E, and lowered TP to HK$120. Suggest to buy on dips.
- 4Q19 all-round beat. 4Q19 revenue grew 42% YoY, 6%/5% above consensus/our estimate. Adj. net profit reached RMB2.27bn, largely above consensus of RMB470mn, mainly on lower S&M, R&D, and narrowing loss of initiatives. GTV grew 38% YoY, 4% above our estimate. By segments, GTV of food delivery/ In-store, hotel & travel/ New initiatives grew 40%/35%/33% YoY. Take rate grew up to 14.8% in 4Q19 (vs. 14.4% in 4Q18), in which food delivery/ In-store, hotel & travel/ New initiatives at 14%/10.5%/35%, +0.1ppts/0.9ppts/4.5ppts QoQ. We are impressed by this eye-catching result with strong earnings beat and solid growth of all segments.
- Near-term pressure from COVID-19, but long term intact. Given COVID-19 impact, mgmt guided revenue to drop 15% YoY and net loss at RMB1.2bn in 1Q20E. We view this guidance as better-than-feared. By segment, food delivery/in-store dining & hotel volumes recovered to 75%/40-50% of pre-epidemic level. We forecast food delivery/ In-store, hotel & travel/ new initiatives revenue to decline 14%/35%/0% YoY, with OPM at -3%/+20%/-40% in 1Q20E. Food delivery might see positive YoY revenue growth in 2Q20E, if domestic market epidemic stabilizes, while in-store would recover until 3Q20E. 1Q20E take rate might see decline. Mgmt was conservative on its take rate in FY20E, considering its subsidies and support to merchants. We cut its revenue by 5%/2% in FY20/21E, and trimmed its adj. net profit by 3%/0%. MD's financials in 1Q20E could bear short-term pressure, but we keep positive on its secular growth, and expect it to benefit from user expansion in the long term and stronger engagement in this epidemic.
- Maintain BUY. With financial adjustment, we slightly trimmed our DCF-based TP from HK$126 to HK$120 (implying 4.4x FY21E P/S, or 48x FY21E P/E). With epidemic impact partly priced in, we suggest to look beyond soft 2020, and keep an eye on more catalysts from: 1) delivery & hotel recovery; 2) cross-selling effect to unlock revenue; and 3) new initiatives expansion.
