Meituan Dianping (“MD”) delivered upbeat 2Q20 results, with revenue up 9% YoY (5% above consensus). Bottom line grew 82% YoY (6696% above consensus), with record-high margin. Given its better-than-expected recovery pace and above-peer performance, we turn more bullish on its 3Q20E outlook and secular growth. We raised its revenue by 1%/1%/2%, and adj. net profit by 155%/10%/9% in FY20/21/21E, with higher TP of HK$290 (from HK$147).
- Another strong quarter with record-high margin. 2Q20 revenue accelerated to +9% YoY, 5%/6% above consensus/our estimates. Adj. net profit reached RMB2.7bn, largely better than consensus of RMB40mn, mainly on lower S&M and narrowing loss margin of initiatives. By segments, rev of food delivery/ In-store, hotel and travel/ new initiatives +13%/-13%/+22% (vs. our estimate of +9%/-18%/+21% YoY). We are surprised to see MD to beat already-high market expectation, and achieve record-high margin post COVID-19 after net loss in 1Q20.
- Strengthening leadership with expanding TAM. In post epidemic period, MD performed more resilient than market expectation and peers. Food delivery GTV +17% YoY, orders +7% YoY, take rate at 13.4%, with restaurants recovery, stronger user demand and “618 Food Delivery Festival” promotion. AOV momentum continued, up 9.4% YoY, suggesting users’ rising demand post COVID-19. In 2H20E, we expect food delivery to continuously gain share, with rising but strategic subsidies. In-store, hotel and travel rev -13% YoY, with hotel room nights -17% YoY, better than our expectation. We expect this segment to achieve positive growth in 3Q20E (forecasting +3% YoY). New initiatives +22% YoY in 2Q20, mainly on strong grocery retail business. On top of that, OPM of food delivery/ in-store, hotel and travel/ new initiatives came in at +8.6%/+41.6%/-25.9% in 2Q20, better than our estimate of +7.2%/+28%/-28%. MD would step up its investment in new initiatives to seize structural opportunities.
- Maintain BUY. Given its strong 2Q20 results, we turn more bullish on MD’s recovery pace and secular growth with margin improvement. We raised its revenue by 1%/1%/2%, and adjusted its bottom line by 155%/10%/9% in FY20/21/21E. Our new SOTP-based TP is HK$290 (implying 9.2x/7.2x FY21/22E P/S). 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.
