Meituan delivered upbeat 3Q20 results, with revenue/adj. net profit up 29%/6% YoY (4%/95% above consensus). All segments beat our estimates. We are bullish on TAM of community group-purchase, and expect Meituan Select to bring further upside, by leveraging its supply chain and traffic advantage. 4Q20 rev would continuously accelerate. We raised its revenue by 3%/8%/12%, with higher TP of HK$348 (from HK$290).
- Another strong quarter. 3Q20 rev accelerated to +29% YoY, 4% above consensus. Adj. net profit reached RMB2.1bn, 95% above consensus, mainly on higher margin of in-store, hotel & travel. By segment, rev of food delivery/ in-store, hotel &travel/ new initiatives +33%/+5%/+43% YoY (vs. our estimates of +27%/+3%/+23% YoY), with OPM at +3.7%/+43.0%/-24.7% in 3Q20.
- Rev acceleration to continue in 4Q20E. Meituan recorded positive rev growth of all segments in 3Q20. Food delivery GTV/orders/AOV +36%/30%/4.5% YoY (vs. +17%/7%/9% YoY in 2Q20), take rate at 13.6% (vs. 13.4% in 2Q20), with strong seasonality and enriched categories (e.g. late-night snacks). Looking ahead, we expect food delivery rev to grow 34% YoY in 4Q20E, with OPM at 3.1%. In-store, hotel and travel rev +5% YoY in 3Q20 (vs. -13% YoY in 2Q20), with hotel room nights +4% YoY (vs. -17% YoY in 2Q20). We expect this segment to record double-digit growth in 4Q20E, backed by faster recovery in lower-tier cities and high-end hotel expansion.
- Eyes on community group-purchase model (社区团购). 3Q20 New initiatives rev accelerated to +43% YoY (vs. +22% YoY in 2Q20). Market eyes on community group-purchase strategy and competition landscape. We are bullish on CGP’s TAM, with stepping-up investment ahead. Compared with peers’ aggressive expansion, Meituan prioritized mechanism enhancement with its grocery portfolio, in which Meituan Select (美团优选) focuses more on low-tier cites CGP, Meituan Maicai (美团买菜) on high-tier cities (higher AOV and margin) and Shangou (闪购) on all-geographic coverage.
- Maintain BUY. We raised its revenue by 3%/8%/12%, and adjusted its bottom line by -3%/-12%/-2% in FY20/21/22E. Our new SOTP-based TP is HK$348 (implying 9.7x/7.3x FY21/22E P/S). We see high visibility for Meituan to long-term benefit from structural opportunities (e.g. groceries, digital operation).
