Meituan delivered upbeat 4Q20 topline, while bottom line slightly missed (but largely expected by market for dynamic investment in groceries). Looking ahead, we expect food delivery & in-store rev with triple-digit YoY growth in 1Q21E. Meituan will step up investment in groceries with low-tier cities penetration, user expansion and infrastructure enhancement, suggesting net loss in next few quarters. We raised its rev by 2%/7% in FY21/22E, with higher TP of HK$401 by rolling over to FY22E multiple.
- 4Q20 beat on topline. 4Q20 rev accelerated to +35% YoY, 3% above consensus. Adj. net loss reached RMB1.44bn (vs. consensus of RMB969mn), mainly on reinvestment in groceries. By segment, rev of food delivery/ in-store, hotel &travel/ new initiatives +37%/+12%/+52% YoY (vs. our estimates of +35%/+11%/+51% YoY), with OPM at +4.1%/+39.5%/-64.9% in 4Q20.
- Expecting food delivery & in-store with triple-digit growth in 1Q21E. All segments rev accelerated in 4Q20. Food delivery GTV/orders/AOV +39%/33%/5% YoY, take rate at 13.8% (vs. 13.6% in 3Q20), with higher mix from branded restaurants. We expect food delivery rev +113% YoY in 1Q21E, with OPM at 4.5%. In-store, hotel and travel rev +12% YoY in 4Q20 (vs. +5% YoY in 3Q20), with hotel room nights +9% YoY (vs. +4% YoY in 3Q20). We expect this segment rev +104% YoY in 1Q21E (with OPM at 38%), backed by high-end hotel expansion and travel rebound after COVID resurgence.
- Stepping-up investment in groceries. 4Q20 new initiatives rev accelerated to +51% YoY (vs. +43% YoY in 3Q20), mainly on aggressive expansion of Meituan Select (>90% city coverage). Meituan Instashopping achieved daily peak orders of 4.5mn. Mgmt prioritized low-tier cities penetration, user expansion and infrastructure enhancement over profitability, backed by multiple grocery portfolio. In the mid-term, ramp-up of AOV per order and lower mix of fresh goods (higher mix of FMCG) would be the key for model evolving. We expect new initiatives non-GAAP operating loss to be RMB8.7bn 1Q21E, in which Meituan Select made up RMB6.0bn. As such, we expect Meituan at net loss positon in FY21/22E, with reinvestment in community ecommerce.
- Maintain BUY. We raised its revenue by 2%7%, but cut its margin in FY21/22E. Our new SOTP-based TP is HK$401 (implying 8x FY22E P/S). Suggest to buy on dips on expanding TAM.
