Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

<ul>
<li>The street’s expectations for Meituan’s bottom line have gone too pessimistic for 2023 while in the meantime too optimistic for 2024 and beyond.</li>
<li>Besides the macro weakness, we see the company’s growth increasingly be constrained by the business model itself, resulting in only 14% CAGR for bottom line over 2023-25 by our calculation.</li>
<li>We take investors’ indifference to Meituan’s strong bottom line growth for 2023 as a signal they are discounting the sharp deceleration kicking in from 2024. Stay neutral.</li>
</ul>


The street’s expectations for Meituan’s bottom line have gone too pessimistic for 2023 while in the meantime too optimistic for 2024 and beyond.
Besides the macro weakness, we see the company’s growth increasingly be constrained by the business model itself, resulting in only 14% CAGR for bottom line over 2023-25 by our calculation.
We take investors’ indifference to Meituan’s strong bottom line growth for 2023 as a signal they are discounting the sharp deceleration kicking in from 2024. Stay neutral.


Meituan (3690 HK): Strong Bottom Line Growth Will Prove to Be Short-Lived

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/robosense-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:39903:1" rel="noopener">Robosense Technology (2498 HK)</a> raised around US$126m in its Hong Kong IPO in Jan 2024. The lockup on its shareholders will expire soon.</li>
<li>The company provides LiDAR and perception solutions to its customers. As of March 2024, it had design wins for mass production of LiDAR products with 22 automotive OEMs and suppliers.</li>
<li>In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.</li>
</ul>



Robosense Technology (2498 HK) raised around US$126m in its Hong Kong IPO in Jan 2024. The lockup on its shareholders will expire soon.
The company provides LiDAR and perception solutions to its customers. As of March 2024, it had design wins for mass production of LiDAR products with 22 automotive OEMs and suppliers.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.


Robosense IPO Lock-Up Expiry - US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement

China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

<ul>
<li>Meituan reported CY2Q23 rev./non-IFRS net income in-line/70% vs. cons., and in-line/28% vs. our estimate. Increased spending on in-store competition was offset by abundant rider supply that lowered food delivery cost. </li>
<li>We raise our 3Q net margin est. by 3ppts as (1) the in-store counterattack against Douyin has been a success, (2) CGB spending to counter Duoduo Maicai has remained restrained.</li>
<li>Initial results of the in-store counterattack showed positive results, while FD margin continues to benefit from ample riders. We maintain Meituan’s BUY rating and HK$ 165 TP.</li>
</ul>


Meituan reported CY2Q23 rev./non-IFRS net income in-line/70% vs. cons., and in-line/28% vs. our estimate. Increased spending on in-store competition was offset by abundant rider supply that lowered food delivery cost. 
We raise our 3Q net margin est. by 3ppts as (1) the in-store counterattack against Douyin has been a success, (2) CGB spending to counter Duoduo Maicai has remained restrained.
Initial results of the in-store counterattack showed positive results, while FD margin continues to benefit from ample riders. We maintain Meituan’s BUY rating and HK$ 165 TP.


[Meituan (3690 HK, BUY, TP HK$165) Earnings Review]: Counterstrike Remains Effective… Maintain BUY

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Meituan reported (24 Aug) its 2Q23 results: revenue was RMB68.0bn, up 33% YoY, 2%/1% higher than our forecast/consensus estimate.</li><li>Adjusted net profit during 2Q23 reached RMB7.7bn, better than our forecast and consensus at both RMB4.5bn, due to better-than-expected operating profit generated from core local commerce business.</li><li>Industry competition has become more disciplined. Meituan’s targeted promotional campaigns drove revenue growth, and it ensured the campaigns are not at profit-destructive mode, which lead to improved profitability outlook. </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Meituan reported (24 Aug) its 2Q23 results: revenue was RMB68.0bn, up 33% YoY, 2%/1% higher than our forecast/consensus estimate.Adjusted net profit during 2Q23 reached RMB7.7bn, better than our forecast and consensus at both RMB4.5bn, due to better-than-expected operating profit generated from core local commerce business.Industry competition has become more disciplined. Meituan’s targeted promotional campaigns drove revenue growth, and it ensured the campaigns are not at profit-destructive mode, which lead to improved profitability outlook. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Meituan (3690 HK) – Staying vigilant in long-lasting competition

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> reported 2Q2023 results yesterday which beat consensus estimates and the company’s profitability has further strengthened during the quarter.</li>
<li>However, there has been clear signs of a slowdown in the company’s core local commerce biz with increased promotions/incentive, decline in revenue per on-demand delivery transaction and fall in OPM.</li>
<li>Meituan has flagged that macroeconomic headwinds and adverse weather conditions could slowdown core local commerce biz in the current quarter which should drag down earnings.</li>
</ul>



Meituan (3690 HK) reported 2Q2023 results yesterday which beat consensus estimates and the company’s profitability has further strengthened during the quarter.
However, there has been clear signs of a slowdown in the company’s core local commerce biz with increased promotions/incentive, decline in revenue per on-demand delivery transaction and fall in OPM.
Meituan has flagged that macroeconomic headwinds and adverse weather conditions could slowdown core local commerce biz in the current quarter which should drag down earnings.


Meituan: Strong Earnings but Tough Times Ahead

China

China Tourism Group Duty Free Corporation Limited engages in sales of duty free goods and tax goods. The Company sells tobacco, wine and spirits, perfume, cosmetics, fashion and accessories, watches, jewelry, food, luggage products,and other products. China Tourism Group Duty Free also engages in investment and development of tourism destination commercial complexes.

China Tourism Group Duty Free Corp Ltd (601888 CH)

Huazhu Group Limited operates a hotel operator and franchisor. The Company provides hotel leasing, directly hotel operation, and co-development services. Huazhu Group mainly conducts businesses in China.

Haidilao International Holding Ltd. operates Chinese cuisine restaurant brand focusing on hot pot cuisine. The Company provides hot pots, soup bases, dipping sauces, drinks, prepared food, and other products. Haidilao International Holding opens restaurants in Taiwan, Hong Kong, Singapore, South Korea, Japan, and the United States.

Songcheng Performance Development Co., LTD invests, develops and operates theme parks and tourism cultural performing arts. The Company's major projects include the Sungcheng theme park and the cultural performing arts musical "The Romance of the Song Dynasty".

Songcheng Performance Development (300144 CH)

Tongcheng Travel Holdings Limited operates as an online travel agency. The Company provides transportation ticketing, accommodation reservation, value added travel products sales, and other services. Tongcheng Travel Holdings provides its services throughout China.

Shanghai Jinjiang International Hotels Co.,Ltd. owns and operates hotels.  The Company also provides catering, business, entertainment, and other services. Shanghai Jinjiang International Hotels conducts its business in China.

Shanghai Jinjiang Internationa (600754 CH)

BTG Hotels (Group) Co., Ltd. operates a tourism business.  The Company also invests in hotel and restaurant management, as well as provides advertising and exhibition center management services.

Shenzhen Overseas Chinese Town Co Ltd invests in and manages theme parks in China.  The Company, through its subsidiaries, also provides travel agency service.

Shenzhen Overseas Chinese (A) (000069 CH)

Giant Network Group Co., Ltd. develops online games. The Company mainly develops, operates, and sells computer terminal network game and mobile terminal network game products. Giant Network Group provides services in China.

China CYTS Tours Holding Co., Ltd. provides travel information and arrangement services.  Through its subsidiaries, the Company also manufactures medical instrument, provides system integration services for the insurance industry, and develops real estate.

Sands China Ltd. develops, owns, and operates integrated resorts, retail malls, and casinos. The Company also manages convention and exhibition halls in Macau.

Galaxy Entertainment Group Limited, through its subsidiary, operates casino, hotel and other entertainment facilities in Macau. The company also manufactures sells and distributes construction materials.

Las Vegas Sands Corp. owns and operates casino resorts and convention centers. The Company operates in the United States, Macau and Singapore. Las Vegas Sand Corp's casinos offer a wide range of gaming activities and entertainment as well as overnight accommodations, while its expo centers host a wide range of entertainment shows, expositions, and other activities.

Yum! Brands, Inc, owns and franchises quick-service restaurants worldwide.  The Company develops, operates, franchises and licenses a worldwide system of restaurants which prepare, package and sell a menu of food items.

Royal Caribbean Cruises Ltd. is a global cruise company operating a fleet of vessels in the cruise vacation industry. The Company operates through brands which primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.

Hyatt Hotels Corp. is a global hospitality company. The Company manages, franchises, owns, and develops branded hotels, resorts and residential and vacation ownership properties around the world.

Chipotle Mexican Grill, Inc. owns and operates quick serve Mexican restaurants. The Company manages restaurants throughout the United States.

Marriott International Inc. is a worldwide operator and franchisor of hotels. The Company franchises lodging facilities and vacation timesharing resorts under various brand names. Marriott also provides services to home and condominium owner associations for projects associated with several of its brands.

Wingstop Inc. owns and operates restaurants. The Company specializes in cooked-to-order, hand-sauced, and tossed chicken wings. Wingstop serves customers worldwide.

Domino's Pizza, Inc. operates a network of Company-owned and franchise Domino's Pizza stores, located throughout the United States and in other countries.  The Company also operates regional dough manufacturing and distribution centers in the contiguous United States and outside the United States.

Meituan operates as a web based shopping platform for locally found consumer products and retail services. The Company offers deals of the day by selling vouchers on local services and entertainment, dining, delivery, and other services. Meituan provides its services throughout China.

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Meituan (3690 HK)

Meituan (3690 HK): Strong Bottom Line Growth Will Prove to Be Short-Lived

While we believe the street underestimate Meituan's strong profit outlook for 2023, investors are discounting sharp deceleration to kick in from 2024.

Eric Chen

Robosense IPO Lock-Up Expiry - US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement

The pre-IPO shareholders came out of lockup today, leading to a 67% drop in the share price with an accompanying spike in volumes.

Sumeet Singh

[Meituan (3690 HK, BUY, TP HK$165) Earnings Review]: Counterstrike Remains Effective… Maintain BUY

Initial results of the in-store counterattack showed positive results, while FD margin continues to benefit from ample riders. We maintain...

Blue Lotus Research Institute

Meituan (3690 HK) – Staying vigilant in long-lasting competition

Meituan reported (24 Aug) its 2Q23 results: revenue was RMB68.0bn, up 33% YoY, 2%/1% higher than our forecast/consensus estimate.

CMB International

Meituan: Strong Earnings but Tough Times Ahead

Meituan's 2Q earnings beat consensus. There are clear signs of a slowdown in core local commerce incl. increased promotions, decrease in revenue...

Shifara Samsudeen, ACMA, CGMA

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