Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

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High Yield Experts

Senior Credit Analyst, Lucror Analytics

Trung Nguyen

Senior Credit Analyst

Credit

In our view, Meituan’s FY 2022 results were acceptable, with the company registering robust revenue growth and a turnaround in profitability on a y-o-y basis. However, we are concerned about the q-o-q deterioration in profitability. As the strong revenue growth in FY 2022 was largely due to the COVID-19 pandemic, we expect it to start tapering. The balance sheet remains in good shape. The company has a large net cash position, with cash at almost 2x of total debt. Leverage ratios and coverage ratios are not meaningful, due to the loss-making business. We expect the competition in the food delivery business in China to intensify with Douyin's entry into the market. Meituan is currently the leader in the Chinese food delivery market, with a 65% share. Douyin is the equivalent of TikTok in China, with both apps being owned by Internet giant ByteDance, which is also a global leader in short-form video platforms. We foresee that Meituan’s profitability will be under pressure as the company has been responding to competition with more incentives, lowering commission fees. We view negatively Meituan’s plan to enter the food delivery market in Hong Kong, which is already dominated by Foodpanda and Deliveroo. We believe that any attempt to take over market shares will be costly for Meituan, and will likely further weigh on the company's profitability. We move our recommendation to "Hold" on the MEITUA notes, from "Buy". We are uncertain about the company’s profitability going forward, given China's post-pandemic reopening as well as intensifying competition in the market. The notes are yielding only slightly wider than those of peers (e.g. Xiaomi), and are rated one notch lower with a negative outlook. Thus, we no longer see value in the notes.

  In our view, Meituan’s FY 2022 results were acceptable, with the company registering robust revenue growth and a turnaround in profitability on a y-o-y basis. However, we are concerned about the q-o-q deterioration in profitability. As the strong revenue growth in FY 2022 was largely due to the COVID-19 pandemic, we expect it to start tapering. The balance sheet remains in good shape. The company has a large net cash position, with cash at almost 2x of total debt. Leverage ratios and coverage ratios are not meaningful, due to the loss-making business.   We expect the competition in the food delivery business in China to intensify with Douyin's entry into the market. Meituan is currently the leader in the Chinese food delivery market, with a 65% share. Douyin is the equivalent of TikTok in China, with both apps being owned by Internet giant ByteDance, which is also a global leader in short-form video platforms. We foresee that Meituan’s profitability will be under pressure as the company has been responding to competition with more incentives, lowering commission fees. We view negatively Meituan’s plan to enter the food delivery market in Hong Kong, which is already dominated by Foodpanda and Deliveroo. We believe that any attempt to take over market shares will be costly for Meituan, and will likely further weigh on the company's profitability.   We move our recommendation to "Hold" on the MEITUA notes, from "Buy". We are uncertain about the company’s profitability going forward, given China's post-pandemic reopening as well as intensifying competition in the market. The notes are yielding only slightly wider than those of peers (e.g. Xiaomi), and are rated one notch lower with a negative outlook. Thus, we no longer see value in the notes. 

Meituan - Earnings Flash - FY 2022 Results - Lucror Analytics