Meituan: Q1 Earnings Beat Overshadowed By Cautious Order Volume Guidance

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Meituan's revenue and normalized net income rose by +25% YoY and +36% YoY, respectively in Q1 2024, which exceeded expectations.But the company's cautious order volume guidance indicates that its top ...

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Guidance\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-11 16:39 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4698545-meituan-stock-q1-earnings-beat-overshadowed-cautious-order-volume-guidance><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Meituan's revenue and normalized net income rose by +25% YoY and +36% YoY, respectively in Q1 2024, which exceeded expectations.But the company's cautious order volume guidance indicates that its top ...</p>\n\n<a href=\"https://seekingalpha.com/article/4698545-meituan-stock-q1-earnings-beat-overshadowed-cautious-order-volume-guidance\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4220","symbol_name":"综合零售","start_time":0,"source_url":"https://seekingalpha.com/article/4698545-meituan-stock-q1-earnings-beat-overshadowed-cautious-order-volume-guidance","article_id":"2442116350","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1979992144/image_1979992144.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2442116350","pubTimestamp":1718095184,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Meituan's revenue and normalized net income rose by +25% YoY and +36% YoY, respectively in Q1 2024, which exceeded expectations.But the company's cautious order volume guidance indicates that its top 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Fanliso/iStock Editorial via Getty Images Elevator Pitch My investment rating for Meituan stock (OTCPK:MPNGF) (OTCPK:MPNGY) [3690:HK] is a Hold. With my earlier write-up published on January 30, 2024, I touched on the company's share repurchases and the preview of its Q4 2023 financial results. In this latest update, my focus is on MPNGF's recently disclosed Q1 2024 financial performance and the company's outlook for the rest of the year. On the positive side of things, Meituan's actual Q1 2024 top line and bottom line were above expectations. On the negative side of things, MPNGF is expected to report a slower pace of YoY revenue growth in the remaining quarters of 2024, taking into consideration the company's order volume guidance. Also, Meituan's P/E valuations are more demanding than that of its peers. As such, my rating for Meituan stays as a Hold. Readers should note that they can deal in the company's shares on the Stock Exchange of Hong Kong or the Over-The-Counter market. Meituan's OTC shares and Hong Kong-listed shares boasted three-month mean daily trading values of $10 million and $500 million, respectively, according to S&P Capital IQ data. Investors can trade in Meituan's Hong Kong-listed shares with U.S. brokerages like Interactive Brokers or Hong Kong stockbrokers such as Monex Boom Securities. First Quarter Revenue And Earnings Surpassed Analysts' Expectations Meituan released its Q1 2024 results announcement on June 6 last week, and the company's key financial metrics for the first quarter came in above the consensus estimates. MPNGF's top line grew by +25% YoY to RMB73,276 million in the first quarter of the current year. Meituan's actual Q1 2024 sales turned out to be +5% better than the sell side's consensus revenue projection of RMB69,622 million (source: S&P Capital IQ). In its latest quarterly results announcement, Meituan disclosed that its on-demand delivery order volume increased by +28% YoY to 5,465 million for Q1 2024. At its Q1 2024 analyst briefing, MPNGF highlighted its \"refined marketing strategy\" and the increase in \"transaction frequency of high frequency users.\" This provides an explanation for Meituan's strong on-demand delivery order volume growth and its above-expectations revenue for the first quarter. The company's actual Q1 2024 normalized net income of RMB7,488 million beat the market's consensus bottom line forecast of RMB6,052 million by +24% as per S&P Capital IQ data. This also meant that MPNGF's normalized net profit rose by +36% YoY in the most recent quarter. Meituan's better-than-expected first quarter earnings were driven by a higher gross profit margin and narrower losses for its New Initiatives business segment. The company's gross margin expanded by +130 basis points YoY to 35.1% in Q1 2024. MPNGF indicated in its Q1 results announcement that it achieved an \"improved gross margin\" for its \"goods retail businesses\" which benefited from \"efforts in improving operating efficiency.\" On the other hand, the operating loss for Meituan's New Initiatives segment narrowed from -RMB5,029 million for Q1 2023 to -RMB2,757 million in Q1 2024. The company mentioned at its first quarter analyst call that Meituan Select, its community group buying business under the New Initiatives segment, made a few profitability enhancement moves like \"raising price markup ratio, lowering user subsidy and closing underperforming warehouses.\" In other words, MPNGF's New Initiatives segment delivered a narrower operating loss thanks to Meituan Select's operating profitability improvement. Expectations Of Slower Top Line Growth Ahead Meituan's Hong Kong-listed shares and OTC shares with the MPNGF ticker symbol corrected by -2% (source: S&P Capital IQ) and -9%, respectively on June 7, 2024, the day after its Q1 results announcement. It seems that the market has chosen to place a greater emphasis on the company's revenue outlook, rather than its first quarter earnings beat. At the company's latest Q1 results briefing, MPNGF guided that the \"order volume growth rate in Q2 (on YoY terms) is expected to trend down to a normal level, which will reflect the current consumption environment.\" Notably, the growth in China's retail sales slowed from +3.1% YoY for March to +2.3% YoY in April, based on the latest economic data available. Meituan also added at the most recent quarterly earnings call that it will \"no longer benefit from a low order base of last year\" starting in the second quarter. As a comparison, the company's actual on-demand delivery order volume growth rates were +15%, +32%, +23%, and +25% for the first, second, third, and final quarters of last year, respectively on a YoY basis. In specific terms, the sell side sees MPNGF's YoY top line expansion moderating from +25% in Q1 2024 to +18%, +17%, and +16% (source: S&P Capital IQ), for Q2 2024, Q3 2024, and Q4 2024, respectively. The analysts' consensus revenue growth forecasts are largely consistent with Meituan's order volume guidance. Peer Valuations In The Spotlight The stock's relatively more expensive valuations as compared to peers might limit its capital appreciation potential, notwithstanding its above-expectations Q1 results. The company's Hong Kong-listed shares rose by +39% in 2024 year-to-date, and Meituan's current valuations are unappealing on a peer comparison basis. Peer Valuation Comparison For Meituan   Stock Consensus Next Twelve Months' Normalized P/E Multiple   Meituan 16.6 times   Tencent (OTCPK:TCEHY) (OTCPK:TCTZF) [700:HK] 16.1 times   PDD (PDD) 11.8 times   Alibaba (BABA) 9.5 times   JD.com (JD) 8.7 times   Click to enlarge Source: S&P Capital IQ As per the peer comparison table presented above, Meituan's consensus next twelve months' normalized P/E metric is now higher than its key listed Chinese internet peers. Considering expectations of slower revenue growth ahead, it won't be realistic to anticipate meaningful valuation multiple expansion for Meituan and a further widening of its valuation gap with the company's peers. Final Thoughts I still have a Neutral view of Meituan as a potential investment. Taking into account its results, outlook, and valuations, my opinion is that a Hold rating for Meituan is justified.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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