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This year, the performance of Hong Kong stock Technology stocks has been very impressive, with Hang Seng Technology up over 33% since the beginning of the year, Tencent rising over 30%, and Alibaba nearing a doubling. However, as a star company in the same tier, MEITUAN-W is still struggling around the 170 mark, far from its historical high of 460 Hong Kong dollars!
On March 21, MEITUAN-W released its latest performance for Q4 2024 and the entire year. With unexpectedly strong performance supporting it, can the stock price turn around? This week, quick courses will be offered to analyze from both Fundamental Analysis and Technical Analysis perspectives.
Fundamental Analysis: Three Key Dimensions
Fundamentals: Core Local Business
MEITUAN-W's business structure is primarily divided into core local business and new business.
The core local business mainly includes takeout (restaurant takeout and MEITUAN-W's on-demand delivery), as well as hotel and travel business. This part of the business is not only the main source of revenue for MEITUAN-W but also the absolute Block Orders contributor to MEITUAN-W's profits, undoubtedly forming the foundation for MEITUAN-W.
In terms of revenue, the core local business of MEITUAN-W is projected to have an income of 250.2 billion yuan for the entire year of 2024, accounting for nearly 3/4 of the total revenue, with a year-on-year growth of 20.9%, maintaining a growth rate of over 20% for four consecutive years, demonstrating considerable stability.
The revenue of the core local business is mainly divided into two parts: the first part consists of delivery services such as takeout and on-demand delivery, primarily generating income from delivery services; the second part comprises group buying and hotel business, which mainly relies on commissions and online marketing services for monetization.
The revenue of MEITUAN's home delivery business is primarily influenced by the number of delivery orders and the average revenue per order. From 2022 to 2024, MEITUAN's food delivery order volume and average revenue per order have shown a growth trend, which directly drives the growth of delivery service revenue. According to public data, the daily average order volume in 2024 is expected to exceed 98 million orders, an increase of 263% compared to 2020; the average transaction value has risen from 48.4 yuan in 2020 to 56.2 yuan in 2024. Additionally, cost optimization brought about by improved order density has pushed the operating profit margin of food delivery from 8.6% in 2020 to 15.3% in 2024.
On the other hand, despite facing competition from Douyin's group buying business, MEITUAN's in-store business has maintained resilience in growth. The order volume for in-store business grew by over 65% year-on-year in 2024, with annual transaction user numbers and active merchant numbers reaching all-time highs. This is mainly due to MEITUAN's continuous improvement of operational infrastructure and traffic support, such as through "special price group buying," live streaming, themed marketing activities, and the "member benefits" program, which have effectively promoted the growth of in-store business.
In terms of operating profit, the operating profit of the core local business reached 52.4 billion yuan in 2024, an increase of 35.4% year-on-year; the operating profit margin improved from 18.7% in 2023 to 20.9%. The increase in operating profit for the local business is mainly due to revenue growth and the increase in the gross margin of this segment, while the increase in the operating profit margin mainly comes from improved operational efficiency. In future performance, MEITUAN's core local business can be observed to see if it can continue to maintain a good revenue growth rate while sustaining a stable increase in operating profit margin.
Growth Point: New Business
If the core local business is $MEITUAN-W (03690.HK)$the foundation, then the new business represents its potential growth point.
From a revenue perspective, the new business sector (including MEITUAN Youxuan, Little Elephant Supermarket, shared mobility, and overseas business Keeta, etc.) achieved total operating revenue of 87.3 billion yuan in 2024, growing by 25.1% year-on-year; Q4 revenue was 22.9 billion yuan, growing by 23.5% year-on-year. In terms of business growth rate, the new business growth rate in 2024 again outpaced the core local business, indicating that the new business is entering a phase of sustained strength. B2B catering supply chain, shared bicycles, and catering SaaS businesses are strengthening MEITUAN's ecosystem, potentially releasing greater financial value in the future. In the overseas market, Keeta has expanded to major cities in Saudi Arabia, with rapid growth in user base and order volume, all of which will become new growth points for MEITUAN.
What is more worthy of attention is the continued loss of MEITUAN's new business. MEITUAN's new business has always been a drag on its overall profits, with quarterly losses once reaching 10 billion, even leading the company to incur overall losses. However, in recent quarters, the loss rate of MEITUAN's new business has decreased each quarter, with an operating loss of 2.2 billion in Q4 2024, and the loss rate improved to 9.5% year-on-year; the annual operating loss for 2024 narrowed to 7.3 billion yuan, compared to a loss of 20.2 billion in 2023. The operating loss rate improved from 28.9% year-on-year to 8.3%, fully confirming the improvement in the operational efficiency of its new business.
For future performances, it will be important to observe whether MEITUAN's new business can maintain its current high growth rate, thereby driving overall revenue growth while further narrowing the loss rate, ultimately reaching a breakeven turning point.
Overall profitability.
As a leading company in the local life service sector in China, MEITUAN has experienced significant fluctuations and transformations over the past five years. The pandemic in 2020 severely impacted the food delivery and hotel services, but the company gradually achieved revenue structural diversification through rapid deployment in new businesses such as instant retail and community group purchases. Currently, the company has formed a dual-driven model of 'stable growth in core local business + efficiency improvement in new business.'
Starting from Q2 2022, MEITUAN began to achieve continuous profitability. Although the quarterly net profit figures have fluctuated, they are generally on an upward trend. In 2024, net profit reached 35.8 billion yuan, a year-on-year increase of 158%; and Q4 alone saw a net profit of 6.2 billion yuan, a year-on-year increase of 180%.
Generally speaking, the improvement in a company's profitability is mainly reflected in two aspects: the increase in gross margin and the improvement in the expense ratio. MEITUAN can be said to have both.
In terms of gross margin, there has been a very obvious upward trend since 2022, reaching a five-year high in 2024. Likewise, the expense ratios for MEITUAN's sales, management, and R&D costs are all on a downward trend, which has significantly reduced the overall expense ratio. With an increase in gross margin and a decrease in expense ratio, MEITUAN's profitability has naturally improved significantly. Attention can be focused on whether MEITUAN's gross margin can continue its upward trend and whether its expense ratios can be further optimized, thereby continuously elevating the overall profit margin.
Investment strategy.
Overall, MEITUAN-W has successfully navigated the cycle over the past five years, from the phase of pressure under the impact of the pandemic to a period of losses in new business exploration, ultimately achieving profit release in 2024, with overall performance surpassing market expectations.
In the future, attention can be focused on the progress of the company's Keeta business, as the accelerated expansion of overseas business may lead to larger losses in new business. However, in the long term, it possesses growth potential and room for imagination. Additionally, the company will continue to increase investments in cutting-edge technologies and related applications such as AI, drone delivery, and autonomous delivery vehicles in 2025, clarifying its core strategy of "active offense" in AI. The implementation of AI will continue to strengthen the company's competitive barriers and growth potential.
According to the ratings from Wind Institutions, MEITUAN-W has a consensus target price of HKD 207.83, currently reflecting short-term performance recovery expectations, but long-term value may be underestimated.
Technical Analysis
Referring to the weekly EMA12 and 50-day moving average levels, there is no clear formation of a bearish reversal in the short term, and there is support at the stock price level of 147 yuan. At the daily level, the stock price has broken below the EMA50 moving average, and if a death cross occurs between EMA12 and 50-day moving averages subsequently, the probability of continued retreat will be greater. Combining with the golden ratio, attention can be paid to the support level near 154, and if this is accompanied by increased trading volume, it would present a relatively safe entry opportunity.
Risk Reminder
MEITUAN-W is transforming from a takeout giant into a "global instant demand solution" platform. In the short term, technical breakthrough opportunities can be seized after the Earnings Reports, while in the medium to long term, the focus should be on internationalization and the landing of AI applications, while being mindful of related risks.
Intense competition: Douyin's in-store business penetration rate exceeds 40%, and JD.com is capturing the chain catering market with "0 commission", which may compress commission rates.
Rising policy costs: Starting from Q2 2025, there will be comprehensive social security contributions for riders,预计 annual cost increase of 18 billion yuan, leading to a reduction in average profit per unit.
Internationalization lag: The Middle East market Keeta is still in the investment phase and is unlikely to contribute profits in the short term.
Technology investment risks: AI and unmanned delivery require long-term funding, and capital expenditure in 2025 may exceed expectations.
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Risk and disclaimer notice: The above content does not constitute any financial marketing or investment invitation, nor does it constitute any investment advice. Before making any investment decision, investors should consider the risk factors related to investment products based on their own circumstances and consult a professional investment advisor if necessary.
