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Citigroup raised the forecast of Chinese on-demand service giant Meituan’s food delivery revenue and operating profit in Q2 by 2.4% and 11.7%, respectively, taking into account the reopening of restaurants in China, robust demand during Father’s Day and Dragon Boat festival, disciplined subsidies and cost optimization effort, according to a note on Monday.
The forecast for the growth for in-store revenue and operating profit were lifted by 3.1% and 4.2%, according to the note.
Citigroup forecast Meituan’s total revenue in the second quarter to grow by 13.2% year over year to 49.5 billion yuan, with a non-GAAP net loss of up to 1.62 billion yuan, below the market consensus of a net loss of 2.66 billion yuan.
Overall, the bank hiked the forecast of Meituan’s annual revenue in 2022 – 24 by 0.5%, 0.3% and 1.3%, respectively. Meituan was predicted to post a net loss of 5.25 billion yuan in 2022 and a net profit of 10.1 billion yuan and 23.8 billion yuan in 2023-24.
The target price for Meituan’s stocks was raised slightly from $222 to $225, with its rating kept at Buy, said Citigroup.
Separately, Credit Suisse forecast Meituan’s 2Q revenue to grow by 13% year over year to 49.5 billion yuan, and the adjusted net loss to narrow to 2 billion yuan, according to a note on Monday.
Despite an only 3% sales growth, Meituan’s food delivery revenue is expected to grow 13% year over year, driven by higher average order value (AOV) and lower subsidies, the bank said. The unit profit was projected to reach 0.93 yuan per order, implying a 13% in operating profit margin (OPM).
Credit Suisse raised the forecast of Meituan’s earnings per share for 2022 – 24 by 3% – 8%, citing the recovery has been faster than expected. The bank remains upbeat on the company in view of relative under-penetration of local services space, still favorable competition and strong execution.
The target price was kept at $245 with rating Outperform.