Meituan expected wider net loss

Thursday, November 25, 2021

Meituan (3690) is expected to report a wider net loss for the third quarter due to the impact of Covid outbreaks across many regions in China and increasing investment in new initiatives, according to analysts. 

3Q ESTIMATES

Revenue is expected to have risen 37% from a year earlier to 48.6b yuan

The net loss is expected to have widened to 7b yuan -- the worst performance since 2018 -- from 3.4b yuan in 2Q

The gross margin is estimated to have fallen to 23.8% from 28.6% a quarter earlier

Nomura (buy, HK$354) 

Meituan’s 3Q results may be largely in line with expectations, with revenue estimated to rise 37% from a year earlier, analysts including Jialong Shi wrote in a note

The food delivery business’s operating margin may have fallen 0.7 percentage points from a year earlier to 3%, partly due to severe weather and the Covid-19 resurgence in 3Q

Meituan will book its 3.4b yuan antitrust fine in 3Q, which will not affect non-GAAP earnings

CICC (outperform, HK$324) 

CICC expects Meituan’s revenue to have risen 36% from a year earlier, while the adjusted net loss may have widened from the previous quarter to 5.3b yuan, analysts including Yang Bai wrote in a note

The bottom line weakness was mainly driven by increased losses from new businesses, as well as the negative impact on its food-delivery businesses due to Covid-19 outbreaks in August and extreme weather conditions in some areas

Regulators are expanding their scrutiny beyond antitrust measures, and the company will work on improving rider protection, algorithms and commissions to meet requirements

Citi (buy, HK$364) 

Meituan’s results may be in line with Bloomberg consensus, analysts including Alicia Yap wrote in a note

The company’s in-store and hotel businesses as well as food delivery order volumes may have been negatively affected by the resurgence of Covid cases and flooding disruptions in China during the quarter

The company’s businesses could improve in 4Q thanks to the October holidays

DATA

The stock’s average price target is HK$329.6, with 52 buys, 5 holds and 1 sell rating: Bloomberg data

Meituan tumbled as much as 57% this year between February and August, though the shares have rebounded 44% from the year’s low

The options market suggests the stock could move 6.1% up or down in the day after the earnings report

(Bloomberg)