On Friday, Benchmark increased its price target on Meituan Dianping (3690:HK) (OTC: OTC:MPNGF) to HK$172.00 from the previous HK$168.00, while reaffirming its Buy rating on the stock. This adjustment follows the company's reported first-quarter results for 2024, which surpassed consensus expectations in both revenue and adjusted EBITDA.
Meituan's performance in the first quarter has been attributed to several key factors that are expected to drive continued efficiency improvements and faster profitability growth. Notably, the stabilization of competitive dynamics in the local services sector is anticipated to contribute to the stabilization and recovery of in-house technology (IHT) margins. Additionally, the company's efforts to streamline its MT Select initiative are projected to further alleviate its loss burden.
Moreover, Meituan's ongoing enhancements to its on-demand delivery services are believed to be instrumental in driving margin expansion for this segment. Despite the uncertain macroeconomic environment, which poses near-term pressure on food delivery (FD) services, Meituan's restructuring efforts aimed at more effectively aligning demand and supply are seen as a potential catalyst for unlocking additional revenue and cost synergies in the future.
In light of these developments, Benchmark has revised upward its adjusted EBITDA forecasts for Meituan for the fiscal years 2024 and 2025. The new price target of HK$172 reflects Benchmark's increased estimates and the positive outlook for Meituan's profitability growth.
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