BofA Merrill Lynch lifted its target price for Meituan Dianping (03690) to HK$103 from HK$90 and maintained its "buy" rating.
The research house expects food delivery to carry solid growth momentum in 2H. According to Sina, the number of food delivery orders grew 43% during the October national holidays.
BofAML raised its estimated order growth of food delivery in 2H to mid-30%, similar to 1H. It assumed a modest increase in food delivery ticket size and monetization rate to just over RMB45 and 14%, respectively, in 3Q and thus see segment revenue growth of 39% in 3Q (versus 32% previously).
The company continuously offers subsidies to target users, especially certain existing users, who in turn order high ticket items. BofAML modeled moderate revenue deceleration of the profitable instore/travel segment (37%, versus 43% in 2Q) and a similar adjusted margin at 36%.
It expects Meituan's 3Q total sales to be RMB26.9bn, up 41% (versus 43% in 2Q) and GAAP operating profit of RMB0.6bn, which would mark the second profitable quarter following 2Q.
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