Research published by Blue Lotus Research on April 25, 2022

(6 Pages, 4 graphs and tables)
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  • Douyin’s commission policy starting 2Q22 is likely to hurt its growth momentum, and pressure on Meituan’s in-store segment will be eased. We estimate Douyin’s local service GTV to reach RMB 35bn in 2022, vs. Meituan’s RMB 370bn.
  • We cut 2Q22 FD/in-store revenue growth estimate from 20%/20% YoY to 5%/3% YoY for lockdown in major cities throughout second quarter. 
  • Price of Meituan has been adjusted (40%) YTD, which reflected concerns over poor 1H22 performance. We upgrade Meituan to BUY rating for eased competitive pressure, as well as narrowed loss of RMB 3bn from new initiatives. Our TP of HK$ 170 implies 2X PS/20X PE/1X PS for Food delivery/in-store/new initiatives in FY2022.

Competition from Douyin is limited 
We previously pointed out that Douyin was actively promoting in-store dining/entertainment videos and achieve substantial GTV starting 4Q21. Recent channel check shows that the growth momentum may slow this year: 1) Higher requirements for merchants. Merchants either have to continuously upload videos onto Douyin, or hire third-party service providers to create such content. 2) Higher marketing cost. If hiring third-party service providers, merchants could pay up to 15% of revenue as advertising budget, which is relatively high compared to Dianping’s 5-8%. 3) Douyin may start to charge 2-8% commission fee starting 2Q22, which further increases merchants’ spending. We estimate that Douyin’s GMV of in-store dining/entertainment will reach RMB 15bn/20bn in 2022, vs. Meitaun’s 130bn /140bn.
Lockdowns lead to flattish local service growth
Our house view believes is that the lockdowns will continue to prevent most Shanghai citizens to access Meituan’s service until May. Other major cities, like Beijing, are also impacted. Channel check data also shows that two weeks lockdown in March dragged FD order growth from 19% YoY to 10% YoY. Since Shanghai/Beijing each contributes about 15%/10% of Meituan’s orders, we cut 2Q22 revenue growth estimate of FD/in-store from 20%/20% YoY to 5%/3% YoY. On the other hand, we see that Meituan Maicai (美团买菜) has (TBC)

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