Rating Quick Look | Meituan, XPeng-W target prices significantly lowered! Kuaishou-W, Alphabet-C receive positive outlook

Morgan Stanley: Meituan's target price has been lowered from HKD 120 to HKD 85, with a "market perform" rating, as the stock lacks short-term catalysts.

The bank maintains its forecast for Meituan's performance in Q4 2023, expecting the company's core local business revenue to grow by 25% YoY to RMB 54.4 billion, with operating profit increasing by 3% to RMB 7.4 billion. Due to stable quarterly losses from new business operations, the bank predicts that the company's total revenue will grow by 21% YoY to RMB 72.5 billion, with non-IFRS operating profit reaching RMB 2.3 billion.

The bank expects Meituan's daily orders in Q3 2023 to increase by 24% YoY to 57 million, with a two-year compound annual growth rate of 16%. It also forecasts revenue to grow by 18% YoY to RMB 38.1 billion, and operating profit to increase by 12% to RMB 4.6 billion. In terms of in-store, hotel, and travel (IHT) businesses, the bank predicts a 56% YoY increase in revenue and a 10% increase in operating profit to RMB 3.2 billion. New business revenue is expected to grow by 9% YoY to RMB 18 billion, taking into account increased brand marketing expenses at the end of the year, resulting in an estimated operating loss of RMB 5 billion.

The bank maintains a cautious view on Meituan, as the visibility of narrowing losses in new businesses remains low. It expects total revenue for 2023-2024 to be RMB 326 billion and RMB 384 billion, respectively, with an annual growth rate of 18%. Non-IFRS operating profit is expected to be RMB 28 billion and RMB 40 billion, respectively, down 15% to 18%. This is mainly due to recent challenges faced by the food delivery business, competition concerns between IHT business and Douyin, and the unclear profitability of Meituan Optimal.

CICC: Maintains a "sell" rating on XPeng, with the target price reduced by 30.5% to HKD 27.3.

The company's total sales volume for the first three weeks of 2024 has declined by 59%, showing poor performance. The new model MPVX9 is expected to be the only highlight in terms of sales in the first quarter. Although X9 has a higher gross margin, the bank expects that the positive impact on gross margin may be offset by the expectation that other models, excluding X9, can increase sales through promotional activities.

The report states that XPeng's brand MONA will release an A-Class electric sedan priced around RMB 150,000 in the mass market, following the G3. It is expected to be launched in the third quarter of 2024. In terms of scale and cost control capabilities in the RMB 150,000 segment, new players like XPeng are not as competitive as traditional automakers such as BYD, Changan Automobile, and Geely. Therefore, the bank expects MONA to play a larger role in improving capacity utilization, with uncertainties and challenges in terms of sales volume and unit gross margin.

The bank believes that 2024 will be a more competitive year for the new energy passenger vehicle market. If there is no significant improvement in terminal orders after the Spring Festival, the bank believes that independent brands with supply chain and cost advantages will stimulate sales through price reductions, and other automakers will follow suit. The bank believes that XPeng will face challenges and may not achieve positive gross margin as expected by the market. The bank has lowered its revenue forecast for XPeng in 2024/2025 by 15%/13% to reflect the downward revision in sales forecast.

Macquarie: Raises Kuaishou's target price by 4% to HKD 61, rating "outperform"

The bank expects Kuaishou to continue benefiting from the positive factors of short video platforms, with healthy revenue growth and stable expansion of gross profit margin. The bank predicts that the group's revenue in the fourth quarter of last year increased by 16% YoY, with live streaming revenue up 1%, network marketing service revenue up 20%, and other revenue up 39%.

The bank expects the group's GMV in the last quarter to increase by 30% YoY to CNY 290 billion, and e-commerce revenue to increase by 35% to CNY 13.8 billion. The bank believes that the rapid growth in e-commerce revenue is due to an increase in KOL revenue sharing and an expansion of commission income, partially offset by an increase in sales based on shelf space.

Macquarie reiterates its positive view on Kuaishou's potential operating leverage, and with the cost reduction of overseas plans, it is expected that adjusted operating profit will grow by 84% YoY, reaching CNY 18.3 billion by 2024. This implies an increase of 5.5 percentage points in adjusted operating profit margin and continuous expansion in the coming years. The bank has raised its earnings forecast for the group in 2023 and 2024 by 4% and 5% respectively to reflect better cost control and profit performance.

Bank of America Securities: Maintains "buy" rating on BYD, target price of HKD 300

The company's management adopted an aggressive pricing strategy in the mass market last year, and it is expected to perform better in 2024 as the company plans to launch the fifth-generation plug-in hybrid electric vehicle (PHEV) technology in that year.

The bank stated that the new technology has stronger power and lower fuel consumption. The company plans to gradually launch redesigned models with PHEV technology after the Chinese New Year. Its long-term goal is to achieve a market share of over 30% in the Chinese passenger vehicle market, and the high-end strategy is expected to improve profitability.

Bank of America: Maintains "buy" rating on Amazon, target price of USD 185

The bank expects Amazon's fourth-quarter revenue and EBIT to be USD 165.8 billion and USD 10.9 billion respectively. The growth of its subsidiary AWS is a key indicator, and the bank expects revenue to be slightly lower than Wall Street's expectations. Cost optimization and demand driven by artificial intelligence are the key drivers of AWS.

For the first quarter of this year, Bank of America Securities expects Amazon's revenue and operating profit to be USD 142.1 billion and USD 11.1 billion respectively. The group's revenue guidance for the period may range from USD 136 billion to USD 142 billion, and the operating profit guidance is expected to be between USD 7.5 billion and USD 11.5 billion.

The bank believes that the market sentiment is quite positive, and the potential for continuous improvement in AWS profitability this year will help establish a positive outlook, while its valuation remains attractive.

Bank of America: Raises Alphabet's target price from USD 166 to USD 175, reiterates "buy" rating

The bank's research report states that Alphabet's revenue in the last quarter is expected to be a highlight, with the fourth-quarter gross revenue forecast raised to USD 86.879 billion, a YoY increase of 14%, higher than the market's expectation of USD 85.199 billion. The bank also raised the forecast for the growth of search engine business revenue to 14%, but at the same time raised the forecast for expenses. The earnings per share forecast remains at USD 1.63, compared to the market's forecast of USD 1.61, and the expected core profit margin is 34.5%. Looking forward to the advertising market recovery since October last year and the growth of advertising spending driven by artificial intelligence (AI) tools, Bank of America predicts that search engine business revenue will reach $48.5 billion, and YouTube business revenue will reach $9.1 billion, both with a YoY growth of 14%; cloud business revenue is expected to grow by 23% to $9 billion.

The bank expects the advertising industry to continue to recover this year, short video monetization to accelerate, AI integration to improve return on investment, and strict cost control, all of which will help drive market expectations upward.