In the first half of this year, Meituan achieved significant performance growth, with operating revenue increasing by over 30% année après année, and net profit turning from a loss to a gain. Cependant, the company expects the growth rate of its food delivery business to slow down in Q3, with specific details yet to be disclosed.
Despite the performance growth, Meituan did not disclose key operational data such as the number of transaction users and active merchants. Will these be disclosed in the future? En plus, the company’s new businesses are still incurring losses.
In the secondary market, Meituan’s stock price peaked at the beginning of the year and has since embarked on a prolonged decline, currently down over 40% from its high. Why does the stock price diverge from the performance, and when will it stop falling?
Behind the Impressive Revenue, Q3 Food Delivery Growth Is Expected to Slow
In the first half of the year, Meituan achieved operating revenue of 126.582 billion yuan, a year-on-year increase of 30.2%. Q1 and Q2 revenues increased by 26.7% and 33.4% year-on-year to 58.617 billion yuan and 67.965 billion yuan, respectivement, with Q2 showing a more remarkable performance.
Looking at the longer timeline from 2018 à 2022, Meituan’s operating revenue grew rapidly, reaching 65.227 billion yuan, 97.529 billion yuan, 114.795 billion yuan, 179.128 billion yuan, and 219.955 billion yuan, respectivement, with a compound annual growth rate of 35.51%. In 2022, the year-on-year increase was 22.79%.
From this perspective, the revenue growth rate in the first half of this year shows some improvement compared to last year but still falls short of the compound annual growth rate.
Meituan’s core local commerce is the main contributor to its revenue, including well-known services such as food delivery and Meituan Flash Purchase, as well as in-store services, hotel and homestay bookings, ticketing, and transportation. The revenue comes from delivery services for merchants and consumers, commissions for technical services provided to merchants and third-party agents, and various forms of online marketing services.
In the first half of the year, Meituan’s core local commerce achieved operating revenue of 94.085 billion yuan, a year-on-year increase of 32.6%. This includes delivery services, commissions, and online marketing services, which grew by 23.5%, 40.1%, and 25.8% year-on-year to 37.28 billion yuan, 34.217 billion yuan, and 17.99 billion yuan, respectivement.
It is evident that the core of Meituan’s local commerce lies in merchants, consumers, and delivery riders.
From 2018 à 2022, the number of Meituan’s transaction users rose from 400.4 million to 677.9 million, with a 1.8% decline in 2022. During the same period, the number of active merchants increased from 5.8 million to 9.3 million, with a 5.1% year-on-year increase in 2022, marking the lowest growth rate.
Meituan did not disclose specific transaction user numbers or active merchant counts in Q1 and Q2 of this year. Will these be disclosed in subsequent quarters?
For riders, Meituan disclosed that there were approximately 6.24 million riders in 2022. This number is likely to set a new record in 2023, pending official disclosure.
With continuous consumption recovery, the food delivery industry has seen growth, and Meituan has implemented a series of measures.
For merchants, Meituan assists new merchants in opening stores and helps improve online operations for all merchants. The company launched initiatives such as the “Sharpshooter” campaign, upgraded the “God Coupons Festival,” and released the “Must-Have List” to help merchants attract customers and create hit products.
For users, Meituan strengthens supply and optimizes subsidy strategies to meet the increasingly diverse needs of consumers, especially in high-order and high-quality categories. The company also continues to explore new traffic growth points, encouraging consumers to stockpile coupons through live events and stimulate non-real-time demand.
These marketing strategies have contributed to the good development of Meituan’s food delivery business. Cependant, participating in various discount activities increases operating costs for merchants, who must decide whether to participate and control the intensity of promotions based on their circumstances.
Thanks to the expanded revenue scale, Meituan’s profitability has also significantly improved. In the first half of the year, it achieved a net profit attributable to shareholders of 8.046 billion yuan, turning from a loss to a gain. The core local commerce’s operating profit grew by 58.7% à 20.584 billion yuan.
The profit growth in Meituan’s core local commerce is also related to the reduced proportion of sales costs. The company mentioned that sufficient capacity supply for food delivery and Meituan Flash Purchase businesses led to a decrease in per-order delivery costs.
It is clear that as the number of riders increases, the average delivery fee decreases further.
Looking ahead to the third quarter, Meituan expects the growth rate of food delivery revenue to slow. In the financial report conference call, Meituan stated that the third quarter would face some short-term business obstacles due to the macroeconomic environment and extreme weather conditions.
New Business Continues to Incur Losses
In the first half of the year, Meituan’s new business achieved operating revenue of 32.497 billion yuan, a year-on-year increase of 23.8%. Q1 and Q2 revenues grew by 30.1% and 18.4% year-on-year to 15.732 billion yuan and 16.765 billion yuan, respectivement, with a slowdown in Q2 growth.
In 2022, the company’s new business achieved revenue of 59.196 billion yuan, a year-on-year increase of 39.3%. It is evident that the revenue growth rate of new business in the first half of this year has significantly slowed down.
According to brief insights, new businesses include Meituan Select, Meituan Grocery, Kuailu, and others. Revenue mainly comes from the sale of goods (Meituan Grocery and Kuailu) and various services provided by different businesses (Meituan Select, ride-hailing, shared bicycles, charging treasures, small loans).
Meituan stated that Q2 transaction volume and revenue for Meituan Select continued to grow year-on-year, but the overall market growth rate was lower than expected, leading to a slowdown. Meituan Select’s revenue recognized on a net basis declined sequentially, mainly due to increased subsidies and lower unit prices.
Cependant, Meituan Grocery still achieved steady year-on-year growth, gaining higher market share, with increased average transaction value and transaction frequency.
In comparison, Meituan Grocery’s interface is highly consistent with the community e-commerce platform Pupu Supermarket, with similar product prices and discounts, such as buy-one-get-one-free and genuine 50% off deals. It’s unclear who is “copying homework.” The future competition will surely be about financial strength.
Actuellement, Meituan’s new business continues to incur significant losses and is a “money-burning” project for the company. In 2022, the new business lost 28.379 billion yuan, with a net loss of 10.222 billion yuan in the first half of the year, although the loss narrowed. Meituan Select’s Q2 loss expanded sequentially.
Meituan explained that the expansion of business scale, increased subsidies to drive growth, spending on cold chain and logistics to cope with the upcoming hot weather, and seasonal product mix changes contributed to the losses.
As of the end of June, the cumulative transaction user count for Meituan Select had reached 470 million.
Comparing Meituan Grocery and Meituan Select, the former is a community e-commerce platform that delivers to homes, while the latter is similar to next-day delivery supermarkets, requiring self-pickup at designated locations.
The author has experienced both shopping modes. Although Meituan Select is cheaper, product quality, especially meat products, needs further improvement, while Meituan Grocery has relatively good quality control.
As of October 18, Meituan Select had 11,657 complaints on the Black Cat Complaint platform, with 7,993 resolved, a resolution rate of 68.57%. After-sales service still needs further improvement, with product quality issues being particularly prominent and requiring attention.
Although Meituan turned a profit in the first half of the year, it faced investor “voting with their feet” in the secondary market. After reaching a high of 195.6 HKD per share in January, the stock price began a continuous decline, reaching a low of 105.5 HKD per share, nearly halving.
As of the close on October 18, Meituan’s stock price was 113.7 HKD per share, down more than 40% from its high, with a market capitalization of 710 billion yuan and a TTM P/E ratio of 77.83.
En plus, Meituan’s shareholders have been consistently reducing their holdings in recent years. Par exemple, Shen Nanpeng of Sequoia Capital had 387.6686 million shares, or 6.59%, at the end of 2020, which decreased to 138.9025 million shares, or 2.23%, by the end of the first half of the year, with his personal holdings at 9.4764 million shares, or 0.15%.
