Meituan submitted a robust third quarter financial report.
On November 28th, Meituan (03690. HK) released its financial report for the third quarter of 2023, with a revenue of 76.467 billion yuan, a year-on-year increase of 22.1%, and a net profit (period profit) of 3.593 billion yuan, a year-on-year increase of 195.3%; After adjustment, the net profit was 5.727 billion yuan, a year-on-year increase of 62.4%.
During a conference call, Meituan CEO Wang Xing stated that the management has full confidence in the company's long-term growth potential. Currently, Meituan's stock price in the secondary market only reflects the valuation of a single takeout business, which does not align with the company's intrinsic value. We are considering promoting a $1 billion repurchase plan, and "the company will make a prudent decision based on a comprehensive consideration of business investment, cash situation, and market conditions."
On the morning of November 29th, Meituan announced on the Hong Kong Stock Exchange that starting from December 1st, 2023, based on the general share repurchase authorization passed by the company's shareholders at the annual general meeting held on June 30th, 2023, and any subsequent general share repurchase authorization approved by shareholders for renewal or renewal from time to time, Meituan will occasionally repurchase company shares in the public market with a total amount not exceeding $1 billion.
Holiday live streaming business growth exceeding 300%
The financial report shows that Meituan's core business, local commerce, continued to maintain steady growth in the third quarter, with its revenue increasing by 24.5% year-on-year to 57.7 billion yuan. The operating profit increased by 8.3% year-on-year to 10.1 billion yuan. However, the financial report mentioned that the growth in operating profits from food and beverage delivery was partially offset by a year-on-year decrease in operating profits from the in store, hotel, and tourism businesses.
In addition, Meituan's delivery service revenue was 22.983 billion yuan, a year-on-year increase of 14.3%; Commission income was 21.536 billion yuan, a year-on-year increase of 30.7%. From the order data, the number of real-time delivery transactions in the third quarter increased by 23% year-on-year, and the peak daily order volume of catering takeout reached 78 million, setting a new historical high. The peak daily order volume of Meituan flash purchase exceeded 13 million.
When it comes to predicting the future of food delivery business, Chen Shaohui, CFO of Meituan, stated that the two-year compound growth rate of food delivery business in the fourth quarter is expected to be consistent with the growth level of the first nine months. He mentioned that factors such as macroeconomic conditions and climate are affecting the growth of order volume. At the same time, more people are returning to offline consumption, which also affects the order volume of takeout consumption.
Regarding Meituan flash buying, Chen Shaohui stated that supply will continue to be optimized in the future, and it is expected that the two-year compound growth rate of this business in the fourth quarter can reach 45%, higher than the growth rate of the general e-commerce industry.
However, he also mentioned that the average order price for takeout may decline. "Due to the pandemic, the high average order price and long-distance orders in the fourth quarter of last year accounted for a much higher proportion of the overall order volume. This year, the recovery of small and medium-sized businesses and changes in consumer behavior will also lead to a year-on-year change in average order price in the fourth quarter."
It is worth noting that the live broadcast business "competing" with Tiktok is becoming a new increment of Meituan. During the holiday period from August to September this year, it was revealed during the conference call that Meituan's live streaming business grew by over 300%. Chen Shaohui stated that based on the current market competition pattern, Meituan's marketing expenses will further increase in the fourth quarter and will strive to capture lower tier markets.
Optimistic about new business prospects and strategic value
Regarding the turnaround progress of Meituan's new businesses (Meituan Youxuan, Meituan Maicai, Catering Supply Chain (KuaiLv), ride hailing services, shared bicycles, shared electric bicycles, power banks, catering management systems, and others) that have attracted external attention, data shows that the revenue of new businesses in the third quarter increased by 15.3% year-on-year to 18.8 billion yuan, and the operating loss narrowed by 24.5% year-on-year to 5.1 billion yuan, while the operating loss rate continued to improve to 27.2%.
Although still losing money, the financial report mentions that Meituan Optimal's operating loss rate in the third quarter further narrowed year-on-year and month on month, maintaining market share and strengthening product selection and pricing capabilities. As of the end of September, Meituan Youxuan has accumulated a total of 490 million users.
During the conference call, Wang Xing provided a detailed analysis of the current loss situation of the new business. He stated that he still has great potential in the food and miscellaneous retail market. Currently, Meituan Youxuan's operating losses are continuously narrowing, which is a good signal. In addition, Meituan will optimize its operations and focus on high-quality growth.
"Overall, most new businesses achieve independent profitability, not to mention the enormous strategic value they bring to us. However, Wang Xing also stated that if new businesses do not have the opportunity to profit independently in the long run, the company will adjust its strategy and resource allocation accordingly.".
As of the close on November 28th, Meituan fell 5.16% to close at HKD 103.