Title: Meituan's Q2 2024 Financial Triumph: Revenue Soars by 21%, Net Profit Surges 77.6%
Meituan (3690.HK), the leading Chinese e-commerce platform, has showcased a stellar performance in the second quarter of 2024. The company reported a remarkable 21% increase in total revenue year-over-year, reaching RMB 28.3 billion. Additionally, Meituan's adjusted net profit catapulted by 77.6% to RMB 13.6 billion, setting a new record in profitability.
Strategic Initiatives Driving Growth
During the earnings call, Meituan emphasized its strategic initiatives that have propelled its success. The introduction of Meituan Group Buy and targeted investments in lower-tier markets have significantly boosted user engagement and strengthened its market leadership in various segments.
Key Takeaways
- Revenue Growth: Total revenue grew by 21% YoY to RMB 28.3 billion.
- Profit Surge: Adjusted net profit increased by 77.6% to RMB 13.6 billion.
- User and Merchant Expansion: Annual transaction users and active merchants reached new highs of 730 million.
- Innovative Offerings: Launched Meituan Group Buy and invested heavily in lower-tier markets.
- Sector Growth: On-demand delivery and in-store, hotel, and travel businesses experienced significant growth.
- Share Repurchase: Repurchased over USD 2 billion worth of shares, with plans to cancel them and reduce share count.
Company Outlook
Meituan's future strategy focuses on leveraging its retail plus technology approach to foster industry growth. The company aims to enhance collaborations within its core local commerce and maintain the momentum of its on-demand delivery business. Solid year-over-year operating profit growth is anticipated for its in-store, hotel, and travel business in the latter half of the year.
Bearish Highlights
- AOV Decline: The on-demand delivery business saw a year-over-year decline in average order value (AOV), although it has begun to stabilize.
- Revenue Lag: Transaction-based services revenue exhibited robust growth, but online marketing services revenue lagged due to changes in subscription service charges.
Bullish Highlights
- Steady Business Growth: On-demand delivery and in-store, hotel, and travel businesses continued their upward trajectory.
- Market Leadership: New initiatives such as Meituan Select and Xiaoxiang Supermarket achieved market leadership.
- Record Financials: The company's total revenue and net profit reached record highs.
Misses
Despite overall growth, Meituan's new initiative segment is still operating at a loss. However, there has been significant progress in loss reduction.
Q&A Highlights
- Cross-Selling Initiatives: Discussed new cross-selling initiatives and organizational restructuring to enhance business synergies.
- Online Grocery Market: Expressed optimism about the online grocery market in China and evaluating overseas expansion opportunities.
- Operational Efficiency: Committed to optimizing operational efficiency and investing in cold-chain infrastructure.
- Additional Buyback Plan: Approved an additional $1 billion buyback plan.
InvestingPro Insights
Meituan (MPNGF) has demonstrated resilience and growth in its recent performance. Here are some key metrics and InvestingPro Tips:
InvestingPro Data:
- Market Cap (Adjusted): $86.0B USD, showcasing robust market valuation.
- P/E Ratio (Adjusted): 44.9 for the last twelve months as of Q2 2024, indicating high market expectations for future earnings growth.
- Revenue Growth: 22.6% over the last twelve months as of Q2 2024, reflecting strong top-line performance.
InvestingPro Tips:
- Financial Health: Meituan holds more cash than debt, suggesting a strong financial position.
- Analyst Confidence: Recent upward revisions in earnings by analysts signal confidence in Meituan's ongoing profitability and growth.
These insights, along with Meituan’s strategic initiatives, portray a robust enterprise that is not only a major player in the Hotels, Restaurants & Leisure industry but is also effectively managing its resources to sustain growth. Additionally, there are more InvestingPro Tips available for Meituan, providing investors with comprehensive analysis and guidance on the company's prospects.
Full Transcript - Meituan Dianping Q2 2024
Operator: Thank you for standing by and welcome to the Meituan Second Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Miss Scarlett Xu, VP and Head of Capital Markets. Please go ahead.
Scarlett Xu: Thank you, operator. Good evening and good morning, everyone. Welcome to our second quarter of 2024 earnings conference call. Joining us today are Mr. Xing Wang, Chairman and CEO; and Mr. Shaohui Chen, Senior Vice President and CFO of Meituan.
For today's call, management will first provide a review of our second quarter of 2024 results, and then conduct our Q&A session. Before we start, we would like to remind you that our presentation contains forward-looking statements which include a number of risks and uncertainties and may differ some actual results in the future. This presentation also contains unaudited non-IFRS accounting standards financial measures that should be considered in addition to and not as a substitute for measures of the company's financial performance prepared in accordance with IFRS accounting standards. For a detailed discussion of risk factors and non-IFRS accounting standards measures, please refer to the disclosure documents in the IR section of our website. Now I will turn the call over to Mr. Xing Wang. Please go ahead, Xing.
Xing Wang: Thank you, Scarlett. Hello, everyone.
In the second quarter, we adapted to the latest consumption environment and we actively iterated our projects and operations and achieved solid results. During the second quarter, our total revenue increased by 21% year-over-year to RMB 28.3 billion. Adjusted net profit increased by 77.6% to RMB 13.6 billion, and adjusted net profit margin improved significantly both year-on-year and quarter-over-quarter to 16.5%. Our annual transaction user and annual active merchants maintained strong growth momentum and reached new highs to 730 million, respectively. Also, average purchase frequency per annual transaction user increased, marking the 15th consecutive quarter of sequential growth since mid-2020.
As the one-stop local commerce platform in China, we effectively satisfy consumer demand for local services through our comprehensive product offerings and on-demand delivery. We support the local merchants throughout their operation cycle across various marketing scenarios. Compared to other sectors, the local commerce industry in China still has significant growth potential from digital transformation. We will continue to implement our retail plus technology strategy, use technology to promote industry growth, and fulfil our mission to help people eat better and live better.
In the second quarter, we continued to integrate the local core local commerce segment and improve its operational efficiency. The goal of our recent organizational restructuring is not only to integrate the on-demand delivery, in-store, hotel and travel businesses. What's more important is to better align consumer demand with our platform supply and subsequently Meituan platform. The Meituan infrastructure platform and each business unit in core local commerce will better develop and realize more synergies, and we view core local commerce as a whole when it comes to long-term business planning, operational strategy and resource allocation and product iteration.
We hope to empower each business with effective traffic support from Meituan platform and post close the collaborations, create synergies that will add more gross sales. This will bring further integration between the demand side and the supply side and further strengthen our brand awareness.
For example, our Shen Hui Yuan membership program, which we expanded nationwide in July, is our very first marketing scheme that covers all categories across on-demand delivery and in-store hotel and travel. Shen Hui Yuan were evoked from the membership program for our on-demand delivery business to effectively enhance the user transaction frequency of on-demand delivery and also brought incremental sales to restaurant merchants and help them operate more efficiently.
This newly integrated membership program we can deepen collaborations with an expanded network of merchants with a higher efficiency allowing merchant to benefit from user traffic. Meanwhile, our members will have access to more diverse selections of value for money, products and services across all categories in a local core commerce domain. In addition, we recently introduced a new brand group by Meituan Group Buy. It covers all local service categories, including in store dining, feature and entertainment, attraction, ticketing, duty services, and more. Going forward, we will focus on this new brand and enhance consumer mention in Meituan Group Buy, more stores, more savings. Meituan than [Indiscernible].
Overall, we will continue to explore collaborations within core local commerce with Meituan platforms, integrate our product and services offerings, and provide the best in class experience for both merchants and consumers. And now let's walk through each business in our core local commerce.
In the second quarter, on-demand delivery maintained a steady growth for food delivery thanks to years of business iterations. We have successfully cultivated a strong consumer mansion in speed and variety. While we focused on improving operations marketing in our shelf based model to further enhance our consumer mind-set in value for money offerings to adapt to the evolving consumption trend. We deep dived into each consumption category and scenario such as travel, weekend and late night snacks to incentivize demand. During the quarter, average order grew by almost 40% year-over-year and orders from late night snacks grew much faster than the average. Our refined operation and marketing strategies have led to improvement in user stickiness as well as steady growth in user scale and purchased frequency of mid-to-high frequency users.
On the supply side, we actively explored new products formats to capture different consumption, consumer demand, and especially in the low price domain. Pin Hao Fan did exceptionally well this quarter. Peak daily order volume broke 8 million, setting a new record. This quarter we worked closely with a branded restaurant to introduce more high quality value for money offering for Pin Hao Fan, and further improved our products and user experience. Subsequently, both user retention and frequency were largely enhanced as consumers increasingly recognize Pin Hao Fan high quality value for money features. That demand also extended from lunch and dinner to other discretionary categories like beverage and late night snacks. After our continuous iteration in the Pin Hao Fan model, it has now become a new growth driver for many small and medium sized restaurants. It also helps branded restaurants improve single store productivity and attracted young consumers. Through Pin Hao Fan, merchants can effectively manage megahit products and offer low price in exchange for high order volume. This allows merchants to unleash more economies of scale. In addition, merchants can cut costs and enhance efficiency by using our platform's in-house procurement and group delivery. Therefore, merchants can pass savings to consumers through a lower price. Going forward, we will continue to help merchants optimize efficiency, help them improve SKU selections, and broaden their price bands to attract more price sensitive consumers.
For branded restaurant last quarter, we launched the branded satellite stores in [Foreign Language]. This quarter, we worked with more brands such as Lao Xiang Ji and Haidilao to help them open more satellite stores, thus bringing more quality selection and low price for our consumers. Looking ahead, we will continue to innovate our supply formats, penetrate deeper into the supply chain, helping merchant improve efficiency and pricing ability, and consistently provide the value for money products for consumers. Meituan Instashopping posted another robust growth. And on-demand retail has become a significant growth driver for local retailers. It is also a reliable shopping channel for consumers. We see steady increase in Meituan Instashopping annual transacting user base and even faster growth in order frequency in this quarter. We precisely capture the latest trend in diversity and personalized consumptions and continue to refine our operations and marketing strategies. Through these measures, we effectively cater to consumer demands across various scenarios such as the holiday gifting travel and camping activities. During the quarter, we deepened our collaborations with the leading brands in FMCG, apparel, liquor and beverage, and more and on-boarded many branded stores to our platform. In addition, we provided various emerging support measures, such as to refine the marketing strategy to increase transaction conversion rate and bring incremental sales to these branded merchants. Those categories I just mentioned achieved steady order growth in the second quarter better with on-demand retail. We proactively penetrate deeper into the industry value chain and expanded Meituan InstaMart [Foreign language] to broader regions. In higher incentives, we increased the density of Meituan InstaMart. In lower densities, we also deepened the penetration to drive strong order volume growth. Meituan InstaMart is a marketplace model where merchants rent and operate brand distribution warehouses and we help merchants with online tenant operations offering traffic support, product selection recommendations and pricing strategy, etcetera. And this new supply format effectively matches supply with demand for on-demand retail. The value of our Meituan InstaMart was gradually recognized by offline retailers. An increasing number of leading offline brands failed to work with us. They can fully capitalize their advantages in the supply chain while leveraging our location based marketing strategy, online solutions and efficient delivery network to offer consumers value for money products through on-demand retail. For certain categories, we penetrated deeper into the supply chain and adopted in-house procurement. For example, we have self-operated brand Wai Ma Song Jiu in the liquor beverage category and continue to expand in scale. Wai Ma Song Jiu has integrated self-operating supply chain plus brand distribution warehouses plus self-operated delivery. This model effectively meets consumers instant consumption needs and in second quarter Wai Ma achieved a record high GTV. For the medicine category, we further strengthened consumer mindshare, build stronger capacity to satisfy seasonal demand and enhanced our product availability in health supplements. In July, we rolled out online medical insurance payment channel for most LTC products in a few cities, including Beijing, Shanghai and Qingdao. Consumers can choose insurance covered pharmacies and drugs for our platform and enjoy 30 minutes delivery to their doorsteps. Going forward, under the guidance of local authorities, we will work closely with chain pharmacies and expand the coverage of stores and drugs that can use medical insurance payment to provide consumers with convenience and health services. Overall, the adoption of on-demand retail from more traditional brands and merchants, coupled with accelerated expansion of new supply formats further enhanced the competitive advantages of Meituan Instashopping on the supply side. It has helped enhance user experience and increase purchase frequency that builds a solid foundation for our resilient growth despite facing external challenges. In addition, the long-term sustainable development of our on-demand business depends on the continuous optimization of our delivery network and hard work of our couriers to address the challenges couriers face and launched courier-friendly communities and courier-friendly merchants. Currently, we have established courier-friendly communities in more than 20 cities nationwide. To facilitate the easy access for couriers in residential areas, we introduced a digital solution in collaboration with the various major property management companies, enhancing their delivery experience. Additionally, we worked with more than 10,000 stores of branded restaurant and healthcare services brands to provide rest stations, beverage and discounted meals for our couriers. Looking forward, under the supervision of relevant local authorities, we will continue to collaborate with the broader society, including local communities, property management companies, chain brands, and caring merchants, to accelerate the promotion of courier-friendly community access solutions, introduce more resting scenarios, and provide more discounted services to enhance courier’s sense of belongings and happiness. In the second quarter, our in-store hotel and travel business maintained a strong growth thanks to the continued digital transformation in local services, as well as consumers rising demand for diversity and value for money. Order volume increased by over 60% year-over-year. Annual transaction user increased by nearly 35% year-over-year and annual active mergers reached a new high. For our in-store business, we continue to leverage our shop based model and mega-hit products, expanding our valuable money products and services offerings for consumers. Through our shelf based model particularly by leveraging our Meituan Group Buy brand [Foreign Language], we continued to satisfy consumer demand for valuable money products. Recently, we put more efforts into the marketing campaign of Meituan Growth. We launched online and offline joint marketing events in 15 cities, especially during holiday seasons like Labour Day and Dragon Boat Festival. This strengthened the consumer mindshare of [Foreign Language] and continue to expand our user base. On top of that, we continue to promote mega-hit products by leveraging Special Deals [Foreign Language] and many other operational tactics. These measures effectively capture the consumer market demand for deep discounted deals and boost our transcending user base and order volume. We also continue to invest in lower tier markets to effectively digitize both supply and demand and help accelerate online penetration of local services in these mid-tier markets. In addition, after we upgraded our Shen Hui Yuan program, consumers can now use coupons in-store hotel and travel categories, which further strengthened the consumer mindshare in our value-for-money offerings. And Shen Hui Yuan is also widely welcomed by our merchants. In current macro environment, consumer demand for local services remain intact with the new consumption trends emerging the sudden [ph] changes in consumer preference. For in-store dining, demand has extended from normal meals to lighter meals and beverage snacks at fast food, coffee and tea, those categories are doing well. To adapt to this change, we swiftly on-boarded more light meal and beverages suppliers. Our in-store business recently promoted the pickup now service that allows consumers to buy and validate coupons online simultaneously so that they won't waste time doing validate the coupons offline, making use in a more convenient way and enhancing the user experience. We see Pickup Now service as a complement to our food delivery and in-store dining service format. Currently, Pickup Now published popular categories at coffee and tea. We have partnered with 46 chain brands and around 90,000 restaurants to offer Pickup Now and have served over 20 million users in 100 of cities. During the second quarter, we launched our 2024 Must-Eat List [Foreign Language] covering nearly 2,800 cities -- covering nearly 2,800 restaurants in over 100 cities. That's more than ever. Majority of the restaurants on our list are localized restaurants and nearly 20% are [indiscernible] Xiaoxiang. We provided online traffic support and operational guidance for the listed merchants, especially those small and medium-sized merchants, helping them enhance store exposure, online operation and efficiency. For other in-store services, there is the trend that consumers want to enjoy diversity and low price in the leisure and entertainment category. We actively captured this evolving trend, improved operation in certain popular categories, capitalizing on our advantages in supply, brand recognition and service quality. We aim to begin consumer’s top choice when they look for digital happiness, [indiscernible] for those type of consumptions. Specifically, leisure and entertainment posted strong growth with GTV and order volume growth growing over 60% year-over-year. And GTV for beauty and medical aesthetics also increased by over 50% year-over-year.
For the hotel business, both our domestic room night and GTV experienced steady growth during the second quarter. We expanded efforts in branding promotion and iterated marketing strategies around the major holidays such as Labour Holiday and Dragon Boat Festival. During the 10-year anniversary celebration of our hotel business, we launched a dedicated marketing campaign effectively incentivized demand. As more and more travellers now focus on culture and experience, we continue to enhance our supply and product formats. For example, we iterated our Hotel + X packaging dues and leveraged our platform