Q1 earnings observation： Meituan, which was hit hard by the epidemic, why is the stock price still soaring？

New Game Original

By Camellia

Editor: Lei Yunting

Yesterday, Meituan Dianping released the 2020 Quarter 1 performance report. The data shows that Meituan’s total revenue in the first quarter was 16.76 billion yuan, a simultaneous decrease of 12.6%. The operating loss was 1.72 billion yuan, an increase of 31.6% from the 1.30 billion in the same period in 2019, and the adjusted net loss was 216 million yuan, a year-on-year decrease of more than 40%.

Among them, the food and beverage takeaway business achieved revenue of 9.49 billion yuan, down 11.4% year-on-year; the revenue of the store, hotel and tourism business 3.09 billion, down 31.1% year-on-year; new business and other income 4.117 billion yuan, up 4.9% against the trend.

Although Meituan’s two strong businesses, catering takeaway and in-store, hotel business, have been hit hard by the epidemic, the sharp narrowing of net losses and the stories to be told in the future still make the market full of confidence in Meituan. After yesterday’s financial report was released, Meituan’s share price closed at HK $125.8, an increase of more than 6%.

Today, Meituan’s share price closed at HK $138.9, an increase of 10.41%, and the current total market value is about HK $804.706 billion.

Wuliangye has been listed for nearly 22 years, and its market value is 573.70 billion RMB, equivalent to 623.70 billion Hong Kong dollars; Meituan has been listed for less than two years, and its market value has exceeded Wuliangye (000858). The great charm of the new economy is evident.

1

"Campaign": Reduced commission, withdrawal price

The platform and merchants are originally a community of interests. During the epidemic, Meituan Takeaway launched the "Merchant Partner Commission Refund Program" to provide merchants with free rebates, subsidies and free traffic support to help them tide over difficult times. Hundreds of thousands of merchants across the country participated. In Wuhan, the amount of free commission has exceeded 30 million yuan.

In addition to alleviating the pressure on merchants in terms of free commission, Meituan has also upgraded the "Spring Breeze Action" to the Million Small Stores Program, by providing online operations and other measures to help merchants recover digitally. Newly launched merchants who originally relied mainly on dine-in and needed to develop online channels can enjoy Meituan’s 7-14 days of "new merchant support traffic."

Although the latest financial report shows that Meituan’s commission income in the first quarter was 8.564 billion yuan, and the commission rate was 11.98%, a decrease of 1.5% year-on-year, in the long run, these two measures have accumulated merchants for the Meituan platform. In addition to commissions, the marketing advertising expenses of merchants are also one of the profit channels for the platform, and merchants provide the possibility for Meituan to increase advertising revenue.

Another profit margin for Meituan comes from the cultivation of user consumption behavior.

"Operation Spring Breeze" has enabled many high-quality merchants to achieve a contrarian growth in orders during the epidemic, which has promoted the increase in the unit price of takeaway consumers. According to the financial report, Meituan’s first-quarter catering takeaway revenue decreased by 11.4% year-on-year, the average daily takeaway order volume fell by 18.2%, and the total order volume fell by 46% year-on-year. However, the average price of each order rose by 14.4% to 52 yuan, and the unit price of customers increased significantly.

In addition, since Meituan Distribution was officially established as an independent brand on May 6 last year, as of now, Meituan Distribution has covered 6.20 million multi-product merchants such as catering, fresh food, supermarkets, bookstores, flowers, etc. These categories have become vertical products ordered by users online, and users’ brand awareness of Meituan’s "everything can be home" is deepening.

2

Future: Food + Platform, Diversity

When Meituan listed in Hong Kong two years ago, Meituan’s co-founder Wang Huiwen repeatedly mentioned Meituan’s Food + Platform grand strategy in the face of the media, that is, starting from takeaway, horizontally covering multiple life service areas such as store delivery, home delivery, and travel.

The core of this strategy is to strengthen a single center of gravity, from the most high-frequency catering consumption to other low-frequency areas, to tap the traffic value of other areas, and to better conduct cross-selling.

Meituan’s current new businesses mainly include food and beverage management systems and B2B food and beverage supply chain services, shared bicycles and online car-hailing, and food retail services.

According to the financial report, in Quarter 1, 2020, Meituan Dianping’s revenue from new business and other divisions was 4.20 billion yuan, an increase of 4.9% year-on-year. This was mainly due to the increase in Meituan’s flash sale and micro-loan business revenue, which was partially offset by the decrease in ride-hailing and B2B catering supply chain service revenue (affected by the epidemic).

The growth of new business is conducive to the overall pull of Meituan.

Meituan’s important fresh food retail business – Meituan market and Meituan flash sale are a major highlight of the earnings report. During the earnings call, Meituan CEO Wang Xing mentioned for the first time that the grocery shopping business will be a very key business sector for Meituan. He said that with the increasing demand of consumers to buy food online, this sector will bring more opportunities and imagination to Meituan in the future, so he will continue to invest in this field.

New businesses including Meituan bicycles and online car-hailing lost 1.40 billion yuan in the first quarter, and the operating profit margin narrowed to -33%. However, the cost of shared bicycles decreased by nearly 1 billion yuan, and depreciation also decreased significantly. Meituan has achieved expenditure control on the bicycle business. These all provide imagination for Meituan’s future development, which is conducive to Meituan’s search for a more perfect growth curve.

3

Competing against each other: the new economy, the new battlefield

Wang Xing said Meituan has no boundaries. However, conducting multiple businesses also means facing multiple competitors.

Ele.me, Meituan’s main competitor, has significantly outpaced Meituan’s 28.3% growth in revenue performance with a 41% growth in the past 12 months (April 2019-March 2020).

Ele.me’s ability to widen the gap with Meituan in terms of growth rate is mainly due to Alibaba’s integration of resources. From the Double 11 promotion at the end of 2019 to the reduction of commission for catering merchants during the epidemic, and a large number of merchants coming to Ele.me to open stores, Alibaba has used the so-called "synergistic advantages of the digital ecological economy" to attract a large number of merchants to settle in Ele.me, and even non-takeaway merchants such as Marriott Hotel, Decathlon, major museums, and Xinhua Bookstore. This places new requirements on Meituan’s resource integration capabilities and technological upgrading.

As a giant in China’s express delivery industry, SF Express’s entry into the takeaway market has also brought challenges to Meituan. Recently, SF Express launched the "Fengshi" platform, focusing on food delivery services for the corporate employee market. At present, many well-known brands such as Xibei, Yoshinojia, Ajisen Ramen, and Dicos have settled in.

Although SF Express said that the "Fengshi" WeChat Mini Program is still in the incubation stage and is currently only implemented within SF Express, it does not mean to fight against Meituan and Ele.me. But "Fengshi", which focuses on low-draw points, may use the B-end business to develop the C-end, which cannot help Meituan, a colleague, feel anxious.

In March, Didi announced that it had launched errands in 21 cities, including Shanghai, Shenzhen, and Chongqing. Users could summon errands to buy goods they needed and enjoy door-to-door delivery services. The function of picking up and delivering goods in the same city would also be opened. At that time, Didi introduced that the first batch of Didi errands were served by Didi drivers, who rode electric vehicles to receive orders every day. Eligible drivers could provide errands as soon as possible after training.

Just today, Hello’s logistics business "Hello Express" has been launched for testing. Hello Travel said that Hello Express is an "errand running" project currently being explored by Hello Travel’s Pratt & Whitney Vehicle Division. It focuses on the delivery of small items and has not been officially launched. It is currently under test operation in Dongguan and Foshan.

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Multiple rivals also mean that the market is vast. As of this afternoon, according to Forbes real-time data, Wang Xing’s personal wealth is 11 billion US dollars (about 77 billion yuan), making him the 20th richest person in China. "We believe that business growth in 2025 is to increase our daily orders to 50 million, and the current data is still a long way off, so we need to further invest in technology in the future." With the strong wind of emerging economies, Meituan is still running.

This article was first published on WeChat official account: New Game. The content of the article belongs to the author’s personal opinion and does not represent the position of Hexun.com. Investors operate accordingly, and please bear the risk.