PWW

Portfolio AI Insights

pww.comMeituan, Q1 2024 Earnings Call, Jun 06, 2024 - SEHK:3690

SEHK:3690

Sijia Xu [VP, Head of Capital Markets & Joint Company Secretary] 💬

Sijia Xu, the VP and Head of Capital Markets & Joint Company Secretary for Meituan, made the following comments during the Q1 2024 Earnings Conference Call:

  1. Opening Remarks:

    • Thanked the operator and welcomed everyone to the First Quarter of 2024 Earnings Conference Call.
    • Introduced Mr. Xing Wang, Chairman and CEO, and Mr. Shaohui Chen, Senior Vice President and CFO of Meituan, who were present for the call.
    • Provided an overview of the agenda, mentioning that management would first review the first quarter of 2024 results and then conduct a Q&A session.

  2. Forward-Looking Statements and Non-IFRS Measures:

    • Reminded attendees that the presentation contained forward-looking statements, which included risks and uncertainties and might differ from actual results in the future.
    • Noted that the presentation included 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.
    • Directed listeners to the disclosure documents in the IR section of the company's website for a detailed discussion of risk factors and non-IFRS accounting standard measures.

  3. Transition to Xing Wang:

    • Handed the call over to Mr. Xing Wang, Chairman and CEO, to provide further details on the business performance and strategies.

  4. Closing Remarks:

    • Thanked everyone for joining the call.
    • Looked forward to speaking with everyone next quarter.
    • Expressed appreciation for the support received.

Throughout her remarks, Sijia Xu maintained a professional tone and ensured that all necessary disclosures and formalities were covered, setting the stage for the detailed discussions that followed.

Xing Wang [Co-Founder, Chairman & CEO] 💬

Xing Wang, Co-Founder, Chairman, and CEO of Meituan, provided an overview of the company's performance and strategy during the first quarter of 2024. Here is a detailed summary of his comments:

Overview:

  • Steady Growth in Local Commerce Industry: Xing noted that China’s local commerce industry continued to grow steadily, with consumption improvements during the Spring Festival. Meituan effectively captured this industry rebound.
  • Robust Performance in Q1 2024:
    • Total revenue increased by 25% year-over-year to RMB 73.3 billion.
    • Adjusted net profit rose by 36.4% year-over-year to RMB 7.5 billion.
    • Growth in user base and merchant base accelerated for four consecutive quarters, reaching new highs.
    • Annual transaction frequency and annual transacting users increased steadily to over 50 times.

Business Highlights:

  • On-Demand Delivery:

    • Healthy growth in the first quarter, with a focus on addressing new macro environments and shifting consumer habits.
    • Launched the "Branded Satellite Stores" model for well-known chain restaurants, which focuses on efficiency and leverages existing brand value.
    • Expanded "Pin Hao Fan" coverage to broader cities and improved consumer experience with an ROI-oriented approach.
    • Improved the "Shen Qiang Shou" program by refining supply quality, variety, and subsidy strategies.
    • Launched various marketing campaigns with high-quality restaurants to stimulate demand during holidays and weekends.
    • Annual active users of food delivery grew to almost 500 million, with transaction frequency increasing notably.

  • Meituan Instashopping:

    • Heightened year-over-year growth in annual active users and transactions.
    • Captured increasing needs for diversity and quality, starting with consumer surging demand for holiday gifting and traveling.
    • GTV from categories such as liquor, beverages, holiday gifts, and daily necessities experienced remarkable growth.
    • Continued to expand the coverage of the new supply format, with around 7,000 Meituan InstaMarts by the end of Q1.
    • Categories offered by Meituan InstaMarts expanded beyond convenience stores to include beauty products and FMCG.

  • In-Store, Hotel, and Travel:

    • Experienced a strong year-over-year growth in GTV, with over 60% growth.
    • Enhanced product offerings, marketing abilities, and pricing competitiveness.
    • Launched dedicated live streaming campaigns during major holidays.
    • Accelerated merchant onboarding and provided broad selections of products and deals to satisfy both local and tourist demands.
    • Achieved robust year-over-year growth in both domestic hotel room nights and GTV, exceeding pre-pandemic levels.

New Initiatives:

  • Meituan Select:
    • Defined business strategy with a focus on operational enhancement and high-quality growth.
    • Improved price markup ratio, fulfillment experience, and warehouse operations, leading to a narrowing of operating loss.
    • Aimed to further improve efficiency and build core competencies in product selection and procurement.

Strategy:

  • Organizational Restructuring:
    • Streamlined and optimized the organizational structure for the core local commerce segment to drive synergies and improve overall efficiency.
    • Worked closely with all participants in the ecosystem to create more job opportunities and realize social value.

Closing Remarks:

  • Xing emphasized the company's commitment to refining product offerings and operational strategies, providing merchants with diverse marketing tools and effective online operational solutions, and enriching consumer experience with a wide selection of value-for-money products and services.

  • He also mentioned the importance of fulfilling the company's mission to help people eat better and live better, and the role of the organizational restructuring in strengthening collaborations among different business units and integrating operations in the core local commerce segment more cohesively.

Shaohui Chen [CFO & Senior VP] 💬

Shaohui Chen, the CFO & Senior VP of Meituan, provided details on the financial results for the first quarter of 2024. Here is a detailed summary of his comments:

Financial Results Overview:

  • Total Revenue: Increased by 25% year-over-year to RMB 73.3 billion.
  • Cost of Revenue Ratio: Decreased by 1.3 percentage points year-over-year to 64.9%. This was primarily due to improved gross margin in the food retail businesses, partially offset by higher delivery costs as a percentage of revenue in the on-demand delivery business.
  • Selling and Marketing Expenses Ratio: Slightly increased by 1.2 percentage points year-over-year to 19%, mainly due to increased promotions and employee benefits.
  • R&D Expenses Ratio: Decreased year-over-year to 6.8%, primarily benefiting from improved operating leverage.
  • G&A Expenses Ratio: Remained stable at 3.1% on a year-over-year basis.

Segment Operating Profit and Margin:

  • Total Segment Operating Profit: Increased from RMB 4.4 billion to RMB 6.9 billion.
  • Operating Margin: Increased from 6.1% to 7.1%.

Adjusted Net Profit:

  • Q1 2024: Reached RMB 7.5 billion, a significant year-over-year increase.

Cash Position:

  • Cash and Cash Equivalents + Short-Term Treasury Investments: Totaled RMB 138.6 billion as of March 31, 2024.
  • Cash Generated from Operating Activities: Declined year-over-year to RMB 6 billion due to the high base of operating cash inflows from the previous year's reopening impact.

Segment Results:

Core Local Commerce:

  • Revenue: Increased by 27.4% year-over-year to RMB 54.6 billion.
  • Operating Profit: Increased year-over-year to RMB 9.7 billion.
  • Operating Margin: Was 17.8% this quarter.

On-Demand Delivery Businesses:

  • Order Volume Growth: Achieved 28.1% year-over-year.
  • Food Delivery: Transaction frequency of mid-to-high frequency users further increased year-over-year.
  • Pin Hao Fan Expansion: Allowed better meeting of mass market consumers' needs on low-digitized meals, promoting engagement of less frequent users.
  • Meituan Instashopping: Delivered faster growth than food delivery with a year-over-year order volume growth rate more than double that of food delivery.
  • Average Order Value (AOV): Declined year-over-year for both food delivery and Meituan Instashopping.
  • Online Marketing Services Revenue: Remarkably grew year-over-year for both food delivery and Meituan Instashopping.

In-Store, Hotel, and Travel Business:

  • GTV Growth: Continued to grow rapidly.
  • Merchant Base and Transaction-Based Service Revenue: Remained robust.
  • Online Marketing Services Revenue: Lagged behind the growth of transaction-based service revenue but still showed strong year-over-year growth.
  • Operating Profit Margin: Improved sequentially due to enhanced marketing efficiency.

New Initiatives Segment:

  • Revenue: Increased by 18.5% year-over-year to RMB 18.7 billion, mainly due to the development of goods retail businesses.
  • Operating Loss and Loss Ratio: Narrowed significantly on both a quarter-over-quarter and year-over-year basis to RMB 2.8 billion and 14.8%, respectively.
  • Efficiency Improvement: Substantial efficiency improvement on Meituan Select, with measures such as raising price markup ratios, lowering user subsidies, and closing underperforming warehouses.

Outlook:

  • Core Business: Continues to grow resiliently, setting new records across market-performance metrics.
  • New Initiatives: Dedication towards efficiency enhancement resulted in a significant reduction in operating losses and marked improvement in adjusted EBITDA.
  • Future Focus: Proactive acceleration of the core business to enhance long-term models, focusing on quality growth and balanced growth with profitability.
  • Confidence: Remains intact in business fundamentals and the long-term growth potential.

Additional Insights:

  • On-Demand Delivery:
    • Expected order volume growth in Q2 and for the full year to be much higher for Meituan Instashopping, possibly more than double that of food delivery.
    • AOV changes should gradually normalize in the second half of the year.
    • Healthy increase in operating profit expected for both Q2 and the full year.
  • In-Store, Hotel, and Travel Business:
    • Consumption downgrade may impact growth, but strong consumer demand across local service categories persists.
    • Online penetration for in-store business is still at an early stage, and healthy growth is expected in the next few years.
    • Operational efficiency is expected to gradually improve, with healthy growth in operating profit for 2024.
  • Hotel and Travel Business:
    • Growing demand for experiential consumption and travel presents substantial opportunities.
    • Competitive landscape has accelerated industry online penetration, strengthening Meituan's competitive edge.
  • Meituan Select:

    • Operating loss narrowed significantly quarter-over-quarter and year-over-year.

    • Loss is expected to further trend down in Q2 on a quarter-over-quarter basis, with a significant narrowing in the second half of the year.

    • Long-term investment focus on online grocery growth potential.

Feedback