“I really didn’t expect it at all. The key is that I don’t know how much the profit margin is!” A fund manager in Shenzhen expressed such concern to the first financial reporter about the sharp decline of meituan’s share price last Friday.
February 18 is not a good day for Wang Xing, founder of meituan-w (03690. HK). Once the news that the delivery platform will reduce the service fee standard of catering businesses was released, meituan’s share price plunged sharply on the afternoon of the 18th, closing at HK $188, down 14.86%.
According to the third quarterly report of meituan in 2021, “catering takeout” business still accounts for more than half of the company’s operating revenue, but the operating profit of this business is not as good as a quarter of that of “going to stores, hotels and tourism”; The large investment in “new business” (sharing riding, fresh food, shopping, etc.) is the main reason for meituan’s continuous loss.
“catering takeout” accounts for more than half of the revenue, and the operating profit margin is only 3.3%
On February 18, the national development and Reform Commission issued the notice on several policies on promoting the recovery and development of difficult industries in the service industry (hereinafter referred to as the “notice”). The notice said that it would guide Internet platform enterprises such as takeout to further reduce the service fee standard of catering merchants and reduce the operating costs of relevant catering enterprises; Guide Internet platform enterprises to give preferential service fees to phased merchants to catering enterprises in county-level administrative regions where high-risk areas are located.
According to the third quarterly report of 2021, the operating revenue of meituan’s “catering takeout” business is 26.485 billion yuan, accounting for 54.2% of the total operating revenue of 48.829 billion yuan, but the operating profit margin of this business is only 3.3%. In the third quarter, the number of orders for catering takeout completed by the company was 4.013 billion, which shows that the average operating revenue of each order to meituan was 6.29 yuan.
Meituan said that despite the influence of factors such as delta variant virus, extreme weather and the industry entering a stable growth period, the catering takeout business maintained strong growth in the third quarter of 2021. The transaction amount of catering takeout business increased by 29.5% year-on-year to RMB 19.1 billion in the quarter. The average number of daily transactions of catering takeout increased by 24.9% year-on-year to 43.6 million; Revenue increased by 28.0% year-on-year to 26.5 billion yuan. Operating profit increased by 14% year-on-year to RMB 876 million in the third quarter of 2021, while the operating profit margin of this business decreased from 3.7% to 3.3%.
“The market has long-term short-term growth. The past expectation is too high, and it is normal for the market to collapse,” Lin Jiayi, CEO of Xuanjia finance, told China business news that the net interest rate of meituan takeout business is not high. Once the charge decreases by several percentage points, the takeout business may be on the edge of loss, which is the source of short-term panic in the market. From the perspective of other competitors, the strength of profit transfer to businesses is greater. Before, the market expected meituan to increase revenue by increasing Commission, but this expectation has been reversed.
“Although we have made good progress in these aspects, we still notice the complexity of the order scheduling system and there are many key variables. Based on the people-oriented operation policy, we will continue to explore and improve the system. We will also improve the transparency of the algorithm and system, listen to the feedback of all parties and iterate repeatedly, and promote the healthy development of the industry.” Meituan also said, “We have launched special promotional activities for high-quality night snack merchants in more than 15 cities and launched seasonal promotional activities in cooperation with many milk tea brands to stimulate milk tea sales. Thanks to the above operation strategy, the number of transaction users and average order frequency in each quarter have reached a new high. For consumers, our catering takeout business has not only become an indispensable service, but also covered more areas More consumption scenarios. “
Dongxing Securities Corporation Limited(601198) analyst Shi Weijing said that at present, there is still much room to improve the takeout penetration rate of meituan, but the distribution mode of “Rider + two wheeled electric vehicle” is limited by various time and space conditions, and the marginal cost does not change significantly. For meituan, from the perspective of improving distribution efficiency, distribution scheduling algorithm optimization and equipment upgrading can help it solve some practical problems in current distribution. In the medium and long term, manpower distribution is limited by time and space, policies, labor and other factors, and there is a large gap in transportation capacity. In contrast, unmanned distribution needs less manpower while supplementing transportation capacity, which has become a feasible way out. However, at present, it is still restricted by technology, cost and policy, so it is still explored in qualified local scenes. Large scale real scene application still needs further development of technology, and it is expected to take another 5 to 10 years.
“shopping” and other new businesses suffer huge losses. Can they turn around by “going to stores, hotels and tourism”?
“I thought that the anti-monopoly policy had bottomed out, so we should vigorously develop the digital economy and trigger a round of rebound in the future. However, the logic has changed again, and the takeout profit which was originally very profitable has been compressed. The new business is in the process of loss again. The profit expectation will naturally affect the free cash flow, which will kill the valuation.” The Shenzhen fund manager said.
Meituan said that in the third quarter of 2021, the revenue of new businesses and other segments increased by 66.7% year-on-year to 13.7 billion yuan, mainly driven by the growth of retail business and shared riding services. In the third quarter of 2021, the operating loss of the division increased year-on-year and month on month to 10.9 billion yuan, while the operating loss rate continued to decline by 2.7 percentage points to negative 79.5% month on month.
“With our continued investment in cold chain logistics over the past few quarters, we have been able to deliver stable quality fresh and frozen products to consumers in real time during the summer.” “In terms of meituan’s shopping, our user base and transaction amount have continued to grow, thanks to our further improvement of the consumer experience by shortening the delivery time and expanding the selection of fresh food and FMCG categories.”
“Why do new businesses burn tens of billions of yuan a year and choose the direction of fresh food and vegetables with low gross profit? Is this a strategic mistake?” In this regard, Lin Jiayi believes that the trial and error cost is too high.
“To store, hotel and tourism” is the profit highlight of meituan. Meituan said that despite the impact of delta variant virus and macroeconomic environment, the business of inbound stores, hotels and tourism still recorded stable growth. In the third quarter of 2021, the revenue still increased by 33.1% year-on-year to RMB 8.6 billion. The operating profit increased by 35.8% from 2.8 billion yuan in the third quarter of 2020 to 3.8 billion yuan in the same period of 2021, while the operating profit margin increased slightly from 43.0% to 43.9%.
Thus, judging from the total operating profit of meituan in the third quarter, “to stores, hotels and tourism” is more than four times that of “catering takeout”.
In this regard, the above-mentioned Shenzhen fund manager said that catering takeout is actually mainly to obtain the consideration of customer flow. The profit proportion is not high. Now I just don’t know how much the profit margin should be; “Going to stores, hotels and tourism” is a reliable source of profit for meituan. If the epidemic is gradually ended in the future, there is still room for significant growth in meituan’s profits. Whether it can turn losses into profits again in the future depends more on whether the huge investment in new business can narrow losses.
Chen Zemin, an analyst at Southwest Securities Co.Ltd(600369) , said that the scale effect of the company’s store to store business is obvious, and the rich categories meet the consumer needs of users. Perfect daily consumption scenarios, in which emerging business sectors such as medical beauty, health, board games and pet care have more room for cash flow than traditional catering to store business, which may drive the rapid growth of store business.
“Meituan’s wine travel business mainly relies on the user flow and consumption data accumulated by the platform’s high-frequency takeout business to convert it into new hotel reservation transaction users.” Chen Zemin said that the establishment of low-cost barriers with low customer acquisition costs may conquer the post-00s with higher price sensitivity. At present, as the group with the highest online acceptance after 00, the penetration rate of online hotel users is only 18.7%, or it may become the main force of online wine tourism consumption in the future and contribute to the increment of industry space.
