Why has Meituan's stock price been falling and falling?The industry believes that a very important reason may be the weak imagination of new business, and the competition with Douyin has also made investors worry about the deterioration of Meituan's profits.
Text: Daily Financial Report Lv Mingxia.
On November 28, Meituan (03690HK) released its financial report for the third quarter of 2023, which showed that Meituan achieved revenue of 764 in the third quarter6.7 billion yuan, a year-on-year increase of 221%；Adjusted net profit was 572.7 billion yuan, a year-on-year increase of 624%；Operating profit was 335.9 billion yuan, a significant increase of 239 percent year-on-year9%。
It can be seen that Meituan's growth in the third quarter is still relatively rapid. However, after the release of the financial report, on November 29, the Hong Kong stock Meituan opened down 772%, and the stock price continued to decline to a low of 78 since April 2020 in the next two days45 yuan, with a total market value of about 548.9 billion Hong Kong dollars. The secondary market is clearly not buying this.
In an effort to boost confidence, Meituan CEO Wang Xing announced that he is considering a $1 billion buyback program. It said that the company's share price in the secondary market only reflected the valuation of a single food delivery business, and did not meet the company's intrinsic value.
Why has Meituan's stock price been falling and falling?The industry believes that a very important reason may be the weak imagination of new business, and the competition with Douyin has also made investors worry about the deterioration of Meituan's profits.
Food and beverage takeaway continues to grow, and the basic market is very stable
According to the financial report, the operating profit of core local businesses in the quarter decreased to 10.1 billion yuan from 11.1 billion yuan in the same period last year, and the operating profit margin fell by 4 percent quarter-on-quarter3% to 175%, which includes food and beverage delivery, Meituan flash sales and in-store hospitality business.
According to the financial report, the increase in profit from food delivery operations was partially offset by a year-on-year decline in operating profit from in-store, hotel and tourism businesses.
Specifically, the basic market of food delivery is stable, which is still Meituan's core competitiveness. Notably, as of the end of the third quarter, the number of annual active trading users, the number of annual active merchants, and the frequency of user purchases all hit record highs. And the total number of orders for instant delivery reached 6.2 billion, a year-on-year increase of 23%.
In addition, its daily order peak exceeded 78 million orders for food and beverage delivery in the quarter, and Meituan's flash sale daily order peak exceeded 13 million orders. As a result, Meituan's core local business quarterly revenue increased to RMB57.7 billion in the third quarter.
It seems that macro consumption has indeed brought some pressure to Meituan in the short term, such as the reduction of the unit price of Meituan Takeaway and flash sales, but overall, Meituan Takeaway still plays the role of a moat, and the fundamentals are still quite stable.
Among the core local life businesses, the flash sale with a more surprising performance is counted as one. In the flash sale business, the number of orders, the size of merchants and the scale of users have all increased significantly, especially in lower-tier cities, and the purchase frequency of core users has accelerated. In the third quarter, Meituan Flash Sale established partnerships with nearly 400 retail brands, and the number of annual active merchants increased by 30% year-on-year. Meituan also laid out front-end warehouses - "Meituan Lightning Warehouse" exceeded 5,000 in the third quarter.
The value of the in-store, hotel and travel business increased by more than 90% year-on-year, and the number of quarterly active merchants increased by more than 50% year-on-year. Meituan said it has consolidated its competitive advantage in the shelf model and used short ** and live streaming to promote popular products. This quarter, Meituan's official live broadcast continued to expand its coverage to more than 200 cities.
Douyin gradually invaded the hinterland of Meituan
Another core factor affecting the short-term volatility of Meituan's stock price is obviously the competition with Douyin, which has investors worried about the deterioration of Meituan's profits.
In addition, Meituan's sales and marketing expenses increased by 55% year-on-year in the third quarter, as it still has to devote more energy and resources to Douyin3%, recording 1690.5 billion yuan, and the sales expense ratio reached 221%。
Selling expenses increased from 19 percent in the second quarter57% is a significant increase, but compared with 61 in the first half of the year95% is lower, but it also continues to grow higher than Meituan's revenue in the same period, reflecting the ongoing war of efficiency, traffic and subsidies.
This is also the part of the market that worries the most, because Meituan's core local business, especially the in-store business, is being hit hard by Douyin, and Meituan also mentioned in its earnings report that profit growth is being "offset by increased subsidies".
Guosheng** released a research report, and it is expected that the total transaction volume of Douyin stores may reach 300 billion yuan in 2025, about half of Meituan. In terms of revenue, in 2025, Douyin's in-store revenue may reach 59 billion yuan (41.6 billion yuan in advertising and 17.4 billion yuan in commissions), which will catch up with Meituan's in-store hospitality business revenue.
In addition to Douyin, platforms such as Kuaishou, Xiaohongshu, and **hao are also deploying local life services this year. Xiaohongshu is recruiting merchants and bloggers, Kuaishou has launched a local life mini program, and ** has also launched a local life component this year. From the perspective of industry competition, Meituan has faced new competition brought by platforms such as Douyin, Kuaishou, and Xiaohongshu since the beginning of this year.
But it's too early to tell when this war will end, and not long ago, Douyin made a major personnel adjustment, replacing the head of life services with Pu Yanzi, the head of the commercialization department.
It's hard to say that Douyin won't launch a new attack in the near future, and if Douyin does make further moves in local life, Meituan will not only have to maintain its market share, but also improve its input-output ratio and deepen and strengthen its moat.
New business losses narrowed
As for the progress of Meituan's new business (Meituan Preferred, Meituan Food, Catering ** Chain (Kuaidun), online car-hailing, shared bicycles, shared motorcycles, power banks, catering management systems, and others) that the outside world has paid attention to, the data shows that new business revenue in the third quarter increased by 15% year-on-year3% to 18.8 billion yuan, and the operating loss narrowed by 24% year-on-year5% to $5.1 billion, while the operating loss ratio continued to improve to 27.1 billion2%。
Meituan's management also talked about new business at the earnings report, saying that from the second quarter to the third quarter of this year, the slowdown in new business was due to the difference and change in revenue mix, and if these two factors were not considered, the growth of this segment was actually the same as the same period last year, but the fourth quarter will face some challenges.
As for the direction of new business in the future, the management also said that it will continue to invest, and even does not rule out seeking overseas growth, but also revealed that "if a new business cannot become a valuable asset, it will make timely adjustments to the strategy".
After a period of silence, Meituan Optimal began to launch a fierce attack on the community sinking market in the third quarter of this year.
It is understood that Meituan Optimal announced the launch of the "Morning Delivery" delivery service at the end of August, which greatly advanced the arrival and pick-up time. In November, the community ** "Group Buy" mini program was launched on WeChat, with very strong red envelope subsidies and traffic support.
According to the data, as of the end of September, Meituan Preferred has accumulated 4900 million trading users, but at the cost of significant operating losses, and the growth in new business revenue is not as high as expected.
So far, some companies have withdrawn, and there are still players who are still crawling forward. However, Meituan has chosen to continue to transfuse its blood for now, after all, market share is more important. Meituan also seems to be unable to afford to lose this war, because its business prospects have gradually revealed its ceiling, and its overseas expansion has not achieved significant results.
From a valuation perspective, Meituan's local life business is not highly valued, and it can even be said to be undervalued. However, if you consider that Meituan's innovation business has an annualized loss of more than 20 billion yuan and the progress of loss reduction is slow, then Meituan is not aggrieved at present.