Shulou(Shulou.com)11/24 Report--

On the evening of March 24, Meituan released its financial results for the fourth quarter and the whole year of 2022 today. According to the financial report, the company's revenue in the fourth quarter was 60.13 billion yuan, an increase of 21.4% over the same period last year. The net loss is 1.08 billion yuan, the estimated loss is 1.53 billion yuan, and the adjusted net profit is 830 million yuan. For the whole of 2022, Meituan's revenue was 219.95 billion yuan, an increase of 22.8% over the same period last year. The net loss was 6.69 billion yuan and the adjusted net profit was 2.83 billion yuan.

After the release of the financial report, Meituan CEO Wang Xing and CFO Chen Shaohui participated in the analyst conference call to interpret the financial report.

The following is the main content of the Q & A session on the conference call: Goldman Sachs analyst Ronald Keung: at present, some short video platforms have set ambitious growth targets for local life this year, and there are also reports that these competitors will expand their food delivery business to more regions. How does the company view the current market competition between catering takeout and in-store consumption? In this competitive environment, what is the company's core competitiveness and strategy?

Wang Xing: first of all, I would like to say that food and beverage takeout service has two main characteristics, one is proximity, the other is instant delivery, which sets a relatively high threshold for the industry, which is much higher than spending at the store.

Consumers usually order a good meal in a short time after making a choice on the App page, then prepare the meal from the merchant and contact the nearby rider to deliver the meal, especially during the peak ordering period, relying on a reliable compliance system, our platform can process orders efficiently. The company has a strong advantage in all aspects that make up the backbone of catering takeout services, including the number of consumers, merchants and distribution networks, and other competitors, whether other existing platforms or new short video platforms, do not have the strength to challenge us. At present, the short video platform provides only a third party to participate in the group meal distribution service, and this model has a limited impact on us.

From the consumer's point of view, Meituan can meet their daily needs for all kinds of price products and consumption scenarios, and we can provide them with efficient real-time delivery and a variety of catering takeout options. In contrast, the business model of the short video platform can only provide services for consumers with no strict requirements for delivery time in very limited consumption scenarios.

In addition, the revenue conversion rate and transaction efficiency of catering takeout service on short video platform are also relatively low. From a business point of view, we can empower the daily operation of small and medium-sized businesses, while the live broadcast mode of the short video platform is mainly used to meet the short-term promotion needs of chain enterprises. small and medium-sized catering takeout businesses using short video platform for promotion is not economic, especially considering the traffic and distribution costs.

From the perspective of compliance, Meituan has created the largest real-time distribution network in the world, with huge distribution capacity, so that we can dispatch orders in an efficient way, especially during the peak order period, to meet the needs of consumers in a variety of scenarios. Compared with third-party service providers, our distribution network is more reliable and efficient.

Generally speaking, there are still great opportunities for growth in the catering takeout industry. We also welcome new entrants to explore and expand this big market. We are confident that the company will continue to maintain its leading position in the market. The company will continue to improve the number of consumers, the number of merchants and the competitiveness of the distribution network. It will also continue to optimize marketing strategies, optimize user acquisition strategies, and continue to launch more explosive products to better meet consumer needs. Help merchants to improve operational efficiency.

With regard to competition in the field of store-to-store services, unlike e-commerce, the market penetration of local services is still very low, and new entrants, including short video platforms, will accelerate the development of the industry.

Compared with the short video platform, Meituan has a more unique and differentiated competitive advantage. After more than a decade of development, our platform has accumulated a large number of high-quality businesses covering a wide range of local service categories. We have also accumulated a large number of high-quality local service consumers, occupying a higher mental share. We provide consumers with the most comprehensive business choices and the latest service information. It can help consumers find local businesses that can meet their needs more efficiently, and then make purchase decisions.

For businesses, our business model can meet their daily operational needs, our services are easy to use, efficient, and cheaper, we also have higher quality consumers and higher repurchase rates, and in serving small and medium-sized businesses, we have unparalleled advantages and can create a higher return on investment for them.

Last year's epidemic had a negative impact on Meituan's arrival business. As a search-based platform, offline activities are severely restricted. This year, with the recovery of the economy and offline consumption, consumers' demand for local services and search behavior will grow rapidly. the improvement of online operating capabilities and the growth of user comments will enable our platform to accumulate more merchants. to help them optimize their operations, we will further improve our efficiency in serving merchants and consumers.

In the face of the new competitive environment, we will continue to optimize our services and coverage for merchants, constantly iterate over the merchant stimulus plan, enhance the viscosity of merchants, further enhance the penetration of low-line cities, and attract more businessmen to join our platform. We will also further strengthen the coverage of products and services, improve both depth and breadth, continue to improve algorithm capabilities, and help businesses operate efficiently.

This year, we will also focus on the synergy of catering takeout and in-store consumption, taking advantage of the capabilities of the platform to consolidate our market leading position, and we are confident that we will maintain this leading position in the future. remain optimistic about the growth potential of our arrival business.

Jeffery analyst Thomas Chung: after the epidemic prevention policy adjustment, China has experienced a peak of infection, how is the recovery of the company's core local service business in the past two months? Is there a momentum of rapid rebound? What do you think of the growth trend of the business this year?

Chen Shaohui: the adjustment of epidemic prevention policy and the arrival of the peak of infection are faster than many people expected, and the recovery process of different businesses is also different during this period.

In December, food and beverage takeout recovered much faster than in-store consumption, and the year-on-year growth rate of orders during the Spring Festival was slower than that in December, mainly due to the promotion of local celebrations during the Spring Festival last year, so the base was relatively high. The change in epidemic prevention policy took place before the Spring Festival this year, when many people returned home earlier than last year, when many businesses were not yet open for business, especially in big cities, where supply and demand fell sharply. After the Lantern Festival, as people gradually returned to work, both supply and demand rebounded sharply, and the growth rate of daily orders gradually returned to the normal level compared with the same period last year. It reached double-digit growth in early February, and the growth rate of medium and large orders in January and February recovered even faster, and we have observed further acceleration in recent weeks.

This year, we will continue to attract more businesses and adopt more efficient marketing strategies to provide consumers with more diverse choices to stimulate consumption and meet consumer demand. We are confident that food and beverage takeout orders will return to normal growth this year.

For Meituan flash purchases, users had a particularly high demand for the service during the peak period of infection, but since then more people have chosen to shop offline and then return to their hometown for the Spring Festival, resulting in a lower average daily order in January than in December last year. With the resumption of work and production after the holiday, demand began to resume.

Meituan's flash purchase business has also benefited from the resumption of growth in business travel. Orders have rebounded rapidly since February, and we expect the business to maintain rapid growth this year.

For the arrival business, group gatherings and family trips during the Spring Festival stimulated new consumption scenes, and orders for multi-person dining packages increased significantly compared with the same period last year. Returning home and traveling during the Spring Festival have promoted the scene of cross-city consumption. In cooperation with high-quality merchants, we have launched various promotional activities to stimulate consumption and distribute coupons in popular tourist destinations such as Sanya and Chengdu to help businesses recover from the epidemic.

We have also explored new niche consumer categories, such as coda surfing, lantern night excursions, sleigh ice bikes, and other traditional Chinese activities. In addition, with the resumption of offline activities, consumers' search for local service items has also increased rapidly. Because Meituan has a high mental share of consumers and is able to provide a variety of services, consumers are very willing to look for local businesses on the outside platform, buy coupons and search for discount information, so the year-on-year growth rate of arrival sales returned to more than 30% in February. We expect the growth rate to increase further in March.

We expect an accelerated increase in online penetration and a substantial increase in sales this year. The post-epidemic tourism market is also popular with consumers, and the demand for cross-city travel has risen sharply, driving the growth of the company's hotel booking and tourism business.

Overall, with the adjustment of epidemic prevention policy and economic recovery, hotel booking and tourism business will resume growth this year.

Ya Jiang, analyst at CITIC Securities: I understand that the expenditure on the company's core local business will rise after the epidemic. How will the operating profit margin of this business change this year?

Chen Shaohui: there will be a rapid recovery in consumption this year, business recovery and growth will become the focus of our core local business, and related expenditure is expected to increase compared with last year, which will have a negative impact on the operating profit margin of the business. We will provide more investment in the promotion and subsidy of catering takeout business, stimulate the growth of demand, focus on high-quality growth, improve subsidy efficiency and optimize operational efficiency through the upgrading of membership programs and preferential packages. It is believed that the unit economic benefits of catering takeout business this year will remain stable compared with last year. In terms of flash purchases, Meituan had a relatively high base last year, mainly benefiting from the hoarding demand of consumers during the epidemic, which is beneficial to the economic benefits of the unit, which is an one-off phenomenon. This year, we will continue to develop the business, increase investment, increase the mental share of users, and promote the growth of key categories. This year, the business is expected to benefit from the efficiency improvement of economies of scale, and the operating profit margin will remain stable compared with last year. For the inbound consumption, hotel booking and tourism business, I would like to say that 2022 is a very special year, the supply and demand of local services are subject to varying degrees of restrictions, we mainly focus on cost control and efficiency improvement, so last year's operating profit margin was surprisingly high. With the increase of the company's investment in this business this year, especially in order to consolidate Meituan's market leading position and strengthen the mental share of users in the face of fierce competition, we expect the growth and market expansion of merchants in the low-line market to accelerate, exploring more operational activities, such as expanding the size of our business development department, optimizing merchant stimulus packages, and exploring traffic cooperation projects with external partners. Accelerating the development of video-related products will push up the amount of investment, which will affect the operating profit margins of store consumption, hotel booking and tourism business in the short term, but it will also help to enhance the competitiveness of the company and accelerate the growth of sales. it will benefit the long-term development of our platform. In the long run, with the improvement of competitiveness and the stability of market share, the operating profit margins of hotel reservation and tourism business will return to the normal level.

Morgan Stanley analyst Gary Yu: a question about the company's hotel booking and travel business. We have seen a sharp rebound in the tourism industry after the adjustment of the epidemic prevention policy. how is the growth of the company's hotel booking and tourism business recently? What is the business development plan for this year? Especially for the development of high-star hotels, what is the company's plan?

Chen Shaohui: after the adjustment of epidemic prevention policy, the tourism industry has indeed rebounded strongly. We have seen a sharp increase in searches for popular tourist destinations, including Sanya, Zhuhai and Xiamen, during the Spring Festival, with a 40 per cent increase in domestic hotel night bookings compared with last year and during the Spring Festival in 2019. In the first two months of this year, sales in the hotel reservation business grew by more than 60% year-on-year, in part because of rising hotel prices. As a result of continuously optimizing supply, improving service quality, and improving resource allocation and operation capacity, we have consolidated the company's competitive advantage in the local accommodation and short-distance travel market, and seized the opportunity of market rebound. to better meet the increasingly diverse consumer demand, this year we will continue to implement a high-quality development strategy to enhance our core competitiveness. On the consumer side, we will continue to capture market trends, improve the penetration of high-quality consumer groups, facilitate transaction transformation, and expand offline and online traffic acquisition. In terms of products, we will continue to optimize and expand product styles, including live streaming, short videos and packages, launch marketing activities with partners, and use holiday activities to improve our brand awareness. For merchants, we will continue to optimize supply to provide them with better online and offline solutions to help them improve operational efficiency. In terms of high-star hotel business, we will take advantage of the platform to better match demand and supply. In fact, our "Hotel +" products increase the synergy of hotel bookings and other businesses, including dining at the hotel. It helps to promote the growth of overnight bookings and help hotels cross-sell other special services. We are confident about the growth potential of the domestic travel market, and we have the ability to seize these opportunities to meet the needs of more consumers and improve overall efficiency.

CICC analyst Yang Bai: we see that the growth of Meituan's flash purchase business in the fourth quarter is very strong, with daily orders reaching 1100 million. What is the company's development strategy for this business? What are the strategies, especially for the pharmaceutical category? Will the company adjust its long-term development goals and profit forecasts?

Chen Shaohui: the flash purchase business has achieved very good growth, and we are also very confident about its future growth potential. When the company listed in Hong Kong in 2018, it announced to investors the medium-and long-term goal of 100 million daily orders for catering takeout. We are making steady progress towards this goal and the growth rate is very healthy. At that time, we also had a clear understanding that the flash business could achieve rapid growth through the ability of the catering takeout business, and in the past few years, our confidence in the flash business had been further strengthened. the company's real-time distribution network can serve industries other than catering takeout to meet the growing needs of consumers for fast business. As you said, I mentioned that the daily order volume of the flash purchase business topped 1100 million in the fourth quarter. in addition to the short-term surge in orders during the epidemic, it also shows that the mental share of everything-to-home and real-time distribution among consumers has been strengthened. the epidemic has fostered consumer behavior, and we are positive about the long-term growth potential of the flash business. In 2022, we not only strengthened the coverage of supermarkets and convenience stores, but also made significant progress in categories such as electronics, alcohol and beverages, with an increase in the frequency of purchases and revenue contribution per user. This year, we will continue to optimize the supply of various categories, improve operational efficiency, empower offline retailers through digital technology, and continue to launch new supply models such as instamart. Looking to the future, we believe that we can continue to enhance our competitive edge, consolidate the company's leading position in retail real-time distribution, and strengthen the mental share of consumers.

With regard to the immediate distribution of pharmaceutical categories you mentioned, we successfully responded to the substantial increase in demand during the epidemic, providing convenient online solutions for consumers, and Meituan's mental share among consumers was strengthened. Meituan has become the preferred platform for many people to buy drugs online, and the demand for online medicine purchase and online medical consulting services is growing, so we are full of confidence in the growth potential in this area. In the future, we will focus on improving the diversification of product supply, product quality and supply cost efficiency, optimizing the year-round medical consulting service, and providing consumers with professional medical consultation and drug purchase services through digital transformation. There is no doubt that the epidemic has profoundly changed people's living habits, and we are full of confidence in the future development potential and penetration rate of retail real-time distribution. The company's advantages in terms of compliance, the number of merchants and the number of consumers will help us maintain a leading position and have a positive attitude towards achieving the company's medium-term growth goals, and the 1100 million single node is a good predictor of this growth potential. For example, the highest daily orders for flowers and medicines reached 6 million and 5.8 million respectively in the fourth quarter. The company will also continue to improve the unit economic efficiency of the business. The profit of the catering takeout business shows that the flash purchase business also has profit potential, and the flash purchase business itself also has stronger flexibility, coupled with the higher customer unit price and advertising potential. The business can achieve at least 1 yuan or more profit per order.

Citigroup analyst Alicia Yap: a question about the company's new business. The loss reduction of the company's new business unit last year was not as big as that of 2021. Will the company make efforts to achieve greater loss reduction of its new business unit this year? Why does the company adjust its taxi-hailing business? does it mean that it will cut more costs in the future to improve efficiency? What are the reasons for adjusting or even shutting down the business? What kind of new business will generate greater financial returns for the company in the long run? In addition, could you ask the management to talk about the international business development this year? What are the plans for investment and business scale growth?

Wang Xing: I understand investors' concern about the company's loss reduction in the current macroeconomic situation. As a CEO, I am more concerned about this issue. For new businesses, I am very concerned about their long-term strategic value, growth and loss reduction. In the fourth quarter, we continued to promote the strategy of high-quality growth of new business, with quarterly operating losses significantly reduced compared with the same period last year, and month-on-month optimization. Retail services, including Meituan selection, Meituan buying vegetables, and the fast donkey business that supplies merchants, have all achieved rapid growth last year, and unit economic benefits have also improved significantly. In December, the fast donkey business achieved national profits at the city level, which is a very important business development node for us. In the past, we talked less about the fast donkey business, but in fact, fast donkey is not a new business. It was released as early as the autumn of 2015, and it has been in operation for more than 7 years. We are still quite patient, and the general manager has been replaced for four terms. In fact, we have invested a lot of strength and resources to achieve national profits at the city level, but also become the largest sales platform in this market, and our patience and investment will be rewarded in the end. Several other new businesses have also made good progress and their profitability has been improved. For example, the shared portable battery business made a profit last year, the shared bike business achieved positive free cash flow for two consecutive years, and its market share has also been improved. the company's investment in new business is aimed at achieving independent financial profits in the medium and long term. Through continuous optimization of operation and supply, our commodity retail business will achieve results in the long run.

Our strategy focuses on the pursuit of return on investment, accurately assesses the progress of each project, and constantly optimizes the operation strategy according to business progress. If the growth pattern does not conform to the predetermined situation continues, or the strategic value of the business is very limited, unable to achieve profitability in the long term, we will make the necessary adjustments. Our adjustment to the taxi-hailing business is an example. We have been cautious about the investment in this business in the past two years. After evaluating its return on investment and current market conditions, we decided to reduce the investment and allocation of resources, including capital and human resources, and finally stop the platform operation model and switch to the aggregation service model. In the future, we will also provide taxi-hailing services and strengthen cooperation with third-party service providers to provide aggregate services for consumers. This is a cost-effective and asset-light business model suitable for Meituan. Looking forward to this year, we will continue to invest in retail platform technology, retail is the strategic focus of the company, continue to be guided by the rate of return on investment, and strive to achieve rapid scale growth, enhance unit economic benefits, and increase user acquisition. improve user viscosity, increase transaction frequency. In other new businesses, we will keep the scale expansion at a reasonable level and continue to reduce losses. Our goal of developing new businesses is to significantly reduce losses and improve operating profit margins this year. It is expected that losses will be reduced in the coming year and profit margins will be better.

On the issue of overseas market business, Hong Kong is our first step, and the company currently has no other market expansion plans, we will be patient with this. Hong Kong has the advantages of multilingualism and cultural diversity, and has similar eating habits to the mainland, which is why we have chosen Hong Kong as the first place for overseas business. We believe that the key to success in overseas markets lies in local operational capabilities, as well as in-depth understanding of the local market and business model, the company will take advantage of the Hong Kong market to improve its products and optimize the overseas operational capabilities of its catering takeout business. At the same time, I would also like to emphasize that the company will continue to be cautious in terms of overseas business development, which has a limited impact on the company's profit and loss performance this year. In the long run, we will also consider launching catering takeout business in other overseas markets with commercial value, but it is not our business focus yet. In addition, we will soon start our operation in Hong Kong, please keep your attention. (end)

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