In 2021, Meituan-W (03690.HK), the largest takeaway platform in China, lost 23.536 billion yuan (unit RMB, the same below) for the whole year, and even after deducting fines, shares in lieu of salaries, investment, impairment and other non-continuous operating items, the adjusted loss for the whole year was still as high as 15.572 billion yuan, compared with the same period last year, a net profit of 3.121 billion yuan.
However, the market is quite recognized by this performance, and on the trading day after the announcement of the results of the Ustuan (March 28, 2022), the stock price rose by 11.56% in a single day to close at HK$150.60, and the market value expanded by HK$95.7 billion in one day.
Why is that?
The loss was mainly due to new business
Meituan's revenue mainly comes from three businesses: 1) food and beverage takeaway; 2) in-store, hotel and tourism; and 3) new business and others, mainly including retail business Meituan Preferred (community group purchase), Meituan flash purchase (instant delivery) and Meituan food purchase (fresh supply), B2B catering supply chain services and shared cycling services.
In 2021, the revenue of the above three businesses increased by 45.34%, 53.07% and 84.35% respectively to 96.312 billion yuan, 32.53 billion yuan and 50.286 billion yuan, and the operating profit of the segment was 6.175 billion yuan, 14.093 billion yuan and -38.394 billion yuan, respectively.
Meituan, which began to operate community group buying in the second half of 2020, continued to rise due to the expansion of new business investment. As can be seen from the above data, the loss of 384 million yuan of new business completely offset the total operating profit of 20.268 billion yuan for takeaway and in-store delivery - although the operating profit in the two segments increased by 117.93% and 72.27% respectively.
However, by the fourth quarter of 2021, the loss of new businesses appears to be showing signs of narrowing.
In the fourth quarter of 2021, revenue from new business and other segments increased by 58.74% year-on-year, or 6.93% quarter-on-quarter to $14.674 billion, while segment losses were 70.01% larger than in the fourth quarter of 2020, when community group buying was just launched, but by 6.43% from the previous quarter (Q3 2021) to $10.205 billion, as shown in the chart below.
Dismantling the takeaway performance of the US group
The loss of new business is within expectations, and a slight loss reduction in the fourth quarter may also bring a small surprise, so meituan's loss is also in line with expectations. In fact, this performance controversy may focus on takeaway, as the management said at the performance meeting, the catering takeaway delivery service in the fourth quarter of 2021 is equivalent to a loss of 1 yuan per order. Since takeaway does not make money, why does Meituan still do it?
In the fourth quarter of 2021, the transaction value of Meituan's catering takeaway business increased by 20.68% year-on-year to 188.6 billion yuan, and the quarterly takeaway business revenue increased by 21.30% year-on-year to 26.127 billion yuan. Based on this, the author estimates that the realization rate of Meituan's takeaway business in the fourth quarter of 2021 was 13.9%, 0.1 percentage points higher than the same period last year and 0.5 percentage points higher than the previous quarter, as shown in the figure below.
For the whole year of 2021, the transaction value of the takeaway business increased by 43.60% year-on-year to 702.1 billion yuan, and the revenue increased by 45.34% year-on-year to 96.312 billion yuan. The author estimates that the full-year realization rate of its takeaway business may be 13.7%, an increase of 0.1 percentage points over the previous year.
From May 2021, Meituan launched a new rate policy, which divides the fees charged to merchants into technical service fees (i.e. commission income) and catering takeaway delivery service fees. Beginning in the fourth quarter of 2021, the company separately disclosed food and beverage delivery service revenue to reflect this new rate policy in its financial results.
That is to say, according to the new rate policy, Meituan's takeaway revenue consists of these four parts: 1) catering takeaway delivery fees; 2) commissions (that is, technical service fees); 3) online marketing services: that is, the fees paid by merchants for promotion and marketing on the Meituan platform; and 4) other services and sales.
Among them, the revenue of catering takeaway delivery fees accounted for the largest proportion, with delivery fee revenues of 14.255 billion yuan and 54.204 billion yuan in the fourth quarter of 2021 and 54.204 billion yuan respectively, accounting for 54.56% and 56.28% of the takeaway business revenue, as shown in the figure below.
However, the costs related to food and beverage delivery in the fourth quarter of 2021 and the whole year of 2021 reached 18.306 billion yuan and 68.183 billion yuan respectively, equivalent to 128.42% and 125.79% of its delivery service revenue.
In the fourth quarter of 2021 and 2021, the number of food and beverage takeaway transactions of Meituan was 3.9106 billion and 14.368 billion, respectively, and the revenue deduction fee was divided by the number of transactions, and the net loss of each food and beverage takeaway of Meituan was 1.04 yuan and 0.97 yuan, which is also the origin of the loss of 1 yuan per order mentioned by the management.
However, it should be noted that the revenue generated by the takeaway business is not only the revenue of catering delivery, but also the commission and marketing. Commission income refers to the fee charged by Meituan for the technical support provided by merchants.
Based on its financial data, the author estimates that the commission rate of the takeaway business in the fourth quarter of 2021 and 4.05% in 2021 was 4.12% and 4.05%, respectively, an increase of 0.26 percentage points and 0.27 percentage points over the same period of the previous year, and the amount was 7.769 billion yuan and 28.547 billion yuan, respectively. Combining foodservice revenue with commissions is sufficient to offset delivery-related expenses.
In addition, there is online marketing revenue, which accounts for about 12% of the revenue of the Meituan takeaway business, and the cost involved is low, only bandwidth, maintenance, etc., which is basically pure earnings, see the figure below.
Although the delivery fee exhausts the delivery service revenue and part of the commission, the marketing income provided to the merchant is a real benefit, which is why Meituan does not hesitate to invest in such a large pie, through doing large-scale, it can win more merchants' business through user traffic - especially in marketing, so as to achieve cost-effectiveness - that is, the income generated per unit of expenditure rises.
In the fourth quarter of 2021 and 2021, the online marketing service revenue of food and beverage takeaway increased by 32% and 51.15% year-on-year, respectively, to 3.223 billion yuan and 11.435 billion yuan, an increase greater than the 12.63% and 38.33% of the delivery cost.
Therefore, in the fourth quarter of 2021 and 2021, the takeaway business revenue generated by each unit of delivery service costs was RMB1.43 and RMB1.41, respectively, an increase of 7.7% and 5.07% year-on-year, achieving an increase in efficiency, and the operating profit of the segments increased by 96.70% and 117.93% year-on-year respectively to RMB1.736 billion and RMB6.175 billion, respectively, and the operating profit margin of the segment increased by 2.54 percentage points and 2.13 percentage points year-on-year to 6.64% respectively. and 6.41%.
Takeaway complements and synergizes with other businesses
For the 12 months ended December 31, 2021, Meituan's trading users increased by 35.2% (or 180 million) year-on-year, 3.45% (or 23 million) from the previous quarter to 690.5 million, an increase greater than jd.com (09618.HK, JD.US) (up 17.5 million in a single quarter, up 97.8 million year-on-year), Alibaba (09988. HK，BABA. US) (up 16 million in a single quarter), and Pinduoduo (PDD.US) (up 1.4 million in a single quarter, up 80.3 million year-on-year), see chart below.
This is because Meituan has formed a relatively closed service ecology: takeaway, in-store, and instant delivery retail. From the perspective of diners, there is no time to cook, there is Meituan takeaway; to eat at the restaurant, there are coupons and food recommendations for public reviews; to cook at home, there are Meituan to buy vegetables and community group to buy fresh food to home.
During the period of regional isolation where the epidemic is repeated, its business advantages are more prominent: it can deliver takeaway and fresh food for the isolated community, offsetting the decline in the volume of in-store dining business; after the epidemic, the growth of dine-in business can offset the impact of the decline in fresh food business volume due to retaliatory consumption growth, forming a complementary relationship.
After the epidemic, the revenue of the in-store business in 2021 increased by 53.07% year-on-year to 32.53 billion yuan, surpassing the level of 22.275 billion yuan in 2019 before the epidemic, and the increase was also higher than the increase in takeaway revenue by 45.34%.
The in-store business is mainly a platform service, and the costs involved are mainly related to servers, bandwidth, etc., and the profitability is much higher than that of the takeaway business. In 2021, the operating profit of the store branch increased by 72.27% year-on-year to 14.093 billion yuan, and the operating profit margin increased by 4.83 percentage points over the same period of the previous year to 43.32%, which is 6.8 times that of the takeaway business, which shows its business advantages.
It is worth noting that Ctrip (09961. HK), the annual revenue increased by only 9.29% year-on-year to 20.029 billion yuan, and turned profit into loss, and the loss attributable to shareholders reached 550 million yuan, which was significantly inferior to Meituan's store-to-store business, or showed the resilience of Meituan's business.
Overall, strong takeaway and in-store revenue and improved profitability of the two major businesses exceeded expectations, coupled with a slightly smaller quarterly loss in new business than in the third quarter, should be the main reasons for the capital markets to recognize this performance.
Is the investment in the new business worth it?
However, although the performance exceeded expectations, the loss of the new business suddenly completely offset the profits earned by meituan in the takeaway and in-store business, but it is a problem that must be faced up to sooner or later.
As we mentioned earlier, the retail business of the new business segment is a part of meituan's closed loop of service that forms its "food" life element, such as some users of Meituan flash sale or conversion from catering takeaway users.
When the Ten Hui Tuan and Orange Heart Preferred retreated, and the Meituan buying vegetables seized the Pu Pu, the daily excellent fresh, the Dingdong shopping vegetables, etc., its own community group buying business Meituan Preferred where to go? I am skeptical about this.
Meituan does enjoy personnel and network advantages in instant delivery, but what is missing is the large-scale warehousing and distribution (fulfillment) infrastructure investment of JD.com, after killing the start-up companies in the front warehouse, what are the odds of meituan's instant retail that is connected with JD.com, Ali and other short soldiers? It may be difficult to tell in the short term. However, if it can survive this pass, meituan's service ecology is closed, or it can form a favorable business advantage.
What is the prospect of Meituan?
In February this year, 14 parts issued the "Several Policies on Promoting the Recovery and Development of Difficult Industries in the Service Industry", proposing to "guide Internet platform enterprises such as takeaway to further reduce the service fee standards of merchants in the catering industry and reduce the operating costs of relevant catering enterprises." Guide Internet platform enterprises to give preferential service fees to catering enterprises in county-level administrative regions where high-risk areas are located during the epidemic. ”
There is no name, but it is certain that as a big man in the takeaway industry, Meituan bears the brunt of social responsibility, which may mean that Meituan's takeaway delivery service revenue and commission income will be affected, which is why Meituan's stock price has fallen sharply after the introduction of relevant policies.
In 2021, its commission income increased by 55.04% year-on-year to 52.905 billion yuan, accounting for nearly 30% of the total revenue. This concession more or less slowed down the overall revenue growth of the US group, and the actual extent may depend on whether the improvement of the macroeconomic environment has led to the warming of consumption, and the improvement of the operating efficiency of the US group, whether it can buffer these effects.
The strong growth in new business revenue was mainly due to the low base available for comparison (due to the short launch time of the business), the investment boom has passed, and the downsizing of competitors, it remains to be seen whether Meituan can seize more market share and put itself in a more favorable cost-effective position.
Overall, there is still a lot of uncertainty. However, if the domestic epidemic situation improves and the economy resumes rapid growth and drives demand, Meituan's highly profitable store business will grow significantly, which may boost its overall profitability and give it more room for reversal. In addition, meituan's attempt to reduce the cost of takeaway by drone delivery is also worth noting, and may optimize the cost of delivery.
At the same time, the competition of the new marketing model cannot be ignored, such as the partners of the Ustuan, Kuaishou-W (01024.HK) and Douyin, whether they will skip the big customer of the Meituan and seize the market of the Meituan with the marketing model such as the short video of the store, which has also become the focus of the market. It is reported that Douyin launched the "Heartbeat Takeaway" internal beta version in the APP in July 2021, but there is still no specific plan for the time being, if it is really launched, the current competitive situation in the domestic and foreign selling markets may have new changes.
Mao Ting