Image source: @Titanium Media App
文 | 巨潮WAVE，作者 | 小卢鱼，编辑 | 杨旭然
A few days ago, there were rumors in the market that Douyin was talking to Ali about acquiring Ele.me, and now it has reached the stage of negotiating the price, and the purchase price is about more than 7 billion US dollars - the whole thing has a nose and an eye.
Meituan's stock price has fallen almost in response, falling by 5.39% on December 19, and if the timeline is further extended, Meituan's stock price has fallen by about 32% in the past month, and the stock price has fallen by more than 56% in the past year, and it has fallen by 83% from the historical high in 2021.
Meituan share price performance (since October 2020)
However, not long ago, Meituan delivered a good growth report. According to the report, in the third quarter of 2023, Meituan achieved revenue of 76.47 billion yuan, a year-on-year increase of 22.1%, a net profit of 3.59 billion yuan, a year-on-year increase of 195.3%, and an adjusted net profit of 5.73 billion yuan, a year-on-year increase of 62.4%.
In response to the continuous decline in the stock price, Wang Xing bluntly said on the 2023Q3 earnings call that the stock price was undervalued:
Management is confident in the company's long-term growth potential, and Meituan's current share price in the secondary market only reflects the valuation of a single food delivery business, and does not meet the company's intrinsic value.
01 Competition
The cooperation between Douyin and Ele.me can be traced back to August 2022, when the agreed cooperation model was that Ele.me used Douyin's open platform to use mini programs as a carrier to provide users with local life services from content planting, online ordering to instant delivery ("instant viewing, instant ordering, instant delivery").
Although the rumors of Douyin's acquisition of Ele.me were quickly debunked by both parties, the reaction of Meituan's stock price still shows the strong uneasiness of the capital market: capital is obviously worried about Meituan's hegemony in local life, and may not be able to withstand the strong combined combat power formed after Douyin Ele.me has really become a family.
In the era of the Thousand Group War, Meituan was able to have the last laugh by grabbing users to leverage more merchants, gradually forming a positive cycle, and winning over those competitors who would only blindly burn money to subsidize. However, Douyin itself has a large number of users, and it is even more tricky to monetize traffic.
Visiting restaurants and food are important contents of short video platforms
During this year's Double 11, the content presentation of the "same city" (local life entrance) and "mall" (Douyin e-commerce) sections on the Douyin homepage has changed from the original short video dominating the screen to a combination of static graphics, videos, and live broadcasts.
Through short video live broadcasts, influencer store visits, and graphic texts, Douyin's local life section actually has the ability to cultivate all of Meituan's target merchants again.
Merchants are indeed actively embracing Douyin. In October 2022, it was disclosed at the Douyin Local Life Service Provider Conference that its life service business has covered 377 cities across the country, with more than 1 million cooperative stores. Another year later, there were more than 1.27 billion videos related to Douyin's store visits, and the number of people who entered the Douyin Life Service Group Buying Center increased by 289%.
In October this year, it launched the "Better Life Discovery Plan", announcing that it would invest 500 million yuan in the next year, mainly for small and medium-sized businesses to match more suitable talents.
In addition to Douyin, Meituan is actually engaged in hand-to-hand combat with new and old rivals in the local life market.
Ele.me launched 110,000 copies of "1 point purchase of good goods" on this year's Double 11, and launched ten categories of discount day activities such as paper products, grain and oil, mother and child, milk drinks, snacks, etc., "hoping to bring consumers an instant gratification Double 11 experience, and also create new marketing opportunities and growth for offline merchants." ”
At the end of April this year, Xiaohongshu began to lay out in the field of local life, testing the group purchase function of merchants in Guangzhou and Shanghai, and officially launched the "Food Power Plan" to recruit physical merchants through traffic incentives. The homepage of businesses that support group buying will display the "Store Group Purchase" entrance, and you can also add a link to the group purchase product of "In-store Discount" in your notes.
Duoduo Grocery is currently testing local life business in Guizhou, Hainan and other provinces, recruiting local life suppliers, including in-store catering coupons, hotel coupons, as well as attraction tickets and movie tickets. In order to attract merchants, Duoduo Grocery Local Life adopts a zero-commission cooperation model, and merchants only need to pay a deposit to settle in.
Shop for groceries and local life interface
With community group buying as the core, Duoduo Grocery has widely penetrated the sinking market, with a layout of more than 2,600 counties and cities across the country. Consumers in these lower-tier markets do not use Meituan very frequently, which is more conducive to the penetration of more groceries.
However, Meituan also has its own advantages, such as Meituan is very good at operation, and the details such as commissions with merchants will be extremely carefully calculated, compared with those new e-commerce companies that will only rely on subsidies to attract merchants for the time being, the profitability of Meituan's local life business is stronger.
In the short term, Meituan's dominance in the local lifestyle market remains unassailable.
02 Users
Local life is a large and growing market, but it may not be a market with a lot of profit margins, because there is a paradox in this trillion-dollar market, which is not so thoroughly dependent on internet platforms.
For many small businesses, online channels are generally only defined as an incremental channel, if there is no profit to idle, it is better to only be offline regular customers, so there will be things like Wei Jialiangpi withdrawing from Meituan.
On the one hand, in the context of economic downturn and sluggish consumption, both merchants and riders are approaching the critical point of "commissioning", and on the other hand, in the face of new competitors, Meituan must provide more subsidies to retain customers.
In 2023Q3, the operating profit of Meituan's local life business increased to 10.1 billion yuan, and its operating profit margin further decreased from 20.1% to 17.5%. In the last quarter, the operating profit of this core business decreased by 1 billion yuan and the operating margin decreased by 4.3%.
Meituan CFO Chen Shaohui also expressed concern when looking forward to the fourth-quarter results:
The year-over-year growth rate of food delivery revenue is expected to be lower than that of the third quarter, and the year-over-year growth rate of flash sale revenue (compared to the third quarter) will be flat, but the average order value of both businesses will decline.
Although the trillion-dollar local living market sounds good, for Meituan, which has a high enough market share, a slowdown in business growth is inevitable, and the capital market attaches the most importance to the growth rate in the pricing logic of Internet companies such as Meituan, and even "steady growth" is sometimes not a good word.
Therefore, after the announcement of the 2023Q3 financial report, Meituan's stock price ushered in a big dive, not so much because the capital market felt that Meituan's performance growth was not as expected, but because everyone generally had no confidence in the consumption willingness and food delivery market under the current economic situation.
When Morgan Stanley lowered the target price of Meituan to 120 yuan, it pointed out that "the attitude towards Meituan is gradually cautious, mainly due to the slower than expected recovery of consumer sentiment, which brings uncertainty to the recovery of Meituan's core local business income", and the rating was downgraded from "overweight" to "in line with the broader market".
The most direct manifestation of the uncertainty of the recovery is actually the surge in the number of food delivery riders and ride-hailing drivers, whether they are men and women, young and old, whether they were workers and farmers or white-collar engineers in their last job, and now they often end up being unemployed.
The surge in the number of riders will lead to an imbalance between supply and demand, and they have to work overtime and even work in extremely bad weather in order to compete for limited delivery orders, but more than eighty percent of full-time riders will not earn more than 8,000 yuan a month, making it difficult to ensure their lives in first- and second-tier cities.
The hardship of the riders also reflects the bitterness of the workers, after all, not everyone can afford to eat takeaway, and the vicious circle of insufficient domestic demand for consumption continues to operate, which is a torture for merchants and customers in the C-end business.
However, for capital, they can take profits and leave the market, like Sequoia China continued to reduce its holdings in Meituan and cashed out more than 10 billion Hong Kong dollars in two years, and continue to invest in the next profitable outlet, but Meituan, merchants and users will be left behind.
03 Growth
Naturally, Meituan could not sit idly by and watch the share price fall, and decided to repurchase the company's shares in the open market from time to time with a total amount of up to US$1 billion from December 1, 2023, as a demonstration of the company's confidence in its business prospects and prospects, which will ultimately bring benefits to the company and create value for shareholders.
However, judging from the subsequent stock price changes, Wang Xing's judgment that "the stock price in the secondary market only reflects the valuation of a single takeaway business" is not unreasonable, and the capital market may need Meituan and other Internet companies to make good achievements in new business areas at present.
Internet Index Performance (2019 to Present)
In 2022, Meituan has adjusted and updated its statistical caliber, integrating takeaway, in-store wine and tourism, flash sales, homestays, and transportation ticketing businesses into its core local business segments, and integrating Meituan Preferred, Meituan Grocery Shopping, Catering Supply Chain Kuaidun, online car-hailing, bike-sharing, motorcycle-sharing, and power bank into new businesses.
It is said that this adjustment of Meituan is aimed at further increasing the existing market share and penetrating deeper into the lower-level market.
According to the 2023Q3 financial report, Meituan's revenue from new business increased by 15.3% year-on-year to RMB18.8 billion, mainly due to the year-on-year growth of the merchandise retail business, although partially offset by the contraction of the self-operated online car-hailing business, the operating loss narrowed by 24.5% year-on-year to RMB5.1 billion, with a loss rate of 27.2%.
Meituan Optimal may be the most controversial new business, after all, in the past two years, community group buying has already become a graveyard for players, either exiting or shrinking, but Meituan Optimal is still investing, no wonder investors are worried that Meituan Optimal will "work harder and more unlucky".
However, after the end of the subsidized melee stage, Meituan's remaining opponents are actually only Duoduo Buy, and Meituan's advantages (linking users and suppliers, shortening the delivery time by 6 hours) also give it the confidence to continue to fight community group buying at this stage where it values its ability to fulfill the contract.
Delivery capacity is a high barrier to entry against other competitors, and from this perspective, Meituan is no longer a simple food delivery company, but closer to a full-fledged local life logistics company.
In 2022, Meituan Distribution ranked seventh on the list of China's top 50 logistics companies with a logistics business revenue of 70.064 billion yuan, with an average single ticket revenue of nearly 4 yuan, which is higher than the average single ticket income of most express delivery companies. Relying on its strong delivery capabilities, Meituan Optimal is not without a chance to turn over.
Meituan Optimal is still expanding its business coverage
As of the end of September, Meituan Optimal has accumulated 490 million transaction users, and in terms of volume, Meituan Optimal and Duoduo Grocery are very likely to become the TOP2 community e-commerce in the future. From a strategic point of view, Meituan Optimal remains an effective way for Meituan to enter the retail of physical goods, which can bring opportunities for cross-selling other products and services.
Meituan's retail dream has indeed not been abandoned, and Meituan, which is defined as a fresh food platform, has recently begun to transform into supermarket retail, officially upgrading and renaming itself as Little Elephant Supermarket. The market size of fresh instant e-commerce is also growing, from 3.5 billion yuan in 2016 to 128.8 billion yuan in 2020, and is expected to reach 511.8 billion yuan in 2025.
Perhaps, as Wang Xing said, I believe that most of the sub-businesses in the new business can achieve profitability and create value for the company's overall business, but the capital market does not have such good patience at present, and can wait for Meituan to make a new growth curve.