On November 26, Meituan announced the 3Q21 financial report. 3Q21 achieved revenue of 48.8 billion yuan, up 38% year on year; 3Q21 takeaway GTV of 1971 billion yuan, up 29.5% year on year; the number of TTM trading users was 668 million, an increase of 39 million in a single quarter, 8.3 million more active TTM merchants, up 28.2% year on year; 3Q21's adjusted net loss was 5.5 billion yuan, with cash and cash equivalent at the end of the quarter.
Brief review:
We believe that this quarter was impacted by adverse factors such as the epidemic and flood conditions, and the company's operations remained steady, showing strong business resilience and flexible organizational coordination: ① Food and beverage takeout broadened categories and scenarios to help merchants refine their operations and optimize the revenue structure under external shocks. ② Through promotions, wine travel strengthens the structured advantages of short trip scenarios and local accommodations, and deepens consumers' mentality through promotions and preferential packages during the pandemic window. ③ Community e-commerce will increase investment and actively promote the rise of agricultural products. We believe that the company actively cooperates with relevant departments to implement regulatory issues, attaches importance to reviewing anti-monopoly and riders' social security issues, discloses takeout algorithm rules, shifts to a development direction that balances social responsibility and efficiency, and gradually releases policy risks. At the same time, the company continues to increase community e-commerce to create a second growth curve, opening up room for the company's long-term growth.
The number of users has maintained high growth, and the core business highlights operational resilience. 3Q21 achieved revenue of 48.8 billion yuan, a year-on-year increase of 38%, a gross profit margin of 22.1%, a year-on-year decrease of 8.5 pct; takeout, in-store & wine travel, new business, and other revenue of 26.5 billion yuan, 8.6 billion yuan, and 13.7 billion yuan, respectively, increased by 28%, 33%, and 67%. 3Q21 had 668 million TTM trading users, up 40.1% year on year, 8.3 million active TTM merchants, up 28.2% year on year, and users had an average of 34.4 transactions per year, up 28.5% year on year.
The company's 3Q21 operating loss was 10.1 billion yuan, a loss ratio of 20.7%, 3Q20 operating profit of 6.7 billion yuan, and a profit margin of 19%. We estimate that the main reason is that ① 3Q21 imposed a fine of 3.4 billion yuan under China's anti-monopoly law; ② continues to increase investment in community group purchases. 3Q21 had an adjusted EBITDA loss of 4.1 billion yuan, an adjusted net profit loss of 5.5 billion yuan, and net cash flow from operating activities of -4 billion yuan.
Food and beverage takeout: Revenue is in line with expectations, and the basic market is stable. 3Q21 takeout GTV was 1971 billion yuan, an increase of 29.5% over the previous year. Judging from unit volume and customer unit price, the average daily order volume in 3Q21 was 43.62 million, up 24.9% year on year; AOV was 49.1 yuan, up 3.7% year on year.
We believe that in 3Q21, due to the impact of the epidemic, flood conditions, etc., the growth rate of takeout revenue slowed down month-on-month, but through hierarchical operations targeting different consumption scenarios and categories, the company optimized the revenue structure through refined operations for merchants. ① Broadening scenarios and deepening categories: providing more diversified choices and more high-quality categories. Among them, the order volume for supper and afternoon tea categories is close to 30% of 3Q19-3Q21CAGR. ② Helping merchants refine their operations: The company has launched a variety of online tools and solutions to help merchants improve operational efficiency; provides training programs related to business analysis to help merchants embrace digital transformation. The 3Q21 advertising monetization rate was 1.65%. ③ Continue to promote the transparency of the distribution and scheduling system: respond positively to policy calls and prepare a pilot occupational injury protection project under government guidance. The company disclosed the delivery “estimated time” algorithm in September and transitioned to a development direction that takes into account social responsibility and efficiency.
3Q21 Food and beverage takeout revenue was 26.5 billion yuan, up 28% year on year; MR (monetization rate) was 13.4%, down 0.2 pct year on year; OP (operating profit) was 876 million yuan, average profit of 0.22 yuan per unit, and OP Margin 3.3%, down 0.4 pct year on year.
In-store, hotel and travel: Under the impact of the pandemic, wine travel has maintained positive growth for two consecutive years, and the coverage rate of low-tier in-store cities has increased.
3Q in-store & wine travel revenue was 8.6 billion yuan, up 33.1% year on year; operating profit was 3.8 billion yuan, and OPM was 43.9%, up 0.9 pct year on year. In-store & wine travel business revenue and operating profit 3Q19-3Q21 have a two-year CAGR of 18.1% and 27.4%, respectively. The in-store & wine travel business continues to contribute a stable source of profit and cash flow to the company.
By business: ① Meal delivery: Improve service quality and operate merchants in a hierarchical manner. High-quality restaurants continue to penetrate, transaction frequency and user stickiness have both increased. ② In-store: Excellent performance in medicine, pets, parent-child, fitness, etc.; strengthened merchant penetration and covered a wider range of low-tier markets. ③ Wine travel: 3Q was affected by the epidemic and flood conditions, and demand for off-site travel was reduced. During this period, the company strengthened its structural advantages in short trip scenarios and local accommodations through promotions and preferential packages, and continuously strengthened consumer mentality.
Community e-commerce continues to invest, and the short-term loss layout is long-term. Driven by the new retail business and ride-sharing services, the new business had revenue of 13.7 billion yuan in 3Q21, an increase of 67% over the previous year. Operating losses were 10.9 billion yuan, OPM was -79.5%, and losses increased 2.7 pct month-on-month. By business, ① Meituan Preference: Cold chain investment is beginning to bear fruit, 3Q fresh and frozen products are of stable quality in hot summer weather; the company continues to create employment opportunities and provide relevant training in the sinking market, open a green channel for agricultural product sales, and actively promote the upward trend of agricultural products; in the future, the company will continue to invest more in optimizing product supply, supply chain and compliance capacity, and evolve towards long-term capacity building. ② Flash sales: Product categories have been broadened, smart pharmacies have been launched around the clock, the online rate of high-quality local merchants has increased, transaction amounts at 3Q supermarkets and convenience stores have increased to record highs over the previous month, and overall business growth is strong. ③ Grocery shopping: The broadening of categories and shortening delivery times have led to continuous growth in the user base and transaction amount, the continuous improvement of operating efficiency in first-tier cities, and the continuous optimization of unit economic effects.
Adequate cash reserves. By the end of the 3Q, the company's cash and cash equivalents were $50.9 billion, net operating cash flow was $4 billion; net investment cash flow was $23.6 billion; and net financing cash flow was $7.1 billion.
Updated profit forecasts and valuations: Revenue for 2021-2023 is expected to be 177 billion yuan, 229 billion yuan, and 291.3 billion yuan, respectively, up 54%, 29%, and 27% year on year. Net profit at the parent level is -18.7 billion yuan, -4.3 billion yuan, and 6.7 billion yuan, respectively, and adjusted net profit of -141 billion yuan, 1 billion yuan, and 13 billion yuan, respectively. SOTP valuation was used for takeout, in-store, community group buying, and other businesses. The reasonable market value range for 2022 was 1.94 trillion to HK$2.46 trillion, and the reasonable value range H shares were HK$316-400 per share, with a “superior to market” rating.
Risk warning: industry competition is intensifying; new business falls short of expectations; market regulation risks; infrastructure economies of scale are not significant.