Meituan's Q4 revenue slightly exceeded expectations, and adjusted net profit increased more than 4 times. Among them, the core local business remained steady, and profit margins decreased by 2.1% year on year; losses in new businesses narrowed, but Meituan Preferred's growth rate slowed.

On Friday, March 22, Meituan announced its fourth quarter and full year results for the year ended December 31. According to financial reports, Meituan achieved revenue of 73.70 billion yuan in the quarter, and revenue of 62.62 billion yuan for the same period last year, up 22.6% year on year, better than market expectations of 72.7 billion yuan.

Fourth-quarter operating profit of RMB 1.76 billion was also better than estimated at RMB 1.34 billion. The adjusted profit before interest, tax, depreciation and amortization was $3.74 billion, an increase of 26.5% over the previous year. Adjusted net profit was $4.374 billion, up 427.6% year on year.

Looking at the annual data, revenue for 2023 was RMB 276.74 billion, up 26% year on year, slightly below the estimate of RMB 275.38 billion; operating profit was RMB 13.42 billion, estimated at RMB 13.2 billion. Adjusted EBITDA and adjusted profit increased to RMB23.9 billion and RMB23.3 billion respectively

Last year, the number of Meituan instant delivery orders increased by 24% to 21.9 billion; the number of Meituan flash sales orders continued to grow, and the annual order growth rate exceeded 40% year-on-year.

Core local businesses remained steady, and profit margins decreased 2.1% year over year

Looking at specific business, Meituan's core local commercial revenue for the fourth quarter was 55.13 billion yuan, better than the estimated estimate of 54.3 billion yuan, an increase of 26.8 percent over the previous year, and a decrease of 4.4% over the previous month. Operating profit increased 11.1% year over year to RMB 8 billion, and operating profit margin for the fourth quarter was 14.5%, a decrease of 2.1 percentage points year over year.

Throughout 2023, thanks to the rapid recovery of local commerce, the revenue of the core local business segment increased 28.7% year over year to RMB 206.9 billion. Operating profit increased 31.2% year over year to RMB 38.7 billion, and operating margin increased slightly, from 18.4% in 2022 to 18.7%.

Meituan pointed out in its financial report that the increase in revenue from delivery services and commissions last year was mainly due to increased supply, product iteration, and continued recovery in consumption driving the increase in the number of transactions in the core local business segment, which was partly offset by the decline in average customer unit prices in the food and beverage takeout and Meituan flash shopping businesses.

The increase in revenue from online marketing services is mainly due to an increase in the number of merchants active in online marketing and their average revenue. Let's take a look at each business in detail:

Food and beverage takeout: Annual transaction users continue to grow, and medium- and high-frequency users and their purchasing frequency are steadily increasing;

In-store, hotel and travel segment: In 2023, transaction amounts increased by more than 100% year over year, and annual transaction users and annual active merchants increased by more than 30% and 60% year over year, respectively. Domestic hotel transaction volume increased by more than 100% year-on-year in 2023

Meituan flash sale: order volume increased by more than 40% year-on-year in 2023

New business losses are narrowing, Meituan Preferred's growth rate is slowing

Revenue from new businesses and other businesses was 18.57 billion yuan, up 11.5% year-on-year, and exceeded the estimate of 18.47 billion yuan. Operating losses narrowed by 24.5% year over year to RMB 4.8 billion, and operating loss ratio narrowed to 26.0% month-on-month.

In 2023, revenue from the new business segment increased 18.0% year over year to RMB 69.8 billion. Operating losses narrowed to RMB 20.2 billion, and the operating loss rate improved to 28.9%, mainly due to increased operating efficiency in all businesses in this segment.

Meituan's financial report pointed out that the market size of community e-commerce was basically the same as last year, and the growth rate of Meituan Premium slowed down. Despite improvements in efficiency in 2023, the loss amount and loss rate were still significant. The main reasons were 1) the scale growth was lower than expected, making it difficult to drastically reduce the cost of performance per item; 2) fierce competition made it more difficult to increase product price increases and reduce subsidies.

In the future, Meituan plans to increase product price increases and reduce subsidies, and pay more attention to long-term growth in the natural retention rate of users.

Last year, the front warehouse business Meituan Grocery Shopping was upgraded to a new brand, and the transaction amount of Xiaoxiang Supermarket increased by about 30% over the same period last year.

Sales and marketing costs are rising, R&D costs are stable

Meituan's Q4 sales cost was 48.7 billion yuan, up 12.7% year on year, and the percentage of revenue decreased by 5.7 percentage points year on year to 66.1%. Meituan said the increase in the amount was mainly due to the increase in delivery costs for food and beverage takeout and Meituan flash sales businesses, as well as the increase in sales costs in the retail sales business.

However, the year-on-year decrease in sales costs as a percentage of revenue was mainly due to changes in revenue structure, lower costs related to average delivery of food and beverage takeout and Meituan flash sales businesses, and improvements in the gross margin of the retail sales business.

Sales and marketing costs increased 55.3% year over year to 16.7 billion yuan, accounting for a year-on-year increase of 4.8 percentage points to 22.7% of revenue.

Both the amount and percentage of revenue increased, mainly due to the recovery in consumption, changes in the business environment and business strategy, which led to an increase in user incentives, promotion and advertising expenses. Furthermore, the increase in employee benefit expenses has also led to an increase in sales and marketing expenses.

R&D expenditure for the fourth quarter was RMB 5.4 billion, which remained stable year on year. The percentage of revenue fell 1.3 percentage points from 8.7% year on year to 7.4%, mainly due to improved operating leverage.

As of December 31, 2023, Meituan held cash and cash equivalents and short-term financial investments of RMB 33.3 billion and RMB 111.8 billion, respectively.

edit/new