$MEITUAN-W (03690.HK)$In the first quarter, both revenue and net income achieved double-digit percentage growth, with rapid expansion of core local business and new business, and historical highs of platform users and merchants. The number of instant delivery orders on the platform increased significantly.

In a telephone conference held on Thursday evening, Meituan stated that it is restructuring its company structure to better support and integrate its core local business. In the future, it will adopt more operational changes, connect the demand side and the supply side, and provide closed-loop solutions from demand discovery to service completion.

Regarding the in-store, hotel and tourism business, Meituan stated that despite the impact of the macro environment on consumer sensitivity to prices and a YoY drop in the average order value, overall demand remains strong. Meituan continues to expand its merchant base, improve cost performance, and launch more packages to meet different consumer needs. It believes that with its leading industry position, user base, conversion frequency, and total transaction volume will maintain good growth.

The competition in the in-store hotel and tourism business has entered a new stage, and all parties will shift from subsidy-driven to focusing on investment returns. Meituan will consolidate its competitive advantage by providing customized marketing solutions, integrating marketing strategies, and providing personalized intelligent recommendations and other measures. It is confident in maintaining strong GTV growth by 2024. The long-term growth rate may be higher than expected.

Meituan stated that the in-store dining business benefits from the synergies of the take-out business, while the hotel and tourism business relies on the advantages of the sinking market, middle and low-end hotels and unique "hotel+X" packages to deepen cooperation with high-star hotels. The company remains optimistic about its growth and profitability in 2024 and beyond.

Starting from February, Meituan has been strictly focusing on efficiency, taking measures such as raising prices, reducing subsidies, and shutting down inefficient warehouses and sites, significantly narrowing losses on a quarterly and YoY basis. In the second half of the year, it will continue to optimize its strategy, strengthen its core competitiveness, and significantly narrow its losses. The company still sees fresh groceries as a market worth investing in for the long term.

Meituan also said that it plans to bring product services to a global audience through its Meituan Grocery app, and is actively evaluating overseas markets such as the Middle East/Gulf countries, Europe, and Southeast Asia, but is still in the early research phase. Global expansion is an important direction for long-term growth, but it will choose cautiously and focus on capital returns.

The following is a transcript of the telephone conference:

Since the beginning of 2024, with the significant increase in consumption during the Spring Festival, the local business industry in China has achieved steady growth. As the leader of the industry, Meituan, with its keen insights into market trends and innovative capabilities, effectively captured the dividend of industry development and stimulated the vitality of local consumption. In the first quarter, Meituan's performance was strong, with total revenue increasing by 25% YoY to RMB 73.3 billion, and adjusted net profit increasing by 36.4% YoY to RMB 7.5 billion. The user and merchant bases continued to accelerate growth for four consecutive quarters.

The prosperous development of the local business has not only changed the way Chinese people live, but also greatly enhanced the happiness of consumption. Through years of finely-tuned operations and strong execution, Meituan continues to promote the development of on-demand retail, meeting the diverse needs of consumers in different consumption categories and scenarios. At the beginning of the year, Meituan streamlined and optimized its core local business unit, which will further promote the synergies between the on-demand delivery, dining, hotel, and travel business units and improve the overall operating efficiency of the platform. Despite facing the macroeconomic environment and changes in consumer habits, Meituan has still achieved healthy growth for on-demand delivery services.

On the merchant side, through close cooperation with millions of merchants and brands, Meituan has delved into the industry value chain and actively explored innovative business models. The brand catalog store launched by Meituan, which is the brand satellite store, focuses on providing high-quality and cost-effective take-out services. This allows merchants to utilize existing brand value while enjoying the cost advantages of take-out, and provide high-quality choices to consumers at more competitive prices.

In addition, Meituan provides merchants with traffic support and AI-enabled services to help them quickly improve business after opening a new store. For the Pinghao Fan (group-buying meal) business, Meituan has expanded its urban coverage, improved consumer experience through ROI-oriented methods, continued to improve its order scheduling system and operational capabilities, and achieved a new high for daily orders in the first quarter.

Regarding the "flash purchase" plan, Meituan has introduced more popular SKUs from well-known restaurants by improving supply chain quality and diversity, further refining its subsidy strategy, and encouraging consumers to choose high-quality food. At the same time, Meituan has strengthened its marketing solution to meet the growing needs of catering merchants to help them more efficiently acquire customers, resulting in an increase of over 20% YoY in the number of advertised merchants for the year.

In the future, Meituan will continue to work closely with all participants in the ecosystem, create more employment opportunities, achieve more social value, and fulfill its mission: to help people eat better. Through continuous innovation and optimization, Meituan is committed to providing users with better service experience and providing merchants with more effective marketing and operational support, jointly promoting the prosperity and development of the local business industry.

On the consumer front, we cooperate with high-quality restaurants to launch various marketing activities, stimulate demand for special consumption scenarios such as Spring Festival, New Year's Day, weekends, cross-city travel, and late night. We also offer a large number of coupon packages and discounts on popular products, which further enhances our share of consumers in the low-cost operation market, while stimulating demand for high-quality and free consumption.

The annual active users of takeaway have continued to grow to nearly 500 million, and the transaction frequency has also increased significantly. Nowadays, more and more high-quality takeaway users are converted into Meituan instant shopping users. In the first quarter of 2024, the annual active users of Meituan instant shopping realized year-on-year growth, and the transaction frequency also increased.

In the first quarter of 2024, we accurately grasped the growing demand for diversity and quality of consumers, and adjusted operational strategies to meet the surge in demand for gifts and travel during festivals. During the Spring Festival, PGC (Commodity Promotion) of categories such as wine, beverage, gifts, and daily necessities achieved significant growth through our instant retail channels, bringing higher income to offline retailers, especially many KA (key customer) merchants.

In Women's Day marketing activities, we cooperated with high-quality brands and merchants, and categories such as flowers, beauty products, and baby products performed particularly well. We also cooperated with top brands in the electronics and clothing fields to jointly launch super brand promotion activities. The participating merchants' GMV (total transaction amount of goods) on the instant retail channel achieved significant growth, and they are also more willing to advertise on our platform.

In terms of the supply chain, we continue to expand the coverage of new supply models. By the end of the first quarter, we have about 7,000 Meituan preferred stores, and each order contributes further increase, accelerating online penetration in low-line markets, bringing diversity and competitive pricing to our platform, and effectively improving consumers' shopping experience in instant retail. Meituan Preferred categories are also constantly expanding, focusing on categories such as beauty products and fast-moving consumer goods, which achieved rapid growth in the first quarter.

In the past few years, our continuous iteration in the supply chain has significantly improved user experience and purchase frequency. We firmly believe that there is huge growth potential in a wide range of product categories in the instant retail market, and we will selectively explore these opportunities with business partners.

In terms of live broadcast, we use major festival marketing windows such as New Year's Day, Spring Festival, and Women's Day to expand the official live broadcast range of the Meituan platform, and continuously increase the frequency of live broadcasts. In the first live broadcast, more than 400,000 merchants from more than 20 major platforms participated. For merchant live broadcasts, we strengthened support measures for merchants, launched online and offline joint promotion activities, and helped them attract live broadcast user traffic. As a result, the number of participating merchants quickly increased.

We have launched featured promotion projects, which are extended from our traditional shelf mode, to promote popular products. After continuous iterations over the past year, we have accumulated deeply discounted products. On the one hand, featured promotions help deepen consumers' impression of our high-performance-to-price products. On the other hand, merchants are also more willing to provide deep discounts on our platform.

For featured promotions, we iterated on product selection standards, improved profit control standards, and improved algorithms to capture consumers' layered consumption needs. These measures also allow us to provide customized operational suggestions for participating merchants, including product selection and pricing, helping them significantly increase sales.

In terms of marketing, we strengthened the brand promotion during major festivals such as New Year's Day, Spring Festival, and Ching Ming Festival, and effectively increased user engagement and new user growth through popular IP and live broadcast activities. In the first quarter of 2024, we continued to optimize operational strategies, fully utilized major consumer scenarios such as holiday travel, family reunions, and group gatherings, and rapidly increased business volume during holidays. During the Spring Festival, we cooperated with more than 10,000 tourist attraction restaurants, thousands of restaurants on the must-visit list, banks, and nearly 6,000 high-quality merchants in low-line markets. By using targeted live broadcasts and themed promotional activities, we provided consumers with a rich selection of package options.

We have also launched various marketing plans to promote high-growth catering categories such as SPA and massage, beauty and hair, pet care, and escape room. In addition, after implementing the direct management model nationwide, we can better capture the opportunities brought by online penetration and strong consumption potential. In the low-line market, we accelerated the merchant entry process, provided a wide range of product and transaction choices, and met the diversified needs of local residents, as well as tourists and returning home during the holidays.

Although the base in the same period last year was higher, people's willingness to travel is still high. We achieved strong year-on-year growth in hotel room nights and total transaction volume, surpassing the pre-epidemic level. We continue to enhance platform supply pricing, product capabilities and marketing strategies, consolidating our competitive advantage.

Recently, consumer preferences for tourist destinations have gradually evolved, and some small towns and lower-tier cities are becoming more and more popular. Thanks to our early advantage in penetrating lower-tier cities and continuous operational iteration, our growth in these niche tourist destinations is significantly higher than the industry average.

In terms of products, we have leveraged our unique cash advantage to launch a one-stop service that meets travel and local service needs, such as the monthly 'Where to Go on Wednesday' event, which provides recommendations for local dining and entertainment to consumers.

Thanks to the high consumption during festivals like New Year's Day and Spring Festival, our dining, hotel, and tourism businesses achieved strong year-on-year growth in the first quarter, with booking volume and annual transaction users increasing by over 60% and 37%, respectively. The number of active merchants reached a historical high, as consumers increasingly favor products with high price-performance ratio. We further iterated our products, improved marketing capabilities, promoted popular products, and enhanced pricing competitiveness.

In the hotel business, we have not only achieved rapid growth in high-star hotels, solidifying our market share, but also launched multiple services for low-star hotels to enhance merchants' customer acquisition capabilities and operational efficiency. Meituan Selection also achieved significant results in the first quarter, by optimizing pricing strategies and consumer experience, improving warehouse operations, and enhancing marketing efficiency, which significantly reduced operational losses.

Our new businesses, including Kuai Lv, Instant Delivery (IMS), bike sharing, and charging treasure, not only achieved market leadership in business scale, but also realized improvements in operational efficiency, forming strategic synergies with our core local business department. In the face of macro environmental changes, we actively adapt to the latest trends and consumer habits, continuously optimize product supply and operational strategies, and provide merchants with diverse marketing tools and effective online operational solutions.

Edited by Jeffrey