Meituan's Q4 revenue increased by 22.6% year-on-year, with adjusted net profit more than quadrupling. Losses from new businesses narrowed. | Financial Report Insights

MEITUAN's Q4 revenue slightly exceeded expectations, with adjusted net profit more than quadrupling. The core local business maintained steady growth, with a year-on-year decrease in profit margin of 2.1%; losses in new businesses narrowed, but MEITUAN's preferred growth rate slowed down.

On Friday, March 22nd, MEITUAN announced its fourth quarter and full-year performance ending on December 31st. According to the financial report, MEITUAN achieved a revenue of RMB 73.70 billion in the quarter, compared to RMB 62.62 billion in the same period last year, representing a 22.6% year-on-year growth, surpassing the market's expectation of RMB 72.7 billion.

Operating profit in the fourth quarter was RMB 1.76 billion, also exceeding the estimated RMB 1.34 billion. Adjusted EBITDA was RMB 3.74 billion, a 26.5% year-on-year increase. Adjusted net profit was RMB 4.374 billion, a 427.6% year-on-year increase.

Looking at the full-year data, in 2023, revenue reached RMB 276.74 billion, a 26% year-on-year growth, slightly below the estimated RMB 275.38 billion; operating profit was RMB 13.42 billion, compared to the estimated RMB 13.2 billion. Adjusted EBITDA and adjusted net profit increased to RMB 23.9 billion and RMB 23.3 billion respectively.

Last year, MEITUAN's instant delivery orders grew by 24% to 21.9 billion; MEITUAN's flash purchase orders continued to grow, with an annual order growth rate exceeding 40%.

Core Local Business Maintains Steady Growth with a 2.1% Decrease in Profit Margin

In terms of specific business segments, MEITUAN's core local business revenue in the fourth quarter was RMB 55.13 billion, surpassing the estimated RMB 54.3 billion, with a 26.8% year-on-year growth and a 4.4% decrease from the previous quarter. Operating profit increased by 11.1% year-on-year to RMB 8 billion, with an operating profit margin of 14.5% in the fourth quarter, a decrease of 2.1 percentage points year-on-year.

For the full year of 2023, benefiting from the rapid recovery of the local business, revenue from the core local business segment grew by 28.7% year-on-year to RMB 206.9 billion. Operating profit increased by 31.2% year-on-year to RMB 38.7 billion, with a slight improvement in the operating profit margin from 18.4% in 2022 to 18.7% MEITUAN pointed out in its financial report that the growth in revenue from delivery services and commissions last year was mainly driven by the increase in transaction volume of the core local business segment due to strengthened supply, product iteration, and continuous recovery in consumption, partially offset by the decrease in average order value of food delivery and MEITUAN Flash Purchase business.

The growth in revenue from online marketing services was mainly due to the increase in the number of active merchants and their average income. Specifically, for each business segment:

• Food delivery: Annual transaction users continued to grow, with medium to high-frequency users and their purchase frequency steadily increasing.
• In-store, hotels, and travel: Transaction amount in 2023 increased by over 100% year-on-year, with annual transaction users and active merchants growing by over 30% and 60% respectively. Domestic hotel transaction amount in 2023 increased by over 100% year-on-year.
• MEITUAN Flash Purchase: Order volume in 2023 increased by over 40% year-on-year.

Losses from new businesses narrow, MEITUAN Optimal growth slows down

The revenue from new and other businesses was RMB 18.57 billion, a year-on-year increase of 11.5%, exceeding the estimated RMB 18.47 billion. Operating losses narrowed by 24.5% year-on-year to RMB 4.8 billion, with the operating loss rate narrowing to 26.0% on a quarter-on-quarter basis.

In 2023, the revenue from the new business segment increased by 18.0% year-on-year to RMB 69.8 billion. Operating losses narrowed to RMB 20.2 billion, with the operating loss rate improving to 28.9%, mainly due to improved operational efficiency in all businesses of this segment.

MEITUAN stated in its financial report that the market size of community e-commerce remained basically flat year-on-year last year, and the growth rate of MEITUAN Optimal slowed down. Although the efficiency of MEITUAN Optimal improved in 2023, the amount and rate of losses remained significant, mainly due to 1) scale growth falling below expectations, making it difficult to significantly reduce the average fulfillment cost per order; 2) intense competition making it harder to increase product markups and reduce subsidies.

• In the future, MEITUAN plans to increase product markups and reduce subsidies, focusing more on the long-term growth of user retention rates.
• Last year, the pre-warehouse business MEITUAN Buy Vegetables was upgraded to a brand new supermarket called XiaoXiang Supermarket, with the transaction amount of XiaoXiang Supermarket increasing by approximately 30% year-on-year.

Increase in sales and marketing costs, stable R&D expenses

MEITUAN's Q4 sales costs were RMB 48.7 billion, a year-on-year increase of 12.7%, accounting for a decrease of 5.7 percentage points to 66.1% of revenue. MEITUAN stated that the increase in amount was mainly due to the increase in delivery-related costs for food delivery and MEITUAN Flash Purchase businesses, as well as the increase in sales costs for the retail business The decrease in the percentage of sales costs to revenue compared to the previous year was mainly due to changes in revenue structure, a decrease in average delivery-related costs for catering takeout and MEITUAN Flash Purchase business, and an improvement in gross profit margin for commodity retail business.

Sales and marketing costs increased by 55.3% year-on-year to 16.7 billion RMB, with the percentage of revenue increasing by 4.8 percentage points year-on-year to 22.7%.

Both the amount and percentage of revenue increased, mainly due to the recovery of consumption, changes in the business environment, and changes in business strategies leading to increased spending on user incentives, promotions, and advertising. In addition, increased employee welfare expenses also contributed to the increase in sales and marketing expenses.

Research and development expenses in the fourth quarter amounted to 5.4 billion RMB, remaining stable year-on-year, with the percentage of revenue decreasing by 1.3 percentage points to 7.4%, mainly due to improvements in operating leverage.

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