Improving Financial Prospects at Meituan: Reduced Losses and Increased Orders Mark the Successful Q1 Transition
Meituan, the Chinese tech giant, has announced its first-quarter results, showcasing a significant turnaround in its business performance and a focus on expansion into new sectors.
The company's food delivery orders accounted for 15% of the total orders this quarter, with an average daily volume of around 53 million, marking a year-on-year growth rate of over 23%. This growth was compounded by the success of Pinhaofan, Meituan's group order feature for food deliveries, which accounted for nearly 10% of the total food delivery orders in Q1.
However, the average transaction value saw a decline this quarter, due in part to the increased share of Pinhaofan orders. The market, however, is not overly concerned, as Meituan has reduced subsidies for food delivery and intentionally controlled the proportion of Pinhaofan orders. This strategy is expected to improve both the average transaction value and profit performance.
Meituan's stock saw a strong rebound over the past three months, driven by expectations of reduced losses in new business segments, organizational restructuring, and eased competition with Douyin. The growth rate of instant delivery orders exceeded expectations, reaching 28%. By the end of Q1, there were already 7,000 warehouses dedicated to Shangou users, up from over 5,000 at the end of last year. Meituan's Shangou (flash purchase) orders averaged around 7.5 million daily, with a high growth rate of over 49%.
The company's local commerce revenue did not decline significantly, with a 0.9% quarter-on-quarter decrease. This stability can be attributed to the appointment of Pu Yanzi, who marked a turning point in the competition between Douyin and Meituan for the local lifestyle sector. The manager hired at the beginning of the year by Meituan, whose name is not publicly disclosed, has been instrumental in this shift.
Looking forward, Meituan plans to expand into areas such as medical beauty, healthcare, weddings, and parent-child services. The company's target for its in-store business is to achieve RMB 1 trillion (USD 137.8 billion) in gross transaction value (GTV), representing a 50% growth rate.
Douyin, on the other hand, has shifted its focus from emphasizing gross merchandise value (GMV) to prioritizing commercialization. The company has set a GMV target of RMB 560-580 billion (USD 77.1-79.9 billion) for 2024.
Meituan's overseas expansion plans remain in the early stages, and the company will be cautious in considering its merits in terms of the company's long-term growth and potential return on investment. Despite this, the first-quarter results show that the new businesses that had been dragging down profits for years saw a significant turnaround, with quarterly losses reduced to just RMB 2.8 billion (USD 385.9 million).
All in all, Meituan's Q1 performance indicates a promising future for the company, with signs of recovery and a focus on expansion into new sectors. The company's strategic decisions, such as reducing subsidies and controlling the proportion of Pinhaofan orders, are expected to improve its profit performance and secure its position in the competitive tech market.
