Meituan made an overall profit for the first time in 2019

Its first overall profit was one of the biggest surprises Meituan brought to the market in its quarterly results. "More than nine years have passed! Celebrate Meituan's breaking 30 million orders a day." On July 29, Wang Xing, long absent from Weibo, used his personal account to announce the latest results of Meituan takeaway orders. It's only been a year and three months since Meituan's last milestone of 20 million orders a day. And that's just the beginning.

On August 23, Meituan Dianping (3690.hk, hereinafter referred to as "Meituan") released its financial results for the second quarter ending June 30, 2019, presenting a more brilliant report card. During the financial reporting period, Meituan's total revenue reached 22.7 billion Yuan (unit: RMB, the same below), with a year-on-year growth of 50.6%, higher than the market expectation of 21.908 billion Yuan. The adjusted EBITDA reached 2.3 billion Yuan, and the adjusted net profit reached 1.5 billion Yuan, making the overall profit for the first time.

Wang Xing attributed the strong growth to "the continuous improvement of brand penetration on the supply and demand side, driving the continuous growth of the business scale of multiple service categories". He said that Meituan should continue to focus on the "Food+Platform" strategy to provide users with more rich consumption scenarios and help merchants' business growth and operational efficiency improvement.

Its first overall profit was one of the biggest surprises Meituan brought to the market in its quarterly results. But Meituan CFO Chen Shaohui said Meituan's future focus is still on growth, not profits. The core business operation efficiency growth, maintains the industry superiority position. As the core business of Meituan, food and beverage delivery continued to contribute the majority of revenue in this quarter.

Of the 22.7 billion Yuan in revenue, the revenue from takeout reached 12.845 billion Yuan, up 44.2% year-on-year, accounting for 56.6% of the overall revenue. In addition, the amount of food and beverage delivery transactions increased 36.5% to 93.1 billion Yuan in the quarter, and the number of transactions increased 34.6% year on year to 2.1 billion Yuan, both maintaining strong growth momentum. This is not simply a one-time gain from higher merchant rates and reduced subsidies for riders and users. Meituan's commissions fell 5.5 percentage points in the quarter compared with the same period last year. The reason for the big increase is not only favorable weather conditions, but also the improvement of Meituan operating efficiency:

1. Implement the membership system in the user end, and launch the joint monthly membership card with Tencent Video to increase the discount, which is helpful to improve the stickiness of takeaway users and bring multiple growth of the number of transactions. The average purchase frequency of monthly active member users is more than 3 times that of ordinary monthly active users. In the 12 months ending June 30, 2019, the number of Meituan trading users reached 420 million, and the average number of transactions per trading user increased from 21.4 to 25.5 each year.

2. Provide innovative marketing services and product services (catering supply chain, small loan) to merchants, further enhance marketing efficiency, increase the exposure of potential consumers of merchants, drive merchants to optimize the income structure of takeout, improve the cash rate of takeout, from 13.1% in the same period last year to 13.8%.

3. Open capacity network, continuous investment in artificial intelligence order scheduling system "Meituan super brain", bring order density growth for takeout business, delivery efficiency is improved, riders can collect more orders in a single ride. Under such economies of scale, the delivery cost of each order can be greatly reduced. In terms of the gross profit margin of takeout, it increased to 22.3% from 15.8% in the same period last year, and 14.4% in the same period last quarter.

Increased operational efficiency, prominent economies of scale, and steady growth in performance have increased Meituan's market share. Analysis report on the development of Chinese takeaway industry in the first half of 2019 released by Trustdata, a big data monitoring platform of mobile Internet, shows that in the second quarter of 2019, Meituan takeaway transaction volume increased to 65.1%, up 1.7% month-on-month. The stickiness of Meituan takeaway merchants is 66.3%, and it has obvious advantages in terms of DAU (daily active users) and supply of merchants in low-line cities.

Store and liquor travel business continues to sink, and continues to strengthen the market position. Although the takeaway business did not contribute as much to Meituan's revenue growth, in-store and liquor Tours were the profit center of the company, maintaining high gross margins for a long time. In the second quarter of 2019, Meituan achieved a gross profit of 4.66 billion Yuan in the business of stores, hotels and tourism, with a gross profit rate as high as 88.8%. The change rate increased from 8.6% to 10.2%, and the number of nights between hotels increased by 28.9% year on year, reaching 94 million nights.

The business of in-store and liquor travel has got rid of the profit model dominated by transaction commission in the "pre-group-buying era". Now the proportion of commission income is gradually decreasing, and more emphasis is placed on both transaction and advertising. Revenue from the business rose 42.8% to 5.2 billion Yuan in the reporting period from 3.7 billion Yuan a year earlier, mainly due to growth in online marketing services. Beauty, vocational training, parenting and entertainment sectors have become an important driving force for Meituan advertising revenue. In the three months ending June 30, 2019, the number of active marketers in the division increased by more than 50% year on year, and the average revenue per active marketer continued to increase steadily.

During 618, for example, Meituan launched a six-day promotion for store-to-store, hotel and travel business to drive the growth of transaction-based services. The activity brought higher brand exposure and online traffic to local life service merchants, among which medical and beauty trading users contributed 670 million Yuan to the platform. Wang Xing revealed in the financial results communication meeting, from beauty and entertainment and other services business plate revenue growth year-on-year, and new development business plate such as health care, parenting, education, home decoration, will become the main source of future growth to the store service. Wang also said Meituan will continue to improve sales efficiency and seize opportunities to penetrate local merchants in the sinking market.