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Meituan, a Chinese digital shopping platform, is the largest online food delivery company in the world and the third largest Chinese internet company after Alibaba and Tencent. Founded in 2010 and headquartered in China’s Beijing, the company started as a group discount website, similar to American global e-commerce marketplace Groupon. It evolved over the years and is now present in almost every walk of Chinese life. From food delivery and restaurant reviews to trip booking, movie tickets and even pet care, the company has evolved into a one-stop-shop for Chinese consumers. The firm had around 678 million transactional users in 2022, a little less than 690.5 million in 2021.
In 2015, the company merged with restaurant review platform Dazhong Dianping and changed its name to ‘Meituan-Dianping’, but was renamed again to ‘Meituan’ in September 2020. In 2018, the company acquired bike-sharing company Mobile and launched its own ride-hailing service a year later. The company has also invested in grocery delivery startups.
Business model of Meituan
In a nutshell, the company’s main business is its online-to-offline (O2O) platform. The official motto of Meituan is: “We help people eat better, live better.” At its core, the company operates as an online marketplace, connecting consumers with various local service providers. Meituan does so using its mobile app and website, allowing users to search for services, compare options, place orders, make reservations, and pay electronically.
One of Meituan’s primary revenue streams comes from its food delivery service, which enables users to order meals from a vast network of restaurants and have them delivered to their doorstep. Meituan partners with restaurants, taking a commission on each order facilitated through its platform.
In addition to food delivery, Meituan also offers a range of other local services. These include hotel and travel bookings, movie ticket reservations, beauty and wellness services, grocery delivery, ride-hailing, and more. By diversifying its service offerings, Meituan aims to capture various aspects of consumers’ daily needs.
Furthermore, Meituan’s ‘Retail + Technology’ strategy is a key initiative that aims to integrate online and offline retail experiences. Through partnerships and collaborations with physical retailers, Meituan aims to bridge the gap between the digital and physical worlds. This integration allows users to access a wider range of products and services, including those offered by local brick-and-mortar stores.
One example of Meituan’s offline integration is its partnership with supermarkets and convenience stores. Through the Meituan app, users can browse and purchase groceries from their favourite local stores. This integration enables users to enjoy the convenience of online shopping while supporting local businesses.
Thus, Meituan’s e-commerce platform serves as the foundation for its ‘Retail + Technology’ strategy. It functions as a virtual marketplace for a variety of goods, including electronics, clothing, food, and various other products.
Meanwhile, to enhance its value proposition and provide a superior user experience to its customers, Meituan employs advanced technologies such as artificial intelligence (AI), big data analytics, and machine learning. These technologies enable personalised recommendations, targeted advertising, optimised delivery routes, and dynamic pricing. In the quarter ended March 2023, Meituan spent 5 bn yuan ($691.18 mn) on R&D, accounting for 8.6% of its revenue.
The Chinese company also focuses on building a robust merchant ecosystem. It provides restaurants and service providers with tools and resources to manage their online presence, streamline operations, and attract customers. Along with that, Meituan offers marketing services, data analytics, customer relationship management tools, and financial solutions to help merchants optimise their businesses and reach a wider audience.
To drive user engagement and loyalty, Meituan has implemented a comprehensive rewards and membership program. Users can earn points and receive discounts by using Meituan’s services regularly.
How is the company doing?
Revenues at Meituan grew by 26.7% year-on-year to 58.6 bn yuan ($8.10 bn) in the quarter ended March 2023. During the same period, the company recorded a profit of 3.4 bn yuan ($469.9 mn), turning from loss into profit on a year-over-year basis. Also, the company’s adjusted EBITDA and adjusted net profit both reached record highs of 6.3 bn yuan ($870.8 mn) and 5.5 bn yuan ($760.2 mn), respectively, in the first three months of 2023.
From January to March 2023, the operating profit for the company’s ‘core local commerce’ segment increased by 100.7% year over year to 9.4 bn yuan ($1.29 bn). The company’s ‘new initiatives’ segment’s operational loss, nevertheless, steadily decreased to 5 bn yuan (691.1 mn) during the same period.
Additionally, the operating cash inflow of Meituan for the first three months of 2023 was 8.1 bn yuan ($1.11 bn). Along with that, as of March 31, 2023, the corporation has 26.9 bn yuan ($3.71bn) in cash and cash equivalents and 84.5 bn yuan ($11.68 bn) in short-term treasury investments.
“Meituan delivered strong growth during the quarter, boosted by strong local consumption recovery post-reopening and our effective marketing measures. We will continue to incentivize consumption recovery and increase demand by optimizing our products, content offerings and fulfilment network. We are firmly committed to creating more value for all the participants in our ecosystem,” said Meituan CFO Shaohui Chen.
Stock movement of Meituan
Primary listed on the Stock Exchange of Hong Kong (HKG: 3690), Meituan has a market capitalization of $104.4 bn. The company’s stock has fallen by 38.07% in the past year as of July 10, 2023. It has a negative PE ratio of 103.28 and a forward PE ratio of 34.48. Meituan stocks have a price-to-book ratio of 5.14. Since July 2021, the stock has fallen by 43.67%, hitting an all-time high in March 2023. Besides Hong Kong, American Depository Receipts (ADR) are listed on NASDAQ (OTCMKTS: MPNGF) in the US and are accessible through over-the-counter transactions.
“Our BUY thesis (for Meituan stocks) remains unchanged, as we believe investors overestimate Douyin’s impact while underestimating Meituan’s ability to improve margins. Therefore, we maintain BUY and raise TP to HK$ 170,” said insight provider Blue Lotus Research Institute on Smartkarma.
What’s next for Meituan?
Meituan is stepping up its efforts to expand internationally. The company debuted its sister app called KeeTa earlier this month in Hong Kong, marking the company’s first expansion outside of mainland China. By doing this, it has entered the competition for food delivery in Hong Kong, taking on companies like Deliveroo and Foodpanda.
Additionally, the Chinese food delivery giant is also slated to buy the Chinese AI startup Light Years Beyond in an effort to create its own generative AI. Meituan recently revealed its plans to fully acquire the AI startup for $233.7 mn.
Looking forward, Meituan underlines that it would continue to carry out its ‘Retail + Technology’ company strategy by utilising technology to bring forth new innovations and development prospects.
“Meituan has witnessed the resilience of the domestic economy and the gigantic potential of consumption, and we firmly believe that we will continue to benefit from new advancements and growth opportunities in retail. As a company that integrates retail and technology, we will increase our investments in technology and innovations and actively explore the implementation of cutting-edge solutions that connects people to products and services,” said Meituan Founder and CEO Xing Wang.
