Benefiting from the recovery in consumer demand, MEITUAN-W's Q3 revenue exceeded expectations, but net profit declined by 23.4% QoQ. The core local business remained robust, but the high subsidy rate led to a decrease in operating profit margin. New business revenue fell short of expectations, but losses continued to narrow. Sales and marketing costs increased, while research and development expenses decreased.
It is worth mentioning that as of the end of the third quarter, MEITUAN-W achieved record-high numbers in annual active trading users, annual active merchants, and user purchase frequency. The total number of instant delivery orders reached 6.2 billion, a YoY increase of 23%. Among them, the peak daily order volume for food delivery exceeded 78 million.
On Tuesday, November 28th, MEITUAN-W announced its Q3 performance as of September 30th. According to the earnings report, MEITUAN-W achieved a revenue of 76.47 billion yuan in the quarter, a YoY increase of 22.1% compared to the revenue of 62.62 billion yuan in the same period last year, surpassing market expectations of 76.009 billion yuan.
Net profit for the third quarter was 3.59 billion yuan, a YoY increase of 195.3%, surpassing the estimated 2.92 billion yuan, but a QoQ decline of 23.4%. Adjusted EBITDA was 6.19 billion yuan, a YoY increase of 28.9%, but lower than the estimated 7.13 billion yuan. Adjusted net profit was 5.727 billion yuan, a YoY increase of 62.4%.
As of today's close of trading in Hong Kong, MEITUAN-W fell more than 5% to 103 Hong Kong dollars.
In terms of specific business segments, MEITUAN-W's core local business division (including the original food delivery and in-store, hotel and travel divisions, as well as MEITUAN-W flash purchase, homestay, and ticketing) achieved a Q3 revenue of 57.69 billion yuan, a YoY increase of 24.5%, with an operating profit of 10.1 billion yuan. The operating profit margin was 17.5%, lower than the previous quarter's 21.8%.
The increase in operating profit was mainly due to: (i) revenue growth, (ii) improved unit economic efficiency driven by sufficient capacity supply in the food delivery and MEITUAN-W flash purchase business, and (iii) offsetting of some increased subsidies. The decrease in operating profit margin was mainly due to the high subsidy rate.
MEITUAN-W stated in its earnings report that the revenue growth was mainly driven by the recovery in consumer spending, the increase in the number of on-demand delivery transactions, and the growth in transaction volume for in-store, hotel, and travel businesses. This was partially offset by the increase in subsidies deducted from revenue and the decrease in average order value for food delivery and MEITUAN-W flash purchase services.
The number of on-demand delivery transactions increased by 23.0% YoY. The peak daily order volume for food delivery reached 78 million, doubling the volume from three years ago. The iterative membership program and the offering of different types of membership coupon packages have increased transaction frequency. The scale of medium to high-frequency users and their purchasing frequency have also continued to grow rapidly.
MEITUAN-W flash purchase orders, merchant scale, and user scale have all significantly increased. In August, the daily peak order volume for MEITUAN-W flash purchase exceeded 13 million. The number of users in lower-tier cities continues to grow.
Transaction volume for in-store, hotel, and travel businesses grew by over 90% YoY, with the number of active merchants increasing by over 50% and the number of transaction users increasing significantly.
In terms of in-store businesses, the transaction volume for &#34;special price group purchases&#34; continues to grow as more merchants participate and offer high-quality and affordable products.
The revenue from new businesses fell short of expectations at 18.8 billion yuan, with a YoY growth of 15.3%, lower than the estimated 19.23 billion yuan. The operating loss narrowed by 24.5% YoY to 5.1 billion yuan, with a slight MoM improvement. The operating loss rate continued to improve to 27.2%.
MEITUAN-W stated in its earnings report that the growth of new businesses was mainly due to the YoY growth of the commodity retail business, partially offset by the contraction of the self-operated online ride-hailing business.
Regarding MEITUAN-W Optimal, macroeconomic fluctuations and changes in consumer behavior continue to impact growth and resulted in significant operating losses in the third quarter. The transaction volume for MEITUAN-W Buy Vegetables grew strongly this quarter and has become the preferred choice for many consumers, with the user scale, purchase frequency, and average order value steadily increasing.
Sales and marketing costs for MEITUAN-W in Q3 were 49.5 billion yuan, with a YoY growth of 12.2%, accounting for a decrease of 5.7 percentage points to 64.7% of revenue. MEITUAN-W stated that the increase in the amount was mainly due to the increase in delivery-related costs for food delivery and MEITUAN-W flash purchase businesses, as well as the increase in sales costs for the commodity retail business.
The decrease in the percentage of sales costs to revenue compared to the same period last year is mainly due to changes in revenue structure, a decrease in average delivery-related costs for catering takeout and MEITUAN-W flash purchase business, and an improvement in gross profit margin for commodity retail business.
Sales and marketing costs increased by 55.3% YoY to 16.9 billion yuan, accounting for an increase of 4.7 percentage points to 22.1% of revenue. Both the amount and percentage increased mainly due to the recovery of consumption, changes in the business environment, and changes in business strategies resulting in increased expenses for user incentives, promotions, and advertising. In addition, the increase in employee welfare expenses also led to an increase in sales and marketing expenses.
Research and development expenses decreased by 1.7% YoY to 5.3 billion yuan, accounting for a decrease of 1.6 percentage points to 7.0% of revenue, mainly due to a decrease in employee welfare expenses.
General and administrative expenses remained stable at 2.5 billion yuan YoY, accounting for a decrease of 0.7 percentage points to 3.3% of revenue, mainly due to the improvement in operating leverage.
In addition, as of September 30, 2023, MEITUAN-W held cash and cash equivalents and short-term investments of 25.1 billion yuan and 108.5 billion yuan, respectively.
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Benefiting from the recovery in consumer demand, MEITUAN-W's Q3 revenue exceeded expectations, but net profit declined by 23.4% on a MoM basis. The core local business remained robust, while the high subsidy rate led to a decrease in operating profit margin.

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Meituan-W's Q3 revenue increased by 22% YoY, exceeding expectations, while net profit declined by 23.4% QoQ. The number of instant delivery transactions increased by 23.0% YoY. | Zhitong App