Meituan 2025 Q1 Data Analysis - Outstanding Performance, Guidance Under Pressure

0. Brief Review

In Q1 2025, similar to the previous consecutive quarters, Meituan once again delivered a stellar performance that exceeded expectations.

However, unlike before, the management's remarks during the subsequent earnings call raised investors' concerns about a potential turning point in Meituan's short-term performance. When asked about how to respond to JD.com's challenge in Q2, Wang Xing replied: "We will spare no cost to win the competition," which will include short-term fluctuations in financial data in the future.

1) From the Q1 performance itself, Meituan delivered an impressive report:

Revenue reached 86.557 billion yuan, up 18.12% YoY, exceeding the expected 85.44 billion yuan.

Adjusted profit was 10.949 billion yuan, up 46.21% YoY, surpassing the expected 9.73 billion yuan.

Core local commerce operating profit was 13.491 billion yuan, up 39.1% YoY, higher than the expected 11.8 billion yuan.

New business operating profit was -2.273 billion yuan, up 17.54% YoY, better than the expected -2.8 billion yuan.

i) Compared to expectations, Q1 performance was generally better than anticipated.

If compared to other Chinese concept stocks, Meituan's main performance metrics maintained double-digit growth rates, indicating higher growth potential, which also corresponds to its relatively higher valuation.

ii) It is also worth noting that compared to Meituan's performance in previous quarters, the overall growth rate has been declining, though it still maintains a decent growth rate after the slowdown.

2) In contrast, the subsequent earnings call revealed more details in the guidance:

i) To counter JD.com's challenge, short-term financial data will face fluctuations:

Since JD.com's entry into the food delivery market in Q1 has not yet fully impacted Meituan, this was the most concerning issue for investors regarding Meituan's Q2 guidance. The first question in the earnings call was about JD.com's impact on Meituan's food delivery business. Wang Xing's response was: "We will spare no cost to win the competition."

His answer implied two things:

On one hand, Wang Xing expressed confidence in ultimately winning the competition, based on Meituan's decade-long experience in the food delivery industry and its inherent advantages. I personally agree with his assessment that defeating JD.com, which relies on subsidies, is highly likely.

On the other hand, Wang Xing repeatedly emphasized that some subsidies are irrational, leading to low quality and low prices. Meanwhile, Meituan's response to the competition will result in short-term financial fluctuations: Q2 core local commerce revenue growth will slow compared to Q1, and core local commerce operating profit will decline significantly. Additionally, it is impossible to predict how long this irrational competition will last and how long the financial impact will persist.

ii) Overseas business is developing well. While it currently pressures profits, it may become a new growth driver in the future:

Hong Kong: Launched in May 2022, it became the largest food delivery platform in the region by 2024, with continuous growth in order volume, average order value, market share, partnered restaurants, and delivery personnel.

Saudi Arabia: Launched in September 2024, it has covered all nine cities with populations over one million and plans to expand to more cities.

Brazil: Brazil has a vibrant economy and a population exceeding 200 million. Its food delivery market ranks among the top five globally. Meituan plans to invest $1 billion over five years to build a delivery network.

iii) Share buybacks remain the primary method for shareholder returns:

Management mentioned in the earnings call that they will seek appropriate windows to further reduce the number of outstanding shares through buybacks.

However, it is worth noting that Meituan repurchased HK$28.159 billion worth of shares from January to September 2024.

From September 2024 until the release of this quarterly report, Meituan paused its share buybacks. Therefore, when management will find the "appropriate window" and the scale of buybacks for this year remain key points to monitor.

1. Operating Performance

Operating Performance - Quarterly