To The Moon

$Meituan(03690)$ posted Q3 financial report after close on November 25th, it made profits from loss again, beat estimates, together with most Chinese big techs. The strong will to survive, made them improved operational efficiency, and also, the market's surprise.

Shall Meituan keep profits? 

From Q3 performance, both main business and new business are in great growth, and the cost control also reflects the operating leverage.

• Revenue was 62.62 billion yuan, a year-on-year increase of 28%, slightly higher than the market expectation of 62.38 billion yuan;
• The net profit was 1.22 billion yuan, turning losses into profits year-on-year, which was better than the market expected loss of 987 million yuan;
• The adjusted EBITDA was 4.8 billion yuan, which was higher than the market expectation of 2.75 billion yuan.
• The number of paying users was 687 million, up 2.9% year-on-year, higher than the market expectation of 515 million.

Meituan's business is divided into two parts, Local business and Initiative business. Among them, the local business includes delivery, In-Store and Hotel & Travel.

The total order volume of food and beverage take-out and Meituan rapid delivery increased by 16.2% year-on-year, with an average daily order volume to 50 million , and reached the highest exceeding 60 million in early August. It is also a major driving force for the growth of single volume, which may reach more than 500 million orders. The transaction volume of convenience stores and supermarkets on the platform increased by 27.9% and 62% respectively, and the order volume of husband and wife stores increased by 125% year-on-year.

Daily delivery orders have become a habit to Users.

In-store orders needs to be focused, it is in high competition with some short video platforms, who are taking the market share. It is said that Douyin's in-store business GMV has reached 10 billion in October, Meituan's in-store business also remained growth. All kinds of recovery activities in summer brought further benefit.

While short video platform's different from Meituan. Meituan‘s business is provided on the behavior of users' "shopping", But Douyin isonly "recommendation" And long-term user evaluation has become an important data advantage.

For the new business, the revenue in this quarter reached 16.3 billion yuan, and the retail business naturally contributed. Although Meituan's business of selecting and buying food is not Meituan's main business, it is Meituan's further expanded retail business besides take-out. The market competition is relatively fierce, and the market share is still growing.

At the same time, the loss of new business began to narrow, which also set the stage for future profits. The overall operational efficiency of Q3 Meituan is also the embodiment of "reducing costs and increasing efficiency".

Although Q3's marketing expenses increased month-on-month, they decreased by 4 points year-on-year again, which was dwarfed by the 28% increase in revenue

This point is very obvious in this quarter's technology companies. The improvement of profit margin naturally further enhances its valuation basis.

Will this be the last time that Meituan will turn losses into profits?