On August 28th, Meituan released its financial report for the second quarter and the first half of 2024, showing a significant increase in profits. The financial statements indicate that Meituan's revenue for the first half of this year reached 155.53 billion yuan, a year-on-year increase of 22.9%; operating profit was 16.46 billion yuan, a year-on-year increase of 98.4%; adjusted EBITDA was 23.07 billion yuan, a year-on-year increase of 65.4%.

In particular, the second quarter revenue was 82.25 billion yuan, a year-on-year increase of 21%; the adjusted net profit for the second quarter was 13.6 billion yuan, a year-on-year increase of 77.6%.

This performance significantly exceeded investor expectations. Previously, Bloomberg analysts expected Meituan's second-quarter revenue to be 80.42 billion yuan, a year-on-year increase of 18%; the adjusted net profit was expected to be 10.34 billion yuan, a year-on-year increase of 35%. Huatai Securities issued a research report stating that it expected Meituan's second-quarter revenue to be 79.9 billion yuan, with a net profit of 8.92 billion yuan.

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Meituan's core business is mainly divided into core local commerce (food delivery, flash purchase, travel, etc.), new businesses (Meituan Youxuan, Xiaoxiang Supermarket, B2B catering supply chain, shared bicycles, charging piles, etc.), and unclassified AI large models. These fields are all in fierce competition, with competitors coming from all directions, including Douyin, Pinduoduo, Alibaba, JD.com, Ctrip, etc. However, Meituan still managed to achieve a significant increase in profits.

A Meituan insider told Caijing that there are three main reasons for the significant increase in profits: the core local business profits have improved, the losses of new businesses have narrowed, and the offensive of Douyin's local life business has weakened, allowing Meituan to focus more on optimizing its revenue structure. "This year, both Meituan and Douyin are more focused on profit than growth."

According to the financial report, Meituan repurchased more than $2 billion worth of shares in the second quarter of this year, and the board of directors has just approved another share repurchase plan of $1 billion. On August 28th, Meituan's share price rose by 3.7%, with the latest market value being 627.66 billion Hong Kong dollars. Since the beginning of this year, Meituan's market value has shrunk by about 40%.Why Local Businesses Are Becoming More Profitable?

Meituan's core local commerce business has shown impressive performance this year, accounting for about 74% of Meituan's total revenue, making it the most important business for the company.

Financial reports indicate that in the first half of 2024, Meituan's core local commerce business achieved a total revenue of 115.31 billion yuan, a year-on-year increase of 23%. The contributions from three main sources of income—delivery services, commissions, and online marketing services, as well as other services and sales (including interest income)—are nearly equal, with year-on-year growth rates of 18%, 23%, and 25%, respectively. The core local commerce business continues to be profitable, with operating profits increasing by 21% year-on-year; the operating profit margin has remained essentially flat, staying around 22%.

In the first half of the year, Meituan's instant delivery transaction volume (i.e., the number of food delivery orders) reached 11.6 billion, a 20% increase year-on-year. However, the average delivery fee per order has dropped from 3.86 yuan in the same period of the previous year to 3.79 yuan. This may be related to the strong momentum of the "Pin Hao Fan" service.

Meituan began piloting "Pin Hao Fan" in 2020, adopting a group buying model to offer low-priced meals, with prices mostly under 15 yuan, and free delivery fees.

According to the financial report, in the second quarter, the peak daily order volume for "Pin Hao Fan" has already exceeded 8 million orders, while the total instant delivery order volume for the second quarter was 6.17 billion, with an average of 67.7 million orders per day, and a peak daily order volume reaching 98 million. This means that "Pin Hao Fan" may already account for about 8% of Meituan's daily food delivery orders.

A Meituan food delivery regional agent told "Caijing" that since the end of last year, Meituan has been adjusting its cooperation model with agents, including gradually increasing the commission ratio and requiring agents to increase subsidies and red packet efforts. Taking Meituan's food delivery membership red packets as an example, after purchasing a membership, users receive six 5-yuan red packets. Initially, Meituan's platform subsidized 2 yuan, the agent contributed 2 yuan, and the merchant contributed 1 yuan. "The 2 yuan from Meituan has gradually decreased, and now it's only a few dimes, with the agent's costs increasing."

He also mentioned that last year, Meituan required agents to launch the low-priced food delivery "Pin Hao Fan" and the group buying business "Meituan Youxuan." These two businesses are loss-making for most agents. The low price of Pin Hao Fan means thinner profits, or even "losing money on each order"; Meituan Youxuan mainly targets the lower-tier market, but "many villages may only have one order a day, but they still have to send a vehicle, resulting in a loss for the round trip."

Industry insiders have mentioned that it is a common practice for platforms to gradually shift costs to agents, not just Meituan, but also Ele.me has similar moves, including many internet platforms that are gradually shifting advertising traffic costs to agents. "In the past, internet platforms spent money to gain growth, and agents made a lot of money as a result. Now the industry has entered a new stage of development, and platforms are paying more attention to cost accounting and profit performance."

A Meituan representative also told "Caijing" that in the past period, Meituan has used various methods to "reduce costs and increase efficiency." From his perspective, agents have been "making too much money." The aforementioned agent stated that in previous years, being an agent could yield profits of several million yuan or even over ten million yuan a year, but now there is only a slim profit, and some peers have started considering changing careers.In addition to adjusting its cooperation model with agents, Meituan's local business faced a slowdown in external competition this year. In 2023, Douyin made a significant push into the local lifestyle business, and platforms such as Kuaishou and Alibaba also accelerated their deployment in the local lifestyle sector. According to Meituan's financial report, in 2023, the company's sales and marketing expenses reached 58.6 billion yuan, a year-on-year increase of 47.5%.

In 2024, the momentum of accelerated marketing has slowed down. In the first half of the year, Meituan's sales and marketing expenses were 28.7 billion yuan, a year-on-year increase of approximately 14.8%. This figure represents a 14.6% decrease compared to the second half of 2023.

During the earnings call, Meituan's CFO, Chen Shaohui, stated that in the second half of this year, after organizational restructuring, the business has shifted its focus to order growth and user base expansion. Meituan's strong execution capabilities will drive the GTV (Gross Transaction Volume) to maintain its growth momentum for the remainder of the year. The gap between the revenue growth rate and the GTV growth rate in the second half will continue to narrow significantly. Operating profit margin is not the focus of Meituan's attention, as it is influenced by the proportion of GTV contributions from different categories, cities, and revenue mixes, as well as market dynamics. Chen Shaohui suggested paying more attention to the growth in the amount of operating profit, which is a more important indicator for the business team.

He anticipates that Meituan's in-store business will achieve a robust year-on-year increase in operating profit in the second half of 2024.

Cost-saving and efficiency improvement results are evident.

Meituan's financial report shows that the new business has significantly reduced losses, with operating losses narrowing by 60% year-on-year to 4.07 billion yuan. The total revenue growth rate of the new business was 24% year-on-year, mainly influenced by "Other services and sales (including interest income)," which accounts for 96% of the revenue and grew by 23% year-on-year. The reduction in losses also benefited from cost control, with the cost of the new business increasing by only 4% year-on-year.

The second quarter showed even better performance. In the core local commerce segment, the operating profit in the second quarter grew by 37% year-on-year. The report indicates that, aside from the home delivery business, the order volume for the in-store hospitality and travel business grew by more than 60% year-on-year, with both the number of annual transaction users and the number of active merchants reaching new highs. However, an industry insider mentioned that Meituan's in-store hospitality and travel business is not very large, mainly focusing on 1-star to 3-star hotels and scenic spot tickets, but the core profits of the travel business come from high-star hotels, resort hotels, and business travel.

In the new business segment, the operating loss narrowed by 75% in the second quarter, with the operating loss rate improving by 9 percentage points quarter-on-quarter. According to the financial report, this is due to Meituan Youxuan's efforts to enhance product quality, strengthen cooperation with suppliers, and improve fulfillment capabilities, thereby increasing the average price per item, product markup rate, and operational efficiency. Other new businesses, such as the Little Elephant supermarket and B2B catering supply chain, have also improved efficiency.

Since the beginning of this year, Meituan has made several organizational adjustments and appointed management personnel, gradually integrating the home delivery business group, in-store business group, Meituan platform, and basic R&D into the "core local commerce" segment. The original departments under the two business groups have been adjusted to be directly under the "core local commerce." This means that the structure has become more flat.The most recent adjustment took place on August 23rd, where SaaS (Software as a Service), cycling, and power bank services were merged into "Software and Hardware Services"; Kuai Lu, Xiao Xiang, and You Xuan businesses were consolidated into "Grocery Retail"; and the overseas business was renamed to Keeta.

During the earnings call in March of this year, Meituan's CEO, Wang Xing, responded that the purpose of the organizational restructuring was to enhance the operational efficiency of merchants and user experience by integrating platforms and R&D to unleash cost synergies.

Cost synergies have already been reflected in the financial reports. In the second quarter of 2024, Meituan's cost of sales increased by 14% year-over-year, which is lower than the revenue growth rate, thus improving the gross margin by nearly 4 percentage points compared to the same period last year, reaching 41%.

In the second quarter earnings call, Wang Xing stated that Meituan's new business revenue grew by 29% year-over-year in the second quarter, which is faster than the first quarter and also faster than the core local commerce. This growth was mainly driven by the strong performance of Xiao Xiang Supermarket and Kuai Lu. Meituan You Xuan has also made some progress in reducing losses. Since February of this year, Meituan has been continuously implementing efficiency improvement measures, promoting sustained loss reduction. "We are no longer focusing on the national market share, but instead, we are focusing on reducing losses and improving efficiency this year. In the second half of this year, we will continue to optimize operational efficiency, but the extent of loss reduction will also depend on the overall business scale."

In addition, marketing expenses in the second quarter only increased by 2% year-over-year, and R&D expenses decreased by 1%. Administrative expenses increased by 26% year-over-year, but administrative expenses only account for 12% of the total of these three major expenses, thus having a minimal impact on the overall cost situation. This led to Meituan's operating profit margin reaching 14% in the second quarter, an increase of nearly 7 percentage points compared to the same period last year.

The outside world has been very concerned about Meituan's overseas business, which is considered by many companies to be a new growth point. Among the top companies, Meituan's overseas expansion started relatively late.

Meituan's food delivery brand Keeta was launched in Hong Kong in May 2023 and quickly established a foothold with substantial subsidies. At the beginning of the launch, new users who registered were rewarded with 300 Hong Kong dollars, and inviting friends earned an additional 50 Hong Kong dollars. There were also subsidies for delivery personnel. A Hong Kong Keeta rider told Caijing that he delivered food at the end of 2023, with the goods totaling 69 Hong Kong dollars, but he received a delivery fee of 72 Hong Kong dollars, including a 12 Hong Kong dollar on-time reward. Some media have calculated that if a Keeta rider completes 500 orders in a month and receives all rewards, their income could reach up to 35,000 Hong Kong dollars.

According to the consumer data platform Measurable AI, as of the first quarter of 2024, Keeta's market share, calculated by order volume, has reached 32% for all services (food delivery, pick-up, and daily necessities), and 27% by GMV, making it the second-largest among the top three local platforms.

Media reports suggest that Keeta may launch in Riyadh, Saudi Arabia, in September or October this year. In the second quarter earnings call, Wang Xing stated that Meituan's overseas expansion is still in a very early stage, and the company will continue to evaluate opportunities in different regions; meanwhile, the budget for overseas business is included in the new business segment, and the impact on the operating loss of this segment will be limited this year. "We believe that the overseas market is the right long-term strategy for Meituan, and we will remain patient and continue to explore."It seems like you've included some non-text elements in your request, which I can't translate. However, if you provide me with the text you'd like translated into English, I'd be more than happy to assist you. Please type out the text you want to be translated, and I'll get to work on it.