Author | Liu Baodan From performance to market confidence, Meituan is walking out of a three-year low point, but Wang Xing is not stopping there - he has even bigger plans. Going overseas has become a must for Chinese companies. Meituan, which has been warming up for 8 years, has finally made up its mind to put going overseas on the agenda. Recently, Meituan began recruiting senior engineers for international silver enterprise direct connection. After the model was successful in the Hong Kong market, Meituan officially kicked off its overseas expansion, accelerated recruitment and put the first stop of the overseas expansion in Saudi Arabia in the Middle East. Going overseas is a critical turning point, which means that after more than ten years of capacity accumulation, Meituan has to export its local life capabilities to the world, which is as significant as the replication of TikTok by ByteDance. In the wave of Internet companies going overseas, Meituan went overseas later because local life patterns are more important than social, e-commerce and other industries. However, Wang Xing must make this move. Against the background of intensified domestic competition and the shrinking of community group buying, he must find a new growth story. On his entrepreneurial journey, Wang Xing is still determined to create a new business legend in this global adventure. A must-have question. Meituan has fought a beautiful takeaway battle in Hong Kong. On May 6, Measurable AI, a market research firm, released the latest data showing that by March 2024, according to the number of orders, KeeTa, the takeaway business of Meituan in Hong Kong, has a market share of 44%, rising to the largest takeaway platform in Hong Kong. However, Hong Kong is only a stopover for Meituan's overseas expansion, and Meituan has set its real meaning of going overseas in Saudi Arabia. Wall Street news learned that Meituan has been recruiting people around the direction of going overseas in the past two months. The positions include engineers, overseas human resources and operation experts, international payment and transaction product managers, mainly responsible for payments, employee management and related products in overseas markets. More importantly, the recruitment of local talents. More than a month ago, Meituan posted relevant recruitment information on LinkedIn and the Middle East recruitment platform Baye.com, with Riyadh, the capital of Saudi Arabia, as the place of work. From the city selection, Meituan did not choose the United States with a larger market space, nor did it choose Southeast Asia where culture and food are more similar, but chose Saudi Arabia. It can be seen that Meituan's overseas expansion strategy still has a heavy experimental component and is more cautious. Wang Xing is not fighting an unprepared battle. For this overseas expansion, Meituan has been planning for many years. As early as 2016, Wang Xing began to consider the issue of going overseas and visited Silicon Valley, Berlin, Israel, Jakarta and other places. In 2017, Meituan officially laid out overseas accommodation business, first connecting hotels in nearly 100 countries overseas to the Meituan application. At that time, the domestic and foreign takeaway wars were in full swing, and with Meituan's listing in Hong Kong in 2018, Wang Xing's overseas strategy was forced to be shelved. Since then, Meituan has also made a series of international investments, including Swiggy in India, Gojek in Indonesia, and Opay in Nigeria, involving food, taxis, payments and other fields, to prepare for going overseas. Along with the frequent news reports of Meituan's victory in Hong Kong, Meituan's overseas plan was finally brought to an unprecedented strategic height in 2024, and Wang Xing once again rushed to the forefront. In February, Meituan put the home business group, the in-store business group and other businesses into the core local business sector, and appointed Wang Putong as CEO, while Wang Xing personally took charge of overseas business, which ensured the landing of the overseas expansion strategy in the organizational structure. In fact, before the confirmation of the overseas expansion strategy, Wang Xing personally visited the Middle East last May and met with members of the Saudi royal family, laying the foundation for Meituan's layout in Saudi Arabia.

In today's weather is good. Today's weather is good.

Following Ali and JD's billion yuan subsidies, Meituan is also learning from Pinduoduo's low-price group purchase model. Wang Xing has applied this model to local life and stabilized the competition with Douyin.

On June 6, Meituan reported better-than-expected results for the first quarter of 2024. Its revenue increased by 25% to 73.3 billion yuan year-on-year, although the growth rate was slightly lower than the same period last year, but it performed better than the previous two quarters and maintained high growth.

In terms of profit, Meituan's net profit for the period and adjusted operating profit before interest, taxes, depreciation and amortization (EBITDA) were 5.37 billion yuan and 8.07 billion yuan, respectively, with growth rates of 60% and 29%, reflecting the strong operating performance of Meituan in the last three quarters.

As of today's close, Meituan's stock price was HKD 110.4, an overall rebound of 80% from its low point in February this year.

Market expectations for Meituan are also rising. Citi, Morgan Stanley and Jefferies respectively raised Meituan's target price to HKD 140, HKD 120 and HKD 135. Citigroup stated that Meituan's first quarter net income was 18.6% and 29.4% higher than the bank and market expectations, respectively. Meituan quickly adapted to changes in consumer behavior and market dynamics and was rated as "buy".

As expected, the core factor in Meituan's improved profitability is the reduced losses in its community group buying business, while Meituan also focused on cost control.

In the first quarter, Meituan's new businesses, including community group buying, operated at a loss of 2.8 billion yuan, the lowest level in recent years, with a year-on-year decline of 45.2%. The loss amount was nearly halved, directly reducing the loss by nearly 2.3 billion yuan in the same period last year, all of which were substantial profits retained.

During the earnings call, Meituan stated that since February, the preferred business has strictly focused on improving efficiency by raising prices, reducing subsidies, and closing low-efficiency warehouses and sites, resulting in a significant reduction in losses.

Meituan cuts costs where possible, with its sales cost in the first quarter growing at a rate of 22.6%, 2.4 percentage points lower than revenue growth; R&D spending is stable at 5 billion yuan; general and administrative expenses are 2.3 billion yuan, with a growth rate of only 15.2%.

Although Meituan's core business did not make much contribution to profit growth, the operating surplus of Meituan's core local commerce was 9.7 billion yuan in the first quarter, with a year-on-year growth rate of only 2.7%, hitting a low point since 2023. But Meituan aims to use profits to take market share, and in this regard, Meituan's strategy has proved effective.

Meituan has stabilized its position in the local life market. In the first quarter, Meituan's core local commerce achieved revenue of 54.6 billion yuan, a year-on-year increase of 27.4%, slightly higher than the same period last year and also at a high level in the past four quarters. Meituan's and Douyin's market share has not changed significantly.

In order to win the market competition, Meituan is also willing to spend money. In the first quarter, Meituan's sales and marketing expenses were as high as 13.9 billion yuan, a year-on-year increase of 33%.

Meituan said that it was mainly due to changes in the business environment and business strategies, resulting in increased spending on transaction user incentives and promotion. In addition, employee compensation costs also increased.

Two years ago, Meituan launched the "Pinner" version of local life, which exploded in the first quarter, with a daily order volume of nearly 5 million, a record high, and a scale that has approached 10% of Meituan's catering takeaway business.

"Pinner" not only meets users' demand for low prices, but also brings more traffic to merchants, which has enabled Meituan to achieve comprehensive growth in orders, users and merchants.

During the earnings call, Meituan stated that the annual active users of the takeaway service continued to grow and approached 500 million, and the trading frequency has also increased significantly. At the same time, the annual active users and trading frequency of Meituan's real-time e-commerce sector have also increased.

A more positive signal is that Meituan's advertising revenue has become a core growth driver. In the first quarter, Meituan's online marketing services revenue was 10.3 billion yuan, a year-on-year increase of 33%, with faster growth than delivery and commission, and a significant increase of 23 percentage points compared with the same period last year.

It can be said that Wang Xing is leading Meituan back to the upward trend. Of course, Meituan is far from being worry-free.

At present, although Meituan has stabilized the market, it still needs to improve its profitability as soon as possible.

From the local life business point of view, Meituan is still in the active defensive stage. Douyin's commercialization leader Pu Yanzi has set the sales target of local life to 600 billion yuan, aiming for double-digit growth. In recent months, Kuaishou has also begun to provide logistics support to merchants, aiming to grab a share of the market.

Meituan also made active responses. In April, Meituan announced that Wang Putong was the core local business CEO. Prior to this, Meituan had merged the in-store and at-home business groups into a "core local commercial" in the hope of strengthening business synergy and improving operational efficiency.

Wang Xing is also actively seeking new growth points. In March, Meituan's market share in Hong Kong has already reached first place and has begun to actively prepare for the next overseas expansion. At present, Meituan is actively building an overseas team and has started recruiting people in Saudi Arabia.

During the phone conference, Wang Xing responded that the Middle East is a choice and there is currently no progress in launching business. The company is evaluating other markets and has not made any final decisions. "The company is also looking at Southeast Asia, Europe and other regions and will cautiously promote globalization and capital investment."

"The meal delivery business was launched in November 2013 and has been in operation for more than 10 years. This is a great journey, but it takes a long time. So we are very patient and we may need another 10 years to establish a foothold in overseas markets."

On one side is the fierce battle for local life in China, and on the other side is the more complex international market. Meituan is entering a new stage of development unprecedentedly, with opportunities and challenges coexisting. Wang Xing's global journey has officially begun.