Investors can expect that Meituan will grow into a more calm and energetic life body. This is especially important for long-term investors who prefer the intrinsic value of the company rather than short-term concepts.

Editor’s note: This article is from the micro-channel public number “Barron” (ID: barronschina), Author: vane, Editor: Leo.

After Meituan clearly crossed the critical line of scale effect, now is the important time to understand it again. Investors should not confuse Meituan’s retail business intentions with various industry outlets too crudely.

Meituan (3690.HK) recently released the 2020 annual performance report, which provides investors with the latest information about this company.

As of December 31, 2020, the number of active merchants on the Meituan platform reached 6.8 million, and the number of annual transaction users reached 510 million. Correspondingly, the company’s annual revenue exceeded 100 billion, reaching a record high of 114.8 billion. , An increase of 17.7% year-on-year.

This is a moderate overall increase, but if you explore its internal composition, you will see a business ecosystem that is increasingly stable and vigorous. Within the ecology, the strategic intention of “Food + Platform” is becoming more concrete.

Get rid of the perspective of looking at the company’s classified business in isolation, what Meituan is advancing is all about the optimization of resource allocation in the broad “local e-commerce” market, the improvement of operational efficiency, and even the inclusive and long-term win of ecological participants.

The new retail business has brought losses in the short term, but on a longer-term scale, the losses at this moment may be considered quite limited and very worthwhile. In the long run, its subsequent contribution to the Meituan ecology will not be limited to the business itself.

After Meituan clearly crossed the critical line of scale effect, now is the important time to understand it again.

Long win ecology: clear and steady overall growth

In 2020, Meituan’s main business maintained steady growth, with annual revenue of 114.8 billion yuan, a year-on-year increase of 17.7%. Behind this is the post-epidemic recovery of the Chinese consumer market, the further evolution of user consumption habits, and the further acceleration of the industry-wide digitalization process.

First of all, the overall situation of the food delivery business is stable and the growth remains the same. The annual transaction volume reached 488.9 billion yuan, a year-on-year increase of 24.5%. The number of annual transaction users reached 511 million, a year-on-year increase of 13.3%; the number of food delivery transactions throughout the year reached 10.1 billion, a year-on-year increase of 16.3%. The purchase frequency has increased significantly, which indirectly feedbacks the increase in user stickiness and overall satisfaction. What’s more noteworthy is that its revenue and profit growth does not depend on the increase in monetization rate, but comes from the overall improvement of operational quality and efficiency, which includes the increase in the supply of quality merchants, the optimization of various marketing activities, the efficiency of distribution and the The improvement of the experience also includes the digital solutionThe trend will continue to infiltrate and nourish the healthy growth of the overall business; it may not be fed back as a short-term premium, but it will definitely help the long-term growth of market value.

ESG perspective: neglected social value

Based on the above judgment, Meituan is entering a new round of virtuous circle and healthy growth cycle, and its value overflow for ecological participants is also beginning to emerge.

The company began to more consciously explore the practice of social responsibility as an important company. Investors should pay more attention to the fact that most of these social responsibility practices are derived from the endogenous logic of Meituan’s ecology, and they are naturally developed around the main business.

The essence of Meituan’s new retail business is to serve e-commerce. Its main implementation method is digital sinking, reaching more secluded corners and reaching the more silent people in the past. The rural and agricultural population is the largest part of it.

It is easy to imagine that Meituan’s “direct harvesting of agricultural products” program will sell agricultural products from all over the country to help farmers increase their income.

Easily overlooked is that, on the one hand, Meituan Optimal Group has and will continue to create more jobs and entrepreneurial opportunities; data shows that by the end of 2020, the cumulative proportion of riders in poverty-stricken areas who have earned income from the Meituan platform Reached 24%. On the other hand, it will also update consumption channels in rural areas on the supply side, greatly increase consumption options for rural people, and improve quality and cost-effectiveness. A set of survey data provided by Meituan shows that as of now, 33% of the country’s townships still have no commodity markets, 53% of villages do not have general stores, and 70% of villages do not have restaurants. For example, most people ignore the demand for tropical fruits and seafood in the remote areas of the Midwest; although in the short term, they will not be comparable to the size of the urban market, but it will be a zero-to-one growth.

In terms of community e-commerce, after the panic period accompanied by new things, the Internet platform is likely to find an appropriate way to coexist harmoniously with small physical stores. Judging from the actual situation during the epidemic, e-commerce services have actually expanded the income dimension of physical stores. Data from the Meituan platform shows that consumers pick up at the store and often bring new second purchases. At present, the conversion rate can reach 20%. Community physical convenience stores and commissaries are businesses with a smaller radiation radius and tighter connections. Behind them is another tens of millions of employment groups across the country.

In the urban market, Meituan will focus its next step on education and assistance for elderly users. For most elderly users, software operation is actually just a one-time bottleneck. Once it breaks through, it will not only greatly improve the convenience of their lives, but also bring some warm and interesting derivatives.

For a long time, ESG (Environmental, Social Responsibility, Corporate Governance) investment philosophy has always been sentimental and more concepts than substance. This is because factual judgments involving corporate responsibilities are often easily separated from the actual operating conditions. In the market to dateIn the environment, the ESG perspective is certainly not helpful in judging the short-term rise and fall of stock prices; its significance lies more in the control of long-term investment risks.

In the case of Meituan, especially the social responsibility (Social) dimension, its main business advantages, “sinking” to the local natural genes, have been more dominant than before the epidemic. In 2020, more than 4.7 million riders will earn income on the Meituan platform. From this perspective, the meaning of the ESG perspective is more about the qualitative judgment of the company’s value. When black swans similar to the new crown epidemic appear, companies with more balanced and sustainable business ecology can often contribute some anti-fragility capabilities to the industry.

Meituan’s management was also very clear at the performance meeting. Meituan CFO Chen Shaohui said, “We will continue to explore new opportunities, invest firmly in the retail sector, and continue to promote the digital upgrade of the Chinese consumer market with long-term returns, so as to ultimately benefit the retail industry ecology and create value for society.”

Accordingly, investors can expect that Meituan will grow into a more calm and energetic life body. This is especially important for long-term investors who prefer the intrinsic value of the company rather than short-term concepts.

(This article is for readers’ reference only and does not constitute providing or relying on as investment, accounting, legal or tax advice.)