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Meituan
HKEX:3690

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Meituan
HKEX:3690
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Price: 116.7 HKD 1.74% Market Closed
Updated: Jun 17, 2024
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Earnings Call Analysis

Q4-2023 Analysis
Meituan

Strong Revenue Growth with Boosted Profits

The company saw a 22.6% increase in total revenue year-over-year, hitting RMB 73.7 billion, attributing the rise to improved food delivery margins and online marketing revenue. The cost of revenue ratio dropped by 5.7 percentage points to 66.1%, while selling and marketing expenses rose 4.8 points to 22.7% due to promotional efforts. Nonetheless, R&D expenses fell to 7.4%, indicating greater operating efficiency. Moreover, adjusted net profit soared to RMB 23.3 billion, jumping from RMB 2.8 billion the year prior. The company bolstered its consumer and merchant bases, reaching record highs with daily order volumes and showcasing significant long-term business expansion potential.

The Market Is at a High Growth Stage

The company expressed strong belief in the ongoing high growth stage of the market, highlighting the potential for online consultation in lower-tier cities and various new categories. The New Initiatives segment grew its revenue by 11.5% year-over-year, reaching RMB 18.6 billion, led by the goods retail business and offset by contractions in other areas. Operating loss narrowed, reflecting improved operating efficiency and a commitment to high-quality growth, which has borne fruit in enhanced EBITDA and free cash flow. Anticipating the future, the company will accelerate its core business, capitalize on growth opportunities, and improve operating efficiency while maintaining confidence in its business fundamentals and long-term potential.

Structural Adjustments to Foster Synergies

To better synergize its business divisions and enhance service offerings to merchants and consumers, the company recently adjusted its organizational structure. By streamlining operations, the company aims to boost integration among teams, providing more competitive products and services, enhancing user experiences, and achieving cost synergies. The restructure anticipates extending the company's reach across 2,800 cities and counties in China, connecting millions of merchants and consumers, and fortifying its position as the go-to platform for local services.

Food Delivery Business Sees Resilient Growth

Amid competitive market conditions, the company's food delivery business maintained robust growth and consumer stickiness. With nearly 490 million annual transaction users and over 4.6 million active merchants, the company leverages its efficient delivery network and brand power as barriers to entry. Strategies to boost user engagement, innovative product offerings, and improved operating efficiencies have positioned the company for sustainable health growth in 2024. A focus on balancing profitability with growth will be key, alongside enhanced advertising monetization, to drive food delivery's operating profit growth in the upcoming year.

In-Store Business Rising Rapidly

The in-store business recorded substantial growth, especially during the Spring Festival with notable year-over-year increases in transactions and hotel & travel bookings. Strategic investments in live streaming, special deals, and nationwide expansion of the direct operation model are expected to significantly benefit the company's long-term business. With intentions to further solidify market share, the company anticipates high Gross Transaction Value (GTV) growth in 2024, driven by increasing online penetration and evolving consumption trends. Despite short-term profit impacts, the alignment of investments with long-term strategy is expected to ensure profitability.

New Initiatives Poised for Break-even in 2024

The company's diverse New Initiatives segment, including previously cash flow positive ventures like restaurant SaaS and B2B food service distribution, is expected to collectively achieve break-even in 2024. Meituan Select faced growth slowdowns and high operating losses in 2023. However, strategic changes to enhance user experience and efficiency, reduce subsidies, and improve price markups are underway. These modifications are forecasted to significantly narrow operating losses as the company persists in making online grocery a successful avenue for growth.

Earnings Call Transcript

Earnings Call Transcript
2023-Q4

from 0
Operator

Thank you for standing by, and welcome to the Meituan Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Scarlett Xu, VP and Head of Capital Markets. Please go ahead.

S
Scarlett Xu
executive

Thank you, operator. Good evening and good morning, everyone. Welcome to our fourth quarter and fiscal year 2023 earnings conference call. Joining us today are Mr. Xing Wang, Chairman and CEO; and Mr. Shaohui Chen, Senior Vice President and CFO of Meituan. For today's call, management will first provide a review of our fourth quarter and fiscal year 2023 results and then conduct a Q&A session. Before we start, we would like to remind you that our presentation contains forward-looking statements, which include a number of risks and uncertainties and may differ from actual results in the future. This presentation also contains unaudited non-IFRS accounting standards financial measures that should be considered in addition to and not as a substitute for measures of the company's financial performance prepared in accordance with IFRS accounting standards. For a detailed discussion of risk factors and non-IFRS accounting standard measures, please refer to the disclosure documents in the IR section of our website. Now I will turn the call over to Mr. Xing Wang. Please go ahead, Xing.

X
Xing Wang
executive

Thank you, Scarlett. Hello, everyone.

During 2023, in China's core local commerce industry is still in the faster growth than other retail sectors. And as an industry leader, Meituan achieved healthy and high-quality growth in core business sales. Total revenue increased by 25.8% year-over-year to RMB 276.7 billion. Adjusted net profit increased substantially to RMB 23.3 billion grown from RMB 2.8 billion in previous year. In the fourth quarter, consumer base and merchant base, both accelerated growth setting new records, 80 active users also grew by over 30% year-over-year to a record high. These results led a solid foundation for our long-term business expansion in the future. In 2023, daily order volumes of on-demand delivery increased by 23.9% year-over-year to RMB 60 million. Peak daily order volume of food delivery exceeded RMB 78 million on the beginning of autumn. [indiscernible] peak daily order volume of Instashopping surpassed 13 million on Chinese Valentine's Day, [indiscernible]. We continue to start the consumer behavior in adapting to the everything known ductile. We also fostered a sustainable development ecosystem for our consumers, merchants, couriers and business partners and facilitated the high-quality growth of on-demand retail in China. Moreover, our in-store, hotel & travel businesses achieved explosive growth of GTV merchant base and user base, we continued expanding online penetration evaluating in the new consumption environment. We effectively satisfy the diverse needs from consumers and invigorated local consumption and operating more valuable money selections through more product formats across broader categories. In future, we will continue to devote ourselves in better serving the needs of our consumers, delivering greater value to merchants and creating more job opportunities and generating more social value. Now let me walk you through each business in more details. 2023 marks the 10-year anniversary of our food delivery business. The past decade shows our continuous innovation and growth in the competitive environment. In 2023, we further solidified our market leadership and core competence, annual transacting user of food delivery continues to grow mid- to high-frequency users, and their consumption frequency increased steadily. We are delighted to see that food delivery now caters to a much larger consumer base and satisfy more diverse needs of consumers. Having food and meals delivered in 30 minutes has become a new lifestyle. Throughout the year, we proactively generated our business strategies and refined our operations in products, marketing and supply to cope with the evolving consumption trends. For Pin Hao Fan, we focused on scale expansion and operational enhancement. It allows us to lead consumption demand for value-for-money selections, through good purchase and having them delivered to their doorstep with higher efficiency. It helped us reach a broader audience, enhance user experience and improve purchase frequency of price strategy user. We also put more efforts in high order value domain by innovating and refining products such as Shen Qiang Shou or [Foreign Language] Meal For One and Must-Order List [Foreign Language]. During the process, we strengthened 2 key competencies. The first one is product display. We enhance our content production capabilities across various formats, including graphics, texts, videos and live streaming, to nurture a vibrant content ecosystem. The other one is promotional channel schemes. We upgraded and simplified our membership program to make it easier to use the consumers and merchants alike. Our continuous improvement in a shelf-based model, combined with our enhanced marketing ability with our mega-hit products, allows us to stimulate consumer demand more effectively. After 5 years of rapid growth, Meituan Instashopping has now become a pivotal loan in the on-demand retail bank. It connect millions of local retailers and brands with hundreds of millions of consumers. We have successfully calculated consumer habit in having everything delivered to their doorsteps in 30 minutes. In 2023, order volume of Meituan Instashopping increased by over 40% year-over-year, showcasing its large growth potential. The user base of Meituan Instashopping, not only it has higher stickiness, but also demonstrate a stronger purchasing power compared to the average purchasing users with a significant portion in young users. While we continue to improve supply, we noticed that consumers now use Meituan Instashopping more frequently because of a wide range of scenarios and time periods. Notably, in the fourth quarter, purchase frequency from core users grew by over 20% year-over-year. We believe that purchase frequency and ARPU from its core users will have substantial room to grow. In 2023, our annual active merchants also grew by almost 30% year-over-year. As more off-line retailers are tapping into the on-demand channel, the quality and diversity of our client has enhanced significantly. We partnered with around 400 brands onboarded the [indiscernible] merchants and supporting their transition to online operation. We also expanded our new supply formats to broader regions that Meituan InstaMart [Foreign Language] now covering over 200 cities. Our continuous efforts on the supply side have progressively yielded and elevated user experience and sustained user growth. Order volume grew robustly across all categories, regions and scenarios, moreover, we continually innovated and optimized our platform solutions to better cope with the evolving demand. For example, we expanded our coverage for 24-hour pharmacies elaborated with the chain pharmacies and operating medical insurance payment options and provided on-demand quick home testing service, [Foreign Language] during the flue seasons. We were the first in the industry a launch a to launch a growth end solution for contesting online diagnose and medicine delivery and [Foreign Language] and offer the consumer one-stop online health service. Thanks to our past efforts, the value embedded in the on-demand retail and on-demand logistics has been recognized. We believe that having everything delivered to the consumers doorsteps will be the material. Historically, driven by growing consumer demand, we continuously move offer time price to the online platform and provided reliable procurement services. In the next stage, we will transform and penetrate deeper into the industry value chain across all major categories for both food delivery and non-food delivery. We are absolutely confident in the long-term development of food delivery and Instashopping. Our in-store, hotel & travel business actively captured a rebound of off-line consumption with products and operations further [ increased ]. For the full year of 2023, GTV increased by over 100%, annual transaction users increased by over 30% and annual active merchants grew by over 60%, all reaching new highs. In 2023, we navigated through the industry involvement and satisfy the diversified references from consumers, merchants by business iterations. As the leading online platform, we have the responsibility to drive the industry transformation. During the year, we proactively enhanced our ability to promote mega-hit products and enriched video content offerings. We worked with high-quality merchants that offer the consumers adverse selection of high-quality discounted SKUs through our Special Deals sessions, [Foreign Language].

Consumer mindshare in our low-price offering was further elevated. Meanwhile, we launched our live streaming programs with the combination of Meituan platform live streaming [Foreign Language], and merchant live streaming and sales team live streaming. And this allows us to recommend value-for-money products in a more vivid way and to satisfy consumer needs in stockpiling deals. Transaction scale from live streamings increased rapidly in 2023 with daily live streaming sessions exceeding 10,000 in December. We are glad to see that consumers are increasingly waiting to watch live streaming and place orders on our platform. Both Special Deals sessions and live streaming events help us further solidify our consumer mindshare of Everyday Low Price. Amidst the changing industry environment, we continue to optimize our shelf-based search model to solidify our competitive edge. Our operating margins, incentives enjoy the marketing programs. We have strengthened our partnership with many high-quality merchants and provided consumers with a more value-for-money deals. We also lowered the threshold for subscription-based services, thus accelerating merchant onboarding and significantly expanding our merchant base, in the fourth quarter, we further implemented our direct operations model nationwide to substitute the former agency model in order to accelerate the online penetration and seek future growth opportunities in the lower tier cities. We are committed to making our platform as a topic for merchants to operate online. Through our continued efforts, we help merchants accumulate valuable digital assets like user reviews and transaction data and provided consumers with a reliable source for making consumption decisions. Additionally, we optimized our theme-based marketing events and organized diversified online and off-line promotions for our trusted [Foreign Language] Must-Eat List and [Foreign Language] Must-Eat Festival and [Foreign Language] Black Pearl List, helping merchants enhance brand awareness and improve transaction conversions. The hotel and travel industry experienced the highest rebound in 2023. Thanks to our accumulated know-hows in leisure travel and our unparalleled leadership in the domestic market, we simply capture the industry growth. We also deepened our understanding in consumer preferences and improved our supply capabilities to better cope with the evolving demand. In 2023, our domestic local -- domestic hotel GTV increased by over 100% year-over-year to provide the consumers with elevated content experience and cost-effective recommendations, we enhanced our live streaming capabilities. Last year, we further leveraged our unique positioning in the in-store dining domain and offer the bundled deals of hotel room size [indiscernible]. In addition, we followed the latest popular trends and launched the various marketing campaigns during holidays, subsequently, room night reservation during holiday seasons of record high in 2023. We also maintained a strong presence and made further progress in high-star domain. At GTV from domestic high-star hotels exceeded 30% in 2023. For alternative accommodations, us achieving absolute leadership in the domestic market, we further expanded by improve the service quality and enhance user experience, while continuing to drive industry development in future. Looking ahead, we will continue to solidify our competitive moat, bring larger value to -- both the consumers and merchants and capture more growth opportunity for our in-store, hotel & travel businesses. We have a full confidence in the online penetration potential of services to retail and we are committed to facilitating the digital transformation process of local services. Our core new initiatives Meituan Select, [Foreign Language] further improve the operational efficiency on a year-over-year basis and we further expanded the business scale in 2023. During the year, we continued to enhance platform supply and provided to consumers with a more diverse and cost-effective products. We also increased the density of a pickup station so that we can reach broader consumers. By the end of 2023, we have accumulated over 500 million transacting users. This new user base can bring more cross-sell opportunities for the platform in future.

However, the business still had a significant operating loss in 2023 with a high operating [ net ] loss ratio. In 2024, we will further iterate our business strategies and [indiscernible] rate loss reduction. We focus on building long-term competencies and improving user experience rather than focusing on market share. Facing the new macro environment and competitive dynamics, we proactively responded to the changes and iterated our business operations in 2023. We enriched our product and service metrics, serve the broader consumers base, merchant base and solidified our consumer mindshare. As you may have noticed, we have recently adjusted our organizational structure. We think this adjustment will lead to more synergies among core businesses, and further solidify by our competitive advantages, so that we can serve our consumers and merchants with better quality and higher efficiency. We believe new consumption demand will continue to emerge and digital transformation of local commerce industry is inevitable. As the industry leader, we are well positioned to adapt to these changes and capture more growth opportunities along the journey. We will firmly implement our Retail + Technology strategy. We are fully committed to accelerate the digital transformation process for industry and work towards our mission "We help people eat better, live better." With that, I will turn the call over to Shaohui for an update on our latest financial results.

S
Shaohui Chen
executive

Thank you, Xing. Hello, everyone. I will now go through our fourth quarter financial results. During the quarter, our business delivered steady growth, with our total revenue increasing by 22.6% year-over-year to RMB 73.7 billion. Cost of revenue ratio decreased 5.7 percentage points year-over-year to 66.1%, primarily due to the improved gross margin of our food delivery and Meituan Instashopping and goods retail business as well as the increased contribution of online marketing service revenue. Selling and marketing expenses ratio increased 4.8 percentage points year-over-year to 22.7%, mainly due to our increased promotions, advertising, user incentives and employee benefits to stimulate consumption and solidify our competitive advantages. R&D expenses ratio decreased year-over-year to 7.4%, primarily benefiting from improved operating leverage. G&A expenses ratio was 3.7% remain in stable on a year-over-year basis. Our focus on stimulating high-quality growth and improving operating efficiency drove essential year-over-year growth in total segment operating profit and operating margin. Total segment operating profit increased from [ RMB 850.2 million ] to RMB 3.2 billion and the operating margin increased from negative 1.2% to 2.4%. On a consolidated basis, our adjusted net profit increased significantly year-over-year, reaching RMB 4.4 billion this quarter. Turning to our cash position. As of December 31, 2023, we maintain our strong net cash position with our cash and cash equivalents and short-term treasury investments totaling RMB 145.2 billion. In the fourth quarter, cash generated from operating activity improved significantly year-over-year to RMB 10.4 billion. Now let's look at our segment results, starting with core local commerce. Our core local commerce segments revenue increased by 26.8% year-over-year to RMB 55.1 billion. Operating profit increased year-over-year to RMB 8 billion. Operating margin was 14.5% this quarter. On-demand delivery order volume growth achieved 25.2% year-over-year this quarter. For food delivery, we focus on driving the consumption frequency of our high-quality users, while more effectively meeting the needs of mass-market consumers foy low city size meals. As a result, other volume achieved nearly 25% year-over-year growth despite external challenges. Revenue grew at a slower pace in order volume mainly because of last year's VAT exemption policy on [ query ] service and this year decline in average order volume. Q4 last year was an unusual high base in AOV with a big portion of orders coming from large ticket size orders, such as family orders and long-distance orders. In time, many SMEs also suspended operations in Q4 last year. However, we are pleased to see that merchant, our margin demand remained strong during this quarter. The expansion of both advertising merchant base and their ARPU drove a strong growth of online marketing revenue. In time, we continue to optimize delivery efficiency and benefit from the [indiscernible] supply of queries. Other volume growth also drove [indiscernible] scale on the cost side. These favorable factors helped to partially offset increase in subsidy and decline in AOV. For Meituan Instashopping. Other volume maintained healthy growth with average order volume reaching 8.3 million this quarter. Our strategy has been focused on strengthening consumer mindshare, broadening the variety of supplies available on our platform and optimizing operations. This effort yet positive results with both the scale of transaction users and their purchase frequency growing rapidly. We are also pleased to see that more consumers place orders in more than one category with regard to its unit economics. AOV decline year-over-year against last year's excluding high base due to consumer serving demand and stockpile in daily necessity and medicine, despite these, we witnessed a positive trend with more additional offline retailers and brands adopting the on-demand delivery channel and allocating marketing budgets to our platform. This has translated into another quarter of remarkable year-over-year growth in online marketing service revenue, improved advertising monetization and improve the supply to enhance economic scale together to help improve the unit economics on a year-over-year basis despite lower AOV. Now let's turn to our in-store, hotel & travel business. Growth momentum in service retail [indiscernible] strong during this quarter. We continue to support merchants to further enhance existing user mindshare and penetrating into lower tier cities. At the same time, we refined and diversify our marketing strategies, enhance our content capabilities to successfully drive growth. GTV for in-store continued its rapid growth treasury this quarter with both the number of transition users and the number of merchants reaching new highs. For hotel & travel business also maintained its robust growth in both room nights deal and ADR this quarter. Our in-store, hotel & travel grow at a slower pace than GTV due to higher merchant incentives and lower subscription-based service charged to merchant. Growth of transition-based service revenue was very strong year-over-year. The digitization of various local service industry has been gaining momentum. For example, the consumer demand for services like [indiscernible] beauty, sports and fitness along with other leisure and entertainment service was particularly high. Growth of online marketing service revenue lagged behind our commission revenue. However, there was an uptick for the number of advertising merchants of our performance-based ads on a sequential basis. [ Operating ] margin further declined on a sequential basis, mainly due to our increased marketing efforts and strategic investment in lower-tier cities. These initiatives will aim at capturing growth opportunity and strengthening our competitive advantages. We strongly believe that the market is still at a high growth stage. There is particularly large potential for online consultation in lower-tier cities and in a variety of new categories. Turning to our New Initiatives segment. During this quarter, revenue in this segment improved by 11.5% year-over-year to RMB 18.6 billion, mainly due to the development of our goods retail business and partially offset by the contraction of our self-operating rights sharing business model. The segment's operating loss and operating loss ratio both narrowed sequentially to RMB 4.8 billion and 26%, respectively. For Meituan Select, our improved business operating efficiency led to a narrowing of the quarterly operating loss -- loss ratio on a sequential basis. Meanwhile, many of our new initiatives continuing to make good progress, enhancing their operating efficiency. To conclude, our Core Local Commerce segment performed resiliently in the new consumption environment and achieved a number of impressive milestones this year. Behind our commitment to high-quality growth and efficiency improved has resulted [ not ] EBITDA and free cash flow improvement. Looking ahead, we will continue to accelerate our core business, capture more growth opportunity and enhance long-term models. We will also pursue high-quality growth strategy for our new initiatives and continuously improve the operating efficiency. Our confidence in our business fundamentals and the long-term growth potential remains intact. With that, we are now open for Q&A.

Operator

[Operator Instructions] The first question today comes from Ronald Keung from Goldman Sachs.

R
Ronald Keung
analyst

So the company announced a change of organization of structure recently. Can management share more color on this change and specifically about the purpose and how will we realize more synergies going forward with this?

X
Xing Wang
executive

Ronald. And yes, we made some adjustments to the organizational structure recently. And after the change on-demand delivery, in-store, hotel & travel, and the Meituan platform and R&D now reports to Mr. Wang Xiaoyan; and Meituan Select, Mr. [ Chen Shaohui ] and our B2B food distribution service quality, he will reports to Ms. [indiscernible]. And Mr. [ Rongjun ] remains in charge of [indiscernible] and our restaurant management system and bike sharing and e-moped sharing, power banks. And after the change, autonomous delivery vehicle drones and the overseas business unit reports direct to me. So today, our businesses have covered more than 2,800 cities and counties in China, and we connect tens of millions of merchants and over 700 million consumers. And looking ahead, we aim to cover all categories and scenarios of local services, providing closed-loop solution from on-demand -- from demand discovery to service procurement. And we want to assure consumers -- we assure consumers that we will provide high-quality services and bring them comprehensive experience. After this organizational change, we will be able to realize better synergy between on-demand delivery and in-store, hotel & travel. On one hand, the 2 business teams can work more closely and provide better services to our merchants, bringing merchants more value and improving merchants operating efficiency. And on the other hand, the integration of equipping teams can help us better identify consumer demand, enhance our products and pricing competitiveness and also improve consumer experience and strengthen our consumer mindshare that Meituan is the go-to platform for local services. In addition, the organizational change can also enhance our operating efficiency and unlock cost to synergies, by consolidating Meituan platform and R&D, we want to improve organizational efficiency and enhance user experience. After changing the [indiscernible] to [indiscernible], they can better support the long-term development of core local commerce in traffic and products. Overall, this is a strategic move. We believe that this change will lay a groundwork for the future so that we can deliver better and more comprehensive services to both merchants and consumers.

Operator

Your next question comes from Thomas Chong at Jefferies.

T
Thomas Chong
analyst

There have been some speculations regarding the potential movement of other food delivery players. Could management share insights on the competitive landscape of food delivery? Considering the current macro environment, how should we project growth for food delivery this year? You see on the declining trend of AOV expected to continue in 2024 and will impact the unit economics. Is there any change in the long-term outlook for the growth and profitability of the business?

S
Shaohui Chen
executive

There have been several set questions. Let me answer it one by one. The first one is on competition. We understand there have been different rumors about the change of the content dynamic, but this is not new to us to Meituan food delivery business. As you may be aware that Meituan food delivery business, the growth journey, have never been short of competition. Actually, we have been through very fierce competition, but in the last many years, we continue to gain market share, improve our efficiency and achieve the target that we set for ourselves. Currently, the industry has been to a relatively more mature stage with more and more users have used this business -- this services and build their measure about which brand, which platform can provide the services. As a leader in this industry, we now serve nearly 490 million annual transaction users and over 4.6 million annual active merchants. We believe we have built the world's largest and most efficient on-demand delivery network. Our scale of economy, our effect and also our very strong brand are all very high entry barriers. So we various the move of other players potentially, we remain confident that we can maintain our clear industry leadership. And together with your second question, I want to emphasize that we are also continuing to invest into ourselves and continue to innovate ourselves to meet the change of different consumption trends to meet all kinds of consumers' needs through our innovative adverse product offering. For example, our Pin Hao Fan business, we focus on high-quality growth and enhanced our aim to improve the value-for-money for our offerings to enhance this experience whereas a higher fulfillment efficiency, better match price-sensitive consumers with affordable and high-quality merchants. We also continue to further iterate our market product promotions like Shen Qiang Shou and [indiscernible] satisfied consumers more entertain demand. We also continue to enhance operating efficiency for the shelf-based model, improve supply across all different categories and optimize our marketing efficiency for the merchants. Over the past few years, mid- to high frequency user stickiness further improve, providing solid foundation for the health growth of our food delivery business under complex macro environment. Meanwhile, we continue to activate our strategy to boost consumption frequency from lower frequent users. We expect our food delivery, the volume will maintain very healthy and solid growth in 2024. We also continue to work towards our long-term growth target and continue to grow our Meituan Instashopping business. We are seeing that the synergy between the food delivery and Meituan Instashopping continue to be strength in areas such as user base, marketing promotion as well as our delivery network and the on-demand retail to broader regions and cover more diversified categories. We think in 2024, consumption trend will see effect average order value due to last year's high base of AOV and new economics have downward trend year-over-year in Q1. We focus on high-quality growth and continue to balance the growth with profitability in the year of 2024, but we will require our effective strategy to improve our efficiency. We also see further growth room for our advertising monetization. As we scale up, we will unlock more operating leverage. In doing consumption trend, we drive continuous acceleration on the supply side. We think that our food delivery operating profit will continue to grow healthily this year. In the longer run, there is still room to further optimize our business efficiency as we scale up, we are confident that we can bring more value to both the merchants -- to the consumers to delivery vehicles and benefit the whole ecosystem and eventually the profitability of food delivery will reflect the value that we create.

Operator

Your next question comes from Kenneth Fong at UBS.

K
Kenneth Fong
analyst

I have a question regarding the in-store business. So could you provide an update on the recent performance for in-store, hotel & travel, Meituan investment in response to competition last year and expanded into low-tier cities since fourth quarter, which have notably decreased the OP margin. How does the company assess the ROI for this investment? Could you also please share some color on growth profitability outlook and competitive landscape for the in-store, hotel & travel business in 2024 and medium and longer term, please?

S
Shaohui Chen
executive

Thank you for your question on our in-store business. Overall, we are very excited for the fastest growth of our in-store business under this quarter, but also in the overall 2023. As we mentioned in our last quarter, the service retail market has wining the rapid growth, particularly on the online penetration. This serge is closely tied to our proactive investment and also related to more offerings into the industry and the more players participating into this industry. By leveraging our deep industry insight, we have not only deepened our merchant collaboration and share-based models also quickly developed our live streaming capability to meet the [ where we ] need. We also launched the Special Deals session to create a marketplace for a competitive matching products, strengthening consumer mindshare in the value-for-money products. In Q4 last year, we expand our direct operation model nationwide, replacing the former agency operation model in lower tier cities. These strategic moves well us to effective and to the merchant and consumer base in those regions and capture the digital transformation opportunities. Although these investments impact our short-term profitability, the return of our investments will significantly benefit our long-term business. In 2023, we expect faster expected GTV growth and also faster expected revenue growth. We also solidify our market share in local service industry and our operating profit achieved double-digit year-over-year growth. I also want to share with you that during the Spring Festival, the in-store, hotel & travel business continue to break new heights with daily average transaction value during the holiday period increased by 36% year-over-year and over 150% compared to 2019. The Spring Festival reunions and [indiscernible] became important drivers for local dining and other local service consumption. In our cooperation with high-quality restaurants and other local service merchants, we roll out special deals live streaming and theme-based promotions, which led to rapid growth for local service orders. In the first 5 days of the Spring Festival holiday, our [indiscernible] group dining text deal [Foreign Language] increased by over 150% year-over-year, and other volume for later in payment increased by 190% year-over-year. Meanwhile, it's more and more people chose to travel during the holidays. Our transaction value of hotel & travel also significantly increased compared to 2019 and 2023. Through a variety of promotional activities, we offer consumers great travel experience with value-for-money products. Looking ahead to 2024, in the new environment, we will continue to invest to enhance our product capability and continue to solidify consumer mind share through the acceleration in our marketing strategy and our increase content offerings. We aim to reinforce consumer mindshare for value for money and enhance online penetration of the overall industry. We think our in-store, hotel & travel business will maintain high GTV growth in 2024. The mid- to long-term growth of the entire industry, we are continuing to benefit from the increase in online penetration and changes in consumption trend. The gap between revenue growth and GTV growth were narrow. We will continue to adjust our investment efficiency and continuing to improve ROI. On the media to long-term competitive landscape, we remain very confident. We are very well positioned to serve merchants through their entire business cycle from daily operation to special promotions and assist consumers in finding the right store and discounts more efficiently. For the share-based product, leveraging our business development team and experience in serving all tier cities and commercial zones, we can help merchants design text deals that better pay for the consumer needs and direct traffic to them is more [indiscernible]. We have merchants acquire customers more efficiently under the current market environment and encourage more consumers to shift from offline to online. Our ongoing improvement in live streaming and specialty [indiscernible] we help merchants promote [indiscernible] key products and cultivate consumer mindshare in stockpiling value-for-money deals, will also help us capture incremental market growth from accelerated digital transformation process. In addition, after our organizational restructure, integration of core business will unlock more synergy. Overall, while the entry of other players bring new competition, we also see this investment by different players together are driving the long-term outlook of this business. Short-term profit fluctuation simply reflects the outcome of our long-term strategic investments. We remain confident in immediate long-term revenue growth to ensure the profitability of our in-store, hotel & travel business.

Operator

Your next question comes from Ya Jiang from Citic Securities.

Y
Ya Jiang
analyst

Okay. Could the management please share some thoughts on the strategy for the new initiative in 2024, and how profitability will be enhanced, or losses narrowed, particularly for Meituan Select? And for Meituan Select, what will be the scale of loss reduction and more directly, would you consider shutting down this business?

X
Xing Wang
executive

So to begin with, there are quite several new initiatives in our New Initiatives segment. So let's talk about them in separate orders. So first, let's talk about all other New Initiatives, excluding Meituan Select. So in this bucket, we will continue to optimize the operation. And actually, in the past several years, we have made a very good progress on several of these new initiatives. For example, the -- how our restaurant management system, the SaaS -- the restaurant SaaS business. We have been investing in that since 2016, so almost 8 years ago. And last year, we finally make it cash flow positive, and we have been the market leader. Now more and more restaurants are running their whole operation on our subsystem, not just their food delivery, not just their coupon business and their whole operation on our restaurant SaaS business. Another good example is [indiscernible] and then the B2B food service distribution business. So we started that in 2015. So even longer history than our restaurant SaaS. And also last year, we have finally achieved the cash flow breakeven in that business. And also, we are leading market shares, both businesses are still growing at very good growth rate. So those are some successful examples. And it's more important that we expect all the new initiatives including Meituan Select combined, we achieved breakeven. Those -- they will achieve a breakeven on a collective basis in 2024. So going forward, it will get better and better as we continue to enhance our efficiency and we expect profitability to further improve. And now let's talk about Meituan Select, which is a very big part of our New Initiatives segment. The growth slowdown in 2023 and as the market size of Meituan E-commerce was relatively flat on a year-over-year basis. The whole industry growth slowed down, mainly due to the macro headwinds and consumers returning to off-line channel post publicly opening. And we tried very hard, but despite the year-over-year efficiency improvement, Meituan Select still make a significant loss with [ quite ] rather high operating loss ratio during 2023. There are many -- there are several reasons. The first one is a scale growth was lower than expected, which may be difficult to meaningfully lower procurement cost item. And the second reason is, of course, fierce competition and that makes it difficult to improve price and mark up ratio and to lower subsidies. So we have been investing in Meituan Select for almost 4 years now. We launched our business in early July 2020, so almost 4 years now. So another year, we have tried and made many efforts. We have put in a lot of resources. And it's not where we could -- at good position as we would like it to be. This year, we will make strategic changes and refine the business model, and we aim to significantly reduce the operating loss. We will prioritize on building key competencies and improving the experience rather than focusing on growing scale or gaining market share. And we have plan to increase the price markup ratio and reduce the subsidy in future. We are paying more attention to the natural retention rate and growing user cohort. And encouragingly, we have already seen some positive results in the first quarter. Operating loss of Meituan Select significantly narrowed on a year-over-year basis in Q1. And I'm confident that this trend will continue in the rest of this year. So it has not been easy. Why are we keep doing this? So I would like to remind you that the mission of the whole Meituan company is to help people eat better and live better. We did start -- we get started with food delivery. We start with local service couponing meals. And later, it will go into food delivery in 2013, it is more than 10 years ago. And now every day, we serve 50 million, 60 million meals. But that's just one of -- still a very small percentage of all meals provided in China. So we have found a way to make online restaurant delivery big. I think sooner or later, hope someone will find a way to make online grocery successful. And I hope we are on that -- we are [indiscernible] 3P that one. But we knew online grocery is not going to be easy. We knew it is not easy. And it is even harder than we expected. And when we look around, is online grocery is not an easy job, not just in China, but also in many other countries. I do believe online grocery is a very important part of how people eat, and we want to help -- find the way to help people eat better. So we are going to keep working on online groceries. Actually, there are several approaches we are taking at the same time. Meituan Select is one of them. The other one is Shen Qiang Shou. On that approach, we are making better progress, although still at a smaller scale, they have higher customer satisfaction rate. And also, we have a much better positions in competition. So I think to sum it up, here, we are going to take this kind of principal. We are going to be start by our vision, and we are going to floxible on our details. So we'll give -- we are going to keep working on online groceries. We are going to evaluate several approaches we are taking at a time and adjust our strategy and resource it allocation according to the market. So that's what we are going to do.

Operator

Your next question comes from Alicia Yap at Citigroup.

A
Alicis a Yap
analyst

I wanted to ask in the recent organization restructuring, it was mentioned that the drone and also the overseas business will be reported to [indiscernible] results. So how should we expect your future development plans in global expansion and technology? What are the company's criteria when it comes to global expansion?

X
Xing Wang
executive

Well, thank you. First, let's talk about overseas business. So what kind of lag in the globalization of our business among all Chinese major [indiscernible] companies. So we finally launched our food delivery business in Hong Kong, and we make our brand in [Foreign Language] last May. So it's slightly less than 1 year old. And now the business is doing well, and the growth is on track. So I think the result is quite positive. Of course, at the same time, we are very actively evaluating other opportunities in other markets. So it turns out food delivery, in the past 10, 15 years as it become a global phenomenon. So it's doing well, not just in China, not just in U.S., it's also doing well in almost every country, either it's a very developed economy or some developing countries. So many people are not probably not aware that right now, at this moment, there are more than 10 public listed companies, who's doing food delivery, not just in U.S. not just in China, also in U.K., Europe and also in India, in Southeast Asia and even in -- well, believe it or not, they are even a public listed company who's doing food delivery in Central Asia, Northern Africa and Saudi Arabia and south countries. So it's a global phenomenon. And among all those companies, I think we are by far the biggest one in scale. So along the way, I believe we have accumulated know-how, both in technology and also in operation know-how. So yes, we are quite confident, we can go to a new market and find a new right way to enter the market and create value for both consumers, merchants and definitely workers. So it's fair to say we are evaluating some other markets because we haven't made any final decision. So we are not going to talk too much about the specific markets. And at the same time, we know it's not easy to go to a new market and -- in market share or become a market leader, and there are already some existing players. So here, I think our cash reserves and our free cash flow generated by our domestic business will be helpful. But at the same time, we will be very disciplined in evaluating the ROI. We are not going to do some crazy owing stuff. So it ends up, it takes 10 years to build our food delivery business in China. So slightly -- it's launched in November 2013, so it's more than 10 years old. So I think it has been a great journey, but it takes a long time. So we are patient. So I think it will probably take another 10 years for us to attach a significant presence in overseas market. So I think we are going to get there. We are in no hurry. We will take many years. We'll be very careful in evaluating the opportunity and evaluating our approaches. So that's what I want to say about our overseas market. And in terms of other new initiatives related to technology, now both drone and autonomous delivery vehicle will report direct to me in the future. And I think autonomous delivery is very important because in order to grow the penetration of online food and online grocery can 2x, 3x or even 10x in future, we have got to find a new better ways, hopefully, with the help of the technology. So we have been investing in both drone -- we have been investing in autonomous delivery vehicles since late [indiscernible]. And we have been investing from since late 2018. So we have been very patient in these 2 units. And we believe in the future, it will become a new component of all the infrastructure. It will take many years, maybe over the next decades. So it will take ongoing experiments and investment. I believe they have strategic value for our future growth. Because of the uncertainty, I think it's better for me to lead that it effort directly. So I can make more nimble adjustment here. So that's it.

Operator

Your next question comes from Charlene Liu from HSBC.

C
Charlene Liu
analyst

I have a question about shareholders' return. We're very encouraged to see that Meituan started share buyback in January. Are there any plans to further expand this buyback quarter after the current RMB 1 billion planned amount is used up? And how should we think about future shareholder returns plans?

S
Shaohui Chen
executive

Thank you for this question. We are committed to improve long-term total shareholder return by carefully considering a combination of different capital allocation options. In our internal business development, we prioritize capital allocation in areas that meet our high-quality ROI requirements, and in areas that strengthen our competitive strength. We focus on generating substantial free cash flow growth by this investment. Externally, we [indiscernible] free assets investment opportunity to bring meaningful strategic value to our core business or to help us capture new growth opportunity in our ecosystem. We will regularly evaluate the option of returning capital to our shareholders if we feel there are no good near-term investment opportunity, and we have sufficient liquidity for our business. Currently, share repurchase is our preferred option to increase our shareholder return, and we are confident that there are still many potential investment areas in our core business. We believe our current stock price is substantial undervalue. Also share buyback can help us offset the dilution from [Foreign Language]. We have kicked off share buyback in January with over USD 400 million worth of shares, which is before our blackout study. And all the shares repurchased have been canceled. We plan to continue to execute our existing share buyback program. And it is likely that we may upsize our buyback program in the future if we will feel we need it.

S
Scarlett Xu
executive

Okay. No more...

Operator

That concludes our question-and-answer session. I'll now hand back to Scarlett Xu for closing. Thank you, Scarlett.

S
Scarlett Xu
executive

Okay. Thank you, everyone, for joining the call. We look forward to talking to you next quarter. Thank you. [indiscernible] quarter.