Dingdong Maicai's "Against the Wind Bureau": First Achieving Annual Profit

With the changes in the stages of economic development, high-quality development has gradually become a new theme of the times. In this historical process, more and more companies have broken away from the path of only pursuing scale growth, and have increasingly focused on improving profitability and risk resistance. Facing the rapidly changing consumer market environment in recent years, Dingdong Maicai (DDL.US), which has been deeply cultivating the instant retail track for many years, has shown strong growth resilience. It is noted that Dingdong Maicai recently released its financial report for the fourth quarter of 2023, which revealed a series of noteworthy signals: by the end of that quarter, Dingdong Maicai had achieved profit for five consecutive quarters under Non-Gaap standards, and 2023 was also its first annual profit under Non-Gaap standards; during the reporting period, the company's operating cash flow net inflow was 120 million yuan... In the past year, due to fluctuations in the consumer market and factors such as other companies in the same track facing survival crises, controversies surrounding Dingdong Maicai have never stopped. However, this latest financial report not only confirmed that Dingdong Maicai had withstood the industry headwinds, but also that the company's self "blood-making" function strengthening seemed to indicate that its "efficiency-first, while considering scale" strategy had achieved some initial success, which is perhaps the most powerful response to external doubts about its survival capabilities. Steadfastly implementing "efficiency-first" In the fourth quarter, Dingdong Maicai achieved a revenue of 4.99 billion yuan, with a GMV of 55.3 billion yuan; looking at the whole year, Dingdong Maicai's revenue in 2023 was 19.97 billion yuan, with a GMV of 21.97 billion yuan. Upon closer inspection, there were many structural highlights for Dingdong Maicai during the reporting period. In terms of geographical areas, the company's core market in East China continued to perform strongly, especially in the Jiangsu-Zhejiang region, where even compared to the high base of 2022, the company saw over 8% growth in GMV and order volume in the region last year. Over the past few years, Dingdong Maicai's GMV in the East China market has seen a compounded annual growth rate of up to 10%. However, reports recently emerged that Dingdong Maicai had adjusted some sites in Guangzhou and Shenzhen, causing concerns in the market about its withdrawal from the South China region. In response, Dingdong Maicai stated that there is currently no plan to withdraw from South China, and that the site adjustments involved various situations, but were all normal station opening and closing actions, with the vast majority of services in South China currently unaffected. It is believed that the market's excessive reaction may have stemmed from reflexes following the downfall of Miss Fresh last year. Undeniably, the current industry environment is not comparable to Dingdong Maicai's early entrepreneurial days, but it is clearly biased to assert that Dingdong Maicai will follow in the footsteps of its competitors. In the backdrop of industry headwinds, rather than expanding indiscriminately as before to cover all bases, it may be more beneficial to focus and enhance the strengths of the core East China market, which is more in line with Dingdong Maicai's long-term interests. Looking at the financial report, the more focused Dingdong Maicai is indeed closer to achieving its goal of "efficiency-first" than before. The data shows that in Q4 2023, Dingdong Maicai's fulfillment cost rate was 23.6%, which improved by 0.5 percentage points compared to the previous year; during the same period, Dingdong Maicai's service capabilities also improved, with the average fulfillment time for instant orders in Q4 being 36 minutes, 2 minutes faster than the previous quarter. After becoming more focused and emphasizing efficiency, Dingdong Maicai's self "blood-making" ability has also significantly improved. On the one hand, under Non-Gaap standards, Dingdong Maicai has transitioned from a 30.4% loss in 2021 to a profit of 0.2% in 2023. On the other hand, after Q3 2023, Dingdong Maicai once again achieved a net inflow of operating cash flow, with a net inflow of 120 million yuan in Q4; by the end of the period, after deducting the balance of short-term loans, the company's actual cash balance was 2.01 billion yuan, a net increase for the second consecutive quarter. Seeking new opportunities amidst the headwinds In addition to weathering industry headwinds, Dingdong Maicai is also exploring new business opportunities. In 2023, Dingdong Maicai's self-owned brands have begun to enter a phase of potential realization. According to the financial report, its representative pre-packaged meal self-owned brand "Cai Changqing" saw a 43% increase in GMV to 840 million yuan year-on-year; during the same period, the self-owned brand "Liangxin Craftsman" which focuses on rice and noodle products saw a GMV of about 500 million yuan, a 19% increase year-on-year. In terms of scale, Dingdong Maicai's self-owned brands in categories such as pre-packaged meals, rice and noodles, bean products, and meat and poultry have already shown significant potential, and the consumption scale of these categories is likely to create greater growth space for the platform in the future. With a high "price-value ratio," Dingdong Maicai's self-owned brand products have already captured the minds of consumers. As of the fourth quarter, the user penetration rate of Dingdong Maicai's self-owned brand products had reached 73.6%. Repeat purchase performance has also reached new heights, with the monthly repeat purchase rate for "Cai Changqing" in Q4 reaching 37%, and the repeat purchase rate for "Liangxin Craftsman" also approaching forty percent. From a business perspective, Dingdong Maicai has already accumulated supply chain advantages, and now developing its self-owned brands not only helps to further increase the company's overall gross profit margin, but also enhances user stickiness and loyalty to the platform in the long run, thereby creating differentiation advantages in the market. Conclusion Due to the uncertainty of economic growth, pessimism has continued to dominate the trends of Chinese concept stocks over the past year. In the midst of this, Dingdong Maicai's stock performance has also been significantly affected. Certainly, the fluctuation of market sentiment will affect short and medium-term trends, but in the long run, the fundamental aspects and growth potential of the company still remain the decisive factors for the stock price trend. In the current "headwinds" environment, Dingdong Maicai has made proactive adjustments. As shown in the latest financial report, Dingdong Maicai's self "blood-making" ability has significantly improved, and the strong growth of its self-owned brands also "spoils" the company's future development direction. As the company gradually emerges from the adjustment period, Dingdong Maicai, having crossed the profitability turning point, may enter a high-quality growth trajectory in the next stage, which remains to be seen.