Meituan recorded a third straight quarter of profit, after strong travel demand helped the food delivery giant defy slowing growth for its core business under China’s uneven economic recovery.
Sales rose 22% to 76.5 billion yuan ($10.7 billion) in the quarter ended September, compared to an average projection for 76.01 billion yuan. Net income almost tripled to 3.59 billion yuan.
Along with tech peers Alibaba Group Holding Ltd and Tencent Holdings Ltd, Meituan has wrestled with a weak rebound in Chinese consumption after three years of strict Covid controls. Mixed official data from last month showed an expansion in Chinese retail sales, but turmoil in the property market has forced Beijing to roll out sweeping measures to shore up the industry’s cash crunch.
The better-than-projected earnings came after Chief Financial Officer Chen Shaohui told analysts that order volumes would slow this quarter, given short-term headwinds from the macroeconomy and extreme weather.
The Beijing-based company has been relying on its familiar subsidy-heavy strategy, in a bid to draw in customers and merchants despite the broader spending malaise. Meituan rolled out a slew of discounts for this year’s Singles’ Day shopping festival, in a year that likely saw lackluster spending from China’s biggest e-commerce players thanks to wider economic malaise.
In its newer initiatives segment, the company has expanded into adjacent areas like grocery retailing and group-buying, although in March it abandoned its costly self-operated ride-hailing service. As the domestic e-commerce rivalry heats up, Meituan has deepened its investments in short video and live-streaming to compete with upstarts like ByteDance Ltd’s Douyin.
Like many other Chinese tech companies, Meituan has also been eyeing an overseas expansion, including taking its meal delivery service outside mainland China for the first time with its debut in Hong Kong this May under the brand “KeeTa.” Meituan held talks with Delivery Hero SE about potentially acquiring the business in Southeast Asia that runs under the Foodpanda brand, Bloomberg News reported earlier.
The company has also joined Chinese rivals, including Baidu Inc. and Tencent, in the generative AI craze as well. In October, Meituan took part in a 2.5 billion yuan ($350 million) funding round for one of the country’s most promising AI startups, Zhipu. That follows its earlier acquisition of its co-founder’s startup Light Year, in a deal valued at almost $234 million.
What Bloomberg Intelligence Says
Meituan’s 3Q core local-commerce operating margin probably declined less than consensus’ projection of a 2.4 percentage-point fall from 2022’s level. This could have been led by stronger-than-expected operating leverage in its travel-related business as domestic demand and related sales surged during the summer. Such gains already helped rival Trip.com beat operating margin estimates in 3Q. The rise in travel-related profitability might have offset part of the drag from lower 3Q food-delivery margin as order volume and ticket sizes slid from Covid-19 highs a year earlier.
- Catherine Lim and Tiffany Tam, analysts
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