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A Meituan deliver driver. PHOTO: Getty Images

Chinese delivery giant Meituan sees revenue surge 28 per cent as lockdowns boost online ordering across the country

  • Meituan reported a 28 per cent increase in revenue for the September quarter
  • Delivery services giant had a strong quarter in the face of macroeconomic headwinds and weak consumer sentiment
Meituan

Meituan reported a 28 per cent increase in revenue for the September quarter, as the on-demand services giant brushed off a slowing economy and weak consumer sentiment.

Beijing-based Meituan, which runs the country’s largest food delivery platform, said on Friday revenue rose to 62.62 billion yuan (US$8.74 billion) for the third quarter. It turned in a profit of 1.2 billion yuan, ending seven straight quarters of losses.

Average annual orders placed by active users grew to 39.5 from 34.4 year-on-year, reflecting a growing stickiness for Meituan services among its users. The firm has around a 70 per cent share of China’s food delivery market.

Snap lockdowns across the country to combat outbreaks of Covid-19 over the quarter prompted many Chinese people to migrate to online platforms, including Meituan, to secure food supplies.

Tencent likely to cut investment portfolio further after Meituan distribution

Speaking on an earnings call with analysts on Friday, CFO Shaohui Chen said that despite some refinement of pandemic-control measures, the impact of Covid on its business “would be heavier in the next quarter” than the current one.

Speaking about Meituan’s global expansion, CEO Wang Xing said in the earnings call that the company had started this in Hong Kong, as the market “shares many similarities with [mainland China] including food habits”. But he acknowledged that delivery models would vary in the two markets.

Meituan announced in October that it was expanding its food delivery business to Hong Kong to take on the local duopoly of Foodpanda and Deliveroo, as part of a global push to offset a slowdown in consumer spending at home.

However, Wang cautioned on Friday that the firm may not lavish funds on overseas expansion, “as the current macro environment” is making this difficult. “We will conduct prudent and comprehensive evaluation [of overseas expansion]... the overall budgeting for overseas businesses will be ROI-oriented. ”

Meituan has folded food delivery into a core local commerce segment, which comprises food delivery, in-store, hotel & travel, instant shopping, and transport ticketing. The segment saw revenue grow 24.6 per cent to 46 billion yuan in the quarter despite Covid restrictions that hit local merchants such as restaurants, hotels, and entertainment venues.

Wang said on the earnings call that Meituan’s hotel and travel business continued to suffer from the pandemic with outbreaks locking down travel destinations such as Sanya and Chengdu, suppressing consumer demand. However, he said its local accommodation business “remains resilient, capturing high-value consumers through tie-ups with high-star hotels such as Marriott International”.

Tencent likely to cut investment portfolio further after Meituan distribution

Meituan’s new initiatives unit saw losses narrow as the company’s cost-cutting initiatives began to take effect.

Meituan’s major shareholder Tencent Holdings said this month it would give away around US$20 billion worth of Meituan shares as dividends to its shareholders. The two companies are expected to keep strong business ties in future though.

Analysts at Goldman Sachs said in a research note earlier this month that Meituan’s business may not rebound significantly until late 2023, when China is expected to further relax its Covid-19 controls.

The company’s share price dropped almost four per cent to close at HK$135.1 on Friday ahead of the results announcement.

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