China food delivery firm Meituan beats revenue expectations amid economic headwinds By Reuters

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© Reuters. A Meituan delivery worker rides a scooter carrying vegetables on a snowy day in Beijing, China January 19, 2021. REUTERS/Tingshu Wang/File Photo

By Casey Hall

SHANGHAI (Reuters) -China’s Meituan posted a bigger-than-expected 22.1% rise in third-quarter revenue on Tuesday, as the country’s largest food delivery firm extended its recovery from the pandemic impact of last year.

The platform, whose app provides services such as bike-sharing, ticket-booking and maps, reported June-September revenue of 76.47 billion yuan ($10.69 billion), versus 62.62 billion yuan in the same period a year earlier.

The result compared with the 75.59 billion average of 15 analyst estimates compiled by LSEG.

Meituan posted a profit of 3.59 billion yuan versus profit of 1.22 billion yuan a year earlier.

Last year’s third-quarter earnings were affected by COVID-19 containment measures, which included restrictions on movement in major cities that curtailed delivery services.

Demand remains lacklustre, with China’s post-pandemic economic recovery losing steam in recent months. Meituan CEO Wang Xing previously flagged a tougher third quarter for the food delivery business due to macroeconomic headwinds.

Quarterly revenue from core local commerce, which includes food delivery as well as non-food delivery service Meituan Instashopping, rose 24.5% to 57.69 billion yuan.

Revenue from in-store, hotel booking, and travel sector businesses benefited from a domestic travel rebound over the summer with transaction volume rising 90% year-on-year.

Meituan competes at home with long-time rival Ele.me, owned by Alibaba (NYSE:) Group, as well as ByteDance, the owner of TikTok and Chinese sister platform Douyin, which branched out into food delivery in February.

It remains China’s biggest delivery platform, with a 69% share of the 1 trillion yuan market, showed data from researcher ChinaIRN.

In May, it expanded beyond mainland China to Hong Kong with new food delivery business KeeTa, and is reportedly eyeing further international expansion, possibly to Southeast Asia.

“Although we believe Meituan is unlikely to achieve the same level of operating margin in food delivery in Southeast Asia as in China, a successful acquisition in Southeast Asia could be another key growth driver for the company,” Daiwa Capital Markets analyst John Choi said.

Earlier this year, Meituan said it would buy artificial intelligence (AI) startup Light Year established by Meituan co-founder Wang Huiwen for $281 million. The purchase comes as major technology firms increase AI bets in the wake of excitement created by ChatGPT from Microsoft-backed OpenAI.

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