Chinese food delivery giant Meituan (3690.HK) reported a 21% increase in second-quarter revenue, surpassing expectations despite a sluggish economic recovery in China. The company’s revenue for the quarter ending June 30 reached 82.3 billion yuan ($11.55 billion), up from 67.9 billion yuan a year earlier.
Financial Performance
Meituan’s revenue exceeded the average analyst estimate of 81 billion yuan compiled by LSEG. The company’s performance highlights its resilience amid a broader economic slowdown that has led many firms to pivot towards low-cost and discounted products. Meituan has capitalized on this trend by offering such products for a nominal fee.
CEO Remarks
Chief Executive Wang Xing attributed the company’s success to its ability to adapt to the current consumption environment in China. In a post-earnings conference call, Wang noted, “Compared to other segments, the local commerce industry in China still has significant growth potential through digitalisation.”
Segment Performance
For the second quarter, Meituan’s total segment operating profit surged from 5.9 billion yuan to 13.9 billion yuan, with the operating margin improving from 8.7% to 16.9%. Revenue from core local commerce, encompassing both food delivery and the Meituan Instashopping service, increased by 18.5% to 60.7 billion yuan. Sales from new initiatives rose by 28.7% year-over-year, reaching 21.6 billion yuan.
The company reported robust growth in its hotel booking and travel sector, with order volumes rising by 60% during the quarter.
Strategic Moves and Innovations
In a strategic move to enhance its technological capabilities, Meituan acquired AI startup Light Year, founded by Meituan co-founder Wang Huiwen, for $281 million. This acquisition aligns with the broader trend of major Chinese tech firms investing heavily in AI.
Additionally, Meituan has ventured into drone delivery, launching a service to deliver food and emergency supplies to tourists at the Great Wall, with a minimum order of 20 yuan and a delivery fee of 4 yuan.
Following a management shift in April, CEO Wang Xing has also expanded Meituan’s international footprint. The company has started recruiting in Riyadh for Keeta, its food delivery platform, which launched in Hong Kong a year ago. Wang emphasized that these international expansion efforts are still in their “early stages,” with potential markets in the Gulf, Europe, and Southeast Asia under consideration.
Market Position
Meituan remains the dominant player in China’s food delivery sector, holding a 69% share of the 1 trillion yuan market, according to data from ChinaIRN.
Conclusion
Meituan’s strong financial results and strategic initiatives reflect its ability to thrive despite economic headwinds. The company’s growth across various segments, coupled with its innovative approaches and international expansion, positions it well for continued success in a challenging economic environment.