China’s most significant food stuff shipping platform is searching to use its mammoth consumer base to grow into e-commerce and bolster its existing forays as a bike-share leader and vacation intermediary. The moves appear even as it continues to be below the vise of Beijing’s regulatory grip and its earnings slows.
(3690: HK) launched its 2021 monetary success this 7 days, demonstrating an formidable and maturing company. Analysts keep on being combined on the company’s potential customers, mostly simply because of 3 variables: the mysterious future of Meituan’s new initiatives, China’s clampdown on tech organizations, and Covid-19.
Whilst Meituan defeat earnings and revenue anticipations for the fourth quarter of 2021, figures were being down—for the quarter and for the calendar year. Revenue took a huge hit, slipping from a $737 million get for all of 2020 to a $3.7 billion decline for 2021. Complete revenues had been up 56% for the year, but have however been slowing for 10 months.
“Challenges” were being a recurring concept in the firm’s commentary accompanying its fiscal statement. “As we entered 2022, we even now confront difficulties from Covid command steps and a weakening usage environment,” it reported. It also blamed the “macro setting and all-natural disasters”—all of which are indeed impediments that have sideswiped a assortment of sectors in China around the previous calendar year.
“We anticipate the company’s earnings to remain underneath strain with new polices on foods delivery commission and resurgence of Covid-19,” LightStream equities analyst Shifara Samsudeen wrote in a note this 7 days.
Meituan did not react to requests for remark.
But Meituan also appears to be to be heading headstrong into its new and current ventures. Late last calendar year, it announced a improve in its overall strategic positioning. It was transferring from “Food + Platform” to “Retail + Technological know-how,” it stated in a statement. What that mainly intended was that it would proceed its prosperous leadership standing in foods shipping and delivery and bike-sharing, but would extend into full-fledged e-commerce.
Meituan is effectively positioned for this significant endeavor, even if levels of competition is fierce. It presently provides a variety of third-party merchandise from food to retail products, and has a escalating logistics community. And by way of its shipping and delivery and bicycle-share services—which are offered along with a amount of other companies in a single do-it-all app—it is previously on extra than 100 million phones in China, in accordance to iiMedia Investigate.
Meituan’s e-commerce push requires growing the products and solutions it delivers in its shipping platform, but also expanding both equally 3rd-get together sellers and its own goods. It is generating a number of spheres in its e-commerce vertical that goal distinctive consumer requirements. Chinese media even claimed that Meituan was developing physical outlets, substantially like
Alibaba Group Holding
(BABA) Tmall has carried out, from which motorists decide up items to be delivered.
Meituan has also lately opened an overseas searching portal for cross-border profits, allowing for Chinese customers to invest in merchandise from made markets like the U.S. That is already a crowded subject, on the other hand, dominated by
(002024.China) getting scaled-down parts, according to Analysys.
Even shorter-movie applications like Douyin (China’s first edition of TikTok) and
(1024.Hong Kong) have begun viewing important profits by way of product sales of shopper goods offered by means of click throughs. But earnings is slowing for the three major e-commerce leaders, Alibaba,
On an earnings simply call this 7 days, Meituan went further more than noting that its big food stuff-delivery consumer base would give it an gain diving into e-commerce, hinting that its many e-commerce platforms would support drive up its conventional verticals.
So although it bleeds revenue, it nonetheless has the self-assurance of quite a few observers.
“As we consider it is fair to hold the corporations in decline, we worth the company by profits. We think earnings will increase by 29% in 2022 and 25% in 2023,” Ming Lu, Chinese equities analyst at Aequitas Exploration, wrote in a observe this 7 days. “We conclude an upside of 20% for the 12 months conclude 2022, which suggests a cost focus on of HK$160 ($20.44).”
As for the slew of new initiatives that are driving losses, Fitch Rankings mentioned going forward it “expects far better discipline in excess of investment decision in new organizations that do not yield economic improvement.”
Analysts at Nomura have been extra dour, positing that downside threats of Meituan inventory incorporate “intensifying competitors from Alibaba in both food shipping and delivery and in-keep usage verticals, and worse-than-predicted functionality in the new initiatives” these kinds of as e-commerce.
Nevertheless Meituan’s stock fell Thursday, it was still up pretty much 15% for the week.