Meituan Records Fastest Growth Since 2021 Despite Weak Economy

Meituan posted its fastest pace of revenue growth since 2021, after dining and travel bounced back from Covid-Zero depths despite broader consumer spending malaise.

(Bloomberg) — Meituan posted its fastest pace of revenue growth since 2021, after dining and travel bounced back from Covid-Zero depths despite broader consumer spending malaise. 

Sales rose 33% to 67.96 billion yuan ($9.3 billion) in the quarter ended June, against an average projection for 67.2 billion yuan, the company said in a statement Thursday. Net income rose 

As with its peers in the internet industry, Meituan is seen as a barometer of China’s post-Covid recovery, which has proven weaker than expected. It’s shed more than 25% of its market value this year.

Still, the company has benefited as consumers grappling with a property slump shun big-ticket items to instead spend on experiences from trips and movies to dining. That’s propping up Meituan’s meals and travel services, and the company has splashed out on marketing to tap that post-pandemic demand.

The company’s longer-term prospects depend on how it navigates post-pandemic demand swings and new arenas such as AI. Meituan joined a global AI investment frenzy alongside big players like Baidu Inc. and Tencent Holdings Ltd. when it doled out almost $234 million to buy co-founder Wang Huiwen’s generative AI startup. But Chief Executive Officer Wang Xing acknowledged this year it was “still playing catch-up” on that front.

What Bloomberg Intelligence Says

Meituan’s 2Q core local commerce operating profit gain probably exceeded consensus estimates of a 17% year-over-year increase as margin of the firm’s in-store and travel-related unit jumped from Covid-impacted lows a year earlier. This would have been led by a surge in the unit’s revenue as more consumers in mainland China dined out and traveled within the country and overseas after the cessation of local Covid Zero measures. Such a rise in travel demand will likely persist through December and help lift Meituan’s overall margin this year.

– Catherine Lim and Trini Tan, analysts

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While the days of heady growth for China’s tech giants are over, Beijing’s rhetorical support for private enterprise mark a significant step toward reversing a crackdown that erased hundreds of billions of market value from the sector since 2021. Meituan and its long-standing backer, Tencent, were both praised in a rare post from the nation’s powerful economic planner for making investments that aligned with Beijing’s goals.

For now, Meituan is expanding into adjacent areas from grocery retailing to group-buying. In March, the food delivery giant abandoned its ride-hailing service to cut down on costs. And it’s investing heavily in live-streaming services to fend off rivals like ByteDance Ltd.’s Douyin. 

As it looks beyond its home market, Meituan has also been rolling out cash-heavy incentive schemes for its “KeeTa” meal delivery app in Hong Kong, its first foray beyond the mainland Chinese market it dominates. Its debut in the city in May pits it against Deliveroo Plc and Delivery Hero SE’s Foodpanda in the international financial hub.

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