China’s food shipment app Meituan shares fall on weaker Q3 outlook

Food shipment carriers for Meituan stand with insulated bags throughout an early morning instruction in Beijing, China, on Wednesday, April 21, 2021.

Yan Cong | Bloomberg | Getty Images

Meituan‘s Hong Kong-noted shares fell more than 5% on Friday after CEO Wang Xing alerted of a food shipment downturn in the next quarter.

“For our food delivery, we expect the third quarter or the volume will slow down, but still be more resilient than other consumption-related sectors,” Wang stated throughout the incomes contact Thursday.

On Thursday, Meituan published strong second-quarter outcomes.

Revenue was 67.96 billion Chinese yuan ($9.33 billion), up 33.4% from 50.93 billion yuan published in the very same duration a year earlier. The company likewise swung to revenue of 4.69 billion Chinese yuan for the 2nd quarter, compared to a loss of 1.11 billion Chinese yuan a year earlier.

“We have seen some short-term headwinds due to macro economy and extreme weather conditions.”

Regions such as Beijing, Tianjin and the provinces of Hebei, Shanxi and Henan skilled severe rain in July, triggering prevalent flooding. Typhoon Doksuri swept north after wrecking southern Chinese provinces.

Consumers’ suppressed need for offline intake is more launched, and this will result in a momentary capture on food shipment deals as individuals head out regularly.

“Extreme weather brings challenges to our business. Many merchants had to suspend their business, while consumers chose to stock packaged food instead of ordering fresh food delivery. In some cities, food delivery was even suspended in order to ensure safety,” stated Wang.

Meituan leads China’s food shipment market, holding practically 70% of the marketplace share in the mainland, according to a 2022 report on Meituan.

Besides food shipment, the tech company likewise runs numerous services consisting of ride-hailing, on-demand shipment, hotel and travel reservation, motion picture ticketing, home entertainment and way of life services.

Xiaolin Chen, head of worldwide at KraneShares, is bullish on Meituan.

The financial investment company has a rate target of 205 Hong Kong dollars ($26.14) on the stock, which represents a 35.2% upside from the existing cost of HK$132.80.

“They literally gained a lot of market share during [the pandemic]. They managed to grab lower tier cities and I believe [that] kind of market share will become sticky with them,” Chen informed CNBC’s “Squawk Box Asia” on Friday.

Wang stated customers will likely eat in restaurants more as the economy recuperates, which might result in a lower need for food shipment.

“So far in third quarter, offline traffic and travel demand continue to recover rapidly. Consumers’ pent-up demand for offline consumption is further released, and this will lead to a temporary squeeze on food delivery transactions as people go out more often,” stated Wang.

China’s weak healing

Credit score company Fitch Ratings still anticipates China’s gdp to grow 5.6% in 2023 as the economy stabilizes following really weak intake development in 2015, according to a July report. This is somewhat greater than the Chinese federal government’s development target of around 5%.

Meituan’s CEO stated he stays positive of long-lasting development in its food shipment organization.

“Order volume in Q3 last year was a relatively high base, but we think a temporary slowdown in order volume growth is due to external factors,” stated Wang. “We will continue to activate our product and operational strategy to better capture the demand and stimulate the recovery.”

Meituan is likewise releasing self-governing shipment automobiles which have actually been “more widely applied in more scenarios,” stated Wang.

Chinese self-driving cars and truck company revealed in March that it is partnering Meituan to construct unmanned automobiles for food shipment services.

Chen stated that leveraging expert system tech in food shipment is essential to “improving costs and services for clients.”

“We will leverage our proprietary research and external investment to explore the use of AI and autonomous delivery and other cutting edge technologies,” stated Wang.

In May, Meituan presented a sibling app in Hong Kong, as it searches for brand-new markets beyond mainland China.


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