China’s major food items shipping and delivery platform is wanting to use its mammoth user foundation to develop into e-commerce and bolster its current forays as a bicycle-share chief and travel middleman. The moves come even as it stays beneath the vise of Beijing’s regulatory grip and its earnings slows.
(3690: HK) released its 2021 fiscal benefits this 7 days, exhibiting an bold and maturing business. Analysts stay blended on the company’s prospective buyers, largely simply because of three aspects: the mysterious long term of Meituan’s new initiatives, China’s clampdown on tech providers, and Covid-19.
While Meituan defeat profits and earnings anticipations for the fourth quarter of 2021, quantities have been down—for the quarter and for the calendar year. Earnings took a substantial hit, falling from a $737 million acquire for all of 2020 to a $3.7 billion decline for 2021. Complete revenues had been up 56% for the calendar year, but have however been slowing for 10 months.
“Challenges” were a recurring concept in the firm’s commentary accompanying its fiscal assertion. “As we entered 2022, we nevertheless facial area difficulties from Covid manage actions and a weakening use natural environment,” it claimed. It also blamed the “macro natural environment and organic disasters”—all of which are in fact impediments that have sideswiped a vary of sectors in China over the earlier yr.
“We be expecting the company’s earnings to keep on being under strain with new restrictions on foods supply fee and resurgence of Covid-19,” LightStream equities analyst Shifara Samsudeen wrote in a take note this week.
Meituan didn’t answer to requests for remark.
But Meituan also seems to be going headstrong into its new and current ventures. Late previous 12 months, it introduced a adjust in its total strategic positioning. It was going from “Food + Platform” to “Retail + Technology,” it said in a assertion. What that largely meant was that it would continue on its prosperous leadership position in food items delivery and bike-sharing, but would broaden into complete-fledged e-commerce.
Meituan is nicely positioned for this large endeavor, even if competitiveness is intense. It presently provides a variety of third-occasion products from foods to retail products, and has a growing logistics community. And by means of its shipping and bicycle-share services—which are available along with a variety of other expert services in a one do-it-all app—it is now on much more than 100 million phones in China, in accordance to iiMedia Research.
Meituan’s e-commerce force includes increasing the goods it features in its supply platform, but also expanding both equally 3rd-get together vendors and its have goods. It is developing several spheres within just its e-commerce vertical that target distinct consumer needs. Chinese media even described that Meituan was developing physical suppliers, significantly like
Alibaba Group Holding
(BABA) Tmall has accomplished, from which drivers choose up goods to be sent.
Meituan has also not too long ago opened an abroad purchasing portal for cross-border product sales, permitting Chinese consumers to acquire products from created markets like the U.S. That is previously a crowded discipline, nevertheless, dominated by
(002024.China) getting smaller sized portions, according to Analysys.
Even shorter-video clip applications like Douyin (China’s primary edition of TikTok) and
(1024.Hong Kong) have started viewing considerable revenue through revenue of purchaser items readily available by means of simply click throughs. But earnings is slowing for the 3 large e-commerce leaders, Alibaba,
On an earnings get in touch with this 7 days, Meituan went even more than noting that its substantial food stuff-delivery person foundation would give it an benefit diving into e-commerce, hinting that its different e-commerce platforms would aid generate up its conventional verticals.
So whilst it bleeds dollars, it however has the assurance of several observers.
“As we believe that it is fair to keep the firms in reduction, we value the company by revenue. We consider income will increase by 29% in 2022 and 25% in 2023,” Ming Lu, Chinese equities analyst at Aequitas Study, wrote in a be aware this 7 days. “We conclude an upside of 20% for the yr close 2022, which implies a cost concentrate on of HK$160 ($20.44).”
As for the slew of new initiatives that are driving losses, Fitch Ratings mentioned likely ahead it “expects much better self-discipline more than financial investment in new companies that do not generate financial enhancement.”
Analysts at Nomura have been a lot more dour, positing that draw back challenges of Meituan stock include things like “intensifying competition from Alibaba in the two food items delivery and in-retail store usage verticals, and even worse-than-predicted performance in the new initiatives” these as e-commerce.
Though Meituan’s inventory fell Thursday, it was continue to up just about 15% for the 7 days.