Chinese food delivery giant Meituan beats estimates to post 25% quarterly revenue increase

Meituan, China's biggest on-demand services provider, on Thursday reported a higher-than-expected 25 per cent year-on-year increase in first-quarter revenue, boosted by gains from its core local commerce operations led by food delivery.

The Beijing-based company posted revenue of 73.3 billion yuan (US$10.1 billion), up from 58.6 billion yuan in the same period last year, as on-demand delivery transactions during the March quarter grew 28.1 per cent year on year to 5.5 million. That beat the 70.3 billion yuan average analysts' estimate compiled by London Stock Exchange Group.

Profit for the quarter reached 5.4 billion yuan, about 60 per cent higher than 3.4 billion yuan a year ago.

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"We effectively captured the industry rebound and invigorated local consumption, leading to our robust performance in the first quarter," Meituan co-founder and chief executive Wang Xing said during the firm's earnings call on Thursday.

Food delivery couriers for Meituan wait for orders in Shenzhen on May 7, 2024. Photo: Bloomberg alt=Food delivery couriers for Meituan wait for orders in Shenzhen on May 7, 2024. Photo: Bloomberg>

Meituan's Hong Kong-listed shares closed largely unchanged at HK$112.70 on Thursday, ahead of its quarterly earnings announcement.

The company's latest quarterly results showed that it continues to defy weak consumer spending, as the mainland deals with a shaky post-pandemic economic recovery.

"We work closely with millions of merchants and brands, penetrate deeper into the industry value chain, and actively explore innovative business models," Wang said during the earnings call.

Meituan is also keen to launch its services in more international markets. "In the long run, our goal is to bring our product and services to a global audience, offer better services and experiences to both consumers and merchants globally," Wang said, adding that his company has been exploring opportunities in Southeast Asia.

Meituan's on-demand delivery transactions during the March quarter hit 5.5 million, up 28.1 per cent year on year. Photo: Shutterstock alt=Meituan's on-demand delivery transactions during the March quarter hit 5.5 million, up 28.1 per cent year on year. Photo: Shutterstock>

In April, Meituan reportedly had plans to launch its international food-delivery platform in Saudi Arabia's capital, marking the company's first expansion outside Greater China. The move into Riyadh, one of the wealthiest cities in the Middle East, would follow a successful Hong Kong foray of its KeeTa service in 2023.

Core local commerce operations - the company's cash cow that includes on-demand food and grocery deliveries, hotel and travel bookings, and merchant marketing services - saw revenue surge 27.4 per cent to 54.6 billion yuan.

That gain was made on the back of subsidised orders, which helped Meituan fend off competition from a number of players including ByteDance-owned Douyin and food delivery platform Ele.me, part of the local consumer services arm of Alibaba Group Holding, owner of the South China Morning Post.

In the first quarter, Meituan also expanded the coverage of its Pin Hao Fan group-buying service to more cities across the mainland, the company said. It pointed out that an improved order-dispatch system and operations enabled Pin Hao Fan's peak daily order volume to reach a new high in the quarter.

A Meituan food delivery courier in Beijing. Photo: Bloomberg alt=A Meituan food delivery courier in Beijing. Photo: Bloomberg>

Its Shen Qiang Shou campaign, meanwhile, introduced discounted meals from popular chain restaurants. In addition, the company launched marketing campaigns to stimulate consumer demand during the holidays, and offered broad selections of coupon packages and discounts to promote mega-hit products.

Those tactics may have helped with order volume growth, but these have also contributed to lower average order value, according to a research note by Jamie Chen, an analyst at investment consultancy Third Bridge, that was published before Meituan's earnings announcement.

Meanwhile, Meituan's new initiatives business segment - covering its online supermarket and community group-buying services - narrowed its operating loss to 2.8 billion yuan from 5 billion yuan a year earlier.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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