Meituan (美團) reported revenue that beat estimates, showing how Beijing’s ongoing antitrust probe into the Internet giant has yet to weigh on its growth prospects.
China’s largest food delivery platform reported sales of 43.8 billion yuan (US$6.77 billion) for the April-to-June quarter, compared with the 42.4 billion yuan average of analyst’s estimates. The company posted a third straight quarterly net loss of 3.4 billion yuan.
Wang Xing’s (王興) Internet behemoth is facing fines of about US$1 billion as part of an investigation by the antitrust watchdog into alleged contraventions such as forced exclusivity arrangements, Bloomberg reported this month.
Photo: Reuters
Since then, Meituan and its peers have come under sustained fire from regulators for a slew of perceived offenses, ranging from the plight of low-income gig workers to their handling of data security.
Despite a pledge by the company earlier this year to provide insurance for its delivery force, regulators have gone even further, asking online food platforms to ensure that workers earn at least the local minimum wage, which could weigh on margins.
“Our base case scenario assumes it might take [about] 5 years to fully implement the potential increase on rider cost,” Citigroup Inc analyst Alicia Yap wrote in a note this month. “While there remain regulatory overhang and financial impacts uncertainty near term, we believe our positive thesis on Meituan for its local services super-app position remains intact and believe Meituan will navigate through the challenges and transform into a reputable and prevailing local service gateway company.”
Citigroup this month cut its share price target for Meituan by 19 percent. The stock has nearly halved since its February high, wiping out about US$160 billion in market value.
Even as regulatory scrutiny intensified, Wang’s firm has splashed out on growing newer businesses, including community commerce, an arena that took off during the COVID-19 pandemic.
The company is counting on its Meituan Select division to help it reach a target of adding about 400 million annual transacting users over the next few years to the 628.4 million it had in the second quarter.
However, competition in the community group buying industry has been stiff.
In the past few months, several smaller operators have folded or run into trouble, unable to compete with the heavy investments by giants like Meituan, Alibaba Group Holding Ltd (阿里巴巴) and Didi Global Inc (滴滴).
Meituan and its peers have announced major philanthropic projects, heeding Beijing’s call to redistribute wealth.
In the latest example, Pinduoduo Inc (拼多多), an e-commerce company known for giving significant discounts to customers when they buy produce together, said it would donate all of its first net profit since going public to support the country’s farmers and agricultural areas.
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