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After second profitable quarter, Meituan takes on bike-sharing as key segment for future investments

Meituan booked RMB 1.9 billion (USD 270.2 million) in adjusted net profit.

Photo: Stock.tuchong.com

China’s largest on-demand service provider Meituan-Dianping reported a net profit of RMB 1.9 billion (USD 270.2 million) for the third quarter of 2019, marking its second consecutive profitable quarter since it went public in Hong Kong last year.

Meituan first turned profitable in the second quarter this year with a net profit of RMB 1.5 billion, reversing a loss trend as the company lost RMB 1 billion and RMB 8.5 billion in the first quarter of this year and in fiscal year 2018, respectively.

The company made a total revenue of RMB 27.5 billion, up 44.1% from the same period of 2018, beating analyst estimates. It also reported increased revenues across all business segments.

“With our ‘Food + Platform’ strategy, we will continue to leverage our insights on the consumers and merchants to further boost innovation and improve efficiency. As always, we will keep investing in our long-term growth and focusing on business opportunities that will generate value for both consumers and merchants in the long run,” said Wang Xing, Chairman and CEO of Meituan.

One of the contributors to the revenue growth is its core food delivery business, with a revenue of RMB 15.6 billion, up 39% year-on-year. The robust growth is a result of various factors including increasing market share, enhanced operational capability, and improved marketing tactics to stimulate consumption.

Meituan’s transacting users in the twelve-month period ended September 30 reached 435.8 million, up 14% from 382.3 million reported during the same period in 2018. The number of food delivery transactions was RMB 2.47 billion, an increase of 38.1% year-on-year.

Meituan’s in-store, hotel, and travel business contributed a revenue of RMB 6.2 billion, increased 39.3% year-on-year, driven by the rising active merchant numbers and the average revenue per merchant. The increasing number of domestic room nights consumed on Meituan has contributed to the growth, which increased by 44.4% year-over-year, surpassing 100 million quarterly room nights for the first time.

The new initiatives and others, including bike-sharing and ride-sharing, generated 5.7 billion in revenue, up 65.4% from the same period of last year. The year-over-year increase was due to the narrowed losses of Meituan’s car-hailing and bike-sharing services. The company scaled back the subsidies of its self-operating ride-hailing business and started integrating other smaller operators to its platform.

The operation losses for its bike-sharing segment were also narrowed as a result of a reduction in depreciation, as some bikes have reached the end of usable life in this quarter. Meituan has already significantly improved the bike design, the supply chain management for bike and also the pricing and operation metrics.

Wang Xing also highlighted the bike-sharing sector over the earnings call, saying that the bike-sharing will be a key sector for further investments in the coming year. “We think it is a very good time window to make additional investment to replace more old bikes with our new bikes in the next few quarters. We believe bike-sharing business not only helps us tend to more high-frequency use cases, but also could continuously expand our user base and our consumer touchpoints, improve transaction frequency and the stickiness of our users,” said Wang.

Meituan’s share increased 6.69% to HKD 98.05 (USD 12.53) on Friday after releasing financial results for the third quarter in 2019, with a market capitalization of HKD 569.1 billion.

The article was updated to reflect developments.