Foodstuff shipping and delivery couriers for Meituan stand with insulated bags during a morning briefing in Beijing, China, on Wednesday, April 21, 2021.
Yan Cong | Bloomberg | Getty Pictures
Meituan‘s Hong Kong-shown shares fell a lot more than 5% on Friday just after CEO Wang Xing warned of a food shipping and delivery slowdown in the up coming quarter.
“For our food items supply, we hope the 3rd quarter or the quantity will gradual down, but even now be additional resilient than other usage-associated sectors,” Wang explained throughout the earnings connect with on Thursday.
On Thursday, Meituan posted solid second-quarter outcomes.
Income was 67.96 billion Chinese yuan ($9.33 billion), up 33.4% from 50.93 billion yuan posted in the same period a year ago. The organization also swung to gain of 4.69 billion Chinese yuan for the next quarter, in comparison to a decline of 1.11 billion Chinese yuan a yr in the past.
“We have viewed some quick-phrase headwinds due to macro economic system and intense weather conditions problems.”
Locations this sort of as Beijing, Tianjin and the provinces of Hebei, Shanxi and Henan seasoned severe rain in July, causing widespread flooding. Typhoon Doksuri swept north after ravaging southern Chinese provinces.
Consumers’ pent-up need for offline consumption is even further produced, and this will direct to a momentary squeeze on food items shipping transactions as individuals go out far more usually.
“Excessive temperature delivers troubles to our business. A lot of retailers experienced to suspend their business, even though people selected to inventory packaged food stuff as a substitute of purchasing clean meals shipping and delivery. In some cities, foodstuff supply was even suspended in order to make sure protection,” said Wang.
Meituan sales opportunities China’s food stuff shipping marketplace, holding almost 70% of the current market share in the mainland, in accordance to a 2022 report on Meituan.
Moreover food shipping and delivery, the tech company also operates a variety of companies including ride-hailing, on-demand supply, lodge and vacation reserving, movie ticketing, enjoyment and lifestyle products and services.
Xiaolin Chen, head of intercontinental at KraneShares, is bullish on Meituan.
The expense agency has a cost focus on of 205 Hong Kong pounds ($26.14) on the inventory, which signifies a 35.2% upside from the present-day price tag of HK$132.80.
“They pretty much received a good deal of sector share in the course of [the pandemic]. They managed to grab decrease tier towns and I think [that] sort of current market share will grow to be sticky with them,” Chen explained to CNBC’s “Squawk Box Asia” on Friday.
Wang stated buyers will probably dine out additional as the overall economy recovers, which could direct to a reduce demand for food delivery.
“So significantly in third quarter, offline targeted visitors and travel need proceed to recover speedily. Consumers’ pent-up need for offline usage is more released, and this will guide to a temporary squeeze on meals delivery transactions as men and women go out a lot more typically,” stated Wang.
China’s weak restoration
Credit score ranking agency Fitch Scores nonetheless expects China’s gross domestic item to increase 5.6% in 2023 as the financial state normalizes pursuing extremely weak consumption growth previous yr, according to a July report. This is marginally larger than the Chinese government’s growth focus on of around 5%.
Meituan’s CEO reported he remains assured of long-phrase progress in its foods supply company.
“Get volume in Q3 past year was a relatively superior base, but we consider a momentary slowdown in purchase volume advancement is due to exterior components,” explained Wang. “We will continue to activate our merchandise and operational approach to improved capture the demand from customers and promote the restoration.”
Meituan is also deploying autonomous shipping motor vehicles which have been “more commonly used in far more scenarios,” mentioned Wang.
Chinese self-driving car company Pony.ai introduced in March that it is partnering Meituan to make unmanned cars for meals shipping and delivery companies.
Chen explained that leveraging synthetic intelligence tech in meals shipping and delivery is critical to “bettering expenses and providers for clients.”
“We will leverage our proprietary exploration and external financial commitment to explore the use of AI and autonomous delivery and other chopping edge technologies,” claimed Wang.
In May possibly, Meituan rolled out a sister app in Hong Kong, as it looks for new marketplaces outside of mainland China.
