A food shipment carrier for Meituan in Beijing, China, on Tuesday,Aug 22,2023 A rise in sales anticipated for Meituan might be a driver to its shares, which have actually surpassed peers as services investing ends up being an unusual brilliant area in the middle of deepening financier pessimism. Source: Bloomberg
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Since the start of 2023, Chinese food shipment leader Meituan has actually lost a shocking $82 billion in market capitalization, as worries over increasing competitors and a caution from its management about a downturn in its primary food shipment organization have actually alarmed financiers.
The tech giant’s market cap has actually toppled almost 60% to 441.06 billion Hong Kong dollars ($564 billion) from HK$ 1.08 trillion ($1382 billion) at the start of 2023, according to LSEG information.
Meituan’s stock has actually dropped almost 85% from its all-time high of HK$460 (about $5891) struck onFeb 18, 2021 to HK$7055 onJan 9, LSEG information revealed.
The business still controls China’s food shipment market, with nearly 70% of the marketplace share in the mainland, according to 2022 information from research study company China IRN.
But competitors has actually been increasing, specifically from Alibaba– ownedEle me, another popular food shipment business in China.
“Based on my experience,Ele me is more aggressive [than Meituan] and have more techniques to offering [discount] vouchers,” Feifei Shen, director at The Blueshirt Group and a food shipment user in China informed CNBC.
“Usually, I feel I can get cheaper prices for my orders on Ele.me,” statedShen “Only when I don’t have a coupon, I will think about Meituan.”
Meituan’s share efficiency
For the quarter endedSept 30, Alibaba’s regional services section– that includes food shipment– saw income boost by 16%, driven by strong development in bothEle me and its movement organization Amap, the tech giant stated.
Chinese media reported onDec 19 that ByteDance-owned short-video app Douyin remained in talks with Alibaba to obtain itsEle me food shipment organization, triggering Meituan shares to drop.
Hong Kong- based Blue Lotus Research Institute stated the fall in Meituan shares was since of reports that recommended ByteDance might purchaseEle me.
Ele me and Douyin signed up with hands in August 2022 to permit the food shipment company’s merchants to reach users of the short-video app.
ByteDance, which informed CNBC in February in 2015 that it was checking a kind of food shipment service in China through Douyin, supposedly rejected it remained in talks with Alibaba to obtainEle me.
Meituan shares were likewise struck after the business cautioned of a downturn in its food shipment organization in the 4th quarter of 2023, in spite of reporting favorable lead to the previous quarter.
Several elements consisting of the macro environment and the warm weather condition were impacting shipment volumes, CFO Shao Hui Chen stated throughout the business’s third-quarter profits call.
“On financial outlook, we think Q4 revenue year-over-year growth for food delivery will be slightly lower than the Q3 growth rate,” he stated.
Following that call, Meituan’s Hong Kong- noted shares plunged 12% to their most affordable because March 2020, according to LSEG information.
Analysts hold ‘purchase’ rankings
Despite macro unpredictabilities, experts are still positive on Meituan’s outlook. On average, they have a “buy” ranking with a cost target of HK$14934, according to FactSet information.
Fitch Ratings onDec 18 modified Meituan’s outlook to favorable, from steady.
“Meituan’s strong cash flow generation in 9M23, which is beyond Fitch’s forecast, can be sustained, as its profitability has improved due to narrowing losses from the new initiatives segment and strong market positions in core segments,” stated Fitch in a report.
“However, uncertainty remains over the impact on profitability from … competition from Douyin, which could result in operating cash flow volatility over the next 6-12 months,” Fitch stated.
But professionals were bearish on ByteDance’s possible acquisition ofEle me.
“An entry into domestic food delivery is a daunting challenge that yields very little benefits for ByteDance,” stated Blue Lotus Research Institute in aDec 19 report, repeating its “buy” ranking on Meituan with a cost target of HK$118
“Food delivery is a very heavily operations-focused business that requires a lot of operational efficiency and (crucially) leadership attention,” stated tech research study company Momentum Works inDecember “Buying and operating a large food delivery platform might not be the best solution for Douyin.”
The intricate food shipment surface makes it challenging for other gamers to present a powerful difficulty to Meituan, which is why experts continue to prefer the marketplace leader.
“The fact that Ele.me falls much behind Meituan in market share is probably telling – when you are not the core of the group, your managers do not have the same level of commitment as compared to Meituan, for which success of food delivery is life and death,” tech research study company Momentum Works’ Jerry Chao stated.
