A meals supply courier for Meituan in Beijing, China, on Tuesday, Aug. 22, 2023. A surge in gross sales anticipated for Meituan could also be a catalyst to its shares, which have outperformed friends as providers spending seems to be a uncommon shiny spot amid deepening investor pessimism. Source: Bloomberg
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Since the start of 2023, Chinese meals supply chief Meituan has misplaced a staggering $82 billion in market capitalization, as fears over rising competitors and a warning from its administration a couple of slowdown in its essential meals supply enterprise have spooked buyers.
The tech large’s market cap has tumbled almost 60% to 441.06 billion Hong Kong {dollars} ($56.4 billion) from HK$1.08 trillion ($138.2 billion) at the start of 2023, based on LSEG knowledge.
Meituan’s inventory has plummeted almost 85% from its all-time excessive of HK$460 (about $58.91) hit on Feb. 18, 2021 to HK$70.55 on Jan. 9, LSEG knowledge confirmed.
The firm nonetheless dominates China’s meals supply trade, with nearly 70% of the market share within the mainland, based on 2022 knowledge from analysis agency ChinaIRN.
But competitors has been rising, particularly from Alibaba-owned Ele.me, one other outstanding meals supply firm in China.
“Based on my experience, Ele.me is more aggressive [than Meituan] and have more approaches to giving [discount] coupons,” Feifei Shen, director at The Blueshirt Group and a meals supply person in China advised CNBC.
“Usually, I feel I can get cheaper prices for my orders on Ele.me,” stated Shen. “Only when I don’t have a coupon, I will think about Meituan.”
Meituan’s share efficiency
For the quarter ended Sept. 30, Alibaba’s native providers phase – which incorporates meals supply – noticed income improve by 16%, pushed by sturdy progress in each Ele.me and its mobility enterprise Amap, the tech large stated.
Chinese media reported on Dec. 19 that ByteDance-owned short-video app Douyin was in talks with Alibaba to accumulate its Ele.me meals supply enterprise, inflicting Meituan shares to drop.
Hong Kong-based Blue Lotus Research Institute stated the autumn in Meituan shares was due to studies that steered ByteDance might purchase Ele.me.
Ele.me and Douyin joined palms in August 2022 to permit the meals supply agency’s retailers to achieve customers of the short-video app.
ByteDance, which advised CNBC in February final yr that it was testing a kind of meals supply service in China by way of Douyin, reportedly denied it was in talks with Alibaba to accumulate Ele.me.
Meituan shares had been additionally hit after the corporate warned of a slowdown in its meals supply enterprise within the fourth quarter of 2023, regardless of reporting optimistic leads to the earlier quarter.
Several elements together with the macro setting and the nice and cozy climate had been affecting supply volumes, CFO Shao Hui Chen stated in the course of the firm’s third-quarter earnings name.
“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 decision, Meituan’s Hong Kong-listed shares plunged 12% to their lowest since March 2020, based on LSEG knowledge.
Analysts maintain ‘purchase’ rankings
Despite macro uncertainties, analysts are nonetheless optimistic on Meituan’s outlook. On common, they’ve a “buy” score with a value goal of HK$149.34, based on FactSet knowledge.
Fitch Ratings on Dec. 18 revised Meituan’s outlook to optimistic, 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 specialists had been bearish on ByteDance’s potential acquisition of Ele.me.
“An entry into domestic food delivery is a daunting challenge that yields very little benefits for ByteDance,” stated Blue Lotus Research Institute in a Dec. 19 report, reiterating its “buy” score on Meituan with a value goal 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 analysis agency Momentum Works in December. “Buying and operating a large food delivery platform might not be the best solution for Douyin.”
The advanced meals supply terrain makes it tough for different gamers to pose a formidable problem to Meituan, which is why analysts proceed to favor the market chief.
“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 analysis agency Momentum Works’ Jerry Chao stated.
Source: www.cnbc.com”