"Meituan, Alleviating Concerns Over Chinese Regulatory Crackdown...Highlighting Mid- to Long-Term Growth Potential"

[Asia Economy Reporter Park Jihwan] Korea Investment & Securities evaluated on the 12th that the worst period for Meituan has passed as regulatory concerns from the Chinese government have somewhat eased. They emphasized that the second-quarter performance was unexpectedly solid and the medium- to long-term growth potential remains intact.

Meituan's second-quarter revenue reached 43.7 billion yuan (8.592 trillion KRW), a 77% increase compared to the same period last year, while the adjusted net loss was 2.22 billion yuan (403.2 billion KRW). Food delivery, IHT (In store, Hotel & Travel), and new businesses grew by 59%, 89%, and 114% respectively compared to the previous year.

Lee Dong-yeon, a researcher at Korea Investment & Securities, stated, "In the second quarter, COVID-19 was well controlled, and traffic increased during the Qingming Festival and Labor Day holidays, leading to excellent performance in the IHT sector." He added, "With reduced rider costs, profitability in the food delivery sector improved, resulting in a smaller-than-expected deficit."

However, it is expected that the third quarter will reflect negative impacts from the spread of regional COVID-19 infections and abnormal weather conditions. Early in the third quarter, a decrease in order volume was observed in both the food delivery and IHT sectors. As economic activity freedom declined compared to the second quarter, it is anticipated that IHT will be more affected than the food delivery business.

Meituan is increasing investments in new businesses starting this summer. Most of the budget appears to be allocated to expanding infrastructure for the community group buying business, with a focus on strengthening competitiveness in Meituan Select, Meituan Grocery, Meituan InstaShopping, and the food distribution sector.

The researcher emphasized, "This year is a period to secure competitiveness for long-term growth," adding, "Ultimately, regulation is important, and the worst period has passed."

Meituan’s management directly mentioned the government’s emphasis on common prosperity trends and has taken a more pro-government stance compared to before. As concerns over peak regulatory pressure have eased, it is expected that investment sentiment may improve in the short term.

He evaluated, "However, it should be noted that Meituan is still under investigation by regulatory authorities for platform antitrust issues for more than 120 days, and there remains policy uncertainty as there is a possibility that riders will need to be provided with social security insurance in the future."

He added, "Considering that results are gradually appearing in the community group buying business, which has a larger market size than the core food delivery business, the medium- to long-term growth potential remains intact."

This content was produced with the assistance of AI translation services.