China’s largest on-demand service provider Meituan-Dianping (HK: 3690) has warned of a potentially adverse impact from the coronavirus outbreak on its business in the first quarter of 2020, despite reporting a better-than-expected fourth quarter, with revenues up 42% reaching RMB 28.2 billion (USD 4 billion).
Meituan also reported a net profit of RMB 2.27 billion (USD 319.8 million), marking its third consecutive profitable quarter since it went public in Hong Kong in 2018.
However, the firm announced that as a result of the pandemic, it expects negative year-over-year revenue growth and an operating loss for the first quarter of 2020. It added that it is currently unable to fully identify the impact on the full year of 2020 due to the uncertainty of the evolving situation.
“Despite the short-term setback, we have strong confidence in our long-term growth. The pandemic has made society more aware of the urgency and importance of digitizing the service industry on both the demand and supply sides, and it has also strengthened our determination to continue upgrading many of the core elements of our business model,” Meituan’s Chairman and CEO Wang Xing said.
In the last quarter of 2019, Meituan’s core food delivery business continued to grow, generating revenue of RMB 15.7 billion, up 42.8% year-on-year and making up 55.8% of total revenues. Meituan’s transacting users in the twelve-month period ended December 31 reached 450.5 million, up 12.5% from 400.4 million reported during the same period in 2018. The number of food delivery transactions was RMB 2.5 billion, an increase of 36.7% year-on-year (YoY).
Meituan’s in-store, hotel, and travel business contributed RMB 6.4 billion in revenue, increasing 38.4% YoY, driven by the rising number of active merchants, which reached 6.2 million as of December 31, 2019. The increasing number of hotel room bookings on Meituan’s platform also contributed to the growth, reaching 110 million domestic room nights, increasing by 47.9% YoY.
New initiatives and other segments, including bike-sharing and ride-sharing services, generated RMB 6.1 billion in revenue, up 44.8% from the same period of last year. Meituan said it has reduced losses from its car-hailing and bike-sharing services in 2019 by improving operation efficiency and developing synergies with other businesses on the platform. The new initiatives and other segments contributed 21.6% of Meituan’s total revenues in the fourth quarter of 2019, its largest proportion since the company’s IPO.
Specifically, Meituan has continued to replace older bikes with new Meituan bikes, which are painted with the company’s signature yellow and can only be unlocked through the Meituan app. For the ride-hailing business, the firm scaled back the subsidies of its self-operating ride-hailing business and started integrating other smaller operators into its platform.
Meituan’s share price increased 6.4% to HKD 93.65 (USD 12.08) on Tuesday following the release of their financial results, resulting in a market capitalization of HKD 544.97 billion.
