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Meituan Impresses with Fourth Quarter Results, Share Soar as much as 14%

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By Gina Lee

Investing.com – Chinese food delivery provider Meituan (HK:3690) impressed in its results for the fourth quarter of 2021, reporting a net loss of CNY 5.3 billion ($832.38 million) versus the CNY7.2 billion forecast by analysts. Revenue rose 31%, the slowest in more than a year, to CNY49.5 billion, and met estimates.

The company’s Hong Kong shares soared 14% to HK$153.9 ($19.66) by 1:25 AM ET (5:25 AM GMT). The stocks snapped a two-day loss to become the best performer on the Hang Seng Tech Index on Monday.

Meituan is one of the Chinese technology giants under regulatory scrutiny in areas from the welfare of its delivery riders to the commissions it charges restaurants. It is also under pressure to share its wealth as part of Chinese President Xi Jinping’s “common prosperity” drive, with the country facing its latest COVID-19 outbreak.

The government in February issued a call to aid the service industry, asking food delivery platforms to cut the fees they charge restaurants and wiping $26 billion off Meituan’s value in a single day. The city of Shanghai also entered a nine-day lockdown earlier in the day.

“Meituan’s fourth-quarter boost in food-delivery margin from a persistent increase in transactions could alleviate concerns about the drag from government-initiated fee cuts, meant to provide relief to merchants amid Covid-19 flare-up, to the unit’s first-half profitability. The company needs to raise first half transaction volume by at least 14% to yield more cost savings, we calculate, while lifting food-delivery margin above the year-earlier level following fee adjustments,” according to Bloomberg analysts Catherine Lim and Tiffany Tam.

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