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Meituan Surges on Q4 Beat, Committing to Profitability

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By Dhirendra Tripathi – Meituan stock (HK:3690) closed nearly 12% higher in Hong Kong trading Monday after its fourth-quarter revenue came in ahead of estimates.

The company followed its results with a positive commentary, saying it aimed to improve profitability by cutting back on the financial incentives that it provides to users.

“Despite obvious top-down challenges (Omicron, macro), Meituan management struck a confident tone on Friday’s calls, noting that activity levels tended to recover quickly after lockdowns ended (e.g., citing evidence in Shenzhen in recent days),” Bloomberg quoted Bernstein analyst Robin Zhu as writing in a note.

Meituan “pointed to plans for a meaty cut in food-delivery user incentives this year, and focusing on mid- and high-frequency users as drivers of business growth,” Zhu wrote in the note.

Meituan, whose services also include restaurant reviews and bike-sharing, said revenue rose to 49.52 billion yuan ($7.78 billion) in the final three months of 2021, up about 31%.

Heavy capex, including in its community e-commerce unit Meituan Select, more than doubled Meituan’s quarterly loss to 5.34 billion yuan with CEO Wang Xing telling analysts that he expects its operating loss to narrow in 2022.

Meituan is among the several Chinese tech platforms battling the government’s heightened scrutiny of their trade practices. Authorities have called upon food delivery firms to pay more to their drivers and cap the commission they charge restaurants.

According to Reuters, the company has committed to lowering the commission charged to some merchants.

Meituan's food delivery-related cost, which includes paying delivery riders, rose over 38% to 68.18 billion yuan.

Sales from food delivery, accounting for over half of Meituan's revenue, were up by more than a fifth and topped 26 billion yuan.

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