Meituan In Q1 2021: Continuing Growth, Strategic Flexibility, Low Regulatory Risk

Ecommerce, Selling Online, Online Sales, E-Commerce

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In tech-savvy China, fundamental industries – food, health, and education – have been rapidly evolving in the direction of online-based business models. The food delivery giant Meituan recently released its earnings report for the first quarter of 2021, including details on various user acquisition tactics and plans for future development. Concurrent with antitrust regulation and some underperforming new business initiatives, what can we expect from the company in the near future?

  • On May 28, 2021, Meituan, the Chinese shopping platform known for food delivery and retail services, released its earnings report for the first quarter of the year.

  • During this quarter, Meituan generated over CNY 37 billion (around USD 5 billion) in revenue, with a YoY growth rate of 120.9%.

  • The food delivery services, Meituan's core business segment, accounted for around 54% of the total revenue, doubling the amount from the same period last year.

  • Food delivery, in-store, and hotel & travel segments have shown a solid post-COVID recovery trend.

  • Potential risks include the current crescendo of antitrust regulation in China's Internet industry and operating losses from Meituan's new business initiatives.

  • Despite the present risks, we consider the company to be worthwhile for long-term investment.

Through leveraging the strengths of faster Internet connectivity and mobile apps, China's major local life service platform, Meituan, has grown to comprise over 200 service categories, including but not limited to on-demand delivery, bike-sharing, catering, movie ticketing, and other lifestyle services. Meituan's fundamental business strategy revolves around the 'Food + Platform' concept while prioritizing food delivery services in its business mix.

According to Meituan's Q1 2021 earnings statement, the company's business has achieved a strong recovery, benefiting from the Chinese state's effective epidemic control and prevention measures. Noticeably, its food delivery, in-store, and hotel & travel segments experienced stellar growth, aggregating operating profits. These three segments have pushed Meituan to gain over CNY 3.9 billion in Q1 2021, up by more than 15% compared to the same period of 2020. To evaluate this company's future potential, we will be inspecting both internal and external factors that impact Meituan's business performance from all dimensions.

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Disclaimer: Please consult your own advisor before making any investment decision. 

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