Shares in Meituan continued to rise during China’s national holiday last week, consolidating the Tencent-backed lifestyle service platform’s position as the country’s third-largest internet firm.

The company’s market cap hit a historical high of HK$ 516 billion ($72 billion) on Monday with shares trading at HK$ 89 apiece, up from HK$80 per share on September 30. Meituan’s share price has more than doubled this year after trading at a little above HK$ 40 in January.

The personal wealth of Meituan’s billionaire founder and chairman Wang Xing also jumped to a high of more than HK$ 58 billion. He owns around 11% of the company.

Meituan shares remained in the doldrums during the first few months after a $4.2 billion initial public offering in September last year. The firm went public at HK$69 a share and spent most of the following months below that level due to market concerns over intense competition in its core food delivery unit, along with profitability issues and cash-fueled expansion efforts in different businesses such as ride-hailing and bike rental.

Market sentiment has gradually shifted over the past few months. The Hong Kong-listed firm overtook search giant Baidu and e-commerce platform JD in terms of market cap to become the third-largest publicly traded Chinese tech firm in May. Meituan is still behind Alibaba and Tencent, which remain in a different league, with market caps each above $400 billion.

Meituan, together with Bytedance’s news app Toutiao and ride-hailing service Didi Chuxing make up a new group known by the acronym TMD. They are seen as the new generation of tech contenders to challenge China’s BAT, short for Baidu, Alibaba, and Tencent. Toutiao and Didi are still private companies.

Maintaining scale over profit

There are multiple reasons for the change in investor sentiment. Firstly, Meituan is gaining market confidence after it posted its first profit of RMB 875.8 million in the second quarter.

Although the company claims the profit is seasonal and emphasized that it will continue to prioritize scale for its highly subsidized food delivery business, Meituan showed investors its potential to make money.

“They are probably not going to push too much further here and going to just operate around the breakeven line for a long time to come so that they can keep growing and expanding their boundaries, while keeping investors not-so-concerned,” private investor ZQ Ong told TechNode. “This is important since Meituan needs capital to grow and keeping investors happy means a higher stock price and thus a lower cost of capital,” Ong added. 

Meanwhile, market analysts believe that changing competition dynamics between Meituan and its rivals in food delivery as well as in the online travel sector are key drivers of Meituan’s holiday share rise.

“What I think has driven the most recent share spike was Alibaba’s Investor Day (held on September 24th),” said Michael Norris, research and strategy manager at marketing and sales firm AgencyChina.  “One of the presentations showed the and Koubei tie-up perhaps wasn’t as strong as the investors suspected. Improvements to order volume, take rate, and cost efficiency were soft.”

“This, in turn, highlights how strong Meituan is in the food delivery space,” he added.

Overtaking Ctrip

Meituan’s travel business, an important revenue driver, is also gaining momentum. The company has supplanted Ctrip to become the largest platform for hotel reservations in terms of nights booked and this has “dented” Ctrip’s position and its stock price, Norris pointed out. A stronger hold on hotel bookings, a very high margin business, is excellent news for Meituan and its shareholders, according to Norris.

Baidu announced in late September plans to offload around one-third of its stake in Ctrip, equivalent to about $1 billion, as the company as it looks to tap new revenue streams.

China’s “Golden Week” break, which spans from National Day on October 1 to October 7, is another driver of Meituan’s share rise. China’s holiday consumer spending mainly goes into tourism, entertainment, and food, which are Meituan’s core service areas. Overall revenue from retail and dining during the period hit RMB 1.52 trillion this year. During the period, Meituan took bookings equivalent to more than three million one-night stays in domestic hotels on October 1 and sold 3.6 million tickets to tourist attractions on October 3, company data showed.

All segments performed strongly for Meituan, with the volume of food delivery orders rise 43% year on year. Orders on Meituan Instashopping, an on-demand grocery delivery service, grew by close to two-thirds on the year, and its hotel bookings reached a historical high. “From a fund flow perspective, investors are investing in domestic consumption names and avoiding names exposed to trade tensions and political uncertainties,” said Esme Pau, an analyst from Tonghai Securities.

Pau believes Meituan will likely continue to consolidate its leading market share and improve its financial results. “On the back of its turnaround in Q2 2019, the market is expecting Meituan to be a success story in achieving breakeven after listing, ramp-up of a sticky local services ecosystem, successful execution of its new initiatives and sensible capital allocation for its product and service portfolio,” she noted.

Of course, Meituan is not the only online platform that benefits from the Golden Week economy. Recorded holiday traffic was reported on online travel platforms like Ctrip and Alibaba’s Fliggy, as well as Airbnb-style platforms such as Tujia, Xiaozhu, and mobile payment tools like Alipay and WeChat. These services are increasingly driven by the country’s younger generations. China’s post-80s and post-90s generations represented a combined 87% of Meituan consumers during the holiday, according to the company.

Emma Lee (Li Xin) was TechNode's e-commerce and new retail reporter until June 2022, when she moved to Sixth Tone to cover technology and consumption. Get in touch with her via or Twitter.

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