Meituan Dianping reported strong fourth quarter revenue, exceeding analyst consensus expectations, and booked profits for a third consecutive quarter but warned that adverse effects from the Covid-19 outbreak could last the entire year.

Why it matters: Impact to the Chinese local services super app from the Covid-19 outbreak will be “significant” because of the heavily offline nature of most of its business units.

  • Like other Chinese tech companies including Alibaba and Tencent, Meituan categorized the Covid-19 hit as “short-term” and expects “long-term” growth as Chinese consumers increasingly shift to online transactions for the service industry.
  • Grocery delivery remained one of the bright spots for Meituan during the outbreak.
  • The Chinese O2O giant is facing intense competition from rival Alibaba which is reshaping its local lifestyle business around its popular payment app Alipay.

“We welcome the other players to join us to accelerate the digitization and development of this industry which will benefit all participants in the ecosystem.”

—Chen Shaohui, Meituan’s chief financial officer

Details: Meituan’s revenue for Q4 2019 reached RMB 28.2 billion ($3.9 billion), up 42.2% from the same period a year ago, beating the average estimate of RMB 26.7 billion for 12 analysts in a Refinitiv I/B/E/S poll, according to data cited by Reuters. The company reported profits of RMB 1.46 billion in Q4, its third consecutive quarter.

  • The company warned that it was expecting negative year-over-year revenue growth and operating losses for the first quarter of 2020 as a result of the pandemic.
  • The cost of revenues increased by 20.3% year over year to RMB 18.4 billion for Q4 from RMB15.3 billion in the same period of 2018, primarily due to an increase in food delivery rider costs resulted from rising orders.
  • Share prices traded up 6.7% at HK$93.85 as of publication thanks to strong Q4 results and signs of a gradual food delivery recovery in March as indicated by the company in the earnings call.
  • The company’s annual transacting user base reached 450.5 million as of end-2019, while the number of annual active merchants increased to 6.2 million. 
  • Despite a gradual recovery for its food delivery unit, Meituan’s in-store, hotel, and travel businesses, which together accounted for 22.6% of the company’s revenue in Q4, has been harder hit. Active merchants for in-store services, nearly all of which were shut down in February, are still at a “very low” level as of late March and the company expects consumers will take more time to return to normal, said Chen Shaohui, Meituan’s chief financial officer, during the earnings call.
  • When commenting on Alipay’s recent expansion to the local lifestyle market, Chen said the local service digitization market is big and still at a very early stage.

Emma Lee

Emma Lee is Shanghai-based tech writer, covering startups and tech happenings in China and Asia in general. We are looking for stories related to tech and China. Reach her at lixin@technode.com.