(Bloomberg) — Meituan is preparing for a potential entry into the Middle East in its first expansion beyond the China region, even as it begins to consider the feasibility of other markets from Europe to Southeast Asia.
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Founder Wang Xing said Meituan was actively exploring new arenas after its success in Hong Kong, but he stressed the company will be cautious and disciplined in venturing abroad. The company was now in the early stages of preparing a launch for the Middle East, he said.
The billionaire outlined his thinking to analysts Thursday after Meituan reported quarterly sales rose a better-than-expected 25%, a sign it’s fending off new rivals in an uncertain Chinese consumer spending environment.
Meituan, for years the dominant player in a mammoth Chinese food delivery market, has spent months preparing to debut its KeeTa app in Riyadh, Bloomberg News reported earlier. The global expansion is emblematic of a push by Chinese companies to seek growth abroad as competition at home intensifies.
“We are actually evaluating many different markets. And the Middle East or the Gulf countries is one of them,” Wang said. “But to be honest, it’s kind of a surprise to me that we received media coverage of Middle East operations so early. So we haven’t really launched anything there. We are just doing some preparation.”
What Bloomberg Intelligence Says
Meituan may have averted a drop in 1Q core local commerce revenue, which rose 3% from the prior year after a 27% surge, but the unit’s persistent margin decline amid competition continues to threaten expectations for higher year-on-year profitability in 2H. Increased spending to expand in the Middle East could also limit the unit’s 2H margin gains from a year earlier.
– Catherine Lim and Trini Tan, analysts
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The Beijing-based company reported revenue of 73.3 billion yuan ($10.1 billion) in the March quarter, compared with the average estimate of 69 billion yuan. Net income in the period rose 60% to 5.4 billion yuan. Food order volume growth however will slow this quarter, in part because of a higher comparison from 2023 when Chinese consumption picked up from Covid-era troughs.
Meituan’s outperformance suggests the company is coping with new rivals like Kuaishou Technology and ByteDance Ltd., which have joined Alibaba Group Holding Ltd. in contesting the Chinese meal-delivery arena. The company has carried out a sweeping overhaul of business lines in recent months to counter that intensifying competition, as it moves to streamline operations and shave costs, including in its grocery business. At the same time, it’s expanding into areas like live-streaming and new markets including the Middle East.
KeeTa — a nod to the fast-moving cheetah — has vaulted to the No. 2 spot in Hong Kong since its launch last May, according to independent research. That foray outside the mainland Chinese market that Meituan already dominates was seen as a trial run for a broader global expansion. Chief Executive Officer Wang took direct control of the overseas businesses in February, elevating the importance of its international ambitions.
Like many of its peers, Meituan has been stepping up share buybacks, launching a $1 billion program in November. Analysts say it could also follow tech companies like Alibaba and JD.com Inc. in issuing convertible bonds, after the two raised a combined $6.5 billion through such notes to tap cheaper funding. Chinese online travel agency Trip.com announced Tuesday an offering of $1.3 billion convertible senior notes due 2029.
For now, China remains Meituan biggest market, one where consumer spending remains shaky.
“As we enter Q2, we no longer benefit from a low order base of last year,” Chief Financial Officer Chen Shaohui told analysts. “So, the year-over-year order volume growth rate in Q2 is expected to trend down to a normal level which reflects the current consumption environment.”
–With assistance from Sarah Zheng.
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