The latest financial quarter seems to have come as a mixed bag for Hong-Kong listed, Chinese tech giant Meituan. The company’s shares hit a new high bringing its valuation to more than $100 billion. At the same time though, the company also recorded significant losses after three consecutive profitable quarters.
The Tencent-backed tech giant that focuses on food delivery, transport and travel became the third Chinese firm to join the $100 billion club after Tencent and Alibaba reached the landmark valuation back in 2013 and 2014.
However, all didn’t go down that well. In the first quarter the firm recorded a loss of 1.58 billion yuan compared to 1.43 billion yuan loss in the year earlier period. Total revenue came down from 19.17 billion yuan to 16.75 billion yuan on a year-over-year basis. Although the loss comes after three consecutive profitable quarters, the figure is a lot smaller than it was analysed to be, and hence the stock price.
The COVID-19 pandemic’s economic impact has been most severe for the travel and hospitality industries. During lockdown, the overall food delivery revenues have experienced a significant dip for Meituan. Subsequently, additional costs had to be covered in the case of incentives for company drivers that continued working through the pandemic and subsidies for merchants as well. “Business segments such as food delivery, in-store and, hotel and travel are all facing significant challenges on the demand side and the supply side” said the company addressing its losses in the first quarter.
In the press release, the company further highlights the long-drawn effects of the pandemic that will expectedly dictate its financial performance for the rest of the year. “Due to the uncertainty of the evolving situation, we are unable to fully ascertain the expected impact on full year 2020 at this stage; however if it takes longer for user demand and merchant operations to recover to normal levels as the pandemic continues, the results of our operations for the following quarters could be adversely affected” said the company.
However, against a background of falling figures in the case of transactions, the value of food deliveries has gone up. The average value of an order has gone up by 14.4 % as delivered meals became a new normal among families. More high-end restaurants have also begun to partner with the firm.