Chinese online food delivery platform Meituan Dianping on Aug. 23 posted its first profitable quarter as the sizzling summer weather led to a surge in online orders.
For the second quarter ended June 30, Meituan Dianping reported an adjusted net profit of 1.49 billion yuan, compared to an adjusted net loss of 3.21 billion yuan in the prior-year period. The Beijing-based company attributed the results to the improved operating margin in its core business, narrowing losses in its new initiatives and seasonality.
Basic and diluted adjusted EPS came in at 15 Chinese fen, an improvement from the 10 fen loss in the prior-year period and ahead of the S&P Global Market Intelligence mean consensus estimate of a 12 fen loss. Operating profit swung to 1.11 billion yuan from a loss of 2.85 billion yuan.
Meituan Dianping, which listed on the Hong Kong Stock Exchange in September 2018, said its revenue climbed 50.6% to 22.70 billion yuan for the quarter, compared to 15.07 billion yuan in the year-ago period. The figure beat Market Intelligence mean consensus estimate of 21.83 billion yuan.
Food delivery accounted for 56.6% of second quarter revenue, compared to in-store, hotel and travel's contribution of 23.1%, while new initiatives and other segments accounted for 20.3% of sales.
CEO Wang Xing said during an Aug. 23 earnings call with analysts that lower delivery costs per order for the second quarter significantly contributed to the positive adjusted operating profit for its food delivery business.
As the company did not have to pay riders extra incentives during summer, delivery costs fell about 6% year over year for the quarter, or 12% on a quarter-over-quarter basis.
Furthermore, a spell of hot weather in July contributed to a surge in online food orders. Wang announced in a July 29 Weibo post that the company saw its daily food orders surpass 30 million for the first time. This happened during a heatwave that hit many cities in China over the last weekend in July.
However, CFO Shaohui Chen cautioned that delivery costs are likely to rise in the third and fourth quarters when the weather turns colder. Furthermore, the fourth quarter is usually a period when online food orders slow down, he said.
"Therefore, we always suggest investors to focus on year-on-year comparison to better understand the progress of our food delivery business," Chen said.
The good news, he added, is that the food delivery business is resilient toward the macroeconomic slowdown seen in the Chinese market.
The Tencent-backed company said the gross transaction volume of its food delivery business increased by 28.7% to 159.2 billion yuan for the quarter, compared to 123.7 billion yuan in the prior-year period.
Annual transacting users on the platform grew 18.4% to 422.6 million in the 12 months ended June 30, compared to 356.9 million in the 12 months ended June 30, 2018.
In June, the platform launched a joint membership program with Tencent Video and sold 400,000 subscriptions through the partnership.
CEO Wang Xing said Meituan Dianping enjoyed improved brand awareness in the lower-tier cities despite efforts by a competitor to gain market share there.
Alibaba Group Holding Ltd.-owned food delivery platform Ele.me has been making a strong push into the lower-tier cities. The Chinese e-commerce giant is keen to tap into consumer demand beyond the Chinese metropolises for further growth.
Nevertheless, Wang said the food delivery business has transitioned to a stage of moderating volume growth that is driven more by purchasing frequency rather than user acquisition.
On its loss-making bike-sharing business Mobike, Meituan Dianping said its operating losses improved due to a reduction in depreciation expenses as some of the bicycles became unusable and were not yet replaced.
The company expanded its car-hailing business to 42 cities as of June 30 under a new aggregated model.
Meituan Dianping's shares closed 0.14% lower Aug. 23 before the release of the earnings results.
As of Aug. 22, US$1 was equivalent to 7.08 yuan.
