Meituan, a leading food delivery company based in China, has reportedly seen its shares rise 12% in Hong Kong after its fourth-quarter earnings and commentary wowed analysts.
The stock ended a two-day losing streak and was the Hang Seng Tech Index's best performer on Monday. The company reported a net loss of ¥5.3 billion (US$831 million) for the December quarter last week, falling short of analysts' projections of ¥7.2 billion.
Revenues increased by 31% to ¥49.5 billion, meeting expectations for the first time in over a year.
Meituan is one of the Chinese tech corporations that is facing a brutal regulatory onslaught from Beijing. The firm, which is owned by billionaire Wang Xing is under scrutiny for factors ranging from the welfare of its delivery workers to the fees it charges restaurants.
According to Bernstein analyst Robin Zhu, despite the evident major challenges such as the surge in Omicron and macro, Meituan management sounded confident on last week’s calls, highlighting that activity levels recovered shortly when lockdowns were lifted.
Meituan and, similarly its competitors are under immense pressure to contribute to Xi Jinping's shared prosperity initiative and relieve immense suffering as China fights multiple Covid outbreaks.
The Chinese government issued an appeal in February to help the struggling service sector, requesting food delivery services to reduce the commissions they charge restaurants, cutting Meituan's valuation by $26 billion in a mere day.
By reducing the financial incentives it offers to customers, the corporation hopes to increase its profitability.
Zhu noted that Meituan mentioned plans for a significant decrease in food-delivery user rewards this year, as well as targeting mid and high-frequency consumers as business growth drivers. Before Monday, Meituan's shares had fallen by 40% this year.
The rise in Meituan's stock aided the recovery of the larger Hang Seng Tech Index, which had fallen 5% at the end of last week due to concerns regarding the industry's profits as well as the possibility of Chinese companies being barred from American markets. At the closing in Hong Kong, the tech index was up 2.6%.
Source credit: https://www.bloombergquint.com/markets/meituan-shares-surge-as-much-as-12-in-hong-kong-after-earnings-l1a3grlm
