Chinese food delivery giant Meituan on Thursday returned to net profit in the first quarter on forecast-beating revenue as it fended off competition from rivals such as Alibaba-backed Ele.me and ByteDance unit Douyin.
Meituan, whose app provides services including bike-sharing, ticket-booking and maps, made a net profit of 3.36 billion yuan ($486 million) versus a loss of 5.7 billion yuan a year earlier.
Revenue jumped 26.7% to 58.62 billion yuan, up from 46.27 billion a year earlier. That beat the 56.48 billion yuan average estimate of 14 analysts, according to Refinitiv.
CEO Wang Xing said on a call with analysts that the company would continue to invest in new technologies to chase further growth, with AI and autonomous delivery of particular importance.
“We are very excited about AI. There are so many ways we can use AI. It will change how people produce and generate content and will impact our business,” Wang said, adding that an internal team at Meituan was working on models and applications for the technology, though they “don’t have anything to share” at this point.
On Monday, Meituan expanded into Hong Kong with a new food delivery business KeeTa. It initially launched in Mong Kok and Tai Kok Tsui, but said it expects the service to be available across Hong Kong by year-end.
The business, which marks Meituan‘s first foray outside of mainland China, could be a stepping stone to further international expansion, Wang said in March.
The expansion comes as Meituan faces competition from long-time competitor Ele.me, as well as ByteDance, the owner of TikTok and Chinese sister platform Douyin, which branched out into food delivery in February.
CEO Wang previously predicted Douyin’s entry into food delivery would have “a limited impact” on Meituan.
Wang’s platform has also made moves into Douyin’s stronghold of live-streamed and short-form video in recent months, with pilot programs launched in Shenzhen and Beijing that allow merchants to use video content on Meituan to direct traffic to products they want to promote.
Analysts said Meituan had a competitive edge in the food delivery space with its lower commission rates.
“After the Lunar New Year, Douyin’s in-store GMV (gross merchandise value) growth slowed down, as it faced increasing competition from Meituan‘s lower commission rate and marketing dollar rebate for large merchants,” said Daiwa Capital Markets analyst John Choi.
“We believe that Meituan‘s low commission rate and rebate will likely continue for the rest of 2023.”
Meituan remains China’s biggest delivery platform, with a 69% share of the 1 trillion yuan market, data from researcher ChinaIRN showed.
Revenue from core local commerce, which includes food delivery and non-food delivery service Meituan Instashopping, rose 25.5% to 42.9 billion yuan in the January to March quarter.
Operating profit for the segment jumped 100.7% on a year-over-year basis to 9.4 billion yuan.
Quarterly revenue from Meituan‘s in-store, hotel booking, and travel sector businesses “grew robustly” compared to the first quarter of last year, which was impacted by COVID-19 curbs in China, the company said in its earnings report.