3690.HK
美團首席執行官王興決定親身轉戰海外

The online-to-offline service provider’s founder will personally lead his company’s global pivot, hoping to imitate the success of other Chinese internet majors

Key Takeaways:

  • Meituan is launching a major restructuring that will place its core local business and new business units under two of its senior vice presidents
  • Founder and CEO Wang Xing will lead the company’s overseas charge, which dates back to the launch of its KeeTa takeout delivery service in Hong Kong last year

  

By Ken Lo

Watch out, Shein, ByteDance and PDD.

Takeout delivery giant Meituan (3690.HK) is hoping to join that trio of Chinese internet giants that have found big success overseas, with its aggressive founder and CEO Wang Xing personally taking on the challenge.

Earlier this month, Wang issued an internal notice announcing a restructuring that would divide Meituan’s core Chinese business into two parts, each managed by a senior vice president. Meantime, Wang will personally oversee all of the company’s overseas operations, as well as its unmanned aerial vehicle business, hinting at where his next big priorities lie. 

In terms of its core China-based business, Meituan is reorganizing its in-store and delivery services, as well as its Meituan platform, basic R&D and other business. The in-store services and R&D that used to operate separately will now both answer to senior vice president Wang Puzhong. Senior vice president Zhang Chuan will oversee Dianping, the Chinese equivalent of Yelp, as well as the company’s SaaS, bike-sharing, power bank-sharing and other new businesses. 

Power game player

But Wang’s decision to take the reins of the company’s fledgling international operations was one element of the reorganization that captured wider attention. Wang is one of the few founders of a Chinese internet company who is still firmly ensconced as its CEO, which owes largely to his strong personality.

Meituan reached its current size through a series of acquisitions, all ending with the ousting of CEOs of the acquired companies. Last June, Meituan’s own co-founder Wang Huiwen resigned as a non-executive director, citing personal health reasons. And this year Wang Xing installed industry veteran Zhang Chuan to take charge of the company’s new businesses. Such movement of chess pieces around his company speaks to Wang Xing’s skill at playing power games.

Meituan’s business is roughly divided into its core local businesses and new businesses, with the former as its main profit engine, accounting for about three-quarters of overall revenue. The company’s core local businesses recorded steady revenue growth in the first three quarters of last year. But the unit’s operating margin fell to 17.5% in the third quarter, down from 22% in the first quarter and 21.8% in the second, reflecting increasing competition in the food delivery business.

Operating losses for the new businesses unit, which accounts for about a quarter of Meituan’s revenue, remained at or below 5 billion yuan ($695 million) in each of the past three quarters and have been gradually improving. The company logged an overall operating cash inflow of 11.2 billion yuan in last year’s third quarter, and reported it had 25.1 billion yuan in cash and 108.5 billion yuan in short-term wealth management investments at that time.

Meituan is quite sound financially, though its new businesses continue to weigh on its overall profit margin. Its adjusted net profit margin in last year’s third quarter fell to 7.5%, down from 9.4% in the first quarter and 11.3% in the second. The company’s stock has been a relative underperformer, compounded by selling by some of its major shareholders.

Meituan launched an earlier restructuring in 2021, aimed at integrating its vast array of daily consumer services onto its platform and upgrading itself into a “super app” covering a wide array of services from group buying to takeout delivery, hospitality and travel, and bike and power bank sharing. Short video sensation Douyin, the Chinese version of TikTok, unveiled a similar consumer service super-ecosystem that same year. While the two internet giants’ moves that year were independent, Douyin nonetheless quickly became Meituan’s toughest rival in terms of super-app operation.

Sinking value

Meituan has ramped up its investments in new initiatives these last few years, building up a presence in grocery retail, group buying and livestreaming to counter competitors like Douyin. Despite steady progress in most of those areas, shareholders have been less impressed. The company’s stock plummeted from a high of HK$451 in February 2021 to just HK$72.75 at Monday’s close, losing more than 80% of its value. The stock now trades just slightly above its 2018 listing price of HK$69, and has been one of the worst-performing blue chips over the last three years.

Meituan was already gearing up to expand overseas at the end of 2022. But perhaps due to its fierce competition with Douyin, Wang Xing delayed those efforts. Now that he has restructured the main China operation by simplifying its structure and cutting costs, he may be able to concentrate more on overseas initiatives. The company made its first step in that direction last May when it launched its KeeTa service in Hong Kong, which has quickly become the city’s second-largest food delivery platform, behind only German giant Delivery Hero’s Foodpanda.

Foodpanda accounted for 42% of Hong Kong’s local food delivery market by December 2023, compared with 37% for KeeTa, according to Measurable AI, a Hong Kong-based company that tracks business revenue. And KeeTa has not achieved full coverage in Hong Kong yet, meaning it may still have room to grow geographically.

Foodpanda merger?

Foodpanda owner Delivery Hero said last September it was in talks to sell some of its Southeast Asian operations, including its Foodpanda operations in Singapore, Malaysia, the Philippines, Thailand, Cambodia, Myanmar and Laos. It did not reveal names of potential buyers, but Meituan’s was rumored as one.

But more recent rumors are saying negotiations between the pair have broken down. Delivery Hero CEO Niklas Ostberg seemed to confirm that when he told CNBC last week that he was glad his company would continue to stay in Southeast Asia, suggesting any sale talks had hit a snag.

Following its stock declines, Meituan trades at an affordable projected price-to-earnings (P/E) ratio of just 12.6 times. But any stock buyers looking for a bargain should also note the company could be headed into uncharted territory with its overseas foray, which could bring it new business but also potential controversy like the rough waters that have rocked TikTok, Shein and PDD.

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