Meituan Shares Jump After Revenue Growth Surprises

Meituan Shares Jump After Revenue Growth Surprises

Meituan shares rose in Hong Kong on Monday, the first trading day after the Chinese food-delivery giant posted better-than-expected revenue growth for the first quarter.

The stock was up 7.1% at 192.90 Hong Kong dollars (US$24.59) at the mid-day break, trimming year-to-date losses to 14%.

“The worst likely behind,” Citi analysts said in a recent note. “Meituan is well-positioned as reopening play short-term and solid local service ecosystem exposure longer term given proven execution track record.”

The bank kept a buy call on the stock while raising its target price to HK$222 from HK$204.

Meituan last Thursday said it delivered a 25% rise in quarterly revenue, driven by the steady growth of its main food delivery business and a 47% jump in revenue from new initiatives, which include grocery delivery and group-purchase operations. That beat expectations of analysts polled by FactSet.

Net loss for the quarter widened to 5.70 billion yuan (US$855.8 million) from a loss of CNY4.85 billion a year earlier, slightly missing expectations according to the FactSet poll. But some analysts said the company’s adjusted net loss exceeded their previous estimates, as home-bound consumers turned to Meituan’s delivery services for daily necessities amid a resurgence of Covid-19 in China.

Bocom International also kept a buy rating on Meituan shares and increased its target to HK$234 from HK$230. It noted the company’s revenue beat and a “solid” long-term outlook, given expectations of a fast, post-pandemic recovery for the food-delivery industry in China, as well as the sector’s continuously expanding addressable market size.

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