As China's largest online food delivery-to-ticketing services platform, Meituan Dianping edged over Baidu as China's third-most valuable tech company after Alibaba and Tencent after its market cap reached HKD500 billion（USD 63.75 billion） in the Q2 financial report.
On Aug. 8, the stock price surged 5.077% with valuation at HKD516.24 billion (USD65.82 billion). The encouraging result was inspired by the positive outlook of capital market and the share price momentum remains respectable, with a net profit of HKD876 million. This suggests the company is continuing to win over new investors.
Although Q2 result show that Meituan Dianping's revenue is RMB22.7 billion (USD9.2 billion), a year-on-year growth of 50.6%, higher than market forecast of RMB21.908 billion, yet the potential crisis is around the corner.
According to CNBC, "I do think Meituan Dianping has a lot to prove to justify their valuation," said Jackson Wong, associate director at Huarong International Securities. Meituan Dianping currently faces challenges on multiple fronts in all three sectors.
In the second quarter of 2019, the food delivery sector was greatly improved mainly due to the 6% year-on-year cost decrease of delivery riders. The year-on-year decrease is attibuted to the company's economies of scale and operational efficiency, while the sequential decrease is due to favorable seasonal factors.
As for seasonal conditions in the second half of the year, hot weather in the third quarter and summer holidays are the most common consumption scenarios for takeaways, but delivery costs will increase as more rewards were needed to provide for delivery man. And Meituan Dianping faces tough competition in the food delivery space from Alibaba's Ele.me, and a pricing war will likely prevent Meituan from making bigger progress for the foreseeable future.
In addition, revenue in "in-store, hotel, and travel"business and two other sectors also saw significant growth, but there was a slight decline in gross margin and business was not as good as expected. After Meituan acquired Mobike in an equity and debt deal worth a reported US$3.4 billion last year, the bike-sharing business remains sluggish owing to unclear business model.
