Meituan snaps losing streak with profitable June quarter though Douyin threat looms

Revenue for the quarter rose 14.4 per cent year on year to 105 billion yuan, beating the consensus estimate of 101 billion yuan

On-demand delivery giant Meituan swung back to profitability in the second quarter as China’s price war in food delivery cooled, allowing the company to scale back subsidies and target higher-value customers.

Beijing-based Meituan posted an adjusted net profit of 2.5 billion yuan (US$372 million) for the June quarter, snapping a three-quarter losing streak according to its earnings report on Friday. The figure beat average analyst forecasts of 340 million yuan compiled by Bloomberg.

Revenue rose 14.4 per cent year on year to 105 billion yuan, beating the consensus estimate of 101 billion yuan.

Revenue and adjusted net loss for the first half came in at 196 billion yuan and 2.4 billion yuan, respectively.

Meituan’s Hong Kong-listed shares closed flat at HK$77.50 on Friday ahead of the earnings announcement.

The latest results come amid Meituan’s effort to curb promotional spending following a year of intense competition with rivals including JD.com and Alibaba Group Holding, which had used aggressive subsidies to capture market share. Alibaba owns the South China Morning Post.

As market subsidies receded, Meituan had been paring back support for low-value orders to redirect resources towards high-value users and larger orders, Huatai Securities said in a recent research note.