(Bloomberg) -- Meituan posted a 28% surge in revenue, affirming resilient demand in China for takeaway from people confined to home during the pandemic.

Sales rose to 62.6 billion yuan ($8.7 billion) during the three months ended September, versus an average projection for 62.4 billion yuan. It swung to a profit for the period of 1.2 billion yuan, helped by big foreign exchange gains and tax benefits, after almost two years in the red.

Despite persistent losses, Meituan is one of the few Chinese internet giants that’s managed to sustain robust growth through an economic slowdown, punishing Covid restrictions and a regulatory crackdown that’s wiped out expansion at most of its peers from Tencent Holdings Ltd. to Alibaba Group Holding Ltd. Its core business of delivering meals has remained resilient even as its travel arm withered, while discipline on spending and subsidies has helped keep losses in check.

Its longer-term prospects may hinge on the pace of China’s reopening and progress in new arenas and overseas, as longstanding backer Tencent begins to unwind its shareholding.

Meituan’s stock has come under pressure after Tencent declared it would distribute some $20 billion of its holding over time to its own shareholders. Prosus NV, which owns a big chunk of Tencent, has already said it plans to sell off the Meituan shares it gets to shore up its balance sheet.

The meal delivery giant is also exploring a major expansion abroad as its home market decelerates, including in Hong Kong. 

What Bloomberg Intelligence Says

Meituan’s 3Q core local commerce operating margin probably exceeded the prior year’s as its on-demand Instashopping business unit, which was reclassified with food delivery and travel-related services to form the core local commerce unit in 2Q, turned profitable this year. Similar to Alibaba’s delivery unit Ele.me, the rise in Meituan’s order value vs. 12 months earlier would have persisted in 3Q as Covid-19 flare-ups and related mobility curbs in mainland China raised residents’ reliance on such services for their necessities.

Increased demand in China probably boosted both order volumes and value to lower delivery cost per unit. Such gains, which narrowed Ele.me losses during July-September vs. a year earlier, would have offset falls in travel-related profit to lift Meituan’s core local commerce margin in 3Q. 

- Catherine Lim and Tiffany Tam, analysts

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