Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

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Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Equity Bottom-Up

Maintaining strong revenue growth at the online food delivery companies largely depends on some combination of rising orders, increasing value per order, and higher monetization ('take') rates. 
And improvement in gross profitability at these companies depends on getting unit delivery revenues to grow faster than unit delivery costs. 
In our view, many of the drivers of recent strong revenue growth and improving gross profitability are beginning to fade for some online food delivery companies, including China's Meituan. 
This decline can be obscured by a number of temporary factors. At <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> in 2020 these include a change in segment reporting, a sharp rise in 'other' operating income, and growth of  the company's food delivery advertising revenue. 
In this note we take a closer look at H1 2020 food delivery results from Meituan, <a href="https://www.smartkarma.com/entities/delivery-hero-se" target="_blank" data-smartkarma-citation="entities:24416:1" rel="noopener">Delivery Hero SE (DHER GY)</a> and newly merged <a href="https://www.smartkarma.com/entities/takeaway-com-nv" target="_blank" data-smartkarma-citation="entities:28360:1" rel="noopener">Takeaway.com NV (TKWY NA)</a> to see how each company is faring in terms of top-line growth and gross profitability. The numbers are mixed, but in Meituan's case show a waning of momentum and stagnant margins in core food delivery activity.

Maintaining strong revenue growth at the online food delivery companies largely depends on some combination of rising orders, increasing value per order, and higher monetization ('take') rates. 
And improvement in gross profitability at these companies depends on getting unit delivery revenues to grow faster than unit delivery costs. 
In our view, many of the drivers of recent strong revenue growth and improving gross profitability are beginning to fade for some online food delivery companies, including China's Meituan. 
This decline can be obscured by a number of temporary factors. At Meituan (3690 HK) in 2020 these include a change in segment reporting, a sharp rise in 'other' operating income, and growth of  the company's food delivery advertising revenue. 
In this note we take a closer look at H1 2020 food delivery results from Meituan, Delivery Hero SE (DHER GY) and newly merged Takeaway.com NV (TKWY NA) to see how each company is faring in terms of top-line growth and gross profitability. The numbers are mixed, but in Meituan's case show a waning of momentum and stagnant margins in core food delivery activity.

Meituan: Key Drivers of Top-Line Growth &  Margin Lift Receding, Obscured By Growth of 'Other' Items