Meituan is expected to show financial strength in the third quarter

Beijing: Meituan, a leading provider of on-demand services in China, is expected to continue its sales growth after releasing its financial results on Friday as the company's business fundamentals remain solid despite a weak global economy.

After a sudden lockdown across China severely damaged restaurants, hotels and entertainment venues, continued revenue growth could help boost investor confidence in Meituan.

Tencent Holdings, the company's largest shareholder, announced last week that it would distribute Meituan shares worth about $20 billion to its shareholders.

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Despite competition from Ele.me and new products from TikTok owner ByteDance, Meituan is expected to maintain its dominance in the food delivery sector with a 70% market share, according to Liu Xinliang, founder of Beijing-based internet industry consultancy DCCI.

According to Liu, "Food distribution is a labor-intensive business that involves a vast network of merchants and delivery personnel that has been built up over the years." He added that even a formidable rival like ByteDance, which has 600 million daily active users on its domestic short video app Douyin, will find it difficult to topple Meituan.

Meituan, which was founded in 2010 and is headquartered in Beijing, expects its revenue to rise to 62.4 billion yuan (US$8.72 billion) in the third quarter from 50.9 billion yuan in the previous quarter, according to a Bloomberg survey of analysts.

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For example, Meituan's delivery services have become vital to Chinese citizens during the Covid-19 lockdown, but pressure from Beijing for "general prosperity" has pressured the company to improve welfare coverage for its army of gig workers. Dala, whose numbers are 5 million strong.

A group of Meituan drivers begged for help on Tuesday in an open letter that has gone viral after they were unable to return to their Beijing neighborhoods that were under lockdown. Meituan responded by saying that it had secured and paid for interim accommodation.

This week, JD.com, a major Chinese e-commerce company, also announced plans to increase housing and educational benefits for its delivery workers while cutting salaries of about 2,000 senior managers by up to 20%.

Meituan's physical stores, hotels and travel businesses -- which are among the company's core segments -- are likely to continue to struggle, according to analysts at Chinese brokerage CMB International.

According to Goldman Sachs analysts, Meituan's business may not recover until late 2023, when China is projected to loosen its Covid-19 controls.

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Meituan is reorganizing its business to cut costs as the market environment worsens, for example by combining its group-buying service with its online supermarket delivery service.

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