Meituan-Dianping reveals its net loss has narrowed to $438m ahead of IPO

Photo credit: Meituan Waimai

Chinese lifestyle services behemoth Meituan-Dianping said today that its net loss narrowed last year while revenue grew sharply, as the company prepares for an initial public offering (IPO).

Revenue surged 162 percent to US$5.21 billion in 2017 from US$1.99 billion in 2016, while adjusted net loss declined by 46.7 percent to US$438 million from US$822 million, according to the firm’s IPO prospectus filed at the Hong Kong Stock Exchange.

The same trend was seen in the previous period. In 2016, Meituan booked a 223 percent jump in revenue from 2015’s US$617 million, as well as a 9.45 percent decrease in net loss from US$908 million in 2015. The firm has more than tripled its monetization rate – revenue divided by gross transaction volume for the year – to 9.5 percent in 2017, from 3 percent in 2015.

Food delivery has played an increasing role in Meituan’s growth, contributing 62 percent of its revenue in 2017, versus 40.8 percent in 2016. That ratio was a mere 4.3 percent in 2015.

Third-party data monitoring firm Trustdata ranked Meituan as China’s largest food-delivery platform in 2017 with a 46.1 percent market share. This exceeds the combined share of Ele.me and and Baidu Waimai, which was bought out by the former last August. In April, Alibaba announced that it would fully acquire Ele.me.

The company calls itself China’s “Amazon for services,” acting as a marketplace that connects consumers and merchants in food delivery, hotel booking, ride hailing, bike sharing, in-store dining services such as food ordering, and more.

Meituan is looking to raise over US$4 billion from its IPO and is targeting a valuation of roughly US$60 billion, according to a Reuters report that cited sources.

The company says in its prospectus that its losses will continue in the future, and it’s uncertain when it will reach profitability. It attributes the situation to its “long-term” operating philosophy of seizing “strategic business opportunities.”

Losses are a common trend in China’s burgeoning online-to-offline (O2O) market, which has seen startups burn cash to gain market share. Started as a group-buying platform in 2010, Meituan has ventured into dozens of lifestyle services that are considered mass market, essential, and high frequency through partnerships and acquisitions.