News Alert: Guidelines encourage food delivery platforms to cut fees for merchants hit by pandemic
- Government issued guidelines on encouraging online food delivery platforms to cut fees to restaurants in regions hit by the pandemic.
- Financial impact for Meituan is limited, as the periodic service fee discounts only apply to merchants in “medium or high risk” regions, which has limited revenue contribution.
- Expect short-term stock price pressures for Meituan due to the market sentiment was harmed.
- We currently rate BUY on the counter with TP of HK$342.
What’s New?
– Online delivery platforms are encouraged to reduce service fees standards for restaurants and offer merchants periodic service fee discounts in regions hit by the pandemic, according to guidelines by the National Development and Reform Commission issued on 18 Feb 2022.
– The guidelines target to promote faster recovery of services sectors from Covid-19, via measures such as tax incentives to catering, retail, tourism and aviation industries.
– The share prices of Meituan (3690 HK) and Alibaba (9988 HK) which own food platforms dropped by c.15% and 3% respectively last Friday.
Our View
– We expect short-term stock price pressure for Meituan as market sentiment was harmed. For Alibaba, we believe that the impact should be limited as revenue contributed by Ele.me accounts for less than 4% total revenue in 2020.
– We believe that the financial impact for Meituan should be manageable, as the guideline stressed that service fees discounts apply to restaurants in “medium or high risk” regions. As of 17 Feb 2022, only 11 cities have been designated as “medium or high risk” regions, only accounting for 5% of total cities coverage of Meituan.
– We remain bullish on Meituan’s food delivery growth driven by strong order volume and more diversified products offering.
– We currently rate BUY with TP of HK$342.