When asked about Chinese technology stocks, most investors will come back with names like Alibaba, Tencent, and JD.com.
But other worthy companies can still make it onto investors' radars. One of these lesser-known but very well-established Chinese companies is Meituan(OTC: MPNGF).
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Meituan is a leading internet platform in China
Meituan is one of the largest platforms in China that most investors are unaware of. Via its mobile app, Meituan facilitated transactions for 678 million consumers in 2022 in services such as food ordering and delivery, hotel and travel booking, and online ticketing.
Listed in 2018, Meituan started as a restaurant review website (dianping.com) in 2003. Since then, the company has added new services, including local deals for restaurants, cinemas, and other services, online food ordering and delivery, hotel and travel booking, and most recently e-commerce.
With 678 million users, Meituan is one of the biggest internet platforms in China. For context, Alibaba had around 900 million buyers in 2022. Leveraging its massive scale, Meituan competed against China's most prominent internet players and won on many occasions. For example, it beat Alibaba's Ele.me hand over fist to become China's largest food delivery company. The tech company also built a massive hotel and travel booking business, even though it was a late comer and had to compete with the incumbent Trip.com Group.
Meituan's extensive business interests result in a relatively diversified income base. In the first six months of 2022, the company generated 51 billion yuan in revenue, of which 31% was from food delivery services, 25% from commissions, 14% from online marketing services, and the rest from other services (mainly new initiatives).
Growth opportunities remain plentiful
Meituan's track record of growth has been admirable. In the last five years, revenue grew more than sixfold from 34 billion yuan to 220 billion yuan. Even in 2022, when most technology companies suffered, Meituan's revenue increased by 23%.
And while past performance does not guarantee future results, there are good reasons to expect Meituan to keep growing for a while.
The platform can count on its existing services to grow in the coming years, and this can come from multiple fronts. One is that as customers become more familiar with the platform, they naturally place more orders. In fact, the average number of annual transactions per user grew by 14% in 2022, from 35.8 to 40.8.
The company also constantly tests new initiatives and services to delight its customers. Ridesharing, e-commerce, and online agricultural products are some of its recently launched services. While not all of these experiments will be successful, some of them will be, and that will help propel Meituan's growth machine further.
Beyond that, Meituan aspires to replicate its success in mainland China in overseas markets. For example, it recently launched its food delivery service in Hong Kong and may add new services over time in that market. It is difficult for any company to enter a new market, so this path will likely be rocky for Meituan. But if successful, this new venture can act as a launching pad for the company to enter other markets.
In short, Meituan has plenty of ambition to keep growing, and based on its track record, there is a good chance that it can sustain that momentum.
What does it mean for investors?
There are plenty of risks to investing in Chinese companies, but by diversifying you can potentially enhance the return on your investment portfolio. Unfortunately, there aren't many well-established Chinese companies that investors can invest in safely over the long run. Meituan may be one of those rare gems.
Investors looking to invest in Chinese companies should keep this company on their watch list.
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Lawrence Nga has positions in Alibaba Group. The Motley Fool has positions in and recommends JD.com and Tencent. The Motley Fool recommends Meituan. The Motley Fool has a disclosure policy.
