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Adjusted net profit falls 89% in second quarter

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Meituan ( MPNGF ) faces fierce competition from JD.com ( JD ) and Alibaba ( BABA )

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Overseas expansion is accelerating

(Adds details of international business in paragraph 10-11;

adds analyst comment in paragraph 8.)

By Casey Hall

SHANGHAI, Aug 27 (Reuters) - China's leading food

delivery group Meituan ( MPNGF ), reported on Wednesday a fall

of 89% in second-quarter adjusted net profit as it looks to

stave off rising competition in the "instant retail" sector.

Meituan ( MPNGF ), whose app offers services ranging from bike-sharing

and ticket-booking to maps, reported a rise of 11.7% in revenue

of 91.8 billion yuan ($12.83 billion) for the three months to

June 30.

The figure fell short of a revenue gain of 13.8% expected by

17 analysts polled by LSEG. Adjusted net profit fell 89% to 1.49

billion yuan, widely missing expectations.

After the release of first quarter results in May, Chief

Executive Wang Xing warned that red-hot competition in the food

delivery and instant retail space this year had made forecasting

profits for the rest of the year "impossible".

Online retailer JD.com ( JD ) responded this year to

Meituan's ( MPNGF ) effort to expand beyond meals by moving aggressively

into the latter's core food delivery business.

Alibaba ( BABA ), which runs the second-largest food

delivery app, Ele.me, also moved to increase its bets on instant

retail. Both JD Takeaway and Ele.me have pledged billions of

yuan in subsidies to boost sales.

Meituan ( MPNGF ) has nearly 70% of the delivery market, Morningstar

analyst estimates show. Defending that customer base could prove

expensive amid the intensifying competition, and squeeze profit

margins. The firm's shares have fallen more than 20% this year.

"China's food delivery sector has entered a full-scale

delivery war...this is a battle Meituan ( MPNGF ) cannot afford to lose,"

said ThirdBridge analyst Jamie Chen. "Rivals Taobao and JD.com ( JD )

see food delivery less as a core business and more as a

strategic entry point to transform their platforms from pure

e-commerce into all-scenario consumer ecosystems."

Another challenge could come from regulators, with Chinese

authorities planning new rules for pricing after merchants and

consumers complained of unfair or misleading pricing by big

internet platforms.

Earlier this year, Meituan ( MPNGF ) announced a $1 billion investment

over the next five years as it enters Brazil with its Keeta app.

The increased pace of expansion for its international division

helped drive an operating loss for its "new initiatives" segment

increased by 43.1% year over year to 1.9 billion yuan.

As well as expanding its international business - Keeta

also operates in Hong Kong, Qatar and Saudi Arabia - Meituan ( MPNGF ) has

been investing in unmanned drone delivery and has joined the AI

race, pledging to invest "billions" of dollars in the

technology.

($1=7.1529 Chinese yuan renminbi)