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Investing.com-- Meituan shares tumbled in Hong Kong trade on Thursday after the food delivery giant clocked a sharp drop in second-quarter earnings amid rapidly intensifying competition in the sector.
Meituan (HK:3690) shares sank 11.2% to HK103.30, and were the biggest weight on the Hang Seng index, which lost over 1%.
The company clocked a 97% drop in its second-quarter profit to 365.3 million yuan ($51 million), which also fell well short of Bloomberg estimates of 7.8 billion yuan.
Revenue rose 12% to 91.8 billion yuan, but also missed estimates of 93.7 billion yuan.
The earnings decline was tied chiefly to Meituan’s core food delivery unit, with the company flagging “irrational competition” in the sector.
Meituan had rolled out a slew of promotions, while also increasing hiring and wages in the food delivery sector as it sought to stave off heightened competition from rivals such as Alibaba’s Ele.me and new entrant JD.com.
While Beijing had intervened in the delivery war earlier this year, calling for healthier competition, new pricing rules set by the government also stand to hurt Meituan’s margins.
Meituan and its rivals had all released statements in July pledging to curb their price wars.
Alibaba Group (HK:9988) shares fell 3.5% on Thursday, while JD.com (HK:9618) shed 2.9%.