China's Pandemic Champs Meituan, Pinduoduo Score Over Tech Titans Like Alibaba, Analysts Say

China's pandemic winners Meituan MPNGF MPNGY and Pinduoduo Inc PDD acclimated to revitalized competition as the country eased down on its zero-Covid policy.

Food delivery group Meituan and bargain shopping app Pinduoduo boosted sales by 28% and 65% year-on-year, respectively. Contrastingly, Tencent Holding Ltd's TCEHY revenues declined while Alibaba Group Holding Limited BABA grew by just 3%.

AB Bernstein analyst Robin Zhu said that the two were the highest quality companies in China's internet land, both agile in the face of the Shanghai lockdown, the Financial Times reports.

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Zhu noted that both platforms quickly executed ways to tap China's pandemic lockdown by group buying services for residents in the same apartment block.

Meituan and Pinduoduo also gained from Beijing's campaign to break up the dominance of e-commerce giant Alibaba. Meituan was able to raise prices as competitors exited, and spending on food delivery zoomed. 

Meituan profited from the pandemic as people got restricted indoors, said Li Chengdong, head of the Haitun e-commerce think-tank. 

However, Beijing's regulatory clampdown has opened the door for new players funded by rivals with deep pockets.

Douyin forged a partnership with three companies to provide food delivery services.

Alibaba resumed its price war and incentive campaign to grow its food delivery business this year, which helped Meituan to ease off on the subsidies, said Zhu.

Meituan aimed to secure future revenue streams through its travel and Yelp-like restaurant directory service and Pinduoduo through Temu fast fashion app targeting western shoppers. 

Analysts said Meituan and Pinduoduo could make decisive moves putting them ahead of the competition during lockdowns because the pair were still founder-led.

Insiders said Meituan executed deep spending and personnel cuts which boosted its profitability. 

Despite Meituan's growth and profitability, Tencent's move to divest its stake in the group spooked investors.

On the other hand, Pinduoduo will have to invest a significant amount to get into this field, said Zhu. But the potential upside is enormous, especially as U.S. consumers swap for cheaper retailers as the country heads into a weaker economy.