Daily BriefsTMT/Internet

TMT: Meituan, Nintendo Co Ltd, Netgear Inc and more

In today’s briefing:

  • Meituan (3690): Positive Signal from Tax Bureau After Negative News from Market Bureau
  • Nintendo – Can Metroid Dread Hit the 10m Unit Mark
  • Meituan Fined RMB3.44bn; Expect Short-Term Gains with Positive Shift in Sentiment
  • NTGR: Routing to Operating Margin

Meituan (3690): Positive Signal from Tax Bureau After Negative News from Market Bureau

By Ming Lu

  • The fine of RMB3.4 billion was based on an investigation long before.
  • Value Added Tax data shows that Meituan recovered strongly in the holiday of the National Day.
  • We are confident in Meituan’s main business lines.
  • However, we believe the company should shut its community group purchase.

Nintendo – Can Metroid Dread Hit the 10m Unit Mark

By Mio Kato

We previously noted that the Metroid series has not been a big seller, at least compared to most of Nintendo’s heavyweight titles, and it hasn’t been as it has yet to break the 3m unit mark for a single title. As such we did not play especially close attention to the latest release but maybe we should have.


Meituan Fined RMB3.44bn; Expect Short-Term Gains with Positive Shift in Sentiment

By Shifara Samsudeen, ACMA, CGMA

The Chinese food delivery giant Meituan (3690 HK) was imposed an antitrust fine of US$534m (RMB3.44bn) on Friday (8th October) for abusing its dominant market position and also ordered to make changes to its business operations. According to the regulators, Meituan was found guilty of pushing merchants to sign exclusive agreements (known as Picking One from Two) with the company and required them to only cooperate with the company and not with any of its rivals taking advantage of its market dominant position. In early August, several news media outlets reported that the antitrust regulators were planning to impose a fine of about US$1bn on the company, and the fine of RMB3.44bn accounts for 3.0% of Meituan’s FY03/2021 revenues of RMB115bn.

This all began when China’s State Administration for Market Regulation (SAMR) launched a probe on Alibaba over its suspected monopolistic practices in December last year. The investigation on Alibaba was concluded on 10th April and the company was fined RMB18.2bn (3.6% of its consolidated FY2020 revenues) for breaching anti-monopoly rules where investigations revealed that Alibaba was abusing its market dominance to prevent other merchants from using other platforms since 2015.

In our previous insight, we highlighted that Meituan was unlikely to be fined anything more than Alibaba’s antitrust fine and mentioned that Meituan would be imposed a fine of around 3-3.5% of its FY2020 revenues (around RMB3.4-4.0bn).


NTGR: Routing to Operating Margin

By Hamed Khorsand

  • NETGEAR (NTGR) used the third quarter to push through some of its excess channel inventory through several promotions. The Company should report third quarter results at the end of October. NTGR is anticipated to report softer sales than the usual third quarter sequential increase the firm experiences, but it’s inventory level that would matter.

 

  • When NTGR reported second quarter results the Company had asserted the consumer was more interested in traveling and being outside than in purchasing a wireless router. NTGR had oversupplied the channel with wireless routers. The strategy was to run promotions during the third quarter to prompt consumers to buy routers for back to school.

 

  • Continued government mandated closures related to new outbreaks in Southeast Asia could have resulted in lower production and shipments of wireless routers to end markets. We believe this delay could help NTGR in the overall need to run promotions.

 

Focus has turned to operating margin as units sold per quarter normalizes.


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