Meituan (03690) Report Interpretation

Overview

This earnings review assesses whether Meituan’s recovery is becoming sustainable after a stronger-than-expected 2Q26. Morgan Stanley sees improving core-local-commerce profitability and stable competition, but expects a non-linear near-term recovery because food-delivery economics face seasonal pressure and spending timing affects quarterly margins.

Core views

Meituan reported a solid 2Q26 beat. Total revenue increased 14% year on year to Rmb104.6bn, 3% above Morgan Stanley’s estimate and 4% above consensus. Adjusted EBITDA was Rmb4.1bn, compared with Morgan Stanley’s Rmb2.1bn estimate. Core local commerce revenue rose 10% to Rmb71.5bn, while operating profit reached Rmb5.7bn, up 52% year on year and well above the Rmb3.0bn Morgan Stanley and consensus expectations. The core-local-commerce operating margin was 7.9%, up 2.2 percentage points year on year, supported by loss reduction and marketing optimization. The report’s central recovery signal is food-delivery unit economics. Morgan Stanley estimates food-delivery unit economics turned positive at Rmb0.26 per order in 2Q26, versus a Rmb0.9 loss per order in 1Q26, alongside stabilization in competitive conditions. Both order and GTV share increased during the quarter, and the institution expects Meituan to sustain about 70% share in food orders with average order values above Rmb30. However, it expects unit economics to fall to Rmb0.1 per order in 3Q26 as rider costs and the summer peak season weigh on margins. It forecasts 3Q core-local-commerce operating profit of Rmb4.2bn, down from Rmb5.7bn in 2Q, including food-delivery operating profit of Rmb646mn and an estimated Rmb500mn Instashopping loss. In-store, hotel and travel was another contributor to the 2Q core-local-commerce profit beat. Morgan Stanley estimates its operating margin approached 30% in 2Q, helped by cost efficiency and a better order mix as a key competitor gained lower-average-order-value share. For 3Q, the report expects revenue growth to slow to 7% amid weak hotel and travel demand. It estimates Rmb4.7bn of operating profit, down 3.5% year on year, and a 25% margin—stable versus 1Q26 and 4Q25. The report also notes that the company tactically shifted some spending from 2Q to 3Q, which contributes to the anticipated quarterly margin normalization. New initiatives delivered a narrower-than-expected 2Q operating loss of Rmb1.7bn, compared with Rmb2.1bn in 1Q and Morgan Stanley’s Rmb2.4bn estimate. The report expects a similar Rmb1.7bn loss in 3Q. It notes that Hong Kong remained profitable and Saudi Arabia reached break-even in July, while expecting Keeta International to prioritize profitability improvement over market expansion. Over the longer term, the institution sees effective investment in new initiatives as a way to enlarge Meituan’s addressable market, although it remains cautious about visibility on loss-making and asset-heavy businesses. Morgan Stanley leaves revenue forecasts broadly unchanged but reduces core-local-commerce operating-profit estimates by 5%, primarily because food-delivery volume growth is slowing from a high base. Its revised forecasts call for total revenue of Rmb418.8bn in 2026E, Rmb485.4bn in 2027E and Rmb544.4bn in 2028E. It expects adjusted EBITDA margin to rise from 2.0% in 2026E to 9.9% in 2027E and 11.6% in 2028E, with core-local-commerce operating margin improving to 15.2% in 2027E. The report estimates total revenue CAGR of 12% for 2025-30 in its base case and adjusted EBITDA margin of 10% in 2027. The HK$110 price target, reduced 8% from HK$120, is Morgan Stanley’s base-case value under a DCF using a 12% WACC and 3% terminal-growth rate. The target implies 19x 2027E P/E, compared with Tencent at 16x. The report frames its risk-reward around a HK$170 bull case based on 22x 2027E P/E, the HK$110 base case, and a HK$60 bear case based on 16x 2027E P/E. Morgan Stanley maintains Overweight, arguing that Meituan retains a strong long-term moat and should remain the dominant food-delivery player, though it expects share could fall to 65%+ from 70-75%; it nevertheless states a preference for Alibaba Group Holding on relative risk-reward.

Analysis framework

Morgan Stanley reviews the 2Q26 revenue and profit outcome against its own estimates and consensus, then traces the variance through core local commerce, food delivery, in-store/hotel/travel, and new initiatives. It updates earnings assumptions for competition and seasonality, and values Meituan primarily with a discounted-cash-flow model supported by bull, base and bear valuation scenarios.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  Discounted cash flow valuation based on unlevered free cash flow.

  Morgan Stanley discounts forecast cash flows using a 12% WACC and 3% terminal growth rate to derive its HK$110 base-case price target.

• Industry AnalysisVolume-price decomposition

  Food-delivery unit economics, order volume, market share, mix and operating margins.

  The report links changes in food-delivery profitability to seasonal costs, competition, order mix and volume growth, rather than treating quarterly profit as a single undifferentiated metric.

• Event-Driven and Behavioral Finance

  Options-implied probabilities for bull, base and bear scenario prices.

  The report references options-market implied volatility to estimate approximate risk-neutral probabilities of the stock moving beyond scenario values over three months or one year.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Meituan (3690.HK)

  Primary covered company; recovery in local-commerce profitability supports the maintained Overweight rating.

  Strengths

  Positive food-delivery unit economics in 2Q26, improving margins, dominant food-delivery position and a strong long-term moat.

  Weaknesses

  Near-term earnings uncertainty, seasonal pressure on unit economics and slowing food-delivery volume growth from a high base.

  Comparison

  The HK$110 target implies 19x 2027E P/E versus Tencent at 16x; Morgan Stanley states a preference for Alibaba Group Holding on risk-reward.

  Risks

  Intensified food-delivery and quick-commerce competition, uncertain economics in new initiatives, weak macro conditions and antitrust regulation.

• Alibaba Group Holding (BABA.N)

  Relative risk-reward preference cited by Morgan Stanley.

  Strengths

  Morgan Stanley states that it prefers BABA relative to Meituan.

  Comparison

  Preferred over Meituan on the report’s stated risk-reward assessment.

Key data

• 2Q26 total revenueRmb104.6bnUp 14% year on year; 3% above Morgan Stanley’s estimate and 4% above consensus.
• 2Q26 adjusted EBITDARmb4.1bnAbove Morgan Stanley’s Rmb2.1bn estimate.
• 2Q26 core local commerce operating profitRmb5.7bnUp 52% year on year; operating margin was 7.9%.
• Food-delivery unit economicsRmb0.26 per order in 2Q26; Rmb0.1 per order forecast for 3Q26Positive in 2Q versus a Rmb0.9 per-order loss in 1Q; 3Q is expected to be affected by seasonality.
• 3Q26 core local commerce operating profit forecastRmb4.2bnCompared with Rmb5.7bn in 2Q26.
• New initiatives operating lossRmb1.7bn in 2Q26 and forecast for 3Q26Improved from a Rmb2.1bn loss in 1Q26.
• Base-case valuation assumptions12% WACC; 3% terminal growth; 19x 2027E P/ESupports the HK$110 price target.

Impact & implications

Morgan Stanley sees the 2Q result as evidence that Meituan’s profitability recovery is underway, especially in food delivery and in-store/hotel/travel. Its outlook remains constrained by seasonality, competition and lower near-term core-local-commerce profit assumptions, while longer-term upside depends on sustained food-delivery leadership, merchant monetization and improving returns from new initiatives.

Risks

• Food-delivery and quick-commerce competition could intensify.
• Loss-making and asset-heavy new initiatives have limited visibility.
• Macroeconomic conditions could be weaker than expected.
• Antitrust regulation could add pressure on internet platforms.

What to watch

• Whether food-delivery unit economics recover after the expected 3Q seasonal decline.
• Meituan’s food-order and GTV market share, particularly for orders above Rmb30 average order value.
• In-store, hotel and travel demand and whether its margin remains near the projected 25% in 3Q.
• The pace of profitability improvement at Keeta International, including Hong Kong and Saudi Arabia.
• Competitive intensity and the resulting effect on core-local-commerce profit forecasts.