Meituan's Tactical Window Before Quarterly Report; Alibaba, Tencent, and NetEase Preferred

Overview

Nomura released a research report on China's internet and new media sector, focusing on Meituan, Alibaba, Tencent, NetEase, and Trip.com. The report views Meituan's recent stock price decline as a tactical trading opportunity, with potential catalysts before 1Q26 earnings release. It maintains Buy ratings for Alibaba, Tencent, and NetEase, favoring their AI transformation, ecosystem synergy, and gaming resilience respectively. Trip.com faces short-term pressures from antitrust investigations and fuel surcharge hikes.

Core views

Meituan: Recent underperformance vs Hang Seng Tech Index (-3.6% vs +2.1%) is seen as driven by capital flows and sentiment rather than fundamentals. 1Q26 earnings (to be released on June 1) are less important, but management's guidance on 2Q26 food delivery unit economics (UE) could be a key catalyst. Alibaba's efforts to reduce losses in instant retail accelerated since April, potentially easing competitive pressure on Meituan. Market expects 2Q26 per-order losses to narrow to CNY0.78 (from CNY1.34 in 1Q26). However, long-term caution remains due to Alibaba's subsidy budget and Douyin's in-store competition potentially delaying profit recovery. Alibaba: Recent shift to AI agent strategy accelerates monetization trajectory; potential IPO of chip business (T-Head) could be a medium-term catalyst. Short-term risks lie in e-commerce, with June quarter customer management revenue (CMR) expected to decline 5% YoY, but AI business growth could offset core e-commerce weakness. Tencent: May lead DeepSeek's financing round to strengthen strategic synergy. DeepSeek's foundational model complements Tencent's in-house AI shortcomings, while Tencent's ecosystem provides rich application scenarios, alleviating market concerns about its AI competitiveness. NetEase: 1Q26 results demonstrated evergreen game resilience, with gaming revenue up 7% YoY (on high base and without new game contributions). Summer game launches serve as short-term catalysts, while HK main listing transition could facilitate inclusion in Stock Connect. Trip.com: 1Q26 release date undetermined, but management likely to lower FY26 outlook reflecting dual impacts from antitrust investigation and fuel surcharge hikes. Domestic hotel business has implemented rectification measures (e.g., suspending AI pricing assistant), which may slow revenue growth and compress margins. Fuel surcharge hikes (short-haul from CNY10 to CNY90, long-haul from CNY20 to CNY170) led to a 7.3% YoY decline in domestic air passenger volume in May, pressuring industry outlook.

Analysis framework

The report uses sum-of-the-parts (SOTP) valuation to independently value each business line before aggregation, combined with competitive landscape analysis and catalyst tracking. For Meituan, it distinguishes between tactical trading opportunities (short-term UE improvement expectations) and structural risks (long-term competitive pressures). For Alibaba, Tencent, and NetEase, it focuses on AI strategy progress and ecosystem synergy value. For Trip.com, it quantifies the impact of fuel surcharge hikes on passenger volume and assesses the profit impact of antitrust rectification measures. The methodology emphasizes separating short-term catalysts from long-term structural factors to avoid misinterpreting tactical opportunities as trend reversals.

Methodology notes

• Valuation MethodSOTP Valuation

  Independent valuation of different business segments before aggregation for multi-business companies

  The report applies different valuation multiples to Meituan's segments (e.g., 10x FY28F P/E for food delivery, 8x FY27F P/E for in-store) to reflect varying growth and profitability characteristics, avoiding distortion from a single multiple.

• Competition & Strategy FrameworkMoat / competitive advantage

  Assessing sustainability of long-term competitive advantages

  The report analyzes how Meituan's food delivery and in-store moats are eroded by Alibaba's subsidies and Douyin competition, emphasizing short-term UE improvements do not alter long-term competitive dynamics, helping readers differentiate tactical rebounds from trend reversals.

• Industry Analysis FrameworkSupply-demand framework

  Analyzing industry changes from both supply and demand sides

  For Trip.com, the report quantifies how fuel surcharge hikes (supply-side cost increases) lead to domestic air passenger volume declines (demand-side contraction), demonstrating how external shocks impact profits through supply-demand transmission.

Asset mapping & comparison

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

• Meituan (3690 HK)

  Benefits from tactical trading opportunity

  Strengths

  1Q26 earnings catalyst, Alibaba's loss reduction eases competition

  Weaknesses

  Long-term pressure from Alibaba subsidies and Douyin in-store competition

  Comparison

  Higher short-term elasticity vs Alibaba/Tencent/NetEase but lower long-term certainty

  Risks

  Intensified competition, new business underperformance

• Alibaba (BABA US)

  Catalyzed by AI transformation and chip IPO

  Strengths

  AI agent accelerates monetization, potential chip business IPO

  Weaknesses

  Short-term e-commerce CMR pressure

  Comparison

  AI narrative more focused than Tencent but higher e-commerce risks

  Risks

  Profit decline from investment ramp-up, regulatory risks

• Tencent (700 HK)

  Benefits from AI ecosystem synergy

  Strengths

  Leading DeepSeek investment strengthens AI capabilities, rich ecosystem scenarios

  Weaknesses

  Aggressive WeChat Pay and overseas marketing spending

  Comparison

  More ecosystem-based AI deployment than Alibaba but longer monetization path

  Risks

  High market expectations, disruptive competitive products

• NetEase (NTES US)

  Gaming resilience and Stock Connect expectations

  Strengths

  Steady evergreen game revenue, summer game catalysts

  Weaknesses

  Incubation business profit contraction risks

  Comparison

  Higher gaming certainty than Meituan but lower growth elasticity

  Risks

  Underperformance of legacy game revenues

• Trip.com (TCOM US)

  Pressured by antitrust and cost pressures

  Strengths

  Relatively resilient international passenger volume

  Weaknesses

  Domestic hotel business rectification, fuel surcharge suppresses demand

  Comparison

  Higher short-term risks than peers, recovery depends on external environment

  Risks

  Global recession, intensifying competition

Key data

• Meituan 2Q26 Food Delivery Per-Order Loss ExpectationCNY0.78/orderImprovement from CNY1.34/order in 1Q26, Bloomberg consensus
• Alibaba June Quarter E-commerce CMR Forecast-5% y-yReflecting retail market deterioration and high base effect
• NetEase 1Q26 Gaming Revenue Growth+7% y-yOn high base and without new game contributions, demonstrating evergreen game resilience
• Domestic Short-Haul Flight Fuel SurchargeCNY90/personSignificant increase from CNY10 in January, leading to 7.3% YoY decline in domestic passenger volume in May
• Tencent Target Price Implied Upside65.6%Based on HKD727 target price vs current HKD439 share price

Impact & implications

The report views Meituan's short-term trading opportunity as stemming from market sentiment mispricing but long-term competition persists; Alibaba's AI transformation and chip IPO may reshape valuation logic; Tencent strengthens its AI position by investing in DeepSeek; NetEase's gaming resilience and Stock Connect expectations provide support; Trip.com needs to digest antitrust and cost pressures. Investors should differentiate tactical rebounds from long-term trends to avoid misinterpreting short-term catalysts as fundamental reversals.

Risks

• Meituan: Intensified competition in food delivery or in-store business, new business underperformance
• Alibaba: Profit decline from investment ramp-up, payment and fintech regulatory risks
• Tencent: High market expectations, aggressive WeChat Pay and overseas marketing spending, disruptive competitive products
• NetEase: Incubation business profit contraction, underperformance of legacy game revenues
• Trip.com: Global recession, emerging competitors intensifying competition

What to watch

• Meituan management's 2Q26 food delivery UE guidance post 1Q26 earnings release
• Progress of Alibaba's chip business (T-Head) IPO
• Tencent's DeepSeek investment execution and synergies
• Performance of NetEase's summer game launches and HK main listing transition progress
• Trip.com antitrust investigation conclusion and fuel surcharge policy changes