Goldman Sachs maintains Buy on Meituan; food delivery unit economics recovering faster than expected

Overview

This report is Goldman Sachs' commentary on Meituan's 1Q26 results. The core view is that food delivery unit economics recovered faster than expected, and Meituan's UE advantage over the number-two player widened, making the profit recovery path clearer. Goldman Sachs maintains its Buy rating and raises its 12-month SOTP target price from HK$112 to HK$116, while lowering the related valuation for the in-store, hotel and travel business due to slower growth and competitive pressure.

Core views

Goldman Sachs believes Meituan's food delivery business has greater room for faster profitability recovery, supported by a high-quality user base, a mid-to-high average order value mix, and leading market share. Instant retail UE narrowed sequentially, but losses may widen in 2Q due to the 618 shopping festival and non-food competition; in-store, hotel and travel margins may stabilize at around 25%; new business revenue met expectations and losses were better than expected, but Keeta, Xiaoxiang Supermarket, and AI investment will determine investment intensity from 2H26 to 2027.

Analysis framework

The report is mainly based on actual 1Q26 results, 2Q26 tracking, and segment assumption adjustments, revising profit forecasts for core local commerce, food delivery, instant retail, in-store/hotel/travel, and new business respectively, and updating the 12-month target price through the SOTP framework.

Methodology notes

• Valuation frameworkSOTP

  sum-of-the-parts valuation

  Goldman Sachs values segments such as food delivery, in-store/hotel/travel, instant retail, and new business separately and then sums them up, resulting in a new 12-month target price of HK$116. Food delivery valuation was raised, while in-store/hotel/travel valuation was lowered due to growth and competitive pressure.

• Earnings forecastUnit Economics

  profit per order and segment EBIT

  The report focuses on changes in EBIT per order for food delivery and instant retail, using UE improvement to assess competition intensity, subsidy normalization, and the speed of profit recovery.

• Goldman Sachs internal toolGS Factor Profile

  comparison of growth, financial returns, valuation multiples, and composite factors

  The appendix explains that this framework compares a stock's growth, financial returns, valuation multiples, and overall performance versus the market and industry peers through standardized rankings.

Asset mapping & comparison

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

• Meituan 03690.HK

  Equity under coverage in the report

  Strengths

  Solid leadership in local services, food delivery GTV share above 60%, estimated market share of about 70% in the Rmb30+ AOV segment, and faster-than-expected recovery in food delivery UE.

  Weaknesses

  Slower growth in in-store/hotel/travel, with competition, macro conditions, and structural changes pressuring margins; new business and AI investment may still drag on profits.

  Comparison

  The report compares Meituan's food delivery and instant retail losses with Alibaba Quick Commerce, and believes Meituan's UE advantage is clearer.

  Risks

  Intensifying competition, rising rider and labor costs, food safety issues or tighter regulation, and Keeta investment exceeding expectations.

• Food delivery business

  Core driver of profit recovery

  Strengths

  Loss per order narrowed in 1Q26, April and May tracking showed slight profitability, and order and GTV share remain ahead.

  Weaknesses

  Profit recovery in 2H26 is still affected by competition intensity and seasonality in rider costs.

  Comparison

  Compared with Alibaba Quick Commerce, Goldman Sachs estimates Meituan's combined losses from food delivery and instant retail are clearly lower.

  Risks

  Renewed subsidy competition, regulatory changes, and rising delivery costs.

• In-store, hotel and travel

  Important profit-contributing segment

  Strengths

  Differentiation built through category mix, content and review system, and user experience.

  Weaknesses

  1Q GTV growth slowed to low double digits, and EBIT margin was about 25%, below the previous 27% forecast.

  Comparison

  Relative to the food delivery segment, valuation was lowered due to slower growth and competitive pressure.

  Risks

  Intensifying competition in in-store dining, weak macro consumption, and changes in city and category mix.

• Keeta and Xiaoxiang Supermarket

  New business growth and investment variables

  Strengths

  Keeta improved efficiency in Hong Kong, Saudi Arabia, and other Middle East markets, while Xiaoxiang Supermarket covered 55 cities in 1Q26 and maintained strong growth.

  Weaknesses

  Overseas expansion and Xiaoxiang's city expansion will increase losses, while expansion in Brazil and LatAm may become swing factors for investment scale.

  Comparison

  New business valuation remains unchanged at HK$19 per share, but the pace of losses affects overall earnings forecasts.

  Risks

  Ramp-up in new markets slower than expected, higher-than-expected investment intensity, and intensifying competition.

Key data

• 12-month target priceHK$116.00Raised from HK$112, based on 2026E SOTP valuation.
• Current share priceHK$78.25Price disclosed on the report cover.
• Implied upside48.2%Calculated based on the target price and current share price.
• Market capitalizationHK$488.1bn / US$62.3bnDisclosed in the report's Key Data.
• Enterprise valueHK$299.6bn / US$38.2bnDisclosed in the report's Key Data.
• 2Q26 core local commerce forecastRevenue +5% YoY, EBIT Rmb3.1bnPrevious forecast was revenue +1% YoY, EBIT -Rmb1.0bn.
• FY26E/FY27E adjusted net profit forecast-Rmb0.1bn / Rmb24bnPrevious forecast was -Rmb6bn / Rmb25bn.
• Long-term food delivery profit-per-order assumptionRmb1.0Raised from Rmb0.7.
• 1Q26 new business revenueRmb27bn, +21% YoYMainly driven by growth from Xiaoxiang Supermarket and overseas Keeta.

Impact & implications

For investors, the key implication of the report is improved visibility on Meituan's food delivery profit recovery, partly offsetting pressure from competition in in-store/hotel/travel and rising new business investment. In terms of valuation, the higher contribution from the food delivery segment is the main reason for the target price increase, but the medium-term share price will still depend on competition intensity, subsidy normalization, Keeta's overseas investment, and the pace of AI capital expenditure.

Risks

• Deteriorating competition may affect the pace of growth or profit inflection.
• Rising labor costs or weaker-than-expected delivery efficiency may pressure food delivery UE.
• Food safety issues or stricter regulation may bring operational and valuation pressure.
• Higher-than-expected Keeta investment may drag on new business and group profits.
• Competition in in-store/hotel/travel, macro pressure, and category mix changes may cause margin recovery to fall short of expectations.

What to watch

• Whether food delivery in 2Q26 can achieve near break-even as expected.
• The extent of loss expansion in instant retail after the 618 shopping festival and non-food competition.
• Whether EBIT margin in in-store/hotel/travel can stabilize at around 25%.
• Keeta's expansion pace and investment intensity in Brazil, the Middle East, and LatAm.
• AI capital expenditure, share-based compensation expense, and product rollout progress.
• Changes in government antitrust investigations into the food delivery industry and the intensity of competitive subsidies.