Meituan (03690) Report Interpretation

Overview

This earnings review argues that Meituan's recovery is becoming clearer as food-delivery competition shifts toward efficiency, core local-services profitability improves and New Businesses losses remain controlled. Nomura maintains Buy and raises its SOTP-based target price to HKD118.

Core views

Meituan delivered a stronger-than-expected 2Q26. Revenue rose 14% year on year to CNY104.6bn, 3% above Nomura's estimate, while consolidated non-IFRS operating profit was CNY3.9bn, versus Nomura's CNY317mn forecast. The report attributes the beat primarily to better Food Delivery and in-store results, together with smaller-than-expected New Businesses losses. Nomura views the overall trajectory as consistent with its recovery thesis, although it cautions that bullish expectations may understate seasonal rider-cost pressure on near-term food-delivery unit economics. Food Delivery is the central recovery driver. Nomura estimates 2Q26 Food Delivery revenue rose 9% year on year to CNY44.8bn, with orders up about 1% to 5.95bn and average daily orders of 65mn. Operating profit of CNY1.6bn implied unit economics of about CNY0.26 per order, materially above the pre-results consensus estimate of CNY0.05. The report links the improvement to higher net average order value, a mix shift toward higher-value users and orders, and improved marketing efficiency as competition becomes more rational. Management indicated that competition is shifting toward quality, service and operating efficiency, supporting Meituan's order-volume and GTV position. For 3Q26F, Nomura forecasts CNY47bn of Food Delivery revenue, up 18% year on year, but unit economics of only CNY0.08 per order as summer rider costs rise; this is still better than pre-2Q26 consensus for negative CNY0.11 per order. Management's medium-term confidence is for unit economics to recover toward CNY1 per order as competition normalizes. Instashopping continues to grow faster than Food Delivery, supported by new-user acquisition, higher purchase frequency and expansion of first-party retail. Nomura estimates 2Q26 revenue of CNY9.4bn, up 20% year on year, with a CNY0.5bn operating loss, equivalent to negative CNY0.39 per order. It forecasts 3Q26F revenue of CNY10.5bn, up 19%, with losses broadly stable at CNY0.5bn, or negative CNY0.32 per order. The report considers these losses manageable because the business is building supply across offline retailers, dark stores and non-food categories while sharing users and rider infrastructure with Food Delivery. In-store, hotel and travel also contributed positively, though the margin beat is not viewed as fully recurring. Nomura estimates 2Q26 in-store revenue rose 8% year on year to CNY17.3bn and operating profit declined only 1.4% to CNY5.1bn, implying an operating margin near 30%, above consensus of roughly 25%. The stronger margin reflected marketing campaigns moving from 2Q into 3Q rather than a permanent reduction in spending. Accordingly, Nomura forecasts 3Q26F revenue of CNY19.1bn, up 6% year on year, and operating profit of CNY4.8bn, implying a 25% margin as the deferred campaigns resume. Management is emphasizing ROI-led spending, concentrating resources on core categories, users and merchants rather than subsidy-driven low-quality transactions. Hotel and travel is a softer area, with management indicating hotel room-night volume could be broadly stagnant in 3Q26E because of macro headwinds. New Initiatives performed better than expected: 2Q26 revenue grew 25% year on year to CNY33.1bn and operating loss narrowed to CNY1.74bn from CNY2.12bn in 1Q26, better than Street expectations for a CNY2.4bn loss. Nomura forecasts 3Q26F revenue of CNY37.0bn, up 32% year on year, with losses broadly stable quarter on quarter. Keeta is sustainably profitable in Hong Kong and reached profitability in Saudi Arabia in July; management intends to prioritize operating efficiency in existing markets, including establishing differentiation in São Paulo before broader Brazilian expansion. Nomura believes this more prudent approach limits the risk of uncontrolled overseas losses. Xiaoxiang Supermarket had expanded to 68 cities by 2Q26, and while its loss margin was improving, Nomura expects absolute losses could rise over the next few quarters as expansion remains the priority. Management expects aggregate FY26E New Businesses losses, including Keeta and grocery retail, to remain below FY25's CNY10bn. The report also highlights disciplined AI investment. Meituan's LongCat-2.0 strategy is application-led: it is intended to strengthen model capabilities, support internal deployment and embed AI in products rather than build an independent model business. Management does not intend to compete as a "token factory" and will assess investment through ROI, with the aim of improving user and merchant experience, core local-services capabilities and internal productivity. Nomura views this as a relatively controlled spending approach. Following the earnings beat, Nomura raises FY26F revenue to CNY418.9bn from CNY406.1bn and forecasts FY26F non-IFRS operating profit of CNY4.5bn, compared with its earlier CNY2.2bn loss forecast. FY27F revenue rises 4% to CNY473.1bn and FY27F non-IFRS operating profit rises 15% to CNY22.3bn. Its SOTP valuation assigns USD24.9bn to Food Delivery, USD6.6bn to Instashopping, USD14.6bn to in-store, hotel and travel, USD24.3bn to New Businesses, USD15.2bn to net cash and USD5.2bn to the investment portfolio, resulting in the HKD118 target price. The report maintains Buy, with the principal downside risks being renewed competition in food delivery or in-store consumption and worse-than-expected performance from new initiatives.

Analysis framework

Nomura reviews the 2Q26 earnings beat against its own and consensus expectations, then analyzes revenue, operating profit and unit economics by Food Delivery, Instashopping, in-store services and New Initiatives. It revises forward earnings assumptions based on growth, margin and investment discipline, and values the business using a sum-of-the-parts framework with segment-specific earnings or sales multiples.

Methodology notes

• Industry AnalysisSupply-demand framework

  Food-delivery competition and unit-economics analysis

  The report connects the competitive environment, subsidies, rider costs, order mix and marketing efficiency to profit per order, distinguishing seasonal cost pressure from a deterioration in competition.

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  Sum-of-the-parts valuation

  Nomura values Food Delivery, Instashopping, in-store/hotel/travel, New Businesses, net cash and the investment portfolio separately, then combines them into a HKD118 target price.

• Valuation methodsP/E and PEG Valuation

  Segment-specific P/E valuation multiples

  The report applies earnings multiples to Food Delivery, Instashopping and in-store/hotel/travel, with the Food Delivery value based on 8x FY28F P/E discounted to FY27.

Asset mapping & comparison

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

• Meituan (03690.HK)

  Primary covered company; the report expects improving core-business profitability and disciplined investment to support earnings recovery.

  Strengths

  Food Delivery profitability improved, in-store margins exceeded expectations, Instashopping is growing, and Keeta achieved profitability in Hong Kong and Saudi Arabia.

  Weaknesses

  Food Delivery unit economics face seasonal rider-cost pressure, in-store margins are expected to normalize, and Hotel & Travel faces macro-related softness.

  Comparison

  2Q26 operating profit and Food Delivery unit economics exceeded Nomura and consensus expectations; New Initiatives losses were below Street expectations.

  Risks

  Intensifying food-delivery or in-store competition and weaker-than-expected performance in new initiatives.

Key data

• 2Q26 revenueCNY104.6bnUp 14% year on year and 3% above Nomura's estimate.
• 2Q26 non-IFRS operating profitCNY3.9bnWell above Nomura's CNY317mn forecast.
• 2Q26 Food Delivery unit economicsc.CNY0.26 per orderAbove pre-results consensus of CNY0.05 per order.
• 3Q26F Food Delivery unit economicsCNY0.08 per orderExpected sequentially lower because of seasonal summer rider costs; above pre-2Q26 consensus of negative CNY0.11 per order.
• 2Q26 New Initiatives operating lossCNY1.74bnNarrowed from CNY2.12bn in 1Q26 and better than consensus for a CNY2.4bn loss.
• FY26F non-IFRS operating profitCNY4.5bnRevised from Nomura's earlier forecast of a CNY2.2bn loss.
• FY27F non-IFRS operating profitCNY22.3bnRaised 15% from CNY19.4bn.
• Target priceHKD118Raised from HKD109 using an SOTP valuation.

Impact & implications

Nomura believes stronger profitability in Meituan's China core businesses, alongside more ROI-focused overseas and AI investment, supports a steady earnings recovery. It expects near-term Food Delivery and in-store margins to be affected by seasonal rider costs and deferred marketing spend, but sees those effects as distinct from the longer-term normalization of competition and profitability.

Risks

• Competition could intensify in Food Delivery or in-store consumption verticals.
• New initiatives could perform worse than expected.

What to watch

• Whether Food Delivery competition continues to shift toward quality, service and operating efficiency, allowing unit economics to recover after seasonal rider-cost pressure.
• 3Q26 Food Delivery unit economics, forecast at CNY0.08 per order, and progress toward management's medium-term target of CNY1 per order.
• Whether in-store marketing spend resumes as expected in 3Q26 and margins normalize toward 25%.
• New Businesses losses, including the pace of Xiaoxiang expansion and Keeta's operational efficiency in overseas markets.
• Hotel room-night trends in 3Q26 amid macro headwinds.