Meituan 1Q26 results beat expectations, with a clearer path to profitability normalization

Overview

This report is UBS's review of Meituan's 1Q26 results. It believes Meituan's revenue performance was broadly in line with expectations, while adjusted operating loss was significantly better than market expectations, mainly driven by improved unit economics in instant retail, stabilizing food delivery competition, and narrowing losses in new businesses. UBS maintains its HK$128 target price and Buy rating based on normalized earnings and SOTP.

Core views

UBS's core view is that Meituan is on the path to profitability normalization. 1Q26 marked the second consecutive quarter of easing competition, with losses narrowing significantly quarter over quarter. Regulation-driven moderation in the food delivery price war and competitors placing greater emphasis on ROI should help Meituan repair profitability. However, the earnings recovery may be front-loaded, with faster improvement in 2Q/3Q and a potentially slower pace thereafter; consumers' low-price mindset, merchant ASP recovery, macro uncertainty, and the food delivery industry's already high penetration rate above 30% may limit the long-term pace of recovery.

Analysis framework

The report evaluates revenue, orders, GTV, margins, and unit economics across food delivery, in-store, core local commerce, and new businesses through a business-segment breakdown, and adjusts 2026E-2028E earnings forecasts by incorporating management communication, the competitive landscape, the regulatory environment, and seasonality. On valuation, UBS maintains its target price framework based on normalized earnings and sum-of-the-parts valuation.

Methodology notes

• Valuation methodsSOTP

  Sum-of-the-parts valuation

  UBS uses the SOTP method to derive its target price, assessing the profitability and valuation contribution of Meituan's different businesses separately, and maintains its HK$128 target price.

• Earnings forecastNormalized earnings

  Medium-term earnings power excluding short-term competitive disruptions

  The report forecasts Meituan's 2028E normalized earnings at about RMB42.0 billion, including RMB27.0 billion from instant retail, RMB22.0 billion from in-store, and a RMB7.0 billion loss from new businesses; earnings are expected to recover further to RMB50.0 billion in 2029E.

• Operating analysisUnit economics

  Profit or loss per order

  The report focuses on tracking UE changes in food delivery and instant retail, believing that easing subsidies, recovering average order value, and improving user stickiness are key drivers bringing food delivery closer to break-even.

Asset mapping & comparison

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

• Meituan 03690.HK

  Covered target

  Strengths

  Leading scale in food delivery and local services platforms, strong user stickiness, improving order volume and GTV share, and a gradually clearer path to profitability normalization.

  Weaknesses

  Food delivery industry penetration is already relatively high, the in-store business is affected by macro conditions and competition, and new businesses are still in a loss-making phase.

  Comparison

  The report compares Meituan with competitors such as BABA and Douyin, believing Meituan continues to improve in food delivery order volume and GTV share, while its in-store category focus differs somewhat from Douyin's.

  Risks

  If the price war restarts, subsidies increase, macro consumption weakens, or the regulatory environment turns unfavorable, the pace of earnings recovery may be slower than expected.

Key data

• 1Q26 revenue+6% YoYRevenue grew 6% YoY, broadly in line with expectations.
• 1Q26 adjusted operating lossRMB4.1 billion lossBetter than the market's expected RMB7.0 billion loss, mainly due to improved instant retail UE.
• Target priceHK$128.0012-month target price, based on SOTP and normalized earnings methodology.
• Report priceHK$78.25As of June 1, 2026.
• Food delivery order volume/GTV share55%+/60%+Management believes order volume and GTV share continued to improve relative to BABA.
• Share of high-ticket food delivery orders70%Orders above RMB30 account for about 70%.
• In-store 1Q GTV growthabout +12% YoYRevenue grew about 8% YoY, with operating margin estimated at about 25%.
• Core local commerce 2Q operating profit forecastRMB3.2 billion profit1Q recorded a RMB2.0 billion loss; 2Q is expected to turn profitable.
• New businesses 1Q operating lossRMB2.1 billion lossNarrowed sequentially from the RMB4.7 billion loss in 4Q, driven by improved operating efficiency at Keeta.
• 2028E normalized earnings forecastRMB42.0 billionUBS expects a further recovery to RMB50.0 billion in 2029E.

Impact & implications

The report has a positive investment implication for Meituan: in the short term, the peak 2Q season and easing food delivery competition are expected to continue driving earnings improvement, while in the long term it depends on the delivery of normalized earnings, narrowing losses in new businesses, and stable margins in the in-store business. From a valuation perspective, the report believes the current share price implies about 10x 2028E normalized P/E, which is attractive for long-term investors, but weak industry sentiment and lower valuations among e-commerce peers may limit short-term valuation expansion.

Risks

• Intensifying competition and renewed subsidy increases may pressure margins in food delivery and in-store businesses.
• Investment in new businesses, overseas Keeta, and Xiaoxiang Supermarket may continue to weigh on profits.
• A weaker macro environment or declining consumer spending may lead to slower growth.
• Regulatory changes may affect platform competition, commissions, subsidies, and operating strategy.
• Lower restaurant subsidies or limited structural industry tailwinds may weaken unit economics improvement.

What to watch

• Recovery in orders, GTV, average order value, and profit per order during the 2Q/3Q food delivery peak season.
• Whether regulatory constraints on food delivery price wars continue to reduce industry subsidy intensity.
• Whether the in-store business can maintain GTV, revenue, and margins around 25% under subsidy pressure from Douyin.
• Whether core local commerce can achieve the expected RMB3.2 billion operating profit in 2Q.
• Whether losses in new businesses such as Keeta, newly entered markets, and Xiaoxiang Supermarket continue to narrow.
• Whether the upward revisions to 2027E-2028E EPS can be delivered through sustained profit improvement.