November 28, 2025 09:14 AM GMT Meituan | Asia Pacific M Update 3Q25 Miss on CLC Rev and OP Reaction to earnings Weakens our thesis Modest shortfall Modest revision lower Impact to our thesis Financial results versus consensus Direction of next 12-month consensus EPS Source: Company data, Morgan Stanley Research Key Takeaways | Exhibit 1: | 3Q25 results review | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | MS Estiamtes vs Co | | | | | | | | 3QFY-2025E | | | Financials (Rmb ...

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **food delivery industry** in the **EMEA** region, particularly in relation to **Meituan's** Q3 results and its implications for competitors like **Delivery Hero**, **talabat**, **Jahez**, and **Prosus** in **Latin America** and **MENA** regions [1][2]. Company Insights 1. **Meituan's International Expansion** - Meituan is actively expanding its operations in the **GCC** and **Brazil**, competing with local players such as Delivery Hero and Jahez in Saudi Arabia, and talabat in Qatar and Kuwait. The company launched pilot operations in Brazil in October 2025 [2][3]. - The company sees significant growth potential in food delivery penetration in the **GCC** and Brazil, where platforms like WhatsApp are commonly used for food orders [2][3]. 2. **Financial Performance** - Meituan reported an adjusted EBITDA of **$(2.1) billion** in Q3 2025, a significant decline from **+$2.1 billion** in Q3 2024, indicating intensified competition and operational challenges [10][8]. - The New Initiatives segment, which includes grocery retail and overseas expansion, showed a narrowing of operating losses quarter-over-quarter, although the exact financial split remains unclear [3][8]. 3. **Market Position and User Data** - In Saudi Arabia, Meituan has become the second-largest player by user count, with Jahez experiencing a decline in users year-over-year [4][9]. - In the UAE, Meituan is gaining traction, although it is still in the early stages of its launch. In Kuwait, Jahez has been negatively impacted, while talabat's daily active users (DAUs) have increased year-over-year [4][12][19]. 4. **Competitive Landscape** - The competition in the food delivery sector is described as "irrational," with Meituan suggesting that the competition may have peaked in Q3 2025 [10]. - The sentiment in the EMEA food delivery market remains weak, influenced by the competitive dynamics in China and the performance of global food delivery companies [10]. Additional Insights - **Keeta**, a grocery delivery service under Meituan, achieved profitability in Hong Kong after 29 months of operation, following the exit of Deliveroo from that market [3]. - Regulatory challenges in Qatar affected talabat, which faced a temporary ban in September 2025, impacting its user base [4][28]. Conclusion - Meituan's aggressive expansion strategy in the EMEA region presents both opportunities and challenges, with significant competition from established players. The financial performance indicates a need for improved operational efficiency and market positioning to navigate the competitive landscape effectively.

E-commerce and New Retail - Alibaba Group donated 20 million HKD following a fire in Hong Kong, while ByteDance and Didi contributed 10 million HKD each. Pinduoduo also donated 10 million HKD and launched a public welfare section for firefighting supplies [1] - Alibaba's Q2 revenue for FY2026 reached 247.8 billion CNY, a 5% year-on-year increase, with cloud revenue growing 34% and AI-related products seeing triple-digit growth for nine consecutive quarters [2] - JD Industrial has received approval for an IPO on the Hong Kong Stock Exchange, with projected revenues of 14.135 billion CNY in 2022, increasing to 20.4 billion CNY in 2024 [3] Logistics and Supply Chain - Jitu Express launched its first industrial-grade automated sorting system in Thailand, improving sorting efficiency by over 100% and achieving a sorting accuracy of over 99% [4] Life Services - Meituan reported a Q3 loss of 14.1 billion CNY in its core local business segment due to irrational competition in the food delivery industry, with expectations of continued losses in Q4 [5][6] - Didi's Q3 order volume reached 4.685 billion, a 13.8% year-on-year increase, with a net profit of 1.5 billion CNY [7] - Taobao Flash Sale announced the cancellation of late fee deductions, expanding to 60 cities, aiming to enhance rider protection and user experience [8] Innovation and Investment - Ruiyun Cold Chain completed nearly 100 million CNY in A+ round financing, focusing on digital capabilities and international expansion [9] - Soul App submitted a listing application to the Hong Kong Stock Exchange, reporting a revenue CAGR of over 15% from 2022 to 2024 and achieving stable profitability since 2023 [10][11]

Core Viewpoint - The intense competition in the food delivery market has led to significant financial losses for major players like Meituan, Alibaba, and JD, with aggressive subsidy strategies impacting profitability and market dynamics [1][3][11]. Group 1: Market Dynamics - In Spring 2024, JD entered the food delivery sector, prompting Alibaba's Taobao to follow suit, leading to a fierce competition that forced all players to increase spending [1]. - By Summer, the market saw unprecedented subsidy levels, with consumers benefiting from numerous promotions, while businesses struggled with the financial implications of these strategies [3]. - The competition has resulted in a significant increase in marketing expenses for all three major companies, with Meituan's spending rising from 18 billion to 34.3 billion, and Alibaba's from 32.5 billion to 66.5 billion year-on-year [3][11]. Group 2: Financial Performance - Meituan reported a core local business operating loss of 14.1 billion in Q3, with expectations of continued losses into Q4, indicating a challenging financial landscape [5]. - Alibaba's CFO indicated that the company would tighten its spending on flash purchase business after a peak in Q3, suggesting a potential shift in strategy to mitigate losses [5][9]. - All three companies reported significant losses in Q3, with Meituan losing 16 billion, while Alibaba and JD also faced substantial financial challenges, leading to a bleak outlook for the industry [15][17]. Group 3: Competitive Strategies - Meituan's market share remains strong, particularly in mid-to-high price orders, with two-thirds of orders over 15 yuan and 70% of orders over 30 yuan being processed through its platform [7]. - Despite the ongoing competition, Meituan's leadership emphasized a commitment to avoiding low-quality, price-driven competition, focusing instead on long-term value creation [13][15]. - The industry is witnessing a shift towards more sustainable practices, with companies beginning to reconsider their aggressive subsidy strategies in light of regulatory pressures and financial realities [9][17].

Investment Rating - The report maintains a "Buy" rating for Meituan [3][13] Core Insights - Meituan reported Q3 2025 revenue of Rmb95.5 billion, a 2.0% year-on-year increase, but below consensus expectations of Rmb97.5 billion. The operating profit was Rmb-19.76 billion, significantly lower than Rmb13.69 billion in the same period last year [8][9] - The report indicates that industry competition has peaked, with core local commerce experiencing significant losses in Q3 but expected sequential improvement in Q4. Core local commerce revenue declined by 2.8% year-on-year to Rmb67.4 billion, with an operating margin of -20.9% [9][10] - Meituan Instashopping achieved strong growth, leading the industry, with a focus on enhancing supply and user engagement. The platform launched "Branded Flagship InstaMart," which saw a 300% sales increase on its first day during the "11.11" shopping event [10][11] - New initiatives showed improved profitability, with revenue from new initiatives rising 15.9% year-on-year to Rmb28.0 billion, although operating losses widened to Rmb1.3 billion. Keeta, a new initiative, achieved profitability in Hong Kong ahead of schedule [11][12] Financial Summary - For 2023, Meituan's revenue is projected at Rmb276.7 billion, with a year-on-year growth rate of 25.8%. Adjusted net profit is expected to be Rmb23.3 billion [6][16] - The adjusted net profit forecast for 2025 has been revised down to Rmb-16.6 billion, reflecting the impact of intensified competition on short-term margins [13][16] - The report anticipates a long-term recovery in profitability, with a projected revenue of Rmb365.98 billion in 2025 and Rmb485.30 billion by 2027 [6][16]

Investment Rating - The investment rating for Meituan-W (03690.HK) is "Outperform the Market" [5] Core Views - The report indicates that the impact of the fierce competition in the food delivery sector on the company's revenue and profit is expected to gradually diminish. The company achieved a revenue of 95.5 billion yuan, with a year-on-year growth of 2%, primarily affected by intensified competition in its core local business. Adjusted losses reached 16 billion yuan, with a net profit margin of -17%, indicating a shift from profit to loss [1][8] - The company maintains its long-term goal of achieving a high daily order volume of 100 million and believes that as the industry returns to rationality, the profitability of the food delivery business will return to reasonable levels [1][8] Summary by Sections Overview - The report highlights that the competition in the food delivery market has significantly impacted the company's revenue and profit, with a revenue of 95.5 billion yuan for the quarter. Revenue breakdown shows a year-on-year decline of 17% in instant delivery services, a 1% increase in transaction commissions, and a 6% increase in marketing services [1][8] - The gross margin, sales expense ratio, and R&D expense ratio have all weakened, leading to an adjusted loss of 16 billion yuan, with a continued increase in losses quarter-on-quarter [1][8] Core Local Business - The core local business revenue decreased by 3% year-on-year, resulting in an operating loss of 14.1 billion yuan and an operating profit margin of -21.0%, a decline of 42 percentage points year-on-year. The company plans to continue significant investments in membership and promotional budgets in Q4 2025 [2][23] - Instant delivery saw a total order volume growth of 17%, with average losses per order of 2.6 yuan for food delivery and 1.1 yuan for flash purchase. The restaurant delivery order volume grew by approximately 15% [2][24] - The in-store travel and accommodation segment experienced a revenue growth of 13% year-on-year, but the operating profit margin decreased to 29% due to increased advertising costs and subsidies [2][28] New Business - New business revenue grew by 16% year-on-year to 28 billion yuan, with an operating loss of 1.3 billion yuan. The management noted that the user experience in Hong Kong's Keeta turned positive in October, leading to improved user retention and higher average prices [3][30] - The company plans to expand its overseas business by opening three new locations in Gulf countries and piloting in Brazil, although significant losses are expected to increase [3][34] Financial Forecasts - Revenue projections for 2025-2027 are adjusted to 360.5 billion yuan, 427 billion yuan, and 509.2 billion yuan, reflecting a slight decrease in growth expectations. Adjusted net profit forecasts for the same period are -16 billion yuan, 12.4 billion yuan, and 33.2 billion yuan, indicating a significant downward adjustment [3][35] - The report also provides detailed financial metrics, including adjusted EPS and profit margins, indicating a challenging outlook for the core local business due to competitive pressures [4][38]

Major Events - Excellence Risen (02687) plans to offer 6.6667 million H-shares globally from November 28 to December 3 [1] - Naxin Micro (02676) plans to offer 19.0684 million shares globally from November 28 to December 3 [1] - Stone Four Pharmaceutical Group (02005) received production registration approval for the sustained-release capsule of Tofacitinib (4mg) [1] - Innovent Biologics (01801) received approval from the National Medical Products Administration for its drug, Xinmeiyue® (Pikankizumab injection), for treating moderate to severe plaque psoriasis [1] - Jiangxi Copper (00358) intends to acquire shares of the overseas-listed company SolGold Plc [1] - ZTO Express-W (02057) plans to acquire 100% equity of Zhejiang Xinglian for 178 million yuan to enhance end-to-end domestic and international air logistics capabilities [1] - China Shenhua (01088) completed 168 hours of trial operation for the Beihai Phase II Unit 3 and transferred it to commercial operation [1] - Zhidatech (02650) signed a major contract worth over 100 million yuan for electric vehicle charging stations with Saudi Controls Ltd, expanding into the Middle East market [1] - Hendry (03389) received a voluntary cash offer from Junya at a 12% premium and will resume trading on December 1 [1] - Zijin Mining (02899) donated 20 million HKD to support post-fire reconstruction in Hong Kong's Tai Po District [1] - Guoquan (02517) donated 10 million HKD for fire rescue efforts in Hong Kong's Tai Po [1] - InnoCare Pharma (02577) donated 2 million HKD to assist in fire rescue efforts in Hong Kong's Tai Po [1] Operating Performance - Meituan-W (03690) reported Q3 revenue of approximately 95.5 billion HKD, a year-on-year increase of about 2%, with highlights in flash purchase and global expansion [1] - China Gas (00384) reported a mid-term profit attributable to shareholders of 1.334 billion HKD, with an interim dividend of 0.15 HKD per share [1] - Zhixing Group Holdings (01539) reported a mid-term profit attributable to shareholders of 27.533 million HKD, a year-on-year increase of 35.68%, with gross margin rising to approximately 67.3% [1] - Guofu Quantum (00290) reported mid-term revenue of 1.027 billion HKD, a year-on-year increase of 4564.52% [1] - Yuhua Education (06169) reported an annual adjusted profit attributable to shareholders of 914 million HKD, a year-on-year increase of 95.6% [1] - China Water Affairs (00855) achieved mid-term revenue of approximately 5.183 billion HKD, with a dividend of 0.13 HKD per share [1] - Zhonghui Group (00382) reported annual revenue of approximately 2.489 billion HKD, a year-on-year increase of 7.7% [1]

Core Insights - Meituan reported Q3 revenue of 95.5 billion yuan, a 2% year-on-year increase, but incurred a quarterly loss of 18.6 billion yuan, raising concerns about its high expenditure in the competitive food delivery market [2][3] - Despite the significant loss, Meituan's user base and engagement metrics improved, with over 800 million transaction users and a more than 20% year-on-year increase in daily active users [4][5] - The company aims to maintain its market dominance in food delivery, viewing the ongoing price war as a necessary strategy to protect its core business [6][8] Financial Performance - The substantial quarterly loss of 18.6 billion yuan is notable, especially compared to the profit from the same period last year, indicating a strategic investment in user retention and market share [3][9] - Meituan's cash reserves stood at approximately 141.3 billion yuan, providing a buffer for continued investment in the competitive landscape [11][12] - The increase in sales and marketing expenses by 90.9% to 34.3 billion yuan was primarily due to higher rider subsidies, reflecting a focus on strengthening its delivery infrastructure [15][16] Market Dynamics - The competitive landscape is shifting, with other players like Alibaba also reporting losses, suggesting that the price war may be nearing its end [13][14] - Meituan's market share in high-value orders remains strong, with over 66% in orders priced above 15 yuan, indicating a solid customer base that is less price-sensitive [21][22] - The ongoing battle for market share may lead to a "tragic victory" for Meituan, where the costs incurred could ultimately solidify its market position despite short-term losses [15][24] Strategic Outlook - The company is expected to benefit from a potential reduction in competitor subsidies, which could enhance user retention and profitability in the long run [25][30] - Meituan's operational efficiency in delivery services remains a competitive advantage, making it difficult for new entrants to disrupt its market position [18][20] - The future of the food delivery market may hinge on innovation and user experience rather than just price competition, as seen in other industries [36][39]

Investment Rating - The report maintains a "Buy" rating for the company, expecting a price increase of over 15% in the next 6-12 months [5][12]. Core Insights - In Q3 2025, the company reported revenue of 95.5 billion yuan, a year-on-year increase of 2%. However, it faced a Non-IFRS net loss of 16 billion yuan, marking a shift from profit to loss compared to the previous year [2]. - The local core business revenue was 67.4 billion yuan, down 2.8% year-on-year, with an operating loss of 14.1 billion yuan, indicating a significant decline in profitability [3]. - New business revenue reached 28 billion yuan, reflecting a robust growth of 15.9% year-on-year, although it still incurred an operating loss of 1.3 billion yuan [4]. Financial Performance Summary - The company’s projected revenues for 2025, 2026, and 2027 are 364.1 billion yuan, 419.9 billion yuan, and 486.7 billion yuan, respectively. The Non-IFRS net profits are expected to be -18.1 billion yuan in 2025, 16.6 billion yuan in 2026, and 48.2 billion yuan in 2027 [5][10]. - The operating income growth rate is projected to be 7.88% in 2025, followed by 15.31% in 2026 and 15.91% in 2027 [10]. - The report indicates a significant improvement in operating efficiency and user engagement in the new business segments, particularly in grocery retail and international expansion [4].

Core Insights - Meituan reported a slight revenue increase of 2% to 95.488 billion yuan in Q3 2025, but experienced a net loss of 18.632 billion yuan, a shift from profit to loss year-on-year [1] - The loss was primarily attributed to intense market competition in the core takeaway business and an expansion of losses in new business segments [1] Local Business Segment Pressure - Revenue from the core local business segment decreased by 2.8% to 67.447 billion yuan, with operating profit turning into a loss of 14.071 billion yuan compared to a profit in the same period last year [2] - The overall net loss for Meituan in Q3 reached 18.632 billion yuan, contrasting with a profit of 12.865 billion yuan in the same quarter of 2024 [2] - Meituan anticipates that the trend of operating losses will continue into Q4 due to ongoing competitive pressures [2] - In response to competition, Meituan is accelerating supply-side innovation and improving service quality, achieving record high daily active users and monthly transaction users in the takeaway segment [2] - Meituan's market share in takeaway orders is gradually recovering, with over two-thirds of orders above 15 yuan and over 70% of orders above 30 yuan attributed to Meituan [2] New Business Growth and International Expansion - The new business segment saw a revenue increase of 15.9% to 28.041 billion yuan, but operating losses expanded by 24.5% to 1.278 billion yuan [4] - Meituan's grocery retail businesses, such as "Xiaoxiang Supermarket" and "Kuaidui," are experiencing strong growth while improving operational efficiency [4] - The international brand Keeta achieved profitability in Hong Kong and is accelerating global expansion, with Keeta's Hong Kong operations becoming profitable in October, ahead of the three-year target [4] - Keeta's successful performance reflects Meituan's execution capabilities in global markets, with plans to pilot operations in Brazil [4] Strategic Focus and Challenges - Meituan plans to continue investing in grocery retail and international business to enhance long-term competitiveness [5] - The increase in losses from new businesses highlights the need for Meituan to balance expansion with profitability [5] - While strong growth in new businesses and international profitability provides a diversified buffer, domestic competitive pressures require careful resource management [5]