Core Viewpoint - The article discusses the intense competition in the food delivery and instant retail market, primarily driven by Alibaba's Taobao Flash Sale, which has prompted major players like Meituan and JD to engage in aggressive subsidy wars [1][10]. Group 1: Competitive Landscape - Alibaba announced a substantial investment of 50 billion RMB for subsidies in the instant retail sector over the next 12 months, significantly escalating competition [10]. - Meituan responded with its own subsidy plans shortly after Alibaba's announcement, while JD also committed over 10 billion RMB for the same period [10]. - As of early July, Meituan's daily order volume reached a record high of 120 million, while Alibaba's daily orders surged to 80 million within two months [10]. Group 2: Financial Implications - Morgan Stanley highlighted that Alibaba's financial strength, with nearly 100 billion RMB in free cash flow and around 600 billion RMB in cash equivalents by March 2025, positions it favorably in this competitive landscape [11]. - The report suggests that the ongoing subsidy war will negatively impact the short-term profitability of all involved companies, including Alibaba, Meituan, and JD [14][18]. Group 3: Market Potential and Valuation - Morgan Stanley predicts that the Chinese instant retail market could reach a gross merchandise volume (GMV) of 4 trillion RMB by 2030, with industry profits estimated at 81 billion RMB [13]. - The report outlines two scenarios: an optimistic one where the market grows as expected, making current investments justifiable, and a pessimistic one where the market only reaches half the expected size, rendering the investments overly aggressive [15]. Group 4: Market Share Dynamics - Prior to the intensified competition, Meituan held approximately 45% of the market share, with Alibaba's Ele.me at 21% and JD at 5% [16]. - Despite the competitive pressures, Meituan is expected to maintain its market leadership, although its market share may decline due to the growth of instant retail, which is a new revenue stream for Meituan but could cannibalize traditional e-commerce for Alibaba and JD [16]. Group 5: Investment Strategy Adjustments - In light of the competitive uncertainties, Morgan Stanley has lowered its earnings forecasts for Alibaba and Meituan, adjusting their target prices accordingly [20]. - The report indicates a preference order for investment in the instant retail sector: Alibaba > Meituan > JD, reflecting the competitive advantages and financial resources of each company [14].