Summary of Meituan's Conference Call Company Overview - **Company**: Meituan (3690.HK) - **Industry**: China Internet and Other Services Key Points and Arguments Financial Performance - **Price Target Adjustment**: Price target reduced from HK$150.00 to HK$135.00 due to ongoing losses and competitive pressures [1] - **3Q Loss Expectations**: Anticipated on-demand operating profit (OP) loss of Rmb15 billion for 3Q, with a CLC OP loss of Rmb10 billion [3][5] - **2Q Performance**: Total revenue increased by 12% YoY, but missed estimates; adjusted EBITDA was Rmb2.8 billion, significantly below expectations [27] - **Core Local Commerce (CLC)**: CLC revenue grew by 8% YoY, but OP fell by 76% to Rmb3.7 billion, missing estimates due to intensified competition [27] - **New Initiatives**: Revenue from new initiatives rose by 23%, but operating loss was Rmb1.9 billion, better than expected due to overseas investments [27] Market Dynamics - **Competition**: Increased competition since May, particularly during the 618 festival, has led to significant losses in the on-demand segment [2][3] - **Subsidy Impact**: Anticipated acceleration in on-demand volume to high teens due to increased subsidies, but profitability is expected to decline due to price competition [3] - **Market Share**: Despite aggressive subsidies, Meituan maintains a solid GTV share of over 70% in high-quality orders [4] Long-Term Outlook - **Cost Efficiency**: Long-term competitiveness is believed to be intact due to cost efficiency, with per-order losses only one-third of competitors [4] - **Future Projections**: Long-term estimates for food delivery GTV margin projected at 2.3% and user efficiency (UE) at Rmb1.08 [54] - **Investment Strategy**: Focus on high-quality orders and effective investment in new initiatives expected to expand the addressable market [63] Risks and Challenges - **Earnings Pressure**: Near-term uncertainties and competitive pressures pose risks to earnings, making it difficult for Meituan to control competition pace [5][54] - **Market Fragmentation**: The quick commerce market is expected to split among multiple players, impacting Meituan's market share [54] Valuation and Recommendations - **Valuation Methodology**: Price target of HK$135 implies a target P/E of 17x for 2026 estimates, comparable to Tencent's 19x [31] - **Investment Rating**: Maintained an Overweight (OW) rating despite short-term challenges, with some earnings pressure already priced in [5] Additional Important Information - **Share Repurchase**: Meituan repurchased HK$391 million worth of shares in 2Q [27] - **Market Capitalization**: Current market cap is approximately US$92.66 billion [7] This summary encapsulates the key insights from Meituan's recent conference call, highlighting the company's current challenges, competitive landscape, and long-term strategies.