Core Insights - The company is increasing investments in user, rider, merchant subsidies, and ecosystem development to consolidate market share amid intensified competition in the instant delivery sector [1] - The company has revised its non-IFRS net profit forecasts for 2025-2027 to -19.9 billion, 32.2 billion, and 54.2 billion yuan, respectively, down from -2.6 billion, 35.8 billion, and 58.8 billion yuan [1] - The company anticipates a return to profitability in 2026 as the competitive landscape stabilizes, with a projected net profit growth rate of 68.4% in 2027 [1] Financial Performance - In Q3 2025, the company's revenue was 95.49 billion yuan, a year-on-year increase of 2.0%, but below Bloomberg's consensus estimate of 97.47 billion yuan [2] - The non-IFRS net loss for Q3 2025 was 16.01 billion yuan, worse than Bloomberg's consensus estimate of a loss of 13.96 billion yuan, primarily due to fierce competition in the food delivery sector [2] - Core business revenue declined by 2.8% year-on-year, with an operating loss of 14.1 billion yuan and an operating loss margin of 20.9% [2] Business Segments - The delivery service revenue fell by 17.1% year-on-year, attributed to increased subsidies and competitive pressures in the food delivery market [2] - New business revenue grew by 15.9% year-on-year, with an operating loss of 1.3 billion yuan, but the loss margin improved by 2.5 percentage points, mainly due to enhanced efficiency in the Hong Kong and Middle Eastern markets [2] - The company plans to pilot its new business, Keeta, in Brazil in late October 2025, expecting to continue significant investments during the initial phase [2]

Group 1: Q4 Performance Expectations - The company is expected to report Q4 revenue between 866.14 billion to 963.14 billion RMB, reflecting a year-on-year change of -2.1% to 8.8% [1][11] - The anticipated net profit for Q4 is projected to be between -168.06 billion to -87.41 billion RMB, indicating a year-on-year change of -370.1% to -240.5% [1][11] - Adjusted net profit for Q4 is forecasted to be between -161.00 billion to -52.34 billion RMB, with a year-on-year change of -263.5% to -153.1% [1][11] Group 2: Analyst Insights - Analysts from Kaiyuan Securities believe that the company is increasing investments to consolidate market share, with expectations of slow profit margin recovery due to intense industry competition in 2025 [4][14] - The company’s third-quarter performance was below expectations, with core business performance being unsatisfactory, although losses in new businesses were better than anticipated [4][14] - Long-term prospects for the company are seen positively, particularly in flash purchase and fresh retail businesses, with potential contributions from overseas markets [4][14] Group 3: Business Segment Performance - In the instant delivery segment, the company is increasing subsidies for users, riders, and merchants to maintain market share amid heightened competition [5][14] - The dine-in segment is experiencing slow profit margin recovery due to macroeconomic factors and order structure, with the company responding by expanding categories and adjusting order structures [6][15] - New business revenue grew by 15.9% year-on-year, with a reduction in operating loss rate by 2.5 percentage points, primarily due to improved efficiency in Hong Kong and the Middle East markets [7][16] Group 4: Recent Financial Results - The company reported third-quarter revenue of 95.5 billion RMB, a 2% year-on-year increase, slightly below expectations due to intensified competition in the delivery market [8][14] - Adjusted net loss for the third quarter reached 160 billion RMB, a significant decline from a profit of 12.8 billion RMB in the same period last year [8][14] - The core local commerce (CLC) revenue was 67.4 billion RMB, down 3% year-on-year, resulting in an operating loss of 14.1 billion RMB [8][14]

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]

Core Viewpoint - The market has experienced a significant style switch since November, with brokerages suggesting a focus on technology, consumption, and core asset industries as the year-end approaches in a bullish market environment [1] Market Valuation - As of October 31, the Hang Seng Technology PE-TTM stands at 22.9 times, which is in the 29th percentile historically [1] - Hong Kong's broad market valuation is notably low compared to global indices, with Hang Seng Technology valuations lower than the S&P 500 by 95%, Nasdaq by 88%, DAX by 79%, Nikkei 225 by 73%, and Nifty by 72% since 2005 [1] Capital Inflows - Since 2025, southbound capital inflows have exceeded 1.1 trillion yuan, primarily driven by institutional forces such as public funds and insurance capital [1] - It is anticipated that net inflows from southbound capital will exceed 1.5 trillion yuan next year [1] - In Q3 2025, both long and short-term foreign capital consistently flowed into Hong Kong's technology sector, indicating a growing consensus among foreign investors [1] Institutional Behavior - Data from China Aviation Securities indicates that in Q3, actively managed equity funds increased their positions in technology while reducing exposure to blue-chip sectors like banking [1] Investment Opportunities - Most brokerages believe that the technology growth trend is not over and still presents investment value, particularly in Hong Kong's technology, consumption, and core asset sectors [1] - The acceleration of the AI industry both domestically and internationally is expected to open new growth avenues for technology stocks, with potential for increased capital investment in the AI sector [1] Magnificent 7 in Hong Kong - The "Magnificent 7" in the Hong Kong market includes Xiaomi, Lenovo, BYD, SMIC, Alibaba, Tencent, and Meituan, which are seen as core technology assets attracting investor attention [2] Company-Specific Insights - **Xiaomi**: Expected to benefit from AI applications and successful entry into the smart electric vehicle market, with a focus on new product launches and growth in smart hardware [3] - **Lenovo**: Anticipated growth in PC and smartphone demand driven by AI investments and expansion in emerging markets, particularly in the Middle East [4] - **BYD**: Projected to achieve global sales of 4.27 million vehicles in 2024, with a focus on smart vehicle technology and international expansion [4] - **SMIC**: Positioned as a major beneficiary of global supply chain restructuring, with strong demand for localized production [5] - **Alibaba**: Expected to lead in cloud services driven by AI demand, with a focus on enhancing e-commerce market share through innovative applications [5] - **Tencent**: Anticipated to leverage AI in social advertising and gaming, with a focus on enhancing product offerings through AI integration [6] - **Meituan**: Expected to benefit from growth in the local consumption market and improvements in profitability across various business segments [6]

Core Viewpoint - Goldman Sachs expresses confidence in Meituan-W (03690) maintaining its leadership position in the expanded Total Addressable Market (TAM) for local services, anticipating a gradual normalization of food delivery subsidies by 2026. The target price is set at HKD 144 with a "Buy" rating [1]. Group 1 - The main focus of investors is on the latest competitive landscape in food delivery and Meituan's unique positioning [1]. - There is significant interest in the competition and profit margin trends in the in-store business [1]. - Growth and profitability prospects for instant retail are also key areas of investor attention [1]. Group 2 - The expansion and investment scale of Keeta is a point of interest for investors [1]. - The company's AI strategy is under scrutiny as part of its future growth potential [1]. - Investors are monitoring the situation regarding the narrowing losses of new business ventures [1].

Group 1 - Goldman Sachs expresses confidence in Meituan-W's (03690) leadership position in the expanded total addressable market (TAM) for local services [1] - The firm anticipates that food delivery subsidies will gradually normalize by 2026 [1] - The target price is maintained at HKD 144 with a "Buy" rating [1] Group 2 - Key investor concerns include the latest food delivery competition landscape and Meituan's unique positioning [1] - Other focal points are the competition and profit margin trends in the in-store business, growth and profitability prospects of instant retail, and the expansion and investment scale of Keeta [1] - The impact of AI strategies and the narrowing losses of new businesses are also significant areas of interest [1]

Core Viewpoint - Meituan's actual investment in food delivery and flash purchase exceeded predictions by 10 billion yuan, indicating more intense irrational competition than expected [1][2][3] - The core risk lies in Meituan's limited financial resources compared to Alibaba, potentially placing it at a disadvantage in a prolonged cash-burning battle [1][2][7] Financial Performance - Meituan's Q2 operating profit under Non-IFRS dropped 87% year-on-year to 1.84 billion yuan, significantly below Bloomberg's market consensus by over 80% [2][4] - Despite a 12% year-on-year revenue growth to 91.84 billion yuan, this figure also failed to meet expectations [2][4] - The core local commerce (CLC) segment is projected to incur "significant losses" in Q3, contrasting sharply with a profit of 14.6 billion yuan in the same period last year [2][5] Competitive Landscape - The core local commerce segment's operating profit fell 76% year-on-year, 70% lower than market expectations [3][5] - Meituan's unit economics (UE) for food delivery turned negative in Q2, recording -0.12 yuan, down from 1.9 yuan a year ago and 1.5 yuan in Q1 [5][6] - Meituan's market share in the broader food delivery and flash purchase market may have declined from 70% to over 50%, while Alibaba's share increased from 30% to over 40% [6][7] Strategic Response - Meituan's management aims to maintain its core advantage in the food-related order segment, claiming a 70% market share despite competitive pressures [6][7] - The intense price war began with Alibaba's announcement of a 50 billion yuan subsidy plan, prompting Meituan to respond with its own subsidy measures [6][7] - New business losses narrowed by 43% year-on-year to 1.9 billion yuan, better than market expectations, although restructuring costs and overseas expansion are expected to increase losses in Q3 to 2.3-2.4 billion yuan [7]

Core Insights - Meituan's latest quarterly results confirm market concerns about its profitability, with a shocking 87% year-on-year drop in non-IFRS operating profit to 1.84 billion RMB, significantly below Wall Street expectations [1] - Despite a 12% year-on-year revenue growth to 91.84 billion RMB, this figure also failed to meet market forecasts [1] - Management has warned of potential "significant losses" in its core local commerce (CLC) segment for Q3, contrasting sharply with a profit of 14.6 billion RMB in the same period last year [1][3] Financial Performance - The CLC segment's operating profit fell 76% year-on-year, 70% lower than market expectations, indicating severe profitability erosion [3] - Meituan's actual investment in delivery and flash purchase services exceeded previous forecasts by 10 billion RMB, suggesting more intense competition than anticipated [1][3] - The unit economics (UE) for Meituan's delivery business turned negative in Q2, recording -0.12 RMB, down from 1.9 RMB a year ago [4] Competitive Landscape - Meituan maintains a 70% market share in core food-related orders, but faces increasing pressure from Alibaba, which has grown its market share from 30% to over 40% [2][5] - The intense price war began with Alibaba's announcement of a 50 billion RMB subsidy plan, prompting Meituan to respond with its own subsidies [6] - The competition has negatively impacted Meituan's other business areas, with a slowdown in revenue growth for dine-in services from 20% to 15% [6] Future Outlook - Management's guidance indicates a challenging Q3, with expectations of a shift from profit to loss in the CLC segment [1][3] - New business losses narrowed by 43% year-on-year to 1.9 billion RMB, better than market expectations, but anticipated to widen to 2.3-2.4 billion RMB in Q3 due to restructuring costs and international expansion [6]

Core Viewpoint - The Hong Kong stock market is experiencing significant volatility in the first half of 2025, with Chinese technology assets undergoing a profound value reassessment, making them a focal point for global investors [1] Group 1: Market Dynamics - Southbound capital has accelerated its inflow into the Hong Kong stock market, with a total net inflow of 731.19 billion HKD in the first half of the year, marking a historical high for the same period [2] - Monthly net inflows exceeded 100 billion HKD for four consecutive months from January to April, with April alone seeing a net inflow of 166.67 billion HKD, the second highest on record [2] - The overall trend of southbound capital shows a "buy the dip" strategy, with 30 trading days in the first half recording net inflows exceeding 10 billion HKD, even during market downturns [2] Group 2: Valuation Insights - The Hong Kong stock market, particularly the Hang Seng Index, remains attractive from a valuation perspective, with a price-to-earnings (PE) ratio in January 2025 hovering in single digits, indicating a significant valuation advantage [3] Group 3: Technology Sector Focus - The "Magnificent Seven" technology giants in the U.S. have seen robust growth, and similar companies in Hong Kong, such as Xiaomi, Lenovo, BYD, SMIC, Alibaba, Tencent, and Meituan, are gaining investor attention [6] - Xiaomi is positioned to benefit from AI applications and is expanding into the electric vehicle market, with a focus on new car releases and growth in smart hardware [6][8] - Lenovo is expected to see demand recovery in PCs and servers driven by AI investments, with a strategic focus on emerging markets [7] - BYD aims to achieve a sales target of 5.5 million vehicles in 2025, leveraging its smart transformation strategy [8] - SMIC is benefiting from the restructuring of the global supply chain, with a focus on maintaining high utilization rates in its mature production lines [8] - Alibaba is poised to capitalize on the surge in AI demand, enhancing its cloud services and e-commerce market share [9] - Tencent is focusing on AI integration in social advertising and gaming, with expectations for significant advancements in its product offerings [9] - Meituan is exploring growth opportunities in local consumption, particularly in the food delivery market and through its retail and technology strategy [9] Group 4: Future Outlook - Analysts are optimistic about the Hong Kong stock market in the second half of 2025, suggesting a "barbell" strategy that balances growth and dividend opportunities [10][11] - Key sectors to watch include technology driven by AI, innovative pharmaceuticals, emerging consumer markets, and stable high-yield sectors like banking and utilities [10][11]

Investment Rating - The report assigns a rating of "Buy" for Meituan-W (3690) [1][9]. Core Insights - In Q1 2025, the core local business operating profit increased by 39% year-on-year, indicating strong performance despite anticipated profit fluctuations in Q2 due to competitive pressures in the food delivery sector. However, long-term competitive barriers remain solid [3][8]. - The company plans to invest 100 billion RMB over the next three years to enhance its ecosystem, which is expected to improve user engagement and frequency of purchases, particularly among mid-to-high frequency users [8][9]. Financial Summary - Revenue for Q1 2025 reached 86.56 billion RMB, a year-on-year increase of 18.1%, with adjusted net profit of 10.949 billion RMB, up 46.2% year-on-year. The operating profit margin improved by 5.1 percentage points to 12.2% [8]. - The core local business generated revenue of 64.325 billion RMB in Q1 2025, reflecting a 17.8% year-on-year increase, while operating profit rose by 39.1% to 13.491 billion RMB, with an operating profit margin of 21.0% [8]. - The financial projections for 2025-2027 have been adjusted, with expected revenues of 393 billion, 459 billion, and 536 billion RMB respectively, and adjusted net profits of 41.8 billion, 53.9 billion, and 68.5 billion RMB [9][12]. Valuation Methodology - The report employs a Sum-of-the-Parts (SOTP) valuation method, assigning a 20x PE ratio to the core local business and a 0.5x PS ratio to new businesses, resulting in a target price of 177 HKD for Meituan-W [9][10].