Ac t i o n | 26 Mar 2026 17:54:43 ET │ 22 pages Meituan (3690.HK) Loss Narrowing Faster-Than-Expected; UG To Buy/HR At TP of HK$110 CITI'S TAKE We are upgrading Meituan from Neutra/HR to Buy/HR. Despite intense competition, MT's food delivery UE demonstrates decent sequential improvement in 4Q25 and is expected to further improve in 1Q26 thanks to its strategic focus on high AOV and high-quality users. Its solid execution is also proven in overseas markets where Keeta has successfully turned profitable in H ...

Core Insights - Alibaba and Meituan are engaged in a competitive landscape, with Alibaba launching new features on its Amap platform to challenge Meituan's market share in local services [1][5] - The local services market in China is projected to reach CNY35.3 trillion by 2025, indicating significant growth potential [6] Alibaba's Strategy - Alibaba introduced an AI-powered feature called "Street Stars" on Amap, allowing users to rank local businesses based on their behavior and Alipay's credit score [2][3] - The "Street Stars" initiative covers over 1.6 million offline service providers across more than 300 cities, including 870,000 restaurants and 230,000 hotels [4] - The strategy aims to leverage Amap's 700 million monthly active users to drive traffic towards local businesses, effectively turning navigation into a shopping opportunity [7] - By integrating Alipay's credit system, Alibaba enhances the reliability of reviews, filtering out fake comments and prioritizing trustworthy ratings [8] - A CNY1 billion subsidy is being offered to encourage spending on services like dining and car rides, creating a synergy with Ele.me's delivery services [9][10] Meituan's Response - Meituan has relaunched its "Premium Delivery" service, promising 30-minute delivery from top-rated restaurants, while also utilizing AI to filter reviews [11][12] - Despite a revenue increase of 12% to CNY91.8 billion, Meituan's net profit fell by 89% to CNY1.5 billion, indicating challenges in profitability [13] - Meituan's strength lies in its network effect, but it faces challenges in maintaining trust due to issues with fake reviews in in-store services [14] Industry Dynamics - The competition is shifting from traditional marketing to AI-driven solutions that prioritize user behavior over subjective reviews, indicating a transformation in local service decision-making [16] - The future of local services will likely hinge on the capabilities of AI assistants to understand consumer needs and deliver superior experiences [17]

Core Viewpoint - Alibaba Group has launched an AI-powered ranking feature on its Amap service to enhance its competitive position against Meituan in the lifestyle services market [1][5]. Group 1: Amap Street Stars Feature - The Amap Street Stars feature utilizes AI algorithms to rank offline destinations such as restaurants, hotels, and tourist attractions, aiming to position Amap as a key player in lifestyle services [2][4]. - The service will initially cover over 300 cities and provide recommendations for 1.6 million local businesses, leveraging data from navigation patterns and user reviews [3]. Group 2: Competitive Landscape - The launch of Amap Street Stars is a strategic move by Alibaba to compete directly with Meituan's Dianping restaurant rating app, highlighting the rivalry between the two companies [5]. - In response, Meituan announced plans to implement AI models for screening consumer reviews and to introduce a "quality food delivery" service on its Dianping app [6]. Group 3: Unique Features and User Engagement - The ranking system emphasizes authenticity, relying on real user behavior and high credit ratings to generate recommendations [4]. - The AI feature allows for customized recommendations based on specific user requests, such as weather conditions or time of day, which standard rankings cannot provide [6][7].