Summary of Meituan (3690.HK) Earnings Call Company Overview - **Company**: Meituan (3690.HK) - **Date of Call**: March 26, 2026 - **Market Cap**: HK$528,955 million (US$67,655 million) - **Current Share Price**: HK$86.70 - **Target Price**: HK$110.00, upgraded from HK$94.00 Key Points Financial Performance - **4Q25 Total Revenues**: Rmb92.1 billion, a 4.1% year-over-year increase but a 3.1% quarter-over-quarter decline, aligning with market expectations [10] - **Group Adjusted Net Loss**: Rmb15.1 billion, wider than expected losses [11] - **Adjusted EBITDA**: Rmb-14.0 billion, with a margin of -15.2% [11] - **Core Local Commerce Revenue**: Declined 1.1% year-over-year to Rmb64.8 billion [16] - **Food Delivery Revenue**: Decreased 9.9% year-over-year to Rmb23.6 billion, accounting for 25.6% of total revenues [16] Strategic Focus and Market Position - **Upgrade to Buy/High Risk**: Due to narrowing losses and improved user engagement (UE) in food delivery, with expectations for further improvement in 1Q26 [1] - **Regulatory Alignment**: Meituan plans to focus on healthy competition and defend market share in food delivery by enhancing core strengths and operational efficiency through AI [2] - **AI Development**: Management views AI as a strategic opportunity, investing heavily in in-house models and partnerships with third-party models to enhance service offerings [12][13][14] Competitive Landscape - **Food Delivery Sector**: Management anticipates a shift towards user lifetime value and supply quality, aiming to improve operational efficiency and customer experience [21] - **In-store Business**: Short-term profitability may be impacted by increased competition, but Meituan is focusing on operational efficiency and innovation [22][23] - **New Initiatives**: Revenue from new initiatives grew 18.9% year-over-year to Rmb27.3 billion, but operating losses widened to Rmb4.65 billion [16] International Operations - **Keeta's Performance**: Achieved profitability in Hong Kong in October 2025, with expectations for profitability in Saudi Arabia by the end of 2026 [4][31] - **Brazil Market**: Meituan remains committed to long-term growth in Brazil, focusing on refining the business model in São Paulo [31] Financial Projections - **2026 Revenue Forecast**: Adjusted to Rmb408.5 billion, with a projected non-GAAP net loss of Rmb11.74 billion [33] - **Profitability Expectations**: Core local commerce expected to resume profitability in 2H26, with food delivery regaining profitability in 2Q27 [33] Additional Insights - **Acquisition of Ding Dong**: Aimed at enhancing grocery retail capabilities and improving operational efficiency in East China [28][29][30] - **Consumer Trends**: Increasing demand for personalized experiences and AI-powered products, with a focus on evolving service offerings [24][25] Conclusion Meituan is navigating a challenging competitive landscape with a strategic focus on AI and operational efficiency. The company is expected to improve its financial performance in the coming quarters, supported by its investments in technology and market expansion efforts. The upgrade to a Buy rating reflects confidence in Meituan's ability to adapt and grow despite current losses.

Financial Data and Key Metrics Changes - In Q4 2025, total revenue was CNY 92.1 billion, an increase of 4.1% year-over-year [17] - Cost of revenue ratio increased by 11.6 percentage points to 33.8%, driven by higher consumer incentives, rider incentives, and increased overseas operational costs [17] - Selling and marketing expenses ratio rose by 14.8 percentage points to 34.4%, reflecting increased investment in promotion and user incentives [17] - Total segment operating loss narrowed to CNY 14.7 billion, with adjusted net loss at CNY 15.1 billion, indicating improved execution efficiency [18] - Cash and cash equivalents totaled CNY 166.8 billion as of December 31, 2025, with operating cash outflow narrowing to CNY 6.6 billion [18] Business Line Data and Key Metrics Changes - Core local commerce segment revenue was CNY 64.8 billion in Q4, down 1.1%, while order volume and GTV showed healthy growth [19] - Multiple consumption categories maintained double-digit growth, including medicine, health, leisure, and entertainment [19] - New initiatives segment revenue reached CNY 27.3 billion, up 18.9% year-over-year, primarily driven by KeeTa and grocery retail business [22] Market Data and Key Metrics Changes - The food delivery industry saw a moderation in subsidies, but they remained at historically high levels [21] - The competitive landscape has evolved, with competitors focusing on efficient operational strategies rather than just subsidies [48] Company Strategy and Development Direction - The company aims to enhance its core strengths by expanding high-quality selections and ensuring reliable deliveries [42] - Focus on AI integration to improve product offerings and user experience, with significant investments in AI technology [13][28] - The company is committed to sustainable growth in grocery retail and has announced plans to acquire Dingdong Grocery to enhance capabilities [56][57] Management Comments on Operating Environment and Future Outlook - Management acknowledges the intense competition and regulatory scrutiny in the food delivery market, emphasizing a commitment to quality growth [41][42] - The company believes that a more regulated market will shift competition towards innovation and service experience, areas where it is well-positioned [44] - Future growth is expected in grocery retail and overseas markets, with a focus on operational efficiency and market adaptation [66] Other Important Information - The company launched its AI assistant, Xiao Tuan, to enhance user experience by allowing natural language queries [32][36] - The company is actively working on improving courier welfare and support programs [10][11] Q&A Session Summary Question: AI competition and future development - Management views AI as a strategic opportunity and is investing significantly in in-house AI models to enhance local service offerings [27][28] Question: Impact of regulatory investigations on strategy - Management is actively cooperating with regulatory investigations and is focused on quality growth while defending market leadership [41][42] Question: Competitive landscape and strategy changes - Management acknowledges increased competition but emphasizes a long-term focus on sustainable development rather than short-term tactical battles [48][49] Question: Acquisition of Dingdong and grocery strategy - The acquisition aims to enhance supply chain capabilities and improve service quality in the grocery sector, aligning with long-term strategic priorities [56][57] Question: Updates on KeeTa's overseas strategy - KeeTa will focus on current markets, with expectations for profitability in Saudi Arabia and continued investment in Brazil [66]

Report Industry Investment Rating - No information provided on the industry investment rating Core Viewpoints - Maintain buy on FAEACO 12.814 Perp due to its decent risk - return profile, larger cushion against the covenanted adj. net gearing ratio, and expected cash inflow from project deliveries in Australia and the UK [2] - Maintain buy on MEITUA 3.05 10/28/30 and MEITUA 0 04/27/28 (CB) as Meituan's overall credit profile remains robust with a strong net cash position, despite near - term headwinds [9] Summary by Related Catalogs Trading Desk Comments - Last Friday, there was small better buying on JP/AU financial names and TW lifers; balanced two - way flows on Chinese AMCs 2 - 5yr notes which closed 1 - 2bps tighter; MEITUAs were unchanged to 3bps wider [2] - In FRN space, PBs were buying Chinese banks, leasing, and SEA names, while AM flippers were taking profit; FAEACO 12.814 Perp dropped 5.6pts; LASUDE 26 increased 0.5pt; CWAHK 26 - 30 edged 0.1 - 0.5pt firmer [2] - In Chinese properties, VNKRLE 27 - 29 lowered 0.8 - 1.3pts; LNGFOR 29 was 1.7pts lower; ROADKG 28 edged 0.6 - 0.9pt higher; AMs were buying ZHHFGR and selling CPDEV [2] - Yankee AT1s were 0.1pt firmer, Japanese AT1s and insurance subs were largely stable, ACPM 5 1/8 Perp was 0.6pt higher; in SE Asia, some bonds were unchanged to 0.5pt higher [2] - This morning, BBLTB senior and JP financials tightened 1 - 2bps; VNKRLE 27 - 29 recovered 0.5 - 1.2pts; some bonds were 0.6 - 1.1pts higher, while others were 0.7 - 1.0pt lower [4] - MEITUAs were unchanged to 3bps wider post 3Q25 results announcement last Friday and unchanged this morning; IDASALs were unchanged this morning [4] Macro News Recap - Last Friday, S&P (+0.54%), Dow (+0.61%), and Nasdaq (+0.65%) were higher; UST yield was higher, with 2/5/10/30 year yield at 3.47%/3.59%/4.02%/4.67% [7] Desk Analyst Comments on Meituan - Meituan's 3Q25 adj. EBITDA dropped to negative RMB14.8bn due to the price war in China's food delivery market, with intense competition weighing on profitability [8] - The aggressive price war has eroded sector - wide margins, and the pressure is expected to persist until the competitive landscape becomes more rational, possibly through regulatory intervention [8] - Meituan's overall credit profile remains robust with a net cash position of RMB90.0bn as of Sep'25, which should cushion near - term earnings impact; near - term pressure on MEITUAs is expected, but further volatility presents better entry opportunities [9] Meituan's Financial Performance - Meituan's 3Q25 total revenue increased 2% yoy to RMB95.5bn, with core local commerce segment revenue decreasing 2.8% yoy to RMB67.4bn and turning into an operating loss of RMB14.1bn; new initiative segment revenue rose 15.9% yoy to RMB28.0bn, but segment loss increased 24.5% yoy to RMB1.3bn [12] - In 3Q25, selling and marketing expenses increased 90.1% yoy to RMB34.3bn, and R&D expenses increased 31.0% to RMB6.9bn; Meituan reported an operating loss of RMB19.7bn and negative adj. EBITDA of RMB14.8bn [13] - Meituan expects losses in the core local commerce segment and at the consolidated level to continue in 4Q25; the operating loss in the new initiative segment is expected to widen in 4Q25 for overseas expansion [13] - Meituan's liquidity position remained solid with a net cash position of RMB90.0bn as of Sep'25, down from RMB106.7bn as of Dec'24, and it had an average net cash position of RMB70.6bn in the past five years [14] Offshore Asia New Issues - No offshore Asia new issues were priced today [17] - Agricultural Bank of China Limited Tokyo Branch has a pipeline issue of 3 - year tenor with a coupon of SOFR + 100 and an issue rating of A1/-/- [18] News and Market Color - Last Friday, 70 credit bonds were issued onshore with an amount of RMB59bn; in Nov'25, 2,133 credit bonds were issued with a total amount of RMB2,286bn, a 17.8% yoy increase [22] - China Jinmao pledged a Shanghai property asset valued at RMB4.8bn as collateral for RMB9.9bn of syndicated loans [22] - China Water Affairs 1HFY26 EBITDA dropped 18.6% yoy to HKD2.2bn [22] - eHi Car 3Q25 fleet utilization rate rose 4.9 pct pt to 72.3% [22] - Seazen issued RMB616mn ABS backed by a Shanghai shopping mall [22] - HD Hyundai Heavy and its partner failed to win Poland's KRW8tn submarine project [22] - Mineral Industri Indonesia repurchased USD95.8mn of IDASAL 6.53 11/15/28 [22] - Melco Resorts Finance 9M25 operating revenue was up 14% yoy, and Studio City 9M25 operating revenue was up 10% yoy [22] - A Hong Kong tycoon seeks to sell some Rosewood Hotels [22] - Vedanta Resources is looking to raise USD600mn bank loan for refinance and secure INR20bn via INR - denominated NCDs at its subsidiary [22] - Vanke provided its entire stake in its property management arm as loan collateral to its controlling shareholder [22]