Xiaomo: Raise the Meituan-W (03690) rating to “increase your holdings” and raise the target price to HK$100

The Zhitong Finance App learned that J.P. Morgan Chase released a research report saying that the rating of Meituan-W (03690) was raised from “neutral” to “increased holdings”, and the target price was raised from HK$85 to HK$100, corresponding to the predicted price-earnings ratio of 16 times in 2027. Xiaomo pointed out that Meituan's takeout business was profitable in the second quarter, and management expects the takeout business to remain profitable in the third quarter even with rising seasonal delivery costs and increased investment in membership and marketing.

Under fierce competition, Meituan's market share for orders over RMB 30 remains around 70%. Xiaomo believes that it reflects that competitors are mainly expanding in the field of low-value orders. Since most of the loss of market share is concentrated on orders below RMB 15 and tea orders, it believes the impact on Meituan's high-value core business is limited. Xiaomo maintained Meituan's 2028 takeaway operating profit forecast unchanged. In the three forecast scenarios of operational resilience, structural duopoly, and fragmented oligopoly, the takeaway operating profit forecast up to 2028 reached 31 billion yuan, 26 billion yuan and 5 billion yuan respectively.

Xiaomo said that Meituan's second-quarter results showed that competitors were unable to rely on the order volume brought in by subsidies and converted into actual market share in high-value business segments. Meituan's investment logic has changed from “profit reversal has not been structurally verified” to “structural profit improvement.” The bank raised Meituan's revenue forecast by 5% to reflect that takeout and new business growth beat expectations. It also raised the adjusted net profit forecast to 48 cents per share to reflect earnings over expectations for the next quarter, the improvement in the takeaway unit economy throughout this year, and discipline in investing in new businesses. The bank raised Meituan's revenue and adjusted net profit forecasts for next year by 5% and 11%, respectively, to reflect improvements in revenue and profitability from takeout and new businesses.