Meituan Earnings Preview: Has the Profit Turning Point Arrived?

After the Hong Kong market closes this Friday, Meituan will release its second-quarter earnings report. Analysts expect Q2 revenue to reach RMB 101.079 billion, up 16.8% year over year, while adjusted EPS is forecast at RMB 0.052, down 97.1% year over year.

As for the stock performance, Meituan has been volatile this year. The stock rebounded briefly in late June but has weakened again recently, falling about 23.8% year to date.

In terms of revenue structure, Meituan has two major business segments: Core Local Commerce and New Initiatives. Delivery services and merchant services are the main sources of revenue within Core Local Commerce. Analysts expect Core Local Commerce revenue to grow about 4.95% year over year in Q2, while New Initiatives is expected to grow much faster, with revenue forecast to rise 22.77% year over year.

As for profitability, analysts expect Meituan's Core Local Commerce business to return to profitability in Q2 after three consecutive quarters of losses. As Alibaba, ByteDance and JD.com gradually scale back their previously aggressive subsidy campaigns, market expectations for Meituan's Core Local Commerce profit have risen by nearly 90% in two months. Given the low base, the recovery in Core Local Commerce could continue through Q1 2027.

From profitability perspective, MMeituan's growth is increasingly driven by lower-margin grocery retail rather than higher-margin commissions and advertising. Meanwhile, Meituan's expansion of Xiaoxiang Supermarket into 55 cities and increased investment in private-label products could intensify competition with Alibaba and JD.com, creating new headwinds for growth.

In terms of valuation, Meituan's price-to-sales (P/S) ratio stands at 1.13x, near its lowest level over the past five years. $MEITUAN-W(03690)$ $MEITUAN-WR(83690)$

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Comments

Investing Leon
08-26 17:28
Investing Leon
I think Meituan spent too heavily on subsidies to gain market share during the previous price war. As a result, although revenue continued to grow, its profit margins became increasingly thin, which is unfavorable for the company’s long-term development.
peepie
08-26 18:02
peepie
1.13x P/S is cheap, but cheap internet names can stay cheap. The real swing factor is whether new initiatives can become a real second growth leg