Citi expects Meituan to report an adjusted loss of RMB 16.3 billion for the last quarter, lowering the target price to RMB 117 with a "Neutral" rating

Citi published a research report, indicating that Meituan (03690.HK) has likely reached the peak of its food delivery subsidies last quarter and is further adjusting its loss assumptions. Citi estimates that its core local commerce (CLC) and on-demand delivery operations will incur losses of RMB 15 billion and RMB 20 billion, respectively, in the third quarter, while losses from new businesses are expected to remain around RMB 2.37 billion.

After adjustments, Citi forecasts Meituan's operational losses and EBITDA losses for the last quarter to be RMB 17.3 billion and RMB 16 billion, respectively. Citi believes that the expected improvement in unit economics (UE) for Meituan's competitors in October is more attributable to increased order density and operational efficiency rather than significant cuts in subsidies. Although the seasonal weakness in the fourth quarter of 2025 suggests a reduction in subsidies, given the overall competitive landscape remains intense, it expects core local commerce (CLC) and on-demand delivery losses in the fourth quarter to remain high at RMB 7.9 billion and RMB 12.6 billion, respectively, while losses from new businesses are projected to be RMB 2.6 billion due to Keeta's expansion into Brazil and more Gulf countries.

After adjusting forecasts, Citi lowered Meituan's target price from HKD 133 to HKD 117 using a sum-of-the-parts valuation method; it maintains a "Neutral" rating and expects short-term pressures to persist.

Although Citi's revision of total revenue forecasts for Meituan is not significant, it has raised its loss assumptions for the fiscal years 2025 to 2026 and increased its profit forecast for 2027 by 2.2%. For the third quarter, Citi adjusted Meituan's core local commerce losses from the previous RMB 9.7 billion to RMB 15 billion, raised food delivery losses from RMB 14.1 billion to RMB 19.2 billion, and lowered the gross margin for in-store business from the previous 29.1% to 28.5%.

Citi expects Meituan's total revenue for the third quarter of fiscal year 2025 to be RMB 97.25 billion, representing a year-on-year growth of 3.9%; adjusted losses are expected to be RMB 16.3 billion. Market consensus anticipates revenue of RMB 98.1 billion and adjusted losses of RMB 12.3 billion