BOCI upgraded Meituan to Buy from Hold and lifted its target to HKD110 from HKD100 after a first-quarter core loss that was 53% narrower than expected.
Back
BOCI upgrades Meituan to Buy, lifts target to HKD110 on loss narrowing
BOCI upgraded Meituan to Buy from Hold and lifted its target to HKD110 from HKD100 after a first-quarter core loss that was 53% narrower than expected.
"The improvement in food delivery unit economics was much better than anticipated, reflecting a more rational competitive environment," the BOCI analyst said, noting that industry-wide subsidies are subsiding after repeated regulatory criticism.
Meituan's revenue for the quarter ended March 31 rose 6% year over year to RMB91 billion ($13.45 billion), in line with analyst estimates. Its Core Local Commerce segment posted an operating loss of RMB2 billion, well below the market consensus of about RMB4.3 billion. The company's overall adjusted net loss narrowed to RMB4.97 billion from RMB15.1 billion in the fourth quarter, though it swung from a RMB10.9 billion profit a year earlier.
CEO Wang Xing told analysts on the earnings call that the shift back to "the fundamentals of operational efficiencies and user experience" plays to Meituan's strengths as industry-wide subsidies become more rational.
The upgrade suggests that China's yearlong food delivery price war may be entering a more normalized phase. E-commerce giants Alibaba's Taobao and JD.com launched instant retail platforms in early 2025, sparking a subsidy battle that pressured margins across the sector. Instant retail, or quick commerce, refers to online purchases of food, bubble tea and daily-use items delivered within 60 minutes. In April, Chinese regulators fined seven platforms a combined RMB3.6 billion over food delivery safety violations and criticized the industry's "race to the bottom" competition. Last week, the State Administration for Market Regulation instructed local regulators to carry out a special inspection campaign until December targeting sectors from live-streaming to food delivery.
BOCI now forecasts Meituan's revenue will accelerate to RMB102.1 billion in the second quarter, an 11% increase, with new businesses growing 23% and core local commerce rising 6%. The broker radically narrowed its 2026 loss forecast and raised its 2027 profit projection, citing improving momentum in the core business.
Meituan shares rose 9.3% on Tuesday to about HKD85.50, giving the stock roughly 29% upside to BOCI's new target. Short selling data showed 18% of turnover on the day, suggesting some bearish bets remain despite the rally. The upgrade follows similar bullish calls from Citigroup, which said the first-quarter results beat expectations.
The BOCI upgrade could trigger further analyst revisions. Investors will watch the second-quarter results, due in August, for confirmation that margin recovery is sustainable as the industry moves past the subsidy war.
This article is for informational purposes only and does not constitute investment advice.
