【3690 Analysis】Meituan shares rise about 2% after earnings; Citi upgrades rating and target price; Analysis: Current level is "quite cheap," but business is not expected to perform particularly well in the next two to three quarters.

Meituan (03690)
The performance meets the previous profit warning forecast, and the stock price stabilized on Friday, rising about 2%. Citigroup upgraded Meituan’s rating to “Buy,” raising the target price from 94 yuan to 110 yuan, benefiting from the strategy of high average order value and high-quality users. The firm indicated that Meituan’s food delivery business unit economics will further improve in the first quarter of this year, and it is expected that the core local business segment will return to profitability in the third quarter. Morgan Stanley maintained Meituan’s “Overweight” rating with a target price of 120 yuan, believing that the trends in market share and profitability recovery remain key to determining valuation.

Yin Yuan Shichuang Family Office’s Vice President in Hong Kong, Huang Weihao, stated in our video program that Meituan’s performance “was neither surprising nor shocking.” The market had already anticipated a loss, but he believes the chances of a short-term turnaround are not high. He expects that even if there is a short-term rebound in the stock price, there will be significant resistance at 95 to 100 yuan, while there is support at 80 yuan below.

Huang Weihao also mentioned that the mainland authorities expressed a desire to end the food delivery war through reports, saying, “Is it that once it ends, growth will return? It’s actually not that easy.” He anticipates that the industry environment will not see significant improvement in the short term, and Meituan’s business “will not show particularly good performance in the next two to three quarters.” On the other hand, in terms of AI application development, Meituan is relatively weaker than other tech stocks and has not become a new focus of the market.

He believes that Meituan’s current stock price is “very cheap,” but if one is not a long-term investor, the attractiveness at this stage is not high. “Is there a good and large upward potential? At least in the short to medium term, the opportunity is not very high. There will be a rebound or two, but it won’t change the overall trend,” and long-term investors need to have patience to wait for performance improvement.

Meituan, which previously issued a profit warning, announced that last year’s performance turned from profit to loss, with a loss of 23.35 billion yuan. For the fourth quarter alone, total revenue increased by about 4% to 92.09 billion yuan, with an adjusted loss of 15.08 billion yuan. The core local business operating loss narrowed quarter-on-quarter, but losses in new businesses significantly widened. CEO Wang Xing stated that regulatory guidelines clearly oppose internal competition, and Meituan’s position is the same. He mentioned that in recent months, even facing fierce competition and irrational subsidies, Meituan remains the top choice for high-value consumers, with overall unit prices far exceeding peers, and it is expected that the loss per order in the food delivery segment will significantly improve quarter-on-quarter in the first quarter.

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