Meituan Q1 Loss Narrows Sharply, Beating Expectations; Morgan Stanley and UBS Reiterate Bullish Outlook
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Meituan's Q1 adjusted net loss came in at RMB 4.97 billion, 26% narrower than consensus; food-delivery unit economics turned profitable in April–May. Morgan Stanley and UBS both reiterate bullish ratings with targets of HK$120 and HK$128.
How much did the loss narrow?
Q1 revenue reached RMB 91.0 billion, up 5.6% year-on-year. Adjusted net loss was RMB 4.97 billion versus consensus of RMB 6.72 billion — a 26% beat.
Operating loss fell to RMB 6.5 billion from RMB 16.1 billion last quarter — a RMB 9.6 billion sequential improvement. This means → nearly 60% of the operating loss was cut in a single quarter.
Core Local Commerce (CLC — the main segment covering food delivery, in-store, and hotel & travel) posted an operating loss of RMB 2.03 billion, far better than Morgan Stanley's estimate of RMB 4.27 billion and consensus of RMB 4.38 billion, beating by 33%.
How far behind is it compared to a year ago?
In Q1 2025, Meituan booked an operating profit of RMB 10.6 billion. This quarter it posted a RMB 6.5 billion loss — a gap of over RMB 17 billion.
CLC revenue grew just 0.1% year-on-year to RMB 64.1 billion, nearly flat. This means → the narrowing loss was driven by spending less, not earning more. The revenue engine has not restarted yet.
Is the food-delivery price war actually cooling?
Q1 food-delivery order volume grew roughly 8% year-on-year. Revenue fell 7%, but improved from -10% in Q4, mainly as subsidies pulled back.
Management disclosed that delivery unit economics (UE — whether each order makes or loses money) turned profitable in April and May. June depends on the intensity of the 618 shopping festival promotions.
Meituan holds 70% market share in orders above RMB 30 per ticket, with an estimated 60% share of total GTV. In plain terms = the high-value order base held firm; the subsidy battle was fought mostly in the low-price segment.
UBS notes average order value (AOV) has rebounded more visibly since March, driven by stronger user stickiness and lower sensitivity to subsidies. Morgan Stanley argues Meituan's per-order economic advantage over Alibaba's delivery arm widened to roughly RMB 3 in Q1, from RMB 2 in Q4 — the competitive landscape has largely stabilised.
What are Morgan Stanley and UBS saying?
Morgan Stanley keeps an Overweight rating with a HK$120 target (implying 18x 2027E P/E) and lifts its 2026 CLC operating-profit forecast by 12%.
It expects Q2 CLC operating profit to turn positive at roughly RMB 3.0 billion (including membership investment), with overall on-demand delivery losses narrowing to about RMB 437 million — delivery profitable at RMB 313 million, Flash Purchase losing RMB 750 million.
UBS keeps a Buy rating with a HK$128 target (SOTP-based) and raises 2027–2028 EPS estimates by 15%–19%.
UBS forecasts Q2 CLC revenue growth accelerating to roughly 5% (from 0.1% in Q1), with operating profit swinging to about RMB 3.2 billion. This means → both banks see Q2 as the inflection point for profitability.
How are retail and overseas businesses progressing?
Xiaoxiang Supermarket now covers 55 cities with over 2,000 warehouse-stores; roughly 60% are profitable. Merchandise sales revenue rose 40.7% year-on-year to RMB 18.0 billion.
New initiatives revenue grew 21.3% to RMB 27.0 billion; operating loss narrowed from RMB 4.6 billion to RMB 2.1 billion.
Overseas brand Keeta is already sustainably profitable in Hong Kong. Saudi Arabia's UE improvement is accelerating; break-even is expected at some point in 2026, with full profitability in FY2027.
What did the CEO say about the second half?
CEO Wang Xing told the earnings call: "Order growth driven solely by subsidies is not sustainable."
He struck a cautious tone on H2, warning that year-on-year order growth may slow — and did not rule out a year-on-year decline. This reflects management already setting expectations for a growth deceleration once subsidies fade.
Q1 R&D spending hit RMB 7.0 billion, up 22% year-on-year. AI's direct contribution to revenue and profit remains limited at this stage.
Order growth driven solely by subsidies is not sustainable.
Wang Xing
CEO, Meituan
(Q1 2026 earnings call)
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