Chapter 1

The Business

Meituan runs China's largest platform for local services — food delivery, in-store dining, hotels and travel, and on-demand grocery — with revenue of ¥364.9 billion in 2025 and a profit pool concentrated almost entirely in its Core Local Commerce segment [1]. That pool proved contestable: after a record ¥35.8 billion profit in 2024, a 2025 subsidy war pushed the group to a ¥23.4 billion loss [2]. This chapter orients the business and its economics; the swing frames the case.

What Meituan does

Meituan is the default app through which hundreds of millions of Chinese consumers order a meal, book a restaurant table or hotel room, hail a shared bike, or have groceries and medicine delivered within the hour. It reports two segments. Core Local Commerce — food delivery, Meituan Instashopping (its on-demand "everything to your door" service), and the in-store, hotel and travel business — is the engine [3]. New Initiatives houses the newer, loss-making ventures: community grocery retail, and the overseas delivery brand Keeta [4].

The platform is a three-sided marketplace. Consumers get convenience and selection; merchants get demand, marketing and payments; and a delivery fleet connects the two — Meituan's occupational-injury insurance programme alone covered over 16 million couriers in 2025, a measure of the physical network beneath the app [5]. Founded in 2010 and merged with review platform Dianping in 2015, the company listed on the HKEX in September 2018.

Source: FY2025 Annual Report, MD&A — full-year revenue ¥364.9bn, net loss ¥23.4bn, Core Local Commerce operating loss ¥6.9bn, and cash of ¥106.8bn plus short-term treasury investments of ¥60.1bn [6].

How it makes money

Revenue arrives in four forms, all flowing off transaction volume on the platform. In 2025 the group booked ¥96.1 billion of delivery services (fees for fulfilment), ¥105.5 billion of commissions (a take rate on merchant transactions), ¥51.9 billion of online marketing services (merchant advertising), and ¥111.4 billion of other services and sales — the last line dominated by New Initiatives' grocery-retail sales [7]. Commissions and advertising against in-store and food-delivery volume are the highest-margin streams; delivery fees and grocery sales carry heavy fulfilment and inventory costs.

The economics that matter sit inside Core Local Commerce. It supplied ¥260.8 billion, or 71%, of 2025 revenue, and in a normal year it is where essentially all of the group's operating profit is made [8]. New Initiatives — grocery and overseas — has never turned an annual operating profit; its role is to buy future scale, funded by the core.

Source: FY2025 Annual Report, MD&A segment revenue (2024–2025) [9]; FY2022 Annual Report, MD&A segment revenue (2021–2022) [10]; FY2024 figures per FY2024 Annual Report MD&A [11].

Scale built, then a profit shock

Across five years the top line nearly doubled — from ¥179.1 billion in 2021 to ¥364.9 billion in 2025 — while profit walked a jagged path [12]. The company lost ¥23.5 billion in 2021 (a year that included an antitrust penalty and investment write-downs), narrowed the loss in 2022, turned profitable in 2023, and reached a record ¥35.8 billion profit in 2024 as Core Local Commerce operating profit hit ¥52.4 billion at a 20.9% margin [13].

Source: FY2025 Annual Report, Financial Summary (five-year revenue and profit) [14].

Then 2025 reversed the trend. Revenue still grew 8.1%, but the group swung to a ¥23.4 billion loss, and total segment operating profit fell from ¥45.1 billion to a loss of ¥17.0 billion [15]. The damage was concentrated where the profit lives: Core Local Commerce operating profit fell from ¥52.4 billion to a ¥6.9 billion loss, a margin swing from positive 20.9% to negative 2.6% [16]. Management attributes the collapse to "intensified competition": selling and marketing expenses rose 60.9% to ¥102.9 billion as the company matched rivals on price and incentives [17].

Source: segment operating profit per FY2025 Annual Report MD&A (2024–2025) [18]; FY2024 Annual Report MD&A (2023–2024) [19]; FY2022 Annual Report MD&A (2021–2022) [20].

The trigger was external. In early 2025, JD.com launched a food-delivery service and Alibaba escalated through its Taobao Instant Commerce and Ele.me platforms, setting off a subsidy war across a market Meituan still leads — its food-delivery share is generally put in press coverage at above half. The intensity drew a regulatory response: China's market regulator drafted guidelines against disorderly subsidies, and in August 2025 the three platforms publicly committed to ending the price-based rivalry. Meituan's own filings name this only as "intensified competition," but the arc is visible in the quarterly numbers: by the fourth quarter of 2025, the Core Local Commerce operating loss had already narrowed to ¥10.0 billion from ¥14.1 billion in the third quarter as incentive spending eased [21]. The pressure carried into 2026: first-quarter revenue still grew 5.6% to ¥91.0 billion, but the group booked a ¥6.8 billion loss against a ¥10.1 billion profit a year earlier [22].

A balance sheet that can absorb the war

Meituan enters this fight from strength. It closed 2025 with ¥106.8 billion of cash and cash equivalents plus ¥60.1 billion of short-term treasury investments — roughly ¥166.9 billion of liquidity against no meaningful net debt [23]. That war chest is why a year of subsidy losses is survivable rather than existential; at the end of the first quarter of 2026, cash and treasury investments still totalled about ¥180.3 billion — ¥117.0 billion of cash plus ¥63.3 billion of short-term treasury [24]. The constraint is not solvency but returns: the same balance sheet that funds the defence also raises the bar for what those returns must eventually be.

The stock

Meituan's 2018 global offering put 480.27 million shares to market at a maximum price of HK$72 [25]; the deal ultimately priced near the top of its HK$60–72 range at HK$69 a share, then the largest internet listing in four years. Nearly eight years and a more-than-fivefold increase in revenue later, the shares closed at HK$71.6 on 3 July 2026 — a round-trip to the listing price — for a market capitalisation of roughly HK$442 billion, against a 52-week range of HK$63.65 to HK$136.10 (per market data).

Source: share price and market capitalisation as of 3 July 2026, per market data; consensus mean target from analyst estimates, as reported.

The Street reads 2025 as a trough rather than a break. Of the analysts covering the stock, a clear majority rate it a buy, and the mean price target of about HK$107 sits about 50% above the current quote (consensus estimates). That view rests on an assumption worth stating plainly, because the rest of this report is built to test it.

The question this report answers

Meituan's Core Local Commerce franchise earned a 20.9% operating margin and ¥52.4 billion of profit in 2024, then lost money in 2025 when two of China's largest platforms attacked its food-delivery pool with subsidies. The question this report exists to answer is whether that franchise has the durable pricing power to earn attractive, through-cycle returns — or whether 2025 revealed a profit pool that well-capitalised rivals can contest whenever they choose. Everything that follows — the unit economics of a delivery order, the reality of the moat, what management does with the cash, and what the price now implies — is an attempt to answer it on the evidence.