Meituan's Q4 revenue grew by 4%, in line with expectations; the operating loss of its core local commerce segment narrowed by USD 41 billion quarter-over-quarter, with a 5.4 percentage point improvement in profit margin, becoming the biggest highlight of this quarter; however, overseas investments in new businesses led to a 264% quarter-over-quarter surge in losses. Morgan Stanley maintained an overweight rating and set a target price of HKD 120, with the slope of market share and profit margin recovery remaining the key variable determining valuation trends.
Meituan's fourth-quarter performance was largely in line with the previous profit warning, showing no unexpected surprises but also no additional downward pressure. Morgan Stanley maintained its overweight rating on Meituan and target price of HKD 120. The core investment thesis remains unchanged, with market share trends and margin recovery paths still being the key variables determining the stock's direction.
Morgan Stanley released a performance commentary on Meituan, stating that Meituan's total revenue in the fourth quarter increased by 4% year-over-year to RMB 92.1 billion, which is largely in line with market expectations and Morgan Stanley’s forecasts. The adjusted EBITDA loss was approximately RMB 14 billion, narrower than Morgan Stanley’s expected loss of RMB 14.9 billion, falling within an acceptable range overall.
The operating loss in the core local commerce segment was approximately RMB 10 billion, slightly better than Morgan Stanley’s expected loss of about RMB 11.1 billion, aligning closely with the previously issued profit warning guidance. Revenue from new business segments grew by 19% year-over-year, slightly exceeding expectations, but operating losses widened to RMB 4.7 billion, mainly due to investments in overseas operations.
Morgan Stanley judged that this earnings report has “no change” to the company’s investment thesis. The financial results are “largely in line” with market consensus expectations, and the direction of earnings forecasts for the next 12 months is “broadly unchanged.”
Meituan's stock price fluctuated and trended lower at the start of today's trading session, currently down by more than 2%.
Earnings Overview: Revenue growth slowed, while losses narrowed quarter-over-quarter.
Meituan’s total revenue for the fourth quarter of the 2025 fiscal year was RMB 92.1 billion, increasing by 4% year-over-year but declining by 4% quarter-over-quarter. It deviated by less than 0.2% from Morgan Stanley’s forecast of RMB 92.2 billion and the market consensus estimate of RMB 92.3 billion.
Gross profit amounted to RMB 24.1 billion, down 28% year-over-year, with significant pressure on gross margins. The adjusted net loss was RMB 15.1 billion, with an adjusted net margin of -16.4%, narrowing slightly from -16.8% in the previous quarter but declining by 27.5 percentage points compared to the positive margin of 11.1% in the same period last year.
The operating loss was RMB 16.1 billion, narrowing by 19% quarter-over-quarter. It was roughly in line with the market consensus estimate of an operating loss of RMB 16 billion and significantly better than Morgan Stanley’s forecast of an operating loss of RMB 19.3 billion, with a variance of approximately 16.7%. Overall, the quarter-over-quarter narrowing of losses was the most notable marginal change.
Core Local Commerce: Losses narrowed, but margins remain under significant pressure.
Revenue from the core local commerce segment in the fourth quarter was RMB 64.8 billion, down 1% year-over-year, with a slight deviation of about 1% from Morgan Stanley’s forecast and the market consensus estimate of approximately RMB 65.4 billion.
The segment reported an operating loss of approximately RMB 10 billion, turning from a profit to a loss year-over-year. The operating profit margin was -15.5%, reflecting a decline of approximately 35 percentage points compared to the same period last year.
However, in a cross-sectional comparison, the loss was better than Morgan Stanley’s forecast of -RMB 11.1 billion and the market consensus expectation of -RMB 10.9 billion. It also aligned closely with the guidance provided in the company’s earlier profit warning, showing no additional unexpected deterioration.
On a quarter-over-quarter basis, the core local commerce operating loss narrowed from RMB 14.1 billion in the previous quarter to RMB 10 billion, while the operating profit margin improved from -20.9% to -15.5%, marking a positive shift of approximately 5.4 percentage points, which stands as the most significant positive signal this quarter.
New Business Segment: Revenue Exceeds Expectations, but Overseas Investments Widen Losses
Revenue for the new business segment in the fourth quarter reached RMB 27.3 billion, representing a 19% year-over-year increase. This figure slightly exceeded Morgan Stanley’s forecast of RMB 26.9 billion and the market consensus of RMB 26.9 billion by approximately 1%, indicating that the revenue momentum for this segment remains intact.
However, the operating loss for the new business segment expanded significantly from RMB 1.3 billion in the previous quarter to RMB 4.7 billion, reflecting a quarter-over-quarter deterioration of 264%. The operating loss margin surged from -4.6% to -17.1%.
Morgan Stanley noted that the widening losses were primarily driven by investments in overseas operations. This figure was slightly worse than Morgan Stanley’s forecast of -RMB 4.4 billion and deviated more noticeably from the market consensus of -RMB 3.9 billion.
The low visibility and asset-heavy nature of the new business segment remain one of the primary downside risks highlighted by Morgan Stanley.
Rating and Core Dynamics: Overweight Rating Maintained, Key Variables Lie in Market Share and Profit Margins
Morgan Stanley has maintained its overweight rating on Meituan, with a target price of HKD 120, implying an upside potential of approximately 38% from the current share price of HKD 86.70. The valuation is based on a DCF model, with core assumptions including a 12% weighted average cost of capital and a 3% perpetual growth rate.
Morgan Stanley analyst Gary Yu believes that the company’s investment view remains unchanged following this earnings report.
Upside risks include a recovery in food delivery market share accompanied by margin improvement, further monetization of merchant ARPU, and new business investments beginning to yield returns. Downside risks encompass intensified competition in food delivery and instant retail, continued losses in new businesses, a weakening macro environment, and anti-monopoly regulations.
In terms of current market focus, the slope of margin recovery in core local commerce and the trend in market share amidst fierce competition remain the two key variables driving Meituan's valuation reassessment. In the short term, this competitive landscape is unlikely to undergo a fundamental shift.
Editor/joryn