The worst is over, but it's not time for Meituan to be happy yet?

Meituan returned to profitability in the second quarter, but structural changes in the competitive landscape make it difficult for its profit margin to return to its former high.

According to the trading platform, Barclays maintained its "underweight" rating and $10 target price for Meituan in its latest report, believing the stock price offers ample defensiveness but limited upside potential. In the second quarter, Meituan's core local commerce segment achieved a positive operating profit margin of 7.9% after three consecutive quarters of losses, but this is still far below the pre-subsidy war level of approximately 20%. Meituan's total revenue for the quarter increased by 13.9% year-on-year to RMB 104.6 billion, slightly exceeding expectations. However, sales and marketing expenses significantly exceeded expectations by 38.6%, resulting in an adjusted net profit of RMB 2.5 billion, 41.1% lower than Barclays' forecast.

Barclays analysts point out that with government intervention to curb disorderly competition in the food delivery industry and major platforms cutting subsidies, Meituan's stock price possesses certain defensive characteristics in the current highly uncertain market environment. However, Alibaba's return to the instant retail sector has permanently altered the industry's competitive landscape, and it has no intention of achieving profitability in this business in the short term, which will continue to suppress Meituan's profit ceiling. Meanwhile, as investors actively seek beneficiaries of AI, Meituan has yet to demonstrate an AI narrative sufficient to excite the market.

Core business: Profitability recovers, but profit margins are under pressure.

Meituan's core local commerce (CLC) revenue grew by approximately 10% year-on-year in the second quarter, with the segment's operating profit margin turning positive to 7.9%, ending three consecutive quarters of losses. Food delivery revenue resumed growth, recording a high single-digit increase year-on-year, benefiting from increased user purchase frequency, improved retention rates, and higher average order value (AOV). Unit economics (UE) also turned positive and led the industry, benefiting from seasonal factors and the phasing out of subsidies.

However, the outlook is not optimistic. Management expects food delivery UE to remain positive and improve significantly year-on-year in the third quarter, but may slow down sequentially . This is due to increased marketing expenses and rider incentive spending during the peak season, coupled with the cost structure being pushed up by the nationwide implementation of the work injury insurance system starting July 1, and the subsidy level still being high compared to 2024. It is expected to take several quarters to normalize.

The In-Store, Hotel & Travel (IHT) business saw its profit margin improve to 30% quarter-over-quarter in the second quarter, but management expects it to decline in the third and fourth quarters due to increased investment. Douyin continues to compete in the in-store fast food sector, but Meituan maintains its lead in in-store dining GTV.

New Business: Losses Narrowed, Overseas Expansion Accelerated

The new business segment saw revenue growth accelerate by 25% year-on-year in the second quarter, while losses narrowed to RMB 1.7 billion, with a loss rate of -5.3%, an improvement of 2.6 percentage points compared to the previous quarter. Management expects that the full-year loss from the new business in 2026 will not exceed the level of 2025.

Regarding overseas expansion, Keeta's Hong Kong operations achieved profitability in October 2025, and its Saudi Arabian operations turned profitable in July of this year, less than a year after launch. In Brazil, the focus is currently on São Paulo—a city that accounts for approximately 25% of Brazil's food delivery market—with broader geographical expansion postponed.

In the domestic retail sector, Elephant Supermarket has expanded to 68 cities and opened 5 offline stores in Beijing, Ningbo, Hangzhou, and Shenzhen, adhering to an omnichannel model. Happy Monkey, a community fresh food retailer, had opened 40 stores by the end of the second quarter, focusing on small stores, high private label penetration, and local delivery.

Valuation: Defensive enough, but lacking in resilience.

Barclays significantly lowered its 2026 adjusted EBITDA forecast for Meituan by 54.5% to RMB 7.8 billion, primarily reflecting pressure on core local commerce profit margins; at the same time, it raised its revenue forecast by 2.5%, mainly driven by new businesses. Based on a valuation methodology of 10x 2027 expected EV/EBITDA plus net cash, the target price remains unchanged at $10.

As of August 28, Meituan (MPNGF) was trading at $10.40, representing a 3.8% downside from the target price. Barclays' upside target price is $14 (based on 15x FY27 EV/EBITDA) and its downside target price is $6 (based on 5x FY27 EV/EBITDA).

Barclays believes that Meituan's management has outstanding execution capabilities, but its core food delivery business previously charged restaurants excessively high commission rates and had a low cost structure, making it unsustainable in the long run. Now, with Alibaba's strong return, Meituan's era of nearly 80% market share is over, and its profitability is unlikely to return to the peak levels of several years ago. In the current market sentiment dominated by AI investment themes, Meituan has also failed to position itself as a core beneficiary of AI among its peers, further limiting the potential for stock price revaluation.

~~~~~~~~~~~~~~~~~~~~~~~

The above content is from Zhuifeng Trading Platform .

For more detailed analysis, including real-time updates and firsthand research, please join the 【 Trader's Trading Platform Annual Membership 】.

Risk warning and disclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.