Financials

Meituan (3690): Financials

Meituan reports in Renminbi (¥) — its audited statements are prepared in RMB even though the shares trade in Hong Kong dollars — so every figure below is in RMB unless a share price or a peer is explicitly flagged otherwise.

The one-line read: Meituan is a dominant Chinese local-commerce platform that spent FY2024 proving it could mint cash — a record ¥35.8 billion profit and ¥46 billion of free cash flow — and then spent FY2025 setting most of that alight to defend its turf, swinging to a ¥23.4 billion loss as a food-delivery subsidy war with JD.com and Alibaba erupted. The question the numbers pose is not whether the business is good; it plainly is. It is whether the balance sheet and the emerging Q1 2026 recovery justify paying up for a franchise that just demonstrated how violently its profits can be competed away.

Sources: revenue, loss, gross margin and liquidity per FY2025 Annual Report, Chairman's Statement [1]; free cash flow derived from reported cash-flow statement [2].

---

1. How Meituan makes money — and why the shape of profit just inverted

Meituan runs two reporting segments. Core Local Commerce (CLC) — food delivery, on-demand "instant" retail, and in-store/hotel/travel bookings — is the profit engine: in FY2024 it earned a ¥52.4 billion operating profit at a 20.9% margin [3]. New Initiatives — community grocery (Xiaoxiang Supermarket, Meituan Select), and overseas delivery under the Keeta brand — is the investment bucket that has run at a loss for years while management tries to build the next growth leg [4].

For a first-time reader, the mechanics matter: Meituan books revenue in four buckets — delivery services (the fee riders generate), commission (take-rate on merchant transactions), online marketing services (merchant advertising, the highest-margin line), and other services and sales (largely the grocery/retail goods it sells directly). In FY2025 those were ¥96.1bn, ¥105.5bn, ¥51.9bn and ¥111.4bn respectively [5]. The advertising line is the one to watch: it is asset-light, high-margin, and the truest read on merchant health.

Sources: FY2023–FY2024 figures per FY2024 Annual Report, Chairman's Statement [6]; FY2025 figures per FY2025 Annual Report, Chairman's Statement and Segment Information [7] [8].

The chart is the whole story. Core Local Commerce compounded profit for two years — ¥38.7bn (2023) to ¥52.4bn (2024) — and then, in FY2025, JD.com's February 2025 entry into food delivery and Alibaba's push through Ele.me and Taobao Instant Commerce triggered a subsidy war that pushed CLC to a ¥6.9 billion operating loss [9]. New Initiatives losses, which had been narrowing to ¥7.3bn in 2024, re-widened to ¥10.1bn in 2025 — but for a different reason: management deliberately stepped up overseas (Keeta) investment across Saudi Arabia, the UAE, Qatar, Kuwait and Brazil [10]. One loss is defensive and involuntary; the other is offensive and discretionary. An investor should price them differently.

---

2. The year-wise statements

Below is the standard multi-year view every investor scans first. Read it top-to-bottom as a single arc: revenue compounding at roughly 18% a year, gross margin climbing from 24% to a 38% peak and then giving back eight points in the war year, and a bottom line that has now printed a loss in three of the last four years — but for opposite reasons (early-stage investment in 2021–22, competitive defence in 2025).

Sources: revenue, gross profit and multi-year P and L per FY2025 Annual Report, Financial Summary [11]; operating income, EPS and cash flows derived from reported financials (operating profit shown as EBIT = gross profit less operating expenses). Cash-flow lines per FY2025 Annual Report, MD and A Liquidity [12].

Source: FY2025 Annual Report, Financial Summary [13].

The revealing feature is that revenue barely flinched — it still grew 8.1% to ¥364.9 billion in the war year [14] — while the bottom line fell ¥59 billion. That is the signature of a margin shock, not a demand shock: users kept ordering (GTV and transacting users hit record highs [15]); Meituan simply had to buy those orders with subsidies. Gross margin compressed from 38.4% to 30.4% [16], because delivery incentives and rider costs run through cost of revenue.

Source: derived from reported financials, FY2022–FY2025 [17].

---

3. The trough — and the first evidence it is passing

The damage was heavily back-loaded into the second half of FY2025. In the fourth quarter of 2025, the total operating loss reached ¥16.1 billion (a negative 17.5% margin, versus a positive 7.6% a year earlier), and Core Local Commerce alone swung to a ¥10.0 billion quarterly operating loss (−15.5% margin) from a ¥12.9 billion profit (+19.7%) in Q4 2024 [18]. That is the bottom of the crater.

The most important number on the entire page for what happens next is the sequential turn. In the first quarter of 2026, Core Local Commerce's operating loss narrowed dramatically to ¥2.0 billion (from ¥10.0 billion the prior quarter), and management explicitly attributed it to "the moderation of intense industry competition" and "a more disciplined approach to subsidies" [19]. Group revenue still grew 5.6% to ¥91.0 billion, the group loss narrowed to ¥6.8 billion, and adjusted EBITDA improved to negative ¥3.0 billion [20].

Sources: Q4 2024 and Q4 2025 per FY2025 Annual Report, MD and A [21]; Q1 2025 and Q1 2026 per Q1 2026 Results Announcement [22]. Note: Q2–Q3 2025 (also loss-making) omitted; bars are not consecutive quarters.

Read that chart with care — the four bars are not four consecutive quarters (Q2 and Q3 2025 were also in the red), so it sketches the shape of the shock rather than a continuous series. But the shape is the point: a franchise that was earning a ~20% segment margin, dropped to −15.5% at the depth of the war, and had already clawed back two-thirds of the loss within one quarter. The subsidy war looks like an event, not a new equilibrium.

---

4. Earnings quality: FY2024 proved the cash engine; FY2025 proved it can reverse

Meituan is a genuinely cash-generative business when it is not fighting a war — and that is the single most important thing the balance sheet is built on. In FY2024, operating cash flow was ¥57.1 billion against ¥35.8 billion of net profit — a 1.6x cash-to-earnings ratio — and free cash flow was roughly ¥46 billion [23]. That is high-quality earnings: profits that convert to more cash than they report, because the platform collects from consumers immediately and pays merchants and riders on a lag (favourable working capital) and because capital intensity is low (capex has run around 3% of revenue).

In FY2025 the same mechanism ran in reverse: operating cash flow was negative ¥13.8 billion and free cash flow roughly negative ¥27 billion [24]. Crucially, this was an earnings-driven cash burn (the loss before tax, adjusted for non-cash items and a working-capital unwind), not a working-capital fraud red flag — the cash outflow tracks the operating loss almost one-for-one [25].

Sources: net income per Financial Summary [26]; operating cash flow per MD and A Liquidity [27]; free cash flow derived (operating cash flow less capex).

Two quality notes for the careful reader. First, share-based compensation is modest for a company this size — ¥6.0 billion in FY2025, down from ¥7.6 billion in FY2024, or under 2% of revenue [28]. Adjusted (non-IFRS) figures therefore do not flatter the picture much: management's own adjusted net loss was ¥18.6 billion and adjusted EBITDA negative ¥13.8 billion in FY2025, both deep in the red even after adding back SBC and non-cash items [29]. Second, goodwill has been stable at ¥27.8 billion for years and no impairment was taken even in the loss year, though goodwill impairment is a designated key audit matter — a reasonable flag rather than a present problem.

---

5. The balance sheet: the war chest that lets Meituan outlast rivals

This is the crux of the bull case. Meituan can afford to lose an argument on price because it holds an enormous, largely unencumbered liquidity buffer. At 31 December 2025 it held ¥106.8 billion of cash and equivalents plus ¥60.1 billion of short-term treasury investments — roughly ¥166.9 billion of liquidity [30] — against total borrowings and notes of about ¥80 billion, i.e. a net cash position even before counting the treasury book. By Q1 2026 cash had risen further to ¥117.0 billion and treasury to ¥63.3 billion [31].

Sources: cash and treasury per FY2025 Annual Report, MD and A Liquidity [32]; debt and equity per Financial Summary and Note 31 [33] [34].

The debt itself is cheap, long-dated and covenant-free — the three things you want in a fortress balance sheet:

• Bank borrowings of ¥22.3 billion carry effective interest rates of just 2.10%–2.70%, and the company confirmed it "complied with all covenants of its borrowing facilities" [35].
• Senior notes: Meituan terms out its debt in the offshore bond market. In November 2025 — mid-war — it comfortably raised a further US$2.0 billion plus CNY7.08 billion of new senior notes maturing 2030–2035 at 2.55%–5.125% [36]. Being able to issue multi-year paper in size during your worst operating year is itself a strength signal.
• Management reports a gearing ratio of about 53% (borrowings and notes over equity), with around 55% of interest-bearing debt maturing in three years or more, and — explicitly — no financial covenants on any of it [37]. There is no maturity wall and no covenant trip-wire that a prolonged war could spring.

One structural nuance worth teaching: Meituan's 2027 and 2028 zero-coupon convertible bonds carry a conversion price of HK$431.24 — roughly five times today's share price — so they are deeply out of the money and will be settled in cash, not shares. During FY2025 the company redeemed US$1.46 billion of the 2027 series at bondholders' option [38]. Translation: the converts are a liability to be repaid, not a dilution overhang — a point often misread on this name.

---

6. Capital allocation: disciplined, and it flexed correctly under fire

Meituan has never paid a dividend [39] — appropriate for a company still investing heavily in growth and overseas expansion. Its shareholder-return lever is the buyback, and the way it used it across the cycle is a genuine mark of quality:

• In the record FY2024, Meituan repurchased 261,396,700 shares for an aggregate HK$28.16 billion — buying back roughly 4% of the company when it had the cash to do so [40].
• In FY2025, as losses and cash burn set in, it all but halted buybacks (well under ¥1 billion) to preserve the war chest.

That is exactly the counter-cyclical discipline you want: return capital when it is abundant, hoard it when the business is under attack. Combined with modest, declining SBC and low-cost debt terming, the capital-allocation record supports paying a quality multiple rather than a distressed one. Share count has drifted down from ~6.30 billion (2023) to ~6.08 billion (2025), so per-share value is being protected even through the loss year.

---

7. Valuation: priced for a slow, uncertain recovery — not for the franchise it was

Nothing is cheap or dear in the abstract, so anchor Meituan against its own history, its cash and its forward earnings. At a share price of about HK$80.9 (versus a 52-week range of HK$63.65–107.0, i.e. near the low end), the equity is worth roughly HK$492 billion (about ¥433 billion / US$63 billion) [41].

Against that:

• EV/Sales of roughly 1.0x (enterprise value net of the ¥86.6bn net-cash-plus-treasury cushion, over ¥364.9bn revenue) and price/sales of ~1.2x. For a platform that earned a double-digit segment operating margin as recently as FY2024, one-times-sales is a trough-cycle multiple. Historically Meituan changed hands at several times sales in its growth years.
• P/E is not meaningful on FY2025 or FY2026 (both loss-making on consensus). The relevant figure is the recovery year: consensus sees FY2027 EPS of about ¥4.07, putting the stock on roughly 17–18x FY2027 earnings — a reasonable multiple for a dominant platform if the recovery lands. Consensus also models revenue of ¥402.6 billion in FY2026 (+10.3%) and ¥457.3 billion in FY2027 (+13.6%).
• P/B of ~2.9x on ¥151 billion of equity — undemanding for a mid-teens ROE business in a normal year (ROE was 20.7% in FY2024 before turning negative in the war year).

The sell-side is firmly constructive but the range is wide, which fairly captures the binary: a mean price target near HK$107 (roughly one-third above the current price) with a spread from HK$56.7 to HK$139.2, and 28 buy-or-better ratings against 8 holds and 2 strong-sells. The market is paying a compressed multiple because it cannot yet underwrite the pace at which Core Local Commerce margins normalise.

Peer check: Meituan was the war's biggest casualty — but not its only one

The auto-selected peer set spans China's platform giants that are bleeding into Meituan's turf. The table makes two points at once: Meituan is the only one of these platforms that fell into a loss in its latest year, and even the aggressor did not escape unscathed.

Sources: Meituan per FY2025 Annual Report [42]; JD.com per FY2025 20-F [43] [44]; Alibaba per FY2026 Annual Report [45]; PDD per FY2025 20-F [46] [47]; Trip.com per FY2025 20-F [48]; Kuaishou per FY2024 Annual Report [49].

The instructive line is JD.com, which lit the fuse by entering food delivery in February 2025. Its marketing spend exploded 75.1% to ¥84.0 billion (6.4% of revenue, up from 4.1%) [50], and its net income attributable to shareholders more than halved, from ¥41.4 billion to ¥19.6 billion [51]. Alibaba, the other combatant through Ele.me and Taobao Instant Commerce, saw net income fall 19% [52]. Meanwhile the peers outside the delivery ring — PDD (22.7% net margin) and Trip.com (whose reported margin is flattered by investment gains, but with a healthy ~25% operating margin) — stayed comfortably profitable [53] [54]. The read-through: this is a contained delivery-margin war, and it is expensive for everyone fighting it — which is precisely why the "moderation" and "disciplined subsidies" language in Q1 2026 matters so much. Price wars in which the attacker is also bleeding tend to de-escalate.

(Peer multiples are not available as structured data in this run, so the comparison is on scale and profitability rather than valuation multiples — a limitation to note. The peer set is a genuine competitive adjacency, not a business-model match: Alibaba, JD and PDD are diversified e-commerce, Trip.com an OTA, Kuaishou a short-video platform, each overlapping only part of Meituan.)

---

8. What the financials confirm, what they contradict, and the metric that decides the next year

What they confirm: the franchise is intact and cash-generative. Revenue grew even at the depth of the war, users hit record highs, the balance sheet is a net-cash fortress with cheap, covenant-free, long-dated debt, capital allocation is disciplined and counter-cyclical, and dilution is negligible. On the evidence, Meituan can outlast this fight financially with room to spare.

What they contradict: any thesis that FY2024's ~13% group segment margin was a stable, defensible run-rate. FY2025 showed that a well-funded new entrant can vaporise the core segment's profit in a single year. The moat protects share and demand; it did not protect price. Underwriters must treat platform margins here as contestable, and value the business on a normalised — not peak — margin.

The swing factor is unambiguous. Everything — the loss, the cash burn, the multiple — traces back to one line: Core Local Commerce's operating margin. It went from roughly +20% to −15.5% at the trough and back to −3.2% by Q1 2026. The entire investment debate is the speed and altitude of its normalisation: get back to a high-single-digit/low-double-digit margin and the ~1x sales multiple looks like a gift; stall in negative territory as subsidies reignite and the cash chest erodes and the stock is fairly valued.

The first financial metric to watch is Core Local Commerce segment operating margin — reported each quarter. It fell from +19.7% (Q4 2024) to −15.5% (Q4 2025) and had already recovered to −3.2% in Q1 2026 [55] [56]. The quarter this line crosses back above zero is the quarter the loss year becomes history — and it is the single number that will move the stock more than any other.