For 3Q25E, we estimate Meituan achieved revenue of RMB97.8bn, inline withBloomberg consensus, translating into 4.6% YoY growth. During the period, weexpect the company inked adjusted net loss of RMB16.6bn, higher thanconsensus of RMB12.6bn, owing to fierce industry competition in the fooddelivery business. Although we believe the impact from incremental investmenton operating profit from food delivery business should be at its peak in 3Q25,the pace of improvement in the competitive environment remains worthobserving, in our view. We remain positive that industry competition shouldreturn to rationality in due course, and Meituan could sustain its industry-leadingposition in quality food delivery orders, such as main meals with relatively higheraverage order value (AOV). However, we are cautious in the near term asvisibility on earnings growth recovery is not high. To account for fiercer than ourpreviously expected industry competition, we lower 2025E adj. NP forecast toloss of RMB12.4bn (from profit of RMB1.1bn), and cut DCF-based TP toHK$154.4 (previous: HK$164.0). Maintain BUY.
　　Earnings pressure of CLC business to persist in the near term. We areanticipating operating loss of RMB20.6bn for the food delivery business in3Q25E, compared to operating profit of RMB9bn (based on our estimates)in 3Q24. The fiercer than our previously expected competition in the fooddelivery industry propelled us to lower overall operating profit forecast ofcore local commerce (CLC) business to -RMB15.5bn (3Q24: RMB14.6bn).
　　Although we believe that the impact from incremental investment onoperating profit should have peaked out in 3Q25, given that high seasonhas passed and Meituan’s industry peers have guided to improve uniteconomics in 4Q25, and this likely pointed to a more benign industrycompetitive environment, the pace of improvement in the competitiveenvironment remains worth observing, in our view. For 4Q25E, we arecurrently anticipating group level adjusted net loss of RMB8.3bn, narrowingfrom that in 3Q25E, but higher than consensus of loss of RMB5.8bn.
　　New initiatives: eying on pace of international expansion. We maintainour forecast for new initiatives largely unchanged in 3Q25E, which isrevenue growth of 17.5% YoY and operating loss of RMB2.35bn. Thestrategic transformation for Meituan Select since June 2025 should helpdrive significant loss reduction for Meituan Select in 2H25, while the pace ofinternational expansion for Keeta and Xiaoxiang Supermarket remains keyto watch, in our view.
　　Revision of forecast and valuation
　　Key changes in our estimates include: 1) we lifted 2025-2027E revenue forecasts by 0-4% to factor inincrease in revenue forecast of new businesses driven by likely better than expected revenue growthfrom international expansion; 2) we cut 2025E/2026E operating profit forecasts to loss ofRMB17.2bn/1.9bn (from RMB5.4bn loss/profit of RMB41.0bn) to factor in fiercer than our previouslyexpected industry competition in food delivery business, and likely slower than our previously expectedpace of improvement in the competitive landscape.