Meituan reported its 4Q25 results on 26 March: revenue was RMB92.1bn, up 4.1% YoY and in line with Bloomberg consensus, while adjusted net loss came in at RMB15.1bn, at the low end of the RMB15.1bn-16.1bn range guided in the previous profit warning. Earnings of Meituan’s Core Local Commerce (CLC) business are bottoming out, in our view, as: 1) regulatory guidance in the food delivery industry is steering the sector toward healthier development; and 2) players in the in-store segment are increasingly focusing on their core competencies and categories to drive more efficient expansion. We believe the most intense phase of competition in the local services sector may have passed. While a meaningful earnings recovery may still take time to materialize, as competition remains dynamic and macro headwinds may take time to improve, we remain positive on Meituan’s potential to optimize user subsidies and its continued efforts to narrow CLC losses. Meituan narrowed its CLC operating loss by 29% QoQ in 4Q25, and we expect a further 58% QoQ reduction in 1Q26 to RMB4.2bn. The Company has demonstrated strong consumer mindshare in high-value food delivery (FD) orders, and improved operating efficiency should help sustain its unit economics (UE) advantage over peers in the long term, in our view. Our DCF-based TP remains largely unchanged at HK$141.1 (was HK$141.0). Maintain BUY.
CLC: FD order and GMV share showing recovery. In 4Q25, the Core Local Commerce (CLC) segment recorded revenue of RMB64.8bn, down 1.1% YoY and in line with consensus, while operating loss was RMB10.0bn, 5% better than consensus. For 1Q26, management noted that it is driving high-quality growth in the food delivery business and optimizing resource allocation by scaling back investment in low-AOV orders. Despite ongoing optimization of user subsidies, Meituan has seen a recovery in both order share and GMV share in 1Q26, driven by a stronger-than-peers recovery in AOV, supported by the favorable holiday season and strong consumer mindshare. We forecast CLC revenue of RMB64.2bn (flat YoY), driven by +9%/+25% YoY growth in the in-store and Instashopping businesses, partially offset by a 9% YoY decline in food delivery. We expect CLC to further narrow its operating loss to RMB4.2bn, down 58% QoQ.
New initiatives: acceleration in revenue growth with improving operating efficiency. Revenue from new initiatives reached RMB27.3bn in 4Q25, up 18.9% YoY, accelerating from 15.9% in 3Q25, supported by business expansion in Xiaoxiang Supermarket and Keeta. Segment operating loss was RMB4.7bn, widening from RMB1.3bn in 3Q25 and exceeding consensus of RMB3.5bn loss, driven by upfront investment in Keeta for business expansion. For 1Q26, we expect further acceleration in segment revenue growth to 20% YoY, with operating loss narrowing sequentially to RMB2.6bn, aided by the roll-off of one-off upfront investments in 4Q25 and improving unit economics in Keeta business in Saudi Arabia, which have exceeded management expectations. Management expects total losses in the new initiatives segment in 2026 to be no more than that in 2025.