JP Morgan expects Meituan to report an adjusted net loss of RMB 17 billion in the third quarter, reiterating a "Neutral" rating

JP Morgan published a research report stating that considering the fierce competition in China's food delivery market, it predicts that Meituan (03690.HK) will continue to face greater pressure than expected from the third to the fourth quarter. It believes that in order to consolidate market share, Meituan may not significantly reduce subsidy expenses, so it is still uncertain when profitability will improve. Currently, it expects an adjusted net loss of RMB 17 billion in the third quarter, reiterating a "neutral" rating and lowering the target price to HKD 100.

Morgan Stanley estimates that Meituan's third-quarter loss in the on-demand delivery business will reach RMB 20 billion, with losses related to instant retail amounting to RMB 1 billion. It predicts that the loss in on-demand delivery could narrow to RMB 16 billion in the fourth quarter. Additionally, it estimates that the core local business will record a loss of RMB 15 billion in the third quarter, compared to an operating profit of RMB 4 billion in the second quarter.

The bank noted that Meituan's subsidiary Keeta will enter the Brazilian market at the end of October, and this investment may cause Meituan's new business quarterly losses to expand to over RMB 3 billion in the coming quarters. In response to intensified business competition, Morgan Stanley has lowered its revenue forecasts for Meituan for this year and next year by 5% and 6% to RMB 374.539 billion and RMB 422.106 billion, respectively; the adjusted net loss forecast has been revised from RMB 6.831 billion and RMB 5.112 billion to RMB 16.144 billion and RMB 6.664 billion, with adjustments of 136% and 30%