Moody's confirms MEITUAN's "Baa1" credit rating, outlook downgraded to "negative"

The rating agency Moody's has confirmed Meituan's "Baa1" issuer rating and senior unsecured rating. At the same time, Moody's has adjusted the rating outlook from "stable" to "negative."

Ying Wang, Vice President and Senior Analyst at Moody's, stated that the negative outlook reflects the rising uncertainty regarding the recovery of Meituan's food delivery business due to intense competition. This may lead to ongoing profit pressure and increased investment demands, keeping the company's leverage at a higher level for a longer period than previously expected.

Wang added that the rating confirmation takes into account Meituan's consistently prudent financial management, which is reflected in its solid net cash position and flexible investment policy, effectively controlling losses from new business plans. Moody's also expects the company's core in-store, hotel, and travel service businesses to continue performing steadily, providing a buffer during the gradual recovery of the food delivery business.

Moody's anticipates that, benefiting from its diversified business operations and ongoing service innovations (partly due to the adoption of new technologies), Meituan's total revenue will continue to grow at an annual rate of approximately 10% over the next 12 to 18 months.

However, intensified market competition has negatively impacted its profit margins. For the 12 months ending September 2025, Meituan's adjusted EBITDA margin is expected to decline from 13% in 2024 to 2%, primarily due to increased consumer subsidies and promotional expenses. As a result, the company's food delivery business has recorded segment losses since the second quarter of 2025, offsetting the stable profits from in-store, hotel, and travel service businesses.

Recently, the acquisition of China's leading instant retail e-commerce platform Dingdong Maicai for $717 million highlights Meituan's determination to defend its market position in the instant retail value chain and indicates that the capital investment needed to fend off competition is on the rise.

Moody's expects that as the market focus shifts towards quality and efficiency, and regulatory measures to curb irrational competition begin to take effect, the current subsidy-driven competition in the food delivery market will gradually ease. However, the pace of this expected recovery remains uncertain.

Moody's forecasts that Meituan's consolidated adjusted EBITDA margin will remain low but gradually recover to 5% to 6% over the next 12 to 18 months. This forecast assumes stable profitability in the in-store, hotel, and travel businesses, and that the pace of investment in new business plans remains disciplined.

As of September 2025, the company's total adjusted debt is expected to decrease from RMB 62 billion at the beginning of 2025 to RMB 51 billion. Moody's anticipates that, driven by refinancing completed in the fourth quarter of 2025 and the need to maintain a high cash buffer amid intensified market competition, its debt balance will rebound to over RMB 60 billion within the next 12 to 18 months.

As the company gradually recovers from the EBITDA losses projected by Moody's for 2025, Meituan's leverage—measured by Moody's adjusted debt/EBITDA ratio—is expected to improve to 3.4 times by the end of 2026 and further decrease to 2.4 times by 2027 Meituan's liquidity remains excellent. As of September 2025, it holds RMB 141 billion in cash and short-term investments, along with expected operating cash flow, which will be sufficient to fully cover its short-term debt of RMB 19 billion maturing in the next 12 months, planned capital expenditures, and anticipated share buybacks