Citi raises Meituan's target price to 110 yuan, rating upgraded to "Buy/High Risk"

Citi published a research report stating that although competition is fierce, Meituan (03690.HK) recorded significant quarter-on-quarter improvement in unit economics (UE) for its takeaway business in the fourth quarter of last year, and is expected to further improve in the first quarter of this year, mainly due to its strategic focus on high average order value (AOV) and high-quality users.

The firm believes that Meituan's execution in overseas markets has also been validated, with Keeta successfully achieving profitability in Hong Kong, and expects the unit economics in Saudi Arabia to turn positive by the end of 2026. Although it may be slightly early to upgrade the rating now, and there remains uncertainty in the competitive landscape for takeaway and in-store businesses, the significant quarter-on-quarter improvement in losses for the instant delivery business is encouraging. The firm predicts that core local e-commerce (CLC) will return to profitability in the third quarter of this year, with the possibility of narrowing losses appearing as early as the second quarter, which will support the stock price.

Citi has raised its total revenue forecast for Meituan for this year and next, increasing the target price from 94 yuan to 110 yuan, and upgrading the rating from "Neutral/High Risk" to "Buy/High Risk."