One of China’s Largest O2O Platforms. Meituan (3690.HK) is a leading O2O lifestyle service platform in China, positioning itself as a “Food + Super Platform” to serve comprehensive consumer needs across dining, accommodation, transportation, travel, shopping, and entertainment. Meituan leverages high-frequency services—such as food delivery, takeout, and travel—to build user habits and drive adoption of lower-frequency services. This strategy creates a flywheel effect: by fostering daily engagement and broadening its service matrix, Meituan achieves scalable, low-cost user acquisition.

Overseas Expansion in the Middle East. In October 2024, Meituan’s overseas brand Keeta entered the Saudi Arabian market, starting in Riyadh and quickly expanding to over six cities by January 2025. Initially viewed as a risky venture due to entrenched incumbents such as Talabat, Deliveroo, and Hunger Station, Keeta rapidly disrupted the market through aggressive subsidies—including “5% off first orders” and “permanent free shipping.” Within three months, it ranked among the top three food delivery apps in Saudi Arabia with over 10% market share and topped the app store download charts.

Drone Delivery Enhances Efficiency. The introduction of drone delivery significantly improves fulfillment capacity and cost efficiency. Drones supplement human riders during peak hours while materially reducing delivery costs. With 7.45 million delivery riders as of 2024, Meituan estimates that replacing one-third with drones could cut overall delivery costs by 25–30%, unlocking billions in long-term savings. By end-2024, Meituan operated 53 drone delivery routes and had completed over 450,000 cumulative orders, with more than 200,000 in 2024 alone—a near 100% YoY increase. The fastest recorded delivery, a cup of hot pear soup to the Badaling Great Wall, took just 6 minutes and 37 seconds.

1Q25 Results In Line with Market Expectations. Core Local Commerce: 1) Food Delivery: Average daily orders rose 9–10% YoY, while AOV declined slightly due to a higher mix of value-focused offerings (e.g., Pin Hao Fan, Shen Qiang Shou). Unit economics improved YoY; 2) Instashopping: Daily orders approached 11 million, up ~30% YoY. Growth in non-food categories (3C, appliances, beauty) exceeded 60% YoY; 3) IHT (In-store, Hotel, and Travel): GTV grew over 30% YoY, with stable sequential operating margin. New Initiatives: 1) Meituan Select narrowed losses QoQ as long-term ecosystem investments tapered; 2) Keeta saw strong order and GTV growth, becoming Hong Kong’s largest food delivery platform and achieving full coverage in nine Saudi cities. Expansion into Brazil is planned, with US$1 billion in investment over five years.

Short-Term Margin Pressure from Food Delivery Subsidies in 2Q25. Management warned of a significant YoY decline in 2Q25 operating profit for Core Local Commerce due to intensified competition and rising subsidies. While the duration of this competitive pressure remains uncertain, the near-term impact on revenue and margin could be negative. We expect food delivery and Instashopping growth to moderate to 4% and 30%, respectively, with a decline in unit economics.

Proactive AI Strategy Unveiled. In 4Q24, Meituan introduced its AI roadmap, including its proprietary large model LongCat and a suite of productivity tools—ranging from AI programming to document, image, and video assistants—to enhance operational efficiency. An all-in-one AI assistant for Meituan’s ecosystem is expected to launch this year, offering users a “digital life secretary.” Meituan continues to prioritize GPU chip procurement and has committed billions of RMB in Capex to secure computing resources critical for large model deployment.

Sustained Growth and Attractive Valuation. Despite its scale, Meituan continues to deliver over 18% YoY revenue growth and over 80% YoY IFRS net income growth, outpacing most Chinese internet peers. For valuation, EV/EBITDA is the preferred metric in the O2O sector. Meituan trades at HK$144.4 per share with a market cap of HK$882.2 billion. Consensus EBITDA estimates for CY2025 and CY2026 are HK$56.6 billion and HK$75.5 billion, respectively, implying 12.7x and 9.5x EV/EBITDA—below the peer average of 12.9x and 9.8x.