CICC has released a research report maintaining its revenue and net profit forecasts for MEITUAN-W (03690) for the years 2025, 2026, and 2027. The firm reaffirms its Outperform industry rating and a target price of HK$125, which corresponds to a 2027E adjusted P/E of 23x and implies a 33% upside potential. The current share price reflects a 2027E adjusted P/E of 17x.
The report highlights recent company developments, noting that MEITUAN has announced its intention to acquire all shares of Dingdong Maicai. The initial consideration for the transaction is $717 million. The transferor may withdraw up to $280 million, but must ensure the target group maintains net cash of no less than $150 million. Considering the cash withdrawal, the actual valuation of the acquisition target is estimated to be around $1 billion.
During the transaction period, Dingdong Maicai will continue to operate under its pre-transaction model, with any operational profits or losses accruing to MEITUAN. If the deal is not completed within 12 months, the agreement may be terminated, potentially involving a termination fee of $150 million or $75 million. Additionally, Dingdong Maicai's overseas business will be spun off prior to the completion of the acquisition and is not part of this transaction.
CICC identifies Dingdong Maicai's core value as stemming from: 1) Strong customer loyalty and recognition among high-value household clients in the Jiangsu-Zhejiang-Shanghai region; 2) A front-end warehouse and instant retail fulfillment network covering core areas of the Yangtze River Delta; 3) A highly efficient, quality-focused fresh produce supply chain featuring over 85% direct sourcing, 12 self-operated factories, and 2 self-operated farms; and 4) A proven capability to continuously develop high-quality products based on consumer demand.
As an acquirer with extensive experience in instant retail and pragmatic values, MEITUAN is well-positioned to leverage Dingdong's strengths. Furthermore, given the intense market competition, the acquisition is expected to enhance Dingdong's ability to withstand risks post-acquisition. Detailed financial data and recent developments for Dingdong Maicai can be found in the latest report from the firm.
The acquisition is viewed as a multi-faceted enhancement to MEITUAN's "Xiaoxiang Supermarket" capabilities, serving a defensive role in the competitive instant retail landscape. From a supply chain perspective, the acquisition is expected to provide Xiaoxiang Supermarket access to Dingdong's direct sourcing resources and self-operated factory capabilities. Regarding product categories, the deal is likely to boost Xiaoxiang's product strength and variety in the fresh produce segment. Geographically, as Xiaoxiang Supermarket accelerates the expansion of its front-end warehouse network, integrating Dingdong's existing warehouse assets could support its scaling efforts, particularly in densifying its network in Eastern China. From a competitive standpoint, against a backdrop of increasingly fierce competition in instant retail, MEITUAN may seek to bolster its defensive capabilities through this acquisition. In the long term, consolidation in the front-end warehouse sector could potentially improve overall industry operational efficiency and expand the scope for future profit margins.
Key risks highlighted include potential antitrust regulatory scrutiny, the possibility of the transaction not proceeding as expected, and broader macroeconomic uncertainties.