Freedom Broker sees Meituan shares with upside potential of 64.87%

Freedom Broker analysts recommend “Buy” shares of Chinese local services platform Meituan (3690) and raised the target price from 120 Hong Kong dollars to HK$130, or roughly from $15.31 to $16.58. From the current price of HK$78.850 ($10.06), the upside potential implies 64.87%. The company’s quarterly report beat market expectations, and lower subsidy spending helped it return to profit.

What Meituan is

Meituan operates one of China’s largest digital local services platforms. Through its apps, users order food and goods delivery, book hotels, purchase travel services, and use instant commerce services. 

The company also develops the grocery supermarkets Xiaoxiang Supermarket and Keeta. Meituan’s market capitalization is 433.71 billion Hong Kong dollars (about $55.322 billion). Free float stands at 98.2% of shares.

Subsidy cuts bring the business back to profitability

According to Freedom Broker analysts, the main positive signal was easing price competition in the Chinese market. Meituan was able to reduce subsidies for merchants, improve its order mix, and restore profitability in its core business.

Experts believe that intervention by Chinese authorities to curb excessive competition could support the company’s margins in the medium term. At the same time, the durability of the improvements will depend on further actions by JD.com (JD) and Alibaba Group (BABA), as well as consumer demand trends in China.

Quarterly revenue exceeded $15.5 billion

In Q2 2026, Meituan’s revenue increased by 14.4% year over year, from 91.4 billion yuan ($13.61 billion) to 104.6 billion yuan ($15.57 billion). Operating profit reached 2.6 billion yuan ($400 million) versus 226 million yuan ($34 million) a year earlier. Operating margin rose to 2.6% from 0.2% a year earlier and negative 7.1% in the previous quarter.

Net profit jumped 490%, from 365.29 million yuan ($54 million) to more than 2 billion yuan ($321 million). Adjusted EBITDA rose 47.3% to 4.1 billion yuan ($610) million. Adjusted net profit increased 69% to 2.5 billion yuan ($375 million).

Core business strengthened margin profile

Revenue in the core local commerce segment grew 10.1% to 71.5 billion yuan ($10.64 billion). Its operating profit increased 52.3% to 5.67 billion yuan ($844 million), and operating margin reached 7.9%.

Revenue from delivery services rose 17.5% to 26.78 billion yuan ($3.98 billion). Revenue from merchant services added 6.6% and reached 39.6 billion yuan ($5.89 billion).

Growth was supported by higher-priced order categories, increased activity among key customers, and reduced subsidy intensity. Meituan also expanded its instant delivery assortment and developed new store formats.

New initiatives added 25%

Revenue from Meituan’s new initiatives rose 25% to 33.1 billion yuan ($4.93 billion). Drivers included the expansion of Xiaoxiang Supermarket (a rapid grocery delivery service), a higher share of private-label products, and the development of the international food delivery brand Keeta outside China. The segment’s operating loss narrowed 7.6% from 1.88 billion yuan ($280 million) to 1.73 billion yuan ($259 million). 

AI spending is rising, but overall efficiency is improving

Cost of sales increased to 69.5 billion yuan ($10.35 billion). Its share of revenue decreased to 66.5% from 67.1% a year earlier and 71.5% in the previous quarter. Selling and marketing expenses rose 11.5% to 24.7 billion yuan, or about $3.675 billion. However, their share of revenue fell to 23.6% from 24.2% a year earlier.

Research and development expenses increased 22.5% to 7.7 billion yuan, or about $1.15 billion, mainly due to investments in artificial intelligence. Meituan intends to more deeply integrate AI into user services and merchant tools.

Experts’ outlook

Analysts expect the company to maintain its leading position in China’s delivery market, continue developing grocery retail, and expand its international presence. An additional tailwind could be China’s economic recovery and a rebound in domestic consumer demand.

Key risks remain a renewed intensification of competition from JD.com and Alibaba, rising customer retention costs, weak demand in China, and a slower path to breakeven for overseas projects.

First-quarter figures

In Q1 2026, Meituan’s revenue grew by 5.6% to 91 billion yuan, while the net loss amounted to 6.8 billion yuan versus the 8.8 billion yuan expected by the market. 

In January, China’s antitrust regulator announced a review of competition among food delivery platforms, including Meituan, Alibaba, and JD.com. The State Council’s market regulation committee planned on-site inspections, interviews, and surveys as part of the investigation. Against the backdrop of the launch of the antitrust review of China’s food delivery market, Meituan shares in Hong Kong rose by 6.6%.

This is not an individual investment recommendation.