Platform and Price War

Platform and Price War

Meituan runs China's dominant local-services and on-demand delivery platform — more than 150 million orders a day, revenue of ¥364.9 billion in 2025. It earned a record ¥35.8 billion profit in 2024, then swung to a ¥23.4 billion loss in 2025 when Alibaba and JD opened a subsidy war that drove even its core business into the red. The platform is dominant and funded by net cash; 2025's loss is either a temporary dip or a permanent reset.

What Meituan is

Meituan is the largest local-services platform in China: the app most people open to have a meal delivered, book a restaurant table, reserve a hotel, or buy groceries and everyday goods for same-hour delivery. Its stated mission — "we help people eat better, live better" — sits behind a business that in July 2025 was fulfilling over 150 million on-demand delivery orders a day, with more than 600 million monthly active users and over 500 million on the core app alone [1]. It is, in effect, the logistics and demand-aggregation layer for a large share of China's restaurants and neighbourhood retailers.

Sources: FY2025 Annual Report, Chairman's Statement and Financial Highlights [2]; daily-order figure from Q2 FY2025 earnings call [2].

The business is Cayman-incorporated, Beijing-headquartered, and has been listed in Hong Kong since September 2018 under a weighted-voting-rights structure. It was founded in 2010 by Wang Xing, who still runs it as Chairman and CEO.

How it makes money

Meituan reports in two segments, and the split is the key to reading the company [2].

Core Local Commerce is the profit engine: food delivery, in-store dining, hotel and travel booking, and Meituan Instashopping (quick commerce — groceries, medicine, electronics and other goods delivered on demand). It earns money four ways — delivery fees paid by users, commissions charged to merchants on each transaction, online marketing and advertising sold to merchants, and product sales from self-operated retail. In 2024 this segment produced ¥250.2 billion of revenue at a 20.9% operating margin [3].

New Initiatives is the investment bucket: Xiaoxiang Supermarket (self-operated grocery with nearly 1,000 distribution centres), community retail, and the overseas delivery brand Keeta (Hong Kong, Saudi Arabia, Qatar, and an evaluation of Brazil) [3]. It has always run at a loss, by design — the question each year is only how large.

Source: FY2024 Annual Report — Core Local Commerce revenue ¥250.2 billion; New Initiatives is total revenue of ¥337.6 billion less Core [3].

The shape that matters: the Core segment is large and, in normal conditions, structurally profitable; New Initiatives is a smaller, deliberately loss-making bet on future categories. For years the story was Core profits rising while New Initiatives losses narrowed. In 2025 both moved the wrong way at once.

Eight years of growth, then a swing

Revenue has compounded almost without interruption — from ¥65.2 billion in 2018 to ¥364.9 billion in 2025, roughly a five-and-a-half-fold increase [4] [5].

Source: FY2018–FY2022 from the FY2022 Annual Report five-year summary [6]; FY2023–FY2025 from the FY2024 and FY2025 Annual Reports [7] [8].

Profit has been far more volatile than revenue. Meituan lost ¥23.5 billion in 2021 (a year that included a regulatory antitrust fine and heavy New Initiatives spending) and ¥6.7 billion in 2022, turned profitable at ¥13.9 billion in 2023, then reached a record ¥35.8 billion in 2024 — a 158% jump as Core margins expanded and New Initiatives losses shrank [9]. In 2025 it swung back to a ¥23.4 billion loss [10].

Source: FY2022, FY2024 and FY2025 Annual Reports [11] [12] [13].

The 2025 subsidy war

The 2025 loss was not an operating stumble in the usual sense — the platform grew. Gross transaction value and order volume both rose double-digits, and annual transacting users, transaction frequency and ARPU all reached record highs [2]. What changed was competition. In early 2025 both JD and Alibaba entered on-demand food delivery aggressively, funding user and courier subsidies to buy share in a market Meituan had long led. Meituan matched the spending to defend its position, and the cost landed squarely on margins.

Total segment operating profit went from a ¥45.1 billion profit in 2024 to a ¥17.0 billion loss in 2025. The most important line: Core Local Commerce — the segment that earned ¥52.4 billion in 2024 at a 20.9% margin — turned to a ¥6.9 billion operating loss. New Initiatives losses widened to ¥10.1 billion, in part from stepped-up overseas investment in Keeta [2].

Source: FY2024 and FY2025 Annual Reports, Chairman's Statement / Financial Highlights [14] [15].

There is early evidence the worst has passed. In August 2025 the three platforms signalled an end to the price war under regulatory pressure, and in the first quarter of 2026 Meituan's revenue was still growing — up 5.6% to ¥91.0 billion — while the total segment operating loss narrowed to ¥4.1 billion (Core Local Commerce ¥2.0 billion, New Initiatives ¥2.1 billion), a far smaller drag than 2025's quarterly run-rate [16]. Whether normalisation restores the old margin structure or settles at a permanently lower level is unresolved; the case is most sensitive to where the Core margin settles.

The balance sheet and who owns it

Two facts bound the downside. First, Meituan absorbed a war of this scale without financial distress: it ended 2025 with ¥106.8 billion of cash and ¥60.1 billion of short-term treasury investments — about ¥166.9 billion of liquidity against roughly ¥80.3 billion of total debt, or some ¥86.6 billion of net cash [17]. For an investor who wants the chance of bankruptcy near zero, that buffer is the starting point of the analysis, not an afterthought.

Second, control sits with the founder. Meituan uses a dual-class structure in which each Class A share carries 10 votes and each Class B share one. As at March 2026, Wang Xing beneficially owned about 45.30% of the voting rights, and co-founder Mu Rongjun a further 5.56% — so the two founders control roughly half the vote [18]. Their economic stake is far smaller than their voting power: all Class A shares together represent only about 10% of the equity, so Wang Xing owns on the order of 8–9% of the company — a holding worth several billion dollars at today's price. That gap between control and economic ownership is a governance feature to weigh, but the alignment a value investor looks for — a founder with a large personal stake, running the business for the long term — is present. It has also been remarkably stable: at the 2018 IPO Wang Xing held about 10.4% of the equity and 47.3% of the vote [19].

The stock and what the price implies

Meituan came to market in September 2018 at up to HK$72 per share [20]. In the first half of 2026 the shares fell from about HK$99 in January to a low near HK$64 as the scale of the 2025 loss became clear, recovering to roughly HK$81 by early July.

Source: company share price data (HKEX: 3690), as reported; indicative points across January–July 2026.

At about HK$81, the roughly 6.08 billion shares are worth close to HK$490 billion — on the order of US$63 billion, or roughly ¥450 billion at prevailing exchange rates. Set against the business, that is about 1.2 times 2025 revenue and roughly 12–13 times the record ¥35.8 billion of profit the company earned in 2024, before the war. Consensus analyst price targets average about HK$107, some 30% above the recent price, and the sell-side expects a return to profit over 2026–2027 as subsidies normalise.

Valuation multiples derived from reported financials and share price data; consensus targets from published analyst estimates, as reported.

The setup is a familiar one for a value or special-situation investor: a business once prized for its growth and profitability, now loss-making and out of favour, priced at roughly a dozen times its most recent normal-year earnings, sitting on net cash, with a founder still at the controls. At roughly a dozen times pre-war earnings, the price neither writes off the Core profit pool nor assumes a full return to pre-war margins; whether the 2025 subsidy war permanently reset the economics of Chinese food delivery is not yet settled in the reported numbers.

The question this report sets out to answer

The rest of the report tests both sides of that question. Meituan is China's dominant local-services platform, structurally profitable at scale until a 2025 subsidy war with Alibaba and JD turned a record profit into a loss; the question this report exists to answer is whether that collapse is a temporary, competition-driven dip in an enduring franchise — making today's depressed, net-cash-backed price a genuine margin of safety — or the first evidence that the profit pool itself is being competed away. The chapters that follow test each half of that question in turn: the durability of the core economics, the balance sheet and forward estimates in detail, the moat against two of China's best-funded rivals, the founder's record with capital, and what the price implies at each outcome.