Chapter 1

Franchise and Trough

Meituan runs China's dominant local-services platform — food delivery, in-store dining, hotels and travel, and instant retail — with FY2025 revenue of ¥364.9 billion [1]. After reaching a record ¥35.8 billion profit in 2024, it swung to a ¥23.4 billion loss in 2025 as a subsidy war in food delivery erupted [2]. The franchise still grew; the profit did not survive the fight. Financials are reported in renminbi (¥); the shares trade in Hong Kong dollars (HK$).

What Meituan is

Meituan operates the app most Chinese consumers open to order a meal, book a restaurant table, buy a hotel night, or have groceries and medicine delivered in under an hour. It reports in two segments: Core Local Commerce — food delivery, in-store dining, hotel and travel, and Meituan Instashopping (instant retail) — and New Initiatives, which houses grocery-retail formats, the Meituan Select community-group-buy business, and overseas delivery (Keeta). In 2025 the platform's gross transaction value and transaction volume both grew double digits, and annual transacting users, purchase frequency and ARPU reached record highs [3].

The company makes money four ways, and the mix matters. In Core Local Commerce, FY2025 revenue of ¥260.8 billion came from delivery fees (¥96.1 billion), merchant commissions (¥99.2 billion), high-margin online marketing — advertising sold to merchants (¥51.5 billion) — and other services (¥14.1 billion) [4]. Commissions and advertising are the profit engine; delivery fees largely pass through to couriers. New Initiatives added ¥104.0 billion, almost all of it lower-margin retail sales [5].

Source: FY2025 Annual Report, MD&A — Revenues by segment [6].

Size and the five-year arc

Meituan is a large-cap platform, not a startup: revenue has doubled in four years, from ¥179.1 billion in 2021 to ¥364.9 billion in 2025 [7]. The profit line tells the more important story. The company lost money in 2021 and 2022 during an earlier phase of regulatory pressure and heavy investment, turned profitable in 2023 (¥13.9 billion), peaked in 2024 (¥35.8 billion), then fell back into a ¥23.4 billion loss in 2025 [8].

Source: FY2025 Annual Report, Financial Summary [9].

The gross margin traces the same round trip: it climbed from 23.7% in 2021 to 38.4% in 2024, then gave back ten points to 30.4% in 2025 as incentives and courier costs rose [10].

The 2025 break

The loss was not a demand problem. Revenue rose 8.1%, and Core Local Commerce revenue grew 4.2% to ¥260.8 billion [11]. It was a spending problem, driven by competition. In early 2025, JD.com entered food delivery and Alibaba escalated instant-retail subsidies, and Meituan answered in kind to protect share. Selling and marketing expense rose 60.9% to ¥102.9 billion — from 19.0% of revenue to 28.2% [12]. That ¥38.9 billion increase in marketing alone is larger than the year's total loss.

The effect on segment profitability was stark. Total segment operating profit fell from ¥45.1 billion in 2024 to a ¥17.0 billion loss in 2025 [13]. Core Local Commerce — the mature, cash-generative engine — went from a ¥52.4 billion operating profit (a 20.9% margin) to a ¥6.9 billion operating loss [14]. A business that minted a fifth of its revenue as operating profit in 2024 was, one year later, subsidizing transactions.

Sources: Chairman’s Statement [15]; MD&A — Core Local Commerce segment results [16].

Whether this is a temporary defense of a durable franchise or the start of a permanent margin reset is the central question of the investment case, and later chapters test it directly. The evidence for "temporary" is that revenue and transactions kept growing and the profit erosion sits almost entirely in incentive spend management chose to deploy [17]. The counter-fact is that two of China's best-capitalised companies have now decided local delivery is worth fighting for, and a subsidy war ends only when someone stops paying.

The balance sheet that buys time

For an investor whose first concern is survival, the balance sheet is the reassuring part. At the end of 2025 Meituan held ¥106.8 billion of cash and equivalents plus ¥60.1 billion of short-term treasury investments — ¥166.9 billion of liquid resources [18]. Against that sit reported borrowings of ¥18.8 billion (non-current) and ¥3.5 billion (current), roughly ¥22 billion in total [19]. The company is deeply net-cash even before counting longer-dated deposits and investments.

Sources: MD&A — Liquidity [20]; Consolidated Statement of Financial Position [21].

The war did cost cash. Operating cash flow turned negative — a ¥13.8 billion outflow in 2025 against a ¥57.1 billion inflow in 2024 [22]. At that rate the net-cash position funds years of losses, not quarters, which is the difference between a distressed balance sheet and a defended one. The bankruptcy risk a cautious investor screens for looks remote here; the risk that matters is how long, and how expensively, the fight runs.

Founder control and skin in the game

Meituan is founder-run, with control locked in by a weighted-voting-rights structure. Each Class A share carries 10 votes to a Class B share's one. Founder, chairman and CEO Wang Xing beneficially owns 515.9 million Class A shares — about 45.30% of the votes — and co-founder Mu Rongjun a further 5.56%, so the two founders command a majority of the vote while holding a minority of the economics [23]. Meituan has roughly 6.11 billion shares outstanding in total [24].

Their pay is negligible next to that stake. In FY2025 Wang Xing's total emoluments were ¥5.26 million — a ¥5.04 million salary and pension costs, with no bonus and no share awards — and Mu Rongjun's were ¥4.32 million [25]. The founders are compensated as owners, through the equity, not through the payroll. For an investor who prizes aligned, founder-led management, the alignment is real; the flip side is that minority holders cannot force a change of course, and the decision to wage the 2025 subsidy war was management's to make.

The stock: a fallen star

Meituan is the kind of name this market once loved and now distrusts. The shares peaked near HK$460 in February 2021; they trade around HK$80.90 today, roughly 82% below that high, with a market capitalisation near HK$500 billion and a 52-week range of HK$63.65 to HK$136.10. How completely the mood has reversed is visible inside the filing itself: the convertible bonds Meituan issued in 2021 carry a conversion price of HK$431.24 — a level the stock last saw at the peak, and the reason management has been redeeming rather than converting them [26].

Consensus expects the trough to pass. Analysts model a near-breakeven 2026 followed by a return to profit in 2027, and the mean price target sits near HK$107 against the ~HK$81 quote — a stock priced for a recovery that has not yet shown up in reported earnings.

Source: share-price levels, market data and consensus estimates as reported; convertible-bond terms per FY2025 Annual Report [27].

The question this report answers

Meituan is a dominant, still-growing local-commerce franchise, founder-controlled and carrying enough net cash that survival is not the issue — thrown, in 2025, from record profit into heavy losses by a subsidy war it chose to fight. The question this report exists to answer: is that swing a durable impairment of the franchise's economics, or a defensible trough that the balance sheet can outlast — and how much of the eventual recovery the stock already excludes? Everything that follows connects to that.