Financials and Estimates

Financials and Estimates

Meituan's three-year record splits cleanly in two: FY2022–FY2024 is a company scaling into rising profitability and heavy cash generation; FY2025 is a single year in which a subsidy war turned a record ¥35.8 billion profit into a ¥23.4 billion loss and a ¥57 billion operating cash inflow into a ¥14 billion outflow. Revenue never stopped growing. Consensus expects a return to profit by 2027, but the balance sheet — not the income statement — is what makes the wait survivable.

The three-year record

Over FY2023–FY2025 revenue rose from ¥276.7 billion to ¥364.9 billion — a 13% annual pace even after 2025's disruption — while the bottom line moved sharply: a ¥13.9 billion profit in 2023, a record ¥35.8 billion in 2024, then a ¥23.4 billion loss in 2025 [1].

Sources: FY2025 Annual Report, Financial Summary [2] and Liquidity and Capital Resources [3].

Source: FY2025 Annual Report, Financial Summary — five-year condensed statements [4].

The table below is the statutory record for the reader's stated three-year window. The story is in the last column: revenue up 8.1% in 2025, yet gross profit down ¥18.8 billion and the result swinging by ¥59 billion year-on-year.

Source: FY2025 Annual Report — Financial Summary [5] and Consolidated Income Statement [6].

Where the profit went

The loss was manufactured almost entirely by competition, and it hit through two lines at once. On the cost side, cost of revenue rose from 61.6% of sales in 2024 to 69.6% in 2025 — an 8-point compression of gross margin — as delivery and rider incentives inflated the cost of each order [7]. Below gross profit, selling and marketing expense jumped from ¥64.0 billion to ¥102.9 billion — from 19.0% to 28.2% of revenue — as Meituan matched the consumer and merchant subsidies that JD and Alibaba put into the market [8]. Research and development and general expenses barely moved.

Source: FY2025 Annual Report, Management Discussion and Analysis [9]; Consolidated Income Statement [10].

Put together, reported operating profit swung from ¥36.8 billion (a 10.9% margin) to a ¥25.0 billion loss — a roughly 18-point move, split about evenly between gross-margin compression in the cost of revenue and the marketing surge [11]. The mechanism matters for the through-line: a demand collapse would show up as falling revenue; this shows up as a deliberate, subsidy-funded fight for order share while revenue kept climbing. That is a discretionary loss, which is easier to reverse than a structural one — provided the spending actually stops. The unresolved question is how much of the 8-point gross-margin hit reverts when it does, which is a matter for the unit-economics case rather than the reported ledger.

One check guards against the loss being a statutory artifact. Meituan's own non-IFRS measures — which add back share-based compensation and similar items and usually flatter the result — tell the same story: adjusted net profit swung from ¥43.8 billion in 2024 to an ¥18.6 billion adjusted loss in 2025, and adjusted EBITDA from ¥49.1 billion to negative ¥13.8 billion [12]. The loss is real cash economics, not an accounting line.

Cash tells the same story

In the two profitable years, Meituan's earnings were high quality: operating cash flow ran well ahead of reported profit — ¥40.5 billion against ¥13.9 billion in 2023, ¥57.1 billion against ¥35.8 billion in 2024 — because the platform collects from users and merchants faster than it pays, and capital intensity is low (capex under 4% of revenue) [13]. That converted into ¥33.6 billion and ¥46.1 billion of free cash flow.

FY2025 reversed this. Operating cash flow was negative ¥13.8 billion and free cash flow negative ¥27.1 billion [14]. The subsidy war did not just dent an accounting margin; it drained roughly ¥27 billion of cash out the door in twelve months.

Source: FY2025 Annual Report, Liquidity and Capital Resources [15]; FY2024 Annual Report, Liquidity and Capital Resources [16].

The clearest sign of how management reads its own position: share buybacks, which absorbed ¥26.1 billion of cash in 2024, were cut to ¥0.4 billion in 2025 [17]. Cash was being retained rather than returned — a capital-allocation shift explored more fully in the management chapter.

The balance sheet absorbed it

This is the part that speaks to a value investor's first concern, that a holding could go to zero. Meituan's balance sheet makes that outcome unlikely. At the end of 2025 Meituan held ¥106.8 billion of cash and a further ¥60.1 billion of short-term treasury investments, ¥166.9 billion in all, against total borrowings of about ¥80.3 billion — net cash of roughly ¥86.5 billion even after the worst operating year in its history [18].

Source: FY2025 Annual Report, Liquidity and Capital Resources [19]; prior-year cash and borrowings from reported financials, FY2022–FY2024.

The balance sheet stayed a fortress through the war only by leaning on debt: about RMB26 billion of net cash went out, replaced with RMB21.2 billion of fresh borrowing, while management widened the New Initiatives loss to RMB10.1 billion for an unproven overseas build and cut the buyback from HK$28 billion to HK$0.4 billion as the stock it had called undervalued fell below HK$80. The gross cash pile held roughly flat only because that ¥21.2 billion financing inflow came mainly from issuing notes payable and new borrowings, which is why total debt climbed from about ¥55.8 billion to ¥80.3 billion in the year [20]. Net cash fell by roughly ¥26 billion even as the headline cash balance rose. Against that, the gearing ratio is about 53%, some 55% of that debt matures in three years or more, and none of it carries a financial covenant [21]. A covenant-free, long-dated debt stack against ¥167 billion of liquid assets is why a full year of cash burn barely registered as a solvency question. On the reader's own bankruptcy-risk test, the evidence points to near-zero; the main thing that would change that read is a multi-year war, not a single one.

What the estimates expect

Consensus treats 2025 as the trough. Forty analysts put FY2026 revenue near ¥402.6 billion (up 10.3%) and thirty-six put FY2027 near ¥457.3 billion (up 13.6%) — growth returning to its pre-war double-digit pace. These are consensus estimates from the analyst data feed, not company guidance, and carry no filing page.

Source: reported revenue FY2023–FY2025 [22]; FY2026–FY2027 are consensus analyst estimates (40 and 36 contributors), as reported.

Source: consensus revenue and price-target estimates (current price HK$78.9; mean target HK$107.0), as reported.

The earnings turn is the softer part of the forecast. Consensus has EPS still modestly negative in FY2026 (about ¥0.56 loss per share on average, with a wide ¥1.81-loss-to-¥0.78-profit range across contributors) before recovering to roughly ¥4.07 in FY2027 — a return to profit, though below the ¥5.66 diluted peak of 2024. The revisions run two ways: FY2026 estimates have been marked up over the past month (seventeen upgrades against three cuts) as the truce held, while FY2027 estimates have been trimmed (thirteen cuts) — near-term relief, out-year caution. Sell-side positioning is constructive despite the depressed tape: of 38 ratings, 28 are buy or strong-buy and only 2 are strong-sell, and the mean target of HK$107 sits about 36% above the HK$78.9 price. The price marks a fallen leader; sell-side coverage stays constructive.

The numbers here establish the base the rest of the report builds on. Whether 2025 was a dip or a reset is not settled by the ledger alone — the case is most sensitive to whether the 8-point gross-margin hit reverts as subsidies fade, and to whether the FY2027 profit consensus assumes survives contact with a competitor that has not formally surrendered. Both are questions for the chapters on unit economics and competition; the financials say only that Meituan can afford to wait for the answer.