UBS: Unexpected subsidies for takeout wars expected to peak in August. Valuations of BABA-W(09988) and JD-SW(09618) are attractive.

UBS released a report indicating that a recent expert conference call with the consumer team revealed that the subsidy war on food delivery platforms is expected to peak in August, and may then shift towards the instant e-commerce sector. Stimulated by subsidies, the order volumes for MEITUAN-W (03690) and Ele.me in July surged to 1 to 1.2 billion and 63 million respectively, while JD-SW (09618) maintained an order volume of around 20 million. Experts predict that by the end of the year, Meituan aims to maintain a 60% share of the total merchandise transaction market, Ele.me 30%, and JD 10%. Meanwhile, Alibaba (BABA-W) plans to invest 50 billion RMB in the fast business field with the goal of matching Ele.me's order volume with Meituan's, reaching 80 million per day, while JD is expected to maintain cautious investments, with order volumes stable at 15-20 million per day. UBS believes that in the short term, e-commerce stocks may continue to fluctuate due to competition uncertainties. With Alibaba showing good execution ability, the potential value release from the synergy of different businesses is greater, and the stock price has fallen back to the levels before the rally driven by DeepSeek, making it attractive. As for JD, with a forecasted P/E ratio of only 7 times for its core business in 2025, its valuation remains competitive. In the restaurant industry, the bank is optimistic about Yum China (09987) and DPC DASH (01405). As the competitive landscape becomes clearer, the industry value is expected to become more apparent.