Citi: Expects MEITUAN-W (03690) to cope with ongoing macroeconomic and competitive challenges, maintains "Buy" rating.

Citigroup has published a research report maintaining its "Buy" rating for MEITUAN-W (03690) with a target price of HKD 120. The firm remains confident in the management's steady execution, focus on high-quality and AI-driven growth, and believes the company can cope with ongoing macroeconomic and competitive challenges. Management indicates that after regulatory guidelines regarding subsidy practices were issued, competition in the food delivery sector eased further in the third quarter, with the industry shifting towards enhancing operational efficiency, which helps lay a foundation for profitability recovery. Meituan's subsidy levels remained roughly flat quarter-on-quarter, and despite rising rider costs and the implementation of injury insurance, unit economic benefits are still expected to remain positive in the third quarter. In terms of instant retail, core local business commodity sales grew by 79% year-on-year, primarily driven by the instant retail 1P business; new business commodity sales increased by 45% year-on-year, supported by the expansion of Xiaoxiang Supermarket and Happy Monkey stores. Overseas, Keeta has already achieved profitability in Hong Kong, the Saudi Arabia business became profitable in July, while the Brazil business is prioritizing budget control and improving operational efficiency in So Paulo. Management believes that the domestic market in China remains the company's primary focus compared to its overseas ventures.