After two consecutive days of decline, Meituan-W (03690.HK) continued to face selling pressure this morning (25th), with the latest report at 107.7 yuan, a decrease of 4.9%, falling below the 100-day moving average (approximately 108.1 yuan), with a turnover of 3.02 billion yuan.

UBS Group has released a report stating that despite the softening of the mainland's macroeconomic conditions, it may damage Meituan's core business, including the growth of food delivery orders and average selling prices as well as Gross Transaction Value (GTV). However, the better business competition landscape should bring high flexibility and visible future profit potential to Meituan. This is due to the growth in GTV (regaining market share from Douyin), the reacceleration of revenue, and the recovery of operating margins (31% for Q1 2024, 46% for 2022). Meituan is currently forecasted to have a PE ratio of 13 times in 2025, and the bank believes that as an industry leader, it is attractive to maintain a "buy" rating on Meituan and a target price of 158 yuan.

UBS stated that, through local service industry channels, it is understood that the competition between Meituan and Douyin in the offline market is continuing to stabilize, and Douyin is no longer focused on GTV growth, but is increasingly concerned with profitability, efficiency, and monetization. GTV has grown steadily this year at around 30-40 billion RMB per month. Douyin's key measures include first raising commission rates - an example is the hotel commission rate increase (from 4.5% to 8.0% from July 1), secondly, shifting the focus to key accounts (KA) rather than small and medium enterprises because KAs have more advertising budgets, which can support Douyin's higher operating costs, thirdly, expanding new categories to accelerate the online penetration of high-profit categories such as beauty and medical beauty, and fourthly, integrating internal employees and 3P institutions to improve cost efficiency by transferring more operational responsibilities from Douyin's internal employees to 3P institutions and eliminating poor-performing employees and institutions. The bank believes that the above-mentioned more rational competition landscape with Douyin should be favourable to Meituan. Merchants have also observed that as Douyin's traffic becomes more expensive, more small and medium enterprises are returning to Meituan.