In the past few days, China's stock market has experienced an unprecedented market trend. The sse composite index broke through 3600 points, and the total turnover of Shanghai and Shenzhen exceeded 3 trillion yuan. Brokerage account openings surged, and a series of policies at the end of September completely reversed the market expectations, igniting investors' enthusiasm.

As a representative Chinese concept stock, Meituan's stock price also reflects this market change. From hovering around 700 billion Hong Kong dollars in market cap to surpassing 1.1 trillion Hong Kong dollars, in just 8 days, Meituan's market cap surged by over 400 billion Hong Kong dollars.

Since September 24, Meituan's stock price has soared by up to 58.6%, leading the Hang Seng Tech Index components. Such a surge over the past three years is undoubtedly rare.

Meituan has once again become the darling of investors, becoming the 'standard-bearer' in this bull market for re-evaluating Chinese assets.

To some extent, in this stock market surge, Meituan's trend has become a leading indicator for observing fund flows. The improvement in investors' expectations for Meituan's performance, the flow of funds back to Chinese assets, and more, are all driving Meituan to become the 'brightest star' in the Hong Kong stock market. In the upcoming market trends, Meituan will continue to be a key indicator.

Of course, behind the sharp rise, there are also factors such as Meituan's performance hitting bottom and rebounding, returning to the growth track. On October 9, Wall Street learned that Meituan's overseas version Keeta was launched in Riyadh, the capital of Saudi Arabia, officially launching the battle for international expansion. Meituan is heading to a new battlefield, telling investors more stories.

After 13 years of development, Meituan has entered a brand new stage of development. Whether Wang Xing can lead Meituan back to the peak of market value, this wave of capital feast may be a critical turning point.

Hot trend.

The capital markets have finally ushered in a long-lost carnival, with nearly 800 stocks hitting limit up, and Meituan standing at the forefront of this hot trend.

On October 9, Meituan closed at HK$184.4, with a price increase of 2.33%. Over the past two weeks, Meituan's stock price has experienced significant gains. According to Wallstreetcn observation, since September 24, Meituan's stock price has risen by as much as 58.6%, with a daily increase of up to 14.64%.

Comparatively, the Hang Seng Tech Index had a maximum increase of 37.6% during the same period, meaning Meituan's stock price increase far exceeded the overall market. Meituan's increase also surpassed similar tech companies, with Alibaba's stock rising by 22.6%, PDD by 43.7%, and JD.com by 47.2% during this period.

The rise in stock price directly boosted Meituan's market cap. According to Hithink RoyalFlush Information Network data, Meituan's market cap reached a nearly two-year high on October 4, at HK$1298.4 billion, increasing by HK$448.2 billion (approximately RMB 407.5 billion) in just eight days.

The core driving force behind the rise in stock price mainly comes from a series of recent bullish policies. Shen Meng, a director at Hithink RoyalFlush Information Network, stated that Meituan's stock price increase was mainly influenced by financial policies announced by institutions such as the central bank before the holiday, with the core being the improvement in policy intensity boosting investor expectations.

Another important factor is the Fed's interest rate cuts. According to past trends, after the Fed enters a rate-cutting cycle, global funds will begin to reallocate, flowing into emerging markets, especially international financial centers like Hong Kong. Hence, Chinese concept stocks will be the first to benefit.

Apart from market factors, the reason why Meituan is leading the Chinese concept stocks is also due to the generally bullish expectations for the company's performance. Compared to the e-commerce sector, Meituan's local lifestyle business demonstrates extremely strong consumption resilience.

Taking the National Day holiday as an example, data from Meituan shows that nationwide in-store consumption for lifestyle services increased by 41.2% year-on-year. Among them, daily tourist consumption increased by 69.6% year-on-year compared to the previous year's holiday period. Popular scenic spots are still crowded, and cultural relics-related study tours, Hanfu travel photography, and other new cultural and tourism activities are loved by young people.

In fact, even before this recent surge in stock prices, Meituan's stock price had already rebounded from its low point, entering into a slow recovery phase, mainly due to the strong performance growth of Meituan.

On August 28, Meituan announced its second quarter report for 2024, with revenue of 82.25 billion yuan, and adjusted net income of 13.6 billion yuan, exceeding market expectations and gaining recognition from the capital markets.

Especially in Meituan's core local business. In the second quarter, Meituan's core local business operating profit was 15.234 billion yuan, an increase of 36.8% year-on-year, with an operating profit margin rising by 3.3 percentage points to 25.1%. Meituan has overcome the darkest moments brought by Douyin and regained control of its development.

In other words, the bullish sentiment of global capital markets towards Chinese concept stocks, combined with the recovery of Meituan's fundamentals, allowed the company to seize this wave of IPO opportunities.

However, there is still a considerable distance for Meituan to return to its peak.

Differences

In 2018, Meituan went public for the first time and was considered one of the best practices for mobile internet in China. By 2021, Meituan's market cap soared to 2.4 trillion, becoming China's third largest internet company, truly becoming the king of local life.

However, as Chinese concept stocks collectively cooled, the share price of Meituan began to decline, especially in the past two years. With Douyin entering the local life market with traffic, quickly opening the closed door of offline markets, catching Meituan off guard. As a result, Meituan's business model began to face scrutiny from the capital markets.

Any news about Douyin entering the food delivery sector or industry acquisitions will further deepen concerns in the capital markets. On January 17, Meituan's stock price fell below the IPO price of HK$69. By the end of January, Meituan's market cap had evaporated by 2.08 trillion RMB from its peak.

After being hit, Meituan finally began to fight back. The company reorganized its combat effectiveness through organizational structure adjustments; at the same time, Meituan won back consumers through strategies like live streaming and KOLs. In the first half of this year, Meituan's food delivery platform saw active users exceed 500 million, with nearly half of internet users using Meituan.

Meanwhile, Meituan is also actively expanding overseas. After testing the model in the Hong Kong market, Meituan chose the first real overseas station in Saudi Arabia. In August, Wang Xing officially renamed the overseas business as Keeta, began trials in Saudi Arabia in September, and officially launched in Riyadh, the capital of Saudi Arabia, in October.

Until this wave of bull market, Meituan's stock price returned to a trillion-dollar valuation, gaining long-lost favor in the capital markets.

However, whether the current feast can last, whether it is a short-lived phenomenon or a long-term bull market, is the most pressing issue in the current market and the key to determining the direction of Meituan's stock price.

There are already divergent views in the market. On October 8, Meituan's closing price was HK$180.2, a 15.48% drop. Shen Meng believes that this may be due to funds from the Hong Kong market participating in A-share trading through Shanghai-Hong Kong Stock Connect, while the information released by the NDRC is significantly lower than market expectations, leading to continued decline in A-shares and H-shares.

Tianfeng Securities' Du Penghui believes that the core logic behind the current uptrend is that A-shares are the 'main battlefield' of the market trend, and the Hong Kong stock market does not have a large base of domestic investors, more focused on passive valuation adjustment, with the key being the absolute valuation restoration of PB.

Many investment bankers told Wall Street News that among the constituents of the Hang Seng Tech Index, Meituan is the top choice for foreign institutions. The alleviation of competition from rivals like Douyin, along with high growth in local services, has improved Meituan's fundamentals. The growth in profitability and the valuation have a solid foundation for recovery.

Recently, institutions like Daiwa, Citigroup, and UBS have all released research reports, significantly raising the target price for Meituan.

On October 9th, Daiwa's research report stated that Meituan's food delivery and local services businesses could benefit from the recovery in consumption. The recent outperformance in stock price compared to the market has led to a higher valuation than peers. The firm reiterated a "buy" rating with the target price raised from HK$160 to HK$235.

UBS also raised Meituan's operating profit forecast for 2025 to 2028 by 5% to 21%, increasing the target price from HK$172 to HK$270. The bank believes that Meituan's accelerated and significant profit growth, with a forecasted five-year compound annual growth rate of 33%, justifies a premium. Additionally, mainland macroeconomic stimulus policies may further drive Meituan's stock price.

This also means that the current rapid rise of Meituan, although sharp, is supported by fundamentals.

However, the huge volatility on October 8th indicates that the funds driving Meituan's rise are more related to trading activities rather than investment allocations.

If the policy environment becomes more favorable in the future, Meituan could also become the preferred choice for foreign long-only funds. Goldman Sachs pointed out that the global actively managed funds (mainly public funds) have a China exposure level of only 5%, down from 15% four years ago.

This means that if foreign funds adopt a more proactive allocation strategy, going long-term, Meituan could launch a new round of attacks and show more positive performance in stock prices.

Over the past six years, Meituan has gone through the entire process of listing, hype, and being questioned. Now, Wang Xing is also at a new starting point, and this will be a key moment for him to lead Meituan back to its peak.

Editor/Emily