Xiaomo: Upgrading the Meituan-W (03690) issuer rating to “increase holdings”, the worst is expected to be over

The Zhitong Finance App learned that J.P. Morgan Chase released a research report stating that it would upgrade the Meituan-W (03690) issuer rating and bond curve rating from “neutral” to “increase holdings.” The bank believes that Meituan's worst situation is over. Competition in the restaurant industry is normalizing under government guidance, and profits are expected to remain positive in the second half of 2026 and 2027. The company announced strong results for the second quarter of 2026. China's takeout business turned a loss into profit after three consecutive quarters of losses.

Core local commercial operating profit was RMB 5.7 billion, ending three consecutive quarters of losses and turning losses into profits; revenue rebounded 10% year over year. The improvements were mainly driven by improvements in the economic efficiency of takeout business units, including the normalization of subsidies and a rebound in market share in the second quarter, particularly in the high-customer unit price segment. Management expects the unit's economic benefits to remain positive in the third quarter, but may slow down from month to month due to rising summer rider costs and marketing expenses. In terms of Keeta's overseas business, Saudi Arabia turned a profit in July 2026. Net cash rebounded 8% month-on-month to 102 billion yuan.

The bank pointed out that the Meituan curve is at the broadest end of China's BBB curve, and there is still room for narrowing under the influence of improved fundamentals and valuations; it also believes that Meituan is mainly a consumer theme, has limited AI exposure, and the risk of being overpriced by potential Asia-Pacific data center bond supply is low.