Meituan Instashopping Adds More Orders but Offset by Food Delivery Slowdown; Maintain HKD 165 FVE

We maintain our fair value estimate at HKD 165 for no-moat Meituan after the company reported mixed results for second-quarter 2022, and we believe that the market is overvaluing Meituan, given the addition of its Instashopping segment to its core business as a long-term viable unit. Better-than-expected revenue of CNY 50.9 billion beat our estimate of CNY 47.6 billion, representing a 16% increase year on year. Losses also narrowed, which was encouraging, and should accelerate Meituan's breakeven date. However, food orders grew by only 5% year on year and the number of customers declined to 685 from 693 sequentially for the first time, which may imply Meituan has reached a saturation point.