Credit Update: A swing back to profitability makes Meituan’s USD bonds compelling, with 5+% yields

Since our update on Meituan back in April 2026, the group has reported its first-quarter results ending 31 March 2026 (1Q26) and second-quarter results ending 30 June 2026 (2Q26). In the article below, we delve into the group’s latest numbers and provide an updated take on the credit standing of Meituan.

Meituan reports across two segments: 1) Core Local Commerce (CLC), the mature, profitable core: food delivery, Meituan Insta-shopping/quick commerce, and in-store, hotel & travel (local services bookings) and 2) New initiatives, which represent the loss-making growth/investment bucket: grocery retail (Xiaoxiang Supermarket, Happy Monkey) and overseas delivery (Keeta, spanning Hong Kong, the Middle East and Brazil).

A sharp swing to profitability in 2Q2026, aided by easing delivery war and subsidies

• For 2Q26, Meituan’s results marked a decisive break from the price-war-driven losses of the prior four quarters. Overall revenue rose 14.4% YoY to RMB 104.6b (2Q25: RMB 91.5b), an acceleration from 1Q26’s 5.6%. Operating profit turned positive at RMB 2.7b (2.6% margin), reversing a RMB (6.5) b operating loss in 1Q26 and up sharply from RMB 0.2b (0.2% margin) in 2Q25. Adjusted EBITDA, which we view as a better indicator of profitability as it excludes one-off items, paints a similar picture, rebounding to RMB 4.1b (+47.3% YoY) and reversing the RMB (3.0) b loss in 1Q26. Consequently, the food delivery giant recorded a profit for the period of RMB 2.2b, which reverses a loss of RMB (6.8) b for 1Q26.

• Core Local Commerce (CLC), Meituan’s largest segment, swung from an operating loss of RMB (2.0) b in 1Q26 to an operating profit of RMB 5.7b (operating margin of 7.9%) in 2Q26 – a 52.3% YoY improvement – as management pulled back on user incentives and refocused spending on higher-value users. Delivery services revenue still rose 13.1% YoY to RMB 26.8b even as incentive spend was cut, evidence of Meituan’s logistics moat we highlighted in our last update.

• New Initiatives narrowed its operating loss to RMB (1.7) b from RMB (2.1) b in 1Q26 and RMB (1.9) b in 2Q25. This improvement is driven by efficiency gains in grocery retail (Xiaoxiang Supermarket) and overseas operations. Management disclosed that Keeta’s Saudi Arabia business turned profitable in July 2026 (ahead of the end-2026 timeline management had previously guided to). Furthermore, management guided that the segment losses for New Initiatives will not exceed the losses incurred in FY25 (10.1) b. With losses coming in at RMB (3.9) b for 1H26, the segment is tracking comfortably within that ceiling so far. In sum, the narrowing of losses for New Initiatives, combined with management’s ability to exceed its stated timeline for profitability, is a clear credit positive that strengthens the group’s credit standing.

• Looking ahead, management highlighted that the group had extended its lead in order volume and gross transaction volume (GTV), particularly in the mid-to-high AOV (average order value) segment – a trend management attributed to continued regulatory pressure on irrational price wars. Food delivery unit economics are guided for YoY improvement but softer sequentially owing to seasonality, while margins for in-store, hotel and travel are expected to weaken as the group reinvests. Management also reiterated a more disciplined, ROI-driven approach to global expansion, rather than growth at all costs.

• On balance, we think Meituan’s 2Q26 results provide early green shoots that our initial thesis is playing out (regulatory crackdown on irrational price war, combined with Meituan’s entrenched moat in delivery logistics, would see the group return to profitability). We are further encouraged by the group’s ability to deliver profitability ahead of schedule (Saudi Arabia), while management is sticking to a more conservative, profit-focused approach in growing its business. Crucially, we do not expect the trajectory of narrowing losses (New Initiatives) and increasing profitability (CLC) to continue linearly, but the key takeaway is clear: subject to no return to the intense price war of 2025, we think Meituan’s credit profile is likely to improve moderately.

Net cash balance sheet still supportive, with a modest improvement in coverage

• As of 30 June 2026, Meituan still operates with a net cash position of RMB 79.6b: cash and equivalents of RMB 104.7b and short-term treasury investments of RMB 63.6b against RMB 46.6b of notes payable and RMB 42.1b of borrowings. This represents a slight improvement from the 1Q26 (31 March 2026) net cash position of RMB 74.3b. Do note that, given the nature of Meituan’s operations, the group has a decent amount of short-term payables (trade payables, payables to merchants, advances from transacting users, other payables and accruals) that probably suggests that not all cash is necessarily available for repayments; nevertheless, the group still has a comfortable buffer of cash available. Near-term refinancing risk remains limited with only RMB 7.3b of notes payable and borrowings due within the next twelve months. Importantly for bondholders, Meituan’s liquidity profile is bolstered by an improvement in its operating cash flow (OCF) generation, which came in at RMB 9.7b for 2Q26 (compared to 1Q26’s outflow of RMB (7) billion and 2Q25’s inflow of RMB 4.8b). Looking forward, we expect OCF generation to continue normalising, which should contribute to the group’s already solid liquidity profile.

• Interest coverage (TTM EBITDA / TTM finance costs) remains negative, mainly due to EBITDA being negative for the prior three quarters; however, we note that 2Q26 interest coverage (2Q EBITDA / 2Q finance costs) is decent at 5.1x. If EBITDA generation improves modestly as the group continues its path to higher profitability, it should strengthen Meituan’s ability to service its finance costs. In the meantime, the group’s ample liquidity provides substantial headroom for the food delivery giant to meet its interest obligations.

• In sum, given the modest improvement in the group’s net cash position compared to 1Q26, its positive EBITDA and OCF generation in 2Q26 are clear credit positives. Net-net, we think Meituan’s credit profile has improved modestly given a smaller drag on net cash and a turnaround in profitability. Moving ahead, we expect further strengthening in Meituan’s credit profile as the group continues to improve its unit economics; a renewed escalation in competitive intensity is a key risk we will monitor that could result in Meituan’s improved 2Q26 results being a one-off quarter rather than the start of a structural trend in improving profitability.

Recommendations

• Overall, we think Meituan’s credit profile is improving, and we remain comfortable with the issuer’s credit standing. Stronger revenue growth, an improvement in unit economics and increased market share, combined with a return to profitability, provide comfort to bondholders. Liquidity is still robust, which provides a comfortable buffer for interest servicing while near-term refinancing risk is limited. Overall, we view the 2Q26 numbers as encouraging and think this could be the quarter that begins Meituan’s return to sustained profitability.

• Looking at Table 1 below, we continue to favour Meituan’s short- to medium-tenor bonds (1.6 years to 4.7 years) against its closest technology peers (do note the difference in credit ratings). In general, these bonds provide a decent yield pickup of 50+ bps (Meituan’s 2029/2030 bonds against Alibaba’s 2029/2030 bonds). Against comparable US Treasuries of similar tenors, Meituan’s outstanding bonds provide an attractive spread of 60+ to 80+bps.

• For investors seeking decent income from an issuer with an improving credit standing, we think Meituan’s outstanding USD bonds present an attractive proposition. 

Table 1: Bond comparison

Disclosure: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds NIL positions and the analyst who produced this report holds NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.