Fitch Revises Meituan's Outlook to Positive

Positive Outlook and Affirmed Ratings:
- Fitch Ratings has revised Meituan's Outlook to Positive and affirmed its Long-Term Issuer Default Rating at 'BBB-'.
- Senior unsecured rating and US dollar notes rating also affirmed at 'BBB-'.

Rationale:
- Outlook shift reflects the expectation of sustained strong cash flow and improved profitability, driven by narrowing losses in new initiatives and solid market positions.
- Strong operating cash flow supports positive free cash flow (FCF), with uncertainties around social security payments and Douyin competition.
- Positive rating action possible with continued disciplined investment and robust FCF, offering flexibility for future investments.

1. EBITDA and Cash Flow Above Expectations:
- Forecast of over CNY 19 billion EBITDA and CNY 10 billion FCF in 2023.
- Strong growth in core local commerce and disciplined investments contribute to robust profitability.

2. Stable On-Demand Delivery:
- Anticipated moderation in food delivery growth due to macroeconomic factors.
- Measures to offset potential social security impacts on delivery riders.

3. Competition Pressures and In-Store Margin:
- Competition with Douyin expected to impact marketing expenses and subsidies.
- Margin pressure to ease as competitive environment stabilizes.

4. New Initiatives and Loss Reduction:
- Continued efforts to reduce losses in the new initiatives segment.
- Moderating pace of loss reduction, influenced by Meituan Select's performance.

5. Moderating Regulatory Risks:
- Decreased regulatory risk in the wider internet sector.
- Ongoing regulatory clarity required, particularly regarding social security payments.