(Yicai) Nov. 30 -- Meituan had its share price target cut at Citibank and Morgan Stanley after the Chinese on-demand delivery giant’s shares plunged yesterday to the lowest in three and a half years.

Citibank cut its target price for Meituan to HKD179 (USD22.92) a share from HKD214, but kept its 'buy' rating on the stock, according to online broker Futu Holdings, which cited a research report the US lender published yesterday. Morgan Stanley set a target of HKD120, down from HKD180, and downgraded its rating to ‘equal weight’ from ‘overweight.’

Meituan’s shares [HKG: 3690] rose 0.2 percent in Hong Kong today to close at HKD90.65 (USD11.61) apiece. They sank to the lowest since April 2020 yesterday, ending 12.2 percent down, after the Beijing-based company warned of slower revenue growth at its main food delivery business this quarter and said it will spend more on promotions to tackle competition.

Citibank said that although Meituan’s management is committed to narrowing the loss ratio of new businesses, its effective merchant penetration and services, including live-streaming, group buying, and scenic spot tickets, may impact net profit. Morgan Stanley said the slower-than-expected pickup in consumer sentiment brought uncertainties to the rebound in Meituan's core local business revenue.

Meituan's sales and marketing costs soared 55 percent to CNY16.9 billion (USD2.4 billion) in the three months ended Sept. 30 from a year earlier, its third-quarter earnings report showed on Nov. 28. Its marketing expenses will continue to grow this quarter, founder and Chief Executive Wang Xing noted yesterday.

US investment bank Jefferies also cut its share price target for Meituan to HKD230 from HKD255 and maintained its ‘buy’ rating, pointing to the delivery firm’s quarter-on-quarter slowdown and a forecast for a 24 percent year-on-year jump in delivery orders.

In the three months ended Sept. 30, Meituan’s net profit surged 195 percent to CNY3.6 billion (USD507.9 million) from a year earlier, with adjusted net profit up 62 percent at CNY5.4 billion, according to its financial report. Revenue rose 22 percent to CNY76.5 billion (USD10.8 billion). 

Editors: Shi Yi, Martin Kadiev