Fitch Upgrades Meituan to BBB on Significant Profitability Boost

Fitch Ratings raised Meituan's (HKG:3690) long-term issuer default rating to BBB from BBB-, based on the Chinese e-commerce company's markedly enhanced profitability and solid free cash flow amid a strategy change and slower in-store competition.

Increased profitability was driven by a marked reduction in losses from the company's new initiatives, continued market leadership in food delivery and fast growth in on-demand delivery business Instashopping, Fitch said in a Wednesday release.

Medium-term prospects for Meituan's EBITDA growth and free cash flow generation will benefit from its platform scalability, greater penetration of its core local commerce segment and a strategy move to return-driven investments from subsidy-tied ones.

The positive outlook considers the chance of the rating being bumped up to BBB+ over the next six to 12 months, with the company's performance hitting Fitch's expectations.

Price (HKD): $119.40, Change: $+0.50, Percent Change: +0.42%