Equity Research

For the upcoming China internet mega-caps' 2Q earnings, we expect aggregate China Internet profits to see the first yoy decline since 2Q22, -10% yoy dragged down eCommerce & local services (otherwise a still healthy +11% profit growth yoy ex. the Top 4 transaction platforms). We expect key highlights to be centered around: 1) Sequential acceleration in AI/cloud hyperscaler revenue growth 2) Significant profit declines across transaction platforms (GSe: -16% yoy for Alibaba group EBITA and 58-70% declines yoy at Meituan & JD EBIT) 3) Responses to the government's anti-involution policies.

As part of the expert channel-check calls arranged alongside China Consumer team's APAC Consumer & Leisure Corporate Day, we hosted an expert session on food delivery with investors on June 11. Key topics discussed include 1) Enlarged on-demand consumption market from recent platform subsidies, where the food delivery industry has seen acceleration of order volume growth towards 120mn daily order (from c.80mn a year ago), with acceleration in on-demand shopping/instashopping volumes; 2) Evolving strategies amongst food delivery platforms, where competition intensified from April to May as Meituan & Taobao Instant Shopping/Ele.me responded to JD's entrance/elevated subsidies. 3) Long-term competitive landscape of food delivery: The expert presented various long-term market share scenarios. On unit economics across platforms, the expert expects JD's loss per order to peak in 2Q25, with gradual improvement towards 4Q25.