The latest: JPMorgan disclosed it purchased 13.83 million shares of Meituan (3690.HK) on May 31 for more than HK$1.6 billion ($205 million), raising its stake in the online food delivery giant from 4.96% to 5.19%, according to a new Hong Kong Stock Exchange filing.

Looking up: Meituan announced at the end of May that it returned to the black in the first quarter of this year, recording a net profit of 3.36 billion yuan ($474 million). JPMorgan’s action could reflect its growing confidence in the company’s prospects during China’s post-pandemic recovery.

Take Note: JPMorgan’s shareholding in Meituan now exceeds the 5% threshold that requires disclosures of any changes in its holdings, meaning it will need to publicly disclose any future increases or decreases.

Digging Deeper: Meituan entered a new cash-burning phase with the launch of its community group-buying and grocery businesses in 2020. That pushed it into the red with combined losses of more than 30 billion yuan in the past two years, as losses from the newer businesses offset profits for its older food delivery and in-store, hotel and travel services businesses. But the company returned to the black with a net profit of 3.36 billion yuan in the first quarter of this year, thanks to an increase in revenue and narrowing operating losses for its new businesses. The profit far exceeding market expectations for a 210 million yuan loss, prompting several major banks to raise their price targets for the company.

Market Reaction: Meituan shares fluctuated slightly on Monday and closed down 0.3% at HK$121.2 by the midday break. The stock now trades near the lower end of its 52-week range.

Translation by Jony Ho

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