Blue Lotus Non US Internet research, Blue Lotus Research Institute

Ying Pan

Blue Lotus Non US Internet research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>PDD reported C4Q23 top-line, non-GAAP EBIT, and non-GAAP net income (2.4%), 12.4%, and 24% vs. our est., and 11.6%, 37.0%, and 50.3% vs. cons., respectively;</li>
<li>We estimate the beat was driven by (1) improved take rate on the China platform following ad tool adjustments, and (2) Temu margin expansion;</li>
<li>We remove Temu US from our model from 2025+, as restrictions seem more than likely following the TikTok ban and cut TP to US$ 159 to reflect this;</li>
</ul>


PDD reported C4Q23 top-line, non-GAAP EBIT, and non-GAAP net income (2.4%), 12.4%, and 24% vs. our est., and 11.6%, 37.0%, and 50.3% vs. cons., respectively;
We estimate the beat was driven by (1) improved take rate on the China platform following ad tool adjustments, and (2) Temu margin expansion;
We remove Temu US from our model from 2025+, as restrictions seem more than likely following the TikTok ban and cut TP to US$ 159 to reflect this;


[PDD Holdings (PDD US, BUY, TP US$159) TP Change]: Bargain Valuation, Even if Temu Disappears

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>Both advertising revenue and commission revenue grew dramatically in 4Q23.</li>
<li>Chinese consumers are seeking low price goods, after the economy went weak.</li>
<li>PDD’s overseas brand, TEMU, is expanding rapidly in the U.S.</li>
</ul>


Both advertising revenue and commission revenue grew dramatically in 4Q23.
Chinese consumers are seeking low price goods, after the economy went weak.
PDD’s overseas brand, TEMU, is expanding rapidly in the U.S.


PDD (PDD): 4Q23, Time for Low Price Goods, Revenue up by 123% YoY

Greater China Equity Long/Short Analyst

Eric Chen

<ul>
<li>We see further upside to our previous above-consensus 4Q23 results estimates on low base, enhanced monetization, and faster TEMU expansion.</li>
<li>That said, we believe market focus already shifted to outlook for 2024, in particular an imminent slowdown in 1Q24 and renewed concern around US curb on TEMU.</li>
<li>30% share price correction is pricing in the above scenario and valuation should gradually improve as PDD delivers back-loaded bottom line growth in 2024.</li>
</ul>


We see further upside to our previous above-consensus 4Q23 results estimates on low base, enhanced monetization, and faster TEMU expansion.
That said, we believe market focus already shifted to outlook for 2024, in particular an imminent slowdown in 1Q24 and renewed concern around US curb on TEMU.
30% share price correction is pricing in the above scenario and valuation should gradually improve as PDD delivers back-loaded bottom line growth in 2024.


Pinduoduo (PDD US): Pricing in an Imminent Slowdown

<ul>
<li>We expect PDD to report CY4Q23 top-line and non-GAAP net income 14.3% and 21.2% vs. consensus. Main model changes are increased Temu revenue per order and PDD take-rate;</li>
<li>Temu continued increasing prices despite the holiday shopping season, and merchants reported that Temu began charging service fees. PDD upgraded its ads tools, which we expect boosted China take rate.</li>
<li>We maintain our BUY rating and raise our TP to US$ 178.</li>
</ul>


We expect PDD to report CY4Q23 top-line and non-GAAP net income 14.3% and 21.2% vs. consensus. Main model changes are increased Temu revenue per order and PDD take-rate;
Temu continued increasing prices despite the holiday shopping season, and merchants reported that Temu began charging service fees. PDD upgraded its ads tools, which we expect boosted China take rate.
We maintain our BUY rating and raise our TP to US$ 178.


[PDD Holdings Inc. (PDD US, BUY, TP US$178) TP Change]: Fine-Tuned Extraction of Merchant Profits

<ul>
<li>We expect PDD to report the highest growth in topline for 4Q23 over last three years. In particular, we believe its bottom line will beat by wide margin.</li>
<li>But easy days are gone for PDD’s domestic e-commerce business and high base will kick in from 1Q24, resulting in tough comps, notable deceleration and potentially short-term share price volatility.</li>
<li>We see 20% upside to current PDD valuation by assigning 20xPE to our US$12 billion adjusted net profit estimate for 2024.</li>
</ul>


We expect PDD to report the highest growth in topline for 4Q23 over last three years. In particular, we believe its bottom line will beat by wide margin.
But easy days are gone for PDD’s domestic e-commerce business and high base will kick in from 1Q24, resulting in tough comps, notable deceleration and potentially short-term share price volatility.
We see 20% upside to current PDD valuation by assigning 20xPE to our US$12 billion adjusted net profit estimate for 2024.


Pinduoduo (PDD US): Another Strong Beat Around the Corner

China

PDD Holdings Inc. is a multinational commerce group that owns and operates a portfolio of businesses. The Company focuses on digital economy so that local communities and small businesses can benefit from the increased productivity and new opportunities. PDD Holdings has built a network of sourcing, logistics, and fulfillment capabilities for its underlying businesses.

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PDD Holdings (PDD US)