Forensic Analyst

Jason Yap, CFA

Forensic Accounting

In the wake of Alibaba’s below consensus earnings, PDD’s upcoming Q2 2021 results would be informative for investors to ascertain whether there is a sector wide slowdown or PDD benefits as Alibaba relinquishes market share in response to anti-monopoly pressures.
While PDD reported a respectable Q1 2021 performance, there are early signs of a financial and operational performance slowdown if we examine the sequential quarter on quarter financial and operating metrics and operating cashflows, and Q2 2021 results can confirm (or debunk) these preliminarily observed trends.  Further, Q2 2021 results will provide insight as to whether PDD’s asset-heavy strategy for Duo Duo Grocery (DDG) and logistics and fulfilment infrastructure yields any tangible results or instead, becomes a longer term drag on earnings.
We examine these issues and highlight key factors to watch in PDD's upcoming Q2 2021 results.

In the wake of Alibaba’s below consensus earnings, PDD’s upcoming Q2 2021 results would be informative for investors to ascertain whether there is a sector wide slowdown or PDD benefits as Alibaba relinquishes market share in response to anti-monopoly pressures.
While PDD reported a respectable Q1 2021 performance, there are early signs of a financial and operational performance slowdown if we examine the sequential quarter on quarter financial and operating metrics and operating cashflows, and Q2 2021 results can confirm (or debunk) these preliminarily observed trends.  Further, Q2 2021 results will provide insight as to whether PDD’s asset-heavy strategy for Duo Duo Grocery (DDG) and logistics and fulfilment infrastructure yields any tangible results or instead, becomes a longer term drag on earnings.
We examine these issues and highlight key factors to watch in PDD's upcoming Q2 2021 results.  

Pinduoduo - Q2 2021 Preview Through a Forensic Lens

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.

Equity Bottom-Up

<ul>
<li>PDD’s market cap has exceeded Alibaba’s due to PDD’s overseas performance and price sensitive consumers.</li>
<li>Great Wall Motor plans to enter eight countries in Europe to bypass the investigation on Chinese export subsidies.</li>
<li>ByteDance plans to close its game subsidy and, 2,000 employees may lose their jobs.</li>
</ul>


PDD’s market cap has exceeded Alibaba’s due to PDD’s overseas performance and price sensitive consumers.
Great Wall Motor plans to enter eight countries in Europe to bypass the investigation on Chinese export subsidies.
ByteDance plans to close its game subsidy and, 2,000 employees may lose their jobs.


China Consumption Weekly (4 Dec 2023): PDD, Alibaba, AliHealth, Great Wall Motor, ByteDance

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

<ul>
<li>PDD reported C3Q23 top-line, non-GAAP EBIT, and GAAP net profit 9%, (4%) and in-line vs. our estimate, and 28%, 29%, and 42%, vs. consensus respectively.</li>
<li>We estimate that Temu reached positive gross profit for the first time in 3Q, one quarter ahead of our prior estimate.</li>
<li>We believe increased prices on its US platform was the main driver, while it was able to maintain supply prices.</li>
</ul>


PDD reported C3Q23 top-line, non-GAAP EBIT, and GAAP net profit 9%, (4%) and in-line vs. our estimate, and 28%, 29%, and 42%, vs. consensus respectively.
We estimate that Temu reached positive gross profit for the first time in 3Q, one quarter ahead of our prior estimate.
We believe increased prices on its US platform was the main driver, while it was able to maintain supply prices.


[PDD Holdings (PDD US, BUY, TP US$165) TP Change]: PDD and Temu Growth Tailwinds Will Continue

Greater China Equity Long/Short Analyst

Eric Chen

<ul>
<li>Stock rally on strong revenue growth suggests TEMU will be at center stage of the investment thesis for PDD down the road. </li>
<li>Besides soaring GMV, TEMU achieved blowout performance likely due to much higher-than-expected take-rate and disciplined marketing, resulting in narrower-than-expected losses.</li>
<li>We expect the company's growth will even accelerate in 4Q23 and generate adjusted net profit of US$12 bn for FY24, with a target market cap of US$240 bn (20xPE).</li>
</ul>


Stock rally on strong revenue growth suggests TEMU will be at center stage of the investment thesis for PDD down the road. 
Besides soaring GMV, TEMU achieved blowout performance likely due to much higher-than-expected take-rate and disciplined marketing, resulting in narrower-than-expected losses.
We expect the company's growth will even accelerate in 4Q23 and generate adjusted net profit of US$12 bn for FY24, with a target market cap of US$240 bn (20xPE).


<ul>
<li>In 3Q23, total revenue surged by 94% YoY, as Temu started operations in nine European countries in August.</li>
<li>Operating profits increased by 60% YoY in 3Q23, so we believe overseas businesses have made profits.</li>
<li>The stock price reached our last target, but we believe there is still an upside of 40% for 2024.</li>
</ul>


In 3Q23, total revenue surged by 94% YoY, as Temu started operations in nine European countries in August.
Operating profits increased by 60% YoY in 3Q23, so we believe overseas businesses have made profits.
The stock price reached our last target, but we believe there is still an upside of 40% for 2024.


PDD (PDD US): 3Q23, Grew Dramatically Overseas, Still Upside After Reaching Our Last Target

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)

Pinduoduo - Q2 2021 Preview Through a Forensic Lens

PDD’s upcoming Q2 2021 results could help investors better understand e-commerce sector and company trends, such as GMV and revenue growth. We...

Jason Yap, CFA

China Consumption Weekly (4 Dec 2023): PDD, Alibaba, AliHealth, Great Wall Motor, ByteDance

PDD’s market cap has exceeded Alibaba’s. Great Wall Motor plans to enter eight countries in Europe. ByteDance plans to close its game subsidy.

Ming Lu