Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

<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).


External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>PDD Holdings (PDD) announced (28 Nov) 3Q23 results: revenue was up 94% YoY to RMB68.8bn, 26% ahead of both our/Bloomberg consensus estimates, which we mainly attribute to stronger-than-expected international expansion, and incremental commission revenue generation from the “Ten billion subsidy” section.</li><li>Non-GAAP net income increased by 37% YoY to RMB17.0bn, 30% ahead of consensus, which we attribute to a likely narrower-than-expected loss generated from Temu business, aided by a stronger-than-expected scale effect, and likely better-than-expected profit generation from Duoduo Grocery, aided by well-established consumer mindshare.</li><li>The results echoed our view that PDD’s overseas business is ramping up quickly, and is on track to support PDD’s long-term revenue and earnings growth. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

PDD Holdings (PDD) announced (28 Nov) 3Q23 results: revenue was up 94% YoY to RMB68.8bn, 26% ahead of both our/Bloomberg consensus estimates, which we mainly attribute to stronger-than-expected international expansion, and incremental commission revenue generation from the “Ten billion subsidy” section.Non-GAAP net income increased by 37% YoY to RMB17.0bn, 30% ahead of consensus, which we attribute to a likely narrower-than-expected loss generated from Temu business, aided by a stronger-than-expected scale effect, and likely better-than-expected profit generation from Duoduo Grocery, aided by well-established consumer mindshare.The results echoed our view that PDD’s overseas business is ramping up quickly, and is on track to support PDD’s long-term revenue and earnings growth. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

PDD Holdings (PDD US) – International Expansion Drove a Strong Beat for 3Q Results

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>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

<ul><li>We remain positive on PDD Holdings’ (PDD) long-term growth prospect, mainly given: 1) domestic business could maintain healthy revenue and earnings growth in 2023, aided by the incorporation of more branded products and high ASP products, as well as the increase in monetization, aided by the increase in percentage of paid traffic volume;</li><li>2) Temu, the overseas e-commerce business operated under the “fully-entrusted” model, leveraging strong domestic supply chain and PDD’s strong execution capability, has seen robust GMV and revenue growth, which is on track to support PDD’s long-term revenue and earnings growth, and will likely propel a further valuation rerating, in our view.</li><li>We lift our DCF-based TP by 21% to US$131.8 (was US$109.0), to factor in potentially stronger-than-expected domestic business monetization expansion, and betterthan-expected development of Temu business. Maintain BUY.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We remain positive on PDD Holdings’ (PDD) long-term growth prospect, mainly given: 1) domestic business could maintain healthy revenue and earnings growth in 2023, aided by the incorporation of more branded products and high ASP products, as well as the increase in monetization, aided by the increase in percentage of paid traffic volume;2) Temu, the overseas e-commerce business operated under the “fully-entrusted” model, leveraging strong domestic supply chain and PDD’s strong execution capability, has seen robust GMV and revenue growth, which is on track to support PDD’s long-term revenue and earnings growth, and will likely propel a further valuation rerating, in our view.We lift our DCF-based TP by 21% to US$131.8 (was US$109.0), to factor in potentially stronger-than-expected domestic business monetization expansion, and betterthan-expected development of Temu business. Maintain BUY.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

PDD Holdings (PDD US) – Rapid Overseas Business Expansion

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

<ul><li>PDD Holdings Inc. delivered a solid result and managed an all-around beat in the quarter.</li><li>The company experienced a substantial 66% year-on-year increase in revenue, signaling a growing trust in its products and services.</li><li>This surge in consumer confidence has led to increased demand across various product categories, a testament to the company's continued success.</li></ul>

PDD Holdings Inc. delivered a solid result and managed an all-around beat in the quarter.The company experienced a substantial 66% year-on-year increase in revenue, signaling a growing trust in its products and services.This surge in consumer confidence has led to increased demand across various product categories, a testament to the company's continued success.

PDD Holdings Inc.: Breaking the Mold with Tech-Driven Farming Innovations and Skyrocketing Revenues! - Major Drivers

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 (PDD US): TEMU at Center Stage

Strong growth and impressive performance suggest TEMU will be at center stage of PDD's investment thesis going forward. We see PDD hit US$240...

Eric Chen