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

[PDD Holdings (PDD US,BUY,TP US$172) TP Change]:Squeezing Supplier Base for Its Own Benefit,Globally

Blue Lotus Non US Internet research, Blue Lotus Research Institute

Ying Pan

Blue Lotus Non US Internet research

Equity Bottom-Up

<ul>
<li>PDD reported C2Q24 top line, non-GAAP operating income and GAAP net income (3.9%), (1.2%) and (4.4%) below our estimates, and (2.9%), 12% and 16% above consensus. </li>
<li>We believe PDD's upgrade in its ecosystem and infrastructure is long overdue. Such investment would support its growth, especially in overseas. </li>
<li>Trading at 6.4x 2025 PE, we believe PDD is undervalued. We reiterate BUY and place it as TOP PICK of China's e-commerce sector.</li>
</ul>


PDD reported C2Q24 top line, non-GAAP operating income and GAAP net income (3.9%), (1.2%) and (4.4%) below our estimates, and (2.9%), 12% and 16% above consensus. 
We believe PDD's upgrade in its ecosystem and infrastructure is long overdue. Such investment would support its growth, especially in overseas. 
Trading at 6.4x 2025 PE, we believe PDD is undervalued. We reiterate BUY and place it as TOP PICK of China's e-commerce sector.


[Pinduoduo (PDD US, BUY, TP US$160) TP Change]: Investment Means Continued High Growth