Investment Rating - The report maintains a "Hold" rating for Pinduoduo (PDD.US) with a target price of $100, indicating a potential downside of 3% from the current price of $102.98 [1][7][17]. Core Insights - The company's profit has significantly declined, with a 45% year-over-year drop in adjusted net profit for Q1 2025, falling short of market expectations by 39% [7]. - Revenue growth for Q1 2025 was 10%, which is below market expectations by 6%, marking a slowdown from the previous quarter's growth of 24% [7]. - The report highlights that the revenue from Temu, a key service, has also slowed, with a growth rate of only 6% in Q1 2025 compared to 33% in the previous quarter [7]. - Increased sales expenses have not translated into significant revenue growth, with sales expenses rising by 43% year-over-year, leading to a net profit margin decline to 17.7% [7]. - The report anticipates further challenges in overseas business due to unaccounted tariff impacts, suggesting a high level of uncertainty moving forward [7]. Financial Projections - The projected revenue for FY25 is adjusted to RMB 428.2 billion, with an expected adjusted net profit of RMB 79.8 billion [2][8]. - The adjusted target P/E ratio for FY25 is set at 13x, with future projections indicating a decrease to 7.5x in FY26 and 6.5x in FY27 [2][8]. - The report outlines a significant increase in sales expenses, which are expected to continue impacting profit margins negatively [7]. Market Expectations - The market's price expectations for Pinduoduo range from $85 to $180, with the current target price set at $100 [3][7]. - The report indicates that the company lacks short-term catalysts for growth, contributing to the decision to maintain the "Hold" rating [7].

Group 1: Company Performance Overview - Meituan's new business revenue reached RMB 22.2 billion in Q1 2025, a year-on-year increase of 19.2%, with operating losses narrowing by 17.5% to RMB 2.3 billion [3][4] - Xiaomi reported total revenue of RMB 111.3 billion in Q1 2025, a historical high with a year-on-year growth of 47.4%, driven by the "mobile × AIoT" segment [5] - Kuaishou's overseas revenue grew by 32.7% year-on-year to RMB 1.3 billion in Q1 2025, marking its first quarter of operating profit [6][7] - Pinduoduo's revenue for Q1 2025 was RMB 95.7 billion, a 10% year-on-year increase, but operating profit and net profit saw significant declines of 38% and 47% respectively [8] Group 2: Strategic Initiatives and Market Expansion - Meituan is expanding its overseas market presence, recently entering Brazil with a planned investment of USD 1 billion over five years, citing the country's potential due to its large population and active economy [4] - Xiaomi is focusing on the African market, aiming to increase its market share from approximately 13% to 20-30% by adopting a scale-first strategy [5] - Kuaishou is enhancing its AI capabilities with the launch of Kuailing AI 2.0, which has generated over RMB 150 million in revenue, primarily from professional content creators [7] - Pinduoduo is implementing a "billion support plan" to assist domestic cross-border SMEs, emphasizing local supply and operations in response to external pressures [8]

Core Viewpoint - PDD Holdings, the parent company of Temu, reported a significant decline in profits for the first quarter, with revenue growth hitting a three-year low, indicating challenges in its operational model due to tariffs and weak consumer sentiment in its domestic market [1][4]. Financial Performance - Total revenue for Pinduoduo in the first quarter increased by 10% year-on-year to RMB 95.7 billion (approximately $13.7 billion), falling short of analyst expectations by RMB 5.9 billion (approximately $824 million) [4]. - Net income dropped by 47% year-on-year to RMB 14.7 billion (approximately $2.1 billion), missing general expectations by RMB 11 billion (approximately $1.5 billion), highlighting the impact of financial charges on profitability [4]. Market Challenges - The sudden slowdown in Pinduoduo's performance suggests that its business model is struggling to cope with combined pressures from tariffs, the end of minimum exemption, and fierce price competition in China's retail ecosystem [5]. - The macroeconomic and regulatory environment is currently unfavorable for Temu, with increasing trade barriers being set by governments to protect domestic interests [5]. Regulatory Developments - The EU has proposed a unified tax of €2 (approximately $2.27) on small packages valued under €150 (approximately $170.02) entering the European market, which could further impact Temu's pricing strategy [6][8]. - The G7 countries are also discussing imposing tariffs on ultra-low-priced goods from China, which could affect Temu's operations [6][8]. Strategic Adjustments - Temu has begun local warehousing services in Europe since December, with plans for 80% of European orders to be shipped from local warehouses [14]. - The company is adjusting its operational model to address regulatory challenges and consumer quality demands by gradually phasing out ultra-low-priced products and reducing user subsidies [14]. Market Position and Growth - According to Emerce, Temu's market share in Europe is expected to grow significantly to 35%-40%, surpassing North America as its largest market, with active users in Europe exceeding 120 million [11]. - The projected GMV for Temu in Europe is expected to reach €58 billion by 2025, reflecting a 45% increase from 2024 [11].

Core Viewpoint - Pinduoduo's Q1 2025 financial results showed a revenue of 95.6722 billion yuan, a 10% year-on-year increase, but below market expectations of 101.6 billion yuan. Net profit attributable to ordinary shareholders was 14.7418 billion yuan, a 47% decline year-on-year, indicating challenges in maintaining profitability amid rising costs and competitive pressures [1][2]. Revenue Structure - The revenue from online marketing services and other services was 48.722 billion yuan, a 15% year-on-year increase. Transaction service revenue was 46.955 billion yuan, a 6% year-on-year increase, but below the expected 54.231 billion yuan, suggesting a slowdown in transaction volume growth [1]. Cost and Profitability - Sales and marketing expenses surged by 43% to 33.403 billion yuan, primarily due to increased competition and customer acquisition costs, which significantly impacted profit margins. Additionally, operating costs rose by 25% year-on-year, driven by higher fulfillment and payment processing expenses [1][2]. Market Environment and Strategy - The company acknowledged that the changing market environment and new challenges have led to a slowdown in revenue growth, which is also influenced by fluctuations in the foreign exchange market. The chairman emphasized the need to sacrifice short-term performance to support merchants through temporary fluctuations [1][2]. Long-term Focus - The CFO pointed out that the combination of business scale expansion, intensified competition, and increased external uncertainties has contributed to the slowdown in growth. The company is focused on long-term intrinsic value enhancement rather than quarterly financial performance, with ongoing investments in its ecosystem [2]. Stock Market Reaction - Following the earnings release, Pinduoduo's stock price experienced a pre-market drop of over 20%, ultimately closing down nearly 14% [3].

Investment Rating - The report maintains a "Buy" rating for Pinduoduo (PDD US) with a target price adjusted from $165 to $135, indicating a potential upside of 31.1% from the current price of $102.98 [2][3][12]. Core Insights - The company's Q1 2025 performance fell short of expectations, with revenue and gross profit impacted by tariff uncertainties affecting TEMU and rising short-term logistics costs. The mainland e-commerce advertising revenue growth met expectations, but net profit was below forecasts due to increased subsidies in response to national policies [3][7]. - The report anticipates continued pressure on profits in Q2 2025 due to these factors, leading to a downward revision of revenue and profit forecasts by 9% and 25% respectively for 2025 [3][4]. - The long-term outlook remains positive, with expectations for a return to normalized profit levels by 2026, supported by strategic adjustments and merchant support plans [3][4]. Financial Forecast Summary - Revenue projections for 2025 have been revised to RMB 449.83 billion, down from RMB 496.41 billion, reflecting a 9.4% decrease. For 2026 and 2027, revenue is expected to be RMB 556.01 billion and RMB 630.39 billion, respectively [4][15]. - Adjusted net profit for 2025 is forecasted at RMB 104.83 billion, a 25.4% decrease from previous estimates, with further declines expected in 2026 and 2027 [4][15]. - The adjusted operating profit margin is projected to decline from 28.5% in 2024 to 24.6% in 2025, with a gradual recovery anticipated thereafter [4][15]. Performance Metrics - The report highlights a significant drop in adjusted net profit for Q1 2025, which fell 45% year-on-year to RMB 16.92 billion, significantly below consensus estimates [7][8]. - The gross margin for Q1 2025 was reported at 57%, down from 62% in the previous quarter, indicating pressure on profitability [8][9]. - The company's market capitalization is approximately $143.36 billion, with a year-to-date change of 6.18% [6][10].

Core Viewpoint - Long-termism is becoming a prominent trend in the business and investment sectors, but few companies can consistently adhere to this principle over time [1] Group 1: Company Strategy - Pinduoduo has launched a "100 billion support" initiative, following its previous "100 billion reduction" campaign, demonstrating a commitment to substantial investment in the e-commerce sector [2][5] - The company’s Q1 revenue reached 957 billion yuan, with a growth rate declining to 10%, yet it continues to prioritize the "100 billion support" strategy despite external pressures [2][9] - Pinduoduo established a "Merchant Rights Protection Committee" to address the needs of merchants, particularly small and medium-sized businesses, and has implemented measures to enhance merchant services [3][5] Group 2: Financial Commitment - In Q1, Pinduoduo's marketing expenses surged to 334 billion yuan, reflecting a nearly 100 billion yuan increase year-over-year, aimed at supporting merchants and consumers [9] - The company has introduced various consumer incentives, including a "100 billion merchant feedback plan" and significant subsidies across all product categories [7][9] Group 3: Long-term Vision - Pinduoduo remains focused on high-quality development within the e-commerce industry, resisting the temptation to chase fleeting market trends [8][10] - Despite facing short-term stock price volatility, the company's long-term strategy prioritizes the interests of users and merchants, which is expected to strengthen its competitive position over time [9][10]

Core Viewpoint - Pinduoduo's Q1 2025 financial report shows a revenue of approximately 95.7 billion RMB, marking a 10% year-on-year growth, the lowest in recent quarters, with a significant decline in operating profit by 38% [1] Financial Performance - The company's revenue fell short of market expectations by about 6 billion RMB, and profits were nearly 9 billion RMB below forecasts, leading to a pre-market stock drop of over 20% and a final decline of nearly 14% [1] - Marketing expenses reached 33.4 billion RMB, an increase of nearly 10 billion RMB compared to the same period last year, driven by the launch of the "100 billion support" strategy [1][2] Strategic Initiatives - The "100 billion support" plan includes various measures to assist merchants, with a focus on reducing operational costs, which has impacted short-term revenue performance [2] - Pinduoduo's management emphasized that investments in merchant support are viewed as long-term investments rather than immediate expenses, aiming to enhance platform ecology over the next 5 to 10 years [2][4] Merchant Support Measures - The company has established a "Merchant Rights Protection Committee" to oversee resources and support for merchants, including regular communication and violation warning mechanisms [2] - Pinduoduo is expanding its support to small and medium-sized merchants and has introduced a "100 billion merchant feedback plan" to provide consumer coupons and subsidies across various product categories [3] Agricultural Support - The "2025 Duoduo Good Specialty" initiative is actively engaging with agricultural regions to enhance production and income for local farmers, with customized solutions for local specialties [3][4] - The company is also supporting the establishment of a technology center focused on "digital commerce + new farmer training" in Yunnan, marking a significant step in agricultural innovation [3] Long-term Vision - Despite short-term financial challenges due to substantial merchant support investments, this strategy is expected to create a more stable merchant ecosystem for future growth [4] - The company remains committed to high-quality development and supporting merchants through economic cycles, emphasizing a long-term growth path [4]

Investment Rating - The report maintains a "Strong Buy" rating for Pinduoduo (PDD) with a target price range of $113 to $134 per share [3][4]. Core Insights - Pinduoduo reported Q1 2025 revenue of 95.67 billion yuan, a year-over-year increase of 10%, but GAAP net profit decreased by 45% to 16.9 billion yuan due to increased merchant support and changes in overseas tariff policies [1][2]. - The company is implementing a 100 billion yuan support plan aimed at enhancing the merchant ecosystem, which is expected to pressure short-term profitability but is viewed as a long-term investment for sustainable growth [1][4]. - The impact of tariff policies has led to a temporary slowdown in the growth of TEMU, but the long-term outlook for global market expansion and profitability remains positive [1][4]. Financial Data Summary - Revenue projections for Pinduoduo are as follows: 2023 at 247.639 billion yuan, 2024 at 393.836 billion yuan, and 2025E at 455.799 billion yuan, with year-over-year growth rates of 90%, 59%, and 16% respectively [2][7]. - Non-GAAP net profit is expected to be 67.899 billion yuan in 2023, 122.344 billion yuan in 2024, and 112.979 billion yuan in 2025E, reflecting a year-over-year growth of 72%, 80%, and a decline of 8% respectively [2][7]. - The report indicates a projected P/E ratio (Non-GAAP) of 14.9 for 2023, decreasing to 5.7 by 2027, suggesting a favorable valuation trend over the forecast period [2][7]. Stock Performance - The stock has shown a 1-month performance of -1.0%, a 6-month performance of +3.7%, and a 12-month performance of -34.6% [4]. - Relative performance indicates a decline of -4.8% over 1 month, -14.1% over 6 months, and -53.6% over 12 months compared to the market [4]. Shareholder Information - The total share capital is 567.859 million shares, with a market capitalization of $146.2 billion [3]. - The major shareholder, Huang Zheng, holds a 24.8% stake in the company [3]. Profitability Metrics - The gross margin for Q1 2025 was reported at 57%, a decrease of 5 percentage points year-over-year [1]. - The report highlights that the company is focusing on high-quality development strategies to foster a healthy merchant ecosystem, which is expected to support long-term sustainable growth [1][4].

Investment Rating - The report assigns a "Buy" rating to PDD Holdings with a 12-month sum-of-the-parts (SOTP) based target price of US$152, indicating an upside potential of 27.5% from the current price of US$119.24 [9][10]. Core Insights - PDD Holdings reported mixed results for 1Q25, with a 10% year-over-year increase in net revenues, but a significant 36% decline in adjusted EBIT. The online marketing revenue grew by 15% year-over-year, aligning with expectations [1][2]. - The negative market reaction, with a 17% drop in pre-market trading, was primarily due to a profit miss attributed to higher-than-expected Selling & Marketing expenses during a typically low season [1][2]. - The company is focusing on investments in its platform ecosystem to support small and medium-sized enterprises (SMEs), allowing them to compete effectively on pricing [1]. Revenue Performance - Online marketing revenue for 1Q25 was reported at RMB 48.722 million, reflecting a 15% year-over-year growth, which was in line with Goldman Sachs estimates and above the Visible Alpha consensus [2][10]. - Transaction commission revenue grew by only 6% year-over-year, falling short of expectations due to a shift in Temu's business model and ongoing investments in the platform ecosystem [2][10]. Future Outlook - Key discussion points for the results call include Pinduoduo's growth drivers, the impact of ongoing investments, and the differentiation of Temu's revenue outlook amidst changing market conditions [3]. - The report highlights potential challenges such as geopolitical headwinds, increased competition, and the need for reinvestments to sustain growth, which may affect core profit margins [9].

Group 1 - Temu has achieved remarkable growth in 2025, surpassing local giants in Poland and Brazil, indicating the global adaptability of its "extreme cost-performance + viral marketing" model [1][3] - In Brazil, Temu's market share reached 9.9% with a significant increase in traffic, totaling 56 million visits in April and 39 million monthly active users, surpassing Shopee [3][4] - In Poland, Temu's user base grew to 18.1 million, exceeding Allegro's 17.8 million users, showcasing its competitive edge in the market [4] Group 2 - The growth strategy of Temu relies on viral marketing and social media advertising, leading to explosive growth in categories like home goods, tools, and electronics [5] - Despite having more active users than Amazon, Temu's average revenue per user (ARPU) is only one-third of Amazon's, indicating a need for refined operations as competition intensifies [8] - Regulatory tightening and increased competition suggest that a simple price war may not be sustainable for Temu in the long run [8] Group 3 - Easy ERP provides a comprehensive solution for Temu sellers, enhancing order fulfillment efficiency through a semi-managed model that synchronizes cross-border and local orders [9][11] - The inventory management feature of Easy ERP allows real-time visibility of stock across various warehouses, facilitating intelligent restocking based on sales forecasts [11] - Easy ERP also supports profit analysis by tracking costs and revenues for each order, which is crucial for maintaining supply chain efficiency under Temu's low-cost model [12]