PDD(US:PDD) Ge Long Hui·2025-08-26 06:38Group 1: Financial Performance - PDD reported total revenue of RMB103 billion in 2Q25, up 7% YoY, aligning with consensus expectations [1] - Online marketing and other services revenue increased by 13% YoY to RMB55.7 billion, exceeding consensus of +11.8% [1] - Transaction services revenue rose 0.7% YoY to RMB48.3 billion, slightly above consensus of +0.6% [1] - Gross profit was RMB58.1 billion, slightly below expectations, with a gross margin of 56% compared to consensus of 59.3% [1] - Non-GAAP operating profit reached RMB27.7 billion, surpassing consensus of RMB23.3 billion, driven by strong cost control [1] Group 2: Market Position and Strategy - PDD has chosen not to aggressively participate in subsidy-driven price wars in China's e-commerce sector, focusing instead on long-term value creation [2] - The company is committed to improving user experience and ecosystem development while managing short-term impacts from the RMB100 billion merchant support program [2] - Sales and marketing efficiency improved, with spending rising only 4% YoY and coming in RMB8 billion below market expectations [2] Group 3: Adaptation to Market Changes - Temu faced challenges from the removal of the U.S. de minimis exemption and increased tariffs, prompting PDD to shift to a semi-entrusted revenue model [3] - Despite these challenges, transaction services revenue remained resilient at RMB48.3 billion, reflecting PDD's ability to adapt and expand into new markets [3] Group 4: Management Outlook and Valuation - Management expressed caution regarding the sustainability of current profit levels, indicating potential volatility in future earnings [4] - The stock is trading at US$128.21 per ADS, with a market cap of US$182 billion, suggesting an undemanding valuation compared to sector averages [4] - Consensus forecasts for 2025/26 revenue are US$60 billion and US$70 billion, with EBITDA expected to be US$13 billion and US$18 billion, indicating growth potential [4]