PDD(US:PDD) Hua Er Jie Jian Wen·2025-10-02 08:14Core Insights - Temu has demonstrated strong resilience through successful business model transformation and robust operations despite tariff policy-induced turbulence [1][2] - UBS analysts have raised the target price for Pinduoduo from $176 to $198, reiterating a "buy" rating based on Temu's recovery momentum and long-term growth potential [1][4] Business Model Transformation - Temu shifted its focus from a "fully managed" model to a "semi-managed" model in the U.S. market, transferring logistics and tax compliance responsibilities to merchants, effectively reducing the impact of tariffs on final prices from 54% to a range of 13-18% [2][3] - By Q2 2025, Temu's GMV composition is expected to reverse from 70% fully managed to 70% semi-managed [2] Supply Chain Efficiency - UBS emphasizes that Temu's long-term value creation stems from enhanced supply chain efficiency rather than temporary subsidies or tax benefits, allowing it to maintain a price discount of 10-15% compared to competitors [3][5] - The semi-managed model is projected to achieve high single-digit operating profit margins by 2029, significantly higher than Pinduoduo's domestic e-commerce margin of approximately 3% [3] Market Expansion and Logistics - Temu has expanded its logistics capabilities, establishing 110 warehouses in the U.S. and 10 in Europe by mid-2025, ensuring timely delivery through pre-stocked popular items [2][6] - The company is also accelerating its expansion into non-U.S. markets like Europe and Latin America to mitigate geopolitical risks [2] Financial Outlook - Despite effective strategic adjustments, Temu is expected to face financial pressure in the short term, with operating losses projected to increase from 32 billion yuan in 2024 to 50 billion yuan in 2025 [6] - Long-term forecasts remain optimistic, with expectations of achieving quarterly breakeven by the end of 2026 and an operating profit margin of 6% by 2029 [6] - UBS predicts Temu's GMV will reach $75 billion and $90 billion in 2025 and 2026, respectively [6]