PDD(US:PDD)2025-05-28 05:45Investment Rating - The investment rating for Pinduoduo Inc. is NEUTRAL with a price objective of USD 120.00, while the current price is USD 102.98 [1][7]. Core Insights - Pinduoduo's 1Q25 results were disappointing, with transaction revenues growing only 6% year-over-year, a significant drop from 33% in the previous quarter, and a 45% decline in non-GAAP profits [1][3]. - The company is adjusting its revenue and profit forecasts due to increased pressure on merchants, lowering 2025-26 revenue estimates by 4-6% and non-GAAP net profit estimates by 20-25% [2][12]. - Pinduoduo's management has indicated that factors affecting earnings include reduced trade-in subsidy benefits, tariff hikes impacting its largest market (the US), and proactive merchant fee reductions [1][2]. Summary by Sections Financial Performance - Total revenues for 1Q25 grew 10% year-over-year to RMB 95.7 billion, which was 6% below market expectations [3]. - Marketing revenues grew by 15% year-over-year, while transaction revenues grew by only 6%, down from 33% in the previous quarter [3]. - Non-GAAP operating margin decreased to 19.1%, down from 25.3% in 4Q24 and 32.9% in 1Q24, primarily due to reduced high-margin domestic revenues [3]. Revenue and Profit Estimates - The company has revised its revenue growth forecast for 2025 to 9% year-over-year, with a non-GAAP net profit forecast of RMB 99.1 billion, reflecting a margin of 23.1% [2][4]. - The adjusted price objective is based on a target P/E multiple of 10x for 2026 estimated non-GAAP EPADS of USD 12.0 [2][15]. Market Position and Strategy - Pinduoduo is recognized as the second-largest e-commerce platform in China by active buyers and is expanding its market share in the online retail segment [12][11]. - The company is investing RMB 100 billion in an ecosystem support program over the next three years to bolster consumer demand and merchant services [2][12].