PDD(US:PDD) HTSC·2025-08-26 04:00Investment Rating - The report maintains a "Hold" rating for Pinduoduo [5] Core Insights - Pinduoduo's Q2 2025 total revenue reached 104 billion RMB, a year-on-year increase of 7.1%, aligning with Visible Alpha's consensus estimate of 103.2 billion RMB; the non-GAAP net profit was 32.7 billion RMB, corresponding to a non-GAAP net profit margin of 31.5%, which is a decline of 4 percentage points year-on-year but better than the consensus estimate of 21.0% [1][5] - The better-than-expected profit performance is attributed to significant improvements in interest and investment income, which amounted to 10.4 billion RMB in Q2 2025, compared to 4.9 billion RMB in Q2 2024 and 0.2 billion RMB in Q1 2025; a decrease in sales expense ratio due to reduced marketing spending in overseas markets and a cautious subsidy strategy in domestic e-commerce [1][2] - Management indicated that profitability may fluctuate as the company increases investment, and the Q2 2025 performance may not represent future trends [1] Domestic E-commerce - Pinduoduo's online marketplace service revenue grew by 13.4% year-on-year to 55.7 billion RMB, exceeding the consensus estimate of 11.8% growth; transaction service revenue increased by 0.7% to 48.3 billion RMB, in line with the consensus estimate [2] - The "100 billion subsidy" plan has significantly reduced costs for merchants, with logistics improvements leading to a 40% year-on-year increase in orders from remote areas; the "1 trillion support" plan is helping merchants transition from private label to branded products [2] Overseas E-commerce - Management is focusing on enhancing supply chain, service, and compliance capabilities to improve business efficiency; the sales expense ratio for Q2 2025 was 26.2%, better than the consensus estimate of 34.1%, reflecting a short-term decrease in marketing spending in the U.S. [3] - Future investments will be directed towards localizing operations and improving fulfillment experiences, with expectations for Temu to continue enhancing overseas warehouse capabilities [3] Profit Forecast and Valuation - The report revises the non-GAAP net profit forecasts for 2025-2027 upwards by 35.6%, 25.7%, and 23.6% to 108.6 billion RMB, 133.9 billion RMB, and 157.9 billion RMB respectively; the new target price is set at 136.0 USD, up from 102.3 USD [4][20] - The valuation for the domestic e-commerce main site is set at 93.0 USD per ADS, based on a 9x PE for 2025E, while the valuation for the multi-buy business is 11.2 USD per ADS, and for Temu, it is 31.8 USD per ADS [20][21]