PDD(US:PDD) GF SECURITIES·2026-01-20 13:47Investment Rating - The report assigns a "Buy" rating for Temu and other related companies in the cross-border e-commerce sector [5]. Core Insights - Temu has experienced rapid growth since its launch in 2022, becoming a significant player in the global cross-border e-commerce market, leveraging supply chain advantages and a full-service model to achieve commercial success [4][12]. - The report discusses Temu's strategies to address U.S. tariff challenges, including expanding semi-managed services and exploring new fulfillment models, which have accelerated its operational upgrades [4][39]. - Regional expansion, particularly in Europe and Latin America, is identified as a potential new growth driver for Temu, despite facing regulatory challenges in these markets [4][19]. - Although Temu is currently operating at a loss, the report suggests that profitability is achievable in the future, driven by marketing cost savings, increased advertising revenue from semi-managed services, and potential reductions in logistics costs [4][12]. Summary by Sections Section 1: Temu as a Global Cross-Border E-Commerce Player - Temu has expanded its operations to 75 countries, including North America, Latin America, Europe, Japan, and Southeast Asia, since its launch [13][15]. - By 2025, Temu's global GMV is projected to reach approximately $75 billion, benefiting from improved supply chain efficiency and sustainable pricing advantages [12]. Section 2: Early Competitive Advantages - Temu initially gained market share by offering low-priced products, with 39% of U.S. users purchasing items priced between $0-50, indicating a focus on budget-conscious consumers [27][28]. - The full-service model allowed Temu to reduce costs through direct factory connections and centralized logistics, enhancing its price competitiveness [35]. Section 3: U.S. Tariff Challenges - In 2025, U.S. tariff changes significantly impacted Temu's business, leading to a decline in sales and user numbers during the transition from a full-service to a semi-managed model [40][41]. - Temu's response included expanding semi-managed services and increasing local warehouse operations to mitigate the impact of tariffs [44]. Section 4: Growth Potential in Other Markets - The report highlights the fragmented nature of the European market, which requires localized strategies, while also noting the competitive landscape in Latin America as a potential growth area for Temu [4][19]. - Temu's advertising expenditures have significantly increased, with a focus on social media platforms, contributing to user acquisition and brand visibility [38]. Section 5: Profitability Pathways - The report explores potential pathways to profitability for Temu, emphasizing the importance of marketing efficiency, increased advertising revenue, and logistics cost reductions [4][12].