拼多多：Increased monetization drove a strong beat on results

Investment Rating - The report maintains a "BUY" rating for PDD Holdings with a target price of US$192.70, which represents a 31.0% upside from the current price of US$147.09 [1]. Core Insights - PDD Holdings reported a strong performance in 1Q24, with revenue increasing by 131% year-over-year to RMB86.8 billion, surpassing Bloomberg consensus estimates by 13% [1]. - The significant revenue growth is attributed to enhanced monetization of the domestic business and accelerated international expansion [1]. - Non-GAAP net profit rose by 202% year-over-year to RMB30.6 billion, exceeding consensus expectations of RMB15.5 billion [1]. - The company is transitioning its valuation method from DCF to SOTP to better reflect the value split between its core domestic and international businesses [1]. Financial Performance Summary - In 1Q24, online marketing services and other revenues increased by 56% year-over-year to RMB42.5 billion, accounting for 48.9% of total revenue [3]. - Transaction services revenue grew by 327% year-over-year to RMB44.4 billion, driven by the Temu business and optimized consumer subsidy spending [1][3]. - Gross profit margin (GPM) decreased to 62.3% in 1Q24 from 70.4% in 1Q23, while operating profit margin (OPM) improved to 29.9% from 18.4% in 1Q23 [3]. - The company aims to build a compliance program to support long-term business development and mitigate geopolitical risks [1]. Revenue and Profit Forecast - Revenue is projected to grow from RMB247.6 billion in FY23A to RMB438.7 billion in FY24E, reflecting a year-over-year growth of 78.8% [2]. - Adjusted net profit is expected to increase from RMB67.9 billion in FY23A to RMB121.4 billion in FY24E, indicating a growth rate of 78.8% [2]. - The report anticipates a continued strong performance with a projected P/E ratio of 12.8x for FY24E [2]. Valuation Breakdown - The SOTP-based target price of US$192.7 includes valuations of US$154.6 for the main app, US$1.9 for Duoduo Grocery, and US$15.6 for Temu, along with US$20.6 for net cash [10].