Investment Rating - The report initiates coverage on Dingdong Maicai with a "Buy" rating and a target price of $2.77, corresponding to an adjusted PE of 11x for 2025 [1][7]. Core Viewpoints - As a leading regional fresh e-commerce player, Dingdong Maicai has demonstrated the profitability and sustainability of the front warehouse model. The internal strategic transformation starting in early 2025 is expected to strengthen its differentiation and product capabilities. While short-term competition from external giants may pose challenges, the company is anticipated to benefit from evolving consumer habits in the instant retail landscape [1][2][3]. Summary by Sections Industry Overview - The fresh e-commerce sector has maintained a high growth rate, with the market size projected to increase from 364.1 billion RMB in 2020 to 736.8 billion RMB in 2024, reflecting a CAGR of 19.3%. The online penetration rate for fresh e-commerce is expected to reach 14.9% in 2024, indicating significant room for growth compared to the 26.8% penetration rate for physical goods [2][17]. Company Strategy - Dingdong Maicai's "4G Strategy" focuses on "Good Users, Good Products, Good Services, and Good Mindset," emphasizing the development of high-quality and differentiated products. The strategy includes restructuring the organizational framework into ten independent business units, each managed by senior executives, and enhancing user experience through app improvements and personalized dietary suggestions [3][19][20]. Competitive Landscape - The report highlights that while there are concerns about intensified competition from instant retail subsidies and players like Xiaoxiang Supermarket, Dingdong Maicai's focus on home cooking and high-quality fresh products positions it uniquely. The user demographics and product categories differ significantly from those of competitors, suggesting limited impact on Dingdong Maicai's market share [4][21][22]. Financial Projections - The forecast for Dingdong Maicai's non-GAAP net profit is projected to be 400 million RMB in 2025, with a slight decline of 4% year-on-year, followed by growth of 27% and 21% in 2026 and 2027, respectively. The target price of $2.77 reflects a discount compared to comparable companies due to the ongoing transformation phase and competitive pressures [5][11].