Shawn Yang

China/Asia TMT

Blue Lotus Research Institute

China TMT research

Equity Bottom-Up

<ul>
<li>We expect PDD’s total revenue in C4Q22 to be in line with cons., and non-GAAP net income to beat cons. by 9%.</li>
<li>Faster-Than-Peers user growth, increase in brand product contribution and newly launched marketing program support PDD’s strong GMV trend and high take rate in the near term.</li>
<li>Temu is moving to increase order volume and ASP to improve scale and save logistics cost.</li>
</ul>

<ul>
<li>There has been debate: 1) why PDD’s take rate can be higher than BABA, 2) how to justify PDD’s long term margin, 3) will PDD be able to beat cons.</li>
<li>We suggest that the key driver of PDD’s outperformance in recent quarters has been the weak macro environment.</li>
<li>We raise our 2023 forecasts of total revenue and non-GAAP net income by 4% and 19%, more than consensus by 8% and 7% respectively.</li>
</ul>

Eric Chen

Greater China Equity Long/Short Analyst

<ul>
<li>We believe it was a wise move for PDD to launch the overseas online marketplace TEMU first off the U.S., because of its massive, lucrative and integrated retail markets.</li>
<li>Still, the adventure lacks some of the recipe for successes PDD made during its early days, and the failure of Wish suggests pricing not come at the expense of quality.</li>
<li>We expect TEMU to lose US$2bn in 2024 (1/3 of PDD’s FY22 earnings) and won’t generate meaningful profit probably until 2026, reinforcing our view on PDD’s near-term earnings risk.</li>
</ul>

Baptista Research

Independent research on the U.S. markets

<ul><li>This is our first report on Chinese internet giant, Pinduoduo.</li><li>In the past few months, various product categories of Pinduoduo, such as beauty and cosmetics, consumer electronics, and agriculture, have performed particularly well.</li><li>During the harvest festival, Pinduoduo worked with CCTV as well as assembled professors from China Agricultural University and the Chinese Academy for Agricultural Sciences to promote agricultural products.</li></ul>

<ul>
<li>PDD's spectacular 3Q results will prove unsustainable based on our assessments of its core markets and deep-dive benchmark analysis of growth trajectory of PDD and Alibaba, using GMV as scale.</li>
<li>We see earnings risk going into 2023 due to well-penetrated wallet share of core user base, deflating growth drivers and ramp-up of investments.</li>
<li>In the long term, inevitable multiple compression also renders the risk-return payoff of this US$100bn company mediocre, even under blue-sky growth forecasts. Prefer Alibaba over PDD.</li>
</ul>

China

Pinduoduo operates China's largest agri-focused technology platform, providing an online marketplace that connects millions of agricultural producers with consumers across the country. A pioneer of interactive commerce and the consumer-to-manufacturer model, Pinduoduo aims to bring more businesses and people into the digital economy so that local communities can benefit from the increased productivity and convenience through new market opportunities.

Pinduoduo - PDD US

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