20260528-招银国际-Investing_to_enhance_supply_chain_capabilities_6页_1mb

PDD Holdings (PDD US) Summary

Core Content

PDD Holdings (PDD US) recently reported its 1Q26 financial results, showing revenue growth of 11.0% YoY to RMB106.2bn, slightly below the Bloomberg consensus. The company continues to invest in its supply chain capabilities and broader ecosystem to enhance the experience for both merchants and customers, especially in the context of fierce industry competition and short-term consumer demand headwinds.

The operating profit (OP) for 1Q26 rose 21.6% YoY to RMB19.6bn, but it was 7% below the consensus due to softer revenue and higher sales and marketing expenses. The gross profit margin (GPM) improved sequentially to 55.9%, slightly above the consensus, while the operating margin (OPM) came in 0.9ppts below the consensus.

The company's target price (TP) based on SOTP valuation is US$154.8, which is 4% lower than the previous TP of US$154.8. The TP corresponds to a 15x 2026E PE, while the current share price is trading at ~8x 2026E PE. With RMB512bn in cash, restricted cash, and short-term investments, the current valuation is considered undemanding. The recommendation to maintain a "BUY" rating is based on the company's strong cash reserves and the potential for future growth despite current shortfalls.

Main Points

• 1Q26 Financial Performance:

  • Revenue: RMB106.2bn, up 11.0% YoY, 2% below consensus.
  • Operating profit: RMB19.6bn, up 21.6% YoY, 7% below consensus.
  • GPM: 55.9%, up 0.4ppts QoQ, 0.3ppts above consensus.
  • S&M expenses: RMB33.8bn, up 1% YoY, accounting for 31.8% of total revenue.
  • OPM: 18.4%, 0.9ppts below consensus.

• Revenue and Profit Trends:

  • Online marketing services and others: RMB49.9bn, 2.5% YoY growth, 5.0% below consensus.
  • Transaction services revenue: RMB56.3bn, 19.9% YoY growth, 1.4% above consensus.
  • Net profit: RMB12.5bn, down 16.8% YoY.
  • Non-GAAP net profit: RMB14.1bn, down 16.8% YoY.

• Valuation and Forecast:

  • Target Price (TP): US$154.8, down 4% from previous.
  • Current Price: US$86.61, trading at ~8x 2026E PE.
  • SOTP valuation: Includes US$89.8 for the main app, US$2.0 for Duoduo Grocery, US$25.0 for Temu, and US$38.0 for net cash.

• Forecast Revision:

  • Revenue for 2026E is revised down by 3.0%.
  • Gross profit, operating profit, and non-GAAP net profit are also revised down by varying percentages.

• Shareholding Structure:

  • Entities affiliated with Zheng Huang: 24.8%
  • Entities affiliated with Tencent: 13.8%

• Stock Performance:

  • 1-month return: -11.0% (absolute), -17.7% (relative)
  • 3-month return: -16.5% (absolute), -29.0% (relative)
  • 6-month return: -25.4% (absolute), -34.6% (relative)

• Market Capitalization:

  • Market Cap: US$129,662.9m
  • Average 3-month trading volume: US$338.2m
  • 52-week high/low: US$138.13/US$86.61

Key Information

• Investment Strategy: PDD is investing in supply chain capabilities and platform ecosystem to improve merchant and customer experience.
• Valuation: Current valuation is undemanding with strong cash reserves.
• Recommendation: Maintain a "BUY" rating with a target price of US$154.8.
• Financial Performance: Revenue growth slowed in online marketing services, while transaction services showed strong performance.
• Margins: GPM improved sequentially, but OPM and non-GAAP net profit margins declined.
• Forecast: Revisions to revenue and profit forecasts reflect increased merchant support and investment.

Risks

1. Slower-than-expected global business expansion.
2. Geopolitical issues impacting business development.
3. Slower-than-expected margin expansion.

Analyst Certification

The research analyst certifies that the views expressed in the report accurately reflect personal views and confirms no conflicts of interest.

CMBIGM Ratings

• BUY: Potential return of over 15% over the next 12 months.
• HOLD: Potential return of +15% to -10% over the next 12 months.
• SELL: Potential loss of over 10% over the next 12 months.
• NOT RATED: Not rated by CMBIGM.
• OUTPERFORM: Industry expected to outperform the market.
• MARKET-PERFORM: Industry expected to perform in-line with the market.
• UNDERPERFORM: Industry expected to underperform the market.

Important Disclosures

• The report is not a recommendation to buy or sell any security.
• CMBIGM is not a registered broker-dealer in the US.
• The report is for major US institutional investors only.
• Information is not guaranteed and may change without notice.
• Investors should consult with a financial advisor for their own investment decisions.