20240321-招银国际-Still_has_potential_to_improve_monetization_6页_1mb

PDD Holdings (PDD US) Q4 2023 Financial Results and Valuation Update

Key Financial Performance

• Revenue: Grew 123% year-over-year (YoY) to RMB88.9 billion, exceeding Bloomberg consensus expectations. Transaction services revenue surged 357% YoY to RMB40.2 billion, largely driven by Temu business growth.
• Profitability: Non-GAAP net profit increased 110% YoY to RMB25.5 billion, ahead of consensus. Operating profit margin (OPM) improved to 25.2%, better than the analyst consensus of 20.9%.

Improvement Factors

• Stronger-than-expected domestic monetization improvements, aided by the "Ten Billion Subsidy" program with higher commission rates and optimized consumer subsidies.
• Rapid expansion in international markets, contributing to overall growth despite potential competitive pressures in 2024.
• Transaction services beat consensus due to rapid business scale and efficient subsidy optimization.

Valuation and Outlook

• Target Price: Raised from USD142.6 to USD155.4, representing a 21.7% upside, based on discounted cash flow (DCF) model.
• Recommendation: Maintain "BUY" rating due to potential for further monetization increases and quality growth, focusing on platform upgrades and user engagement enhancements.

Additional Notes

• China Internet analysts highlight risks, including competition and fluctuating margin performance.
• Future priorities include deepening value-for-money propositions and investing in high-quality ecosystem development.