20221129-招银国际-Strong_revenue_and_earnings_growth_5页_514kb

Pinduoduo (PDD US) Summary

Core Content and Key Highlights

Pinduoduo (PDD) reported its third-quarter 2022 financial results, showcasing strong revenue and earnings growth. The company exceeded expectations with revenue rising by 65% YoY to RMB35.5bn, surpassing the Bloomberg consensus estimate. Non-GAAP net income also beat expectations, reaching RMB12.4bn, a significant increase from RMB3.2bn in 3Q21. This growth is attributed to increased merchant activities, the onboarding of more quality merchants, and enhanced technology capabilities that improved the match between products and consumers.

The company's online marketing services and others revenue rose by 58% YoY to RMB28.4bn, accounting for 80% of total revenue. This segment was driven by higher merchant engagement and PDD's subsidies to boost consumption. Transaction services revenue grew by 102% YoY to RMB7.0bn, due to increased transaction processing fees and a broader range of services for merchants.

Main Points

• Revenue Growth:

  • 3Q22: RMB35.5bn, up 65% YoY
  • 3Q21: RMB3.2bn
  • 3Q20: RMB14.2bn
  • 2022E: RMB119.494bn
  • 2023E: RMB144.739bn
  • 2024E: RMB166.149bn

• Non-GAAP Net Income:

  • 3Q22: RMB12.4bn, beating estimates of RMB7.5/7.1bn
  • 3Q21: RMB3.2bn
  • 3Q20: RMB-7.179.7bn

• Gross Margin (GPM):

  • 3Q22: 79.1%, up 6.1pp from forecast
  • 2022E: 72.9%
  • 2023E: 73.0%
  • 2024E: 72.9%

• Operating Margin (OPM):

  • 3Q22: 29.4%, up from 33.5% in 2Q22
  • 2022E: 25.9%
  • 2023E: 26.2%
  • 2024E: 27.1%

• Profitability:

  • Strong profitability was attributed to the asynchronous timing between business cycle and financial recording cycle, though management noted this may not be sustainable.
  • PDD remains committed to long-term growth while maintaining a strict ROI target.

Strategic Initiatives and Outlook

• PDD is increasing its focus on branded products and high ASP categories, which could drive GMV growth above industry average in 2023E.
• International e-commerce is highlighted as a key area to watch for future growth.
• The company's highly sticky user base allows for efficient sales and marketing spending.

Financial Performance

Shareholding and Stock Data

• Shareholding Structure:

  • Zheng Huang-affiliated entities: 27.9%
  • Tencent-affiliated entities: 15.5%

• Stock Performance:

  • Current Price: US$65.75
  • Target Price: US$92.90
  • Up/Downside: 41.3%
  • Market Cap: US$93,920.0m
  • Avg 3 mths t/o: US$62.3m
  • 52w High/Low: US$72.19/25.53

Valuation Metrics

Analyst Rating

• CMBIG Rating: BUY
• Target Price: US$92.90
• Potential Return: Over 15% over the next 12 months

Summary of Key Financial Drivers

• Revenue Growth: Driven by increased merchant and consumer engagement.
• Margin Expansion: Improved GPM and OPM due to better monetization and cost control.
• Strategic Shift: Emphasis on branded products and higher ASP categories to boost GMV.
• Operational Efficiency: High user retention allows for efficient and proactive sales and marketing spending.
• International E-commerce: Seen as a key growth driver for the future.

Disclaimer and Risk Information

• The report is based on publicly available information and CMBIGM estimates.
• CMBIGM does not provide individually tailored investment advice.
• There are risks involved in transacting in any securities.
• The value and returns of investments are uncertain and may fluctuate.
• The report is not an offer or solicitation to buy or sell any securities.
• Conflicts of interest may exist due to potential investment banking relationships.