20220322-招银国际-Solid_margin_but_moderate_growth_ahead_4页_816kb

Pinduoduo (PDD US) Company Update Summary

Core Content

This report provides an analysis of Pinduoduo's (PDD US) financial performance and outlook for the fiscal years 2022-2024, based on CMB International Global Markets (CMBIGM) estimates. It highlights the mixed performance in 4Q21, the challenges ahead, and the revised financial forecasts.

Key Financial Highlights

• 4Q21 Performance:

  • Revenue grew by 3% YoY, 9% below consensus (mainly due to reduced 1P business).
  • Excluding 1P business, revenue increased by 28% YoY, with OMS revenue up 19% YoY.
  • Non-GAAP net profit reached RMB8.4bn, 184% above consensus, driven by disciplined S&M control and one-off rebate.
  • S&M/Rev ratio (excluding 1P business) improved to -42% in 4Q21 (vs. -47% in 3Q21).
  • User growth was +2mn QoQ, but topline growth remained moderate, raising concerns about long-term organic growth.

• Forecast for FY22E:

  • Revenue is expected to grow by 16%, with a 15% adj. NPM.
  • The RMB10bn Agriculture Initiative may dilute margins, but improved S&M efficiency and DDMC UE will help offset this.
  • Topline growth is projected to slow due to macroeconomic challenges, epidemic impact, and intensified competition from short video platforms.

• Earnings Summary:

  • FY20A-FY24E revenue is forecasted to grow from RMB59,492mn to RMB143,310mn, with 16% YoY growth in FY22E.
  • Adj. net profit is expected to increase from RMB13,830mn in FY21A to RMB26,696mn in FY24E.
  • Adj. EPS is projected to rise from RMB9.56 in FY21A to RMB17.40 in FY24E.

• Valuation:

  • The new DCF-based target price is US$65, down from US$121.
  • P/E ratio for FY23E is 18x, with a P/S ratio of 2.5x.
  • Current stock price is US$40.0, implying a +62.5% upside to the new target price.

Market and Shareholder Information

• Market Cap: US$53,390mn.

• Average 3-Month Turnover: US$549.93mn.

• Shareholding Structure:

  • Nanpeng Shen: 15.35%
  • Baillie Gifford: 2.32%
  • BlackRock: 1.62%

• Share Performance:

  • 1-month: -24.0%
  • 3-month: -22.2%
  • 6-month: -70.0%

• 12-Month Price Performance:

  • The chart is referenced but not included here.

Financial Ratios and Metrics

• Gross Margin: Expected to increase from 64.9% in FY21A to 69.8% in FY24E.
• Operating Margin: Projected to rise from 6.8% in FY20A to 12.4% in FY24E.
• Adj. Net Margin: Forecasted to increase from 9.8% in FY20A to 18.6% in FY24E.
• ROE: Expected to reach 20.5% in FY24E.
• ROA: Projected to rise from 8.6% in FY21A to 10.4% in FY24E.
• Adj. EPS: Expected to increase from RMB9.56 in FY21A to RMB17.40 in FY24E.

Revenue Breakdown

• Online Marketing: Dominates revenue, with a sales mix of 83.8% in FY22E.
• Transaction Services: Expected to grow to 15.9% in FY22E.
• Merchant Sales: A minor contributor, with a sales mix of 0.3% in FY22E.

Key Challenges and Outlook

• Challenges:

  • AAC ceiling limits growth.
  • Slower ARPU expansion due to DDMC dilution.
  • Epidemic impact and intensified competition from short video players.
  • Shrinking 1P business affects revenue momentum.

• Outlook:

  • PDD is expected to maintain solid margins.
  • Adj. NPM is forecasted to reach 15% in FY22E.
  • Revenue growth is expected to decelerate in FY22E, with 16% growth.

CMBIGM Ratings and Recommendations

• Rating: BUY.
• Target Price: US$65 (a -62.5% downside from previous US$121).
• Reason: Despite soft GMV momentum, the company is expected to maintain disciplined expenses and improved UE from DDMC, leading to a higher adj. NPM.

Analyst Certification and Disclaimers

• The analyst certifies that all views expressed reflect their personal views and that they are not liable for any losses or damages resulting from reliance on this report.
• The report is not an offer or solicitation to buy/sell securities.
• CMBIGM does not provide individually tailored investment advice and recommends consulting a professional financial advisor.
• The report is for intended recipients only and may not be reproduced or distributed without prior consent.

Regulatory Information

• The report is subject to regulatory restrictions in the United Kingdom, United States, and Singapore, with specific conditions on distribution and use.

Conclusion

PDD delivered mixed results in 4Q21, with strong margins but moderate revenue growth. Despite the challenges, the company is expected to maintain disciplined expenses and improve user engagement, leading to a higher adj. NPM in FY22E. The new target price reflects the soft GMV momentum and revised expectations, with the BUY recommendation maintained.