Financial Report Preview | Pinduoduo's revenue is expected to double, with Temu leading the way!

PDD is set to announce its financial report before the market opens on the 20th (today).

According to Bloomberg analysts' expectations, PDD's Q4 revenue is CNY 79.965 billion, a 101% increase year-on-year; adjusted net profit is CNY 16.834 billion, a 39% increase year-on-year.

In terms of specific business segments, institutions predict that its Q4 online marketing revenue will be CNY 44.7 billion, and transaction service revenue will be CNY 35.7 billion. Temu is expected to have GMV exceeding USD 9 billion in the fourth quarter, significantly higher than the USD 5 billion in the third quarter.

HSBC, Jefferies, Bank of America Bullish on PDD, HSBC Expects Temu to Contribute Over 50% of Revenue by 2025

HSBC has raised PDD's target price to USD 186.

HSBC believes that by 2025, the overseas GMV of Chinese e-commerce platforms will reach USD 500 billion. This is a substantial increase compared to USD 350 billion in 2023 and USD 155 billion in 2019.

Although Temu, under PDD, entered the international market relatively late, HSBC believes that with its full-line low-price strategy from clothing to children's toys and aggressive marketing methods, compared to Alibaba, Shein, and Tiktok, Temu is expected to have the fastest growth rate. By 2027, it is expected to achieve a GMV of USD 140 billion.

In 2023, Temu contributed 23% of PDD's total revenue, a figure expected to rise to 43% in 2024 and surpass 50% in 2025.

According to HSBC, despite starting operations in September 2022, Temu has maintained exponential growth. In just one year, it has expanded from the United States to 49 countries, becoming the most downloaded shopping app globally.

It is expected to achieve USD 16.5 billion in global GMV in 2023. After just one year of operation, it has gained a 1% market share in the United States.

In developed markets in the United States, Europe, and Asia, Temu is expected to gain a market share of 3-6%.

Additionally, on March 11th, investment bank Jefferies also expressed optimism, upgrading PDD's rating from "hold" to "buy" and raising the target price from USD 117 to USD 157. It stated that PDD's stock price already reflects investors' concerns about risk factors, and the potential for Temu to increase market share in domestic and international markets still exists. PDD's total merchandise value (GMV) in the domestic market is expected to achieve strong growth this year.

Jefferies expects that PDD's Q4 revenue is likely to increase by 16% quarter-on-quarter, reaching nearly CNY 80 billion, nearly doubling year-on-year. The forecast for non-GAAP net profit is around CNY 16.5 billion, with Temu expected to generate a loss of approximately CNY 11 billion in this quarter Bank of America Securities has also raised PDD's target price from $153 to $182. It is expected that the company's revenue in the fourth quarter of last year will increase by 108% year-on-year to 82.7 billion yuan, exceeding the market's expectations by 6%; the net profit forecast under non-GAAP is expected to reach 17.6 billion yuan, with a net profit margin expectation of 21.2%.

The bank stated that driven by a 29% growth in GMV and an increase in the comprehensive commission rate to 5.18%, PDD's domestic core market revenue in the fourth quarter of last year is expected to increase by 71% year-on-year. Assuming Temu's GMV exceeds $7 billion in the fourth quarter, the forecasted revenue for Temu will reach 18 billion yuan, accounting for approximately 22% of the total revenue.

In addition, the bank predicts that the losses related to Temu in the fourth quarter will range from 10 to 11 billion yuan, an increase from 8 billion yuan in the third quarter of last year. The bank stated that with the continued trend of consumption downgrading in the Chinese market, PDD is expected to consolidate its position as a "cost-effective" e-commerce platform and increase market share. Coupled with Temu's strong development momentum, it is expected to support PDD's steady growth in 2024.

Some investment bank ratings are as follows:

Goldman Sachs Downgrades Rating

On March 11, Goldman Sachs downgraded PDD's rating.

Goldman Sachs is bearish, downgrading PDD's stock rating from "Buy" to "Neutral" and significantly lowering the stock price target from $196 to $136. The main reasons for Goldman Sachs' downgrade include:

1. The variability of the cross-border business policy environment;
2. Domestic competitors of PDD are increasing investment to promote business growth in 2024;
3. The competition in the entire e-commerce industry is intensifying, which may lead to a slowdown in the expansion rate of PDD's domestic business commission rate.

Goldman Sachs' concerns about the policy environment happen to be the same concerns of a cross-border e-commerce professional:

Risk Factors

Taking a lesson from TikTok, PDD's Temu may also face certain risks.

MT Newswires reported that, according to the Information Times, on Tuesday, citing two people briefed by company executives, as local hostility grows, PDD Holdings (PDD) is seeking to reduce its reliance on the U.S. market.

The report stated that Temu hopes to reduce the share of the U.S. market in total sales from 60% last year to 30% by next year, while expanding its business to other regions, including Europe, the Middle East, Japan, and South Korea.

PDD did not immediately respond to MT Newswires' request for comment.

It is worth mentioning that some time ago, the Financial Times also questioned PDD: Financials are a black box! Financial Times questions PDD, netizens respond