Pinduoduo 2024Q4 earnings report interpretation - Growth slows down, when will shareholder returns be put on the agenda?

01

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Revenue

2024Q4:

Total revenue 110.61 billion yuan, up 24.4% YoY;

Online marketing revenue 57.01 billion yuan, up 17.1% YoY;

Transaction service fee revenue 53.6 billion yuan, up 33.3% YoY.

2024 Full Year:

Total revenue 393.84 billion yuan, up 59% YoY;

Online marketing revenue 197.93 billion yuan, up 28.9% YoY;

Transaction service fee revenue 195.9 billion yuan, up 108.2% YoY.

02

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Revenue Composition

2024Q4:

Online marketing revenue 57.01 billion yuan, accounting for 51.5% of total revenue;

Transaction service fee revenue 53.6 billion yuan, accounting for 48.5% of total revenue.

2024 Full Year:

Online marketing revenue 197.93 billion yuan, accounting for 50.3% of total revenue;

Transaction service fee revenue 195.9 billion yuan, accounting for 49.7% of total revenue.

03

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Gross Profit & Gross Margin

2024Q4:

Total revenue up 24.4% YoY, gross profit 62.81 billion yuan, up 16.7% YoY, gross margin 56.8%.

2024 Full Year:

Total revenue up 59% YoY, gross profit 239.94 billion yuan, up 53.9% YoY, gross margin 60.6%.

04

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Expenses & Expense Ratio

2024Q4:

Total expenses 37.22 billion yuan, expense ratio 34%, down 1 percentage point YoY;

Marketing expenses 31.36 billion yuan, expense ratio 28.3%, down 1.7 percentage points YoY;

R&D expenses 3.78 billion yuan, expense ratio 3.4%, up 0.2 percentage points YoY;

Administrative expenses 2.09 billion yuan, expense ratio 1.9%, down 0.2 percentage points YoY.

2024 Full Year:

Total expenses 131.51 billion yuan, expense ratio 33.4%, down 5.9 percentage points YoY;

Marketing expenses 111.3 billion yuan, expense ratio 28.3%, down 4.9 percentage points YoY;

R&D expenses 12.66 billion yuan, expense ratio 3.2%, down 1.2 percentage points YoY;

Administrative expenses 7.55 billion yuan, expense ratio 1.9%, up 0.3 percentage points YoY.

05

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Profit & Profit Margin

2024Q4:

Operating profit 22.9 billion yuan, up 14.3% YoY, operating margin 23.1%;

Net profit 27.45 billion yuan, up 17.9% YoY, net margin 24.8%.

2024 Full Year:

Operating profit 108.42 billion yuan, up 84.7% YoY, operating margin 27.5%;

Net profit 112.43 billion yuan, up 87.3% YoY, net margin 28.5%.

06

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Cash Flow & Cash Position

2024Q4:

Operating cash flow 29.55 billion yuan, compared to 36.89 billion yuan in the same period last year, down 19.9% YoY.

2024 Full Year:

Operating cash flow 121.93 billion yuan, compared to 94.16 billion yuan in the same period last year, up 29.5% YoY;

Cash reserves 331.6 billion yuan ($45.4 billion), compared to 217.2 billion yuan last year, an increase of 114.4 billion yuan.

07

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Brief Commentary

If we simply use the growth rate of online marketing revenue as a reference for the domestic main platform's growth rate (for reference only, the domestic main platform also includes transaction service fee revenue), the approximate data comparison between Pinduoduo and Taotian is as follows:

Q4: Pinduoduo's domestic main platform grew 17.1%, Taotian grew 9.4%;

Full Year: Pinduoduo's domestic main platform grew 28.9%, Taotian grew 4.6%.

Pinduoduo's full-year growth rate is much higher than Taotian's, but the Q4 growth rate has slowed significantly, and the lead has narrowed substantially. If there are no major changes in the domestic e-commerce competitive landscape, the short-term ceiling for Pinduoduo's domestic main platform revenue may be around Taotian's current revenue scale, approximately 315 billion yuan. A simple estimate suggests that the domestic main platform's growth potential in the coming years may be around 20%-30%, gradually approaching its ceiling. Of course, this could change if there are major shifts in the domestic landscape.

The overseas TEMU segment is expected to achieve over 100% growth for the full year, but Q4 growth is expected to be below 50%, showing a clear slowdown. However, this is likely more related to geopolitical factors and trade protectionism. Without these non-commercial factors, the overseas potential would be enormous given China's supply chain and cost advantages, combined with Pinduoduo's efficiency. But under the influence of these non-commercial factors, the future development space is highly uncertain.

From the current situation of both the domestic main platform and overseas operations, Pinduoduo's growth prospects are uncertain. However, the market has already priced these uncertainties into the stock price and valuation. The current market cap of around $160 billion corresponds to a valuation of about 11x, which is already very pessimistic pricing—after all, even stagnant Chinese stocks typically trade at more than 10x PE. From a margin of safety perspective, this is sufficient, equivalent to holding a mature and stable business while getting a potentially high-growth business for free.

For bullish shareholders, the stock price and valuation decline are not the main issues. The real problem is the $40-50 billion in cash sitting on the balance sheet, with an annual increase of over $10 billion. Shareholder returns should indeed be on the agenda, as even with future investments, the cash pile is likely to keep growing. $PDD(PDD.US) $Alibaba(BABA.US) $JD.com(JD.US)