【行业研究报告】拼多多-Investment to enhance platform ecosystem, user retention impacted ST earnings

28May2025CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdatePDDHoldings(PDDUS)Investmenttoenhanceplatformecosystem,userretentionimpactedSTearningsPDDHoldings(PDD)announced(27May)1Q25results:revenuewasup10.2%YoY(4Q24:24.4%)toRMB95.7bn,6%shyofBloombergconsensusestimates.Thisshortfallwasmainlyduetoa12%missontransactionservicesfees,despitepartlyoffsetbythe2%beatinonlinemarketingservicesandothersrevenue,whichweattributetothefurtherstep-upinmerchantsupport,andislikelytosustain,inourview.Non-GAAPNPdecreasedby45%YoYtoRMB16.9bn,significantlymissingconsensusby39%.Weattributethemisstogreater-than-expectedsalesandmarketingspendingtomatchtheintensityofnationalsubsidiesonothere-commerceplatforms.Inaddition,PDDhasupgradeditsplatformecosystemenhancementprograminApr2025toimprovequalityanddiversityofsupply,aswellastoenhanceuserretention,whichinourviewbothshouldweighonshort-termearningsgrowth.Wecutour2025-2027Enon-GAAPNPforecastby25-31%tofactorintheimpact.Butwearelookingforaturningpointforearningsgrowthin4Q25E,whenboththelaunchoffirstbatchofplatformecosystemenhancementpoliciesand“nationalsubsidies”campaignreachedfull-yearmilestone.WecutourSOTPbasedTPby21%toUS$134.5,translatinginto15x2025EPE(non-GAAP).MaintainBUY.Merchantsupportpoliciesweighedontransactionservicesfeegrowth.In1Q25,PDD’sonlinemarketingservicesandothersrevenuerosegrowth.In1Q25,PDD’sonlinemarketingservicesandothersrevenueroseby14.8%YoY(1Q24:55.8%YoY;4Q24:17.1%YoY)toRMB48.7bn,2%betterthanconsensus.WeestimatethegrowthislargelyinlinewiththatofGMVgrowthofPDD’smainapp.Transactionservicesrevenuefor1Q25grewbymerely5.8%YoY(1Q24:326.8%YoY;4Q24:33.3%YoY)toRMB47.0bn,whichmissedconsensusby12%.Inourview,thisisattributedtoPDD’smovetofurtherenhancemerchantsupport.Accountingforthegreater-than-expectedimpactfromenhancementinmerchantsupport,wecut2025E-2027Erevenueforecastby9-12%.SignificantriseinS&MexpenseleadtoamissonOPM.PDD’sGPMshrankto57.2%in1Q25(1Q24:62.3%),andwas1.0pptshyofconsensus,whichweattributetothemissincommissionrevenuewhichhasahigher-than-companyaveragegrossmargin,asPDDisstrengtheningitsmerchantsupport.However,theGPMrecoveredfromthetroughof56.8%in4Q24,whichinourviewwasdrivenbythebusinessmodeltransformationofTemuto“semi-entrustedmodel”insomeofthecountriesthatfacegreatergeopoliticalimpact.Salesandmarketingexpensein1Q25reachedRMB33.4bn,up43%YoY(4Q24:17.7%),whichaccountedfor34.9%oftotalrevenue,andwas6.4pptsworsethanconsensus.ThisindicatesthatPDDhasfurthersteppedupitsusersubsidytomaintainuserretentionandmarketshareamidthebackdropof“nationalsubsidy”program.Managementnotedonearningsconferencecallthatitwillofferadditionalcouponsacrossallcategoriestomeetdiverseconsumerdemands,anditwillcontinuetobenchmarkpricesagainstthenationalsubsidyprogramandexpandthepromotioncoveragetocategoriessuchasdailynecessitytoenhanceuserexperienceinthecomingquarters.SOTP-basedTPloweredtoUS$134.5;maintainBUY.OurnewTPconsists,perADS:1)US$83.1forthemainappbasedon12x2025EPE(wasUS$125.1);2)US$1.9forDuoduoGrocery(unchanged);3)US$20.5forTemubasedon1.0x2025EPS(unchanged);and4)US$29.0fornetcash(wasUS$20.1afterconsidering30%holdingdiscount).