Slower top-line growth, but improving profit
? PDD’s 4Q21 revenue was Rmb27.2bn, up 3% yoy, below our expectation, mainly
because PDD largely reduced its 1P business. Excluding the 1P business, revenue
grew by 28% yoy. PDD achieved a non-GAAP net profit of Rmb7.6bn for the quarter,
above our expectation, driven by a lower selling and marketing expenses ratio and a
one-off rebate from one of PDD’s service providers.
? Management said PDD is in the process of adjusting its growth strategy, so we may
see some short-term fluctuation in user numbers. We expect PDD’s profitability to
improve, along with a lower selling and marketing expenses ratio.
? PDD’s investment in agriculture should generate long-term quality growth, but it will
take time to bear fruit.
? Reiterate Add with a new DCF-based TP of US$138.