On November 28th, before the US stock market opened, PDD once again announced better-than-expected performance, causing the stock to surge by 15% in pre-market trading.
According to the earnings report, as of September 30, 2023, PDD's third-quarter revenue reached 68.84 billion yuan, a year-on-year increase of 94%, reaching a new historical high and surpassing market expectations of 53.77 billion yuan. The net profit attributable to shareholders was 15.537 billion yuan, a year-on-year increase of 47%. Both revenue and net profit exceeded expectations, making PDD stand out in the e-commerce sector.
After the release of the earnings report, PDD Chairman and Co-CEO Chen Lei, Executive Director and Co-CEO Zhao Jiazhen, and CFO Liu Jun attended the subsequent earnings conference call to interpret the key points of the report and answer analysts' questions.
During the conference call, the core viewpoints of PDD executives were as follows:
Since the third quarter, PDD has been implementing a high-quality development strategy, focusing on high-quality consumption, high-quality supply, platform governance, and merchant ecology, and has achieved tangible results, creating incremental value for consumers and society.
With the implementation of a series of policies to stimulate consumption, the demand for consumption upgrades is increasing. At the same time, from user behavior, we can see that consumption upgrades are not only about quality but also about price. Consumers are pursuing the ultimate value for money.
To lead high-quality consumption, PDD fully leverages the driving effects of &#34;affordability&#34; and &#34;good service&#34; to improve the accessibility of affordable products and the inclusiveness of high-quality supply through the establishment of long-term mechanisms.
In the third quarter, which has passed the 618 shopping festival and is yet to reach the 11.11 shopping festival, PDD has organized a series of activities such as the Harvest Festival, National Goods Festival, Duoduo Reading Month, and National Day promotion, allowing consumers to enjoy the benefits of major promotions every day. As a result, the overall trend of consumption upgrades on the platform is evident, especially in categories such as wine and gift boxes, high-end appliances, outdoor sports, and cosmetics and personal care, which have shown significant year-on-year growth.
Improving consumption quality cannot be achieved without optimizing the supply. In the third quarter, PDD launched the &#34;Agricultural Cloud Action&#34; and entered agricultural production areas such as Jiangsu hairy crabs and Northwest fruits, helping to build more resilient and competitive digital agricultural belts in these regions. As the largest platform for the upward movement of agricultural products in China, PDD officially launched the &#34;Duoduo Harvest Pavilion&#34; and invested 1 billion yuan in resources to celebrate the harvest together with over 300,000 agricultural merchants on the platform and more than 1,000 agricultural production areas nationwide. PDD's subsidies, totaling billions of yuan, have provided comprehensive coverage for rice, noodles, grains, oil, meat, poultry, eggs, dairy products, vegetables, fruits, and other physical products in the Harvest Pavilion.
The following is a transcript of the conference call:
Q: What will be the management's strategic focus going forward? Does agricultural products have strategic significance for PDD?
A: As we mentioned in the previous quarter, starting from this year, we have entered a stage of prioritizing quality and high-quality development. High-quality development is not just empty talk; it is reflected in all aspects of platform ecosystem development.
On the supply side, on the one hand, we will further deepen our presence in the agricultural sector, which is our core expertise. We will increase investment in agricultural technology and its supporting infrastructure to improve the overall quality and technological content of our agricultural products.
On the other hand, we have also initiated the construction of a billion-dollar ecosystem to support and cooperate with high-quality merchants and ecosystem partners who provide good products and services. This is to further incentivize the high-quality development of the entire ecosystem.
At the same time, earlier this year, we launched a 100 billion ecosystem to support high-quality merchants and other ecosystem partners who do business with us. This is to provide the right incentives and promote the high-quality development of the entire ecosystem.
Meanwhile, we are working hard to improve our platform governance, which has been one of our top priorities since I took office. We have made steady progress in areas such as protecting consumers and product safety.
From the consumer side, on the one hand, we have made high-quality and high-priced products more affordable and accessible through billion-dollar subsidies.
In the recent Double 11 promotion, the scale of users benefiting from PDD's billion-dollar subsidies has exceeded 620 million. We believe that user loyalty is our most valuable asset, which requires continuous efforts and satisfaction through every single order. However, it can be easily destroyed in a short period of time, so we will not slack off in this regard.
On the other hand, we are making every effort to enhance our &#34;good service&#34; capabilities, and we have received positive feedback. In the long run, we hope to further enhance user trust in the platform and improve their perception of good service through persistent service upgrades. This will encourage consumers to try more new product categories on the platform and meet their diverse and multi-level consumption needs.
Agricultural products are strategically important for PDD. PDD started with agricultural products, and many users initially came into contact with the platform through agricultural products. However, we also recognize that circulation is just one aspect of the overall modernization of agriculture. Therefore, we need to accelerate the implementation of agricultural technology innovation to fundamentally improve agricultural productivity and the quality of agricultural products.
Last quarter, we launched the &#34;Duoduo Harvest Pavilion&#34; and connected over 1,000 agricultural product regions directly to consumers nationwide. By increasing platform resources and improving the quality and consumption of agricultural products, we also facilitated the connection between agricultural product merchants and suitable logistics resources.
In this way, we have brought many regionally distinctive agricultural products to the dining tables of consumers across the country for the first time. We better meet consumers' demands for high-quality, fresh, and healthy consumption. These are some of the measures we continuously try in order to improve the quality and efficiency of product circulation.
In the future, agriculture will remain an important focus for the high-quality development of the platform. We will continue to leverage our unique technological advantages and platform resources to improve the efficiency of agricultural product circulation and promote the practical implementation of agricultural technology innovation. This will directly connect higher-quality agricultural products from the source to consumers and increase real income for agricultural producers.
_Q: How do you view the competition in the e-commerce industry? Many e-commerce platforms have lowered the threshold for opening stores on their platforms, and we have also seen some trends in user and merchant satisfaction. How do you evaluate the competitive landscape of the industry, and could you share some measures that the management has taken to respond to this competition in this competitive environment?
A: This year has been a year of continuous consumer growth and intensified competition in the e-commerce industry. With the implementation of policies to stimulate consumption, various e-commerce platforms have increased their investment and stimulated the release of consumer potential. We are not surprised by the actions taken by our industry competitors.
Our industry itself needs to directly face the ever-changing demands of consumers, and consumers have different platforms to choose from. Therefore, competition is inevitable and the main theme of the industry. In the face of competition, we are always thinking about how to continuously improve our core competitiveness and create greater value for consumers together with our industry partners.
In the third quarter, we continued to focus on the key points of &#34;affordability&#34; and &#34;good service&#34; and developed a series of innovative initiatives to bring more good products and better shopping experiences to consumers.
While continuously strengthening the consumer awareness of PDD, we hope to enhance consumers' trust in the platform through upgraded services, making users more willing to discover new product categories on the platform and meet the demands of consumer upgrades.
On the supply side, we continue to build a &#34;digital new supply&#34; to provide tools for new farmers and manufacturing companies across the country to solve the digital challenges of private domain economy, helping them connect their products directly to consumers nationwide and even worldwide, so that more producers can benefit from data and enrich consumers' shopping choices from the source.
Instead of focusing on what competitors are doing, we should focus on what consumers need. The demand and trend of consumer upgrades on our platform are obvious. Based on this trend, we have formulated a strategy for high-quality development. This approach may seem simple, but simplicity does not mean it is easy.
There is strong competition and vicious competition in the market, and sometimes competition can easily become distorted and combined with certain market behaviors. We also believe that doing well will attract challenges.
For example, in early September, a short-selling institution released a short-selling report against us, which was baseless, and the client company of this institution also had a bad reputation. The motive behind the release of this report by the institution was obvious, which was to create market panic and hope that the decline in stock price would profit from short-selling.
During the investigation, we also discovered that there were more excessive behaviors behind the scenes, and their motives and excessively abnormal behaviors were very obvious. Therefore, we are also pleased to see that most investors understand the motives behind the CNC report and see through the baseless accusations.
In the future, we will continue to focus on our consumers and our strategy for high-quality development, maintain a calm attitude, isolate external forces and interference, focus on quality, and implement the strategy for high-quality development seriously. We believe that consumers will give us the most direct feedback through real orders.
Q: What is the development trend of global business in the future?
A: Our global business concept is to use years of accumulated supply chain expertise to create a new channel and shopping experience that directly connects factories with consumers. It is based on a flexible supply chain. Currently, consumers from countries with different cultural backgrounds can directly purchase goods from high-quality factories through our services.
Currently, our global strategy is still in its early stages, and many of our initiatives are in the customization phase. Our team has a deep understanding of different markets and consumer needs around the world. It will be a challenging iterative process, but also very interesting. We look forward to making the lives of consumers around the world more enjoyable.
Q: What factors drove the 94% increase in revenue, and what are the expectations for the fourth quarter and next year? The profit margin for this month has declined both MoM and YoY. What are the prospects for the profit margin in the future?
A: This quarter's performance is the result of the continuous improvement of the consumption environment and the execution of our high-quality development strategy.
From a macro perspective, the domestic economy in the third quarter grew beyond expectations, driven by consumption, which demonstrates the strong resilience of the Chinese economy. The trends we have observed on our platform also confirm the potential of the consumer market. We have great confidence in the prospects of the Chinese consumer market, and there is still much consumer demand for us to explore.
From a company policy perspective, although there was no major annual promotion in the third quarter, we have always adhered to the concept of &#34;everyday low prices&#34; and continued to invest, providing consumers with a wide range of high-quality and affordable choices.
While serving the basic needs of consumers, our collaboration with brand merchants has also achieved good results. During the National Goods Festival, which lasted for more than a month, we invested in subsidies, live streaming, and other brand resources, which promoted the rapid growth of more domestic brands. Through cooperation with us, some established brands have experienced exponential growth in the past year or two.
Through various incentive policies and platform fee investments, we have also fully mobilized the enthusiasm of merchants to work together with the platform to provide more affordability and better services. We are also pleased to see that users are increasingly recognizing brands and their engagement is increasing, which in turn provides more sales opportunities for merchants, making them more willing to invest on the platform.
We will also maintain strategic focus and concentrate our efforts on the execution of our high-quality development strategy, striving to enhance the core capabilities of serving merchants and consumers. We will not pay excessive attention to the short-term revenue trends.
We have also established supply chain facilities and ecosystem declarations. Our execution has achieved encouraging results, and we will continue to invest firmly when we see good ROI potential for future transformations. Understanding the stock market environment, their investment opportunities change every day, so our business execution may not align with the financial reporting schedule. For us, our visibility may continue to fluctuate. Thank you.

On Tuesday, November 28th, before the US stock market opened, PDD once again announced better-than-expected performance, causing a 15% surge in pre-market trading. According to the earnings report, as of September 30th, 2023, PDD's third-quarter revenue reached 68.84 billion yuan, a year-on-year increase of 94%, reaching a new historical high, surpassing market expectations of 53.7 billion yuan.

Pinduoduo Conference Call: Agricultural development holds strategic significance, with less focus on short-term revenue trends.