First Shanghai Securities: PDD's Third Quarter Performance Outlook

PDD announced that it will release its Q3 2024 financial report on November 21. After the report is released, the company will hold an earnings conference at 20:30 Beijing time (7:30 AM Eastern Time). Q3 2024 Performance Expectations According to Visible Alpha's expectations, total revenue is expected to be CNY 101.6 billion, a year-on-year increase of 48%. Among them, online marketing revenue is expected to be CNY 49.5 billion, a year-on-year increase of 25%, and transaction service revenue is expected to be CNY 52.4 billion, a year-on-year increase of 80%. Operating expenses are expected to total CNY 35.1 billion, a year-on-year increase of 38%, with an expense ratio of 35%. Among them, marketing expenses are expected to increase by 36% year-on-year to CNY 29.6 billion, management expenses are expected to increase by 143% year-on-year to CNY 1.8 billion, and R&D expenses are expected to increase by 27% year-on-year to CNY 3.6 billion, corresponding expense ratios of 29%, 2%, and 4%, respectively. Operating profit is expected to be CNY 28.6 billion, a year-on-year increase of 71%, with a profit margin of 28%. Non-GAAP operating profit is expected to be CNY 31.0 billion, a year-on-year increase of 71%, with a profit margin of 30%. Diluted earnings per share are expected to be CNY 4.46, and earnings per ADS are expected to be CNY 18.31. 2024 Annual Performance Expectations We expect total revenue for the full year 2024 to be CNY 423.6 billion, a year-on-year increase of 71%. Among them, online marketing revenue is expected to be CNY 194.4 billion, a year-on-year increase of 27%, and transaction service revenue is expected to be CNY 229.2 billion, a year-on-year increase of 144%. Operating profit is expected to be CNY 125.4 billion, a year-on-year increase of 114%, with a profit margin of 30%. Non-GAAP operating profit is expected to be CNY 136.8 billion, a year-on-year increase of 108%, with a profit margin of 32%. In the first three quarters of 2024, the total retail sales of consumer goods increased by 3.2% year-on-year, among which the online retail sales of physical goods increased by 7.9% year-on-year, accounting for 25.7% of the total retail sales. In September, with the implementation of the old-for-new subsidy policy, the retail sales of home appliances increased by 20.5% year-on-year, a month-on-month increase of 17 percentage points. Since October, the growth rate of social retail data has warmed up, and we believe that the sales of PDD's main site have accelerated compared to Q2. Management stated in the Q2 report that considering changes in the external environment and competitive landscape, the high growth of revenue and profitability will face challenges, and the company will increase investment in the future, with no plans for stock buybacks or dividends at this time. The current domestic market faces many uncertainties and competition, which remains quite challenging in the short term. The company will sacrifice profits for a more long-term platform ecosystem. We expect Temu's global sales to reach USD 50 billion in 2024, with the cost structure continuing to optimize throughout the year. Considering the possibility of Trump being re-elected as President of the United States and changes in the external environment, we believe that there is a possibility of accelerated realization of tariff-related risks, which may bring certain impacts on the fully managed business of cross-border platforms like Temu