PDD-拼多多：Impact from enhancement of merchant support stared to emerge

Investment Rating - The report maintains a "BUY" rating for PDD Holdings, indicating a potential return of over 15% over the next 12 months [1]. Core Insights - PDD Holdings reported a revenue increase of 44.3% YoY in 3Q24, reaching RMB99.4 billion, which was 3% below Bloomberg consensus estimates [1]. - Non-GAAP net profit rose by 61.3% YoY to RMB27.5 billion, also falling short of consensus by 6% due to revenue generation misses [1]. - The target price (TP) has been adjusted down to US $156.8 from US$ 187.9, reflecting a 34.6% upside from the current price of US $116.49 [1]. - The company is focusing on enhancing merchant support, which has led to cost savings for over 10 million merchants [1]. - Management plans to continue investing in the merchant ecosystem to ensure sustainable long-term growth [1]. Financial Performance Summary - For FY24E, revenue is projected at RMB398.2 billion, with a net profit of RMB113.0 billion, reflecting a YoY growth of 81.7% [3]. - The gross profit margin is expected to be 61.8% in FY24E, with an operating margin of 28.2% [5]. - The adjusted net profit for FY24E is forecasted at RMB123.4 billion, with a P/E ratio of 10.3x [3][5]. Revenue Breakdown - Online marketing services and other revenues increased by 24.3% YoY to RMB49.4 billion in 3Q24, while transaction services revenue grew by 71.5% YoY to RMB50.0 billion [1]. - The total revenue for 3Q24 was RMB99.4 billion, with a gross profit of RMB59.6 billion, resulting in a gross profit margin of 60.0% [1][5]. Segment Valuation - The SOTP valuation indicates that the main app contributes RMB240.1 billion in revenue, with a valuation of US$ 119.1 per share based on a 12x 2024E P/E [5]. - Duoduo Grocery is valued at US $1.9 per share, while Temu is valued at US$ 15.7 per share based on a 1.2x 2024E P/S [5].