PDD Holdings: Temu’s Scaling Challenges and Tariff Risks Impact — Will It Sustain Competitive Leadership?

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PDD Holdings’ Q3 results showcased robust YoY revenue (+44% to RMB 99.4 billion) and net income growth (+61% to RMB 25 billion), driven by strong operational execution in core transaction services (+72%) and online marketing services (+24%). However, softer-than-expected GMV growth, elevated costs tied to Temu’s expansion, and intensified competition weighed on sequential momentum. PDD’s strategic pivot toward high-quality development, exemplified by the RMB 10 billion fee reduction program and merchant support initiatives, is fostering ecosystem growth and rural market penetration. Investments in supply chain upgrades and logistics efficiency are aligning well with evolving consumer preferences. Despite these strengths, rising marketing costs (+40% YoY), regulatory headwinds, and deflationary pressures in China’s economy present challenges. Temu’s revenue growth decelerated sharply, reflecting scaling difficulties amid rising competition and operational complexities in overseas markets. While PDD’s cash reserve of RMB 308.5 billion supports reinvestment flexibility, uncertainties tied to macroeconomic recovery, tariff risks, and profitability pressures loom large. Valuation remains attractive at 8.64x NTM Forward P/E, but JD.com’s stronger capital return initiatives and stable growth position it as a preferred peer. As PDD navigates these headwinds, a key question remains: Can Temu scale efficiently while sustaining PDD’s competitive leadership in a fiercely contested e-commerce landscape?

Table of Contents :
• Stock Rating & Target Price
• Investment Thesis
• Fundamental Models Used
• Company Description
• Corporate Timeline
• Key Metrics (KPI ) and Recently Reported Earnings Review
• Business Highlights, Strategic Announcements & Outlook
• Quarter-over-Quarter (Q-o-Q) and Year-over-Year (Y-o-Y) Growth Analysis
• Key Catalysts Driving Growth
• Historical Financial Statement Analysis & CAGR Trends
• Quarterly Key Financial Ratios and Performance Metrics
• Annual Financial Performance Analysis: Horizontal and Vertical Financial Analysis, Trends
• Financial Forecasts
• Annual Forecasts: Income Statement
• Annual Forecasts: Cash Flow Statements
• Net Debt Levels
• A Closer Look at DCF: Our Assumptions and Methodology
• Terminal Value Calculation
• Target Price Analysis
• Valuation Multiples
• Supplementary Valuation Analysis: Multiples Approach
• Scenario/Sensitivity Analysis – Base Case , Bull Case ,Bear Case
• Holistic Peer Review & Trading Comps: Financial Data, Operational Metrics, and Valuation Multiples
• Implied Price Per Share
• Ownership Activity/ Insider Trades
• Ownership Summary
• An analysis of ESG Risk Rating
• Key Professionals
• Key Board Members
• Key Risks Considerations
• Analyst Ratings
• Analyst Industry Views
• Disclosures

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