PDD

US$104.09 - OUTPERFORM

Elinor Leung, CFA

Missed expectations
Increased merchant support lowered take rate and gross margin
[email protected]
+852 2600 8632 PDD’s 3Q24 results disappointed with total revenue up 44.3% YoY to Rmb99.4bn and
adj. net profit up 61.3% YoY to Rmb27.5bn, 6% below consensus. Revenue growth
Wenting Yu moderated to 2% QoQ. While the China GMV sustained c.20% YoY growth, the take
+852 2600 8651 rate was likely flat YoY/fell 0.6% QoQ to 5.2% given increased merchant support
measures. Its gross margin also declined 1ppt YoY given lowering logistics fees. We
Leo You, CFA believe PDD will continue to face challenges over the next few quarters as it benefits
+852 2600 7142 less from trade-in subsidies & as it raises promotions to stay competitive. We forecast
revenue growth to decelerate to +24% YoY in 4Q24. We lower our adj. NP 6% for
24/25CL & our target price from US$180 to US$150, implying a 10x 26CL adj. PE. We
22 November 2024 maintain our Outperform recommendation.

China Take rate fell on increased merchant support

Internet Online marketing and other revenue grew 24% YoY to Rmb49.4bn in 3Q24, driven by
20% YoY domestic GMV growth. Transaction revenue grew 72% YoY to Rmb50bn. 7%
Reuters PDD.O below estimate, likely due to an increased contribution from the semi-consignment
Bloomberg PDD US
model for Temu and a domestic commission rate decline. The total take rate (ads plus
Priced on 21 November 2024
commissions) on PDD could be flat YoY/decline 0.6ppt QoQ to 5.2% as PDD introduced
HS CEI @ 7,090.9
the Rmb10bn fee reduction programme to merchants. For example, the technology
12M hi/lo US$157.57/89.17 service fee refund programme was introduced for returned goods. The transit fees for
12M price target US$150.40 remote areas are exempt, and merchants are allowed to argue and reclaim certain losses
±% potential +44% from ‘refund-only’ cases. Commission for ‘pay first use later’ orders (c.25% of total
Shares in issue 2,528.8m orders) was reduced from 1% to 0.6%.
Free float (est.) 22.9%
Market cap US$161.8bn
Raising promotions to stay competitive
The government’s trade-in subsidy programme has boosted appliance and electronics
3M ADV US$1,900.4m
sales. But, PDD indicated it enjoyed fewer benefits than peers due to its pure platform
Foreign s'holding 45.0% model and a lack of operational experience. PDD may have to invest additional
Major shareholders resources to maintain its price advantage with peers which enjoy trade-in subsidies. We
Zheng Huang 44.6% estimate PDD’s Double-11 GMV saw c.20% YoY growth though it added Billions
Tencent 16.9%
Consumption Coupons (百亿消费券) and Super Extra Subsidies (超级加倍补) on top of
the Billions Subsidies Program (百亿补贴).
Temu continued rapid global user growth
Blended ESG Score (%)* We estimate Temu achieved c.US$15bn GMV in 3Q24 as it sustained rapid global user
Overall 31.1
growth. Temu recorded c.330m global mobile MAUs in July (96% of Amazon), up c.15%
Country average 53.1
GEM sector average 49.6 from Aug 2024. Its MAU was stable at c.50m in the US, and sustained rapid growth in
*Click to visit company page on clsa.com for details South America (47% Oct vs Aug) and Southeast Asia (30%). By Oct 2024, Temu
Stock performance (%) garnered a 94m MAU in Europe (c.80% above Shein/Amazon), and Europe remains its
biggest market (29% of global MAU), followed by Latin America (23%) & US (15%).
1M 3M 12M
Absolute (16.6) (28.7) (11.3) Financials
Relative (12.2) (37.7) (23.6) Year to 31 December 22A 23A 24CL 25CL 26CL
Abs (US$) (16.6) (28.7) (11.3) Revenue (Rmbm) 130,558 247,639 393,091 457,171 516,629
Rev forecast change (%) - - 1.2 3.8 8.8
Net income (Rmbm) 31,538 60,027 110,772 120,067 141,677
Adjusted net profit (Rmbm) 39,530 67,899 120,847 130,841 152,819
EPS (fen) 2,189.7 4,111.7 7,493.4 8,126.7 9,589.3
EPS forecast change (%) - - 1.0 (6.9) (6.8)
CL/consensus (32) (EPS%) - - 88 81 79
Adjusted EPS (fen) 2,744.5 4,650.9 8,174.9 8,855.9 10,343.5
Adj EPS growth (% YoY) 183.5 69.5 75.8 8.3 16.8
Adjusted PE (x) 25.6 16.1 9.2 8.5 7.2
Net debt/equity (%) (65.2) (61.9) (75.4) (81.7) (85.7)
Source: Bloomberg Source: www.clsa.com

CLSA and CL Securities Taiwan Co., Ltd. (“CLST”) do and seek to do business with companies covered in its research reports. As such,
investors should be aware that there may be conflicts of interest which could affect the objectivity of the report. Investors should consider
this report as only a single factor in making their investment decisions. For important disclosures please refer to page 16.
Prepared for - RD: Thomson Reuters
 Missed expectations PDD - O-PF

Financials at a glance
Year to 31 December 2022A 2023A 2024CL (% YoY) 2025CL 2026CL

Profit & Loss (Rmbm)

Revenue 130,558 247,639 393,091 58.7 457,171 516,629
Cogs (ex-D&A) (29,238) (90,937) (148,571) (178,588) (195,749)
Gross Profit (ex-D&A) 101,319 156,702 244,520 56 278,583 320,880
SG&A and other expenses (68,693) (97,217) (134,437) (154,284) (176,429)
Op Ebitda 32,626 59,485 110,083 85.1 124,299 144,451
Depreciation/amortisation (2,224) (786) (1,196) (1,995) (3,153)
Op Ebit 30,402 58,699 108,886 85.5 122,305 141,297
Net interest inc/(exp) 3,945 10,194 19,549 91.8 20,023 27,604
Other non-Op items 2,072 2,988 2,120 (29.1) - -
Profit before tax 36,419 71,881 130,555 81.6 142,328 168,901
Taxation (4,726) (11,850) (19,583) (22,061) (27,024)
Profit after tax 31,693 60,031 110,972 84.9 120,267 141,877
Minorities/pref divs/affils (155) (5) (200) (200) (200)
Net income 31,538 60,027 110,772 84.5 120,067 141,677
Adjusted profit 39,530 67,899 120,847 78 130,841 152,819
Cashflow (Rmbm) 2022A 2023A 2024CL (% YoY) 2025CL 2026CL
Net income 31,538 60,027 110,772 84.5 120,067 141,677
Depreciation/amortisation 2,224 786 1,196 52.2 1,995 3,153
Working capital changes 7,423 26,456 393 (98.5) 366 331
Other items - - - - -
Net operating cashflow 48,508 94,163 122,411 30 133,202 156,303
Capital expenditure (636) (584) (5,896) (6,858) (7,749)
Free cashflow 47,872 93,579 116,515 24.5 126,344 148,554
M&A/Others (21,726) (54,847) 0 0 0
Net investing cashflow (22,362) (55,431) (5,896) (6,858) (7,749)
Increase in loans - (8,969) - - -
Dividends 0 0 0 0 0
Net equity raised/other 10 8 - - -
Net financing cashflow 10 (8,961) 0 0 0
Incr/(decr) in net cash 26,156 29,771 116,515 291.4 126,344 148,554
Exch rate movements 100 (291) 0 0 0
Balance sheet (Rmbm) 2022A 2023A 2024CL (% YoY) 2025CL 2026CL
Cash & equivalents 92,300 121,780 238,295 95.7 364,639 513,193
Accounts receivable 588 3,914 3,232 (17.4) 5,079 4,313
Other current assets 8,617 11,641 20,516 76.2 16,883 25,380
Fixed assets 1,045 980 5,683 480.1 10,548 15,144
Investments 17,907 48,222 48,222 0 48,222 48,222
Intangible assets 134 21 18 (14.2) 15 15
Other non-current assets 116,529 161,520 161,520 0 161,520 161,520
Total assets 237,120 348,078 477,486 37.2 606,907 767,787
Short-term debt 13,886 649 649 0 649 649
Accounts payable 63,317 74,997 71,221 (5) 57,598 52,006
Other current liabs 39,687 77,255 89,617 16 101,820 115,474
Long-term debt/CBs 1,576 5,232 5,232 0 5,232 5,232
Provisions/other LT liabs 884 2,704 2,704 0 2,704 2,704
Shareholder funds 117,771 187,242 308,064 64.5 438,905 591,724
Minorities/other equity 0 0 0 0 0
Total liabs & equity 237,120 348,078 477,486 37.2 606,907 767,787
Ratio analysis 2022A 2023A 2024CL (% YoY) 2025CL 2026CL
Revenue growth (% YoY) 39.0 89.7 58.7 16.3 13.0
Ebitda margin (%) 25.0 24.0 28.0 27.2 28.0
Ebit margin (%) 23.3 23.7 27.7 26.8 27.3
Net profit growth (%) 306.0 90.3 84.5 8.4 18.0
Op cashflow growth (% YoY) 68.5 94.1 30.0 8.8 17.3
Capex/sales (%) 0.5 0.2 1.5 1.5 1.5
Net debt/equity (%) (65.2) (61.9) (75.4) (81.7) (85.7)
Net debt/Ebitda (x) - - - - -
ROE (%) 32.7 39.4 44.7 32.1 27.5
ROIC (%) 183.2 197.1 330.8 319.2 322.9
Source: www.clsa.com

Find CLSA research on Bloomberg, Thomson Reuters, FactSet and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

22 November 2024 [email protected] 2

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Missed expectations
PDD’s 3Q24 results PDD 3Q24 results disappointed with total revenue up 44.3% YoY to Rmb99.4bn,
disappointed and adj. net profit up 61.3% YoY to Rmb27.5bn, 6% below consensus. Revenue
growth moderated to 2% QoQ. While China GMV sustained c.20% YoY growth, take
rate was likely flat YoY and fell 0.6% QoQ to 5.2% given increased merchant
supportive measures. Gross margin also declined 1ppt YoY given lowering logistics
fees. We believe PDD will continue to face challenges next few quarters as it
benefits less from trade-in subsidies and has raised promotion to stay competitive.
Revenue could decelerate to 23% YoY growth in 4Q24. We lower adj. NP by 6% for
24/25CL and target price form US$180 to US$150. Our target price implies 10x
26CL adj. PE. We maintain our Outperform recommendation.

Figure 1

PDD key quarterly financials

(Rmbm) 3Q23 4Q23 1Q24 2Q24 3Q24 3Q24 YoY 3Q24 QoQ Actual 3Q24CL
/CL
Estimated T12M GMV (Rmbbn) 3,580.9 3,847.1 4,049.2 4,253.7 4,458.2 24.5 4.8 4,422.4
GMV YoY (%) 24.0 26.2 27.0 25.5 24.5 23.5

Online marketing & others 39,688 48,676 42,456 49,116 49,351 24.3 0.5 1.7 48,520
Transaction 29,153 40,205 44,356 47,944 50,003 71.5 4.3 (7.3) 53,936
Net revenues 68,840 88,881 86,812 97,060 99,354 44.3 2.4 (3.0) 102,456
YoY (%) 93.9 123.2 130.7 85.7 44.3 48.8
Gross profit 42,010 53,803 54,117 63,361 59,645 42.0 (5.9) (10.8) 66,885
YoY (%) 49.6 74.2 104.1 88.6 42.0 59.2
Gross margin (%) 61.0 60.5 62.3 65.3 60.0 -1.0pt -5.2pt -5.2pt 65.3
EBIT 16,656 22,395 25,974 32,565 24,292 45.8 (25.4) (12.9) 27,900
Net income to shareholders 15,537 23,280 27,998 32,009 24,981 60.8 (22.0) (6.6) 26,746
Non-GAAP
S&M (21,283) (26,227) (22,738) (25,411) (29,834) 40.2 17.4 (9.9) (33,111)
G&A (403) (674) (572) (594) (647) 60.4 9.0 (23.9) (850)
R&D (2,218) (2,367) (2,273) (2,407) (2,439) 10.0 1.3 (5.2) (2,574)
Total opex (23,884) (29,223) (25,565) (28,374) (32,875) 37.6 15.9 (9.9) (36,495)
% of revenue
S&M 30.9 29.5 26.2 26.2 30.0 -0.9pt 3.8pt -2.3pt 32.3
G&A 0.6 0.8 0.7 0.6 0.7 0.1pt 0.0pt -0.2pt 0.8
R&D 3.2 2.7 2.6 2.5 2.5 -0.8pt 0.0pt -0.1pt 2.5
Adj EBIT 18,126 24,580 28,552 34,987 26,770 47.7 (23.5) (11.9) 30,390
Adj EBIT margin (%) 26.3 27.7 32.9 36.0 26.9 0.6pt -9.1pt -2.7pt 29.7
Adj net income 17,027 25,476 30,602 34,432 27,459 61.3 (20.3) (6.1) 29,236
Adj net margin (%) 24.7 28.7 35.3 35.5 27.6 2.9pt -7.8pt -0.9pt 28.5
Source: Company, CLSA

Revenue miss
Online marketing and Online marketing and others revenue grew 24% YoY to Rmb49.4bn in 3Q24, driven
others revenue grew 24% by 20% YoY domestic GMV growth. Ad Take rate may rise 0.1ppt YoY but dropped
YoY to Rmb49.4bn 0.6ppt QoQ, likely due to more traffic support to merchants.

Transaction revenue grew Transaction revenue grew 72% YoY to Rmb50bn. 7% below estimate, likely due to
72% YoY to Rmb50bn increased contribution of the semi-consignment model for Temu and domestic
commission rate decline. Transaction revenue included commission on marketplace,
payment charges, logistics and income from community groupbuy (CGB) business
Duoduo Grocery (多多买菜) and overseas business Temu.

Total take rate (ad + commission) on PDD could be flat YoY and decline 0.6ppt QoQ
to 5.2% as PDD introduced the Rmb10bn fee reduction programme to merchants.

22 November 2024 [email protected] 3

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Starting from end-July 2024, PDD introduced technology service fee (commission)
refund programme for returned goods, instead of charging on the full GMV. The
transit fees for remote areas are exempted, Merchants are allowed to argue and
reclaim certain loss from “refund-only” cases. The commission rate for “pay first use
later” orders (c.25% of total orders) is reduced from 1% to 0.6%.

Governments’ trade-in subsidies programme started in Sep and boosted overall

appliances and electronics sales. However, management indicated that the platform
enjoyed fewer benefits than peers due to its pure platform model and a lack of
operation experience. PDD may have to invest additional resources to maintain its
price advantage to peers who enjoy trade-in subsidies.

We estimate PDD’s Double-11 GMV grew c.20% YoY per channel checks. However,
PDD launched two additional promotional programs Billions Consumption Coupons
(百亿消费券) and Super Extra Subsidies (超级加倍补) on top of its regular Billions
Subsidies Program (百亿补贴) during Double-11 this year.

Billions Consumption Coupons, offered by the platform, can be used on top of the
discounted prices by merchants and mainly target home appliance products, which
we believe could be a way PDD tried to offer home appliance prices as competitive
as other platforms benefiting more from government subsidies. PDD receives fewer
benefits from the government's trade-in policies compared to JD and Tmall due to
its limited presence in 1P ecommerce and smaller exposure to home appliance
brand merchants on the platform. Trade-in subsidies from home appliance brands
are primarily distributed through direct-operated stores and large agencies, which
puts smaller agencies on PDD at a disadvantage. These smaller agencies may not
be eligible to claim the subsidies. However, the platform subsidies have less use
restrictions as compared with government subsidies.

The Super Extra Subsidies rolled out in three phases, with aggregated order volume
of first two phases (14 Oct to 4 Nov) reached 61m. In terms of order volume, fresh
produce & food and beauty & personal goods categories accounted for c.30% and
15-20% of total respectively. In terms of GMV, 3C and beauty & personal goods
categories accounted for c.40% and c.30% of total respectively.

TEMU sustained rapid global user growth

Temu likely achieved Temu likely achieved c.US$15bn GMV in 3Q24 (vs c.US$24bn in 1H24) as its global
c.US$15bn GMV in 3Q24 users sustained rapid growth. Temu recorded c.330m global mobile MAUs in July
(96% of Amazon), up c.15% from Aug-2024. Its users was stable at c.50m in the US,
and sustained rapid growth in South America and Southeast Asia in 3Q24. By Oct-
2024, Temu garnered 94m MAU in Europe (c.80% above Shein/Amazon), and 25m
MAU in Middle East (c.140% above Shein, 450% above Amazon). Its South America
and Southeast Asia MAU jumped 47% and 30%, respectively, in October vs August.
Europe remains Temu’s biggest market, contributing 29% of its global MAU. Latin
America becomes the second largest market (23%), surpassing the US (15%).

Temu continued to promote semi-consignment model, recruiting more local

merchants and prioritising semi-consignment goods in search results. Semi-
consignment model contributes to c.20% of Temu GMV and may increase to c.30%
by end 2024. We maintain our FY24 Temu GMV forecast at US$55bn driven by the
growth in new markets and semi-consignment.

22 November 2024 [email protected] 4

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Figure 2 Figure 3

Global mobile MAU as a percentage of Amazon US mobile MAU as a percentage of Amazon

Source: Sensor Tower, CLSA Source: Sensor Tower, CLSA

Figure 4 Figure 5

Europe mobile MAU as a percentage of Amazon South Korea + Japan mobile MAU as a percentage of Coupang

Source: Sensor Tower, CLSA Source: Sensor Tower, CLSA

Figure 6 Figure 7

South America mobile MAU as a percentage of Mercado Libre Southeast Asia mobile MAU as a percentage of Shopee

Source: Sensor Tower, CLSA Source: Sensor Tower, CLSA

22 November 2024 [email protected] 5

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Figure 8 Figure 9

Temu global mobile MAU Temu US mobile MAU

Source: Sensor Tower, CLSA Source: Sensor Tower, CLSA

Figure 10 Figure 11

Temu South America mobile MAU Temu mobile MAU breakdown by region

Source: Sensor Tower, CLSA Source: Sensor Tower, CLSA

Figure 12 Figure 13

Temu mobile MAU breakdown by region (Jun-2024) Temu mobile MAU breakdown by region (Oct-2024)

Source: Sensor Tower, CLSA Source: Sensor Tower, CLSA

22 November 2024 [email protected] 6

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Figure 14 Figure 15

Temu mobile MAU breakdown by region – US vs Europe Temu mobile MAU breakdown by region – others

Source: Sensor Tower, CLSA Source: Sensor Tower, CLSA

Lower gross margin

Adj. net profit rose 61% Adj net profit rose 61% YoY to Rmb27.5bn with a 27.6% margin in 3Q24. China
YoY to Rmb27.5bn with a margin may reduce from +60% to +50% after all merchant supportive efforts, and
27.6% margin the overseas losses ratio fell to low single digit-%.

Gross profit increased at slower 42% YoY to Rmb59.6bn with 60% margin, down
1ppt YoY, due to increased fulfilment fees and payment processing fees. PDD
launched logistic support initiative to cover transhipment fees across western China
to reduce delivery cost in these regions. Delivery fees were cut by up to 70% for
orders include agriculture products and daily essentials.

q Adjusted S&M expenses increased 40% YoY to Rmb29.8bn mainly due to

increased spending in promotion and advertising activities. However, the S&M
cost ratio decreased 0.5pt YoY to 30.0%, with operating leverage.

q Adjusted R&D expense increased 10% YoY to Rmb2.4bn as PDD was committed
to further strengthening its R&D capabilities to improve user satisfaction and
supply chain efficiency. However, the cost ratio fell 0.8pt YoY to 2.5%.

q Adjusted G&A expense increased 60% YoY to Rmb647m. due to increased staff-
related costs, and the cost ratio edged up 0.1ppt YoY to 0.7%.

Figure 16 Figure 17 Figure 18

Non-GAAP S&M expenses Non-GAAP R&D expenses Non-GAAP G&A expenses

Source: Pinduoduo, CLSA Source: Pinduoduo, CLSA Source: Pinduoduo, CLSA

22 November 2024 [email protected] 7

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Figure 19 Figure 20

Non-GAAP Ebit Non-GAAP net profit

Source: Pinduoduo, CLSA Source: Pinduoduo, CLSA

Retain Outperform rating but at a lower target price US$150

We lower target price form We lower our adj. NP by 6% for 24/25CL as PDD will continue to face challenges
US$180 to US$150 next few quarters as it benefits less from trade-in subsidies and has raised
promotions to stay competitive. We forecast revenue to decelerate to 23% YoY
growth in 4Q24. We lower our target price form US$180 to US$150. Our target
price implies a 10x 26CL adj PE. We maintain our Outperform recommendation.

Figure 21

Forecast changes
Year to 31 Dec 2022 2023 24CL 25CL 26CL
Revenue (Rmbm) 130,558 247,639 393,091 457,171 516,629
Forecast change (%) 1.2 3.8 8.8
Adj EBIT (Rmbm) 38,120 65,778 118,936 133,079 152,439
Forecast change (%) (7.2) (11.7) (11.8)
Adj net profit (Rmbm) 39,530 67,899 120,847 130,841 152,819
Forecast change (%) 1.3 (5.9) (5.6)
Source: Company, CLSA

Figure 22

DCF valuation
Discounted to Dec 2025 25CL 26CL 27CL 28CL 29CL 30CL 35CL CAGR (26- CAGR (31-
30) 35)
Revenue growth (%) 16.3 13.0 9.9 8.0 6.1 4.4 0.9 8.2 2.4
EBITDA growth (%) 12.9 16.2 12.6 10.6 6.6 1.2 (8.2) 9.3 (5.7)
EBITDA margin (%) 27.2 28.0 28.7 29.3 29.5 28.6 19.0
Capex/sale (%) 1.5 1.5 1.5 1.5 1.5 1.5 1.5
FCF (Rmbbn) 98.9 114.4 128.3 141.4 150.0 150.7 106.4
Discounted FCF (Rmbbn) 0.0 101.8 101.6 99.6 94.0 84.0 33.1
WACC (%) 12.4
Terminal growth rate (%) 1.0
Implied terminal EV/EBIT (x) 6.4
Enterprise value (US$bn) 145
Net cash (US$bn) 64
Equity value (US$bn) 208
ADS outstanding (m) 1,386
DCF share price (US$/sh) 150
Exchange rate (Rmb/US$) 7.10
Source: Company, CLSA

22 November 2024 [email protected] 8

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Figure 23

WACC inputs (no change)

Risk free rate 4.0%
Beta 1.20
Equity risk premium 7.0%
Cost of equity 12.4%
Cost of debt 5.0%
Tax rate 25.0%
Equity/capital 100%
Debt/capital 0.0%
WACC 12.4%
Source: CLSA

22 November 2024 [email protected] 9

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Figure 24

Profit and loss

(Rmbm) 2022 2023 24CL 25CL 26CL
Online marketing & others 102,931 153,541 197,195 229,982 288,543
Transaction 27,626 94,099 195,896 227,189 228,086
Online marketplace 130,558 247,639 393,091 457,171 516,629
Merchandize sales 0 0 0 0 0
Total net revenue 130,558 247,639 393,091 457,171 516,629
YoY (%)
Online marketing & others 41.8 49.2 28.4 16.6 25.5
Transaction 95.4 240.6 108.2 16.0 0.4
Online marketplace 50.6 89.7 58.7 16.3 13.0
Total 39.0 89.7 58.7 16.3 13.0
% of revenue
Online marketing & others 78.8 62.0 50.2 50.3 55.9
Transaction 21.2 38.0 49.8 49.7 44.1
Online marketplace 100.0 100.0 100.0 100.0 100.0

Cost of revenue (31,462) (91,724) (149,768) (180,583) (198,902)

Gross profit 99,095 155,916 243,324 276,589 317,727
YoY (%) 59.2 57.3 56.1 13.7 14.9
Gross margin (%) 75.9 63.0 61.9 60.5 61.5

Selling and marketing (54,344) (82,189) (113,996) (132,580) (152,405)

General and administrative (3,965) (4,076) (8,058) (8,903) (9,558)
Research an development (10,385) (10,952) (12,382) (12,801) (14,466)
Total opex (68,693) (97,217) (134,437) (154,284) (176,429)
Operating profit 30,402 58,699 108,886 122,305 141,297
Operating margin (%) 23.3 23.7 27.7 26.8 27.3

Interest income 3,997 10,238 19,549 20,023 27,604

FX (150) 36 (273) 0 0
Other income 2,221 2,953 2,393 0 0
Pre-tax income 36,419 71,881 130,555 142,328 168,901
Taxation (4,726) (11,850) (19,583) (22,061) (27,024)
Effective tax rate (%) 13.0 16.5 15.0 15.5 16.0
Associates income (155) (5) (200) (200) (200)
Contribution of convertible preferred shareholders 0 0 0 0 0
Net profit 31,538 60,027 110,772 120,067 141,677
Net margin (%) 24.2 24.2 28.2 26.3 27.4
Basic EPS (per ADS, Rmb) 24.94 44.33 80.09 86.63 102.23
Diluted EPS (per ADS, Rmb) 21.90 41.12 74.93 81.27 95.89
Basic EPS (per ADS, US$) 3.62 6.24 11.28 12.20 14.40
Diluted EPS (per ADS, US$) 3.17 5.79 10.55 11.45 13.51
Non-GAAP financials
EBITDA 40,344 66,564 120,133 135,073 155,593
EBITDA margin (%) 30.9 26.9 30.6 29.5 30.1
EBIT 38,120 65,778 118,936 133,079 152,439
EBIT margin (%) 29.2 26.6 30.3 29.1 29.5
Net profit to shareholders 39,530 67,899 120,847 130,841 152,819
Net margin to shareholders (%) 30.3 27.4 30.7 28.6 29.6
Diluted EPS (Rmb) 27.4 46.5 81.7 88.6 103.4
Diluted EPS (US$) 4.0 6.6 11.5 12.5 14.6
Source: Company, CLSA

22 November 2024 [email protected] 10

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Figure 25

Balance sheet
(Rmbm) 2022 2023 24CL 25CL 26CL
Cash 34,326 59,794 176,309 302,654 451,207
Restricted cash 57,974 61,985 61,985 61,985 61,985
Short-term investments 115,113 157,415 157,415 157,415 157,415
Account receivable 588 3,914 3,232 5,079 4,313
Prepaid expenses and others 2,298 4,213 6,123 5,898 7,686
Amount due from related parties 6,319 7,428 14,393 10,985 17,694
Total current assets 216,618 294,750 419,458 544,017 700,301
PPE 1,045 980 5,683 10,548 15,144
Intangible assets 134 21 18 15 15
Right of use assets 1,416 4,105 4,105 4,105 4,105
Others 17,907 48,222 48,222 48,222 48,222
Total assets 237,120 348,078 477,486 606,907 767,787
Accounts payable 63,317 74,997 71,221 57,598 52,006
Customers advances 1,390 2,145 2,743 2,866 3,548
Merchant deposits 15,058 16,879 33,817 25,143 41,485
Amount due to related party 1,676 1,239 1,239 1,239 1,239
Accrued expenses and other current liab. 20,961 55,351 50,178 70,930 67,561
Lease liabilities 602 1,642 1,642 1,642 1,642
Total current liabilities 116,889 152,901 161,487 160,067 168,128
Lease Liabilities 871 2,644 2,644 2,644 2,644
Others 13 60 60 60 60
Total liabilities 119,349 160,837 169,422 168,002 176,064
Mezzanine equity 0 0 0 0 0
Share capital 0 0 0 0 0
Share premium 99,255 107,399 117,449 128,223 139,365
Accumulated deficit 15,193 75,119 185,890 305,958 447,635
Accumulated OCI 3,322 4,724 4,724 4,724 4,724
Non-controlling interests 0 0 0 0 0
Total shareholders' equity 117,771 187,242 308,064 438,905 591,724
Total liabilities & shareholders' equity 237,120 348,078 477,486 606,907 767,787
Source: Company, CLSA

Figure 26

Cashflow statement
(Rmbm) 2022 2023 24CL 25CL 26CL
Net income 31,538 60,027 110,772 120,067 141,677
Depreciation & amortization 2,224 786 1,196 1,995 3,153
Stock compensation 7,718 7,079 10,050 10,774 11,142
Change in working capital 7,423 26,456 393 366 331
Others (396) (185) 0 0 0
CF from operating activities 48,508 94,163 122,411 133,202 156,303
Capex (636) (584) (5,896) (6,858) (7,749)
Acquisition 0 0 0 0 0
Others (21,726) (54,847) 0 0 0
CF from investing activities (22,362) (55,431) (5,896) (6,858) (7,749)
Issue (repayment) of debt 0 (8,969) 0 0 0
Issue (repurchase) of shares 0 0 0 0 0
Others 10 8 0 0 0
CF from financing activities 10 (8,961) 0 0 0
Net change in cash 26,156 29,771 116,515 126,344 148,554
Cash, beginning of year 66,044 92,300 121,780 238,295 364,639
Exchange gain (loss) 100 (291) 0 0 0
Cash, end of year 92,300 121,780 238,295 364,639 513,193
Source: Company, CLSA

22 November 2024 [email protected] 11

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Investment thesis
PDD's value-for-money proposition makes it the major beneficiary of China's
consumer downtrading trend. By sustaining outperformance in GMV growth versus
peers, it continues to gain market share in the Chinese ecommerce market. Its
overseas business Temu is gaining traction in terms of user base and GMV as it
expands into more countries. The margin profile remains healthy with robust
domestic profits despite Temu's losses.

Catalysts
Catalysts include strong outperformance versus peers in GMV growth during
shopping festivals and Temu's successful track record overseas.

Valuation details
Our DCF-based target price is based on a 12.4% WACC (4% risk-free rate, 1.2x beta
and 7% equity-risk premium) and 1% terminal growth rate (c.7x terminal EV/Ebit).
We forecast c.10% revenue Cagr in the teens for the next five years. We expect
adjusted Ebitda margin to reach c.35% in 10 years.

Investment risks
Competition and overseas losses are the main risks: (1) Competitors have upgraded
apps and launched new channels to penetrate mass users and low-tier cities and
introduced the Billion Subsidies Program for shopping festivals or daily promotions.
(2) PDD started to expand its Temu business overseas in September 2022 and may
have to invest more in user acquisition, logistics and infrastructure in overseas
markets. Existing and potential regulations on antitrust, data security, ecommerce
and employee welfare may challenge business arrangements and hinder financial
outcomes.

22 November 2024 [email protected] 12

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Detailed financials
Profit & Loss (Rmbm)
Year to 31 December 2020A 2021A 2022A 2023A 2024CL 2025CL 2026CL
Revenue 59,492 93,950 130,558 247,639 393,091 457,171 516,629
Cogs (ex-D&A) (18,627) (30,223) (29,238) (90,937) (148,571) (178,588) (195,749)
Gross Profit (ex-D&A) 40,865 63,727 101,319 156,702 244,520 278,583 320,880
Research & development costs (6,892) (8,993) (10,385) (10,952) (12,382) (12,801) (14,466)
Selling & marketing expenses (41,195) (44,802) (54,344) (82,189) (113,996) (132,580) (152,405)
Other SG&A (1,507) (1,541) (3,965) (4,076) (8,058) (8,903) (9,558)
Other Op Expenses ex-D&A 0 0 - - - - -
Op Ebitda (8,729) 8,392 32,626 59,485 110,083 124,299 144,451
Depreciation/amortisation (652) (1,495) (2,224) (786) (1,196) (1,995) (3,153)
Op Ebit (9,380) 6,897 30,402 58,699 108,886 122,305 141,297
Interest income 2,455 3,062 3,997 10,238 19,549 20,023 27,604
Interest expense (757) (1,231) (52) (44) 0 0 0
Net interest inc/(exp) 1,698 1,831 3,945 10,194 19,549 20,023 27,604
Associates/investments - - - - - - -
Forex/other income 225 72 (150) 36 (273) - -
Asset sales/other cash items - - - - 0 - -
Provisions/other non-cash items 194 656 2,221 2,953 2,393 0 0
Asset revaluation/Exceptional items - - - - - - -
Profit before tax (7,263) 9,455 36,419 71,881 130,555 142,328 168,901
Taxation - (1,934) (4,726) (11,850) (19,583) (22,061) (27,024)
Profit after tax (7,263) 7,522 31,693 60,031 110,972 120,267 141,877
Minorities and other 84 247 (155) (5) (200) (200) (200)
Profit before preference dividends (7,180) 7,769 31,538 60,027 110,772 120,067 141,677
Preference dividends 0 0 0 0 0 0 0
Net income (7,180) 7,769 31,538 60,027 110,772 120,067 141,677
Extraordinaries/others 0 0 0 0 0 0 0
Profit avail to ordinary shares (7,180) 7,769 31,538 60,027 110,772 120,067 141,677
Dividends - - - - - - -
Retained profit (7,180) 7,769 31,538 60,027 110,772 120,067 141,677
Adjusted profit (2,965) 13,830 39,530 67,899 120,847 130,841 152,819
EPS (fen) (602.3) 543.9 2,189.7 4,111.7 7,493.4 8,126.7 9,589.3
Adj EPS [pre excep] (fen) (248.7) 968.2 2,744.5 4,650.9 8,174.9 8,855.9 10,343.5
Core EPS (fen) (602.3) 543.9 2,189.7 4,111.7 7,493.4 8,126.7 9,589.3
DPS (fen) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Profit & loss ratios

Year to 31 December 2020A 2021A 2022A 2023A 2024CL 2025CL 2026CL
Growth (%)
Revenue growth (% YoY) 97.4 57.9 39.0 89.7 58.7 16.3 13.0
Ebitda growth (% YoY) nm nm 288.8 82.3 85.1 12.9 16.2
Ebit growth (% YoY) nm nm 340.8 93.1 85.5 12.3 15.5
Net income growth (%) nm nm 306.0 90.3 84.5 8.4 18.0
EPS growth (% YoY) nm nm 302.6 87.8 82.2 8.5 18.0
Adj EPS growth (% YoY) nm nm 183.5 69.5 75.8 8.3 16.8
DPS growth (% YoY) - - - - - - -
Core EPS growth (% YoY) nm nm 302.6 87.8 82.2 8.5 18.0
Margins (%)
Gross margin (%) 68.7 67.8 77.6 63.3 62.2 60.9 62.1
Ebitda margin (%) (14.7) 8.9 25.0 24.0 28.0 27.2 28.0
Ebit margin (%) (15.8) 7.3 23.3 23.7 27.7 26.8 27.3
Net income margin (%) (12.1) 8.3 24.2 24.2 28.2 26.3 27.4
Core profit margin (12.1) 8.3 24.2 24.2 28.2 26.3 27.4
Op cashflow margin 47.4 30.6 37.2 38.0 31.1 29.1 30.3
Returns (%)
ROE (%) (16.9) 11.5 32.7 39.4 44.7 32.1 27.5
ROA (%) (8.0) 3.2 12.6 16.8 22.4 19.1 17.3
ROIC (%) - - 183.2 197.1 330.8 319.2 322.9
ROCE (%) 18.6 (10.7) (43.5) (73.3) (129.7) (153.8) (188.1)
Other key ratios (%)
Effective tax rate (%) 0.0 20.4 13.0 16.5 15.0 15.5 16.0
Ebitda/net int exp (x) - - - - - - -
Exceptional or extraord. inc/PBT (%) - - - - - - -
Dividend payout (%) - 0.0 0.0 0.0 0.0 0.0 0.0
Source: www.clsa.com

22 November 2024 [email protected] 13

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Balance sheet (Rmbm)

Year to 31 December 2020A 2021A 2022A 2023A 2024CL 2025CL 2026CL
Cash & equivalents 74,844 66,044 92,300 121,780 238,295 364,639 513,193
Accounts receivable 730 674 588 3,914 3,232 5,079 4,313
Inventories - - - - - - -
Other current assets 9,400 7,675 8,617 11,641 20,516 16,883 25,380
Current assets 84,973 74,393 101,505 137,335 262,043 386,601 542,886
Fixed assets 203 2,203 1,045 980 5,683 10,548 15,144
Investments 7,275 16,457 17,907 48,222 48,222 48,222 48,222
Goodwill 0 0 0 0 0 0 0
Other intangible assets 1,277 701 134 21 18 15 15
Other non-current assets 65,181 87,455 116,529 161,520 161,520 161,520 161,520
Total assets 158,909 181,210 237,120 348,078 477,486 606,907 767,787
Short term loans/OD 1,866 - 13,886 649 649 649 649
Accounts payable 53,834 62,510 63,317 74,997 71,221 57,598 52,006
Accrued expenses 11,193 14,086 20,961 55,351 50,178 70,930 67,561
Taxes payable 0 0 0 0 0 0 0
Other current liabs 16,988 17,134 18,726 21,904 39,440 30,889 47,913
Current liabilities 83,882 93,730 116,889 152,901 161,487 160,067 168,128
Long-term debt/leases/other 14,433 11,789 1,576 5,232 5,232 5,232 5,232
Convertible bonds - - - - - - -
Provisions/other LT liabs 418 577 884 2,704 2,704 2,704 2,704
Total liabilities 98,733 106,095 119,349 160,837 169,422 168,002 176,064
Share capital 86,699 95,341 99,256 107,399 117,449 128,223 139,365
Retained earnings (26,523) (20,226) 18,515 79,842 190,614 310,682 452,359
Reserves/others - - - - 0 - -
Treasury stock 0 0 0 0 0 0 0
Shareholder funds 60,176 75,115 117,771 187,242 308,064 438,905 591,724
Minorities/other equity 0 0 0 0 0 0 0
Total equity 60,176 75,115 117,771 187,242 308,064 438,905 591,724
Total liabs & equity 158,909 181,210 237,120 348,078 477,486 606,907 767,787
Total debt 16,299 11,789 15,462 5,880 5,880 5,880 5,880
Net debt (58,545) (54,255) (76,839) (115,900) (232,415) (358,759) (507,313)
Adjusted EV 790,087 888,061 916,388 930,003 827,247 700,290 551,736
BVPS (fen) 5,047.9 5,258.5 8,176.7 12,825.6 20,839.5 29,707.0 40,050.4

Balance sheet ratios

Year to 31 December 2020A 2021A 2022A 2023A 2024CL 2025CL 2026CL
Key ratios
Current ratio (x) 1.0 0.8 0.9 0.9 1.6 2.4 3.2
Growth in total assets (% YoY) 108.9 14.0 30.9 46.8 37.2 27.1 26.5
Growth in capital employed (% YoY) nm nm nm nm nm nm nm
Net debt to operating cashflow (x) - - - - - - -
Gross debt to Ebitda (x) (1.9) 1.4 0.5 0.1 0.1 0.0 0.0
Net debt/Ebitda (x) - - - - - - -
Gearing
Net debt/equity (%) (97.3) (72.2) (65.2) (61.9) (75.4) (81.7) (85.7)
Gross debt/equity (%) 27.1 15.7 13.1 3.1 1.9 1.3 1.0
Interest cover (x) (9.1) 8.1 665.9 1,567.2 0.0 0.0 0.0
Debt cover (x) 1.7 2.4 3.1 16.0 20.8 22.7 26.6
Net cash per share (fen) 4,911.1 3,798.2 5,334.8 7,938.8 15,722.1 24,282.3 34,337.1
Working capital analysis
Inventory days - - - - - - -
Debtor days 5.5 2.7 1.8 3.3 3.3 3.3 3.3
Creditor days 792.9 669.4 729.9 275.2 178.2 130.2 100.6
Working capital/Sales (%) (120.8) (90.9) (71.8) (55.2) (34.9) (30.1) (26.7)
Capital employed analysis
Sales/Capital employed (%) (94.6) (143.1) (176.0) (287.7) (480.7) (591.7) (707.7)
EV/Capital employed (%) (1,255.7) (1,352.6) (1,235.3) (1,080.5) (1,011.7) (906.3) (755.8)
Working capital/Capital employed (%) 114.3 130.0 126.4 158.8 167.7 177.9 188.7
Fixed capital/Capital employed (%) (0.3) (3.4) (1.4) (1.1) (6.9) (13.7) (20.7)
Other ratios (%)
PB (x) 14.2 12.8 8.6 5.8 3.6 2.5 1.9
EV/Ebitda (x) (90.5) 105.8 28.1 15.6 7.5 5.6 3.8
EV/OCF (x) 28.0 30.9 18.9 9.9 6.8 5.3 3.5
EV/FCF (x) 28.1 34.8 19.1 9.9 7.1 5.5 3.7
EV/Sales (x) 13.3 9.5 7.0 3.8 2.1 1.5 1.1
Capex/depreciation (%) 6.6 219.8 28.6 74.3 492.8 343.8 245.7
Source: www.clsa.com

22 November 2024 [email protected] 14

Prepared for - RD: Thomson Reuters

 Missed expectations PDD - O-PF

Cashflow (Rmbm)
Year to 31 December 2020A 2021A 2022A 2023A 2024CL 2025CL 2026CL
Net income (7,180) 7,769 31,538 60,027 110,772 120,067 141,677
Operating adjustments 0 0 0 0 0 0 0
Depreciation/amortisation 652 1,495 2,224 786 1,196 1,995 3,153
Working capital changes 31,050 13,562 7,423 26,456 393 366 331
Minority interest adjustment - - - - - - -
Dividend from affiliates - - - - - - -
Deferred taxes adjustment - - - - - - -
Other net non-operating income - - - - - - -
Other non-cash operating items 3,675 5,957 7,322 6,893 10,050 10,774 11,142
Net operating cashflow 28,197 28,783 48,508 94,163 122,411 133,202 156,303
Capital expenditure (43) (3,287) (636) (584) (5,896) (6,858) (7,749)
Free cashflow 28,154 25,496 47,872 93,579 116,515 126,344 148,554
Acq/inv/disposals (38,315) (32,275) (21,726) (54,847) - - -
Other investing items - - - 0 - - -
Net investing cashflow (38,358) (35,562) (22,362) (55,431) (5,896) (6,858) (7,749)
Increase in loans 13,930 (1,875) - (8,969) - - -
Dividends 0 0 0 0 0 0 0
Net equity raised/others 37,869 0 10 8 - - -
Other financing items 0 0 0 0 0 0 0
Net financing cashflow 51,799 (1,875) 10 (8,961) 0 0 0
Incr/(decr) in net cash 41,638 (8,655) 26,156 29,771 116,515 126,344 148,554
Exch rate movements (140) (145) 100 (291) 0 0 0
Opening cash 33,346 74,844 66,044 92,300 121,780 238,295 364,639
Closing cash 74,844 66,044 92,300 121,780 238,295 364,639 513,193
OCF PS (fen) 2,365.3 2,015.0 3,367.8 6,449.9 8,280.7 9,015.7 10,579.3
FCF PS (fen) 2,361.7 1,784.9 3,323.7 6,409.9 7,881.9 8,551.5 10,054.8

Cashflow ratio analysis

Year to 31 December 2020A 2021A 2022A 2023A 2024CL 2025CL 2026CL
Growth (%)
Op cashflow growth (% YoY) 90.2 2.1 68.5 94.1 30.0 8.8 17.3
FCF growth (% YoY) 90.3 (9.4) 87.8 95.5 24.5 8.4 17.6
Capex growth (%) 56.9 7,536.6 (80.7) (8.2) 909.9 16.3 13.0
Other key ratios (%)
Capex/sales (%) 0.1 3.5 0.5 0.2 1.5 1.5 1.5
Capex/op cashflow (%) 0.2 11.4 1.3 0.6 4.8 5.1 5.0
Operating cashflow payout ratio (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Cashflow payout ratio (%) - - - - - - -
Free cashflow payout ratio (%) - - - - - - -

DuPont analysis
Year to 31 December 2020A 2021A 2022A 2023A 2024CL 2025CL 2026CL
Ebit margin (%) (15.8) 7.3 23.3 23.7 27.7 26.8 27.3
Asset turnover (x) 0.5 0.6 0.6 0.8 1.0 0.8 0.8
Interest burden (x) 0.8 1.4 1.2 1.2 1.2 1.2 1.2
Tax burden (x) 1.0 0.8 0.9 0.8 0.8 0.8 0.8
Return on assets (%) (8.0) 3.2 12.6 16.8 22.4 19.1 17.3
Leverage (x) 2.8 2.5 2.2 1.9 1.7 1.5 1.3
ROE (%) (16.9) 11.5 32.7 39.4 44.7 32.1 27.5

EVA® analysis
Year to 31 December 2020A 2021A 2022A 2023A 2024CL 2025CL 2026CL
Ebit adj for tax (9,380) 5,486 26,457 49,022 92,553 103,347 118,690
Average invested capital (3,943) (124) 14,444 24,866 27,977 32,379 36,761
ROIC (%) - - 183.2 197.1 330.8 319.2 322.9
Cost of equity (%) 14.5 14.5 14.5 14.5 14.5 14.5 14.5
Cost of debt (adj for tax) 5.0 4.0 4.4 4.2 4.3 4.2 4.2
Weighted average cost of capital (%) 14.5 14.5 14.5 14.5 14.5 14.5 14.5
EVA/IC (%) 0.0 0.0 168.7 182.6 316.3 304.7 308.4
EVA (Rmbm) 0 0 24,363 45,416 88,497 98,652 113,359
Source: www.clsa.com

22 November 2024 [email protected] 15

Prepared for - RD: Thomson Reuters

 Important disclosures PDD - O-PF

Research subscriptions
To change your report distribution requirements, please contact your CLSA sales representative or email us at [email protected].
You can also fine-tune your Research Alert email preferences at https://www.clsa.com/member/tools/email_alert/.

Companies mentioned
PDD (PDD US - US$104.09 - OUTPERFORM)
AliExpress (N-R)
Amazon (N-R)
Coupang (CPNG US - US$23.97 - O-PF)
Duoduo Grocery (N-R)
Lazada (N-R)
Mercado Libre (N-R)
Sensor Tower (N-R)
Shein (N-R)
Shopee (N-R)
Temu (N-R)

Analyst certification
The analyst(s) of this report hereby certify that the views expressed in this research report accurately reflect my/our
own personal views about the securities and/or the issuers and that no part of my/our compensation was, is, or will
be directly or indirectly related to the specific recommendation or views contained in this research report.

Important disclosures
Recommendation history of PDD Holdings Inc PDD US

Date Rec Target Date Rec Target

LATEST O-PF 150.40 29 Nov 2022 BUY 95.00
27 Aug 2024 O-PF 180.00 30 Aug 2022 BUY 90.00
28 Jun 2024 O-PF 190.00 26 May 2022 BUY 70.00
23 May 2024 BUY 190.00 22 Mar 2022 BUY 81.00
25 Jan 2024 BUY 180.00 15 Feb 2022 BUY 100.00
29 Nov 2023 BUY 167.00 29 Nov 2021 BUY 138.00
30 Aug 2023 BUY 114.00
Note: At 6pm (HKT) on 28 June 2024, we changed our ratings to Outperform (O-PF), Hold (HLD) and Underperform
(U-PF). Please see Key to CLSA/CLST investment rankings below for details. Source: CLSA

22 November 2024 [email protected] 16

Prepared for - RD: Thomson Reuters

 Important disclosures PDD - O-PF

Recommendation history of Coupang Inc CPNG US

Date Rec Target Date Rec Target

04 Sep 2024 O-PF 31.00 16 Aug 2022 SELL 16.40
28 Jun 2024 HLD 18.00 20 Jun 2022 O-PF 14.00
10 May 2023 U-PF 18.00 03 Mar 2022 O-PF 29.00
01 Mar 2023 U-PF 16.40
Note: At 6pm (HKT) on 28 June 2024, we changed our ratings to Outperform (O-PF), Hold (HLD) and Underperform
(U-PF). Please see Key to CLSA/CLST investment rankings below for details. Source: CLSA

CLSA (“CLSA”) in this report refers to CLSA Limited, CLSA Americas, fees from the company except in ordinary course of business of the
LLC, CLSA Australia Pty Ltd, CLSA India Private Limited, PT CLSA company. The analyst/s also state/s and confirm/s that he/she/they
Sekuritas Indonesia, CLSA Securities Japan Co., Ltd., CLSA Securities has/have not been placed under any undue influence, intervention or
Korea Ltd., CLSA Securities Malaysia Sdn. Bhd., CLSA Philippines, Inc, pressure by any person/s in compiling this research report. In
CLSA Singapore Pte Ltd, CLSA Securities (Thailand) Limited, CLSA addition, the analysts included herein attest that they were not in
(UK), CLSA Europe B.V. and/or their respective affiliates. CLST possession of any material, non-public information regarding the
(“CLST”) in this report refers to CL Securities Taiwan Co., Ltd. subject company that has securities listed in the relevant
The policies of CLSA and CLST are to only publish research that is jurisdiction(s) at the time of publication of this report. The analysts
impartial, independent, clear, fair, and not misleading. Regulations or further confirm that none of the information used in this report was
market practice of some jurisdictions/markets prescribe certain received from CLSA's Corporate Finance department or CLSA's
disclosures to be made for certain actual, potential or perceived and/or CLST's Sales and Trading business. Save from the disclosure
conflicts of interests relating to a research report as below. This below (if any), the analyst(s) is/are not aware of any material conflict
research disclosure should be read in conjunction with the research of interest.
disclaimer as set out hereof and at www.clsa.com/disclaimer.html, the For the companies under research coverage, CLSA Limited and/or
Terms and Conditions of Use as set out at CL Securities Taiwan Company Limited expect(s) to receive or
https://www.clsa.com/terms-and-conditions-of-use/ and the intend(s) to seek compensation for investment banking services from
applicable regulation of the concerned market where the analyst is Coupang Inc in the next three months.
stationed and hence subject to. Investors are strongly encouraged to Key to CLSA/CLST investment rankings: From 6pm (HK time) on
review this disclaimer before investing. 28 June 2024: Outperform (O-PF): Total stock return (TSR) expected
Neither analysts nor their household members or associates may to exceed or be equal to 10%; Hold (HLD): Total stock return expected
have a financial interest in, or be an officer, director or advisory board to be below 10% but more than or equal to negative 10%;
member of companies covered by the analyst unless disclosed herein. Underperform (U-PF): Total stock return expected to be below
In circumstances where an analyst has a pre-existing holding in any negative 10%. TSR is up/downside to 12-month target price plus
securities under coverage, those holdings are grandfathered and the dividend. Up to 6pm (HK time) on 28 June 2024: BUY: Total stock
analyst is prohibited from trading such securities. return (including dividends) expected to exceed 20%; O-PF (aka
The analysts included herein hereby confirm that they have not ACCUMULATE): Total expected return below 20% but exceeding
been placed under any undue influence, intervention or pressure by market return; U-PF (aka REDUCE): Total expected return positive but
any person/s in compiling this research report. In addition, the below market return; SELL: Total return expected to be negative. For
analysts attest that they were not in possession of any material, non- relative performance, we benchmark the 12-month total forecast
public information regarding the subject company that has securities return (including dividends) for the stock against the 12-month
listed in the relevant jurisdiction(s) at the time of publication of this forecast return (including dividends) for the market on which the
report. (For full disclosure of interest for all companies covered by stock trades.
CLSA in this report, please refer to "High Conviction" Ideas are not necessarily stocks with the most
http://www.clsa.com/member/research_disclosures/ for details.) upside/downside, but those where the Research Head/Strategist
As analyst(s) of this report, I/we hereby certify that the views believes there is the highest likelihood of positive/negative returns.
expressed in this research report accurately reflect my/our own The list for each market is monitored weekly.
personal views about the securities and/or the issuers and that no According to the key to CLSA/CLST investment rankings effective
part of my/our compensation was, is, or will be directly or indirectly from 6pm (HK time) on 28 June 2024: Overall rating distribution for
related to the specific recommendation or views contained in this CLSA (exclude CLST) only Universe: Outperform - CLSA: 68.28%,
report or to any investment banking relationship with the subject Hold - CLSA: 24.35%, Underperform - CLSA: 7.38%, Restricted -
company covered in this report (for the past one year) or otherwise CLSA: 0.08%; Data as of 1 Oct 2024. Investment banking clients as a
any other relationship with such company which leads to receipt of % of rating category: Outperform - CLSA: 14.04%, Hold - CLSA:

22 November 2024 [email protected] 17

Prepared for - RD: Thomson Reuters

 Important disclosures PDD - O-PF

1.51%, Underperform - CLSA: 1.03%; Restricted - CLSA: 0.08%. Data of the information, opinions or estimates contained herein reflects the
for 12-month period ending 1 Oct 2024. Overall rating distribution views and opinions of a sales person or a non-analyst, such views and
for CLST only Universe: Outperform - CLST: 73.77%, Hold - CLST: opinions may not correspond to the published view of CLSA and/or
18.03 %, Underperform - CLST: 8.20%, Restricted - CLST: 0.00%. CLST. Any price target given in the report may be projected from one
Data as of 1 Oct 2024. Investment banking clients as a % of rating or more valuation models and hence any price target may be subject
category: Outperform - CLST: 0.00%, Hold - CLST: 0.00%, to the inherent risk of the selected model as well as other external
Underperform - CLST: 0.00%, Restricted - CLST: 0.00%. Data for 12- risk factors. Where the publication does not contain ratings, the
month period ending 1 Oct 2024. For purposes of regulatory material should not be construed as research but is offered as factual
disclosure only, our Outperform rating falls into a buy rating category; commentary. It is not intended to, nor should it be used to form an
our Hold rating falls into a hold rating category; and our investment opinion about the non-rated companies.
Underperform rating falls into a sell rating category. This report is for information purposes only and it does not
According to the key to CLSA/CLST investment rankings effective constitute or contain, and should not be considered as an offer or
up to 6pm (HK time) on 28 June 2024: Overall rating distribution for invitation to sell, or any solicitation or invitation of any offer to
CLSA (exclude CLST) only Universe: BUY / Outperform - CLSA: subscribe for or purchase any securities in any jurisdiction and
72.61%, Underperform / SELL - CLSA: 27.39%, Restricted - CLSA: recipient of this report must make its own independent decisions
0.39%; Data as of 28 June 2024. Investment banking clients as a % of regarding any securities or financial instruments mentioned herein.
rating category: BUY / Outperform - CLSA: 14.60%, Underperform / This is not intended to provide professional, investment or any other
SELL - CLSA: 2.05%; Restricted - CLSA: 0.39%. Data for 12-month type of advice or recommendation and does not take into account the
period ending 28 June 2024. Overall rating distribution for CLST only particular investment objectives, financial situation or needs of
Universe: BUY / Outperform - CLST: 79.66%, Underperform / SELL - individual recipients. Before acting on any information in this report,
CLST: 20.34%, Restricted - CLST: 0.00%. Data as of 28 June 2024. you should consider whether it is suitable for your particular
Investment banking clients as a % of rating category: BUY / circumstances and, if appropriate, seek professional advice, including
Outperform - CLST: 0.00%, Underperform / SELL - CLST: 0.00%, legal or tax advice. Investments involve risks, and investors should
Restricted - CLST: 0.00%. Data for 12-month period ending 28 June exercise prudence and their own judgment in making their investment
2024. There are no numbers for Hold/Neutral as CLSA/CLST do not decisions. The value of any investment or income may go down as
have such investment rankings. well as up, and investors may not get back the full (or any) amount
For a history of the recommendation, price targets and disclosure invested. Investments that are denominated in foreign currencies may
information for companies mentioned in this report please write to: fluctuate in value as a result of exposure to movements of exchange
CLSA Group Compliance, 18/F, One Pacific Place, 88 Queensway, rate. Past performance is not necessarily a guide to future
Hong Kong and/or; CLST Compliance (27/F, 95, Section 2 Dun Hua performance or liquidity. CLSA and/or CLST do/does not accept any
South Road, Taipei 10682, Taiwan, telephone (886) 2 2326 8188). responsibility and cannot be held liable for any person’s use of or
EVA® is a registered trademark of Stern, Stewart & Co. "CL" in charts reliance on the information and opinions contained herein. To the
and tables stands for CLSA estimates, “CT” stands for CLST estimates, extent permitted by applicable securities laws and regulations, CLSA
"CRR" stands for CRR Research estimates and “CS” for CITIC and/or CLST accept(s) no liability whatsoever for any direct or
Securities estimates unless otherwise noted in the source. consequential loss arising from the use of this report or its contents.
Charts and tables sourced to CLSA in this report may include data To maintain the independence and integrity of our research, our
extracted from CLSA’s automated databases, which derive their Corporate Finance, Sales Trading, Asset Management and Research
original data from a range of sources. These can include: companies; business lines are distinct from one another. This means that CLSA’s
analyst estimates/calculations; local exchanges and/or third-party Research department is not part of and does not report to CLSA's
data or market pricing providers such as Bloomberg, FactSet or IBES. Corporate Finance department or CLSA’s Sales and Trading business.
Additional information on data sources for specific charts or tables Accordingly, neither the Corporate Finance department nor the Sales
can be obtained by contacting the publishing analysts. and Trading department supervises or controls the activities of CLSA’s
This report is subject to and incorporates the terms and conditions research analysts. CLSA’s research analysts report to the management
of use set out on the www.clsa.com website of the Research department, who in turn report to CLSA’s senior
(https://www.clsa.com/disclaimer.html and management. CLSA has put in place a number of internal controls
https://www.clsa.com/terms -and-conditions-of use/) and the designed to manage conflicts of interest that may arise as a result of
references to “publication/communication” or “Publications” thereof CLSA engaging in Corporate Finance, Sales and Trading, Asset
shall include this report. Neither this report nor any portion hereof Management and Research activities. Some examples of these
may be reprinted, sold, resold, copied, reproduced, distributed, controls include: the use of information barriers and other controls
redistributed, published, republished, displayed, posted or designed to ensure that confidential information is only shared on a
transmitted in any form or media or by any means without the written “need to know” basis and in compliance with CLSA’s Chinese Wall
consent of CLSA and/or CLST. CLSA and/or CLST has/have produced policies and procedures; measures designed to ensure that
this report for private circulation to professional, institutional and/or interactions that may occur among CLSA’s Research personnel,
wholesale clients only, and may not be distributed to retail investors. Corporate Finance, Asset Management, and Sales and Trading
The information, opinions and estimates herein are not directed at, or personnel, CLSA’s financial product issuers and CLSA’s research
intended for distribution to or use by, any person or entity in any analysts do not compromise the integrity and independence of CLSA’s
jurisdiction where doing so would be contrary to law or regulation or research.
which would subject CLSA and/or CLST to any additional registration Subject to any applicable laws and regulations at any given time,
or licensing requirement within such jurisdiction. The information and CLSA, CLST, their respective affiliates, officers, directors or
statistical data (for private or public companies) herein have been employees may have used the information contained herein before
obtained from sources we believe to be reliable. Such information has publication and may have positions in, or may from time to time
not been independently verified and CLSA and/or CLST makes no purchase or sell or have a material interest in any of the securities
representation or warranty as to its fairness, adequacy, accuracy, mentioned or related securities, or may currently or in future have or
completeness or correctness. The replication of any third party views have had a business or financial relationship with, or may provide or
in this report should not be treated necessarily as an indication that have provided corporate finance/capital markets and/or other
CLSA and/or CLST agrees with or concurs with such views. None of services to, the entities referred to herein, their advisors and/or any
CLSA and/or CLST, its affiliates and their respective directors, other connected parties. As a result, you should be aware that CLSA
officers, employees, advisers and representatives makes any and/or CLST and/or their respective affiliates, officers, directors or
representation or warranty, express or implied, as to and no reliance employees may have one or more conflicts of interest. Regulations or
should be placed on, the fairness, accuracy, completeness or market practice of some jurisdictions/markets prescribe certain
correctness of such data or information contained herein or any disclosures to be made for certain actual, potential or perceived
statement made in this report. Any opinions or estimates herein conflicts of interests relating to research reports. Details of the
reflect the judgment of CLSA and/or CLST at the date of this report disclosable interest can be found in certain reports as required by the
and are subject to change at any time without notice. Where any part relevant rules and regulation and the full details of conflict of interest

22 November 2024 [email protected] 18

Prepared for - RD: Thomson Reuters

 Important disclosures PDD - O-PF

with companies under coverage are available at subject company. Further, CLSA and its associates, in the past 12
http://www.clsa.com/member/research_disclosures/. Disclosures months, may have received compensation for non-investment
therein include the position of CLSA and CLST only. Unless specified banking services and/or non-securities related services from the
otherwise, CLSA did not receive any compensation or other benefits subject company. For further details of “associates” of CLSA India
from the subject company, covered in this report, or from any third please contact [email protected]. Registration granted by
party. For CITICS disclosure about specific companies mentioned SEBI and certification from NISM in no way guarantee performance
herein, please access: of CLSA India Private Limited or provide any assurance of returns to
https://www.clsa.com/member/research_disclosures_citics/. If investors. Compliance officer & Grievance officer: Neeta Sanghavi,
investors have any difficulty accessing this website, please contact Tel: 22 6650 5050. Email address of Compliance officer and
[email protected]. If you require disclosure information on Grievance cell: [email protected].
previous dates, please contact [email protected]. Singapore: This report is distributed in Singapore by CLSA
Any disputes related to this report shall be governed by the laws Singapore Pte Ltd to institutional investors, accredited investors or
of Hong Kong and to the non-exclusive jurisdiction of the courts of expert investors (each as defined under the Financial Advisers
Hong Kong in connection with any suite, action or proceeding arising Regulations) only. Singapore recipients should contact CLSA
out of or in connection with this material. In the event any of the Singapore Pte Ltd, 80 Raffles Place, #18-01, UOB Plaza 1, Singapore
provisions in these Terms of Use shall be held to be unenforceable, 048624, Tel: +65 6416 7888, in respect of any matters arising from,
that provision shall be enforced to the maximum extent permissible or in connection with, the analysis or report. By virtue of your status
to reflect the intention underlying the unenforceable term, and the as an institutional investor, accredited investor or expert investor,
remainder of these General Disclaimer shall be unimpaired. CLSA Singapore Pte Ltd is exempted from complying with certain
This report is distributed for and on behalf of CLSA (for research requirements under the Financial Advisers Act 2001, the Financial
compiled by non-US and non-Taiwan analyst(s)), CLSA Americas, LLC Advisers Regulations and the relevant Notices and Guidelines issued
(for research compiled by US analyst(s)) and/or CLST (for research thereunder (as disclosed in Part C of the Securities Dealing Services –
compiled by Taiwan analyst(s)) in Australia by CLSA Australia Pty Ltd Singapore Annex of the CLSA terms of business), in respect of any
(ABN 53 139 992 331/AFSL License No: 350159); in Hong Kong by financial advisory services that CLSA Singapore Pte Ltd may provide
CLSA Limited (Incorporated in Hong Kong with limited liability); in to you. MCI (P) 042/11/2022.
India by CLSA India Private Limited, (Address: 8/F, Dalamal House, United States of America: Where any section of the research is
Nariman Point, Mumbai 400021. Tel No: +91-22-66505050. Fax No: compiled by US analyst(s), it is distributed by CLSA Americas, LLC.
+91-22-22840271; CIN: U67120MH1994PLC083118; SEBI Where any section is compiled by non-US analyst(s), it is distributed
Registration No: INZ000001735 as Stock Broker, INM000010619 as into the United States by CLSA (except CLSA Americas, LLC) solely to
Merchant Banker and INH000001113 as Research Analyst; in persons who qualify as "Major US Institutional Investors" as defined
Indonesia by PT CLSA Sekuritas Indonesia; in Japan by CLSA in Rule 15a-6 under the Securities and Exchange Act of 1934 and who
Securities Japan Co., Ltd.; in Korea by CLSA Securities Korea Ltd.; in deal with CLSA Americas, LLC. However, the delivery of this research
Malaysia by CLSA Securities Malaysia Sdn. Bhd.; in the Philippines by report to any person in the United States shall not be deemed a
CLSA Philippines Inc (a member of Philippine Stock Exchange and recommendation to effect any transactions in the securities discussed
Securities Investors Protection Fund); in Singapore by CLSA herein or an endorsement of any opinion expressed herein. Any
Singapore Pte Ltd and solely to persons who qualify as an recipient of this research in the United States wishing to effect a
"Institutional Investor", "Accredited Investor" or "Expert Investor" transaction in any security mentioned herein should do so by
MCI (P) 042/11/2022; in Thailand by CLSA Securities (Thailand) contacting CLSA Americas, LLC.
Limited; in Taiwan by CLST (for reports compiled by Taiwan analyst(s) The United Kingdom: This document is a marketing
or CLSA (for non Taiwan stock reports to CLSA clients) and in the communication. It has not been prepared in accordance with the legal
European Economic Area (‘EEA”) by CLSA Europe BV and in the requirements designed to promote the independence of investment
United Kingdom by CLSA (UK). research, and is not subject to any prohibition on dealing ahead of the
Hong Kong: This research report is distributed by CLSA Limited. dissemination of investment research. The document is disseminated
This research report is distributed in Hong Kong only to professional in the UK by CLSA (UK) and directed at persons having professional
investors (as defined in the Securities and Futures Ordinance (Chapter experience in matters relating to investments, as defined in the
571 of the Laws of Hong Kong) and any rules promulgated relevant applicable local regulations. Any investment activity to which
thereunder) and may not be distributed to retail investors. Recipients it relates is only available to such persons. If you do not have
should contact CLSA Limited, Tel: +852 2600 8888 in respect of any professional experience in matters relating to investments you should
matters arising from, or in connection with, the analysis or report. not rely on this document. Where research material is compiled by UK
Australia: CLSA Australia Pty Ltd (“CAPL”) (ABN 53 139 992 analyst(s), it is produced and disseminated by CLSA (UK). For the
331/AFS License No: 350159) is regulated by the Australian purposes of the Financial Conduct Rules in the UK such material is
Securities and Investments Commission (“ASIC”) and is a Market prepared and intended as substantive research material. CLSA (UK) is
Participant of ASX Limited and Cboe Australia Pty Ltd. . This material authorised and regulated by the Financial Conduct Authority.
is issued and distributed by CAPL in Australia to "wholesale clients" The European Economic Area (‘EEA”): research is distributed by
only. This material does not take into account the specific investment CLSA Europe BV, authorised and regulated by the Netherlands
objectives, financial situation or particular needs of the recipient. The Authority for Financial Markets.
recipient of this material must not distribute it to any third party CLSA Securities Malaysia Sdn. Bhd (CLSA Malaysia)’s research
without the prior written consent of CAPL. For the purposes of this coverage universe spans listed securities across the FBM KLCI Index,
paragraph the term "wholesale client" has the meaning given in securities listed on offshore markets, unlisted issuers and investment
section 761G of the Corporations Act 2001. CAPL’s research products which Research management deem to be relevant to the
coverage universe spans listed securities across the ASX All investor base from time to time. CLSA Malaysia seeks to cover
Ordinaries index, securities listed on offshore markets, unlisted companies of relevance to its domestic and international investor
issuers and investment products which Research management deem base across a variety of sectors.
to be relevant to the investor base from time to time. CAPL seeks to For all other jurisdiction-specific disclaimers please refer to
cover companies of relevance to its domestic and international https://www.clsa.com/disclaimer.html. The analysts/contributors to
investor base across a variety of sectors. this report may be employed by any relevant CLSA entity or CLST,
India: CLSA India Private Limited, incorporated in November 1994 which is different from the entity that distributes the report in the
provides equity brokerage services (SEBI Registration No: respective jurisdictions.© 2024 CLSA and/or CL Securities Taiwan
INZ000001735), research services (SEBI Registration No: Co., Ltd. (“CLST”).
INH000001113) and merchant banking services (SEBI Registration Investment in securities market are subject to market
No.INM000010619) to global institutional investors, pension funds risks. Read all the related documents carefully before
and corporates. CLSA and its associates may have debt holdings in the investing.

22 November 2024 [email protected] 19

Prepared for - RD: Thomson Reuters