Revenue increased by 89% year-on-year, and adjusted net profit of 4.1 billion yuan exceeded market expectations
The user scale is close to 850 million, and the sales expense ratio has dropped significantly
Focus on agriculture and weaken other growth curves
Under supervision, competition and enforcement can be carried forward
With the continuous implementation of anti-monopoly supervision in the first half of the year, the stock prices of Internet giants have been falling all the way. Under this general trend, Pinduoduo is no exception. Compared with the highest point of 212.6 US dollars on February 18 this year, the closing price on August 24 hit more than "50%." However, after the release of the financial report, Pinduoduo's share price opened higher and rose 22.25% as of the close, with the latest market value of 124.2 billion US dollars.
- The main points of Pinduoduo’s financial report: revenue increased by 89%, and GAAP net profit attributable to the parent was 2.415 billion yuan
The company's financial report shows that in the second quarter of 2021, Pinduoduo achieved revenue of 23.046 billion yuan, an increase of 89% over the same period last year. Excluding commodity sales, revenue increased by 73% year-on-year, but still lower than market expectations by 14% (26.438 billion yuan).
Under the Non-GAAP standard, the adjusted net profit attributable to the parent is RMB 4.1 billion, far better than the market's expected loss of RMB 2.8 billion, showing surprising profitability (loss of RMB 77.2 million in the same period in 2020). Under the GAAP standard, the net profit attributable to the parent was 2.415 billion yuan. This is the company's first quarterly profit under the GAAP standard.
From the first half of 2021, Pinduoduo achieved revenue of 45.213 billion yuan, a year-on-year increase of 141%. It achieved a net profit of 2.235 billion yuan under the Non-GAAP standard and -491 million yuan under the GAAP standard.
In terms of business segments, the company's rapid growth mainly comes from its online marketing service revenue, which increased by 64% year-on-year to 18.08 billion yuan. Transaction service revenue increased by 164% year-on-year to 3.01 billion yuan. Under the condition that the transaction commission rate has not changed, the revenue growth of Duoduo Shopping in the second quarter drove the rapid growth of transaction service revenue.
The sales revenue of 1P mode commodities was 1.96 billion yuan, which was narrowing from the previous month.
The management has pointed out that 1P business is a transitional model for the development of community group buying business. Southwest Securities believes that as merchants continue to settle in, the expansion of the entire platform category will be significant, and the continuous enrichment of third-party SKUs can meet the commodity needs of most users. Therefore, the future 1P model The scale is limited and contributes little to the monetization rate.
- The ratio of operating costs and sales expenses has narrowed sharply, subsidies have fallen, but user activity has been stable
The key to Pinduoduo's turnaround this quarter was largely from controlling operating costs.
From the perspective of cost, the company focused on controlling marketing expenses, increasing R&D investment, and profitability began to appear. The company's total expenses dropped significantly from the previous month. Under Non-GAAP, the company's marketing expenses this quarter were 10 billion yuan, and the sales expense ratio fell 30% to 43% year-on-year.
Everbright Securities pointed out that an important reason for the decline in the company's sales expense ratio in this quarter is that Pinduoduo spent a large amount of marketing investment during the non-closing period of the Spring Festival in Q1 21, but the participation during the 618 promotion period was not high, and marketing investment was relatively small.
Taking into account that Duoduomai is still in the early stages of providing consumers with a new shopping experience, the company has continued to invest in logistics, algorithms and technology. The research and development expenses this quarter were 1.75 billion yuan, and the research and development expenses remained stable at 8%. The company's R&D expenses in the first half of the year totaled 4.56 billion yuan, mainly for R&D personnel and cloud computing level investment.
Sales expenses narrowed, but user activity (MAU/annual active) remained at 87%, a slight decrease of 1.1% from the previous month and an increase of 4% from the same period last year.
The company's annual number of active buyers (TTM) also achieved a year-on-year increase of 24% to 850 million, and monthly active users increased by 30% to 740 million.
The combination of sales expenses and active user data answers a question that the market has been concerned about for a long time, namely: If Pinduoduo does not burn money, can it support user growth? Can you maintain user stickiness? Can it not support the scale of income?
The financial report data for this quarter shows that Pinduoduo has begun to show this ability-even if it does not burn money, it can run through the business and support the scale.
- Find your own breakthrough: focus on agriculture and weaken other growth curves
When Huang Zheng took over from the management team last year, he had already begun to consider how to deal with the slowdown in competition and growth. One of the important strategies includes the continued heavy storage of agriculture.
CEO Chen Lei also took the initiative to talk about the adjustment of the team and strategy, "Our team started handover last year. Can we adjust our strategy as quickly as possible? Can our model be suitable for the future trend in 5 years or even 10 years. We will Work hard, but there will be more unpredictable challenges and difficulties in the future."
Pinduoduo, which focuses on the agricultural field, announced on the day of the financial report that it will set up a special fund of 10 billion yuan for agricultural science and technology, with Pinduoduo chairman and CEO Chen Lei as the number one position. Choosing to invest in this plan, Pinduoduo said that the possible profits in this quarter and the next few quarters will be prioritized to be invested in the project until the total amount of 10 billion is met.
Since the launch of the "Buy Duoduo" business, Pinduoduo has increased the construction of supply chain systems for agricultural products such as cold chain, logistics, warehousing and distribution.
In the second quarter report, Pinduoduo's marketing expenses dropped significantly by 3 billion yuan from the first quarter, but R&D investment increased by 40% year-on-year.
Reducing marketing and focusing on technology are exactly the new changes brought about by Chen Lei, who was a technical dispatcher, after he took over.
This year, on the basis of "zero commission", Pinduoduo increased its subsidies for high-quality agricultural products, with a cumulative subsidy of more than 50 million, covering more than 400 high-quality agricultural production areas. As of the first quarter of 2021, Pinduoduo has directly connected more than 16 million rural households across the country, directly driving 100,000 "new farmers" to return to their hometowns for employment, and will train another 100,000 "new farmers" in the next five years.
Inclusiveness and assistance to farmers, will this be a thankless decision? Pinduoduo also needs time to give answers.
- Views of major banks: intensified supervision and improvement of the company’s business structure, "buy"
Regarding the tightening of supervision, Chen Lei said, “The short- and medium-term may have an impact on the business model, but it is beneficial to the long-term and healthy development of the platform.” Many big banks also hold the same view.
CMB International believes that Pinduoduo’s 2Q21 results will boost investors’ confidence in long-term profit visibility. 2H21E quarterly profit volatility (due to increased marketing expenses, community group buying and agricultural investment) will not affect its long-term investment logic, so it is revised upwards The adjusted net profit margin forecast for 2021-2023 is 4-6%, and the target price is maintained at US$175, which means that today’s stock price still has 43.4% room to rise.