To The Moon

$Pinduoduo Inc.(PDD)$ released excellen Q3 earnings with super-surprising revenue and profits beats, which leading the $NASDAQ 100(NDX)$ in Oct.28th.

Temu, as we know the subsidiary of PDD, now has contributed to its parent company, with excellent performance in Black Friday.

1. TEMU has the potential to recreate $Pinduoduo Inc.(PDD)$ . In Q3, Pinduoduo’s commission income (TEMU) doubled from Q2 to 29.2 billion RMB. TEMU has the potential to recreate Pinduoduo because cross-border e-commerce is a vast and promising field. Pinduoduo’s “hardcore strength reform” has disrupted the traditional players in the industry, and the combination of blue-collar and white-collar workers has created a chemical reaction that has led to the creation of high-quality products and an app that has been well received by consumers. The market needs to seriously consider TEMU’s valuation in Pinduoduo’s overall valuation from this quarter onwards.

2. Pinduoduo’s main business is also doing well this quarter, with advertising and commission revenue of around 45 billion RMB, accounting for about 65% of Alibaba’s Taotian customer management revenue of 68.7 billion RMB in the same period. Pinduoduo’s monetization efficiency is higher than that of Taobao $Alibaba(BABA)$ and $JD.com(JD)$ , which focus on brand merchants, despite having a bunch of small and medium-sized merchants and white-label merchants.

3. Pinduoduo’s personnel expenses are well-controlled, and the company’s efficiency is even better than that of early-stage Alibaba. In the case of a 30 billion RMB increase in revenue YoY, the company’s internal R&D and administrative expenses have remained relatively stable, and personnel expenses are well-controlled. The cost of sales can be roughly judged by comparing the increase in revenue with the increase in costs. TEMU’s gross profit margin (revenue-cost-performance) may have turned positive, which is better than market expectations. The marketing expense ratio can be clearly seen from the marketing expense side, and TEMU has a good grasp of the input-output ratio. In the case of revenue being 14 billion RMB higher than market expectations, marketing expenses increased by more than 4 billion RMB, and the marketing expense ratio was 5 percentage points lower than market expectations.

4. Pinduoduo’s operating profit this quarter has reached 16.7 billion RMB, which is 4 billion RMB more than the still-exploding Q2. The market’s expectation was that Pinduoduo’s operating profit would decline on a QoQ basis due to the seasonal decline in Q3 and the explosive growth of TEMU. However, Pinduoduo has once again exceeded market expectations.