PDD Q1：棍棒或许能打断我的骨头……但言语永远伤不了我？PDD的Q1业绩会动摇公司忠实信徒的信心吗？

Robin Zhu+852 2123 2659robin.zhu@bernsteinsg.com Charles Gou+852 2123 2618charles.gou@bernsteinsg.com RatingMarket-Perform Min-Joo Kang+852 2123 2644minjoo.kang@bernsteinsg.com Price Target PDD 110.00 USD(132.00OLD) Hyrum Caesar+81 3 6777 6979hyrum.caesar@bernsteinsg.com PDD Q1: Sticks and stones may break my bones... …but words will never hurt me?Will PDD’s Q1 print shake the faith of true believers in thecompany? To us, it felt like another reminder that “violently resisting regulation” (paraphrasingthe SAMR model…) carries consequences, and that PDD’s capacity for P&L surprises. Grouprevenue of RMB106bn grew 11.0% year on year, below Street consensus. 2.5% OnlineMarketing Services revenue growth contrasted with our channel checks pointing to double-digit GMV growth. RMB21.1bn of non-GAAP operating profit grew 15.5%, but fell belowconsensus on RMB22.4bn. Negative below-the-line items (notably interest and investmentloss) meant non-GAAP net income missed by some 40%. Breaking down the numbers.We think Q1 Online Marketing Services revenue implieda 20-30bps year on year drop in PDD’s domestic take rate. RMB56.3bn of TransactionServices revenue (+19.9%) was slightly ahead of our estimate and consensus (RMB51.5bnand RMB55.5bn). The 55.9% group gross margin meanwhile was 130bps lower year onyear… which felt like a function of small differences in Temu mark-ups and subsidy rates… orthe domestic grocery business. Referring to (1) the latest Pathmatics data; and (2) RMB4.1bnof income tax payments this quarter (e.g. assuming a 15-20% rate on domestic profits), weestimate Temu generated a c. RMB5-6bn loss in Q1 2026. Where did interest on cash go (again)?Similarly to Q4, PDD management speakingaround the quarter focused on supply chain investments, first-party, private labeldevelopment, and more spending to help merchants. Channel feedback we’ve heard on Temuhas been solid, and it’s not hard to justify why Temu could make 2-3% margin on GMV in afew years… or why PDD should be capable of double-digit earnings growth in the interveningperiod. PDD’s shares remain cheaply valued. On the other hand, the contrast betweenRMB632mn of net interest expenses and RMB436bn of net cash this quarter - served asanother reminder of the mysteriousness one contends with when modelling PDD’s accounts. Investment ImplicationsWe rate PDD Market-Perform (PT US$110). DETAILS A SQUISHY QUARTER… INTEREST INCOME BACK IN FOCUS PDD’s Q1 print was mediocre. Q1 revenue (RMB106bn, +11.0% year on year) split our estimates (RMB105bn) and streetconsensus (RMB109bn). RMB21.1bn of non-GAAP operating profit (+15.5% year on year) meanwhile was 6.0% below whatthe street had modeled (RMB22.4bn). We think 2.5% OMS revenue growth this quarter (to RMB49.9bn) implied a 20-30bps year on year drop in ad monetisationrates. Transaction Services revenue (RMB56.3bn) grew 19.9% year on year this quarter, the beat versus us and consensus(RMB51.5bn and RMB55.5bn) likely reflecting small differences in Temu revenue recognition (e.g. net of mark-ups on merchantpurchasing, and user subsidies)… or possibly the domestic grocery business. RMB33.8bn of group-level marketing spend was 7% higher than we’d modeled (RMB31.5bn). Modelling a modest sequentialdecline in Temu marketing spend from Q4 (Pathmatics data pointed to Q1 spend which was c. 33% lower year on year, andc. 13% lower versus Q4), we think it’s likely Temu as a whole saw losses in the RMB5-6bn range. RMB4.4bn of R&D spendtranslated into a spend ratio of 4.2% of revenue, 20bps higher sequentially and 50 bps higher versus the prior year quarter. Allthings considered we think PDD’s domestic operating margin over GMV stood around 2.1% this quarter, flattish year on year. Our updated price target for PDD falls to US$110, on lower EPS estimates multiplied by a 9x FY+1 PE multiple, lowered(previously 10x) to reflect the company’s ongoing ability to surprise in what ought to be innocuous parts of the P&L. Exhibit 2 shows a summary of our estimate changes for the company. Q1 REPORTING IN CHARTS Exhibit 3 to Exhibit 8 show the key data points we track for the company on a quarterly basis. EXHIBIT 4:PDD online marketing services revenue grew2.5% in Q1 2026 to RMB49.9bn Source: Corporate reports and Bernstein analysis. EXHIBIT 8:PDD non-GAAP EPS was RMB9.51 in Q1,compared with RMB11.41 a year earlier EXHIBIT 7:PDD group non-GAAP operating profit came toRMB21.1bn in Q1 2026, 1.6% of GMV APPENDIX - FINANCIAL FORECASTS BERNSTEIN TICKER TABLE PRICE TARGET CHANGE / ESTIMATE CHANGE IN BOLD O - Outperform, M - Market-Perform, U - Underperform, NR - Not Rated, CS - Coverage SuspendedSource: Bloomberg, Bernstein estimates and analysis. I. REQUIRED DISCLOSURES References to "Bernstein" or the “Firm” in these disclosures relate to the following entities: Bernstein Institutional Services LLC(April 1, 2024 onwards), Sanford C. Bernstein & Co., LLC (pre April 1, 2024), Bernstein Autonomous LLP, BSG France S.A.