Our target price of US$167 is derived from 14x 2026E EPS. Our 14x target multiple continues to implies ~35% discount to 2025-2027E earnings CAGR of 22%. Given the lack of visibility in growth and management's cautious reminder that profitability trend will continue to be weighed by investment, together with lack of disclosure and communication, we believe the discount applied is warranted. 

 

Our quantitative risk rating model assigns a High Risk rating to PDD based on its share-price volatility in the past 12 months. Given the limited visibility of growth outlook following the business strategy shift, we believe a High Risk rating is appropriate to reflect volatility as well as the historically more limited company disclosures and management communications. Downside risks include: 1) US-China tariff negotiation still ongoing and there could still be uncertainty; 2) uncertainty on US consumer demand and impact from price increase; 3) competition in domestic China remains intense; 4) ongoing merchant subsidies support could weigh on revs growth slower than GMV growth; 5) slowing China and global macro; 6) ADR delisting risks; and 7) lack of shareholder returns. Any of these risk factors could cause the shares to deviate from our target price.