PDD Q4 Earnings Overview
E-commerce company PDD Holdings (PDD US) reported Q4 results before the U.S. open. The company is not the most communicative, as the founder’s engineering background means he focuses solely on the business. For instance, the company doesn’t break out revenues from domestic China e-commerce from its Temu global e-commerce. The lack of communication has sometimes created volatility for shareholders. On today’s analyst conference call, the company, when asked by an analyst about competition in e-commerce, noted that competition pushes the company to keep investing in technology. When asked indirectly about changing US import shipping laws, the company said that it could create “challenges” though it was out of their control, so they will focus on improving their platform. After rising+29% YTD, the ADR is off slightly this morning following the report.
- Revenue increased +24% YoY to RMB 111B from RMB 99.3B versus analyst expectations of RMB 116B
- Adjusted Net Income increased 17% YoY to RMB 29.85B ($4.089B) from RMB 25.476B versus analyst expectations of RMB 28.5B
- Adjusted EPS increased to RMB 20.15 ($2.76) from RMB 17.32 versus analyst expectations of RMB 19.68
Key News
Asian equities were largely higher, as Taiwan, Australia, India, and Indonesia all gained +1% while Hong Kong underperformed.
The PBOC kept the 1 and 5-year Loan Prime Rates unchanged as expected, as they will likely cut when the U.S. Federal Reserve cuts rates. After rising more than 80% over the last year, Tencent’s better-than-expected results led to profit taking in the stock and Hong Kong internet stocks that have also outperformed significantly over the last year, as Alibaba fell -3.97%, Xiaomi fell -2.92%, Meituan fell -4.43%, and Kuaishou fell -4.64%.
There is some chatter about Tencent’s 2025 buyback being smaller than 2024 and lighter capex, but it is likely just profit-taking, in my opinion.
Insurance giant Ping An’s Q4 missed analyst expectations, weighing on the market and insurance sub-sector as the stock fell -5.01% in Hong Kong and -2.97% in Mainland China. The Hang Seng and Hang Seng Tech indexes are hitting resistance levels at 25,000 and 6,000 levels, while the Shanghai and Shenzhen are just above the 3400 and 1,1000 levels. Markets need further specifics on the government’s stimulus plans to provide another boost/catalyst. However, I suspect many institutional investors will use any pullback as a buying opportunity as we near the end of the quarter.
All the talk of Chinese equities’ outperformance is the year to date, but in the quarter, the one-year performance figure will be hard to ignore. An announcement about a Trump-Xi summit could also provide a catalyst. We’ve heard chatter that it will occur in June, but nothing is definitive. Mainland investors did not buy today’s dip with a rare net sell of just -$52 million. Healthcare in Hong Kong gained +0.62%, though -1.16% in Mainland China, as the State Council released a decree supporting traditional Chinese medicine. Auto was a rare bright spot today, as Geely Auto gained +1.45% after reporting strong Q4 results. It was a fairly quiet night.
The Hang Seng and Hang Seng Tech indexes fell -2.23% and -3.39%, respectively, on volume that increased +8.392% from yesterday, 180% of the 1-year average. 114 stocks advanced, while 372 stocks declined. Main Board short turnover increased by +10.37% from yesterday, which is 187% of the 1-year average, as 16% was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Dividends, value, and small caps “outperformed” (i.e. fell less than) growth and large caps. Healthcare was the only buoyant sector, up +0.62%. Meanwhile, the top-performing sectors were Communication Services, which fell -3.8%; Consumer Discretionary, which fell -3.09 %; and Real Estate, which fell -3.07%. The top-performing subsectors were the auto, pharmaceuticals, and chemical industries. Meanwhile, consumer services, consumer staples distribution, and software services were among the worst-performing. Southbound Stock Connect volumes were 3x pre-stimulus levels as Mainland investors sold a net -$52 million worth of Hong Kong-listed stocks and ETFs, led by Alibaba, which was a moderate net buy, Meituan and Dobot, which were small net buys, XPeng, which was a small net sell, Xiaomi, SMIC, and Ping An Insurance, which were moderate net sells, and Tencent, which was a large net sell.
Shanghai, Shenzhen, and the STAR Board fell -0.51%, -0.60%, and -1.13%, respectively, on volume that decreased -1.87% from yesterday, which is 121% of the 1-year average. 2,191 stocks advanced, while 2,822 declined. The value factor and small caps “outperformed,” i.e., fell less than the growth factor and large caps. Energy was the only positive sector, up +0.41%. Meanwhile, Consumer Staples fell -1.68%, Communication Services fell -1.29%, and Health Care fell-1.15%. The top-performing subsectors were energy equipment, soft drinks, and power generation equipment. Meanwhile, insurance, liquor, and household products were among the worst-performing. Northbound Stock Connect volumes were above average. CNY and the Asia Dollar Index fell versus the US dollar. Treasury bond prices gained. Copper rose, and steel fell.
Live Webinar
Join us on Thursday, March 13, 2025 at 10 am EDT for:
The Future of Carbon in the Trump Era
Please click here to register
New Content
Read our latest article:
2025 China Outlook: A Recipe For Re-Rating
Please click here to read
Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.24 versus 7.23 yesterday
- CNY per EUR 7.85 versus 7.88 yesterday
- Yield on 10-Year Government Bond 1.83% versus 1.87% yesterday
- Yield on 10-Year China Development Bank Bond 1.87% versus 1.91% yesterday
- Copper Price +0.87%
- Steel Price -0.38%
Read the full article here
