---
endpoint: analytics
pattern: Internet
status: done
latency_ms: 153812
conversation_id: 78b40466-606d-4c10-a1f5-e03e6894f9e7
citations: 0
created: 2026-05-31 18:41:20Z
---

# Is CLSA incrementally more positive/negative on PDD. If so, why?

**CLSA is incrementally MORE NEGATIVE on PDD.** Over the past ~12 months CLSA has cut its target price four consecutive times (from US$190 → US$180 → US$150 → US$128), downgraded the rating from BUY to O-PF, and slashed its 25/26CL adj. NP forecasts by 29% / 36% in the latest May-2025 note. The narrative arc has shifted from "share-gainer with record margins" (Aug 2024) to "challenging time, pressured by domestic merchant support and Temu disruption" (May 2025).

## Rating & TP trajectory (lead analyst: Elinor Leung, CFA — CLSA parent, @clsa.com)

| Date | Note title | Rating | TP (US$) | Δ TP | Δ Sentiment |
|---|---|---|---|---|---|
| 14 May 2024 | Solid GMV growth in China & overseas | BUY | 190 | — | Positive |
| 22 May 2024 | Strong 1Q24 beat | BUY | 190 | — | Positive |
| 28 Jun 2024 | (recommendation history) | **O-PF** ↓ | 190 | flat | First downgrade |
| 6 Aug 2024 | Strong performance set to continue | O-PF | 190 | flat | Constructive |
| 26 Aug 2024 | **Expecting more investments** | O-PF | **180** ↓ | -5% | Turn cautious [8] |
| 21 Nov 2024 | **Missed expectations** | O-PF | **150** ↓ | -17% | More cautious [5] |
| 27 May 2025 | **Challenging time** | O-PF | **128** ↓ | -15% | Most cautious [1] |

Cumulatively: **TP cut 33% from peak (US$190 → US$128); rating one notch lower than mid-2024.** O-PF is being maintained primarily on valuation/positioning grounds, not on improving fundamentals.

## Why CLSA has turned more negative — three transmission channels

### 1) Domestic — take-rate compression from escalating merchant support

The first signal came in **August 2024**, when CLSA flagged that management had begun "guiding higher investment and intensified competition, which would lower revenue growth and profits," and announced an Rmb10bn merchant fee cut — c.4% of ecommerce revenue [9]. CLSA called out that PDD also "prioritises growth and has no share repurchase plan" [8] — a negative signal vs Alibaba/JD which were ramping buybacks.

By **November 2024**, that Rmb10bn programme had already pressured the take rate: total take rate fell ~0.6ppt QoQ to 5.2%, gross margin declined ~1ppt YoY, and CLSA explicitly warned PDD would "continue to face challenges over the next few quarters as it benefits less from trade-in subsidies & as it raises promotions to stay competitive" [5][6]. The trade-in subsidy disadvantage (pure-platform model vs JD/Tmall's operational depth) became a structural drag [7].

By **May 2025**, the Rmb10bn programme had been **upgraded 10x to an Rmb100bn merchant support programme**, expanding from top/mid-tier merchants to small merchants amid macro and tariff headwinds. Domestic take rate fell another 0.7ppt YoY to 5.3%, and domestic revenue growth decelerated to just **6% YoY** (vs 86% in 2Q24) [1][2]. PDD also subsidised SME merchants "out of its own pocket" to match peer prices on appliances, 3Cs and even daily goods [4].

### 2) Profitability collapse

The trajectory of adj. EBIT growth has inverted:
- **2Q24**: adj. EBIT **+139.5% YoY** to Rmb35bn, record 36% margin [8]
- **3Q24**: adj. EBIT growth moderating; consensus miss [5]
- **1Q25**: adj. EBIT **-36% YoY** to Rmb18.3bn, margin **down 14ppts YoY** to 19.1%; adj. NP -45% YoY; GPM fell 5ppts to 57% on high delivery support; S&M up 34% YoY to remain competitive [4]

In other words: in nine months, PDD went from "record 36% adj. EBIT margin" to "adj. EBIT margin down 14 percentage points." This is the single most important driver of CLSA's TP cuts.

### 3) Temu — from "Europe is largest market, raising 2024 GMV forecast" to "US users -30%, US GMV -50%"

Temu narrative inflection is dramatic:
- **Aug 2024**: CLSA raised Temu 2024 GMV forecast to US$55bn; Europe became Temu's largest market; semi-consignment improving loss ratios.
- **Nov 2024**: Temu ~US$15bn 3Q24 GMV, c.330m global MAUs (96% of Amazon), US MAU stable at ~50m, rapid growth in Europe/LatAm/SEA.
- **May 2025**: Temu's global MAU reached 408m (118% of Amazon) — **but US users fell ~30% since March** post tariff hike, **US daily GMV fell ~50%**, Temu stopped direct Chinese imports to US buyers and shifted ad spend from US to Europe and South America. Temu also accelerated migration to semi-consignment (now 80%+ of US GMV), which structurally lowers reported overseas revenue. Temu losses now assumed c.Rmb5bn vs improving trajectory previously. [3]

The tariff/de minimis exposure is now the most acute risk: the US transmission line for Temu is materially broken, and CLSA assumes domestic ecommerce margin would be ~35% (down +20ppts YoY) backing out Temu losses [4].

## Bottom line

CLSA has not formally downgraded below O-PF (it implies ~14x 26CL adj. PE, or 12x ex-Temu losses, which CLSA finds defensible on valuation [1]). But every other dimension of the call — TP, EPS forecasts, language, list of catalysts vs risks — has been incrementally pulled negative for **four consecutive quarters**. The most recent note's title literally says "**Challenging time**" [1] — a stark contrast with the May 2024 "Strong 1Q24 beat" and August 2024 "Strong performance set to continue" titles. The thesis has degraded from "share-gainer compounding through downtrading" to "structural take-rate compression at home + binary tariff overhang on Temu."

If CLSA's view continues to deteriorate at this cadence, the O-PF rating itself is at risk on the next disappointment.

---

**Sources**
[1] PDD — O-PF (Challenging time) — CLSA, Elinor Leung, 28 May 2025 — 607960697LinqAlpha.PDF
[2] PDD — O-PF (Challenging time) — CLSA, 28 May 2025 — domestic take-rate / Rmb100bn merchant support
[3] PDD — O-PF (Challenging time) — CLSA, 28 May 2025 — Temu US users -30% / GMV impact
[4] PDD — O-PF (Challenging time) — CLSA, 28 May 2025 — profit miss / margin compression
[5] PDD — O-PF (Missed expectations) — CLSA, Elinor Leung, 22 Nov 2024 — 607944970LinqAlpha.PDF
[6] PDD — O-PF (Missed expectations) — CLSA, 22 Nov 2024 — take rate / merchant support detail
[7] PDD — O-PF (Missed expectations) — CLSA, 22 Nov 2024 — trade-in subsidy disadvantage
[8] PDD — O-PF (Expecting more investments) — CLSA, Elinor Leung, 27 Aug 2024 — 607937466LinqAlpha.PDF
[9] PDD — O-PF (Expecting more investments) — CLSA, 27 Aug 2024 — management investment guidance

