---
endpoint: analytics
pattern: Internet
status: done
latency_ms: 216961
conversation_id: 04bd3985-21cc-4f4c-a3db-373c5e46c53a
citations: 3
created: 2026-05-31 19:12:36Z
---

# How does PDD’s valuation compare to peers, and what justifies its premium/discount?

# PDD Holdings — Valuation vs. Peers, Premium/Discount Drivers

**Sources note (corpus recency):** CLSA's most recent dedicated PDD valuation note in the internal archive is dated **27-May-2025** [1] — roughly a year before today (31-May-2026). PDD has since reported four additional quarters; selected color from those calls (Q2'25, Q3'25, Q1'26) is layered in where it directly reinforces (or contradicts) the May-2025 framework. Multiples below are CLSA's house numbers as of May-2025; current-market multiples cannot be sourced from this corpus and are flagged where omitted.

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## 1. Where PDD's multiple stood (CLSA's last marked book, May-2025)

CLSA carries PDD at **O-PF (Outperform)** with a US$128 target price, anchored on a **DCF** rather than a peer multiple [1][6]. The implied multiple in that TP is the cleanest read on CLSA's house view of "fair" valuation:

| Metric | Value | Source |
|---|---|---|
| Target price (US$) | 128 | CLSA DCF, roll-forward to Jun-2026 [1][7] |
| Implied target adj. PE (26CL) | **14x** (12x ex-Temu losses) | CLSA [1] |
| Spot price at note (US$, 27-May-2025) | 88.35–154.27 (12M range; spot ~103) | CLSA cover [3] |
| Market cap at note | US$169.3bn | CLSA cover [3] |
| Foreign shareholding | 45.0% | CLSA cover [3] |

CLSA's actual forecast multiples on the stock at the May-2025 price:

| Year | 23A | 24A | 25CL | 26CL | 27CL |
|---|---|---|---|---|---|
| Adj. PE (x) | 15.9 | **9.0** | 11.8 | 11.3 | 10.3 |
| Adj. EPS growth (% YoY) | +69.5 | +77.8 | **-24.0** | +4.5 | +9.9 |
| ROE (%) | 39.4 | 44.9 | 23.5 | 19.5 | 17.6 |
| Dividend yield (%) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |

Source: CLSA [2]

The key tension is visible in one line: PDD traded at **~9x trailing (24A) adj. PE** at the time of CLSA's note [2] — an absolute level that on most ecommerce franchises (Amazon, MELI) would be a deep-value print. The internal archive does **not** contain a contemporaneous peer-comp table with BABA / JD / AMZN / MELI / SE in the same May-2025 note (Figure 16 in the document referenced but not retrieved in scope), so a direct CLSA-sourced multiples grid against peers cannot be reproduced here. I would not infer those peer numbers from memory.

---

## 2. CLSA's explicit thesis for the multiple

CLSA's narrative explains **why** PDD trades at a discount despite top-of-cohort growth and returns — and why CLSA still rates the stock O-PF:

### Reasons for the discount (vs. an "8-10x trailing PE" implies)

1. **Earnings reset risk is live, not theoretical.** 1Q25 results were a "hard miss": revenue +10% YoY at Rmb95.7bn, but adj. EBIT **down 36% YoY** to Rmb18.3bn — 33% below CLSA's estimate [6]. Domestic revenue decelerated to **+6% YoY** as PDD cut take rate 0.7ppt to support merchants [6]. CLSA slashed 25/26CL adj. NP forecasts by **29%/36%** in response [1].

2. **Margin compression is structural, not one-off.** Adj. EBIT margin fell **14ppts YoY** to 19.1%; GPM dropped 5ppts to 57% on delivery support; S&M expenses jumped 34% YoY as PDD subsidised merchants out-of-pocket to match peer trade-in pricing on appliances/3Cs [9]. The Rmb100bn merchant support program is open-ended and "could further pressure margin" per CLSA [1].

3. **Management has institutionalized the lower-margin regime.** Confirmed across subsequent quarters: Q3-2025 — "our financial performance may experience ups and downs in the coming period… we do not think this quarter's profitability should serve as guidance for future performance" [10]. Q2-2025 — operating profit declined **21% YoY**, with management explicitly saying "we prioritize long-term value creation over short-term financial results" [12]. Q1-2026 — "2026 marks the new starting point for PDD's next decade" with the RMB100bn support program escalating into a new **first-party brand** business [11]. The discount reflects the market pricing in a longer reinvestment runway than a typical mature-platform comparable would warrant.

4. **Temu = embedded option, not a clean profit center.** CLSA strips out Temu losses to get a 12x "core" PE vs. the 14x headline [1]. The disclosed risk: "PDD may have to invest more in user acquisition, logistics and infrastructure in overseas markets" and faces "existing and potential regulations on antitrust, data security, ecommerce and employee welfare" [8]. The US Temu app's MAU share dropped from ~32.5% (Dec-23) to ~10% (Apr-25) on de minimis / tariff disruptions; Europe held closer to 27% [based on Sensor Tower data in CLSA].

5. **Quality-of-earnings overhang.** The Rmb112bn 2024 net income was inflated by **Rmb20.6bn of interest income** on a US$64.4bn net-cash pile [4] — pure non-operating yield that doesn't deserve an ecommerce-platform multiple. CLSA's DCF uses a 12.4% WACC (4% RFR, 1.20 beta, 7% ERP) and 0.5% terminal growth, implying ~7x terminal EV/EBIT — a relatively conservative exit multiple [5][7].

### Reasons for the premium (vs. BABA/JD specifically)

1. **GMV growth differential.** CLSA's thesis statement: "PDD's value-for-money proposition makes it the major beneficiary of China's consumer downtrading trend. By sustaining outperformance in GMV growth versus peers, it continues to gain market share in the Chinese ecommerce market" [4].

2. **Returns profile.** 24A ROE was 44.9%, falling to a still-healthy 19.5% by 26CL [2] — well above the typical low-teens ROE for BABA/JD on stable-state numbers.

3. **Asset-light + cash-rich.** Domestic ecommerce margin, stripping out ~Rmb5bn Temu losses in 1Q25, was ~35% — down 20ppts YoY but still structurally higher than the core BABA/JD marketplaces [9]. US$64.4bn net cash gives the franchise multi-year runway to fund Temu / merchant support without dilution [7].

4. **Catalyst optionality.** CLSA explicitly cites "strong outperformance versus peers in GMV growth during shopping festivals and Temu's successful track record overseas" as the multiple-re-rating triggers [5].

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## 3. Net read on the premium/discount question

CLSA's net call — which I take at face value but flag is a **May-2025 vintage** — is that PDD's multiple is **discounted to its own growth/returns profile but in line with peers on a forward-EPS basis**, because:

- **vs. AMZN / MELI**: PDD trades at a meaningful **discount** on PE despite faster GMV growth and higher ROE. The discount is justified by (a) China-listing / ADR-delisting tail risk, (b) Temu regulatory overhang, (c) zero dividend / no buyback (DPS = 0 across the forecast horizon [2]), and (d) management's explicit signaling that profit is no longer the optimization target.

- **vs. BABA / JD**: PDD likely trades at a modest **premium** on forward PE (CLSA targets ~14x 26CL adj. PE [1]), justified by (a) GMV market-share gains [4], (b) higher domestic margins, (c) Temu as a real (if loss-making) global option vs. BABA's narrower AliExpress and JD's domestic concentration. The 12x ex-Temu multiple [1] is the cleanest cross-comp anchor — close to where BABA / JD have historically cleared on core marketplace earnings.

- **The CLSA O-PF call is essentially a bet that the DCF (12.4% WACC, 0.5% terminal growth, ~7x terminal EV/EBIT [7]) is more relevant than the trailing multiple optics**, on the view that GMV outperformance + Temu scaling will eventually compound back through the P&L once the merchant-support reinvestment cycle moderates.

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## 4. What's missing / caveats

- **Live multiples (as of 31-May-2026)** are not in the CLSA archive used here. A current peer-comp grid against BABA, JD, AMZN, MELI, SE would require pulling FactSet estimates — not retrieved in this scope.
- **CLSA's Figure 16 peer-comp table** (referenced in chunk_index 53 but not surfaced as a retrievable chunk in my Figure searches) likely contains the explicit BABA/JD/AMZN/MELI line items. If you want me to re-query specifically for that figure or pull live FactSet multiples, I can do that as a follow-up.
- **Forecast vintage**: CLSA's 26CL adj. NP of Rmb97.4bn [2] predates four additional reporting quarters; consensus has likely moved materially given continued margin-investment messaging [10][11][12].

---

**Sources**
[1] PDD - O-PF (Challenging time), p.~12 (Target & rating) — CLSA, 27-May-2025
[2] PDD - O-PF (Challenging time), Forecast table — CLSA, 27-May-2025
[3] PDD - O-PF (Challenging time), Cover page — CLSA, 27-May-2025
[4] PDD - O-PF (Challenging time), Investment thesis — CLSA, 27-May-2025
[5] PDD - O-PF (Challenging time), Catalysts — CLSA, 27-May-2025
[6] PDD - O-PF (Challenging time), 1Q25 results recap — CLSA, 27-May-2025
[7] PDD - O-PF (Challenging time), DCF summary (Figure 17/18) — CLSA, 27-May-2025
[8] PDD - O-PF (Challenging time), Investment risks — CLSA, 27-May-2025
[9] PDD - O-PF (Challenging time), Margin discussion — CLSA, 27-May-2025
[10] PDD Holdings Q3 2025 Earnings Call — 18-Nov-2025
[11] PDD Holdings Q1 2026 Earnings Call — 27-May-2026
[12] PDD Holdings Q2 2025 Earnings Call — 25-Aug-2025

## Citations

- [10] **PDD Holdings, Inc., Q3 2025 Earnings Call, 18-November-2025 7** · external
- [11] **PDD Holdings, Inc., Q1 2026 Earnings Call, 27-May-2026 7** · external
- [12] **PDD Holdings, Inc., Q2 2025 Earnings Call, 25-August-2025 7** · external

