Q2 2024 Earnings Summary
- PDD is investing significantly in supporting high-quality merchants, offering significant transaction fee reductions with an expected amount of RMB 10 billion in the following year. This initiative aims to incentivize high-quality merchants to join the platform and enhance the ecosystem.
- Strong commitment to supply chain improvements and innovation, particularly in agriculture and manufacturing sectors. PDD is collaborating with high-quality brands and manufacturers to create customized products, and supporting small and medium-sized businesses to emerge stronger from competition, leading to long-term growth and competitiveness.
- Focus on core strengths and high-quality development amidst intensifying competition. Despite acknowledging increased competition and uncertainties, PDD emphasizes high-quality development by enhancing its supply chain and investing in the platform's long-term health, which can sustain its growth and market position in the competitive e-commerce industry.
- The company anticipates that profitability will gradually enter a downward trend due to increased investments and intense competition, which will slow down top-line growth and cause fluctuations in business performance.
- Management acknowledged that revenue growth declined in the second quarter, indicating that high revenue growth is not sustainable, and further slowdown is inevitable due to competition and external uncertainties.
- The company is facing intense competition and significant uncertainties from external factors, which will inevitably lead to disruptions in their global business operations.
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Profitability Outlook
Q: How do you assess future profit plans?
A: Management expects profitability to fluctuate and gradually enter a downward trend due to intense competition and substantial investments over the next 12 months to support high-quality merchants. -
Competition Impact
Q: How has intense competition affected growth and priorities?
A: Intensified competition has led to a decline in revenue growth, indicating that high revenue growth is not sustainable. Management is focusing on core strengths, investing in supply chain innovation, and committing to long-term investments to meet diversified consumer needs and drive high-quality development. -
Global Business Risks
Q: Are you managing risks in global business proactively?
A: Management is experiencing increasing uncertainties and nonbusiness factors affecting global operations in over 70 markets, prompting them to focus on core strengths and improve supply chain, customer services, and compliance to achieve high-quality development. -
Shareholder Returns
Q: Any plans for share buybacks or dividends?
A: The company is still in an investment phase and faces intense competition; thus, management unanimously believes it's not the appropriate time for share repurchases or dividends and doesn't foresee such actions in the foreseeable future. -
Merchant Ecosystem Focus
Q: Why emphasize the merchant ecosystem now?
A: Management is transitioning towards high-quality development by strongly supporting high-quality merchants, significantly reducing transaction fees by an expected RMB 10 billion in the following year, aiming to create a virtuous cycle for the platform.