Pinduoduo: Stellar Performance Reinforces Industry Position, Agriculture Is Next Engine

China's largest e-commerce company is transforming its development strategy.


  • Pinduoduo turned losses into gains in the second quarter of 2021, defending its leading position in the Chinese e-commerce area with 849.9 million annual active buyers.
  • Pinduoduo mainly focuses on lower-tier cities' customers and follows a 'universal social welfare' way to expand its business.
  • Agricultural products and reinforcing networks among farmers and customers may become the next profit points for the company.

Dazzling financial results

On August 24, 2021, Pinduoduo (PDD: NASDAQ) held its Q2 2021 earning call, showing rather impressive financial results. Its stock surged over 20% at the beginning of that trading day.

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Pinduoduo turned losses into gains for the first time in the second quarter of 2021. In Q2 2021, the company achieved revenue of CNY 23.05 billion, up 89% year-on-year. Its operating profit reached nearly CNY 2 billion (with non-GAAP operating profit of CNY 3.19 billion), compared with an operating loss of CNY 1.64 billion. In the remarkable quarter, the company received gains (net income attributable to ordinary shareholders) of CNY 2.41 billion, which is a big move compared with a net loss of CNY 0.90 billion in the same quarter of 2020. The company's basic earnings per ADS increased to USD 0.30, and diluted EPS reached USD 0.27. At the same time, its annual active buyers reached 849.9 million as of June 30, 2021, and average monthly active users (MAUs) increased to 738.5 million, accounting for 87% of its annual active buyers, defending its leading position in China's e-commerce area.

Analyzing the financials, we found that Pinduoduo's cost control contributes the most to the result. Due to increased promotion and coupon expenses, the company's sales and marketing expenses only increased 14% to CNY 10.39 billion. In comparison, general and administrative costs only increased 10% to CNY 0.43 billion, compared with the same quarter in 2020. Its operating margin and the net margin reached a historical high in the past three years, accounting for 8.7% and 17.9%, respectively. Notably, its sales and marketing expenses ratio has been cut to 45%, compared with 81% and 73% for the same quarter in 2019 and 2020, showing its consistent cost control efforts.

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