This article is edited by CICC Pinduoduo: 1Q19 performance is good; competition concerns lead to oversold, it is recommended to buy on the bargain ", Anxin Securities" Pinduoduo: second quarter performance Prospect "

Reduction in sales expenses +Monetization promotion, 2019Q1Exceed expectations

2019Q1 and Pinduoduo achieved revenue of 4.5 billion yuan, an increase of 228% over the same period last year, exceeding consensus expectations by 10%. The adjusted net loss was 1.4 billion yuan, better than the market's expected loss of 2.1 billion yuan.As for the better-than-expected results, CICC believes that it benefits from reduced sales costs and increased monetization.

The company has previously guided 2019Q1 marketing expenses of 50-5.5 billion yuan, but it is actually only 4.89 billion yuan (1.14 billion lower than 2018Q4), so the decline in marketing expenses has greatly promoted performance improvement.

In addition, MAU, per capita GMV continued to rise slightly, and the monetization rate rebounded slightly from 2.76 per cent of 2018Q4 to 2.99 per cent of 2019Q1, which also contributed to revenue and gross profit growth.

To sum up, Pinduoduo's loss in the first quarter was less than the market expected, mainly due to a reduction in marketing expenses, but this change also brought a relatively large slowdown in user growth.

2019Q1 Pinduoduo MAU reached 290 million, an increase of 6.3 per cent from the previous month, which was 11.4pct lower than 2018Q4's 17.7 per cent. The month-on-month growth rate of active buyers also slowed from 9 per cent of 2018Q4 to 6 per cent of 2019Q1.

2019Q2Outlook: sinking dividend is coming to an end, loss or month-on-month expansion

Pinduoduo's high revenue growth in the past is based on users, per capita GMV growth, and monetization, which are also indispensable to achieve scale profits in the future.

However, from the perspective of the first quarter, the decrease in sales expenses led to a rapid slowdown in user growth, and this year BABA and JD.com continued to compete for user dividends in low-line cities, especially JD.com made users grow again with this strategy, soAt this stage, it is still necessary to maintain a high marketing investment for user operation. CICC expects Pinduoduo to increase marketing expenditure in the second quarter, which will lead to a larger loss than the previous quarter..

Pinduoduo's revenue is expected to be 6.1 billion in the second quarter, 125.7% year-on-year, with an adjusted net loss of 1.87 billion, up from 1.38 billion in the first quarter, according to Bloomberg data.

According to Analysys, the coincidence rate of active users between Pinduoduo and Taobao is as high as 72.4%, and the subsequent user growth is likely to fall at a low level. So how to maintain high revenue growth, most organizations believe that the key lies in GMV.During the period of June 18, Pinduoduo platform orders exceeded 1.1 billion, and the total GMV increased by more than 300% compared with the same period last year. Anxin Securities believes that even if user growth rebounds in the second quarter, it may still be low, but subsidies for high-price goods will significantly increase the unit prices of some users. GMV for the whole of 2019 is expected to increase 94% year-on-year to 914.7 billion yuan, with an overall realization rate of 3.1%.

Pinduoduo's annualized GMV lags far behind JD.com and BABA, indicating that there is a lot of room for guest unit price.If this logic is verified in the second quarter, the results may exceed expectations.

Valuation proposal

Although 21 analysts have given Pinduoduo a buy rating, the target price is $27, only slightly higher than the current price, according to Bloomberg.

According to Anxin Securities estimates, revenue growth of 116% in 2019 / 20, adjusted net profit of-3.76 billion yuan / 4.85 billion yuan, given 4x 2020E Phand S (industry average), the target price is also around $25. From the institutional valuation, we can see that the market is more worried about the user growth and profit balance problem that Pinduoduo is facing in the short term, while the long-term is the uncertainty of GMV logic.