In-depth Investment Analysis Report on PDD Holdings' Temu Platform

Based on comprehensive analysis, we believe Temu

in 2025-2026, but faces significant challenges. The semi-managed model transformation and regional expansion strategy are key factors affecting its long-term valuation. Currently, PDD’s valuation is amid marginal improvement, but investors need to closely monitor execution risks and geopolitical factors.

According to the latest financial report data, PDD Holdings’ overall financial condition is robust:

• Net profit margin as high as 24.43%
  , significantly outperforming the industry average of 18.5%[0]
• ROE reaches 29.30%
  , demonstrating excellent capital return capacity[0]
• Current P/E ratio is 11.33x
  , lower than the industry average of 15.2x, indicating valuation attractiveness[0]

However, as an international expansion business, Temu is still in a high-investment phase, dragging down overall profitability. Q3 2025 data shows the company’s operating margin dropped from 27% in the same period last year to 25%, mainly due to Temu’s huge investments.

1. Cost reduction and efficiency improvement via semi-managed model
   : Semi-managed share in the U.S. market has reached 70%, significantly reducing logistics and fulfillment costs
2. Economies of scale emerging
   : High GMV growth drives operational efficiency improvement
3. U.S. market expected to break even in Q4
   , marking an important milestone

1. Tariff pressure
   : U.S. cancellation of de minimis exemption will increase cost structure burden
2. Intense competition
   : Amazon launched low-priced product lines like Bazaar for direct competition
3. Regulatory risks
   : FTC and Congress are increasingly scrutinizing Temu’s business practices

To achieve sustained profitability, the following conditions need to be met:

• Promote semi-managed model to cover over 80%
  of U.S. orders
• Emerging markets contribute over 40% of GMV
  to diversify regional risks
• Increase supply chain localization
  to reduce tariff impacts
• Continuously optimize advertising ROI
  to lower customer acquisition costs

The semi-managed model is Temu’s strategic choice to address market challenges:

• Platform responsible for end-to-end operations (warehousing, logistics, customer service)
• Merchants only responsible for product supply
• Suitable for rapid initial expansion but with high costs

• Cost structure optimization
  : Local merchants handle fulfillment, reducing international logistics costs
• Delivery speed improvement
  : Local warehousing enables 2-3 day delivery
• Compliance enhancement
  : Meets regulatory requirements of various countries, reducing political risks

According to the latest data, the penetration rate of the semi-managed model varies significantly across markets:

: 70% semi-managed penetration rate, mainly due to:

• Mature local e-commerce infrastructure
• Abundant third-party logistics service providers
• High consumer demand for fast delivery

: 45% penetration rate, facing challenges:

• Higher complexity of cross-border logistics
• Un unified regulatory policies across countries
• Relatively high local operation costs

In December 2024, Temu launched the Shopify integration app, marking an important milestone for the semi-managed model:

1. Rapid expansion of local product supply
   : Access to 3 million U.S. Shopify merchants
2. Reduce platform operation costs
   : Utilize existing merchant infrastructure
3. Improve product diversity
   : Cover over 600 product categories
4. Enhance user experience
   : Realize real-time inventory updates and fast delivery

• Reduce customer acquisition costs by 20-30%
• Increase user retention rate by 15-25%
• Improve ARPU value by 10-15%

Temu has established an impressive global user base:

• Global MAU reaches 500 million
  , becoming an important player in international e-commerce
• Coverage in major developed countries reaches 30%
  , still with huge growth space
• Total downloads exceed 1.2 billion
  , second only to Amazon and Shein

(43% YoY growth)

• U.S. Market: 212 Billion RMB (40% share)
• European Market: 159 Billion RMB (30% share)
• Asia-Pacific Market: 106 Billion RMB (20% share)
• Other Markets: 53 Billion RMB (10% share)

(42% YoY growth)

1. Latin America
   : Brazil and Mexico have large populations and rapid e-commerce growth
2. Southeast Asia
   : Popular digital payments and high mobile e-commerce penetration
3. Middle East
   : High consumption capacity and high acceptance of Chinese products

• Establish regional operation centers
• Cultivate local teams and cultural adaptation
• Adapt to local payment and logistics habits
• Comply with local regulatory requirements

• Amazon: 37.8% absolute leading position
• Walmart: 6.3% second place
• Apple: 3.9%
• eBay:3.5%
• Target:2.1%
• Temu: Expected 1.5-2.0%
  (growing rapidly)

1. Price advantage
   : Direct procurement from Chinese factories with low costs
2. Mobile-first
   : Optimized mobile user experience
3. Social e-commerce
   : Gamification and social sharing mechanisms enhance user stickiness
4. Rapid innovation
   : Agile product iteration and feature updates

1. Infrastructure
   : Mature logistics network and Prime membership system
2. Brand trust
   : Long-established consumer trust and loyalty
3. Technical advantages
   : AI recommendation systems and personalized services
4. Ecosystem
   : Multi-business synergy like AWS and Prime Video

Facing competition from low-priced e-commerce platforms like Temu, Amazon has taken multiple measures:

• Launch Amazon Bazaar low-priced product line covering 14 countries
• Strengthen third-party seller support and provide more flexible pricing strategies
• Optimize mobile experience and enhance user engagement
• Increase procurement of Chinese products to improve price competitiveness

Based on the DCF model, we derive the following valuation results:

• Conservative Scenario
  : Per share value $762.84 (+599.7% upside)
• Base Scenario
  : Per share value $18,778.42 (+17,124.7% upside)
• Optimistic Scenario
  : Per share value $126,802.54 (+116,211.3% upside)

• Revenue growth rate
  : 60.4% (historical 5-year average)
• EBITDA margin
  :14.2%
• Terminal growth rate
  :2.5%
• WACC
  :4.8%

• P/E ratio
  :11.33x (industry average 15.2x)
• P/B ratio
  :2.74x (industry average3.8x)
• EV/EBITDA
  :8.83x
• Net profit margin
  :24.43% (industry average18.5%)

PDD’s valuation multiples are significantly lower than peer levels, mainly reflecting market concerns about Temu’s international expansion risks.

###5.3 Investment Return Expectations

• Price target: $140.50 (analyst consensus)
• Expected return: +28.9%
• Key catalysts: Temu U.S. market break-even, semi-managed model promotion

• Price target: $180-220
• Expected return: +65-100%
• Key catalysts: Emerging market breakthrough, profitability improvement

• Price target: $300+
• Expected return: +175%+
• Key catalysts: Global ecosystem establishment, sustained profitability

• Semi-managed model promotion falls short of expectations
• Supply chain localization execution difficulties
• Intensified competition in emerging markets

• Changes in U.S. tariff policies
• European digital service tax collection
• Strengthened data privacy regulation

• Deterioration of China-U.S. relations affecting business
• Political instability in certain markets
• Increased trade barriers

• High growth expectations are difficult to sustain
• Market competition leads to margin decline
• Investor sentiment fluctuations

###6.2 Investment Recommendations

1. Valuation has safety margin
   : Current 11.33x P/E is significantly lower than peers
2. Temu has huge long-term potential
   : Semi-managed model improves profitability, regional expansion provides growth momentum
3. Core business is robust
   : Chinese main site provides cash flow support
4. Strong management team execution
   : Proven ability to quickly adapt to market changes

• Positioning price range
  : $100-110
• Target price
  : $140-150 (6 months), $180-200 (2 years)
• Stop-loss price
  : $85-90
• Position allocation
  : Recommended 5-8% of investment portfolio

###6.3 Key Monitoring Indicators

1. Temu U.S. market profitability
   : Whether it can achieve break-even in Q4 2025
2. Semi-managed model penetration rate
   : Whether U.S. market can reach over 80%
3. Emerging market GMV growth
   : Market share changes in Latin America and Southeast Asia
4. Overall operating margin
   : Whether it can stabilize above 25%

1. 2025
   : Temu global GMV exceeds 530 billion RMB
2. 2026
   : Temu achieves quarterly profitability, emerging markets account for over 40%
3. 2027
   : Temu enters top 3 global e-commerce platforms, PDD market capitalization exceeds $300 billion

[0] Gilin API Data - Company financial indicators, stock price performance, DCF valuation data
[1] Mexico Business News - “Temu’s PDD Posts 14% Profit Gain as Discounts Fuel 3Q25 Demand”
[2] Investors.com - “PDD Stock Slides After Temu Parent Posts Mixed Q3 Results”
[3] Retail TouchPoints - “Temu Launches Shopify Seller Integration in Bid to Expand U.S.-Based Assortment”
[4] ElectroIQ - “Shopping Application Statistics By Users and Facts (2025)”
[5] Fool.com - “Amazon’s Next Chapter: A Look Back at 2025 and What Investors…”
[6] DBS Bank Research - “PDD Holdings” equity research report
[7] CMB International - “PDD Holdings (PDD US)” research report
[8] ITIF Report - “Comments to USTR for Its Section 301 Investigation of China’s…”
[9] Tinuiti Report - “Tinuiti Wrapped 2025 | A Recap of Our Year”