To The Moon

China’s Retail Recovery Exceeds Expectations

In Q2 2025, China’s retail sales grew at an average monthly rate of +5.4% YoY, nearly double the +2.7% growth seen in the same period last year.

Even more encouraging, online retail sales in H1 2025 rose +8.5% YoY, outpacing the overall retail sales growth of +5%. This is positive news for Pinduoduo. Although its Q1 2025 revenue grew only +10% YoY, far below the +59% growth for the full year of 2024, it at least indicates growth momentum is continuing.

The recent retail rebound is unlikely to restore $PDD Holdings Inc(PDD)$ to the hypergrowth levels of 2024, but it may help offset some of the negative impact from higher U.S. tariffs. Analysts may even raise their full-year 2025 revenue growth forecasts—the current market consensus is +9.9%, while the most bullish forecast goes as high as +18.5%.

Strategic Considerations Behind Profit Contraction

In its latest earnings report, Pinduoduo’s sharp profit decline was disappointing. In 2024, its non-GAAP operating profit and net income both surged +80%, but in Q1 2025 they fell –36% and –45% YoY, respectively.

On the surface, this might seem due to slowing demand. However, the company explained that the contraction came from strategic investments: increasing platform spending to address “changes in the external environment,” while also supporting merchants and consumers to boost sales and cut costs. Looking ahead, Pinduoduo plans to continue ramping up investments, which suggests profits may remain under pressure in the short term.

That said, this does not mean investors should lose confidence in Pinduoduo:

• Analysts forecast a –25.9% decline in FY2025 EPS, which is much smaller than the Q1 drop.

• The company’s strategy aims to enhance its long-term health.

• From next year onward, Pinduoduo is expected to return to double-digit profit growth.

Valuations Becoming More Attractive

Pinduoduo’s valuation multiples have dropped significantly, making it more attractive:

• Forward non-GAAP P/E is 13.56x, far below its 5-year average of 71.8x. In comparison, Alibaba trades at 13.64x and JD.com at 11.84x, leaving little gap.

• GAAP forward P/E is 14.95x, sharply down from 24.85x in February 2025.

• In the past, Pinduoduo’s valuation was much higher than Alibaba’s and JD.com’s. Now the gap has narrowed: Alibaba at 16.05x, JD.com at 13.39x, making Pinduoduo no longer look expensive in relative terms.