Pinduoduo share price to rise following shock profit

The Pinduoduo (NASDAQ: PDD) share price is set to rise sharply today after the Chinese fresh produce-focussed ecommerce platform announced a surprising profit result in its second quarter 2021 results.

Pinduoduo’s operating profit in the quarter was RMB1,997.5 million (US$309.4 million), compared with an operating loss of RMB1,639.6 million in the same quarter of 2020. It’s the first time the company has posted a quarterly net profit.

Total revenues in the quarter were RMB23,046.2 million (US$13,569.4 million), an increase of 89% from RMB12,193.3 million in the same quarter of 2020, while average monthly active users hit 738.5 million, an increase of 30% from the same quarter of 2020.

Pinduoduo share price
Pinduoduo Q2 2021 results presentation

The company says it has taken orders from 849.9 million buyers in the twelve-month period that ended June 30, 2021.

“We continued to deliver strong execution in the quarter. Our total revenues, excluding contribution from merchandise sales, for the second quarter 2021 increased 73% from the prior year,” said Tony Ma, Vice President of Finance of Pinduoduo.

“Agriculture remains our strategic priority, and we are committed to patient and continued investment in agriculture.”

1.5 billion dollar initiative to support “agricultural modernization and rural vitalization”

In tandem with its second quarter results, Pinduoduo announced it will donate US$1.5 billion to address critical needs in the agricultural sector and rural areas of China.

All Q2 2021 profit and any future profits (until the $1.5 billion target is hit) will be allocated to the initiative, which is called the 10 Billion Agriculture Initiative.

“Although the 10 Billion Yuan Agriculture Initiative will clearly impact the short-term earnings per share for shareholders, the Initiative has already received the support and approval of the Board of Directors, and will be personally overseen by Chairman and CEO Chen Lei. The company will subsequently convene a shareholders’ meeting to seek the support of majority shareholders,” said the company in a statement.

“This is an important and challenging task, which we will invest in patiently,” said Chen. “All profits from the second quarter and any potential profits in future quarters will first be allocated towards this initiative until the total 10 billion yuan commitment is fulfilled.”

Earlier this year, Pinduoduo was among three technology companies commended for their contributions to China’s poverty alleviation efforts.

Agriculture-related initiatives undertaken by Pinduoduo in recent years include improvements to downstream market access for farmers, brand building, agri-business training, and the improvement of rural Chinese agriculture logistics infrastructure.

What is Pinduoduo?

Pinduoduo is a mobile-only marketplace that’s disrupting the traditional Chinese wet market grocery landscape. It is changing the way millions of Chinese access fresh produce by directly linking consumers with sellers from rural areas and enabling direct delivery and community group buying.

Asia Markets correspondent Aditya Raghunath, provides a comprehensive overview of the business in this article.

This recent Asia Markets article named Pinduoduo as one of three stocks legendary growth investor Cathie Wood is buying.