Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

In our previous insight <a href="https://www.smartkarma.com/insights/dida-pre-ipo-carpool-focused-but-is-main-business-in-short-term-risk" target="_blank" data-smartkarma-citation="insights:44376" rel="noopener">Dida Pre-IPO: Carpool-Focused, But Is Main Business in Short-Term Risk?</a> , we looked at Dida’s business model and its growth prospects by comparing the company with its rival <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a>. In this insight, we carry out a financial analysis and outlook on the company. Our key points are:<ul>
<li>
<a href="https://www.smartkarma.com/entities/dida-inc" target="_blank" data-smartkarma-citation="entities:29701:1" rel="noopener">Dida (DIDA HK)</a> has reported strong revenue growth rates during 2017-2019 (CAGR of 244%). Moreover, despite the COVID impact, revenue during 1H 2020, grew by 66% YoY. A majority of the revenue growth came from the carpooling business (CAGR of 339% during 2017-2019). Given the strong industry growth prospects for carpooling and Dida’s dominant position in the market, if we conservatively assume Dida to grow in line with the industry (an outperformance is likely though), we could expect Dida’s revenue to grow at a double-digit CAGR of c. 27% through 2022.</li>
<li>Gross profit margins are at 82.2% as of 1H 2020, driven mainly by the carpooling business (GPM: 86.3%). However, based on our MPR analysis, total GPM and the GPM of the carpooling business appears to have reached potential, where significant upside is unlikely.</li>
<li>An upside in GPM is likely for the ride-hailing business, which started generating gross profits only in 1H2020 (Dida’s 31.1%), but appears limited given that GPM of peers like <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> and <a href="https://www.smartkarma.com/entities/lyft-inc" target="_blank" data-smartkarma-citation="entities:24423:1" rel="noopener">Lyft Inc (LYFT US)</a> range around 34-39%. Moreover, at the overall operating level, this business is unlikely to report profits any time soon as we see with international peers like Uber and Lyft.</li>
<li>Selling expenses do not move in line with revenue. Selling expenses usually increase when Dida expects to boost its sales in the upcoming year. This was the case in 2018. Having said that, a majority of selling expenses include user incentive costs, which has levelled out for the carpooling business but is likely to continue for the ride-hailing business which Dida started last year. Overall, given that Dida is yet to grab a share of the ride-hailing market, selling expenses are likely to be a significant expense over the next few years as well.</li>
<li>The company is generating losses at the net level and these losses are likely to continue even based on our less conservative assumptions. Though based on adjustments the company makes, profits are reported, we feel that these adjustments do not necessarily justify the company’s loss-making position.</li>
</ul>

In our previous insight Dida Pre-IPO: Carpool-Focused, But Is Main Business in Short-Term Risk? , we looked at Dida’s business model and its growth prospects by comparing the company with its rival DiDi Chuxing (1284375D CH). In this insight, we carry out a financial analysis and outlook on the company. Our key points are:

Dida (DIDA HK) has reported strong revenue growth rates during 2017-2019 (CAGR of 244%). Moreover, despite the COVID impact, revenue during 1H 2020, grew by 66% YoY. A majority of the revenue growth came from the carpooling business (CAGR of 339% during 2017-2019). Given the strong industry growth prospects for carpooling and Dida’s dominant position in the market, if we conservatively assume Dida to grow in line with the industry (an outperformance is likely though), we could expect Dida’s revenue to grow at a double-digit CAGR of c. 27% through 2022.
Gross profit margins are at 82.2% as of 1H 2020, driven mainly by the carpooling business (GPM: 86.3%). However, based on our MPR analysis, total GPM and the GPM of the carpooling business appears to have reached potential, where significant upside is unlikely.
An upside in GPM is likely for the ride-hailing business, which started generating gross profits only in 1H2020 (Dida’s 31.1%), but appears limited given that GPM of peers like Uber (UBER US) and Lyft Inc (LYFT US) range around 34-39%. Moreover, at the overall operating level, this business is unlikely to report profits any time soon as we see with international peers like Uber and Lyft.
Selling expenses do not move in line with revenue. Selling expenses usually increase when Dida expects to boost its sales in the upcoming year. This was the case in 2018. Having said that, a majority of selling expenses include user incentive costs, which has levelled out for the carpooling business but is likely to continue for the ride-hailing business which Dida started last year. Overall, given that Dida is yet to grab a share of the ride-hailing market, selling expenses are likely to be a significant expense over the next few years as well.
The company is generating losses at the net level and these losses are likely to continue even based on our less conservative assumptions. Though based on adjustments the company makes, profits are reported, we feel that these adjustments do not necessarily justify the company’s loss-making position.


Dida IPO (Financial Analysis): Expect Strong Revenue Growth but Not Profits

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Kuaishou Technology / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Beijing Kuaishou Technology Co Ltd (1496219D CH)</a> (KT) is a content community and social platform. The company is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, Sequoia China, <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>, DST Global, Boyu Capital, Temasek and others. As of six months ended Jun 2020, it had 302m daily active users (DAUs), who spent 85 mins on average on the app every day. It also had 776m monthly active users (MAUs) and total e-commerce GMV of RMB109.6bn. On an average 1.1bn short videos were uploaded on its app during 1H20. As per iResearch, Kuaishou was globally the largest live streaming platform by gross billings from virtual gifting and average live streaming MPUs, the second largest short video platform by average DAUs, and the second largest live streaming e-commerce platform by GMV, over six months ended June 30, 2020.In this note, I'll talk about the positive aspects of the deal.

Beijing Kuaishou Technology Co Ltd (1496219D CH) (KT) is a content community and social platform. The company is backed by Tencent Holdings (700 HK), Sequoia China, Baidu (BIDU US), DST Global, Boyu Capital, Temasek and others. As of six months ended Jun 2020, it had 302m daily active users (DAUs), who spent 85 mins on average on the app every day. It also had 776m monthly active users (MAUs) and total e-commerce GMV of RMB109.6bn. On an average 1.1bn short videos were uploaded on its app during 1H20. As per iResearch, Kuaishou was globally the largest live streaming platform by gross billings from virtual gifting and average live streaming MPUs, the second largest short video platform by average DAUs, and the second largest live streaming e-commerce platform by GMV, over six months ended June 30, 2020.In this note, I'll talk about the positive aspects of the deal.

Kuaishou Technology Pre-IPO - The Positives - Hot Segment, Fast Growth

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

We hope <a href="https://www.smartkarma.com/entities/dida-inc" target="_blank" data-smartkarma-citation="entities:29701:1" rel="noopener">Dida (DIDA HK)</a> will publish another set of updated financial statements (from Q3 2020) before it lists in Hong Kong later this year. If and when those results are published, investors should study them carefully to detect signs of a resurgent <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a> , the ride-hailing giant that exited the car pool market in late 2018 but quietly re-entered about a year ago.
The two most telling signs of a DiDi ChuXing resurgence in the car pool segment would be: 
<ol>
<li>Dida Inc's car pool revenue growing slower than its car pool ride volume or GTV</li>
<li>A sharp rise in Sales &amp; Marketing expenses relative to DiDa Inc's overall revenue</li>
</ol>
Both of the above metrics would be reflected in DiDa Inc's car pool 'take rate': the net revenue it earns on booking car pool rides after deducting any incentives paid to drivers, payments that have likely diminished dramatically in the two years since Didi ChuXing exited the market. 
We suspect that in the absence of a large, savvy competitor (like DiDi ChuXing), DiDa Inc's 'take rate' is higher and its spending on Sales &amp; Marketing is lower than it would be otherwise. Signs that DiDi ChuXing is aggressively pushing its way back into this market -- which it used to dominate, and not so long ago -- would be negative for DiDa Inc, in our view.
In fact, the 'free ride' DiDa Inc has enjoyed as the dominant (and quite profitable) player in the growing car pool segment could come to an end.

We hope Dida (DIDA HK) will publish another set of updated financial statements (from Q3 2020) before it lists in Hong Kong later this year. If and when those results are published, investors should study them carefully to detect signs of a resurgent DiDi Chuxing (1284375D CH) , the ride-hailing giant that exited the car pool market in late 2018 but quietly re-entered about a year ago.
The two most telling signs of a DiDi ChuXing resurgence in the car pool segment would be: 

Dida Inc's car pool revenue growing slower than its car pool ride volume or GTV
A sharp rise in Sales &amp; Marketing expenses relative to DiDa Inc's overall revenue

Both of the above metrics would be reflected in DiDa Inc's car pool 'take rate': the net revenue it earns on booking car pool rides after deducting any incentives paid to drivers, payments that have likely diminished dramatically in the two years since Didi ChuXing exited the market. 
We suspect that in the absence of a large, savvy competitor (like DiDi ChuXing), DiDa Inc's 'take rate' is higher and its spending on Sales &amp; Marketing is lower than it would be otherwise. Signs that DiDi ChuXing is aggressively pushing its way back into this market -- which it used to dominate, and not so long ago -- would be negative for DiDa Inc, in our view.
In fact, the 'free ride' DiDa Inc has enjoyed as the dominant (and quite profitable) player in the growing car pool segment could come to an end. 

No More 'Free Ride'? Key DiDa Inc Metrics That Could Reveal a DiDi ChuXing Resurgence

<a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a>’s rival <a href="https://www.smartkarma.com/entities/dida-inc" target="_blank" data-smartkarma-citation="entities:29701:1" rel="noopener">Dida (DIDA HK)</a> has taken the lead to file for an IPO, being the first Asian ride-hailing company to go public. In this note, we have taken a look at the company’s business model and its growth prospects by comparing the company with its rival Didi. Based on our first look, the key points we highlight are:<ul>
<li>85% of Dida’s revenue is from Carpooling where it holds a 66.5% market share which appears to be a defensible share.</li>
<li>Dida became the leading player specialising in Carpooling services when Didi had to suspend its carpooling app due to two murder incidents. Dida claims their app has better safety features.</li>
<li>Though the company is exposed to the growth potential of ride-sharing through the niche of carpooling, we believe the risks from COVID are higher for carpooling because the number of strangers per ride is higher. This is likely to be highly negative in the short-term and our question is, will it really get easier over time?</li>
<li>For ride-hailing services (around 5% of revenue), Dida mainly partners with taxi companies but is still struggling to keep pace with Didi. Thus, we question whether the company can ever benefit from the major segment of the ride-sharing market?</li>
<li>The company claims its asset-light model will help them reach profitability soon and it did generate a positive adjusted NP in 2019, and in 1H FY12/2020. However, given the struggles of most companies in the sector and the use of items below the operating line to generate a NP, we believe some caution is warranted. We are sceptical about this claim and intend to investigate the path to profitability more closely in a follow-up note.</li>
</ul>

DiDi Chuxing (1284375D CH)’s rival Dida (DIDA HK) has taken the lead to file for an IPO, being the first Asian ride-hailing company to go public. In this note, we have taken a look at the company’s business model and its growth prospects by comparing the company with its rival Didi. Based on our first look, the key points we highlight are:
85% of Dida’s revenue is from Carpooling where it holds a 66.5% market share which appears to be a defensible share.
Dida became the leading player specialising in Carpooling services when Didi had to suspend its carpooling app due to two murder incidents. Dida claims their app has better safety features.
Though the company is exposed to the growth potential of ride-sharing through the niche of carpooling, we believe the risks from COVID are higher for carpooling because the number of strangers per ride is higher. This is likely to be highly negative in the short-term and our question is, will it really get easier over time?
For ride-hailing services (around 5% of revenue), Dida mainly partners with taxi companies but is still struggling to keep pace with Didi. Thus, we question whether the company can ever benefit from the major segment of the ride-sharing market?
The company claims its asset-light model will help them reach profitability soon and it did generate a positive adjusted NP in 2019, and in 1H FY12/2020. However, given the struggles of most companies in the sector and the use of items below the operating line to generate a NP, we believe some caution is warranted. We are sceptical about this claim and intend to investigate the path to profitability more closely in a follow-up note.


Dida Pre-IPO: Carpool-Focused, But Is Main Business in Short-Term Risk?

<a href="https://www.smartkarma.com/entities/dida-inc" target="_blank" data-smartkarma-citation="entities:29701:1" rel="noopener">Dida (DIDA HK)</a> (Dida), a technology driven mobility platform in China, aims to raise around US$400m in its Hong Kong IPO. The company is backed by JD.com, Hillhouse, Ctrip, Bitauto and a host of other investors.Dida claims to operate the largest carpooling marketplace in China with a market share of 66.5% in terms of the number of carpooling rides in 2019, as per Frost &amp; Sullivan (F&amp;S) report. Over 2017-19, Dida’s total revenue increased by 11.87x. Revenue was up another 66% over 6M20. Revenue coming from carpooling has grown 19x over 2017 to 2019 and was up another 66% over 6M20.

Dida (DIDA HK) (Dida), a technology driven mobility platform in China, aims to raise around US$400m in its Hong Kong IPO. The company is backed by JD.com, Hillhouse, Ctrip, Bitauto and a host of other investors.Dida claims to operate the largest carpooling marketplace in China with a market share of 66.5% in terms of the number of carpooling rides in 2019, as per Frost &amp; Sullivan (F&amp;S) report. Over 2017-19, Dida’s total revenue increased by 11.87x. Revenue was up another 66% over 6M20. Revenue coming from carpooling has grown 19x over 2017 to 2019 and was up another 66% over 6M20. 

Dida Pre-IPO - Making Hay While Big Brother Retreats

China

DiDi Chuxing Incorporated operates passenger transportation platforms. The Company provides mobility solutions, cloud computing and other application based services. DiDi Chuxing serves customers worldwide.

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DiDi Global (DIDI US)

Dida IPO (Financial Analysis): Expect Strong Revenue Growth but Not Profits

This is our follow-up note on Dida's IPO. In this insight, we carry out a financial analysis and outlook on the company.

Aqila Ali

Kuaishou Technology Pre-IPO - The Positives - Hot Segment, Fast Growth

Kuaishou Technology is a content community and social platform. The company is backed by Tencent Holdings (700 HK), Sequoia China, Baidu (BIDU US),...

Sumeet Singh

No More 'Free Ride'? Key DiDa Inc Metrics That Could Reveal a DiDi ChuXing Resurgence

DiDa Inc has carved out a niche for itself in China's growing car pool segment. But should ride-hailing giant DiDi ChuXing re-emerge as a player,...

Tracking Traffic

Dida Pre-IPO: Carpool-Focused, But Is Main Business in Short-Term Risk?

Didi’s rival Dida takes the lead to file for an IPO, and would be the first Asian ride-hailing company to go public. We compare Dida's business...

Aqila Ali

Dida Pre-IPO - Making Hay While Big Brother Retreats

Dida, a technology driven mobility platform in China, aims to raise around US$400m in its Hong Kong IPO. The company is backed by JD.com,...

Sumeet Singh

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