Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

Shares of Didi Global appear to have stabilized after regulatory turmoil but whilst the stream of bad news has slowed, the lack of good news (an end to the app ban, any management comments) is also troubling. Even with a hopeful view on the end of regulatory pressure, the company appears less valuable as competition and higher pay for drivers shifts the economics and our new forecasts value the company at $9.74 versus our pre-IPO value of $15.8. We track Didi as part of our Softbank Group coverage.

Shares of Didi Global appear to have stabilized after regulatory turmoil but whilst the stream of bad news has slowed, the lack of good news (an end to the app ban, any management comments) is also troubling. Even with a hopeful view on the end of regulatory pressure, the company appears less valuable as competition and higher pay for drivers shifts the economics and our new forecasts value the company at $9.74 versus our pre-IPO value of $15.8. We track Didi as part of our Softbank Group coverage.

Didi Global - Regulatory Overhang Remains and Long-Term Value Is Falling

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

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.

The Chinese mobility technology platform <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a> has had a tough time since its IPO in the US on the 30th of June. Two days after Didi’s IPO debut in the US, The Cyberspace Administration of China (CAC) announced on 2nd July that it had launched an investigation into Didi to protect national security and the public interest. On 4th July, CAC announced that it had found that Didi’s app had severely violated the country’s data protection laws by illegally collecting and using its users’ personal information and was ordered to remove its app from app stores. According to news media outlets, the Cyberspace Administration has found that the company had illegally collected personal data of its users and was asked to make changes to comply with the country’s data protection rules.According to CIC, Didi operates the world’s largest mobility technology platform based on annual active users and by average daily transactions for the twelve months ended March 2021. Didi priced its IPO at US$14 per ADS and the company’s shares are currently trading at around 40% below its IPO price at US$8.62 per ADS.Since its app ban in July 2021, there has been rumours that the Chinese regulators could impose heavy fines on the company, would be asked to delist from the US Exchange and a complete state takeover of the company. On the other hand, Meituan (Meituan Dache) and other small ride-hailing operators have started to play catch up with Didi losing its momentum with the app ban. Meituan re-launched its stand-alone app for ride-hailing on app stores soon after Didi’s app ban while automaker Geely’s ride-hailing unit Cao Cao Mobility has been raising funds to grab market share from the company.Didi has not yet reported its quarterly earnings for the June quarter nor the company has provided any data for its operations, and in this insight, we present an outlook and our thoughts on the company’s current valuation.

The Chinese mobility technology platform DiDi Global (DIDI US) has had a tough time since its IPO in the US on the 30th of June. Two days after Didi’s IPO debut in the US, The Cyberspace Administration of China (CAC) announced on 2nd July that it had launched an investigation into Didi to protect national security and the public interest. On 4th July, CAC announced that it had found that Didi’s app had severely violated the country’s data protection laws by illegally collecting and using its users’ personal information and was ordered to remove its app from app stores. According to news media outlets, the Cyberspace Administration has found that the company had illegally collected personal data of its users and was asked to make changes to comply with the country’s data protection rules.According to CIC, Didi operates the world’s largest mobility technology platform based on annual active users and by average daily transactions for the twelve months ended March 2021. Didi priced its IPO at US$14 per ADS and the company’s shares are currently trading at around 40% below its IPO price at US$8.62 per ADS.Since its app ban in July 2021, there has been rumours that the Chinese regulators could impose heavy fines on the company, would be asked to delist from the US Exchange and a complete state takeover of the company. On the other hand, Meituan (Meituan Dache) and other small ride-hailing operators have started to play catch up with Didi losing its momentum with the app ban. Meituan re-launched its stand-alone app for ride-hailing on app stores soon after Didi’s app ban while automaker Geely’s ride-hailing unit Cao Cao Mobility has been raising funds to grab market share from the company.Didi has not yet reported its quarterly earnings for the June quarter nor the company has provided any data for its operations, and in this insight, we present an outlook and our thoughts on the company’s current valuation.

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

In this insight, we provide a bullish case for <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a>. We argue that there are signs that Xi Jinping is starting to soften the brutal crackdown on China's Internet giants including Didi. At a meeting of Communist Party officials on Monday (18 October), <a href="https://uk.finance.yahoo.com/news/u-listed-chinese-stocks-track-093844642.html" target="_blank" rel="noopener">Xi Jinping</a> stated that “In recent years, the internet, big data, cloud computing, artificial intelligence, blockchain and other technologies have accelerated their innovation and are increasingly integrated into the entire economy and society.” We believe that this statement is a reflection of a softening stance on the Internet giants in China. Xi understands very well that if the government cracks down on China's tech giants too much, this is likely to crush the technological innovation and research. <div class="content-highlight">
Comparable Companies Valuation Analysis - Based on our revised down sales and earnings estimates of the company, our base case valuation of <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a> is implied market cap of $58 billion or target price of $12 per share. This represents a 39% upside to the current price of $8.62.
Given the recent softening stance towards China's Internet tech giants combined with their improving share prices in October, we believe that there is a solid upside for Didi Global and we have a Positive view on this stock at current levels.
Our base case valuation $58 billion market cap is based on EV/S multiple of 1.3x using our estimated sales of 236 billion RMB in 2022, which is 70% discount to the median EV/S valuation multiples of the four comps.
</div>

In this insight, we provide a bullish case for DiDi Global (DIDI US). We argue that there are signs that Xi Jinping is starting to soften the brutal crackdown on China's Internet giants including Didi. At a meeting of Communist Party officials on Monday (18 October), Xi Jinping stated that “In recent years, the internet, big data, cloud computing, artificial intelligence, blockchain and other technologies have accelerated their innovation and are increasingly integrated into the entire economy and society.” We believe that this statement is a reflection of a softening stance on the Internet giants in China. Xi understands very well that if the government cracks down on China's tech giants too much, this is likely to crush the technological innovation and research. 
Comparable Companies Valuation Analysis - Based on our revised down sales and earnings estimates of the company, our base case valuation of DiDi Global (DIDI US) is implied market cap of $58 billion or target price of $12 per share. This represents a 39% upside to the current price of $8.62.
Given the recent softening stance towards China's Internet tech giants combined with their improving share prices in October, we believe that there is a solid upside for Didi Global and we have a Positive view on this stock at current levels.
Our base case valuation $58 billion market cap is based on EV/S multiple of 1.3x using our estimated sales of 236 billion RMB in 2022, which is 70% discount to the median EV/S valuation multiples of the four comps.


Didi Global: Xi Jinping Softening the Brutal Crackdown on China's Internet Giants?

TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Some updated thinking around our long portfolio: more bullish Google, Netflix, and Match, less bullish Snowflake, Facebook. And thinking about getting long some DIDI!<div class="content-highlight">Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.  </div>

Some updated thinking around our long portfolio: more bullish Google, Netflix, and Match, less bullish Snowflake, Facebook. And thinking about getting long some DIDI!Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.  

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

The Cyberspace Administration of China (CAC) ordered app stores in China to remove Didi's app for the illegal collection and use of personal data.  This comes after the CAC announcing a cybersecurity review of Didi.   The regulatory investigations are not just limited to Didi.  The CAC also opened a cybersecurity probe into the recent US-listed Chinese online recruiter Boss Zhipin and subsidiaries of Full Truck Alliance (both backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> ). The removal of the Didi app from app stores is concerning as this could have a direct impact on new user and driver acquisitions, and thus impacting its revenue, which is a key driver for the company's valuation.  Didi's China Mobility business had 337 million annual active users (AAU) and 156 monthly active users (MAU) generating 25 million average daily transactions at the March quarter. I am cautious on Didi because of its rich valuation, risks related to its bike-sharing business, and regulatory and business risks.  Please see my last insight, <a href="https://www.smartkarma.com/insights/didi-chuxing-didi-us-avoid-buyers-remorse-do-an-apples-to-apples-comparison" target="_blank" data-smartkarma-citation="insights:53823" rel="noopener">Didi Chuxing (DIDI US): Avoid Buyers' Remorse - Do an Apples to Apples Comparison,</a> for discussions on valuations.

The Cyberspace Administration of China (CAC) ordered app stores in China to remove Didi's app for the illegal collection and use of personal data.  This comes after the CAC announcing a cybersecurity review of Didi.   The regulatory investigations are not just limited to Didi.  The CAC also opened a cybersecurity probe into the recent US-listed Chinese online recruiter Boss Zhipin and subsidiaries of Full Truck Alliance (both backed by Tencent (700 HK) ). The removal of the Didi app from app stores is concerning as this could have a direct impact on new user and driver acquisitions, and thus impacting its revenue, which is a key driver for the company's valuation.  Didi's China Mobility business had 337 million annual active users (AAU) and 156 monthly active users (MAU) generating 25 million average daily transactions at the March quarter. I am cautious on Didi because of its rich valuation, risks related to its bike-sharing business, and regulatory and business risks.  Please see my last insight, Didi Chuxing (DIDI US): Avoid Buyers' Remorse - Do an Apples to Apples Comparison, for discussions on valuations. 

United States

Lyft, Inc. provides online ridesharing services. The Company offers ride booking, payment processing, and car transportation services. Lyft serves customers in the United States.

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Lyft (LYFT US)

Didi Global - Regulatory Overhang Remains and Long-Term Value Is Falling

Volatility in Didi shares appear has stabilized after regulatory turmoil but whilst the stream of bad news has slowed, a lack of good news is also...

Kirk Boodry

DiDi: Buckle Up Your Seat Belts

Didi's Shares are currently trading at around 40% below its IPO price and our revised forecasts suggests that there is further upside of around 16...

Shifara Samsudeen, ACMA, CGMA

Didi Global: Xi Jinping Softening the Brutal Crackdown on China's Internet Giants?

In this insight, we provide a bullish case for DiDi Global. We argue that there are signs that Xi Jinping is starting to soften the brutal...

Douglas Kim

2H21 Obex Research Long Portfolio

Some updated thinking around our long portfolio: more bullish Google, Netflix, and Match, less bullish Snowflake, Facebook. And thinking about...

Aaron Gabin

DIDI US: Regulatory Risk on the Rise

The CAC ordered app stores in China to remove Didi's app for the illegal collection and use of personal data. With rich valuations and regulatory...

Mitchell Kim

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