Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Capital Markets

<p>Didi Chuxing is the dominant ride-hailing platform in one of the world’s most compelling markets for shared mobility. It is a global leader in some respects (number of active users, drivers, and transactions) and its IPO could represent the second-largest China IPO in the US trailing only eCommerce giant Alibaba Group. We value Didi Chuxing at $63/share (the ADR exchange has not yet been announced) which implies a pre-IPO equity value for the entire company of $70bn. </p><p>This report includes full financial forecasts, valuation, a summary of investment highlights and a list of questions we would ask on the roadshow.</p>

Didi Chuxing is the dominant ride-hailing platform in one of the world’s most compelling markets for shared mobility. It is a global leader in some respects (number of active users, drivers, and transactions) and its IPO could represent the second-largest China IPO in the US trailing only eCommerce giant Alibaba Group. We value Didi Chuxing at $63/share (the ADR exchange has not yet been announced) which implies a pre-IPO equity value for the entire company of $70bn. This report includes full financial forecasts, valuation, a summary of investment highlights and a list of questions we would ask on the roadshow.

Didi Chuxing and Softbank - Long Awaited IPO of China’s Mobility Giant Worth $70bn

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Full Truck Alliance   / Equity Capital Markets

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<p><a href="https://www.smartkarma.com/entities/full-truck-alliance" target="_blank" data-smartkarma-citation="entities:33429:1" rel="noopener">Full Truck Alliance (YMM US)</a>, known as <em>Manbang</em> in China, is the world’s largest digital freight platform by gross transaction value (GTV) in 2020, according to CIC. FTA was formed in 2017 through the merger of <em>Yunmanman</em> and <em>Huochebang</em>, which were founded in 2013 and 2011, respectively. FTA is backed by SoftBank Vision Fund (22.2% of the outstanding shares), Sequoia Capital (7.2%), Hillhouse and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>. </p>
<p>At the mid-point of the proposed IPO price range of $17.00-19.00 per ADS, FTA will have a market cap of $19.6 billion. FTA will also raise an additional $200 million in concurrent private placements to Ontario Teachers' Pension Plan Board and Mubadala Investment Company. At the mid-point of the IPO price range and including the concurrent private placement, the net proceeds are $1,620.7 million. FTA has received indications of interest from Fidelity ($100 million) and Invesco ($500 million). </p>
</div><div><p>In <a href="https://www.smartkarma.com/insights/full-truck-alliance-ipo-initiation-a-less-than-perfect-delivery" target="_blank" data-smartkarma-citation="insights:52399" rel="noopener">Full Truck Alliance IPO Initiation: A Less than Perfect Delivery</a>, we stated that at first sight, FTA recent results look stunning due to fast-paced growth, improving margin and cash generation. However, a closer look, suggests that FTA has less than ideal disclosure, a regulatory overhang and potential corporate governance issues. We concluded that we cannot recommend FTA wholeheartedly and inclined to watch this IPO unfold from the sidelines.   </p></div><div><div>
<div class="content-highlight"><p>Our valuation analysis suggests that FTA trades at frothy multiples (EV/Sales and growth adjusted EV/Sales) compared to its peers. On the other hand, the indications of interest and the concurrent placing with blue-chip investors suggest that the IPO price range is grounded in some logic. We think that the IPO pricing seems reasonable based on recent share repurchases and the PEG multiple. While the recent first-day pops suggest an awakening of IPO animal spirits, we remain uncomfortable in recommending FTA based on our previously highlighted concerns and a rich valuation. </p></div>
<p><em><strong>For readers interested in peer</strong></em>, <a href="https://www.smartkarma.com/entities/foru-worldwide-inc" target="_blank" data-smartkarma-citation="entities:33314:1" rel="noopener">ForU Worldwide (FOYO US)</a>, which also recently filed for a $500 million Nasdaq IPO, we highlight our note - <a href="https://www.smartkarma.com/insights/foru-worldwide-ipo-initiation-not-foru" target="_blank" data-smartkarma-citation="insights:51888" rel="noopener">ForU Worldwide IPO Initiation: Not ForU</a>  </p>
</div></div>


Full Truck Alliance (YMM US), known as Manbang in China, is the world’s largest digital freight platform by gross transaction value (GTV) in 2020, according to CIC. FTA was formed in 2017 through the merger of Yunmanman and Huochebang, which were founded in 2013 and 2011, respectively. FTA is backed by SoftBank Vision Fund (22.2% of the outstanding shares), Sequoia Capital (7.2%), Hillhouse and Tencent (700 HK). 
At the mid-point of the proposed IPO price range of $17.00-19.00 per ADS, FTA will have a market cap of $19.6 billion. FTA will also raise an additional $200 million in concurrent private placements to Ontario Teachers' Pension Plan Board and Mubadala Investment Company. At the mid-point of the IPO price range and including the concurrent private placement, the net proceeds are $1,620.7 million. FTA has received indications of interest from Fidelity ($100 million) and Invesco ($500 million). 
In Full Truck Alliance IPO Initiation: A Less than Perfect Delivery, we stated that at first sight, FTA recent results look stunning due to fast-paced growth, improving margin and cash generation. However, a closer look, suggests that FTA has less than ideal disclosure, a regulatory overhang and potential corporate governance issues. We concluded that we cannot recommend FTA wholeheartedly and inclined to watch this IPO unfold from the sidelines.   
Our valuation analysis suggests that FTA trades at frothy multiples (EV/Sales and growth adjusted EV/Sales) compared to its peers. On the other hand, the indications of interest and the concurrent placing with blue-chip investors suggest that the IPO price range is grounded in some logic. We think that the IPO pricing seems reasonable based on recent share repurchases and the PEG multiple. While the recent first-day pops suggest an awakening of IPO animal spirits, we remain uncomfortable in recommending FTA based on our previously highlighted concerns and a rich valuation. 
For readers interested in peer, ForU Worldwide (FOYO US), which also recently filed for a $500 million Nasdaq IPO, we highlight our note - ForU Worldwide IPO Initiation: Not ForU  


Full Truck Alliance IPO: Valuation Insights

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.

<div><p><a href="https://www.smartkarma.com/entities/full-truck-alliance" target="_blank" data-smartkarma-citation="entities:33429:1" rel="noopener">Full Truck Alliance (YMM US)</a> (FTA),  China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.6bn via a US listing. It is backed by Softbank and Sequoia.</p></div><div><p>In our earlier notes, we spoke about the positive and negatives aspects of the deal, <a href="https://www.smartkarma.com/insights/full-truck-alliance-pre-ipo-the-positives-category-leader" target="_blank" rel="noopener">Full Truck Alliance Pre-IPO - The Positives - Category Leader</a> and <a href="https://www.smartkarma.com/insights/full-truck-alliance-pre-ipo-the-negatives-still-a-mixed-bag" target="_blank" rel="noopener">Full Truck Alliance Pre-IPO - The Negatives - Still a Mixed Bag,</a> as well as valuations in <a href="https://www.smartkarma.com/insights/full-truck-alliance-pre-ipo-valuation-even-the-previous-round-might-have-been-a-stretch" target="_blank" rel="noopener">Full Truck Alliance Pre-IPO - Valuation, Even the Previous Round Might Have Been a Stretch</a>.</p></div><div><p>In this note, we will talk about the deal dynamics and run the deal through our ECM framework. </p></div>

Full Truck Alliance (YMM US) (FTA),  China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.6bn via a US listing. It is backed by Softbank and Sequoia.In our earlier notes, we spoke about the positive and negatives aspects of the deal, Full Truck Alliance Pre-IPO - The Positives - Category Leader and Full Truck Alliance Pre-IPO - The Negatives - Still a Mixed Bag, as well as valuations in Full Truck Alliance Pre-IPO - Valuation, Even the Previous Round Might Have Been a Stretch.In this note, we will talk about the deal dynamics and run the deal through our ECM framework. 

Full Truck Alliance IPO - Decent Investor Line-Up, at Best a Punt at These Valuations

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>In this insight, we discuss in detail our initial thoughts on the valuation range of <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a> IPO. Didi was last valued at $65 billion in its latest fundingraising round in August 2020. The media have mentioned that the valuations of Didi Chuxing could be about <a href="https://techcrunch.com/2021/06/10/softbank-uber-tencent-set-to-reap-rewards-from-didi-ipo/?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAMj5A2PgL-33D8uIOLSUl0PGX8TWig2FrftAae5MrH0qB7Jm7ZwviMBR8Ca6R2uOSje6Ep9uNZNsMwEy3FYscaBJf7P9FQXuaOZ5NXJHihyhXCPjXlAjwL5gNJKBVC-zQSM2Z1oGfH5A7b8-JakCHOHtZDR9n3PhDYPB7Lv7s9og" target="_blank" rel="noopener">$70 billion to $100 billion. </a></p><div class="content-highlight">
<p>Our initial valuation analysis of Didi Chuxing suggests a base case market cap valuation of $138 billion. Our valuation ranges from $77 billion (low case) to $215 billion (high case). The IPO price range is not yet available from the bankers but we plan to narrow our valuation once the IPO price range becomes public. </p>
<p>Although we do not know how the bankers will price the deal, if the IPO is priced at about $100 billion, our base case valuation of $138 billion would be 38% higher and given the solid upside, we would be positive on the IPO. </p>
</div>

In this insight, we discuss in detail our initial thoughts on the valuation range of DiDi Chuxing (DIDI US) IPO. Didi was last valued at $65 billion in its latest fundingraising round in August 2020. The media have mentioned that the valuations of Didi Chuxing could be about $70 billion to $100 billion. 
Our initial valuation analysis of Didi Chuxing suggests a base case market cap valuation of $138 billion. Our valuation ranges from $77 billion (low case) to $215 billion (high case). The IPO price range is not yet available from the bankers but we plan to narrow our valuation once the IPO price range becomes public. 
Although we do not know how the bankers will price the deal, if the IPO is priced at about $100 billion, our base case valuation of $138 billion would be 38% higher and given the solid upside, we would be positive on the IPO. 


Initial Thoughts on the Didi Chuxing Valuation

<p><a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a>/Xiaoju Kuaizhi is the world's largest mobility technology platform by annual active users and by average daily transactions for the twelve months ended 31 March 2021, according to CIC. Xiaoju Kuaizhi is best known for its <em>DiDi Chuxing</em> app in China where consumers can access mobility and other essential services. It acquired rival Kuaidi Dache in February 2015 for $2.2 billion and then acquired the China operations of Uber Technologies for $7.0 billion in August 2016.  </p><p>Didi is seeking to raise as much as $10 billion through a US listing, according to press reports. Didi is backed by Softbank Vision Fund (21.5% stake), <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> (12.8%), <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (6.8%), <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> and <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a>. </p><p>Ride-hailing platforms depend heavily on customers in high-density populated cities. China which has 14 metropolitan areas with a population of over 10 million offers the ideal conditions for ride-hailing platforms to flourish. Didi’s core china mobility business is heading on the right trajectory with rising growth and improving margin. </p><div class="content-highlight"><p>However, Didi is saddled with two other businesses (international and other initiatives) which are driven by its global ambitions and its desire to provide a broad array of service offerings to consumers and drivers. This ecosystem strategy is sensible for a business that is trying to make it costlier for customers to switch to rival platforms by leveraging a core business that is highly profitable and cash generative. Unfortunately, Didi’s core business is not close to achieving this status and the international and other initiatives business look like unnecessary and costly distractions. In combination with the ongoing regulatory overhang and less than ideal financial disclosure, we are inclined to give the Didi IPO a pass.</p></div><p><em><strong>For readers interested in Didi's peers which are also seeking IPOs/SPAC deals, we highlight our research notes:</strong></em> </p><p><a href="https://www.smartkarma.com/insights/grab-spac-deal-delivering-the-goods" target="_blank" data-smartkarma-citation="insights:50305" rel="noopener">Grab SPAC Deal: Delivering the Goods</a> </p><p><a href="https://www.smartkarma.com/insights/grab-spac-deal-a-sensible-super-app-valuation" target="_blank" data-smartkarma-citation="insights:50344" rel="noopener">Grab SPAC Deal: A Sensible Super-App Valuation?</a> </p><p><a href="https://www.smartkarma.com/insights/hello-ipo-initiation-goodbye" target="_blank" data-smartkarma-citation="insights:50795" rel="noopener">Hello IPO Initiation: Goodbye</a> </p><p><a href="https://www.smartkarma.com/insights/hello-ipo-1q21-update-does-not-change-the-avoid-tag" target="_blank" data-smartkarma-citation="insights:51119" rel="noopener">Hello IPO: 1Q21 Update Does Not Change the Avoid Tag</a> </p><p><a href="https://www.smartkarma.com/insights/dida-ipo-initiation-sharing-a-lift" target="_blank" data-smartkarma-citation="insights:47652" rel="noopener">Dida IPO Initiation: Sharing a Lift</a> </p>

DiDi Chuxing (DIDI US)/Xiaoju Kuaizhi is the world's largest mobility technology platform by annual active users and by average daily transactions for the twelve months ended 31 March 2021, according to CIC. Xiaoju Kuaizhi is best known for its DiDi Chuxing app in China where consumers can access mobility and other essential services. It acquired rival Kuaidi Dache in February 2015 for $2.2 billion and then acquired the China operations of Uber Technologies for $7.0 billion in August 2016.  Didi is seeking to raise as much as $10 billion through a US listing, according to press reports. Didi is backed by Softbank Vision Fund (21.5% stake), Uber (UBER US) (12.8%), Tencent (700 HK) (6.8%), Alibaba Group (BABA US) and Toyota Motor (7203 JP). Ride-hailing platforms depend heavily on customers in high-density populated cities. China which has 14 metropolitan areas with a population of over 10 million offers the ideal conditions for ride-hailing platforms to flourish. Didi’s core china mobility business is heading on the right trajectory with rising growth and improving margin. However, Didi is saddled with two other businesses (international and other initiatives) which are driven by its global ambitions and its desire to provide a broad array of service offerings to consumers and drivers. This ecosystem strategy is sensible for a business that is trying to make it costlier for customers to switch to rival platforms by leveraging a core business that is highly profitable and cash generative. Unfortunately, Didi’s core business is not close to achieving this status and the international and other initiatives business look like unnecessary and costly distractions. In combination with the ongoing regulatory overhang and less than ideal financial disclosure, we are inclined to give the Didi IPO a pass.For readers interested in Didi's peers which are also seeking IPOs/SPAC deals, we highlight our research notes: Grab SPAC Deal: Delivering the Goods Grab SPAC Deal: A Sensible Super-App Valuation? Hello IPO Initiation: Goodbye Hello IPO: 1Q21 Update Does Not Change the Avoid Tag Dida IPO Initiation: Sharing a Lift 

Didi Chuxing (Xiaoju Kuaizhi) Initiation: In for a Bumpy Ride?

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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 Chuxing and Softbank - Long Awaited IPO of China’s Mobility Giant Worth $70bn

This report includes full financial forecasts/valuation, the investment case top down and bottom-up,, Uber comps and a list of questions we would...

Kirk Boodry

Full Truck Alliance IPO: Valuation Insights

While the recent first-day pops suggest an awakening of IPO animal spirits, we remain uncomfortable in recommending FTA based on our previously...

Arun George

Full Truck Alliance IPO - Decent Investor Line-Up, at Best a Punt at These Valuations

Full Truck Alliance (YMM US), China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.6bn via a US listing....

Sumeet Singh

Initial Thoughts on the Didi Chuxing Valuation

Our initial valuation analysis of Didi Chuxing suggests a base case market cap valuation of $138 billion. Our valuation ranges from $77 billion...

Douglas Kim

Didi Chuxing (Xiaoju Kuaizhi) Initiation: In for a Bumpy Ride?

Didi is seeking to raise as much as $10 bn. Due to the costly distractions of the non-core business, regulatory overhang and less than ideal...

Arun George

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