Uber Stock – China’s Didi is less Grab, more Uber
HONG KONG, June 16 (Reuters Breakingviews) – Didi looks short on engine power. The Beijing-based ride-hailing group is revving up for what might be the biggest Chinese share offering in New York since Alibaba’s (9988.HK) blockbuster debut seven years ago. Boss Will Wei Cheng hopes to raise $10 billion at a $100 billion valuation, Reuters reported citing sources. That uplift from Didi’s previous $60 billion or so price tag in 2018 looks out of range.
A Southeast Asian counterpart offers clues on how Didi might expect to reach that target. In April, the region’s ride-hailing-to-delivery-to-payments group Grab unveiled plans to go public by combining with a special-purpose acquisition company. The SPAC merger, the largest so far, valued its enterprise at $30 billion. That’s equivalent to 13 times its own estimate for this year’s adjusted net revenue, broadly defined as gross billings minus base incentives paid to Grab drivers and merchants.
That same multiple gets Didi to a 12-digit valuation if it accelerates its so-called platform sales, the rough equivalent of Grab’s adjusted net revenue, by 42% to $7.7 billion this year. That looks manageable: Even after factoring in China’s draconian lockdowns in early 2020, Didi managed a 40%-plus increase for the full year, thanks to the strong recovery in the latter half. On a low base, platform sales in the three months to March more than doubled year-on-year to $1.7 billion.
Even so, the Chinese outfit is very different under the hood. Whereas Grab boasts super-app credentials, offering a wide range of services, Didi is still overwhelmingly a local transport application. Despite Cheng’s ambitious overseas expansion from Japan to Brazil, and newer bets including e-commerce and food delivery, the company relies on ride-hailing in China for over 90% of its top line.
That makes its U.S. peer look like a better comparison. Uber (UBER.N), which owns 12.8% of Didi thanks to its retreat from China in 2016, makes most of its revenue from mobility and delivery. On the roughly six times forecast 2021 sales its enterprise trades on, less than half of Grab’s multiple, Didi would need to triple its platform sales to get to $100 billion or almost double them to hit its last private price tag. Given Beijing’s campaign to rein in technology companies, betting on speeding growth seems unwise.
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– China’s Didi Chuxing on June 10 filed documents for an initial public offering in New York.
– The company, formally called Xiaoju Kuaizhi, could raise about $10 billion and seek a valuation of close to $100 billion, Reuters reported, citing unnamed sources.
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