Shulou(Shulou.com)11/24 Report--

Eight months after Didi's delisting, the travel sector has ushered in new customs breakers.

At the end of February, Didi Chuxing once again submitted a prospectus to the Hong Kong Stock Exchange, sprinting IPO for the third time. Prior to this, the tick-tock travel table was submitted twice on October 8, 2020 and April 13, 2021 respectively, both of which failed.

IPO told the story for three years, but tick-tock didn't come up with anything new. Performance is still highly dependent on hitchhiking, and safety and compliance problems remain. Although it has been profitable for four years in a row, due to factors such as the epidemic, revenue and net profit are getting less and less.

According to the prospectus, the market share of Didi's free-riding business has fallen from 66.5% in 2019 to 38.1% in 2021. Hello, a new competitor, has a fierce ride, and Didi has recently reopened its subsidy campaign. for Didi, a fierce competition is already in sight.

Affected by the epidemic in the first nine months of 2022, Jingliao Didi Chuxing was founded in 2014, formerly known as Didi carpool, mainly with two major businesses: hitchhiking and taxis, of which nearly 90% of revenue comes from hitchhiking. Thanks to the light asset model of hitchhiking, Didi announced its overall profit in 2019, becoming the first domestic travel platform to achieve overall profit.

According to the prospectus, in 2020, 2021, the first nine months of 2021 and the first nine months of 2022, Didi's revenue was 754.2 million yuan, 780.6 million yuan, 583.7 million yuan and 428.3 million yuan respectively, and the adjusted net profit was 343.3 million yuan, 2.380 billion yuan, 1.847 billion yuan and 0.654 billion yuan, respectively.

According to the data, Didi Chuxing has maintained this profit trend since its first profit in 2019, but its revenue and net profit are dwindling. Of this total, net profit halved in the first nine months of 2022, a year-on-year decline of nearly 65%. According to the prospectus, this is mainly due to the reduction in the number of hitchhiking caused by the regional recurrence of the COVID-19 epidemic in many regions.

According to the prospectus, Didi Chuxing offers App-based ride platform services in 366 cities across the country. In 2020, 2021 and the nine months ended September 30, 2022, tick-tock contributed about 146.3 million, 129.7 million and 7210 ride trips respectively, with a transaction volume of approximately $8.1 billion, $7.8 billion and $4.6 billion, respectively.

The decline of downwind market share the coexistence of high profits and high risk tick-tock travel can stand out in the travel scuffle and occupy the first place in the hitchhiking market segment, an important turning point occurred in 2018.

Until then, the Didi ride had been suppressed by Didi. On August 27, 2018, Didi Hitchhiker was offline nationwide due to two vicious safety incidents. In the same year, Gaud also took off the ride business. Tick-tock took advantage of this gap and began to occupy the market quickly.

According to the prospectus, Didi Chuxing accounted for 66.5% of the domestic free-ride market in 2019, making it a well-deserved leader in the free-ride market. In 2020, 2021 and the first nine months of 2022, the revenue of the Didi ride business was 672 million yuan, 695 million yuan and 389 million yuan respectively, accounting for 89.1%, 89% and 91.1% of the total revenue, respectively.

However, the window left by the giants' absence did not last long. A year after offline rectification, Didi and Gaode's ride-sharing business came online again. Hello travel, Cao Cao travel and other platforms are also online ride business. Without forming its own moat, the Didi ride business was challenged and its market share began to decline.

According to the newly disclosed prospectus, Didi's market share has dropped from 66.5% in 2019 to 38.1% in 2021. It is still the largest ride platform in China, but the gap with the second place is getting smaller and smaller. According to the description of the notes below, it can be guessed that the second company An is Hello (market share 31.5%) and the third company B is Didi (market share 21.7%).

By 2022, Didi disclosed in its prospectus that there were 7210 hitchhiking trips in the first nine months of 2022. According to previously released data, Hello Hitchhiker completed 150 million orders in 2022. This means that Didi Hitchhiker needs to complete its orders for the first three quarters in the fourth quarter in order to catch up with Hello Rider.

While the market share is falling, the gross profit margin of Didi ride continues to decline. In 2020, the gross profit margin for this business was 86.7 per cent, down from 80.5 per cent in the first three quarters of 2022. In its prospectus, Didi explained that the gross profit margin of its ride platform service declined between 2020 and the first three quarters of 2022, mainly due to increased subsidies for private car owners and an increase in the upper limit of ride insurance.

This also shows that the competition in the free ride market is fierce. On January 16, Didi resumed the registration of new users, followed by a new round of subsidies, and customers got drivers. In the face of industry giants with more abundant cash flow and larger scale, there will also be more pressure on Didi Chuxing to grab more market share.

In addition, there are some risks in relying heavily on the hitchhiking business. Didi Chuxing said in its prospectus that its success will largely depend on whether the public accepts the ride and its services. If the public thinks that a free ride is not good, or does not choose a ride because of safety concerns (whether due to safety incidents related to our or our competitors' services or other reasons), the free ride market may stagnate and the pace of development may be slower than expected or the expected growth potential may not be realized. Any of the above may have a significant adverse impact on its business, results of operations and financial position.

According to the prospectus, a total of 57 administrative fines were received by the Didi ride-sharing platform during the track record period, of which 36 were subsequently withdrawn as of the date of this document. In the remaining 21 cases, the administrative fines ranged from $5000 to $30,000, with a total of about $550000.

Taxi business launched six years ago, revenue accounted for only 3.6% of the business model, a single hidden danger. Song Zhongjie, CEO of tick-tock travel, also saw this early. "growth is the ultimate goal of every company, but hitchhiking accounts for only 15% of the travel market, which means that the ceiling of the business is not high and growth will be limited," he said in an interview with the media. "

Therefore, in 2017, Song Zhongjie made a decision to take a taxi, focusing on developing taxi network booking service and optimizing taxi recruitment service. As of September 30, 2022, Didi had signed strategic cooperation agreements or memorandums with taxi companies and municipal or district taxi associations in 53 cities, according to the prospectus.

Now Didi is nominally hitchhiking and taxi walking on two legs, but in the first nine months of 2022, smart taxi service accounted for only 3.6% of Didi's total revenue, accounting for only 16 million yuan, while hitchhiking accounted for 91.1% of total revenue, with an income of 389 million yuan.

In terms of the overall market, according to the Frost Sullivan report, tick-tock ranked second in China's travel platform in 2021 in terms of taxi rides, with a market share of 0.22%. By comparison, Didi, which ranks No. 1, has a market share of 3.15%.

In 2022, tick-tock increased subsidies in the taxi sector. According to the prospectus, the subsidy for taxi drivers in the first three quarters of 2022 was 7.348 million yuan, an increase of 381.8 percent over the same period last year, while the reward for taxi passengers was 11.558 million yuan, an increase of 19 percent over the same period last year.

But it should be mentioned that there is more than tick-tock travel to increase subsidies for taxi drivers and incentives for users. Didi has joined the competition for ride-hailing drivers since its return, and launched a new subsidy policy in February this year. It is hard for Didi to gain an advantage in the taxi market it is familiar with.

Whether hitchhiking track or taxi business, tick-tock travel is facing fierce competition. The third breakthrough of the HKEx has not brought a new growth story, but the market pattern is no longer what it used to be. We will continue to pay attention to how Didi Chuxing moves the capital market.

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