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This report was generated using published research from our Global Tech team led by Sector Head Felix Wang.
DiDi Global Inc. (DIDIY) is a dominant force in the Chinese mobility and ride-hailing sector, demonstrating robust growth, strategic resilience, and a promising outlook despite regulatory and market challenges. With a significant market share in China, burgeoning international operations, and advancements in autonomous driving, we are bullish on DIDIY’s outlook. The company's recent performance, strategic pivots, and the lifting of regulatory hurdles underscore its potential for substantial growth. This report delves into the reasons behind DIDIY’s bullish sentiment and outlines our predictions for the company's future.
Market Position and Growth
DiDi Global, often compared to Uber, has cemented its position as the king in China's ride-hailing market, boasting over 75% market share. The company's diverse portfolio, including e-bikes, freight, charging stations, and financial services, complements its core ride-hailing and food delivery services. Notably, DiDi has made significant strides in autonomous driving, setting it apart from competitors who lag in this space.
Financial Performance and Growth Metrics
- China Mobility Segment: DiDi reported 46.7 billion RMB (China’s currency) in revenues for the China Mobility segment, marking a 27% YoY growth. The Gross Transaction Value (GTV) and transactions grew by 33% and 32%, respectively, with average daily transactions reaching a new high of 31.3 million in Q3 2023.
- International Segment: The International segment witnessed a 52% GTV growth, its highest since Q3 2021, with transactions increasing by 42%. The price per transaction reached a record 27.1 RMB.
- Overall Performance: Despite a challenging Q3, DiDi's GTV beat expectations in both China and International segments. The company announced a new US$1bn stock repurchase program, signaling confidence in its growth trajectory.
Regulatory Developments and Strategic Moves
DiDi has navigated regulatory challenges skillfully, evidenced by its app's reinstatement and the payment of regulatory fines. The Shanghai government's quick reversal of a ride-hailing ban at Pudong International Airport highlights the essential role of services like DiDi in modern urban mobility. Additionally, DiDi's efforts to re-list in Hong Kong through the Hang Seng Index could further bolster investor confidence and facilitate access to capital.
Investment Highlights
- Dominant Market Share: DiDi's commanding presence in the Chinese market (75%+ market share), coupled with its expanding international footprint, particularly in Latin America, positions the company for sustained growth.
- Strategic Initiatives: Reductions in losses in other segments by 63%, significant investments in autonomous driving, and a focused approach to downsizing loss-making segments underscore DiDi's strategic acumen.
- Regulatory Milestones: Overcoming regulatory challenges, including the payment of a substantial fine and app reinstatement, paves the way for stable operations and future growth.
- Financial Health: Despite a challenging environment, DiDi reported higher positive EBITDA for its China unit in 2022, excluding an $8bn RMB government fine. This resilience, coupled with a robust recovery post-COVID-19 lockdowns, highlights DiDi's underlying financial strength.
- Valuation and Market Opportunity: Trades at a substantial discount to UBER.
Growth Outlook and Strategic Priorities
Looking forward, DiDi's growth will be driven by several key factors:
- Hong Kong Re-Listing: This move is crucial for improving investor sentiment and access to capital markets.
- Sustained Market Leadership in China: Maintaining over 75% market share amid rising competition will be vital for DiDi's continued dominance.
- International Expansion: Scaling operations, particularly in Latin America, while managing losses <20%, is a priority. The company's international segment, accounting for 14% of GTV, represents a significant growth avenue.
- Technological Advancements: Continued investment in autonomous driving and other innovative technologies will differentiate DiDi from competitors and drive future growth.
Conclusion
DiDi Global Inc. stands at a pivotal juncture, poised for a significant revaluation amidst a rapidly evolving mobility landscape. The company's strategic positioning, robust growth metrics, and resilience in the face of regulatory challenges lay the groundwork for a bullish outlook. Investors are encouraged to consider DiDi's compelling valuation, strong market share, and strategic initiatives for international expansion as key drivers of its future success. As DiDi continues to navigate market and regulatory dynamics adeptly, it solidifies its status as a leading player in the global mobility sector, offering a promising investment opportunity.