Didachuxing launches Hong Kong IPO: sustainable profits for 5 consecutive years, high gross profit margin, high net profit margin, high cash flow model verified.

On June 20, Dida Chuxing, which focuses on the digital transformation of ride-hailing and taxi services, officially launched its IPO for public offering. In this IPO, Dida Chuxing plans to publicly issue 39,091,000 new shares, accounting for approximately 4% of the total share capital after the issuance, with a maximum offer price not exceeding HKD 7.0 per share. CICC, Haitong, and Nomura Securities are the joint sponsors. This means that China's first shared travel stock is about to be listed on the Hong Kong Stock Exchange. The prospectus shows that in the future, Dida Chuxing will continue to focus on its core business, further consolidating its market position and enhancing brand influence in the ride-hailing industry; continuing to expand its taxi services to promote the digital transformation of the taxi industry; improving monetization capabilities and diversifying revenue channels; enhancing technological capabilities and operational efficiency, particularly investing in artificial intelligence and machine learning technologies, while also advancing user experience and safety mechanisms; in addition, it will explore more strategic alliances, investments, and acquisitions in terms of capital. In 2023, Dida Chuxing's total revenue, gross profit, adjusted net profit, and net cash flow are expected to be RMB 820 million, RMB 610 million, RMB 230 million, and RMB 230 million, respectively, representing year-on-year increases of 43.2%, 41.6%, 166.3%, and 114.4% respectively. For the years 2021, 2022, and 2023, Dida Chuxing's adjusted net profit margins (non-IFRS) are expected to be 30.5%, 14.9%, and 27.7%, respectively, with gross margins of 80.9%, 75.1%, and 74.3%. This means that Dida Chuxing, which first turned a profit in 2019, has been profitable for five consecutive years, maintaining high net profit margins, gross profit margins, and cash flows, demonstrating sustainable profitability capabilities. As of December 31, 2023, Dida Chuxing provides ride-hailing services based on the app in 366 cities in China. In 2023, the number of ride-hailing trips and total transactions for Dida Chuxing increased significantly by 38.3% and 41% year-on-year. Specifically, in 2021, 2022, and 2023, Dida Chuxing facilitated approximately 129.7 million, 94.2 million, and 130.3 million ride-hailings, with total transaction values of approximately RMB 7.8 billion, RMB 6.1 billion, and RMB 8.6 billion, respectively. From the public offering materials, it is clear that Dida Chuxing is in good shape in terms of business growth, profitability, cash flow, and cash reserves. This is not only due to its leading asset-light business model and healthy unit economics, which enable the company to sustain steady growth, but also because Dida Chuxing adheres to a green travel concept of utilizing existing transportation capacity to improve passenger efficiency without adding more vehicles, traffic congestion, or carbon emissions, which aligns with sustainable development trends and is supported by the government and loved by users. I. Verified Sustainable Profitability Net cash flow increased by 114.4% in 2023 The prospectus shows that in 2023, Dida Chuxing's total transactions amounted to approximately RMB 9 billion. Meanwhile, from 2021 to 2023, Dida Chuxing's total revenue was RMB 780 million, RMB 570 million, and RMB 820 million, respectively, with a 43.2% increase in 2023 compared to the previous year. In 2023, Dida Chuxing's net profit reached RMB 230 million, a 166.3% increase from 2022; and the gross profit reached RMB 610 million, an increase of 41.6% year-on-year. II. Continuous Positive Cash Flow, Business Model with Resilience In addition, from 2021 to 2023, Dida Chuxing's net cash flow from operating activities was RMB 140 million, RMB 110 million, and RMB 230 million, respectively, with a 114.4% increase in 2023 compared to the previous year. 2022 was the most challenging year for the travel industry, with many cities under strict management. Despite this, Dida Chuxing withstood the extreme pressure test in 2022 and still generated RMB 110 million in operating cash flow, demonstrating the resilience of its Dida ride-hailing platform. By the end of 2023, Dida had a cash and cash equivalent balance of RMB 1.42 billion. Behind the continuous positive cash flow is Dida Chuxing's steady business model, which has a sustainable high gross profit and net profit margin across cycles. In 2023, Dida Chuxing's gross profit margin and adjusted net profit margin reached 74.3% and 27.7%, respectively. III. Asset-light model promotes business scalability and profitability As a pure information service platform, Dida Chuxing does not own or lease fleet vehicles, nor does it incur any expenses related to owning vehicle assets. Furthermore, since ride-hailing involves cost-sharing between the driver and passengers, creating a mutually beneficial travel model, the platform does not need to offer significant subsidies to generate orders compared to ride-hailing services. According to a report by Frost & Sullivan, from 2021 to 2023, the total amount of subsidies from Dida ride-hailing owners and passenger rewards accounted for only 1.8%, 1.9%, and 1.8% of the total transaction volume on the ride-hailing platform in the same year, significantly lower than the average of 16.7% paid to drivers and passengers on ride-hailing platforms. In addition, from 2021 to 2023, Dida Chuxing's sales and operational expenses have decreased year by year, primarily due to an improved evaluation mechanism for promotional activities that has increased the efficiency of marketing activities. Over the past decade, this asset-light business model has enabled Dida Chuxing to rapidly expand its business scale with minimal incremental costs, promote business scalability, maintain profitability, achieve high unit economics and operating leverage compared to other travel platforms, and enhance the resilience of enterprise development. IV. Leading unit economic model creates a stable business model Although ride-hailing platforms and ride-hailing platforms have many similarities from a user experience perspective, the service providers on both platforms are entirely different, with one being a car owner who happens to be going in the same direction, and the other being a professional driver, resulting in fundamental differences in business models and significant differences in unit economic indicators. In the cost structure of ride-hailing platforms, the cost of purchasing or leasing vehicles accounts for a large part, and ride-hailing drivers rely on car fees as their source of income. For ride-hailing car owners, buying a car is for the purpose of.Self-consumption and providing ride-sharing services are done on the way. Therefore, ride-sharing drivers do not need to calculate the depreciation of their vehicles or their time costs. They can provide ride-sharing services at a very low marginal cost. At the same time, ride-sharing passengers can enjoy a travel experience similar to or even better than ride-hailing services at about half the cost. Meanwhile, due to the fact that Hitching platforms do not need to pay large subsidies and rewards, despite Hitching fees and service fees being much lower than those of ride-hailing services, Hitching platforms can still maintain a high level of profitability. According to the prospectus, in 2023, the average service fee rate of major Hitching platforms is approximately 9.8%, while the average service fee rate of major ride-hailing platforms is approximately 27.1%. The average percentage of driver rewards for major Hitching platforms is about 1.2% (as a percentage of total transaction amount) and about 12.2% (as a percentage of revenue), while the average percentage of driver rewards for major ride-hailing platforms is about 8.0% and 30.1%, respectively. Furthermore, since the service fee rate of Hitching platforms is much lower than that of ride-hailing services, Hitching drivers can earn a higher commission rate, with the Hitching industry's average commission rate being 89.5%, much higher than the ride-hailing industry's average of 70.3%. Among them, the highest commission rate for Didi Hitching drivers is 89.7%. V. Dual-sided user growth drives massive network effects Response rate and monthly active users grow significantly year-on-year Unlike ride-hailing services, both Hitching drivers and passengers have a spontaneous demand to participate in ride-sharing in order to save travel costs. As the platform increases the number of Hitching drivers and passengers, matching efficiency continues to improve, attracting more passengers and drivers to use the platform, thus creating massive network effects. As the number of Hitching drivers continues to grow, the platform can attract more passengers to spend less time waiting, enjoy higher response rates, and complete trips over a larger area, while an increase in passengers improves the utilization rate of available platform capacity, thereby attracting more drivers to post trips or accept requests, leading to a continuous improvement in Hitching response rates. According to the F&S report, the response rates for Didi Hitching in 2021, 2022, and 2023 were 56.4%, 58.8%, and 66.5%, respectively, higher than the industry average of approximately 50% to 55%. In addition, in 2023, the monthly average active certified Hitching drivers and the number of Hitching passengers for Didi Hitching increased by 33.3% and 29.7% year-on-year, respectively. VI. Big data AI partnership empowers technology-driven research and development expenses with a year-on-year growth of 36.7% in 2023 In 2023, Didi Chuxing's gross profit increased by 41.6% year-on-year, while the gross profit margin decreased slightly from 75.1% in 2022 to 74.3% in 2023. The main reasons for this are... **The text exceeds the character limit set by the tool.**Light asset business model enables Didi Chuxing to improve the utilization of empty seats in existing vehicles on the road, reduce per capita carbon emissions from travel, and help alleviate traffic congestion and reduce emissions.In 2021, 2022, and 2023, Didi Chuxing's ride-hailing platform service helped reduce approximately 1.2 million tons, 900,000 tons, and 1.3 million tons of carbon dioxide emissions, respectively. The carbon emissions reduction in 2023 is equivalent to planting approximately 1.6 million acres of forests. Over the next three years, Didi Chuxing will help reduce over 1 million tons of carbon dioxide emissions annually and promote sustainable and inclusive travel solutions to key stakeholders in the travel community through technology-driven methods. Digitizing the taxi industry and promoting the coexistence of taxis and ride-hailing is a continuous effort. According to the F&S report, taxis still hold the largest market share in the Chinese passenger car market in 2023, accounting for approximately 54.2%. However, the digitization of taxis is relatively low, with taxi dispatch services accounting for 88.9% of total taxi transactions in 2023. The digital transformation of China's taxi industry is still in its early stages, with significant room for improvement in operational efficiency in dispatch services. The F&S report states that taxi dispatch services still have advantages in certain situations, such as higher efficiency during peak hours compared to ride-hailing. Therefore, combining taxis and ride-hailing can improve efficiency and flexibility in the Chinese passenger car market. In the future, taxi ride-hailing and dispatch services will continue to develop in parallel to meet the diverse transportation needs of the public. The report predicts that the overall size of the taxi market will increase to 48.76 billion yuan in 2028, with a compound annual growth rate of 7.3%. The compound annual growth rates for taxi ride-hailing and dispatch services are estimated to be 19% and 5%, respectively. The F&S report believes that the digital transformation of China's taxi industry is still in its early stages, and will benefit from the continuous and accelerated digital transformation process in various aspects, including enhancing user experience, upgrading industry service standards, improving fleet utilization rates, and optimizing taxi company and association management. As a professional service provider for the digital transformation and upgrading of the taxi industry, Didi Chuxing entered the traditional taxi industry in 2017 and launched the "Taxi New Travel" strategy in 2019, helping the taxi industry digitally transform and upgrade from the perspectives of passenger experience, driver service, operational efficiency, and industry regulation. Starting from the digitization of dispatch services, through the taxi QR code, taxi assistant, and Phoenix Cloud Platform, Didi Chuxing is building a digital infrastructure to fundamentally reshape transactions and user experiences, ultimately creating a new type of mobile travel mode that combines taxi dispatch and ride-hailing. As of December 31, 2023, Didi Chuxing's taxi ride-hailing service covers 91 cities nationwide and has strategic partnerships with 79 cities. By the final feasible date, Didi Chuxing has entered into comprehensive smart taxi cooperation with local transportation departments and taxi associations in 17 cities and provided Phoenix taxi cloud platform services to 916 taxi companies in 73 cities. Since the launch of the taxi QR code and up to December 31, 2023, the accumulated passenger reviews have reached approximately 1.05 million times, with an average of over 1,500 reviews per taxi driver. In the future, Didi Chuxing will continue to promote the digital transformation of the taxi industry and explore the growth potential of the travel market.