Text: Si Fanxing
Source: Bowang Finance
Under the stock competition, the pattern of "one super and many strong" in the domestic online car-hailing market is relatively stable.
Among them, Cao Cao Travel is backed by Geely, and after several years of savage growth, it has transformed from a B2C model to a full business. According to Frost & Sullivan, Cao Cao has been among the top three ride-hailing platforms in China from 2021 to 2023 in terms of GTV (total transaction value).
With the return to normalcy of the domestic market economy in 2023, Cao Cao's order volume in 2023 has also achieved substantial growth, and the situation is good. On April 29, Cao Cao also officially submitted a prospectus to the Hong Kong Stock Exchange, planning to be listed on the main board, with Huatai International, ABC International and GF Capital (Hong Kong) as joint sponsors.
Under the rapid progress, the other side of the coin is that the entire online car-hailing market is difficult to make profits, it is difficult to comply, and it is difficult to implement autonomous driving, and multiple constraints restrict development.
01
What is the solution to the profitability problem?
As the king of China's online car-hailing market, Didi was delisted in the United States shortly after its listing, Dida Chuxing submitted its form five times and finally went public with difficulty, and Hellogo also submitted an IPO to the United States but finally withdrew its application.
Behind the difficulty in being favored by capital is the fact that it is difficult for the entire online car-hailing industry to make a profit.
In the overseas market, Uber has lost nearly $30 billion since its establishment in 2014, and its net profit margin is only 3.4%. At the same time, Indonesia's GoTo net loss in fiscal 2023 reached US$5.7 billion, and Singapore's Grab laid off more than 1,000 employees in 2023 and continues to lose money.
In the domestic market, according to the prospectus, the net profit loss from 2021 to the end of 2023 will be 685 million yuan, 627 million yuan and 693 million yuan respectively, and the cumulative loss in three years will reach 2 billion yuan.
Cao Cao's revenue from 2021 to 2023 will be 7.153 billion yuan, 7.631 billion yuan and 10.668 billion yuan respectively, although the revenue will increase year by year, but in 2021, 2022 and 2023, Cao Cao's annual losses will reach 3.007 billion yuan, 2.007 billion yuan and 1.981 billion yuan respectively.
It has accumulated a loss of about 7 billion yuan in three years, and Cao Cao Travel also mentioned in the prospectus that it has suffered significant losses since its inception and may not be able to achieve or maintain profitability in the future.
Why is it so difficult for Cao Cao to make a profit?
Zhi Peiyuan, a master's tutor at the School of Management of China University of Mining and Technology (Beijing) and president of Zhongqinnong Co., Ltd., said: "The profitability challenges faced by ride-hailing companies are mainly due to high fixed costs and fierce market competition. These companies are responsible for a series of fixed expenses such as driver recruitment, vehicle purchase and maintenance, platform technical support, etc., and in order to stay ahead of the competitive market, they often have to offer discounts and subsidies to attract and retain users, which further compresses profit margins. ”
In other words, homogeneous competition under high-cost operations leads to low premiums and limited profits. At present, there are many entrants to the online car-hailing market, and the competition in the industry is fierce, and online car-hailing platforms, including T3, AutoNavi, Meituan, etc., are spending a lot of money to attract users and drivers through subsidies.
According to the prospectus, Cao Cao's marketing expenses, administrative expenses, and R&D expenses will account for nearly 25% in 2023. Under the heavy asset investment, Cao Cao's gross profit margin from 2021 to 2023 will be -24.4%, -4.4%, and 5.8% respectively.
On the other hand, the top players have formed a Matthew effect and competitive barriers in the reshuffle, and the latecomers do not have much room for counterattack, and domestic online car-hailing can only rely on high-tier cities to drive performance growth, and there is no more increment in the sinking market, so for investors, the imagination space is very limited.
It is difficult to make a profit, and you can only find another way. In recent years, Cao Cao has been exploring diversified businesses, from the layout of unmanned driving to selling cars, but there are still not too many waves, the prospectus shows that its travel service business revenue accounts for more than 96% all year round, and it is still the pillar of its revenue.
In today's situation, the online car-hailing capacity tends to be saturated, and the online car-hailing leasing companies in Guangzhou, Shenzhen Stock Exchange and other places have closed down.
02
Frequent complaints from drivers and passengers, compliance tests
In addition to the problem of profitability, Cao Cao's operation and management problems are also a mountain erected in front of him.
Gong Xin, CEO of Cao Cao Travel, once said that Cao Cao Travel is not necessarily the platform with the lowest price and the fastest ride-hailing, but it must be the platform with the best service.
However, according to Bowang Finance, on the black cat complaint platform, Cao Cao's cumulative complaints have reached 6827, except for a small number of complaints from the driver complaint platform to deduct the driver's fee, most of them are passengers' questions about the route, service, price, and potential safety hazards, from the service is not up to standard, the fare is charged indiscriminately, the overlord clause, the customer service kicks the ball and so on.
claims to have the best service, but there are constant complaints, and behind the slap in the face, it is the compliance test under the scale of Cao Cao's travel.
Since the beginning of this year, Cao Cao Travel has been named by the Consumer Protection Commission many times, saying that it has recently found that 10 online car-hailing platforms, including Cao Cao Travel, generally have "unspoken rules" in the industry where the notification of high-speed fee collection is not significant and insufficient, and some drivers charge additional return high-speed fees and airport high-speed return fees. The notice of highway toll collection is not significant.
In January this year, the Shanghai Consumer Protection Commission conducted a comparative test of the taxi timing of 10 online car-hailing platforms and found that 30 out of 110 taxi timings did not meet the requirements of the specification, and 35 times the timing error did not meet the requirements of the specification.
Among them, the platforms with the largest number of taxi and timing errors that do not meet the requirements of the specification have Cao Cao Travel, and among the taxi errors, the number of Cao Cao Travel irregularities reaches 5 times; In the timing error, Cao Cao traveled 6 times.
In addition, as the main company of Cao Cao's travel, Hangzhou Youxing Technology has suffered a total of 175 administrative penalties, 47 this year.
In fact, with the strengthening of the management norms of online car-hailing platforms by relevant state departments, online car-hailing platforms such as Cao Cao Travel have been repeatedly interviewed since 2022, but they still do not change.
Judging from the frequent complaints and the lack of compliant operating mechanisms, Cao Cao seems to be far from the "best service platform".
03
Cash flow is urgent, and listing blood transfusion is imminent?
Blocked by the two mountains of profitability and compliance, the IPO became a lifesaver for Cao Cao's travel.
According to the prospectus, from 2021 to 2023, the short-term part of the company's short-term debt and long-term debt will be 2.4 billion yuan, 3.5 billion yuan and 5.2 billion yuan respectively, and the long-term part of long-term debt will be 1.4 billion yuan, 2.1 billion yuan and 2.4 billion yuan respectively.
In the case of heavy asset model and perennial losses, Cao Cao can only maintain business operations by borrowing a large amount of money.
At the same time, from 2021 to 2023, Cao Cao's net negative actions will be 3 billion yuan, 4.4 billion yuan, and 5.2 billion yuan respectively. During the same period, the operating cash flow was -1.5 billion yuan, -1.1 billion yuan and 136 million yuan respectively.
The cash flow is urgent, which may also be one of the reasons why Cao Cao chose to IPO.
It is worth mentioning that before applying for listing, Cao Cao Travel has carried out 3 rounds of financing, with an amount of more than 4.8 billion yuan. The most recent one was in 2021, when it received 3.8 billion yuan in Series B financing, including Geely Holdings, Xiangcheng Financial Holding and other companies, which was also the largest single financing in China obtained by an online car-hailing company at that time.
From the perspective of valuation, in 2017, when the A round of financing was held, Cao Cao's valuation was 9.6 billion yuan, and the cost per share was 30.75 yuan, in December 2017, during the A1 round of financing, the pre-investment valuation climbed to 10.3 billion yuan, and the cost per share was 30.76 yuan, and in August 2021, the pre-investment valuation at the B round of financing was 17 billion yuan, and the cost per share was 37.60 yuan. Since the B round of financing, the total transaction volume of Cao Cao's online car-hailing platform has always remained in the top three in China, and the gross profit margin has also turned from negative to positive, which may also be one of the reasons for Cao Cao's application for listing.
In addition, if Cao Cao successfully lands on the Hong Kong stock market, it will become the ninth listed company under the name of Li Shufu after Geely Automobile, Volvo, Polestar Auto, ECARX, Qianjiang Motorcycle, Hanma Technology, Lotus Technology and Lifan Technology.
From the early years of the "snake swallowing elephant" style to eat Volvo, to invest in Daimler, to the proton, Lotus and other brands have been merged into the command, capital operation methods have always been Geely's best, which also laid the foundation for Cao Cao's listing.
Backed by Geely trees, it is good to enjoy the shade, and the pre-investment valuation of the B round is 17 billion yuan, which is enough to enter the unicorn level. However, at the business level, the huge gap between Cao Cao and the head players cannot be ignored.
According to Frost & Sullivan, the five leading companies in China's ride-hailing industry currently account for nearly 90% of the market. Among them, Didi Chuxing's market share is more than 70%, and Didi's total transaction volume in 2023 will be close to 16 times that of Cao Cao Chuxing, and Cao Cao's revenue in 2023 will only account for 6% of Didi's.
Cao Caoxing, who is in a profit dilemma, still needs more time to prove his ability to the capital market.
On the one hand, the pattern of online car-hailing is clear, and the market is showing an obvious Matthew effect, and how to abide by its own market share from being eroded has become a key issue for Cao Cao's travel. On the other hand, the incremental space of the entire online car-hailing industry is gradually shrinking, and the early warning that the online car-hailing market is becoming saturated by the regulatory authorities in many places is waiting to be examined.
END
From Tick Travel, Ruqi to Cao Cao Travel, online car-hailing companies are ushering in a wave of intensive listings.
When the relevant enterprises in an industry are intensively "securitized", it proves that the industry is no longer rollable, such as new tea drinks, consumer dairy companies, and online car-hailing.
Even if it is listed, it is only a new beginning, and under the test, how to strengthen its own hematopoietic ability and operation management services, and continue to dig deep moats may be the real test questions in front of Cao Cao.