Author / Tomato under the stars
Edit/Spinach's Starry Sky
Typesetting/Leeks under the stars
Starting with the money-burning war between Didi and Kuaidi Taxi, the melee in the domestic ride-hailing industry has been going on for years. At present, there are many players in the industry as a whole, but the entire industry is still on the verge of loss or profit.
On April 29, 2024, Cao Cao Travel (full name: Cao Cao Travel Co., Ltd.) submitted to the Hong Kong Stock Exchange. Although it is clear that it is difficult for companies in the online car-hailing industry to go public, Cao Cao has to launch an impact on equity financing in the secondary market under the condition of accumulating long-term and short-term debts and becoming insolvent.
1. With a loss of 7 billion, when will it really turn around?
Cao Cao Travel was incubated in 2015 by Geely Group, a large domestic automobile group, which focuses on customized car and car service solutions, and is a leading enterprise in the field of shared travel platforms in China.
Cao Cao's travel business is excerpted from the "Prospectus"
According to Frost & Sullivan, Cao Cao has been among the top three ride-hailing platforms in China in terms of GTV (total transaction value) in recent years.
Cao Cao's travel market ranking from the "Prospectus"
It's just that from the time when Didi burned money to get out of the position, the problem of difficulty in making profits has always been a pain point in the online car-hailing industry, so investors in the market are also paying close attention to the profitability of companies to be listed.
According to the prospectus, from 2021 to 2023 (referred to as the reporting period), the company's total revenue will be 7.152 billion yuan, 7.631 billion yuan and 10.668 billion yuan respectively, and the revenue growth in 2023 will reach 39.80%, and at the same time, in 2023, Cao Cao Travel will achieve the first time that the EBITDA will turn from negative to positive, reaching 130 million yuan. However, the company still failed to achieve profitability, during the reporting period, the company's net profit was -3.007 billion yuan, -2.007 billion yuan and -1.981 billion yuan respectively, with a total loss of 6.995 billion yuan, even after the adjusted net loss reached 5.576 billion yuan.
Operating results Excerpt from the Prospectus
At present, Didi, as the absolute leader of the industry, leads the situation of one super and many strong, and players are playing in the stock market. Since the end of 2022, online car-hailing platforms have been interviewed by regulatory authorities, Hangzhou and other places have introduced new requirements for drivers and operating vehicles, and Jinan has suspended the issuance of online car-hailing vehicle transportation licenses.
In a heavily regulated stock market, companies have to grab food from competitors if they want to make a profit. And what can achieve profitability is nothing more than cost leadership or product and service differentiation. And Cao Cao did not have enough advantages in either path.
First, let's talk about the cost leadership route. Cao Cao's B2C business model, compared with Tick's C2C model and Didi's S2B2C model, has a stronger overall control ability of the platform, but the platform customizes vehicles means that the platform needs to bear vehicle customization costs, insurance maintenance costs, depreciation costs, etc. The cost is high, so the company's overall gross profit margin is very low, which is not a star and a half compared with peer companies.
Gross margin comparison with competitors is collated by public information
During the reporting period, long-term and short-term debt increased by 100% from 3.8 billion yuan to 7.6 billion yuan, which also led to an increase in financial costs from 205 million yuan to 313 million yuan. Coupled with the company's annual average of about 25% of the three expense ratios (sales, administration, and R&D), it is not easy to make a profit, and it is necessary to continuously improve the company's gross profit margin while reducing the expense ratio.
The reduction of the expense ratio is closely related to the scale effect, but it is not easy to form a scale effect in the stock market. In order to reduce the expense rate, starting in the second half of 2022, Cao Cao Travel was revealed to have laid off nearly 40% of its employees, but the large layoffs are just a way to abandon the car and protect the handsome, and it will not make the company live better.
When it comes to the differentiation of products and services, we have to talk about Cao Cao's business expansion and transformation over the years.
Second, customer price sensitivity, autonomous driving is a new opportunity?
Cao Cao Travel now has three types of business: travel services, vehicle leasing and vehicle sales services, and is committed to a diversified profit model, but the latter two have been difficult to become a climate, and the business of travel services has been more than 96% during the reporting period, and the company's overall revenue is still dependent on the online car-hailing business.
Proportion of revenue by business Extract from the Prospectus
As of December 31, 2023, the company has a fleet of about 31,000 vehicles in 24 cities, the largest customized car fleet in the same industry in China, and is committed to providing customers with consistent and large-scale quality services.
However, good service cannot sell at a good price. Cao Cao Travel, a customized car, bears a higher cost, but consumers are very sensitive to price when using online car-hailing, and are not willing to pay higher fees for a special car with better service at the same distance, such as Cao Cao's unit price in 2023 is 27.3 yuan, only 2.03 yuan higher than Didi. At the same time, consumers are accustomed to comparing prices on multiple platforms, and customer stickiness is insufficient.
This makes it so that in order to develop business, in addition to business promotion on its own platform, Cao Cao Travel also has to carry out business development on other aggregation platforms. Of course, in order to be as chosen by customers as possible, the price war on the aggregator platform is even worse. During the reporting period, the GTV of Cao Cao Travel on the aggregation platform accounted for 43.8%, 49.9% and 73.2% respectively, showing a state of increasing year by year, which is not a good trend, indicating that Cao Cao's bargaining power is gradually being weakened.
With the in-depth layout of car companies in the field of autonomous driving, Cao Cao also wants to seize this hot spot and tell the new story of Robotaxi (self-driving taxi) to the capital market. However, Robotaxi faces many problems in the process of landing, first of all, safety issues, once an accident occurs, it is easy to be stopped by regulators, and secondly, the landing of Robotaxi will squeeze the living space of existing online car-hailing drivers, which will lead to new conflicts of interest. Uber, an overseas travel giant, chose to sell its Robotaxi division. Robotaxi still has a long way to go if it wants to become a new profitable growth point for the company.
Of course, in the process of listing, the valuation of the company to be listed is an issue that cannot be ignored.
3. If the valuation is too high, who can pay in the market?
According to the prospectus, Cao Cao has carried out three rounds of financing since its establishment, and Geely Holdings, Zheshang Venture Capital, Paradise Silicon Valley, ABC International, and Soochow Innovation Capital are its shareholders. Before the third round of financing, Cao Cao's valuation had reached 17 billion yuan.
Cao Cao's Financing History Excerpt from the Prospectus
At present, the online car-hailing industry has experienced more than ten years of development, and market investors have long recovered from their enthusiasm, and cost performance is the part they value more. Taking Didi as an example, in 2023, Didi's total revenue will be 192.4 billion yuan, and Cao Cao's revenue will be about 10.7 billion yuan, accounting for about 5.56% of Didi's revenue, while the current total market value of Didi is 24.5 billion US dollars (about 177.1 billion yuan), because Cao Cao is insolvent and has not yet made a profit, so according to the price-to-sales ratio, Cao Cao's reasonable valuation in the secondary market is about 9.8 billion yuan, which is only 57.92% of the third round of pre-investment valuation, and the valuation inversion problem is very obvious.
The ride-hailing industry is recognized by the market as an industry that is difficult to make profits, and if it cannot find new profit growth points, it is indeed difficult for market investors to contribute generously to it.
Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.