Image source: Visual China
Blue Whale financial reporter Wang Jianwen
According to market news, on May 16, Dida Travel launched the Hong Kong NDR (non-trading roadshow). As to whether the situation is true, Blue Whale Finance sent a letter to Tick Travel for verification, but did not receive a reply as of press time.
Previously, Dida Travel submitted its report to the Hong Kong Stock Exchange on March 19, with CICC, Haitong International and Nomura International as the joint sponsors, and this is the company's fifth submission to the Hong Kong Stock Exchange since October 2020.
As one of the earliest platforms to enter the ride-hailing business in China, Dida Travel has gradually come to the forefront of the industry after its establishment. According to Frost & Sullivan data, in 2022, Tick Out will be the second largest rideshare platform in China in terms of the number of rides. With the high gross margin of the ride-hailing business, the company has continued to be profitable in recent years. However, under the appearance of "no shortage of money", the company is also facing a series of problems such as the narrow market and the intensification of the industry.
Why is Tick Travel, which is not short of money, in a hurry to go public?
Tick Travel was jointly established by 5 people: Song Zhongjie, Li Jinlong, Zhu Min, Duan Jianbo and Li Yuejun. In 2010, the five founders created the group buying platform "Tick Group" together, but after the reshuffle of the Thousand Group War, since 2013, the five people began to plan for transformation. And in 2014, it established Dida Chuxing, focusing on the hitchhiking business. After several rounds of financing, the five founders currently hold 33.57% of the company's equity through 5brothers Limited.
Unlike other travel platforms, Dida Travel has been profitable for many years in a row.
According to the prospectus, from 2021 to 2023, the company's operating income will be 781 million yuan, 569 million yuan, and 815 million yuan respectively, and the profit during the year will be 1.731 billion yuan, -188 million yuan, and 300 million yuan respectively, and the adjusted profit will be 238 million yuan, 85 million yuan, and 226 million yuan respectively.
As of the end of December 2023, the balance of cash and cash equivalents held by Dida Travel was approximately $686 million, an increase of $22 million from the end of 2022. And as of January 31, 2024, Dida Travel does not have any bank loans, and its liquidity is good.
In fact, Tick Travel has submitted its forms 5 times and plans to be listed on the Hong Kong Stock Exchange. According to the prospectus, the company's fundraising will be used to expand the user base and strengthen marketing and promotion plans, improve technical capabilities, upgrade security mechanisms, enhance monetization capabilities, and use it for working capital and other general corporate purposes.
Why is Dida Travel, which is not short of money, in a hurry to go public in Hong Kong?
Judging from the financing process of Tick Travel, in the first year after its establishment, the company received 3 million yuan in Series A financing from IDG Capital. Since then, until 2018, the company has carried out 4 rounds of financing, and investors include well-known institutions and investors such as Yiche, Ctrip, NIO Capital, Hillhouse, JD.com, and Li Bin. In the five rounds of financing, Dida Travel has received a total investment of about 1.8 billion yuan.
Among them, Li Bin, chairman of NIO, not only went into battle himself, but also introduced many investors such as NIO Capital and Yiche. In 2018, Song Zhongjie, the founder of Dida Travel, also invited Li Bin to serve as the company's chairman. At present, Li Bin is still a non-executive director of the company.
Since the first submission of the form in 2020, Tick Travel has submitted the form a total of 5 times, which lasted nearly 4 years, but it has not yet been successfully listed. Investors need an opportunity to exit their funds.
The joys and sorrows behind the ride
Dida Chuxing's ability to achieve profitability ahead of other travel platforms is inseparable from its business structure.
From the perspective of business composition, in recent years, Dida Chuxing's dependence on the ride-hailing business has gradually increased. From 2021 to 2023, the revenue of the company's ride-hailing business accounted for 89.0%, 90.5%, and 95.0% respectively, while the revenue and proportion of the rest of the smart taxi services, advertising and other services continued to decline.
China's auto passenger market mainly consists of taxis, ride-hailing and ride-hailing. However, in terms of operation mode, taxi companies operate in an asset-heavy manner, and online ride-hailing platforms with self-built fleets are also operated in an asset-heavy manner, while ride-hailing companies generally operate in an asset-light manner.
Therefore, although Dida Travel has frequently increased the scale of subsidies in recent years, the proportion of subsidy expenditure revenue is still relatively low. From 2021 to 2023, the company's subsidies to private car (hitchhiking) owners will be 53 million yuan, 58 million yuan, and 97 million yuan respectively, accounting for 7.6%, 11.3%, and 12.6% of revenue, respectively.
In contrast, ride-hailing platforms are still struggling with profitability issues. Taking Cao Cao's recent report to the Hong Kong Stock Exchange as an example, in 2023, the company's driver income and subsidy expenditure will reach 8.146 billion yuan, accounting for 81% of the total revenue.
There is no need to "burn money" for subsidies, so that Dida Travel has achieved a high gross profit margin. From 2021 to 2023, the company's gross profit margin will be 85.4%, 79.5% and 75.9% respectively. And in recent years, it has continued to make profits. In the same year, Cao Cao's gross profit margin turned positive for the first time, at 5.8%, and the annual loss was still as high as 1.981 billion yuan. In addition, Didi's previously released performance report showed that in 2023, the company's net profit will be 540 million yuan, but the adjusted EBITA loss will still reach 2.1 billion yuan.
However, relying only on hitchhiking, the future growth prospects of Tick Travel are relatively limited.
According to Frost & Sullivan data, in 2022, the market share of the three types of domestic taxis, ride-hailing and ride-hailing businesses accounted for 58.5%, 37.8% and 3.7% respectively. In other words, the application scenarios and market size of hitchhiking are relatively low. Tick Ride, which accounts for more than 90% of its revenue, has limited room for growth in the future.
In this relatively narrow market, Dida Travel is also facing increasing competitive pressure.
As an early participant in the domestic ride-hailing market, Dida Travel entered the ride-hailing market as early as 2014. In 2015, Didi also launched a ride-hailing business, and Hellogo only joined the fray in 2019. During this period, due to multiple vicious crimes, Didi also suspended its ride-sharing business in 2018 and did not gradually open until November 2019.
Even so, backed by a larger platform, the two are constantly eating into the market share of Dida Chuxing. According to the prospectus, in 2021, Dida Travel will still have the first market share in the hitchhiking market. In 2022, the market share of Hello Travel Hitchhike has increased significantly, reaching 42.5%, an increase of 11 percentage points year-on-year, surpassing Dida Chuxing. Tick Chuxing's market share fell by 5.6 percentage points to 32.5%. The market share of Didi's ride-hailing business also rebounded to 19.3%.
Compared with the above two platforms, the business line of Dida Travel is relatively simple, and it is difficult to use other businesses to drive the ride-sharing business to acquire customers. Or because of this, in 2023, Dida Travel will accelerate its cooperation with third-party platforms.
According to the prospectus, in 2023, the cost of third-party services of Dida Travel will reach 61 million yuan, an increase of 119.22% over 2022, and the proportion of total service costs will increase from 19.7% in 2022 to 29.1%. As for the increase in costs, Dida Chuxing explained that it was due to a new partnership with an aggregator platform. At present, Dida Chuxing has cooperative relations with third-party apps and platforms such as Baidu Maps, Meituan Taxi, Alipay, and WeChat Pay.
The IPO will be mainly used to expand the user base, strengthen the marketing and promotion plan, enhance the monetization ability, improve the technical ability and upgrade the security mechanism.