70 million passengers of Shun windmill "compete" for a Hong Kong stock IPO

[TechWeb] Nearly 70 million passengers of the windmill have finally "pieced together" into an IPO.

On June 28, Dida Chuxing was officially listed on the Hong Kong Stock Exchange, becoming "the first share of shared travel in China". The opening price was HK $5.23, down 12.83% from the issue price of HK $6, with a total market value of HK $5.2 billion.

The predecessor of Dida Chuxing is "Dida carpooling". Founded in 2014, Dida Chuxing is the first player to enter the free ride market in China, and has provided services for about 70 million free ride passengers. Up to now, the downwind car business is still the largest revenue source of Dida Travel, contributing 95% of the revenue in 2023.

Thanks to the asset light model of Shunfengche, Dida Travel has made profits early in the domestic mass travel platform. The prospectus shows that from 2021 to 2023, the adjusted net profits of Dida Travel will be 238 million yuan, 84.708 million yuan and 226 million yuan respectively.

However, the development prospect of Dida Travel is still uncertain. On the one hand, there is a limited market for free wheelers, and the competition is fierce. During the four years of preparation for listing, Dida has fallen from the top position in the tailwind market. On the other hand, compliance risks always exist.

For Dida Chuxing, listing is just a new start. How to break through the ceiling of main business growth, seize more market share, and how to tell new stories and find new growth points are the issues that it has to think about next.

Five times in four years Final listing Li Bin has accompanied the company for 10 years

The beginning of all the stories of Dida originated from a taxi experience of founder Song Zhongjie in 2014. At the evening peak in Beijing, Song Zhongjie drove on the street for a long time without success, but the private cars he drove by were one after another. This made him find the business opportunities in the spare seats of private cars, so he took his old friend at Google to create Dida Travel and launched "Dida carpooling".

At that time, the online car hailing market was in the ascendant, and the Didi and Kuaidi subsidy wars were in full swing, but no one set foot in the free ride mode. The establishment of Dida Chuxing has created a new track, which has attracted the attention of the capital. IDG Capital, Hillhouse Capital, Weilai Capital, Jingdong Group, Yiche, Ctrip, etc. are all investors of Dida Chuxing.

Among them, Li Bin, the founder of Weilai, has invested in Dida Travel in 2014 and has been running with it for 10 years. According to public reports, it was driven by Li Bin that Dida extended its business to the taxi industry in 2017. In January 2018, Dida carpooling officially changed its name to "Dida Chuxing".

It is also reported that Song Zhongjie once invited Li Bin to join Dida Travel in April 2018 as the chairman of the board, and Li Bin agreed to this invitation. However, this information was not reflected in Dida Chuxing's prospectus. At present, Li Bin is a non-executive director of Dida Chuxing.

In 2019, Dida Travel achieved overall profitability for the first time, becoming the first travel platform in China to achieve overall profitability. On October 8, 2020, Dida Chuxing officially submitted its prospectus to the Hong Kong Stock Exchange, opening the way for listing.

However, the road was not smooth. Dida Chuxing's first submission of the prospectus was not approved by the Hong Kong Stock Exchange, and then three times on April 13, 2021, February 20, 2023, and August 30, 2023, respectively, were not approved. Until the fifth submission on March 19, 2024, substantial progress was finally made and the listing hearing was passed on June 12.

After 4 years and 5 times of submission, Dida Travel finally completed its IPO. This is also Li Bin's fourth listed company after Yiche, Yixin and Weilai.

Downward share of downwind car market Compliance challenges remain

Dida Trip is an IPO supported by a tailwind.

According to the prospectus, 90% of Dida Chuxing's revenue comes from the tailwind business. From 2019 to 2023, its downwind car business accounted for 91.9%, 89.2%, 89%, 90.5% and 95% of the total revenue respectively. In 2018, the proportion was only 66%.

In fact, Dida Travel can take an absolute advantage in the downwind car segment market, and the important turning point also occurred in 2018. Before that, Dida downwind has been suppressed by Didi. In August 2018, Didi Shunfeng dropped off the production line nationwide due to two consecutive security incidents, and then Gaode also dropped off the business of Shunfeng. Dida Chuxing seized this gap and began to quickly occupy the market.

According to the prospectus, there were 179 million orders for Dida hitchhiking in 2019, nearly three times more than 48.2 million in 2018. At that time, Dida Chuxing accounted for 66.5% of the domestic hitchhiker market, becoming a worthy leader in the hitchhiker market.

However, the window period left by the absence of giants did not last too long. One year after the offline rectification, the downwind car business of Didi and Gaode was back online. Hailuo, Caocao Chuxing and other platforms have also launched the tailwind business. Since there is no moat of its own, the business of Dida Shunfeng has been challenged, and the market share has begun to decline.

According to the newly disclosed prospectus, the market share of Dida hitchhiker has dropped from nearly 70% in 2019 to 31% in 2023, ranking second in the hitchhiker market. According to the description in the prospectus, the first one should be Halo Hitchhiker, with a market share of 47.9%; Didi Shunfeng ranked third with a market share of 17.2%.

The competition in the tailwind market is fierce, but the plates are limited. Frost Sullivan report shows that the market shares of taxis, online car hailing and hitchhikers in China's automobile passenger transport market are 54.2%, 41.4% and 4.4% respectively. In other words, the market size of online car hailing is nearly 10 times that of downwind cars.

As for the future growth space, Dida Chuxing mentioned in the prospectus that it is expected that the size of the domestic tailwind car market will increase from 37.1 billion yuan in 2024 to 103.9 billion yuan in 2028, accounting for 8.4% of the overall car passenger transport market share. However, it is still unknown whether Dida Hitchhiker can grab more shares from this market.

On the other hand, the compliance of the downwind car market is another challenge facing Dida Travel. At present, the tailwind scenario is still in the initial stage of supervision. Relevant laws and regulations are generally applicable to online car hailing services, but not directly applicable to free ride and smart taxi services.

Dida Chuxing clearly stated in the prospectus, "We are facing challenges related to the laws and regulations of the tailwind market. Failure to comply with the laws and regulations or licensing system, or changes in the laws and regulations or licensing system may have a significant adverse impact on our business, operating performance and financial condition."

In 2020 and 2021, Dida Shunfeng platform received 57 administrative fines, 36 of which were subsequently revoked, and the remaining 21 administrative fines ranged from 5000 yuan to 30000 yuan, totaling about 550000 yuan.

According to the prospectus, due to the strengthening of technical infrastructure and security facilities, the increase of operation and maintenance service fees of Dida Shunfeng Car Platform, and the increasing subsidies for private car owners in response to fierce competition, the gross profit margin of Dida Shunfeng Car was affected. From 2021 to 2023, the gross profit rate of Dida Shunfeng will be 85.4%, 79.5% and 75.9% respectively, decreasing year by year.

In general, the road after Dida Chuxing's listing is not easy, and it is necessary to be more cautious in dealing with industry competition and compliance challenges.

What other cards can be played except for hitchhiking?

In addition to the tailwind business, Dida Chuxing is also seeking new growth points, trying to break the dilemma of a single business model. At present, in addition to hitchhiking, Dida Travel also has two businesses: smart taxi service, advertising and other services.

Among them, smart taxi service focuses on the development of taxi online appointment service and optimizing taxi recruitment service. The mode of taxi online appointment service is to provide online appointment service to private car owners through the ticker driver end APP, and collect service fees from drivers. Advertising and other services are to provide a platform for third-party merchants to display advertising positions, collect a fixed amount of advertising fees, and collect commissions based on the sales opportunities obtained by third-party automobile value-added service providers.

According to the prospectus, from 2021 to 2023, the service revenue of Dida Smart Taxi will be 32.63 million yuan, 19.42 million yuan and 11.33 million yuan respectively, accounting for 4.2%, 3.4% and 1.4% of the total revenue, decreasing year by year; The revenue from advertising and other services was 52.82 million yuan, 34.76 million yuan and 29.75 million yuan, respectively, accounting for 6.8%, 6.1% and 3.6% of the total revenue.

Dida said in the prospectus that the revenue from smart taxi services is currently all from taxi online booking services. The decrease in revenue of this segment is mainly due to the intensification of market competition and the termination of cooperation with the aggregation platform on taxi online booking services, which led to the reduction of taxi online booking times.  

At present, aggregation platforms such as Gaode and Meituan all provide online taxi hailing services. After Didi's return, it also began to compete for online taxi hailing drivers. For Dida, it is difficult to gain absolute advantage in fighting with Didi in its familiar taxi market. According to the Frost Sullivan report, in 2023, Dida will rank the fourth among China's online platforms in terms of the number of taxi network rides.

However, the taxi market is large enough compared with the free rider. Frost Sullivan report shows that the taxi industry will still maintain a considerable market share of 54.2% in China's automobile passenger transport market in 2023, and is expected to maintain its leading position and vitality in the foreseeable future.

Therefore, smart taxi service is still an important part of Dida. Dida Chuxing said, "It is planned to increase liquidity nationwide and explore other types of service charging modes while continuing to improve our services and products and broaden our user base."

In addition, Dida also said in the prospectus that "it is planned to selectively seek strategic alliances, investments and acquisitions in the value chain of China's travel market to further enhance competitiveness." As for possible acquisition targets, including intelligent hardware companies and map data companies that have close relationships with their existing services, or cooperation with large technology platforms.

Choosing strategic alliances through investment or acquisition may enable Dida to find new growth points. However, the prospectus shows that as of the last practical date, Dida has not identified any potential investment or acquisition targets.

Both in the tailwind market and the smart taxi industry, Dida Travel is facing fierce competition. Although it successfully broke through the Hong Kong Stock Exchange, it has not brought new growth stories, and the market pattern has changed. On the first day of listing, Dida Chuxing broke at the opening. Next, we will continue to pay attention to how it will move the capital market. (Zhou Xiaobai)