Uber and Didi Valuation
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Uber v. Didi Valuation Investment recommendations Contact: Nathan McCutcheon | Mobile: (425) 879-6215 | Email: [email protected] Contact: Ike Ekeh | Mobile: (415) 290-2713 | Email: [email protected] Contat: Rajat Raizada | Mobile: (619) 319–8488 | Email:
Transcript of Uber and Didi Valuation
Uber v. Didi ValuationInvestment recommendations
Contact: Nathan McCutcheon | Mobile: (425) 879-6215 | Email: [email protected]: Ike Ekeh | Mobile: (415) 290-2713 | Email: [email protected]: Rajat Raizada | Mobile: (619) 319–8488 | Email: [email protected]
Team•University of San Diego (MBA, Candidate)
•Portfolio Manager (Intern) at The Retirement Group, LLC
•Management Consultant at The Army and Navy Academy
•Expert competencies in financial valuation and Excel modeling
Rajat Raizada
•University of San Diego (MBA / MS in Finance)
•CFA Level 1, Candidate
•Director, Business Development and Corporate Finance at NDC
•5 Years of Private Accounting Experience
•Expertise in FSA / Valuation
Ike Ekeh
•University of San Diego (MBA / MS in Finance)
•Business & Financial Analyst (United Technologies Corporation)
•Associate Venture Capital Intern (Analytics Ventures)
•4 Years Active Duty (Army)
Nathan McCutcheon
Executive Summary
Current Market Valuations
Uber: $68B+ Didi: $34B+
AnalysisDiscounted Cash Flow Comparable Company Analysis
Case RequirementsValuations of Uber and Didi Recommendations to Investor
Valuations derived from Crunchbase funding in latest round of equity financing for each company.
General Assumptions• Uber – 2,000,000 rides per day (used for 2016 sales)¹
• Didi – 10,000,000 rides per day (used for 2016 sales)¹
• Uber Net Debt - $2.75B²
• Didi Net Debt - $3B²
• $10 per ride (most sources cite $12 plus per ride)³
• Same comparable companies to benchmark Uber and Didi at the same position⁴
• 25% discount assumed for comparable analysis
• Assuming no cash on hand for both Uber and Didi
Uber Football Field
Uber Equity Value - $30.25B
Discounted Cash Flow
Comparable Companies
$15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00
Uber Valuation Ranges
$39.28$24.32
$25.84 $31.58
Didi Football Field
Didi Equity Value - $159.89B
Discounted Cash Flow
Comparable Companies
$100.00 $120.00 $140.00 $160.00 $180.00 $200.00 $220.00 $240.00
Didi Valuation Range
$128.58 $203.41
$169.16$138.41
Comparable Company AssumptionsShippingJB HuntKnight TransportationLandstar Systems IncOld Dominion Freight LineSwift TransportationHeartland ExpressMarten TransportSaia IncUniversal HoldingAutoGeneral MotorsTeslaFordTechAmazonLineFacebookAlibabaGrubhubTwilio
Due to Uber’s acquisition of Otto and general capacity for growth in the shipping industry, we applied several public Shipping Comparables
Due to the significant disruption within the auto industry, we decided to value Uber and Didi based on these comparables. All have significant investment or partnerships in autonomous vehicle technology.
Uber and Didi are, first and foremost, tech companies. We chose recent IPOs with significantly higher multiples than the above comparables.
Comparable Analysis (UBER and DIDI)Company Ticker EV/SalesAmazon AMZN 2.76Line LN 5.38Facebook FB 12.63Alibaba BABA 12.04Grubhub GRUB 6.11Twilio TWLO 11.24
Tech CompaniesCompany Ticker EV / SalesJB Hunt JBHT 1.73Knight Transportation KNX 2.53Landstar Systems Inc LSTR 1.06Old Dominion Freight Line ODFL 2.42Swift Transportation SWFT 1.08Heartland Express HTLD 2.67Marten Transport MRTN 1.15Saia Inc SAIA 0.94Universal Holding ULH 0.57
Shipping CompaniesCompany Ticker EV / SalesGeneral Motors GM 0.67Tesla TSLA 4.66Ford F 1.05
Car Companies
All ComparablesAverage 1.57Median 1.15
Best ComparablesAverage 1.81Median 1.73
All ComparablesAverage 8.36Median 8.675
All ComparablesAverage 10.51Median 11.64
All ComparablesAverage 2.13Median 1.05
Best ComparablesAverage 2.13Median 1.05
Industry EV/Sales Median EV/Sales Average Weightage AllocationShipping 1.73 1.81 0.2Auto 1.05 2.13 0.2Tech 11.64 10.51 0.6
Forward EV / Sales Multiple 4.81 4.81 7.54
Comparable Company Valuation DataWeighted Allocations determined by importance to business model
Uber Comparable Analysis
Uber Equity Value: $24B - $39B
Industry EV/Sales Median EV/Sales Average Weightage AllocationShipping 1.73 1.81 0.2Auto 1.05 2.13 0.2Tech 11.64 10.51 0.6
Forward EV / Sales Multiple 4.81 4.81 7.54
2016 Sales (UBER) 7,300,000,000 7,300,000,000 7,300,000,000Uber Enterprise Value (billions) $26.32 $26.35 $41.28Uber Net Debt (billions) $2.00 $2.00 $2.00Uber Equity Value $24.32 $24.35 $39.28
Comparable Company Valuation Data
Didi Comparable
Didi Equity Value: $128B - $203B
Industry EV/Sales Median EV/Sales Average Weightage AllocationShipping 1.73 1.81 0.2Auto 1.05 2.13 0.2Tech 11.64 10.51 0.6
Forward EV / Sales Multiple 4.81 4.81 7.54
2016 Sales (DIDI) 36,500,000,000 36,500,000,000 36,500,000,000Didi Enterprise Value (billions) $131.58 $131.74 $206.41Didi Net Debt (billions) $3.00 $3.00 $3.00Didi Equity Value (billions) $128.58 $128.74 $203.41
Comparable Company Valuation Data
DCF AssumptionsUber
• Operating margin for 2016 is 15% growing 5% per year; constant at 30%
• Cost of Capital – 12% declining by .5% annually
• Reinvestment rate 25% constant• American Corporate Tax Rate (30%)• Revenue growth rate 6% - Average taxi cab
growth globally (2-6%)• WACC – 9% declining by .5% through 2022• Terminal growth rate 5%
Didi
• Operating margin for 2016 is 15% growing 5% per year; constant at 30%
• Cost of Capital – 12% declining by .5% annually• Reinvestment rate 25% constant• Chinese Corporate Tax Rate (25%)• Revenue growth rate 6% - Average taxi cab growth
globally (2-6%)• WACC – 9% declining by .5%• Terminal growth rate 5%
Uber DCF
Uber Equity Value: $25B - $31B
2016 2017 2018 2019 2020 2021 2022Sales Revenue 7,300,000,000$ 7,738,000,000$ 8,202,280,000$ 8,694,416,800$ 9,216,081,808$ 9,769,046,716$ 10,355,189,519$ Operating Margin 15% 20.00% 25.00% 30.00% 30.00% 30.00% 30.00%Operating Income 1,095,000,000$ 1,547,600,000$ 2,050,570,000$ 2,608,325,040$ 2,764,824,542$ 2,930,714,015$ 3,106,556,856$ Effective Tax Rate 30% 30% 30% 30% 30% 30% 30%Less: Taxes 328,500,000$ 464,280,000$ 615,171,000$ 782,497,512$ 829,447,363$ 879,214,204$ 931,967,057$ After Tax Operating Income 766,500,000$ 1,083,320,000$ 1,435,399,000$ 1,825,827,528$ 1,935,377,180$ 2,051,499,810$ 2,174,589,799$ Reinvestment % 25% 25% 25% 25% 25% 25% 25%Less: Reinvestment 191,625,000$ 270,830,000$ 358,849,750$ 456,456,882$ 483,844,295$ 512,874,953$ 543,647,450$ FCF from firm 574,875,000$ 812,490,000$ 1,076,549,250$ 1,369,370,646$ 1,451,532,885$ 1,538,624,858$ 1,630,942,349$ Terminal Value 23,299,176,419$ 14,406,657,419$ Present value of FCFF 728,690,583$ 869,833,354$ 1,001,292,331$ 964,881,701$ 934,040,733$ 908,333,190$ Cost of Captial 12% 11.50% 11.00% 10.50% 10.00% 9.50% 9.00%Cumulated cost of capital 1.1 1.2 1.4 1.5 1.6 1.8
PV of cash flow 6 years 5,407,071,891$ Terminal Growth Rate 5%PV of Terminal Value 23,299,176,419$ Revenue Growth Rate 6%PV of Equity 28,706,248,310$ Discount Rate 12%Upper Limit ( +10%) 31,576,873,141$ Lower Limit (-10%) 25,835,623,479$
Didi DCF
Didi Equity Value: $138B - $169B
2016 2017 2018 2019 2020 2021 2022Sales Revenue 36,500,000,000$ 38,690,000,000$ 41,011,400,000$ 43,472,084,000$ 46,080,409,040$ 48,845,233,582$ 51,775,947,597$ Operating Margin 15% 20.00% 25.00% 30.00% 30.00% 30.00% 30.00%Operating Income 5,475,000,000$ 7,738,000,000$ 10,252,850,000$ 13,041,625,200$ 13,824,122,712$ 14,653,570,075$ 15,532,784,279$ Effective Tax Rate 25% 25% 25% 25% 25% 25% 25%Less: Taxes 1,368,750,000$ 1,934,500,000$ 2,563,212,500$ 3,260,406,300$ 3,456,030,678$ 3,663,392,519$ 3,883,196,070$ After Tax Operating Income 4,106,250,000$ 5,803,500,000$ 7,689,637,500$ 9,781,218,900$ 10,368,092,034$ 10,990,177,556$ 11,649,588,209$ Reinvestment % 25% 25% 25% 25% 25% 25% 25%Less: Reinvestment 1,026,562,500$ 1,450,875,000$ 1,922,409,375$ 2,445,304,725$ 2,592,023,009$ 2,747,544,389$ 2,912,397,052$ FCF from firm 3,079,687,500$ 4,352,625,000$ 5,767,228,125$ 7,335,914,175$ 7,776,069,026$ 8,242,633,167$ 8,737,191,157$ Terminal Value 124,817,016,529$ Present value of FCFF 3,903,699,552$ 4,659,821,537$ 5,364,066,059$ 5,169,009,111$ 5,003,789,642$ 4,866,070,661$ Cost of Captial 12% 11.50% 11.00% 10.50% 10.00% 9.50% 9.00%Cumulated cost of capital 1.1 1.2 1.4 1.5 1.6 1.8
PV of cash flow 6 years 28,966,456,561$ Terminal Growth Rate 5%PV of Terminal Value 124,817,016,529$ Revenue Growth Rate 6%PV of Equity 153,783,473,090$ Discount Rate 12%Upper Limit (+10%) 169,161,820,399$ Lower Limit (-10%) 138,405,125,781$
ConclusionsUber• Recent funding valued Uber at
$60B+• Analysis shows valuation of
~$30B• 20% Growth requirement will not
be recognized due to a market overvaluation (2019 PV is $36B)
• Cash out at $100 per share ASAP
Didi• Recent funding valued Didi at
$30B+• Analysis shows valuation of
~$160B (demonstrates >20% growth potential)
• 20% Growth requirement will be realized due to a market undervaluation (2019 PV $236B)
• Use gains from Uber stock sale to invest in Didi @ $50 per share**
Additional Considered Events• Regulatory issue flare ups globally. Dispute between governmental bodies, taxi
unions, etc.
• Lawsuits between 1099 Contract Employees
• Dissolved partnerships with car makers and autonomous vehicle regulation hurdles
• New competitive threats from auto industry (example: GM or Ford into Ride Sharing)
• Due to the significant undervaluation of Didi, events should not impact the 20% growth requirement
