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Is DiDi Global Inc. (DIDI) A Buy After Strong Rally?

DiDi Global Inc. (DIDI) surged for almost 14% on 21 October 2021 as there was suggestion for Hong Kong listing from China ‘s regulator. As the stock retreated on 22 October 2021, will it be an opportunity for long term investor ?

Valuation

In view of the business nature, Uber Technologies (UBER) should be a close competitor for DiDi Global Inc. (DIDI). As both company haven’t profitable yet, Price to Sales ratio is suitable for comparison.

DiDi Global Inc. (DIDI) Uber Technologies (UBER)
Revenue21,600,000,00011,139,000,000
Share Price on 22 October 2021 9.1945.51
Share Outstanding4,794,000,0001,752,960,000
Market Capitalion44,056,860,00079,777,209,600
P/S2.047.16
Data from 2020 Annual Report with Rounding

Even some report said that DiDi Global Inc. (DIDI) has lost 30% of its daily users since the began of the crackdown, the company still seems to be undervalued when compare with Uber Technologies (UBER).

Globalization

Currently, China are the main market for DiDi Global Inc. However, the company has started developing its global business. According to Wikipedia, In March 2021, DiDi launch services in South Africa. In May 2021, DiDi launched services in Ufa, Tomsk, Voronezh, Tyumen, Krasnodar and Kazakhstan. In September 2021, DiDi launched services in Egypt.

Conclusion

Based on valuation and future outlook, DiDi Global Inc seems to be undervalued. However, the company is still full of uncertainly such as potential penalty for violation. Moreover, if the company undergo listing in Hong Kong by issuing new share, there will be a huge dilution effect on existing share.

As full of uncertainly and share price has already surged up, long term investor should wait and see for further development.

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