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Uber and Didi Valuation

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Uber and Didi Valuation

  1. 1. Uber v. Didi Valuation Investment recommendations Contact: Nathan McCutcheon | Mobile: (425) 879-6215 | Email: nmccutcheon@sandiego.edu Contact: Ike Ekeh | Mobile: (415) 290-2713 | Email: Iekeh@Sandiego.edu Contat: Rajat Raizada | Mobile: (619) 319–8488 | Email: Rraizada@sandiego.edu
  2. 2. 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
  3. 3. Executive Summary Current Market Valuations Uber: $68B+ Didi: $34B+ Analysis Discounted Cash Flow Comparable Company Analysis Case Requirements Valuations of Uber and Didi Recommendations to Investor Valuations derived from Crunchbase funding in latest round of equity financing for each company.
  4. 4. 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
  5. 5. Uber Football Field Uber Equity Value - $30.25B $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 Discounted Cash Flow Comparable Companies Uber Valuation Ranges $39.28$24.32 $25.84 $31.58
  6. 6. Didi Football Field Didi Equity Value - $159.89B $100.00 $120.00 $140.00 $160.00 $180.00 $200.00 $220.00 $240.00 Discounted Cash Flow Comparable Companies Didi Valuation Range $128.58 $203.41 $169.16$138.41
  7. 7. Comparable Company Assumptions Shipping JB Hunt Knight Transportation Landstar Systems Inc Old Dominion Freight Line Swift Transportation Heartland Express Marten Transport Saia Inc Universal Holding Auto General Motors Tesla Ford Tech Amazon Line Facebook Alibaba Grubhub Twilio 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.
  8. 8. Comparable Analysis (UBER and DIDI) Company Ticker EV/Sales Amazon AMZN 2.76 Line LN 5.38 Facebook FB 12.63 Alibaba BABA 12.04 Grubhub GRUB 6.11 Twilio TWLO 11.24 Tech Companies Company Ticker EV / Sales JB Hunt JBHT 1.73 Knight Transportation KNX 2.53 Landstar Systems Inc LSTR 1.06 Old Dominion Freight Line ODFL 2.42 Swift Transportation SWFT 1.08 Heartland Express HTLD 2.67 Marten Transport MRTN 1.15 Saia Inc SAIA 0.94 Universal Holding ULH 0.57 Shipping Companies Company Ticker EV / Sales General Motors GM 0.67 Tesla TSLA 4.66 Ford F 1.05 Car Companies All Comparables Average 1.57 Median 1.15 Best Comparables Average 1.81 Median 1.73 All Comparables Average 8.36 Median 8.675 All Comparables Average 10.51 Median 11.64 All Comparables Average 2.13 Median 1.05 Best Comparables Average 2.13 Median 1.05 Industry EV/Sales Median EV/Sales Average Weightage Allocation Shipping 1.73 1.81 0.2 Auto 1.05 2.13 0.2 Tech 11.64 10.51 0.6 Forward EV / Sales Multiple 4.81 4.81 7.54 Comparable Company Valuation Data Weighted Allocations determined by importance to business model
  9. 9. Uber Comparable Analysis Uber Equity Value: $24B - $39B Industry EV/Sales Median EV/Sales Average Weightage Allocation Shipping 1.73 1.81 0.2 Auto 1.05 2.13 0.2 Tech 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 7,300,000,000 Uber Enterprise Value (billions) $26.32 $26.35 $41.28 Uber Net Debt (billions) $2.00 $2.00 $2.00 Uber Equity Value $24.32 $24.35 $39.28 Comparable Company Valuation Data
  10. 10. Didi Comparable Didi Equity Value: $128B - $203B Industry EV/Sales Median EV/Sales Average Weightage Allocation Shipping 1.73 1.81 0.2 Auto 1.05 2.13 0.2 Tech 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 36,500,000,000 Didi Enterprise Value (billions) $131.58 $131.74 $206.41 Didi Net Debt (billions) $3.00 $3.00 $3.00 Didi Equity Value (billions) $128.58 $128.74 $203.41 Comparable Company Valuation Data
  11. 11. DCF Assumptions Uber • 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%
  12. 12. Uber DCF Uber Equity Value: $25B - $31B 2016 2017 2018 2019 2020 2021 2022 Sales Revenue 7,300,000,000$ 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$
  13. 13. Didi DCF Didi Equity Value: $138B - $169B 2016 2017 2018 2019 2020 2021 2022 Sales Revenue 36,500,000,000$ 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$
  14. 14. Conclusions Uber • 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**
  15. 15. 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

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