To The Moon

$DiDi Global Inc.(DIDIY)$ released its Q3 2023 financial report, causing the stock to surge over 9% on the same day. Due to the fact that the liquidity of over-the-counter trading is not as good as that of the main board, it is understandable that there is slightly more volatility.

However, this quarter's financial report still reflects a decent growth rate. Although it no longer has the high-speed growth it once had, there are clear signs of business recovery. The economic model of shared mobility is feasible and can also make stable profits relying on the macro economy, just like $Uber(UBER)$ and $Grab Holdings(GRAB)$

Q3 Earnings Overview

Total revenue was 51.4 billion yuan, a year-on-year increase of 25%. Among them, revenue from China's mobility services reached 46.6 billion yuan, a year-on-year increase of 27%; international business revenue reached 2 billion yuan, a year-on-year increase of 28%.

DiDi's core platform had a total order volume of 3.579 billion orders, a year-on-year increase of 34%.

Among them, China's mobility services had a total order volume of 2.878 billion orders, a year-on-year increase of 32%; international business had a total order volume of 701 million orders, a year-on-year increase of 43%.

The daily average order volume in Q3 reached a new peak at 31.3 million orders. DiDi's Gross Transaction Value (GTV) on its core platform was 91.5 billion yuan, a year-on-year increase of 37%. The GTV for China's mobility services was 72.5 billion yuan, a year-on-year increase of 33%; the GTV for international business was 19 billion yuan, a year-on-year increase of 52%.

In terms of profit, adjusted EBITA was -300 million yuan, with an EBITA profit margin of -0.6%.

Among them, China's mobility services had an EBITA profit of 1.5 billion yuan, with a profit margin of 3.4%. International business had an EBITA loss of 1.8 billion yuan, with a profit margin of -90%.

As of September 30, 2023, DiDi's cash, cash equivalents, restricted funds, and investment balance were 54.6 billion yuan, an increase compared to 48.8 billion yuan on December 31, 2022.

Investment Highlights

Order volume stabilizing and rebounding.

The daily average order volume in China's mobility services market was 31.98 million orders, higher than Q2's 29.71 million orders, setting a new high for two consecutive quarters, mainly driven by domestic economic activities. Of course, from the perspective of market share, there is also a stable rebound because shared mobility emphasizes economies of scale and has high entry barriers for the industry.

Profitability level is relatively stable.

Currently, the adjusted EBITA for China's mobility services business is 1.47 billion yuan, corresponding to a profit margin of 2.03%, which is slightly lower than the previous quarter. International mobility services are still incurring losses, with an adjusted EBITA of -795 million yuan and a profit margin of -4.18%.

The domestic business is relatively stable, and if the international business can continue to turn losses into profits through operations, it may further improve the overall profit margin.

Valuations

Currently valued at $170 billion, the forward price-earnings ratio (PE) is approximately 10 times, which most investors still consider to be low. If we consider the potential for further improvement in operating profit margins in the future, the valuation multiple can be further increased.

However, DiDi's biggest problem is the restriction on over-the-counter trading and investors' previous negative sentiment towards it.

Of course, the management has also approved a $1 billion share buyback program for a period of two years. Based on a daily average trading volume of $15 million, it would take at least... [omitted]