Uber and Didi Valuation

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+

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.

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

$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

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

Comparable Company AssumptionsShipping

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.

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 DataWeighted

Allocations

determined by

importance to

business model

Uber Comparable Analysis

Uber Equity Value: $24B - $39B


Shipping 1.73 1.81 0.2

Auto 1.05 2.13 0.2

Tech 11.64 10.51 0.6


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

Didi Comparable

Didi Equity Value: $128B - $203B


Shipping 1.73 1.81 0.2

Auto 1.05 2.13 0.2

Tech 11.64 10.51 0.6


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

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%

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$

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$

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**

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

Uber and Didi Valuation

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