CICC has published a research report initiating coverage on CAOCAO INC (02643) with an "Outperform" rating and a target price of HK$70. While the market believes that small and medium-sized ride-hailing platforms struggle to achieve profitability, CICC believes that with abundant supply, platforms can reduce driver and passenger subsidies and improve efficiency to optimize unit economics (UE).

The ride-hailing industry is entering a regulated and mature phase, with unmet demand in lower-tier markets. Cost reduction from new energy vehicles and traffic from aggregation platforms are driving steady industry growth. CICC forecasts that the ride-hailing industry will maintain high single-digit growth from 2024 to 2026.

The company is expanding its market share through customized vehicles and service advantages. According to Frost & Sullivan, CAOCAO INC ranked second with a 6% GTV share in 2024. CICC notes that CAOCAO INC leverages Geely's supply chain and rapidly expands into new cities through aggregation platform traffic, with UE optimization expected.

CAOCAO INC builds differentiated advantages through customized vehicles, leveraging Geely's supply chain to control a fleet of over 50,000 vehicles. Its low acquisition and vehicle service costs reduce drivers' total cost of ownership (TCO), while the battery swapping model increases driver income, leading to higher hourly wages and driver retention. Since 2023, the company has gained traffic through aggregation platforms and expanded into lower-tier markets.

CICC believes that CAOCAO INC can gradually optimize its ride-hailing business UE levels by increasing driver commission rates, reducing user subsidies, optimizing partner rebates, and achieving efficiency improvements through scale expansion.

Additionally, CAOCAO INC possesses a comprehensive Robotaxi ecosystem that can leverage Geely Group's coverage across R&D, manufacturing, and operations. The company also has an established dispatch network that can support business launch and data accumulation through a hybrid model in the future.

Robotaxi pilots are currently underway in Suzhou and Hangzhou. The company plans to collaborate with Geely to develop L4-level Robotaxi customized vehicle models by the end of 2026, accelerating commercial deployment.