Initiating Yidu Tech, HKD 11 FVE; Differentiated Product but Lack of Profitability Is Key Concern

We initiate coverage on no-moat Yidu Tech with a fair value estimate of HKD 11. Our moderate upside represents positive key trends, but also significant risks, given a lack of company history within a nascent industry. The stock declined significantly since its IPO but Yidu has key highlights that justify the moderate upside in our valuation. The company has robust growth prospects but is generating significant net losses, and we see a wide range of investment outcomes for the business. If the company can improve on its margins in the next year, we could see higher forecasts and a better long-term outlook.