← Back to Projects Valuation Analysis

Valuing an Autonomous-Driving Technology Company: Applying Market Multiples to a Loss-Making Growth Business

Developing a defensible valuation range for a loss-making autonomous-driving company through cross-market comparables and sensitivity analysis.

Carried out the principal analytical work within the defined scope, subject to review by the project lead.

Investment Banking Department, GF Securities

Background and Core Question

The subject is an autonomous-driving technology company in the early commercialisation stage. Revenue was growing rapidly, but the company remained loss-making with negative shareholder equity. Under these conditions, standard earnings-based valuation multiples such as price-to-earnings (P/E) offer little practical guidance.

The central question was how to select and apply a defensible relative-valuation framework in the absence of stable profit metrics, and to produce a reasoned valuation reference range for institutional investors.

Work Completed

Valuation-method assessment: systematically compared the income approach (DCF), the market approach, and the asset-based approach. Given that the company was pre-profit with uncertain cash-flow projections and that comparable-company data were relatively available, the comparable-company method under the market approach was selected as the primary valuation method.
Comparable-company screening: screened candidate comparable companies across A-share and Hong Kong markets, within the industry scope defined by the project team.
Multiple-exclusion analysis: documented why P/E and EV/EBITDA (negative net profit and EBITDA across the target and peer group) and P/B (negative shareholder equity, making book value an invalid valuation basis) each lacked explanatory value. P/S was identified as the most workable common basis because revenue remained positive.
Price-to-sales (P/S) valuation: performed cross-market data cleaning — addressing IFRS/PRC GAAP accounting differences — handled outliers, and calculated a weighted-average P/S multiple to derive the valuation range.
Sensitivity analysis: independently constructed a two-variable sensitivity matrix.
Chapter 18C public-rule information and data support.

Team Inputs

Industry scope for comparable-company screening was defined by the project team.
The discount for lack of marketability (DLOM) assumption was selected by the project team and applied in the valuation model.

Review

Project lead reviewed the work.

Method Selection

The valuation began with a systematic comparison of the three standard approaches. The income approach (DCF) was rejected because early-stage cash-flow projections were too uncertain to support reliable valuation. The asset-based approach could not adequately capture the value of internally developed technology and intangible assets. Given that the company was pre-profit, cash-flow projections were uncertain, and comparable-company data were relatively available, the comparable-company method under the market approach was selected as the primary valuation method.

Within the comparable-company method framework, the analysis proceeded to compare the applicability of P/E, EV/EBITDA and P/S. P/E and EV/EBITDA were excluded because both the target and the peer group were loss-making, leaving net profit and EBITDA negative. P/B — a balance-sheet rather than earnings-based metric — was also excluded because the target's shareholder equity was negative, meaning book value could not serve as a valid valuation basis. The P/S multiple was selected because revenue data remained positive and provided a more workable common basis for cross-company comparison at the current stage.

Valuation-Method Selection Logic

Loss-making autonomous-driving company at an early commercialisation stage

Compare the three valuation approaches

Income approach (DCF)

Not selected

Early-stage cash-flow projections were too uncertain to support reliable valuation.
Asset-based approach

Not selected

Internally developed technology and intangible assets were not adequately captured.
Market approach (comparable-company method)

Selected

Publicly traded peers and market-derived valuation data were available; comparable-company data were relatively accessible.

Compare valuation metrics within the comparable-company method

P/E and EV/EBITDA

Limited practical use

Both the target and the relevant peer group were loss-making, leaving net profit and EBITDA negative.
P/B

Limited practical use

The target’s shareholder equity was negative; book value could not serve as a valid valuation basis.
Price-to-sales multiple (P/S)

Selected

Revenue data remained positive and provided a more workable common basis for cross-company comparison at the current stage.

P/S valuation framework using the comparable-company method under the market approach

Redrawn methodology diagram. No internal materials reproduced.

Comparable-Company Screening

Initial A-share screening yielded few directly comparable peers in the relevant sub-sector and commercialisation stage. Expanding to Hong Kong-listed companies provided additional candidates with closer business-model and commercialisation-stage fit. The retained A-share reference set and the Hong Kong candidate set were then assessed together under a unified cross-market review framework covering sub-sector relevance, business model, commercialisation stage, accounting-basis differences (IFRS vs. PRC GAAP), and market-liquidity differences.

Cross-Market Comparable-Company Screening

The screening process expanded beyond the A-share market when the initial candidate pool provided limited direct comparability.

Industry scope defined by the project team

Initial A-share screening

Limited direct comparability

Few candidates matched the relevant sub-sector and commercialisation stage closely enough.

Expand screening scope

Retained A-share reference set

Selective reference

Hong Kong-listed candidate set

Broader candidate pool

Cross-market comparability review

Standardise and assess

Sub-sector relevance
Business model
Commercialisation stage
Accounting basis (IFRS vs. PRC GAAP)
Market-liquidity differences

Cross-market peer scope supporting the P/S analysis

Conceptual diagram; no numerical evidence is presented.

Does not display actual comparable companies.

Data Cleaning and Multiple Calculation

Cross-market accounting differences (IFRS vs. PRC GAAP) were addressed, extreme outliers removed, and the target's revenue annualised to a trailing-twelve-month (TTM) basis. Mean, median, and weighted-average P/S multiples were calculated across the selected peer set to establish the baseline multiple. This step ensured that the cross-market comparison rested on a consistent, like-for-like data foundation.

Liquidity Adjustment and Sensitivity Testing

The team-selected DLOM assumption was applied as a marketability adjustment. A two-variable sensitivity matrix — varying projected revenue growth and the P/S multiple — was then constructed to produce a valuation range in place of a single-point estimate. The matrix makes explicit how changes in the two key assumptions interact, providing a decision-useful valuation band rather than a false-precision point estimate.

Illustrative P/S Sensitivity Matrix

The matrix shows how changes in the projected revenue-growth assumption and the P/S multiple interact to affect an indexed valuation outcome.

Illustrative valuation index
Projected revenue-growth scenario index P/S multiple scenario index	80	90	100	110	120
80	64	72	80	88	96
90	72	81	90	99	108
100	80	90	100 — Illustrative base case	110	120
110	88	99	110	121	132
120	96	108	120	132	144

An index of 100 represents the illustrative base assumption. It does not represent 100% revenue growth or a 100x P/S multiple.

Each cell equals the revenue-growth scenario index multiplied by the P/S scenario index and divided by 100.

The matrix demonstrates how assumption changes create a valuation range rather than a single-point estimate.

Illustrative values only; not actual project or client data.

Key Judgements and Challenges

Choosing a valuation method for a loss-making company

With no positive earnings at the target or across the peer group, P/E and EV/EBITDA had limited practical use. P/B — a balance-sheet rather than earnings-based metric — was also inapplicable because the target's shareholder equity was negative. The P/S multiple was not an ideal solution but was the most workable metric under the available data constraints.

Cross-market comparable-company screening

The A-share market alone offered insufficient directly comparable peers. Expanding to Hong Kong required adjusting for cross-market accounting differences and structural liquidity premiums. The screening framework balanced breadth against relevance across two markets with different regulatory and disclosure regimes.

Valuation range over false precision

When key assumptions — revenue growth, valuation multiples, and the liquidity discount — each carry material uncertainty, a single-point estimate would provide less decision-useful information than a valuation range. The sensitivity matrix made the uncertainty explicit by translating assumption ranges into a valuation band.

Deliverables and Skills Demonstrated

The project produced: a documented valuation-method-selection rationale; structured comparable-company screening and exclusion records; a cross-market P/S valuation analysis; a two-variable sensitivity framework; and public-rule research support relating to the HKEX Chapter 18C framework for Specialist Technology Companies. The work demonstrates capability in valuation-method selection, comparable-company analysis, cross-market financial-data standardisation, sensitivity analysis, and the disciplined treatment of valuation uncertainty for a loss-making growth company.

Disclosure

The target company is anonymised and no non-public engagement information is disclosed. The case does not present a target-specific Chapter 18C eligibility conclusion. It focuses on valuation methodology and the contribution scope described above.