Key Insights
China BlueChemical's estimated fair value is HK$1.77 based on 2 Stage Free Cash Flow to Equity
China BlueChemical's HK$1.82 share price indicates it is trading at similar levels as its fair value estimate
China BlueChemical's peers seem to be trading at a higher premium to fair value based onthe industry average of -42%
In this article we are going to estimate the intrinsic value of China BlueChemical Ltd. (HKG:3983) by taking the expected future cash flows and discounting them to their present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine.
Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.
Check out our latest analysis for China BlueChemical
Crunching The Numbers
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To begin with, we have to get estimates of the next ten years of cash flows. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:
10-year free cash flow (FCF) estimate
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 |
Levered FCF (CN¥, Millions) | CN¥655.4m | CN¥592.3m | CN¥555.8m | CN¥534.9m | CN¥523.9m | CN¥519.3m | CN¥519.0m | CN¥521.7m | CN¥526.6m | CN¥533.0m |
Growth Rate Estimate Source | Est @ -14.55% | Est @ -9.62% | Est @ -6.17% | Est @ -3.76% | Est @ -2.06% | Est @ -0.88% | Est @ -0.05% | Est @ 0.53% | Est @ 0.93% | Est @ 1.22% |
Present Value (CN¥, Millions) Discounted @ 8.2% | CN¥606 | CN¥506 | CN¥439 | CN¥391 | CN¥354 | CN¥324 | CN¥300 | CN¥278 | CN¥260 | CN¥243 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = CN¥3.7b
The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (1.9%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.2%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = CN¥533m× (1 + 1.9%) ÷ (8.2%– 1.9%) = CN¥8.6b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= CN¥8.6b÷ ( 1 + 8.2%)10= CN¥3.9b
The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is CN¥7.6b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of HK$1.8, the company appears around fair value at the time of writing. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind.
SEHK:3983 Discounted Cash Flow October 19th 2023
The Assumptions
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at China BlueChemical as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.2%, which is based on a levered beta of 1.036. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
SWOT Analysis for China BlueChemical
Strength
Weakness
Opportunity
Threat
Moving On:
Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For China BlueChemical, there are three important factors you should assess:
Risks: For example, we've discovered 3 warning signs for China BlueChemical (2 are potentially serious!) that you should be aware of before investing here.
Future Earnings: How does 3983's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SEHK every day. If you want to find the calculation for other stocks just search here.
關鍵見解
中國藍化學(China BlueChemical)的估計公允價值爲1.77港元(按兩階段股權自由現金流計算)
China BlueChemical的1.82港元股價顯示,其交易價格與其公允價值估計相似
根據-42%的行業平均水平,中藍化學的同行似乎以比公允價值更高的溢價進行交易
在本文中,我們將通過計算預期的未來現金流並將其貼現爲現值來估算中海石油化工有限公司(HKG: 3983)的內在價值。折扣現金流 (DCF) 模型是我們將用來實現這一目標的工具。在你認爲自己無法理解之前,請繼續閱讀吧!實際上,它比你想象的要簡單得多。
公司可以通過多種方式獲得估值,因此我們要指出,DCF並不適合所有情況。對於那些熱衷於股票分析的人來說,這裏的Simply Wall St分析模型可能會引起你的興趣。
查看我們對 China BlueChemical 的最新分析
計算數字
我們使用的是兩階段增長模型,這只是意味着我們考慮了公司增長的兩個階段。在初始階段,公司的增長率可能更高,通常假設第二階段的增長率穩定。首先,我們必須對未來十年的現金流進行估計。鑑於我們沒有分析師對自由現金流的估計,因此我們從公司上次報告的價值中推斷了之前的自由現金流(FCF)。我們假設,在此期間,自由現金流萎縮的公司將減緩萎縮速度,而自由現金流不斷增長的公司的增長率將放緩。我們這樣做是爲了反映,最初幾年的增長放緩幅度往往比後來的幾年更大。
DCF 完全是指未來一美元的價值低於今天的一美元,因此我們需要折扣這些未來現金流的總和才能得出現值估計值:
10 年自由現金流 (FCF) 估計
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 |
Levered FCF (CN¥, Millions) | CN¥655.4m | CN¥592.3m | CN¥555.8m | CN¥534.9m | CN¥523.9m | CN¥519.3m | CN¥519.0m | CN¥521.7m | CN¥526.6m | CN¥533.0m |
Growth Rate Estimate Source | Est @ -14.55% | Est @ -9.62% | Est @ -6.17% | Est @ -3.76% | Est @ -2.06% | Est @ -0.88% | Est @ -0.05% | Est @ 0.53% | Est @ 0.93% | Est @ 1.22% |
Present Value (CN¥, Millions) Discounted @ 8.2% | CN¥606 | CN¥506 | CN¥439 | CN¥391 | CN¥354 | CN¥324 | CN¥300 | CN¥278 | CN¥260 | CN¥243 |
(“Est” = Simply Wall St估計的FCF增長率)
10年期現金流(PVCF)的現值 = CN¥37b
第二階段也稱爲終端價值,這是第一階段之後的業務現金流。出於多種原因,使用了非常保守的增長率,不能超過一個國家的GDP增長率。在本例中,我們使用了10年期國債收益率的5年平均值(1.9%)來估計未來的增長。與10年 “增長” 期相同,我們使用8.2%的權益成本將未來的現金流折現爲今天的價值。
終端價值 (TV)= FCF2033 × (1 + g) ε (r — g) = cn¥533m× (1 + 1.9%) ε (8.2% — 1.9%) = cn¥8.6b
終端價值的現值 (PVTV)= 電視/ (1 + r) 10= cn¥8.6bε (1 + 8.2%) 10= cn¥3.9b
總價值是未來十年的現金流之和加上貼現的最終價值,由此得出總權益價值,在本例中爲人民幣76億元。爲了得出每股的內在價值,我們將其除以已發行股票總數。相對於目前的1.8港元股價,該公司在撰寫本文時似乎接近公允價值。但是,估值是不精確的工具,就像望遠鏡一樣——移動幾度然後最終進入另一個星系。一定要記住這一點。
香港聯交所:3983 貼現現金流 2023 年 10 月 19 日
假設
上面的計算在很大程度上取決於兩個假設。第一個是貼現率,另一個是現金流。你不必同意這些輸入,我建議你自己重做計算然後試一試。DCF也沒有考慮一個行業可能的週期性或公司未來的資本需求,因此它沒有全面反映公司的潛在業績。鑑於我們將中海石油化工視爲潛在股東,因此權益成本被用作貼現率,而不是考慮債務的資本成本(或加權平均資本成本,WACC)。在此計算中,我們使用了8.2%,這是基於1.036的槓桿貝塔值。Beta是衡量股票與整個市場相比的波動率的指標。我們的beta值來自全球可比公司的行業平均貝塔值,其限制在0.8至2.0之間,這對於穩定的業務來說是一個合理的區間。
中海藍化工 SWOT 分析
力量
弱點
機會
威脅
繼續前進:
儘管很重要,但差價合約計算只是公司需要評估的衆多因素之一。使用 DCF 模型不可能獲得萬無一失的估值。相反,它應該被視爲 “這隻股票被低估/高估需要哪些假設是正確的?” 的指南例如,公司股本成本或無風險利率的變化可能會對估值產生重大影響。對於 China BlueChemical 來說,你應該評估三個重要因素:
風險: 例如,我們發現了 中海藍化工 3 個警告信號 (2 可能很嚴重!)在這裏投資之前你應該意識到這一點。
未來收益: 與同行和整個市場相比,3983的增長率如何?通過與我們的免費分析師增長預期圖表互動,更深入地了解未來幾年的分析師共識數字。
其他穩健的業務: 低債務、高股本回報率和良好的過往表現是強勁業務的基礎。爲什麼不瀏覽我們的互動式具有堅實商業基礎的股票清單,看看是否還有其他公司你可能沒有考慮過!
PS。Simply Wall St應用程序每天對聯交所的每隻股票進行折扣現金流估值。如果您想找到其他股票的計算結果,請在此處搜索。