Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Shanghai Mechanical & Electrical Industry Co.,Ltd. (SHSE:600835) as an investment opportunity by projecting its future cash flows and then discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Don't get put off by the jargon, the math behind it is actually quite straightforward.
We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.
Check out our latest analysis for Shanghai Mechanical & Electrical IndustryLtd
What's The Estimated Valuation?
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. In the first stage we need to estimate the cash flows to the business over the next ten years. 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.
Generally we assume that a dollar today is more valuable than a dollar in the future, 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
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
Levered FCF (CN¥, Millions) | CN¥537.2m | CN¥506.0m | CN¥490.4m | CN¥484.6m | CN¥485.3m | CN¥490.5m | CN¥498.9m | CN¥509.8m | CN¥522.5m | CN¥536.7m |
Growth Rate Estimate Source | Est @ -9.67% | Est @ -5.79% | Est @ -3.08% | Est @ -1.19% | Est @ 0.14% | Est @ 1.07% | Est @ 1.72% | Est @ 2.18% | Est @ 2.5% | Est @ 2.72% |
Present Value (CN¥, Millions) Discounted @ 8.0% | CN¥497 | CN¥434 | CN¥389 | CN¥356 | CN¥330 | CN¥308 | CN¥290 | CN¥275 | CN¥261 | CN¥248 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = CN¥3.4b
After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 3.2%. We discount the terminal cash flows to today's value at a cost of equity of 8.0%.
Terminal Value (TV)= FCF2032 × (1 + g) ÷ (r – g) = CN¥537m× (1 + 3.2%) ÷ (8.0%– 3.2%) = CN¥12b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= CN¥12b÷ ( 1 + 8.0%)10= CN¥5.3b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is CN¥8.7b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of CN¥11.2, the company appears reasonably expensive 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.
SHSE:600835 Discounted Cash Flow September 27th 2022
The Assumptions
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual 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 Shanghai Mechanical & Electrical IndustryLtd 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 8.0%, which is based on a levered beta of 0.971. 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.
Looking Ahead:
Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Can we work out why the company is trading at a premium to intrinsic value? For Shanghai Mechanical & Electrical IndustryLtd, we've compiled three relevant items you should further examine:
- Risks: We feel that you should assess the 3 warning signs for Shanghai Mechanical & Electrical IndustryLtd we've flagged before making an investment in the company.
- Future Earnings: How does 600835'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. Simply Wall St updates its DCF calculation for every Chinese stock every day, so if you want to find the intrinsic value of any other stock just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
今天,我們將簡單介紹一種估值方法,該方法通過預測未來現金流並將其折現為今天的價值,來評估上海機電工業股份有限公司(上海證券交易所代碼:600835)作為投資機會的吸引力。實現這一點的一種方法是使用貼現現金流(DCF)模型。不要被行話嚇跑了,它背後的數學實際上是相當簡單的。
我們要提醒的是,對一家公司進行估值的方法有很多種,與貼現現金流一樣,每種方法在某些情況下都有優缺點。任何有興趣瞭解更多內在價值的人,都應該閲讀一下Simply Wall St.的分析模型。
查看我們對上海機電實業有限公司的最新分析
估計的估價是多少?
我們使用的是兩階段增長模型,也就是説,我們考慮了公司發展的兩個階段。在初期,公司可能有較高的增長率,而第二階段通常被假設為有一個穩定的增長率。在第一階段,我們需要估計未來十年為企業帶來的現金流。由於沒有分析師對自由現金流的估計,我們根據公司最近報告的價值推斷出了之前的自由現金流(FCF)。我們假設,自由現金流萎縮的公司將減緩收縮速度,而自由現金流增長的公司在這段時間內的增長速度將放緩。我們這樣做是為了反映出,增長在最初幾年往往比後來幾年放緩得更多。
一般來説,我們假設今天的一美元比未來的一美元更有價值,因此我們需要對這些未來現金流的總和進行貼現,以得出現值估計:
10年自由現金流(FCF)估計
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
槓桿FCF(CN元,百萬元) | CN元5.372億元 | CN元5.06億元 | CN元4.904億元 | CN元4.846億元 | CN元4.853億元 | CN元4.905億元 | 淨額4.989億元 | CN元5.098億元 | CN元5.225億元 | CN元5.367億元 |
增長率預估來源 | Est@-9.67% | Est@-5.79% | Est@-3.08% | Est@-1.19% | Est@0.14% | Est@1.07% | Est@1.72% | Est@2.18% | EST@2.5% | Est@2.72% |
現值(CN元,百萬元)貼現8.0% | CN元497元 | CN元434元 | CN元389元 | CN元356元 | CN元330元 | CN元308元 | CN元290元 | CN元275元 | CN元261元 | 人民幣248元 |
(“EST”=Simply Wall St.預估的FCF成長率)
10年期現金流現值(PVCF)=CN人民幣34億元
在計算了最初10年內未來現金流的現值後,我們需要計算終止值,它考慮了第一階段之後的所有未來現金流。戈登增長公式用於計算終端價值,其未來年增長率等於10年期政府債券收益率3.2%的5年平均水平。我們以8.0%的權益成本將終端現金流貼現到今天的價值。
終端值(TV)=FCF2032×(1+g)?(r-g)=CN元537M×(1+3.2%)?(8.0%-3.2%)=CN元12b
終值現值(PVTV)=TV/(1+r)10=CN元120億?(1+8.0%)10=CN人民幣53億元
那麼,總價值或股權價值就是未來現金流的現值之和,在這種情況下,現金流為87億加元。最後一步是將股權價值除以流通股數量。與目前11.2元的股價相比,在撰寫本文時,該公司似乎相當昂貴。然而,估值是不精確的工具,更像是一臺望遠鏡--移動幾度,就會到達另一個星系。一定要記住這一點。
上海證交所:600835貼現現金流2022年9月27日
假設
現在,貼現現金流最重要的投入是貼現率,當然還有實際現金流。您不必同意這些輸入,我建議您自己重新計算並使用它們。DCF也沒有考慮一個行業可能的週期性,也沒有考慮一家公司未來的資本要求,因此它沒有給出一家公司潛在業績的全貌。鑑於我們將上海機電工業股份有限公司視為潛在股東,股權成本被用作貼現率,而不是佔債務的資本成本(或加權平均資本成本,WACC)。在這個計算中,我們使用了8.0%,這是基於槓桿率為0.971的測試版。貝塔係數是衡量一隻股票相對於整個市場的波動性的指標。我們的貝塔係數來自全球可比公司的行業平均貝塔係數,強制限制在0.8到2.0之間,這是一個穩定業務的合理範圍。
展望未來:
儘管一家公司的估值很重要,但它不應該是你在研究一家公司時唯一考慮的指標。貼現現金流模型並不是一個完美的股票估值工具。相反,貼現現金流模型的最佳用途是測試某些假設和理論,看看它們是否會導致公司被低估或高估。例如,公司權益成本或無風險利率的變化可能會對估值產生重大影響。我們能弄清楚為什麼該公司的股價高於內在價值嗎?對於上海機電工業有限公司,我們已經整理了三個相關項目,您應該進一步檢查:
- 風險:我們認為您應該評估上海機電實業有限公司的3個警示標誌在投資這家公司之前,我們已經做了標記。
- 未來收益:600835的增長率與同行和更廣泛的市場相比如何?通過與我們的免費分析師增長預期圖表互動,更深入地挖掘分析師對未來幾年的共識數字。
- 其他穩固的企業:低債務、高股本回報率和良好的過去業績是強勁業務的基礎。為什麼不探索我們具有堅實商業基本面的股票的互動列表,看看是否有其他您可能沒有考慮過的公司!
PS.Simply Wall St.每天更新其針對每隻中國股票的貼現現金流計算,所以如果你想找到任何其他股票的內在價值,只需搜索此處。
對這篇文章有什麼反饋嗎?擔心內容嗎? 保持聯繫直接與我們聯繫。或者,也可以給編輯組發電子郵件,地址是implywallst.com。
本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。