The projected fair value for JA Solar Technology is CN¥21.38 based on 2 Stage Free Cash Flow to Equity
Current share price of CN¥13.71 suggests JA Solar Technology is potentially 36% undervalued
Analyst price target for 2459 is CN¥19.62 which is 8.3% below our fair value estimate
In this article we are going to estimate the intrinsic value of JA Solar Technology Co., Ltd. (SZSE:002459) by taking the forecast future cash flows of the company and discounting them back to today's value. Our analysis will employ the Discounted Cash Flow (DCF) model. 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. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.
The Model
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. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or 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, and so the sum of these future cash flows is then discounted to today's value:
10-year free cash flow (FCF) forecast
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
Levered FCF (CN¥, Millions)
-CN¥4.26b
-CN¥709.5m
CN¥7.03b
CN¥8.00b
CN¥8.73b
CN¥9.36b
CN¥9.92b
CN¥10.4b
CN¥10.9b
CN¥11.3b
Growth Rate Estimate Source
Analyst x1
Analyst x4
Analyst x1
Analyst x1
Est @ 9.13%
Est @ 7.26%
Est @ 5.95%
Est @ 5.04%
Est @ 4.40%
Est @ 3.95%
Present Value (CN¥, Millions) Discounted @ 12%
-CN¥3.8k
-CN¥563
CN¥5.0k
CN¥5.0k
CN¥4.9k
CN¥4.7k
CN¥4.4k
CN¥4.1k
CN¥3.8k
CN¥3.6k
("Est" = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = CN¥31b
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 (2.9%) 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 12%.
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= CN¥124b÷ ( 1 + 12%)10= CN¥39b
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¥70b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of CN¥13.7, the company appears quite good value at a 36% discount to where the stock price trades currently. 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.
Important Assumptions
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. 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 JA Solar Technology 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 12%, which is based on a levered beta of 1.661. 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 JA Solar Technology
Strength
Debt is not viewed as a risk.
Dividend is in the top 25% of dividend payers in the market.
Dividend information for 002459.
Weakness
Earnings declined over the past year.
Opportunity
Annual earnings are forecast to grow faster than the Chinese market.
Good value based on P/E ratio and estimated fair value.
Threat
Paying a dividend but company has no free cash flows.
Revenue is forecast to grow slower than 20% per year.
See 002459's dividend history.
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. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. What is the reason for the share price sitting below the intrinsic value? For JA Solar Technology, we've compiled three further aspects you should explore:
Risks: Take risks, for example - JA Solar Technology has 3 warning signs (and 1 which is potentially serious) we think you should know about.
Future Earnings: How does 002459'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 High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
キーインサイト
JA Solar Technologyの予想株価は、2ステージフリーキャッシュフローに基づいてCN¥21.38であります。
現在の株価CN¥13.71が示すところによれば、JA Solar Technologyは潜在的に36%下落している。
アナリストの株価目標2459は、我々の公正価値評価の8.3%下回るCN¥19.62です。
この記事では、JA Solar Technology Co.、Ltd.(SZSE:002459)の内在価値を、会社の将来のキャッシュフローを予測し、現在の価値に割引して評価することによって評価します。私たちの分析では、割引キャッシュフローモデル(DCF)を採用します。理解できないと思う前に、続けて読んでください。実際、あなたが想像するよりも遥かに複雑ではありません。
上記の計算は2つの前提条件に大きく依存しています。一つ目は割引率で、もう一つはキャッシュフローです。この結果に同意しない場合は、自分で計算をして前提条件を調整してみてください。DCFは業種のサイクリカル性や企業の将来の資本需要を考慮していないため、企業の潜在的なパフォーマンスを完全に描写するものではありません。JA Solar Technologyをポテンシャルな株主として見ているため、割引率には株式のコストが含まれ、負債を考慮した資本コスト(または加重平均資本コスト、WACC)ではありません。この計算では、1.661のレバレッジベータに基づく12%を使用しています。ベータとは、株式の市場全体に対するボラティリティを示す指標です。私たちは、グローバルに比較可能な他社の業界平均ベータからベータを取得しました。範囲は0.8から2.0の間で、安定したビジネスにとって合理的な範囲です。
JA Solar TechnologyのSWOT分析
強み
負債はリスクとして見られていません。
配当は市場の配当支払い企業の上位25%に入ります。
002459の配当情報
弱み
過去1年間の収益は減少しました。
機会
年間収益が中国市場よりも速く成長すると予想されている。
P/E比と見積もり公正価値に基づいて、よい価値があります。
脅威
配当を支払っていますが、自由現金流がありません。
売上高は年間20%以下で成長する見込みです。
002459の配当履歴を参照してください。
今後に向けて:
企業の評価が重要であるとしても、研究する際にはそれだけを見るべきではありません。DCFモデルは完全な株式評価ツールではありません。可能な限り異なるシナリオや前提条件を適用し、企業の評価にどのように影響するかを確認することが理想的です。たとえば、企業の株式のコストやリスクフリーレートの変化が、評価に重大な影響を与える可能性があります。企業の株価が内在価値以下になる理由は何ですか?JA Solar Technologyの場合、探索すべき3つの別の面があります。
リスク:JA Solar Technologyには3つの警告サイン(そして1つは潜在的に深刻なもの)があります。知っておくべきだと思います。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。