How far off is Xinyi Solar Holdings Limited (HKG:968) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the forecast future cash flows of the company and discounting them back to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Believe it or not, it's not too difficult to follow, as you'll see from our example!
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.
See our latest analysis for Xinyi Solar Holdings
Is Xinyi Solar Holdings Fairly Valued?
We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To start off with, we need to estimate the next ten years of cash flows. 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, 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 (HK$, Millions) | -HK$794.7m | HK$1.43b | HK$6.05b | HK$8.07b | HK$9.59b | HK$10.9b | HK$12.0b | HK$12.9b | HK$13.6b | HK$14.3b |
Growth Rate Estimate Source | Analyst x8 | Analyst x8 | Analyst x3 | Analyst x2 | Est @ 18.87% | Est @ 13.69% | Est @ 10.07% | Est @ 7.54% | Est @ 5.76% | Est @ 4.52% |
Present Value (HK$, Millions) Discounted @ 9.8% | -HK$724 | HK$1.2k | HK$4.6k | HK$5.5k | HK$6.0k | HK$6.2k | HK$6.2k | HK$6.1k | HK$5.9k | HK$5.6k |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = HK$47b
We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. 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 (1.6%) 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 9.8%.
Terminal Value (TV)= FCF2032 × (1 + g) ÷ (r – g) = HK$14b× (1 + 1.6%) ÷ (9.8%– 1.6%) = HK$177b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= HK$177b÷ ( 1 + 9.8%)10= HK$70b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is HK$116b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of HK$8.6, the company appears quite good value at a 35% 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.
SEHK:968 Discounted Cash Flow December 19th 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 Xinyi Solar Holdings 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 9.8%, which is based on a levered beta of 1.262. 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 Xinyi Solar Holdings
Strength - Debt is not viewed as a risk.
- Balance sheet summary for 968.
Weakness - Earnings declined over the past year.
- Dividend is low compared to the top 25% of dividend payers in the Semiconductor market.
Opportunity - Annual earnings are forecast to grow faster than the Hong Kong market.
- Trading below our estimate of fair value by more than 20%.
Threat - Paying a dividend but company has no free cash flows.
- See 968's dividend history.
Moving On:
Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For Xinyi Solar Holdings, there are three relevant items you should further research:
- Risks: As an example, we've found 1 warning sign for Xinyi Solar Holdings that you need to consider before investing here.
- Future Earnings: How does 968'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 Hong Kong 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.
信义光能控股有限公司(HKG:968)距离其内在价值还有多远?使用最新的财务数据,我们将通过将公司预测的未来现金流折现回今天的价值来看看股票的定价是否公平。实现这一点的一种方法是使用贴现现金流(DCF)模型。信不信由你,遵循它并不太难,正如您将从我们的示例中看到的那样!
不过请记住,有很多方法可以评估一家公司的价值,贴现现金流只是其中一种方法。任何有兴趣了解更多内在价值的人,都应该阅读一下Simply Wall St.的分析模型。
查看我们对信义光能控股的最新分析
信义光能控股的估值是否公允?
我们将使用两阶段贴现现金流模型,顾名思义,该模型考虑了两个增长阶段。第一阶段通常是一个较高的成长期,接近终值,在第二个“稳定增长”阶段捕捉到。首先,我们需要估计未来十年的现金流。在可能的情况下,我们使用分析师的估计,但当这些估计不可用时,我们会根据上次估计或报告的价值推断先前的自由现金流(FCF)。我们假设,自由现金流萎缩的公司将减缓收缩速度,而自由现金流增长的公司在这段时间内的增长速度将放缓。我们这样做是为了反映出,增长在最初几年往往比后来几年放缓得更多。
一般来说,我们假设今天的一美元比未来的一美元更有价值,因此我们需要对这些未来现金流的总和进行贴现,以得出现值估计:
10年自由现金流(FCF)估计
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
杠杆FCF(港币,百万元) | -7.947亿港元 | 港币14.3亿元 | 港币60.5亿元 | 80.7亿港元 | 港币95.9亿元 | 港币109亿元 | 港币120亿元 | 港币129亿元 | 港币136亿元 | 港币143亿元 |
增长率预估来源 | 分析师x8 | 分析师x8 | 分析师x3 | 分析师x2 | Est@18.87% | Est@13.69% | Est@10.07% | Est@7.54% | Est@5.76% | Est@4.52% |
现值(港币,百万元)贴现@9.8% | -港币724元 | 港币1.2万元 | 港币460万元 | 港币5.5万元 | 港币6.0K元 | 港币620万元 | 港币620万元 | 港币610万元 | 港币590万元 | 港币560万元 |
(“EST”=Simply Wall St.预估的FCF成长率)
10年期现金流现值(PVCF)=470亿港元
我们现在需要计算终端价值,它说明了这十年之后的所有未来现金流。出于一些原因,使用了一个非常保守的增长率,不能超过一个国家的国内生产总值增长率。在这种情况下,我们使用了10年期政府债券收益率的5年平均值(1.6%)来估计未来的增长。与10年“增长”期一样,我们使用9.8%的权益成本将未来现金流贴现至当前价值。
终端值(TV)=FCF2032×(1+g)?(r-g)=港币140亿×(1+1.6%)?(9.8%-1.6%)=港币1.77亿
终值现值(PVTV)=TV/(1+r)10=1,770亿港元?(1+9.8%)10=港币700亿元
那么,总价值或股权价值就是未来现金流的现值之和,在这种情况下,现金流为1160亿港元。最后一步是将股权价值除以流通股数量。相对于目前8.6港元的股价,该公司的价值似乎相当不错,较目前的股价有35%的折让。然而,估值是不精确的工具,更像是一台望远镜--移动几度,就会到达另一个星系。一定要记住这一点。
联交所:968贴现现金流量2022年12月19日
假设
现在,贴现现金流最重要的投入是贴现率,当然还有实际现金流。您不必同意这些输入,我建议您自己重新计算并使用它们。DCF也没有考虑一个行业可能的周期性,也没有考虑一家公司未来的资本要求,因此它没有给出一家公司潜在业绩的全貌。鉴于我们将信义光能控股视为潜在股东,股权成本被用作贴现率,而不是占债务的资本成本(或加权平均资本成本,WACC)。在这个计算中,我们使用了9.8%,这是基于杠杆率为1.262的测试值。贝塔系数是衡量一只股票相对于整个市场的波动性的指标。我们的贝塔系数来自全球可比公司的行业平均贝塔系数,强制限制在0.8到2.0之间,这是一个稳定业务的合理范围。
信义光能控股的SWOT分析
软肋 - 与半导体市场上前25%的股息支付者相比,股息很低。
下一步:
虽然很重要,但理想情况下,贴现现金流计算不会是你为一家公司仔细审查的唯一分析。贴现现金流模型并不是投资估值的全部。你最好应用不同的案例和假设,看看它们会如何影响公司的估值。例如,如果终端价值增长率稍有调整,可能会极大地改变整体结果。为什么内在价值高于当前股价?对于信义光能控股来说,有三个相关项目值得你进一步研究:
- 风险:举个例子,我们发现信义光能控股的1个警告标志你在这里投资之前需要考虑的问题。
- 未来收益:968的增长率与同行和更广泛的市场相比如何?通过与我们的免费分析师增长预期图表互动,更深入地挖掘分析师对未来几年的共识数字。
- 其他稳固的企业:低债务、高股本回报率和良好的过去业绩是强劲业务的基础。为什么不探索我们具有坚实商业基本面的股票的互动列表,看看是否有其他您可能没有考虑过的公司!
PS.Simply Wall St.每天更新每只香港股票的贴现现金流计算,所以如果你想找出任何其他股票的内在价值,只需搜索此处。
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本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。