Does the December share price for Geely Automobile Holdings Limited (HKG:175) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the expected future cash flows and discounting them to their present value. Our analysis will employ 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. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.
View our latest analysis for Geely Automobile Holdings
The Method
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 begin with, we have to get estimates of 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.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value:
10-year free cash flow (FCF) estimate
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
Levered FCF (CN¥, Millions) | CN¥9.46b | CN¥11.8b | CN¥13.0b | CN¥14.7b | CN¥15.9b | CN¥16.9b | CN¥17.8b | CN¥18.5b | CN¥19.1b | CN¥19.6b |
Growth Rate Estimate Source | Analyst x6 | Analyst x7 | Analyst x2 | Analyst x2 | Est @ 8.41% | Est @ 6.37% | Est @ 4.95% | Est @ 3.95% | Est @ 3.25% | Est @ 2.76% |
Present Value (CN¥, Millions) Discounted @ 11% | CN¥8.5k | CN¥9.7k | CN¥9.5k | CN¥9.8k | CN¥9.5k | CN¥9.2k | CN¥8.7k | CN¥8.2k | CN¥7.6k | CN¥7.1k |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = CN¥88b
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 1.6%. We discount the terminal cash flows to today's value at a cost of equity of 11%.
Terminal Value (TV)= FCF2032 × (1 + g) ÷ (r – g) = CN¥20b× (1 + 1.6%) ÷ (11%– 1.6%) = CN¥218b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= CN¥218b÷ ( 1 + 11%)10= CN¥79b
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¥166b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of HK$11.7, the company appears quite undervalued at a 37% 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:175 Discounted Cash Flow December 25th 2022
Important Assumptions
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own 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 Geely Automobile 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 11%, which is based on a levered beta of 1.436. 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 Geely Automobile Holdings
Strength - Debt is not viewed as a risk.
- Dividends are covered by earnings and cash flows.
- Dividend information for 175.
Weakness - Earnings declined over the past year.
- Dividend is low compared to the top 25% of dividend payers in the Auto market.
- Shareholders have been diluted in the past year.
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 - Revenue is forecast to grow slower than 20% per year.
- What else are analysts forecasting for 175?
Next Steps:
Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess 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 example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For Geely Automobile Holdings, we've compiled three pertinent factors you should further examine:
- Risks: Case in point, we've spotted 2 warning signs for Geely Automobile Holdings you should be aware of.
- Future Earnings: How does 175'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 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.
吉利汽车控股有限公司(HKG:175)12月份的股价反映了它的真实价值吗?今天,我们将通过获取预期的未来现金流并将其贴现到其现值来估计股票的内在价值。我们的分析将采用贴现现金流(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。对于那些热衷于学习股票分析的人来说,这里的Simply Wall St.分析模型可能会让你感兴趣。
查看我们对吉利汽车控股的最新分析
该方法
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,我们必须对未来十年的现金流进行估计。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。
贴现现金流就是这样一种想法,即未来的一美元不如现在的一美元有价值,因此这些未来现金流的总和就会贴现到今天的价值:
10年自由现金流(FCF)估计
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
杠杆FCF(CN元,百万元) | 净额94.6亿元 | CN元118亿元 | 净额13亿元 | 净额147亿元 | 净额159亿元 | 净额169亿元 | 净额178亿元 | CN元人民币185亿元 | 净额191亿元 | CN人民币196亿元 |
增长率预估来源 | 分析师x6 | 分析师x7 | 分析师x2 | 分析师x2 | Est@8.41% | Est@6.37% | Est@4.95% | Est@3.95% | Est@3.25% | Est@2.76% |
现值(CN元,百万)折现@11% | CN元8.5K | CN元9.7K | CN元9.5K | CN元9.8K | CN元9.5K | CN元9.2K元 | CN元8.7K | CN元8.2K | CN元7.6K元 | CN元7.1K |
(“EST”=Simply Wall St.预估的FCF成长率)
10年期现金流现值(PVCF)=CN元88亿元
在计算了最初10年内未来现金流的现值后,我们需要计算终止值,它考虑了第一阶段之后的所有未来现金流。戈登增长公式用于计算终端价值,其未来年增长率等于10年期政府债券收益率1.6%的5年平均水平。我们以11%的权益成本将终端现金流贴现到今天的价值。
终端值(TV)=FCF2032×(1+g)?(r-g)=CN元20B×(1+1.6%)?(11%-1.6%)=CN元218B
终值现值(PVTV)=TV/(1+r)10=CN元218B?(1+11%)10=790亿元
总价值是未来十年的现金流总和加上贴现的终端价值,得出总股权价值,在本例中为1660亿加元。在最后一步,我们用股本价值除以流通股的数量。与目前11.7港元的股价相比,该公司的估值似乎相当低,较目前的股价有37%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:175贴现现金流2022年12月25日
重要假设
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。投资的一部分是你自己对一家公司未来业绩的评估,所以你自己试一试计算,检查你自己的假设。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。鉴于我们将吉利汽车控股视为潜在股东,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11%,这是基于杠杆率为1.436的测试版。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。
吉利汽车控股的SWOT分析
接下来的步骤:
就构建你的投资论点而言,估值只是硬币的一面,它只是你需要为一家公司评估的众多因素之一。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,公司权益成本或无风险利率的变化可能会对估值产生重大影响。为什么内在价值高于当前股价?对于吉利汽车控股,我们整理了三个相关因素,你应该进一步研究一下:
- 风险:例如,我们已经发现了吉利汽车控股的2个警告信号你应该意识到。
- 未来收益:与同行和更广泛的市场相比,175的增长率如何?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。
- 其他高质量替代产品:你喜欢一个好的全能运动员吗?浏览我们的高质量股票互动列表,了解您可能会错过的其他股票!
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。
对这篇文章有什么反馈吗?担心内容吗? 保持联系直接与我们联系。或者,也可以给编辑组发电子邮件,地址是implywallst.com。
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。