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.
吉利汽車控股有限公司(HKG:175)12月份的股價反映了它的真實價值嗎?今天,我們將通過獲取預期的未來現金流並將其貼現到其現值來估計股票的內在價值。我們的分析將採用貼現現金流(DCF)模型。信不信由你,遵循它並不太難,正如您將從我們的示例中看到的那樣!
不過請記住,有很多方法可以評估一家公司的價值,貼現現金流只是其中一種方法。對於那些熱衷於學習股票分析的人來説,這裏的Simply Wall St.分析模型可能會讓你感興趣。
查看我們對吉利汽車控股的最新分析
該方法
我們將使用兩階段貼現現金流模型,顧名思義,該模型考慮了兩個增長階段。第一階段通常是一個較高的成長期,接近終值,在第二個“穩定增長”階段捕捉到。首先,我們必須對未來十年的現金流進行估計。在可能的情況下,我們使用分析師的估計,但當這些估計不可用時,我們會根據上次估計或報告的價值推斷先前的自由現金流(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。
貼現現金流就是這樣一種想法,即未來的一美元不如現在的一美元有價值,因此這些未來現金流的總和就會貼現到今天的價值:
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) | 淨額94.6億元 | CN元118億元 | 淨額13億元 | 淨額147億元 | 淨額159億元 | 淨額169億元 | 淨額178億元 | CN元人民幣185億元 | 淨額191億元 | CN人民幣196億元 |
增長率預估來源 | 分析師x6 | 分析師x7 | 分析師x2 | 分析師x2 | Est@8.41% | Est@6.37% | Est@4.95% | Est@3.95% | Est@3.25% | Est@2.76% |
現值(CN元,百萬)折現@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.預估的FCF成長率)
10年期現金流現值(PVCF)=CN元88億元
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1.6%的5年平均水平。我們以11%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20B×(1+1.6%)?(11%-1.6%)=CN元218B
終值現值(PVTV)=TV/(1+r)10=CN元218B?(1+11%)10=790億元
總價值是未來十年的現金流總和加上貼現的終端價值,得出總股權價值,在本例中為1660億加元。在最後一步,我們用股本價值除以流通股的數量。與目前11.7港元的股價相比,該公司的估值似乎相當低,較目前的股價有37%的折讓。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。
聯交所:175貼現現金流2022年12月25日
重要假設
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。投資的一部分是你自己對一家公司未來業績的評估,所以你自己試一試計算,檢查你自己的假設。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。鑑於我們將吉利汽車控股視為潛在股東,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11%,這是基於槓桿率為1.436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。
吉利汽車控股的SWOT分析
接下來的步驟:
就構建你的投資論點而言,估值只是硬幣的一面,它只是你需要為一家公司評估的眾多因素之一。貼現現金流模型並不是投資估值的全部。你最好應用不同的案例和假設,看看它們會如何影響公司的估值。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。為什麼內在價值高於當前股價?對於吉利汽車控股,我們整理了三個相關因素,你應該進一步研究一下:
- 風險:例如,我們已經發現了吉利汽車控股的2個警告信號你應該意識到。
- 未來收益:與同行和更廣泛的市場相比,175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,更深入地挖掘分析師對未來幾年的共識數字。
- 其他高質量替代產品:你喜歡一個好的全能運動員嗎?瀏覽我們的高質量股票互動列表,瞭解您可能會錯過的其他股票!
PS.Simply Wall St.每天更新每隻香港股票的貼現現金流計算,所以如果你想找出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。