DCF Studio

    0175.HK · HKG · Consumer Cyclical

    Geely Automobile Holdings Limited

    Also onConsensus Drift

    Implied value per share

    HKD 73.98

    Market price

    HKD 15.94

    Implied upside

    +364.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · CNY model at 1.1708

    AdjustedReports in CNY, trades in HKD. Modelled in CNY, converted at the end.
    AdjustedCapital expenditure runs at 6.7% of revenue against depreciation of 4.9%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    HKD 73.98+364.1%
    Exit multiple
    HKD 77.79+388.0%
    Market price
    HKD 15.94

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn50bn101bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 457.9bnCNY 607.3bnCNY 805.5bnCNY 1068.4bnCNY 1417.0bn+32.6%
    EBITCNY 11.6bnCNY 15.4bnCNY 20.4bnCNY 27.1bnCNY 35.9bn+32.6%
    NOPATCNY 11.0bnCNY 14.6bnCNY 19.4bnCNY 25.7bnCNY 34.0bn+32.6%
    Add depreciation & amortisationCNY 22.7bnCNY 30.1bnCNY 39.9bnCNY 52.9bnCNY 70.1bn+32.6%
    Less capital expenditureCNY -30.7bnCNY -40.8bnCNY -54.1bnCNY -71.7bnCNY -95.1bn+32.6%
    Less increase in working capitalCNY 29.7bnCNY 39.4bnCNY 52.3bnCNY 69.3bnCNY 91.9bn-32.6%
    Free cashflow to firmCNY 32.6bnCNY 43.3bnCNY 57.4bnCNY 76.1bnCNY 101.0bn+32.6%
    Discount factor0.96740.90540.84730.79300.7421-
    Present valueCNY 31.6bnCNY 39.2bnCNY 48.6bnCNY 60.4bnCNY 74.9bn+24.1%
    Present Value Of The ForecastCNY 254.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.20%HKD assumption - no free live source available for this market (assumption)
    Equity risk premium7.00%Market assumption
    Beta0.660Reported 0.493, pulled toward 1.0 (Blume)
    Cost of equity7.82%Risk-free + beta x equity risk premium
    Cost of debt3.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationCNY 171.9bn79.7% of capital
    Total debtCNY 43.7bn20.3% of capital, book value as a proxy
    Tax rate5.3%Effective, capped at statutory
    WACC6.85%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareCNY 63.19

    60% of EV

    Forecast FCFF, final year
    CNY 101.0bn
    Capex at depreciation, working capital in reinvestment
    CNY 34.0bn
    Less reinvestment at g/ROIC (36.5% of NOPAT)
    CNY -12.4bn
    Capitalised
    CNY 21.6bn
    ROIC (WACC floor)
    6.9%
    Terminal value, undiscounted
    CNY 509.3bn
    Terminal value, discounted
    CNY 378.0bn
    Enterprise value
    CNY 632.6bn
    Less net debt
    CNY -21.6bn
    Equity value
    CNY 654.2bn

    Exit at 5.2x EBITDA

    Value per shareCNY 66.45

    62% of EV

    Terminal value, undiscounted
    CNY 554.7bn
    Terminal value, discounted
    CNY 411.7bn
    Enterprise value
    CNY 666.3bn
    Less net debt
    CNY -21.6bn
    Equity value
    CNY 688.0bn

    Spread between methods: 5%.

    Sensitivity

    Value per share (CNY) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.85%85.5386.8788.6791.3095.71
    5.85%71.5371.7571.9672.1872.40
    6.85%62.8363.0163.1963.3763.55
    7.85%56.2756.4256.5756.7256.87
    8.85%51.1351.2651.3951.5151.64

    Outlined: this model. Green text: above today's price of 13.61. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year32.6%2.0%-30.7pp
    EBIT margin2.5%-1.5%-4.0pp
    Discount rate6.9%48.9%+42.1pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.