DCF Studio

    0241.HK · HKG · Healthcare

    Alibaba Health Information Technology Limited

    Also onConsensus Drift

    Implied value per share

    HKD 1.32

    Market price

    HKD 3.06

    Implied upside

    -56.8%

    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.
    AdjustedReported capital expenditure averages just 0.05% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.2%. 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.

    Current EV/EBITDA of 20.3x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    HKD 1.32-56.8%
    Exit multiple
    HKD 2.32-24.3%
    Market price
    HKD 3.06

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0m103m207mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayCNY
    LineFY27FY28FY29FY30FY31CAGR
    RevenueCNY 37.2bnCNY 40.4bnCNY 43.8bnCNY 47.6bnCNY 51.7bn+8.6%
    EBITCNY 1.3bnCNY 1.4bnCNY 1.5bnCNY 1.6bnCNY 1.7bn+8.6%
    NOPATCNY 1.2bnCNY 1.3bnCNY 1.4bnCNY 1.5bnCNY 1.6bn+8.6%
    Add depreciation & amortisationCNY 72.6mCNY 78.8mCNY 85.5mCNY 92.9mCNY 100.8m+8.6%
    Less capital expenditureCNY -371.9mCNY -403.8mCNY -438.4mCNY -476.0mCNY -516.9m+8.6%
    Less increase in working capitalCNY -717.9mCNY -779.5mCNY -846.3mCNY -918.9mCNY -997.7m+8.6%
    Free cashflow to firmCNY 148.7mCNY 161.5mCNY 175.3mCNY 190.4mCNY 206.7m+8.6%
    Discount factor0.94080.83280.73710.65250.5776-
    Present valueCNY 139.9mCNY 134.5mCNY 129.2mCNY 124.2mCNY 119.4m-3.9%
    Present Value Of The ForecastCNY 647.2m

    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
    Beta1.398Reported 1.594, pulled toward 1.0 (Blume)
    Cost of equity12.99%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 49.6bn99.9% of capital
    Total debtCNY 59.8m0.1% of capital, book value as a proxy
    Tax rate7.1%Effective, capped at statutory
    WACC12.97%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 1.13

    92% of EV

    Forecast FCFF, final year
    CNY 206.7m
    Capex at depreciation, working capital in reinvestment
    CNY 1.6bn
    Less reinvestment at g/ROIC (19.3% of NOPAT)
    CNY -317.6m
    Capitalised
    CNY 1.3bn
    ROIC (WACC floor)
    13.0%
    Terminal value, undiscounted
    CNY 13.0bn
    Terminal value, discounted
    CNY 7.5bn
    Enterprise value
    CNY 8.2bn
    Less net debt
    CNY -10.1bn
    Equity value
    CNY 18.3bn

    Exit at 20.0x EBITDA

    Value per shareCNY 1.98

    97% of EV

    Terminal value, undiscounted
    CNY 36.9bn
    Terminal value, discounted
    CNY 21.3bn
    Enterprise value
    CNY 22.0bn
    Less net debt
    CNY -10.1bn
    Equity value
    CNY 32.1bn

    Spread between methods: 55%.

    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%
    10.97%1.261.261.261.271.27
    11.97%1.181.191.191.191.20
    12.97%1.131.131.131.131.13
    13.97%1.071.081.081.081.08
    14.97%1.031.031.041.041.04

    Outlined: this model. Green text: above today's price of 2.62. 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
    EBIT margin3.4%9.9%+6.5pp
    Discount rate13.0%5.2%-7.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.