DCF Studio

    0386.HK · HKG · Energy

    China Petroleum & Chemical Corporation

    Also onConsensus Drift

    Implied value per share

    HKD 1.00

    Market price

    HKD 4.51

    Implied upside

    -77.9%

    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.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 5.0% of revenue against depreciation of 3.8%. 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 1.00-77.9%
    Exit multiple
    HKD 0.57-87.4%
    Market price
    HKD 4.51

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    -20090022062-100450110310FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 2623.3bnCNY 2473.8bnCNY 2332.9bnCNY 2200.0bnCNY 2074.7bn-5.7%
    EBITCNY 63.6bnCNY 59.9bnCNY 56.5bnCNY 53.3bnCNY 50.3bn-5.7%
    NOPATCNY 53.1bnCNY 50.0bnCNY 47.2bnCNY 44.5bnCNY 42.0bn-5.7%
    Add depreciation & amortisationCNY 100.7bnCNY 95.0bnCNY 89.6bnCNY 84.5bnCNY 79.6bn-5.7%
    Less capital expenditureCNY -130.3bnCNY -122.9bnCNY -115.9bnCNY -109.3bnCNY -103.1bn-5.7%
    Less increase in working capitalCNY -43.5bnCNY -41.0bnCNY -38.7bnCNY -36.5bnCNY -34.4bn-5.7%
    Free cashflow to firmCNY -20.1bnCNY -18.9bnCNY -17.9bnCNY -16.8bnCNY -15.9bn+5.7%
    Discount factor0.97140.91670.86510.81630.7704-
    Present valueCNY -19.5bnCNY -17.4bnCNY -15.5bnCNY -13.8bnCNY -12.2bn+11.0%
    Present Value Of The ForecastCNY -78.3bn

    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
    Beta0.802Reported 0.704, pulled toward 1.0 (Blume)
    Cost of equity8.81%Risk-free + beta x equity risk premium
    Cost of debt3.66%Interest expense / average total debt
    Market capitalisationCNY 544.4bn50.6% of capital
    Total debtCNY 531.0bn49.4% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC5.97%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 0.85

    116% of EV

    Forecast FCFF, final year
    CNY -15.9bn
    Capex at depreciation, working capital in reinvestment
    CNY 42.0bn
    Less reinvestment at g/ROIC (41.7% of NOPAT)
    CNY -17.5bn
    Capitalised
    CNY 24.4bn
    ROIC (reported)
    6.0%
    Terminal value, undiscounted
    CNY 722.4bn
    Terminal value, discounted
    CNY 556.5bn
    Enterprise value
    CNY 478.2bn
    Less net debt
    CNY 374.8bn
    Equity value
    CNY 103.4bn

    Exit at 5.1x EBITDA

    Value per shareCNY 0.49

    118% of EV

    Terminal value, undiscounted
    CNY 664.6bn
    Terminal value, discounted
    CNY 512.0bn
    Enterprise value
    CNY 433.6bn
    Less net debt
    CNY 374.8bn
    Equity value
    CNY 58.8bn

    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%
    3.97%5.196.268.0511.6522.88
    4.97%2.352.622.983.514.40
    5.97%0.800.830.850.880.91
    6.97%-0.000.020.040.050.07
    7.97%-0.59-0.57-0.56-0.54-0.53

    Outlined: this model. Green text: above today's price of 3.85. 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 year-5.7%-0.2%+5.5pp
    EBIT margin2.4%3.6%+1.2pp
    Discount rate6.0%4.7%-1.3pp
    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.