DCF Studio

    0881.HK · HKG · Consumer Cyclical

    Zhongsheng Group Holdings Limited

    Also onConsensus Drift

    Implied value per share

    HKD 7.59

    Market price

    HKD 3.16

    Implied upside

    +140.3%

    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.
    NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    HKD 7.59+140.3%
    Exit multiple
    HKD 19.13+505.5%
    Market price
    HKD 3.16

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    -144439607-722198030FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 159.6bnCNY 154.8bnCNY 150.3bnCNY 145.8bnCNY 141.5bn-3.0%
    EBITCNY 2.1bnCNY 2.0bnCNY 1.9bnCNY 1.9bnCNY 1.8bn-3.0%
    NOPATCNY 1.7bnCNY 1.7bnCNY 1.6bnCNY 1.6bnCNY 1.5bn-3.0%
    Add depreciation & amortisationCNY 2.5bnCNY 2.4bnCNY 2.3bnCNY 2.3bnCNY 2.2bn-3.0%
    Less capital expenditureCNY -2.8bnCNY -2.7bnCNY -2.6bnCNY -2.5bnCNY -2.4bn-3.0%
    Less increase in working capitalCNY -1.6bnCNY -1.5bnCNY -1.5bnCNY -1.5bnCNY -1.4bn-3.0%
    Free cashflow to firmCNY -144.4mCNY -140.2mCNY -136.0mCNY -132.0mCNY -128.1m+3.0%
    Discount factor0.97820.93610.89580.85720.8203-
    Present valueCNY -141.3mCNY -131.2mCNY -121.9mCNY -113.2mCNY -105.1m+7.1%
    Present Value Of The ForecastCNY -612.7m

    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
    Beta0.926Reported 0.890, pulled toward 1.0 (Blume)
    Cost of equity9.68%Risk-free + beta x equity risk premium
    Cost of debt4.05%Interest expense / average total debt
    Market capitalisationCNY 7.5bn17.8% of capital
    Total debtCNY 34.7bn82.2% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC4.50%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 6.49

    102% of EV

    Forecast FCFF, final year
    CNY -128.1m
    Capex at depreciation, working capital in reinvestment
    CNY 1.9bn
    Less reinvestment at g/ROIC (55.6% of NOPAT)
    CNY -1.0bn
    Capitalised
    CNY 832.1m
    ROIC (WACC floor)
    4.5%
    Terminal value, undiscounted
    CNY 42.7bn
    Terminal value, discounted
    CNY 35.0bn
    Enterprise value
    CNY 34.4bn
    Less net debt
    CNY 19.0bn
    Equity value
    CNY 15.4bn

    Exit at 17.7x EBITDA

    Value per shareCNY 16.34

    101% of EV

    Terminal value, undiscounted
    CNY 71.1bn
    Terminal value, discounted
    CNY 58.3bn
    Enterprise value
    CNY 57.7bn
    Less net debt
    CNY 19.0bn
    Equity value
    CNY 38.7bn

    Spread between methods: 86%.

    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%
    2.50%36.2963.10———
    3.50%13.0414.4617.2125.32—
    4.50%6.346.416.496.566.63
    5.50%3.183.243.303.353.41
    6.50%1.021.061.111.161.20

    Outlined: this model. Green text: above today's price of 2.70. 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-3.0%-5.2%-2.3pp
    EBIT margin1.3%1.0%-0.3pp
    Discount rate4.5%5.7%+1.2pp
    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.