DCF Studio

    0883.HK · HKG · Energy

    CNOOC Limited

    Also onConsensus Drift

    Implied value per share

    HKD 59.94

    Market price

    HKD 23.60

    Implied upside

    +154.0%

    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 27.0% of revenue against depreciation of 17.4%. 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 59.94+154.0%
    Exit multiple
    HKD 28.69+21.6%
    Market price
    HKD 23.60

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn51bn101bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 387.5bnCNY 377.0bnCNY 366.9bnCNY 357.0bnCNY 347.4bn-2.7%
    EBITCNY 169.4bnCNY 164.9bnCNY 160.4bnCNY 156.1bnCNY 151.9bn-2.7%
    NOPATCNY 141.5bnCNY 137.7bnCNY 134.0bnCNY 130.3bnCNY 126.8bn-2.7%
    Add depreciation & amortisationCNY 67.5bnCNY 65.7bnCNY 63.9bnCNY 62.2bnCNY 60.5bn-2.7%
    Less capital expenditureCNY -104.6bnCNY -101.8bnCNY -99.0bnCNY -96.3bnCNY -93.7bn-2.7%
    Less increase in working capitalCNY -3.0bnCNY -2.9bnCNY -2.8bnCNY -2.8bnCNY -2.7bn-2.7%
    Free cashflow to firmCNY 101.4bnCNY 98.7bnCNY 96.0bnCNY 93.4bnCNY 90.9bn-2.7%
    Discount factor0.96670.90330.84420.78880.7372-
    Present valueCNY 98.0bnCNY 89.1bnCNY 81.0bnCNY 73.7bnCNY 67.0bn-9.1%
    Present Value Of The ForecastCNY 408.9bn

    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
    Beta0.547Reported 0.324, pulled toward 1.0 (Blume)
    Cost of equity7.03%Risk-free + beta x equity risk premium
    Cost of debt8.05%Interest expense / average total debt
    Market capitalisationCNY 1121.7bn94.1% of capital
    Total debtCNY 69.8bn5.9% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC7.01%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 51.19

    82% of EV

    Forecast FCFF, final year
    CNY 90.9bn
    Capex at depreciation, working capital in reinvestment
    CNY 127.5bn
    Less reinvestment at g/ROIC (13.2% of NOPAT)
    CNY -16.9bn
    Capitalised
    CNY 110.7bn
    ROIC (reported)
    18.9%
    Terminal value, undiscounted
    CNY 2514.3bn
    Terminal value, discounted
    CNY 1853.4bn
    Enterprise value
    CNY 2262.3bn
    Less net debt
    CNY -170.9bn
    Equity value
    CNY 2433.2bn

    Exit at 3.7x EBITDA

    Value per shareCNY 24.51

    59% of EV

    Terminal value, undiscounted
    CNY 793.5bn
    Terminal value, discounted
    CNY 584.9bn
    Enterprise value
    CNY 993.8bn
    Less net debt
    CNY -170.9bn
    Equity value
    CNY 1164.7bn

    Spread between methods: 71%.

    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%
    5.01%69.8877.8088.84105.35132.73
    6.01%55.1259.3064.6571.7681.68
    7.01%45.7348.2051.1954.9359.71
    8.01%39.2440.8042.6344.8247.48
    9.01%34.4835.5136.7038.0739.69

    Outlined: this model. Green text: above today's price of 20.16. 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-2.7%-21.9%-19.2pp
    EBIT margin43.7%17.0%-26.7pp
    Discount rate7.0%15.7%+8.7pp
    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.