DCF Studio

    1088.HK · HKG · Energy

    China Shenhua Energy Company Limited

    Also onConsensus Drift

    Implied value per share

    HKD 55.33

    Market price

    HKD 44.46

    Implied upside

    +24.5%

    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 11.7% of revenue against depreciation of 6.9%. 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 55.33+24.5%
    Exit multiple
    HKD 44.52+0.1%
    Market price
    HKD 44.46

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn22bn45bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 280.0bnCNY 265.9bnCNY 252.4bnCNY 239.7bnCNY 227.6bn-5.1%
    EBITCNY 73.6bnCNY 69.9bnCNY 66.4bnCNY 63.0bnCNY 59.9bn-5.1%
    NOPATCNY 61.5bnCNY 58.4bnCNY 55.4bnCNY 52.6bnCNY 50.0bn-5.1%
    Add depreciation & amortisationCNY 19.3bnCNY 18.3bnCNY 17.4bnCNY 16.5bnCNY 15.7bn-5.1%
    Less capital expenditureCNY -32.7bnCNY -31.0bnCNY -29.4bnCNY -28.0bnCNY -26.5bn-5.1%
    Less increase in working capitalCNY -3.5bnCNY -3.3bnCNY -3.2bnCNY -3.0bnCNY -2.8bn-5.1%
    Free cashflow to firmCNY 44.6bnCNY 42.4bnCNY 40.3bnCNY 38.2bnCNY 36.3bn-5.1%
    Discount factor0.96630.90230.84250.78670.7346-
    Present valueCNY 43.1bnCNY 38.3bnCNY 33.9bnCNY 30.1bnCNY 26.7bn-11.3%
    Present Value Of The ForecastCNY 172.0bn

    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
    Beta0.573Reported 0.363, pulled toward 1.0 (Blume)
    Cost of equity7.21%Risk-free + beta x equity risk premium
    Cost of debt5.01%Interest expense / average total debt
    Market capitalisationCNY 964.3bn96.1% of capital
    Total debtCNY 39.0bn3.9% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC7.09%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 47.26

    80% of EV

    Forecast FCFF, final year
    CNY 36.3bn
    Capex at depreciation, working capital in reinvestment
    CNY 51.1bn
    Less reinvestment at g/ROIC (15.3% of NOPAT)
    CNY -7.8bn
    Capitalised
    CNY 43.3bn
    ROIC (reported)
    16.3%
    Terminal value, undiscounted
    CNY 965.4bn
    Terminal value, discounted
    CNY 709.2bn
    Enterprise value
    CNY 881.2bn
    Less net debt
    CNY -57.8bn
    Equity value
    CNY 938.9bn

    Exit at 9.5x EBITDA

    Value per shareCNY 38.03

    75% of EV

    Terminal value, undiscounted
    CNY 715.7bn
    Terminal value, discounted
    CNY 525.7bn
    Enterprise value
    CNY 697.8bn
    Less net debt
    CNY -57.8bn
    Equity value
    CNY 755.5bn

    Spread between methods: 22%.

    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%
    5.09%64.6871.4380.7594.48116.79
    6.09%51.2954.8359.3465.2973.50
    7.09%42.7044.7647.2650.3654.30
    8.09%36.7138.0039.5041.2943.45
    9.09%32.3133.1534.1035.1936.48

    Outlined: this model. Green text: above today's price of 37.97. 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-5.1%-9.5%-4.5pp
    EBIT margin26.3%21.1%-5.2pp
    Discount rate7.1%8.3%+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.