DCF Studio

    1093.HK · HKG · Healthcare

    CSPC Pharmaceutical Group Limited

    Also onConsensus Drift

    Implied value per share

    HKD 5.20

    Market price

    HKD 8.93

    Implied upside

    -41.7%

    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 8.2% of revenue against depreciation of 4.2%. 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.

    Value Per Share

    Perpetuity growth
    HKD 5.20-41.7%
    Exit multiple
    HKD 7.64-14.4%
    Market price
    HKD 8.93

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 24.5bnCNY 23.2bnCNY 21.9bnCNY 20.6bnCNY 19.5bn-5.6%
    EBITCNY 4.9bnCNY 4.6bnCNY 4.3bnCNY 4.1bnCNY 3.9bn-5.6%
    NOPATCNY 4.1bnCNY 3.8bnCNY 3.6bnCNY 3.4bnCNY 3.2bn-5.6%
    Add depreciation & amortisationCNY 1.0bnCNY 983.9mCNY 928.6mCNY 876.3mCNY 827.1m-5.6%
    Less capital expenditureCNY -2.0bnCNY -1.9bnCNY -1.8bnCNY -1.7bnCNY -1.6bn-5.6%
    Less increase in working capitalCNY 554.2mCNY 523.0mCNY 493.6mCNY 465.8mCNY 439.6m+5.6%
    Free cashflow to firmCNY 3.6bnCNY 3.4bnCNY 3.2bnCNY 3.1bnCNY 2.9bn-5.6%
    Discount factor0.95760.87810.80520.73840.6771-
    Present valueCNY 3.5bnCNY 3.0bnCNY 2.6bnCNY 2.3bnCNY 2.0bn-13.5%
    Present Value Of The ForecastCNY 13.3bn

    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
    Beta0.839Reported 0.760, pulled toward 1.0 (Blume)
    Cost of equity9.07%Risk-free + beta x equity risk premium
    Cost of debt6.72%Interest expense / average total debt
    Market capitalisationCNY 101.9bn99.4% of capital
    Total debtCNY 641.1m0.6% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC9.05%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 4.45

    69% of EV

    Forecast FCFF, final year
    CNY 2.9bn
    Capex at depreciation, working capital in reinvestment
    CNY 3.3bn
    Less reinvestment at g/ROIC (15.9% of NOPAT)
    CNY -522.6m
    Capitalised
    CNY 2.8bn
    ROIC (reported)
    15.7%
    Terminal value, undiscounted
    CNY 43.2bn
    Terminal value, discounted
    CNY 29.2bn
    Enterprise value
    CNY 42.6bn
    Less net debt
    CNY -8.2bn
    Equity value
    CNY 50.8bn

    Exit at 16.7x EBITDA

    Value per shareCNY 6.53

    80% of EV

    Terminal value, undiscounted
    CNY 78.3bn
    Terminal value, discounted
    CNY 53.0bn
    Enterprise value
    CNY 66.3bn
    Less net debt
    CNY -8.2bn
    Equity value
    CNY 74.6bn

    Spread between methods: 38%.

    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%
    7.05%5.435.665.946.286.72
    8.05%4.754.895.065.265.49
    9.05%4.254.344.454.564.70
    10.05%3.873.933.994.074.16
    11.05%3.563.603.653.703.75

    Outlined: this model. Green text: above today's price of 7.63. 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-5.6%11.2%+16.8pp
    EBIT margin19.8%36.3%+16.5pp
    Discount rate9.1%5.9%-3.2pp
    Download as Excel

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