DCF Studio

    1099.HK · HKG · Healthcare

    Sinopharm Group Co. Ltd.

    Also onConsensus Drift

    Implied value per share

    HKD 232.66

    Market price

    HKD 15.02

    Implied upside

    +1449.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · CNY model at 1.1708

    Wrong toolThis model values the shares at 15.5x the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedReports in CNY, trades in HKD. Modelled in CNY, converted at the end.
    AdjustedReported capital expenditure averages just 0.36% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.8%. 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 232.66+1449.0%
    Exit multiple
    HKD 48.02+219.7%
    Market price
    HKD 15.02

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn9bn19bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 583.1bnCNY 591.0bnCNY 599.1bnCNY 607.4bnCNY 615.7bn+1.4%
    EBITCNY 20.2bnCNY 20.4bnCNY 20.7bnCNY 21.0bnCNY 21.3bn+1.4%
    NOPATCNY 16.8bnCNY 17.1bnCNY 17.3bnCNY 17.5bnCNY 17.8bn+1.4%
    Add depreciation & amortisationCNY 4.4bnCNY 4.5bnCNY 4.6bnCNY 4.6bnCNY 4.7bn+1.4%
    Less capital expenditureCNY -5.8bnCNY -5.9bnCNY -6.0bnCNY -6.1bnCNY -6.2bn+1.4%
    Less increase in working capitalCNY 2.3bnCNY 2.4bnCNY 2.4bnCNY 2.4bnCNY 2.5bn-1.4%
    Free cashflow to firmCNY 17.8bnCNY 18.0bnCNY 18.3bnCNY 18.5bnCNY 18.8bn+1.4%
    Discount factor0.97770.93450.89330.85390.8162-
    Present valueCNY 17.4bnCNY 16.8bnCNY 16.3bnCNY 15.8bnCNY 15.3bn-3.1%
    Present Value Of The ForecastCNY 81.6bn

    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
    Beta0.623Reported 0.437, pulled toward 1.0 (Blume)
    Cost of equity7.56%Risk-free + beta x equity risk premium
    Cost of debt3.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationCNY 46.9bn39.8% of capital
    Total debtCNY 71.0bn60.2% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC4.62%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 198.72

    87% of EV

    Forecast FCFF, final year
    CNY 18.8bn
    Capex at depreciation, working capital in reinvestment
    CNY 18.1bn
    Less reinvestment at g/ROIC (21.9% of NOPAT)
    CNY -4.0bn
    Capitalised
    CNY 14.2bn
    ROIC (reported)
    11.4%
    Terminal value, undiscounted
    CNY 686.9bn
    Terminal value, discounted
    CNY 560.7bn
    Enterprise value
    CNY 642.3bn
    Less net debt
    CNY 22.2bn
    Equity value
    CNY 620.1bn

    Exit at 3.2x EBITDA

    Value per shareCNY 41.01

    46% of EV

    Terminal value, undiscounted
    CNY 83.9bn
    Terminal value, discounted
    CNY 68.5bn
    Enterprise value
    CNY 150.2bn
    Less net debt
    CNY 22.2bn
    Equity value
    CNY 128.0bn

    Spread between methods: 132%.

    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%
    2.62%429.40727.513589.13——
    3.62%226.24277.79375.34630.853083.33
    4.62%153.40171.77198.72242.22324.50
    5.62%115.90124.31135.35150.54172.82
    6.62%93.0397.36102.71109.48118.36

    Outlined: this model. Green text: above today's price of 12.83. 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 year1.4%-23.0%-24.4pp
    EBIT margin3.5%0.3%-3.2pp
    Discount rate4.6%33.9%+29.3pp
    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.