DCF Studio

    1810.HK · HKG · Technology

    Xiaomi Corporation

    Also onConsensus Drift

    Implied value per share

    HKD 22.70

    Market price

    HKD 26.40

    Implied upside

    -14.0%

    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 2.3% of revenue against depreciation of 1.7%. 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 22.70-14.0%
    Exit multiple
    HKD 37.40+41.7%
    Market price
    HKD 26.40

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn7bn15bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 538.5bnCNY 634.1bnCNY 746.7bnCNY 879.3bnCNY 1035.4bn+17.8%
    EBITCNY 28.1bnCNY 33.1bnCNY 39.0bnCNY 45.9bnCNY 54.0bn+17.8%
    NOPATCNY 23.5bnCNY 27.6bnCNY 32.5bnCNY 38.3bnCNY 45.1bn+17.8%
    Add depreciation & amortisationCNY 9.1bnCNY 10.7bnCNY 12.6bnCNY 14.8bnCNY 17.5bn+17.8%
    Less capital expenditureCNY -12.3bnCNY -14.5bnCNY -17.1bnCNY -20.2bnCNY -23.7bn+17.8%
    Less increase in working capitalCNY -12.6bnCNY -14.9bnCNY -17.5bnCNY -20.6bnCNY -24.3bn+17.8%
    Free cashflow to firmCNY 7.6bnCNY 8.9bnCNY 10.5bnCNY 12.4bnCNY 14.5bn+17.8%
    Discount factor0.95870.88110.80980.74420.6840-
    Present valueCNY 7.3bnCNY 7.8bnCNY 8.5bnCNY 9.2bnCNY 9.9bn+8.2%
    Present Value Of The ForecastCNY 42.7bn

    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
    Beta0.810Reported 0.716, pulled toward 1.0 (Blume)
    Cost of equity8.87%Risk-free + beta x equity risk premium
    Cost of debt9.34%Interest expense / average total debt
    Market capitalisationCNY 679.1bn94.2% of capital
    Total debtCNY 41.8bn5.8% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC8.81%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 19.39

    91% of EV

    Forecast FCFF, final year
    CNY 14.5bn
    Capex at depreciation, working capital in reinvestment
    CNY 51.4bn
    Less reinvestment at g/ROIC (28.4% of NOPAT)
    CNY -14.6bn
    Capitalised
    CNY 36.8bn
    ROIC (WACC floor)
    8.8%
    Terminal value, undiscounted
    CNY 598.0bn
    Terminal value, discounted
    CNY 409.0bn
    Enterprise value
    CNY 451.8bn
    Less net debt
    CNY -65.9bn
    Equity value
    CNY 517.6bn

    Exit at 15.2x EBITDA

    Value per shareCNY 31.95

    95% of EV

    Terminal value, undiscounted
    CNY 1088.0bn
    Terminal value, discounted
    CNY 744.2bn
    Enterprise value
    CNY 787.0bn
    Less net debt
    CNY -65.9bn
    Equity value
    CNY 852.8bn

    Spread between methods: 49%.

    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%
    6.81%26.1026.4926.9627.5328.23
    7.81%21.9522.0422.1322.2122.30
    8.81%19.2419.3219.3919.4619.54
    9.81%17.1117.1717.2317.3017.36
    10.81%15.3815.4415.5015.5515.61

    Outlined: this model. Green text: above today's price of 22.55. 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 year17.8%22.9%+5.1pp
    EBIT margin5.2%6.1%+0.9pp
    Discount rate8.8%7.7%-1.1pp
    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.