DCF Studio

    1929.HK · HKG · Consumer Cyclical

    Chow Tai Fook Jewellery Group Limited

    Also onConsensus Drift

    Implied value per share

    HKD 15.96

    Market price

    HKD 11.05

    Implied upside

    +44.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages 1.06% of revenue against depreciation of 2.15%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 2.15% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    HKD 15.96+44.4%
    Exit multiple
    HKD 9.23-16.5%
    Market price
    HKD 11.05

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (HKD). Outflows negative.

    0bn5bn11bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayHKD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueHKD 94.3bnHKD 94.2bnHKD 94.1bnHKD 94.0bnHKD 93.9bn-0.1%
    EBITHKD 13.0bnHKD 13.0bnHKD 12.9bnHKD 12.9bnHKD 12.9bn-0.1%
    NOPATHKD 10.8bnHKD 10.8bnHKD 10.8bnHKD 10.8bnHKD 10.8bn-0.1%
    Add depreciation & amortisationHKD 2.1bnHKD 2.1bnHKD 2.0bnHKD 2.0bnHKD 2.0bn-0.1%
    Less capital expenditureHKD -2.0bnHKD -2.0bnHKD -2.0bnHKD -2.0bnHKD -2.0bn-0.1%
    Less increase in working capitalHKD -4.9mHKD -4.9mHKD -4.9mHKD -4.9mHKD -4.9m-0.1%
    Free cashflow to firmHKD 10.8bnHKD 10.8bnHKD 10.8bnHKD 10.8bnHKD 10.8bn-0.1%
    Discount factor0.96380.89530.83170.77260.7177-
    Present valueHKD 10.5bnHKD 9.7bnHKD 9.0bnHKD 8.4bnHKD 7.8bn-7.2%
    Present Value Of The ForecastHKD 45.3bn

    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
    Beta0.804Reported 0.707, pulled toward 1.0 (Blume)
    Cost of equity8.83%Risk-free + beta x equity risk premium
    Cost of debt3.41%Interest expense / average total debt
    Market capitalisationHKD 109.0bn80.3% of capital
    Total debtHKD 26.7bn19.7% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC7.65%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 shareHKD 15.96

    75% of EV

    Forecast FCFF, final year
    HKD 10.8bn
    Capex at depreciation, working capital in reinvestment
    HKD 10.8bn
    Less reinvestment at g/ROIC (11.0% of NOPAT)
    HKD -1.2bn
    Capitalised
    HKD 9.6bn
    ROIC (reported)
    22.7%
    Terminal value, undiscounted
    HKD 191.3bn
    Terminal value, discounted
    HKD 137.3bn
    Enterprise value
    HKD 182.6bn
    Less net debt
    HKD 18.4bn
    Equity value
    HKD 164.2bn

    Exit at 6.3x EBITDA

    Value per shareHKD 9.23

    60% of EV

    Terminal value, undiscounted
    HKD 94.8bn
    Terminal value, discounted
    HKD 68.1bn
    Enterprise value
    HKD 113.3bn
    Less net debt
    HKD 18.4bn
    Equity value
    HKD 94.9bn

    Spread between methods: 53%.

    Sensitivity

    Value per share (HKD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.65%21.5423.7026.5530.4636.19
    6.65%17.1718.4319.9821.9524.55
    7.65%14.2215.0115.9617.0918.50
    8.65%12.1012.6313.2413.9514.80
    9.65%10.4910.8611.2711.7512.30

    Outlined: this model. Green text: above today's price of 11.05. 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-0.1%-7.0%-6.9pp
    EBIT margin13.7%9.9%-3.8pp
    Discount rate7.7%9.8%+2.1pp
    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.