DCF Studio

    2331.HK · HKG · Consumer Cyclical

    Li Ning Company Limited

    Also onConsensus Drift

    Implied value per share

    HKD 30.00

    Market price

    HKD 12.57

    Implied upside

    +138.6%

    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.
    NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    HKD 30.00+138.6%
    Exit multiple
    HKD 21.84+73.7%
    Market price
    HKD 12.57

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn2bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 31.0bnCNY 32.4bnCNY 34.0bnCNY 35.5bnCNY 37.2bn+4.7%
    EBITCNY 4.4bnCNY 4.6bnCNY 4.8bnCNY 5.0bnCNY 5.2bn+4.7%
    NOPATCNY 3.6bnCNY 3.8bnCNY 4.0bnCNY 4.2bnCNY 4.4bn+4.7%
    Add depreciation & amortisationCNY 1.8bnCNY 1.9bnCNY 2.0bnCNY 2.1bnCNY 2.2bn+4.7%
    Less capital expenditureCNY -1.8bnCNY -1.9bnCNY -2.0bnCNY -2.1bnCNY -2.2bn+4.7%
    Less increase in working capitalCNY 243.7mCNY 255.1mCNY 267.0mCNY 279.5mCNY 292.6m-4.7%
    Free cashflow to firmCNY 3.9bnCNY 4.1bnCNY 4.3bnCNY 4.5bnCNY 4.7bn+4.7%
    Discount factor0.95510.87140.79490.72520.6616-
    Present valueCNY 3.7bnCNY 3.6bnCNY 3.4bnCNY 3.2bnCNY 3.1bn-4.5%
    Present Value Of The ForecastCNY 17.0bn

    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
    Beta0.954Reported 0.932, pulled toward 1.0 (Blume)
    Cost of equity9.88%Risk-free + beta x equity risk premium
    Cost of debt6.46%Interest expense / average total debt
    Market capitalisationCNY 32.5bn94.1% of capital
    Total debtCNY 2.1bn5.9% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC9.61%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 25.62

    66% of EV

    Forecast FCFF, final year
    CNY 4.7bn
    Capex at depreciation, working capital in reinvestment
    CNY 4.4bn
    Less reinvestment at g/ROIC (20.8% of NOPAT)
    CNY -919.9m
    Capitalised
    CNY 3.5bn
    ROIC (reported)
    12.0%
    Terminal value, undiscounted
    CNY 50.6bn
    Terminal value, discounted
    CNY 33.4bn
    Enterprise value
    CNY 50.5bn
    Less net debt
    CNY -15.8bn
    Equity value
    CNY 66.3bn

    Exit at 3.1x EBITDA

    Value per shareCNY 18.65

    48% of EV

    Terminal value, undiscounted
    CNY 23.3bn
    Terminal value, discounted
    CNY 15.4bn
    Enterprise value
    CNY 32.5bn
    Less net debt
    CNY -15.8bn
    Equity value
    CNY 48.2bn

    Spread between methods: 31%.

    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%
    7.61%30.8831.6432.5333.6234.95
    8.61%27.5828.0228.5229.1029.78
    9.61%25.0925.3425.6225.9326.29
    10.61%23.1523.2823.4323.5923.77
    11.61%21.5821.6521.7121.7821.86

    Outlined: this model. Green text: above today's price of 10.74. 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 year4.7%-22.0%-26.6pp
    EBIT margin14.0%3.0%-11.1pp
    Discount rate9.6%41.9%+32.3pp
    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.