DCF Studio

    2359.HK · HKG · Healthcare

    WuXi AppTec Co., Ltd.

    Also onConsensus Drift

    Implied value per share

    HKD 98.01

    Market price

    HKD 200.00

    Implied upside

    -51.0%

    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 15.3% of revenue against depreciation of 6.2%. 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.

    Current EV/EBITDA of 28.0x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    HKD 98.01-51.0%
    Exit multiple
    HKD 149.35-25.3%
    Market price
    HKD 200.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn5bn10bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 47.7bnCNY 50.0bnCNY 52.5bnCNY 55.1bnCNY 57.8bn+4.9%
    EBITCNY 14.4bnCNY 15.1bnCNY 15.9bnCNY 16.7bnCNY 17.5bn+4.9%
    NOPATCNY 12.0bnCNY 12.6bnCNY 13.3bnCNY 13.9bnCNY 14.6bn+4.9%
    Add depreciation & amortisationCNY 2.9bnCNY 3.1bnCNY 3.2bnCNY 3.4bnCNY 3.6bn+4.9%
    Less capital expenditureCNY -7.3bnCNY -7.7bnCNY -8.1bnCNY -8.5bnCNY -8.9bn+4.9%
    Less increase in working capitalCNY 290.2mCNY 304.4mCNY 319.4mCNY 335.2mCNY 351.6m-4.9%
    Free cashflow to firmCNY 8.0bnCNY 8.3bnCNY 8.8bnCNY 9.2bnCNY 9.6bn+4.9%
    Discount factor0.96330.89400.82960.76990.7145-
    Present valueCNY 7.7bnCNY 7.5bnCNY 7.3bnCNY 7.1bnCNY 6.9bn-2.6%
    Present Value Of The ForecastCNY 36.4bn

    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
    Beta0.659Reported 0.491, pulled toward 1.0 (Blume)
    Cost of equity7.81%Risk-free + beta x equity risk premium
    Cost of debt4.56%Interest expense / average total debt
    Market capitalisationCNY 606.4bn98.6% of capital
    Total debtCNY 8.4bn1.4% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC7.76%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 83.72

    83% of EV

    Forecast FCFF, final year
    CNY 9.6bn
    Capex at depreciation, working capital in reinvestment
    CNY 14.8bn
    Less reinvestment at g/ROIC (15.6% of NOPAT)
    CNY -2.3bn
    Capitalised
    CNY 12.5bn
    ROIC (reported)
    16.1%
    Terminal value, undiscounted
    CNY 243.1bn
    Terminal value, discounted
    CNY 173.7bn
    Enterprise value
    CNY 210.0bn
    Less net debt
    CNY -32.5bn
    Equity value
    CNY 242.5bn

    Exit at 20.0x EBITDA

    Value per shareCNY 127.56

    89% of EV

    Terminal value, undiscounted
    CNY 420.9bn
    Terminal value, discounted
    CNY 300.7bn
    Enterprise value
    CNY 337.1bn
    Less net debt
    CNY -32.5bn
    Equity value
    CNY 369.6bn

    Spread between methods: 42%.

    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%
    5.76%110.00118.52129.62144.69166.40
    6.76%90.5395.34101.26108.71118.42
    7.76%77.3380.2583.7287.8893.00
    8.76%67.7969.6671.8174.3177.27
    9.76%60.5861.8263.2064.7866.59

    Outlined: this model. Green text: above today's price of 170.82. 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 year4.9%23.7%+18.7pp
    EBIT margin30.2%63.9%+33.7pp
    Discount rate7.8%4.9%-2.8pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.