DCF Studio

    3692.HK · HKG · Healthcare

    Hansoh Pharmaceutical Group Company Limited

    Also onConsensus Drift

    Implied value per share

    HKD 29.89

    Market price

    HKD 34.30

    Implied upside

    -12.9%

    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.

    Current EV/EBITDA of 29.7x 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 29.89-12.9%
    Exit multiple
    HKD 44.43+29.5%
    Market price
    HKD 34.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn5bn11bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 17.6bnCNY 20.6bnCNY 24.1bnCNY 28.2bnCNY 33.0bn+17.0%
    EBITCNY 5.6bnCNY 6.6bnCNY 7.7bnCNY 9.0bnCNY 10.5bn+17.0%
    NOPATCNY 4.9bnCNY 5.7bnCNY 6.6bnCNY 7.8bnCNY 9.1bn+17.0%
    Add depreciation & amortisationCNY 579.7mCNY 678.3mCNY 793.6mCNY 928.6mCNY 1.1bn+17.0%
    Less capital expenditureCNY -625.8mCNY -732.2mCNY -856.8mCNY -1.0bnCNY -1.2bn+17.0%
    Less increase in working capitalCNY 911.2mCNY 1.1bnCNY 1.2bnCNY 1.5bnCNY 1.7bn-17.0%
    Free cashflow to firmCNY 5.7bnCNY 6.7bnCNY 7.8bnCNY 9.2bnCNY 10.7bn+17.0%
    Discount factor0.96160.88910.82220.76020.7029-
    Present valueCNY 5.5bnCNY 5.9bnCNY 6.4bnCNY 7.0bnCNY 7.5bn+8.2%
    Present Value Of The ForecastCNY 32.4bn

    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
    Beta0.707Reported 0.563, pulled toward 1.0 (Blume)
    Cost of equity8.15%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 208.0bn99.9% of capital
    Total debtCNY 105.1m0.1% of capital, book value as a proxy
    Tax rate13.5%Effective, capped at statutory
    WACC8.15%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 25.53

    73% of EV

    Forecast FCFF, final year
    CNY 10.7bn
    Capex at depreciation, working capital in reinvestment
    CNY 9.1bn
    Less reinvestment at g/ROIC (23.7% of NOPAT)
    CNY -2.2bn
    Capitalised
    CNY 7.0bn
    ROIC (reported)
    10.6%
    Terminal value, undiscounted
    CNY 126.4bn
    Terminal value, discounted
    CNY 88.8bn
    Enterprise value
    CNY 121.2bn
    Less net debt
    CNY -31.5bn
    Equity value
    CNY 152.7bn

    Exit at 20.0x EBITDA

    Value per shareCNY 37.95

    83% of EV

    Terminal value, undiscounted
    CNY 232.0bn
    Terminal value, discounted
    CNY 163.1bn
    Enterprise value
    CNY 195.5bn
    Less net debt
    CNY -31.5bn
    Equity value
    CNY 227.0bn

    Spread between methods: 39%.

    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%
    6.15%32.8034.2035.9638.2741.42
    7.15%28.0528.7729.6330.6832.02
    8.15%24.7225.1025.5326.0326.64
    9.15%22.2622.4422.6522.8823.15
    10.15%20.3620.4420.5220.6020.70

    Outlined: this model. Green text: above today's price of 29.30. 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 year17.0%21.3%+4.3pp
    EBIT margin31.9%38.1%+6.2pp
    Discount rate8.1%7.2%-0.9pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.