DCF Studio

    9633.HK · HKG · Consumer Defensive

    Nongfu Spring Co., Ltd.

    Also onConsensus Drift

    Implied value per share

    HKD 70.47

    Market price

    HKD 38.60

    Implied upside

    +82.6%

    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.
    AdjustedCapital expenditure runs at 13.1% of revenue against depreciation of 6.7%. 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 70.47+82.6%
    Exit multiple
    HKD 74.75+93.6%
    Market price
    HKD 38.60

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn14bn28bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 61.2bnCNY 71.3bnCNY 83.1bnCNY 96.8bnCNY 112.8bn+16.5%
    EBITCNY 21.0bnCNY 24.4bnCNY 28.5bnCNY 33.2bnCNY 38.6bn+16.5%
    NOPATCNY 17.5bnCNY 20.4bnCNY 23.8bnCNY 27.7bnCNY 32.3bn+16.5%
    Add depreciation & amortisationCNY 4.1bnCNY 4.8bnCNY 5.6bnCNY 6.5bnCNY 7.6bn+16.5%
    Less capital expenditureCNY -8.0bnCNY -9.4bnCNY -10.9bnCNY -12.7bnCNY -14.8bn+16.5%
    Less increase in working capitalCNY 1.5bnCNY 1.8bnCNY 2.1bnCNY 2.4bnCNY 2.8bn-16.5%
    Free cashflow to firmCNY 15.1bnCNY 17.6bnCNY 20.5bnCNY 23.9bnCNY 27.9bn+16.5%
    Discount factor0.96880.90940.85360.80130.7521-
    Present valueCNY 14.7bnCNY 16.0bnCNY 17.5bnCNY 19.2bnCNY 21.0bn+9.4%
    Present Value Of The ForecastCNY 88.3bn

    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
    Beta0.482Reported 0.227, pulled toward 1.0 (Blume)
    Cost of equity6.57%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 434.1bn99.0% of capital
    Total debtCNY 4.5bn1.0% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC6.53%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 60.19

    87% of EV

    Forecast FCFF, final year
    CNY 27.9bn
    Capex at depreciation, working capital in reinvestment
    CNY 32.3bn
    Less reinvestment at g/ROIC (6.9% of NOPAT)
    CNY -2.2bn
    Capitalised
    CNY 30.1bn
    ROIC (reported)
    36.3%
    Terminal value, undiscounted
    CNY 763.8bn
    Terminal value, discounted
    CNY 574.5bn
    Enterprise value
    CNY 662.8bn
    Less net debt
    CNY -14.2bn
    Equity value
    CNY 677.1bn

    Exit at 17.7x EBITDA

    Value per shareCNY 63.84

    87% of EV

    Terminal value, undiscounted
    CNY 818.4bn
    Terminal value, discounted
    CNY 615.6bn
    Enterprise value
    CNY 703.9bn
    Less net debt
    CNY -14.2bn
    Equity value
    CNY 718.1bn

    Spread between methods: 6%.

    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%
    4.53%84.9298.94119.82154.29222.05
    5.53%63.6570.7480.1793.30112.86
    6.53%50.8555.0160.1966.8375.66
    7.53%42.3144.9748.1752.0656.91
    8.53%36.2138.0340.1442.6445.62

    Outlined: this model. Green text: above today's price of 32.97. 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 year16.5%2.4%-14.1pp
    EBIT margin34.3%18.8%-15.5pp
    Discount rate6.5%9.8%+3.3pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.