Intrinsic value of Aluminum Corp. of China ADR - ACH

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$12.41

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$12.41

 
Intrinsic value

$1.85

 
Up/down potential

-85%

 
Rating

str. sell

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ACH stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2015), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 9.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2015(a)
   2016
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -13.07
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  17,859
  18,216
  18,635
  19,114
  19,652
  20,248
  20,901
  21,613
  22,384
  23,214
  24,105
  25,058
  26,075
  27,157
  28,308
  29,529
  30,823
  32,193
  33,642
  35,172
  36,789
  38,494
  40,292
  42,188
  44,185
  46,288
  48,503
  50,834
  53,287
  55,868
  58,583
Variable operating expenses, $m
 
  19,601
  20,051
  20,567
  21,145
  21,786
  22,490
  23,256
  24,085
  24,978
  25,937
  26,962
  28,056
  29,221
  30,460
  31,774
  33,166
  34,640
  36,199
  37,846
  39,584
  41,419
  43,354
  45,394
  47,543
  49,806
  52,189
  54,698
  57,337
  60,114
  63,035
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  17,132
  19,601
  20,051
  20,567
  21,145
  21,786
  22,490
  23,256
  24,085
  24,978
  25,937
  26,962
  28,056
  29,221
  30,460
  31,774
  33,166
  34,640
  36,199
  37,846
  39,584
  41,419
  43,354
  45,394
  47,543
  49,806
  52,189
  54,698
  57,337
  60,114
  63,035
Operating income, $m
  727
  -1,384
  -1,416
  -1,453
  -1,494
  -1,539
  -1,588
  -1,643
  -1,701
  -1,764
  -1,832
  -1,904
  -1,982
  -2,064
  -2,151
  -2,244
  -2,343
  -2,447
  -2,557
  -2,673
  -2,796
  -2,926
  -3,062
  -3,206
  -3,358
  -3,518
  -3,686
  -3,863
  -4,050
  -4,246
  -4,452
EBITDA, $m
  1,758
  -354
  -363
  -372
  -382
  -394
  -407
  -421
  -436
  -452
  -469
  -488
  -507
  -528
  -551
  -575
  -600
  -626
  -655
  -684
  -716
  -749
  -784
  -821
  -860
  -901
  -944
  -989
  -1,037
  -1,087
  -1,140
Interest expense (income), $m
  874
  670
  690
  713
  740
  770
  803
  839
  879
  922
  968
  1,017
  1,070
  1,127
  1,187
  1,251
  1,319
  1,391
  1,467
  1,548
  1,633
  1,723
  1,818
  1,918
  2,023
  2,134
  2,251
  2,374
  2,504
  2,640
  2,784
Earnings before tax, $m
  28
  -2,054
  -2,106
  -2,166
  -2,233
  -2,309
  -2,391
  -2,482
  -2,580
  -2,686
  -2,800
  -2,922
  -3,052
  -3,191
  -3,339
  -3,495
  -3,662
  -3,838
  -4,024
  -4,221
  -4,429
  -4,648
  -4,880
  -5,124
  -5,381
  -5,652
  -5,937
  -6,238
  -6,554
  -6,886
  -7,236
Tax expense, $m
  -33
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  30
  -2,054
  -2,106
  -2,166
  -2,233
  -2,309
  -2,391
  -2,482
  -2,580
  -2,686
  -2,800
  -2,922
  -3,052
  -3,191
  -3,339
  -3,495
  -3,662
  -3,838
  -4,024
  -4,221
  -4,429
  -4,648
  -4,880
  -5,124
  -5,381
  -5,652
  -5,937
  -6,238
  -6,554
  -6,886
  -7,236

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,035
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  27,429
  24,885
  25,458
  26,112
  26,847
  27,661
  28,554
  29,526
  30,579
  31,713
  32,930
  34,232
  35,621
  37,100
  38,672
  40,341
  42,109
  43,980
  45,959
  48,050
  50,258
  52,587
  55,044
  57,634
  60,362
  63,236
  66,261
  69,446
  72,797
  76,322
  80,031
Adjusted assets (=assets-cash), $m
  24,394
  24,885
  25,458
  26,112
  26,847
  27,661
  28,554
  29,526
  30,579
  31,713
  32,930
  34,232
  35,621
  37,100
  38,672
  40,341
  42,109
  43,980
  45,959
  48,050
  50,258
  52,587
  55,044
  57,634
  60,362
  63,236
  66,261
  69,446
  72,797
  76,322
  80,031
Revenue / Adjusted assets
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
Average production assets, $m
  8,188
  8,343
  8,535
  8,754
  9,001
  9,273
  9,573
  9,899
  10,252
  10,632
  11,040
  11,476
  11,942
  12,438
  12,965
  13,524
  14,117
  14,745
  15,408
  16,109
  16,849
  17,630
  18,454
  19,322
  20,237
  21,200
  22,214
  23,282
  24,406
  25,588
  26,831
Working capital, $m
  -2,427
  2,477
  2,534
  2,600
  2,673
  2,754
  2,843
  2,939
  3,044
  3,157
  3,278
  3,408
  3,546
  3,693
  3,850
  4,016
  4,192
  4,378
  4,575
  4,783
  5,003
  5,235
  5,480
  5,738
  6,009
  6,295
  6,596
  6,913
  7,247
  7,598
  7,967
Total debt, $m
  15,669
  13,018
  13,458
  13,960
  14,524
  15,149
  15,835
  16,582
  17,390
  18,261
  19,196
  20,196
  21,263
  22,399
  23,606
  24,888
  26,245
  27,683
  29,202
  30,808
  32,504
  34,293
  36,180
  38,169
  40,264
  42,471
  44,795
  47,240
  49,814
  52,522
  55,370
Total liabilities, $m
  21,763
  19,112
  19,552
  20,054
  20,618
  21,243
  21,929
  22,676
  23,484
  24,355
  25,290
  26,290
  27,357
  28,493
  29,700
  30,982
  32,339
  33,777
  35,296
  36,902
  38,598
  40,387
  42,274
  44,263
  46,358
  48,565
  50,889
  53,334
  55,908
  58,616
  61,464
Total equity, $m
  5,666
  5,773
  5,906
  6,058
  6,228
  6,417
  6,624
  6,850
  7,094
  7,357
  7,640
  7,942
  8,264
  8,607
  8,972
  9,359
  9,769
  10,203
  10,662
  11,148
  11,660
  12,200
  12,770
  13,371
  14,004
  14,671
  15,373
  16,111
  16,889
  17,707
  18,567
Total liabilities and equity, $m
  27,429
  24,885
  25,458
  26,112
  26,846
  27,660
  28,553
  29,526
  30,578
  31,712
  32,930
  34,232
  35,621
  37,100
  38,672
  40,341
  42,108
  43,980
  45,958
  48,050
  50,258
  52,587
  55,044
  57,634
  60,362
  63,236
  66,262
  69,445
  72,797
  76,323
  80,031
Debt-to-equity ratio
  2.765
  2.250
  2.280
  2.300
  2.330
  2.360
  2.390
  2.420
  2.450
  2.480
  2.510
  2.540
  2.570
  2.600
  2.630
  2.660
  2.690
  2.710
  2.740
  2.760
  2.790
  2.810
  2.830
  2.850
  2.880
  2.890
  2.910
  2.930
  2.950
  2.970
  2.980
Adjusted equity ratio
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  -2,054
  -2,106
  -2,166
  -2,233
  -2,309
  -2,391
  -2,482
  -2,580
  -2,686
  -2,800
  -2,922
  -3,052
  -3,191
  -3,339
  -3,495
  -3,662
  -3,838
  -4,024
  -4,221
  -4,429
  -4,648
  -4,880
  -5,124
  -5,381
  -5,652
  -5,937
  -6,238
  -6,554
  -6,886
  -7,236
Depreciation, amort., depletion, $m
  1,031
  1,030
  1,054
  1,081
  1,111
  1,145
  1,182
  1,222
  1,266
  1,313
  1,363
  1,417
  1,474
  1,536
  1,601
  1,670
  1,743
  1,820
  1,902
  1,989
  2,080
  2,177
  2,278
  2,385
  2,498
  2,617
  2,743
  2,874
  3,013
  3,159
  3,312
Funds from operations, $m
  1,029
  -1,024
  -1,053
  -1,085
  -1,122
  -1,164
  -1,210
  -1,260
  -1,314
  -1,373
  -1,437
  -1,505
  -1,578
  -1,655
  -1,738
  -1,826
  -1,919
  -2,017
  -2,122
  -2,232
  -2,349
  -2,472
  -2,601
  -2,738
  -2,883
  -3,035
  -3,195
  -3,363
  -3,541
  -3,727
  -3,923
Change in working capital, $m
  -17
  49
  57
  65
  73
  81
  89
  97
  105
  113
  121
  130
  138
  147
  157
  166
  176
  186
  197
  208
  220
  232
  245
  258
  272
  286
  301
  317
  334
  351
  369
Cash from operations, $m
  1,046
  -7,751
  -1,110
  -1,150
  -1,195
  -1,245
  -1,298
  -1,357
  -1,419
  -1,486
  -1,558
  -1,635
  -1,716
  -1,803
  -1,894
  -1,992
  -2,095
  -2,204
  -2,319
  -2,440
  -2,568
  -2,704
  -2,846
  -2,996
  -3,154
  -3,321
  -3,496
  -3,680
  -3,874
  -4,078
  -4,293
Maintenance CAPEX, $m
  0
  -1,011
  -1,030
  -1,054
  -1,081
  -1,111
  -1,145
  -1,182
  -1,222
  -1,266
  -1,313
  -1,363
  -1,417
  -1,474
  -1,536
  -1,601
  -1,670
  -1,743
  -1,820
  -1,902
  -1,989
  -2,080
  -2,177
  -2,278
  -2,385
  -2,498
  -2,617
  -2,743
  -2,874
  -3,013
  -3,159
New CAPEX, $m
  -1,277
  -155
  -192
  -219
  -246
  -273
  -299
  -326
  -353
  -380
  -408
  -437
  -466
  -496
  -527
  -559
  -593
  -627
  -663
  -701
  -740
  -781
  -824
  -868
  -915
  -963
  -1,014
  -1,068
  -1,123
  -1,182
  -1,243
Cash from investing activities, $m
  427
  -1,166
  -1,222
  -1,273
  -1,327
  -1,384
  -1,444
  -1,508
  -1,575
  -1,646
  -1,721
  -1,800
  -1,883
  -1,970
  -2,063
  -2,160
  -2,263
  -2,370
  -2,483
  -2,603
  -2,729
  -2,861
  -3,001
  -3,146
  -3,300
  -3,461
  -3,631
  -3,811
  -3,997
  -4,195
  -4,402
Free cash flow, $m
  1,473
  -8,916
  -2,331
  -2,423
  -2,522
  -2,629
  -2,743
  -2,864
  -2,994
  -3,132
  -3,279
  -3,434
  -3,599
  -3,773
  -3,957
  -4,152
  -4,357
  -4,574
  -4,803
  -5,043
  -5,297
  -5,565
  -5,846
  -6,143
  -6,454
  -6,782
  -7,128
  -7,490
  -7,872
  -8,273
  -8,695
Issuance/(repayment) of debt, $m
  -1,888
  384
  440
  502
  564
  625
  686
  747
  808
  871
  935
  1,000
  1,067
  1,136
  1,207
  1,281
  1,358
  1,437
  1,520
  1,606
  1,696
  1,789
  1,887
  1,989
  2,095
  2,207
  2,324
  2,446
  2,574
  2,708
  2,848
Issuance/(repurchase) of shares, $m
  1,143
  8,640
  2,025
  2,073
  2,129
  2,193
  2,264
  2,343
  2,430
  2,524
  2,626
  2,736
  2,854
  2,980
  3,114
  3,258
  3,410
  3,571
  3,742
  3,923
  4,114
  4,316
  4,529
  4,755
  4,992
  5,242
  5,506
  5,783
  6,076
  6,383
  6,707
Cash from financing (excl. dividends), $m  
  -841
  9,024
  2,465
  2,575
  2,693
  2,818
  2,950
  3,090
  3,238
  3,395
  3,561
  3,736
  3,921
  4,116
  4,321
  4,539
  4,768
  5,008
  5,262
  5,529
  5,810
  6,105
  6,416
  6,744
  7,087
  7,449
  7,830
  8,229
  8,650
  9,091
  9,555
Total cash flow (excl. dividends), $m
  649
  -8,532
  -1,892
  -1,921
  -1,958
  -2,004
  -2,057
  -2,118
  -2,186
  -2,261
  -2,344
  -2,434
  -2,532
  -2,637
  -2,750
  -2,870
  -2,999
  -3,137
  -3,283
  -3,438
  -3,602
  -3,776
  -3,959
  -4,154
  -4,359
  -4,575
  -4,804
  -5,045
  -5,298
  -5,566
  -5,847
Retained Cash Flow (-), $m
  -1,572
  -107
  -133
  -152
  -170
  -189
  -207
  -226
  -244
  -263
  -282
  -302
  -322
  -343
  -365
  -387
  -410
  -434
  -459
  -485
  -512
  -540
  -570
  -601
  -633
  -667
  -702
  -739
  -777
  -818
  -860
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Discount rate, %
 
  9.90
  10.40
  10.91
  11.46
  12.03
  12.64
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.83
  25.02
  26.27
  27.58
  28.96
  30.41
  31.93
  33.52
  35.20
  36.96
  38.81
  40.75
PV of cash for distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  52.4
  43.4
  35.9
  29.7
  24.5
  20.3
  16.8
  13.8
  11.4
  9.4
  7.8
  6.4
  5.3
  4.3
  3.6
  2.9
  2.4
  2.0
  1.6
  1.3
  1.1
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2

Aluminum Corporation of China Limited, together with its subsidiaries, engages in the manufacture and distribution of alumina, and primary aluminum and energy products in China. It operates through Alumina, Primary Aluminum, Energy, and Trading segments. The Alumina segment is involved in the mining and purchasing of bauxite and other raw materials; refining of bauxite into alumina; sale of alumina; and production and sale of chemical alumina and metal gallium. The Primary Aluminum segment procures alumina and other raw materials, supplemental materials, and electricity power; and produces and sells primary aluminum, as well as carbon products, aluminum alloy products, and other aluminum products. The Energy segment engages in the research and development, production, and operation of energy products, including coal mining; generates and sells electricity to regional power grid corporations using thermal power, wind power, and solar power sources; and manufacture of energy related equipment. The Trading segment trades in alumina, primary aluminum, aluminum fabrication products, other non-ferrous metal products, coal products, raw materials, and supplemental materials; and provides logistics and transport services to internal manufacturing plants and external customers. The company also manufactures, acquires, and distributes bauxite mines, limestone ore, aluminum magnesium ore, and related nonferrous metal products. The company was founded in 2001 and is based in Beijing, the People's Republic of China.

FINANCIAL RATIOS  of  Aluminum Corp. of China ADR (ACH)

Valuation Ratios
P/E Ratio 6165.2
Price to Sales 10.4
Price to Book 32.6
Price to Tangible Book
Price to Cash Flow 176.8
Price to Free Cash Flow -800.7
Growth Rates
Sales Growth Rate -13.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 5.9%
Cap. Spend. - 3 Yr. Gr. Rate -0.7%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 137.2%
Total Debt to Equity 276.5%
Interest Coverage 1
Management Effectiveness
Return On Assets 7%
Ret/ On Assets - 3 Yr. Avg. 1.7%
Return On Total Capital 0.1%
Ret/ On T. Cap. - 3 Yr. Avg. -3.5%
Return On Equity 0.6%
Return On Equity - 3 Yr. Avg. -13.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 2%
Gross Margin - 3 Yr. Avg. 1.4%
EBITDA Margin 10.8%
EBITDA Margin - 3 Yr. Avg. 6.1%
Operating Margin 4.1%
Oper. Margin - 3 Yr. Avg. -0.1%
Pre-Tax Margin 0.2%
Pre-Tax Margin - 3 Yr. Avg. -3.5%
Net Profit Margin 0.2%
Net Profit Margin - 3 Yr. Avg. -3.6%
Effective Tax Rate -117.9%
Eff/ Tax Rate - 3 Yr. Avg. -28.8%
Payout Ratio 0%

ACH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ACH stock intrinsic value calculation we used $17859 million for the last fiscal year's total revenue generated by Aluminum Corp. of China ADR. The default revenue input number comes from 2015 income statement of Aluminum Corp. of China ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ACH stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.9%, whose default value for ACH is calculated based on our internal credit rating of Aluminum Corp. of China ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Aluminum Corp. of China ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ACH stock the variable cost ratio is equal to 107.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ACH stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.3% for Aluminum Corp. of China ADR.

Corporate tax rate of 27% is the nominal tax rate for Aluminum Corp. of China ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ACH stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ACH are equal to 45.8%.

Life of production assets of 8.1 years is the average useful life of capital assets used in Aluminum Corp. of China ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ACH is equal to 13.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $5666 million for Aluminum Corp. of China ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 767.519 million for Aluminum Corp. of China ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Aluminum Corp. of China ADR at the current share price and the inputted number of shares is $9.5 billion.


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Stock chart of ACH Financial statements of ACH
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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