Intrinsic value of Amira Nature Foods - ANFI

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$5.03

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of ANFI 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 2016), $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 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   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
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -19.57
  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
  563
  574
  587
  603
  620
  638
  659
  681
  706
  732
  760
  790
  822
  856
  892
  931
  972
  1,015
  1,061
  1,109
  1,160
  1,214
  1,270
  1,330
  1,393
  1,459
  1,529
  1,603
  1,680
  1,761
  1,847
Variable operating expenses, $m
 
  461
  472
  484
  497
  513
  529
  547
  567
  588
  610
  634
  660
  687
  716
  747
  780
  815
  851
  890
  931
  974
  1,020
  1,068
  1,118
  1,172
  1,228
  1,287
  1,349
  1,414
  1,483
Fixed operating expenses, $m
 
  51
  53
  54
  55
  57
  58
  59
  61
  62
  64
  66
  67
  69
  71
  72
  74
  76
  78
  80
  82
  84
  86
  88
  90
  93
  95
  97
  100
  102
  105
Total operating expenses, $m
  501
  512
  525
  538
  552
  570
  587
  606
  628
  650
  674
  700
  727
  756
  787
  819
  854
  891
  929
  970
  1,013
  1,058
  1,106
  1,156
  1,208
  1,265
  1,323
  1,384
  1,449
  1,516
  1,588
Operating income, $m
  63
  62
  63
  65
  67
  69
  72
  75
  78
  82
  86
  90
  95
  100
  105
  111
  117
  124
  131
  139
  147
  155
  164
  174
  184
  195
  206
  219
  231
  245
  259
EBITDA, $m
  63
  64
  66
  67
  70
  72
  75
  78
  81
  85
  89
  93
  98
  103
  109
  115
  121
  128
  135
  143
  152
  160
  170
  179
  190
  201
  213
  225
  238
  252
  267
Interest expense (income), $m
  31
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
  67
  71
  74
  78
  83
  87
  92
  97
  102
  107
  113
Earnings before tax, $m
  38
  34
  34
  35
  36
  37
  38
  40
  41
  43
  45
  48
  50
  53
  56
  60
  63
  67
  71
  75
  80
  85
  90
  96
  102
  108
  115
  122
  130
  138
  146
Tax expense, $m
  5
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
Net income, $m
  26
  25
  25
  25
  26
  27
  28
  29
  30
  32
  33
  35
  37
  39
  41
  43
  46
  49
  52
  55
  58
  62
  66
  70
  74
  79
  84
  89
  95
  100
  107

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  18
  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
  503
  495
  506
  519
  534
  550
  568
  587
  608
  630
  655
  680
  708
  737
  769
  802
  837
  874
  913
  955
  999
  1,045
  1,094
  1,146
  1,200
  1,257
  1,317
  1,380
  1,447
  1,517
  1,591
Adjusted assets (=assets-cash), $m
  485
  495
  506
  519
  534
  550
  568
  587
  608
  630
  655
  680
  708
  737
  769
  802
  837
  874
  913
  955
  999
  1,045
  1,094
  1,146
  1,200
  1,257
  1,317
  1,380
  1,447
  1,517
  1,591
Revenue / Adjusted assets
  1.161
  1.160
  1.160
  1.162
  1.161
  1.160
  1.160
  1.160
  1.161
  1.162
  1.160
  1.162
  1.161
  1.161
  1.160
  1.161
  1.161
  1.161
  1.162
  1.161
  1.161
  1.162
  1.161
  1.161
  1.161
  1.161
  1.161
  1.162
  1.161
  1.161
  1.161
Average production assets, $m
  23
  24
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  43
  45
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
Working capital, $m
  229
  287
  294
  301
  310
  319
  329
  341
  353
  366
  380
  395
  411
  428
  446
  465
  486
  507
  530
  554
  580
  607
  635
  665
  696
  730
  765
  801
  840
  881
  923
Total debt, $m
  209
  197
  203
  210
  218
  227
  237
  248
  259
  272
  285
  300
  315
  331
  349
  367
  387
  407
  429
  452
  476
  502
  529
  558
  588
  620
  653
  688
  725
  764
  805
Total liabilities, $m
  287
  275
  281
  288
  296
  305
  315
  326
  337
  350
  363
  378
  393
  409
  427
  445
  465
  485
  507
  530
  554
  580
  607
  636
  666
  698
  731
  766
  803
  842
  883
Total equity, $m
  216
  220
  225
  231
  237
  245
  253
  261
  270
  280
  291
  303
  315
  328
  342
  357
  372
  389
  406
  425
  445
  465
  487
  510
  534
  559
  586
  614
  644
  675
  708
Total liabilities and equity, $m
  503
  495
  506
  519
  533
  550
  568
  587
  607
  630
  654
  681
  708
  737
  769
  802
  837
  874
  913
  955
  999
  1,045
  1,094
  1,146
  1,200
  1,257
  1,317
  1,380
  1,447
  1,517
  1,591
Debt-to-equity ratio
  0.968
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.050
  1.060
  1.060
  1.070
  1.080
  1.090
  1.090
  1.100
  1.110
  1.110
  1.120
  1.130
  1.130
  1.140
Adjusted equity ratio
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  26
  25
  25
  25
  26
  27
  28
  29
  30
  32
  33
  35
  37
  39
  41
  43
  46
  49
  52
  55
  58
  62
  66
  70
  74
  79
  84
  89
  95
  100
  107
Depreciation, amort., depletion, $m
  0
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Funds from operations, $m
  -80
  27
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  63
  67
  71
  75
  80
  85
  90
  96
  101
  108
  114
Change in working capital, $m
  -74
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
Cash from operations, $m
  -6
  20
  21
  20
  20
  20
  20
  21
  21
  22
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  38
  40
  43
  45
  48
  52
  55
  59
  63
  67
  72
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
Cash from investing activities, $m
  2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -10
  -11
Free cash flow, $m
  -4
  18
  18
  17
  17
  17
  17
  17
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  31
  33
  35
  38
  40
  43
  46
  50
  53
  57
  61
Issuance/(repayment) of debt, $m
  9
  6
  6
  7
  8
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -22
  6
  6
  7
  8
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
Total cash flow (excl. dividends), $m
  -29
  23
  24
  25
  25
  26
  27
  28
  29
  30
  32
  33
  35
  37
  39
  41
  44
  46
  49
  52
  55
  59
  62
  66
  71
  75
  80
  85
  90
  96
  102
Retained Cash Flow (-), $m
  -23
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
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
 
  19
  19
  19
  19
  19
  19
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  50
  53
  57
  60
  65
  69
Discount rate, %
 
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
 
  18
  17
  15
  14
  13
  12
  11
  10
  9
  8
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
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  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Amira Nature Foods Ltd. engages in processing, sourcing, and selling packaged Indian specialty rice. The company provides various types of basmati rice, other specialty rice and value add meals, ready-to-eat snacks, ready-to-heat meals, edible oils, and organic products for retailers under the Amira brand; and non-basmati rice. It also sells bulk commodities, including wheat, barley, legume, maize, sugar, soybean meal, onion, potato, and millet products to trading firms. Amira Nature Foods Ltd. sells its products to buyers in the Asia Pacific, the Middle East, Europe, North Africa, and North America; and distributors and retail chains in India. The company was founded in 1915 and is based in Dubai, the United Arab Emirates.

FINANCIAL RATIOS  of  Amira Nature Foods (ANFI)

Valuation Ratios
P/E Ratio 5.6
Price to Sales 0.3
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow -24.3
Price to Free Cash Flow -20.8
Growth Rates
Sales Growth Rate -19.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 96.8%
Interest Coverage 2
Management Effectiveness
Return On Assets 10.6%
Ret/ On Assets - 3 Yr. Avg. 13%
Return On Total Capital 6.3%
Ret/ On T. Cap. - 3 Yr. Avg. 9%
Return On Equity 12.7%
Return On Equity - 3 Yr. Avg. 19.3%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 96.1%
Gross Margin - 3 Yr. Avg. 104.1%
EBITDA Margin 12.3%
EBITDA Margin - 3 Yr. Avg. 12.9%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 12.4%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 8.1%
Net Profit Margin 4.6%
Net Profit Margin - 3 Yr. Avg. 5.4%
Effective Tax Rate 13.2%
Eff/ Tax Rate - 3 Yr. Avg. 15.6%
Payout Ratio 0%

ANFI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ANFI stock intrinsic value calculation we used $563 million for the last fiscal year's total revenue generated by Amira Nature Foods. The default revenue input number comes from 2016 income statement of Amira Nature Foods. 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 ANFI 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 6.5%, whose default value for ANFI is calculated based on our internal credit rating of Amira Nature Foods, 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 Amira Nature Foods.
    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 ANFI stock the variable cost ratio is equal to 80.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $50 million in the base year in the intrinsic value calculation for ANFI 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 14.8% for Amira Nature Foods.

Corporate tax rate of 27% is the nominal tax rate for Amira Nature Foods. 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 ANFI 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 ANFI are equal to 4.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Amira Nature Foods 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 ANFI is equal to 50%. 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 - $216 million for Amira Nature Foods - 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 37.329 million for Amira Nature Foods 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 Amira Nature Foods at the current share price and the inputted number of shares is $0.2 billion.


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Stock chart of ANFI Financial statements of ANFI Annual reports of ANFI
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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