Intrinsic value of Braskem ADR - BAK

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$21.56

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$21.56

 
Intrinsic value

$15.57

 
Up/down potential

-28%

 
Rating

sell

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

We calculate the intrinsic value of BAK 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 8.4

 

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, %
  2.08
  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
  15,081
  15,383
  15,736
  16,141
  16,595
  17,098
  17,650
  18,251
  18,902
  19,603
  20,355
  21,160
  22,019
  22,933
  23,905
  24,936
  26,029
  27,186
  28,409
  29,701
  31,066
  32,506
  34,025
  35,625
  37,312
  39,088
  40,958
  42,927
  44,998
  47,178
  49,470
Variable operating expenses, $m
 
  13,106
  13,407
  13,752
  14,139
  14,567
  15,038
  15,550
  16,104
  16,702
  17,343
  18,028
  18,760
  19,539
  20,367
  21,245
  22,177
  23,162
  24,204
  25,306
  26,468
  27,695
  28,989
  30,353
  31,790
  33,303
  34,897
  36,574
  38,339
  40,195
  42,148
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
  13,210
  13,106
  13,407
  13,752
  14,139
  14,567
  15,038
  15,550
  16,104
  16,702
  17,343
  18,028
  18,760
  19,539
  20,367
  21,245
  22,177
  23,162
  24,204
  25,306
  26,468
  27,695
  28,989
  30,353
  31,790
  33,303
  34,897
  36,574
  38,339
  40,195
  42,148
Operating income, $m
  1,871
  2,277
  2,329
  2,389
  2,456
  2,531
  2,612
  2,701
  2,797
  2,901
  3,013
  3,132
  3,259
  3,394
  3,538
  3,691
  3,852
  4,023
  4,205
  4,396
  4,598
  4,811
  5,036
  5,273
  5,522
  5,785
  6,062
  6,353
  6,660
  6,982
  7,322
EBITDA, $m
  2,723
  2,461
  2,518
  2,583
  2,655
  2,736
  2,824
  2,920
  3,024
  3,136
  3,257
  3,386
  3,523
  3,669
  3,825
  3,990
  4,165
  4,350
  4,545
  4,752
  4,971
  5,201
  5,444
  5,700
  5,970
  6,254
  6,553
  6,868
  7,200
  7,548
  7,915
Interest expense (income), $m
  487
  403
  337
  349
  362
  377
  394
  412
  432
  453
  476
  501
  528
  556
  586
  618
  652
  689
  727
  767
  810
  855
  902
  953
  1,005
  1,061
  1,120
  1,182
  1,247
  1,315
  1,387
Earnings before tax, $m
  -53
  1,874
  1,992
  2,040
  2,094
  2,154
  2,219
  2,289
  2,366
  2,448
  2,536
  2,631
  2,731
  2,838
  2,952
  3,072
  3,200
  3,335
  3,478
  3,629
  3,788
  3,956
  4,133
  4,320
  4,517
  4,724
  4,942
  5,172
  5,413
  5,667
  5,935
Tax expense, $m
  198
  506
  538
  551
  565
  581
  599
  618
  639
  661
  685
  710
  737
  766
  797
  829
  864
  900
  939
  980
  1,023
  1,068
  1,116
  1,166
  1,220
  1,275
  1,334
  1,396
  1,462
  1,530
  1,602
Net income, $m
  -143
  1,368
  1,454
  1,489
  1,529
  1,572
  1,620
  1,671
  1,727
  1,787
  1,851
  1,920
  1,994
  2,072
  2,155
  2,243
  2,336
  2,435
  2,539
  2,649
  2,765
  2,888
  3,017
  3,154
  3,297
  3,448
  3,608
  3,775
  3,952
  4,137
  4,332

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,493
  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
  16,331
  14,112
  14,437
  14,808
  15,225
  15,686
  16,193
  16,744
  17,341
  17,984
  18,674
  19,413
  20,201
  21,040
  21,931
  22,877
  23,880
  24,941
  26,063
  27,249
  28,501
  29,822
  31,215
  32,684
  34,231
  35,861
  37,577
  39,383
  41,283
  43,282
  45,385
Adjusted assets (=assets-cash), $m
  13,838
  14,112
  14,437
  14,808
  15,225
  15,686
  16,193
  16,744
  17,341
  17,984
  18,674
  19,413
  20,201
  21,040
  21,931
  22,877
  23,880
  24,941
  26,063
  27,249
  28,501
  29,822
  31,215
  32,684
  34,231
  35,861
  37,577
  39,383
  41,283
  43,282
  45,385
Revenue / Adjusted assets
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
Average production assets, $m
  901
  923
  944
  968
  996
  1,026
  1,059
  1,095
  1,134
  1,176
  1,221
  1,270
  1,321
  1,376
  1,434
  1,496
  1,562
  1,631
  1,705
  1,782
  1,864
  1,950
  2,041
  2,138
  2,239
  2,345
  2,458
  2,576
  2,700
  2,831
  2,968
Working capital, $m
  664
  -723
  -740
  -759
  -780
  -804
  -830
  -858
  -888
  -921
  -957
  -995
  -1,035
  -1,078
  -1,124
  -1,172
  -1,223
  -1,278
  -1,335
  -1,396
  -1,460
  -1,528
  -1,599
  -1,674
  -1,754
  -1,837
  -1,925
  -2,018
  -2,115
  -2,217
  -2,325
Total debt, $m
  11,189
  8,422
  8,714
  9,048
  9,423
  9,839
  10,294
  10,791
  11,328
  11,907
  12,528
  13,192
  13,902
  14,657
  15,459
  16,310
  17,213
  18,168
  19,178
  20,245
  21,372
  22,561
  23,815
  25,136
  26,529
  27,996
  29,540
  31,165
  32,876
  34,675
  36,568
Total liabilities, $m
  15,468
  12,701
  12,993
  13,327
  13,702
  14,118
  14,573
  15,070
  15,607
  16,186
  16,807
  17,471
  18,181
  18,936
  19,738
  20,589
  21,492
  22,447
  23,457
  24,524
  25,651
  26,840
  28,094
  29,415
  30,808
  32,275
  33,819
  35,444
  37,155
  38,954
  40,847
Total equity, $m
  863
  1,411
  1,444
  1,481
  1,522
  1,569
  1,619
  1,674
  1,734
  1,798
  1,867
  1,941
  2,020
  2,104
  2,193
  2,288
  2,388
  2,494
  2,606
  2,725
  2,850
  2,982
  3,122
  3,268
  3,423
  3,586
  3,758
  3,938
  4,128
  4,328
  4,539
Total liabilities and equity, $m
  16,331
  14,112
  14,437
  14,808
  15,224
  15,687
  16,192
  16,744
  17,341
  17,984
  18,674
  19,412
  20,201
  21,040
  21,931
  22,877
  23,880
  24,941
  26,063
  27,249
  28,501
  29,822
  31,216
  32,683
  34,231
  35,861
  37,577
  39,382
  41,283
  43,282
  45,386
Debt-to-equity ratio
  12.965
  5.970
  6.040
  6.110
  6.190
  6.270
  6.360
  6.440
  6.530
  6.620
  6.710
  6.800
  6.880
  6.970
  7.050
  7.130
  7.210
  7.280
  7.360
  7.430
  7.500
  7.570
  7.630
  7.690
  7.750
  7.810
  7.860
  7.910
  7.960
  8.010
  8.060
Adjusted equity ratio
  -0.118
  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
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -143
  1,368
  1,454
  1,489
  1,529
  1,572
  1,620
  1,671
  1,727
  1,787
  1,851
  1,920
  1,994
  2,072
  2,155
  2,243
  2,336
  2,435
  2,539
  2,649
  2,765
  2,888
  3,017
  3,154
  3,297
  3,448
  3,608
  3,775
  3,952
  4,137
  4,332
Depreciation, amort., depletion, $m
  852
  185
  189
  194
  199
  205
  212
  219
  227
  235
  244
  254
  264
  275
  287
  299
  312
  326
  341
  356
  373
  390
  408
  428
  448
  469
  492
  515
  540
  566
  594
Funds from operations, $m
  502
  1,552
  1,643
  1,683
  1,728
  1,777
  1,831
  1,890
  1,954
  2,022
  2,096
  2,174
  2,258
  2,347
  2,442
  2,542
  2,648
  2,761
  2,880
  3,005
  3,138
  3,278
  3,426
  3,581
  3,745
  3,918
  4,099
  4,290
  4,492
  4,703
  4,926
Change in working capital, $m
  -1,104
  -14
  -17
  -19
  -21
  -24
  -26
  -28
  -31
  -33
  -35
  -38
  -40
  -43
  -46
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -88
  -93
  -97
  -102
  -108
Cash from operations, $m
  1,606
  1,554
  1,660
  1,702
  1,749
  1,801
  1,857
  1,919
  1,984
  2,055
  2,131
  2,212
  2,298
  2,390
  2,487
  2,590
  2,700
  2,815
  2,937
  3,066
  3,202
  3,346
  3,497
  3,656
  3,824
  4,001
  4,187
  4,383
  4,589
  4,806
  5,034
Maintenance CAPEX, $m
  0
  -180
  -185
  -189
  -194
  -199
  -205
  -212
  -219
  -227
  -235
  -244
  -254
  -264
  -275
  -287
  -299
  -312
  -326
  -341
  -356
  -373
  -390
  -408
  -428
  -448
  -469
  -492
  -515
  -540
  -566
New CAPEX, $m
  -909
  -22
  -21
  -24
  -27
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -52
  -55
  -58
  -62
  -66
  -69
  -73
  -78
  -82
  -86
  -91
  -96
  -101
  -107
  -112
  -118
  -124
  -131
  -138
Cash from investing activities, $m
  -898
  -202
  -206
  -213
  -221
  -229
  -238
  -248
  -258
  -269
  -280
  -292
  -306
  -319
  -333
  -349
  -365
  -381
  -399
  -419
  -438
  -459
  -481
  -504
  -529
  -555
  -581
  -610
  -639
  -671
  -704
Free cash flow, $m
  708
  1,352
  1,454
  1,489
  1,528
  1,572
  1,619
  1,671
  1,726
  1,786
  1,851
  1,919
  1,993
  2,071
  2,154
  2,242
  2,335
  2,433
  2,538
  2,648
  2,764
  2,886
  3,016
  3,152
  3,296
  3,447
  3,606
  3,773
  3,950
  4,135
  4,330
Issuance/(repayment) of debt, $m
  -240
  -1,648
  292
  334
  375
  415
  456
  496
  537
  579
  621
  665
  709
  755
  802
  851
  902
  955
  1,010
  1,067
  1,127
  1,189
  1,254
  1,322
  1,393
  1,467
  1,544
  1,625
  1,710
  1,799
  1,893
Issuance/(repurchase) of shares, $m
  0
  844
  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  
  -240
  -804
  292
  334
  375
  415
  456
  496
  537
  579
  621
  665
  709
  755
  802
  851
  902
  955
  1,010
  1,067
  1,127
  1,189
  1,254
  1,322
  1,393
  1,467
  1,544
  1,625
  1,710
  1,799
  1,893
Total cash flow (excl. dividends), $m
  654
  -296
  1,746
  1,823
  1,903
  1,987
  2,075
  2,167
  2,264
  2,365
  2,472
  2,584
  2,702
  2,826
  2,956
  3,093
  3,237
  3,388
  3,548
  3,715
  3,891
  4,075
  4,270
  4,474
  4,688
  4,913
  5,150
  5,399
  5,660
  5,934
  6,223
Retained Cash Flow (-), $m
  -342
  -1,922
  -32
  -37
  -42
  -46
  -51
  -55
  -60
  -64
  -69
  -74
  -79
  -84
  -89
  -95
  -100
  -106
  -112
  -119
  -125
  -132
  -139
  -147
  -155
  -163
  -172
  -181
  -190
  -200
  -210
Prev. year cash balance distribution, $m
 
  1,374
  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
  1,714
  1,786
  1,861
  1,941
  2,024
  2,112
  2,204
  2,301
  2,403
  2,510
  2,623
  2,742
  2,867
  2,998
  3,137
  3,282
  3,435
  3,596
  3,765
  3,943
  4,130
  4,327
  4,533
  4,750
  4,978
  5,218
  5,470
  5,734
  6,012
Discount rate, %
 
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
 
  0
  1,430
  1,345
  1,252
  1,155
  1,054
  952
  849
  748
  650
  557
  471
  391
  319
  256
  202
  156
  117
  87
  63
  44
  30
  20
  13
  8
  5
  3
  2
  1
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Braskem S.A., together with its subsidiaries, produces and sells thermoplastic resins. Its Basic Petrochemicals segment offers olefins, such as ethylene, polymer and chemical grade propylene, butadiene, isoprene, and butene-1; BTX products comprising benzene, toluene, ortho-xylene, para-xylene, and mixed xylenes; fuels, including automotive gasoline and liquefied petroleum gas; intermediates, such as cumene; and other basic petrochemicals, which include ethyl tertiary butyl ether, solvent C9, and pyrolysis C9. This segment also supplies electric energy, steam, compressed air, and other products to second-generation producers. Its Polyolefins segment produces polyethylene, including LDPE, LLDPE, HDPE, ultra-high molecular weight polyethylene, and EVA; green polyethylene from renewable resources; and polypropylene. This segment’s products are used in plastic films for food and industrial packaging; bottles, shopping bags, and other consumer goods containers; automotive parts; and household appliances. Its Vinyls segment produces polyvinyl chloride, caustic soda, chlorine, hydrogen, caustic soda flake, and sodium hypochlorite. The company’s USA and Europe segment produces polypropylene in the United States and Germany. Its Chemical Distribution segment distributes solvents, including aliphatic, aromatic, synthetic, and ecologically-friendly solvents; engineering plastics; hydrocarbon solvents and isoparafins; and general purpose chemicals, such as process oils, chemical intermediates, blends, specialty chemicals, and pharmaceuticals. The company also imports and exports chemicals, petrochemicals, and fuels; produces, supplies, and sells utilities, such as water and industrial gases; and provides industrial services. The company was formerly known as Copene Petroquímica do Nordeste S.A. and changed its name to Braskem S.A. in 2002. Braskem S.A. was founded in 1972 and is headquartered in São Paulo, Brazil. Braskem S.A. is a subsidiary of Odebrecht S.A.

FINANCIAL RATIOS  of  Braskem ADR (BAK)

Valuation Ratios
P/E Ratio -120
Price to Sales 1.1
Price to Book 19.9
Price to Tangible Book
Price to Cash Flow 10.7
Price to Free Cash Flow 24.6
Growth Rates
Sales Growth Rate 2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -30.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.7%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 1166.9%
Total Debt to Equity 1296.5%
Interest Coverage 1
Management Effectiveness
Return On Assets 12.3%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital -1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 3.2%
Return On Equity -20.7%
Return On Equity - 3 Yr. Avg. 23.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 26.5%
Gross Margin - 3 Yr. Avg. 20.4%
EBITDA Margin 8.5%
EBITDA Margin - 3 Yr. Avg. 11.4%
Operating Margin 12.4%
Oper. Margin - 3 Yr. Avg. 11.6%
Pre-Tax Margin -0.4%
Pre-Tax Margin - 3 Yr. Avg. 3.9%
Net Profit Margin -0.9%
Net Profit Margin - 3 Yr. Avg. 2.5%
Effective Tax Rate -373.6%
Eff/ Tax Rate - 3 Yr. Avg. -99.2%
Payout Ratio -442%

BAK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BAK stock intrinsic value calculation we used $15081 million for the last fiscal year's total revenue generated by Braskem ADR. The default revenue input number comes from 2016 income statement of Braskem 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 BAK 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%, whose default value for BAK is calculated based on our internal credit rating of Braskem 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 Braskem 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 BAK stock the variable cost ratio is equal to 85.2%.

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 BAK 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 4% for Braskem ADR.

Corporate tax rate of 27% is the nominal tax rate for Braskem 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 BAK 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 BAK are equal to 6%.

Life of production assets of 1.1 years is the average useful life of capital assets used in Braskem 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 BAK is equal to -4.7%. 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 - $863 million for Braskem 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 391.155 million for Braskem 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 Braskem ADR at the current share price and the inputted number of shares is $8.4 billion.


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