Intrinsic value of Braskem ADR - BAK

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$19.36

  Intrinsic Value

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  Value-price divergence*

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$19.36

 
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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 7.6

 

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
  48,654
  49,773
  51,052
  52,488
  54,080
  55,826
  57,727
  59,785
  62,002
  64,381
  66,927
  69,643
  72,535
  75,609
  78,871
  82,327
  85,986
  89,855
  93,943
  98,259
  102,814
  107,617
  112,680
  118,015
  123,633
  129,548
  135,775
  142,326
  149,219
  156,469
Variable operating expenses, $m
 
  41,453
  42,407
  43,496
  44,720
  46,076
  47,563
  49,183
  50,937
  52,826
  54,853
  57,022
  59,336
  61,800
  64,419
  67,198
  70,143
  73,260
  76,556
  80,039
  83,717
  87,598
  91,690
  96,003
  100,548
  105,335
  110,375
  115,680
  121,262
  127,135
  133,312
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
  41,453
  42,407
  43,496
  44,720
  46,076
  47,563
  49,183
  50,937
  52,826
  54,853
  57,022
  59,336
  61,800
  64,419
  67,198
  70,143
  73,260
  76,556
  80,039
  83,717
  87,598
  91,690
  96,003
  100,548
  105,335
  110,375
  115,680
  121,262
  127,135
  133,312
Operating income, $m
  1,871
  7,201
  7,366
  7,556
  7,768
  8,004
  8,262
  8,544
  8,848
  9,176
  9,528
  9,905
  10,307
  10,735
  11,190
  11,673
  12,184
  12,726
  13,299
  13,904
  14,542
  15,216
  15,927
  16,677
  17,466
  18,298
  19,173
  20,095
  21,064
  22,084
  23,157
EBITDA, $m
  2,723
  7,785
  7,964
  8,168
  8,398
  8,653
  8,932
  9,236
  9,566
  9,920
  10,301
  10,708
  11,143
  11,606
  12,097
  12,619
  13,172
  13,758
  14,377
  15,031
  15,722
  16,450
  17,219
  18,029
  18,882
  19,781
  20,728
  21,724
  22,772
  23,875
  25,035
Interest expense (income), $m
  487
  1,274
  1,066
  1,103
  1,145
  1,192
  1,245
  1,302
  1,365
  1,433
  1,506
  1,585
  1,669
  1,759
  1,854
  1,956
  2,064
  2,178
  2,299
  2,426
  2,561
  2,704
  2,854
  3,013
  3,180
  3,356
  3,542
  3,737
  3,943
  4,159
  4,387
Earnings before tax, $m
  -53
  5,927
  6,301
  6,453
  6,624
  6,812
  7,017
  7,241
  7,483
  7,743
  8,022
  8,320
  8,638
  8,976
  9,336
  9,717
  10,121
  10,548
  11,000
  11,477
  11,981
  12,513
  13,073
  13,664
  14,286
  14,941
  15,631
  16,357
  17,121
  17,925
  18,770
Tax expense, $m
  198
  1,600
  1,701
  1,742
  1,788
  1,839
  1,895
  1,955
  2,020
  2,091
  2,166
  2,246
  2,332
  2,424
  2,521
  2,624
  2,733
  2,848
  2,970
  3,099
  3,235
  3,378
  3,530
  3,689
  3,857
  4,034
  4,220
  4,416
  4,623
  4,840
  5,068
Net income, $m
  -143
  4,327
  4,600
  4,711
  4,835
  4,972
  5,123
  5,286
  5,463
  5,652
  5,856
  6,074
  6,306
  6,553
  6,815
  7,093
  7,388
  7,700
  8,030
  8,378
  8,746
  9,134
  9,543
  9,974
  10,429
  10,907
  11,411
  11,941
  12,499
  13,085
  13,702

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,496
  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
  16,384
  44,637
  45,663
  46,837
  48,154
  49,614
  51,216
  52,960
  54,848
  56,883
  59,066
  61,401
  63,893
  66,546
  69,366
  72,358
  75,529
  78,886
  82,436
  86,186
  90,146
  94,325
  98,731
  103,376
  108,270
  113,425
  118,852
  124,564
  130,575
  136,898
  143,550
Adjusted assets (=assets-cash), $m
  13,888
  44,637
  45,663
  46,837
  48,154
  49,614
  51,216
  52,960
  54,848
  56,883
  59,066
  61,401
  63,893
  66,546
  69,366
  72,358
  75,529
  78,886
  82,436
  86,186
  90,146
  94,325
  98,731
  103,376
  108,270
  113,425
  118,852
  124,564
  130,575
  136,898
  143,550
Revenue / Adjusted assets
  1.086
  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
  2,919
  2,986
  3,063
  3,149
  3,245
  3,350
  3,464
  3,587
  3,720
  3,863
  4,016
  4,179
  4,352
  4,537
  4,732
  4,940
  5,159
  5,391
  5,637
  5,896
  6,169
  6,457
  6,761
  7,081
  7,418
  7,773
  8,146
  8,540
  8,953
  9,388
Working capital, $m
  680
  -2,287
  -2,339
  -2,399
  -2,467
  -2,542
  -2,624
  -2,713
  -2,810
  -2,914
  -3,026
  -3,146
  -3,273
  -3,409
  -3,554
  -3,707
  -3,869
  -4,041
  -4,223
  -4,415
  -4,618
  -4,832
  -5,058
  -5,296
  -5,547
  -5,811
  -6,089
  -6,381
  -6,689
  -7,013
  -7,354
Total debt, $m
  11,189
  26,639
  27,563
  28,619
  29,805
  31,119
  32,561
  34,130
  35,830
  37,660
  39,625
  41,727
  43,970
  46,358
  48,896
  51,589
  54,442
  57,463
  60,658
  64,034
  67,598
  71,358
  75,324
  79,505
  83,909
  88,548
  93,432
  98,573
  103,983
  109,675
  115,661
Total liabilities, $m
  15,517
  40,173
  41,097
  42,153
  43,339
  44,653
  46,095
  47,664
  49,364
  51,194
  53,159
  55,261
  57,504
  59,892
  62,430
  65,123
  67,976
  70,997
  74,192
  77,568
  81,132
  84,892
  88,858
  93,039
  97,443
  102,082
  106,966
  112,107
  117,517
  123,209
  129,195
Total equity, $m
  867
  4,464
  4,566
  4,684
  4,815
  4,961
  5,122
  5,296
  5,485
  5,688
  5,907
  6,140
  6,389
  6,655
  6,937
  7,236
  7,553
  7,889
  8,244
  8,619
  9,015
  9,432
  9,873
  10,338
  10,827
  11,342
  11,885
  12,456
  13,057
  13,690
  14,355
Total liabilities and equity, $m
  16,384
  44,637
  45,663
  46,837
  48,154
  49,614
  51,217
  52,960
  54,849
  56,882
  59,066
  61,401
  63,893
  66,547
  69,367
  72,359
  75,529
  78,886
  82,436
  86,187
  90,147
  94,324
  98,731
  103,377
  108,270
  113,424
  118,851
  124,563
  130,574
  136,899
  143,550
Debt-to-equity ratio
  12.905
  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
  -0.117
  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
  4,327
  4,600
  4,711
  4,835
  4,972
  5,123
  5,286
  5,463
  5,652
  5,856
  6,074
  6,306
  6,553
  6,815
  7,093
  7,388
  7,700
  8,030
  8,378
  8,746
  9,134
  9,543
  9,974
  10,429
  10,907
  11,411
  11,941
  12,499
  13,085
  13,702
Depreciation, amort., depletion, $m
  852
  584
  597
  613
  630
  649
  670
  693
  717
  744
  773
  803
  836
  870
  907
  946
  988
  1,032
  1,078
  1,127
  1,179
  1,234
  1,291
  1,352
  1,416
  1,484
  1,555
  1,629
  1,708
  1,791
  1,878
Funds from operations, $m
  502
  4,910
  5,197
  5,323
  5,465
  5,621
  5,793
  5,979
  6,180
  6,396
  6,629
  6,877
  7,142
  7,423
  7,722
  8,040
  8,376
  8,732
  9,108
  9,506
  9,925
  10,368
  10,835
  11,327
  11,845
  12,391
  12,965
  13,570
  14,207
  14,876
  15,580
Change in working capital, $m
  -1,104
  -45
  -53
  -60
  -67
  -75
  -82
  -89
  -97
  -104
  -112
  -120
  -128
  -136
  -144
  -153
  -162
  -172
  -182
  -192
  -203
  -214
  -226
  -238
  -251
  -264
  -278
  -293
  -308
  -324
  -341
Cash from operations, $m
  1,606
  4,916
  5,249
  5,384
  5,533
  5,696
  5,875
  6,068
  6,277
  6,501
  6,741
  6,997
  7,269
  7,559
  7,867
  8,193
  8,539
  8,904
  9,290
  9,698
  10,128
  10,582
  11,060
  11,565
  12,096
  12,655
  13,243
  13,863
  14,514
  15,200
  15,921
Maintenance CAPEX, $m
  0
  -570
  -584
  -597
  -613
  -630
  -649
  -670
  -693
  -717
  -744
  -773
  -803
  -836
  -870
  -907
  -946
  -988
  -1,032
  -1,078
  -1,127
  -1,179
  -1,234
  -1,291
  -1,352
  -1,416
  -1,484
  -1,555
  -1,629
  -1,708
  -1,791
New CAPEX, $m
  -909
  -71
  -67
  -77
  -86
  -95
  -105
  -114
  -123
  -133
  -143
  -153
  -163
  -174
  -184
  -196
  -207
  -220
  -232
  -245
  -259
  -273
  -288
  -304
  -320
  -337
  -355
  -374
  -393
  -414
  -435
Cash from investing activities, $m
  -898
  -641
  -651
  -674
  -699
  -725
  -754
  -784
  -816
  -850
  -887
  -926
  -966
  -1,010
  -1,054
  -1,103
  -1,153
  -1,208
  -1,264
  -1,323
  -1,386
  -1,452
  -1,522
  -1,595
  -1,672
  -1,753
  -1,839
  -1,929
  -2,022
  -2,122
  -2,226
Free cash flow, $m
  708
  4,275
  4,599
  4,710
  4,834
  4,971
  5,121
  5,284
  5,460
  5,650
  5,854
  6,071
  6,303
  6,550
  6,812
  7,090
  7,385
  7,697
  8,026
  8,374
  8,742
  9,130
  9,538
  9,969
  10,423
  10,902
  11,405
  11,935
  12,492
  13,078
  13,695
Issuance/(repayment) of debt, $m
  -240
  -5,211
  924
  1,056
  1,186
  1,314
  1,442
  1,570
  1,699
  1,831
  1,965
  2,102
  2,243
  2,388
  2,538
  2,693
  2,854
  3,021
  3,195
  3,376
  3,564
  3,761
  3,966
  4,180
  4,405
  4,639
  4,884
  5,141
  5,410
  5,691
  5,986
Issuance/(repurchase) of shares, $m
  0
  2,670
  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
  -2,541
  924
  1,056
  1,186
  1,314
  1,442
  1,570
  1,699
  1,831
  1,965
  2,102
  2,243
  2,388
  2,538
  2,693
  2,854
  3,021
  3,195
  3,376
  3,564
  3,761
  3,966
  4,180
  4,405
  4,639
  4,884
  5,141
  5,410
  5,691
  5,986
Total cash flow (excl. dividends), $m
  654
  -936
  5,522
  5,766
  6,019
  6,285
  6,563
  6,854
  7,160
  7,481
  7,818
  8,173
  8,546
  8,938
  9,350
  9,783
  10,239
  10,717
  11,221
  11,750
  12,306
  12,890
  13,504
  14,150
  14,828
  15,541
  16,289
  17,076
  17,902
  18,770
  19,682
Retained Cash Flow (-), $m
  -346
  -6,081
  -103
  -117
  -132
  -146
  -160
  -174
  -189
  -203
  -218
  -234
  -249
  -265
  -282
  -299
  -317
  -336
  -355
  -375
  -396
  -418
  -441
  -464
  -489
  -515
  -543
  -571
  -601
  -632
  -665
Prev. year cash balance distribution, $m
 
  4,346
  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
  5,420
  5,648
  5,888
  6,139
  6,402
  6,680
  6,971
  7,278
  7,600
  7,940
  8,297
  8,673
  9,068
  9,484
  9,922
  10,382
  10,866
  11,375
  11,910
  12,472
  13,064
  13,685
  14,339
  15,025
  15,746
  16,504
  17,301
  18,137
  19,016
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
  4,524
  4,253
  3,961
  3,653
  3,334
  3,010
  2,685
  2,366
  2,057
  1,763
  1,489
  1,237
  1,010
  810
  638
  492
  372
  274
  198
  139
  95
  63
  41
  26
  16
  9
  5
  3
  1
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 -107.8
Price to Sales 1
Price to Book 17.8
Price to Tangible Book
Price to Cash Flow 9.6
Price to Free Cash Flow 22.1
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 1161.5%
Total Debt to Equity 1290.5%
Interest Coverage 1
Management Effectiveness
Return On Assets 12.2%
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 -20.6%
Return On Equity - 3 Yr. Avg. 23.5%
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 $47700 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 - $2729 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 392.722 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 $7.6 billion.


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Stock chart of BAK Financial statements of BAK
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