Intrinsic value of China Green Agriculture - CGA

Previous Close

$1.28

  Intrinsic Value

$8.21

stock screener

  Rating & Target

str. buy

+541%

  Value-price divergence*

+118%

Previous close

$1.28

 
Intrinsic value

$8.21

 
Up/down potential

+541%

 
Rating

str. buy

 
Value-price divergence*

+118%

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

We calculate the intrinsic value of CGA 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 0.0

 

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, %
  2.28
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  269
  276
  283
  292
  301
  311
  322
  334
  347
  360
  375
  390
  407
  424
  443
  462
  483
  505
  528
  552
  578
  605
  634
  664
  696
  729
  764
  801
  840
  881
  924
Variable operating expenses, $m
 
  233
  239
  246
  254
  262
  272
  282
  292
  304
  316
  328
  342
  357
  372
  389
  406
  425
  444
  465
  486
  509
  533
  559
  585
  613
  643
  674
  707
  741
  777
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
  236
  233
  239
  246
  254
  262
  272
  282
  292
  304
  316
  328
  342
  357
  372
  389
  406
  425
  444
  465
  486
  509
  533
  559
  585
  613
  643
  674
  707
  741
  777
Operating income, $m
  33
  43
  44
  46
  47
  49
  50
  52
  54
  56
  59
  62
  65
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  127
  134
  140
  147
EBITDA, $m
  73
  57
  59
  60
  62
  65
  67
  69
  72
  75
  78
  81
  84
  88
  92
  96
  100
  105
  109
  115
  120
  126
  131
  138
  144
  151
  159
  166
  174
  183
  192
Interest expense (income), $m
  1
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
Earnings before tax, $m
  32
  43
  44
  45
  47
  48
  50
  52
  54
  56
  58
  61
  64
  66
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103
  107
  112
  118
  123
  129
  135
  142
Tax expense, $m
  7
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  38
Net income, $m
  25
  31
  32
  33
  34
  35
  37
  38
  39
  41
  42
  45
  46
  48
  50
  53
  55
  57
  60
  63
  65
  68
  72
  75
  78
  82
  86
  90
  94
  99
  104

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  103
  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
  419
  324
  333
  343
  354
  366
  378
  392
  407
  423
  440
  459
  478
  498
  520
  543
  568
  593
  620
  649
  679
  711
  745
  780
  818
  857
  898
  942
  987
  1,035
  1,086
Adjusted assets (=assets-cash), $m
  316
  324
  333
  343
  354
  366
  378
  392
  407
  423
  440
  459
  478
  498
  520
  543
  568
  593
  620
  649
  679
  711
  745
  780
  818
  857
  898
  942
  987
  1,035
  1,086
Revenue / Adjusted assets
  0.851
  0.852
  0.850
  0.851
  0.850
  0.850
  0.852
  0.852
  0.853
  0.851
  0.852
  0.850
  0.851
  0.851
  0.852
  0.851
  0.850
  0.852
  0.852
  0.851
  0.851
  0.851
  0.851
  0.851
  0.851
  0.851
  0.851
  0.850
  0.851
  0.851
  0.851
Average production assets, $m
  65
  67
  69
  71
  73
  75
  78
  81
  84
  87
  91
  94
  98
  103
  107
  112
  117
  122
  128
  134
  140
  146
  153
  161
  168
  176
  185
  194
  203
  213
  224
Working capital, $m
  288
  138
  142
  146
  151
  156
  161
  167
  173
  180
  187
  195
  203
  212
  221
  231
  241
  252
  264
  276
  289
  303
  317
  332
  348
  365
  382
  401
  420
  441
  462
Total debt, $m
  11
  1
  2
  3
  4
  6
  7
  9
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  36
  40
  44
  47
  51
  56
  60
  65
  70
  75
  80
  86
  92
Total liabilities, $m
  48
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  82
  85
  89
  94
  98
  103
  108
  113
  118
  124
  130
Total equity, $m
  370
  285
  293
  302
  311
  322
  333
  345
  358
  372
  388
  403
  421
  439
  458
  478
  499
  522
  546
  571
  598
  626
  656
  687
  720
  754
  790
  829
  869
  911
  956
Total liabilities and equity, $m
  418
  324
  333
  343
  353
  366
  378
  392
  407
  423
  441
  458
  478
  499
  520
  543
  567
  593
  620
  649
  680
  711
  745
  781
  818
  857
  898
  942
  987
  1,035
  1,086
Debt-to-equity ratio
  0.030
  0.000
  0.010
  0.010
  0.010
  0.020
  0.020
  0.030
  0.030
  0.030
  0.040
  0.040
  0.050
  0.050
  0.050
  0.060
  0.060
  0.060
  0.070
  0.070
  0.070
  0.080
  0.080
  0.080
  0.080
  0.090
  0.090
  0.090
  0.090
  0.090
  0.100
Adjusted equity ratio
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  31
  32
  33
  34
  35
  37
  38
  39
  41
  42
  45
  46
  48
  50
  53
  55
  57
  60
  63
  65
  68
  72
  75
  78
  82
  86
  90
  94
  99
  104
Depreciation, amort., depletion, $m
  40
  14
  15
  15
  15
  16
  16
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
Funds from operations, $m
  -1
  46
  47
  48
  50
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
  142
  148
Change in working capital, $m
  -35
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
  22
Cash from operations, $m
  34
  42
  43
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
Maintenance CAPEX, $m
  0
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
New CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
Cash from investing activities, $m
  1
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
Free cash flow, $m
  35
  27
  28
  28
  29
  29
  30
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  71
  74
Issuance/(repayment) of debt, $m
  -18
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
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  
  -17
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Total cash flow (excl. dividends), $m
  10
  28
  29
  29
  30
  31
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  76
  80
Retained Cash Flow (-), $m
  3
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
Prev. year cash balance distribution, $m
 
  92
  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
 
  113
  21
  21
  20
  20
  20
  20
  20
  20
  20
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  109
  19
  18
  17
  16
  14
  13
  12
  11
  11
  10
  9
  8
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  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
  100.0

China Green Agriculture, Inc. is engaged in the research, development, production and sale of various types of fertilizers and agricultural products in the People's Republic of China (PRC) through its Chinese subsidiaries, Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd. (Jinong) and Beijing Gufeng Chemical Products Co., Ltd. (Gufeng), and its variable interest entity (VIE), Xi'an Hu County Yuxing Agriculture Technology Development Co., Ltd. (Yuxing). The Company's segments include Jinong (fertilizer production), Gufeng (fertilizer production) and Yuxing (agricultural products production). The Company's primary business is of fertilizer products, specifically humic acid-based compound fertilizer produced through Jinong, and compound fertilizer, blended fertilizer, organic compound fertilizer, slow-release fertilizers, water-soluble fertilizers and mixed organic-inorganic compound fertilizer produced through Gufeng.

FINANCIAL RATIOS  of  China Green Agriculture (CGA)

Valuation Ratios
P/E Ratio 1.9
Price to Sales 0.2
Price to Book 0.1
Price to Tangible Book
Price to Cash Flow 1.4
Price to Free Cash Flow 1.4
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 3%
Interest Coverage 33
Management Effectiveness
Return On Assets 6.1%
Ret/ On Assets - 3 Yr. Avg. 7.1%
Return On Total Capital 6.4%
Ret/ On T. Cap. - 3 Yr. Avg. 7.5%
Return On Equity 6.7%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 34.6%
Gross Margin - 3 Yr. Avg. 37.7%
EBITDA Margin 27.1%
EBITDA Margin - 3 Yr. Avg. 30.2%
Operating Margin 12.3%
Oper. Margin - 3 Yr. Avg. 14.3%
Pre-Tax Margin 11.9%
Pre-Tax Margin - 3 Yr. Avg. 13.9%
Net Profit Margin 9.3%
Net Profit Margin - 3 Yr. Avg. 10.7%
Effective Tax Rate 21.9%
Eff/ Tax Rate - 3 Yr. Avg. 22.6%
Payout Ratio 0%

CGA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CGA stock intrinsic value calculation we used $269 million for the last fiscal year's total revenue generated by China Green Agriculture. The default revenue input number comes from 2016 income statement of China Green Agriculture. 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 CGA stock valuation model: a) initial revenue growth rate of 2.5% 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 4.3%, whose default value for CGA is calculated based on our internal credit rating of China Green Agriculture, 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 China Green Agriculture.
    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 CGA stock the variable cost ratio is equal to 84.4%.

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 CGA 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 5.7% for China Green Agriculture.

Corporate tax rate of 27% is the nominal tax rate for China Green Agriculture. 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 CGA 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 CGA are equal to 24.2%.

Life of production assets of 1.8 years is the average useful life of capital assets used in China Green Agriculture 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 CGA 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 - $370 million for China Green Agriculture - 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 38.238 million for China Green Agriculture 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 China Green Agriculture at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
SQM Sociedad Quimi 60.60 16.66  str.sell
UAN CVR Partners 3.01 1.28  str.sell
CF CF Industries 36.83 36.87  buy

COMPANY NEWS

▶ 4 Top-Ranked Net-Net Working Capital Stocks   [Dec-30-16 10:51AM  GuruFocus.com]
▶ Buy These 5 Stocks For Less Than Liquidation Value   [12:09PM  at Insider Monkey]
▶ China Green Agriculture Announces Strategic Acquisitions   [Jul-08-16 10:00AM  PR Newswire]
▶ ConAgra Goes BPA-Free   [Aug-06  10:09AM  at Investopedia]
Financial statements of CGA
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.