Intrinsic value of China Green Agriculture - CGA

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$1.29

  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 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
  3.50
  3.65
  3.78
  3.91
  4.02
  4.11
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.58
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
Revenue, $m
  269
  278
  289
  299
  311
  324
  337
  351
  366
  382
  399
  417
  436
  456
  477
  499
  522
  547
  573
  600
  629
  660
  691
  725
  760
  797
  836
  877
  920
  966
  1,013
Variable operating expenses, $m
 
  235
  244
  253
  263
  273
  284
  296
  309
  322
  336
  351
  367
  383
  401
  420
  439
  460
  482
  505
  529
  555
  582
  610
  639
  671
  703
  738
  774
  812
  852
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
  235
  244
  253
  263
  273
  284
  296
  309
  322
  336
  351
  367
  383
  401
  420
  439
  460
  482
  505
  529
  555
  582
  610
  639
  671
  703
  738
  774
  812
  852
Operating income, $m
  33
  43
  45
  47
  49
  51
  53
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  127
  133
  139
  146
  154
  161
EBITDA, $m
  73
  58
  60
  62
  65
  67
  70
  73
  76
  79
  83
  86
  90
  95
  99
  103
  108
  113
  119
  125
  130
  137
  143
  150
  158
  165
  173
  182
  191
  200
  210
Interest expense (income), $m
  1
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
Earnings before tax, $m
  32
  43
  45
  47
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135
  141
  148
  156
Tax expense, $m
  7
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
Net income, $m
  25
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  98
  103
  108
  114

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
  327
  339
  352
  366
  380
  396
  413
  430
  449
  469
  490
  512
  536
  560
  586
  614
  643
  673
  706
  739
  775
  812
  852
  893
  937
  983
  1,031
  1,082
  1,135
  1,191
Adjusted assets (=assets-cash), $m
  316
  327
  339
  352
  366
  380
  396
  413
  430
  449
  469
  490
  512
  536
  560
  586
  614
  643
  673
  706
  739
  775
  812
  852
  893
  937
  983
  1,031
  1,082
  1,135
  1,191
Revenue / Adjusted assets
  0.851
  0.850
  0.853
  0.849
  0.850
  0.853
  0.851
  0.850
  0.851
  0.851
  0.851
  0.851
  0.852
  0.851
  0.852
  0.852
  0.850
  0.851
  0.851
  0.850
  0.851
  0.852
  0.851
  0.851
  0.851
  0.851
  0.850
  0.851
  0.850
  0.851
  0.851
Average production assets, $m
  65
  67
  70
  72
  75
  78
  82
  85
  89
  92
  97
  101
  105
  110
  115
  121
  126
  132
  139
  145
  152
  160
  167
  175
  184
  193
  202
  212
  223
  234
  245
Working capital, $m
  288
  139
  144
  150
  156
  162
  169
  176
  183
  191
  200
  208
  218
  228
  238
  249
  261
  274
  287
  300
  315
  330
  346
  362
  380
  399
  418
  439
  460
  483
  507
Total debt, $m
  11
  1
  3
  4
  6
  8
  10
  12
  14
  16
  18
  21
  23
  26
  29
  32
  36
  39
  43
  47
  51
  55
  59
  64
  69
  74
  80
  86
  92
  98
  105
Total liabilities, $m
  48
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
  124
  130
  136
  143
Total equity, $m
  370
  288
  298
  310
  322
  335
  348
  363
  379
  395
  413
  431
  451
  471
  493
  516
  540
  566
  593
  621
  651
  682
  715
  750
  786
  825
  865
  907
  952
  999
  1,048
Total liabilities and equity, $m
  418
  327
  339
  352
  366
  381
  396
  413
  431
  449
  469
  490
  512
  535
  560
  586
  614
  643
  674
  706
  740
  775
  812
  852
  893
  937
  983
  1,031
  1,082
  1,135
  1,191
Debt-to-equity ratio
  0.030
  0.000
  0.010
  0.010
  0.020
  0.020
  0.030
  0.030
  0.040
  0.040
  0.040
  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
  0.100
  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
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  98
  103
  108
  114
Depreciation, amort., depletion, $m
  40
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  39
  40
  42
  45
  47
  49
Funds from operations, $m
  -1
  46
  48
  49
  51
  53
  55
  58
  60
  62
  65
  68
  71
  74
  77
  81
  85
  88
  93
  97
  102
  106
  111
  117
  122
  128
  134
  141
  148
  155
  163
Change in working capital, $m
  -35
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Cash from operations, $m
  34
  37
  43
  44
  45
  47
  49
  50
  52
  55
  57
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  105
  110
  115
  120
  126
  132
  139
Maintenance CAPEX, $m
  0
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -40
  -42
  -45
  -47
New CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
Cash from investing activities, $m
  1
  -15
  -15
  -17
  -17
  -18
  -19
  -19
  -21
  -22
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -35
  -36
  -37
  -40
  -41
  -44
  -46
  -48
  -50
  -52
  -56
  -59
Free cash flow, $m
  35
  22
  27
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
Issuance/(repayment) of debt, $m
  -18
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
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
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
Total cash flow (excl. dividends), $m
  10
  23
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  39
  41
  43
  44
  46
  48
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
  79
  83
  87
Retained Cash Flow (-), $m
  3
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -45
  -47
  -49
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
 
  105
  18
  18
  18
  18
  18
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  23
  24
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
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
 
  101
  16
  15
  14
  14
  13
  12
  11
  11
  10
  9
  8
  8
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  2
  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
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China Green Agriculture, Inc., through its subsidiaries, engages in the research, development, production, and sale of various types of fertilizers and agricultural products. The company operates in three segments: Jinong, Gufeng, and Yuxing. Its fertilizer products include humic acid-based compound fertilizers, compound fertilizers, blended fertilizers, organic compound fertilizers, slow-release fertilizers, water-soluble fertilizers, and mixed organic-inorganic compound fertilizers. The company markets its fertilizer products to private wholesalers and retailers of agricultural farm products. It also develops, produces, and sells fruits, vegetables, flowers, and colored seedlings. The company sells its decorative flowers to end-users, such as flower shops, luxury hotels, and government agencies; fruits and vegetables to supermarkets and upscale restaurants; and seedlings to city planning departments. As of June 30, 2016, it operated a network of 1,904 regional distributors covering 27 provinces, 4 autonomous regions, and 3 central government-controlled municipalities in China. The company also exports its products through contracted distributors to India and Ghana. China Green Agriculture, Inc. is based in Xi'an, the People’s Republic of China.

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 3.5% 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 37.696 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.


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