Intrinsic value of China Cord Blood - CO

Previous Close

$10.76

  Intrinsic Value

$14.89

stock screener

  Rating & Target

buy

+38%

  Value-price divergence*

-248%

Previous close

$10.76

 
Intrinsic value

$14.89

 
Up/down potential

+38%

 
Rating

buy

 
Value-price divergence*

-248%

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

We calculate the intrinsic value of CO 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 2017), $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 1.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  14.58
  26.10
  23.99
  22.09
  20.38
  18.84
  17.46
  16.21
  15.09
  14.08
  13.17
  12.36
  11.62
  10.96
  10.36
  9.83
  9.34
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.51
  6.36
  6.23
  6.10
  5.99
Revenue, $m
  110
  139
  172
  210
  253
  300
  353
  410
  472
  538
  609
  685
  764
  848
  936
  1,028
  1,124
  1,224
  1,328
  1,437
  1,550
  1,667
  1,789
  1,915
  2,047
  2,184
  2,326
  2,474
  2,628
  2,788
  2,955
Variable operating expenses, $m
 
  30
  37
  46
  55
  65
  77
  89
  103
  117
  133
  149
  167
  185
  204
  224
  245
  267
  290
  313
  338
  363
  390
  418
  446
  476
  507
  539
  573
  608
  644
Fixed operating expenses, $m
 
  50
  51
  53
  54
  55
  57
  58
  60
  61
  63
  64
  66
  68
  69
  71
  73
  75
  76
  78
  80
  82
  84
  86
  89
  91
  93
  95
  98
  100
  103
Total operating expenses, $m
  72
  80
  88
  99
  109
  120
  134
  147
  163
  178
  196
  213
  233
  253
  273
  295
  318
  342
  366
  391
  418
  445
  474
  504
  535
  567
  600
  634
  671
  708
  747
Operating income, $m
  38
  58
  83
  111
  144
  179
  219
  262
  309
  360
  414
  471
  532
  596
  663
  733
  806
  883
  962
  1,045
  1,131
  1,221
  1,314
  1,411
  1,512
  1,617
  1,726
  1,839
  1,957
  2,080
  2,208
EBITDA, $m
  46
  68
  96
  127
  162
  201
  245
  292
  344
  399
  458
  521
  587
  657
  731
  808
  888
  972
  1,059
  1,150
  1,244
  1,343
  1,445
  1,551
  1,661
  1,776
  1,895
  2,019
  2,149
  2,283
  2,424
Interest expense (income), $m
  14
  0
  -6
  1
  8
  16
  25
  35
  46
  58
  71
  84
  99
  114
  130
  147
  165
  183
  202
  222
  243
  265
  287
  311
  335
  360
  386
  414
  442
  472
  502
Earnings before tax, $m
  24
  58
  89
  111
  136
  163
  194
  227
  263
  302
  343
  387
  433
  481
  532
  586
  641
  699
  760
  823
  888
  956
  1,027
  1,101
  1,177
  1,256
  1,339
  1,425
  1,515
  1,608
  1,706
Tax expense, $m
  5
  16
  24
  30
  37
  44
  52
  61
  71
  81
  93
  104
  117
  130
  144
  158
  173
  189
  205
  222
  240
  258
  277
  297
  318
  339
  362
  385
  409
  434
  461
Net income, $m
  18
  43
  65
  81
  99
  119
  142
  166
  192
  220
  250
  282
  316
  351
  389
  428
  468
  511
  555
  601
  648
  698
  750
  803
  859
  917
  978
  1,040
  1,106
  1,174
  1,245

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  508
  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
  750
  305
  378
  461
  556
  660
  776
  901
  1,037
  1,183
  1,339
  1,505
  1,680
  1,864
  2,057
  2,259
  2,470
  2,690
  2,919
  3,158
  3,406
  3,663
  3,931
  4,209
  4,498
  4,799
  5,112
  5,437
  5,775
  6,128
  6,495
Adjusted assets (=assets-cash), $m
  242
  305
  378
  461
  556
  660
  776
  901
  1,037
  1,183
  1,339
  1,505
  1,680
  1,864
  2,057
  2,259
  2,470
  2,690
  2,919
  3,158
  3,406
  3,663
  3,931
  4,209
  4,498
  4,799
  5,112
  5,437
  5,775
  6,128
  6,495
Revenue / Adjusted assets
  0.455
  0.456
  0.455
  0.456
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
Average production assets, $m
  97
  122
  152
  185
  223
  265
  311
  362
  416
  475
  537
  604
  674
  748
  825
  907
  991
  1,080
  1,172
  1,267
  1,367
  1,470
  1,578
  1,689
  1,805
  1,926
  2,051
  2,182
  2,318
  2,459
  2,607
Working capital, $m
  322
  -47
  -58
  -71
  -85
  -101
  -119
  -138
  -159
  -181
  -205
  -230
  -257
  -285
  -314
  -345
  -378
  -411
  -446
  -483
  -521
  -560
  -601
  -644
  -688
  -734
  -781
  -831
  -883
  -937
  -993
Total debt, $m
  149
  -61
  5
  80
  165
  259
  363
  476
  599
  730
  870
  1,019
  1,177
  1,342
  1,516
  1,698
  1,888
  2,086
  2,292
  2,507
  2,730
  2,962
  3,203
  3,453
  3,714
  3,984
  4,265
  4,558
  4,863
  5,180
  5,511
Total liabilities, $m
  484
  274
  340
  415
  500
  594
  698
  811
  934
  1,065
  1,205
  1,354
  1,512
  1,677
  1,851
  2,033
  2,223
  2,421
  2,627
  2,842
  3,065
  3,297
  3,538
  3,788
  4,049
  4,319
  4,600
  4,893
  5,198
  5,515
  5,846
Total equity, $m
  266
  30
  38
  46
  56
  66
  78
  90
  104
  118
  134
  150
  168
  186
  206
  226
  247
  269
  292
  316
  341
  366
  393
  421
  450
  480
  511
  544
  578
  613
  650
Total liabilities and equity, $m
  750
  304
  378
  461
  556
  660
  776
  901
  1,038
  1,183
  1,339
  1,504
  1,680
  1,863
  2,057
  2,259
  2,470
  2,690
  2,919
  3,158
  3,406
  3,663
  3,931
  4,209
  4,499
  4,799
  5,111
  5,437
  5,776
  6,128
  6,496
Debt-to-equity ratio
  0.560
  -1.990
  0.140
  1.740
  2.970
  3.930
  4.680
  5.280
  5.770
  6.170
  6.500
  6.770
  7.010
  7.200
  7.370
  7.520
  7.640
  7.750
  7.850
  7.940
  8.020
  8.090
  8.150
  8.200
  8.260
  8.300
  8.340
  8.380
  8.420
  8.450
  8.480
Adjusted equity ratio
  -0.384
  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
  18
  43
  65
  81
  99
  119
  142
  166
  192
  220
  250
  282
  316
  351
  389
  428
  468
  511
  555
  601
  648
  698
  750
  803
  859
  917
  978
  1,040
  1,106
  1,174
  1,245
Depreciation, amort., depletion, $m
  8
  10
  13
  15
  18
  22
  26
  30
  34
  39
  44
  50
  56
  62
  68
  75
  82
  89
  97
  105
  113
  121
  130
  140
  149
  159
  170
  180
  192
  203
  215
Funds from operations, $m
  139
  53
  77
  96
  118
  141
  167
  196
  227
  260
  295
  332
  372
  413
  457
  503
  550
  600
  652
  705
  761
  820
  880
  943
  1,008
  1,076
  1,147
  1,221
  1,297
  1,377
  1,461
Change in working capital, $m
  47
  -10
  -11
  -13
  -14
  -16
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
Cash from operations, $m
  92
  62
  89
  109
  132
  157
  185
  215
  247
  282
  319
  357
  398
  441
  486
  533
  582
  633
  687
  742
  799
  859
  921
  986
  1,053
  1,122
  1,195
  1,271
  1,349
  1,431
  1,517
Maintenance CAPEX, $m
  0
  -8
  -10
  -13
  -15
  -18
  -22
  -26
  -30
  -34
  -39
  -44
  -50
  -56
  -62
  -68
  -75
  -82
  -89
  -97
  -105
  -113
  -121
  -130
  -140
  -149
  -159
  -170
  -180
  -192
  -203
New CAPEX, $m
  -4
  -25
  -29
  -34
  -38
  -42
  -46
  -50
  -55
  -59
  -63
  -66
  -70
  -74
  -78
  -81
  -85
  -88
  -92
  -96
  -99
  -103
  -107
  -112
  -116
  -121
  -125
  -131
  -136
  -141
  -147
Cash from investing activities, $m
  -13
  -33
  -39
  -47
  -53
  -60
  -68
  -76
  -85
  -93
  -102
  -110
  -120
  -130
  -140
  -149
  -160
  -170
  -181
  -193
  -204
  -216
  -228
  -242
  -256
  -270
  -284
  -301
  -316
  -333
  -350
Free cash flow, $m
  79
  29
  49
  63
  79
  97
  117
  139
  163
  189
  217
  247
  278
  312
  347
  384
  423
  463
  505
  549
  595
  643
  692
  743
  797
  853
  910
  970
  1,033
  1,098
  1,166
Issuance/(repayment) of debt, $m
  -9
  -61
  66
  75
  85
  94
  104
  113
  122
  131
  140
  149
  157
  166
  174
  182
  190
  198
  206
  215
  223
  232
  241
  250
  260
  271
  281
  293
  305
  317
  331
Issuance/(repurchase) of shares, $m
  0
  81
  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  
  -9
  20
  66
  75
  85
  94
  104
  113
  122
  131
  140
  149
  157
  166
  174
  182
  190
  198
  206
  215
  223
  232
  241
  250
  260
  271
  281
  293
  305
  317
  331
Total cash flow (excl. dividends), $m
  73
  49
  115
  138
  164
  191
  221
  252
  285
  320
  357
  396
  436
  477
  521
  566
  613
  661
  712
  764
  818
  875
  933
  994
  1,057
  1,123
  1,192
  1,263
  1,338
  1,416
  1,497
Retained Cash Flow (-), $m
  -19
  -123
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
Prev. year cash balance distribution, $m
 
  359
  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
 
  285
  108
  130
  154
  181
  209
  239
  272
  306
  342
  379
  418
  459
  502
  546
  592
  639
  689
  740
  793
  849
  906
  966
  1,028
  1,093
  1,160
  1,231
  1,304
  1,380
  1,460
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
 
  273
  99
  113
  127
  140
  152
  162
  170
  176
  179
  180
  178
  175
  168
  160
  150
  139
  127
  114
  101
  88
  75
  63
  52
  43
  34
  26
  20
  15
  11
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

China Cord Blood Corporation is a provider of cord blood banking services in China. The Company and its subsidiaries are principally engaged in the provision of umbilical cord blood storage and ancillary services in the People's Republic of China. It provides cord blood testing, processing and storage services under the direction of subscribers for a cord blood processing fee and a storage fee. It also tests, processes and stores donated cord blood, and provides matching services to the public for a fee. The Company provides cord blood processing and storage services for expectant parents interested in capturing the opportunities made available by evolving medical treatments and technologies, such as cord blood transplants. It also preserves cord blood units donated by the public; provides matching services on such donated units, and delivers matching units to patients in need of transplants. As of March 31, 2016, the Company had three operating cord blood banks.

FINANCIAL RATIOS  of  China Cord Blood (CO)

Valuation Ratios
P/E Ratio 43.6
Price to Sales 7.1
Price to Book 3
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 8.9
Growth Rates
Sales Growth Rate 14.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate -28.9%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 56%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 4.5%
Ret/ On T. Cap. - 3 Yr. Avg. 4.3%
Return On Equity 7%
Return On Equity - 3 Yr. Avg. 6.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 80.9%
Gross Margin - 3 Yr. Avg. 79.5%
EBITDA Margin 41.8%
EBITDA Margin - 3 Yr. Avg. 39.5%
Operating Margin 34.5%
Oper. Margin - 3 Yr. Avg. 33.2%
Pre-Tax Margin 21.8%
Pre-Tax Margin - 3 Yr. Avg. 22.2%
Net Profit Margin 16.4%
Net Profit Margin - 3 Yr. Avg. 15.8%
Effective Tax Rate 20.8%
Eff/ Tax Rate - 3 Yr. Avg. 27.7%
Payout Ratio 0%

CO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CO stock intrinsic value calculation we used $110 million for the last fiscal year's total revenue generated by China Cord Blood. The default revenue input number comes from 2017 income statement of China Cord Blood. 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 CO stock valuation model: a) initial revenue growth rate of 26.1% 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 CO is calculated based on our internal credit rating of China Cord Blood, 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 Cord Blood.
    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 CO stock the variable cost ratio is equal to 21.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $49 million in the base year in the intrinsic value calculation for CO 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 9.7% for China Cord Blood.

Corporate tax rate of 27% is the nominal tax rate for China Cord Blood. 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 CO 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 CO are equal to 88.2%.

Life of production assets of 12.1 years is the average useful life of capital assets used in China Cord Blood 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 CO is equal to -33.6%. 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 - $266 million for China Cord Blood - 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 118.609 million for China Cord Blood 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 Cord Blood at the current share price and the inputted number of shares is $1.3 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ European Union continues to crack down on U.S. companies   [Oct-04-17 08:59AM  Yahoo Finance]
▶ Is It Time To Sell China Cord Blood Corporation (CO)?   [Oct-02-17 06:37PM  Simply Wall St.]
▶ China Cord Blood posts 1Q profit   [Aug-23-17 09:26PM  Associated Press]
▶ Here's What a Breakup of Procter & Gamble Would Look Like   [Jul-19-17 03:10PM  TheStreet.com]
▶ China Cord Blood posts 4Q profit   [Jun-21-17 09:39PM  Associated Press]
▶ [$$] Investment is in the blood for stem cell futurists   [May-25-17 12:01AM  Financial Times]
▶ Is Pepsi Kraft Heinz's Next Takeover Target?   [Apr-12-17 12:31PM  Barrons.com]
▶ China Cord Blood Corporation Announces Executive Change   [Mar-31-17 07:00AM  PR Newswire]
▶ China Cord Blood posts 3Q profit   [Feb-24-17 04:22PM  Associated Press]
▶ [$$] The buying spree behind the Beijing crackdown   [Nov-29-16 09:12AM  at Financial Times]
Financial statements of CO
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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