Intrinsic value of China Cord Blood - CO

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$9.49

  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 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 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 0.7

 

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, %
  4.35
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  96
  713
  766
  820
  877
  936
  997
  1,060
  1,126
  1,195
  1,267
  1,342
  1,420
  1,502
  1,587
  1,675
  1,768
  1,865
  1,966
  2,072
  2,183
  2,299
  2,421
  2,548
  2,681
  2,821
  2,967
  3,120
  3,281
  3,450
  3,626
Variable operating expenses, $m
 
  449
  482
  517
  552
  589
  628
  668
  710
  753
  798
  845
  895
  946
  1,000
  1,055
  1,114
  1,175
  1,239
  1,306
  1,375
  1,448
  1,525
  1,605
  1,689
  1,777
  1,869
  1,966
  2,067
  2,173
  2,285
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
  69
  449
  482
  517
  552
  589
  628
  668
  710
  753
  798
  845
  895
  946
  1,000
  1,055
  1,114
  1,175
  1,239
  1,306
  1,375
  1,448
  1,525
  1,605
  1,689
  1,777
  1,869
  1,966
  2,067
  2,173
  2,285
Operating income, $m
  26
  264
  283
  303
  324
  346
  369
  392
  417
  442
  469
  497
  525
  556
  587
  620
  654
  690
  728
  767
  808
  851
  896
  943
  992
  1,044
  1,098
  1,155
  1,214
  1,276
  1,342
EBITDA, $m
  34
  319
  342
  366
  392
  418
  445
  474
  503
  534
  566
  600
  635
  671
  709
  749
  790
  833
  879
  926
  975
  1,027
  1,082
  1,138
  1,198
  1,260
  1,326
  1,394
  1,466
  1,541
  1,620
Interest expense (income), $m
  7
  50
  -21
  -15
  -8
  -1
  7
  14
  22
  30
  39
  48
  57
  67
  77
  88
  99
  111
  123
  136
  149
  163
  177
  193
  209
  225
  243
  261
  280
  300
  322
Earnings before tax, $m
  20
  214
  305
  318
  332
  347
  362
  378
  395
  412
  430
  448
  468
  488
  510
  532
  555
  579
  605
  631
  659
  688
  718
  750
  783
  818
  855
  893
  934
  976
  1,020
Tax expense, $m
  7
  58
  82
  86
  90
  94
  98
  102
  107
  111
  116
  121
  126
  132
  138
  144
  150
  156
  163
  170
  178
  186
  194
  203
  212
  221
  231
  241
  252
  264
  275
Net income, $m
  13
  156
  222
  232
  243
  253
  264
  276
  288
  301
  314
  327
  342
  356
  372
  388
  405
  423
  441
  461
  481
  502
  524
  548
  572
  597
  624
  652
  682
  712
  745

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  435
  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
  678
  1,806
  1,939
  2,076
  2,220
  2,368
  2,523
  2,684
  2,852
  3,026
  3,208
  3,398
  3,595
  3,801
  4,017
  4,241
  4,476
  4,721
  4,978
  5,246
  5,527
  5,821
  6,128
  6,450
  6,788
  7,141
  7,512
  7,900
  8,307
  8,734
  9,181
Adjusted assets (=assets-cash), $m
  243
  1,806
  1,939
  2,076
  2,220
  2,368
  2,523
  2,684
  2,852
  3,026
  3,208
  3,398
  3,595
  3,801
  4,017
  4,241
  4,476
  4,721
  4,978
  5,246
  5,527
  5,821
  6,128
  6,450
  6,788
  7,141
  7,512
  7,900
  8,307
  8,734
  9,181
Revenue / Adjusted assets
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
Average production assets, $m
  102
  756
  812
  869
  929
  992
  1,056
  1,124
  1,194
  1,267
  1,343
  1,423
  1,505
  1,592
  1,682
  1,776
  1,874
  1,977
  2,084
  2,197
  2,314
  2,437
  2,566
  2,701
  2,842
  2,990
  3,145
  3,308
  3,478
  3,657
  3,844
Working capital, $m
  395
  -233
  -250
  -267
  -286
  -305
  -325
  -346
  -367
  -390
  -413
  -438
  -463
  -489
  -517
  -546
  -576
  -608
  -641
  -676
  -712
  -750
  -789
  -831
  -874
  -920
  -967
  -1,017
  -1,070
  -1,125
  -1,182
Total debt, $m
  140
  -388
  -268
  -144
  -15
  119
  258
  403
  554
  711
  874
  1,045
  1,223
  1,408
  1,602
  1,804
  2,015
  2,236
  2,467
  2,709
  2,961
  3,226
  3,503
  3,792
  4,096
  4,414
  4,748
  5,097
  5,463
  5,847
  6,250
Total liabilities, $m
  431
  1,625
  1,745
  1,869
  1,998
  2,132
  2,271
  2,416
  2,567
  2,724
  2,887
  3,058
  3,236
  3,421
  3,615
  3,817
  4,028
  4,249
  4,480
  4,722
  4,974
  5,239
  5,516
  5,805
  6,109
  6,427
  6,761
  7,110
  7,476
  7,860
  8,263
Total equity, $m
  247
  181
  194
  208
  222
  237
  252
  268
  285
  303
  321
  340
  360
  380
  402
  424
  448
  472
  498
  525
  553
  582
  613
  645
  679
  714
  751
  790
  831
  873
  918
Total liabilities and equity, $m
  678
  1,806
  1,939
  2,077
  2,220
  2,369
  2,523
  2,684
  2,852
  3,027
  3,208
  3,398
  3,596
  3,801
  4,017
  4,241
  4,476
  4,721
  4,978
  5,247
  5,527
  5,821
  6,129
  6,450
  6,788
  7,141
  7,512
  7,900
  8,307
  8,733
  9,181
Debt-to-equity ratio
  0.567
  -2.150
  -1.380
  -0.690
  -0.070
  0.500
  1.020
  1.500
  1.940
  2.350
  2.730
  3.080
  3.400
  3.700
  3.990
  4.250
  4.500
  4.740
  4.960
  5.160
  5.360
  5.540
  5.720
  5.880
  6.030
  6.180
  6.320
  6.450
  6.580
  6.700
  6.810
Adjusted equity ratio
  -0.737
  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
  13
  156
  222
  232
  243
  253
  264
  276
  288
  301
  314
  327
  342
  356
  372
  388
  405
  423
  441
  461
  481
  502
  524
  548
  572
  597
  624
  652
  682
  712
  745
Depreciation, amort., depletion, $m
  8
  55
  59
  63
  67
  72
  77
  81
  87
  92
  97
  103
  109
  115
  122
  129
  136
  143
  151
  159
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265
  279
Funds from operations, $m
  127
  211
  281
  295
  310
  325
  341
  357
  375
  392
  411
  430
  451
  472
  494
  517
  541
  566
  592
  620
  649
  679
  710
  743
  778
  814
  852
  892
  934
  977
  1,023
Change in working capital, $m
  43
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -46
  -48
  -50
  -52
  -55
  -58
Cash from operations, $m
  84
  211
  298
  313
  328
  344
  361
  378
  396
  415
  434
  455
  476
  498
  522
  546
  571
  598
  625
  654
  685
  717
  750
  785
  821
  860
  900
  942
  986
  1,032
  1,081
Maintenance CAPEX, $m
  0
  -51
  -55
  -59
  -63
  -67
  -72
  -77
  -81
  -87
  -92
  -97
  -103
  -109
  -115
  -122
  -129
  -136
  -143
  -151
  -159
  -168
  -177
  -186
  -196
  -206
  -217
  -228
  -240
  -252
  -265
New CAPEX, $m
  -2
  -53
  -56
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -83
  -86
  -90
  -94
  -98
  -103
  -107
  -112
  -118
  -123
  -129
  -135
  -141
  -148
  -155
  -163
  -170
  -179
  -187
Cash from investing activities, $m
  -2
  -104
  -111
  -117
  -123
  -129
  -137
  -144
  -151
  -160
  -168
  -176
  -186
  -195
  -205
  -216
  -227
  -239
  -250
  -263
  -277
  -291
  -306
  -321
  -337
  -354
  -372
  -391
  -410
  -431
  -452
Free cash flow, $m
  82
  106
  188
  197
  205
  215
  224
  234
  245
  255
  267
  278
  290
  303
  316
  330
  344
  359
  375
  391
  408
  426
  444
  464
  484
  506
  528
  551
  576
  602
  629
Issuance/(repayment) of debt, $m
  0
  -1,294
  119
  124
  129
  134
  139
  145
  151
  157
  164
  171
  178
  186
  194
  202
  211
  221
  231
  241
  253
  264
  277
  290
  304
  318
  333
  349
  366
  384
  403
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  
  0
  -1,294
  119
  124
  129
  134
  139
  145
  151
  157
  164
  171
  178
  186
  194
  202
  211
  221
  231
  241
  253
  264
  277
  290
  304
  318
  333
  349
  366
  384
  403
Total cash flow (excl. dividends), $m
  83
  -1,187
  307
  321
  334
  349
  364
  379
  395
  412
  430
  449
  468
  488
  510
  532
  555
  580
  606
  632
  661
  690
  721
  754
  788
  824
  861
  901
  942
  986
  1,031
Retained Cash Flow (-), $m
  -25
  -1,420
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
Prev. year cash balance distribution, $m
 
  2,948
  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
 
  341
  294
  307
  320
  334
  348
  363
  379
  395
  412
  430
  448
  468
  488
  510
  532
  555
  580
  606
  633
  661
  691
  722
  754
  788
  824
  862
  902
  943
  987
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
 
  327
  269
  267
  263
  259
  253
  245
  237
  227
  216
  204
  191
  178
  164
  150
  135
  121
  107
  93
  80
  68
  57
  47
  38
  31
  24
  19
  14
  10
  7
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 Cord Blood Corporation, together with its subsidiaries, primarily provides umbilical cord blood storage and ancillary services in the People’s Republic of China. The company provides cord blood testing, processing, and storage services under the direction of subscribers; and tests, processes, and stores donated cord blood, as well as offers matching services. As of March 31, 2016, it had three operating cord blood banks in the Beijing municipality, the Guangdong province, and the Zhejiang province. The company has a strategic collaboration with Cord Blood Registry to share data on cord blood collection, processing, and storage. China Cord Blood Corporation is based in Central, Hong Kong.

FINANCIAL RATIOS  of  China Cord Blood (CO)

Valuation Ratios
P/E Ratio 53.3
Price to Sales 7.2
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 8.2
Price to Free Cash Flow 8.4
Growth Rates
Sales Growth Rate 4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -42.9%
Financial Strength
Quick Ratio 48
Current Ratio 0
LT Debt to Equity 53%
Total Debt to Equity 56.7%
Interest Coverage 4
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 4.8%
Return On Equity 5.5%
Return On Equity - 3 Yr. Avg. 7.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 78.1%
Gross Margin - 3 Yr. Avg. 79.8%
EBITDA Margin 36.5%
EBITDA Margin - 3 Yr. Avg. 40.8%
Operating Margin 28.1%
Oper. Margin - 3 Yr. Avg. 35.3%
Pre-Tax Margin 20.8%
Pre-Tax Margin - 3 Yr. Avg. 26.2%
Net Profit Margin 13.5%
Net Profit Margin - 3 Yr. Avg. 17.9%
Effective Tax Rate 35%
Eff/ Tax Rate - 3 Yr. Avg. 31.5%
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 $663 million for the last fiscal year's total revenue generated by China Cord Blood. The default revenue input number comes from 2016 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 7.6% 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 63%.

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 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 5.5% 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 106%.

Life of production assets of 13.8 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 -32.6%. 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 - $1709 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 74.801 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 $0.7 billion.


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Stock chart of CO Financial statements of CO Annual reports of CO
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