Intrinsic value of China Cord Blood - CO

Previous Close

$10.46

  Intrinsic Value

$17.51

stock screener

  Rating & Target

str. buy

+67%

Previous close

$10.46

 
Intrinsic value

$17.51

 
Up/down potential

+67%

 
Rating

str. buy

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 1.2

 

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
  28.00
  25.70
  23.63
  21.77
  20.09
  18.58
  17.22
  16.00
  14.90
  13.91
  13.02
  12.22
  11.50
  10.85
  10.26
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.26
  7.04
  6.83
  6.65
  6.49
  6.34
  6.20
  6.08
Revenue, $m
  110
  141
  177
  219
  266
  320
  379
  445
  516
  593
  675
  763
  856
  955
  1,058
  1,167
  1,281
  1,399
  1,523
  1,652
  1,786
  1,925
  2,069
  2,220
  2,376
  2,538
  2,707
  2,883
  3,066
  3,256
  3,454
Variable operating expenses, $m
 
  31
  39
  48
  58
  70
  83
  97
  112
  129
  147
  166
  187
  208
  231
  254
  279
  305
  332
  360
  389
  420
  451
  484
  518
  553
  590
  628
  668
  710
  753
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
  81
  90
  101
  112
  125
  140
  155
  172
  190
  210
  230
  253
  276
  300
  325
  352
  380
  408
  438
  469
  502
  535
  570
  607
  644
  683
  723
  766
  810
  856
Operating income, $m
  38
  60
  87
  118
  154
  195
  240
  290
  344
  402
  465
  533
  604
  679
  758
  842
  929
  1,020
  1,115
  1,213
  1,316
  1,423
  1,534
  1,649
  1,769
  1,894
  2,024
  2,159
  2,299
  2,446
  2,598
EBITDA, $m
  46
  70
  100
  134
  174
  218
  268
  322
  381
  446
  515
  588
  666
  749
  836
  927
  1,022
  1,122
  1,226
  1,334
  1,446
  1,563
  1,685
  1,811
  1,943
  2,079
  2,221
  2,369
  2,523
  2,683
  2,850
Interest expense (income), $m
  14
  0
  -5
  1
  9
  19
  29
  40
  53
  66
  81
  97
  114
  132
  151
  171
  191
  213
  236
  260
  284
  310
  337
  365
  393
  423
  455
  487
  521
  556
  592
Earnings before tax, $m
  24
  60
  92
  117
  145
  176
  211
  249
  291
  336
  384
  435
  490
  547
  608
  671
  737
  806
  879
  954
  1,032
  1,113
  1,197
  1,285
  1,376
  1,471
  1,569
  1,672
  1,779
  1,890
  2,006
Tax expense, $m
  5
  16
  25
  32
  39
  48
  57
  67
  79
  91
  104
  118
  132
  148
  164
  181
  199
  218
  237
  257
  279
  300
  323
  347
  372
  397
  424
  451
  480
  510
  542
Net income, $m
  18
  44
  67
  85
  106
  129
  154
  182
  212
  245
  280
  318
  358
  400
  444
  490
  538
  589
  641
  696
  753
  812
  874
  938
  1,004
  1,074
  1,146
  1,221
  1,299
  1,380
  1,464

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
  309
  389
  481
  586
  703
  834
  978
  1,134
  1,303
  1,484
  1,677
  1,882
  2,099
  2,326
  2,565
  2,815
  3,075
  3,347
  3,630
  3,924
  4,230
  4,548
  4,879
  5,222
  5,579
  5,950
  6,336
  6,737
  7,155
  7,591
Adjusted assets (=assets-cash), $m
  242
  309
  389
  481
  586
  703
  834
  978
  1,134
  1,303
  1,484
  1,677
  1,882
  2,099
  2,326
  2,565
  2,815
  3,075
  3,347
  3,630
  3,924
  4,230
  4,548
  4,879
  5,222
  5,579
  5,950
  6,336
  6,737
  7,155
  7,591
Revenue / Adjusted assets
  0.455
  0.456
  0.455
  0.455
  0.454
  0.455
  0.454
  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
  124
  156
  193
  235
  282
  335
  392
  455
  523
  596
  673
  755
  842
  934
  1,029
  1,130
  1,234
  1,343
  1,457
  1,575
  1,698
  1,825
  1,958
  2,096
  2,239
  2,388
  2,543
  2,704
  2,872
  3,046
Working capital, $m
  322
  -47
  -59
  -74
  -90
  -108
  -127
  -149
  -173
  -199
  -227
  -256
  -288
  -321
  -356
  -392
  -430
  -470
  -512
  -555
  -600
  -647
  -695
  -746
  -798
  -853
  -910
  -969
  -1,030
  -1,094
  -1,160
Total debt, $m
  149
  -56
  15
  98
  192
  298
  415
  545
  686
  838
  1,001
  1,175
  1,359
  1,554
  1,759
  1,973
  2,198
  2,433
  2,677
  2,932
  3,197
  3,472
  3,758
  4,056
  4,365
  4,686
  5,020
  5,367
  5,729
  6,105
  6,497
Total liabilities, $m
  484
  279
  350
  433
  527
  633
  750
  880
  1,021
  1,173
  1,336
  1,510
  1,694
  1,889
  2,094
  2,308
  2,533
  2,768
  3,012
  3,267
  3,532
  3,807
  4,093
  4,391
  4,700
  5,021
  5,355
  5,702
  6,064
  6,440
  6,832
Total equity, $m
  266
  31
  39
  48
  59
  70
  83
  98
  113
  130
  148
  168
  188
  210
  233
  256
  281
  308
  335
  363
  392
  423
  455
  488
  522
  558
  595
  634
  674
  716
  759
Total liabilities and equity, $m
  750
  310
  389
  481
  586
  703
  833
  978
  1,134
  1,303
  1,484
  1,678
  1,882
  2,099
  2,327
  2,564
  2,814
  3,076
  3,347
  3,630
  3,924
  4,230
  4,548
  4,879
  5,222
  5,579
  5,950
  6,336
  6,738
  7,156
  7,591
Debt-to-equity ratio
  0.560
  -1.830
  0.390
  2.030
  3.280
  4.240
  4.980
  5.570
  6.050
  6.430
  6.740
  7.000
  7.220
  7.400
  7.560
  7.690
  7.810
  7.910
  8.000
  8.080
  8.150
  8.210
  8.260
  8.310
  8.360
  8.400
  8.440
  8.470
  8.500
  8.530
  8.560
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
  44
  67
  85
  106
  129
  154
  182
  212
  245
  280
  318
  358
  400
  444
  490
  538
  589
  641
  696
  753
  812
  874
  938
  1,004
  1,074
  1,146
  1,221
  1,299
  1,380
  1,464
Depreciation, amort., depletion, $m
  8
  10
  13
  16
  19
  23
  28
  32
  38
  43
  49
  56
  62
  70
  77
  85
  93
  102
  111
  120
  130
  140
  151
  162
  173
  185
  197
  210
  223
  237
  252
Funds from operations, $m
  139
  54
  80
  101
  125
  152
  182
  214
  250
  288
  330
  374
  420
  469
  521
  575
  632
  691
  752
  816
  883
  953
  1,025
  1,100
  1,178
  1,259
  1,343
  1,431
  1,522
  1,617
  1,716
Change in working capital, $m
  47
  -10
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -52
  -55
  -57
  -59
  -61
  -64
  -67
Cash from operations, $m
  92
  64
  93
  115
  141
  170
  202
  236
  274
  314
  357
  403
  451
  502
  556
  611
  670
  731
  794
  860
  928
  999
  1,073
  1,150
  1,230
  1,313
  1,400
  1,490
  1,583
  1,681
  1,783
Maintenance CAPEX, $m
  0
  -8
  -10
  -13
  -16
  -19
  -23
  -28
  -32
  -38
  -43
  -49
  -56
  -62
  -70
  -77
  -85
  -93
  -102
  -111
  -120
  -130
  -140
  -151
  -162
  -173
  -185
  -197
  -210
  -223
  -237
New CAPEX, $m
  -4
  -27
  -32
  -37
  -42
  -47
  -52
  -58
  -63
  -68
  -73
  -78
  -82
  -87
  -91
  -96
  -100
  -105
  -109
  -114
  -118
  -123
  -128
  -133
  -138
  -143
  -149
  -155
  -161
  -168
  -175
Cash from investing activities, $m
  -13
  -35
  -42
  -50
  -58
  -66
  -75
  -86
  -95
  -106
  -116
  -127
  -138
  -149
  -161
  -173
  -185
  -198
  -211
  -225
  -238
  -253
  -268
  -284
  -300
  -316
  -334
  -352
  -371
  -391
  -412
Free cash flow, $m
  79
  29
  50
  66
  83
  103
  126
  151
  179
  209
  241
  276
  314
  353
  395
  439
  484
  533
  583
  635
  690
  746
  805
  867
  931
  997
  1,066
  1,137
  1,212
  1,290
  1,371
Issuance/(repayment) of debt, $m
  -9
  -56
  72
  83
  94
  106
  118
  129
  141
  152
  163
  174
  184
  195
  205
  215
  225
  235
  245
  255
  265
  275
  286
  297
  309
  321
  334
  347
  361
  376
  392
Issuance/(repurchase) of shares, $m
  0
  80
  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
  24
  72
  83
  94
  106
  118
  129
  141
  152
  163
  174
  184
  195
  205
  215
  225
  235
  245
  255
  265
  275
  286
  297
  309
  321
  334
  347
  361
  376
  392
Total cash flow (excl. dividends), $m
  73
  53
  122
  148
  177
  209
  243
  280
  319
  361
  404
  450
  498
  548
  600
  653
  709
  767
  827
  890
  955
  1,022
  1,092
  1,164
  1,240
  1,318
  1,400
  1,485
  1,573
  1,666
  1,762
Retained Cash Flow (-), $m
  -19
  -124
  -8
  -9
  -10
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
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
 
  288
  114
  139
  167
  197
  230
  266
  304
  344
  386
  431
  477
  526
  577
  629
  684
  741
  800
  862
  925
  991
  1,060
  1,131
  1,205
  1,282
  1,363
  1,446
  1,533
  1,624
  1,719
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
 
  276
  104
  121
  137
  153
  167
  180
  190
  198
  203
  205
  204
  200
  194
  185
  174
  161
  147
  133
  118
  103
  88
  74
  61
  50
  40
  31
  24
  18
  13
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 42.4
Price to Sales 6.9
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 8.7
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 28% 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 113.553 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 $1.2 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ China Cord Blood posts 2Q profit   [Nov-20-17 04:31PM  Associated Press]
▶ 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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