Intrinsic value of China XD Plastics - CXDC

Previous Close

$4.60

  Intrinsic Value

$18.99

stock screener

  Rating & Target

str. buy

+313%

  Value-price divergence*

+988%

Previous close

$4.60

 
Intrinsic value

$18.99

 
Up/down potential

+313%

 
Rating

str. buy

 
Value-price divergence*

+988%

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

We calculate the intrinsic value of CXDC 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 0.2

 

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, %
  20.32
  10.70
  10.13
  9.62
  9.16
  8.74
  8.37
  8.03
  7.73
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
  6.06
  5.95
  5.86
  5.77
  5.69
  5.62
  5.56
  5.51
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
Revenue, $m
  1,202
  1,331
  1,465
  1,606
  1,753
  1,907
  2,066
  2,232
  2,404
  2,584
  2,770
  2,964
  3,165
  3,374
  3,591
  3,818
  4,054
  4,299
  4,555
  4,822
  5,100
  5,390
  5,693
  6,010
  6,341
  6,687
  7,048
  7,427
  7,823
  8,237
  8,671
Variable operating expenses, $m
 
  1,115
  1,228
  1,346
  1,469
  1,598
  1,731
  1,870
  2,015
  2,165
  2,321
  2,483
  2,652
  2,827
  3,010
  3,199
  3,397
  3,603
  3,817
  4,040
  4,274
  4,517
  4,771
  5,036
  5,314
  5,603
  5,906
  6,224
  6,555
  6,903
  7,266
Fixed operating expenses, $m
 
  29
  29
  30
  31
  32
  32
  33
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  51
  52
  53
  55
  56
  57
  59
Total operating expenses, $m
  1,034
  1,144
  1,257
  1,376
  1,500
  1,630
  1,763
  1,903
  2,049
  2,200
  2,357
  2,520
  2,690
  2,866
  3,050
  3,240
  3,439
  3,646
  3,861
  4,085
  4,320
  4,564
  4,819
  5,085
  5,365
  5,655
  5,959
  6,279
  6,611
  6,960
  7,325
Operating income, $m
  168
  187
  208
  230
  253
  277
  302
  328
  355
  384
  413
  443
  475
  508
  542
  578
  615
  654
  694
  736
  780
  826
  874
  924
  977
  1,031
  1,089
  1,149
  1,211
  1,277
  1,346
EBITDA, $m
  202
  224
  249
  276
  303
  331
  361
  391
  423
  457
  491
  527
  565
  603
  644
  686
  730
  775
  823
  873
  925
  979
  1,035
  1,094
  1,156
  1,220
  1,288
  1,359
  1,433
  1,510
  1,591
Interest expense (income), $m
  46
  26
  34
  43
  52
  61
  71
  82
  92
  104
  115
  127
  140
  153
  167
  181
  195
  211
  227
  243
  261
  279
  297
  317
  338
  359
  382
  405
  430
  455
  482
Earnings before tax, $m
  119
  161
  174
  187
  201
  216
  231
  247
  263
  280
  298
  316
  335
  355
  376
  397
  420
  443
  468
  493
  520
  548
  577
  607
  639
  672
  707
  743
  782
  822
  864
Tax expense, $m
  17
  44
  47
  51
  54
  58
  62
  67
  71
  76
  80
  85
  90
  96
  101
  107
  113
  120
  126
  133
  140
  148
  156
  164
  172
  181
  191
  201
  211
  222
  233
Net income, $m
  102
  118
  127
  137
  147
  158
  169
  180
  192
  204
  217
  231
  245
  259
  274
  290
  306
  324
  341
  360
  379
  400
  421
  443
  466
  491
  516
  543
  571
  600
  630

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  353
  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
  2,127
  1,963
  2,161
  2,369
  2,586
  2,812
  3,047
  3,292
  3,546
  3,811
  4,085
  4,371
  4,668
  4,976
  5,297
  5,631
  5,979
  6,341
  6,718
  7,111
  7,522
  7,950
  8,397
  8,864
  9,352
  9,862
  10,396
  10,954
  11,538
  12,149
  12,789
Adjusted assets (=assets-cash), $m
  1,774
  1,963
  2,161
  2,369
  2,586
  2,812
  3,047
  3,292
  3,546
  3,811
  4,085
  4,371
  4,668
  4,976
  5,297
  5,631
  5,979
  6,341
  6,718
  7,111
  7,522
  7,950
  8,397
  8,864
  9,352
  9,862
  10,396
  10,954
  11,538
  12,149
  12,789
Revenue / Adjusted assets
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
  0.678
Average production assets, $m
  714
  790
  870
  954
  1,042
  1,133
  1,227
  1,326
  1,428
  1,535
  1,645
  1,760
  1,880
  2,004
  2,133
  2,268
  2,408
  2,554
  2,706
  2,864
  3,029
  3,202
  3,382
  3,570
  3,766
  3,972
  4,187
  4,411
  4,647
  4,893
  5,151
Working capital, $m
  240
  367
  404
  443
  484
  526
  570
  616
  664
  713
  765
  818
  873
  931
  991
  1,054
  1,119
  1,187
  1,257
  1,331
  1,408
  1,488
  1,571
  1,659
  1,750
  1,845
  1,945
  2,050
  2,159
  2,273
  2,393
Total debt, $m
  694
  451
  568
  690
  817
  950
  1,088
  1,231
  1,381
  1,536
  1,697
  1,865
  2,039
  2,220
  2,408
  2,604
  2,808
  3,021
  3,243
  3,473
  3,714
  3,966
  4,228
  4,502
  4,789
  5,088
  5,401
  5,729
  6,072
  6,430
  6,806
Total liabilities, $m
  1,395
  1,152
  1,269
  1,391
  1,518
  1,651
  1,789
  1,932
  2,082
  2,237
  2,398
  2,566
  2,740
  2,921
  3,109
  3,305
  3,509
  3,722
  3,944
  4,174
  4,415
  4,667
  4,929
  5,203
  5,490
  5,789
  6,102
  6,430
  6,773
  7,131
  7,507
Total equity, $m
  732
  811
  893
  978
  1,068
  1,161
  1,259
  1,360
  1,465
  1,574
  1,687
  1,805
  1,928
  2,055
  2,188
  2,326
  2,469
  2,619
  2,775
  2,937
  3,107
  3,283
  3,468
  3,661
  3,862
  4,073
  4,293
  4,524
  4,765
  5,018
  5,282
Total liabilities and equity, $m
  2,127
  1,963
  2,162
  2,369
  2,586
  2,812
  3,048
  3,292
  3,547
  3,811
  4,085
  4,371
  4,668
  4,976
  5,297
  5,631
  5,978
  6,341
  6,719
  7,111
  7,522
  7,950
  8,397
  8,864
  9,352
  9,862
  10,395
  10,954
  11,538
  12,149
  12,789
Debt-to-equity ratio
  0.948
  0.560
  0.640
  0.700
  0.760
  0.820
  0.860
  0.910
  0.940
  0.980
  1.010
  1.030
  1.060
  1.080
  1.100
  1.120
  1.140
  1.150
  1.170
  1.180
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.270
  1.280
  1.290
Adjusted equity ratio
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  102
  118
  127
  137
  147
  158
  169
  180
  192
  204
  217
  231
  245
  259
  274
  290
  306
  324
  341
  360
  379
  400
  421
  443
  466
  491
  516
  543
  571
  600
  630
Depreciation, amort., depletion, $m
  34
  38
  41
  45
  50
  54
  58
  63
  68
  73
  78
  84
  90
  95
  102
  108
  115
  122
  129
  136
  144
  152
  161
  170
  179
  189
  199
  210
  221
  233
  245
Funds from operations, $m
  16
  155
  169
  182
  197
  212
  227
  243
  260
  278
  296
  315
  334
  355
  376
  398
  421
  445
  470
  496
  524
  552
  582
  613
  646
  680
  715
  753
  792
  833
  876
Change in working capital, $m
  -68
  35
  37
  39
  41
  42
  44
  46
  48
  49
  51
  53
  56
  58
  60
  62
  65
  68
  71
  74
  77
  80
  84
  87
  91
  95
  100
  104
  109
  114
  120
Cash from operations, $m
  84
  120
  131
  143
  156
  169
  183
  197
  212
  228
  244
  261
  279
  297
  316
  336
  356
  377
  400
  423
  447
  472
  498
  526
  554
  584
  616
  648
  683
  718
  756
Maintenance CAPEX, $m
  0
  -34
  -38
  -41
  -45
  -50
  -54
  -58
  -63
  -68
  -73
  -78
  -84
  -90
  -95
  -102
  -108
  -115
  -122
  -129
  -136
  -144
  -152
  -161
  -170
  -179
  -189
  -199
  -210
  -221
  -233
New CAPEX, $m
  0
  -77
  -80
  -84
  -87
  -91
  -95
  -99
  -102
  -106
  -111
  -115
  -120
  -124
  -129
  -134
  -140
  -146
  -152
  -158
  -165
  -172
  -180
  -188
  -197
  -205
  -215
  -225
  -235
  -246
  -258
Cash from investing activities, $m
  -149
  -111
  -118
  -125
  -132
  -141
  -149
  -157
  -165
  -174
  -184
  -193
  -204
  -214
  -224
  -236
  -248
  -261
  -274
  -287
  -301
  -316
  -332
  -349
  -367
  -384
  -404
  -424
  -445
  -467
  -491
Free cash flow, $m
  -65
  9
  14
  18
  23
  29
  34
  40
  47
  54
  61
  68
  75
  83
  91
  99
  108
  117
  126
  136
  145
  155
  166
  177
  188
  200
  212
  224
  237
  251
  265
Issuance/(repayment) of debt, $m
  164
  110
  117
  122
  127
  133
  138
  144
  149
  155
  161
  168
  174
  181
  188
  196
  204
  213
  221
  231
  241
  251
  262
  274
  286
  299
  313
  328
  343
  359
  376
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  
  122
  110
  117
  122
  127
  133
  138
  144
  149
  155
  161
  168
  174
  181
  188
  196
  204
  213
  221
  231
  241
  251
  262
  274
  286
  299
  313
  328
  343
  359
  376
Total cash flow (excl. dividends), $m
  48
  119
  130
  140
  151
  161
  172
  184
  196
  209
  222
  235
  250
  264
  280
  295
  312
  329
  348
  366
  386
  407
  428
  451
  474
  499
  525
  552
  580
  610
  641
Retained Cash Flow (-), $m
  -56
  -79
  -82
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -113
  -118
  -123
  -127
  -133
  -138
  -144
  -150
  -156
  -162
  -169
  -177
  -185
  -193
  -202
  -211
  -220
  -230
  -241
  -252
  -264
Prev. year cash balance distribution, $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 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
 
  41
  48
  54
  61
  68
  75
  83
  91
  100
  108
  117
  127
  137
  147
  158
  169
  180
  192
  204
  217
  230
  244
  258
  273
  288
  304
  321
  339
  357
  377
Discount rate, %
 
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
 
  39
  44
  46
  49
  51
  52
  53
  53
  53
  52
  50
  48
  46
  43
  39
  36
  32
  28
  25
  21
  18
  15
  12
  9
  7
  6
  4
  3
  2
  2
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 XD Plastics Company Ltd. engages in the research, development, manufacture, and sale of modified plastics primarily for automotive applications in China and Dubai, the United Arab Emirates. Its modified plastics are used to fabricate various auto components, including exteriors consisting of automobile bumpers, rearview and sideview mirrors, and license plate parts; interiors, such as door panels, dashboards, steering wheels, glove compartments, and safety belt components; and functional components comprising air conditioner casings, heating and ventilation casings, engine covers, and air ducts. The company also offers specially engineered plastics and environment-friendly plastics for use in oilfield equipment, mining equipment, vessel propulsion systems, and power station equipment. China XD Plastics Company Limited primarily sells its products to end customers through distributors, as well as directly. The company was founded in 1999 and is based in Harbin, the People’s Republic of China.

FINANCIAL RATIOS  of  China XD Plastics (CXDC)

Valuation Ratios
P/E Ratio 2.2
Price to Sales 0.2
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow 2.7
Price to Free Cash Flow 2.7
Growth Rates
Sales Growth Rate 20.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 34%
Total Debt to Equity 94.8%
Interest Coverage 4
Management Effectiveness
Return On Assets 7.3%
Ret/ On Assets - 3 Yr. Avg. 9.2%
Return On Total Capital 7.7%
Ret/ On T. Cap. - 3 Yr. Avg. 9.4%
Return On Equity 14.5%
Return On Equity - 3 Yr. Avg. 16.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 20.5%
Gross Margin - 3 Yr. Avg. 19.5%
EBITDA Margin 16.6%
EBITDA Margin - 3 Yr. Avg. 17.1%
Operating Margin 14%
Oper. Margin - 3 Yr. Avg. 14.3%
Pre-Tax Margin 9.9%
Pre-Tax Margin - 3 Yr. Avg. 10.9%
Net Profit Margin 8.5%
Net Profit Margin - 3 Yr. Avg. 9.3%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 15%
Payout Ratio 0%

CXDC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CXDC stock intrinsic value calculation we used $1202 million for the last fiscal year's total revenue generated by China XD Plastics. The default revenue input number comes from 2016 income statement of China XD Plastics. 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 CXDC stock valuation model: a) initial revenue growth rate of 10.7% 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 4.9%, whose default value for CXDC is calculated based on our internal credit rating of China XD Plastics, 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 XD Plastics.
    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 CXDC stock the variable cost ratio is equal to 83.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $28 million in the base year in the intrinsic value calculation for CXDC 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 7.5% for China XD Plastics.

Corporate tax rate of 27% is the nominal tax rate for China XD Plastics. 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 CXDC 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 CXDC are equal to 59.4%.

Life of production assets of 21 years is the average useful life of capital assets used in China XD Plastics 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 CXDC is equal to 27.6%. 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 - $732 million for China XD Plastics - 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 49.557 million for China XD Plastics 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 XD Plastics at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ China XD posts 2Q profit   [Aug-09-17 11:43PM  Associated Press]
▶ China XD posts 1Q profit   [May-10-17 08:18AM  Associated Press]
▶ China XD posts 4Q profit   [08:46AM  Associated Press]
▶ China XD Plastics Co Ltd (CXDC) Hedge Funds Are Snapping Up   [Nov-28  09:35AM  at Insider Monkey]
▶ Hedge Funds Are Selling Black Diamond Inc (BDE)   [03:59AM  at Insider Monkey]
▶ China XD Plastics Provides Business Update   [Sep-15  08:30AM  PR Newswire]
Stock chart of CXDC Financial statements of CXDC
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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