Intrinsic value of China XD Plastics - CXDC

Previous Close

$4.56

  Intrinsic Value

$17.78

stock screener

  Rating & Target

str. buy

+290%

Previous close

$4.56

 
Intrinsic value

$17.78

 
Up/down potential

+290%

 
Rating

str. buy

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,202
  1,226
  1,254
  1,286
  1,323
  1,363
  1,407
  1,455
  1,507
  1,562
  1,622
  1,687
  1,755
  1,828
  1,905
  1,987
  2,075
  2,167
  2,264
  2,367
  2,476
  2,591
  2,712
  2,839
  2,974
  3,115
  3,265
  3,421
  3,587
  3,760
  3,943
Variable operating expenses, $m
 
  1,061
  1,085
  1,113
  1,144
  1,179
  1,217
  1,258
  1,303
  1,351
  1,403
  1,459
  1,518
  1,581
  1,648
  1,719
  1,795
  1,874
  1,959
  2,048
  2,142
  2,241
  2,346
  2,456
  2,572
  2,695
  2,824
  2,960
  3,102
  3,253
  3,411
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
  1,053
  1,061
  1,085
  1,113
  1,144
  1,179
  1,217
  1,258
  1,303
  1,351
  1,403
  1,459
  1,518
  1,581
  1,648
  1,719
  1,795
  1,874
  1,959
  2,048
  2,142
  2,241
  2,346
  2,456
  2,572
  2,695
  2,824
  2,960
  3,102
  3,253
  3,411
Operating income, $m
  149
  166
  169
  174
  179
  184
  190
  196
  203
  211
  219
  228
  237
  247
  257
  268
  280
  293
  306
  320
  334
  350
  366
  383
  401
  421
  441
  462
  484
  508
  532
EBITDA, $m
  183
  200
  205
  210
  216
  223
  230
  238
  246
  255
  265
  275
  287
  298
  311
  325
  339
  354
  370
  387
  404
  423
  443
  464
  486
  509
  533
  559
  586
  614
  644
Interest expense (income), $m
  46
  26
  27
  29
  31
  33
  36
  39
  42
  45
  49
  53
  57
  61
  66
  71
  76
  82
  88
  94
  101
  108
  116
  124
  132
  141
  150
  159
  170
  180
  192
Earnings before tax, $m
  119
  140
  142
  145
  148
  151
  154
  158
  161
  166
  170
  175
  180
  185
  191
  197
  204
  210
  218
  225
  233
  242
  250
  260
  270
  280
  291
  302
  315
  327
  341
Tax expense, $m
  17
  38
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  49
  50
  52
  53
  55
  57
  59
  61
  63
  65
  68
  70
  73
  76
  79
  82
  85
  88
  92
Net income, $m
  102
  102
  104
  106
  108
  110
  112
  115
  118
  121
  124
  128
  131
  135
  140
  144
  149
  154
  159
  164
  170
  176
  183
  190
  197
  204
  212
  221
  230
  239
  249

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
  1,808
  1,850
  1,897
  1,951
  2,010
  2,075
  2,146
  2,222
  2,304
  2,393
  2,487
  2,588
  2,696
  2,810
  2,931
  3,060
  3,196
  3,340
  3,492
  3,652
  3,821
  4,000
  4,188
  4,386
  4,595
  4,815
  5,046
  5,290
  5,546
  5,815
Adjusted assets (=assets-cash), $m
  1,774
  1,808
  1,850
  1,897
  1,951
  2,010
  2,075
  2,146
  2,222
  2,304
  2,393
  2,487
  2,588
  2,696
  2,810
  2,931
  3,060
  3,196
  3,340
  3,492
  3,652
  3,821
  4,000
  4,188
  4,386
  4,595
  4,815
  5,046
  5,290
  5,546
  5,815
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
  728
  745
  764
  786
  809
  836
  864
  895
  928
  964
  1,002
  1,042
  1,086
  1,132
  1,181
  1,232
  1,287
  1,345
  1,406
  1,471
  1,539
  1,611
  1,687
  1,766
  1,851
  1,939
  2,032
  2,130
  2,234
  2,342
Working capital, $m
  240
  338
  346
  355
  365
  376
  388
  401
  416
  431
  448
  465
  484
  504
  526
  549
  573
  598
  625
  653
  683
  715
  748
  784
  821
  860
  901
  944
  990
  1,038
  1,088
Total debt, $m
  694
  360
  385
  413
  444
  479
  517
  558
  603
  652
  704
  759
  818
  882
  949
  1,020
  1,095
  1,175
  1,259
  1,349
  1,443
  1,542
  1,647
  1,757
  1,874
  1,996
  2,125
  2,261
  2,404
  2,555
  2,713
Total liabilities, $m
  1,395
  1,061
  1,086
  1,114
  1,145
  1,180
  1,218
  1,259
  1,304
  1,353
  1,405
  1,460
  1,519
  1,583
  1,650
  1,721
  1,796
  1,876
  1,960
  2,050
  2,144
  2,243
  2,348
  2,458
  2,575
  2,697
  2,826
  2,962
  3,105
  3,256
  3,414
Total equity, $m
  732
  747
  764
  784
  806
  830
  857
  886
  918
  952
  988
  1,027
  1,069
  1,113
  1,161
  1,211
  1,264
  1,320
  1,379
  1,442
  1,508
  1,578
  1,652
  1,730
  1,812
  1,898
  1,989
  2,084
  2,185
  2,291
  2,402
Total liabilities and equity, $m
  2,127
  1,808
  1,850
  1,898
  1,951
  2,010
  2,075
  2,145
  2,222
  2,305
  2,393
  2,487
  2,588
  2,696
  2,811
  2,932
  3,060
  3,196
  3,339
  3,492
  3,652
  3,821
  4,000
  4,188
  4,387
  4,595
  4,815
  5,046
  5,290
  5,547
  5,816
Debt-to-equity ratio
  0.948
  0.480
  0.500
  0.530
  0.550
  0.580
  0.600
  0.630
  0.660
  0.680
  0.710
  0.740
  0.770
  0.790
  0.820
  0.840
  0.870
  0.890
  0.910
  0.940
  0.960
  0.980
  1.000
  1.020
  1.030
  1.050
  1.070
  1.080
  1.100
  1.120
  1.130
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
  102
  104
  106
  108
  110
  112
  115
  118
  121
  124
  128
  131
  135
  140
  144
  149
  154
  159
  164
  170
  176
  183
  190
  197
  204
  212
  221
  230
  239
  249
Depreciation, amort., depletion, $m
  34
  35
  35
  36
  37
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
  112
Funds from operations, $m
  16
  137
  139
  142
  145
  149
  152
  156
  161
  165
  170
  175
  181
  187
  193
  200
  207
  215
  223
  231
  240
  250
  260
  270
  281
  293
  305
  318
  331
  345
  360
Change in working capital, $m
  -68
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  50
Cash from operations, $m
  84
  130
  132
  133
  135
  137
  140
  143
  146
  150
  154
  158
  162
  167
  172
  177
  183
  189
  196
  203
  210
  218
  226
  235
  244
  253
  264
  274
  286
  297
  310
Maintenance CAPEX, $m
  0
  -34
  -35
  -35
  -36
  -37
  -39
  -40
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -97
  -101
  -106
New CAPEX, $m
  -211
  -15
  -17
  -19
  -21
  -24
  -26
  -28
  -31
  -33
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -109
Cash from investing activities, $m
  -149
  -49
  -52
  -54
  -57
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -108
  -114
  -119
  -125
  -132
  -138
  -145
  -153
  -160
  -168
  -177
  -185
  -195
  -204
  -215
Free cash flow, $m
  -65
  81
  80
  79
  77
  76
  75
  75
  74
  74
  74
  74
  74
  74
  74
  75
  75
  76
  77
  78
  79
  80
  81
  82
  84
  85
  87
  89
  91
  93
  95
Issuance/(repayment) of debt, $m
  164
  19
  24
  28
  31
  35
  38
  41
  45
  48
  52
  56
  59
  63
  67
  71
  75
  80
  84
  89
  94
  99
  105
  110
  116
  123
  129
  136
  143
  150
  158
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
  19
  24
  28
  31
  35
  38
  41
  45
  48
  52
  56
  59
  63
  67
  71
  75
  80
  84
  89
  94
  99
  105
  110
  116
  123
  129
  136
  143
  150
  158
Total cash flow (excl. dividends), $m
  48
  101
  105
  106
  109
  111
  113
  116
  119
  122
  126
  129
  133
  137
  141
  146
  151
  156
  161
  167
  173
  179
  186
  193
  200
  208
  216
  225
  234
  243
  253
Retained Cash Flow (-), $m
  -56
  -15
  -17
  -20
  -22
  -24
  -27
  -29
  -32
  -34
  -37
  -39
  -42
  -44
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -86
  -91
  -96
  -101
  -106
  -111
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
 
  86
  87
  87
  87
  87
  87
  87
  88
  88
  89
  90
  91
  93
  94
  96
  98
  100
  102
  104
  107
  109
  112
  115
  118
  122
  125
  129
  133
  137
  142
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
 
  82
  79
  74
  69
  65
  60
  56
  51
  47
  43
  39
  35
  31
  27
  24
  21
  18
  15
  13
  10
  8
  7
  5
  4
  3
  2
  2
  1
  1
  1
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 Limited (China XD) is a specialty chemical company. The Company is engaged in the research, development, manufacture and sale of modified plastics for automotive applications in China and to a lesser extent, in Dubai, the United Arab Emirates (UAE). The Company operates in the modified plastics segment. Through its subsidiaries, Heilongjiang Xinda Enterprise Group Company Limited (HLJ Xinda Group) and AL Composites Materials FZE (Dubai Composites), the Company manufactures and sells polymer composite materials (including modified plastics), for automotive applications. The Company's products categories include Modified Polypropylene (PP), Modified Acrylonitrile Butadiene Styrene (ABS), Modified Polyamide 66 (PA66), Modified Polyamide 6 (PA6), Modified Polyoxymethylenes (POM), Modified Polyphenylene Oxide (PPO), Plastic Alloy, Modified Polyphenylene Sulfide (PPS), Modified Polyimide (PI), Modified Polylactic Acid (PLA) and Poly Ether Ether Ketone (PEEK).

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 -1.8
Growth Rates
Sales Growth Rate 20.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -24.9%
Cap. Spend. - 3 Yr. Gr. Rate 58.6%
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 12.4%
Oper. Margin - 3 Yr. Avg. 13.8%
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 2% 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 86.5%.

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 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 50.267 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 3Q profit   [08:41AM  Associated Press]
▶ 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]
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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