Intrinsic value of PetroChina ADR - PTR

Previous Close

$62.55

  Intrinsic Value

$15.16

stock screener

  Rating & Target

str. sell

-76%

  Value-price divergence*

+12%

Previous close

$62.55

 
Intrinsic value

$15.16

 
Up/down potential

-76%

 
Rating

str. sell

 
Value-price divergence*

+12%

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

We calculate the intrinsic value of PTR 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 170.6

 

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, %
  -6.29
  39.90
  36.41
  33.27
  30.44
  27.90
  25.61
  23.55
  21.69
  20.02
  18.52
  17.17
  15.95
  14.86
  13.87
  12.98
  12.19
  11.47
  10.82
  10.24
  9.71
  9.24
  8.82
  8.44
  8.09
  7.78
  7.51
  7.25
  7.03
  6.83
  6.64
Revenue, $m
  233,921
  327,255
  446,409
  594,925
  776,033
  992,530
  1,246,697
  1,540,261
  1,874,383
  2,249,696
  2,666,362
  3,124,147
  3,622,510
  4,160,699
  4,737,834
  5,352,995
  6,005,289
  6,693,918
  7,418,223
  8,177,723
  8,972,145
  9,801,443
  10,665,805
  11,565,663
  12,501,691
  13,474,804
  14,486,151
  15,537,109
  16,629,278
  17,764,473
  18,944,716
Variable operating expenses, $m
 
  270,701
  369,021
  491,569
  641,010
  819,652
  1,029,378
  1,271,612
  1,547,312
  1,857,002
  2,200,813
  2,577,887
  2,989,111
  3,433,197
  3,909,419
  4,417,018
  4,955,259
  5,523,480
  6,121,139
  6,747,840
  7,403,357
  8,087,651
  8,800,879
  9,543,396
  10,315,759
  11,118,722
  11,953,233
  12,820,430
  13,721,633
  14,658,338
  15,632,214
Fixed operating expenses, $m
 
  32,939
  33,763
  34,607
  35,472
  36,359
  37,268
  38,200
  39,155
  40,133
  41,137
  42,165
  43,219
  44,300
  45,407
  46,543
  47,706
  48,899
  50,121
  51,374
  52,659
  53,975
  55,324
  56,708
  58,125
  59,578
  61,068
  62,595
  64,159
  65,763
  67,407
Total operating expenses, $m
  225,149
  303,640
  402,784
  526,176
  676,482
  856,011
  1,066,646
  1,309,812
  1,586,467
  1,897,135
  2,241,950
  2,620,052
  3,032,330
  3,477,497
  3,954,826
  4,463,561
  5,002,965
  5,572,379
  6,171,260
  6,799,214
  7,456,016
  8,141,626
  8,856,203
  9,600,104
  10,373,884
  11,178,300
  12,014,301
  12,883,025
  13,785,792
  14,724,101
  15,699,621
Operating income, $m
  8,772
  23,615
  43,625
  68,749
  99,551
  136,519
  180,051
  230,450
  287,916
  352,561
  424,412
  504,095
  590,180
  683,202
  783,008
  889,434
  1,002,325
  1,121,539
  1,246,962
  1,378,508
  1,516,130
  1,659,817
  1,809,602
  1,965,560
  2,127,808
  2,296,504
  2,471,850
  2,654,084
  2,843,486
  3,040,372
  3,245,094
EBITDA, $m
  40,332
  60,312
  93,442
  134,918
  185,659
  246,463
  317,980
  400,699
  494,953
  600,920
  718,646
  848,063
  989,018
  1,141,295
  1,304,643
  1,478,798
  1,663,507
  1,858,540
  2,063,708
  2,278,876
  2,503,963
  2,738,956
  2,983,907
  3,238,939
  3,504,244
  3,780,080
  4,066,775
  4,364,720
  4,674,370
  4,996,240
  5,330,908
Interest expense (income), $m
  2,789
  2,175
  4,482
  7,425
  11,093
  15,566
  20,914
  27,191
  34,442
  42,694
  51,964
  62,255
  73,562
  85,871
  99,164
  113,418
  128,612
  144,723
  161,731
  179,621
  198,380
  218,001
  238,484
  259,833
  282,058
  305,177
  329,212
  354,191
  380,148
  407,124
  435,162
Earnings before tax, $m
  6,531
  21,439
  39,143
  61,324
  88,458
  120,953
  159,138
  203,258
  253,474
  309,867
  372,448
  441,839
  516,618
  597,331
  683,844
  776,015
  873,712
  976,816
  1,085,231
  1,198,888
  1,317,750
  1,441,816
  1,571,118
  1,705,727
  1,845,750
  1,991,327
  2,142,638
  2,299,893
  2,463,338
  2,633,248
  2,809,933
Tax expense, $m
  2,282
  5,789
  10,569
  16,558
  23,884
  32,657
  42,967
  54,880
  68,438
  83,664
  100,561
  119,297
  139,487
  161,279
  184,638
  209,524
  235,902
  263,740
  293,012
  323,700
  355,792
  389,290
  424,202
  460,546
  498,352
  537,658
  578,512
  620,971
  665,101
  710,977
  758,682
Net income, $m
  1,137
  15,651
  28,575
  44,767
  64,574
  88,295
  116,171
  148,379
  185,036
  226,203
  271,887
  322,543
  377,131
  436,052
  499,206
  566,491
  637,810
  713,076
  792,218
  875,188
  961,957
  1,052,525
  1,146,916
  1,245,181
  1,347,397
  1,453,669
  1,564,126
  1,678,922
  1,798,237
  1,922,271
  2,051,251

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  14,267
  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
  346,729
  464,852
  634,104
  845,064
  1,102,319
  1,409,843
  1,770,877
  2,187,871
  2,662,476
  3,195,592
  3,787,446
  4,437,708
  5,145,611
  5,910,084
  6,729,878
  7,603,686
  8,530,240
  9,508,406
  10,537,248
  11,616,083
  12,744,525
  13,922,504
  15,150,291
  16,428,499
  17,758,084
  19,140,347
  20,576,918
  22,069,757
  23,621,134
  25,233,627
  26,910,107
Adjusted assets (=assets-cash), $m
  332,462
  464,852
  634,104
  845,064
  1,102,319
  1,409,843
  1,770,877
  2,187,871
  2,662,476
  3,195,592
  3,787,446
  4,437,708
  5,145,611
  5,910,084
  6,729,878
  7,603,686
  8,530,240
  9,508,406
  10,537,248
  11,616,083
  12,744,525
  13,922,504
  15,150,291
  16,428,499
  17,758,084
  19,140,347
  20,576,918
  22,069,757
  23,621,134
  25,233,627
  26,910,107
Revenue / Adjusted assets
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
Average production assets, $m
  257,539
  360,308
  491,497
  655,013
  854,412
  1,092,775
  1,372,614
  1,695,827
  2,063,696
  2,476,916
  2,935,665
  3,439,685
  3,988,384
  4,580,930
  5,216,355
  5,893,647
  6,611,823
  7,370,004
  8,167,463
  9,003,673
  9,878,332
  10,791,389
  11,743,051
  12,733,795
  13,764,362
  14,835,759
  15,949,252
  17,106,357
  18,308,836
  19,558,685
  20,858,132
Working capital, $m
  -17,013
  -14,726
  -20,088
  -26,772
  -34,921
  -44,664
  -56,101
  -69,312
  -84,347
  -101,236
  -119,986
  -140,587
  -163,013
  -187,231
  -213,203
  -240,885
  -270,238
  -301,226
  -333,820
  -367,998
  -403,747
  -441,065
  -479,961
  -520,455
  -562,576
  -606,366
  -651,877
  -699,170
  -748,318
  -799,401
  -852,512
Total debt, $m
  74,690
  124,503
  206,252
  308,146
  432,400
  580,934
  755,314
  956,722
  1,185,956
  1,443,451
  1,729,317
  2,043,393
  2,385,310
  2,754,550
  3,150,511
  3,572,560
  4,020,086
  4,492,540
  4,989,471
  5,510,548
  6,055,585
  6,624,550
  7,217,571
  7,834,945
  8,477,135
  9,144,767
  9,838,632
  10,559,673
  11,308,988
  12,087,822
  12,897,562
Total liabilities, $m
  174,710
  224,523
  306,272
  408,166
  532,420
  680,954
  855,334
  1,056,742
  1,285,976
  1,543,471
  1,829,337
  2,143,413
  2,485,330
  2,854,570
  3,250,531
  3,672,580
  4,120,106
  4,592,560
  5,089,491
  5,610,568
  6,155,605
  6,724,570
  7,317,591
  7,934,965
  8,577,155
  9,244,787
  9,938,652
  10,659,693
  11,409,008
  12,187,842
  12,997,582
Total equity, $m
  172,019
  240,328
  327,832
  436,898
  569,899
  728,889
  915,543
  1,131,129
  1,376,500
  1,652,121
  1,958,110
  2,294,295
  2,660,281
  3,055,513
  3,479,347
  3,931,105
  4,410,134
  4,915,846
  5,447,757
  6,005,515
  6,588,919
  7,197,935
  7,832,701
  8,493,534
  9,180,930
  9,895,559
  10,638,267
  11,410,064
  12,212,126
  13,045,785
  13,912,526
Total liabilities and equity, $m
  346,729
  464,851
  634,104
  845,064
  1,102,319
  1,409,843
  1,770,877
  2,187,871
  2,662,476
  3,195,592
  3,787,447
  4,437,708
  5,145,611
  5,910,083
  6,729,878
  7,603,685
  8,530,240
  9,508,406
  10,537,248
  11,616,083
  12,744,524
  13,922,505
  15,150,292
  16,428,499
  17,758,085
  19,140,346
  20,576,919
  22,069,757
  23,621,134
  25,233,627
  26,910,108
Debt-to-equity ratio
  0.434
  0.520
  0.630
  0.710
  0.760
  0.800
  0.820
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.900
  0.910
  0.910
  0.910
  0.910
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.930
  0.930
  0.930
  0.930
Adjusted equity ratio
  0.506
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,137
  15,651
  28,575
  44,767
  64,574
  88,295
  116,171
  148,379
  185,036
  226,203
  271,887
  322,543
  377,131
  436,052
  499,206
  566,491
  637,810
  713,076
  792,218
  875,188
  961,957
  1,052,525
  1,146,916
  1,245,181
  1,347,397
  1,453,669
  1,564,126
  1,678,922
  1,798,237
  1,922,271
  2,051,251
Depreciation, amort., depletion, $m
  31,560
  36,698
  49,817
  66,168
  86,108
  109,944
  137,928
  170,250
  207,036
  248,358
  294,233
  343,969
  398,838
  458,093
  521,636
  589,365
  661,182
  737,000
  816,746
  900,367
  987,833
  1,079,139
  1,174,305
  1,273,379
  1,376,436
  1,483,576
  1,594,925
  1,710,636
  1,830,884
  1,955,869
  2,085,813
Funds from operations, $m
  36,379
  52,348
  78,391
  110,935
  150,682
  198,240
  254,099
  318,628
  392,073
  474,561
  566,120
  666,511
  775,969
  894,145
  1,020,841
  1,155,856
  1,298,992
  1,450,076
  1,608,965
  1,775,555
  1,949,791
  2,131,664
  2,321,221
  2,518,560
  2,723,833
  2,937,245
  3,159,051
  3,389,558
  3,629,120
  3,878,140
  4,137,064
Change in working capital, $m
  -1,985
  -4,200
  -5,362
  -6,683
  -8,150
  -9,742
  -11,438
  -13,210
  -15,035
  -16,889
  -18,750
  -20,600
  -22,426
  -24,218
  -25,971
  -27,682
  -29,353
  -30,988
  -32,594
  -34,178
  -35,749
  -37,318
  -38,896
  -40,494
  -42,121
  -43,790
  -45,511
  -47,293
  -49,148
  -51,084
  -53,111
Cash from operations, $m
  38,364
  56,549
  83,753
  117,618
  158,832
  207,982
  265,536
  331,839
  407,108
  491,450
  584,870
  687,112
  798,396
  918,363
  1,046,813
  1,183,538
  1,328,346
  1,481,065
  1,641,558
  1,809,733
  1,985,540
  2,168,983
  2,360,118
  2,559,054
  2,765,955
  2,981,035
  3,204,561
  3,436,851
  3,678,268
  3,929,224
  4,190,175
Maintenance CAPEX, $m
  0
  -25,754
  -36,031
  -49,150
  -65,501
  -85,441
  -109,278
  -137,261
  -169,583
  -206,370
  -247,692
  -293,566
  -343,969
  -398,838
  -458,093
  -521,636
  -589,365
  -661,182
  -737,000
  -816,746
  -900,367
  -987,833
  -1,079,139
  -1,174,305
  -1,273,379
  -1,376,436
  -1,483,576
  -1,594,925
  -1,710,636
  -1,830,884
  -1,955,869
New CAPEX, $m
  -27,404
  -102,769
  -131,188
  -163,516
  -199,400
  -238,363
  -279,839
  -323,213
  -367,868
  -413,220
  -458,749
  -504,021
  -548,698
  -592,546
  -635,426
  -677,292
  -718,176
  -758,180
  -797,459
  -836,210
  -874,659
  -913,057
  -951,663
  -990,744
  -1,030,567
  -1,071,397
  -1,113,493
  -1,157,105
  -1,202,479
  -1,249,850
  -1,299,447
Cash from investing activities, $m
  -25,446
  -128,523
  -167,219
  -212,666
  -264,901
  -323,804
  -389,117
  -460,474
  -537,451
  -619,590
  -706,441
  -797,587
  -892,667
  -991,384
  -1,093,519
  -1,198,928
  -1,307,541
  -1,419,362
  -1,534,459
  -1,652,956
  -1,775,026
  -1,900,890
  -2,030,802
  -2,165,049
  -2,303,946
  -2,447,833
  -2,597,069
  -2,752,030
  -2,913,115
  -3,080,734
  -3,255,316
Free cash flow, $m
  12,918
  -71,975
  -83,466
  -95,048
  -106,069
  -115,822
  -123,580
  -128,636
  -130,343
  -128,139
  -121,570
  -110,476
  -94,271
  -73,021
  -46,706
  -15,389
  20,805
  61,702
  107,099
  156,777
  210,513
  268,093
  329,316
  394,005
  462,008
  533,202
  607,493
  684,821
  765,153
  848,490
  934,860
Issuance/(repayment) of debt, $m
  -5,265
  64,080
  81,749
  101,894
  124,254
  148,534
  174,379
  201,408
  229,234
  257,495
  285,866
  314,077
  341,917
  369,240
  395,961
  422,049
  447,526
  472,454
  496,930
  521,077
  545,037
  568,964
  593,021
  617,374
  642,190
  667,633
  693,864
  721,041
  749,315
  778,834
  809,740
Issuance/(repurchase) of shares, $m
  0
  52,658
  58,929
  64,300
  68,427
  70,694
  70,484
  67,207
  60,335
  49,418
  34,102
  13,643
  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  
  -8,472
  116,738
  140,678
  166,194
  192,681
  219,228
  244,863
  268,615
  289,569
  306,913
  319,968
  327,720
  341,917
  369,240
  395,961
  422,049
  447,526
  472,454
  496,930
  521,077
  545,037
  568,964
  593,021
  617,374
  642,190
  667,633
  693,864
  721,041
  749,315
  778,834
  809,740
Total cash flow (excl. dividends), $m
  4,862
  44,764
  57,212
  71,146
  86,612
  103,406
  121,283
  139,979
  159,226
  178,774
  198,398
  217,244
  247,646
  296,219
  349,254
  406,660
  468,331
  534,156
  604,029
  677,854
  755,550
  837,057
  922,337
  1,011,379
  1,104,198
  1,200,834
  1,301,357
  1,405,862
  1,514,469
  1,627,324
  1,744,600
Retained Cash Flow (-), $m
  -1,347
  -68,309
  -87,504
  -109,066
  -133,001
  -158,990
  -186,655
  -215,586
  -245,371
  -275,621
  -305,989
  -336,185
  -365,986
  -395,232
  -423,834
  -451,758
  -479,029
  -505,712
  -531,911
  -557,758
  -583,404
  -609,015
  -634,766
  -660,833
  -687,396
  -714,630
  -742,708
  -771,797
  -802,062
  -833,659
  -866,740
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
 
  -23,545
  -30,292
  -37,921
  -46,389
  -55,583
  -65,371
  -75,607
  -86,145
  -96,847
  -107,591
  -118,942
  -118,340
  -99,013
  -74,579
  -45,098
  -10,698
  28,444
  72,118
  120,096
  172,146
  228,041
  287,571
  350,546
  416,802
  486,205
  558,650
  634,064
  712,407
  793,666
  877,859
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
 
  -22,574
  -27,731
  -33,001
  -38,196
  -43,084
  -47,442
  -51,079
  -53,843
  -55,634
  -56,406
  -56,484
  -50,500
  -37,647
  -25,038
  -13,240
  -2,719
  6,189
  13,281
  18,491
  21,875
  23,587
  23,861
  22,975
  21,229
  18,914
  16,299
  13,609
  11,022
  8,664
  6,610
Current shareholders' claim on cash, %
  100
  76.4
  61.3
  51.1
  44.2
  39.3
  35.8
  33.3
  31.6
  30.5
  29.9
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7
  29.7

PetroChina Company Limited, together with its subsidiaries, produces and distributes oil and gas in the People’s Republic of China. It operates in four segments: Exploration and Production, Refining and Chemicals, Marketing, and Natural Gas and Pipeline. The Exploration and Production segment is involved in the exploration, development, production, and marketing of crude oil and natural gas. The Refining and Chemicals segment refines crude oil and petroleum products; and produces and markets primary petrochemical products, derivative petrochemical products, and other chemical products. The Marketing segment engages in the marketing of refined products through a network of 20,714 service stations, as well as in trading business. The Natural Gas and Pipeline segment is involved in the transmission of natural gas, crude oil, and refined products; and the sale of natural gas. As of December 31, 2015, it had oil and gas pipelines of 77,612 km consisting of 48,629 km of natural gas pipelines, 18,892 km of crude oil pipelines, and 10,091 km of refined product pipelines. The company was founded in 1988 and is based in Beijing, the People’s Republic of China. PetroChina Company Limited operates as a subsidiary of China National Petroleum Corporation.

FINANCIAL RATIOS  of  PetroChina ADR (PTR)

Valuation Ratios
P/E Ratio 10068.6
Price to Sales 48.9
Price to Book 66.6
Price to Tangible Book
Price to Cash Flow 298.4
Price to Free Cash Flow 1044.5
Growth Rates
Sales Growth Rate -6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.4%
Cap. Spend. - 3 Yr. Gr. Rate -9.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 31.4%
Total Debt to Equity 43.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 0.9%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 0.5%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 0.7%
Return On Equity - 3 Yr. Avg. 4.3%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 39.8%
Gross Margin - 3 Yr. Avg. 37.4%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 16.5%
Operating Margin 3.7%
Oper. Margin - 3 Yr. Avg. 5.3%
Pre-Tax Margin 2.8%
Pre-Tax Margin - 3 Yr. Avg. 4.3%
Net Profit Margin 0.5%
Net Profit Margin - 3 Yr. Avg. 2.4%
Effective Tax Rate 34.9%
Eff/ Tax Rate - 3 Yr. Avg. 28.7%
Payout Ratio 107.5%

PTR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PTR stock intrinsic value calculation we used $233921 million for the last fiscal year's total revenue generated by PetroChina ADR. The default revenue input number comes from 2016 income statement of PetroChina ADR. 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 PTR stock valuation model: a) initial revenue growth rate of 39.9% 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 PTR is calculated based on our internal credit rating of PetroChina ADR, 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 PetroChina ADR.
    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 PTR stock the variable cost ratio is equal to 82.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $32136 million in the base year in the intrinsic value calculation for PTR 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 3.6% for PetroChina ADR.

Corporate tax rate of 27% is the nominal tax rate for PetroChina ADR. 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 PTR 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 PTR are equal to 110.1%.

Life of production assets of 10 years is the average useful life of capital assets used in PetroChina ADR 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 PTR is equal to -4.5%. 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 - $172019 million for PetroChina ADR - 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 2727.36 million for PetroChina ADR 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 PetroChina ADR at the current share price and the inputted number of shares is $170.6 billion.

RELATED COMPANIES Price Int.Val. Rating
EC Ecopetrol ADR 9.17 1.76  str.sell
CEO CNOOC ADR 115.82 30.11  str.sell
CVX Chevron 106.36 18.49  str.sell
XOM Exxon Mobil 76.74 102.38  buy
TOT Total ADR 51.06 10.00  str.sell
E ENI ADR 30.93 7.44  str.sell

COMPANY NEWS

▶ China Prepares For A Natural Gas Import Boom   [Aug-10-17 06:00PM  Oilprice.com]
▶ [$$] Saudi Aramco Is in Talks to Buy PetroChina Refinery Stake   [Aug-04-17 11:45PM  The Wall Street Journal]
▶ [$$] Saudi Aramco in Talks to Buy PetroChina Refinery Stake   [06:19AM  The Wall Street Journal]
▶ PetroChina Forecasts Profit Boost   [Jul-27-17 12:04AM  Bloomberg Video]
▶ Whats the Forecast for ExxonMobils Stock Price?   [Jul-26-17 07:40AM  Market Realist]
▶ How Chevron Stock Has Performed ahead of 2Q17 Earnings   [Jul-20-17 06:06PM  Market Realist]
▶ Why CNOOC Is Better Than PetroChina, Sinopec   [Jul-18-17 03:51AM  Barrons.com]
▶ ETFs with exposure to PetroChina Co., Ltd. : July 6, 2017   [Jul-06-17 02:07PM  Capital Cube]
▶ Short Interest in BP Has Risen: What Does That Imply?   [Jun-08-17 07:35AM  Market Realist]
▶ ETFs with exposure to PetroChina Co., Ltd. : May 30, 2017   [May-30-17 12:39PM  Capital Cube]
▶ Has Big Oil Regained Its Pre-Crash Position?   [May-29-17 06:00PM  Oilprice.com]
▶ [$$] China Wants More Private Money for Its State-Owned Energy Giants   [May-22-17 07:51AM  The Wall Street Journal]
▶ Mixed bag for Asian stocks as Nikkei gets back on track   [May-15-17 11:13PM  MarketWatch]
▶ Inside Shells Implied Volatility after 1Q17   [May-09-17 07:36AM  Market Realist]
▶ ETFs with exposure to PetroChina Co., Ltd. : May 8, 2017   [May-08-17 05:07PM  Capital Cube]
▶ Wheres BPs Implied Volatility Now?   [09:06AM  Market Realist]
▶ PetroChina posts 1Q profit   [02:28PM  Associated Press]
▶ PetroChina Files Annual Report on Form 20-F   [Apr-27-17 11:59AM  PR Newswire]
▶ Has Short Interest in Chevron Tumbled?   [Apr-20-17 07:37AM  Market Realist]
▶ What's the most expensive stock of all time?   [Apr-19-17 01:21PM  Investopedia]
▶ PetroChina Downgraded to Underperform   [Apr-10-17 02:25AM  Barrons.com]
▶ Is An Iraqi Production Slowdown Inevitable?   [Apr-03-17 07:00PM  Oilprice.com]
▶ Oil Prices Rise Above $50 On Outages, OPEC Expectations   [Mar-31-17 04:30PM  Oilprice.com]
▶ Hang Seng Slides, Follows Oil And Metals Lower   [Mar-08-17 09:40PM  at Barrons.com]
▶ [$$] Go Long China, Short US: 5 Smart Stock Trades   [Mar-06-17 10:03PM  at Barrons.com]
▶ Dividends? 4 Cash Cow Oil Companies   [Feb-07-17 08:55PM  at Barrons.com]
▶ The New Profit Warnings Coming Out of China   [Jan-25-17 08:50PM  at Bloomberg]
▶ PetroChina Has 37% Upside: Morgan Stanley   [Jan-10-17 09:50PM  at Barrons.com]
▶ 7 Energy Stocks With Up To 30% Upside   [Jan-03-17 08:28PM  at Barrons.com]
▶ Sinopec Soars On Reports Of Retail Business IPO   [Dec-13-16 09:09PM  at Barrons.com]
Stock chart of PTR Financial statements of PTR
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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