Intrinsic value of Sify Technologies ADR - SIFY

Previous Close

$1.55

  Intrinsic Value

$1.30

stock screener

  Rating & Target

hold

-16%

Previous close

$1.55

 
Intrinsic value

$1.30

 
Up/down potential

-16%

 
Rating

hold

We calculate the intrinsic value of SIFY 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 0.3

 

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, %
  22.67
  30.00
  27.50
  25.25
  23.23
  21.40
  19.76
  18.29
  16.96
  15.76
  14.69
  13.72
  12.85
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
Revenue, $m
  276
  359
  457
  573
  706
  857
  1,027
  1,214
  1,420
  1,644
  1,885
  2,144
  2,420
  2,711
  3,019
  3,343
  3,682
  4,037
  4,407
  4,793
  5,194
  5,612
  6,046
  6,497
  6,966
  7,453
  7,959
  8,486
  9,033
  9,603
  10,196
Variable operating expenses, $m
 
  337
  429
  537
  662
  804
  963
  1,139
  1,332
  1,542
  1,769
  2,011
  2,270
  2,543
  2,832
  3,136
  3,454
  3,786
  4,134
  4,495
  4,872
  5,264
  5,671
  6,094
  6,534
  6,991
  7,466
  7,960
  8,473
  9,008
  9,564
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
  262
  337
  429
  537
  662
  804
  963
  1,139
  1,332
  1,542
  1,769
  2,011
  2,270
  2,543
  2,832
  3,136
  3,454
  3,786
  4,134
  4,495
  4,872
  5,264
  5,671
  6,094
  6,534
  6,991
  7,466
  7,960
  8,473
  9,008
  9,564
Operating income, $m
  14
  22
  28
  36
  44
  53
  64
  75
  88
  102
  117
  133
  150
  168
  187
  207
  228
  250
  273
  297
  322
  348
  375
  403
  432
  462
  493
  526
  560
  595
  632
EBITDA, $m
  40
  50
  63
  79
  98
  119
  142
  168
  197
  228
  261
  297
  335
  375
  418
  463
  510
  559
  610
  663
  719
  777
  837
  899
  964
  1,031
  1,102
  1,174
  1,250
  1,329
  1,411
Interest expense (income), $m
  0
  2
  4
  6
  8
  11
  15
  18
  22
  27
  32
  37
  43
  49
  56
  62
  69
  77
  85
  93
  101
  110
  120
  129
  139
  149
  160
  171
  183
  195
  208
Earnings before tax, $m
  10
  20
  25
  30
  35
  42
  49
  57
  66
  75
  85
  96
  107
  119
  132
  145
  159
  173
  188
  204
  221
  238
  255
  274
  293
  313
  333
  355
  377
  400
  425
Tax expense, $m
  0
  6
  7
  8
  10
  11
  13
  15
  18
  20
  23
  26
  29
  32
  36
  39
  43
  47
  51
  55
  60
  64
  69
  74
  79
  84
  90
  96
  102
  108
  115
Net income, $m
  10
  15
  18
  22
  26
  31
  36
  42
  48
  55
  62
  70
  78
  87
  96
  106
  116
  127
  138
  149
  161
  173
  186
  200
  214
  228
  243
  259
  275
  292
  310

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  24
  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
  322
  387
  494
  619
  762
  926
  1,109
  1,311
  1,534
  1,775
  2,036
  2,315
  2,613
  2,928
  3,260
  3,610
  3,976
  4,359
  4,759
  5,176
  5,609
  6,060
  6,529
  7,016
  7,522
  8,048
  8,595
  9,164
  9,755
  10,371
  11,011
Adjusted assets (=assets-cash), $m
  298
  387
  494
  619
  762
  926
  1,109
  1,311
  1,534
  1,775
  2,036
  2,315
  2,613
  2,928
  3,260
  3,610
  3,976
  4,359
  4,759
  5,176
  5,609
  6,060
  6,529
  7,016
  7,522
  8,048
  8,595
  9,164
  9,755
  10,371
  11,011
Revenue / Adjusted assets
  0.926
  0.928
  0.925
  0.926
  0.927
  0.925
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
Average production assets, $m
  106
  137
  175
  219
  270
  327
  392
  464
  543
  628
  720
  819
  924
  1,036
  1,153
  1,277
  1,407
  1,542
  1,683
  1,831
  1,984
  2,144
  2,309
  2,482
  2,661
  2,847
  3,040
  3,242
  3,451
  3,668
  3,895
Working capital, $m
  11
  58
  75
  93
  115
  140
  167
  198
  231
  268
  307
  349
  394
  442
  492
  545
  600
  658
  718
  781
  847
  915
  985
  1,059
  1,135
  1,215
  1,297
  1,383
  1,472
  1,565
  1,662
Total debt, $m
  74
  102
  165
  237
  321
  417
  523
  642
  772
  913
  1,065
  1,228
  1,402
  1,586
  1,780
  1,984
  2,198
  2,422
  2,655
  2,899
  3,152
  3,415
  3,689
  3,973
  4,269
  4,576
  4,896
  5,228
  5,573
  5,932
  6,307
Total liabilities, $m
  199
  226
  289
  361
  445
  541
  647
  766
  896
  1,037
  1,189
  1,352
  1,526
  1,710
  1,904
  2,108
  2,322
  2,546
  2,779
  3,023
  3,276
  3,539
  3,813
  4,097
  4,393
  4,700
  5,020
  5,352
  5,697
  6,056
  6,431
Total equity, $m
  124
  161
  206
  257
  317
  385
  461
  546
  638
  739
  847
  963
  1,087
  1,218
  1,356
  1,502
  1,654
  1,813
  1,980
  2,153
  2,333
  2,521
  2,716
  2,919
  3,129
  3,348
  3,576
  3,812
  4,058
  4,314
  4,581
Total liabilities and equity, $m
  323
  387
  495
  618
  762
  926
  1,108
  1,312
  1,534
  1,776
  2,036
  2,315
  2,613
  2,928
  3,260
  3,610
  3,976
  4,359
  4,759
  5,176
  5,609
  6,060
  6,529
  7,016
  7,522
  8,048
  8,596
  9,164
  9,755
  10,370
  11,012
Debt-to-equity ratio
  0.597
  0.630
  0.800
  0.920
  1.010
  1.080
  1.130
  1.180
  1.210
  1.240
  1.260
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.340
  1.340
  1.350
  1.350
  1.350
  1.360
  1.360
  1.360
  1.370
  1.370
  1.370
  1.370
  1.380
  1.380
Adjusted equity ratio
  0.386
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  15
  18
  22
  26
  31
  36
  42
  48
  55
  62
  70
  78
  87
  96
  106
  116
  127
  138
  149
  161
  173
  186
  200
  214
  228
  243
  259
  275
  292
  310
Depreciation, amort., depletion, $m
  26
  27
  35
  44
  54
  65
  78
  93
  109
  126
  144
  164
  185
  207
  231
  255
  281
  308
  337
  366
  397
  429
  462
  496
  532
  569
  608
  648
  690
  734
  779
Funds from operations, $m
  6
  42
  53
  66
  80
  96
  114
  134
  156
  180
  206
  234
  263
  294
  327
  361
  397
  435
  474
  515
  558
  602
  648
  696
  746
  798
  851
  907
  965
  1,026
  1,089
Change in working capital, $m
  -20
  13
  16
  19
  22
  25
  28
  31
  34
  36
  39
  42
  45
  48
  50
  53
  55
  58
  60
  63
  65
  68
  71
  74
  76
  79
  83
  86
  89
  93
  97
Cash from operations, $m
  26
  29
  37
  47
  58
  71
  87
  104
  123
  144
  167
  191
  218
  246
  277
  308
  342
  377
  414
  452
  492
  534
  578
  623
  670
  718
  769
  821
  876
  933
  992
Maintenance CAPEX, $m
  0
  -21
  -27
  -35
  -44
  -54
  -65
  -78
  -93
  -109
  -126
  -144
  -164
  -185
  -207
  -231
  -255
  -281
  -308
  -337
  -366
  -397
  -429
  -462
  -496
  -532
  -569
  -608
  -648
  -690
  -734
New CAPEX, $m
  -25
  -32
  -38
  -44
  -51
  -58
  -65
  -72
  -79
  -86
  -92
  -99
  -105
  -111
  -118
  -124
  -130
  -135
  -141
  -147
  -153
  -160
  -166
  -172
  -179
  -186
  -193
  -201
  -209
  -218
  -227
Cash from investing activities, $m
  -24
  -53
  -65
  -79
  -95
  -112
  -130
  -150
  -172
  -195
  -218
  -243
  -269
  -296
  -325
  -355
  -385
  -416
  -449
  -484
  -519
  -557
  -595
  -634
  -675
  -718
  -762
  -809
  -857
  -908
  -961
Free cash flow, $m
  2
  -24
  -28
  -32
  -36
  -40
  -44
  -46
  -49
  -50
  -51
  -51
  -51
  -50
  -48
  -46
  -43
  -40
  -36
  -32
  -27
  -22
  -17
  -12
  -6
  0
  6
  12
  19
  25
  32
Issuance/(repayment) of debt, $m
  1
  52
  62
  73
  84
  95
  107
  118
  130
  141
  152
  163
  174
  184
  194
  204
  214
  224
  233
  243
  253
  263
  274
  285
  296
  307
  319
  332
  345
  359
  374
Issuance/(repurchase) of shares, $m
  4
  22
  26
  30
  34
  37
  40
  43
  45
  46
  46
  46
  46
  44
  42
  40
  36
  33
  29
  24
  19
  14
  9
  3
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1
  74
  88
  103
  118
  132
  147
  161
  175
  187
  198
  209
  220
  228
  236
  244
  250
  257
  262
  267
  272
  277
  283
  288
  296
  307
  319
  332
  345
  359
  374
Total cash flow (excl. dividends), $m
  1
  51
  60
  71
  81
  92
  104
  115
  126
  137
  148
  158
  168
  178
  188
  198
  207
  217
  226
  236
  245
  255
  265
  276
  290
  307
  325
  344
  364
  385
  406
Retained Cash Flow (-), $m
  -12
  -37
  -44
  -52
  -60
  -68
  -76
  -84
  -93
  -101
  -108
  -116
  -124
  -131
  -138
  -145
  -152
  -159
  -166
  -173
  -180
  -188
  -195
  -203
  -211
  -219
  -227
  -237
  -246
  -256
  -267
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
 
  14
  16
  19
  22
  24
  27
  30
  33
  36
  39
  42
  45
  47
  50
  52
  55
  57
  60
  63
  65
  68
  70
  73
  79
  88
  98
  108
  118
  129
  140
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
 
  13
  15
  16
  18
  19
  20
  21
  21
  21
  21
  20
  19
  18
  17
  15
  14
  13
  11
  10
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  92.6
  86.3
  80.9
  76.4
  72.6
  69.3
  66.6
  64.2
  62.2
  60.5
  59.1
  57.8
  56.8
  55.9
  55.2
  54.6
  54.1
  53.8
  53.5
  53.2
  53.1
  53.0
  53.0
  53.0
  53.0
  53.0
  53.0
  53.0
  53.0
  53.0

Sify Technologies Limited (Sify) is an integrated information and communications technology (ICT) solutions and services company. The Company's segments are Telecom services, which includes domestic data, international data wholesale voice and network managed services; Data Centre services, which includes co-location services; Cloud and managed services, which includes information technology (IT) infra services, IT transformation services, remote and onsite infrastructure managed services and delivery platforms; Technology integration services, which includes data center build, network integration, information security, end-user computing, and collaborative tools and solutions, and Applications integration services, which includes application development and maintenance, application testing, mobility solutions, e-learning, portals, tools, process and automation. The Company has approximately six Tier III data centers across various geographical locations in India.

FINANCIAL RATIOS  of  Sify Technologies ADR (SIFY)

Valuation Ratios
P/E Ratio 27.7
Price to Sales 1
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 10.6
Price to Free Cash Flow 276.7
Growth Rates
Sales Growth Rate 22.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.2%
Cap. Spend. - 3 Yr. Gr. Rate 12.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 12.9%
Total Debt to Equity 59.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 5.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 6.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 35.5%
Gross Margin - 3 Yr. Avg. 38.3%
EBITDA Margin 13%
EBITDA Margin - 3 Yr. Avg. 13.3%
Operating Margin 5.1%
Oper. Margin - 3 Yr. Avg. 6%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 30%

SIFY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SIFY stock intrinsic value calculation we used $276 million for the last fiscal year's total revenue generated by Sify Technologies ADR. The default revenue input number comes from 2017 income statement of Sify Technologies 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 SIFY stock valuation model: a) initial revenue growth rate of 30% 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 SIFY is calculated based on our internal credit rating of Sify Technologies 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 Sify Technologies 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 SIFY stock the variable cost ratio is equal to 93.8%.

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 SIFY 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 3.5% for Sify Technologies ADR.

Corporate tax rate of 27% is the nominal tax rate for Sify Technologies 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 SIFY 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 SIFY are equal to 38.2%.

Life of production assets of 4.1 years is the average useful life of capital assets used in Sify Technologies 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 SIFY is equal to 16.3%. 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 - $124 million for Sify Technologies 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 178.42 million for Sify Technologies 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 Sify Technologies ADR at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Sify reports revenues of INR 18432 million for FY 2016-17   [Apr-25-17 08:19AM  GlobeNewswire]
▶ 8 Stocks With Strong Yields but Falling Prices   [Feb-14-17 03:00PM  GuruFocus.com]
▶ Sify receives NASDAQ Staff Deficiency letter   [Jan-05-17 07:36AM  GlobeNewswire]
▶ Sify reports revenues of INR 15035 million for FY 2015-16   [Apr-22-16 08:38AM  GlobeNewswire]
▶ Industry Leading Suite of Security Challenges   [Mar-23-16 04:29AM  at noodls]
▶ Sify shareholders approve dividend payment of 10%   [Jun-19  01:56AM  GlobeNewswire]
▶ Sify reports revenues of INR 12864 million for FY 2014-15   [Apr-23  09:16AM  GlobeNewswire]
▶ 5 of Last Week's Biggest Losers   [Jan-26  05:31AM  at Motley Fool]
▶ Why Sify Technologies Shares Plunged   [Oct-23  03:50PM  at Motley Fool]
Financial statements of SIFY
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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