Intrinsic value of China Petroleum&Chemical ADR - SNP

Previous Close

$75.36

  Intrinsic Value

$38.90

stock screener

  Rating & Target

sell

-48%

  Value-price divergence*

-71%

Previous close

$75.36

 
Intrinsic value

$38.90

 
Up/down potential

-48%

 
Rating

sell

 
Value-price divergence*

-71%

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

We calculate the intrinsic value of SNP 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 106.4

 

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, %
  -4.43
  40.60
  37.04
  33.84
  30.95
  28.36
  26.02
  23.92
  22.03
  20.32
  18.79
  17.41
  16.17
  15.05
  14.05
  13.14
  12.33
  11.60
  10.94
  10.34
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
Revenue, $m
  279,349
  392,765
  538,245
  720,365
  943,336
  1,210,839
  1,525,916
  1,890,905
  2,307,422
  2,776,397
  3,298,142
  3,872,446
  4,498,684
  5,175,938
  5,903,108
  6,679,021
  7,502,525
  8,372,575
  9,288,290
  10,249,012
  11,254,341
  12,304,160
  13,398,654
  14,538,314
  15,723,944
  16,956,652
  18,237,848
  19,569,238
  20,952,808
  22,390,824
  23,885,816
Variable operating expenses, $m
 
  381,730
  523,089
  700,050
  916,704
  1,176,629
  1,482,781
  1,837,429
  2,242,147
  2,697,836
  3,204,801
  3,762,743
  4,371,241
  5,029,309
  5,735,879
  6,489,811
  7,289,987
  8,135,388
  9,025,162
  9,958,668
  10,935,517
  11,955,596
  13,019,084
  14,126,459
  15,278,501
  16,476,287
  17,721,189
  19,014,861
  20,359,237
  21,756,515
  23,209,155
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
  268,181
  381,730
  523,089
  700,050
  916,704
  1,176,629
  1,482,781
  1,837,429
  2,242,147
  2,697,836
  3,204,801
  3,762,743
  4,371,241
  5,029,309
  5,735,879
  6,489,811
  7,289,987
  8,135,388
  9,025,162
  9,958,668
  10,935,517
  11,955,596
  13,019,084
  14,126,459
  15,278,501
  16,476,287
  17,721,189
  19,014,861
  20,359,237
  21,756,515
  23,209,155
Operating income, $m
  11,168
  11,035
  15,156
  20,315
  26,632
  34,210
  43,136
  53,476
  65,275
  78,561
  93,341
  109,702
  127,443
  146,629
  167,229
  189,210
  212,539
  237,186
  263,128
  290,344
  318,824
  348,564
  379,570
  411,856
  445,443
  480,365
  516,660
  554,377
  593,572
  634,309
  676,661
EBITDA, $m
  26,854
  33,102
  45,362
  60,711
  79,503
  102,047
  128,602
  159,362
  194,466
  233,990
  277,962
  326,363
  379,142
  436,220
  497,504
  562,897
  632,300
  705,627
  782,802
  863,770
  948,497
  1,036,974
  1,129,216
  1,225,265
  1,325,188
  1,429,079
  1,537,056
  1,649,263
  1,765,868
  1,887,062
  2,013,057
Interest expense (income), $m
  1,008
  595
  2,063
  3,944
  6,299
  9,181
  12,640
  16,713
  21,432
  26,817
  32,880
  39,625
  47,050
  55,146
  63,902
  73,303
  83,334
  93,981
  105,229
  117,068
  129,488
  142,486
  156,058
  170,208
  184,942
  200,270
  216,207
  232,771
  249,984
  267,871
  286,462
Earnings before tax, $m
  11,596
  10,440
  13,093
  16,371
  20,333
  25,029
  30,496
  36,762
  43,843
  51,744
  60,461
  70,077
  80,393
  91,483
  103,327
  115,907
  129,205
  143,206
  157,899
  173,276
  189,336
  206,079
  223,512
  241,647
  260,501
  280,094
  300,452
  321,605
  343,588
  366,438
  390,198
Tax expense, $m
  2,996
  2,819
  3,535
  4,420
  5,490
  6,758
  8,234
  9,926
  11,838
  13,971
  16,325
  18,921
  21,706
  24,700
  27,898
  31,295
  34,885
  38,666
  42,633
  46,785
  51,121
  55,641
  60,348
  65,245
  70,335
  75,625
  81,122
  86,833
  92,769
  98,938
  105,354
Net income, $m
  6,752
  7,621
  9,558
  11,951
  14,843
  18,271
  22,262
  26,837
  32,006
  37,773
  44,137
  51,157
  58,687
  66,783
  75,429
  84,612
  94,319
  104,540
  115,266
  126,492
  138,215
  150,437
  163,164
  176,403
  190,166
  204,469
  219,330
  234,772
  250,819
  267,500
  284,845

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  20,615
  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
  216,807
  275,818
  377,981
  505,874
  662,455
  850,308
  1,071,571
  1,327,883
  1,620,380
  1,949,717
  2,316,111
  2,719,414
  3,159,188
  3,634,788
  4,145,441
  4,690,323
  5,268,627
  5,879,617
  6,522,675
  7,197,340
  7,903,329
  8,640,562
  9,409,167
  10,209,490
  11,042,095
  11,907,761
  12,807,478
  13,742,442
  14,714,051
  15,723,893
  16,773,747
Adjusted assets (=assets-cash), $m
  196,192
  275,818
  377,981
  505,874
  662,455
  850,308
  1,071,571
  1,327,883
  1,620,380
  1,949,717
  2,316,111
  2,719,414
  3,159,188
  3,634,788
  4,145,441
  4,690,323
  5,268,627
  5,879,617
  6,522,675
  7,197,340
  7,903,329
  8,640,562
  9,409,167
  10,209,490
  11,042,095
  11,907,761
  12,807,478
  13,742,442
  14,714,051
  15,723,893
  16,773,747
Revenue / Adjusted assets
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
Average production assets, $m
  123,402
  173,602
  237,904
  318,401
  416,954
  535,191
  674,455
  835,780
  1,019,880
  1,227,167
  1,457,779
  1,711,621
  1,988,418
  2,287,765
  2,609,174
  2,952,127
  3,316,116
  3,700,678
  4,105,424
  4,530,063
  4,974,419
  5,438,439
  5,922,205
  6,425,935
  6,949,983
  7,494,840
  8,061,129
  8,649,603
  9,261,141
  9,896,744
  10,557,531
Working capital, $m
  -10,602
  -28,672
  -39,292
  -52,587
  -68,863
  -88,391
  -111,392
  -138,036
  -168,442
  -202,677
  -240,764
  -282,689
  -328,404
  -377,843
  -430,927
  -487,569
  -547,684
  -611,198
  -678,045
  -748,178
  -821,567
  -898,204
  -978,102
  -1,061,297
  -1,147,848
  -1,237,836
  -1,331,363
  -1,428,554
  -1,529,555
  -1,634,530
  -1,743,665
Total debt, $m
  27,815
  58,949
  112,687
  179,959
  262,320
  361,131
  477,515
  612,335
  766,189
  939,420
  1,132,143
  1,344,281
  1,575,602
  1,825,768
  2,094,371
  2,380,979
  2,685,167
  3,006,548
  3,344,796
  3,699,670
  4,071,020
  4,458,804
  4,863,091
  5,284,061
  5,722,011
  6,177,351
  6,650,602
  7,142,394
  7,653,460
  8,184,637
  8,736,860
Total liabilities, $m
  113,946
  145,080
  198,818
  266,090
  348,451
  447,262
  563,646
  698,466
  852,320
  1,025,551
  1,218,274
  1,430,412
  1,661,733
  1,911,899
  2,180,502
  2,467,110
  2,771,298
  3,092,679
  3,430,927
  3,785,801
  4,157,151
  4,544,935
  4,949,222
  5,370,192
  5,808,142
  6,263,482
  6,736,733
  7,228,525
  7,739,591
  8,270,768
  8,822,991
Total equity, $m
  102,861
  130,738
  179,163
  239,784
  314,004
  403,046
  507,924
  629,416
  768,060
  924,166
  1,097,836
  1,289,002
  1,497,455
  1,722,890
  1,964,939
  2,223,213
  2,497,329
  2,786,938
  3,091,748
  3,411,539
  3,746,178
  4,095,626
  4,459,945
  4,839,298
  5,233,953
  5,644,279
  6,070,744
  6,513,918
  6,974,460
  7,453,125
  7,950,756
Total liabilities and equity, $m
  216,807
  275,818
  377,981
  505,874
  662,455
  850,308
  1,071,570
  1,327,882
  1,620,380
  1,949,717
  2,316,110
  2,719,414
  3,159,188
  3,634,789
  4,145,441
  4,690,323
  5,268,627
  5,879,617
  6,522,675
  7,197,340
  7,903,329
  8,640,561
  9,409,167
  10,209,490
  11,042,095
  11,907,761
  12,807,477
  13,742,443
  14,714,051
  15,723,893
  16,773,747
Debt-to-equity ratio
  0.270
  0.450
  0.630
  0.750
  0.840
  0.900
  0.940
  0.970
  1.000
  1.020
  1.030
  1.040
  1.050
  1.060
  1.070
  1.070
  1.080
  1.080
  1.080
  1.080
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.100
  1.100
  1.100
  1.100
  1.100
Adjusted equity ratio
  0.419
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,752
  7,621
  9,558
  11,951
  14,843
  18,271
  22,262
  26,837
  32,006
  37,773
  44,137
  51,157
  58,687
  66,783
  75,429
  84,612
  94,319
  104,540
  115,266
  126,492
  138,215
  150,437
  163,164
  176,403
  190,166
  204,469
  219,330
  234,772
  250,819
  267,500
  284,845
Depreciation, amort., depletion, $m
  15,686
  22,067
  30,206
  40,396
  52,871
  67,838
  85,466
  105,887
  129,191
  155,430
  184,621
  216,661
  251,699
  289,590
  330,275
  373,687
  419,762
  468,440
  519,674
  573,426
  629,673
  688,410
  749,646
  813,409
  879,745
  948,714
  1,020,396
  1,094,886
  1,172,296
  1,252,752
  1,336,396
Funds from operations, $m
  34,501
  29,688
  39,764
  52,347
  67,714
  86,109
  107,728
  132,723
  161,196
  193,203
  228,758
  267,817
  310,386
  356,373
  405,704
  458,299
  514,081
  572,980
  634,940
  699,917
  767,888
  838,847
  912,810
  989,812
  1,069,911
  1,153,183
  1,239,726
  1,329,658
  1,423,116
  1,520,252
  1,621,241
Change in working capital, $m
  3,463
  -8,279
  -10,620
  -13,295
  -16,277
  -19,528
  -23,001
  -26,644
  -30,406
  -34,235
  -38,087
  -41,924
  -45,715
  -49,440
  -53,083
  -56,642
  -60,116
  -63,514
  -66,847
  -70,133
  -73,389
  -76,637
  -79,898
  -83,195
  -86,551
  -89,988
  -93,527
  -97,191
  -101,001
  -104,975
  -109,134
Cash from operations, $m
  31,038
  37,967
  50,384
  65,642
  83,991
  105,636
  130,729
  159,368
  191,602
  227,438
  266,845
  309,742
  356,101
  405,813
  458,787
  514,941
  574,197
  636,494
  701,787
  770,050
  841,277
  915,484
  992,708
  1,073,007
  1,156,461
  1,243,170
  1,333,254
  1,426,850
  1,524,116
  1,625,227
  1,730,376
Maintenance CAPEX, $m
  0
  -15,620
  -21,975
  -30,114
  -40,304
  -52,779
  -67,746
  -85,374
  -105,795
  -129,099
  -155,338
  -184,529
  -216,661
  -251,699
  -289,590
  -330,275
  -373,687
  -419,762
  -468,440
  -519,674
  -573,426
  -629,673
  -688,410
  -749,646
  -813,409
  -879,745
  -948,714
  -1,020,396
  -1,094,886
  -1,172,296
  -1,252,752
New CAPEX, $m
  -9,471
  -50,200
  -64,302
  -80,497
  -98,553
  -118,236
  -139,264
  -161,325
  -184,100
  -207,287
  -230,611
  -253,842
  -276,797
  -299,346
  -321,409
  -342,953
  -363,989
  -384,562
  -404,746
  -424,639
  -444,355
  -464,020
  -483,766
  -503,730
  -524,048
  -544,857
  -566,289
  -588,474
  -611,538
  -635,603
  -660,786
Cash from investing activities, $m
  -9,580
  -65,820
  -86,277
  -110,611
  -138,857
  -171,015
  -207,010
  -246,699
  -289,895
  -336,386
  -385,949
  -438,371
  -493,458
  -551,045
  -610,999
  -673,228
  -737,676
  -804,324
  -873,186
  -944,313
  -1,017,781
  -1,093,693
  -1,172,176
  -1,253,376
  -1,337,457
  -1,424,602
  -1,515,003
  -1,608,870
  -1,706,424
  -1,807,899
  -1,913,538
Free cash flow, $m
  21,458
  -27,854
  -35,893
  -44,970
  -54,866
  -65,379
  -76,281
  -87,331
  -98,293
  -108,948
  -119,104
  -128,630
  -137,357
  -145,232
  -152,212
  -158,288
  -163,479
  -167,829
  -171,399
  -174,263
  -176,504
  -178,209
  -179,468
  -180,369
  -180,996
  -181,431
  -181,749
  -182,020
  -182,309
  -182,672
  -183,163
Issuance/(repayment) of debt, $m
  -9,113
  41,958
  53,738
  67,272
  82,361
  98,811
  116,384
  134,820
  153,854
  173,231
  192,723
  212,138
  231,321
  250,165
  268,603
  286,608
  304,188
  321,381
  338,249
  354,873
  371,350
  387,784
  404,286
  420,970
  437,950
  455,340
  473,251
  491,791
  511,066
  531,177
  552,223
Issuance/(repurchase) of shares, $m
  0
  30,046
  38,867
  48,671
  59,376
  70,772
  82,616
  94,655
  106,638
  118,332
  129,534
  140,009
  149,766
  158,652
  166,621
  173,662
  179,797
  185,069
  189,544
  193,299
  196,424
  199,011
  201,155
  202,951
  204,489
  205,857
  207,136
  208,401
  209,723
  211,166
  212,786
Cash from financing (excl. dividends), $m  
  -11,020
  72,004
  92,605
  115,943
  141,737
  169,583
  199,000
  229,475
  260,492
  291,563
  322,257
  352,147
  381,087
  408,817
  435,224
  460,270
  483,985
  506,450
  527,793
  548,172
  567,774
  586,795
  605,441
  623,921
  642,439
  661,197
  680,387
  700,192
  720,789
  742,343
  765,009
Total cash flow (excl. dividends), $m
  10,475
  44,151
  56,712
  70,973
  86,871
  104,203
  122,719
  142,144
  162,199
  182,615
  203,153
  223,517
  243,730
  263,585
  283,012
  301,983
  320,505
  338,620
  356,393
  373,910
  391,271
  408,586
  425,973
  443,552
  461,443
  479,766
  498,637
  518,172
  538,481
  559,671
  581,846
Retained Cash Flow (-), $m
  -5,034
  -37,668
  -48,425
  -60,622
  -74,219
  -89,042
  -104,878
  -121,492
  -138,644
  -156,105
  -173,671
  -191,166
  -208,453
  -225,434
  -242,049
  -258,274
  -274,116
  -289,609
  -304,810
  -319,791
  -334,639
  -349,448
  -364,319
  -379,353
  -394,655
  -410,325
  -426,466
  -443,173
  -460,542
  -478,665
  -497,631
Prev. year cash balance distribution, $m
 
  9,791
  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
 
  16,274
  8,287
  10,351
  12,652
  15,161
  17,841
  20,652
  23,555
  26,510
  29,483
  32,351
  35,277
  38,151
  40,962
  43,708
  46,389
  49,011
  51,583
  54,119
  56,632
  59,138
  61,654
  64,199
  66,788
  69,440
  72,172
  74,999
  77,938
  81,005
  84,215
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
 
  15,604
  7,586
  9,008
  10,418
  11,751
  12,948
  13,952
  14,722
  15,229
  15,457
  15,363
  15,054
  14,506
  13,752
  12,832
  11,788
  10,664
  9,500
  8,333
  7,196
  6,117
  5,116
  4,208
  3,402
  2,701
  2,106
  1,610
  1,206
  884
  634
Current shareholders' claim on cash, %
  100
  76.2
  59.2
  46.9
  37.8
  31.1
  25.9
  22.0
  18.9
  16.4
  14.5
  12.9
  11.6
  10.5
  9.6
  8.9
  8.2
  7.7
  7.2
  6.8
  6.4
  6.1
  5.8
  5.6
  5.4
  5.2
  5.0
  4.8
  4.7
  4.6
  4.4

China Petroleum & Chemical Corporation is a China-based energy and chemical company. The Company's segments include Exploration and Development segment, Refining segment, Marketing and Distribution segment, Chemicals segment, and Corporate and Others segment. Exploration and Development segment explores and develops oil fields, as well as produces crude oil and natural gas. Refining segment processes and purifies crude oil, which is sourced from Exploration and Development segment and external suppliers. Marketing and Distribution segment owns and operates oil depots and service stations in China. Chemical segment manufactures and sells petrochemical products, derivative petrochemical products and other chemical products to external customers.

FINANCIAL RATIOS  of  China Petroleum&Chemical ADR (SNP)

Valuation Ratios
P/E Ratio 1351.3
Price to Sales 32.7
Price to Book 88.7
Price to Tangible Book
Price to Cash Flow 294
Price to Free Cash Flow 423
Growth Rates
Sales Growth Rate -4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -31.4%
Cap. Spend. - 3 Yr. Gr. Rate -14.7%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 16.5%
Total Debt to Equity 27%
Interest Coverage 13
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 5.1%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity 6.7%
Return On Equity - 3 Yr. Avg. 6.6%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 27.8%
Gross Margin - 3 Yr. Avg. 23.3%
EBITDA Margin 10.1%
EBITDA Margin - 3 Yr. Avg. 8%
Operating Margin 4%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin 4.2%
Pre-Tax Margin - 3 Yr. Avg. 3.1%
Net Profit Margin 2.4%
Net Profit Margin - 3 Yr. Avg. 1.9%
Effective Tax Rate 25.8%
Eff/ Tax Rate - 3 Yr. Avg. 25%
Payout Ratio 36.2%

SNP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SNP stock intrinsic value calculation we used $279349 million for the last fiscal year's total revenue generated by China Petroleum&Chemical ADR. The default revenue input number comes from 2016 income statement of China Petroleum&Chemical 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 SNP stock valuation model: a) initial revenue growth rate of 40.6% 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 SNP is calculated based on our internal credit rating of China Petroleum&Chemical 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 China Petroleum&Chemical 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 SNP stock the variable cost ratio is equal to 97.2%.

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 SNP 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 China Petroleum&Chemical ADR.

Corporate tax rate of 27% is the nominal tax rate for China Petroleum&Chemical 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 SNP 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 SNP are equal to 44.2%.

Life of production assets of 7.9 years is the average useful life of capital assets used in China Petroleum&Chemical 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 SNP is equal to -7.3%. 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 - $102861 million for China Petroleum&Chemical 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 1412.53 million for China Petroleum&Chemical 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 China Petroleum&Chemical ADR at the current share price and the inputted number of shares is $106.4 billion.

RELATED COMPANIES Price Int.Val. Rating
PTR PetroChina ADR 65.13 12.65  str.sell
CEO CNOOC ADR 129.47 29.97  str.sell
XOM Exxon Mobil 82.81 9.82  str.sell
BP BP ADR 39.19 6.38  str.sell
SHI SINOPEC Shangh 62.45 29.31  str.sell

COMPANY NEWS

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▶ 3 Alibaba Must-Reads: $30 Billion In Planned Investments   [Oct-11-17 03:16PM  Barrons.com]
▶ IIROC Trade Resumption - SNP   [09:50AM  CNW Group]
▶ IIROC Trading Halt - SNP   [09:33AM  PR Newswire]
▶ China's Nigerian Misadventures   [Aug-31-17 04:00PM  Bloomberg]
▶ Sinopec's 1H Profit Jumps 40% Fueled by Chemicals Unit   [Aug-27-17 09:56PM  Bloomberg Video]
▶ [$$] Big Names Bow To Political Power   [Aug-15-17 12:30AM  The Wall Street Journal]
▶ War of Words With China Intensifies Over South China Sea   [Aug-07-17 09:00AM  TheStreet.com]
▶ OPEC: June Oil Production Rose, Except In Venezuela   [Jul-12-17 12:06PM  Barrons.com]
▶ China Aims For Market Share In African Refining Sector   [Jun-22-17 04:00PM  Oilprice.com]
▶ New Strong Sell Stocks for June 5th   [Jun-05-17 10:56AM  Zacks]
▶ China Petro&Chm posts 1Q profit   [Apr-27-17 12:23PM  Associated Press]
▶ New Strong Buy Stocks for April 11th   [Apr-11-17 10:30AM  Zacks]
▶ [$$] Sinopec to Lift 2017 Capex Up to 44%   [10:23AM  at The Wall Street Journal]
▶ Sinopec Now Offers Best Dividend Yield Among Asia Oil Majors   [Mar-26-17 10:40PM  at Barrons.com]
▶ [$$] Sinopec 2016 Earnings Expected to Rise   [Mar-23-17 12:07PM  at The Wall Street Journal]
▶ Dividends? 4 Cash Cow Oil Companies   [Feb-07-17 08:55PM  at Barrons.com]
▶ Why Credit Suisse Turned Bullish On Sinopec   [Jan-12-17 10:51PM  at Barrons.com]
▶ PetroChina Has 37% Upside: Morgan Stanley   [Jan-10-17 09:50PM  at Barrons.com]
Financial statements of SNP
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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