Intrinsic value of China Petroleum&Chemical ADR - SNP

Previous Close

$72.76

  Intrinsic Value

$30.20

stock screener

  Rating & Target

str. sell

-58%

  Value-price divergence*

-45%

Previous close

$72.76

 
Intrinsic value

$30.20

 
Up/down potential

-58%

 
Rating

str. sell

 
Value-price divergence*

-45%

*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 93.4

 

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
  28,487
  39,038
  52,247
  68,419
  87,821
  110,673
  137,145
  167,355
  201,369
  239,211
  280,865
  326,285
  375,406
  428,146
  484,423
  544,151
  607,254
  673,670
  743,350
  816,266
  892,408
  971,791
  1,054,449
  1,140,442
  1,229,849
  1,322,773
  1,419,337
  1,519,686
  1,623,984
  1,732,414
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
  17,452
  23,882
  31,932
  41,787
  53,611
  67,537
  83,670
  102,080
  122,809
  145,870
  171,162
  198,842
  228,776
  260,917
  295,213
  331,612
  370,068
  410,542
  453,006
  497,442
  543,844
  592,220
  642,593
  694,998
  749,484
  806,113
  864,960
  926,114
  989,674
  1,055,753
Funds from operations, $m
  34,501
  25,073
  33,440
  43,883
  56,631
  71,882
  89,800
  110,507
  134,086
  160,582
  190,007
  222,319
  257,529
  295,559
  336,346
  379,825
  425,931
  474,608
  525,808
  579,498
  635,657
  694,281
  755,384
  818,996
  885,164
  953,953
  1,025,443
  1,099,732
  1,176,933
  1,257,174
  1,340,598
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
  33,353
  44,060
  57,178
  72,907
  91,410
  112,800
  137,151
  164,491
  194,817
  228,094
  264,243
  303,244
  344,999
  389,430
  436,466
  486,047
  538,122
  592,656
  649,631
  709,046
  770,918
  835,282
  902,191
  971,715
  1,043,940
  1,118,970
  1,196,924
  1,277,934
  1,362,149
  1,449,732
Maintenance CAPEX, $m
  0
  -12,340
  -17,360
  -23,790
  -31,840
  -41,695
  -53,519
  -67,446
  -83,578
  -101,988
  -122,717
  -145,778
  -171,162
  -198,842
  -228,776
  -260,917
  -295,213
  -331,612
  -370,068
  -410,542
  -453,006
  -497,442
  -543,844
  -592,220
  -642,593
  -694,998
  -749,484
  -806,113
  -864,960
  -926,114
  -989,674
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
  -62,540
  -81,662
  -104,287
  -130,393
  -159,931
  -192,783
  -228,771
  -267,678
  -309,275
  -353,328
  -399,620
  -447,959
  -498,188
  -550,185
  -603,870
  -659,202
  -716,174
  -774,814
  -835,181
  -897,361
  -961,462
  -1,027,610
  -1,095,950
  -1,166,641
  -1,239,855
  -1,315,773
  -1,394,587
  -1,476,498
  -1,561,717
  -1,650,460
Free cash flow, $m
  21,458
  -29,188
  -37,602
  -47,110
  -57,486
  -68,522
  -79,983
  -91,620
  -103,187
  -114,458
  -125,234
  -135,377
  -144,715
  -153,190
  -160,756
  -167,404
  -173,155
  -178,052
  -182,158
  -185,551
  -188,316
  -190,544
  -192,328
  -193,759
  -194,927
  -195,915
  -196,802
  -197,663
  -198,565
  -199,568
  -200,728
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
  42,817
  55,003
  68,833
  84,251
  101,060
  119,017
  137,856
  157,305
  177,105
  197,023
  216,769
  236,372
  255,628
  274,468
  292,866
  310,830
  328,398
  345,634
  362,622
  379,459
  396,251
  413,114
  430,162
  447,513
  465,282
  483,584
  502,529
  522,225
  542,775
  564,280
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
 
  14,940
  6,578
  8,211
  10,032
  12,018
  14,139
  16,364
  18,661
  21,000
  23,352
  25,604
  27,919
  30,193
  32,419
  34,592
  36,714
  38,789
  40,824
  42,831
  44,820
  46,803
  48,795
  50,808
  52,858
  54,957
  57,118
  59,356
  61,682
  64,110
  66,650
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
 
  14,324
  6,022
  7,146
  8,261
  9,315
  10,261
  11,055
  11,664
  12,063
  12,243
  12,159
  11,914
  11,480
  10,884
  10,156
  9,330
  8,440
  7,518
  6,595
  5,695
  4,841
  4,049
  3,330
  2,692
  2,138
  1,666
  1,274
  954
  700
  502
Current shareholders' claim on cash, %
  100
  73.8
  55.6
  42.8
  33.6
  26.9
  22.0
  18.2
  15.3
  13.1
  11.4
  10.0
  8.8
  7.9
  7.1
  6.5
  6.0
  5.5
  5.1
  4.8
  4.5
  4.3
  4.1
  3.9
  3.7
  3.5
  3.4
  3.3
  3.2
  3.1
  3.0

China Petroleum & Chemical Corporation, an energy and chemical company, engages in the oil and gas, and chemical operations and businesses in the People’s Republic of China. It operates through Exploration and Production, Refining, Marketing and Distribution, Chemicals, and Corporate and Others segments. The company explores and develops oil fields, and produces and sells crude oil and natural gas; processes and purifies crude oil into refined petroleum products; and manufactures and sells petroleum products. It also owns and operates oil depots and service stations; and distributes and sells refined petroleum products, such as gasoline and diesel through wholesale and retail sales networks. In addition, the company manufactures and sells petrochemical products, derivative petrochemical products, and other chemical products, such as basic organic chemicals, synthetic resins, synthetic fiber monomers and polymers, synthetic fibers, synthetic rubbers, and chemical fertilizers. Further, it is also involved in the pipeline transportation of crude oil and natural gas; and production and supplies electricity and coal. Additionally, the company engages in the import and export of petroleum, natural gas, petroleum products, petrochemical and chemical products, and other commodities and technologies; and research, development, and application of technologies and information. China Petroleum & Chemical Corporation was founded in 2000 and is headquartered in Beijing, the People’s Republic of China. China Petroleum & Chemical Corporation operates as a subsidiary of China Petrochemical Corporation.

FINANCIAL RATIOS  of  China Petroleum&Chemical ADR (SNP)

Valuation Ratios
P/E Ratio 1304.7
Price to Sales 31.5
Price to Book 85.6
Price to Tangible Book
Price to Cash Flow 283.8
Price to Free Cash Flow 408.5
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 10 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 1283.06 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 $93.4 billion.

RELATED COMPANIES Price Int.Val. Rating
PTR PetroChina ADR 61.31 15.16  str.sell
CEO CNOOC ADR 111.25 30.11  str.sell
XOM Exxon Mobil 76.64 102.38  buy
BP BP ADR 34.16 6.50  str.sell
SHI SINOPEC Shangh 60.62 29.55  sell

COMPANY NEWS

▶ [$$] Big Names Bow To Political Power   [Aug-15-17 12:30AM  The Wall Street Journal]
▶ War of Words With China Intensifies Over South China Sea   [Aug-07-17 09:00AM  TheStreet.com]
▶ OPEC: June Oil Production Rose, Except In Venezuela   [Jul-12-17 12:06PM  Barrons.com]
▶ China Aims For Market Share In African Refining Sector   [Jun-22-17 04:00PM  Oilprice.com]
▶ New Strong Sell Stocks for June 5th   [Jun-05-17 10:56AM  Zacks]
▶ China Petro&Chm posts 1Q profit   [Apr-27-17 12:23PM  Associated Press]
▶ New Strong Buy Stocks for April 11th   [Apr-11-17 10:30AM  Zacks]
▶ [$$] 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]
▶ [$$] Sinopec 2016 Earnings Expected to Rise   [Mar-23-17 12:07PM  at The Wall Street Journal]
▶ Dividends? 4 Cash Cow Oil Companies   [Feb-07-17 08:55PM  at Barrons.com]
▶ Why Credit Suisse Turned Bullish On Sinopec   [Jan-12-17 10:51PM  at Barrons.com]
▶ PetroChina Has 37% Upside: Morgan Stanley   [Jan-10-17 09:50PM  at Barrons.com]
▶ [$$] China Smog Alerts Signal New Outlook   [Dec-20-16 12:21AM  at The Wall Street Journal]
▶ [$$] China's Sinopec Revives Plan for Up to $10 Billion IPO of Retail Unit   [Dec-13-16 11:56PM  at The Wall Street Journal]
▶ Sinopec's Obscenely Profitable Pipeline   [02:34AM  at Bloomberg]
▶ [$$] Sinopec to Sell 50% Pipeline Stake   [09:20AM  at The Wall Street Journal]
▶ [$$] Chinas Anbang Insurance Plans First International Bond Issue   [Nov-25-16 12:16AM  at The Wall Street Journal]
▶ [$$] China's Anbang Insurance Plans First International Bond Issue   [Nov-24-16 05:14AM  at The Wall Street Journal]
▶ [$$] China Oil Companies' Push Into U.S. Faces Uncertainty After Election   [Nov-13-16 02:51AM  at The Wall Street Journal]
Stock chart of SNP 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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