Intrinsic value of Sinovac Biotech - SVA

Previous Close

$8.10

  Intrinsic Value

$0.51

stock screener

  Rating & Target

str. sell

-94%

Previous close

$8.10

 
Intrinsic value

$0.51

 
Up/down potential

-94%

 
Rating

str. sell

We calculate the intrinsic value of SVA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

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

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.46
  7.50
  7.25
  7.02
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.78
  5.71
  5.64
  5.57
  5.51
  5.46
  5.42
  5.38
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
Revenue, $m
  72
  77
  83
  89
  95
  101
  108
  115
  122
  129
  137
  145
  153
  162
  171
  181
  191
  201
  212
  223
  235
  248
  261
  274
  289
  304
  319
  336
  353
  371
  390
Variable operating expenses, $m
 
  74
  80
  85
  91
  97
  103
  110
  117
  124
  131
  139
  147
  155
  164
  173
  183
  193
  203
  214
  225
  237
  250
  263
  277
  291
  306
  322
  338
  356
  374
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
  72
  74
  80
  85
  91
  97
  103
  110
  117
  124
  131
  139
  147
  155
  164
  173
  183
  193
  203
  214
  225
  237
  250
  263
  277
  291
  306
  322
  338
  356
  374
Operating income, $m
  1
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  16
EBITDA, $m
  6
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
  41
  44
Interest expense (income), $m
  2
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  15
Earnings before tax, $m
  0
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
Tax expense, $m
  3
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  62
  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
  211
  160
  172
  184
  196
  210
  223
  237
  252
  267
  283
  300
  317
  335
  354
  374
  394
  416
  439
  462
  487
  513
  540
  568
  598
  629
  661
  695
  731
  769
  808
Adjusted assets (=assets-cash), $m
  149
  160
  172
  184
  196
  210
  223
  237
  252
  267
  283
  300
  317
  335
  354
  374
  394
  416
  439
  462
  487
  513
  540
  568
  598
  629
  661
  695
  731
  769
  808
Revenue / Adjusted assets
  0.483
  0.481
  0.483
  0.484
  0.485
  0.481
  0.484
  0.485
  0.484
  0.483
  0.484
  0.483
  0.483
  0.484
  0.483
  0.484
  0.485
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.482
  0.483
  0.483
  0.483
  0.483
  0.483
  0.482
  0.483
Average production assets, $m
  66
  70
  76
  81
  86
  92
  98
  104
  111
  117
  124
  132
  139
  147
  156
  164
  173
  183
  193
  203
  214
  225
  237
  250
  263
  276
  291
  306
  321
  338
  355
Working capital, $m
  68
  39
  42
  44
  47
  51
  54
  57
  61
  65
  68
  72
  77
  81
  86
  90
  95
  100
  106
  112
  118
  124
  130
  137
  144
  152
  160
  168
  177
  186
  195
Total debt, $m
  43
  14
  18
  23
  28
  34
  39
  45
  51
  57
  64
  71
  78
  85
  93
  101
  109
  118
  127
  137
  147
  158
  169
  180
  192
  205
  218
  232
  247
  262
  278
Total liabilities, $m
  96
  66
  70
  75
  80
  86
  91
  97
  103
  109
  116
  123
  130
  137
  145
  153
  161
  170
  179
  189
  199
  210
  221
  232
  244
  257
  270
  284
  299
  314
  330
Total equity, $m
  116
  95
  102
  109
  116
  124
  132
  140
  149
  158
  167
  177
  187
  198
  209
  221
  233
  246
  259
  273
  288
  303
  319
  336
  353
  372
  391
  411
  432
  454
  478
Total liabilities and equity, $m
  212
  161
  172
  184
  196
  210
  223
  237
  252
  267
  283
  300
  317
  335
  354
  374
  394
  416
  438
  462
  487
  513
  540
  568
  597
  629
  661
  695
  731
  768
  808
Debt-to-equity ratio
  0.371
  0.140
  0.180
  0.210
  0.240
  0.270
  0.300
  0.320
  0.340
  0.360
  0.380
  0.400
  0.410
  0.430
  0.440
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.580
Adjusted equity ratio
  0.362
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Depreciation, amort., depletion, $m
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
Funds from operations, $m
  -35
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
Change in working capital, $m
  -20
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Cash from operations, $m
  -15
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
Maintenance CAPEX, $m
  0
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
New CAPEX, $m
  -13
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
Cash from investing activities, $m
  -12
  -10
  -10
  -11
  -12
  -13
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -22
  -24
  -25
  -27
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
Free cash flow, $m
  -27
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
Issuance/(repayment) of debt, $m
  21
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
Issuance/(repurchase) of shares, $m
  0
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  23
Cash from financing (excl. dividends), $m  
  28
  10
  10
  10
  11
  11
  12
  13
  13
  13
  15
  15
  16
  16
  18
  18
  19
  20
  21
  23
  23
  25
  26
  28
  28
  30
  31
  33
  35
  36
  39
Total cash flow (excl. dividends), $m
  -1
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
Retained Cash Flow (-), $m
  6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
Prev. year cash balance distribution, $m
 
  28
  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
 
  25
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
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
 
  24
  -3
  -3
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  98.7
  97.4
  96.2
  95.0
  93.8
  92.6
  91.5
  90.4
  89.3
  88.2
  87.2
  86.1
  85.1
  84.1
  83.0
  82.1
  81.1
  80.1
  79.1
  78.2
  77.2
  76.3
  75.4
  74.5
  73.6
  72.7
  71.8
  70.9
  70.0
  69.2

Sinovac Biotech Ltd. (Sinovac) is a holding company. The Company is a biopharmaceutical company that focuses on the research, development, manufacturing and commercialization of vaccines that protect against human infectious diseases, including hepatitis A, hepatitis B, seasonal influenza, Haemagglutinase5 Neuraminidase1 (H5N1) and Influenza A (H1N1) pandemic influenza and mumps. The Company's pipeline consists of vaccine candidates in the clinical and pre-clinical development Phases in China. The Company is engaged in the sales, marketing, manufacturing and development of vaccines for infectious disease. The Company develops various products, including Healive, Bilive, Anflu, Panflu Whole Viron Pandemic Influenza Vaccine, Split Viron Pandemic Influenza Vaccine, Panflu.1, RabEnd, Mumps Vaccine, Enterovirus 71 (EV71) Vaccine, Pneumococcal Polysaccharide Vaccine, Pneumococcal Conjugate Vaccine, Rubella Vaccine, Varicella Vaccine and Sabin Inactivated Polio Vaccine.

FINANCIAL RATIOS  of  Sinovac Biotech (SVA)

Valuation Ratios
P/E Ratio -461.8
Price to Sales 6.4
Price to Book 4
Price to Tangible Book
Price to Cash Flow -30.8
Price to Free Cash Flow -16.5
Growth Rates
Sales Growth Rate 7.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 160%
Cap. Spend. - 3 Yr. Gr. Rate 21.1%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 7.8%
Total Debt to Equity 37.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. -0.3%
Return On Total Capital -0.7%
Ret/ On T. Cap. - 3 Yr. Avg. -0.8%
Return On Equity -0.8%
Return On Equity - 3 Yr. Avg. -1.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 69.4%
Gross Margin - 3 Yr. Avg. 72.4%
EBITDA Margin 9.7%
EBITDA Margin - 3 Yr. Avg. 15.6%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 2.6%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 2.6%
Net Profit Margin -1.4%
Net Profit Margin - 3 Yr. Avg. -2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 66.7%
Payout Ratio 0%

SVA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SVA stock intrinsic value calculation we used $72 million for the last fiscal year's total revenue generated by Sinovac Biotech. The default revenue input number comes from 2016 income statement of Sinovac Biotech. 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 SVA stock valuation model: a) initial revenue growth rate of 7.5% 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 SVA is calculated based on our internal credit rating of Sinovac Biotech, 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 Sinovac Biotech.
    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 SVA stock the variable cost ratio is equal to 95.8%.

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 SVA 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 5.9% for Sinovac Biotech.

Corporate tax rate of 27% is the nominal tax rate for Sinovac Biotech. 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 SVA 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 SVA are equal to 91%.

Life of production assets of 13.1 years is the average useful life of capital assets used in Sinovac Biotech 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 SVA is equal to 50%. 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 - $116 million for Sinovac Biotech - 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 57.156 million for Sinovac Biotech 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 Sinovac Biotech at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Sinovac Provides Update on Going Private Transaction   [Feb-07-18 08:50AM  PR Newswire]
▶ Sinovac Schedules 2017 Annual Meeting of Shareholders   [Dec-29-17 06:00AM  PR Newswire]
▶ Sinovac Biotech Announces Update on Nasdaq Matters   [Nov-30-17 06:00AM  PR Newswire]
▶ Sinovac posts 4Q profit   [Nov-22-17 05:01PM  Associated Press]
Financial statements of SVA
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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