Intrinsic value of Videocon d2h ADR - VDTH

Previous Close

$8.20

  Intrinsic Value

$4.04

stock screener

  Rating & Target

str. sell

-51%

Previous close

$8.20

 
Intrinsic value

$4.04

 
Up/down potential

-51%

 
Rating

str. sell

We calculate the intrinsic value of VDTH 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
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, %
  7.48
  9.80
  9.32
  8.89
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
Revenue, $m
  460
  519
  568
  618
  671
  725
  782
  841
  903
  966
  1,033
  1,102
  1,173
  1,248
  1,326
  1,406
  1,491
  1,578
  1,670
  1,766
  1,865
  1,969
  2,078
  2,192
  2,311
  2,435
  2,565
  2,702
  2,844
  2,994
  3,150
Variable operating expenses, $m
 
  247
  270
  294
  319
  345
  372
  399
  429
  459
  490
  521
  555
  591
  627
  666
  705
  747
  790
  836
  883
  932
  984
  1,037
  1,094
  1,153
  1,214
  1,279
  1,346
  1,417
  1,491
Fixed operating expenses, $m
 
  207
  212
  217
  221
  226
  231
  236
  242
  247
  252
  258
  264
  269
  275
  281
  288
  294
  300
  307
  314
  321
  328
  335
  342
  350
  357
  365
  373
  382
  390
Total operating expenses, $m
  412
  454
  482
  511
  540
  571
  603
  635
  671
  706
  742
  779
  819
  860
  902
  947
  993
  1,041
  1,090
  1,143
  1,197
  1,253
  1,312
  1,372
  1,436
  1,503
  1,571
  1,644
  1,719
  1,799
  1,881
Operating income, $m
  48
  65
  86
  108
  131
  154
  179
  205
  233
  261
  290
  322
  355
  388
  423
  459
  498
  538
  579
  623
  669
  717
  767
  820
  875
  933
  994
  1,058
  1,125
  1,195
  1,269
EBITDA, $m
  151
  112
  137
  163
  191
  219
  249
  281
  313
  347
  382
  419
  458
  498
  539
  583
  629
  676
  726
  778
  833
  890
  950
  1,012
  1,078
  1,147
  1,219
  1,295
  1,375
  1,458
  1,546
Interest expense (income), $m
  48
  17
  20
  23
  26
  29
  33
  36
  40
  44
  48
  52
  56
  61
  66
  70
  75
  81
  86
  92
  98
  104
  111
  117
  125
  132
  140
  148
  156
  165
  175
Earnings before tax, $m
  7
  48
  66
  85
  104
  125
  147
  169
  192
  217
  242
  270
  298
  327
  357
  389
  422
  457
  493
  531
  571
  613
  656
  702
  750
  801
  854
  910
  968
  1,030
  1,095
Tax expense, $m
  2
  13
  18
  23
  28
  34
  40
  46
  52
  59
  65
  73
  80
  88
  96
  105
  114
  123
  133
  143
  154
  165
  177
  190
  203
  216
  231
  246
  261
  278
  296
Net income, $m
  5
  35
  48
  62
  76
  91
  107
  123
  140
  158
  177
  197
  218
  239
  261
  284
  308
  333
  360
  388
  417
  447
  479
  513
  548
  585
  623
  664
  707
  752
  799

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10
  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
  649
  734
  802
  873
  947
  1,025
  1,105
  1,188
  1,275
  1,365
  1,459
  1,556
  1,657
  1,763
  1,872
  1,986
  2,105
  2,229
  2,359
  2,494
  2,635
  2,782
  2,935
  3,096
  3,264
  3,440
  3,623
  3,816
  4,017
  4,228
  4,449
Adjusted assets (=assets-cash), $m
  639
  734
  802
  873
  947
  1,025
  1,105
  1,188
  1,275
  1,365
  1,459
  1,556
  1,657
  1,763
  1,872
  1,986
  2,105
  2,229
  2,359
  2,494
  2,635
  2,782
  2,935
  3,096
  3,264
  3,440
  3,623
  3,816
  4,017
  4,228
  4,449
Revenue / Adjusted assets
  0.720
  0.707
  0.708
  0.708
  0.709
  0.707
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
Average production assets, $m
  408
  456
  498
  543
  589
  637
  687
  739
  793
  849
  907
  967
  1,030
  1,096
  1,164
  1,235
  1,309
  1,386
  1,466
  1,550
  1,638
  1,729
  1,825
  1,925
  2,029
  2,138
  2,252
  2,372
  2,497
  2,628
  2,766
Working capital, $m
  -407
  -79
  -86
  -94
  -102
  -110
  -119
  -128
  -137
  -147
  -157
  -167
  -178
  -190
  -201
  -214
  -227
  -240
  -254
  -268
  -284
  -299
  -316
  -333
  -351
  -370
  -390
  -411
  -432
  -455
  -479
Total debt, $m
  304
  370
  426
  485
  546
  609
  675
  743
  814
  888
  965
  1,045
  1,128
  1,214
  1,304
  1,398
  1,495
  1,597
  1,703
  1,814
  1,929
  2,050
  2,176
  2,308
  2,445
  2,589
  2,740
  2,898
  3,063
  3,236
  3,417
Total liabilities, $m
  533
  602
  658
  716
  777
  840
  906
  974
  1,046
  1,119
  1,196
  1,276
  1,359
  1,445
  1,535
  1,629
  1,726
  1,828
  1,934
  2,045
  2,160
  2,281
  2,407
  2,539
  2,676
  2,821
  2,971
  3,129
  3,294
  3,467
  3,648
Total equity, $m
  117
  132
  144
  157
  171
  184
  199
  214
  230
  246
  263
  280
  298
  317
  337
  358
  379
  401
  425
  449
  474
  501
  528
  557
  588
  619
  652
  687
  723
  761
  801
Total liabilities and equity, $m
  650
  734
  802
  873
  948
  1,024
  1,105
  1,188
  1,276
  1,365
  1,459
  1,556
  1,657
  1,762
  1,872
  1,987
  2,105
  2,229
  2,359
  2,494
  2,634
  2,782
  2,935
  3,096
  3,264
  3,440
  3,623
  3,816
  4,017
  4,228
  4,449
Debt-to-equity ratio
  2.598
  2.800
  2.950
  3.080
  3.200
  3.300
  3.390
  3.470
  3.550
  3.610
  3.680
  3.730
  3.780
  3.830
  3.870
  3.910
  3.950
  3.980
  4.010
  4.040
  4.070
  4.090
  4.120
  4.140
  4.160
  4.180
  4.200
  4.220
  4.240
  4.250
  4.270
Adjusted equity ratio
  0.167
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  35
  48
  62
  76
  91
  107
  123
  140
  158
  177
  197
  218
  239
  261
  284
  308
  333
  360
  388
  417
  447
  479
  513
  548
  585
  623
  664
  707
  752
  799
Depreciation, amort., depletion, $m
  103
  47
  51
  56
  60
  65
  70
  75
  81
  86
  92
  97
  103
  110
  116
  123
  131
  139
  147
  155
  164
  173
  182
  192
  203
  214
  225
  237
  250
  263
  277
Funds from operations, $m
  175
  82
  99
  117
  136
  156
  177
  199
  221
  244
  269
  294
  321
  348
  377
  407
  439
  472
  507
  543
  581
  620
  662
  705
  751
  799
  849
  901
  957
  1,015
  1,076
Change in working capital, $m
  10
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
Cash from operations, $m
  165
  89
  106
  125
  144
  165
  186
  208
  230
  254
  279
  305
  332
  360
  389
  420
  452
  485
  521
  557
  596
  636
  678
  722
  769
  817
  868
  922
  978
  1,037
  1,099
Maintenance CAPEX, $m
  0
  -42
  -46
  -50
  -54
  -59
  -64
  -69
  -74
  -79
  -85
  -91
  -97
  -103
  -110
  -116
  -123
  -131
  -139
  -147
  -155
  -164
  -173
  -182
  -192
  -203
  -214
  -225
  -237
  -250
  -263
New CAPEX, $m
  -94
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -88
  -91
  -96
  -100
  -104
  -109
  -114
  -120
  -125
  -131
  -137
Cash from investing activities, $m
  -88
  -83
  -88
  -94
  -100
  -107
  -114
  -121
  -128
  -135
  -143
  -152
  -160
  -168
  -178
  -187
  -197
  -208
  -219
  -231
  -243
  -255
  -269
  -282
  -296
  -312
  -328
  -345
  -362
  -381
  -400
Free cash flow, $m
  77
  7
  18
  31
  44
  58
  72
  87
  103
  119
  136
  153
  172
  191
  211
  232
  254
  277
  302
  327
  353
  381
  410
  440
  472
  505
  540
  577
  616
  657
  699
Issuance/(repayment) of debt, $m
  -43
  53
  56
  58
  61
  63
  66
  68
  71
  74
  77
  80
  83
  86
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -88
  53
  56
  58
  61
  63
  66
  68
  71
  74
  77
  80
  83
  86
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
Total cash flow (excl. dividends), $m
  -11
  60
  74
  89
  105
  121
  138
  155
  174
  193
  213
  233
  255
  278
  301
  326
  352
  379
  408
  437
  469
  501
  536
  572
  610
  649
  691
  735
  781
  830
  880
Retained Cash Flow (-), $m
  -9
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
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
 
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
Cash available for distribution, $m
 
  48
  62
  76
  91
  107
  123
  140
  158
  177
  196
  216
  237
  259
  282
  305
  331
  357
  384
  413
  443
  475
  508
  543
  579
  618
  658
  700
  745
  792
  841
Discount rate, %
 
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
PV of cash for distribution, $m
 
  46
  56
  66
  74
  81
  86
  91
  94
  95
  96
  94
  92
  88
  84
  78
  72
  66
  59
  52
  45
  38
  32
  26
  21
  17
  13
  10
  7
  5
  4
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Videocon d2h Limited is engaged in the provision of direct to home (DTH) subscription television services to subscribers in India. The Company operates under the Videocon d2h brand. The Company is engaged in the transmission of programming to subscribers through satellite broadcasting. Its subscribers have access to over 550 national and international channels and services, including approximately 45 high definition (HD) channels and services, and over 42 audio and video services through its Music Channel Services through several subscription packages, as well as the option of choosing add-ons and a la carte channels and receiving certain discounts through long-term recharge offers. Its subscription packages include Flexi Pack, Super Gold Pack, Gold Maxi pack, Gold Kids, New Gold Sports Pack, Gold Sports Kids, New Diamond Pack, Platinum Pack and Platinum HD Pack. It offers value-added services, such as movie channel services, active music channel services, tickers and smart services.

FINANCIAL RATIOS  of  Videocon d2h ADR (VDTH)

Valuation Ratios
P/E Ratio 690.4
Price to Sales 7.5
Price to Book 29.5
Price to Tangible Book
Price to Cash Flow 20.9
Price to Free Cash Flow 48.6
Growth Rates
Sales Growth Rate 7.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.8%
Cap. Spend. - 3 Yr. Gr. Rate -0.6%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 2.6%
Total Debt to Equity 259.8%
Interest Coverage 1
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 1.1%
Ret/ On T. Cap. - 3 Yr. Avg. -3.6%
Return On Equity 4.4%
Return On Equity - 3 Yr. Avg. -111.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 53.7%
Gross Margin - 3 Yr. Avg. 53.7%
EBITDA Margin 34.3%
EBITDA Margin - 3 Yr. Avg. 30.2%
Operating Margin 10.4%
Oper. Margin - 3 Yr. Avg. 6.6%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. -6.6%
Net Profit Margin 1.1%
Net Profit Margin - 3 Yr. Avg. -4.6%
Effective Tax Rate 28.6%
Eff/ Tax Rate - 3 Yr. Avg. 28.5%
Payout Ratio 0%

VDTH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VDTH stock intrinsic value calculation we used $473 million for the last fiscal year's total revenue generated by Videocon d2h ADR. The default revenue input number comes from 2017 income statement of Videocon d2h 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 VDTH stock valuation model: a) initial revenue growth rate of 9.8% 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 4.8%, whose default value for VDTH is calculated based on our internal credit rating of Videocon d2h 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 Videocon d2h 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 VDTH stock the variable cost ratio is equal to 47.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $203 million in the base year in the intrinsic value calculation for VDTH 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 5.4% for Videocon d2h ADR.

Corporate tax rate of 27% is the nominal tax rate for Videocon d2h 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 VDTH stock is equal to 0.4%.

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 VDTH are equal to 87.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Videocon d2h 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 VDTH is equal to -15.2%. 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 - $120 million for Videocon d2h 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 420 million for Videocon d2h 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 Videocon d2h ADR at the current share price and the inputted number of shares is $3.4 billion.

RELATED COMPANIES Price Int.Val. Rating
Financial statements of VDTH
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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