Intrinsic value of China Zenix Auto International ADR - ZX

Previous Close

$1.38

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$1.38

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of ZX 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, %
  -8.19
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  325
  330
  338
  347
  357
  367
  379
  392
  406
  421
  437
  455
  473
  493
  514
  536
  559
  584
  610
  638
  667
  698
  731
  765
  802
  840
  880
  922
  967
  1,014
  1,063
Variable operating expenses, $m
 
  334
  341
  350
  360
  371
  383
  396
  410
  425
  442
  459
  477
  497
  518
  541
  564
  590
  616
  644
  674
  705
  738
  773
  809
  848
  888
  931
  976
  1,023
  1,073
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
  329
  334
  341
  350
  360
  371
  383
  396
  410
  425
  442
  459
  477
  497
  518
  541
  564
  590
  616
  644
  674
  705
  738
  773
  809
  848
  888
  931
  976
  1,023
  1,073
Operating income, $m
  -4
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
EBITDA, $m
  18
  19
  20
  20
  21
  21
  22
  23
  24
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  49
  51
  53
  56
  59
  62
Interest expense (income), $m
  4
  4
  2
  3
  4
  4
  5
  6
  7
  8
  10
  11
  12
  14
  16
  17
  19
  21
  23
  25
  28
  30
  33
  36
  38
  41
  45
  48
  51
  55
  59
Earnings before tax, $m
  -4
  -8
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -17
  -19
  -20
  -22
  -25
  -27
  -29
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -57
  -61
  -65
  -69
Tax expense, $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
Net income, $m
  -4
  -8
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -17
  -19
  -20
  -22
  -25
  -27
  -29
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -57
  -61
  -65
  -69

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  172
  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
  558
  567
  580
  595
  612
  630
  650
  673
  697
  722
  750
  780
  811
  845
  881
  919
  959
  1,002
  1,047
  1,095
  1,145
  1,198
  1,254
  1,313
  1,375
  1,440
  1,509
  1,582
  1,658
  1,739
  1,823
Adjusted assets (=assets-cash), $m
  386
  567
  580
  595
  612
  630
  650
  673
  697
  722
  750
  780
  811
  845
  881
  919
  959
  1,002
  1,047
  1,095
  1,145
  1,198
  1,254
  1,313
  1,375
  1,440
  1,509
  1,582
  1,658
  1,739
  1,823
Revenue / Adjusted assets
  0.842
  0.582
  0.583
  0.583
  0.583
  0.583
  0.583
  0.582
  0.582
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
Average production assets, $m
  211
  222
  228
  233
  240
  247
  255
  264
  273
  283
  294
  306
  318
  332
  346
  361
  376
  393
  411
  429
  449
  470
  492
  515
  539
  565
  592
  621
  651
  682
  715
Working capital, $m
  120
  -78
  -80
  -82
  -84
  -87
  -89
  -93
  -96
  -99
  -103
  -107
  -112
  -116
  -121
  -126
  -132
  -138
  -144
  -151
  -158
  -165
  -173
  -181
  -189
  -198
  -208
  -218
  -228
  -239
  -251
Total debt, $m
  81
  40
  52
  65
  80
  97
  115
  135
  157
  180
  205
  231
  260
  290
  322
  357
  393
  431
  472
  515
  560
  608
  658
  711
  767
  826
  888
  953
  1,022
  1,094
  1,170
Total liabilities, $m
  191
  510
  522
  535
  550
  567
  585
  605
  627
  650
  675
  702
  730
  761
  793
  827
  863
  902
  942
  985
  1,030
  1,078
  1,128
  1,182
  1,237
  1,296
  1,358
  1,424
  1,492
  1,565
  1,641
Total equity, $m
  367
  57
  58
  59
  61
  63
  65
  67
  70
  72
  75
  78
  81
  85
  88
  92
  96
  100
  105
  109
  114
  120
  125
  131
  137
  144
  151
  158
  166
  174
  182
Total liabilities and equity, $m
  558
  567
  580
  594
  611
  630
  650
  672
  697
  722
  750
  780
  811
  846
  881
  919
  959
  1,002
  1,047
  1,094
  1,144
  1,198
  1,253
  1,313
  1,374
  1,440
  1,509
  1,582
  1,658
  1,739
  1,823
Debt-to-equity ratio
  0.221
  0.700
  0.890
  1.090
  1.310
  1.530
  1.770
  2.010
  2.250
  2.490
  2.730
  2.970
  3.200
  3.430
  3.660
  3.880
  4.100
  4.300
  4.510
  4.700
  4.890
  5.070
  5.250
  5.420
  5.580
  5.730
  5.880
  6.030
  6.160
  6.290
  6.420
Adjusted equity ratio
  0.715
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4
  -8
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -17
  -19
  -20
  -22
  -25
  -27
  -29
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -57
  -61
  -65
  -69
Depreciation, amort., depletion, $m
  22
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
Funds from operations, $m
  30
  15
  17
  17
  17
  17
  17
  16
  16
  16
  16
  15
  15
  15
  14
  14
  13
  13
  12
  11
  11
  10
  10
  9
  8
  7
  6
  5
  5
  4
  2
Change in working capital, $m
  4
  -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
  -9
  -10
  -11
  -11
  -12
Cash from operations, $m
  26
  16
  19
  19
  19
  20
  20
  20
  20
  19
  19
  19
  19
  19
  19
  19
  19
  18
  18
  18
  18
  18
  17
  17
  17
  16
  16
  15
  15
  15
  14
Maintenance CAPEX, $m
  0
  -22
  -22
  -23
  -23
  -24
  -25
  -26
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
New CAPEX, $m
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
Cash from investing activities, $m
  -9
  -27
  -27
  -29
  -30
  -31
  -33
  -35
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -80
  -84
  -87
  -92
  -97
  -101
Free cash flow, $m
  17
  -10
  -8
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -31
  -33
  -36
  -39
  -42
  -45
  -48
  -52
  -55
  -59
  -63
  -68
  -72
  -77
  -82
  -87
Issuance/(repayment) of debt, $m
  0
  -41
  12
  13
  15
  17
  18
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
  72
  76
Issuance/(repurchase) of shares, $m
  -2
  59
  7
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  49
  52
  56
  60
  64
  68
  73
  78
Cash from financing (excl. dividends), $m  
  -5
  18
  19
  21
  24
  27
  29
  32
  36
  38
  42
  45
  48
  52
  56
  60
  65
  69
  75
  79
  84
  90
  95
  102
  108
  115
  122
  129
  137
  145
  154
Total cash flow (excl. dividends), $m
  12
  9
  10
  12
  13
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  30
  32
  33
  35
  37
  39
  42
  44
  46
  49
  51
  54
  57
  60
  63
  66
Retained Cash Flow (-), $m
  4
  -59
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -29
  -31
  -34
  -36
  -39
  -42
  -45
  -49
  -52
  -56
  -60
  -64
  -68
  -73
  -78
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -51
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  3
  2
  2
  1
  0
  0
  -1
  -2
  -3
  -4
  -6
  -7
  -8
  -10
  -11
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
 
  -48
  3
  4
  4
  4
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  45.7
  45.2
  44.6
  44.0
  43.3
  42.5
  41.7
  40.9
  40.0
  39.1
  38.2
  37.2
  36.2
  35.2
  34.2
  33.2
  32.1
  31.1
  30.1
  29.0
  28.0
  27.0
  26.0
  25.0
  24.0
  23.0
  22.1
  21.2
  20.3
  19.4

China Zenix Auto International Limited is a commercial vehicle wheel manufacturer in both the aftermarket and original equipment manufacturer (OEM) markets in People's Republic of China (PRC). The Company designs, manufactures and sells steel wheels. It operates in three segments: PRC OEM sales, which include production and sales of steel and aluminum wheels to vehicle manufacturers in the PRC; PRC aftermarket sales, which include production and sales of steel and aluminum wheels to distributors in the PRC, and international sales, which includes the production and sales of steel wheels to distributors and vehicle manufacturers outside the PRC. It offers over 710 series of tubed steel wheels (which are used for commercial vehicles using tires that contain a rubber inner tube), tubeless steel wheels (which are used for commercial vehicles using tubeless tires) and off-road steel wheels (which are used for construction and other types of off-road vehicles).

FINANCIAL RATIOS  of  China Zenix Auto International ADR (ZX)

Valuation Ratios
P/E Ratio -71.2
Price to Sales 0.9
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 11
Price to Free Cash Flow 13
Growth Rates
Sales Growth Rate -8.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -69.2%
Cap. Spend. - 3 Yr. Gr. Rate -30.7%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 22.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0.9%
Return On Total Capital -0.9%
Ret/ On T. Cap. - 3 Yr. Avg. 0.2%
Return On Equity -1.1%
Return On Equity - 3 Yr. Avg. 0.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 17.2%
Gross Margin - 3 Yr. Avg. 16.6%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 6.8%
Operating Margin -1.2%
Oper. Margin - 3 Yr. Avg. 0.2%
Pre-Tax Margin -1.2%
Pre-Tax Margin - 3 Yr. Avg. 0.2%
Net Profit Margin -1.2%
Net Profit Margin - 3 Yr. Avg. -0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 7.1%
Payout Ratio 0%

ZX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ZX stock intrinsic value calculation we used $324 million for the last fiscal year's total revenue generated by China Zenix Auto International ADR. The default revenue input number comes from 2016 income statement of China Zenix Auto International 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 ZX stock valuation model: a) initial revenue growth rate of 2% 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 ZX is calculated based on our internal credit rating of China Zenix Auto International 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 Zenix Auto International 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 ZX stock the variable cost ratio is equal to 101%.

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 ZX 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 China Zenix Auto International ADR.

Corporate tax rate of 27% is the nominal tax rate for China Zenix Auto International 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 ZX 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 ZX are equal to 67.3%.

Life of production assets of 10 years is the average useful life of capital assets used in China Zenix Auto International 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 ZX is equal to -23.6%. 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 - $5 million for China Zenix Auto International 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 207 million for China Zenix Auto International 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 Zenix Auto International ADR at the current share price and the inputted number of shares is $0.3 billion.

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Financial statements of ZX
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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