Intrinsic value of Amira Nature Foods - ANFI

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$4.26

  Intrinsic Value

$4.24

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  Rating & Target

hold

-0%

Previous close

$4.26

 
Intrinsic value

$4.24

 
Up/down potential

-0%

 
Rating

hold

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

We calculate the intrinsic value of ANFI 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 2017), $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 0.2

 

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, %
  -1.95
  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
  552
  563
  576
  591
  607
  626
  646
  668
  692
  718
  745
  775
  806
  839
  875
  913
  953
  995
  1,040
  1,087
  1,137
  1,190
  1,245
  1,304
  1,366
  1,431
  1,499
  1,571
  1,647
  1,727
  1,811
Variable operating expenses, $m
 
  501
  512
  525
  540
  556
  574
  594
  615
  638
  662
  688
  716
  746
  778
  811
  847
  884
  924
  966
  1,011
  1,058
  1,107
  1,159
  1,214
  1,272
  1,332
  1,397
  1,464
  1,535
  1,609
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
  485
  501
  512
  525
  540
  556
  574
  594
  615
  638
  662
  688
  716
  746
  778
  811
  847
  884
  924
  966
  1,011
  1,058
  1,107
  1,159
  1,214
  1,272
  1,332
  1,397
  1,464
  1,535
  1,609
Operating income, $m
  67
  62
  64
  66
  67
  69
  72
  74
  77
  80
  83
  86
  90
  93
  97
  101
  106
  111
  116
  121
  126
  132
  138
  145
  152
  159
  167
  175
  183
  192
  201
EBITDA, $m
  67
  65
  66
  68
  70
  72
  74
  77
  79
  82
  86
  89
  93
  96
  101
  105
  109
  114
  119
  125
  131
  137
  143
  150
  157
  164
  172
  181
  189
  198
  208
Interest expense (income), $m
  28
  27
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  64
  67
  71
  75
  79
  83
  87
  92
  97
  102
  108
Earnings before tax, $m
  36
  36
  36
  37
  38
  39
  40
  41
  42
  43
  45
  46
  48
  49
  51
  52
  54
  56
  58
  60
  63
  65
  68
  70
  73
  76
  79
  83
  86
  90
  93
Tax expense, $m
  4
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
Net income, $m
  25
  26
  27
  27
  28
  28
  29
  30
  31
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
  49
  51
  53
  56
  58
  60
  63
  65
  68

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17
  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
  575
  569
  582
  597
  614
  633
  653
  675
  700
  725
  753
  783
  815
  849
  885
  923
  963
  1,006
  1,051
  1,099
  1,150
  1,203
  1,259
  1,318
  1,381
  1,447
  1,516
  1,589
  1,665
  1,746
  1,831
Adjusted assets (=assets-cash), $m
  558
  569
  582
  597
  614
  633
  653
  675
  700
  725
  753
  783
  815
  849
  885
  923
  963
  1,006
  1,051
  1,099
  1,150
  1,203
  1,259
  1,318
  1,381
  1,447
  1,516
  1,589
  1,665
  1,746
  1,831
Revenue / Adjusted assets
  0.989
  0.989
  0.990
  0.990
  0.989
  0.989
  0.989
  0.990
  0.989
  0.990
  0.989
  0.990
  0.989
  0.988
  0.989
  0.989
  0.990
  0.989
  0.990
  0.989
  0.989
  0.989
  0.989
  0.989
  0.989
  0.989
  0.989
  0.989
  0.989
  0.989
  0.989
Average production assets, $m
  21
  21
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
Working capital, $m
  286
  282
  288
  295
  304
  313
  323
  334
  346
  359
  373
  387
  403
  420
  437
  456
  476
  498
  520
  544
  569
  595
  623
  652
  683
  715
  750
  786
  824
  863
  905
Total debt, $m
  224
  213
  220
  228
  237
  246
  257
  269
  282
  296
  310
  326
  343
  361
  380
  400
  422
  444
  468
  494
  520
  549
  578
  610
  643
  678
  714
  753
  794
  836
  881
Total liabilities, $m
  312
  302
  309
  317
  326
  335
  346
  358
  371
  385
  399
  415
  432
  450
  469
  489
  511
  533
  557
  583
  609
  638
  667
  699
  732
  767
  803
  842
  883
  925
  970
Total equity, $m
  262
  268
  274
  281
  289
  297
  307
  317
  329
  341
  354
  368
  383
  399
  416
  434
  453
  473
  494
  517
  540
  565
  592
  620
  649
  680
  712
  747
  783
  821
  861
Total liabilities and equity, $m
  574
  570
  583
  598
  615
  632
  653
  675
  700
  726
  753
  783
  815
  849
  885
  923
  964
  1,006
  1,051
  1,100
  1,149
  1,203
  1,259
  1,319
  1,381
  1,447
  1,515
  1,589
  1,666
  1,746
  1,831
Debt-to-equity ratio
  0.855
  0.800
  0.800
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.960
  0.970
  0.980
  0.980
  0.990
  1.000
  1.000
  1.010
  1.010
  1.020
  1.020
Adjusted equity ratio
  0.439
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  26
  27
  27
  28
  28
  29
  30
  31
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
  49
  51
  53
  56
  58
  60
  63
  65
  68
Depreciation, amort., depletion, $m
  0
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
Funds from operations, $m
  -68
  28
  29
  29
  30
  31
  32
  32
  33
  34
  35
  37
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
Change in working capital, $m
  -74
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
Cash from operations, $m
  6
  23
  22
  22
  22
  22
  22
  21
  21
  22
  22
  22
  22
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
  30
  31
  32
  33
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
New CAPEX, $m
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
Cash from investing activities, $m
  3
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -9
  -9
  -9
  -9
Free cash flow, $m
  9
  20
  20
  19
  19
  19
  18
  18
  18
  18
  18
  18
  18
  18
  18
  18
  18
  18
  19
  19
  19
  19
  20
  20
  20
  21
  21
  22
  22
  23
  23
Issuance/(repayment) of debt, $m
  9
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
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  
  -19
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
Total cash flow (excl. dividends), $m
  -1
  26
  27
  27
  28
  29
  29
  30
  31
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  66
  68
Retained Cash Flow (-), $m
  -46
  -6
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -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
 
  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
 
  21
  21
  20
  20
  20
  20
  20
  20
  20
  20
  20
  20
  20
  20
  20
  21
  21
  21
  22
  22
  23
  23
  24
  24
  25
  26
  26
  27
  28
  29
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  19
  18
  17
  15
  14
  13
  11
  10
  9
  8
  7
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
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
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  100.0
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  100.0

Amira Nature Foods Ltd is primarily engaged in the business of processing and selling packaged Indian specialty rice, primarily basmati rice and other food products. The Company sells Basmati rice and other specialty rice, under its Amira brand, as well as under other third-party brands. It also sells non-basmati rice. It has developed a line of Amira branded products to complement its packaged rice offerings, including edible oil, snacks, ready-to-heat meals and a line of organic product offerings. It is engaged in the institutional sale of bulk commodities to international and regional trading firms, which includes wheat, barley, legume, maize, sugar, soybean meal, onion, potato, millet and others. Its Amira branded product line includes Amira Pure Basmati Rice, Amira Indian Basmati Rice, Smoked Basmati Rice, Amira Khichdi Rice, Amira Navratan Mix and others. The Company's third-party branded rice products include Euricom Brown Basmati Rice, Bonne Chance Long Grain Rice and others.

FINANCIAL RATIOS  of  Amira Nature Foods (ANFI)

Valuation Ratios
P/E Ratio 5.4
Price to Sales 0.2
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 22.4
Price to Free Cash Flow 22.4
Growth Rates
Sales Growth Rate -2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 85.5%
Interest Coverage 2
Management Effectiveness
Return On Assets 9.3%
Ret/ On Assets - 3 Yr. Avg. 11.5%
Return On Total Capital 5.5%
Ret/ On T. Cap. - 3 Yr. Avg. 7.7%
Return On Equity 10.5%
Return On Equity - 3 Yr. Avg. 15.8%
Asset Turnover 1
Profitability Ratios
Gross Margin 106.3%
Gross Margin - 3 Yr. Avg. 103.8%
EBITDA Margin 11.6%
EBITDA Margin - 3 Yr. Avg. 12.3%
Operating Margin 12.1%
Oper. Margin - 3 Yr. Avg. 12%
Pre-Tax Margin 6.5%
Pre-Tax Margin - 3 Yr. Avg. 7.4%
Net Profit Margin 4.5%
Net Profit Margin - 3 Yr. Avg. 5%
Effective Tax Rate 11.1%
Eff/ Tax Rate - 3 Yr. Avg. 12.9%
Payout Ratio 0%

ANFI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ANFI stock intrinsic value calculation we used $552 million for the last fiscal year's total revenue generated by Amira Nature Foods. The default revenue input number comes from 2017 income statement of Amira Nature Foods. 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 ANFI 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 6.1%, whose default value for ANFI is calculated based on our internal credit rating of Amira Nature Foods, 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 Amira Nature Foods.
    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 ANFI stock the variable cost ratio is equal to 88.9%.

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 ANFI 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 12.9% for Amira Nature Foods.

Corporate tax rate of 27% is the nominal tax rate for Amira Nature Foods. 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 ANFI 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 ANFI are equal to 3.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Amira Nature Foods 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 ANFI 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 - $262 million for Amira Nature Foods - 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 41.19 million for Amira Nature Foods 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 Amira Nature Foods at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

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Financial statements of ANFI
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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