Intrinsic value of China New Borun ADR - BORN

Previous Close

$1.01

  Intrinsic Value

$21.61

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  Rating & Target

str. buy

+999%

Previous close

$1.01

 
Intrinsic value

$21.61

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of BORN 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 0001), $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 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.15
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
Revenue, $m
  341
  359
  378
  399
  419
  441
  464
  489
  514
  540
  568
  597
  628
  660
  693
  729
  766
  804
  845
  888
  933
  980
  1,029
  1,081
  1,135
  1,192
  1,252
  1,315
  1,381
  1,450
Variable operating expenses, $m
  159
  167
  176
  185
  195
  205
  216
  227
  238
  250
  261
  275
  289
  304
  319
  335
  352
  370
  389
  408
  429
  451
  473
  497
  522
  548
  576
  605
  635
  667
Fixed operating expenses, $m
  151
  155
  158
  161
  165
  169
  172
  176
  180
  184
  188
  192
  196
  201
  205
  210
  214
  219
  224
  229
  234
  239
  244
  250
  255
  261
  266
  272
  278
  284
Total operating expenses, $m
  310
  322
  334
  346
  360
  374
  388
  403
  418
  434
  449
  467
  485
  505
  524
  545
  566
  589
  613
  637
  663
  690
  717
  747
  777
  809
  842
  877
  913
  951
Operating income, $m
  31
  38
  44
  52
  60
  68
  77
  86
  95
  106
  119
  130
  143
  156
  169
  184
  199
  215
  233
  251
  270
  290
  311
  334
  358
  383
  410
  438
  468
  499
EBITDA, $m
  50
  58
  65
  74
  83
  92
  102
  112
  123
  135
  147
  160
  174
  189
  204
  220
  238
  256
  275
  295
  317
  339
  363
  389
  415
  443
  473
  504
  537
  572
Interest expense (income), $m
  5
  9
  10
  10
  10
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
Earnings before tax, $m
  22
  28
  35
  42
  49
  57
  65
  74
  83
  93
  106
  117
  129
  141
  154
  168
  183
  199
  215
  233
  251
  271
  291
  313
  336
  360
  386
  413
  442
  472
Tax expense, $m
  6
  8
  9
  11
  13
  15
  18
  20
  23
  25
  29
  32
  35
  38
  42
  45
  49
  54
  58
  63
  68
  73
  79
  84
  91
  97
  104
  112
  119
  127
Net income, $m
  16
  20
  25
  30
  36
  42
  48
  54
  61
  68
  77
  85
  94
  103
  113
  123
  134
  145
  157
  170
  183
  198
  213
  228
  245
  263
  282
  302
  322
  344

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  418
  440
  464
  488
  514
  541
  569
  599
  630
  662
  696
  732
  769
  809
  850
  893
  938
  986
  1,036
  1,088
  1,143
  1,201
  1,261
  1,325
  1,391
  1,461
  1,535
  1,612
  1,693
  1,778
Adjusted assets (=assets-cash), $m
  418
  440
  464
  488
  514
  541
  569
  599
  630
  662
  696
  732
  769
  809
  850
  893
  938
  986
  1,036
  1,088
  1,143
  1,201
  1,261
  1,325
  1,391
  1,461
  1,535
  1,612
  1,693
  1,778
Revenue / Adjusted assets
  0.816
  0.816
  0.815
  0.818
  0.815
  0.815
  0.815
  0.816
  0.816
  0.816
  0.816
  0.816
  0.817
  0.816
  0.815
  0.816
  0.817
  0.815
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
  0.816
Average production assets, $m
  137
  145
  153
  161
  169
  178
  187
  197
  207
  218
  229
  241
  253
  266
  279
  294
  309
  324
  341
  358
  376
  395
  415
  436
  457
  480
  505
  530
  557
  585
Working capital, $m
  171
  180
  189
  199
  210
  221
  232
  244
  257
  270
  284
  299
  314
  330
  347
  364
  383
  402
  423
  444
  466
  490
  514
  540
  568
  596
  626
  658
  691
  725
Total debt, $m
  155
  160
  165
  170
  176
  182
  188
  195
  201
  209
  216
  224
  232
  241
  250
  260
  270
  280
  291
  303
  315
  328
  341
  355
  370
  385
  401
  418
  436
  455
Total liabilities, $m
  92
  97
  103
  108
  114
  120
  126
  132
  139
  146
  154
  162
  170
  179
  188
  197
  207
  218
  229
  240
  253
  265
  279
  293
  307
  323
  339
  356
  374
  393
Total equity, $m
  326
  343
  361
  380
  400
  421
  443
  466
  491
  516
  542
  570
  599
  630
  662
  696
  731
  768
  807
  848
  890
  935
  982
  1,032
  1,084
  1,138
  1,195
  1,255
  1,319
  1,385
Total liabilities and equity, $m
  418
  440
  464
  488
  514
  541
  569
  598
  630
  662
  696
  732
  769
  809
  850
  893
  938
  986
  1,036
  1,088
  1,143
  1,200
  1,261
  1,325
  1,391
  1,461
  1,534
  1,611
  1,693
  1,778
Debt-to-equity ratio
  0.470
  0.470
  0.460
  0.450
  0.440
  0.430
  0.420
  0.420
  0.410
  0.400
  0.400
  0.390
  0.390
  0.380
  0.380
  0.370
  0.370
  0.360
  0.360
  0.360
  0.350
  0.350
  0.350
  0.340
  0.340
  0.340
  0.340
  0.330
  0.330
  0.330
Adjusted equity ratio
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  20
  25
  30
  36
  42
  48
  54
  61
  68
  77
  85
  94
  103
  113
  123
  134
  145
  157
  170
  183
  198
  213
  228
  245
  263
  282
  302
  322
  344
Depreciation, amort., depletion, $m
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  70
  73
Funds from operations, $m
  35
  40
  46
  52
  59
  66
  73
  81
  89
  97
  106
  115
  126
  136
  148
  160
  172
  186
  200
  215
  230
  247
  264
  283
  302
  323
  345
  368
  392
  418
Change in working capital, $m
  9
  9
  10
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  31
  33
  35
Cash from operations, $m
  26
  31
  37
  42
  48
  55
  61
  69
  76
  84
  92
  101
  110
  120
  131
  142
  154
  166
  179
  193
  208
  223
  240
  257
  275
  295
  315
  336
  359
  383
Maintenance CAPEX, $m
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -70
New CAPEX, $m
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
Cash from investing activities, $m
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -41
  -42
  -45
  -47
  -49
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -93
  -98
Free cash flow, $m
  3
  7
  11
  15
  20
  25
  30
  35
  41
  47
  54
  61
  68
  76
  84
  93
  102
  112
  122
  133
  145
  157
  170
  184
  199
  214
  231
  248
  266
  285
Issuance/(repayment) of debt, $m
  4
  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
  18
  19
Issuance/(repurchase) of shares, $m
  1
  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  
  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
  18
  19
Total cash flow (excl. dividends), $m
  8
  12
  16
  21
  26
  31
  36
  42
  48
  55
  61
  68
  76
  84
  93
  102
  112
  122
  133
  145
  157
  170
  184
  198
  214
  230
  247
  265
  284
  304
Retained Cash Flow (-), $m
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
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
  -8
  -6
  -2
  2
  5
  10
  14
  19
  24
  29
  35
  41
  47
  54
  61
  69
  77
  85
  95
  104
  114
  125
  137
  149
  162
  175
  190
  205
  221
  238
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
  -8
  -5
  -2
  1
  4
  7
  10
  12
  14
  15
  16
  17
  18
  18
  18
  17
  17
  16
  15
  13
  12
  10
  9
  8
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7

China New Borun Corporation (New Borun) is a producer and distributor of corn-based edible alcohol in the People's Republic of China. The Company also produces Distillers Dried Grains with Solubles high-protein feed (DDGS Feed), liquid carbon dioxide and crude corn oil as by-products of edible alcohol production and chlorinated polyethylene (CPE) and foam insulation that are used in a range of industries. The Company's segments include Corn-base edible alcohol and its by-products, CPE and Foam insulation. The Company's edible alcohol products are primarily sold as an ingredient to producers of baijiu who further blend its products into finished products sold under various brand names throughout China. The Company's facilities are located in Shouguang, Shandong Province and the other in Daqing, Heilongjiang Province.

FINANCIAL RATIOS  of  China New Borun ADR (BORN)

Valuation Ratios
P/E Ratio 2.9
Price to Sales 0.1
Price to Book 0.1
Price to Tangible Book
Price to Cash Flow 1.1
Price to Free Cash Flow 1.2
Growth Rates
Sales Growth Rate -19.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate -48.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 15.6%
Total Debt to Equity 64.1%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 2.1%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 3.4%
Return On Equity - 3 Yr. Avg. 5.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 8.4%
Gross Margin - 3 Yr. Avg. 9.9%
EBITDA Margin 11.3%
EBITDA Margin - 3 Yr. Avg. 12.9%
Operating Margin 6.1%
Oper. Margin - 3 Yr. Avg. 7.8%
Pre-Tax Margin 3.9%
Pre-Tax Margin - 3 Yr. Avg. 4.9%
Net Profit Margin 2.9%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 25.2%
Payout Ratio 0%

BORN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BORN stock intrinsic value calculation we used $323.590081469 million for the last fiscal year's total revenue generated by China New Borun ADR. The default revenue input number comes from 0001 income statement of China New Borun 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 BORN stock valuation model: a) initial revenue growth rate of 5.4% 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 BORN is calculated based on our internal credit rating of China New Borun 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 New Borun 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 BORN stock the variable cost ratio is equal to 46.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $148 million in the base year in the intrinsic value calculation for BORN 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 6.2% for China New Borun ADR.

Corporate tax rate of 27% is the nominal tax rate for China New Borun 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 BORN 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 BORN are equal to 40.3%.

Life of production assets of 8 years is the average useful life of capital assets used in China New Borun 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 BORN 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 - $309.189587817 million for China New Borun 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 12.863 million for China New Borun 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 New Borun ADR at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Baijiu Regains Its Investment Palate   [Oct-11-16 01:30AM  Bloomberg]
▶ Baijiu Regains Its Investment Palate   [01:30AM  at Bloomberg]
▶ CHINA NEW BORUN CORP Financials   [01:04PM  EDGAR Online Financials]
▶ Klarifikasi atas Pemberitaan Media Massa   [Jan-12  05:53AM  at noodls]
▶ China New Borun (BORN) Downgraded From Buy to Hold   [Sep-23  08:57AM  at TheStreet]
▶ 3 Stocks Under $10 Making Big Moves   [Jul-02  08:29AM  at TheStreet]
▶ China New Borun Corp Stock Upgraded (BORN)   [May-26  11:21AM  at TheStreet]
▶ China New Borun falls 10.7%   [May-23  12:00PM  at theflyonthewall.com]
▶ China New Borun rises 6.9%   [09:00AM  at theflyonthewall.com]

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