Intrinsic value of China Biologic Products - CBPO

Previous Close

$90.40

  Intrinsic Value

$64.42

stock screener

  Rating & Target

sell

-29%

Previous close

$90.40

 
Intrinsic value

$64.42

 
Up/down potential

-29%

 
Rating

sell

We calculate the intrinsic value of CBPO 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 2.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
Revenue, $m
  402
  435
  469
  505
  542
  581
  621
  663
  706
  751
  798
  847
  898
  952
  1,007
  1,065
  1,125
  1,188
  1,254
  1,323
  1,395
  1,470
  1,549
  1,631
  1,717
  1,808
  1,902
  2,001
  2,105
  2,214
Variable operating expenses, $m
  232
  251
  271
  291
  312
  334
  357
  381
  406
  432
  456
  484
  513
  544
  575
  608
  643
  679
  716
  756
  797
  840
  885
  932
  981
  1,033
  1,087
  1,143
  1,202
  1,265
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
  232
  251
  271
  291
  312
  334
  357
  381
  406
  432
  456
  484
  513
  544
  575
  608
  643
  679
  716
  756
  797
  840
  885
  932
  981
  1,033
  1,087
  1,143
  1,202
  1,265
Operating income, $m
  170
  184
  199
  214
  230
  247
  264
  282
  300
  320
  342
  363
  385
  408
  432
  457
  482
  509
  538
  567
  598
  630
  664
  699
  736
  775
  816
  858
  903
  949
EBITDA, $m
  191
  207
  223
  240
  258
  276
  295
  315
  336
  357
  380
  403
  427
  453
  479
  506
  535
  565
  596
  629
  663
  699
  737
  776
  817
  860
  905
  952
  1,001
  1,053
Interest expense (income), $m
  0
  0
  1
  1
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  37
Earnings before tax, $m
  170
  183
  197
  212
  227
  243
  259
  276
  294
  313
  334
  354
  375
  397
  420
  443
  468
  494
  520
  549
  578
  609
  641
  674
  710
  747
  785
  826
  868
  913
Tax expense, $m
  46
  50
  53
  57
  61
  66
  70
  75
  79
  84
  90
  96
  101
  107
  113
  120
  126
  133
  141
  148
  156
  164
  173
  182
  192
  202
  212
  223
  234
  246
Net income, $m
  124
  134
  144
  155
  166
  177
  189
  202
  215
  228
  244
  259
  274
  290
  306
  323
  341
  360
  380
  400
  422
  444
  468
  492
  518
  545
  573
  603
  634
  666

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
  671
  726
  784
  843
  905
  970
  1,037
  1,107
  1,179
  1,255
  1,333
  1,415
  1,500
  1,589
  1,681
  1,778
  1,878
  1,984
  2,093
  2,208
  2,328
  2,454
  2,585
  2,723
  2,867
  3,018
  3,175
  3,341
  3,514
  3,696
Adjusted assets (=assets-cash), $m
  671
  726
  784
  843
  905
  970
  1,037
  1,107
  1,179
  1,255
  1,333
  1,415
  1,500
  1,589
  1,681
  1,778
  1,878
  1,984
  2,093
  2,208
  2,328
  2,454
  2,585
  2,723
  2,867
  3,018
  3,175
  3,341
  3,514
  3,696
Revenue / Adjusted assets
  0.599
  0.599
  0.598
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.598
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
Average production assets, $m
  188
  204
  220
  237
  254
  272
  291
  311
  331
  352
  374
  397
  421
  446
  472
  499
  528
  557
  588
  620
  654
  689
  726
  765
  805
  848
  892
  939
  987
  1,038
Working capital, $m
  137
  148
  160
  172
  185
  198
  212
  226
  241
  256
  272
  289
  306
  324
  343
  363
  384
  405
  428
  451
  476
  501
  528
  556
  586
  616
  649
  682
  718
  755
Total debt, $m
  12
  25
  38
  52
  67
  82
  98
  114
  131
  149
  167
  186
  206
  227
  248
  271
  294
  319
  345
  372
  400
  429
  460
  492
  526
  561
  598
  637
  677
  720
Total liabilities, $m
  157
  170
  183
  197
  212
  227
  243
  259
  276
  294
  312
  331
  351
  372
  393
  416
  440
  464
  490
  517
  545
  574
  605
  637
  671
  706
  743
  782
  822
  865
Total equity, $m
  514
  556
  600
  646
  694
  743
  794
  848
  903
  961
  1,021
  1,084
  1,149
  1,217
  1,288
  1,362
  1,439
  1,519
  1,604
  1,692
  1,784
  1,880
  1,980
  2,086
  2,196
  2,311
  2,432
  2,559
  2,692
  2,831
Total liabilities and equity, $m
  671
  726
  783
  843
  906
  970
  1,037
  1,107
  1,179
  1,255
  1,333
  1,415
  1,500
  1,589
  1,681
  1,778
  1,879
  1,983
  2,094
  2,209
  2,329
  2,454
  2,585
  2,723
  2,867
  3,017
  3,175
  3,341
  3,514
  3,696
Debt-to-equity ratio
  0.020
  0.040
  0.060
  0.080
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
Adjusted equity ratio
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  124
  134
  144
  155
  166
  177
  189
  202
  215
  228
  244
  259
  274
  290
  306
  323
  341
  360
  380
  400
  422
  444
  468
  492
  518
  545
  573
  603
  634
  666
Depreciation, amort., depletion, $m
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  37
  40
  42
  45
  47
  50
  53
  56
  59
  62
  65
  69
  73
  76
  81
  85
  89
  94
  99
  104
Funds from operations, $m
  145
  157
  169
  181
  194
  207
  221
  235
  250
  266
  282
  298
  316
  334
  353
  373
  394
  416
  439
  462
  487
  513
  540
  569
  599
  630
  662
  697
  732
  770
Change in working capital, $m
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  21
  22
  23
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
Cash from operations, $m
  134
  145
  157
  169
  181
  194
  207
  221
  236
  251
  265
  282
  299
  316
  335
  354
  374
  395
  416
  439
  463
  488
  514
  541
  569
  599
  630
  663
  697
  733
Maintenance CAPEX, $m
  -17
  -19
  -20
  -22
  -24
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -73
  -76
  -81
  -85
  -89
  -94
  -99
New CAPEX, $m
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -49
  -51
Cash from investing activities, $m
  -32
  -35
  -36
  -39
  -41
  -43
  -46
  -49
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -74
  -78
  -83
  -87
  -91
  -96
  -100
  -106
  -112
  -116
  -123
  -129
  -135
  -143
  -150
Free cash flow, $m
  102
  111
  120
  130
  140
  150
  161
  172
  184
  196
  208
  221
  235
  249
  264
  279
  295
  312
  330
  348
  367
  387
  408
  430
  452
  476
  501
  527
  555
  583
Issuance/(repayment) of debt, $m
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
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
Cash from financing (excl. dividends), $m  
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
Total cash flow (excl. dividends), $m
  114
  124
  134
  144
  155
  165
  177
  189
  201
  214
  227
  240
  255
  270
  286
  302
  319
  337
  355
  375
  395
  416
  438
  462
  486
  511
  538
  566
  595
  626
Retained Cash Flow (-), $m
  -40
  -42
  -44
  -46
  -48
  -49
  -51
  -53
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -101
  -105
  -110
  -115
  -121
  -127
  -133
  -139
Prev. year cash balance distribution, $m
  191
  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
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  73
  78
  83
  88
  93
  98
  104
  109
  115
  122
  128
  135
  142
  150
  158
  166
  175
  184
  194
Cash available for distribution, $m
  264
  82
  90
  98
  107
  116
  126
  135
  146
  156
  166
  178
  190
  202
  215
  228
  242
  256
  271
  287
  303
  320
  338
  356
  376
  396
  417
  439
  462
  487
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
  253
  75
  78
  81
  83
  84
  85
  85
  84
  82
  79
  76
  72
  68
  63
  58
  53
  47
  42
  36
  31
  27
  22
  18
  15
  12
  9
  7
  5
  4
Current shareholders' claim on cash, %
  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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China Biologic Products, Inc. engages in the research, development, manufacture, and sale of human plasma-based biopharmaceutical products to hospitals and inoculation centers in the People’s Republic of China. It offers human albumin for treating shock caused by blood loss trauma or burn; raised intracranial pressure caused by hydrocephalus or trauma; oedema or ascites caused by hepatocirrhosis and nephropathy; and neonatal hyperbilirubinemia, as well as for the prevention and treatment of low-density-lipoproteinemia. The company also provides human immunoglobulin and immunoglobulin for intravenous injection products for original and secondary immunoglobulin deficiency, and auto-immune deficiency diseases; human hepatitis B immunoglobulin for the prevention of measles and contagious hepatitis; human rabies immunoglobulin primarily for passive immunity from bites or claws by rabies or other infected animals; and human tetanus immunoglobulin for the prevention and therapy of tetanus. In addition, it offers placenta polypeptide for the treatment of cell immunity deficiency diseases, viral infection, and leucopenia, as well as assists in postoperative healing; factor VIII for treating coagulopathies; and human prothrombin complex concentrate for treating congenital and acquired clotting factor II, VII, IX, X deficiency, as well as excessive anticoagulant, vitamin K deficiency, etc. Further, the company is developing human hepatitis B immunoglobulin (pH4) for intravenous injection; human fibrinogen; immune globulin intravenous; human antithrombin III; human cytomegalovirus immunoglobulin; human coagulation factor IX; and human fibrin sealant products. The company sells its products directly, as well as through distributors. China Biologic Products, Inc. is headquartered in Beijing, the People’s Republic of China.

FINANCIAL RATIOS  of  China Biologic Products (CBPO)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CBPO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CBPO stock intrinsic value calculation we used $370 million for the last fiscal year's total revenue generated by China Biologic Products. The default revenue input number comes from 2017 income statement of China Biologic Products. 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 CBPO stock valuation model: a) initial revenue growth rate of 8.6% 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 CBPO is calculated based on our internal credit rating of China Biologic Products, 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 Biologic Products.
    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 CBPO stock the variable cost ratio is equal to 57.8%.

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 CBPO 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 Biologic Products.

Corporate tax rate of 27% is the nominal tax rate for China Biologic Products. 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 CBPO stock is equal to 9.2%.

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 CBPO are equal to 46.9%.

Life of production assets of 10 years is the average useful life of capital assets used in China Biologic Products 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 CBPO is equal to 34.1%. 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 - $664 million for China Biologic Products - 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 27 million for China Biologic Products 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 Biologic Products at the current share price and the inputted number of shares is $2.4 billion.

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COMPANY NEWS

▶ China Biologic Names Bing Li as New CEO   [Aug-13-18 08:00AM  PR Newswire]
▶ China Biologic Products: 2Q Earnings Snapshot   [Aug-03-18 04:40PM  Associated Press]
▶ Stocks Slide; Intel Downgraded; JD.com Spikes On Google Deal   [09:42AM  Investor's Business Daily]
▶ China Biologic Products: 1Q Earnings Snapshot   [May-04-18 04:37PM  Associated Press]
▶ China Biologic Announces Corporate Update   [08:00AM  PR Newswire]
▶ China Biologic Products posts 3Q profit   [Nov-02-17 05:47AM  Associated Press]
▶ China Biologic Agrees to Acquire TianXinFu from PWM   [Oct-12-17 08:30AM  PR Newswire]
▶ China Biologic Products posts 2Q profit   [Aug-04-17 02:36AM  Associated Press]
▶ This Chinese Pharma Stock Has 20% Upside   [May-04-17 10:29PM  Barrons.com]
▶ China Biologic Products posts 1Q profit   [05:02AM  Associated Press]
▶ China Biologic Products posts 4Q profit   [Feb-23-17 07:53PM  Associated Press]
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