Intrinsic value of Huaneng Power International ADR - HNP

Previous Close

$24.16

  Intrinsic Value

$4,181

stock screener

  Rating & Target

str. buy

+999%

Previous close

$24.16

 
Intrinsic value

$4,181

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of HNP 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 0.1

 

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, %
  40.80
  37.22
  34.00
  31.10
  28.49
  26.14
  24.03
  22.12
  20.41
  18.87
  17.48
  16.23
  15.11
  14.10
  13.19
  12.37
  11.63
  10.97
  10.37
  9.84
  9.35
  8.92
  8.53
  8.17
  7.86
  7.57
  7.31
  7.08
  6.87
  6.69
Revenue, $m
  32,153
  44,121
  59,121
  77,506
  99,586
  125,618
  155,798
  190,265
  229,100
  272,330
  319,941
  371,881
  428,076
  488,434
  552,858
  621,252
  693,527
  769,610
  849,445
  932,997
  1,020,255
  1,111,233
  1,205,971
  1,304,534
  1,407,013
  1,513,525
  1,624,211
  1,739,233
  1,858,781
  1,983,063
Variable operating expenses, $m
  26,713
  36,474
  48,708
  63,703
  81,712
  102,944
  127,559
  155,671
  187,345
  222,605
  260,948
  303,311
  349,145
  398,374
  450,919
  506,702
  565,650
  627,704
  692,819
  760,965
  832,133
  906,336
  983,606
  1,063,995
  1,147,579
  1,234,452
  1,324,728
  1,418,542
  1,516,047
  1,617,413
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
  26,713
  36,474
  48,708
  63,703
  81,712
  102,944
  127,559
  155,671
  187,345
  222,605
  260,948
  303,311
  349,145
  398,374
  450,919
  506,702
  565,650
  627,704
  692,819
  760,965
  832,133
  906,336
  983,606
  1,063,995
  1,147,579
  1,234,452
  1,324,728
  1,418,542
  1,516,047
  1,617,413
Operating income, $m
  5,440
  7,647
  10,413
  13,803
  17,874
  22,674
  28,239
  34,594
  41,755
  49,726
  58,993
  68,570
  78,931
  90,061
  101,940
  114,550
  127,877
  141,906
  156,626
  172,032
  188,121
  204,896
  222,365
  240,538
  259,434
  279,074
  299,483
  320,691
  342,734
  365,650
EBITDA, $m
  10,010
  13,736
  18,405
  24,129
  31,003
  39,107
  48,503
  59,234
  71,324
  84,782
  99,604
  115,774
  133,269
  152,060
  172,116
  193,409
  215,909
  239,596
  264,450
  290,461
  317,627
  345,950
  375,444
  406,129
  438,033
  471,192
  505,651
  541,460
  578,677
  617,369
Interest expense (income), $m
  1,063
  1,971
  3,000
  4,321
  5,977
  8,007
  10,445
  13,319
  16,651
  20,457
  24,744
  29,517
  34,774
  40,509
  46,713
  53,377
  60,490
  68,042
  76,022
  84,422
  93,236
  102,461
  112,095
  122,140
  132,600
  143,482
  154,797
  166,557
  178,778
  191,477
  204,677
Earnings before tax, $m
  3,469
  4,647
  6,092
  7,826
  9,867
  12,229
  14,920
  17,943
  21,298
  24,981
  29,475
  33,796
  38,423
  43,348
  48,562
  54,060
  59,835
  65,884
  72,204
  78,796
  85,660
  92,801
  100,225
  107,938
  115,952
  124,277
  132,925
  141,913
  151,257
  160,974
Tax expense, $m
  937
  1,255
  1,645
  2,113
  2,664
  3,302
  4,028
  4,845
  5,750
  6,745
  7,958
  9,125
  10,374
  11,704
  13,112
  14,596
  16,156
  17,789
  19,495
  21,275
  23,128
  25,056
  27,061
  29,143
  31,307
  33,555
  35,890
  38,317
  40,839
  43,463
Net income, $m
  2,532
  3,393
  4,447
  5,713
  7,203
  8,927
  10,891
  13,098
  15,547
  18,236
  21,517
  24,671
  28,049
  31,644
  35,450
  39,464
  43,680
  48,095
  52,709
  57,521
  62,532
  67,745
  73,164
  78,795
  84,645
  90,722
  97,036
  103,597
  110,417
  117,511

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
  84,391
  115,802
  155,172
  203,428
  261,381
  329,705
  408,919
  499,384
  601,312
  714,777
  839,740
  976,066
  1,123,560
  1,281,980
  1,451,072
  1,630,583
  1,820,282
  2,019,974
  2,229,514
  2,448,810
  2,677,834
  2,916,622
  3,165,278
  3,423,974
  3,692,949
  3,972,508
  4,263,020
  4,564,917
  4,878,690
  5,204,890
Adjusted assets (=assets-cash), $m
  84,391
  115,802
  155,172
  203,428
  261,381
  329,705
  408,919
  499,384
  601,312
  714,777
  839,740
  976,066
  1,123,560
  1,281,980
  1,451,072
  1,630,583
  1,820,282
  2,019,974
  2,229,514
  2,448,810
  2,677,834
  2,916,622
  3,165,278
  3,423,974
  3,692,949
  3,972,508
  4,263,020
  4,564,917
  4,878,690
  5,204,890
Revenue / Adjusted assets
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
Average production assets, $m
  55,914
  76,726
  102,811
  134,783
  173,181
  218,449
  270,933
  330,871
  398,405
  473,582
  556,377
  646,702
  744,425
  849,388
  961,421
  1,080,357
  1,206,044
  1,338,352
  1,477,185
  1,622,481
  1,774,223
  1,932,434
  2,097,183
  2,268,585
  2,446,796
  2,632,021
  2,824,502
  3,024,527
  3,232,420
  3,448,547
Working capital, $m
  -707
  -971
  -1,301
  -1,705
  -2,191
  -2,764
  -3,428
  -4,186
  -5,040
  -5,991
  -7,039
  -8,181
  -9,418
  -10,746
  -12,163
  -13,668
  -15,258
  -16,931
  -18,688
  -20,526
  -22,446
  -24,447
  -26,531
  -28,700
  -30,954
  -33,298
  -35,733
  -38,263
  -40,893
  -43,627
Total debt, $m
  55,548
  80,016
  110,686
  148,277
  193,423
  246,647
  308,354
  378,827
  458,229
  546,618
  643,964
  750,162
  865,060
  988,469
  1,120,192
  1,260,031
  1,407,806
  1,563,367
  1,726,598
  1,897,430
  2,075,839
  2,261,855
  2,455,558
  2,657,082
  2,866,614
  3,084,390
  3,310,699
  3,545,877
  3,790,306
  4,044,416
Total liabilities, $m
  65,741
  90,210
  120,879
  158,470
  203,616
  256,840
  318,548
  389,020
  468,422
  556,812
  654,157
  760,356
  875,253
  998,663
  1,130,385
  1,270,224
  1,417,999
  1,573,560
  1,736,792
  1,907,623
  2,086,033
  2,272,048
  2,465,751
  2,667,275
  2,876,807
  3,094,583
  3,320,892
  3,556,070
  3,800,499
  4,054,609
Total equity, $m
  18,650
  25,592
  34,293
  44,958
  57,765
  72,865
  90,371
  110,364
  132,890
  157,966
  185,582
  215,711
  248,307
  283,318
  320,687
  360,359
  402,282
  446,414
  492,723
  541,187
  591,801
  644,573
  699,526
  756,698
  816,142
  877,924
  942,127
  1,008,847
  1,078,190
  1,150,281
Total liabilities and equity, $m
  84,391
  115,802
  155,172
  203,428
  261,381
  329,705
  408,919
  499,384
  601,312
  714,778
  839,739
  976,067
  1,123,560
  1,281,981
  1,451,072
  1,630,583
  1,820,281
  2,019,974
  2,229,515
  2,448,810
  2,677,834
  2,916,621
  3,165,277
  3,423,973
  3,692,949
  3,972,507
  4,263,019
  4,564,917
  4,878,689
  5,204,890
Debt-to-equity ratio
  2.980
  3.130
  3.230
  3.300
  3.350
  3.380
  3.410
  3.430
  3.450
  3.460
  3.470
  3.480
  3.480
  3.490
  3.490
  3.500
  3.500
  3.500
  3.500
  3.510
  3.510
  3.510
  3.510
  3.510
  3.510
  3.510
  3.510
  3.510
  3.520
  3.520
Adjusted equity ratio
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,532
  3,393
  4,447
  5,713
  7,203
  8,927
  10,891
  13,098
  15,547
  18,236
  21,517
  24,671
  28,049
  31,644
  35,450
  39,464
  43,680
  48,095
  52,709
  57,521
  62,532
  67,745
  73,164
  78,795
  84,645
  90,722
  97,036
  103,597
  110,417
  117,511
Depreciation, amort., depletion, $m
  4,570
  6,089
  7,993
  10,327
  13,129
  16,434
  20,264
  24,640
  29,569
  35,056
  40,611
  47,204
  54,338
  61,999
  70,177
  78,858
  88,032
  97,690
  107,824
  118,429
  129,505
  141,054
  153,079
  165,590
  178,598
  192,118
  206,168
  220,768
  235,943
  251,719
Funds from operations, $m
  7,102
  9,481
  12,440
  16,039
  20,332
  25,361
  31,156
  37,738
  45,116
  53,293
  62,128
  71,875
  82,386
  93,643
  105,627
  118,322
  131,712
  145,785
  160,533
  175,950
  192,037
  208,798
  226,243
  244,385
  263,243
  282,840
  303,204
  324,365
  346,361
  369,229
Change in working capital, $m
  -205
  -263
  -330
  -404
  -486
  -573
  -664
  -758
  -854
  -951
  -1,047
  -1,143
  -1,236
  -1,328
  -1,417
  -1,505
  -1,590
  -1,674
  -1,756
  -1,838
  -1,920
  -2,002
  -2,084
  -2,168
  -2,255
  -2,343
  -2,435
  -2,530
  -2,630
  -2,734
Cash from operations, $m
  7,307
  9,745
  12,770
  16,444
  20,818
  25,933
  31,820
  38,496
  45,971
  54,244
  63,176
  73,018
  83,622
  94,971
  107,045
  119,827
  133,302
  147,459
  162,289
  177,788
  193,957
  210,800
  228,327
  246,553
  265,498
  285,183
  305,639
  326,896
  348,991
  371,964
Maintenance CAPEX, $m
  -2,898
  -4,081
  -5,600
  -7,504
  -9,838
  -12,641
  -15,945
  -19,776
  -24,151
  -29,081
  -34,568
  -40,611
  -47,204
  -54,338
  -61,999
  -70,177
  -78,858
  -88,032
  -97,690
  -107,824
  -118,429
  -129,505
  -141,054
  -153,079
  -165,590
  -178,598
  -192,118
  -206,168
  -220,768
  -235,943
New CAPEX, $m
  -16,207
  -20,811
  -26,085
  -31,972
  -38,397
  -45,269
  -52,484
  -59,939
  -67,533
  -75,178
  -82,795
  -90,325
  -97,723
  -104,963
  -112,033
  -118,936
  -125,687
  -132,308
  -138,832
  -145,297
  -151,742
  -158,211
  -164,749
  -171,401
  -178,212
  -185,224
  -192,481
  -200,024
  -207,893
  -216,127
Cash from investing activities, $m
  -19,105
  -24,892
  -31,685
  -39,476
  -48,235
  -57,910
  -68,429
  -79,715
  -91,684
  -104,259
  -117,363
  -130,936
  -144,927
  -159,301
  -174,032
  -189,113
  -204,545
  -220,340
  -236,522
  -253,121
  -270,171
  -287,716
  -305,803
  -324,480
  -343,802
  -363,822
  -384,599
  -406,192
  -428,661
  -452,070
Free cash flow, $m
  -11,798
  -15,148
  -18,916
  -23,033
  -27,418
  -31,976
  -36,609
  -41,219
  -45,714
  -50,014
  -54,187
  -57,918
  -61,305
  -64,330
  -66,988
  -69,286
  -71,243
  -72,881
  -74,233
  -75,332
  -76,214
  -76,916
  -77,476
  -77,927
  -78,304
  -78,639
  -78,961
  -79,297
  -79,671
  -80,106
Issuance/(repayment) of debt, $m
  19,044
  24,469
  30,669
  37,591
  45,146
  53,224
  61,707
  70,472
  79,402
  88,390
  97,346
  106,199
  114,897
  123,410
  131,723
  139,839
  147,775
  155,561
  163,231
  170,832
  178,409
  186,016
  193,703
  201,524
  209,532
  217,776
  226,309
  235,178
  244,429
  254,110
Issuance/(repurchase) of shares, $m
  2,871
  3,549
  4,254
  4,952
  5,605
  6,172
  6,615
  6,895
  6,979
  6,840
  6,100
  5,457
  4,547
  3,367
  1,919
  208
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  21,915
  28,018
  34,923
  42,543
  50,751
  59,396
  68,322
  77,367
  86,381
  95,230
  103,446
  111,656
  119,444
  126,777
  133,642
  140,047
  147,775
  155,561
  163,231
  170,832
  178,409
  186,016
  193,703
  201,524
  209,532
  217,776
  226,309
  235,178
  244,429
  254,110
Total cash flow (excl. dividends), $m
  10,117
  12,870
  16,008
  19,510
  23,333
  27,421
  31,713
  36,148
  40,667
  45,215
  49,258
  53,738
  58,140
  62,447
  66,653
  70,760
  76,533
  82,679
  88,998
  95,500
  102,195
  109,099
  116,227
  123,597
  131,227
  139,137
  147,348
  155,881
  164,758
  174,004
Retained Cash Flow (-), $m
  -5,404
  -6,942
  -8,701
  -10,665
  -12,808
  -15,100
  -17,506
  -19,993
  -22,526
  -25,076
  -27,617
  -30,128
  -32,596
  -35,011
  -37,369
  -39,672
  -41,923
  -44,132
  -46,308
  -48,464
  -50,614
  -52,772
  -54,953
  -57,172
  -59,443
  -61,783
  -64,203
  -66,719
  -69,344
  -72,090
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
  4,713
  5,928
  7,307
  8,846
  10,525
  12,321
  14,207
  16,156
  18,141
  20,139
  21,642
  23,610
  25,544
  27,436
  29,284
  31,089
  34,609
  38,547
  42,690
  47,035
  51,581
  56,327
  61,274
  66,425
  71,784
  77,355
  83,145
  89,162
  95,414
  101,913
Discount rate, %
  10.40
  10.92
  11.47
  12.04
  12.64
  13.27
  13.94
  14.63
  15.37
  16.13
  16.94
  17.79
  18.68
  19.61
  20.59
  21.62
  22.70
  23.84
  25.03
  26.28
  27.59
  28.97
  30.42
  31.94
  33.54
  35.22
  36.98
  38.83
  40.77
  42.81
PV of cash for distribution, $m
  4,269
  4,818
  5,276
  5,614
  5,804
  5,833
  5,700
  5,418
  5,012
  4,513
  3,870
  3,311
  2,758
  2,236
  1,766
  1,357
  1,068
  822
  613
  442
  309
  209
  136
  86
  52
  30
  17
  9
  5
  2
Current shareholders' claim on cash, %
  76.4
  60.0
  48.5
  40.2
  34.1
  29.6
  26.2
  23.6
  21.7
  20.2
  19.1
  18.4
  17.8
  17.5
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3
  17.3

HUANENG POWER INTERNATIONAL,INC. is a China-based company principally engaged in the development, construction, operation and management of power plants. The Company mainly operates through the generation and sale of electric power. The Company also provides supply of heat. The Company operates its business both in domestic market and to overseas market.

FINANCIAL RATIOS  of  Huaneng Power International ADR (HNP)

Valuation Ratios
P/E Ratio 297.8
Price to Sales 22.5
Price to Book 29.5
Price to Tangible Book
Price to Cash Flow 80.6
Price to Free Cash Flow 225
Growth Rates
Sales Growth Rate -11.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.8%
Cap. Spend. - 3 Yr. Gr. Rate 2.7%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 90.3%
Total Debt to Equity 204.1%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 5.1%
Return On Total Capital 3.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity 10%
Return On Equity - 3 Yr. Avg. 14.6%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 32%
EBITDA Margin - 3 Yr. Avg. 31%
Operating Margin 16.3%
Oper. Margin - 3 Yr. Avg. 19.8%
Pre-Tax Margin 12.3%
Pre-Tax Margin - 3 Yr. Avg. 15.2%
Net Profit Margin 7.6%
Net Profit Margin - 3 Yr. Avg. 9%
Effective Tax Rate 25.1%
Eff/ Tax Rate - 3 Yr. Avg. 26.2%
Payout Ratio 84.6%

HNP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HNP stock intrinsic value calculation we used $22836.0235792 million for the last fiscal year's total revenue generated by Huaneng Power International ADR. The default revenue input number comes from 0001 income statement of Huaneng Power 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 HNP stock valuation model: a) initial revenue growth rate of 40.8% 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 10.4%, whose default value for HNP is calculated based on our internal credit rating of Huaneng Power 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 Huaneng Power 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 HNP stock the variable cost ratio is equal to 83.7%.

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 HNP 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 Huaneng Power International ADR.

Corporate tax rate of 27% is the nominal tax rate for Huaneng Power 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 HNP 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 HNP are equal to 173.9%.

Life of production assets of 13.7 years is the average useful life of capital assets used in Huaneng Power 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 HNP is equal to -2.2%. 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 - $13246.9114268 million for Huaneng Power 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 5.473 million for Huaneng Power 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 Huaneng Power International ADR at the current share price and the inputted number of shares is $0.1 billion.

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