Intrinsic value of Highpower International - HPJ

Previous Close

$3.05

  Intrinsic Value

$21.97

stock screener

  Rating & Target

str. buy

+620%

Previous close

$3.05

 
Intrinsic value

$21.97

 
Up/down potential

+620%

 
Rating

str. buy

We calculate the intrinsic value of HPJ 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 2016), $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
   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, %
  18.90
  17.51
  16.26
  15.13
  14.12
  13.21
  12.39
  11.65
  10.98
  10.39
  9.85
  9.36
  8.93
  8.53
  8.18
  7.86
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.65
Revenue, $m
  207
  243
  283
  325
  371
  420
  472
  528
  585
  646
  710
  776
  846
  918
  993
  1,071
  1,152
  1,236
  1,324
  1,415
  1,510
  1,608
  1,711
  1,817
  1,928
  2,044
  2,164
  2,290
  2,421
  2,558
Variable operating expenses, $m
  184
  217
  252
  290
  331
  374
  421
  470
  521
  575
  632
  691
  752
  817
  883
  953
  1,025
  1,100
  1,178
  1,259
  1,343
  1,431
  1,522
  1,617
  1,716
  1,818
  1,926
  2,038
  2,154
  2,276
Fixed operating expenses, $m
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
Total operating expenses, $m
  199
  233
  268
  306
  348
  391
  438
  488
  539
  594
  651
  710
  772
  837
  904
  974
  1,047
  1,122
  1,201
  1,282
  1,367
  1,455
  1,547
  1,642
  1,742
  1,844
  1,953
  2,066
  2,182
  2,305
Operating income, $m
  7
  11
  15
  19
  24
  29
  34
  40
  46
  52
  59
  66
  73
  81
  89
  97
  105
  114
  123
  133
  143
  153
  164
  175
  187
  199
  212
  225
  239
  253
EBITDA, $m
  13
  18
  23
  29
  35
  41
  48
  55
  63
  71
  79
  88
  97
  107
  117
  127
  138
  149
  161
  173
  186
  199
  212
  227
  241
  257
  273
  290
  307
  326
Interest expense (income), $m
  1
  3
  4
  5
  7
  8
  10
  12
  14
  16
  18
  20
  23
  25
  28
  30
  33
  36
  39
  42
  45
  49
  52
  56
  59
  63
  67
  72
  76
  81
  86
Earnings before tax, $m
  4
  7
  9
  12
  15
  19
  22
  26
  30
  34
  39
  44
  48
  53
  58
  64
  69
  75
  81
  88
  94
  101
  108
  116
  123
  132
  140
  149
  158
  168
Tax expense, $m
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  11
  12
  13
  14
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  36
  38
  40
  43
  45
Net income, $m
  3
  5
  7
  9
  11
  14
  16
  19
  22
  25
  28
  32
  35
  39
  43
  47
  51
  55
  59
  64
  69
  74
  79
  84
  90
  96
  102
  109
  115
  122

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
  194
  228
  266
  306
  349
  395
  444
  496
  550
  607
  667
  730
  795
  863
  933
  1,007
  1,083
  1,162
  1,244
  1,330
  1,419
  1,511
  1,608
  1,708
  1,812
  1,921
  2,034
  2,152
  2,276
  2,404
Adjusted assets (=assets-cash), $m
  194
  228
  266
  306
  349
  395
  444
  496
  550
  607
  667
  730
  795
  863
  933
  1,007
  1,083
  1,162
  1,244
  1,330
  1,419
  1,511
  1,608
  1,708
  1,812
  1,921
  2,034
  2,152
  2,276
  2,404
Revenue / Adjusted assets
  1.067
  1.066
  1.064
  1.062
  1.063
  1.063
  1.063
  1.065
  1.064
  1.064
  1.064
  1.063
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
  1.064
Average production assets, $m
  59
  69
  80
  92
  105
  119
  134
  149
  166
  183
  201
  220
  239
  260
  281
  303
  326
  350
  375
  400
  427
  455
  484
  514
  546
  578
  613
  648
  685
  724
Working capital, $m
  -34
  -40
  -47
  -54
  -62
  -70
  -78
  -88
  -97
  -107
  -118
  -129
  -140
  -152
  -165
  -178
  -191
  -205
  -220
  -235
  -251
  -267
  -284
  -302
  -320
  -339
  -359
  -380
  -402
  -425
Total debt, $m
  76
  100
  127
  157
  188
  221
  257
  294
  334
  375
  419
  464
  511
  560
  611
  665
  720
  777
  837
  899
  964
  1,031
  1,100
  1,173
  1,249
  1,328
  1,410
  1,495
  1,585
  1,678
Total liabilities, $m
  141
  166
  193
  222
  253
  286
  322
  359
  399
  440
  484
  529
  576
  625
  677
  730
  785
  842
  902
  964
  1,029
  1,096
  1,166
  1,238
  1,314
  1,393
  1,475
  1,560
  1,650
  1,743
Total equity, $m
  53
  63
  73
  84
  96
  109
  122
  136
  151
  167
  183
  201
  219
  237
  257
  277
  298
  320
  342
  366
  390
  416
  442
  470
  498
  528
  559
  592
  626
  661
Total liabilities and equity, $m
  194
  229
  266
  306
  349
  395
  444
  495
  550
  607
  667
  730
  795
  862
  934
  1,007
  1,083
  1,162
  1,244
  1,330
  1,419
  1,512
  1,608
  1,708
  1,812
  1,921
  2,034
  2,152
  2,276
  2,404
Debt-to-equity ratio
  1.420
  1.600
  1.740
  1.860
  1.960
  2.040
  2.100
  2.160
  2.210
  2.250
  2.280
  2.310
  2.340
  2.360
  2.380
  2.400
  2.420
  2.430
  2.450
  2.460
  2.470
  2.480
  2.490
  2.500
  2.510
  2.510
  2.520
  2.530
  2.530
  2.540
Adjusted equity ratio
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  5
  7
  9
  11
  14
  16
  19
  22
  25
  28
  32
  35
  39
  43
  47
  51
  55
  59
  64
  69
  74
  79
  84
  90
  96
  102
  109
  115
  122
Depreciation, amort., depletion, $m
  6
  7
  8
  10
  11
  12
  14
  15
  17
  19
  20
  22
  24
  26
  28
  30
  33
  35
  37
  40
  43
  46
  48
  51
  55
  58
  61
  65
  69
  72
Funds from operations, $m
  9
  12
  15
  19
  22
  26
  30
  34
  39
  44
  49
  54
  59
  65
  71
  77
  83
  90
  97
  104
  112
  119
  127
  136
  145
  154
  163
  174
  184
  195
Change in working capital, $m
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
Cash from operations, $m
  15
  18
  22
  26
  30
  34
  39
  43
  49
  54
  59
  65
  71
  77
  83
  90
  97
  104
  111
  119
  127
  136
  144
  154
  163
  173
  184
  194
  206
  218
Maintenance CAPEX, $m
  -5
  -6
  -7
  -8
  -9
  -11
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -33
  -35
  -37
  -40
  -43
  -46
  -48
  -51
  -55
  -58
  -61
  -65
  -69
New CAPEX, $m
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
Cash from investing activities, $m
  -14
  -16
  -18
  -20
  -22
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -42
  -44
  -47
  -50
  -53
  -57
  -60
  -63
  -67
  -71
  -75
  -78
  -82
  -88
  -92
  -97
  -102
  -108
Free cash flow, $m
  1
  2
  4
  6
  8
  10
  12
  15
  17
  20
  23
  26
  29
  33
  36
  40
  44
  47
  52
  56
  60
  65
  70
  75
  80
  86
  92
  98
  104
  110
Issuance/(repayment) of debt, $m
  23
  25
  27
  29
  31
  33
  35
  38
  39
  41
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  89
  93
Issuance/(repurchase) of shares, $m
  5
  5
  3
  2
  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
Cash from financing (excl. dividends), $m  
  28
  30
  30
  31
  32
  33
  35
  38
  39
  41
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  89
  93
Total cash flow (excl. dividends), $m
  29
  31
  34
  37
  40
  43
  48
  52
  57
  61
  66
  71
  76
  82
  87
  93
  99
  105
  111
  118
  125
  132
  140
  148
  156
  165
  174
  183
  193
  204
Retained Cash Flow (-), $m
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -34
  -35
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
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
Cash available for distribution, $m
  20
  22
  24
  26
  28
  30
  34
  38
  42
  46
  50
  54
  58
  63
  68
  73
  78
  83
  89
  94
  100
  107
  113
  120
  127
  135
  143
  151
  159
  168
Discount rate, %
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
  19
  20
  21
  21
  21
  22
  22
  23
  23
  23
  22
  22
  21
  20
  18
  17
  15
  14
  12
  10
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  89.5
  82.6
  78.4
  76.3
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7

Highpower International, Inc., through its subsidiaries, is engaged in the manufacturing and marketing of nickel metal hydride rechargeable batteries (Ni-MH) and lithium batteries for both consumer and industrial applications. The Company operates through three segments: Lithium Batteries, Ni-MH Batteries and New Material. It has commenced over two production lines of Lithium-ion (Li-ion) and Lithium polymer rechargeable batteries for consumer applications, such as consumer electronic products, mobile devices and wireless communication products. It produces a line of batteries falling into two categories: Consumer Batteries, which are relative to ordinary nickel cadmium (Ni-Cad) rechargeable batteries, as well as their non-rechargeable counterparts, and Industrial Batteries, which are designed for electric bikes, power tools and electric toys. It produces A, AA and AAA sized batteries in blister packing, as well as chargers and battery packs.

FINANCIAL RATIOS  of  Highpower International (HPJ)

Valuation Ratios
P/E Ratio 7.7
Price to Sales 0.3
Price to Book 1
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow -15.4
Growth Rates
Sales Growth Rate 19.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -27.3%
Cap. Spend. - 3 Yr. Gr. Rate -16.7%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 117.8%
Interest Coverage 8
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 6.5%
Ret/ On T. Cap. - 3 Yr. Avg. 4.7%
Return On Equity 13.8%
Return On Equity - 3 Yr. Avg. 10.6%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 21.8%
Gross Margin - 3 Yr. Avg. 20.5%
EBITDA Margin 7.5%
EBITDA Margin - 3 Yr. Avg. 6.8%
Operating Margin 3.4%
Oper. Margin - 3 Yr. Avg. 2.5%
Pre-Tax Margin 4%
Pre-Tax Margin - 3 Yr. Avg. 2.9%
Net Profit Margin 3.4%
Net Profit Margin - 3 Yr. Avg. 2.7%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 13.1%
Payout Ratio 0%

HPJ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HPJ stock intrinsic value calculation we used $174 million for the last fiscal year's total revenue generated by Highpower International. The default revenue input number comes from 2016 income statement of Highpower International. 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 HPJ stock valuation model: a) initial revenue growth rate of 18.9% 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 4.6%, whose default value for HPJ is calculated based on our internal credit rating of Highpower International, 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 Highpower International.
    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 HPJ stock the variable cost ratio is equal to 89.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15 million in the base year in the intrinsic value calculation for HPJ 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 Highpower International.

Corporate tax rate of 27% is the nominal tax rate for Highpower International. 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 HPJ stock is equal to 0.2%.

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 HPJ are equal to 28.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Highpower International 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 HPJ is equal to -16.6%. 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 - $45 million for Highpower International - 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 15 million for Highpower International 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 Highpower International at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
ENR Energizer Hold 63.98 74.37  buy

COMPANY NEWS

▶ Highpower International, Inc. to Host Earnings Call   [Apr-02-18 07:00AM  ACCESSWIRE]
▶ /C O R R E C T I O N -- Highpower International, Inc./   [Mar-28-18 11:22AM  PR Newswire]
▶ Highpower International to Attend CES 2018   [Dec-28-17 08:30AM  PR Newswire]
▶ Highpower International, Inc. to Host Earnings Call   [Nov-14-17 06:50AM  ACCESSWIRE]
▶ Highpower International Adopts Stockholder Rights Plan   [Sep-13-17 08:30AM  PR Newswire]
▶ Highpower International Announces Management Changes   [Jun-15-17 05:04PM  PR Newswire]
▶ Highpower International Retains ICR, Inc.   [08:00AM  PR Newswire]
▶ 6 Stocks Trading Below Peter Lynch Value   [Apr-06-17 03:44PM  GuruFocus.com]
▶ Heres Why These 5 Stocks Are on the Move Today   [11:55AM  at Insider Monkey]
▶ These 4 Stocks Are Strong Gainers On Friday   [Nov-27  11:57AM  at Insider Monkey]
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.