Intrinsic value of Highpower International - HPJ

Previous Close

$2.70

  Intrinsic Value

$22.97

stock screener

  Rating & Target

str. buy

+751%

Previous close

$2.70

 
Intrinsic value

$22.97

 
Up/down potential

+751%

 
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 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, %
  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
  290
  341
  397
  457
  521
  590
  663
  740
  822
  907
  996
  1,089
  1,187
  1,288
  1,393
  1,503
  1,617
  1,735
  1,858
  1,986
  2,119
  2,257
  2,400
  2,550
  2,706
  2,868
  3,037
  3,214
  3,398
  3,590
Variable operating expenses, $m
  245
  288
  335
  385
  440
  498
  559
  624
  693
  765
  840
  918
  1,000
  1,086
  1,174
  1,267
  1,363
  1,462
  1,566
  1,674
  1,786
  1,902
  2,023
  2,149
  2,281
  2,418
  2,560
  2,709
  2,864
  3,026
Fixed operating expenses, $m
  26
  26
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  35
  35
  36
  37
  38
  39
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
Total operating expenses, $m
  271
  314
  362
  412
  468
  526
  588
  654
  723
  796
  872
  950
  1,033
  1,120
  1,209
  1,302
  1,399
  1,499
  1,604
  1,713
  1,825
  1,942
  2,064
  2,191
  2,324
  2,462
  2,605
  2,755
  2,911
  3,074
Operating income, $m
  20
  27
  35
  44
  54
  64
  75
  86
  98
  111
  125
  139
  153
  168
  184
  201
  218
  236
  254
  273
  293
  314
  336
  358
  382
  406
  432
  459
  487
  516
EBITDA, $m
  26
  35
  44
  54
  65
  77
  89
  102
  116
  130
  146
  162
  178
  195
  213
  232
  252
  272
  293
  315
  338
  361
  386
  412
  439
  467
  496
  526
  558
  591
Interest expense (income), $m
  1
  4
  6
  7
  9
  11
  13
  16
  18
  21
  24
  27
  30
  33
  36
  39
  43
  47
  51
  55
  59
  63
  68
  72
  77
  82
  87
  93
  99
  105
  111
Earnings before tax, $m
  16
  22
  28
  35
  42
  50
  59
  68
  77
  87
  98
  109
  121
  132
  145
  158
  171
  185
  199
  215
  230
  247
  264
  281
  300
  319
  339
  360
  382
  405
Tax expense, $m
  4
  6
  8
  9
  11
  14
  16
  18
  21
  24
  27
  29
  33
  36
  39
  43
  46
  50
  54
  58
  62
  67
  71
  76
  81
  86
  92
  97
  103
  109
Net income, $m
  11
  16
  20
  26
  31
  37
  43
  50
  57
  64
  72
  80
  88
  97
  106
  115
  125
  135
  146
  157
  168
  180
  192
  205
  219
  233
  248
  263
  279
  296

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
  262
  308
  358
  412
  470
  532
  598
  668
  741
  818
  899
  983
  1,071
  1,162
  1,257
  1,356
  1,459
  1,566
  1,677
  1,792
  1,912
  2,037
  2,166
  2,301
  2,442
  2,589
  2,741
  2,900
  3,067
  3,240
Adjusted assets (=assets-cash), $m
  262
  308
  358
  412
  470
  532
  598
  668
  741
  818
  899
  983
  1,071
  1,162
  1,257
  1,356
  1,459
  1,566
  1,677
  1,792
  1,912
  2,037
  2,166
  2,301
  2,442
  2,589
  2,741
  2,900
  3,067
  3,240
Revenue / Adjusted assets
  1.107
  1.107
  1.109
  1.109
  1.109
  1.109
  1.109
  1.108
  1.109
  1.109
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
  1.108
Average production assets, $m
  55
  65
  76
  87
  100
  113
  127
  141
  157
  173
  190
  208
  227
  246
  266
  287
  309
  331
  355
  379
  405
  431
  458
  487
  517
  548
  580
  614
  649
  686
Working capital, $m
  43
  51
  59
  68
  78
  88
  99
  110
  122
  135
  148
  162
  177
  192
  208
  224
  241
  259
  277
  296
  316
  336
  358
  380
  403
  427
  453
  479
  506
  535
Total debt, $m
  105
  137
  171
  209
  250
  293
  339
  387
  438
  492
  548
  606
  667
  731
  797
  865
  937
  1,011
  1,088
  1,168
  1,252
  1,338
  1,428
  1,522
  1,620
  1,722
  1,828
  1,938
  2,054
  2,174
Total liabilities, $m
  182
  214
  249
  286
  327
  370
  416
  464
  515
  569
  625
  683
  744
  808
  874
  943
  1,014
  1,088
  1,165
  1,246
  1,329
  1,416
  1,506
  1,600
  1,697
  1,799
  1,905
  2,016
  2,131
  2,252
Total equity, $m
  80
  94
  109
  126
  143
  162
  183
  204
  226
  250
  274
  300
  327
  355
  384
  414
  445
  478
  511
  547
  583
  621
  661
  702
  745
  789
  836
  885
  935
  988
Total liabilities and equity, $m
  262
  308
  358
  412
  470
  532
  599
  668
  741
  819
  899
  983
  1,071
  1,163
  1,258
  1,357
  1,459
  1,566
  1,676
  1,793
  1,912
  2,037
  2,167
  2,302
  2,442
  2,588
  2,741
  2,901
  3,066
  3,240
Debt-to-equity ratio
  1.310
  1.460
  1.570
  1.660
  1.740
  1.800
  1.860
  1.900
  1.940
  1.970
  2.000
  2.020
  2.040
  2.060
  2.080
  2.090
  2.100
  2.120
  2.130
  2.140
  2.150
  2.150
  2.160
  2.170
  2.170
  2.180
  2.190
  2.190
  2.200
  2.200
Adjusted equity ratio
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  16
  20
  26
  31
  37
  43
  50
  57
  64
  72
  80
  88
  97
  106
  115
  125
  135
  146
  157
  168
  180
  192
  205
  219
  233
  248
  263
  279
  296
Depreciation, amort., depletion, $m
  6
  7
  9
  10
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  29
  32
  34
  36
  39
  42
  44
  47
  50
  54
  57
  60
  64
  67
  71
  75
Funds from operations, $m
  18
  23
  29
  35
  42
  49
  57
  65
  74
  83
  93
  103
  113
  124
  135
  147
  159
  171
  185
  198
  213
  227
  243
  259
  276
  293
  311
  330
  350
  371
Change in working capital, $m
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
Cash from operations, $m
  11
  16
  21
  26
  33
  39
  46
  54
  62
  70
  79
  89
  98
  109
  119
  130
  142
  154
  166
  179
  193
  207
  221
  237
  252
  269
  286
  304
  323
  342
Maintenance CAPEX, $m
  -5
  -6
  -7
  -8
  -10
  -11
  -12
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -42
  -44
  -47
  -50
  -54
  -57
  -60
  -64
  -67
  -71
New CAPEX, $m
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
Cash from investing activities, $m
  -14
  -16
  -18
  -19
  -22
  -24
  -26
  -29
  -32
  -33
  -36
  -39
  -42
  -44
  -47
  -50
  -54
  -57
  -59
  -63
  -67
  -70
  -74
  -79
  -84
  -88
  -92
  -98
  -102
  -108
Free cash flow, $m
  -3
  0
  3
  7
  11
  15
  20
  25
  31
  37
  43
  50
  57
  64
  72
  80
  89
  97
  106
  116
  126
  136
  147
  158
  169
  181
  194
  207
  220
  234
Issuance/(repayment) of debt, $m
  29
  32
  35
  38
  40
  43
  46
  48
  51
  54
  56
  58
  61
  64
  66
  69
  71
  74
  77
  80
  83
  87
  90
  94
  98
  102
  106
  111
  115
  121
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  
  30
  32
  35
  38
  40
  43
  46
  48
  51
  54
  56
  58
  61
  64
  66
  69
  71
  74
  77
  80
  83
  87
  90
  94
  98
  102
  106
  111
  115
  121
Total cash flow (excl. dividends), $m
  27
  32
  38
  44
  51
  58
  66
  74
  82
  90
  99
  108
  118
  128
  138
  149
  160
  171
  183
  196
  209
  223
  237
  251
  267
  283
  300
  317
  336
  355
Retained Cash Flow (-), $m
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
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
  15
  18
  23
  28
  33
  39
  46
  52
  60
  67
  75
  83
  91
  100
  109
  119
  129
  139
  150
  161
  172
  185
  197
  210
  224
  238
  253
  269
  285
  302
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  14
  15
  18
  20
  22
  23
  24
  24
  24
  24
  22
  21
  19
  17
  15
  13
  11
  9
  7
  6
  5
  3
  3
  2
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4
  97.4

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 6.8
Price to Sales 0.2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 8.2
Price to Free Cash Flow -13.6
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 $244.166312 million for the last fiscal year's total revenue generated by Highpower International. The default revenue input number comes from 0001 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 7.1%, 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 84.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $25 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%.

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 19.1%.

Life of production assets of 9.1 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 14.9%. 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 - $67.212185 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 15.56 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.

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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]

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