Intrinsic value of Sify Technologies ADR - SIFY

Previous Close

$2.02

  Intrinsic Value

$3.74

stock screener

  Rating & Target

str. buy

+85%

Previous close

$2.02

 
Intrinsic value

$3.74

 
Up/down potential

+85%

 
Rating

str. buy

We calculate the intrinsic value of SIFY 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 0.4

 

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, %
  25.20
  23.18
  21.36
  19.73
  18.25
  16.93
  15.74
  14.66
  13.70
  12.83
  12.04
  11.34
  10.71
  10.13
  9.62
  9.16
  8.74
  8.37
  8.03
  7.73
  7.46
  7.21
  6.99
  6.79
  6.61
  6.45
  6.31
  6.17
  6.06
  5.95
Revenue, $m
  356
  438
  532
  636
  753
  880
  1,018
  1,168
  1,328
  1,498
  1,678
  1,869
  2,069
  2,278
  2,498
  2,726
  2,965
  3,213
  3,471
  3,739
  4,018
  4,308
  4,609
  4,922
  5,247
  5,585
  5,938
  6,304
  6,686
  7,084
Variable operating expenses, $m
  335
  413
  501
  600
  709
  829
  959
  1,100
  1,250
  1,410
  1,579
  1,758
  1,946
  2,144
  2,350
  2,565
  2,789
  3,023
  3,265
  3,518
  3,780
  4,053
  4,336
  4,630
  4,937
  5,255
  5,586
  5,931
  6,290
  6,665
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
  335
  413
  501
  600
  709
  829
  959
  1,100
  1,250
  1,410
  1,579
  1,758
  1,946
  2,144
  2,350
  2,565
  2,789
  3,023
  3,265
  3,518
  3,780
  4,053
  4,336
  4,630
  4,937
  5,255
  5,586
  5,931
  6,290
  6,665
Operating income, $m
  20
  25
  31
  37
  44
  51
  59
  68
  78
  88
  99
  111
  122
  135
  148
  161
  175
  190
  205
  221
  238
  255
  273
  291
  310
  330
  351
  373
  396
  419
EBITDA, $m
  35
  43
  52
  62
  73
  85
  99
  113
  129
  145
  163
  181
  201
  221
  242
  265
  288
  312
  337
  363
  390
  418
  447
  478
  509
  542
  576
  612
  649
  688
Interest expense (income), $m
  0
  7
  12
  18
  24
  31
  39
  47
  57
  67
  78
  89
  101
  114
  128
  142
  157
  172
  188
  205
  223
  241
  260
  279
  300
  321
  343
  366
  390
  414
  440
Earnings before tax, $m
  13
  13
  13
  13
  13
  12
  12
  11
  11
  10
  10
  9
  8
  7
  6
  4
  3
  2
  0
  -1
  -3
  -5
  -7
  -8
  -10
  -12
  -14
  -17
  -19
  -21
Tax expense, $m
  4
  4
  4
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  10
  10
  10
  9
  9
  9
  9
  8
  8
  7
  7
  7
  6
  5
  4
  3
  2
  1
  0
  -1
  -3
  -5
  -7
  -8
  -10
  -12
  -14
  -17
  -19
  -21

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
  415
  512
  621
  743
  879
  1,028
  1,190
  1,364
  1,551
  1,750
  1,961
  2,183
  2,417
  2,662
  2,918
  3,185
  3,463
  3,753
  4,055
  4,368
  4,694
  5,032
  5,384
  5,750
  6,130
  6,525
  6,936
  7,365
  7,811
  8,276
Adjusted assets (=assets-cash), $m
  415
  512
  621
  743
  879
  1,028
  1,190
  1,364
  1,551
  1,750
  1,961
  2,183
  2,417
  2,662
  2,918
  3,185
  3,463
  3,753
  4,055
  4,368
  4,694
  5,032
  5,384
  5,750
  6,130
  6,525
  6,936
  7,365
  7,811
  8,276
Revenue / Adjusted assets
  0.858
  0.855
  0.857
  0.856
  0.857
  0.856
  0.855
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
  0.856
Average production assets, $m
  135
  166
  201
  241
  285
  334
  386
  443
  503
  568
  636
  708
  784
  864
  947
  1,033
  1,124
  1,218
  1,315
  1,417
  1,523
  1,633
  1,747
  1,865
  1,989
  2,117
  2,250
  2,389
  2,534
  2,685
Working capital, $m
  -100
  -123
  -149
  -179
  -211
  -247
  -286
  -328
  -373
  -421
  -472
  -525
  -581
  -640
  -702
  -766
  -833
  -903
  -975
  -1,051
  -1,129
  -1,210
  -1,295
  -1,383
  -1,474
  -1,569
  -1,668
  -1,771
  -1,879
  -1,991
Total debt, $m
  127
  186
  254
  329
  413
  504
  604
  712
  827
  949
  1,079
  1,216
  1,360
  1,511
  1,668
  1,833
  2,005
  2,183
  2,369
  2,562
  2,763
  2,971
  3,188
  3,413
  3,647
  3,891
  4,144
  4,408
  4,683
  4,969
Total liabilities, $m
  256
  315
  383
  458
  542
  633
  733
  840
  955
  1,078
  1,208
  1,345
  1,489
  1,640
  1,797
  1,962
  2,133
  2,312
  2,498
  2,691
  2,891
  3,100
  3,317
  3,542
  3,776
  4,019
  4,273
  4,537
  4,811
  5,098
Total equity, $m
  160
  196
  238
  285
  338
  395
  457
  524
  596
  672
  753
  838
  928
  1,022
  1,120
  1,223
  1,330
  1,441
  1,557
  1,677
  1,802
  1,932
  2,067
  2,208
  2,354
  2,506
  2,664
  2,828
  2,999
  3,178
Total liabilities and equity, $m
  416
  511
  621
  743
  880
  1,028
  1,190
  1,364
  1,551
  1,750
  1,961
  2,183
  2,417
  2,662
  2,917
  3,185
  3,463
  3,753
  4,055
  4,368
  4,693
  5,032
  5,384
  5,750
  6,130
  6,525
  6,937
  7,365
  7,810
  8,276
Debt-to-equity ratio
  0.800
  0.950
  1.060
  1.150
  1.220
  1.280
  1.320
  1.360
  1.390
  1.410
  1.430
  1.450
  1.470
  1.480
  1.490
  1.500
  1.510
  1.510
  1.520
  1.530
  1.530
  1.540
  1.540
  1.550
  1.550
  1.550
  1.560
  1.560
  1.560
  1.560
Adjusted equity ratio
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  10
  10
  9
  9
  9
  9
  8
  8
  7
  7
  7
  6
  5
  4
  3
  2
  1
  0
  -1
  -3
  -5
  -7
  -8
  -10
  -12
  -14
  -17
  -19
  -21
Depreciation, amort., depletion, $m
  14
  17
  21
  25
  29
  34
  39
  45
  51
  58
  64
  71
  78
  86
  95
  103
  112
  122
  132
  142
  152
  163
  175
  187
  199
  212
  225
  239
  253
  268
Funds from operations, $m
  24
  27
  31
  34
  39
  43
  48
  53
  59
  65
  71
  77
  84
  91
  99
  107
  115
  123
  132
  140
  149
  158
  168
  178
  189
  199
  211
  222
  235
  247
Change in working capital, $m
  -20
  -23
  -26
  -29
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -53
  -56
  -59
  -62
  -64
  -67
  -70
  -73
  -75
  -78
  -81
  -85
  -88
  -91
  -95
  -99
  -103
  -107
  -112
Cash from operations, $m
  44
  50
  57
  64
  71
  79
  87
  95
  104
  113
  122
  131
  141
  150
  160
  171
  182
  193
  204
  216
  228
  240
  253
  266
  280
  294
  310
  325
  342
  359
Maintenance CAPEX, $m
  -11
  -13
  -17
  -20
  -24
  -29
  -33
  -39
  -44
  -50
  -57
  -64
  -71
  -78
  -86
  -95
  -103
  -112
  -122
  -132
  -142
  -152
  -163
  -175
  -187
  -199
  -212
  -225
  -239
  -253
New CAPEX, $m
  -27
  -31
  -35
  -40
  -44
  -48
  -52
  -57
  -61
  -65
  -68
  -72
  -76
  -79
  -83
  -87
  -90
  -94
  -98
  -102
  -106
  -110
  -114
  -119
  -123
  -128
  -133
  -139
  -145
  -151
Cash from investing activities, $m
  -38
  -44
  -52
  -60
  -68
  -77
  -85
  -96
  -105
  -115
  -125
  -136
  -147
  -157
  -169
  -182
  -193
  -206
  -220
  -234
  -248
  -262
  -277
  -294
  -310
  -327
  -345
  -364
  -384
  -404
Free cash flow, $m
  6
  5
  5
  4
  3
  2
  1
  0
  -1
  -2
  -3
  -5
  -6
  -8
  -9
  -10
  -12
  -14
  -15
  -18
  -20
  -22
  -25
  -27
  -30
  -33
  -36
  -39
  -42
  -45
Issuance/(repayment) of debt, $m
  51
  59
  67
  75
  84
  92
  100
  107
  115
  123
  130
  137
  144
  151
  158
  165
  172
  179
  186
  193
  201
  208
  217
  225
  234
  244
  253
  264
  275
  286
Issuance/(repurchase) of shares, $m
  23
  27
  32
  38
  43
  48
  53
  59
  64
  69
  74
  79
  84
  89
  94
  99
  105
  110
  116
  122
  128
  135
  142
  149
  156
  164
  172
  181
  190
  200
Cash from financing (excl. dividends), $m  
  74
  86
  99
  113
  127
  140
  153
  166
  179
  192
  204
  216
  228
  240
  252
  264
  277
  289
  302
  315
  329
  343
  359
  374
  390
  408
  425
  445
  465
  486
Total cash flow (excl. dividends), $m
  80
  92
  105
  117
  130
  142
  154
  166
  178
  190
  200
  211
  222
  232
  243
  253
  264
  275
  286
  297
  309
  321
  334
  347
  361
  375
  390
  406
  423
  441
Retained Cash Flow (-), $m
  -33
  -37
  -42
  -47
  -52
  -57
  -62
  -67
  -72
  -76
  -81
  -85
  -90
  -94
  -98
  -103
  -107
  -111
  -116
  -122
  -128
  -135
  -142
  -149
  -156
  -164
  -172
  -181
  -190
  -200
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
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
Cash available for distribution, $m
  48
  55
  63
  70
  78
  85
  92
  99
  106
  113
  119
  126
  132
  138
  145
  151
  157
  164
  170
  175
  181
  186
  192
  198
  204
  211
  218
  225
  233
  241
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
  46
  51
  54
  58
  60
  62
  62
  62
  61
  59
  57
  54
  50
  46
  42
  38
  34
  30
  26
  22
  19
  15
  13
  10
  8
  6
  5
  3
  3
  2
Current shareholders' claim on cash, %
  94.0
  88.7
  83.8
  79.4
  75.4
  71.8
  68.6
  65.6
  62.9
  60.5
  58.2
  56.2
  54.3
  52.5
  50.8
  49.3
  47.9
  46.5
  45.2
  44.0
  42.9
  41.8
  40.7
  39.7
  38.8
  37.8
  36.9
  36.1
  35.3
  34.4

Sify Technologies Limited (Sify) is an integrated information and communications technology (ICT) solutions and services company. The Company's segments are Telecom services, which includes domestic data, international data wholesale voice and network managed services; Data Centre services, which includes co-location services; Cloud and managed services, which includes information technology (IT) infra services, IT transformation services, remote and onsite infrastructure managed services and delivery platforms; Technology integration services, which includes data center build, network integration, information security, end-user computing, and collaborative tools and solutions, and Applications integration services, which includes application development and maintenance, application testing, mobility solutions, e-learning, portals, tools, process and automation. The Company has approximately six Tier III data centers across various geographical locations in India.

FINANCIAL RATIOS  of  Sify Technologies ADR (SIFY)

Valuation Ratios
P/E Ratio 36.1
Price to Sales 1.3
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 13.9
Price to Free Cash Flow 360.6
Growth Rates
Sales Growth Rate 22.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.2%
Cap. Spend. - 3 Yr. Gr. Rate 12.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 12.9%
Total Debt to Equity 59.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 5.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 6.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 35.5%
Gross Margin - 3 Yr. Avg. 38.3%
EBITDA Margin 13%
EBITDA Margin - 3 Yr. Avg. 13.3%
Operating Margin 5.1%
Oper. Margin - 3 Yr. Avg. 6%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 30%

SIFY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SIFY stock intrinsic value calculation we used $284 million for the last fiscal year's total revenue generated by Sify Technologies ADR. The default revenue input number comes from 2017 income statement of Sify Technologies 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 SIFY stock valuation model: a) initial revenue growth rate of 25.2% 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 SIFY is calculated based on our internal credit rating of Sify Technologies 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 Sify Technologies 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 SIFY stock the variable cost ratio is equal to 94.4%.

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 SIFY 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 9.4% for Sify Technologies ADR.

Corporate tax rate of 27% is the nominal tax rate for Sify Technologies 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 SIFY stock is equal to 0.1%.

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 SIFY are equal to 37.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Sify Technologies 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 SIFY is equal to -28.1%. 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 - $127 million for Sify Technologies 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 179 million for Sify Technologies 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 Sify Technologies ADR at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Is It Too Late To Buy Sify Technologies Limited (NASDAQ:SIFY)?   [Apr-20-18 07:46AM  Simply Wall St.]
▶ Why Did Sify Technologies Limited Stock Rise on Monday?   [Jan-08-18 02:14PM  Motley Fool]
▶ Sify reports revenues of INR 18432 million for FY 2016-17   [Apr-25-17 08:19AM  GlobeNewswire]
▶ 8 Stocks With Strong Yields but Falling Prices   [Feb-14-17 03:00PM  GuruFocus.com]
▶ Sify receives NASDAQ Staff Deficiency letter   [Jan-05-17 07:36AM  GlobeNewswire]
▶ Sify reports revenues of INR 15035 million for FY 2015-16   [Apr-22-16 08:38AM  GlobeNewswire]
▶ Industry Leading Suite of Security Challenges   [Mar-23-16 04:29AM  at noodls]
▶ Sify shareholders approve dividend payment of 10%   [Jun-19  01:56AM  GlobeNewswire]
▶ Sify reports revenues of INR 12864 million for FY 2014-15   [Apr-23  09:16AM  GlobeNewswire]
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