Intrinsic value of Sify Technologies Limited - SIFY

Previous Close

$1.41

  Intrinsic Value

$1.19

stock screener

  Rating & Target

hold

-16%

Previous close

$1.41

 
Intrinsic value

$1.19

 
Up/down potential

-16%

 
Rating

hold

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 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 0.3

 

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, %
  11.90
  11.21
  10.59
  10.03
  9.53
  9.07
  8.67
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
Revenue, $m
  356
  396
  438
  482
  527
  575
  625
  677
  731
  787
  845
  906
  969
  1,034
  1,102
  1,173
  1,247
  1,323
  1,403
  1,487
  1,573
  1,664
  1,758
  1,857
  1,960
  2,068
  2,181
  2,298
  2,422
  2,550
Variable operating expenses, $m
  308
  342
  378
  416
  456
  497
  540
  585
  631
  679
  729
  781
  835
  892
  950
  1,011
  1,075
  1,141
  1,210
  1,282
  1,357
  1,435
  1,516
  1,601
  1,690
  1,783
  1,880
  1,982
  2,088
  2,199
Fixed operating expenses, $m
  28
  28
  29
  29
  30
  31
  31
  32
  33
  34
  34
  35
  36
  37
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
Total operating expenses, $m
  336
  370
  407
  445
  486
  528
  571
  617
  664
  713
  763
  816
  871
  929
  987
  1,049
  1,114
  1,181
  1,251
  1,324
  1,400
  1,479
  1,561
  1,647
  1,737
  1,831
  1,929
  2,032
  2,139
  2,251
Operating income, $m
  21
  25
  31
  36
  42
  48
  54
  60
  67
  74
  82
  90
  98
  106
  115
  123
  133
  142
  153
  163
  174
  186
  198
  210
  224
  237
  252
  267
  283
  300
EBITDA, $m
  46
  54
  62
  70
  79
  89
  98
  108
  119
  130
  141
  153
  165
  178
  191
  205
  220
  235
  250
  267
  284
  302
  320
  340
  360
  381
  404
  427
  452
  477
Interest expense (income), $m
  0
  8
  11
  14
  17
  20
  23
  26
  30
  33
  37
  41
  45
  49
  54
  58
  63
  68
  73
  78
  84
  89
  96
  102
  108
  115
  122
  130
  138
  146
  154
Earnings before tax, $m
  12
  15
  17
  19
  22
  25
  28
  31
  34
  37
  41
  45
  49
  52
  56
  61
  65
  70
  74
  79
  85
  90
  96
  102
  108
  115
  122
  129
  137
  145
Tax expense, $m
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
Net income, $m
  9
  11
  12
  14
  16
  18
  20
  22
  25
  27
  30
  33
  35
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
  75
  79
  84
  89
  94
  100
  106

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
  421
  468
  517
  569
  623
  680
  739
  800
  864
  930
  999
  1,071
  1,145
  1,223
  1,303
  1,387
  1,474
  1,564
  1,659
  1,757
  1,860
  1,967
  2,079
  2,195
  2,317
  2,444
  2,577
  2,717
  2,862
  3,015
Adjusted assets (=assets-cash), $m
  421
  468
  517
  569
  623
  680
  739
  800
  864
  930
  999
  1,071
  1,145
  1,223
  1,303
  1,387
  1,474
  1,564
  1,659
  1,757
  1,860
  1,967
  2,079
  2,195
  2,317
  2,444
  2,577
  2,717
  2,862
  3,015
Revenue / Adjusted assets
  0.846
  0.846
  0.847
  0.847
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.845
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
  0.846
Average production assets, $m
  124
  138
  152
  168
  184
  200
  218
  236
  254
  274
  294
  315
  337
  360
  384
  408
  434
  461
  488
  517
  548
  579
  612
  646
  682
  720
  759
  800
  843
  888
Working capital, $m
  56
  62
  69
  76
  83
  90
  98
  106
  115
  124
  133
  142
  152
  162
  173
  184
  196
  208
  220
  233
  247
  261
  276
  292
  308
  325
  342
  361
  380
  400
Total debt, $m
  117
  147
  178
  211
  246
  281
  319
  357
  398
  440
  483
  528
  575
  624
  675
  728
  783
  840
  900
  962
  1,027
  1,095
  1,165
  1,239
  1,316
  1,396
  1,481
  1,568
  1,661
  1,757
Total liabilities, $m
  266
  296
  327
  360
  394
  430
  467
  506
  546
  588
  632
  677
  724
  773
  824
  876
  931
  989
  1,048
  1,111
  1,175
  1,243
  1,314
  1,387
  1,464
  1,545
  1,629
  1,717
  1,809
  1,905
Total equity, $m
  155
  172
  190
  209
  229
  250
  272
  294
  318
  342
  368
  394
  421
  450
  480
  510
  542
  576
  610
  647
  684
  724
  765
  808
  853
  900
  949
  1,000
  1,053
  1,109
Total liabilities and equity, $m
  421
  468
  517
  569
  623
  680
  739
  800
  864
  930
  1,000
  1,071
  1,145
  1,223
  1,304
  1,386
  1,473
  1,565
  1,658
  1,758
  1,859
  1,967
  2,079
  2,195
  2,317
  2,445
  2,578
  2,717
  2,862
  3,014
Debt-to-equity ratio
  0.760
  0.860
  0.940
  1.010
  1.070
  1.120
  1.170
  1.210
  1.250
  1.280
  1.310
  1.340
  1.370
  1.390
  1.410
  1.430
  1.440
  1.460
  1.470
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.550
  1.560
  1.570
  1.580
  1.580
Adjusted equity ratio
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  11
  12
  14
  16
  18
  20
  22
  25
  27
  30
  33
  35
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
  75
  79
  84
  89
  94
  100
  106
Depreciation, amort., depletion, $m
  26
  28
  31
  34
  38
  41
  44
  48
  52
  56
  59
  63
  67
  72
  77
  82
  87
  92
  98
  103
  110
  116
  122
  129
  136
  144
  152
  160
  169
  178
Funds from operations, $m
  35
  39
  44
  49
  54
  59
  65
  70
  76
  83
  89
  96
  103
  110
  118
  126
  134
  143
  152
  161
  171
  182
  192
  204
  216
  228
  241
  254
  269
  284
Change in working capital, $m
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
Cash from operations, $m
  29
  33
  37
  42
  46
  52
  57
  62
  68
  74
  80
  86
  93
  100
  107
  115
  123
  131
  139
  148
  158
  167
  178
  188
  199
  211
  223
  236
  249
  263
Maintenance CAPEX, $m
  -22
  -25
  -28
  -30
  -34
  -37
  -40
  -44
  -47
  -51
  -55
  -59
  -63
  -67
  -72
  -77
  -82
  -87
  -92
  -98
  -103
  -110
  -116
  -122
  -129
  -136
  -144
  -152
  -160
  -169
New CAPEX, $m
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
Cash from investing activities, $m
  -35
  -39
  -43
  -45
  -50
  -54
  -57
  -62
  -66
  -71
  -75
  -80
  -85
  -90
  -96
  -102
  -108
  -114
  -120
  -127
  -133
  -142
  -149
  -156
  -165
  -173
  -183
  -193
  -203
  -214
Free cash flow, $m
  -7
  -6
  -5
  -4
  -3
  -2
  -1
  1
  2
  4
  5
  6
  8
  10
  12
  13
  15
  17
  20
  22
  24
  26
  29
  32
  34
  37
  40
  43
  46
  50
Issuance/(repayment) of debt, $m
  28
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
Issuance/(repurchase) of shares, $m
  8
  7
  6
  5
  4
  3
  1
  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  
  36
  37
  37
  38
  38
  39
  38
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
Total cash flow (excl. dividends), $m
  29
  31
  32
  34
  35
  37
  38
  40
  42
  45
  48
  52
  55
  59
  62
  66
  70
  75
  79
  84
  89
  94
  100
  105
  111
  118
  124
  131
  139
  146
Retained Cash Flow (-), $m
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
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
  13
  13
  14
  15
  15
  16
  16
  17
  19
  21
  23
  25
  28
  30
  33
  36
  38
  41
  44
  48
  51
  55
  58
  62
  66
  71
  75
  80
  85
  90
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
  12
  12
  12
  12
  12
  11
  11
  11
  11
  11
  11
  11
  11
  10
  10
  9
  8
  8
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  97.1
  94.8
  93.1
  91.8
  90.9
  90.3
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0
  90.0

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 Limited (SIFY)

Valuation Ratios
P/E Ratio 25.2
Price to Sales 0.9
Price to Book 2
Price to Tangible Book
Price to Cash Flow 9.7
Price to Free Cash Flow 252.3
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 $318 million for the last fiscal year's total revenue generated by Sify Technologies Limited. The default revenue input number comes from 0001 income statement of Sify Technologies Limited. 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 11.9% 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 4.3%, whose default value for SIFY is calculated based on our internal credit rating of Sify Technologies Limited, 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 Limited.
    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 86.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $27 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 9.3% for Sify Technologies Limited.

Corporate tax rate of 27% is the nominal tax rate for Sify Technologies Limited. 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%.

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 34.8%.

Life of production assets of 4.2 years is the average useful life of capital assets used in Sify Technologies Limited 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 15.7%. 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 - $138.324930876 million for Sify Technologies Limited - 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 178.685 million for Sify Technologies Limited 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 Limited at the current share price and the inputted number of shares is $0.3 billion.

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