Intrinsic value of Silvercorp Metals - SVM

Previous Close

$2.05

  Intrinsic Value

$3.86

stock screener

  Rating & Target

str. buy

+88%

Previous close

$2.05

 
Intrinsic value

$3.86

 
Up/down potential

+88%

 
Rating

str. buy

We calculate the intrinsic value of SVM 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, %
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
Revenue, $m
  177
  184
  192
  200
  209
  218
  228
  238
  249
  260
  272
  285
  299
  313
  328
  343
  360
  377
  396
  415
  435
  456
  479
  502
  527
  553
  580
  609
  639
  671
Variable operating expenses, $m
  101
  105
  110
  114
  119
  124
  130
  136
  142
  149
  156
  163
  170
  179
  187
  196
  206
  215
  226
  237
  248
  261
  273
  287
  301
  316
  331
  348
  365
  383
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
  101
  105
  110
  114
  119
  124
  130
  136
  142
  149
  156
  163
  170
  179
  187
  196
  206
  215
  226
  237
  248
  261
  273
  287
  301
  316
  331
  348
  365
  383
Operating income, $m
  76
  79
  82
  86
  90
  93
  98
  102
  107
  112
  117
  122
  128
  134
  141
  147
  154
  162
  170
  178
  187
  196
  205
  215
  226
  237
  249
  261
  274
  288
EBITDA, $m
  96
  100
  104
  109
  113
  118
  124
  129
  135
  141
  148
  155
  162
  170
  178
  187
  196
  205
  215
  225
  236
  248
  260
  273
  286
  300
  315
  331
  347
  364
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
Earnings before tax, $m
  76
  79
  82
  85
  88
  92
  95
  99
  104
  108
  113
  118
  123
  128
  134
  140
  146
  153
  160
  167
  175
  183
  192
  201
  211
  221
  231
  242
  254
  266
Tax expense, $m
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  62
  65
  68
  72
Net income, $m
  55
  57
  60
  62
  64
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
  161
  169
  177
  185
  194

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
  419
  436
  455
  474
  495
  516
  539
  564
  590
  617
  645
  676
  708
  741
  776
  814
  853
  894
  937
  983
  1,031
  1,081
  1,134
  1,190
  1,249
  1,310
  1,375
  1,443
  1,514
  1,589
Adjusted assets (=assets-cash), $m
  419
  436
  455
  474
  495
  516
  539
  564
  590
  617
  645
  676
  708
  741
  776
  814
  853
  894
  937
  983
  1,031
  1,081
  1,134
  1,190
  1,249
  1,310
  1,375
  1,443
  1,514
  1,589
Revenue / Adjusted assets
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.423
  0.422
  0.422
  0.421
  0.422
  0.422
  0.422
  0.422
  0.423
  0.421
  0.422
  0.422
  0.423
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
Average production assets, $m
  299
  311
  324
  338
  353
  368
  385
  402
  420
  440
  460
  482
  505
  529
  554
  580
  608
  638
  669
  701
  735
  771
  809
  849
  891
  934
  981
  1,029
  1,080
  1,133
Working capital, $m
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
Total debt, $m
  6
  12
  19
  26
  33
  41
  50
  59
  68
  78
  89
  100
  111
  124
  137
  150
  164
  180
  195
  212
  230
  248
  268
  288
  309
  332
  356
  380
  407
  434
Total liabilities, $m
  153
  160
  166
  173
  181
  189
  197
  206
  216
  226
  236
  247
  259
  271
  284
  298
  312
  327
  343
  360
  377
  396
  415
  436
  457
  480
  503
  528
  554
  582
Total equity, $m
  266
  277
  288
  300
  314
  327
  342
  357
  374
  391
  409
  428
  449
  470
  492
  516
  541
  567
  594
  623
  654
  686
  719
  755
  792
  831
  872
  915
  960
  1,008
Total liabilities and equity, $m
  419
  437
  454
  473
  495
  516
  539
  563
  590
  617
  645
  675
  708
  741
  776
  814
  853
  894
  937
  983
  1,031
  1,082
  1,134
  1,191
  1,249
  1,311
  1,375
  1,443
  1,514
  1,590
Debt-to-equity ratio
  0.020
  0.040
  0.060
  0.090
  0.110
  0.130
  0.150
  0.160
  0.180
  0.200
  0.220
  0.230
  0.250
  0.260
  0.280
  0.290
  0.300
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.420
  0.430
Adjusted equity ratio
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  55
  57
  60
  62
  64
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
  161
  169
  177
  185
  194
Depreciation, amort., depletion, $m
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  70
  73
  77
Funds from operations, $m
  76
  78
  81
  85
  88
  92
  96
  100
  104
  109
  113
  118
  124
  129
  135
  141
  148
  155
  162
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
  271
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
Cash from operations, $m
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  114
  120
  125
  131
  137
  143
  149
  156
  164
  171
  179
  188
  197
  206
  216
  226
  237
  249
  261
  274
Maintenance CAPEX, $m
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -70
  -73
New CAPEX, $m
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
Cash from investing activities, $m
  -31
  -32
  -34
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -81
  -86
  -90
  -95
  -99
  -104
  -109
  -114
  -121
  -126
Free cash flow, $m
  45
  47
  48
  50
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
Issuance/(repayment) of debt, $m
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
  21
  23
  24
  25
  26
  27
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
  21
  23
  24
  25
  26
  27
Total cash flow (excl. dividends), $m
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
  81
  85
  89
  92
  97
  101
  106
  110
  115
  121
  126
  132
  138
  145
  152
  159
  167
  174
Retained Cash Flow (-), $m
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -48
Prev. year cash balance distribution, $m
  74
  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
  115
  42
  43
  45
  46
  47
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
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
  110
  39
  38
  37
  36
  34
  33
  32
  30
  29
  27
  25
  23
  21
  19
  18
  16
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Silvercorp Metals Inc. (Silvercorp) is a silver-producing Canadian mining company. The Company is engaged in the acquisition, exploration, development, and mining of silver-related mineral properties in China. The Company's segments include Mining, including projects, such as Henan Luoning, Hunan, Guangdong and Other, and Administrative, which includes Beijing and Vancouver. The Company is the primary silver producer in China through the operation of over four silver-lead-zinc mines in the Ying Mining District in Henan Province, China, including SGX, HZG, TLP, Haopinggou (HPG) and the LM mines. The Company also has commercial production at its Gaocheng (GC) silver-lead-zinc project in Guangdong Province. Silvercorp's principal products and source of sales are silver-bearing lead and zinc concentrates and some direct smelting ores. The Company sells all its products to local smelters or companies in the mineral products trading business.

FINANCIAL RATIOS  of  Silvercorp Metals (SVM)

Valuation Ratios
P/E Ratio -3.4
Price to Sales 2.7
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow 43.8
Growth Rates
Sales Growth Rate 18.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -38.7%
Cap. Spend. - 3 Yr. Gr. Rate -8.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -24.6%
Ret/ On Assets - 3 Yr. Avg. -9.2%
Return On Total Capital -35%
Ret/ On T. Cap. - 3 Yr. Avg. -13.1%
Return On Equity -35%
Return On Equity - 3 Yr. Avg. -13.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 43%
Gross Margin - 3 Yr. Avg. 48.6%
EBITDA Margin -57.8%
EBITDA Margin - 3 Yr. Avg. -14%
Operating Margin -75.8%
Oper. Margin - 3 Yr. Avg. -29%
Pre-Tax Margin -75%
Pre-Tax Margin - 3 Yr. Avg. -26.8%
Net Profit Margin -80.5%
Net Profit Margin - 3 Yr. Avg. -34.5%
Effective Tax Rate -13.5%
Eff/ Tax Rate - 3 Yr. Avg. 9.1%
Payout Ratio -2.9%

SVM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SVM stock intrinsic value calculation we used $170.039 million for the last fiscal year's total revenue generated by Silvercorp Metals. The default revenue input number comes from 0001 income statement of Silvercorp Metals. 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 SVM stock valuation model: a) initial revenue growth rate of 4% 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 SVM is calculated based on our internal credit rating of Silvercorp Metals, 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 Silvercorp Metals.
    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 SVM stock the variable cost ratio is equal to 57.1%.

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 SVM 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 Silvercorp Metals.

Corporate tax rate of 27% is the nominal tax rate for Silvercorp Metals. 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 SVM 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 SVM are equal to 169%.

Life of production assets of 14.8 years is the average useful life of capital assets used in Silvercorp Metals 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 SVM is equal to -9.2%. 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 - $329.236 million for Silvercorp Metals - 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 167.03 million for Silvercorp Metals 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 Silvercorp Metals at the current share price and the inputted number of shares is $0.3 billion.

RELATED COMPANIES Price Int.Val. Rating
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EXK Endeavour Silv 1.79 0.80  str.sell
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COMPANY NEWS

▶ Silvercorp (SVM) Q2 Earnings Match Estimates   [Nov-08-18 07:30AM  Zacks]
▶ Silvercorp: Fiscal 2Q Earnings Snapshot   [05:05AM  Associated Press]
▶ Silvercorp Reports 2018 AGM Results and Management Updates   [Oct-01-18 05:00PM  GlobeNewswire]
▶ Silvercorp: Fiscal 1Q Earnings Snapshot   [05:56PM  Associated Press]
▶ Silvercorp Files Form 40-F Annual Report   [Jun-22-18 05:00PM  GlobeNewswire]
▶ What Is Silvercorp Metals Incs (TSE:SVM) Share Price Doing?   [Jun-03-18 11:34AM  Simply Wall St.]
▶ Silvercorp Declares Increased Dividend   [May-28-18 06:50AM  GlobeNewswire]
▶ Silvercorp: Fiscal 4Q Earnings Snapshot   [May-24-18 05:30PM  Associated Press]
▶ Silvercorp Announces Resumption of Milling Operations   [May-01-18 05:50AM  GlobeNewswire]
▶ Silvercorp Provides Share Buyback Program Update   [Mar-01-18 06:00AM  GlobeNewswire]
▶ Silvercorp posts 3Q profit   [Feb-09-18 05:01AM  Associated Press]
▶ Silvercorp Provides Share Repurchase Program Update   [Dec-15-17 06:29PM  PR Newswire]
▶ Silvercorp Announces Share Repurchase Program   [Nov-23-17 06:30AM  PR Newswire]
▶ Silvercorp Declares US$0.01 Semi-Annual Dividend   [Nov-09-17 06:30AM  CNW Group]
▶ The Top 3 Silver Penny Stocks for 2017   [Nov-05-17 08:19AM  Investopedia]
▶ Silvercorp Reports 2017 AGM Results   [Oct-02-17 05:59AM  PR Newswire]
▶ Silvercorp Reports 2017 AGM Results   [05:59AM  CNW Group]

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