Intrinsic value of ZK International Group Co., Ltd - ZKIN

Previous Close

$1.31

  Intrinsic Value

$4.13

stock screener

  Rating & Target

str. buy

+215%

Previous close

$1.31

 
Intrinsic value

$4.13

 
Up/down potential

+215%

 
Rating

str. buy

We calculate the intrinsic value of ZKIN 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, %
  22.10
  20.39
  18.85
  17.47
  16.22
  15.10
  14.09
  13.18
  12.36
  11.62
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.52
  6.36
  6.23
  6.10
  5.99
  5.89
  5.81
Revenue, $m
  67
  81
  96
  113
  131
  151
  172
  195
  219
  245
  271
  299
  329
  360
  392
  425
  460
  496
  533
  572
  613
  655
  699
  744
  792
  841
  892
  946
  1,002
  1,060
Variable operating expenses, $m
  55
  66
  79
  92
  107
  123
  141
  159
  179
  200
  221
  244
  268
  294
  320
  347
  375
  405
  435
  467
  500
  535
  570
  607
  646
  686
  728
  772
  817
  865
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
  55
  66
  79
  92
  107
  123
  141
  159
  179
  200
  221
  244
  268
  294
  320
  347
  375
  405
  435
  467
  500
  535
  570
  607
  646
  686
  728
  772
  817
  865
Operating income, $m
  12
  15
  18
  21
  24
  28
  32
  36
  40
  45
  50
  55
  60
  66
  72
  78
  85
  91
  98
  105
  113
  120
  128
  137
  146
  155
  164
  174
  184
  195
EBITDA, $m
  13
  15
  18
  22
  25
  29
  33
  37
  42
  47
  52
  57
  63
  69
  75
  81
  88
  95
  102
  109
  117
  125
  133
  142
  151
  161
  170
  181
  191
  202
Interest expense (income), $m
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  11
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
  27
  29
  31
  33
  35
  38
  40
  42
Earnings before tax, $m
  11
  13
  15
  18
  20
  23
  26
  29
  33
  37
  40
  44
  49
  53
  58
  62
  67
  72
  78
  83
  89
  95
  101
  108
  114
  121
  129
  136
  144
  152
Tax expense, $m
  3
  4
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
Net income, $m
  8
  10
  11
  13
  15
  17
  19
  21
  24
  27
  30
  32
  35
  39
  42
  45
  49
  53
  57
  61
  65
  69
  74
  79
  83
  89
  94
  99
  105
  111

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
  93
  112
  133
  157
  182
  210
  239
  271
  304
  340
  377
  416
  457
  499
  544
  590
  639
  689
  741
  795
  851
  910
  971
  1,034
  1,100
  1,168
  1,239
  1,314
  1,391
  1,472
Adjusted assets (=assets-cash), $m
  93
  112
  133
  157
  182
  210
  239
  271
  304
  340
  377
  416
  457
  499
  544
  590
  639
  689
  741
  795
  851
  910
  971
  1,034
  1,100
  1,168
  1,239
  1,314
  1,391
  1,472
Revenue / Adjusted assets
  0.720
  0.723
  0.722
  0.720
  0.720
  0.719
  0.720
  0.720
  0.720
  0.721
  0.719
  0.719
  0.720
  0.721
  0.721
  0.720
  0.720
  0.720
  0.719
  0.719
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
Average production assets, $m
  8
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  38
  41
  45
  49
  53
  57
  61
  66
  70
  75
  80
  86
  91
  97
  103
  109
  115
  122
Working capital, $m
  34
  40
  48
  56
  66
  75
  86
  97
  110
  122
  136
  150
  164
  180
  196
  213
  230
  248
  267
  286
  306
  328
  349
  372
  396
  420
  446
  473
  501
  530
Total debt, $m
  28
  38
  49
  61
  74
  88
  103
  119
  137
  155
  174
  194
  215
  237
  260
  284
  309
  335
  361
  389
  418
  448
  480
  512
  546
  581
  618
  656
  696
  738
Total liabilities, $m
  48
  58
  69
  81
  94
  108
  123
  139
  157
  175
  194
  214
  235
  257
  280
  304
  329
  355
  382
  409
  438
  469
  500
  532
  566
  602
  638
  677
  716
  758
Total equity, $m
  45
  54
  65
  76
  88
  102
  116
  131
  148
  165
  183
  202
  222
  242
  264
  286
  310
  334
  359
  386
  413
  441
  471
  501
  533
  566
  601
  637
  675
  714
Total liabilities and equity, $m
  93
  112
  134
  157
  182
  210
  239
  270
  305
  340
  377
  416
  457
  499
  544
  590
  639
  689
  741
  795
  851
  910
  971
  1,033
  1,099
  1,168
  1,239
  1,314
  1,391
  1,472
Debt-to-equity ratio
  0.620
  0.690
  0.750
  0.800
  0.830
  0.860
  0.890
  0.910
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  0.990
  1.000
  1.000
  1.010
  1.010
  1.010
  1.020
  1.020
  1.020
  1.020
  1.030
  1.030
  1.030
  1.030
  1.030
Adjusted equity ratio
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  10
  11
  13
  15
  17
  19
  21
  24
  27
  30
  32
  35
  39
  42
  45
  49
  53
  57
  61
  65
  69
  74
  79
  83
  89
  94
  99
  105
  111
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
Funds from operations, $m
  9
  10
  12
  14
  16
  18
  20
  23
  26
  28
  31
  35
  38
  41
  45
  48
  52
  56
  60
  65
  69
  74
  79
  84
  89
  94
  100
  106
  112
  119
Change in working capital, $m
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
Cash from operations, $m
  3
  3
  4
  5
  7
  8
  10
  12
  14
  16
  18
  20
  23
  26
  29
  32
  35
  38
  42
  45
  49
  53
  57
  61
  65
  70
  74
  79
  84
  90
Maintenance CAPEX, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
New CAPEX, $m
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
Cash from investing activities, $m
  -1
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -10
  -12
  -12
  -12
  -13
  -14
Free cash flow, $m
  1
  1
  2
  3
  4
  5
  6
  8
  9
  11
  13
  15
  18
  20
  23
  25
  28
  31
  34
  37
  40
  44
  47
  51
  55
  59
  63
  67
  71
  76
Issuance/(repayment) of debt, $m
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
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  
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
Total cash flow (excl. dividends), $m
  10
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  39
  42
  45
  49
  53
  57
  61
  65
  69
  74
  78
  83
  89
  94
  99
  105
  111
  117
Retained Cash Flow (-), $m
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -39
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
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  17
  19
  21
  24
  27
  29
  32
  35
  39
  42
  45
  49
  53
  57
  61
  65
  69
  74
  78
Discount rate, %
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
  1
  2
  2
  3
  3
  4
  4
  4
  4
  5
  5
  4
  4
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6

ZK International Group Co., Ltd operates through its subsidiary Zhejiang Zhengkang. The Company is engaged in designing and producing pipes and fittings, such as double-press thin-walled stainless steel tubes and fittings, carbon steel tubes and fittings and single-press tubes and fittings. The Company’s product offering includes steel strip, light gauge stainless steel pipe (LGSSP), pipe connections and fittings, fittings to change a pipe's direction, pipe fittings to connect two or more pipes, pipe fittings to change pipe size and pipe fitting tools. The Company’s products focus primarily on the drinking water and gas transmission industries. The Company’s products are used in a range of applications, including water and gas transmission within urban infrastructural development, residential housing development, oil and gas exploitation, and agricultural irrigation. The Company's products are primarily sold in China, and also exported and distributed in Europe and Southeast Asia.

FINANCIAL RATIOS  of  ZK International Group Co., Ltd (ZKIN)

Valuation Ratios
P/E Ratio 3.5
Price to Sales 0.5
Price to Book 2
Price to Tangible Book
Price to Cash Flow -17.7
Price to Free Cash Flow -17.7
Growth Rates
Sales Growth Rate 5.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 288.9%
Interest Coverage 7
Management Effectiveness
Return On Assets 14.1%
Ret/ On Assets - 3 Yr. Avg. 15.2%
Return On Total Capital 14.9%
Ret/ On T. Cap. - 3 Yr. Avg. 15.4%
Return On Equity 71.4%
Return On Equity - 3 Yr. Avg. 90.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 29.7%
Gross Margin - 3 Yr. Avg. 19.4%
EBITDA Margin 18.9%
EBITDA Margin - 3 Yr. Avg. 13%
Operating Margin 21.6%
Oper. Margin - 3 Yr. Avg. 14.8%
Pre-Tax Margin 16.2%
Pre-Tax Margin - 3 Yr. Avg. 11.1%
Net Profit Margin 13.5%
Net Profit Margin - 3 Yr. Avg. 9.3%
Effective Tax Rate 16.7%
Eff/ Tax Rate - 3 Yr. Avg. 11.1%
Payout Ratio 0%

ZKIN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ZKIN stock intrinsic value calculation we used $55 million for the last fiscal year's total revenue generated by ZK International Group Co., Ltd. The default revenue input number comes from 0001 income statement of ZK International Group Co., Ltd. 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 ZKIN stock valuation model: a) initial revenue growth rate of 22.1% 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 6.8%, whose default value for ZKIN is calculated based on our internal credit rating of ZK International Group Co., Ltd, 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 ZK International Group Co., Ltd.
    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 ZKIN stock the variable cost ratio is equal to 81.8%.

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 ZKIN 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 6.1% for ZK International Group Co., Ltd.

Corporate tax rate of 27% is the nominal tax rate for ZK International Group Co., Ltd. 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 ZKIN 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 ZKIN are equal to 11.5%.

Life of production assets of 16.3 years is the average useful life of capital assets used in ZK International Group Co., Ltd 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 ZKIN is equal to 50%. 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 - $37.041845 million for ZK International Group Co., Ltd - 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 16.558 million for ZK International Group Co., Ltd 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 ZK International Group Co., Ltd at the current share price and the inputted number of shares is $0.0 billion.

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