An Intrinsic Calculation For Hangzhou SF Intra-city Industrial Co., Ltd. (HKG:9699) Suggests It's 29% Undervalued

Simply Wall St.08-11

Key Insights Using the 2 Stage Free Cash Flow to Equity, Hangzhou SF Intra-city Industrial fair value estimate is HK$14.11 Hangzhou SF Intra-city Industrial is estimated to be 29% undervalued based ...

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(HKG:9699) Suggests It's 29% Undervalued</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAn Intrinsic Calculation For Hangzhou SF Intra-city Industrial Co., Ltd. (HKG:9699) Suggests It's 29% Undervalued\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-11 08:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://simplywall.st/stocks/hk/transportation/hkg-9699/hangzhou-sf-intra-city-industrial-shares/news/an-intrinsic-calculation-for-hangzhou-sf-intra-city-industri><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights Using the 2 Stage Free Cash Flow to Equity, Hangzhou SF Intra-city Industrial fair value estimate is HK$14.11   Hangzhou SF Intra-city Industrial is estimated to be 29% undervalued based ...</p>\n\n<a href=\"https://simplywall.st/stocks/hk/transportation/hkg-9699/hangzhou-sf-intra-city-industrial-shares/news/an-intrinsic-calculation-for-hangzhou-sf-intra-city-industri\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"TV","symbol_name":"墨西哥电视","start_time":0,"source_url":"https://simplywall.st/stocks/hk/transportation/hkg-9699/hangzhou-sf-intra-city-industrial-shares/news/an-intrinsic-calculation-for-hangzhou-sf-intra-city-industri","article_id":"2458667605","we_media_id":null,"thumbnails":["https://images.simplywall.st/asset/industry/3211000-choice2-main-header/1585186782858"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2458667605","pubTimestamp":1723335876,"sourceInfo":{"source_id":"simplywall_highlight","name":"Simply Wall St."},"weMediaInfo":null,"summary":"Key Insights Using the 2 Stage Free Cash Flow to Equity, Hangzhou SF Intra-city Industrial fair value estimate is...","collect":0,"end_time":0,"defaultTopTitle":"simplywall.st","property":[],"viewcount":null,"language":"en","relate_stocks":{"TV":"墨西哥电视","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","BK4211":"区域性银行","BK4127":"投资银行业与经纪业","FCF":"第一联邦金融","SF":"Stifel Financial Corp","BK1151":"航空货运与物流","09699":"顺丰同城","BK4100":"有线和卫星"},"translate_title":"杭州顺丰同城实业有限公司（HKG：9699）的内在计算表明其被低估了29%","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"09699":1,"DCF":1,"FCF":1,"SF":1,"TV":1},"content_text":"Key Insights Using the 2 Stage Free Cash Flow to Equity, Hangzhou SF Intra-city Industrial fair value estimate is HK$14.11   Hangzhou SF Intra-city Industrial is estimated to be 29% undervalued based on current share price of HK$10.04   Our fair value estimate is 11% higher than Hangzhou SF Intra-city Industrial's analyst price target of CN¥12.66   Today we will run through one way of estimating the intrinsic value of Hangzhou SF Intra-city Industrial Co., Ltd. (HKG:9699) by taking the forecast future cash flows of the company and discounting them back to today's value.  The Discounted Cash Flow (DCF) model is the tool we will apply to do this.  It may sound complicated, but actually it is quite simple!  Remember though, that there are many ways to estimate a company's value, and a DCF is just one method.  If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.  View our latest analysis for Hangzhou SF Intra-city Industrial  The Method   We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase.  To begin with, we have to get estimates of the next ten years of cash flows.   Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.   Generally we assume that a dollar today is more valuable than a dollar in the future,  so we discount the value of these future cash flows to their estimated value in today's dollars:  10-year free cash flow (FCF) forecast  2025 2026 2027 2028 2029 2030 2031 2032 2033 2034  Levered FCF (CN¥, Millions)  CN¥222.0m CN¥437.1m CN¥567.8m CN¥690.6m CN¥799.7m CN¥893.6m CN¥973.1m CN¥1.04b CN¥1.10b CN¥1.15b Growth Rate Estimate Source Analyst x1 Analyst x1 Est @ 29.92% Est @ 21.62% Est @ 15.81% Est @ 11.74% Est @ 8.89% Est @ 6.90% Est @ 5.51% Est @ 4.53%  Present Value (CN¥, Millions) Discounted @ 6.6%  CN¥208 CN¥384 CN¥468 CN¥534 CN¥580 CN¥607 CN¥620 CN¥622 CN¥615 CN¥603 (\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = CN¥5.2b We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period.  For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.6%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = CN¥1.1b× (1 + 2.3%) ÷ (6.6%– 2.3%) = CN¥27bPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= CN¥27b÷ ( 1 + 6.6%)10= CN¥14b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value,  which in this case is CN¥19b.  The last step is to then divide the equity value by the number of shares outstanding.  Relative to the current share price of HK$10.0, the company appears   a touch undervalued    at a 29% discount to where the stock price trades currently.   The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. SEHK:9699 Discounted Cash Flow August 11th 2024  The Assumptions  Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows.  You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them.  The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance.  Given that we are looking at Hangzhou SF Intra-city Industrial as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt.  In this calculation we've used 6.6%, which is based on a levered beta of 0.883. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.  SWOT Analysis for Hangzhou SF Intra-city IndustrialStrength Currently debt free. Balance sheet summary for 9699. Weakness Shareholders have been diluted in the past year.Opportunity Annual earnings are forecast to grow faster than the Hong Kong market. Trading below our estimate of fair value by more than 20%. Threat Revenue is forecast to grow slower than 20% per year.  What else are analysts forecasting for 9699?  Next Steps:  Whilst important, the DCF calculation  shouldn't be the only metric you look at when researching a company.  It's not possible to obtain a foolproof valuation with a DCF model.  Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation.  For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result.   What is the reason for the share price sitting below the intrinsic value?   For Hangzhou SF Intra-city Industrial, we've put together three  pertinent  elements  you should further examine:   Risks: For example, we've discovered 2 warning signs for Hangzhou SF Intra-city Industrial (1 can't be ignored!) that you should be aware of before investing here.  Future Earnings: How does 9699's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!   PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SEHK every day. If you want to find the calculation for other stocks just search here.Valuation is complex, but we're here to simplify it.Discover if Hangzhou SF Intra-city Industrial might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.Access Free AnalysisHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. 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