Result of equity valuation ( Based on Discounted Cash Flow Model (DCF)):
|
company value
|
103200387941.61
|
Yuan
|
|
Total equity:
|
2,080,176,851.00
|
Share
|
|
share value
|
49.61
|
Yuan
|
Recommendation: BUY
Introduction:
Founded in 1968, Midea is renowned as a sizeable conglomerate that specializes in the manufacturing of household appliances and sets foot in relevant fields of real estates and logistics. For the past 20 years or so, Midea has been regulating its strategies and tactics in face of changes in the market, and has developed from a local brand with a single product to an international one engaged in multiple sectors.
Since the arrival of the new millennium, Midea maintains a growth rate of 35% annually. In 2009, sales revenue of Midea increased by 4.34% and hit a record of 47 billion Yuan, while total profit went up by 56.8% to 1.9 billion Yuan. In the assessment of ChinaMost Valuable Brands 2009, brand value of Midea ranks No.6 by surging to 4.5 billion Yuan.
Major Business:
Midea holds the largest and most complete production chains for air-conditioner, refrigerator, microwave oven, small home appliances and kitchen utensil groups in China. Its core products include AC, washing machine, electric cooker, small household appliances and other home hold appliance products, as well as other supporting products, such as compressor, electric motor, magnetron and transformer.
|
Major Business and Service
|
|
Name
|
Sales Revenue(Yuan)
|
Share of the total income
|
|
Air Conditioning and Parts
|
25,854,895,900
|
66.25%
|
|
Refrigerators and parts
|
5,602,475,100
|
14.36%
|
|
Washing machines and parts
|
48,344,004,800
|
12.39%
|
Basic information of the stock
|
Total equity:
|
2,080,176,851 Shares
|
|
Tradable share ：
|
2,077,775,054 Shares
|
|
Percentage of the tradable share:
|
99.88%
|
|
Earnings per share:
|
0.9700 Yuan (09)
|
|
Net assets per share:
|
4.54 Yuan (09)
|
|
Rate of return:
|
20.02%
|
Key factor on the equity valuation:
1. β calculated : β is a main parameters in CAPM to measure the systematic risk of the asset. The β of midea is 0.92, which means the midea has a high correlation with the market. The R2 is 0.32, meaning a low credibility of the result.
2 . Risk premium
The stock market in China has a high volatility. As the following table shows, the market return changes easily, as well as the risk premium. the world stock market has a tremendous drop in 2007,so I kick off the red data when I calculate the risk premium.
|
Year
|
Shanghai Stock Exchange
|
market return
|
risk-free rate
|
Risk premium
|
|
1999
|
1144.89
|
|
|
|
|
2000
|
1368.69
|
19.55%
|
2.735%
|
16.81%
|
|
2001
|
2077.08
|
51.76%
|
2.946%
|
48.81%
|
|
2002
|
1643.49
|
-20.87%
|
2.182%
|
-23.06%
|
|
2003
|
1347.43
|
-18.01%
|
2.650%
|
-20.66%
|
|
2004
|
1492.72
|
10.78%
|
4.023%
|
6.76%
|
|
2005
|
1260.78
|
-15.54%
|
3.370%
|
-18.91%
|
|
2006
|
1163.88
|
-7.69%
|
2.910%
|
-10.60%
|
|
2007
|
2728.19
|
134.40%
|
2.910%
|
131.49%
|
|
2008
|
5265
|
92.99%
|
3.400%
|
89.59%
|
|
2009
|
1849.02
|
-64.88%
|
3.40%
|
-68.28%
|
|
2010
|
3289.75
|
77.92%
|
3.40%
|
74.52%
|
|
Average
|
|
|
3.053%
|
29.48%
|
3. WACC (Weighted Average Cost of Capital)
WACC= Claim cost + Equity cost= Loaning rate +CAPM
Equity cost =3.05%+ 0.92*29.48%=30.17%.
Claim cost =5.31 %*( 1-25%)
Asset-liability ratio: 59.80% (2009)
WACC=14.52%
4. Equity valuation
Value per share=49.61Yuan
2007/12/28 ， the share price is 14.99 Yuan
Recommendation: BUY
Data sources:
Annual Report of midea (http://www.midea.com.cn);
Wind Info (http://www.wind.com.cn);
EQUITY VALUATION AND ANALYSIS ON MIDEA
Result of equity valuation ( Based on Discounted Cash Flow Model (DCF)):
company value
103200387941.61
Yuan
Total equity:
2,080,176,851.00
Share
share value
49.61
Yuan
Recommendation: BUY
Introduction:
Founded in 1968, Midea is renowned as a sizeable conglomerate that specializes in the manufacturing of household appliances and sets foot in relevant fields of real estates and logistics. For the past 20 years or so, Midea has been regulating its strategies and tactics in face of changes in the market, and has developed from a local brand with a single product to an international one engaged in multiple sectors.
Since the arrival of the new millennium, Midea maintains a growth rate of 35% annually. In 2009, sales revenue of Midea increased by 4.34% and hit a record of 47 billion Yuan, while total profit went up by 56.8% to 1.9 billion Yuan. In the assessment of ChinaMost Valuable Brands 2009, brand value of Midea ranks No.6 by surging to 4.5 billion Yuan.
Major Business:
Midea holds the largest and most complete production chains for air-conditioner, refrigerator, microwave oven, small home appliances and kitchen utensil groups in China. Its core products include AC, washing machine, electric cooker, small household appliances and other home hold appliance products, as well as other supporting products, such as compressor, electric motor, magnetron and transformer.
Major Business and Service
Name
Sales Revenue(Yuan)
Share of the total income
Air Conditioning and Parts
25,854,895,900
66.25%
Refrigerators and parts
5,602,475,100
14.36%
Washing machines and parts
48,344,004,800
12.39%
Basic information of the stock
Total equity:
2,080,176,851 Shares
Tradable share ：
2,077,775,054 Shares
Percentage of the tradable share:
99.88%
Earnings per share:
0.9700 Yuan (09)
Net assets per share:
4.54 Yuan (09)
Rate of return:
20.02%
Key factor on the equity valuation:
1. β calculated : β is a main parameters in CAPM to measure the systematic risk of the asset. The β of midea is 0.92, which means the midea has a high correlation with the market. The R2 is 0.32, meaning a low credibility of the result.
2 . Risk premium
The stock market in China has a high volatility. As the following table shows, the market return changes easily, as well as the risk premium. the world stock market has a tremendous drop in 2007,so I kick off the red data when I calculate the risk premium.
Year
Shanghai Stock Exchange
market return
risk-free rate
Risk premium
1999
1144.89
2000
1368.69
19.55%
2.735%
16.81%
2001
2077.08
51.76%
2.946%
48.81%
2002
1643.49
-20.87%
2.182%
-23.06%
2003
1347.43
-18.01%
2.650%
-20.66%
2004
1492.72
10.78%
4.023%
6.76%
2005
1260.78
-15.54%
3.370%
-18.91%
2006
1163.88
-7.69%
2.910%
-10.60%
2007
2728.19
134.40%
2.910%
131.49%
2008
5265
92.99%
3.400%
89.59%
2009
1849.02
-64.88%
3.40%
-68.28%
2010
3289.75
77.92%
3.40%
74.52%
Average
3.053%
29.48%
3. WACC (Weighted Average Cost of Capital)
WACC= Claim cost + Equity cost= Loaning rate +CAPM
Equity cost =3.05%+ 0.92*29.48%=30.17%.
Claim cost =5.31 %*( 1-25%)
Asset-liability ratio: 59.80% (2009)
WACC=14.52%
4. Equity valuation
Value per share=49.61Yuan
2007/12/28 ， the share price is 14.99 Yuan
Recommendation: BUY
Data sources:
Annual Report of midea (http://www.midea.com.cn);
Wind Info (http://www.wind.com.cn);