<div id="readability-page-1"><div><h3>Key Insights</h3><ul><li> Using the 2 Stage Free Cash Flow to Equity, LEPU ScienTech Medical Technology (Shanghai) fair value estimate is HK$21.30 </li> <li> LEPU ScienTech Medical Technology (Shanghai)'s HK$21.16 share price indicates it is trading at similar levels as its fair value estimate </li> <li> Industry average discount to fair value of 8.5% suggests LEPU ScienTech Medical Technology (Shanghai)'s peers are currently trading at a higher discount  </li> </ul><p>In this article we are going to estimate the intrinsic value of LEPU ScienTech Medical Technology (Shanghai) Co., Ltd. (HKG:2291) by taking the expected future cash flows and discounting them to today's value.  We will use the Discounted Cash Flow (DCF) model on this occasion.  Don't get put off by the jargon, the math behind it is actually quite straightforward.</p><p> We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios.  If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. </p><p>We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.</p><h2> Is LEPU ScienTech Medical Technology (Shanghai) Fairly Valued? </h2> <p> We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period.  To begin with, we have to get estimates of the next ten years of cash flows.   Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last 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.  </p><p> A DCF is all about the idea that a dollar in the future is less valuable than a dollar today,  so we need to discount the sum of these future cash flows to arrive at a present value estimate: </p><h4> 10-year free cash flow (FCF) forecast </h4><table><tbody><tr><td> </td><td><strong>2026</strong></td><td><strong>2027</strong></td><td><strong>2028</strong></td><td><strong>2029</strong></td><td><strong>2030</strong></td><td><strong>2031</strong></td><td><strong>2032</strong></td><td><strong>2033</strong></td><td><strong>2034</strong></td><td><strong>2035</strong></td></tr><tr><td><strong> Levered FCF (CN¥, Millions) </strong></td><td>CN¥227.6m</td><td>CN¥265.5m</td><td>CN¥298.7m</td><td>CN¥327.2m</td><td>CN¥351.7m</td><td>CN¥372.9m</td><td>CN¥391.7m</td><td>CN¥408.7m</td><td>CN¥424.4m</td><td>CN¥439.2m</td></tr><tr><td><strong>Growth Rate Estimate Source</strong></td><td>Est @ 22.66%</td><td>Est @ 16.67%</td><td>Est @ 12.48%</td><td>Est @ 9.54%</td><td>Est @ 7.49%</td><td>Est @ 6.05%</td><td>Est @ 5.04%</td><td>Est @ 4.33%</td><td>Est @ 3.84%</td><td>Est @ 3.50%</td></tr><tr><td><strong> Present Value (CN¥, Millions) Discounted @ 7.6% </strong></td><td>CN¥212</td><td>CN¥230</td><td>CN¥240</td><td>CN¥244</td><td>CN¥244</td><td>CN¥241</td><td>CN¥235</td><td>CN¥228</td><td>CN¥220</td><td>CN¥212</td></tr></tbody></table><p><i>(&#34;Est&#34; = FCF growth rate estimated by Simply Wall St)</i><br/><strong>Present Value of 10-year Cash Flow (PVCF)</strong> = CN¥2.3b</p><p> After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage.  The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.7%. We discount the terminal cash flows to today's value at a cost of equity of 7.6%. </p><p><strong>Terminal Value (TV)</strong>= FCF<sub>2035</sub> × (1 + g) ÷ (r – g) = CN¥439m× (1 + 2.7%) ÷ (7.6%– 2.7%) = CN¥9.3b</p><p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= CN¥9.3b÷ ( 1 + 7.6%)<sup>10</sup>= CN¥4.5b</p><p> The total value, or equity value, is then the sum of the present value of the future cash flows,  which in this case is CN¥6.8b.  In the final step we divide the equity value by the number of shares outstanding.  Compared to the current share price of HK$21.2, the company appears   about fair value    at a 0.7% discount to where the stock price trades currently.   Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. </p><figure><img height="760" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/1774404533-dcf-1-dark-2/1760571684174?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1706" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/1774404533-dcf-1-dark-2/1760571684174"/><figcaption>SEHK:2291 Discounted Cash Flow October 15th 2025</figcaption></figure> <h2> Important Assumptions </h2><p> We would point out that 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 LEPU ScienTech Medical Technology (Shanghai) 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 7.6%, which is based on a levered beta of 0.928. 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. </p> <p><span> View our latest analysis for LEPU ScienTech Medical Technology (Shanghai) </span></p><h3>SWOT Analysis for LEPU ScienTech Medical Technology (Shanghai)</h3><div><div><p><strong>Strength</strong></p><ul><li>Earnings growth over the past year exceeded the industry.</li></ul> <ul><li>Currently debt free.</li></ul> <ul>Balance sheet summary for 2291.</ul> </div><div><p><strong>Weakness</strong></p><ul><li>Earnings growth over the past year is below its 5-year average.</li></ul> <ul><li>Dividend is low compared to the top 25% of dividend payers in the Medical Equipment market.</li></ul></div><div><p><strong>Opportunity</strong></p><ul><li>Annual earnings are forecast to grow faster than the Hong Kong market.</li></ul> <ul><li>Good value based on P/E ratio and estimated fair value.</li></ul> </div><div><p><strong>Threat</strong></p><ul><li>Dividends are not covered by cash flow.</li></ul> <ul> See 2291's dividend history.</ul> </div></div><h2> Next Steps: </h2><p> Valuation is only one side of the coin in terms of building your investment thesis, and it  ideally won't be the sole piece of analysis you scrutinize for a company.  The DCF model is not a perfect stock valuation tool.  Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued.  For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result.  For LEPU ScienTech Medical Technology (Shanghai), we've compiled three  further  elements  you should further research: </p><ol> <li> <strong>Risks</strong>: We feel that you should assess the <strong>1 warning sign for LEPU ScienTech Medical Technology (Shanghai)</strong> we've flagged before making an investment in the company. </li> <li><strong>Future Earnings</strong>: How does 2291'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.</li><li> <strong>Other High Quality Alternatives</strong>: 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! </li> </ol><p>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.</p></div></div>

02291

<p>LEPU ScienTech Medical Technology (Shanghai) Co., Ltd. (HKG:2291) has an estimated fair value of HK$21.30, with its current share price at HK$21.16, indicating it is trading close to fair value. A two-stage Discounted Cash Flow (DCF) model was used to estimate future cash flows, resulting in a total equity value of CN¥6.8 billion. The analysis suggests the company is fairly valued, with a slight 0.7% discount to its current stock price. However, valuations can be imprecise and should be approached with caution.</p>

Calculating The Fair Value Of LEPU ScienTech Medical Technology (Shanghai) Co., Ltd. (HKG:2291)