Application Analysis of DCF Model in Enterprise Value Evaluation: A Case Study of Midea

Research Article
Open access

Application Analysis of DCF Model in Enterprise Value Evaluation: A Case Study of Midea

Junyu Zhao 1*
  • 1 University of Sheffield    
  • *corresponding author JZhao84@sheffield.ac.uk
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/24/20230422
AEMPS Vol.24
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-91-1
ISBN (Online): 978-1-915371-92-8

Abstract

With the development of markets of household electric appliances and the extinct sales performance of Midea, Midea should be viewed as a good example to explore. Many company values are overstated or understated, which has caused major problems for the stability of markets. Therefore, the author made an effort to determine the company's value so that it could be compared to its market capitalization to determine whether it is underpriced or overpriced. And in order to do that, the company was examined using the discounted cash flow (DCF) model. It was discovered that the market price of Midea should be around 384.92 billion CNY, which is slightly higher than its actual market capitalisation. As a result, although there might be some deviations made by some other factors, that might indicate that Midea has been marginally underpriced in the market.

Keywords:

midea, discounted cash flow model (DCF), value evaluation, market capitalization

Zhao,J. (2023). Application Analysis of DCF Model in Enterprise Value Evaluation: A Case Study of Midea. Advances in Economics, Management and Political Sciences,24,98-106.
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References

[1]. Brealey, R. A. (2020). Principles of corporate finance.13th edn. New York: McGraw Hill Education.

[2]. Lundholm, R. and O'Keefe, T. (2001). ‘Reconciling Value Estimates from the Discounted Cash Flow Model and the Residual Income Model’, Contemporary accounting research, 18(2), pp. 311-335.

[3]. Ehrhardt, M. C. and Brigham, E. F., (2020). Corporate Finance A Focused Approach, 7th Edn, Australia: Cengage Learning.

[4]. Our businesses. (2023). Available at: https://www.midea-group.com/our-businesses (Accessed: 10 February 2023).

[5]. Datayes! (2022). Net Profit Attributable to Equity. Available at: https://robo.datayes.com/v2/landing/analyst_expect (Accessed: 27 December 2022).

[6]. Midea Group Co., Ltd. (2022). 2021 Annual Report. Available at: https://www.midea-group.com/content/dam/mideaco-aem/investors/financial-reports/Midea%20Group%20-%20Annual%20Report%202021%20-%20April2022.pdf.coredownload.inline.pdf (Accessed: 20 December 2022).

[7]. Midea Group Co., Ltd. (2021). The 2020 Annual Report. Available at: https://www.midea-group.com/content/dam/mideaco-aem/investors/financial-reports/Midea-Group---Humanizing-Technology---Annual-Report-2020---30Apr2021.pdf.coredownload.inline.pdf (Accessed: 20 December 2022).

[8]. Midea Group Co., Ltd. (2020). The 2019 Annual Report. Available at: https://www.midea-group.com/content/dam/mideaco-aem/investors/financial-reports/Midea-Group-2019-Annual-Report.PDF.coredownload.inline.pdf (Accessed: 20 December 2022).

[9]. Midea Group Co., Ltd. (2019). The 2018 Annual Report. Available at: https://www.midea-group.com/content/dam/mideaco-aem/investors/financial-reports/Midea-Group-2018-Annual-Report.PDF.coredownload.inline.pdf (Accessed: 20 December 2022).

[10]. Yahoo Finance. (2022). Statistics. Available at: https://finance.yahoo.com/quote/000333.SZ/key-statistics?p=000333.SZ (Accessed: 27 December 2022).

[11]. Textor, C. (2022, 1). Inflation rate in China from 2011 to 2021 with forecasts until 2027. Available at: https://www.statista.com/statistics/270338/inflation-rate-in-china/ (Accessed at: 23 December 2022).

[12]. Textor, C. (2022, 2). Growth rate of real gross domestic product (GDP) in China from 2011 to 2021 with forecasts until 2027. Available at: https://www.statista.com/statistics/263616/gross-domestic-product-gdp-growth-rate-in-china/ (Accessed: 24 December 2022).

[13]. Google finance. (2022). Midea Group Co Ltd. Available at: https://www.google.com/finance/quote/000333:SHE?sa=X&ved=2ahUKEwiKxZTxo538AhWpX_EDHUZTDZUQ3ecFegQIKhAb (Accessed: 27 December 2022).

Cite this article

Zhao,J. (2023). Application Analysis of DCF Model in Enterprise Value Evaluation: A Case Study of Midea. Advances in Economics, Management and Political Sciences,24,98-106.

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About volume

Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development

ISBN：978-1-915371-91-1(Print) / 978-1-915371-92-8(Online)
Editor：Canh Thien Dang, Javier Cifuentes-Faura
Conference website: https://2023.icmred.org/
Conference date: 28 April 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.24
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Brealey, R. A. (2020). Principles of corporate finance.13th edn. New York: McGraw Hill Education.

[2]. Lundholm, R. and O'Keefe, T. (2001). ‘Reconciling Value Estimates from the Discounted Cash Flow Model and the Residual Income Model’, Contemporary accounting research, 18(2), pp. 311-335.

[3]. Ehrhardt, M. C. and Brigham, E. F., (2020). Corporate Finance A Focused Approach, 7th Edn, Australia: Cengage Learning.

[4]. Our businesses. (2023). Available at: https://www.midea-group.com/our-businesses (Accessed: 10 February 2023).

[5]. Datayes! (2022). Net Profit Attributable to Equity. Available at: https://robo.datayes.com/v2/landing/analyst_expect (Accessed: 27 December 2022).

[6]. Midea Group Co., Ltd. (2022). 2021 Annual Report. Available at: https://www.midea-group.com/content/dam/mideaco-aem/investors/financial-reports/Midea%20Group%20-%20Annual%20Report%202021%20-%20April2022.pdf.coredownload.inline.pdf (Accessed: 20 December 2022).

[7]. Midea Group Co., Ltd. (2021). The 2020 Annual Report. Available at: https://www.midea-group.com/content/dam/mideaco-aem/investors/financial-reports/Midea-Group---Humanizing-Technology---Annual-Report-2020---30Apr2021.pdf.coredownload.inline.pdf (Accessed: 20 December 2022).

[8]. Midea Group Co., Ltd. (2020). The 2019 Annual Report. Available at: https://www.midea-group.com/content/dam/mideaco-aem/investors/financial-reports/Midea-Group-2019-Annual-Report.PDF.coredownload.inline.pdf (Accessed: 20 December 2022).

[9]. Midea Group Co., Ltd. (2019). The 2018 Annual Report. Available at: https://www.midea-group.com/content/dam/mideaco-aem/investors/financial-reports/Midea-Group-2018-Annual-Report.PDF.coredownload.inline.pdf (Accessed: 20 December 2022).

[10]. Yahoo Finance. (2022). Statistics. Available at: https://finance.yahoo.com/quote/000333.SZ/key-statistics?p=000333.SZ (Accessed: 27 December 2022).

[11]. Textor, C. (2022, 1). Inflation rate in China from 2011 to 2021 with forecasts until 2027. Available at: https://www.statista.com/statistics/270338/inflation-rate-in-china/ (Accessed at: 23 December 2022).

[12]. Textor, C. (2022, 2). Growth rate of real gross domestic product (GDP) in China from 2011 to 2021 with forecasts until 2027. Available at: https://www.statista.com/statistics/263616/gross-domestic-product-gdp-growth-rate-in-china/ (Accessed: 24 December 2022).

[13]. Google finance. (2022). Midea Group Co Ltd. Available at: https://www.google.com/finance/quote/000333:SHE?sa=X&ved=2ahUKEwiKxZTxo538AhWpX_EDHUZTDZUQ3ecFegQIKhAb (Accessed: 27 December 2022).

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