If we buy Wuliangye shares now, will our assets triple in five years? To answer this question, we need to value the company. Wuliangye's Q3 net profit growth rate in 2022 was 14.52%, and the historical average growth rate of net profit in the past five years was 24.38%.

If I buy Wuliangye stocks now, will my assets triple in five years? To answer this question, we need to value the business. Today we try to use price-earnings ratio to make a simple valuation of Wuliangye. The valuation calculation for and below only requires mastering the addition, subtraction, multiplication and division of primary school mathematics to simply derive .

We can perform PE valuation analysis according to the following steps:

1. estimates the net profit growth rate in the next 5 years and calculates the net profit after 5 years;
2. predicts the dividend payout rate in the next 5 years , calculates dividends over the years;
3. predicts the price-earnings ratio in the fifth year, and uses net profit * price-earnings ratio to calculate the total market value after 5 years;
4. divides the sum of dividends and total market value by the current total market value to calculate asset growth.

Step one: Forecast net profit growth rate

Wuliangye’s Q3 net profit growth rate in 2022 is 14.52%, and the historical average growth rate of net profit in the past five years is 24.38%. Based on the 2021 financial report's net profit of 23.377 billion and the 2022 net profit growth rate of 14.52% year-on-year, we estimate that the full-year net profit in 2022 will be 26.771 billion.

It is expected that consumption will recover after 2023. For conservative reasons, the growth rate in 23 years may not reach the historical average of 24.38% in the past five years. If we assume that the historical average growth rate in the past three years has been 19.61% and has declined by 10% every year, then the year-on-year growth rates in these five years are: 19.61% 17.65% 15.88% 14.30% 12.87%. That is to say, the profit in 2023 will reach 32.021 billion after the net profit in 2022* (1+19.61%). By analogy, the profits for the next five calendar years can be calculated as follows.

Step 2: Forecast the dividend payout rate

Wuliangye’s dividend payout ratio data over the years is shown in the figure below. The average dividend payout rate is basically stable at 50%. Therefore, we assume that Wuliangye’s dividend payout rate will be 50% in the next five years.

With the above forecast data of net profit growth rate and dividend ratio, we can calculate the net profit and dividends over the years as follows:

Table 1: Net profit forecast over the years

Step 3: Forecast price-earnings ratio

Wuliangye's market value as of December 30, 2022 is 701.3 billion , stock price is 180.69 yuan, with a share capital of 3.882 billion. The price-to-earnings ratio of is 30 times. The historical average price-to-earnings ratio in the past five years is 33.87 times. The price-to-earnings ratio over the years is as follows.

We can make the following three assumptions:

1. Optimistic assumption: After five years we happen to encounter a big bull market, and the price-earnings ratio will return to the current five-year price-earnings ratio , a high level of 38.5 times;
2. Neutral hypothesis: After five years, the price-earnings ratio will maintain Maintain the current level, that is, 30 times;
3. Pessimistic assumptions: The price-to-earnings ratio will fall to a 5-year historical low of 16 times in five years;

Step 4: Calculate asset growth

Based on the above forecast price-to-earnings ratio multiplied by 2027 net profit, we can respectively calculate the estimated total market value after five years under three assumptions, and calculate total assets through the sum of dividends and total market value. Divide the total assets by the current total market value of 701.3 billion to get the growth rate of total assets, and divide the total market value by the equity in five years to get the stock price.

Through the above table, if we press the current price of 180.69 Yuan buying, we can see:

1. Optimistic hypothesis: Total assets will increase to 3.25 times of initial assets in five years, with an annualized compound growth rate of 26.6%;
2. Neutral hypothesis: Total assets will increase to 2 times of initial assets in five years .57 times, with an annualized compound growth rate of 20.7%;
3. Pessimistic assumption: Total assets will increase to 1.44 times of initial assets in five years, with an annualized compound growth rate of 7.6%;
4. The return from all dividends in the past five years is 1098 /7013 =15.7%, the annualized return of dividend income is 3.0%;

In summary, if we buy at the current price of 180.69 yuan, under three assumptions, the estimated five-year return is 1.44 times - 3.25 times, and the annualized compound growth rate is 7.6% - 26.6%. At this time, Wuliangye's total market value will be between 0.9 trillion and 2.17 trillion.

So, we can answer the question at the beginning of the article, buy Wuliangye now, If we encounter a bull market in five years, and the price-to-earnings ratio can rise to the second highest price-to-earnings ratio in the current five-year history of 38.5 times, the assets will have the opportunity to triple from the beginning of the period, and the stock price will exceed 500 yuan.

Please note , The above is just a rough calculation based on PE valuation. There are many forecast data. If the net profit growth rate and price-to-earnings ratio fail to reach the forecast value, the results will change significantly. Please do not buy or sell based on this. The valuation calculation of allows us to deepen our understanding of various key indicators, and to evaluate our investment targets in a more conservative manner, so that we have a clear idea.

welcomes likes, collections, comments, attention, and forwarding to communicate and discuss. Thank you for your attention and forwarding, regarding valuation analysis, please correct me if there is anything wrong.

The content of this article does not constitute any investment advice, is for learning reference only, and does not have any guiding role. Investment is risky, so be cautious when trading!