A Case Analysis on Value Comparision of China Merchants Bank and Shanghai Pudong Development Bank
|School||Huazhong University of Science and Technology|
|Keywords||Valuation Discounted cash flow model Book value|
The split share structure reform is so far the most significant event affecting the development of China's securities market has achieved significant results, although the entire equity division reform works, the split share structure reform controversy did not stop. The core of the split share reform on the price, and the price in real terms is a company valuation problems. To settle the dispute, the content and substance of the price of the share reform profiling is a useful way to use the value of the company. Company valuation securities research is the most important, the most critical link, macro, industry and financial analysis of the end result. Fundamentally speaking, all the analysis in order to provide the basis of a company valuation, and based on this to make investment decisions. Typical valuation methods used in the current securities research is divided into: price-earnings ratio (PE) method, cash flows generated (DCF) method and the Economic Value Added (EVA) method. Selected two example of China's banking sector - China Merchants Bank and Shanghai Pudong Development Bank as a comparative analysis of the target company, standing investor point of view, to take the concept and then from the macro to the micro, first under analysis method or the two-phase combination of research methods, comparative analysis of the intrinsic value and competitive position of the two listed companies. First of all, these two listed banks industry background and elaborate on the two companies in which the development of the financial industry background, status, trends, analysis pointed out that the two companies through the grasp of the macroeconomic and the Present Situation of China Banking facing both opportunities and challenges. Then, using qualitative and quantitative techniques, and contrast the two companies, the company specific analysis. Finally, the valuation model to calculate the value of the company of the two companies, and compare, select A superior, concluded. Through the analysis, the paper argues that in addition to the three elements of the degree of control of resources, corporate branding, core products, investment return on capital (ROIC) and the weighted cost of capital (WACC) is also an important factor affecting the value of listed companies in the financial sector. As the Hong Kong capital market risk premium is less than the capital market in China, China Merchants Bank's weighted cost of capital (ie, opportunity cost) less than the Shanghai Pudong Development Bank. Shanghai Pudong Development Bank only improve its ROIC and efforts to reduce the WACC in order to improve the company's value. A sense, tend to be more efficient capital markets may reduce the weighted cost of capital of Shanghai Pudong Development Bank to improve its competitiveness.