Research On Long-term Investment Value Of China Yangtze Power Co.Ltd

Even though the stock market recently has been developing rapidly and strongly, there are still immature disadvantages that we failed to correct such as deficiency in ideology of value investment, blindly strong atmosphere of speculation and prevalence of concept and trend-following speculation. The most important reason is there is no rational structure of investors in our investment market of China. All most investors are small investors. The small investors use to abandon speculation, not focus on the real value of the company, they like to buy higher price stocks, and sell lower price stocks. The essay try to find some clear and easy understand methods which make the small investors have good habits in rational investment and value investment, and improve their investment lever.China Yangtze Power Co., Ltd, a company in hydroelectricity industry, is taken as an example in this article to probe into how to research the intrinsic value of a quoted company. First the author discussed the future growth of hydroelectricity industry under the present economic conditions and circumstances of development of powers. Then the fundamental conditions, advantages in competition and key factors to grow are thoroughly analyzed. In the end, the writer respectively use PE, PB and evaluation of average price to calculate the investment value of this company after computing and predicting its finance conditions. Conclusion is drawn that hydroelectricity industry is developing healthily and China Yangtze Power Co., Ltd is undervalued severely. Long-term investment is highly encouraged.The innovative idea of this essay is at first time to come up with the evaluation model of average price by improving the common methods of evaluation. PB is the basis of evaluation of average price which inherits its merit recognized as easy to understand and operate. Meanwhile more attention is paid to evaluate the capacity of property to perpetually earn profits. This evaluation introduced a concept of expected return using the reference to Economic Value Added and strengthened the time value of capital while endeavored to simplify the process of calculation. Lessons are drawn from Discounted Cash Flow Method to emphasize on analysis of factors to influence a company’s future value. It not only examines the cash flow and cash bonus in the future of a company, but also avoids the complexity and guarantees the preciseness of prediction by tactful evaluation of average price.