The Valuation Of HR Stock Based On Residual Operating Income Model

With the increased actions in China's securities trading market,stock investment in the secondary market has become an important investment for institutional investors.Facing the situation of hard IPO approval,and the lack of quality assets in the prima ry market,D company intends to invest part of the funds to do long-term investment who faces on the equity investment of primary market in the past.HR company is selected to be the investment target,HR company is the pharmaceutical industry's outstanding enterprise,high gross profit,high-growth,the stock price is about 45 RMB,price-earnings ratio is about 48 times,which is far more than the industry average price-earnings ratio.In fact,good company may not always bring good stock,buying the good company's stock in a high price is not a good transaction obviously.Then,how much is HR company's intrinsic value? Is the price reasonable?In this paper,we first introduces industry that the HR company belongs to,and the characteristic of HR company,and analysis the basic theory,advantages,applicability and limitations of common methods of enterprise value evaluation.Next,we provide the reason that we adopt residual value model to evaluate the intrinsic value.In the end,we use the Residual Operating Income Model and financial ratios to conduct a comprehensive value assessment for HR company.This paper draws the following conclusions: First,it is found that in December 31,2016,the physical value of HR company is 157534.36 million RMB,net financial assets is 1530.16 million RMB,and the equity value of HR company's is 159064.52 million RMB.HR company issued a total of 2347.46 million shares,so the unit intrinsic value is 67.76 RMB.Compared with the stock market price at that time,which is 45.5RMB,HR company stock value is underestimated about 48.9%,so it has good investment value;Second,we study the company's stock drive factors of intrinsic value,research capabilities,development capabilities,marketing capabilities and organizational management capabilities,and understand the intrinsic value of HR company more deeply;Third,it is find that using residual income model to value the intrinsic value of the stock is quite operable.So it can be used as a tool to value the intrinsic value of the stock in the future.This paper has the practical significance for investment practice,which can provide operational guidance and decision-making basis for institutional investors,and also provide methods for managers based on value-based management.