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HK Equities · Finance research note

HKEX 1187 - Pearl River Tyre

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2. Company Fundamentals

2.3 Management

Role Metric
Consensus Rating N/A

2.4 Return

Metric Value
Expected Return (Ann.)* -45.31%
Risk / Std Dev (Ann.)* 54.66%
1-Year Price Return* -18.30%

Latest Market Data (as of 2026-08-14, Hong Kong time):

Metric Value
Last Price HK$31.36
52-Week Range HK$25.88 – HK$41
Observation Count 69 trading days

The return and risk statistics use daily adjusted closes from the retrieved one-year price series and annualise daily moments using 252 trading days. The last price is the latest regular-market price reported for the stated date. Source: Yahoo Finance market data.

DuPont Model Analysis

The DuPont model decomposes return on equity (ROE) into three operating and capital-structure drivers:

ROE = Net Margin × Asset Turnover × Equity Multiplier

The comparison uses the latest two comparable annual periods available for the issuer, with reported statement amounts shown in HK$. Revenue and net income are income-statement flows; total assets and shareholders’ equity are year-end balance-sheet figures. This is a simplified year-end-balance DuPont comparison rather than an average-balance ROE calculation.

DuPont component Calculation FY2025 FY2024
Revenue Reported revenue HK$3.39B HK$2.98B
Net income Reported net income HK$371.61M HK$311.75M
Total assets Year-end reported balance HK$6.63B HK$6.42B
Shareholders’ equity Year-end reported balance HK$4.87B HK$4.80B
Net margin Net income ÷ revenue 10.97% 10.45%
Asset turnover Revenue ÷ total assets 0.5110x 0.4644x
Equity multiplier Total assets ÷ shareholders’ equity 1.3621x 1.3390x
ROE Net margin × asset turnover × equity multiplier 7.64% 6.50%

Source: Yahoo Finance annual statements. Values are based on the two latest comparable annual periods returned by the source; fiscal period labels use the statement period-end year.

2.5 FCFF DCF Valuation

Valuation basis: This research model follows a five-year, unlevered FCFF DCF. It starts from reported annual operating inputs, forecasts revenue and operating cash conversion under an explicit mechanical policy, discounts FCFF at WACC, applies a Gordon-growth terminal value, and bridges enterprise value to an indicative common-equity value per share. It is an analytical estimate rather than a recommendation or personalised target price.

Step 1 — Forecast Operating Profit and NOPAT

Reported operating input Value
Revenue HK$3.39B
Prior annual revenue HK$2.98B
EBIT HK$441.91M
Tax rate 13.04%
NOPAT = EBIT × (1 − tax rate) HK$384.29M
Forecast start-growth basis 13.56%
Forecast policy latest reported annual revenue growth, bounded to -10.00% / 15.00%

Step 2 — Calculate FCFF

Current FCFF building block Value
NOPAT HK$384.29M
Add: depreciation & amortisation HK$183.97M
Less: capital expenditure -HK$178.10M
Less/(add): working-capital cash-flow movement HK$96.14M
Current unlevered FCFF HK$486.30M

Explicit FCFF forecast

Forecast year Revenue growth NOPAT D&A Capex Change in NWC FCFF Present value
1 13.56% HK$436.41M HK$208.92M -HK$202.25M HK$109.18M HK$552.26M HK$532.74M
2 10.80% HK$483.53M HK$231.48M -HK$225.94M HK$120.97M HK$610.04M HK$547.62M
3 8.03% HK$522.36M HK$250.07M -HK$246.08M HK$130.68M HK$657.04M HK$548.85M
4 5.27% HK$549.87M HK$263.24M -HK$261.14M HK$137.56M HK$689.53M HK$536.00M
5 2.50% HK$563.61M HK$269.82M -HK$269.82M HK$141.00M HK$704.62M HK$509.70M

Step 3 — Determine the Discount Rate (WACC)

WACC input Value
Risk-free rate 4.71%
Equity risk premium assumption 5.50%
Beta 0.62
Cost of equity 8.11%
Pre-tax cost of debt 1.86%
WACC 7.46%
WACC validation within standard range

Step 4 — Estimate Terminal Value

Terminal-value input Value
Perpetuity growth rate 2.50%
Terminal value HK$14.56B
Implied terminal EV / EBITDA 15.86x
Terminal value as % of enterprise value 79.16%

Step 5 — Discount Cash Flows to Enterprise Value

Enterprise-value component Value
Present value of explicit FCFF HK$2.67B
Present value of terminal value HK$10.16B
Indicated enterprise value HK$12.83B
Discounting convention mid-year for explicit FCFF; terminal value discounted at year-end five

Step 6 — Convert Enterprise Value to Equity Value

Equity bridge Value
Indicated enterprise value HK$12.83B
Less: gross interest-bearing debt HK$826.18M
Add: cash and equivalents HK$2.44B
Add: affiliate investments HK$0.00
Less: minority interests HK$36.03M
Indicated common equity value HK$14.41B

Step 7 — Calculate Indicative Value Per Share

Per-share output Value
Shares used 205,308,622.00
Share-count basis reported diluted weighted-average shares
Current market price HK$31.70
DCF indicative value per share HK$70.18
Indicative value vs. market price 121.39%

Model Integrity Checks

Check Result
Perpetuity growth is below the risk-free rate pass
Perpetuity growth is below WACC pass
WACC is within the configured operating-company range pass
Terminal-year FCFF is positive pass
Terminal capex converges to D&A pass
Terminal-value concentration within review band
Implied price differs from spot by more than 30% review required

2.6 Investor-Style Research Screen

Educational screen Result
Buffett-inspired cash-quality checks 4/4 evidenced checks
Lynch-inspired balance-and-growth checks 4/4 evidenced checks

Data lineage: Yahoo Finance public market and reported-statement data; retrieval timestamp: 2026-08-18 16:48:05.697043 UTC; latest reported fiscal period: 2025-12-31 00:00:00. Default assumptions: five-year forecast, mid-year discounting for explicit FCFF, a maximum 2.50% perpetuity-growth rate below both WACC and the risk-free rate, historical operating-ratio persistence, and capex convergence to D&A by year five. No sell-side consensus or management guidance is substituted for reported inputs. This is research and analysis only, not personalized financial advice.

2.7 Quantitative Factor Diagnostics

Factor-model exception: No sufficiently aligned issuer-return and regional factor-return sample is available. No Fama–French loading or alpha estimate is published on an incomplete basis.

Factor models are descriptive in-sample exposure diagnostics, not forecasts, investment recommendations, or estimates of future returns. This is research and analysis only, not personalized financial advice.

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