Question $1$

The electric vehicle $($EV$)$ market is experiencing rapid growth. In your role as an equity research analyst in Singapore, you've been tasked with covering the EV battery manufacturing industry. After some research, you find that CATL, a Chinese publicly listed company on the Shanghai Stock Exchange, is currently the largest EV battery manufacturer. You have also collected some information about CATL outlined below:

Income Statement $($B$)20222021$

Revenue $328\mathrm{.}59130\mathrm{.}36$

Depreciation $3\mathrm{.}972\mathrm{.}05$

Other operating expenses $287\mathrm{.}80108\mathrm{.}48$

Income before taxes $36\mathrm{.}8219\mathrm{.}82$

Taxes $3\mathrm{.}222\mathrm{.}03$

Net Income $33\mathrm{.}4617\mathrm{.}86$

Dividends $6\mathrm{.}160\mathrm{.}00$

Common Shares Outstanding $2\mathrm{.}442\mathrm{.}32$

Balance Sheet $($B$)20222021$

Current assets $387\mathrm{.}73177\mathrm{.}73$

Net PPE $213\mathrm{.}22129\mathrm{.}93$

Total assets $600\mathrm{.}95307\mathrm{.}67$

Current liabilities $295\mathrm{.}7699\mathrm{.}34$

Long term debt $128\mathrm{.}28115\mathrm{.}70$

Total liabilities $424\mathrm{.}04215\mathrm{.}04$

Shareholder equity $176\mathrm{.}9192\mathrm{.}62$

Total liabilities and equity $600\mathrm{.}95307\mathrm{.}67$

Capital expenditure $18\mathrm{.}4524\mathrm{.}60$

Date Monthly return of CATL Adjusted closing price of SG Straits Times Index Adjusted closing price of Shanghai Composite Index

$1/10/20213198\mathrm{.}173547\mathrm{.}34$

$1/11/20216\mathrm{.}38\%3041\mathrm{.}293563\mathrm{.}89$

$1/12/2021-13\mathrm{.}53\%3123\mathrm{.}683639\mathrm{.}78$

$1/1/20220\mathrm{.}78\%3249\mathrm{.}593361\mathrm{.}44$

$1/2/2022-10\mathrm{.}00\%3242\mathrm{.}243462\mathrm{.}31$

$1/3/2022-3\mathrm{.}95\%3408\mathrm{.}523252\mathrm{.}20$

$1/4/2022-20\mathrm{.}10\%3356\mathrm{.}93047\mathrm{.}06$

$1/5/2022-0\mathrm{.}33\%3232\mathrm{.}493186\mathrm{.}43$

$1/6/202230\mathrm{.}88\%3102\mathrm{.}213398\mathrm{.}62$

$1/7/2022-4\mathrm{.}76\%3211\mathrm{.}563253\mathrm{.}24$

$1/8/2022-5\mathrm{.}03\%3221\mathrm{.}673202\mathrm{.}14$

$1/9/2022-17\mathrm{.}00\%3130\mathrm{.}243024\mathrm{.}39$

$1/10/2022-6\mathrm{.}99\%3093\mathrm{.}112893\mathrm{.}48$

$1/11/20223\mathrm{.}25\%3290\mathrm{.}493151\mathrm{.}34$

$1/12/20222\mathrm{.}19\%3251\mathrm{.}323089\mathrm{.}26$

$1/1/202318\mathrm{.}25\%3365\mathrm{.}673255\mathrm{.}67$

$1/2/2023-13\mathrm{.}18\%3262\mathrm{.}633279\mathrm{.}61$

$1/3/20230\mathrm{.}53\%3258\mathrm{.}93272\mathrm{.}86$

$1/4/20232\mathrm{.}33\%3270\mathrm{.}513323\mathrm{.}27$

$1/5/2023-4\mathrm{.}19\%3158\mathrm{.}83204\mathrm{.}56$

$1/6/20233\mathrm{.}45\%3205\mathrm{.}913202\mathrm{.}06$

$1/7/20233\mathrm{.}92\%3373\mathrm{.}983291\mathrm{.}04$

$1/8/2023-0\mathrm{.}50\%3233\mathrm{.}33119\mathrm{.}88$

$1/9/2023-14\mathrm{.}17\%3217\mathrm{.}413110\mathrm{.}48$

$1/10/2023-8\mathrm{.}58\%3067\mathrm{.}743018\mathrm{.}77$

You can assume that the risk$-$free rate is $2\%$ and market risk premium is $6\mathrm{.}5\%$ in Singapore, and the risk$-$free rate is $3\mathrm{.}5\%$ and market risk premium is $2\%$ in China.

Answer below;Your research team has helped you to do some research. After discussing with the team, you then estimate that the dividends of CATL will grow at $15\%$ in the next two years and will grow at a constant rate of $5\%$ per year from Year $3$ onwards. You also estimate that the FCFE of CATL will grow at $15\%$ in the next two years and will grow at a constant rate of $5\%$ per year from Year $3$ onwards.

Value the company using the following methods:

$($a$)$ Dividend model

$($b$)$ FCFE model