You are analyzing the company potential for future investment where you will use the absolute valuation methodology for estimating the intrinsic value. Pak Suzuki Motors (PSMC) Company posted a revenue of 15.5bn in 2019 and further expecting a growth in the revenue 5% for the next 5 years period. However, due to economic turmoil and lower purchasing power parity of customer CAR sales remain choppy over the period of last 3-years and we have witnessed substantial decline in earnings and cashflows. In addition to that rising interest rate scenario put more downward pressure on firm's capacity to pay dividends in near future.In 2020 would be a year which provide relief to Auto industry as we are suffering from COVID-19 and face the economic slow-down in Pakistan. Govt. has reduced the interest rate cumulatively by 5.25% to 8% which will give positive impact on the CAR sales and bode well for auto industry as a whole. Currently, auto sector is trading at very cheap valuations which needs to confirm through the valuation analysis. You have gathered the following information related to fundamentals of the company which are mentioned below:-

Last year revenue stood at 15.5bn and expected growth rate would be 5% for the next 5 years period.

PSMC is maintaining the gross margins of 18% over the period of 5 years and expected margins would be around 16% for next 5 years.

A major focus of the management to maintain the net margins which is hovering around 3.25% over the period last five years and expected Net margins would be around 3.50%.

Expectation for the finance cost would be 10% of the sales

Due to heavy machinery and utilization which impact on the economic value of the assets therefore company is expecting a depreciation 10% of the sales.

Working capital investments for the incremental sales would be 15% over the period of 5 years.

Planned capital expenditure for the next 5 years 10% of the next year revenue.

Gordon growth model will be applied to estimate the future cashflows and value of operations of the company, however non-operating assets are worth of 10bn and debts are 5bn. Moreover, weighted average cost of capital is around 15% and expected perpetual growth rate at 5% for terminal value.

Instructions:

Write the brief valuation summary using the above information and state your stance for investment in the PSMC whether this is a good opportunity to hunt at the current levels or not? required to explain the entire process of forecasting)