Is Ubtech Robotics Corp Ltd (HKG:9880) Expensive For A Reason? A Look At Its Intrinsic Value

Simply Wall St · 2d ago

Key Insights

Using the 2 Stage Free Cash Flow to Equity, Ubtech Robotics fair value estimate is HK$94.42
Ubtech Robotics is estimated to be 34% overvalued based on current share price of HK$127
Analyst price target for 9880 is CN¥154, which is 64% above our fair value estimate

How far off is Ubtech Robotics Corp Ltd (HKG:9880) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Believe it or not, it's not too difficult to follow, as you'll see from our example!

We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.

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Is Ubtech Robotics Fairly Valued?

We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

Generally we assume that a dollar today is more valuable than a dollar in the future, so we need to discount the sum of these future cash flows to arrive at a present value estimate:

10-year free cash flow (FCF) forecast

	2026	2027	2028	2029	2030	2031	2032	2033	2034	2035
Levered FCF (CN¥, Millions)	-CN¥1.08b	-CN¥697.3m	CN¥240.0m	CN¥869.0m	CN¥1.59b	CN¥2.21b	CN¥2.82b	CN¥3.40b	CN¥3.91b	CN¥4.36b
Growth Rate Estimate Source	Analyst x3	Analyst x3	Analyst x1	Analyst x1	Analyst x1	Est @ 38.67%	Est @ 27.92%	Est @ 20.39%	Est @ 15.12%	Est @ 11.43%
Present Value (CN¥, Millions) Discounted @ 8.6%	-CN¥990	-CN¥591	CN¥187	CN¥624	CN¥1.1k	CN¥1.3k	CN¥1.6k	CN¥1.8k	CN¥1.9k	CN¥1.9k

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = CN¥8.7b

After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.8%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.6%.

Terminal Value (TV)= FCF₂₀₃₅ × (1 + g) ÷ (r – g) = CN¥4.4b× (1 + 2.8%) ÷ (8.6%– 2.8%) = CN¥77b

Present Value of Terminal Value (PVTV)= TV / (1 + r)¹⁰= CN¥77b÷ ( 1 + 8.6%)¹⁰= CN¥34b

The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is CN¥42b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of HK$127, the company appears reasonably expensive at the time of writing. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.

dcf — SEHK:9880 Discounted Cash Flow January 11th 2026

The Assumptions

Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Ubtech Robotics as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.6%, which is based on a levered beta of 1.106. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

See our latest analysis for Ubtech Robotics

SWOT Analysis for Ubtech Robotics

Strength

Debt is well covered by earnings.

Balance sheet summary for 9880.

Weakness

Expensive based on P/S ratio and estimated fair value.

Shareholders have been diluted in the past year.

Opportunity

Forecast to reduce losses next year.

Threat

Debt is not well covered by operating cash flow.

Has less than 3 years of cash runway based on current free cash flow.

Not expected to become profitable over the next 3 years.

Is 9880 well equipped to handle threats?

Next Steps:

Whilst important, the DCF calculation shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Can we work out why the company is trading at a premium to intrinsic value? For Ubtech Robotics, we've put together three pertinent aspects you should assess:

Risks: For example, we've discovered 2 warning signs for Ubtech Robotics that you should be aware of before investing here.
Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for 9880's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SEHK every day. If you want to find the calculation for other stocks just search here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.