Canaan Research Report

Summarize

Summarize

Although Canaan Zhizhi announced that the performance growth in the first three quarters of 2019 was lower than expected, the growth rate of the entire industry is also declining due to the bear market of Bitcoin. However, the company's free cash flow and revenue have both declined significantly, accompanied by an increase in cost of sales. There may be a slight decline in the future.

catalyst

1. Mining machine business: We expect that the core business will continue to grow well and occupy more market share. The company will use the cash obtained from the listing to strengthen research and development and further accelerate the launch of new products.

risk

risk

Net cash flow loss - Canaan had a negative cash flow from operating activities of RMB 12.7 million (US$1.8 million) for the year ended December 31, 2018 During the month, it suffered another net loss of 236.3 million yuan ($33.1 million). Canaan Creative may not be able to maintain or increase profitability over the long term. The inability to generate positive cash flow from operating activities can greatly affect financing costs.

Discounted Cash Flow Analysis (DCF)

Based on the weighted average cost of capital of 4.355%, operating income growth rate of 10%, and long-term growth rate of 3.5%, we estimate the intrinsic value of Canaan to be $2.11.

Comparative analysis of similar companies (Comps)

After analyzing the basic situation, we concluded that, assuming that the stock price is converted at a 25% percentile P/E and P/TBV, we estimate that the intrinsic value of Canaan Zhizhi is $2.315.

Gross calculation

Be vigilant against illegal financial activities under the banner of blockchain and new technologies. The standard consensus resolutely resists various illegal activities such as illegal fundraising, network pyramid schemes, ICO and various variants, and dissemination of bad information using blockchain.

Disclaimer:

• Be vigilant against illegal financial activities under the banner of blockchain and new technologies. The standard consensus resolutely resists various illegal activities such as illegal fundraising, network pyramid schemes, ICO and various variants, and dissemination of bad information using blockchain.