This case is the gold medal work of the first Challenge Cup Entrepreneurship Plan Competition, which is provided by the Youth League Committee of Shanghai Donghua University. In order to avoid excessive length, some of the contents have been cut down.
Contents
1. Executive Summary
2. Project Background
3. Market Opportunities
4. Company Strategy
5.
10. Opportunities and Risks
11. Exit of Venture Capital
Appendices:
1. Market Volume Estimation
2. Market Survey and Qualitative Analysis
3. Financial Schedules
1. 1. Executive Summary
1. 1. 1. 1. 1. 1. 1. 1. The Company
The Crustacean Materials Research & Development Co. Ltd. is a proposed company, which owns the patented technology of chitin fiber preparation, advocates the new concept of science and technology-based green life, and provides mankind with the best natural biological products.
China's medical sutures have an annual market demand of about 1.5 billion yuan, of which about 750 million is absorbable sutures. The company was initially established to produce medical chitosan absorbable sutures to meet the needs of the rapidly growing absorbable suture market, and used the investment in factory solutions to solve the problem that most of the PGA (Polyglycolic Acid) absorbable sutures were imported and expensive, which affected the improvement of people's medical standards.
The company focuses on the combination of short-term goals and long-term strategy, the medium and long-term goal will gradually broaden the product range, involved in chitin medical antibacterial materials, fast food utensils, drug release materials, artificial organs, cosmetics, health care clothing fabrics, new environmentally friendly packaging materials, etc., the formation of a chitin materials as the core of the diversified business group.
1.2 Market
The medical suture market is a group market, and the purchasing process is a group purchasing behavior.
1. 3 Investment and Finance
The company is located in Shanghai Zhangjiang Hi-Tech Park and enjoys the preferential tax policy of "three exemptions and three halves".
The company was established in the early stage **** the capital required 11 million. Among them, venture capital is 7 million, Donghua University invests 1 million, and short-term borrowing is 3 million. Which is used for fixed assets investment of 6.02 million, working capital of 4.98 million. In addition, the Tianpure Biomaterials Co., Ltd. equipment shares 1 million.
Size and structure of the share capital for the time being: the company's registered capital of 12 million. Foreign venture capital 7 million (58.33%); Donghua University (former China Textile University) patented technology into 3 million (25%); capital into 1 million (8.33); Shanghai Tianchun Biomaterials Co.
The second year is estimated to make a profit of 10 million yuan, and then the annual sales margin of about 45%, the second year of return on assets of 75.39%, payback period of two years and one month.
Risk capital is best withdrawn in the 3rd-5th year, the acquisition method is more suitable for the company.
1.4 Organization and Human Resources
The nature of the company is a limited liability company, the initial organizational structure to take the linear system. The company's ownership and operation are separated, and the general manager is responsible for the system. Under the general manager, there are vice general manager of marketing, vice general manager of technology and vice general manager of finance.
A gram of fiber equipment technology patents belong to Donghua University, Professor Tan Zhiqing and other teachers are the inventors of patented technology. Professor Tan Zhiqing has many years of experience in the industrialization of technological achievements, will serve as chairman of the board of directors of the company and deputy general manager of technology; entrepreneurial team members will be involved in the company's marketing and financial management; the company has also hired the Donghua University Department of Marketing Professor Gu Qingliang as a marketing consultant.
2. Project Background
2. 1Industrial Background
In recent years, China's medical device industry has been developing rapidly. 1978, China's total industrial output value of medical devices was 730 million yuan. By 1995, according to the State Administration of Medicine statistics for 8 billion yuan, while the relevant aspects of the survey shows that the actual total output value of the national medical device industry amounted to 16-18 billion yuan, equivalent to 22-25 times in 1978, accounting for about 2% of the world's total sales. China's medical equipment industry development lags behind the chemical and pharmaceutical industries, developed countries, medical equipment and drug sales ratio of nearly 1:1, while China is only 1:10, so there is great room for expansion.
According to the survey, the value-added of high-performance medical textiles can reach about 1:50.
At present, China's large number of medical sutures are used in three kinds of thread: silk thread, sheep intestinal thread and PGA class absorbable thread. The sheep's intestines and PGA sutures are absorbable sutures.
Sheep intestinal thread production process is backward, pollution of the environment, poor absorbability, easy to allergic and antibody reaction. At present, its existence is only due to the price advantage.PGA class absorbable suture is heavily dependent on imports, which not only costs a lot of foreign exchange and increases the economic burden of the country and surgical patients, but also has a certain impact on the improvement of China's surgical level.
According to the Taiwan Chemical Industry Association, there are only three factories in the world to produce PGA raw materials, it is not easy to obtain, the price remains high. In addition, the high water content of PGA will lead to hydrolytic deterioration of the material, mechanical strength decline, the quality of the suture is seriously affected.
As a pure biological product, the absorbable suture made of chitosan can be completely absorbed by the human body without toxic side effects, and can meet the needs as an alternative to absorbable sutures. On the basis of absorbing the advantages of imported absorbable sutures, the research and development of absorbable sutures made of crustaceans with superior performance and suitable price is in line with the requirements of society and the market.
The production of absorbable sutures made of medical shells is ahead of its time globally, and has long-term economic and social interests in promoting the development of China's medical device industry, improving people's medical standards, and reducing the burden of the country's foreign exchange.
2.2 Product Overview
Obviously
2.3 Advantages of Chitosan Absorbable Suture
It has been proved by clinical experiments that, compared with the existing sutures, the medical Chitosan Absorbable Suture possesses the main advantages of being an absorbable suture:
*Pure biological products, good compatibility with the human body, and small scars of the wound suture;
*The raw material is widely found in marine organisms, and the cost is one-tenth of that of PGA products;
*The formation of an environment around the thread that inhibits bacterial growth, which is conducive to wound healing;
*Non-toxic, non-irritating, non-antibody reaction, and can be completely absorbed by the body;
*Sufficient tensile strength and flexibility, which is in full compliance with the requirements for the preparation of resorbable sutures.
*Easy to store, almost no decomposition in the air;
*Can withstand sterilization treatment, can be dyed, antiseptic treatment, etc.;
*Qualified professors, experts, researchers as the scientific research, research and development strength, patented technology, international leading.
2. 4 chitin application prospects
Chitin is a natural polymer, is a new type of environmentally friendly materials, in the field of medicine, agriculture, light industry and other fields with a wide range of prospects. In medicine, it can be used to make artificial skin, drug release materials, hemostatic agents and wound healing agents, artificial organs (such as artificial kidney, artificial blood vessels), etc.; in agriculture, it can be used for the production of chitosan, shell system packaged agriculture, degradation of mulch film, etc.; and then light industry, it can be used for cosmetics, health care products, functional clothing, environmentally friendly packaging materials, etc..
3. Market Opportunities
3. 1 Market Characteristics
3.1.1 Overview
The actual consumer of medical sutures is the patient, the user and the purchase decision maker is the surgeon and the head nurse, and the actual buyer is the purchasing department. The market characteristics present the specificity of the separation of users, purchase decision makers and purchasers.
Medical sutures are a group market, the purchasing process is a group purchasing behavior, and sales promotion is the most effective way to sell. Doctors first choose the type and size of suture according to the type of surgery and requirements, and at the same time will be affected by the use of habits, brand preference, geographical differences and other factors.
Sutures belong to the category of medical devices, and the macro policies and regulations formulated by medical and health management organizations, such as the State Administration of Medicine and Health Bureau, will have a significant impact on their development.
The sale of medical devices should be complete with three certificates, three certificates are "Medical Device Manufacturing License", "Medical Device Sales License", "Product Conformity Certificate", and in some places, "Permission to Sell" issued by the local health authorities is also required.
3.1.2 Purchase decision-making process
In the purchase decision, the doctor and the head nurse of the operating room play a very important role, and some are even designated or purchased by the head nurse (especially in hospitals below the second level), and a very small number of hospitals by the administration to decide to buy. The decision-making pattern is mainly shown in the following figure:
Purchase Decision Flow Chart
Figure 1. 略
3. 2. Market Segmentation
By the degree of market development, the domestic market of medical sutures is mainly divided into two categories:
3. 2. 1. Developed Absorbable Suture Market
It is a market that uses sheep's intestinal sutures and PGA-type absorbable sutures. sutures market.
*Markets using a large number of PGA absorbable sutures
The distribution of these markets is mainly in hospitals in large cities with high level of economic development and high level of medical care, such as Beijing, Shanghai, Guangzhou, etc. The characteristics of the market are as follows: Manufacturers are very interested in the use of PGA absorbable sutures, but they are not interested in the use of PGA absorbable sutures. Market characteristics are: manufacturers for the use of PGA class absorbable sutures for the pre-publicity has been basically completed, the degree of acceptance of doctors is high, doctors have a high degree of brand loyalty; absorbable sutures are widely used, the application of time is long; price sensitivity is relatively low; consumer behavior is more mature.
*Markets that use a large number of sheep's intestines
This type of market distribution is mainly in the hospitals of large and medium-sized cities with relatively low water quality of economic development. Such as Xi'an. Market characteristics are: absorbable medical sutures mainly use sheep's intestines, not yet large-scale use of PGA absorbable sutures; doctors for absorbable sutures for a relatively high degree of acceptance; more sensitive to price; brand loyalty is not high.
3. 2. 2. Untapped market for absorbable sutures
This refers to the market where absorbable sutures should or could be used but silk sutures are still used.
This kind of market distribution is mainly in the low level of economic development, limited medical level of small and medium-sized urban hospitals or small hospitals in large cities. Market characteristics are: doctors less contact or use of PGA absorbable sutures; the common use of silk thread in surgery; for price sensitivity is very high; PGA absorbable sutures have not yet entered this type of market, competition and ring.
3. 3. Sales Channel Analysis
According to the survey, the main sales channels of medical sutures are:
* Manufacturers' direct sales/local agents' sales
This is the main method used by manufacturers of PGA-based absorbable sutures. Through local agents can reduce barriers to entry and enter new markets smoothly. Manufacturers' direct sales are suitable for markets with small barriers to entry. Hospitals generally trust the local agent, problems occur in a timely manner, and reputation is guaranteed.
The sales process is mainly like this:
Figure 2. strategy
*Sales through the medical device wholesale companies
Mainly domestic manufacturers of silk thread, sheep intestines, they have established a huge sales network through all levels of medical device companies, distributors, sales channels are smooth, and has a strong business relationship with the country's major Chinese hospitals, subject to the influence of human factors is relatively small. The influence of human factors is relatively small.
Sales process as shown in Figure:
Figure 3. slightly
3. 4. Competitive analysis
* Silk thread: cheap, at present, the operation is still a large number of ordinary silk thread. Shanghai Pudong Jinhuan Medical Supplies Co., Ltd. occupies the majority of the market share of the national silk thread market, followed by the United States Johnson and Johnson's "Mousseline" is also commonly used in large hospitals in China, and domestic manufacturers in Tianjin, Hangzhou, Wuxi, Nantong and other places.
*Sheep's intestines: cheap, more often used in obstetrics and gynecology surgery, inconvenient to use, easy to cause inflammation, in the stage of being gradually replaced. Manufacturers are mainly located in Shanghai, Tianjin, Hangzhou and other places.
*PGA class absorbable sutures: mostly imported, domestic Nantong also have production, higher prices, manufacturers to the United States Johnson and Cyanamid (Kendall) for the most. The main use of door-to-door sales and a large number of complimentary products to use the way to capture the market.
According to the survey, Johnson & Johnson and Cyanamid have more than 80% of the market share of absorbable sutures in Shanghai; followed by Nantong "Huarikang" also has a certain percentage. The price of "Huarikang" is about 60% of that of Johnson & Johnson and Cyanamid, but the price advantage is basically offset by its imperfect after-sales service and quality problems.
3. 4. 2. Competitive Influence Analysis
Slightly
3. 4. 3. Competitive Advantages
Superior performance of chitin suture itself; monopoly of know-how and talents; cost advantage; availability of resources; and high and new technology in line with the direction of the government's policy development.
3.5.1.1 Market Capacity
3.5.1.1 Market Capacity
According to the estimation: in 1999, the market capacity of the domestic medical suture market is about **1.5 billion RMB. According to the survey and secondary information, the current use of absorbable sutures only accounts for about 5% (including sheep's intestine thread, PGA class thread), but the amount accounts for about 50% of the total amount of about **750 million. (Note: **Estimation process see Appendix 1)
3.5.2. Trend Analysis and Forecast
According to Taiwan's Industrial Technology Research Institute reported that the global medical sutures is the long-term annual growth rate of 4%. According to the survey, PGA class suture products only developed absorbable suture market of about 10%, the market potential is huge.
At present, medical absorbable sutures are mainly used in large-scale surgery (such as open thoracic, abdominal, etc.), PGA-type absorbable sutures are mainly dependent on imports, and the country has strict restrictions on them.
Considering the growth of the market, the annual sales of crustacean sutures are estimated to reach about 100 million dollars in five years.
(See Appendix 1)
3. 6. Impact of policy guidelines and WTO
Obtuse
4. Company strategy
4. 1. Company overview
Obtuse
4. 2. Overall strategy
The company is expected to be the market leader in the field of medical resorbable sutures in 3~~5 years.
4.2.1 Mission
Provide high quality chitin products to the society and improve the health of human beings
4.2.2 Purpose
To focus on the green environment and the quality of life, and to create health and hope
4.3.3.4 Development strategy
4.3.1 Initial period (1-3 years)
4.3.2.3 Development strategy
4.3.3.1 Initial period (1-3 years)
5 years
The main product is medical chitin absorbable suture, the market strategy is to replace the sheep's intestine thread and part of the silk thread, to occupy the market share of PGA suture; to build up their own brand, to accumulate intangible assets; to recover the initial investment, to prepare for the expansion of the scale of production, and to begin to prepare for the development of derivative products.
The first two years:
Product introduction into the market, increase product awareness, establish brand image;
Gradually establish a sound sales network;
Opening and initially occupying the market of medical absorbable sutures;
Accumulative production of about 4 million, sales revenue of about 43 million yuan, profits of about 10 million yuan;
Market share of the PGA suture market;
Market share of the PGA suture market. >
Market share of absorbable sutures 4%-8%.
Third year:
Enhance brand image and increase intangible assets;
Increase equipment and expand production scale;
Annual output reaches to 3,000,000 pcs, with sales revenue of about 60,000,000 yuan and profit of about 26,000,000 yuan;
Market share is increased to about 15%;
Develop silk thread, utilize the existing sales network to develop the entire suture market;
Products are basically mature, focusing on tapping the new performance of the products, developing derivative products, and expanding the market;
4. 3. 2. Medium-term (4-6 years)
Further improve and sound sales network;
Focus on the development of related products, further expanding the product line, and technology advantages, develop and research chitin-related products, realize product diversification, expand market space and market share, and become a leader in the medical, agricultural and chemical fields.
Vertical extension: based on the medical field, to further improve the performance of chitin sutures; development of new medical materials; the production of related hemostatic agents and wound healing agents; the development of artificial kidneys and so on.
Horizontal extension: development of pesticides and agricultural films for soil restoration; development of health care products and environmentally friendly packaging materials; development of cosmetics and health care clothing fabrics.
The company will participate in the international competition with high technology and enter the corresponding international market in due course.
The product extension is shown in Figure 5:
Figure 5:
5. Market Distribution
5.1.Target Market
General hospitals, specialized hospitals, health care hospitals, etc., at the county level or above nationwide.
5.2.2 Product
5.2.1 Product
Slight
5.2.2 Packaging
Slight
5.2.3 Service
Slight
5.2.4 Brand
Slight
5.3.4 Price
5.3.4 Branding
Slight
5.3.4 Branding
Slight
5.5.5.5.1 Target Market
National county-level or above general hospitals, specialized hospitals, health care hospitals, etc. Price)
For the domestic market situation, we intend to take the intention of pricing price strategy, the big agreement in the imported brands of 50% -75%. That is, under the same conditions, relative to imported brands have price advantages, relative to domestic brands have quality advantages. Competitors to take the price reduction strategy, we have a larger price reduction space to maintain their own advantages.
According to the survey, the overall price of PGA-type absorbable sutures is too high, and hospitals try to minimize the use of PGA-type sutures in order to reduce the burden on patients. We are a late entrant, the pricing strategy of similar products has a greater impact on us; from the perspective of enhancing the competitiveness of our products and the development of our company, the price of our products is positioned in the mid-range.
5. 4. Sales Channels (Place)
There are two types of sales channels to be adopted: building our own sales network; utilizing existing channels.
Establishment of the above Shanghai as the center of the sales network: Jiang country divided into Northeast, North China, Central China, South China, East China, Northwest, Southwest seven regions, each city set up a distribution center, by the regional distribution centers and agents*** with the development of the market, and is responsible for overseeing the work of the agents in this region and the construction of the secondary network. The principle of the establishment of the sales network is to provide customers with the most efficient service.
Use of existing dealers: the company is in the initial stage, the sales network is being gradually built, the use of dealers ready-made sales network to make up for the shortcomings of the self-built network, to expand the scope of the market, and to attract a good relationship with the network, the ability to attract agents to improve the self-built sales network.
Try to choose the dealer in the sales network has not been built or not perfected in the region, to avoid conflicts between the two. With the continuous improvement of the company's sales network, will gradually reduce the sales range of dealers.
Establishing the company's website and customer resource management library, actively promoting the development of the company's network distribution, and timely development of e-commerce. Timely collection of feedback information after use, and according to the situation to take appropriate measures to ensure the smooth entry of products into the market. Giving away products for doctors to try is a more effective way of rough marketing, which can cultivate the product and brand affinity, and can also change the doctors' suture trial habits.
Considering the company's long-term strategy and competitive advantages, the amount of free gifts will be 900,000 pcs in the first year, 1.6 million pcs in the second year, and 800,000 pcs per year after the third year.
Figure 6.
5.5.2.2 Personnel marketing
Sketch
5.5.3.3 Advertisement
*Corporate image advertisement
Published well-produced advertisements of the company's corporate image in large and medium-sized media and specialized media, the advertisements strive to convey the information accurately in the right place, and at the same time, with the written reports will achieve more good results.
Publicize the company's philosophy--"Your health ,our success"
"Your health ,our hope"
"Your health ,our hope"< /p>
*Product brand advertising
Brand advertising can be carried out through a variety of channels. Radio and TV advertisements have a short information transmission time and can be used to increase awareness; newspapers and magazines are utilized to produce some profound and high-grade advertisements to enhance the brand image; product brand advertisements maintain the unity of style and utilize the characteristics of different media to establish an all-around and three-dimensional information broadcasting network.
*Public Welfare Advertising
In addition to the use of newspapers, magazines, radio, television and other communication channels, but also in the social welfare activities to establish a good image of the company. For example, it builds first aid centers with medical departments*** and publicizes the knowledge of self-rescue and mutual rescue in emergency situations.
5.5.4.4 Public Relations (Public Relation)
In the beginning of the company's public relations work. The principle of public relations activities is to establish a good image of the company's advanced technology, innovation, rigor and pragmatism, and a sense of social responsibility.
In the early stage of the company's establishment, the focus of public relations activities to enhance the company's visibility, to help the construction of the sales network.
*Hosting large-scale academic exchanges, seminars
*Establishing scholarships in the medical school, not only to cultivate potential customers, but also in the hearts of teachers (usually the backbone of the medical school) to establish a corporate image for the later sales to lay a good foundation;
After the company formally operates, the focus of public relations activities is to establish a corporate image, to attract the attention of the public, and to deepen the sales network. Two-way communication with the public, deepen the public's understanding of the product, and improve product and brand awareness and reputation.
*Organize popular science programs and columns with the media, and open free consultation hotlines;
*Produce a lively, user-friendly homepage to launch online public relations.
5. 6. Market development and entry
According to the survey, doctors and head nurses in Xi'an are less loyal to the brand of medical sutures, and the key factor is the price, and it is easier for them to use different brands of the product; doctors in Beijing, Shanghai, and Guangzhou are less sensitive to the price, and they are not willing to try different brands, so it is not easy for them to develop and enter into the market, but the amount of use is far greater than that in Xi'an.
Medical chitin suture market strategy for the replacement of sheep's intestines and crowded PGA class absorbable suture market, to open up the market that should use absorbable sutures but use silk sutures. Entry strategy should first consider Xi'an and other large and medium-sized cities in the Mainland, to be able to get returns earlier; but also to Beijing, Shanghai, Guangzhou and other developed cities to develop the market, to obtain the company's long-term and maximum benefits.
5.6.1.1 For the market of absorbable suture that has been developed
Market development and entry can be used as follows:
* Occupy the market of traditional absorbable suture sheep's intestines, replace the existing sheep's intestines.
According to the survey, sheep's intestinal thread is still used in large quantities in small and medium-sized urban hospitals with a low level of economic development. Sheep intestinal line is in the decline of the product, the trend of substitution is becoming more and more obvious, so that medical chitin sutures into this market will have the following advantages: good product performance, easy to use, perfect service, affordable.
*Entering the market of shell absorbable sutures of PGA-like materials, competing with imported products for market share
Competing with imported absorbable sutures, medical quality, good price and excellent service to establish the product and brand image, highlighting the bio-environmental protection of chitin, and constantly expanding the market.
The focus of the work is to improve brand awareness, reputation, and establish a good brand image; emphasize the biological properties of the product; change the brand preference of doctors of the existing absorbable sutures, and establish brand loyalty.
Organize discussions on the prospects for the application of chitin materials in professional medical magazines, emphasizing the biological characteristics of chitin materials; professional sales staff to introduce the product to doctors, so that doctors fully understand the product performance, to establish confidence in chitin medical sutures, and be able to try it out; to provide a perfect pre-sale, sale, after-sales service, supplemented by competitive prices to win the market; to improve the relationship between public ****, to establish a good corporate social image. , establish a good social image of the enterprise and win the trust of customers.
5.6.2 The market for absorbable sutures has not yet been developed
The focus of market development and entry is the traditional habit of doctors to use sutures in surgery, replacing part of the silk thread.
According to the survey, doctors choose sutures according to the type of surgery. Silk sutures are available for some surgeries and absorbable sutures are also available. Doctors choose sutures on the basis of their own long-term working process formed the habit of use and price with the patient.
The focus of the work is to change doctors' attitudes towards the use of traditional sutures and to emphasize the importance of absorbable sutures for surgical patients; to publicize the trend of suture development, to make doctors accept the idea of using absorbable sutures and to guide some of the "trend leaders" among doctors to use absorbable sutures.
The way of market development lies in the communication between professional sales staff and doctors, introducing the advantages of chitin sutures and raising the awareness of doctors to chitin sutures; introducing chitin-shell absorbable sutures to them, so that customers can understand the product's various properties, application, etc.; through a large number of gifts to try and cultivate the habit of use among doctors, but it takes a longer period of time (one to two years) to popularize the use of chitin sutures.
Then, with moderate prices, perfect service, strong public **** means to open the market.
6. Production Management
6.1. Production Requirements
Production Cycle: from raw materials to the sewing line production cycle of 6 days.
Worker requirements: college or university degree in related fields, after three months of professional training
Technical key: chitin fiber equipment
6.2.2 Factory site selection
Obviously
6.3.3 The project schedule
Figure 7. Oblong
6.4.4 Production process
Obviously
7 Investment analysis
7. p>7. Investment Analysis
7. 1. Share Capital Structure and Size
The company has a registered capital of 12 million. The structure and scale of share capital are as follows:
Share Capital
Source
Scale of Share Capital
Venture Capital
Donghua University
Equipment Equity
Technology Equity Capital Equity
Amount 7.0 million 3.0 million 1.0 million 1.0 million
Proportion 58.33% 25.0% 8.33% 8.33% 8.33% 8.33% 8.33% 8.33% 25.0 00% 8.33% 8.33% 8.33%
In the share capital structure, the technical and capital participation of Donghua University accounts for 33.33% of the total share capital, and in terms of venture capital, we intend to bring in 2-5 venture capitals*** with us to facilitate fundraising and risk mitigation, as well as to prepare for a possible listing in the future.
Figure 9.
Equity structure and size
7. 2. Sources and application of funds
The company needs to borrow funds of 3,000,000 yuan (one-year borrowing from financial institutions at an interest rate of 5.85%) at the initial stage to be used as liquidity, and at the same time, taking into account the reasonable ratio of liabilities, the company's assets and liabilities ratio of 1:5.
The funds are mainly used for Purchase and construction of production fixed assets (6.02 million), as well as direct raw materials, direct labor, manufacturing costs and other types of period costs required in production (4.98 million). (Note: the third year of additional fixed assets investment of 700,000 for the purchase of knitting machines and other equipment)
7.3. Investment return and risk analysis
Main assumptions: the company's equipment, raw materials suppliers of the credibility of the company is good enough, the arrival of the equipment, installation, debugging in 4-6 months to complete the production of product quality can be guaranteed in the production;
Leasing plant, located in the well-equipped Pudong Zhangjiang Hi-Tech Park, pay rent to operate.
The investment cash flow markers are as follows:
Table 2.
Investment Cash Flow Statement
Initial First Year Second Year Third Year Fourth Year Fifth Year
Investment in Fixed Assets 602.00 70.00
Liquidity 498.00
Sales Revenue 1000.00 3250.00 5750.00 7250.00 8750.00
-Variable cost 641.71 1242.66 1772.00 2230.08 2639.79
-Fixed cost 509.55 888.00 1294.00 1540.00 1836.00
Profit before tax 0.00 -151.28 1119.34 2684.00 3479.92 4274.21
-Taxes 0.00 0.00 0.00 260.99 320.57
Profit after tax 0.00 - 151.28 1119.34 2684.00 3218.93 3953.64
+Depreciation 86.00 86.00 96.00 96.00 96.00
+Amortization of intangibles 15.00 15.00 15.00 15.00 15.00 15.00
Net cash flow -1100.00 - 50.28 1220.34 2795.00 3329.93 4064.64
Note: The first half of the year is the construction period (initial period), and the second half of the year, i.e., when the production is put into operation, are recorded in the first fiscal year.
7.3.1. Net Present Value of Investment
n
NPV=∑ ( CI -CO ) t ( 1 + i ) - t NPV=6760.97 (million yuan)
t=1
The interest rate of short-term bank borrowing (1 year) is 5.85%, and the interest rate of long-term borrowing is 5.92%. Interest rate on long term borrowings is 5.92% (based on 8/99). Considering the current low cost of funds, as well as the opportunity cost of funds and the riskiness of investment and other factors, I take 10% (the same below), at this time, NPV = 67,609,700 (million dollars), much greater than the 伶. The profitability of the calculation period is very good, the investment program is feasible.
7. 3. 2. payback period
Through the net flow of thrill, discount rate, investment and other data calculated by interpolation, the payback period of two years and one month, the investment program is feasible.
Payback period = the number of years in which the cumulative NPV is positive - 1 + (unrecovered cash/present value of the year)
7 .3 .3. Embedded rate of return
Calculated according to the cash flow statement, the embedded rate of return is as follows:
n
NPV (IRR) = ∑ ( CI -CO ) t ( 1 + IRR ) - t IRR=92%
t=1
The embedded rate of return is 92%, which is much larger than the cost of capital rate of 10%, mainly because of the high quality and low price of the product, which is a high profit margin on the sales, and also, the market growth is very good in the first 5 years.
7 .3. 4. project sensitivity analysis
The company's sales revenue, investment, operating costs on the existence of uncertainty from all sides, we are three by 10% and 10% reduction in single-factor changes for sensitivity analysis. Calculate the payback period and embedded rate of return using the itemized substitution method. (See the following figure:)
Figure 10. omitted
Table 3. Project Sensitivity Analysis omitted
The company is most sensitive to increases and decreases in sales revenue, followed by operating costs. Within a range of ±10% change, the embedded rate of return remains high at 75%, indicating the ability to take risks with some reliability.
7. 3. 5. Break-even analysis
Slightly
7. 3. 6. Return on investment
Based on the forecast of the company's operating conditions in the next few years (see table of contents), the company can maintain a high profit growth, and you withdraw a reasonable proportion of net profit as a return to shareholders. For this reason, the company does not pay a dividend in the first year and pays an annual dividend of 30% of net profit after the second year.
8. Financial Analysis
8. 1. Accounting Statements and Schedules
Obviously
8. 2. Analysis of Accounting Statements
Important Statements Saying Hints: Five-year Sales Revenue (Million Yuan): 1,000.00; 3,250.00; 5,750.00; 7,250.00; 7,250.00; 8,750.00; Five-Year Net profit (million): -151.28; 1119.34; 2684.00; 3218.93; 3953.64; Time to reach positive cash flow: eight months; Time to reach break-even: fourteen months.8. 2. 1. Ratio and Trend Analysis
Table 8.
Items (%) Year 1 Year 2 Year 3 Year 4 Year 5
Sales Profit Margin _ 33.67 46.67 44.39 45.18
Basic Profitability _ 75.39 94.44 70.81 57.50
Return on Assets _ 75.39 94.44 65.50 53.19
Return on Net Assets _ 59.58 71.45 53.56 45.04
Investment Profit Margin _ 96.97 231.81 300.55 369.15
8. 2. 2. 2. 2. 2. 2. 2. 2. 2. 2. 2. Projected Sales Trend Analysis
Figure 12. <
Note:
From the sales trend graph, it can be seen that after the fifth year, the growth of sales volume and sales revenue tends to be flat, so that the sales margin basically remains at about 45%; The income statement shows that the company's economic profit in the last three years is relatively high because of the use of fixed budgets in the slush and the statement, if you consider the flexible budget, the sales inputs are subjected to the effects of market changes such as the entry of competitors or the price reduction of products, then the sales profit will be higher than that in the second three years. price reductions, etc., then the sales profit will be lower than the budgeted figure. Specific considerations are in risk assumptions and analysis.8 .2. 3. Risk Assumptions and Analysis
With there is in the financial and focus, without considering the elasticity analysis, it is assumed that the price is set at $30/root (including tax) on the basis of higher sales profit. Variable costs accounted for 38.23% of revenue, it is assumed that due to higher economic profits, yes potential competitors to join and compete for market share; the company's operations do not reach the expected sales. These factors can have a relatively large impact on the company's sales revenue. Specific prices, sales volume, cost of each year can change the space as shown in the following table:
Table 9.
First year Second year Third year Fourth year ?