The Value Evaluation On Power Industry

Asset pricing is one of the three core researchs in finance, and business valuation is pricing the assets of enterprises. Valuation is closely related with other issues of finance:as an investor with the philosophy of value investing, an indispensable lesson is to value the firms invested so that they can find underestimated stocks; in M&A and asset reorganization, the core problem is also to find out how much value the target company is worthy of (there is a study showed that:about 90% of the time in a negotiation of M & A is to talk about the value of the business).so, we can see that the effectiveness of all those problems is directly related with the effectiveness of evaluation.All of those let me realize that value assessment is an extremely important problem which has not been solved satisfactorily. Research on this issue can help the parties involved in capital markets to correctly understand and assess value of enterprises, can be also conducive to the optimal allocation of resources, and improve the efficiency of capital markets. So, this is a very meaningful research topic.There are many literatures which have a research on how to analyze an industry and a company so far, however, they have a weak point which is that although they have given a comprehensive analysis, they have been lack of strong logic. It looks as if you are surrounded by mountains and could not find a way out.Therefore, I am trying to find a good starting point, which helps to grasp the main factors. In the paper, I use competitive advantage as the perspective of analysis, which is not researched much in previous literatures.The unique perspective is an innovation in the paper and also a challenge.In the empirical part, I select power industry as a case study. Power industry, as a basic industry of a nation, holds an important position in the national economy, and is also an very important plate in the capital market. In the background of economic restructuring, what will happen to power industry and the value of investment which is also concerned by all participants in capital market. Through this analysis, I hope I will get an answer to this question.Through this paper, I have a more deeper understanding of valuation: valuation is not an easy thing and the biggest challenge is that the intrinsic value depends on cash flows on the future, but the future is uncertain, besides, the longer the forecast period, the greater the difficulty of forecasting. Even Warren Buffett has lamented:Valuation is a combination of science and art. Fortunately, what we want is not a precise value, but a rough value of estimation or a range of valuation. Keyness once said:I'd rather be vaguely right, but not be precisely wrong. Personally, this is the best interpretation of valuation.Finally, The feature of this paper is that:the paper has six chapters. The first chapter is an introduction of research background,research ideas and related literature; In the second chapter, it describes theories and models of assessment and advantages and disadvantages of models, gives a theoretical explanation between competitive advantage and business value; The third chapter is to analyze the fundamental of power generation industry, where I have apply tools such as Porter five forces model, and also analyze the most important factor which will have an impact on investment value and future prospects of the industry; In the fourth chapter, it is about analysis of company's fundamentals from both non-financial and financial prospectives, and the purpose is to analyze the company's competitive advantage; The fifth chapter is the empirical part,based on the first two parts of qualitative analysis, through the application of DCF model and P/E model,we can give a value to the company; The last chapter is a summary of the paper, which is talking about the understanding of valuation and the inadequacies of this article.