Research on Enterprise Value Evaluation Based on EVA Model Taking Three Squirrels Inc. as an Example

: With the rapid development of e-commerce, all industries in China have joined the army of e-commerce, and the food industry is no exception. E-commerce in the food industry can effectively broaden food sales channels, and the industry has great potential for development. As a food e-commerce company with the highest sales scale in China, Three Squirrels has a good representation in the food e-commerce industry. Therefore, selecting it as a case study for enterprise value evaluation is of reference significance for investors and managers to comprehensively and accurately assess the value of food e-commerce enterprises. This paper takes Three Squirrels Co., Ltd. as an example to explore the application of EVA model in food e-commerce enterprises and verify its applicability in the valuation of e-commerce enterprises.


INTRODUCTION
With the continuous improvement of China's economy and the upgrading of consumer philosophy, the market development potential of the casual food industry is huge, and the competition among major casual food brands is becoming more and more intense.Yio believes that the development potential of China's casual snack food industry is large and is expected to maintain a compound growth rate of more than 6%, and it is estimated that the domestic casual snack food market will reach 4 trillion yuan by 2025 [1].At the same time, with the rapid development of e-commerce, various industries have joined the army of e-commerce, and the food industry is no exception.Food e-commerce is important for improving food logistics and expanding food sales channels, and can effectively combine all aspects of the food industry organically, so it has great development prospects [2].Therefore, it is very important for both business managers and investors to accurately understand the financial status of food e-commerce enterprises and reasonably measure the enterprise value of food ecommerce enterprises.
At present, in the domestic capital market, enterprise value assessment is based on the income approach and the market approach [3].This traditional appraisal method easily leads to unreasonable pricing of enterprise value, making the appraised value of the enterprise deviate significantly from the actual value of the enterprise [4].With the gradual adoption of EVA as a performance evaluation standard by central enterprises, the concept of EVA for enterprise value assessment is gradually developing.The empirical study of EVA by Chengfeng Long et al. [5] shows that compared with traditional evaluation indicators, EVA performance evaluation indicators are more effective.
EVA is an evolution of the discounted cash flow model, which adjusts the statement from the perspective of economic profit and better reflects the intrinsic value of the enterprise.By applying different evaluation methods and exploring suitable approaches for evaluating food ecommerce enterprises, we can not only improve the effectiveness of valuation of such enterprises but also provide new ideas for evaluating this type of enterprise [6].

Meaning of EVA
EVA refers to the return on investment over the cost of capital, i.e., the difference between the net operating profit after tax and the cost of capital.When the difference is positive, the shareholder value increases accordingly; on the contrary, when the difference is negative, the shareholder value decreases accordingly [7].The advantage of the EVA model is that it comprehensively considers the cost of capital and avoids overestimation of the final assessment results.EVA does not negate the traditional accounting, but adjusts the accounting treatment method, and comprehensively considers the balance sheet and the income statement in the calculation, to eliminate some negative effects on the business performance of the enterprise [8].Under this method, the corporate profit is defined from the shareholders' perspective, which allows for a better examination of a company's ability to create value for shareholders [9].

Calculation of EVA
The formula for calculating EVA is:  =  −  ×  (1) Among them, NOPAT is net operating profit after tax; TC is total capital; WACC is weighted average capital cost.

Introduction to Three Squirrels
Founded in 2012, Three Squirrels Inc. is currently the largest food e-commerce retailer in China.Its main business model is to use the Internet for online product sales, and its main business includes nuts, dried fruits, puffs, and other full varieties of casual foods.on July 10, 2019, Three Squirrels Co., Ltd. announced that it will issue common shares, and on July 12, 2019, it was successfully listed on the GEM of the Shenzhen Stock Exchange, becoming the "first national snack stock ".Currently, Three Squirrels has become the first company in the snack food industry to break the threshold of USD 10 billion [10].

Financial Analysis of Three Squirrels
The analysis of Three Squirrels' financial indicators such as gearing ratio and net sales margin from 2017-2021 shows that the company's debt-paying ability, profitability, and operating capacity indicators in recent years are relatively reasonable and stable, with the indicator values fluctuating within a small range.Therefore, the company can ensure continuous operation, has a stable external environment and capital structure in the industry and has the prerequisites for applying the EVA method.The main financial indicators of Three Squirrels, as shown in Table 1.

Calculation of net operating profit after tax (NOPAT)
Net operating profit after tax (NOPAT) is a reflection of the profitability of a company's operations and is not directly reflected in the income statement.EVA focuses on the net profit generated from operations.NOPAT is based on the net profit on the income statement published by the enterprise in the reporting period, calculating the sum of net profit and interest expense items, and then adjusting some items of accounting accounts to arrive at the final value of NOPAT, which reflects the operating profitability of the enterprise.The NOPAT is based on the net income of the reporting period, the sum of net income and interest expense, and the adjustment of some accounting items to arrive at the NOPAT value.An analysis of the adjusted net operating profit after tax of Three Squirrels and the specific calculation process is shown in Table 2.

Calculation of total capital (TC)
According to our accounting standards, the assets in the accounting statements are not equal to all the assets used by the enterprise for operating activities, and accounting adjustments need to be made to the relevant asset items in accordance with the EVA value concept.The total capital analysis table and specific calculation process of Three Squirrels are shown in Table 3.

Calculation of weighted average cost of capital (WACC)
The Weighted average cost of capital (WACC) consists of two components: the firm's cost of equity capital, which refers to the rate of compensation required by shareholders; and the cost of debt capital, which refers to the amount the company pays for issuing bonds or borrowing.The formula for calculating the weighted average cost of capital is as follows: ) Among them,  is equity capital;   is the capital cost per equity unit;  is debt Capital;   is the capital cost per unit of pre-tax debt; and  is the corporate income tax rate.
can be calculated from the capital asset pricing model by the following formula: ) Among them,   is the risk-free rate of return, which is generally taken as the short-term treasury rate;   is the market rate of return on securities;   −   is the risk premium, which reflects the compensation for market risk, using the growth rate of our GDP as a proxy;  is the volatility of a stock relative to the market.The  of Three Squirrels can be queried to be 1.16, i.e.   =1.16, which is  of the asset, and we should apply   , the  of equity capital, when calculating the cost of equity capital.  can be calculated as follows: The analysis of the weighted average cost of capital of the three squirrels in 2017-2021 is shown in Table 4.

Enterprise value evaluation of Three Squirrels
The EVA values of Three Squirrels for 2017-2021 can be obtained by using formula (1), and the calculation process is shown in Table 5.The enterprise value evaluation model is: Where  is the enterprise value;  0 is the initial investment cost.The value of Three Squirrels can be calculated by using formula (4):  =  +   + .% +  ( + .%)  +  ( + .%)  +  ( + .%)  +  ( + .%)  = . According to the above estimates, the enterprise value of Three Squirrels in 2022 is expected to be 12.89 billion yuan, with a market value of 5.68 yuan per share.

Analysis of evaluation results
In 2022, the total number of outstanding shares of the Three Squirrels is estimated to be 227 million.The enterprise value of 1.289 billion yuan calculated by the above estimation model is divided by the number of shares, and the market value is 5.68 yuan per share.The current average market share price is 23.29 yuan per share.However, the market price is higher than the actual value of the enterprise, indicating that there is a fictitious component of the enterprise market value, mainly due to the project investment of the enterprise in recent years caused by the shareholders EVA valuation method can not reflect the impact of all factors on the enterprise value.There are certain risks, such as choosing accounting accounts and determining the cost of capital.

CONCLUSION
Through the study of this paper, it is found that there are still significant differences in the application of EVA model for enterprise value assessment for Three Squirrels.At present, EVA theory is not fully researched in China's food e-commerce industry, and there are not enough objective and perfect applications of EVA models today.In the calculation of enterprise value assessment, the yearby-year EVA forecasts for the future high growth period and the annual EVA values for the stable growth period are very important, and they will have a great impact on the enterprise value.However, today's models do not provide a unified and scientific standard for EVA forecasting, which may lead to deviations between the evaluated valuation and the true value of the enterprise.Therefore, we should make reasonable improvements to these deficiencies in the future to improve the universality and accuracy of EVA models.

Table 1 .
Financial indicators of Three Squirrels in 2017-2021

Table 2 .
Calculation of net operating profit after tax in 2017-2021 (Unit: million yuan)

Table 4 .
Calculation of weighted average cost of capital in 2017-2021

Table 5 .
Calculation of Annual EVA of Three Squirrels in 2017-2021 (Unit: million yuan)