Abstract
My study was focusing on business valuation and value creation strategies of AUO, CPT, and QDI which the three important companies in Taiwan TFT LCD industry. We made use of P/E、P/B、P/S method, Debt-Free method, discount cash flow (DCF)method (Rappaport sales driven DCF method, Copeland earnings driven DCF method, sales driven franchise value method, ROIC franchise value method) to evaluate the valuation of AUO, CPT, QDI。My research found the market price was higher than valuation price in DCF method, the market price of AUO, CPT was lower than valuation price in Debt-Free method. The result was different in QDI. In other way, the market price of AUO,CPT, QDI was in the range of P/E、P/B、P/S valuation price. In summary, we can say P/E、P/B method is the proper valuation model. The value driver sensitive analysis research found that ROIC, profit margin, sales growth rate was the most important factors which can influence market price of three companies. Due to ROIC was consisted of profit margin, capital turnover rate, cash tax rate, so the first priority was to increase profit margin and capital turnover rate for three company. My research found that the value destruction scope in AUO was less narrow than CPT, QDI. It means the operation profit in AUO is more stable and risk is lower than CPT, QDI. At mean time we found QDI had the largest value destruction scope among three companies, it means QDI have the highest operational risk. Due to AUO and CPT had lower debt ratio than QDI, they had debt capacity which can raise debt to reduce WACC. QDI had higher debt ratio, when it raised debt ratio would enhance its operational risk and costs of capital. We predict the equity financing possibility of AUO and QDI is higher than CPT. At last my research found that the merger benefits for AUO shareholders, which merged with CPT, were higher than QDI, but the merger benefits for CPT shareholders, which merged with QDI, were higher than AUO. In summary, we predict the M&A activities will take place in the future.