DCF Studio

    0669.HK · HKG · Industrials

    Techtronic Industries Company Limited

    Also onConsensus Drift

    Implied value per share

    HKD 58.31

    Market price

    HKD 128.40

    Implied upside

    -54.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 7.8441

    AdjustedReports in USD, trades in HKD. Modelled in USD, converted at the end.
    NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

    Current EV/EBITDA of 106.3x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    HKD 58.31-54.6%
    Exit multiple
    HKD 149.50+16.4%
    Market price
    HKD 128.40

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 16.0bnUSD 16.8bnUSD 17.6bnUSD 18.4bnUSD 19.3bn+4.8%
    EBITUSD 1.4bnUSD 1.5bnUSD 1.5bnUSD 1.6bnUSD 1.7bn+4.8%
    NOPATUSD 1.3bnUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.5bn+4.8%
    Add depreciation & amortisationUSD 766.3mUSD 803.2mUSD 841.8mUSD 882.3mUSD 924.7m+4.8%
    Less capital expenditureUSD -894.2mUSD -937.2mUSD -982.3mUSD -1.0bnUSD -1.1bn+4.8%
    Less increase in working capitalUSD 233.5mUSD 244.7mUSD 256.5mUSD 268.9mUSD 281.8m-4.8%
    Free cashflow to firmUSD 1.4bnUSD 1.5bnUSD 1.5bnUSD 1.6bnUSD 1.7bn+4.8%
    Discount factor0.93840.82640.72780.64090.5644-
    Present valueUSD 1.3bnUSD 1.2bnUSD 1.1bnUSD 1.0bnUSD 946.4m-7.7%
    Present Value Of The ForecastUSD 5.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.20%HKD assumption - no free live source available for this market (assumption)
    Equity risk premium7.00%Market assumption
    Beta1.488Reported 1.729, pulled toward 1.0 (Blume)
    Cost of equity13.62%Risk-free + beta x equity risk premium
    Cost of debt5.00%Interest expense / average total debt
    Market capitalisationUSD 234.5bn99.3% of capital
    Total debtUSD 1.8bn0.7% of capital, book value as a proxy
    Tax rate7.6%Effective, capped at statutory
    WACC13.55%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 7.43

    59% of EV

    Forecast FCFF, final year
    USD 1.7bn
    Capex at depreciation, working capital in reinvestment
    USD 1.9bn
    Less reinvestment at g/ROIC (17.3% of NOPAT)
    USD -321.8m
    Capitalised
    USD 1.5bn
    ROIC (reported)
    14.5%
    Terminal value, undiscounted
    USD 14.3bn
    Terminal value, discounted
    USD 8.1bn
    Enterprise value
    USD 13.7bn
    Less net debt
    USD 46.9m
    Equity value
    USD 13.6bn

    Exit at 20.0x EBITDA

    Value per shareUSD 19.06

    84% of EV

    Terminal value, undiscounted
    USD 52.0bn
    Terminal value, discounted
    USD 29.4bn
    Enterprise value
    USD 35.0bn
    Less net debt
    USD 46.9m
    Equity value
    USD 34.9bn

    Spread between methods: 88%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    11.55%8.798.888.999.109.22
    12.55%8.018.078.138.208.27
    13.55%7.367.407.437.477.51
    14.55%6.826.836.856.876.89
    15.55%6.376.396.406.426.44

    Outlined: this model. Green text: above today's price of 16.37. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year4.8%21.7%+16.9pp
    EBIT margin8.7%20.7%+12.0pp
    Discount rate13.6%7.4%-6.2pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.