DCF Studio

    AVIO.MI · MIL · Industrials

    Avio S.p.A.

    Also onConsensus Drift

    Implied value per share

    EUR 16.95

    Market price

    EUR 28.81

    Implied upside

    -41.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 8.5% of revenue against depreciation of 4.2%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: USD assumption - no free live source available for this market.

    Current EV/EBITDA of 35.9x 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
    EUR 16.95-41.2%
    Exit multiple
    EUR 38.68+34.3%
    Market price
    EUR 28.81

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    0m3m6mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 678.6mEUR 789.0mEUR 917.4mEUR 1.1bnEUR 1.2bn+16.3%
    EBITEUR 7.6mEUR 8.8mEUR 10.3mEUR 11.9mEUR 13.9m+16.3%
    NOPATEUR 7.2mEUR 8.4mEUR 9.7mEUR 11.3mEUR 13.1m+16.3%
    Add depreciation & amortisationEUR 28.4mEUR 33.0mEUR 38.3mEUR 44.6mEUR 51.8m+16.3%
    Less capital expenditureEUR -58.0mEUR -67.4mEUR -78.4mEUR -91.1mEUR -105.9m+16.3%
    Less increase in working capitalEUR 25.9mEUR 30.1mEUR 35.0mEUR 40.7mEUR 47.3m-16.3%
    Free cashflow to firmEUR 3.5mEUR 4.1mEUR 4.7mEUR 5.5mEUR 6.4m+16.3%
    Discount factor0.95240.86380.78350.71060.6446-
    Present valueEUR 3.3mEUR 3.5mEUR 3.7mEUR 3.9mEUR 4.1m+5.5%
    Present Value Of The ForecastEUR 18.6m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.20%USD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.938Reported 0.908, pulled toward 1.0 (Blume)
    Cost of equity10.30%Risk-free + beta x equity risk premium
    Cost of debt4.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationEUR 1.3bn99.2% of capital
    Total debtEUR 10.1m0.8% of capital, book value as a proxy
    Tax rate5.4%Effective, capped at statutory
    WACC10.25%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 shareEUR 16.95

    92% of EV

    Forecast FCFF, final year
    EUR 6.4m
    Capex at depreciation, working capital in reinvestment
    EUR 31.4m
    Less reinvestment at g/ROIC (24.4% of NOPAT)
    EUR -7.7m
    Capitalised
    EUR 23.8m
    ROIC (WACC floor)
    10.3%
    Terminal value, undiscounted
    EUR 314.4m
    Terminal value, discounted
    EUR 202.6m
    Enterprise value
    EUR 221.2m
    Less net debt
    EUR -281.7m
    Equity value
    EUR 503.0m

    Exit at 20.0x EBITDA

    Value per shareEUR 38.68

    98% of EV

    Terminal value, undiscounted
    EUR 1.3bn
    Terminal value, discounted
    EUR 847.3m
    Enterprise value
    EUR 865.9m
    Less net debt
    EUR -281.7m
    Equity value
    EUR 1.1bn

    Spread between methods: 78%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.25%19.2819.3219.3719.4119.46
    9.25%17.9417.9818.0218.0618.10
    10.25%16.8816.9216.9516.9817.02
    11.25%16.0216.0516.0816.1116.14
    12.25%15.3115.3415.3615.3915.42

    Outlined: this model. Green text: above today's price of 28.81. 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 year16.3%32.4%+16.1pp
    EBIT margin1.1%4.3%+3.2pp
    Discount rate10.3%4.7%-5.5pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.