DCF Studio

    BAJAJ-AUTO.NS · NSI · Consumer Cyclical

    Bajaj Auto Limited

    Also onConsensus Drift

    Implied value per share

    INR 4175.67

    Market price

    INR 11414.00

    Implied upside

    -63.4%

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

    AdjustedCapital expenditure runs at 1.9% of revenue against depreciation of 0.9%. 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: INR assumption - no free live source available for this market.

    Current EV/EBITDA of 24.1x 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
    INR 4175.67-63.4%
    Exit multiple
    INR 12735.07+11.6%
    Market price
    INR 11414.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn26bn52bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 721.6bnINR 862.2bnINR 1030.3bnINR 1231.2bnINR 1471.2bn+19.5%
    EBITINR 140.2bnINR 167.6bnINR 200.2bnINR 239.3bnINR 285.9bn+19.5%
    NOPATINR 107.0bnINR 127.8bnINR 152.7bnINR 182.5bnINR 218.1bn+19.5%
    Add depreciation & amortisationINR 6.4bnINR 7.7bnINR 9.1bnINR 10.9bnINR 13.1bn+19.5%
    Less capital expenditureINR -14.0bnINR -16.7bnINR -20.0bnINR -23.9bnINR -28.5bn+19.5%
    Less increase in working capitalINR -74.1bnINR -88.5bnINR -105.8bnINR -126.4bnINR -151.0bn+19.5%
    Free cashflow to firmINR 25.3bnINR 30.2bnINR 36.1bnINR 43.2bnINR 51.6bn+19.5%
    Discount factor0.94340.83970.74730.66520.5920-
    Present valueINR 23.9bnINR 25.4bnINR 27.0bnINR 28.7bnINR 30.5bn+6.4%
    Present Value Of The ForecastINR 135.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate6.80%INR assumption - no free live source available for this market (assumption)
    Equity risk premium8.00%Market assumption
    Beta0.755Reported 0.635, pulled toward 1.0 (Blume)
    Cost of equity12.84%Risk-free + beta x equity risk premium
    Cost of debt7.33%Interest expense / average total debt
    Market capitalisationINR 3136.6bn93.3% of capital
    Total debtINR 226.4bn6.7% of capital, book value as a proxy
    Tax rate23.7%Effective, capped at statutory
    WACC12.36%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 shareINR 4175.67

    89% of EV

    Forecast FCFF, final year
    INR 51.6bn
    Capex at depreciation, working capital in reinvestment
    INR 219.1bn
    Less reinvestment at g/ROIC (15.0% of NOPAT)
    INR -32.8bn
    Capitalised
    INR 186.3bn
    ROIC (reported)
    16.7%
    Terminal value, undiscounted
    INR 1937.6bn
    Terminal value, discounted
    INR 1147.1bn
    Enterprise value
    INR 1282.6bn
    Less net debt
    INR 115.5bn
    Equity value
    INR 1167.2bn

    Exit at 20.0x EBITDA

    Value per shareINR 12735.07

    96% of EV

    Terminal value, undiscounted
    INR 5978.9bn
    Terminal value, discounted
    INR 3539.6bn
    Enterprise value
    INR 3675.1bn
    Less net debt
    INR 115.5bn
    Equity value
    INR 3559.6bn

    Spread between methods: 101%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    10.36%5344.145501.755677.525875.136099.37
    11.36%4611.924719.764838.144968.965114.59
    12.36%4021.074095.314175.664263.124358.88
    13.36%3535.493586.443640.863699.243762.19
    14.36%3130.323164.823201.143239.543280.29

    Outlined: this model. Green text: above today's price of 11414.00. 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 year19.5%53.8%+34.3pp
    EBIT margin19.4%42.4%+22.9pp
    Discount rate12.4%7.0%-5.4pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.