DCF Studio

    BEL.NS · NSI · Industrials

    Bharat Electronics Limited

    Also onConsensus Drift

    Implied value per share

    INR 119.92

    Market price

    INR 393.30

    Implied upside

    -69.5%

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

    AdjustedCapital expenditure runs at 3.7% of revenue against depreciation of 2.2%. 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: INR assumption - no free live source available for this market.

    Current EV/EBITDA of 33.4x 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 119.92-69.5%
    Exit multiple
    INR 284.64-27.6%
    Market price
    INR 393.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn12bn24bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 309.4bnINR 357.3bnINR 412.6bnINR 476.4bnINR 550.1bn+15.5%
    EBITINR 79.7bnINR 92.0bnINR 106.2bnINR 122.7bnINR 141.7bn+15.5%
    NOPATINR 59.6bnINR 68.9bnINR 79.5bnINR 91.8bnINR 106.0bn+15.5%
    Add depreciation & amortisationINR 6.8bnINR 7.8bnINR 9.1bnINR 10.5bnINR 12.1bn+15.5%
    Less capital expenditureINR -11.4bnINR -13.2bnINR -15.2bnINR -17.5bnINR -20.2bn+15.5%
    Less increase in working capitalINR -41.5bnINR -47.9bnINR -55.3bnINR -63.8bnINR -73.7bn+15.5%
    Free cashflow to firmINR 13.6bnINR 15.7bnINR 18.1bnINR 20.9bnINR 24.1bn+15.5%
    Discount factor0.94930.85550.77100.69490.6262-
    Present valueINR 12.9bnINR 13.4bnINR 14.0bnINR 14.5bnINR 15.1bn+4.1%
    Present Value Of The ForecastINR 69.9bn

    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
    Beta0.520Reported 0.284, pulled toward 1.0 (Blume)
    Cost of equity10.96%Risk-free + beta x equity risk premium
    Cost of debt10.26%Interest expense / average total debt
    Market capitalisationINR 2874.9bn100.0% of capital
    Total debtINR 654.6m0.0% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC10.96%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 119.92

    91% of EV

    Forecast FCFF, final year
    INR 24.1bn
    Capex at depreciation, working capital in reinvestment
    INR 106.6bn
    Less reinvestment at g/ROIC (10.8% of NOPAT)
    INR -11.5bn
    Capitalised
    INR 95.1bn
    ROIC (reported)
    23.1%
    Terminal value, undiscounted
    INR 1152.1bn
    Terminal value, discounted
    INR 721.5bn
    Enterprise value
    INR 791.4bn
    Less net debt
    INR -85.2bn
    Equity value
    INR 876.6bn

    Exit at 20.0x EBITDA

    Value per shareINR 284.64

    96% of EV

    Terminal value, undiscounted
    INR 3074.9bn
    Terminal value, discounted
    INR 1925.6bn
    Enterprise value
    INR 1995.5bn
    Less net debt
    INR -85.2bn
    Equity value
    INR 2080.7bn

    Spread between methods: 81%.

    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%
    8.96%147.80154.39161.95170.75181.13
    9.96%128.18132.81138.02143.96150.79
    10.96%112.86116.21119.92124.07128.75
    11.96%100.61103.07105.77108.76112.07
    12.96%90.6092.4594.4596.6499.04

    Outlined: this model. Green text: above today's price of 393.30. 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 year15.5%60.7%+45.3pp
    EBIT margin25.8%76.0%+50.2pp
    Discount rate11.0%5.3%-5.6pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.