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    EICHERMOT.NS · NSI · Consumer Cyclical

    Eicher Motors Limited

    Also onConsensus Drift

    Implied value per share

    INR 3266.58

    Market price

    INR 7516.00

    Implied upside

    -56.5%

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

    AdjustedCapital expenditure runs at 5.3% of revenue against depreciation of 3.7%. 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 34.6x 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 3266.58-56.5%
    Exit multiple
    INR 7166.29-4.7%
    Market price
    INR 7516.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn43bn86bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 269.9bnINR 317.1bnINR 372.4bnINR 437.5bnINR 513.9bn+17.5%
    EBITINR 59.0bnINR 69.3bnINR 81.4bnINR 95.7bnINR 112.4bn+17.5%
    NOPATINR 45.6bnINR 53.6bnINR 62.9bnINR 73.9bnINR 86.9bn+17.5%
    Add depreciation & amortisationINR 10.1bnINR 11.9bnINR 14.0bnINR 16.4bnINR 19.3bn+17.5%
    Less capital expenditureINR -14.2bnINR -16.7bnINR -19.6bnINR -23.0bnINR -27.0bn+17.5%
    Less increase in working capitalINR 3.7bnINR 4.3bnINR 5.1bnINR 6.0bnINR 7.0bn-17.5%
    Free cashflow to firmINR 45.2bnINR 53.1bnINR 62.4bnINR 73.3bnINR 86.1bn+17.5%
    Discount factor0.95070.85920.77660.70190.6344-
    Present valueINR 43.0bnINR 45.6bnINR 48.5bnINR 51.5bnINR 54.6bn+6.2%
    Present Value Of The ForecastINR 243.2bn

    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
    Beta0.480Reported 0.224, pulled toward 1.0 (Blume)
    Cost of equity10.64%Risk-free + beta x equity risk premium
    Cost of debt14.72%Interest expense / average total debt
    Market capitalisationINR 2063.3bn99.8% of capital
    Total debtINR 5.1bn0.2% of capital, book value as a proxy
    Tax rate22.7%Effective, capped at statutory
    WACC10.64%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 3266.58

    71% of EV

    Forecast FCFF, final year
    INR 86.1bn
    Capex at depreciation, working capital in reinvestment
    INR 89.9bn
    Less reinvestment at g/ROIC (16.6% of NOPAT)
    INR -14.9bn
    Capitalised
    INR 75.0bn
    ROIC (reported)
    15.1%
    Terminal value, undiscounted
    INR 943.7bn
    Terminal value, discounted
    INR 598.7bn
    Enterprise value
    INR 841.9bn
    Less net debt
    INR -55.7bn
    Equity value
    INR 897.5bn

    Exit at 20.0x EBITDA

    Value per shareINR 7166.29

    87% of EV

    Terminal value, undiscounted
    INR 2632.8bn
    Terminal value, discounted
    INR 1670.2bn
    Enterprise value
    INR 1913.4bn
    Less net debt
    INR -55.7bn
    Equity value
    INR 1969.0bn

    Spread between methods: 75%.

    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%
    8.64%4013.724131.274266.754424.914612.38
    9.64%3535.343611.163696.593793.813905.69
    10.64%3162.063211.693266.573327.723396.47
    11.64%2862.792895.322930.692969.383012.01
    12.64%2617.592638.632661.122685.282711.39

    Outlined: this model. Green text: above today's price of 7516.00. 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 year17.5%41.6%+24.1pp
    EBIT margin21.9%52.9%+31.0pp
    Discount rate10.6%5.9%-4.7pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.