DCF Studio

    GSK.L · LSE · Healthcare

    GSK plc

    Also onConsensus Drift

    Implied value per share

    GBp 3756.15

    Market price

    GBp 1877.50

    Implied upside

    +100.1%

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

    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 3756.15+100.1%
    Exit multiple
    GBp 2092.20+11.4%
    Market price
    GBp 1877.50

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0bn3bn7bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 33.9bnGBP 35.1bnGBP 36.4bnGBP 37.7bnGBP 39.1bn+3.7%
    EBITGBP 7.6bnGBP 7.9bnGBP 8.2bnGBP 8.5bnGBP 8.8bn+3.7%
    NOPATGBP 6.6bnGBP 6.8bnGBP 7.1bnGBP 7.3bnGBP 7.6bn+3.7%
    Add depreciation & amortisationGBP 2.5bnGBP 2.6bnGBP 2.7bnGBP 2.8bnGBP 2.9bn+3.7%
    Less capital expenditureGBP -2.9bnGBP -3.0bnGBP -3.1bnGBP -3.2bnGBP -3.3bn+3.7%
    Less increase in working capitalGBP -434.0mGBP -449.9mGBP -466.3mGBP -483.4mGBP -501.1m+3.7%
    Free cashflow to firmGBP 5.8bnGBP 6.0bnGBP 6.3bnGBP 6.5bnGBP 6.7bn+3.7%
    Discount factor0.96800.90710.85000.79650.7464-
    Present valueGBP 5.6bnGBP 5.5bnGBP 5.3bnGBP 5.2bnGBP 5.0bn-2.9%
    Present Value Of The ForecastGBP 26.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.524Reported 0.290, pulled toward 1.0 (Blume)
    Cost of equity7.38%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationGBP 75.2bn80.9% of capital
    Total debtGBP 17.7bn19.1% of capital, book value as a proxy
    Tax rate13.8%Effective, capped at statutory
    WACC6.72%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 shareGBP 37.56

    84% of EV

    Forecast FCFF, final year
    GBP 6.7bn
    Capex at depreciation, working capital in reinvestment
    GBP 9.0bn
    Less reinvestment at g/ROIC (12.5% of NOPAT)
    GBP -1.1bn
    Capitalised
    GBP 7.9bn
    ROIC (reported)
    20.0%
    Terminal value, undiscounted
    GBP 191.0bn
    Terminal value, discounted
    GBP 142.6bn
    Enterprise value
    GBP 169.2bn
    Less net debt
    GBP 14.6bn
    Equity value
    GBP 154.6bn

    Exit at 8.4x EBITDA

    Value per shareGBP 20.92

    74% of EV

    Terminal value, undiscounted
    GBP 99.2bn
    Terminal value, discounted
    GBP 74.1bn
    Enterprise value
    GBP 100.7bn
    Less net debt
    GBP 14.6bn
    Equity value
    GBP 86.1bn

    Spread between methods: 57%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.72%54.9963.1674.9993.69127.75
    5.72%40.9145.0450.4557.8368.53
    6.72%32.2334.6237.5641.2846.15
    7.72%26.3627.8529.6331.7634.40
    8.72%22.1323.1124.2525.5827.16

    Outlined: this model. Green text: above today's price of 18.77. 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 year3.7%-10.5%-14.1pp
    EBIT margin22.6%11.0%-11.6pp
    Discount rate6.7%10.2%+3.5pp
    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.