DCF Studio

    HCLTECH.NS · NSI · Technology

    HCL Technologies Limited

    Also onConsensus Drift

    Implied value per share

    INR 230553.13

    Market price

    INR 1249.30

    Implied upside

    +18354.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 95.8630

    Wrong toolThis model values the shares at 184.5x the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedReports in USD, trades in INR. Modelled in USD, converted at the end.
    AdjustedReported capital expenditure averages 1.16% of revenue against depreciation of 2.45%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 2.45% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    INR 230553.13+18354.6%
    Exit multiple
    INR 184806.76+14692.8%
    Market price
    INR 1249.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn258bn517bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 1414.1bnUSD 1536.5bnUSD 1669.4bnUSD 1813.9bnUSD 1970.9bn+8.7%
    EBITUSD 449.2bnUSD 488.0bnUSD 530.3bnUSD 576.2bnUSD 626.0bn+8.7%
    NOPATUSD 337.5bnUSD 366.7bnUSD 398.4bnUSD 432.9bnUSD 470.4bn+8.7%
    Add depreciation & amortisationUSD 52.0bnUSD 56.5bnUSD 61.4bnUSD 66.7bnUSD 72.5bn+8.7%
    Less capital expenditureUSD -34.6bnUSD -37.6bnUSD -40.9bnUSD -44.4bnUSD -48.3bn+8.7%
    Less increase in working capitalUSD 15.9bnUSD 17.3bnUSD 18.8bnUSD 20.4bnUSD 22.2bn-8.7%
    Free cashflow to firmUSD 370.8bnUSD 402.9bnUSD 437.7bnUSD 475.6bnUSD 516.8bn+8.7%
    Discount factor0.95610.87390.79880.73010.6674-
    Present valueUSD 354.5bnUSD 352.1bnUSD 349.7bnUSD 347.3bnUSD 344.9bn-0.7%
    Present Value Of The ForecastUSD 1748.4bn

    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
    Beta0.331Reported 0.001, pulled toward 1.0 (Blume)
    Cost of equity9.45%Risk-free + beta x equity risk premium
    Cost of debt8.80%Implied cost of debt of 15.1% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 3380.3bn98.5% of capital
    Total debtUSD 52.1bn1.5% of capital, book value as a proxy
    Tax rate24.9%Effective, capped at statutory
    WACC9.40%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 shareUSD 2405.03

    72% of EV

    Forecast FCFF, final year
    USD 516.8bn
    Capex at depreciation, working capital in reinvestment
    USD 488.6bn
    Less reinvestment at g/ROIC (6.6% of NOPAT)
    USD -32.4bn
    Capitalised
    USD 456.1bn
    ROIC (reported)
    37.7%
    Terminal value, undiscounted
    USD 6773.8bn
    Terminal value, discounted
    USD 4520.7bn
    Enterprise value
    USD 6269.2bn
    Less net debt
    USD -254.0bn
    Equity value
    USD 6523.2bn

    Exit at 6.9x EBITDA

    Value per shareUSD 1927.82

    65% of EV

    Terminal value, undiscounted
    USD 4834.4bn
    Terminal value, discounted
    USD 3226.4bn
    Enterprise value
    USD 4974.8bn
    Less net debt
    USD -254.0bn
    Equity value
    USD 5228.8bn

    Spread between methods: 22%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.40%2925.633104.123318.673581.563911.37
    8.40%2522.262643.312784.592951.723152.60
    9.40%2220.902306.862405.032518.292650.47
    10.40%1987.192050.362121.342201.692293.46
    11.40%1800.631848.331901.211960.222026.51

    Outlined: this model. Green text: above today's price of 13.03. 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
    EBIT margin31.8%-7.5%-39.3pp
    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.