DCF Studio

    HER.MI · MIL · Utilities

    Hera S.p.A.

    Also onConsensus Drift

    Implied value per share

    EUR -0.04

    Market price

    EUR 3.60

    Implied upside

    -101.1%

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

    AdjustedCapital expenditure runs at 5.8% 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: USD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    EUR -0.04-101.1%
    Exit multiple
    EUR -0.18-105.1%
    Market price
    EUR 3.60

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    0m143m286mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 11.2bnEUR 9.8bnEUR 8.5bnEUR 7.3bnEUR 6.4bn-13.3%
    EBITEUR 592.0mEUR 513.4mEUR 445.3mEUR 386.2mEUR 334.9m-13.3%
    NOPATEUR 444.0mEUR 385.1mEUR 334.0mEUR 289.6mEUR 251.2m-13.3%
    Add depreciation & amortisationEUR 411.3mEUR 356.7mEUR 309.3mEUR 268.3mEUR 232.7m-13.3%
    Less capital expenditureEUR -657.2mEUR -570.0mEUR -494.4mEUR -428.8mEUR -371.9m-13.3%
    Less increase in working capitalEUR 88.4mEUR 76.7mEUR 66.5mEUR 57.7mEUR 50.0m+13.3%
    Free cashflow to firmEUR 286.4mEUR 248.4mEUR 215.4mEUR 186.8mEUR 162.0m-13.3%
    Discount factor0.96830.90800.85140.79830.7486-
    Present valueEUR 277.3mEUR 225.5mEUR 183.4mEUR 149.2mEUR 121.3m-18.7%
    Present Value Of The ForecastEUR 956.8m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.20%USD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.876Reported 0.815, pulled toward 1.0 (Blume)
    Cost of equity9.89%Risk-free + beta x equity risk premium
    Cost of debt4.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationEUR 5.3bn51.8% of capital
    Total debtEUR 4.9bn48.2% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC6.65%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 shareEUR -0.04

    76% of EV

    Forecast FCFF, final year
    EUR 162.0m
    Capex at depreciation, working capital in reinvestment
    EUR 251.2m
    Less reinvestment at g/ROIC (34.7% of NOPAT)
    EUR -87.1m
    Capitalised
    EUR 164.1m
    ROIC (reported)
    7.2%
    Terminal value, undiscounted
    EUR 4.1bn
    Terminal value, discounted
    EUR 3.0bn
    Enterprise value
    EUR 4.0bn
    Less net debt
    EUR 4.1bn
    Equity value
    EUR -60.4m

    Exit at 6.7x EBITDA

    Value per shareEUR -0.18

    75% of EV

    Terminal value, undiscounted
    EUR 3.8bn
    Terminal value, discounted
    EUR 2.8bn
    Enterprise value
    EUR 3.8bn
    Less net debt
    EUR 4.1bn
    Equity value
    EUR -267.9m

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.65%1.481.812.273.024.40
    5.65%0.500.610.750.941.22
    6.65%-0.11-0.08-0.040.000.06
    7.65%-0.49-0.48-0.48-0.47-0.46
    8.65%-0.75-0.75-0.74-0.73-0.73

    Outlined: this model. Green text: above today's price of 3.60. 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 year-13.3%6.2%+19.5pp
    EBIT margin5.3%11.5%+6.2pp
    Discount rate6.6%4.2%-2.5pp
    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.