DCF Studio

    HINDUNILVR.NS · NSI · Consumer Defensive

    Hindustan Unilever Limited

    Also onConsensus Drift

    Implied value per share

    INR 559.41

    Market price

    INR 1932.00

    Implied upside

    -71.0%

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

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

    Current EV/EBITDA of 29.5x 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 559.41-71.0%
    Exit multiple
    INR 1144.75-40.7%
    Market price
    INR 1932.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn66bn132bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 652.3bnINR 667.4bnINR 682.8bnINR 698.5bnINR 714.6bn+2.3%
    EBITINR 142.9bnINR 146.2bnINR 149.6bnINR 153.0bnINR 156.6bn+2.3%
    NOPATINR 107.2bnINR 109.7bnINR 112.2bnINR 114.8bnINR 117.4bn+2.3%
    Add depreciation & amortisationINR 13.8bnINR 14.1bnINR 14.4bnINR 14.7bnINR 15.1bn+2.3%
    Less capital expenditureINR -14.1bnINR -14.5bnINR -14.8bnINR -15.1bnINR -15.5bn+2.3%
    Less increase in working capitalINR 13.6bnINR 13.9bnINR 14.3bnINR 14.6bnINR 14.9bn-2.3%
    Free cashflow to firmINR 120.5bnINR 123.2bnINR 126.1bnINR 129.0bnINR 131.9bn+2.3%
    Discount factor0.94850.85340.76780.69080.6216-
    Present valueINR 114.3bnINR 105.2bnINR 96.8bnINR 89.1bnINR 82.0bn-8.0%
    Present Value Of The ForecastINR 487.3bn

    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
    Beta0.545Reported 0.321, pulled toward 1.0 (Blume)
    Cost of equity11.16%Risk-free + beta x equity risk premium
    Cost of debt8.80%Implied cost of debt of 26.2% 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 capitalisationINR 4539.4bn99.7% of capital
    Total debtINR 14.8bn0.3% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC11.15%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 559.41

    61% of EV

    Forecast FCFF, final year
    INR 131.9bn
    Capex at depreciation, working capital in reinvestment
    INR 117.5bn
    Less reinvestment at g/ROIC (12.5% of NOPAT)
    INR -14.6bn
    Capitalised
    INR 102.9bn
    ROIC (reported)
    20.1%
    Terminal value, undiscounted
    INR 1219.4bn
    Terminal value, discounted
    INR 757.9bn
    Enterprise value
    INR 1245.2bn
    Less net debt
    INR -69.3bn
    Equity value
    INR 1314.6bn

    Exit at 20.0x EBITDA

    Value per shareINR 1144.75

    81% of EV

    Terminal value, undiscounted
    INR 3432.3bn
    Terminal value, discounted
    INR 2133.4bn
    Enterprise value
    INR 2620.7bn
    Less net debt
    INR -69.3bn
    Equity value
    INR 2690.0bn

    Spread between methods: 69%.

    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%
    9.15%660.16679.32701.25726.61756.31
    10.15%592.90606.22621.17638.10657.46
    11.15%539.46548.93559.41571.08584.18
    12.15%495.93502.78510.28518.51527.60
    13.15%459.77464.79470.22476.11482.54

    Outlined: this model. Green text: above today's price of 1932.00. 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 year2.3%29.3%+27.0pp
    EBIT margin21.9%81.2%+59.3pp
    Discount rate11.1%4.7%-6.5pp
    Download as Excel

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    Yahoo Finance and RBA data. General information, not advice. Methodology.