DCF Studio

    IAG.MC · MCE · Industrials

    International Consolidated Airlines Group S.A.

    Also onConsensus Drift

    Implied value per share

    EUR 12.09

    Market price

    EUR 4.90

    Implied upside

    +146.6%

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

    AdjustedCapital expenditure runs at 11.8% of revenue against depreciation of 7.9%. 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 12.09+146.6%
    Exit multiple
    EUR 6.42+30.9%
    Market price
    EUR 4.90

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 37.5bnEUR 42.4bnEUR 47.8bnEUR 54.0bnEUR 61.0bn+12.9%
    EBITEUR 4.4bnEUR 4.9bnEUR 5.6bnEUR 6.3bnEUR 7.1bn+12.9%
    NOPATEUR 3.3bnEUR 3.8bnEUR 4.3bnEUR 4.8bnEUR 5.4bn+12.9%
    Add depreciation & amortisationEUR 2.9bnEUR 3.3bnEUR 3.8bnEUR 4.2bnEUR 4.8bn+12.9%
    Less capital expenditureEUR -4.4bnEUR -5.0bnEUR -5.6bnEUR -6.4bnEUR -7.2bn+12.9%
    Less increase in working capitalEUR -95.4mEUR -107.7mEUR -121.7mEUR -137.4mEUR -155.1m+12.9%
    Free cashflow to firmEUR 1.8bnEUR 2.0bnEUR 2.3bnEUR 2.6bnEUR 2.9bn+12.9%
    Discount factor0.95850.88060.80910.74330.6829-
    Present valueEUR 1.7bnEUR 1.8bnEUR 1.8bnEUR 1.9bnEUR 2.0bn+3.7%
    Present Value Of The ForecastEUR 9.2bn

    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
    Beta1.214Reported 1.320, pulled toward 1.0 (Blume)
    Cost of equity12.09%Risk-free + beta x equity risk premium
    Cost of debt5.18%Interest expense / average total debt
    Market capitalisationEUR 21.4bn60.0% of capital
    Total debtEUR 14.3bn40.0% of capital, book value as a proxy
    Tax rate23.3%Effective, capped at statutory
    WACC8.84%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 12.09

    86% of EV

    Forecast FCFF, final year
    EUR 2.9bn
    Capex at depreciation, working capital in reinvestment
    EUR 5.8bn
    Less reinvestment at g/ROIC (10.4% of NOPAT)
    EUR -606.2m
    Capitalised
    EUR 5.2bn
    ROIC (reported)
    24.0%
    Terminal value, undiscounted
    EUR 84.3bn
    Terminal value, discounted
    EUR 57.6bn
    Enterprise value
    EUR 66.8bn
    Less net debt
    EUR 6.0bn
    Equity value
    EUR 60.8bn

    Exit at 3.6x EBITDA

    Value per shareEUR 6.42

    76% of EV

    Terminal value, undiscounted
    EUR 42.6bn
    Terminal value, discounted
    EUR 29.1bn
    Enterprise value
    EUR 38.3bn
    Less net debt
    EUR 6.0bn
    Equity value
    EUR 32.3bn

    Spread between methods: 61%.

    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%
    6.84%16.0417.3318.9120.8923.46
    7.84%13.0513.8814.8516.0317.47
    8.84%10.8911.4512.0912.8413.73
    9.84%9.259.6510.0910.5911.18
    10.84%7.988.268.588.939.33

    Outlined: this model. Green text: above today's price of 4.90. 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 year12.9%-4.7%-17.7pp
    EBIT margin11.6%5.7%-5.9pp
    Discount rate8.8%15.1%+6.2pp
    Download as Excel

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