DCF Studio

    IMB.L · LSE · Consumer Defensive

    Imperial Brands PLC

    Also onConsensus Drift

    Implied value per share

    GBp 6789.62

    Market price

    GBp 2492.00

    Implied upside

    +172.5%

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

    AdjustedReported capital expenditure averages just 0.83% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 2.10% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 6789.62+172.5%
    Exit multiple
    GBp 2703.50+8.5%
    Market price
    GBp 2492.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 32.0bnGBP 31.9bnGBP 31.8bnGBP 31.7bnGBP 31.5bn-0.4%
    EBITGBP 3.4bnGBP 3.4bnGBP 3.4bnGBP 3.4bnGBP 3.4bn-0.4%
    NOPATGBP 2.6bnGBP 2.5bnGBP 2.5bnGBP 2.5bnGBP 2.5bn-0.4%
    Add depreciation & amortisationGBP 672.8mGBP 670.1mGBP 667.5mGBP 664.9mGBP 662.3m-0.4%
    Less capital expenditureGBP -672.8mGBP -670.1mGBP -667.5mGBP -664.9mGBP -662.3m-0.4%
    Less increase in working capitalGBP -37.2mGBP -37.0mGBP -36.9mGBP -36.7mGBP -36.6m-0.4%
    Free cashflow to firmGBP 2.5bnGBP 2.5bnGBP 2.5bnGBP 2.5bnGBP 2.5bn-0.4%
    Discount factor0.97270.92030.87080.82390.7796-
    Present valueGBP 2.5bnGBP 2.3bnGBP 2.2bnGBP 2.1bnGBP 1.9bn-5.8%
    Present Value Of The ForecastGBP 10.9bn

    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
    Beta0.420Reported 0.134, pulled toward 1.0 (Blume)
    Cost of equity6.81%Risk-free + beta x equity risk premium
    Cost of debt4.78%Interest expense / average total debt
    Market capitalisationGBP 18.8bn65.3% of capital
    Total debtGBP 10.0bn34.7% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC5.69%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 67.90

    83% of EV

    Forecast FCFF, final year
    GBP 2.5bn
    Capex at depreciation, working capital in reinvestment
    GBP 2.5bn
    Less reinvestment at g/ROIC (14.4% of NOPAT)
    GBP -362.8m
    Capitalised
    GBP 2.2bn
    ROIC (reported)
    17.4%
    Terminal value, undiscounted
    GBP 69.3bn
    Terminal value, discounted
    GBP 54.0bn
    Enterprise value
    GBP 65.0bn
    Less net debt
    GBP 8.6bn
    Equity value
    GBP 56.4bn

    Exit at 6.4x EBITDA

    Value per shareGBP 27.03

    65% of EV

    Terminal value, undiscounted
    GBP 25.8bn
    Terminal value, discounted
    GBP 20.1bn
    Enterprise value
    GBP 31.0bn
    Less net debt
    GBP 8.6bn
    Equity value
    GBP 22.5bn

    Spread between methods: 86%.

    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%
    3.69%112.59141.10193.51321.811126.39
    4.69%74.9085.96102.04127.59174.57
    5.69%55.1960.6967.9077.7592.08
    6.69%43.0646.1850.0354.9061.28
    7.69%34.8436.7639.0341.7745.15

    Outlined: this model. Green text: above today's price of 24.92. 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-0.4%-13.8%-13.4pp
    EBIT margin10.6%4.8%-5.8pp
    Discount rate5.7%10.0%+4.3pp
    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.