DCF Studio

    ITC.NS · NSI · Consumer Defensive

    ITC Limited

    Also onConsensus Drift

    Implied value per share

    INR 256.03

    Market price

    INR 262.30

    Implied upside

    -2.4%

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

    AdjustedBeta of -0.093 is not usable in a cost of equity. Clamped to 0.30.
    AdjustedCapital expenditure runs at 3.8% of revenue against depreciation of 2.5%. 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: INR assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    INR 256.03-2.4%
    Exit multiple
    INR 284.59+8.5%
    Market price
    INR 262.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn106bn212bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 810.7bnINR 840.2bnINR 870.9bnINR 902.6bnINR 935.5bn+3.6%
    EBITINR 272.1bnINR 282.0bnINR 292.3bnINR 303.0bnINR 314.0bn+3.6%
    NOPATINR 204.3bnINR 211.7bnINR 219.4bnINR 227.4bnINR 235.7bn+3.6%
    Add depreciation & amortisationINR 20.4bnINR 21.2bnINR 21.9bnINR 22.7bnINR 23.6bn+3.6%
    Less capital expenditureINR -30.5bnINR -31.6bnINR -32.7bnINR -33.9bnINR -35.2bn+3.6%
    Less increase in working capitalINR -10.8bnINR -11.2bnINR -11.6bnINR -12.0bnINR -12.4bn+3.6%
    Free cashflow to firmINR 183.4bnINR 190.1bnINR 197.1bnINR 204.3bnINR 211.7bn+3.6%
    Discount factor0.95710.87670.80300.73560.6738-
    Present valueINR 175.6bnINR 166.7bnINR 158.3bnINR 150.2bnINR 142.6bn-5.1%
    Present Value Of The ForecastINR 793.4bn

    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
    Beta0.300Clamped from a reported -0.093
    Cost of equity9.20%Risk-free + beta x equity risk premium
    Cost of debt6.80%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationINR 3286.8bn99.3% of capital
    Total debtINR 24.0bn0.7% of capital, book value as a proxy
    Tax rate24.9%Effective, capped at statutory
    WACC9.17%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 256.03

    74% of EV

    Forecast FCFF, final year
    INR 211.7bn
    Capex at depreciation, working capital in reinvestment
    INR 235.7bn
    Less reinvestment at g/ROIC (9.7% of NOPAT)
    INR -22.8bn
    Capitalised
    INR 212.9bn
    ROIC (reported)
    25.8%
    Terminal value, undiscounted
    INR 3271.6bn
    Terminal value, discounted
    INR 2204.4bn
    Enterprise value
    INR 2997.8bn
    Less net debt
    INR -210.9bn
    Equity value
    INR 3208.7bn

    Exit at 11.3x EBITDA

    Value per shareINR 284.59

    76% of EV

    Terminal value, undiscounted
    INR 3802.8bn
    Terminal value, discounted
    INR 2562.3bn
    Enterprise value
    INR 3355.7bn
    Less net debt
    INR -210.9bn
    Equity value
    INR 3566.6bn

    Spread between methods: 11%.

    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%
    7.17%315.25333.70356.04383.68418.77
    8.17%270.88283.00297.22314.13334.61
    9.17%238.10246.46256.03267.11280.11
    10.17%212.90218.87225.59233.20241.93
    11.17%192.93197.31202.17207.59213.69

    Outlined: this model. Green text: above today's price of 262.30. 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 year3.6%4.3%+0.7pp
    EBIT margin33.6%34.4%+0.9pp
    Discount rate9.2%9.0%-0.2pp
    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.