DCF Studio

    JSWSTEEL.NS · NSI · Basic Materials

    JSW Steel Limited

    Also onConsensus Drift

    Implied value per share

    INR 244.97

    Market price

    INR 1275.60

    Implied upside

    -80.8%

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

    AdjustedCapital expenditure runs at 8.5% of revenue against depreciation of 5.0%. 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 244.97-80.8%
    Exit multiple
    INR 825.67-35.3%
    Market price
    INR 1275.60

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn38bn75bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 1886.2bnINR 1954.3bnINR 2024.9bnINR 2098.1bnINR 2174.0bn+3.6%
    EBITINR 194.5bnINR 201.5bnINR 208.8bnINR 216.3bnINR 224.1bn+3.6%
    NOPATINR 145.5bnINR 150.7bnINR 156.2bnINR 161.8bnINR 167.7bn+3.6%
    Add depreciation & amortisationINR 95.1bnINR 98.5bnINR 102.1bnINR 105.8bnINR 109.6bn+3.6%
    Less capital expenditureINR -159.7bnINR -165.4bnINR -171.4bnINR -177.6bnINR -184.0bn+3.6%
    Less increase in working capitalINR -15.8bnINR -16.3bnINR -16.9bnINR -17.5bnINR -18.2bn+3.6%
    Free cashflow to firmINR 65.1bnINR 67.5bnINR 69.9bnINR 72.4bnINR 75.0bn+3.6%
    Discount factor0.95040.85860.77560.70060.6329-
    Present valueINR 61.9bnINR 57.9bnINR 54.2bnINR 50.7bnINR 47.5bn-6.4%
    Present Value Of The ForecastINR 272.2bn

    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
    Beta0.750Reported 0.627, pulled toward 1.0 (Blume)
    Cost of equity12.80%Risk-free + beta x equity risk premium
    Cost of debt6.97%Interest expense / average total debt
    Market capitalisationINR 3113.7bn72.3% of capital
    Total debtINR 1190.8bn27.7% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC10.70%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 244.97

    79% of EV

    Forecast FCFF, final year
    INR 75.0bn
    Capex at depreciation, working capital in reinvestment
    INR 168.5bn
    Less reinvestment at g/ROIC (23.4% of NOPAT)
    INR -39.4bn
    Capitalised
    INR 129.1bn
    ROIC (WACC floor)
    10.7%
    Terminal value, undiscounted
    INR 1613.6bn
    Terminal value, discounted
    INR 1021.2bn
    Enterprise value
    INR 1293.5bn
    Less net debt
    INR 694.4bn
    Equity value
    INR 599.1bn

    Exit at 11.6x EBITDA

    Value per shareINR 825.67

    90% of EV

    Terminal value, undiscounted
    INR 3857.5bn
    Terminal value, discounted
    INR 2441.3bn
    Enterprise value
    INR 2713.5bn
    Less net debt
    INR 694.4bn
    Equity value
    INR 2019.1bn

    Spread between methods: 108%.

    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%
    8.70%384.38387.10389.82392.54395.26
    9.70%304.96307.30309.65311.99314.33
    10.70%240.90242.93244.97247.01249.04
    11.70%188.22190.01191.80193.59195.38
    12.70%144.22145.80147.39148.97150.55

    Outlined: this model. Green text: above today's price of 1275.60. 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 year3.6%37.9%+34.3pp
    EBIT margin10.3%26.3%+16.0pp
    Discount rate10.7%5.0%-5.7pp
    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.