DCF Studio

    M&M.NS · NSI · Consumer Cyclical

    Mahindra & Mahindra Limited

    Also onConsensus Drift

    Implied value per share

    INR 2383.40

    Market price

    INR 3052.00

    Implied upside

    -21.9%

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

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 6.1% of revenue against depreciation of 3.5%. 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 2383.40-21.9%
    Exit multiple
    INR 4788.38+56.9%
    Market price
    INR 3052.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    -86493253221-432466266100FY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 2268.8bnINR 2665.8bnINR 3132.3bnINR 3680.3bnINR 4324.3bn+17.5%
    EBITINR 335.9bnINR 394.6bnINR 463.7bnINR 544.8bnINR 640.1bn+17.5%
    NOPATINR 253.1bnINR 297.4bnINR 349.5bnINR 410.6bnINR 482.4bn+17.5%
    Add depreciation & amortisationINR 79.5bnINR 93.4bnINR 109.7bnINR 128.9bnINR 151.5bn+17.5%
    Less capital expenditureINR -137.7bnINR -161.8bnINR -190.1bnINR -223.3bnINR -262.4bn+17.5%
    Less increase in working capitalINR -240.3bnINR -282.4bnINR -331.8bnINR -389.8bnINR -458.0bn+17.5%
    Free cashflow to firmINR -45.4bnINR -53.3bnINR -62.7bnINR -73.6bnINR -86.5bn-17.5%
    Discount factor0.95580.87310.79760.72860.6655-
    Present valueINR -43.4bnINR -46.6bnINR -50.0bnINR -53.6bnINR -57.6bn-7.3%
    Present Value Of The ForecastINR -251.1bn

    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
    Beta0.518Reported 0.280, pulled toward 1.0 (Blume)
    Cost of equity10.94%Risk-free + beta x equity risk premium
    Cost of debt7.23%Interest expense / average total debt
    Market capitalisationINR 3664.7bn73.2% of capital
    Total debtINR 1339.6bn26.8% of capital, book value as a proxy
    Tax rate24.6%Effective, capped at statutory
    WACC9.47%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 2383.40

    107% of EV

    Forecast FCFF, final year
    INR -86.5bn
    Capex at depreciation, working capital in reinvestment
    INR 520.4bn
    Less reinvestment at g/ROIC (26.4% of NOPAT)
    INR -137.4bn
    Capitalised
    INR 383.0bn
    ROIC (WACC floor)
    9.5%
    Terminal value, undiscounted
    INR 5632.2bn
    Terminal value, discounted
    INR 3748.5bn
    Enterprise value
    INR 3497.4bn
    Less net debt
    INR 826.2bn
    Equity value
    INR 2671.2bn

    Exit at 12.2x EBITDA

    Value per shareINR 4788.38

    104% of EV

    Terminal value, undiscounted
    INR 9682.1bn
    Terminal value, discounted
    INR 6443.9bn
    Enterprise value
    INR 6192.8bn
    Less net debt
    INR 826.2bn
    Equity value
    INR 5366.5bn

    Spread between methods: 67%.

    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%
    7.47%3788.103902.394035.944195.214389.92
    8.47%2944.362986.413032.513083.793141.80
    9.47%2350.762367.082383.392399.712416.02
    10.47%1919.611933.771947.941962.101976.27
    11.47%1569.681582.101594.511606.931619.35

    Outlined: this model. Green text: above today's price of 3052.00. 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 year17.5%25.0%+7.5pp
    EBIT margin14.8%17.1%+2.3pp
    Discount rate9.5%8.4%-1.0pp
    Download as Excel

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