DCF Studio

    NESTLEIND.NS · NSI · Consumer Defensive

    Nestlé India Limited

    Also onConsensus Drift

    Implied value per share

    INR 294.02

    Market price

    INR 1372.40

    Implied upside

    -78.6%

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

    AdjustedOnly 3 year(s) of history available to anchor assumptions on.
    AdjustedCapital expenditure runs at 6.1% 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.

    Current EV/EBITDA of 55.5x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    INR 294.02-78.6%
    Exit multiple
    INR 713.46-48.0%
    Market price
    INR 1372.40

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn23bn46bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayINR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueINR 234.9bnINR 274.9bnINR 321.6bnINR 376.3bnINR 440.3bn+17.0%
    EBITINR 49.2bnINR 57.6bnINR 67.3bnINR 78.8bnINR 92.2bn+17.0%
    NOPATINR 36.8bnINR 43.1bnINR 50.4bnINR 58.9bnINR 69.0bn+17.0%
    Add depreciation & amortisationINR 6.0bnINR 7.0bnINR 8.2bnINR 9.6bnINR 11.2bn+17.0%
    Less capital expenditureINR -14.3bnINR -16.8bnINR -19.6bnINR -22.9bnINR -26.8bn+17.0%
    Less increase in working capitalINR -4.1bnINR -4.8bnINR -5.6bnINR -6.6bnINR -7.7bn+17.0%
    Free cashflow to firmINR 24.3bnINR 28.5bnINR 33.3bnINR 39.0bnINR 45.6bn+17.0%
    Discount factor0.94630.84750.75900.67970.6087-
    Present valueINR 23.0bnINR 24.1bnINR 25.3bnINR 26.5bnINR 27.8bn+4.8%
    Present Value Of The ForecastINR 126.7bn

    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
    Beta0.611Reported 0.419, pulled toward 1.0 (Blume)
    Cost of equity11.69%Risk-free + beta x equity risk premium
    Cost of debt8.80%Implied cost of debt of 18.9% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationINR 2646.4bn99.6% of capital
    Total debtINR 11.7bn0.4% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC11.66%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 294.02

    78% of EV

    Forecast FCFF, final year
    INR 45.6bn
    Capex at depreciation, working capital in reinvestment
    INR 69.0bn
    Less reinvestment at g/ROIC (4.2% of NOPAT)
    INR -2.9bn
    Capitalised
    INR 66.1bn
    ROIC (reported)
    60.0%
    Terminal value, undiscounted
    INR 739.3bn
    Terminal value, discounted
    INR 450.0bn
    Enterprise value
    INR 576.7bn
    Less net debt
    INR 9.6bn
    Equity value
    INR 567.1bn

    Exit at 20.0x EBITDA

    Value per shareINR 713.46

    91% of EV

    Terminal value, undiscounted
    INR 2068.4bn
    Terminal value, discounted
    INR 1259.0bn
    Enterprise value
    INR 1385.7bn
    Less net debt
    INR 9.6bn
    Equity value
    INR 1376.1bn

    Spread between methods: 83%.

    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%
    9.66%350.09367.65387.63410.58437.22
    10.66%307.03320.21334.98351.65370.62
    11.66%272.64282.79294.02306.54320.56
    12.66%244.57252.55261.30270.93281.60
    13.66%221.26227.64234.58242.16250.46

    Outlined: this model. Green text: above today's price of 1372.40. 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 year17.0%63.2%+46.2pp
    EBIT margin20.9%88.8%+67.9pp
    Discount rate11.7%4.7%-7.0pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.