DCF Studio

    NTPC.NS · NSI · Utilities

    NTPC Limited

    Also onConsensus Drift

    Implied value per share

    INR 31.49

    Market price

    INR 323.65

    Implied upside

    -90.3%

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

    Wrong toolThis model values the shares at 9.7% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedCapital expenditure runs at 19.5% of revenue against depreciation of 10.0%. 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 31.49-90.3%
    Exit multiple
    INR 180.40-44.3%
    Market price
    INR 323.65

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn48bn96bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 1874.5bnINR 1909.5bnINR 1945.2bnINR 1981.6bnINR 2018.6bn+1.9%
    EBITINR 366.6bnINR 373.4bnINR 380.4bnINR 387.5bnINR 394.8bn+1.9%
    NOPATINR 274.2bnINR 279.3bnINR 284.6bnINR 289.9bnINR 295.3bn+1.9%
    Add depreciation & amortisationINR 186.7bnINR 190.1bnINR 193.7bnINR 197.3bnINR 201.0bn+1.9%
    Less capital expenditureINR -364.7bnINR -371.5bnINR -378.5bnINR -385.5bnINR -392.7bn+1.9%
    Less increase in working capitalINR -7.1bnINR -7.2bnINR -7.4bnINR -7.5bnINR -7.7bn+1.9%
    Free cashflow to firmINR 89.0bnINR 90.7bnINR 92.4bnINR 94.1bnINR 95.9bn+1.9%
    Discount factor0.96110.88790.82030.75780.7000-
    Present valueINR 85.6bnINR 80.5bnINR 75.8bnINR 71.3bnINR 67.1bn-5.9%
    Present Value Of The ForecastINR 380.4bn

    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
    Beta0.522Reported 0.287, pulled toward 1.0 (Blume)
    Cost of equity10.98%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 3138.3bn53.7% of capital
    Total debtINR 2710.0bn46.3% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC8.25%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 31.49

    87% of EV

    Forecast FCFF, final year
    INR 95.9bn
    Capex at depreciation, working capital in reinvestment
    INR 295.5bn
    Less reinvestment at g/ROIC (30.3% of NOPAT)
    INR -89.6bn
    Capitalised
    INR 205.9bn
    ROIC (WACC floor)
    8.2%
    Terminal value, undiscounted
    INR 3672.0bn
    Terminal value, discounted
    INR 2570.5bn
    Enterprise value
    INR 2950.9bn
    Less net debt
    INR 2645.5bn
    Equity value
    INR 305.3bn

    Exit at 9.6x EBITDA

    Value per shareINR 180.40

    91% of EV

    Terminal value, undiscounted
    INR 5734.9bn
    Terminal value, discounted
    INR 4014.5bn
    Enterprise value
    INR 4394.9bn
    Less net debt
    INR 2645.5bn
    Equity value
    INR 1749.3bn

    Spread between methods: 141%.

    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%
    6.25%145.69147.86150.12152.50155.08
    7.25%78.7480.2781.8083.3484.87
    8.25%28.9030.1931.4932.7834.07
    9.25%-9.82-8.71-7.61-6.50-5.39
    10.25%-40.70-39.74-38.78-37.82-36.86

    Outlined: this model. Green text: above today's price of 323.65. 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 year1.9%18.8%+16.9pp
    EBIT margin19.6%34.4%+14.8pp
    Discount rate8.2%5.2%-3.0pp
    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.