DCF Studio

    ONGC.NS · NSI · Energy

    Oil and Natural Gas Corporation Limited

    Also onConsensus Drift

    Implied value per share

    INR 396.40

    Market price

    INR 232.80

    Implied upside

    +70.3%

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

    AdjustedCapital expenditure runs at 8.7% of revenue against depreciation of 5.3%. 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 396.40+70.3%
    Exit multiple
    INR 192.71-17.2%
    Market price
    INR 232.80

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn164bn328bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 5974.1bnINR 5896.4bnINR 5819.8bnINR 5744.1bnINR 5669.4bn-1.3%
    EBITINR 709.9bnINR 700.6bnINR 691.5bnINR 682.5bnINR 673.7bn-1.3%
    NOPATINR 531.0bnINR 524.1bnINR 517.3bnINR 510.5bnINR 503.9bn-1.3%
    Add depreciation & amortisationINR 317.1bnINR 313.0bnINR 308.9bnINR 304.9bnINR 300.9bn-1.3%
    Less capital expenditureINR -520.6bnINR -513.9bnINR -507.2bnINR -500.6bnINR -494.1bn-1.3%
    Less increase in working capitalINR 583.2mINR 575.6mINR 568.1mINR 560.7mINR 553.4m+1.3%
    Free cashflow to firmINR 328.0bnINR 323.7bnINR 319.5bnINR 315.4bnINR 311.3bn-1.3%
    Discount factor0.96160.88920.82230.76040.7031-
    Present valueINR 315.4bnINR 287.9bnINR 262.7bnINR 239.8bnINR 218.9bn-8.7%
    Present Value Of The ForecastINR 1324.7bn

    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
    Beta0.395Reported 0.097, pulled toward 1.0 (Blume)
    Cost of equity9.96%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 2928.7bn62.7% of capital
    Total debtINR 1743.0bn37.3% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC8.14%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 396.40

    79% of EV

    Forecast FCFF, final year
    INR 311.3bn
    Capex at depreciation, working capital in reinvestment
    INR 505.2bn
    Less reinvestment at g/ROIC (21.9% of NOPAT)
    INR -110.6bn
    Capitalised
    INR 394.6bn
    ROIC (reported)
    11.4%
    Terminal value, undiscounted
    INR 7169.7bn
    Terminal value, discounted
    INR 5041.2bn
    Enterprise value
    INR 6365.9bn
    Less net debt
    INR 1379.1bn
    Equity value
    INR 4986.9bn

    Exit at 3.6x EBITDA

    Value per shareINR 192.71

    65% of EV

    Terminal value, undiscounted
    INR 3525.2bn
    Terminal value, discounted
    INR 2478.7bn
    Enterprise value
    INR 3803.4bn
    Less net debt
    INR 1379.1bn
    Equity value
    INR 2424.3bn

    Spread between methods: 69%.

    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%
    6.14%583.77624.30675.58742.77834.88
    7.14%458.13479.79505.83537.86578.32
    8.14%370.54382.52396.40412.75432.34
    9.14%306.05312.64320.04328.46338.15
    10.14%256.63260.05263.76267.83272.35

    Outlined: this model. Green text: above today's price of 232.80. 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 year-1.3%-9.6%-8.3pp
    EBIT margin11.9%8.5%-3.4pp
    Discount rate8.1%10.8%+2.7pp
    Download as Excel

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