DCF Studio

    ORI.AX · ASX · Basic Materials

    Orica Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 31.66

    Market price

    AUD 22.61

    Implied upside

    +40.0%

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

    Wrong toolThis line has no market capitalisation, which means it is not ordinary shares - typically a hybrid, preference line, note or unlisted stub. A discounted cashflow values a claim on the whole business, so applying it here attributes all of the group’s revenue to a security that has no such claim. Its value is its coupon and call schedule. Look up the ordinary line instead.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.

    No usable EV/EBITDA (EBITDA is not positive), so the exit multiple falls back to 8x.

    Value Per Share

    Perpetuity growth
    AUD 31.66+40.0%
    Exit multiple
    AUD 20.35-10.0%
    Market price
    AUD 22.61

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m324m647mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayAUD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueAUD 8.5bnAUD 8.9bnAUD 9.3bnAUD 9.7bnAUD 10.2bn+4.5%
    EBITAUD 774.4mAUD 809.3mAUD 845.7mAUD 883.8mAUD 923.7m+4.5%
    NOPATAUD 542.1mAUD 566.5mAUD 592.0mAUD 618.7mAUD 646.6m+4.5%
    Add depreciation & amortisationAUD 469.7mAUD 490.8mAUD 513.0mAUD 536.1mAUD 560.2m+4.5%
    Less capital expenditureAUD -456.0mAUD -476.5mAUD -498.0mAUD -520.4mAUD -543.9m+4.5%
    Less increase in working capitalAUD -13.2mAUD -13.8mAUD -14.4mAUD -15.0mAUD -15.7m+4.5%
    Free cashflow to firmAUD 542.6mAUD 567.0mAUD 592.6mAUD 619.3mAUD 647.2m+4.5%
    Discount factor0.97640.93090.88760.84620.8068-
    Present valueAUD 529.8mAUD 527.9mAUD 526.0mAUD 524.1mAUD 522.2m-0.4%
    Present Value Of The ForecastAUD 2.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.35%Australian Government 10-year (RBA F2)
    Equity risk premium6.00%Market assumption
    Beta0.774Reported 0.663, pulled toward 1.0 (Blume)
    Cost of equity9.99%Risk-free + beta x equity risk premium
    Cost of debt6.98%Interest expense / average total debt
    Market capitalisationAUD 0.000.0% of capital
    Total debtAUD 3.0bn100.0% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC4.89%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 shareAUD 31.66

    85% of EV

    Forecast FCFF, final year
    AUD 647.2m
    Capex at depreciation, working capital in reinvestment
    AUD 646.6m
    Less reinvestment at g/ROIC (32.6% of NOPAT)
    AUD -210.5m
    Capitalised
    AUD 436.1m
    ROIC (reported)
    7.7%
    Terminal value, undiscounted
    AUD 18.7bn
    Terminal value, discounted
    AUD 15.1bn
    Enterprise value
    AUD 17.7bn
    Less net debt
    AUD 2.3bn
    Equity value
    AUD 15.5bn

    Exit at 8.0x EBITDA

    Value per shareAUD 20.35

    78% of EV

    Terminal value, undiscounted
    AUD 11.9bn
    Terminal value, discounted
    AUD 9.6bn
    Enterprise value
    AUD 12.2bn
    Less net debt
    AUD 2.3bn
    Equity value
    AUD 9.9bn

    Spread between methods: 43%.

    Sensitivity

    Value per share (AUD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    2.89%69.5399.95208.72——
    3.89%39.0045.4256.4079.69162.90
    4.89%26.4928.6431.6636.2444.08
    5.89%19.6720.4821.5022.8624.76
    6.89%15.3715.6415.9616.3416.81

    Outlined: this model. Green text: above today's price of 22.61. 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 year4.5%-1.8%-6.3pp
    EBIT margin9.1%6.8%-2.3pp
    Discount rate4.9%5.7%+0.9pp
    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.