DCF Studio

    REC.MI · MIL · Healthcare

    Recordati Industria Chimica e Farmaceutica S.p.A.

    Also onConsensus Drift

    Implied value per share

    EUR 68.71

    Market price

    EUR 52.70

    Implied upside

    +30.4%

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

    AdjustedCapital expenditure runs at 15.8% of revenue against depreciation of 7.2%. 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: USD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    EUR 68.71+30.4%
    Exit multiple
    EUR 72.02+36.7%
    Market price
    EUR 52.70

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    0m168m335mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 2.9bnEUR 3.3bnEUR 3.7bnEUR 4.2bnEUR 4.7bn+12.2%
    EBITEUR 804.3mEUR 902.5mEUR 1.0bnEUR 1.1bnEUR 1.3bn+12.2%
    NOPATEUR 619.8mEUR 695.5mEUR 780.4mEUR 875.7mEUR 982.6m+12.2%
    Add depreciation & amortisationEUR 210.5mEUR 236.2mEUR 265.0mEUR 297.4mEUR 333.7m+12.2%
    Less capital expenditureEUR -464.3mEUR -520.9mEUR -584.5mEUR -655.9mEUR -736.0m+12.2%
    Less increase in working capitalEUR -154.4mEUR -173.3mEUR -194.4mEUR -218.2mEUR -244.8m+12.2%
    Free cashflow to firmEUR 211.6mEUR 237.4mEUR 266.4mEUR 299.0mEUR 335.5m+12.2%
    Discount factor0.96380.89520.83160.77240.7175-
    Present valueEUR 203.9mEUR 212.6mEUR 221.6mEUR 230.9mEUR 240.7m+4.2%
    Present Value Of The ForecastEUR 1.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.20%USD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.687Reported 0.533, pulled toward 1.0 (Blume)
    Cost of equity8.67%Risk-free + beta x equity risk premium
    Cost of debt4.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationEUR 10.8bn81.4% of capital
    Total debtEUR 2.5bn18.6% of capital, book value as a proxy
    Tax rate22.9%Effective, capped at statutory
    WACC7.66%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 shareEUR 68.71

    93% of EV

    Forecast FCFF, final year
    EUR 335.5m
    Capex at depreciation, working capital in reinvestment
    EUR 1.2bn
    Less reinvestment at g/ROIC (9.8% of NOPAT)
    EUR -116.1m
    Capitalised
    EUR 1.1bn
    ROIC (reported)
    25.6%
    Terminal value, undiscounted
    EUR 21.3bn
    Terminal value, discounted
    EUR 15.3bn
    Enterprise value
    EUR 16.4bn
    Less net debt
    EUR 2.0bn
    Equity value
    EUR 14.4bn

    Exit at 13.9x EBITDA

    Value per shareEUR 72.02

    94% of EV

    Terminal value, undiscounted
    EUR 22.3bn
    Terminal value, discounted
    EUR 16.0bn
    Enterprise value
    EUR 17.1bn
    Less net debt
    EUR 2.0bn
    Equity value
    EUR 15.1bn

    Spread between methods: 5%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.66%97.84109.95125.86147.73179.71
    6.66%74.5181.5890.34101.46116.09
    7.66%58.8663.3668.7175.2083.23
    8.66%47.6750.7054.2158.3263.22
    9.66%39.2941.4243.8346.6049.80

    Outlined: this model. Green text: above today's price of 52.70. 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 year12.2%6.5%-5.7pp
    EBIT margin27.4%21.6%-5.8pp
    Discount rate7.7%8.8%+1.1pp
    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.