DCF Studio

    RKT.L · LSE · Consumer Defensive

    Reckitt Benckiser Group plc

    Also onConsensus Drift

    Implied value per share

    GBp 7020.01

    Market price

    GBp 4928.00

    Implied upside

    +42.5%

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

    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 7020.01+42.5%
    Exit multiple
    GBp 4827.61-2.0%
    Market price
    GBp 4928.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 14.1bnGBP 14.0bnGBP 14.0bnGBP 13.9bnGBP 13.8bn-0.6%
    EBITGBP 3.3bnGBP 3.3bnGBP 3.3bnGBP 3.3bnGBP 3.3bn-0.6%
    NOPATGBP 2.5bnGBP 2.5bnGBP 2.5bnGBP 2.5bnGBP 2.5bn-0.6%
    Add depreciation & amortisationGBP 500.1mGBP 497.2mGBP 494.3mGBP 491.5mGBP 488.7m-0.6%
    Less capital expenditureGBP -485.5mGBP -482.7mGBP -479.9mGBP -477.2mGBP -474.4m-0.6%
    Less increase in working capitalGBP 31.8mGBP 31.7mGBP 31.5mGBP 31.3mGBP 31.1m+0.6%
    Free cashflow to firmGBP 2.6bnGBP 2.5bnGBP 2.5bnGBP 2.5bnGBP 2.5bn-0.6%
    Discount factor0.96900.90990.85450.80240.7534-
    Present valueGBP 2.5bnGBP 2.3bnGBP 2.2bnGBP 2.0bnGBP 1.9bn-6.6%
    Present Value Of The ForecastGBP 10.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.499Reported 0.252, pulled toward 1.0 (Blume)
    Cost of equity7.24%Risk-free + beta x equity risk premium
    Cost of debt4.95%Interest expense / average total debt
    Market capitalisationGBP 31.3bn78.8% of capital
    Total debtGBP 8.4bn21.2% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC6.49%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 shareGBP 70.20

    79% of EV

    Forecast FCFF, final year
    GBP 2.5bn
    Capex at depreciation, working capital in reinvestment
    GBP 2.6bn
    Less reinvestment at g/ROIC (16.0% of NOPAT)
    GBP -411.2m
    Capitalised
    GBP 2.2bn
    ROIC (reported)
    15.6%
    Terminal value, undiscounted
    GBP 55.4bn
    Terminal value, discounted
    GBP 41.7bn
    Enterprise value
    GBP 52.6bn
    Less net debt
    GBP 6.7bn
    Equity value
    GBP 45.9bn

    Exit at 9.7x EBITDA

    Value per shareGBP 48.28

    72% of EV

    Terminal value, undiscounted
    GBP 36.3bn
    Terminal value, discounted
    GBP 27.4bn
    Enterprise value
    GBP 38.2bn
    Less net debt
    GBP 6.7bn
    Equity value
    GBP 31.6bn

    Spread between methods: 37%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.49%105.95122.11146.33186.70267.60
    5.49%77.7285.3895.57109.81131.14
    6.49%60.7864.9870.2076.8985.79
    7.49%49.4851.9854.9658.5963.10
    8.49%41.4142.9844.7946.9349.47

    Outlined: this model. Green text: above today's price of 49.28. 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-0.6%-7.8%-7.2pp
    EBIT margin23.7%17.3%-6.4pp
    Discount rate6.5%8.0%+1.5pp
    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.