DCF Studio

    SRG.MI · MIL · Utilities

    Snam S.p.A.

    Also onConsensus Drift

    Implied value per share

    EUR 0.64

    Market price

    EUR 5.60

    Implied upside

    -88.6%

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

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 57.5% of revenue against depreciation of 24.2%. 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 0.64-88.6%
    Exit multiple
    EUR 3.32-40.7%
    Market price
    EUR 5.60

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    -75295775-376478880FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 4.0bnEUR 4.1bnEUR 4.2bnEUR 4.4bnEUR 4.5bn+3.3%
    EBITEUR 1.7bnEUR 1.8bnEUR 1.8bnEUR 1.9bnEUR 2.0bn+3.3%
    NOPATEUR 1.3bnEUR 1.3bnEUR 1.4bnEUR 1.4bnEUR 1.5bn+3.3%
    Add depreciation & amortisationEUR 961.1mEUR 992.6mEUR 1.0bnEUR 1.1bnEUR 1.1bn+3.3%
    Less capital expenditureEUR -2.3bnEUR -2.4bnEUR -2.4bnEUR -2.5bnEUR -2.6bn+3.3%
    Less increase in working capitalEUR -41.2mEUR -42.6mEUR -44.0mEUR -45.4mEUR -46.9m+3.3%
    Free cashflow to firmEUR -66.2mEUR -68.3mEUR -70.6mEUR -72.9mEUR -75.3m-3.3%
    Discount factor0.97100.91550.86320.81390.7674-
    Present valueEUR -64.2mEUR -62.6mEUR -60.9mEUR -59.3mEUR -57.8m+2.6%
    Present Value Of The ForecastEUR -304.8m

    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
    Beta0.752Reported 0.630, pulled toward 1.0 (Blume)
    Cost of equity9.09%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 18.8bn49.0% of capital
    Total debtEUR 19.5bn51.0% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC6.06%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 0.64

    102% of EV

    Forecast FCFF, final year
    EUR -75.3m
    Capex at depreciation, working capital in reinvestment
    EUR 1.5bn
    Less reinvestment at g/ROIC (41.2% of NOPAT)
    EUR -633.6m
    Capitalised
    EUR 902.4m
    ROIC (WACC floor)
    6.1%
    Terminal value, undiscounted
    EUR 26.0bn
    Terminal value, discounted
    EUR 19.9bn
    Enterprise value
    EUR 19.6bn
    Less net debt
    EUR 17.5bn
    Equity value
    EUR 2.1bn

    Exit at 12.3x EBITDA

    Value per shareEUR 3.32

    101% of EV

    Terminal value, undiscounted
    EUR 37.7bn
    Terminal value, discounted
    EUR 28.9bn
    Enterprise value
    EUR 28.6bn
    Less net debt
    EUR 17.5bn
    Equity value
    EUR 11.1bn

    Spread between methods: 136%.

    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%
    4.06%5.205.886.979.0414.73
    5.06%2.052.082.122.152.19
    6.06%0.580.610.640.670.69
    7.06%-0.46-0.44-0.41-0.39-0.37
    8.06%-1.23-1.21-1.19-1.17-1.15

    Outlined: this model. Green text: above today's price of 5.60. 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 year3.3%17.4%+14.1pp
    EBIT margin43.6%72.3%+28.8pp
    Discount rate6.1%4.2%-1.8pp
    Download as Excel

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