DCF Studio

    SUNPHARMA.NS · NSI · Healthcare

    Sun Pharmaceutical Industries Limited

    Also onConsensus Drift

    Implied value per share

    INR 958.08

    Market price

    INR 1837.30

    Implied upside

    -47.9%

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

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

    Current EV/EBITDA of 24.9x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    INR 958.08-47.9%
    Exit multiple
    INR 1808.15-1.6%
    Market price
    INR 1837.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn89bn178bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 642.7bnINR 709.5bnINR 783.2bnINR 864.6bnINR 954.4bn+10.4%
    EBITINR 146.0bnINR 161.2bnINR 177.9bnINR 196.4bnINR 216.8bn+10.4%
    NOPATINR 121.8bnINR 134.5bnINR 148.5bnINR 163.9bnINR 180.9bn+10.4%
    Add depreciation & amortisationINR 34.1bnINR 37.6bnINR 41.5bnINR 45.8bnINR 50.6bn+10.4%
    Less capital expenditureINR -31.7bnINR -35.0bnINR -38.6bnINR -42.6bnINR -47.0bn+10.4%
    Less increase in working capitalINR -4.6bnINR -5.0bnINR -5.6bnINR -6.1bnINR -6.8bn+10.4%
    Free cashflow to firmINR 119.6bnINR 132.1bnINR 145.8bnINR 160.9bnINR 177.6bn+10.4%
    Discount factor0.95320.86600.78680.71480.6494-
    Present valueINR 114.0bnINR 114.4bnINR 114.7bnINR 115.0bnINR 115.4bn+0.3%
    Present Value Of The ForecastINR 573.5bn

    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
    Beta0.411Reported 0.121, pulled toward 1.0 (Blume)
    Cost of equity10.09%Risk-free + beta x equity risk premium
    Cost of debt9.70%Interest expense / average total debt
    Market capitalisationINR 4408.3bn99.0% of capital
    Total debtINR 46.3bn1.0% of capital, book value as a proxy
    Tax rate16.6%Effective, capped at statutory
    WACC10.07%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 958.08

    71% of EV

    Forecast FCFF, final year
    INR 177.6bn
    Capex at depreciation, working capital in reinvestment
    INR 201.7bn
    Less reinvestment at g/ROIC (19.2% of NOPAT)
    INR -38.7bn
    Capitalised
    INR 163.0bn
    ROIC (reported)
    13.0%
    Terminal value, undiscounted
    INR 2207.7bn
    Terminal value, discounted
    INR 1433.7bn
    Enterprise value
    INR 2007.2bn
    Less net debt
    INR -291.5bn
    Equity value
    INR 2298.7bn

    Exit at 20.0x EBITDA

    Value per shareINR 1808.15

    86% of EV

    Terminal value, undiscounted
    INR 5348.3bn
    Terminal value, discounted
    INR 3473.3bn
    Enterprise value
    INR 4046.8bn
    Less net debt
    INR -291.5bn
    Equity value
    INR 4338.4bn

    Spread between methods: 61%.

    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%
    8.07%1182.601215.501253.911299.451354.46
    9.07%1041.131060.961083.481109.351139.47
    10.07%932.79944.78958.08972.96989.79
    11.07%847.21854.28861.95870.31879.52
    12.07%777.91781.80785.91790.25794.88

    Outlined: this model. Green text: above today's price of 1837.30. 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 year10.4%29.7%+19.3pp
    EBIT margin22.7%48.3%+25.6pp
    Discount rate10.1%6.2%-3.9pp
    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.