DCF Studio

    TIT.MI · MIL · Communication Services

    Telecom Italia S.p.A.

    Also onConsensus Drift

    Implied value per share

    EUR 1.41

    Market price

    EUR 7.75

    Implied upside

    -81.8%

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

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

    Value Per Share

    Perpetuity growth
    EUR 1.41-81.8%
    Exit multiple
    EUR 1.75-77.3%
    Market price
    EUR 7.75

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 13.1bnEUR 12.5bnEUR 11.9bnEUR 11.4bnEUR 10.9bn-4.5%
    EBITEUR 1.4bnEUR 1.3bnEUR 1.3bnEUR 1.2bnEUR 1.1bn-4.5%
    NOPATEUR 1.0bnEUR 987.1mEUR 942.3mEUR 899.6mEUR 858.7m-4.5%
    Add depreciation & amortisationEUR 3.2bnEUR 3.0bnEUR 2.9bnEUR 2.8bnEUR 2.6bn-4.5%
    Less capital expenditureEUR -3.2bnEUR -3.1bnEUR -2.9bnEUR -2.8bnEUR -2.7bn-4.5%
    Less increase in working capitalEUR 129.6mEUR 123.7mEUR 118.1mEUR 112.7mEUR 107.6m+4.5%
    Free cashflow to firmEUR 1.1bnEUR 1.1bnEUR 1.0bnEUR 984.1mEUR 939.4m-4.5%
    Discount factor0.96390.89550.83200.77300.7182-
    Present valueEUR 1.1bnEUR 967.1mEUR 857.7mEUR 760.7mEUR 674.6m-11.3%
    Present Value Of The ForecastEUR 4.4bn

    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
    Beta0.836Reported 0.755, pulled toward 1.0 (Blume)
    Cost of equity9.63%Risk-free + beta x equity risk premium
    Cost of debt6.85%Interest expense / average total debt
    Market capitalisationEUR 16.5bn55.5% of capital
    Total debtEUR 13.2bn44.5% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC7.63%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 1.41

    79% of EV

    Forecast FCFF, final year
    EUR 939.4m
    Capex at depreciation, working capital in reinvestment
    EUR 1.7bn
    Less reinvestment at g/ROIC (32.7% of NOPAT)
    EUR -546.1m
    Capitalised
    EUR 1.1bn
    ROIC (WACC floor)
    7.6%
    Terminal value, undiscounted
    EUR 22.4bn
    Terminal value, discounted
    EUR 16.1bn
    Enterprise value
    EUR 20.4bn
    Less net debt
    EUR 9.8bn
    Equity value
    EUR 10.6bn

    Exit at 6.9x EBITDA

    Value per shareEUR 1.75

    81% of EV

    Terminal value, undiscounted
    EUR 26.0bn
    Terminal value, discounted
    EUR 18.7bn
    Enterprise value
    EUR 23.1bn
    Less net debt
    EUR 9.8bn
    Equity value
    EUR 13.3bn

    Spread between methods: 22%.

    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%
    5.63%2.412.432.442.462.47
    6.63%1.821.831.851.861.87
    7.63%1.391.401.411.421.43
    8.63%1.051.061.071.081.09
    9.63%0.790.800.810.810.82

    Outlined: this model. Green text: above today's price of 7.75. 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-4.5%26.0%+30.5pp
    EBIT margin10.5%51.6%+41.1pp
    Discount rate7.6%3.1%-4.5pp
    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.