DCF Studio

    TITAN.NS · NSI · Consumer Cyclical

    Titan Company Limited

    Also onConsensus Drift

    Implied value per share

    INR 1634.45

    Market price

    INR 4798.50

    Implied upside

    -65.9%

    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 54.0x 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 1634.45-65.9%
    Exit multiple
    INR 4623.76-3.6%
    Market price
    INR 4798.50

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn24bn48bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 1128.3bnINR 1458.2bnINR 1884.5bnINR 2435.4bnINR 3147.5bn+29.2%
    EBITINR 105.2bnINR 136.0bnINR 175.8bnINR 227.1bnINR 293.6bn+29.2%
    NOPATINR 78.7bnINR 101.7bnINR 131.5bnINR 169.9bnINR 219.6bn+29.2%
    Add depreciation & amortisationINR 12.2bnINR 15.8bnINR 20.4bnINR 26.4bnINR 34.1bn+29.2%
    Less capital expenditureINR -12.1bnINR -15.6bnINR -20.2bnINR -26.0bnINR -33.7bn+29.2%
    Less increase in working capitalINR -61.7bnINR -79.8bnINR -103.1bnINR -133.2bnINR -172.2bn+29.2%
    Free cashflow to firmINR 17.2bnINR 22.2bnINR 28.7bnINR 37.0bnINR 47.9bn+29.2%
    Discount factor0.95320.86600.78680.71480.6494-
    Present valueINR 16.4bnINR 19.2bnINR 22.5bnINR 26.5bnINR 31.1bn+17.4%
    Present Value Of The ForecastINR 115.6bn

    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
    Beta0.453Reported 0.184, pulled toward 1.0 (Blume)
    Cost of equity10.43%Risk-free + beta x equity risk premium
    Cost of debt6.80%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationINR 4257.8bn93.3% of capital
    Total debtINR 306.2bn6.7% of capital, book value as a proxy
    Tax rate25.2%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 1634.45

    93% of EV

    Forecast FCFF, final year
    INR 47.9bn
    Capex at depreciation, working capital in reinvestment
    INR 220.5bn
    Less reinvestment at g/ROIC (17.4% of NOPAT)
    INR -38.4bn
    Capitalised
    INR 182.2bn
    ROIC (reported)
    14.4%
    Terminal value, undiscounted
    INR 2467.3bn
    Terminal value, discounted
    INR 1602.3bn
    Enterprise value
    INR 1718.0bn
    Less net debt
    INR 267.3bn
    Equity value
    INR 1450.7bn

    Exit at 20.0x EBITDA

    Value per shareINR 4623.76

    97% of EV

    Terminal value, undiscounted
    INR 6552.8bn
    Terminal value, discounted
    INR 4255.5bn
    Enterprise value
    INR 4371.2bn
    Less net debt
    INR 267.3bn
    Equity value
    INR 4103.9bn

    Spread between methods: 96%.

    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%2261.562371.882500.912654.202839.71
    9.07%1852.071921.181999.922090.672196.68
    10.07%1541.181585.271634.451689.781752.69
    11.07%1297.841326.031356.881390.891428.68
    12.07%1102.741120.481139.541160.131182.51

    Outlined: this model. Green text: above today's price of 4798.50. 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 year29.2%61.6%+32.4pp
    EBIT margin9.3%21.6%+12.3pp
    Discount rate10.1%5.8%-4.3pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.