DCF Studio

    TRN.MI · MIL · Utilities

    Terna S.p.A.

    Also onConsensus Drift

    Implied value per share

    EUR 5.69

    Market price

    EUR 9.33

    Implied upside

    -39.0%

    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 64.7% of revenue against depreciation of 25.0%. 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 5.69-39.0%
    Exit multiple
    EUR 12.56+34.6%
    Market price
    EUR 9.33

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    -1144682088-5723410440FY25FY26FY27FY28FY29
    Nominal FCFFDiscounted to todayEUR
    LineFY25FY26FY27FY28FY29CAGR
    RevenueEUR 4.1bnEUR 4.6bnEUR 5.2bnEUR 5.9bnEUR 6.6bn+12.6%
    EBITEUR 1.8bnEUR 2.1bnEUR 2.3bnEUR 2.6bnEUR 3.0bn+12.6%
    NOPATEUR 1.4bnEUR 1.6bnEUR 1.8bnEUR 2.0bnEUR 2.2bn+12.6%
    Add depreciation & amortisationEUR 1.0bnEUR 1.2bnEUR 1.3bnEUR 1.5bnEUR 1.6bn+12.6%
    Less capital expenditureEUR -2.7bnEUR -3.0bnEUR -3.4bnEUR -3.8bnEUR -4.3bn+12.6%
    Less increase in working capitalEUR -460.0mEUR -518.0mEUR -583.2mEUR -656.6mEUR -739.3m+12.6%
    Free cashflow to firmEUR -712.2mEUR -801.9mEUR -902.9mEUR -1.0bnEUR -1.1bn-12.6%
    Discount factor0.96900.90980.85420.80210.7531-
    Present valueEUR -690.1mEUR -729.6mEUR -771.3mEUR -815.4mEUR -862.1m-5.7%
    Present Value Of The ForecastEUR -3.9bn

    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
    Beta0.737Reported 0.607, pulled toward 1.0 (Blume)
    Cost of equity8.99%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 18.7bn57.5% of capital
    Total debtEUR 13.9bn42.5% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC6.50%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 5.69

    117% of EV

    Forecast FCFF, final year
    EUR -1.1bn
    Capex at depreciation, working capital in reinvestment
    EUR 2.2bn
    Less reinvestment at g/ROIC (38.4% of NOPAT)
    EUR -854.3m
    Capitalised
    EUR 1.4bn
    ROIC (WACC floor)
    6.5%
    Terminal value, undiscounted
    EUR 35.0bn
    Terminal value, discounted
    EUR 26.4bn
    Enterprise value
    EUR 22.5bn
    Less net debt
    EUR 11.1bn
    Equity value
    EUR 11.4bn

    Exit at 11.6x EBITDA

    Value per shareEUR 12.56

    111% of EV

    Terminal value, undiscounted
    EUR 53.3bn
    Terminal value, discounted
    EUR 40.2bn
    Enterprise value
    EUR 36.3bn
    Less net debt
    EUR 11.1bn
    Equity value
    EUR 25.2bn

    Spread between methods: 75%.

    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%
    4.50%14.9516.2918.2621.4727.82
    5.50%8.678.828.999.209.47
    6.50%5.565.625.695.755.82
    7.50%3.413.463.513.573.62
    8.50%1.791.831.881.921.97

    Outlined: this model. Green text: above today's price of 9.33. 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 year12.6%19.8%+7.2pp
    EBIT margin44.8%54.5%+9.7pp
    Discount rate6.5%5.5%-1.1pp
    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.