DCF Studio

    ULTRACEMCO.NS · NSI · Basic Materials

    UltraTech Cement Limited

    Also onConsensus Drift

    Implied value per share

    INR 2480.14

    Market price

    INR 11014.00

    Implied upside

    -77.5%

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

    AdjustedCapital expenditure runs at 11.5% of revenue against depreciation of 5.0%. 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: INR assumption - no free live source available for this market.

    Current EV/EBITDA of 20.3x 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 2480.14-77.5%
    Exit multiple
    INR 11018.17+0.0%
    Market price
    INR 11014.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn18bn36bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 978.0bnINR 1094.5bnINR 1224.9bnINR 1370.9bnINR 1534.2bn+11.9%
    EBITINR 125.3bnINR 140.3bnINR 157.0bnINR 175.7bnINR 196.6bn+11.9%
    NOPATINR 93.7bnINR 104.9bnINR 117.4bnINR 131.4bnINR 147.1bn+11.9%
    Add depreciation & amortisationINR 48.4bnINR 54.2bnINR 60.7bnINR 67.9bnINR 76.0bn+11.9%
    Less capital expenditureINR -112.7bnINR -126.2bnINR -141.2bnINR -158.0bnINR -176.8bn+11.9%
    Less increase in working capitalINR -6.7bnINR -7.5bnINR -8.4bnINR -9.4bnINR -10.5bn+11.9%
    Free cashflow to firmINR 22.8bnINR 25.5bnINR 28.5bnINR 31.9bnINR 35.7bn+11.9%
    Discount factor0.94640.84760.75910.67990.6089-
    Present valueINR 21.5bnINR 21.6bnINR 21.6bnINR 21.7bnINR 21.7bn+0.2%
    Present Value Of The ForecastINR 108.2bn

    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
    Beta0.662Reported 0.495, pulled toward 1.0 (Blume)
    Cost of equity12.09%Risk-free + beta x equity risk premium
    Cost of debt7.57%Interest expense / average total debt
    Market capitalisationINR 3240.0bn93.2% of capital
    Total debtINR 237.6bn6.8% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC11.65%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 2480.14

    88% of EV

    Forecast FCFF, final year
    INR 35.7bn
    Capex at depreciation, working capital in reinvestment
    INR 150.7bn
    Less reinvestment at g/ROIC (21.5% of NOPAT)
    INR -32.3bn
    Capitalised
    INR 118.4bn
    ROIC (WACC floor)
    11.7%
    Terminal value, undiscounted
    INR 1325.2bn
    Terminal value, discounted
    INR 807.0bn
    Enterprise value
    INR 915.2bn
    Less net debt
    INR 185.2bn
    Equity value
    INR 729.9bn

    Exit at 20.0x EBITDA

    Value per shareINR 11018.17

    97% of EV

    Terminal value, undiscounted
    INR 5451.9bn
    Terminal value, discounted
    INR 3319.8bn
    Enterprise value
    INR 3428.0bn
    Less net debt
    INR 185.2bn
    Equity value
    INR 3242.8bn

    Spread between methods: 127%.

    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%
    9.65%3310.793328.313345.823363.343380.85
    10.65%2839.372854.612869.842885.082900.31
    11.65%2453.402466.782480.152493.532506.90
    12.65%2132.392144.232156.062167.892179.73
    13.65%1861.871872.411882.941893.481904.02

    Outlined: this model. Green text: above today's price of 11014.00. 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 year11.9%48.5%+36.6pp
    EBIT margin12.8%38.9%+26.1pp
    Discount rate11.7%5.2%-6.5pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.