AC Choksi Share Brokers Private Limited - Myiris.com

A C Choksi
Share Brokers Private Limited
INITIATION REPORT | BAJAJ CORP LTD. Sept 09, 2011
DCF-Valuation
Valuation:
In our DCF model we have derived explicit free cash flow projections till FY 2020
after which we have assumed a terminal value. Based on a WACC of 10.90% and a
perpetual growth rate of 5% we arrive at a DCF fair value of Rs. 148.13 for Bajaj Corp.
We initiate the coverage on the stock with “BUY” recommendation with potential
upside of 19.8%.
Particulars (Rs. Mn) FY 2011A FY 2012E FY 2013E FY 2014E FY 2015E FY 2016E FY 2017E FY 2018E FY 2019E FY 2020E
Net revenues 3,587 4,475 5,282 6,074 6,985 7,963 8,998 10,078 11,186 12,305
EBIT 1,063 1,164 1,435 1,680 1,929 2,117 2,388 2,570 2,848 3,066
EBIT margin 29.6% 26.0% 27.2% 27.7% 27.6% 26.6% 26.5% 25.5% 25.5% 24.9%
Net income (Adjusted) 1,031 1,234 1,502 1,719 1,844 1,982 2,210 2,371 2,606 2,500
Free Cash Flow (FCF) analysis
NOPLAT 853 855 1,059 1,250 1,347 1,456 1,652 1,779 1,979 1,835
Depreciation 18 28 39 51 61 73 86 101 116 133
Change in working capital (455) (212) (149) (156) (170) (184) (196) (207) (214) (218)
Capex (62) (150) (180) (207) (237) (271) (306) (343) (380) (409)
Free cash flow 1,264 945 1,067 1,250 1,341 1,442 1,628 1,744 1,929 1,777
Discounted Free Cash Flow 8,001
Perpetual growth rate 5.00%
WACC 10.90%
Terminal Value 31,622
Discounted Terminal Value 13,035
Net Debt
(813)
Outstanding shares (mn)
147.5
Fair Value per share (Rs.) 148.13
Source: Company, A C Choksi Institutional Research
DCF sensitivity analysis
Terminal growth rate
148.13 3.00% 4.00% 5.00% 6.00% 7.00%
9.90% 142.1 156.6 177.0 207.9 260.0
10.40% 132.7 144.7 161.2 185.2 223.3
WACC 10.90% 124.5 134.6 148.1 167.2 196.0
11.40% 117.3 125.8 137.1 152.5 174.9
11.90% 110.9 118.2 127.6 140.3 158.1
Source: A C Choksi Institutional Research
A C Choksi Institutional Research 24