company DCM INDUSTRIES

dcf 187.408877434164
enterprise valuation 68.5975052716047

variable value comment

gross profit margin (gpm) or OPM 7% >20%

in line with gross

Revenue growth cyclical profit growth
EPS should be
consistent with the
EPS cyclical net profits

company should
not be highly
debt level leveraged

applicable for
manufacturing
inventory companies

sales backed by
receivables is not a
sales Vs receivables great sign

cash flow from operations has to be positive

return on equity >25%

1 or 2 simple
Business diversity business lines

subsidiary not many

what does it signify
higher the margin, higher is the evidence of a sustainable moat(moat is the companys competitive
advantage

Revenue growth should be inline with the profit growth

if a company is diluting its equity then it is not good for its shareholders

High debt means the company is operating on high leverage.plus finance cost eats away the
earnings.if debt is there check interest coverage ratio

a growing inventory along with a growing PAT margin is a good sign.Always check the inventory
number of days

this shows that company is just pushing products to show revenue growth

if the company is not generating cash from operations then it indicates operating stress
higher the ROE better it is for the investor however make sure you check the debt levels along with
this.debt increases ROE(use dupont method)
avoid companies that have multiple business interests.Stick to companies that operate in 1 or 2
segments

if there are too many subsidiaries then it could be a sign of the company siphoning off money .Be
cautious while investing in such companies
 The Discounted Cash Flow (DCF) Model
Module 3, Chapter 15
Version 1.0

Free Cash Flow Estimate (In INR Crs)

2018 - 19 2019- 20

Net cash from Operating Activities 83.7 37.9

Capital Expenditures 88.5 75.1
Free Cash Flow (FCF) (4.8) (37.2)
3 Year Average Free Cash flow

Inputs
Number of years considered 10
FCF Growth rate for first 5 years 18%
FCF Growth rate for last 5 years 10%
Terminal Growth Rate 3.50%
Discount Rate 9.386%

Intrinsic Value Calculation (INR Crs, unless indicated)

Total PV of cash flow 1,689.16
Total Debt 115.07 BS-LONG TERM BORROWING
BS-CURRENT ASSETS -CASH N
Cash & Cash Balance 32.00 BANK BALANCE
Net Debt 83.07
Share Capital 17.14
Face Value (INR) 2.00
Number of Shares 85,700,000
Share Price (INR) 187.41

Intrinsic Value Band

Model Error leeway 10%
Lower Intrinsic value band 168.7
Upper Intrinsic value band 206.1

Disclaimer – This DCF model is for educational purpose only.

 2020- 21

net cash from operating activities from cash flow

225.3 statement
57.0 CASH FLOW -INVESTING ACTIVITY-PURCHASE OF TANGIBLE
168.3
42.1

Cash flow & Present Value Table

Sl No Year Cash flow PV of Cash flow
1 2014 - 15 49.64 45.38
2 2015 - 16 58.57 48.95
3 2016 - 17 69.12 52.81
4 2017 - 18 81.56 56.97
5 2018 - 19 96.24 61.45
6 2019 - 20 105.86 61.80
7 2020 - 21 116.45 62.14
8 2021 - 22 128.09 62.49

9 2022 - 23 140.90 62.84

10 2023 - 24 154.99 63.19

Terminal Year 2023 - 24

Terminal Value 2,725.23
PV of Terminal Value 1,111.14
company name 21 20 19 18 17 16

Enterprise value (cr.) 708.58 675.05 734.51 723.65 913.41 from money control balanc
EBITDA 168.70952381 168.34165 135.26888 116.1557 208.5411
EV/EBITDA(X) 4.2 4.01 5.43 6.23 4.38
Growth in EBITDA 0.2185305 24.449652 16.454792 -44.30081
Average 3 yrs growth in EBITDA -0.794459
EXPECTED EBITDA 167.3692
FORCASTED EV 587.88062
SHARES OUTSTANDING 8.57 in crores
TARGET PRICE 68.597505
ENTRY PRICE 51.448129
from money control balanc sheet

DEBT
115.07

1030027
company name

cost of Debt calculation

interest expense 39.74 MONEY CONTROL BALANCE SHEET & INCOME STATEMENT
ST Debt 298.61
LT Debt 115.07
cost of Debt 9.61%
Income tax expense 34.1
income before tax 99.99
Effective tax rate 34.10%
cost of debt*(1-T) 6.33%

cost of equity calculation

RISK FREE RATE 6.88% 10 YEAR BOND RATE
BETA 1.51 MONEY CONTROL
MARKET RETURN 9.40% 20YEAR STOCK MARKET RETURN
COST OF EQUITY 10.69%

WEIGHT OF DEBT & EQUITY CALCULATION

TOTAL DEBT 413.68 29.83% WEIGHT OF DEBT
MARKET CAP 973 70% WEIGHT OF EQUITY
TOTAL 1386.68

WACC CALCULATION
WACC 9.39%
& INCOME STATEMENT