ABB India Valuation Excel Model and Intrinsic Value of Shares

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ABB India Valuation : About the Company

ABB India has a resilient and diversified business model which helps them to drive growth. Since the last few years, it has shown revenue growth across emerging segments and a solid cash position. It has around 70+ years of presence in India and is promoted by the Swiss giant ABB Schweiz AG. The company competes with some other big names in electrification and automation like FESTO, Crompton Greaves and Honeywell all of which are foreign-based. They are all competing for the emerging market in India with their foreign technology. Since the Industry is asset-heavy entry of new players is difficult. From here, we go ahead with ABB India Valuation and Intrinsic Value of its shares.

Read more here: ABB India Shares Fundamental Analysis 

Methodology Used:

Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its expected future cash flows. DCF analysis attempts to figure out the value of an investment today, based on projections of how much money it will generate in the future. The following step by step procedure is followed.

  1. Determining the Revenue Growth Rates
  2. Forecasting the Financial Statements
  3. Deriving the FCFF and FCFE
  4. Calculating the Terminal Value
  5. Calculating the Discount Rate
  6. Discounting the Cashflows
  7. Arriving at the Intrinsic Value of the Shares
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You can also get the formula based DCF Excel Model from below (Use code “BDV25” to get 25% off)



Step 1: Determining the Revenue Growth Rates

We arrive at the below table by using the past and expected future performance of both the company and the economy. This along with adjustments to changes in the management expectations, extraordinary events and other macro factors give the revenue growth rates for ABB India Valuation.

Financial Year Revenue Growth Rate
Year 1 -20%
Year 2 23%
Year 3 12%
Year 4 10%
Year 5 11%
Revenue Growth Rates: ABB India Valuation

Step 2: Forecasting the Financial Statements

The financial statements are forecasted for a period of 5 years using the annual report data of the company. The assumptions used for forecasting are tabulated below. The Excel model is completely editable and can be adjusted for specific changes which may happen over a period of time.

Financial Statements Forecast : ABB India Valuation
Financial Statements Forecast : ABB India Valuation



Step 3: Deriving the FCFF and FCFE

Free cash flow to the firm (FCFF) represents the amount of cash flow from operations available for distribution after accounting for depreciation expenses, taxes, working capital, and investments. FCFF is a measurement of a company’s profitability after all expenses and reinvestments. It is given as follows.

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Free cash flow to equity (FCFE) is a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt are paid. FCFE is a measure of equity capital usage.

F/S Items (INR Millions) Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Free Cash Flow to Firm 7304 6251 7959 9064 10366
Free Cash Flow to Equity 16758 7315 8709 9794 11230
FCFF and FCFE values: ABB India Valuation

Step 4: Calculating the Terminal Value

Terminal value (TV) is the value of a business or project beyond the forecast period when future cash flows can be estimated. It assumes that a business will grow at a set growth rate forever after the forecast period. Terminal value often comprises a large percentage of the total assessed value.

Terminal Value Calculation Units INR Millions
Free Cash Flow to Firm 10365.98
Growth Rate 5.00%
Cost of Capital 14.32%
Terminal Value 116810.40
Terminal Value: ABB IndiaValuation

Step 5: Calculating the Discount Rate

DCF analysis helps assess the viability of a project or investment by calculating the present value of expected future cash flows using a discount rate. Here we use the Weighted average cost of capital (WACC) to discount the cash flow. The below table from the excel model shows the calculation of WACC for ABB India Valuation.

WACC Calculation for ABB India Valuation.
WACC Calculation for ABB India Valuation.



Step 6: Discounting the Cashflows

The WACC and the Cost of Equity for the company calculated in the above step are then used to discount the FCFF, FCFE and Terminal Value calculated in Step 3 and 4. In our case, we’ll only consider the FCFF based Intrinsic price of the shares as it represents the cash flow to all the suppliers of capital and not only to the equity shareholders. Thus we arrive at Present value of future FCFF for ABB India Valuation. (Units are INR Millions)

PV of FCFF and FCFE  for ABB India Valuation.
PV of FCFF and FCFE for ABB India Valuation.

Step 7: Arriving at the Intrinsic Value of the Shares

Dividing the PV of the FCFF and Terminal Value (the Value of the entire firm) by the number of outstanding shares we get the per share intrinsic value. We can compare this price with the current market price of the stock to get the Discount or Premium to its intrinsic price.

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ABB India Valuation Units
PV in INR Million 86945
No of Shares Outstanding (In Million) 212
Intrinsic Value 410.12
Current Market Price of Share 948.00
Current Discount/Premium 131%
Intrinsic Value of the Shares: ABB India Valuation

ABB India Valuation and Intrinsic Share Price = INR 410.12

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References: Investopedia
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(Note: All the research done by me is only for educational purposes and should not be seen as Investment recommendations. I am a Research analyst and not a SEBI registered Investment Advisor. My research completely reflects my personal opinions and not of my employers. Kindly do your own due diligence before Investing)



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