Ashok Leyland Valuation and Intrinsic Value of Shares- DCF Excel Model

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Ashok Leyland Valuation : About the Company

Ashok Leyland, the flagship of the Hinduja group, is the 2nd largest manufacturer of commercial vehicles in India and also the 3rd largest manufacturer of buses in the world. The company is also amongst the top 10 largest manufacturers of trucks globally. The company is headquartered in Chennai and has 9 manufacturing plants – 7 in India, a bus manufacturing facility in Ras Al Khaimah (UAE), one at Leeds, United Kingdom and a joint venture with the All teams Group. Ashok Leyland has a well-diversified portfolio across the automobile industry. The company has also been ranked as 34th best brand in India. From here, we go ahead with Ashok Leyland Valuation and Intrinsic Value of its shares.

Read more here: Ashok Leyland 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 used for this Analysis from below:



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 Ashok Leyland Valuation.

Financial Year Revenue Growth Rate
Year 1 -40%
Year 2 15%
Year 3 16%
Year 4 13%
Year 5 13%
Revenue Growth Rates: Ashok Leyland 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 : Ashok Leyland Valuation
Financial Statements Forecast : Ashok Leyland 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 -33473 19519 22388 24712 26295
Free Cash Flow to Equity -86749 18386 33906 21493 27284
FCFF and FCFE values: Ashok Leyland 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 26294.62
Growth Rate 5.00%
Cost of Capital 11.82%
Terminal Value 404814.63
Terminal Value: Ashok Leyland Valuation

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 Ashok Leyland Valuation.

WACC Calculation for Ashok Leyland Valuation.
WACC Calculation for Ashok Leyland Valuation.



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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 Ashok Leyland Valuation. (Units are INR Millions)

PV of FCFF and FCFE  for Ashok Leyland Valuation.
PV of FCFF and FCFE for Ashok Leyland 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.

Ashok Leyland Valuation Units
PV in INR Million 264090
No of Shares Outstanding (In Million) 2935
Intrinsic Value 89.98
Current Market Price of Share 84.15
Current Discount/Premium -6%
Intrinsic Value of the Shares: Ashok Leyland Valuation

Ashok Leyland Valuation and Intrinsic Share Price = INR 89.98

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Download the Excel Model from Here!

References: Investopedia
Our 150+ Stock Valuations
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You can read more about the company on its website!
Investor Presentation.
Ashok Leyland Financial Ratios

(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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