P&G India Valuation Excel Model and Intrinsic Value of Shares

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P&G India Valuation : About the Company

Procter & Gamble Hygiene and Health Care Limited is is engaged in the manufacturing and selling of branded fast-moving consumer goods in the feminine care and healthcare segments. The Company has a manufacturing plant in Goa and Baddi in Himachal Pradesh. They also have third-party manufacturing locations spread across India.

The business model of the company is such that it operates mostly across feminine hygiene and healthcare business. In the Feminine Care business, Whisper continues to hold its position as the market leader. The brand continues to make strong progress in growing more users on sanitary napkins, particularly on top-tier usage. Their best in the class menstrual hygiene school program is also expanded to reach 50% of the urban girls across the country.

The Health Care business also continues to grow strong double-digit behind the strength of our equities and our portfolio, which includes Vicks VapoRub, Vicks Cough Drops, Vicks Action 500 Advanced, Vicks Inhaler and Vicks BabyRub. The growth is majorly driven by a combination of plans to win with consumers, winning versus the competition and winning in whitespaces such as the BabyRub version of the product. This overall shows a high growth model for the company in niche FMCG segments. From here, we go ahead with P&G India Valuation and Intrinsic Value of its shares.

Read more here: P&G 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:

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 P&G India Valuation.

Financial Year Revenue Growth Rate
Year 1 -6%
Year 2 12%
Year 3 14%
Year 4 15%
Year 5 12%
Revenue Growth Rates: P&G 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 : P&G India Valuation
Financial Statements Forecast : P&G 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.

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.

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F/S Items (INR Millions) Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Free Cash Flow to Firm 9885 4529 5444 6575 7440
Free Cash Flow to Equity 9696 4449 5487 6651 7056
FCFF and FCFE values: P&G 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 7439.66
Growth Rate 5.00%
Cost of Capital 8.19%
Terminal Value 244959.45
Terminal Value: P&G India 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 P&G India Valuation.

WACC Calculation for P&G India Valuation.
WACC Calculation for P&G 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 P&G India Valuation. (Units are INR Millions)

PV of FCFF and FCFE  for P&G India Valuation.
PV of FCFF and FCFE for P&G India Valuation.

Step 7: Arriving at the Intrinsic Value of the Shares

Dividing the PV of the FCFE 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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P&G India Valuation Units
PV in INR Million 191976
No of Shares Outstanding (In Million) 32
Intrinsic Value 5999.24
Current Market Price of Share 11405
Current Discount/Premium 90%
Intrinsic Value of the Shares: P&G India Valuation

P&G India Valuation and Intrinsic Share Price = INR 5999.24

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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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