Godrej Consumer Products Valuation Excel Model and Intrinsic Value of Shares

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Godrej Consumer Products Valuation : About the Company

Godrej Consumer Products Limited (GCPL) is an Indian consumer goods company based in Mumbai, India. GCPL’s products include soap, hair colourants, toiletries and liquid detergents. The company has a history of 120+ years and today has a presence in 90+ countries and touches the life of 1.15 billion citizens. The company operates in the FMCG industry where market dominance comes from scale, distribution and branding. The company has 123 years of market presence in India and reaches 1.15 billion people across Asia, Africa and Latin America. Godrej consumer products manufacture products for Hair Care, Home Care and Personal care and own some of the largest brands like GoodNight, Godrej Aer, Hit, Ezee, Cinthol etc. Some of the brands are market leaders and others have seen a rapid market size growth which is a good indicator for the company.

The business model is such that the company operates in 3 major verticals home care, hair care, and personal care. The company is #1 brand in Hair Color, Air Fresheners, Household Insecticides and Wet Wipes across India, Indonesia and Africa. In the fiscal year 2008-09, 22% of their overall revenues came from international businesses. In the fiscal year 2018-19, it is 46%, with Indonesia and Africa accounting for 39%. To drive more focus on emerging markets, in 2018, they divested their UK business. From here, we go ahead with Godrej Consumer Products Valuation and Intrinsic Value of its shares.

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Read more here: Godrej Consumer Products 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

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 Godrej Consumer Products Valuation.

Financial Year Revenue Growth Rate
Year 1 -4%
Year 2 8%
Year 3 10%
Year 4 11%
Year 5 9%
Revenue Growth Rates: Godrej Consumer Products 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 : Godrej Consumer Products Valuation
Financial Statements Forecast : Godrej Consumer Products 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 -23148 18989 23226 25780 26640
Free Cash Flow to Equity -58475 17504 23744 28551 28081
FCFF and FCFE values: Godrej Consumer Products 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 26639.70
Growth Rate 5.00%
Cost of Capital 8.75%
Terminal Value 745499.89
Terminal Value: Godrej Consumer Products 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 Godrej Consumer Products Valuation.

WACC Calculation for Godrej Consumer Products Valuation.
WACC Calculation for Godrej Consumer Products 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 Godrej Consumer Products Valuation. (Units are INR Millions)

PV of FCFF and FCFE  for Godrej Consumer Products Valuation.
PV of FCFF and FCFE for Godrej Consumer Products 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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Godrej Consumer Products Valuation Units
PV in INR Million 431248
No of Shares Outstanding (In Million) 1022
Intrinsic Value 421.96
Current Market Price of Share 897
Current Discount/Premium 113%
Intrinsic Value of the Shares: Godrej Consumer Products Valuation

Godrej Consumer Products Valuation and Intrinsic Share Price = INR 421.96

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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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