Hi Members,
I am learning to create intrinsic value based on the DCF method. The following is the DCF analysis for SBI life IPO. For the initial cash flow I am considering the 3 years average PAT. I am only getting the Intrinsic value as ~198 but the actual price is set around 700. Can any senior board member check if what I am doing is correct or the price is set very high for this IPO.
Initial Cash Flow: $8,711,000,000
Years: 1-5 6-10
Growth Rate: 15% 10%
Terminal Growth Rate: 3% Discount Rate: 12%
Shares Outstanding: 1,000,000,000 Margin of Safety: 25%
Debt Level:
Year Flows Growth Value
1 10,017,650,000 15% $8,944,330,357
2 11,520,297,500 15% $9,183,910,635
3 13,248,342,125 15% $9,429,908,241
4 15,235,593,444 15% $9,682,495,069
5 17,520,932,460 15% $9,941,847,615
6 19,273,025,706 10% $9,764,314,622
7 21,200,328,277 10% $9,589,951,861
8 23,320,361,105 10% $9,418,702,721
9 25,652,397,215 10% $9,250,511,601
10 28,217,636,937 10% $9,085,323,893
Terminal Year $29,064,166,045
PV of Year 1-10 Cash Flows: $94,291,296,614
Terminal Value: $103,976,484,558
Total PV of Cash Flows: $198,267,781,172
Number of Shares: 1,000,000,000
Intrinsic Value (IV): $198.27
Margin of Safety IV: $148.70
What Percentage of IV comes from 52%
the Terminal Value: