I have created a three-stage DCF model to value more than 500 Indian stocks. The valuation was done with the following assumptions:
- Growth for the next 5 years - Half of the past 5-year profit or sales growth (whichever is lower)
- Growth for the years 5-10 - Half of the above mentioned rate
- Terminal growth rate of 2%
- Discount rates of 10%, 12%, 14% (for smaller companies it's best to use 14%, for larger ones use 10-12%)
- profit for the last 12 months
FULL LIST OF 540 UNDERVALUED / OVERVALUED INDIAN STOCKS
Valuing so many stocks is a challenge, given that each one has unique fundamentals and expected growth. I just did a calculation of what are the companies worth, if they can maintain only half of their past growth in the future. DCF models work only with companies which have stable cash flow and are usually in a mature phase. Companies with negative earnings were omitted. Some values might be unreliable, if there is a big difference in expected growth rates in the past and analyst projections for the future.
Here are some notable examples (using discount rates of 10%, 12%, 14%), a negative value means a stock is overvalued, positive is undervalued:
Name Market cap (Rs.Cr.) 10% 12% 14%
- Growth for the next 5 years - Half of the past 5-year profit or sales growth (whichever is lower)
- Growth for the years 5-10 - Half of the above mentioned rate
- Terminal growth rate of 2%
- Discount rates of 10%, 12%, 14% (for smaller companies it's best to use 14%, for larger ones use 10-12%)
- profit for the last 12 months
FULL LIST OF 540 UNDERVALUED / OVERVALUED INDIAN STOCKS
Valuing so many stocks is a challenge, given that each one has unique fundamentals and expected growth. I just did a calculation of what are the companies worth, if they can maintain only half of their past growth in the future. DCF models work only with companies which have stable cash flow and are usually in a mature phase. Companies with negative earnings were omitted. Some values might be unreliable, if there is a big difference in expected growth rates in the past and analyst projections for the future.
Here are some notable examples (using discount rates of 10%, 12%, 14%), a negative value means a stock is overvalued, positive is undervalued:
Name Market cap (Rs.Cr.) 10% 12% 14%
| Mahindra & Mahindra Ltd. Maruti Suzuki India Ltd. Hero MotoCorp Ltd. Bajaj Auto Ltd. UltraTech Cement Ltd. Indian Oil Corporation Ltd. Reliance Industries Ltd. Hindustan Unilever Ltd. ITC Ltd. Bharat Heavy Electricals Ltd. Axis Bank Ltd. HDFC Bank Ltd. Hindustan Zinc Ltd. NMDC Ltd. NTPC Ltd. Power Grid Corporation of India Ltd. Tata Steel Ltd. Adani Ports & Special Economic Zone Tech Mahindra Ltd. Infosys Ltd. Tata Consultancy Services Ltd. Cairn India Ltd. Wipro Ltd. Asian Paints Ltd. Sun Pharmaceutical Industries Ltd. State Bank of India ICICI Bank Ltd. Kotak Mahindra Bank Ltd. Housing Development Finance Corp. Coal India Ltd. Idea Cellular Ltd. Bharti Airtel Ltd. Sesa Sterlite Ltd. | 70,965.87 75,485.73 50,687.85 61,025.78 68,171.94 80,342.52 336,571.47 139,039.98 283,491.81 57,836.79 94,124.44 202,788.53 71,259.68 70,670.78 123,435.14 70,443.49 55,185.23 57,072.66 50,871.48 193,464.70 508,321.82 60,442.95 142,308.90 59,316.93 154,967.18 190,913.09 173,989.20 72,322.98 162,380.38 243,339.31 53,710.84 141,747.80 88,401.48 | 24% -37% -31% 4% -34% 78% -8% -62% -44% 59% 27% -23% 91% 41% 44% 30% 44% -6% -16% -14% -15% 272% -36% -61% -72% -14% 401% -54% -1% 64% -27% 35% -3% | 5% -46% -41% -12% -44% 54% -20% -67% -52% 36% 8% -35% 63% 21% 24% 11% 24% -21% -28% -26% -28% 217% -45% -67% -76% -26% 314% -60% -16% 39% -38% 12% -17% | -10% -54% -49% -24% -52% 34% -31% -72% -59% 16% -7% -44% 39% 4% 7% -5% 7% -33% -38% -36% -38% 173% -52% -72% -80% -35% 244% -65% -28% 18% -47% -7% -29% |
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