DCF Studio

SHEL.L · LSE · Energy

Shell plc

Implied value per share

GBp 3860.04

Market price

GBp 3413.00

Implied upside

+13.1%

5y forecast · perpetuity growth TV · mid-year discounting · base case · USD model at 0.7440

AdjustedAccounts are reported in USD but the shares trade in GBp. The model runs in USD and converts once, at the end.
AdjustedReported beta of -0.218 is outside a defensible range and has been clamped to 0.30.
NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

Value Per Share

Perpetuity growth
GBp 3860.04+13.1%
Exit multiple
GBp 1791.10-47.5%
Market price
GBp 3413.00

Same forecast, different terminal treatment. Percentages vs price.

Forecast Cashflows

Reporting currency (USD). Outflows negative.

0bn12bn24bnFY26FY27FY28FY29FY30
Nominal FCFFDiscounted to todayUSD
LineFY26FY27FY28FY29FY30CAGR
RevenueUSD 237.0bnUSD 210.4bnUSD 186.8bnUSD 165.9bnUSD 147.3bn-11.2%
EBITUSD 27.9bnUSD 24.8bnUSD 22.0bnUSD 19.5bnUSD 17.4bn-11.2%
NOPATUSD 20.9bnUSD 18.6bnUSD 16.5bnUSD 14.7bnUSD 13.0bn-11.2%
Add depreciation & amortisationUSD 17.5bnUSD 15.5bnUSD 13.8bnUSD 12.2bnUSD 10.8bn-11.2%
Less capital expenditureUSD -16.1bnUSD -14.3bnUSD -12.7bnUSD -11.3bnUSD -10.0bn-11.2%
Less increase in working capitalUSD 1.9bnUSD 1.7bnUSD 1.5bnUSD 1.3bnUSD 1.2bn+11.2%
Free cashflow to firmUSD 24.2bnUSD 21.5bnUSD 19.1bnUSD 16.9bnUSD 15.0bn-11.2%
Discount factor0.97260.91990.87010.82300.7785-
Present valueUSD 23.5bnUSD 19.8bnUSD 16.6bnUSD 13.9bnUSD 11.7bn-16.0%
Present Value Of The ForecastUSD 85.6bn

Discount Rate

Source shown per component. All overridable above.

Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
Equity risk premium5.50%Market assumption
Beta0.300Clamped from a reported -0.218
Cost of equity6.15%Risk-free + beta x equity risk premium
Cost of debt6.21%Interest expense / average total debt
Market capitalisationUSD 188.9bn71.4% of capital
Total debtUSD 75.6bn28.6% of capital, book value as a proxy
Tax rate25.0%Effective, capped at statutory
WACC5.72%E/V x Re + D/V x Rd x (1 - t)

Terminal Value

Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

Perpetuity growth at 2.50%

Value per shareUSD 51.88

76% of EV

Forecast FCFF, final year
USD 15.0bn
Capex reset to depreciation
USD 14.2bn
Less reinvestment at g/ROIC (25.6% of NOPAT)
USD -3.3bn
Capitalised
USD 10.9bn
ROIC (reported)
9.8%
Terminal value, undiscounted
USD 345.6bn
Terminal value, discounted
USD 269.1bn
Enterprise value
USD 354.6bn
Less net debt
USD 46.0bn
Equity value
USD 308.6bn

Exit at 4.7x EBITDA

Value per shareUSD 24.07

55% of EV

Terminal value, undiscounted
USD 133.1bn
Terminal value, discounted
USD 103.6bn
Enterprise value
USD 189.2bn
Less net debt
USD 46.0bn
Equity value
USD 143.2bn

Spread between methods: 73%.

Sensitivity

Value per share (USD) by discount rate and long-run growth.

Long-run growth
Discount rate1.50%2.00%2.50%3.00%3.50%
3.72%86.71104.64137.16214.52638.52
4.72%59.4365.9675.3990.24117.15
5.72%45.0348.0151.8857.1464.74
6.72%36.1137.6139.4541.7644.76
7.72%30.0230.8131.7432.8434.19

Outlined: this model. Green text: above today's price of 45.87. Shading: distance from this model's own value.

Priced In

Each input solved to today's price, holding the others. Alternatives, not a set.

InputModelImpliedGap
Revenue growth, every year-11.2%-13.9%-2.7pp
EBIT margin11.8%10.4%-1.3pp
Discount rate5.7%6.1%+0.4pp

Yahoo Finance and RBA data. General information, not advice. Methodology.