Question

Project the EBITDA for the FY2020 using EBITDA margin average You are an intern with an...

Project the EBITDA for the FY2020 using EBITDA margin average

You are an intern with an equity research organization. You have been given the task to project the values of certain income statement and balance sheet items for the next year (FY2020) for ABC Ltd (Your current time=0 is FY ending 2019). You have collected information about the historical income statement and balance sheet items. The historical information is provided in Table 1.

Table 1

PARTICULARS (All values in INR crores)

FY2019

FY2018

FY2017

FY2016

Sales Revenue

17273.00

15463.00

14789.00

13636.00

EBITDA

12213.00

9385.00

10237.00

Not given

Depreciation expense

1811.00

745.00

645.00

Not given

EBIT

10402.00

8640.00

9592.00

Not given

Interest

0.00

0.00

0.00

Not given

EBT

10402.00

8640.00

9592.00

Not given

Tax

2600.50

2160.00

2398.00

Not given

Net Profit

7801.50

6480.00

7194.00

Not given

                          Net PPE

17032.00

14522.00

13064.00

12813.00

Net PPE: Net Property Plant and equipment (Balance sheet item)

Homework Answers

Answer #1

Historical EBITDA margin

2017 = 10237/14789 = 69.22%

2018 = 9385/15463 = 60.69%

2019 = 12213/17273 = 70.70%

EBITDA margin average for last 3 years = 66.87%

To project the EBITDA for FY 2020, we need sales for FY 2020

We will calculate average growth rate for sales to estimate the FY 2020 sales

Revenue growth 2017 = (14789-13626)/13626 = 8.54%

Revenue growth 2018 = (15463-14789)/14789 = 4.56%

Revenue growth 2019 = (17273-15463)/15463 = 11.71%

Average growth rate = 8.27%

FY 2020 sales = 17273* (1+0.0827)

= 18,701.5

FY 2020 EBITDA = 18701.5 * 66.87%

= $12,505.67

In this question we assumed the sales growth to estimate the FY2020 sales. Please post in comments if you have any issues.

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