What is BRSAN.IS's Intrinsic value?

Borusan Mannesmann Boru Sanayi ve Ticaret AS (BRSAN.IS) Intrinsic Value Analysis

Executive Summary

As of June 18, 2025, Borusan Mannesmann Boru Sanayi ve Ticaret AS's estimated intrinsic value ranges from $1.49 to $7.92 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $7.60 -71.6%
Discounted Cash Flow (5Y) $4.65 -82.7%
Dividend Discount Model (Multi-Stage) $7.92 -70.4%
Dividend Discount Model (Stable) $1.49 -94.4%

Is Borusan Mannesmann Boru Sanayi ve Ticaret AS (BRSAN.IS) undervalued or overvalued?

With the current market price at $26.78, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Borusan Mannesmann Boru Sanayi ve Ticaret AS's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 21.4% 21.9%
Equity market risk premium 10.2% 11.2%
Adjusted beta 0.53 0.68
Cost of equity 26.8% 29.9%
Cost of debt 10.4% 31.3%
Tax rate 16.4% 22.6%
Debt/Equity ratio 0.75 0.75
After-tax WACC 19.0% 27.5%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 23.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $3,729 (FY12-2020) to $4,963 (FY12-2030)
  • Net profit margin expansion from 0% to 19%
  • Capital expenditures maintained at approximately 4% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $5 $2,960M 45.6%
10-Year Growth $8 $3,379M 20.8%
5-Year EBITDA $14 $4,298M 62.5%
10-Year EBITDA $12 $4,044M 33.9%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 9.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 28.4%
  • Long-term growth rate: 4.0%
  • Fair value: $7.92 (-70.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 29.9% (Low) to 26.8% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $1 to $2
  • Selected fair value: $1.49 (-94.4% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $3796M
Enterprise Value $6097M
Trailing P/E 60.37
Forward P/E 26.34
Trailing EV/EBITDA 7.25
Current Dividend Yield 16.38%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 0.75

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $2.28
Discounted Cash Flow (5Y) 28% $1.16
Dividend Discount Model (Multi-Stage) 22% $1.58
Dividend Discount Model (Stable) 17% $0.22
Weighted Average 100% $5.83

Investment Conclusion

Based on our comprehensive valuation analysis, Borusan Mannesmann Boru Sanayi ve Ticaret AS's weighted average intrinsic value is $5.83, which is approximately 78.2% below the current market price of $26.78.

Key investment considerations:

  • Strong projected earnings growth (0% to 19% margin)
  • Consistent cash flow generation

Given these factors, we believe Borusan Mannesmann Boru Sanayi ve Ticaret AS is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.