DISCOUNTED CASH FLOW VALUATION OF DIAMOND BUILDING PRODUCTS PUBLIC COMPANY LIMITED.

Abstract

This thematic paper applied the principle of discounted cash flow valuation approach to evaluate the intrinsic value of Diamond Building Products Public Company Limited (DRT)’s share price. Diamond Building Products Public Company Limited (DRT) is a roof tilesand construction material manufacturing and distributing company that is listed in the construction material sector in the stock exchange of Thailand (SET). The company’s products are composed of 5 groups which are roofing products, boards and ceiling products, siding board products, roof accessory products, and non-roof products. DRT also provides the installation service for customers. According to the DCF analysis, the sales revenue of the company increases by 4.67 % CAGR from 2020 to 2025 driven by GDP growth in the construction sector which is forecasted to increase by 4.72% CAGR in the same period. After the year 2025, I assume the sales growth of the company is 2.09% per annum (perpetual growth), which is a conservative rate considering the past five years’ performance of the company. The target stock price of DRT is 7.51 baht per share as of 31 December 2020, with a 28% upside compared to the latest stock price as of 30 December 2020 which is 5.85 baht per share. The current stock price is undervalued based on our DCF valuation. As the difference is in the range of “10% or Greater upside”, my recommendation for DRT is “BUY”.