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Case: Valuing Vinamilk (VNM)

Vietnam Dairy Products (Vinamilk, VNM) is a dairy and food-and-beverage leader on the HOSE, reporting revenue of approximately VND 62 trillion (FY2024). Its scale, brand and steady demand make cash flows unusually predictable, which is exactly the setting a textbook FCFF enterprise DCF with a Gordon growth terminal value handles best. A mature, cash-generative staple grows slowly and reinvests modestly, so a single constant terminal growth rate is a defensible long-run assumption. The case shows the full chain from forecast free cash flow, through discounting at the WACC, to a terminal value, and finally across the equity bridge to value per share.

Why it matters

A stable consumer-staples business is the friendliest possible DCF subject. Demand for milk does not swing with the economy the way steel or property does, so next year looks a lot like this year plus a little growth. That stability is what licenses the Gordon shortcut. When a firm has genuinely reached steady state, capitalising one normalized free cash flow into a growing perpetuity is honest rather than lazy. The analyst spends less effort on the shape of the forecast and more on two levers that move the answer most, the terminal growth rate and the discount rate.

Formulas

Gordon growth terminal value
TVn=FCFFn+1WACC−g=FCFFn (1+g)WACC−g\text{TV}_n = \dfrac{\text{FCFF}_{n+1}}{\text{WACC} - g} = \dfrac{\text{FCFF}_n\,(1 + g)}{\text{WACC} - g}
The terminal value capitalises the first post-horizon cash flow as a growing perpetuity. It is valid only when WACC exceeds the perpetual growth rate g, and it must use the year n+1 flow, not the year n flow.
Enterprise value to value per share
Equity value=EV−Net debt,Value per share=Equity valueShares outstanding\text{Equity value} = \text{EV} - \text{Net debt}, \qquad \text{Value per share} = \dfrac{\text{Equity value}}{\text{Shares outstanding}}
Discount each forecast FCFF and the terminal value at the WACC to get enterprise value, subtract net debt to cross the equity bridge, then divide by shares to compare with the market price.

Worked examples

Scenario

Vinamilk reported revenue of approximately VND 62 trillion (FY2024). For illustration only, assume a mature free cash flow to the firm of VND 10 trillion next year, perpetual growth of 3 percent, and a WACC of 11 percent. Roughly what terminal value does the Gordon model imply, and why does the method fit this firm?

Solution

These figures are illustrative, anchored only to the real revenue scale of about VND 62 trillion. Apply the growing perpetuity. The terminal value is VND 10 trillion times one plus 0.03, divided by 0.11 minus 0.03. That is about VND 10.3 trillion over 0.08, or roughly VND 129 trillion at the horizon, which is then discounted back to today at the WACC. The method fits because a dominant dairy staple is close to steady state, so a single constant growth rate is a reasonable description of its distant future rather than a convenient guess. The sensitivity is the lesson. Moving the WACC to 10 percent lifts the denominator gap to 0.07 and raises the terminal value by roughly a seventh, so the two perpetuity inputs deserve the most scrutiny.

NoteEvery figure except the VND 62 trillion revenue scale is illustrative and chosen to show the mechanics, not to state Vinamilk’s actual cash flow, cost of capital or value.

Common mistakes

  • ✗A stable business needs no sensitivity analysis. Even a steady staple is highly sensitive to the terminal growth rate and the discount rate, since most of the value sits in the perpetuity.
  • ✗The Gordon terminal value uses the final forecast year’s cash flow. It must use the first post-horizon flow, the year n+1 figure grown by g, not the year n flow itself.
  • ✗High predictability means a high value. Predictable cash flows narrow the range of outcomes, but the level of value still depends on growth, reinvestment and the cost of capital.
  • ✗Enterprise value is the value per share. Enterprise value must first cross the equity bridge by subtracting net debt, and only then divide by shares to reach a per-share figure.

Revision bullets

  • •Vinamilk (VNM) is a stable dairy staple, revenue about VND 62 trillion (FY2024)
  • •Stability licenses a Gordon growth terminal value on one normalized cash flow
  • •Forecast FCFF, discount at the WACC, add the discounted terminal value
  • •Cross the equity bridge by subtracting net debt, then divide by shares
  • •Most of the value sits in the perpetuity, so growth and WACC dominate
  • •The terminal value uses the year n+1 cash flow, not the year n flow

Quick check

Why is a Gordon growth terminal value a reasonable fit for a stable staple such as Vinamilk?

In the enterprise DCF for Vinamilk, the step from enterprise value to value per share requires

Connected topics

Free Cash FlowTerminal ValueWACCEquity BridgeEnterprise DCF

Sources

  1. Vinamilk (2024)
    Vietnam Dairy Products JSC (Vinamilk). FY2024 Annual Report.
    Source for the revenue scale of approximately VND 62 trillion. All other figures in this case are illustrative.
  2. Titman & Martin, Ch. 9
    Titman, S., & Martin, J. D. Valuation: The Art and Science of Corporate Investment Decisions. Pearson.
    Anchors the enterprise FCFF DCF and the constant-growth terminal value used here.
  3. Damodaran on stable-growth valuation
    Damodaran, A. Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. Wiley.
    Develops the stable-growth DCF and the conditions under which a single perpetual growth rate is defensible.
How to cite this page
Dr. Phil's Quant Lab. (2026). Case: Valuing Vinamilk (VNM). Derivatives Atlas. https://phucnguyenvan.com/concept/sabv-case-vinamilk
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