Share Price vs.

Fair Value
Below are the data sources, inputs and calculation used to determine the
intrinsic value for Ambev.

BOVESPA:ABEV3 Discounted Cash Flow Data Sources

Data Point Source Value

Valuation Model 2 Stage Free Cash Flow

to Equity

Levered Free Cash Flow Up to 2 Analyst Estimates on Average See below

(S&P Global)

Discount Rate (Cost of See below 17.4%

Equity)

Perpetual Growth Rate 5-Year Average of BR Long-Term 9.7%

Govt Bond Rate

An important part of a discounted cash flow is the discount rate, below we

explain how it has been calculated.

Calculation of Discount Rate/ Cost of Equity for BOVESPA:ABEV3

Data Point Calculation/ Source Result

Risk-Free Rate 5-Year Average of BR Long-Term Govt Bond Rate 9.7%

Equity Risk Premium S&P Global 9.6%

Beverage Unlevered Simply Wall St/ S&P Global 0.58

Beta

Re-levered Beta = 0.33 + [(0.66 * Unlevered beta) * (1 + (1 - tax rate) 0.726

(Debt/Market Equity))]
= 0.33 + [(0.66 * 0.584) * (1 + (1 - 34.0%) (1.88%))]

Levered Beta Levered Beta limited to 0.8 to 2.0 0.8

(practical range for a stable firm)
 Calculation of Discount Rate/ Cost of Equity for BOVESPA:ABEV3

Data Point Calculation/ Source Result

Discount Rate/ Cost of = Cost of Equity = Risk Free Rate + (Levered Beta * 17.39%
Equity Equity Risk Premium)
= 9.73% + (0.800 * 9.57%)
Discounted Cash Flow Calculation for BOVESPA:ABEV3 using 2 Stage Free
Cash Flow to Equity

The calculations below outline how an intrinsic value for Ambev is arrived at by
discounting future cash flows to their present value using the 2 stage method.
We use analyst's estimates of cash flows going forward 10 years for the 1st
stage, the 2nd stage assumes the company grows at a stable rate into
perpetuity.

BOVESPA:ABEV3 DCF 1st Stage: Next 10 years cash flow forecast

Levered FCF (BRL, Millions) Source Present Value

Discounted (@ 17.39%)

2024 16.568,82 Analyst x3 14.114,82

2025 19.567,26 Analyst x3 14.200,3

2026 17.326 Analyst x1 10.711,48

2027 19.315 Analyst x1 10.172,54

2028 20.324,77 Est @ 5.23% 9.118,93

2029 21.661,84 Est @ 6.58% 8.279,37

2030 23.291,67 Est @ 7.52% 7.583,79

 BOVESPA:ABEV3 DCF 1st Stage: Next 10 years cash flow forecast

Levered FCF (BRL, Millions) Source Present Value

Discounted (@ 17.39%)

2031 25.198,27 Est @ 8.19% 6.989,41

2032 27.377,68 Est @ 8.65% 6.469,19

2033 29.834,37 Est @ 8.97% 6.005,57

Present value of next 10 years cash flows R$93.645,4

BOVESPA:ABEV3 DCF 2nd Stage: Terminal Value

Calculation Result

Terminal Value FCF2033 × (1 + g) ÷ (Discount Rate – g) R$427.602,66

= R$29.834,375 x (1 + 9.73%) ÷ (17.39% -
9.73% )

Present Value of Terminal = Terminal Value ÷ (1 + r)10 R$86.075,06

Value R$427.603 ÷ (1 + 17.39%)10

BOVESPA:ABEV3 Total Equity Value

Calculation Result

Total Equity Value = Present value of next 10 years cash flows + R$179.720,47
Terminal Value
= R$93.645 + R$86.075

Equity Value per = Total value / Shares Outstanding R$11,41

Share = R$179.720 / 15.747
(BRL)

BOVESPA:ABEV3 Discount to Share Price

 BOVESPA:ABEV3 Total Equity Value

Calculation Result

Calculation Result

Value per share (BRL) From above. R$11.41

Current discount Discount to share price of -21.5%

R$13.87
= (R$11.41 - R$13.87) /
R$11.41
Learn more about our DCF calculations in Simply Wall St’s analysis model.