VK Investing / DCF Models / DCF for Cyclicals — cement, metals, mid-cycle valuation
DCF · CYCLICALS · ADVANCED
DCF for cyclicals: cement, metals, and the mid-cycle problem
Point-in-time DCF fails for cyclicals. Mid-cycle EBITDA, replacement cost, and the sensitivity grid that keeps you from buying at the top.
By VK Investing
12 SHEETS · EXCEL · 6,800 WORDS WALK-THROUGH
Applying a point-in-time DCF to a cyclical business is one of the most common mistakes in equity research. The FY26 EBITDA might be at a cyclical peak or a cyclical trough — using it as the base for a perpetuity model will produce a valuation that is meaningfully wrong in either direction.
The model in front of you uses mid-cycle EBITDA as the base, with two additional layers: a replacement cost cross-check, and a sensitivity table that shows what happens to fair value across different points in the cycle.
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