Uni lever
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Unilever Pakistan is a consumer goods company that saw strong sales growth from 1996-2012. Key drivers of the industry included GDP growth, low inflation, a favorable exchange rate, increased advertising spending, and lower tariffs and interest rates. Unilever Pakistan increased its market share over time and saw high operating, EBT, and net margins. A DuPont analysis showed rising net margins, return on equity, leverage, and asset turnover. The firm generated strong and increasing cash flows. Based on a discounted cash flow valuation with a WACC of 6.6% and long term growth rate of 2%, the fair value of the stock was estimated to be Rs. 2,178.88, higher than the current market price of
![Valuation of Firm
.
Risk Free Rate = 4%
Market Risk Premium = 5%
Required Return of Equity Holders = 9.25%
WACC = 6.6%
Assuming growth rate to be 2%,
10
Value of firm = Σ [FCFF/(1+WACC)] + [FCFF/(WACC-g)] / (1+WACC )
= Rs. 54,989.53 million
Value of Equity = Value of Firm – Value of Debt = 43,578.4
Fair Value of Stock = Value of Equity / No. of Outstanding shares = Rs. 2,178.88
Current Stock Price = Rs. 1,495](https://image.slidesharecdn.com/unilever-140126084503-phpapp02/85/Uni-lever-11-320.jpg)
Uni lever
- 2. Meeting Everyday Needs of People Everywhere
- 3. Key Drivers of Industry . • GDP Growth The continuing trend of GDP growth in Pakistan restores confidence in the future prospects of increasing revenues. • Low Inflationary Trends Low inflationary trend has helped in keeping the cost of inputs in check. • Favorable Exchange Rate The strengthening of the rupee has resulted in lower the cost of inputs that are imported • Response to Advertising The company recorded its highest sales revenue in 2002 which it attributed to a 43% increase in advertising expenditure. The company gives credit to schemes such as the “Supreme Inami Khazana” and advertisement of songs such as “Supreme Ishq” • Lower Tariffs Lower raw material costs due to lower tariffs • Lower Interest Rates Lower interest rates have resulted in creation of a conducive environment for investment.
- 4. Industry Sales Trend . Sales - Industry vs UniLever 70,000.00 60,000.00 50,000.00 40,000.00 30,000.00 20,000.00 10,000.00 0.00 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sales(Industry) Sales(UniLever)
- 6. Operating, EBT & Net Margins . .
- 8. DuPont Analysis . . DUPONT Analysis 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 1996 1997 1998 1999 2000 2001 2002 Net Margins 2003 ROE 2004 2005 Leverage 2006 2007 Asset Turnover 2008 2009 2010 2011 2012
- 11. Valuation of Firm . Risk Free Rate = 4% Market Risk Premium = 5% Required Return of Equity Holders = 9.25% WACC = 6.6% Assuming growth rate to be 2%, 10 Value of firm = Σ [FCFF/(1+WACC)] + [FCFF/(WACC-g)] / (1+WACC ) = Rs. 54,989.53 million Value of Equity = Value of Firm – Value of Debt = 43,578.4 Fair Value of Stock = Value of Equity / No. of Outstanding shares = Rs. 2,178.88 Current Stock Price = Rs. 1,495
- 12. Rating | • Valuation of Management (High) • Earnings Momentum ( 2003 - 2004)