A Case Study of the DSV Group Based on Fundamental Analysis

Andreas Berger Hjortholt

Student thesis: Master thesis


This thesis is a case study of the Danish transport company DSV Group A/S and its main objective is to address the following research question: what is the theoretical stock price for DSV Group based on an in-depth strategic and financial analysis. The freight forwarding industry is exposed to a number of issues. There is high market rivalry due to a fragmented market (from smaller domestic players to larger international competitors), governmental regulations, a customer universe that demands new product solutions, and constant negotiation of prices between the supplier (e.g. hauliers, shippers) and the customer. In addition, it is also an industry affected by broad economic measures (gross domestic product) and impacted by oil prices, freight rates, and currency fluctuations. The challenges are growing with the increase in intermodal solutions and customers that demand a worldwide network, reflected by the globalisation that has created an increase in product flow from important trade lanes between Asia-Europe, Europe-North America and Asia-North America. The high level of competition challenges the strategic agenda. The strategic path has to concentrate on a large range of parameters to distinguish itself from competitors, with specialisation in product type (automotive vs. pharmaceutical), routes and delivery type (full-truck load vs. less-than-truck load), terminal placement and warehouse services (picking and packing for customers). Another crucial factor is the ‘asset-light’ business model that is used among the international freight forwarders, helping to uphold operating margins in periods of volatility. DSV have managed to obtain a strong market position through an attractive product mix combination (product type and routes etc.) in air and sea freight. The DSV’s profitability from transportation (gross-margin per tonne and TEU) and operating margins (EBIT and EBITDA) surpasses the representative peers. In addition, DSV have managed to bring down fixed and variable costs year-to-year, which suggests that they pursue a costs leadership strategy in the core three divisions: road, air, and sea freight. However, the constantly changing industry has challenged the DSV to focus on three growth strategies: market development, market penetration and product development, which is shifting year-to-year depending on whether an acquisition opportunity arises or if customers request new transportation solutions. Broadly speaking, with no particular change in the product mix from the three core business divisions, the forecasts of revenue growth drivers (line-item approach) are based on the assessment of promising growth prospects from market and economic indicators and a strong strategic position in the market. The sales-driven approach was applied to the balance sheet items according to previous-years observations. The costs of capital were applied together with the forecast predictions in the DCF models, which gave a theoretical stock price of 174,8 DKK as of 1st July 2014. Hence, the listed stock price of the DSV Group was overvalued according to the findings in this thesis.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2014
Number of pages127