Valuation of Philip Morris ČR a.s.

Martin Cingroš

Student thesis: Master thesis


The master thesis is conducted on the theory obtained at the Accounting, Strategy and Control graduate programme at Copenhagen Business School. This thesis presents the results from a strategical and a financial analysis and valuation of Philip Morris ČR a.s. Philip Morris ČR is the clear leader of the Czech and Slovak tobacco market. Furthermore, it produces cigarettes for export to the various countries of European Union. The main purpose of this report is to find the theoretical value of Philip Morris ČR as at June 30, 2010. Number of various mathematical and statistical approaches has been applied in an in-depth analysis through the historical performance analysis and cost of capital estimation. The financial analysis, forecasting and valuation is mainly based on the framework by McKinsey & Co. For the valuation itself, the Discounted Cash Flow model has been applied as the main tool. The financial statements have been reformulated to better reflect economic position of the Company and express some figures such as NOPAT or Invested Capital. The result of DCF valuation suggests that one share is worth CZK 15,329, while it was traded at the value of CZK 8,720 as at June 30, 2010. Because the forecasts are always to a great extent uncertain and many assumption have been made in the valuation phase, supporting models and tools have been applied to verify the estimated share price. Firstly, EVA valuation and multiples valuation has been conducted. The EVA valuation provides us with the result of CZK 15,442 and multiples valuation indicates the price per share at CZK 15,238. Secondly, sensitivity analysis has been applied for the DCF model in order to explore how changes in variables will affect the result. The supporting models and tools confirmed result from the main valuation model. The conclusion of this paper indicates that the Company value could be undervalued by the market. This would give a BUY recommendation.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final Thesis
Publication date2010
Number of pages107