Strategisk analyse og værdiansættelse af Novozymes A/S

Abstract

My background for choosing Novozymes is based on a general interest in the company along with the recent developments in the conception of 2nd generation bioethanol. Within the last few years, it has been made possible to develop bioethanol based on excess plant parts instead of corn and sugar. If they can commercialize the production of bioethanol based on plant parts, and make it able to compete with gasoline and 1st generation bioethanol, there is an enormous earnings potential for the company. I would like to make a thorough analysis of the company and so the purpose of this thesis is to obtain an estimated fair value of the Novozymes share per 30 March 2012. Obtaining the estimate will be done based on a strategic and profitability analysis of the company. To obtain an understanding of the company and the industry it operates on, a strategic analysis was performed. The analysis concluded that Novozymes has a very powerful position as market leaders with regards to both research and development and market shares. Competitors are starting to pressure Novozymes, and it is important that they keep this advantage, if they want to keep their position as market leaders. The profitability analysis concluded that Novozymes is in a good economic position, with high ROE margins due to the fact that they are very effective at minimizing their costs and obtaining good earnings on their investments, compared to their peers. The operational and financial risks in the company turned out to be moderate based on a number of internal and external risk factors that are subdued by a high level of risk control. The strategic and profitability analysis served as input to the budget and the estimated development of the company. The valuation then showed an estimated fair share value of 198 DKK per share. The estimated fair value was based on an estimated WACC of 8.44 %, with a cost of equity of 9.12 % and a cost of debt of 3.69 %. A relative evaluation based on Novozymes peers was not able to provide a useful analysis, based on the fact that the peers are not directly comparable to Novozymes and are therefore traded at another EV/EBITDA multiple. A sensitivity analysis showed that there is a lot of risk involved in determining the fair value of the share, as even small changes in the terminal growth or WACC, can have a big impact on the estimated value of the stock. The estimated fair value of the Novozymes share seems to be a fair estimate, which means the share is underestimated by 21,4 % at the time of the valuation. It is therefore recommended that investors purchase this share.