Strategic Analysis and Valuation of Solar A/S

Rasmus Krogdahl

Student thesis: Master thesis


The purpose of this thesis is to create a valuation of the Danish company Solar A/S, who is a wholesaler within electricity, plumbing and ventilation. Solar is controlled by a fund called ”Fonden af 20. December”. The hypothesis in this thesis is that Solar’s market value of their equity possibly is underestimated, as the ownership of the fund contributes with steady and long-term ownership. In order to valuate Solar, a strategic analysis has been made; this includes the internal and external factors that influence the company. The company has strategically made a change of identity from being a traditional wholesaler, to becoming a sourcing- and service company focusing on the costumer. The market that Solar operates within is generally characterised by tough competition, with several large companies as competitors. In order to be a part of this industry it demands tying up large amounts of capital in stock, buildings, internal logistic systems, etc. It furthermore demands economies of scale in order to obtain profit. In the PEST analysis it was established that Solar is exposed especially to macroeconomic trends, as these are crucial for new constructions and renovations. In the financial analysis Solar was analysed using the Dupont-pyramid, where the overall key figure, return on equity, showed a decreasing tendency until 2015, where it increased to 7,52%. Net interestbearing debt was further determined to be negative in 2015. Solar has a good financial situation and the fund ownership can supply economical support if necessary. Furthermore the company sees the fund ownership as an advantage, as it provides robustness and a stable ownership, which is valued as an advantage for the company’s development. This perspective was involved when determining the Weighted Average Cost of Capital (WACC), while the rest of the strategical analysis formed the background knowledge, as the WACC was determined to be 5,17%. Afterwards the pro forma income statement, balance and cash flow statements was set-up for the purpose of the valuation. The valuation was conducted using the discounted cash flow (DCF) and the Earnings Value Added (EVA) methods, as well as a multiple valuation was used to assess whether the result was realistic. The DCF and EVA valuations estimated the market value of the equity for Solar to be DKK 3.537.752.119 on the reference date 24/02/2016. Solar can therefore be determined to be underestimated. In this context it must be mentioned, that the result is relatively sensitive, as of why this cannot be concluded with certainty, that the stock is underestimated due to the ownership of the fund’s importance.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2016
Number of pages95