The aim of this thesis is to do a an intrinsic value of Norsk Hydro’s equity per 1st of January 2022.
A strategic analysis of the company and the aluminium industry was performed, including detirmining an industry average. This forms the foundation for the analysis throughout the thesis. There is a section about the theoretic framework of valuation, followed by Hydro’s financial statements where I analyze the threat of bankrupcy based on a short-term and long-term risk analysis, and comparing it to the industry average.
In the valuation process, step 1 is to use a discounted cashflow valuation where I apply the assumptions, company guidance, and the conclusions from strategic analysis. I will forecast future cash flows, estimate WACC and growth for Terminal Value, and then discount the cash flows to present value to find the equity value. Step 2 is supplimenting it with a value from a relative valuation technique, and these two values make up the final combined value.
A sensitivity analysis was performed, studying how adjustments to variables like WACC, Terminal value growth, revenue growth and EBIT-margins impact the discounted cashflow valuation.
Finally, I present the findings summarized in a conclusion with a trading strategy. I will also discuss how an integrated strategy of sustainability as a business model might influence the valuation of a company.According to the valuation performed in this thesis Hydro’s equity is valued to 72,9 NOK, compared to a market price 69,5 NOK at Oslo Børs Stock Exchange. The recommended trading strategy was therefore to hold the stock position unchanged since market price is 10% below the valuation.