| dc.description.abstract | The purpose of this master’s thesis is to conduct a fundamental valuation of Yara International ASA and determine the value per share as of 24th of March 2023. A presentation and strategic analysis of Yara International ASA and the fertilizer industry is provided in the first part of the thesis. The analysis reveals that Yara has the potential to expand its green fertilizer offerings and maintain its position as a leading sustainable agricultural producer.
Examining Yara’s historical financial performance reveals its interdependence with fluctuations in the natural gas and fertilizer prices. As a result of the ongoing geopolitical conflict, fertilizer prices reached record high levels in 2021 and 2022. Consequently, Yara’s revenues more than doubled, despite a considerable fall in delivery volume.
In terms of future financial performance, Yara is forecasted to decline in the coming years, with natural gas and fertilizer prices moving downwards to normal price levels. Yara is expected to reach a steady state of growth from 2029 onwards, but with a forecasted return on new invested capital below its cost of capital. This finding is consistent with both historical and short-term projected performance and will be an important factor for Yara to address to improve its future financial performance.
The fundamental valuation was calculated using a discounted enterprise model, with adjustments made for the value of non-operating assets and non-equity claims. This resulted in an estimated intrinsic value of 447 NOK per share for Yara, as of 24th of March 2023. On the same day, the stock closed at 439 NOK, presenting only a modest upside of 1,84%. Due to the sensitivity of the valuation, we have issued a hold-recommendation for Yara. | |