This document provides an introduction and analysis of Unilever Pakistan Limited (UPFL). It includes information on UPFL's vision, brands, financial ratios, comparison to industry averages, balance sheet, cash flow statement, and free cash flow valuation. Key highlights are that UPFL has higher profit margins, returns and operating efficiency than industry averages. The valuation estimates UPFL's intrinsic value at 4272.976Rs per share, below the current market price of 5700Rs, indicating the stock is overvalued.
2. Introduction
• No such company like UNILEVER serving with more than 400
brands to customer for their health and well beings.
• UNILEVER operating in Pakistan since 1948 by LEVER BROTHER in
RAHIM YAR KHAN.
• Unilever Pakistan is the largest fast-moving consumer goods
(FMCG) company in Pakistan, Unilever Pakistan is the largest
fast-moving consumer goods (FMCG) company in Pakistan.
• Now their head office is in Karachi.
3. Vision
• “We work to create a better future every day.”
• We help people feel good, look good and get more out of
life with brands and services that are good for them and
good for others. We will inspire people to take small every
day actions that can add up to a big difference in the
world. We will develop new ways of doing business with
the aim of doubling the size of our Company while
reducing our environmental impact.
6. Ratio analysis
• Current Ratio: 0.89 times
• Quick Ratio: 0.56 times.
• Inventory Turnover Ratio:
8.73 times per year
• Day sales outstanding
(DSO) ratio: 0.0001
• Fixed Assets Turnover: 2.43
times
• Total Assets Turnover Ratio:
is 1.9403
•
7. Ratio analysis
• Total Debt to Total Assets: 55.19%
• Times-Interest-Earned Ratio: 49.65
times.
•
• Operating Margin: EBIT/Sales
• 14.26%
• Profit Margin: Net income/ Sales
• 14.3%
• Return on common Equity:73.4%
• Price/Earnings Ratios is 27.49
8. Comparison Analysis with
Industry
• UPFL’s ROE is 73.4% while industry average is 16.59%. It is because of
company has not used debt.
• UPFL’s PE ratio is 27.49x while industry average is 26.8x which mean
company is relatively low risky and having high growth as compare to
industry.
• UPFL’s operation margin is 14.56% as compare to industry average which is
12.56% which means UPFL is tackling its operation cost efficiently. It also
implies they have relatively high turnover rate and days sales outstanding.
• UPFL’s current ratio is 0.89 while industry average is 1.82 which shows that
UPFL is able to fulfil its short term liabilities in given period of time.
• UPFL’s profit margin is 14.38%% while industry average is 12.43% because its
operating Margin is higher and its sales are enough to generate profit.
11. Some basic calculation
regarding FCF model
• Free Cash Flow Valuation Model:
• FCF= EBIT*(1-T) + Depreciation and Amortization – Capital
Expenditures – Change in net working capital.
• FCF2016 = FCF2015 (1+g)
• Horizon Value = FCF2019 (1+g) / (WACC – g)
• Non-Constant Growth:
12. Cost of Equity
• We have extracted data from Bloomberg to
determine cost of equity (rs)
• Cost of equity is based upon CAPM model which is 13.32%
which includes:
• Risk free rate which is 8%
• Market premium is 7% which is the difference of the
market rate & risk free rate
• Beta of company is 0.76
13. Determining WACC (Weighted
Average Cost of Capital)
Weight of debt=wd= 62%
Cost of debt=rd= 7.5%
Weight of equity=ws= 38%
Cost of equity=rs= 13.32%
No preferred equity.
Tax rate= 35
Formula
WACC= (wd) rd(1-T) + (ws)(rs)
WACC= 8.08%
14. FCF VALUATION
MODEL F/2015 F/2016 F/2017 F/2018 F/2019
Sales 8571.1
less: Operating cost 4738.8
less: Depreciation expense 107.3
EBIT 3725
EBIT(1-T) 2421.25
EBIT(1-T)+ depreciation and amortization 2528.55
Change in Net Operating Working Capital -260.5
Gross capital expenditure -153.2
FCF 2942.25 3442.433 4044.858 4772.933 381.8346
Horizon Value 5047.428
Discounted FCF 2942.25 3247.884 3600.589 4008.581 4367.668
PV Of FCF 18166.97
Less debt 220.6
Value of equity 17946.37
Number of shares outstanding 4.2
Price per share 4272.946
15. our valuation
• The intrinsic value is 4272.976Rs
• whereas the ongoing market price is 5700Rs.
• In this regard the stock is overvalued.
