GAP Company name: Ticker Date: Currency: Units: Analyst name: The Gap Inc GAP 2/3/2018 USD Millions Key features of Model Financial analysis Integrated financial forecast Calcs worksheet Debt worksheet Forecast length Five years: 2018-2022 END (C) Bridget Lyons 2010 Cover 5/12/2019 GAP Hist. Hist. Hist. Hist. Proj Proj Proj Proj Proj Assumptions 2014 2015 2016 2017 2018 2019 2020 2021 2022 Income Statement Assumptions Sales growth - % Cost of sales - % of sales - excl depreciation Selling and administrative expense - % sales - excl amortization Impairment and other - $ Other operating expenses - $ Interest income - % return on cash & equivalents Interest expense - % rate paid on long-term debt Nonoperating income, net - $ Income taxes - % income before taxes Dividends per share - growth rate Basic WASO Diluted WASO Depreciation - % PY net PP&E Amortization - % PY other long term assets #REF! 61.7% 22.3% 2762.0 -2785.0 0.3% 5.5% 0.0 37.3% #REF! 435.0 440.0 #REF! #REF! -3.9% 63.8% 22.0% 2772.0 -2643.0 0.4% 3.4% 0.0 37.5% 5% 411.0 413.0 21.2% 1.0% -1.8% 63.7% 23.2% 3001.0 -2745.0 0.4% 5.7% 0.0 39.9% 0% 399.0 400.0 20.7% 0.7% 2.2% 61.7% 25.6% 3058.0 -3095.0 1.1% 5.9% 0.0 40.4% 0% 393.0 396.0 21.3% 0.5% 4.0% 62.7% 28.0% 0.0 -3095.0 1.1% 5.9% 0.0 19% 0.0 393.0 396.0 21.0% 0.5% 15.0% 62.7% 29.0% 0.0 -3095.0 1.1% 5.9% 0.0 19% 0.0 393.0 396.0 21.0% 0.5% 20.0% 62.7% 29.0% 0.0 -3095.0 1.1% 5.9% 0.0 19% 0.0 393.0 396.0 21.0% 0.5% 5.0% 62.7% 29.0% 0.0 -3095.0 1.1% 5.9% 0.0 19% 0.0 393.0 396.0 21.0% 0.5% 5.0% 62.7% 29.0% 0.0 -3095.0 1.1% 5.9% 0.0 19% 0.0 393.0 396.0 21.0% 0.5% Based on average of historicals Based on average of historicals Set to 0 Set to 0 Set equal to prior year Set equal to prior year Set to 0 Assume 25% based on new tax law Set equal to prior year Set equal to prior year Set equal to prior year Based on average of historicals Set equal to prior year 1.7% 18.6% 3.9% 4.3% 0.0 180.0 1.8% 18.6% 2.9% 4.6% 0.0 180.0 2.2% 18.5% 2.4% 3.4% 0.0 109.0 1.8% 20.4% 3.2% 4.6% 0.0 109.0 11.6% 10.3% 11.0% 9.9% 12.6% 11.6% 12.1% 13.1% - - - - 1.8% 21.0% 3.1% 6.0% 0.0 109.0 0.0 14.0% 11.2% 0.0 0.0 0.0 1.8% 21.0% 3.1% 6.0% 0.0 109.0 0.0 14.0% 11.2% 1,000.0 0.0 0.0 1.8% 21.0% 3.1% 6.0% 0.0 109.0 0.0 14.0% 11.2% 1,091.0 0.0 0.0 1.8% 21.0% 3.1% 6.0% 0.0 109.0 0.0 14.0% 11.2% 2,250.0 0.0 0.0 1.8% 21.0% 3.1% 6.0% 0.0 109.0 0.0 14.0% 11.2% 2,360.0 0.0 0.0 Based on average of historicals Based on average of historicals Based on average of historicals Based on average of historicals Set to 0 Set equal to prior year Set to 0 Based on average of historicals Based on average of historicals Based on current debt maturity schedule Set to 0 Set to 0 6.9% 19.0 8.0 0.0 36.0 6.9% 19.0 8.0 0.0 36.0 6.9% 19.0 8.0 0.0 36.0 6.9% 19.0 8.0 0.0 36.0 6.9% 19.0 8.0 0.0 36.0 Balance Sheet Assumptions Accounts receivable, net - % sales Inventories - % COGS Prepaids and other current assets - % sales CapEx - % sales Inv & advances affiliates - $ Goodwill - $ Other long-term assets - $ growth Accounts payable - % COGS Accrued liabilities - % COGS Long-term debt (inc. current portion) - $ repayment from debt note Long term income taxes Deferred income taxes - $ rethink Other long term liabilities - % sales Common stock - $ Additional paid in capital - $ Treasury stock - $ Accum other income - $ 6.9% 21.0 0.0 0.0 165.0 6.9% 20.0 0.0 0.0 85.0 6.5% 20.0 81.0 0.0 54.0 7.2% 19.0 8.0 0.0 36.0 Based on average of historicals Set equal to prior year Set equal to prior year Set to 0 Set equal to prior year GAP Hist. Hist. Hist. Hist. Proj Proj Key Driver assumptions 2014 2015 2016 2017 2018 2019 U.S. Revenues growth rate 12,531.0 12,672.0 1.1% 12,213.0 -3.6% 11,989.0 -1.8% 12,408.6 3.5% 12,811.9 3.3% International Revenues growth rate 3,617.0 3,763.0 4.0% 3,584.0 -4.8% 3,527.0 -1.6% 3,544.6 0.5% 3,562.4 0.5% 16,148.0 16,435.0 1.8% 15,797.0 -3.9% 15,516.0 -1.8% 15,953.3 2.8% 16,374.3 2.6% 4.0% 4.0% 4.0% 3.0% 15.0% 17.0% 15.0% 17.0% Total Revenues growth rate Select a revenue growth scenario 2 Overall growth rate used in forecast Base case Upside case Downside case Proj Proj Proj 2020 2021 2022 13,196.3 3.0% 3,580.2 0.5% 16,776.4 2.5% 20.0% 5.0% 20.0% 5.0% 13,559.1 13,898.1 2.8% 2.5% 3,598.1 0.5% 3,616.1 0.5% 17,157.2 17,514.2 2.3% 2.1% 5.0% 15.0% 5.0% 9.0% 5.0% 4.0% 5.0% 5.0% GAP Hist. Hist. Hist. Hist. Proj Proj Proj Proj Income statement 2014 2015 2016 2017 2018 2019 2020 2021 2022 16,435.0 10,146.0 524.0 5,765.0 15,797.0 10,077.0 588.0 5,132.0 15,516.0 9,876.0 590.0 5,050.0 15,855.0 9,789.0 556.0 5,510.0 16,489.2 10,338.7 598.5 5,552.0 18,962.6 11,889.5 671.1 6,401.9 22,755.1 14,267.4 769.1 7,718.5 23,892.9 14,980.8 894.3 8,017.7 25,087.5 15,729.9 1,007.6 8,350.1 Selling and administrative expense - excl amortization Amortization EBIT 3,665.0 40.0 2,060.0 3,475.0 4.0 1,653.0 3,600.0 3.0 1,447.0 4,065.0 3.0 1,442.0 4,617.0 2.4 932.6 5,499.1 2.7 900.1 6,599.0 2.6 1,116.9 6,928.9 2.6 1,086.2 7,275.4 2.6 1,072.1 Impairment and other Other operating expenses/(income) - p. 43 Operating profit as reported 2,762.0 (2,785.0) 2,083.0 2,772.0 (2,643.0) 1,524.0 3,001.0 (2,745.0) 1,191.0 3,058.0 (3,095.0) 1,479.0 0.0 (3,095.0) 4,027.6 0.0 (3,095.0) 3,995.1 0.0 (3,095.0) 4,211.9 0.0 (3,095.0) 4,181.2 0.0 (3,095.0) 4,167.1 Interest income p 24 Interest expense Nonoperating income(expense) Income before taxes 5.0 75.0 0.0 2,013.0 6.0 59.0 0.0 1,471.0 8.0 75.0 0.0 1,124.0 19.0 74.0 0.0 1,424.0 19.0 74.0 0.0 3,972.6 44.7 74.0 0.0 3,965.8 60.7 14.8 0.0 4,257.8 77.5 (49.9) 0.0 4,308.5 81.6 (183.2) 0.0 4,431.9 Income taxes Net income 751.0 1,262.0 551.0 920.0 448.0 676.0 576.0 848.0 754.8 3,217.8 753.5 3,212.3 809.0 3,448.8 818.6 3,489.9 842.1 3,589.9 383.0 377.0 367.0 361.0 361.6 361.6 361.6 361.6 361.6 435.0 440.0 2.9 2.9 0.9 411.0 413.0 2.2 2.2 0.9 399.0 400.0 1.7 1.7 0.9 393.0 396.0 2.2 2.1 0.9 393.0 396.0 8.2 8.1 0.9 393.0 396.0 8.2 8.1 0.9 393.0 396.0 8.8 8.7 0.9 393.0 396.0 8.9 8.8 0.9 393.0 396.0 9.1 9.1 0.9 564.0 524.0 40.0 2,624.0 592.0 588.0 4.0 2,245.0 593.0 590.0 3.0 2,040.0 559.0 556.0 3.0 2,001.0 598.5 2.4 1,533.5 671.1 2.7 1,573.9 769.1 2.6 1,888.7 894.3 2.6 1,983.1 1,007.6 2.6 2,082.3 Revenues Cost of sales - excluding D&A on PP&E Depreciation Gross profit Dividends paid Shareholder information Basic WASO Diluted WASO Basic earnings per common share Diluted earnings per common share Dividends declared per common share Other information D&A total D&A on PP&E Amortization EBITDA Proj GAP Hist. Hist. Hist. Hist. Proj Proj Proj Proj Proj Balance sheet 2014 2015 2016 2017 2018 2019 2020 2021 2022 Assets Cash & equivalents Accounts receivable, net Inventories Prepaids and other current assets Assets held for sale Total current assets 1,515.0 275.0 1,889.0 638.0 0.0 4,317.0 1,370.0 282.0 1,873.0 460.0 0.0 3,985.0 1,783.0 335.0 1,830.0 367.0 0.0 4,315.0 1,783.0 282.0 1,997.0 506.0 0.0 4,568.0 4,192.6 304.9 2,171.1 509.1 5,692.2 350.6 2,496.8 585.5 7,268.1 420.7 2,996.2 702.6 7,661.7 441.8 3,146.0 737.7 8,089.5 463.9 3,303.3 774.6 7,177.7 9,125.1 11,387.6 11,987.2 12,631.2 Net P,P&E Inv & advances affiliates Goodwill Other long-term assets Total non-current assets 2,773.0 0.0 180.0 420.0 3,373.0 2,850.0 0.0 180.0 458.0 3,488.0 2,616.0 0.0 109.0 570.0 3,295.0 2,805.0 0.0 109.0 507.0 3,421.0 3,195.9 0.0 109.0 504.6 3,809.4 3,662.5 0.0 109.0 501.9 4,273.4 4,258.7 0.0 109.0 499.3 4,867.0 4,797.9 0.0 109.0 496.7 5,403.6 5,295.6 0.0 109.0 494.1 5,898.7 TOTAL ASSETS 7,690.0 7,473.0 7,610.0 7,989.0 10,987.1 13,398.6 16,254.6 17,390.8 18,529.9 1,173.0 1,040.0 1,112.0 1,002.0 0.0 1,664.5 1,333.5 0.0 1,997.4 1,600.2 0.0 2,097.3 1,680.2 0.0 2,202.2 1,764.2 2,114.0 1,181.0 1,280.0 0.0 2,461.0 0.0 1,447.4 1,159.6 2,213.0 1,243.0 1,145.0 0.0 2,388.0 2,607.0 2,998.0 3,597.7 3,777.5 3,966.4 Long-term debt (inc. current portion) Deferred income taxes Long term income taxes Other long term liabilities Total non-current liabilities 1,353.0 0.0 0.0 1,141.0 2,494.0 1,731.0 0.0 0.0 1,083.0 2,814.0 1,313.0 0.0 0.0 1,005.0 2,318.0 1,249.0 0.0 0.0 1,135.0 2,384.0 1,249.0 0.0 0.0 1,130.9 2,379.9 249.0 0.0 0.0 1,300.6 1,549.6 (842.0) 0.0 0.0 1,560.7 718.7 (3,092.0) 0.0 0.0 1,638.7 (1,453.3) (5,452.0) 0.0 0.0 1,720.6 (3,731.4) Total liabilities 4,707.0 4,928.0 4,706.0 4,845.0 4,986.9 4,547.6 4,316.3 2,324.2 235.0 Common stock Additional paid in capital Retained earnings Treasury stock Accum other income Total equity 21.0 0.0 2,797.0 0.0 165.0 2,983.0 20.0 0.0 2,440.0 0.0 85.0 2,545.0 20.0 81.0 2,749.0 0.0 54.0 2,904.0 19.0 8.0 3,081.0 0.0 36.0 3,144.0 19.0 8.0 5,937.2 0.0 36.0 6,000.2 19.0 19.0 8.0 8.0 8,788.0 11,875.2 0.0 0.0 36.0 36.0 8,851.0 11,938.2 19.0 8.0 15,003.6 0.0 36.0 15,066.6 19.0 8.0 18,231.9 0.0 36.0 18,294.9 TOTAL LIABILITIES & EQUITY 7,690.0 7,473.0 7,610.0 7,989.0 10,987.1 13,398.6 16,254.6 17,390.8 18,529.9 Does balance sheet balance? 0.0 0.0 0.0 0.0 0.0 Liabilities & Equity Financing gap Accounts payable Accrued liabilities Liabilities held for sale Total current liabilities 0.0 0.0 0.0 0.0 GAP Hist. Hist. Hist. Hist. Proj Proj Proj 2014 2015 2016 2017 2018 2019 2020 2,129.0 1,594.0 1,719.0 1,380.0 (1,137.8) (1,365.3) Cash flow statement Operating cash flows CAPEX Investing cash flows (714.0) (596.0) (726.0) (730.0) (524.0) (529.0) (731.0) (668.0) Financing cash flows (1,507.0) (990.0) (777.0) (731.0) 26.0 (126.0) 413.0 (19.0) (21.0) (19.0) 0.0 19.0 5.0 (145.0) 413.0 0.0 Change in cash pre FX FX effects Change in cash post FX (989.4) Proj Proj 2021 2022 (1,433.6) (1,505.2) GAP Hist. Hist. Hist. Hist. Proj Proj Proj Proj Proj 2014 2015 2016 2017 2018 2019 2020 2021 2022 3,217.8 598.5 2.4 (22.9) (174.1) (3.1) 266.4 (120.4) (4.1) 3,760.5 3,212.3 671.1 2.7 (45.7) (325.7) (76.4) 217.1 173.9 169.6 3,999.0 3,448.8 769.1 2.6 (70.1) (499.4) (117.1) 332.9 266.7 260.1 4,393.7 3,489.9 894.3 2.6 (21.0) (149.8) (35.1) 99.9 80.0 78.0 4,438.8 3,589.9 1,007.6 2.6 (22.1) (157.3) (36.9) 104.9 84.0 81.9 4,654.6 CAPEX Additions to other long term assets Inv & advances affiliates Goodwill Investing cash flows (989.4) (989.4) (1,137.8) (1,137.8) (1,365.3) (1,365.3) (1,433.6) (1,433.6) (1,505.2) (1,505.2) Long-term debt (inc. current portion) Common stock Additional paid in capital Treasury stock Accum other income Dividends Financing cash flows (361.6) (361.6) (1,000.0) (361.6) (1,361.6) (1,091.0) (361.6) (1,452.6) (2,250.0) (361.6) (2,611.6) (2,360.0) (361.6) (2,721.6) Cash flow statement Net income Depreciation Amortization Accounts receivable, net Inventories Prepaids and other current assets Assets held for sale Accounts payable Accrued liabilities Liabilities held for sale Deferred income taxes Long term income taxes Other long term liabilities Operating cash flows Change in cash 2,409.6 1,499.7 1,575.9 393.6 427.8 Cash - beg Change in cash Cash - end 1,783.0 2,409.6 4,192.6 4,192.6 1,499.7 5,692.2 5,692.2 1,575.9 7,268.1 7,268.1 393.6 7,661.7 7,661.7 427.8 8,089.5 1,783 GAP Hist. Hist. Hist. Hist. Proj Proj Proj Proj Proj Calculations 2014 2015 2016 2017 2018 2019 2020 2021 2022 3,195.9 1,137.8 671.1 3,662.5 3,662.5 1,365.3 769.1 4,258.7 4,258.7 1,433.6 894.3 4,797.9 4,797.9 1,505.2 1,007.6 5,295.6 504.6 0.0 2.7 501.9 501.9 0.0 2.6 499.3 499.3 0.0 2.6 496.7 496.7 0.0 2.6 494.1 PP&E PP&E - beg CAPEX Depreciation PP&E - end 714.0 726.0 524.0 731.0 2,773.0 2,850.0 2,616.0 2,805.0 2,805.0 989.4 598.5 3,195.9 507.0 507.0 0.0 2.4 504.6 3,081.0 3,081.0 3,217.8 (361.6) 5,937.2 Other long term assets - beg Additions to other long term assets Amortization Other long term assets - end 420.0 Reconciliation of RE RE - beg Net income Dividends RE - end 2,797.0 458.0 2,440.0 570.0 2,749.0 5,937.2 8,788.0 11,875.2 15,003.6 3,212.3 3,448.8 3,489.9 3,589.9 (361.6) (361.6) (361.6) (361.6) 8,788.0 11,875.2 15,003.6 18,231.9 GAP Hist. Hist. Hist. Hist. Proj Proj Proj Proj Proj Summary 2014 2015 2016 2017 2018 2019 2020 2021 2022 Scenario running Upside case Growth Sales growth EBITDA growth Net income growth Profitability Operating margin EBIT margin EBITDA margin Net income margin Return on equity - ROE total Leverage & Coverage Net debt Gross debt / EBITDA EBITDA / interest expense Asset management Receivable days Inventory days Payable days OWC OWC to sales Net PPE /Sales CAPEX/Sales CAPEX/Depreciation -3.9% -14.4% -27.1% -1.8% -9.1% -26.5% 2.2% -1.9% 25.4% 4.0% -23.4% 279.5% 15.0% 2.6% -0.2% 20.0% 20.0% 7.4% 5.0% 5.0% 1.2% 5.0% 5.0% 2.9% 12.7% 12.5% 16.0% 7.7% 42.3% 9.6% 10.5% 14.2% 5.8% 36.1% 7.7% 9.3% 13.1% 4.4% 23.3% 9.3% 9.1% 12.6% 5.3% 27.0% 24.4% 5.7% 9.3% 19.5% 53.6% 21.1% 4.7% 8.3% 16.9% 36.3% 18.5% 4.9% 8.3% 15.2% 28.9% 17.5% 4.5% 8.3% 14.6% 23.2% 16.6% 4.3% 8.3% 14.3% 19.6% (162.0) 0.5 35.0 361.0 0.8 38.1 (470.0) 0.6 27.2 (534.0) 0.6 27.0 (2,943.6) 0.8 20.7 (5,443.2) 0.2 21.3 (8,110.1) (0.4) 128.0 (10,753.7) (1.6) (39.8) (13,541.5) (2.6) (11.4) 6.1 68.0 42.2 589.0 3.6% 0.2 4.3% 1.4 6.5 67.8 40.3 501.0 3.2% 0.2 4.6% 1.2 7.9 67.6 45.9 144.0 0.9% 0.2 3.4% 0.9 6.5 74.5 44.0 324.0 2.0% 0.2 4.6% 1.3 6.7 76.7 51.1 378.2 2.3% 0.2 6.0% 1.7 6.7 76.7 51.1 434.9 2.3% 0.2 6.0% 1.7 6.7 76.7 51.1 521.9 2.3% 0.2 6.0% 1.8 6.7 76.7 51.1 547.9 2.3% 0.2 6.0% 1.6 6.7 76.7 51.1 575.3 2.3% 0.2 6.0% 1.5 Exam 2 fall 2008 GAP Version 1 Hist. Hist. Hist. 2014 2015 2016 Inputs Scenario running EBIT Depreciation & amortization Change in OWC & other operating cash flows CAPEX Tax rate FCF long run growth rate WACC Cash & Investments Value of Debt Shares of stock outstanding EV/EBITDA multiple (ltm) Hist. Proj Proj 2017 2018 2019 Upside case 1,442.0 559.0 932.6 600.9 (58.2) (989.4) 19.0% 900.1 673.8 112.9 (1,137.8) 19.0% Proj 2020 1,116.9 771.8 173.1 (1,365.3) 19.0% Proj Proj 2021 2022 1,086.2 896.9 51.9 (1,433.6) 19.0% 1,072.1 1,010.2 54.5 (1,505.2) 19.0% 3.5% 6.8% 1,783.0 1,249.0 396.0 5.0 Barnes & Noble Big Lots Bed Bath & Beyond BASIC APPROACHES THAT USE ONLY NEXT YEAR'S FORECAST A: Enterprise Valuation: Relative Valuation using Trailing EBITDA Multiple EBITDA EV Equity value Share price Lyons 4.6 6.3 4.1 5.0 2,001.0 9,998.3 10,532.3 $26.6 B: Enterprise Valuation Assuming Constant Growth FCF EV Equity value Share price 308.7 9,216.8 9,750.8 $24.6 APPROACHES THAT USE A MULTI-YEAR FORECAST C: Enterprise Valuation: Use Forecast since we assume Non-Constant Growth over short term;TV is based off EBITDA Multiple Calculations Variable growth phase Year (for discounting) Free cash flow Present value of FCF TV using EBITDA multiple PV of TV 1 308.7 288.9 2 378.0 331.1 3 484.3 397.0 4 395.1 303.1 5 427.9 307.2 6 443 EV/EBITDA 10,404 24.32 4.0 5.0 6.0 6.4% 20.89 20.89 24.74 Enterprise value 9,097.9 5.9% 21.32 21.32 25.26 Equity value 9,631.9 5.4% 21.76 21.76 25.79 Share price $24.3 4.9% 22.21 22.21 26.34 4.4% 22.67 22.67 26.90 D: Enterprise Valuation: Use Forecast since we assume Non-Constant Growth over short term;TV assumes we hit steady state and can apply constant growth model Stable growth phase Free cash flow during first year of stable growth Enterprise value when growth becomes stable Present value of enterprise value in stable phase Enterprise value Equity value Share price 7,471 442.8 29.43 7.8% 7.3% 6.8% 6.3% 5.8% 9,493 11,120.2 11,654.2 $29.4 0% 14.78 13.96 13.96 14.78 16.78 1% 16.26 15.23 15.23 16.26 18.85 13,220.8 2% 18.26 16.91 16.91 18.26 21.78 3% 21.07 19.22 19.22 21.07 26.22 E: Enterprise Valuation Assuming Non-Constant Growth and Finite Time Horizon Free Cash Flow Valuation of an Enterprise under a 60 Year Time Horizon Inputs Year Free cash flow FCF growth rate expected Calculations Year (for discounting) Free Cash Flow PV of FCF Output Enterprise Value for 60 year time horizon Equity value Share price End 10,304.4 10,838.4 $27.4 2018 309 2019 378 2020 484 2021 395 2022 428 1 309 289 2 378 331 3 484 397 4 395 303 5 428 307 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 445 463 481 501 521 541 563 586 609 633 659 685 712 741 771 801 833 867 901 937 975 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 6 445 299 7 463 291 8 481 283 9 501 276 10 521 268 11 541 261 12 563 254 13 586 247 14 609 241 15 633 234 16 659 228 17 685 222 18 712 216 19 741 210 20 771 205 21 801 199 22 833 194 23 867 189 24 901 184 25 937 179 26 975 174 2044 1,014 4.0% 27 1,014 170 2045 1,055 4.0% 28 1,055 165 2046 1,097 4.0% 29 1,097 161 2047 1,141 4.0% 30 1,141 156 2048 1,186 4.0% 31 1,186 152 2049 1,234 4.0% 32 1,234 148 2050 1,283 4.0% 33 1,283 144 2051 1,334 4.0% 34 1,334 140 2052 1,388 4.0% 35 1,388 137 2053 1,443 4.0% 36 1,443 133 2054 1,501 4.0% 37 1,501 129 2055 1,561 4.0% 38 1,561 126 2056 1,623 4.0% 39 1,623 123 2057 1,688 4.0% 40 1,688 119 2058 1,756 4.0% 41 1,756 116 2059 1,826 4.0% 42 1,826 113 2060 1,899 4.0% 43 1,899 110 2061 1,975 4.0% 44 1,975 107 2062 2,054 4.0% 45 2,054 104 2063 2,136 4.0% 46 2,136 101 2064 2,222 4.0% 47 2,222 99 2065 2,311 4.0% 48 2,311 96 2066 2,403 4.0% 49 2,403 94 2067 2,499 4.0% 50 2,499 91 2068 2,599 4.0% 51 2,599 89 2069 2,703 4.0% 52 2,703 86 2070 2,811 4.0% 53 2,811 84 2071 2,924 4.0% 54 2,924 82 2072 3,041 4.0% 55 3,041 80 2073 3,162 4.0% 56 3,162 77 2074 3,289 4.0% 57 3,289 75 2075 3,420 4.0% 58 3,420 73 2076 3,557 4.0% 59 3,557 71 2077 3,699 4.0% 60 3,699 69 WACC US 10 yr ERP Beta Cost of equity Cost of debt - blend Morningstar Marginal tax rate # shares outstanding Share price Market capitalization Debt Total capital % equity % Debt WACC 3.1% 5.5% 0.6 7.2% 4.6% 25.0% 396.0 30.4 12,054.2 1,249.0 13,303.2 90.6% 9.4% 6.85% H&M Company name: Ticker Date: Currency: Units: Analyst name: H & M Hennes & Mauritz AB HM B 11/30/2017 USD Millions Key features of Model Financial analysis Integrated financial forecast Calcs worksheet Debt worksheet Forecast length Five years: 2018-2022 END (C) Bridget Lyons 2010 Cover 5/12/2019 H&M Hist. Hist. Hist. Hist. Proj Proj Proj Proj Proj Assumptions 2014 2015 2016 2017 2018 2019 2020 2021 2022 Income Statement Assumptions Sales growth - % Cost of sales - % of sales - excl depreciation Selling and administrative expense - % sales - excl amortization Impairment and other - $ Other operating expenses - $ Interest income - % return on cash & equivalents Interest expense - % rate paid on long-term debt Nonoperating income, net - $ Income taxes - % income before taxes Dividends per share - growth rate Basic WASO Diluted WASO Depreciation - % PY net PP&E Amortization - % PY other long term assets Balance Sheet Assumptions Accounts receivable, net - % sales Inventories - % COGS Prepaids and other current assets - % sales CapEx - % sales Inv & advances affiliates - $ Goodwill - $ Other long-term assets - $ growth Accounts payable - % COGS Accrued liabilities - % COGS Long-term debt (inc. current portion) - $ repayment from debt note Long term income taxes Deferred income taxes - $ rethink Other long term liabilities - % sales Common stock - $ Additional paid in capital - $ Treasury stock - $ Accum other income - $ #REF! 40.8% 39.0% 0.0 0.0 2.0% #DIV/0! 0.0 22.9% #REF! 1,655.1 1,655.1 #REF! #REF! 2.0% 42.6% 39.0% 0.0 0.0 2.4% #DIV/0! 0.0 23.3% -12% 1,655.1 1,655.1 20.3% 0.0% 0.3% 44.3% 39.3% 0.0 0.0 2.4% 3.9% 0.0 22.5% -6% 1,655.1 1,655.1 21.8% 0.0% 15.4% 45.5% 40.0% 0.0 0.0 2.9% 11.7% 0.0 22.2% 11% 1,655.1 1,655.1 24.3% 0.0% -0.5% 43.3% 39.3% 0.0 0.0 2.9% 11.7% 0.0 22% 10% 1655.1 1655.1 25.0% 0.0% -0.6% 43.3% 39.3% 0.0 0.0 2.9% 11.7% 0.0 22% 10% 1655.1 1655.1 25.0% 0.0% -0.7% 43.3% 39.3% 0.0 0.0 2.9% 11.7% 0.0 22% 10% 1655.1 1655.1 25.0% 0.0% -0.8% 43.3% 39.3% 0.0 0.0 2.9% 11.7% 0.0 22% 10% 1655.1 1655.1 25.0% 0.0% -0.9% 43.3% 39.3% 0.0 0.0 2.9% 11.7% 0.0 22% 10% 1655.1 1655.1 25.0% 0.0% Based on average of historicals Based on average of historicals Set to 0 Set to 0 Set equal to prior year Set equal to prior year Set to 0 Set equal to prior year Set to 10% Set equal to prior year Set equal to prior year Reflected trend Set equal to prior year 3.4% 31.4% 1.0% 5.6% 0.0 8.6 3.2% 32.3% 1.0% 5.9% 0.0 7.3 3.9% 37.2% 1.1% 6.1% 0.0 6.9 4.8% 37.1% 1.4% 5.2% 0.0 7.7 8.9% 23.9% 7.8% 22.0% 8.5% 28.7% 7.9% 36.8% 441.0 501.4 529.1 638.9 3.8% 34.5% 1.1% 5.7% 0.0 7.7 0.0 8.3% 27.9% 41.9 0.0 638.9 3.8% 34.5% 1.1% 5.7% 0.0 7.7 0.0 8.3% 27.9% 0.0 0.0 638.9 3.8% 34.5% 1.1% 5.7% 0.0 7.7 0.0 8.3% 27.9% 0.0 0.0 638.9 3.8% 34.5% 1.1% 5.7% 0.0 7.7 0.0 8.3% 27.9% 0.0 0.0 638.9 3.8% 34.5% 1.1% 5.7% 0.0 7.7 0.0 8.3% 27.9% 0.0 0.0 638.9 Based on average of historicals Based on average of historicals Based on average of historicals Based on average of historicals Set to 0 Set equal to prior year Set to 0 Based on average of historicals Based on average of historicals Based on current debt maturity schedule Set to 0 Set to 0 0.3% 24.8 121.6 0.0 0.0 0.3% 24.8 121.6 0.0 0.0 0.3% 24.8 121.6 0.0 0.0 0.3% 24.8 121.6 0.0 0.0 0.3% 24.8 121.6 0.0 0.0 Based on average of historicals Set equal to prior year Set equal to prior year Set to 0 Set equal to prior year 0.3% 27.8 27.4 0.0 0.0 0.2% 23.7 218.0 0.0 0.0 0.3% 22.4 286.4 0.0 0.0 0.2% 24.8 121.6 0.0 0.0 H&M Hist. Hist. Hist. Hist. Proj Proj Key Driver assumptions 2014 2015 2016 2017 2018 2019 U.S. Revenues growth rate 2,204.1 2,735.1 24.1% 2,754.1 0.7% 3,155.5 14.6% International Revenues growth rate 18,110.3 17,976.4 -0.7% 18,015.3 0.2% 20,813.6 23,415.3 26,108.0 15.5% 12.5% 11.50% 20,314.4 20,711.5 2.0% 20,769.4 0.3% 23,969.1 26,981.0 30,101.6 15.4% 12.6% 11.6% Total Revenues growth rate Select a revenue growth scenario 3 Overall growth rate used in forecast Base case Upside case Downside case 3,565.7 13.0% -0.5% 1.0% 0.5% -0.5% 3,993.6 12.0% -0.6% 1.4% 0.5% -0.6% Proj Proj Proj 2020 2021 2022 4,432.8 11.0% 4,876.1 10.0% 5,315.0 9.0% 28,849.4 31,590.1 34,275.2 10.50% 9.50% 8.50% 33,282.2 36,466.2 39,590.2 10.6% 9.6% 8.6% -0.7% 1.3% 0.5% -0.7% -0.8% 1.2% 0.5% -0.8% -0.9% 1.1% 0.5% -0.9% H&M Hist. Hist. Hist. Hist. Proj Proj Proj Proj Income statement 2014 2015 2016 2017 2018 2019 2020 2021 2022 20,314.4 8,291.0 676.8 11,346.6 20,711.5 8,814.2 732.8 11,164.6 20,769.4 9,207.0 821.5 10,740.9 23,969.1 10,900.3 1,017.2 12,051.5 23,849.2 10,325.3 943.7 12,580.2 23,706.1 10,263.4 1,295.7 12,147.0 23,540.2 10,191.5 1,308.4 12,040.2 23,351.8 10,110.0 1,315.6 11,926.3 23,141.7 10,019.0 1,318.3 11,804.4 Selling and administrative expense - excl amortization Amortization EBIT 7,914.4 0.0 3,432.2 8,079.2 0.0 3,085.3 8,167.5 0.0 2,573.4 9,586.5 0.0 2,465.1 9,378.0 0.0 3,202.3 9,321.7 0.0 2,825.3 9,256.4 0.0 2,783.8 9,182.4 0.0 2,743.9 9,099.7 0.0 2,704.6 Impairment and other Other operating expenses/(income) Operating profit as reported 0.0 0.0 3,432.2 0.0 0.0 3,085.3 0.0 0.0 2,573.4 0.0 0.0 2,465.1 0.0 0.0 3,202.3 0.0 0.0 2,825.3 0.0 0.0 2,783.8 0.0 0.0 2,743.9 0.0 0.0 2,704.6 Interest income Interest expense Nonoperating income(expense) Income before taxes 44.0 2.1 0.0 3,474.1 35.5 1.1 0.0 3,119.7 24.2 0.9 0.0 2,596.7 33.7 4.9 0.0 2,493.9 33.7 4.9 0.0 3,231.1 21.3 0.0 0.0 2,846.6 16.3 0.0 0.0 2,800.1 4.2 0.0 0.0 2,748.1 0.0 64.4 0.0 2,640.2 Income taxes Net income 794.1 2,680.0 726.5 2,393.2 583.7 2,013.0 554.3 1,939.6 718.2 2,512.9 632.7 2,213.9 622.4 2,177.7 610.8 2,137.3 586.8 2,053.4 Dividends paid 2,109.4 1,847.9 1,743.2 1,933.9 2,127.3 2,340.0 2,574.0 2,831.4 3,114.6 Shareholder information Basic WASO Diluted WASO Basic earnings per common share Diluted earnings per common share Dividends declared per common share 1,655.1 1,655.1 1.6 1.6 1.3 1,655.1 1,655.1 1.4 1.4 1.1 1,655.1 1,655.1 1.2 1.2 1.1 1,655.1 1,655.1 1.2 1.2 1.2 1,655.1 1,655.1 1.5 1.5 1.3 1,655.1 1,655.1 1.3 1.3 1.4 1,655.1 1,655.1 1.3 1.3 1.6 1,655.1 1,655.1 1.3 1.3 1.7 1,655.1 1,655.1 1.2 1.2 1.9 Other information D&A total D&A on PP&E Amortization EBITDA 676.8 676.8 0.0 4,109.0 732.8 732.8 0.0 3,818.1 821.5 821.5 0.0 3,394.9 1,017.2 1,017.2 0.0 3,482.3 943.7 0.0 4,145.9 1,295.7 0.0 4,121.1 1,308.4 0.0 4,092.2 1,315.6 0.0 4,059.5 1,318.3 0.0 4,022.9 Revenues Cost of sales - excluding D&A on PP&E Depreciation Gross profit Proj H&M Hist. Hist. Hist. Hist. Proj Proj Proj Proj Proj Balance sheet 2014 2015 2016 2017 2018 2019 2020 2021 2022 Assets Cash & equivalents Accounts receivable, net Inventories Prepaids and other current assets Assets held for sale Total current assets 2,239.5 688.1 2,603.1 203.4 0.0 5,734.1 1,483.0 672.1 2,843.8 215.7 0.0 5,214.6 1,020.4 800.9 3,427.8 223.7 0.0 5,472.8 1,164.6 1,144.0 4,040.1 332.0 0.0 6,680.8 735.6 909.9 3,561.1 268.6 564.3 904.5 3,539.7 267.0 145.9 898.1 3,514.9 265.1 0.0 891.0 3,486.8 263.0 0.0 882.9 3,455.4 260.6 5,475.2 5,275.5 4,824.1 4,640.8 4,599.0 3,615.3 0.0 8.6 784.0 4,408.0 3,774.7 0.0 7.3 830.4 4,612.4 4,179.8 0.0 6.9 989.4 5,176.1 4,771.9 0.0 7.7 1,310.4 6,089.9 5,182.9 0.0 7.7 1,310.4 6,500.9 5,233.7 0.0 7.7 1,310.4 6,551.8 5,262.4 0.0 7.7 1,310.4 6,580.4 5,273.2 0.0 7.7 1,310.4 6,591.3 5,269.4 0.0 7.7 1,310.4 6,587.4 10,142.1 9,827.0 10,648.9 12,770.7 11,976.1 11,827.3 11,404.6 11,232.0 11,186.4 740.6 1,983.3 0.0 2,723.9 687.1 1,939.6 0.0 2,626.7 784.5 2,640.4 0.0 3,424.9 864.7 4,015.7 0.0 4,880.4 0.0 856.5 2,876.8 0.0 851.4 2,859.5 0.0 845.4 2,839.5 551.6 838.6 2,816.8 1,600.6 831.1 2,791.4 3,733.2 3,710.8 3,684.9 4,207.0 5,223.1 0.0 441.0 0.0 60.5 501.5 0.0 501.4 0.0 51.4 552.8 23.0 529.1 0.0 56.9 609.0 41.9 638.9 0.0 53.3 734.2 0.0 638.9 0.0 62.2 701.1 0.0 638.9 0.0 61.8 700.7 0.0 638.9 0.0 61.4 700.3 0.0 638.9 0.0 60.9 699.8 0.0 638.9 0.0 60.3 699.3 Total liabilities 3,225.3 3,179.4 4,033.9 5,614.5 4,434.3 4,411.6 4,385.2 4,906.8 5,922.4 Common stock Additional paid in capital Retained earnings Treasury stock Accum other income Total equity 27.8 27.4 6,861.6 0.0 0.0 6,916.8 23.7 218.0 6,405.8 0.0 0.0 6,647.6 22.4 286.4 6,306.2 0.0 0.0 6,614.9 24.8 121.6 7,009.7 0.0 0.0 7,156.2 24.8 121.6 7,395.3 0.0 0.0 7,541.8 24.8 121.6 7,269.2 0.0 0.0 7,415.7 24.8 121.6 6,873.0 0.0 0.0 7,019.4 24.8 121.6 6,178.8 0.0 0.0 6,325.3 24.8 121.6 5,117.6 0.0 0.0 5,264.1 TOTAL LIABILITIES & EQUITY 10,142.1 9,827.0 10,648.9 12,770.7 11,976.1 11,827.3 11,404.6 11,232.0 11,186.4 Does balance sheet balance? 0.0 0.0 0.0 0.0 0.0 Net P,P&E Inv & advances affiliates Goodwill Other long-term assets Total non-current assets TOTAL ASSETS Liabilities & Equity Financing gap Accounts payable Accrued liabilities Liabilities held for sale Total current liabilities Long-term debt (inc. current portion) Deferred income taxes Long term income taxes Other long term liabilities Total non-current liabilities 0.0 0.0 0.0 0.0 H&M Hist. Hist. Hist. Hist. Proj Proj Proj Proj Proj 2014 2015 2016 2017 2018 2019 2020 2021 2022 Net income Depreciation Amortization Accounts receivable, net Inventories Prepaids and other current assets Assets held for sale Accounts payable Accrued liabilities Liabilities held for sale Deferred income taxes Long term income taxes Other long term liabilities Operating cash flows 2,512.9 943.7 234.1 479.1 63.4 (8.2) (1,138.9) 8.8 3,094.8 2,213.9 1,295.7 5.5 21.4 1.6 (5.1) (17.3) (0.4) 3,515.3 2,177.7 1,308.4 6.3 24.8 1.9 (6.0) (20.0) (0.4) 3,492.7 2,137.3 1,315.6 7.2 28.1 2.1 (6.8) (22.7) (0.5) 3,460.3 2,053.4 1,318.3 8.0 31.4 2.4 (7.5) (25.4) (0.5) 3,380.0 CAPEX Additions to other long term assets Inv & advances affiliates Goodwill Investing cash flows (1,354.7) (1,354.7) (1,346.5) (1,346.5) (1,337.1) (1,337.1) (1,326.4) (1,326.4) (1,314.5) (1,314.5) Long-term debt (inc. current portion) Common stock Additional paid in capital Treasury stock Accum other income Dividends Financing cash flows (41.9) (2,127.3) (2,169.2) (2,340.0) (2,340.0) (2,574.0) (2,574.0) (2,831.4) (2,831.4) (3,114.6) (3,114.6) Change in cash (429.0) (171.3) (418.4) (697.5) (1,049.1) Cash - beg Change in cash Cash - end 1,164.6 (429.0) 735.6 735.6 (171.3) 564.3 564.3 (418.4) 145.9 145.9 (697.5) (551.6) (551.6) (1,049.1) (1,600.6) Cash flow statement 1,165 H&M Hist. Hist. Hist. Hist. Proj Proj Proj Proj Proj Calculations 2014 2015 2016 2017 2018 2019 2020 2021 2022 1,138.8 1,213.3 1,267.2 1,235.7 3,615.3 3,774.7 4,179.8 4,771.9 4,771.9 1,354.7 943.7 5,182.9 5,182.9 1,346.5 1,295.7 5,233.7 5,233.7 1,337.1 1,308.4 5,262.4 5,262.4 1,326.4 1,315.6 5,273.2 5,273.2 1,314.5 1,318.3 5,269.4 1,310.4 1,310.4 0.0 0.0 1,310.4 1,310.4 0.0 0.0 1,310.4 1,310.4 0.0 0.0 1,310.4 1,310.4 0.0 0.0 1,310.4 1,310.4 0.0 0.0 1,310.4 PP&E PP&E - beg CAPEX Depreciation PP&E - end Other long term assets - beg Additions to other long term assets Amortization Other long term assets - end Reconciliation of RE RE - beg Net income Dividends RE - end 784.0 6,861.6 830.4 6,405.8 989.4 6,306.2 7,009.7 7,009.7 7,395.3 7,269.2 6,873.0 6,178.8 2,512.9 2,213.9 2,177.7 2,137.3 2,053.4 (2,127.3) (2,340.0) (2,574.0) (2,831.4) (3,114.6) 7,395.3 7,269.2 6,873.0 6,178.8 5,117.6 H&M Hist. Hist. Hist. Hist. Proj Proj Proj 2014 2015 2016 2017 2018 2019 2020 3,240.8 2,756.1 2,568.3 2,587.0 Cash flow statement Operating cash flows CAPEX Investing cash flows (1,138.8) (1,213.3) (1,267.2) (1,235.7) (1,168.3) (1,100.5) (1,458.1) (1,497.6) Financing cash flows (2,109.4) (1,847.9) (1,519.8) (1,020.7) Change in cash pre FX (36.9) (192.3) (409.6) 68.7 FX effects 60.1 61.7 31.1 (36.2) Change in cash post FX 23.2 (130.6) (378.5) 32.5 (1,375.1) (1,394.3) (1,412.5) Proj Proj 2021 2022 (1,429.4) (1,445.1) H&M Hist. Hist. Hist. Hist. Proj Proj Proj Proj Proj Summary 2014 2015 2016 2017 2018 2019 2020 2021 2022 Scenario running Downside case Growth Sales growth EBITDA growth Net income growth Profitability Operating margin EBIT margin EBITDA margin Net income margin Return on equity - ROE total Leverage & Coverage Net debt Gross debt / EBITDA EBITDA / interest expense Asset management Receivable days Inventory days Payable days OWC OWC to sales Net PPE /Sales CAPEX/Sales CAPEX/Depreciation 2.0% -7.1% -10.7% 0.3% -11.1% -15.9% 15.4% 2.6% -3.6% -0.5% 19.1% 29.6% -0.6% -0.6% -11.9% -0.7% -0.7% -1.6% -0.8% -0.8% -1.9% -0.9% -0.9% -3.9% 16.9% 16.9% 20.2% 13.2% 38.7% 14.9% 14.9% 18.4% 11.6% 36.0% 12.4% 12.4% 16.3% 9.7% 30.4% 10.3% 10.3% 14.5% 8.1% 27.1% 13.4% 13.4% 17.4% 10.5% 33.3% 11.9% 11.9% 17.4% 9.3% 29.9% 11.8% 11.8% 17.4% 9.3% 31.0% 11.8% 11.8% 17.4% 9.2% 33.8% 11.7% 11.7% 17.4% 8.9% 39.0% (2,239.5) 1,956.7 (1,483.0) 3,471.0 (997.4) 0.0 3,772.1 (1,122.7) 0.0 710.7 (735.5) 0.0 846.1 (564.3) 0.0 783,907.3 (145.9) 0.0 778,419.9 12.4 114.6 32.6 770.7 3.8% 0.2 5.6% 1.7 11.8 117.8 28.5 1,105.0 5.3% 0.2 5.9% 1.7 14.1 135.9 31.1 1,027.5 4.9% 0.2 6.1% 1.5 17.4 135.3 29.0 635.8 2.7% 0.2 5.2% 1.2 13.9 125.9 30.3 1,006.4 4.2% 0.2 5.8% 1.5 13.9 125.9 30.3 1,000.3 4.2% 0.2 5.9% 1.1 13.9 125.9 30.3 993.3 4.2% 0.2 6.0% 1.1 551.6 0.1 772,192.6 13.9 125.9 30.3 985.4 4.2% 0.2 6.1% 1.1 1,600.7 0.4 62.4 13.9 125.9 30.3 976.5 4.2% 0.2 6.2% 1.1 WACC US 10 yr ERP Beta Cost of equity Cost of debt - blend Morningstar Marginal tax rate # shares outstanding Share price Market capitalization Debt Total capital % equity % Debt WACC 3.1% 5.5% 1.1 9.2% 0.0% 22.5% 1655.1 23.6 39,094.5 41.9 39,136.4 99.9% 0.1% 9.2% Exam 2 fall 2008 H&M Version 1 Hist. Hist. Hist. 2014 2015 2016 Inputs Scenario running EBIT Depreciation & amortization Change in OWC & other operating cash flows CAPEX Tax rate FCF long run growth rate WACC Cash & Investments Value of Debt Shares of stock outstanding EV/EBITDA multiple (ltm) Hist. Proj 2017 2018 Downside case 2,465.1 3,202.3 1,017.2 943.7 (361.8) (1,354.7) 22.2% 2.5% 9.2% 1,164.6 41.9 1,655.1 8.5 Proj 2019 2,825.3 1,295.7 5.7 (1,346.5) 22.2% Proj 2020 2,783.8 1,308.4 6.6 (1,337.1) 22.2% Proj Lyons Proj 2021 2022 2,743.9 1,315.6 7.5 (1,326.4) 22.2% 2,704.6 1,318.3 8.3 (1,314.5) 22.2% L Brands, Inc Nordstrom, Inc. Ross Stores, Inc 6.7 6.5 12.4 BASIC APPROACHES THAT USE ONLY NEXT YEAR'S FORECAST A: Enterprise Valuation: Relative Valuation using Trailing EBITDA Multiple EBITDA EV Equity value Share price 3,482.3 29,715.4 30,838.1 $18.6 B: Enterprise Valuation Assuming Constant Growth FCF EV Equity value Share price 1,717.7 25,787.5 26,910.2 $16.3 ` APPROACHES THAT USE A MULTI-YEAR FORECAST C: Enterprise Valuation: Use Forecast since we assume Non-Constant Growth over short term;TV is based off EBITDA Multiple Calculations Variable growth phase Year (for discounting) Free cash flow Present value of FCF TV using EBITDA multiple PV of TV 1 1,717.7 1,573.6 2 2,152.2 1,806.1 3 2,142.9 1,647.4 4 2,130.6 1,500.5 5 2,115.6 1,364.9 11 2,169 EV/EBITDA 34,329 18.83 7.5 8.5 9.5 9.6% 16.97 16.97 18.51 Enterprise value 30,039.9 9.1% 17.30 17.30 18.87 Equity value 31,162.6 8.6% 17.64 17.64 19.25 Share price $18.8 8.1% 17.99 17.99 19.64 7.6% 18.35 18.35 20.03 D: Enterprise Valuation: Use Forecast since we assume Non-Constant Growth over short term;TV assumes we hit steady state and can apply constant growth model Stable growth phase Free cash flow during first year of stable growth Enterprise value when growth becomes stable Present value of enterprise value in stable phase Enterprise value Equity value Share price 22,147 1,717.7 15.50 10.2% 9.7% 9.2% 8.7% 8.2% 16,637 24,529.3 25,652.0 $15.5 0% 11.62 11.13 11.13 11.62 12.76 1% 12.31 11.74 11.74 12.31 13.65 25,787.5 2% 13.16 12.48 12.48 13.16 14.80 3% 14.26 13.43 13.43 14.26 16.31 E: Enterprise Valuation Assuming Non-Constant Growth and Finite Time Horizon Free Cash Flow Valuation of an Enterprise under a 60 Year Time Horizon Inputs Year Free cash flow FCF growth rate expected Calculations Year (for discounting) Free Cash Flow PV of FCF Output Enterprise Value for 60 year time horizon Equity value Share price End 2018 1,718 2019 2,152 2020 2,143 2021 2,131 2022 2,116 1 1,718 1,574 2 2,152 1,806 3 2,143 1,647 4 2,131 1,501 5 2,116 1,365 2023 2,169 2.5% 28,236.9 29,359.6 $17.7 6 2,169 1,282 2024 2,223 2.5% 7 2,223 1,203 2025 2026 2,278 2.5% 8 2,278 1,130 2,335 2.5% 9 2,335 1,061 2027 2,394 2.5% 10 2,394 996 2028 2,453 2.5% 11 2,453 935 2029 2,515 2.5% 12 2,515 878 2030 2,578 2.5% 13 2,578 825 2031 2,642 2.5% 14 2,642 774 2032 2,708 2.5% 15 2,708 727 2033 2,776 2.5% 16 2,776 683 2034 2,845 2.5% 17 2,845 641 2035 2,916 2.5% 18 2,916 602 2036 2,989 2.5% 19 2,989 565 2037 3,064 2.5% 20 3,064 531 2038 3,141 2.5% 21 3,141 498 2039 3,219 2.5% 22 3,219 468 2040 3,300 2.5% 23 3,300 439 2041 3,382 2.5% 24 3,382 413 2042 3,467 2.5% 25 3,467 387 2043 3,553 2.5% 26 3,553 364 2044 3,642 2.5% 27 3,642 342 2045 3,733 2.5% 28 3,733 321 2046 3,827 2.5% 29 3,827 301 2047 3,922 2.5% 30 3,922 283 2048 4,020 2.5% 31 4,020 266 2049 4,121 2.5% 32 4,121 249 2050 4,224 2.5% 33 4,224 234 2051 4,329 2.5% 34 4,329 220 2052 4,438 2.5% 35 4,438 206 2053 4,549 2.5% 36 4,549 194 2054 4,662 2.5% 37 4,662 182 2055 4,779 2.5% 38 4,779 171 2056 4,898 2.5% 39 4,898 160 2057 5,021 2.5% 40 5,021 151 2058 5,146 2.5% 41 5,146 141 2059 5,275 2.5% 42 5,275 133 2060 5,407 2.5% 43 5,407 125 2061 5,542 2.5% 44 5,542 117 2062 5,681 2.5% 45 5,681 110 2063 5,823 2.5% 46 5,823 103 2064 5,968 2.5% 47 5,968 97 2065 6,117 2.5% 48 6,117 91 2066 6,270 2.5% 49 6,270 85 2067 6,427 2.5% 50 6,427 80 2068 6,588 2.5% 51 6,588 75 2069 6,752 2.5% 52 6,752 71 2070 6,921 2.5% 53 6,921 66 2071 7,094 2.5% 54 7,094 62 2072 7,272 2.5% 55 7,272 59 2073 7,453 2.5% 56 7,453 55 2074 7,640 2.5% 57 7,640 52 2075 7,831 2.5% 58 7,831 49 2076 8,027 2.5% 59 8,027 46 2077 8,227 2.5% 60 8,227 43 Do the analysis of these firms and develop an equity research report for each firm that includes: ❖ A competitive analysis of the industry and the firm’s competitive positioning ❖ Financial analysis of both firms ❖ Integrated financial forecast model developed in Excel ❖ Determination of each firm’s weighted average cost of capital ❖ A valuation of each firm utilizing both comparables and DCF approaches ❖ One year target stock price with rationale ❖ Investment thesis/recommendation ❖ Scenario analysis ( you find the scenario list in the revenue build sheet ,1 to 3, change the scenario and analysis them, and how they affect the enter value (valuation ) I already did the Excel File, please Analyze the Excel file based on the outline.
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