Valuation of Scatec Solar ASA : a fundamental analysis of a high-growth company

Abstract

This thesis aims at obtaining the fair value of Scatec Solar ASA by applying a three-stage weighted average cost of capital model, supported with a relative valuation approach. By thoroughly examining key aspects of the solar power industry as well as crucial companyspecific factors, necessary assumptions are made in order to forecast future performance of the company and carry out the valuation. On the back of substantial cost decreases recent years, the solar power industry has experienced a rapid growth in capacity and globalization. Further driven by governmental support mechanisms these trends are expected to continue, establishing solar power as a prominent contributor to the global energy supply in the future. With experience and a solid integrated structure and network, Scatec Solar is well positioned in this emerging industry. Currently holding a strong project funnel, containing new capacity both close to construction and in development, the company is set to continue its rapid growth going forward. Implemented in the fundamental valuation these factors yield an estimated share price of NOK 53 for Scatec Solar ASA. Supported by the relative EV/EBITDA valuation, the analysis indicates a strong upside from the currently traded price of the stock. Although the results contain large amounts of uncertainty, revealed through analyses of sensitivity and risk factors, I conclude that Scatec Solar is currently undervalued and that a buy recommendation is appropriate.