Bakkafrost Group Strategic Analysis and Valuation
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- Master Thesis 
This thesis has evaluated Bakkafrost holistically and estimated share price of the company. The thesis has used WACC-based DCF approach to calculate the intrinsic value and complemented it with multiples-based valuation using P/E multiple and EV/EBIT multiple. The estimated share price as of 18th May is NOK 850, and is a weighted average of fundamental and multiples-based valuation, with 70% weight to the fundamental valuation. The market price of the share as of 17th May was NOK 685; the estimated share price offers an upside of over 24% and hence, the author issues a “BUY” recommendation. The financial valuation has been grounded in industry and economic realities using strategic analysis. The analysis finds that salmon farming industry is well-suited to the emerging consumer trends of health, wellness, and sustainability. Furthermore, salmon farming remains politically and socially accepted in the countries Bakkafrost operates in. Moreover, Bakkafrost has demonstrated success over the years and is currently focusing on enhancing capacity and improving efficiency, which will lead to higher cash inflows in the future. Nonetheless, the salmon farming industry is not without its challenges. The growth in the industry is constrained due to limited number of farming licenses; however, the limited availability of licenses also creates a high barrier to entry, thereby protecting the industry from new entrants and high rivalry. Limited growth, coupled with increasing demand, is set to push prices up. Global warming and extreme weather events pose a threat to salmon farming because salmon growth requires very particular environmental conditions. But perhaps, the single largest challenge is salmon lice, which continues to reappear in significant levels in different countries and imposes various costs on salmon farmers. All in all, as per the author, salmon farming’s competitive landscape has moderate rivalry and is well positioned to capitalize on the macro-trends in the world. The author issues a “BUY” recommendation for Bakkafrost.