Equity Research in Food & Retail Industry - TESCO PLC

Mestrado Bolonha em Finanças ; This Equity Research in the Food and Retail Industry follows the research report format recommended by the CFA Institute. The company under analysis is Tesco PLC and the main goal is to provide an estimation of the company’s PT for the end of 2021, considering the close share price on 30th June 2021. Events that may have happened after this date were not considered for the valuation. Tesco PLC is the largest food retailer in the UK and one of the most valuable grocery companies worldwide. The company is listed at the London Stock Exchange, and it is part of the FTSE 100 index. Nowadays Tesco has its stores spread across the UK, Republic of Ireland and in Central Europe, offering a wide range of products. This project provides an overview of the company including its history, business model, strategy, key performance indicators and the company’s corporate governance. Additionally, because Tesco was the first UK retailer to issue an 8.5-year Sustainability Linked Bonds (SLB) of £750m, it was considered important to create an ESG topic as it is incorporated in the company’s strategy. Indicators like GDP growth, unemployment rate, inflation, population growth and levels of disposable income were analyzed on the Economic Outlook topic. The highlight of these macroeconomic indicators was because they directly influence the performance of the food retail industry, both supply and demand, each one in their own way. Moreover, the analysis provides information about Competitive Positioning including SWOT and PESTEL, as well as the identification of Tesco peers’ companies using the SARD approach. After understanding the company’s business and projecting all FS, the valuation was conducted applying two approaches: the Absolute Valuation Approach using DCF, APV and DDM method; and Relative Valuation Approach through multiples of the peer group. To evaluate the risks of the company and support the final recommendation, a risk matrix was firstly performed, followed by a sensitivity analysis of ...