1. Project Title
Unilever DCF Valuation Using Unlevered Free Cash Flow
2. Project Objective
The objective of this project is to estimate the intrinsic value of the company using a Discounted Cash Flow (DCF) model based on Unlevered Free Cash Flow (UFCF). The model will support investment decision-making by comparing intrinsic value with the current market price.
3. Business Need / Justification
Investors need a reliable valuation framework to determine whether the company is undervalued or overvalued. This project helps:
- Estimate enterprise value and equity value
- Assess investment attractiveness
- Support strategic financial decisions
4. Scope of Work
In Scope
- Forecast EBITDA (2027–2031)
- Calculate Unlevered Free Cash Flow
- Apply DCF valuation methodology
- Estimate Terminal Value using the growth model
- Calculate Enterprise Value and Equity Value
- Perform sensitivity analysis (WACC & terminal growth)
Out of Scope
- Detailed operational forecasting
- Macroeconomic scenario modeling
- Industry-wide comparative valuation (comps)
5. Key Assumptions
- Forecast period: 2027–2031
- Terminal growth rate: 2%
- WACC: 13.5%
- Stable tax rate: ~17%
- Constant capital expenditure and working capital trends
6. Methodology
Step 1: Forecast Cash Flows
Unlevered Free Cash Flow is calculated as:
- EBITDA
- Less: Taxes
- Less: Capital Expenditure
- Less: Change in Working Capital
Step 2: Discount Cash Flows
- Discount projected UFCFs using WACC (13.5%)
Step 3: Calculate Terminal Value
- Based on perpetual growth model (2%)
Step 4: Valuation Outputs
- Enterprise Value = $133,793 (000)
- Equity Value = $115,151 (000)
- Equity Value per Share = $3.37
7. Key Deliverables
- Fully functional DCF model (Excel)
- Forecasted financials (EBITDA, UFCF)
- Enterprise and equity valuation
- Sensitivity analysis tables
- Investment recommendation
8. Key Results / Insights
- Current share price: $2.71
- Intrinsic value: $3.37
- Implied upside: 24%
This suggests the stock is undervalued
- Terminal value contributes 61% of total value → high sensitivity to assumptions
- Valuation is highly sensitive to WACC and growth rate
9. Risks & Limitations
- High reliance on terminal value assumptions
- Forecast uncertainty in EBITDA growth
- Sensitivity to WACC changes
- Simplified working capital assumptions
12. Success Criteria
- Accurate and logical DCF model
- Clear linkage between assumptions and outputs
- Reasonable valuation vs market price
- Decision-ready insights
13. Final Recommendation
Based on the DCF analysis, the company appears undervalued with a 24% upside, making it an attractive investment opportunity, subject to the validation of assumptions.