Editing Novo Nordisk A/S (section)

== Valuation ==
[[File:Screenshot 2023-08-10 at 10.14.01.png|thumb]]
[[File:Screenshot 2023-08-10 at 10.14.33.png|thumb|[[File:Screenshot 2023-08-10 at 10.14.23.png|thumb]]]]
[[File:Screenshot 2023-08-10 at 10.14.12.png|thumb]]

=== '''DCF Valuation:''' ===
{| class="wikitable"
|+
|Unlevered Free Cash Flow (mn)
|
|
|
|
|
|
|
|
|
|
|-
|Fiscal Year
|2018A
|2019A
|2020A
|2021A
|2022A
|2023E
|2024E
|2025E
|2026E
|2027E
|-
|Revenue
|111,831
|122,021
|126,946
|140,800
|176,954
|188,290
|211,703
|238,028
|267,626
|300,905
|-
|COGS
|(17,617)
|(20,088)
|(20,932)
|(23,658)
|(28,448)
|(29,713)
|(34,543)
|(38,839)
|(43,668)
|(49,098)
|-
|Gross Profit
|94,214
|101,933
|106,014
|117,142
|148,506
|158,577
|177,160
|199,190
|223,958
|251,807
|-
|Operating Expenses
|(13,653)
|(13,620)
|(15,002)
|(17,440)
|(23,013)
|(24,894)
|(25,650)
|(28,839)
|(32,425)
|(36,457)
|-
|Selling, General, Administrative
|(33,313)
|(35,830)
|(36,886)
|(41,058)
|(50,684)
|(53,014)
|(61,822)
|(69,510)
|(78,153)
|(87,871)
|-
|Total Operating Expenses
|(46,966)
|(49,450)
|(51,888)
|(58,498)
|(73,697)
|(77,908)
|(87,472)
|(98,349)
|(110,579)
|(124,329)
|-
|Operating Profit (EBITDA)
|47,248
|52,483
|54,126
|58,644
|74,809
|80,669
|89,688
|100,840
|113,380
|127,478
|-
|D&A
|3,925
|5,661
|5,753
|6,025
|7,362
|7,431
|2,861
|2,982
|3,108
|3,239
|-
|EBIT
|43,323
|46,822
|48,373
|52,619
|67,447
|73,238
|86,827
|97,858
|110,272
|124,239
|-
|Operating Taxes
|(8,987)
|(9,602)
|(10,992)
|(11,323)
|(13,537)
|(14,751)
|(17,046)
|(19,165)
|(21,548)
|(24,228)
|-
|NOPAT (Net Operating Profit After Taxes)
|34,336
|37,220
|37,381
|41,296
|53,910
|58,487
|69,781
|78,693
|88,723
|100,011
|-
|(+) Depreciation & Amortization
|3,925
|5,661
|5,753
|6,025
|7,362
|7,431
|2,861
|2,982
|3,108
|3,239
|-
|(-) Capital Expenditures
|(3,370)
|(3,388)
|(4,353)
|(8,656)
|(5,336)
|(17,445)
|5,604
|5,841
|6,087
|6,344
|-
|(-) Change in NWC
| --
|(1,430)
|(7,937)
|(9,457)
|1,175
|(19,800)
|(3,906)
|(4,533)
|(5,096)
|(5,730)
|-
|NWC
|4,903
|3,473
|(4,464)
|(13,921)
|(12,746)
|(32,546)
|(36,452)
|(40,985)
|(46,081)
|(51,811)
|-
|Current Assets (non cash)
|59,067
|62,456
|65,809
|85,595
|108,194
|80,219
|91,188
|102,527
|115,276
|129,610
|-
|Current Liabilitites
|54,164
|58,983
|70,273
|99,516
|120,940
|112,765
|127,640
|143,512
|161,357
|181,421
|-
|Unlevered Free Cash Flow
|41,631
|47,699
|55,424
|65,434
|65,433
|103,163
|70,944
|80,367
|90,840
|102,636
|}
{| class="wikitable"
|+
|Assumptions
|
|
|
|
|
|
|
|
|
|
|-
|Fiscal Year
|2018A
|2019A
|2020A
|2021A
|2022A
|2023E
|2024E
|2025E
|2026E
|2027E
|-
|Revenue Growth
|
|9.1%
|4.0%
|10.9%
|25.7%
|12.4%
|12.4%
|12.4%
|12.4%
|12.4%
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|COGS % of Revenue
| -15.8%
| -16.5%
| -16.5%
| -16.8%
| -16.1%
| -16.3%
| -16.3%
| -16.3%
| -16.3%
| -16.3%
|-
|OE% of Revenue
| -12.2%
| -11.2%
| -11.8%
| -12.4%
| -13.0%
| -12.1%
| -12.1%
| -12.1%
| -12.1%
| -12.1%
|-
|SG&A % of Revenue
| -29.8%
| -29.4%
| -29.1%
| -29.2%
| -28.6%
| -29.2%
| -29.2%
| -29.2%
| -29.2%
| -29.2%
|-
|Tax % of EBIT
| -19.0%
| -18.3%
| -20.3%
| -19.3%
| -18.1%
| -19.0%
| -19.0%
| -19.0%
| -19.0%
| -19.0%
|}
{| class="wikitable"
|+
|Net Working Capital (mn)
|
|
|
|
|
|
|
|
|
|
|-
|Fiscal Year
|2018A
|2019A
|2020A
|2021A
|2022A
|2023E
|2024E
|2025E
|2026E
|2027E
|-
|Accounts Receivables
|26,889
|29,152
|32,184
|46,799
|57,505
|52,353
|58,863
|66,183
|74,412
|83,665
|-
|Merchandise Inventory
|16,336
|17,641
|18,536
|19,621
|24,388
|26,015
|30,244
|34,004
|38,233
|42,987
|-
|Other Current Assets 
|204
|188
|2,332
|1,690
|2,727
|1,851
|2,081
|2,340
|2,631
|2,958
|-
|Current Assets (without cash)
|43,429
|46,981
|53,052
|68,110
|84,620
|80,219
|91,188
|102,527
|115,276
|129,610
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Accounts Payable and Accrued Expenses,Current
|25,464
|10,570
|9,630
|12,528
|22,678
|22,335
|25,965
|29,194
|32,824
|36,906
|-
|Financial Liabilities, Current
|2,539
|2,208
|8,824
|15,868
|4,369
|12,986
|14,600
|16,416
|18,457
|20,752
|-
|Provisions, Current
|26,161
|31,120
|34,814
|51,520
|70,287
|57,478
|64,626
|72,662
|81,697
|91,856
|-
|Defferred Liabilities, Current
|0
|0
|0
|0
|0
|0
|0
|0
|0
|0
|-
|Other Current Liabilities
|0
|15,085
|17,005
|19,600
|23,606
|19,966
|22,448
|25,240
|28,378
|31,907
|-
|Current Liabilities
|54,164
|58,983
|70,273
|99,516
|120,940
|112,765
|127,640
|143,512
|161,357
|181,421
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Assumptions 
|
|
|
|
|
|
|
|
|
|
|-
|Fiscal Year
|2018A
|2019A
|2020A
|2021A
|2022A
|2023E
|2024E
|2025E
|2026E
|2027E
|-
|Revenue
|111,831
|122,021
|126,946
|140,800
|176,954
|188,290
|211,703
|238,028
|267,626
|300,905
|-
|COGS
|(17,617)
|(20,088)
|(20,932)
|(23,658)
|(28,448)
|(29,713)
|(34,543)
|(38,839)
|(43,668)
|(49,098)
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Days Sales Outstanding (DSO)
|86.6
|86.0
|91.3
|119.7
|117.0
|100.1
|100.1
|100.1
|100.1
|100.1
|-
|Days Inventory Outstanding (DIO)
|333.8
|316.1
|318.8
|298.6
|308.6
|315.2
|315.2
|315.2
|315.2
|315.2
|-
|Days Payable Outstanding (DPO)
|520.4
|189.4
|165.6
|190.6
|287.0
|270.6
|270.6
|270.6
|270.6
|270.6
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Other Current Assets as a % of Revenue
|0.18%
|0.15%
|1.84%
|1.20%
|1.54%
|0.98%
|0.98%
|0.98%
|0.98%
|0.98%
|-
|Financial Liabilities, Current as a % of Revenue
|2.3%
|1.8%
|7.0%
|11.3%
|2.5%
|6.90%
|6.90%
|6.90%
|6.90%
|6.90%
|-
|Provisions, Current as a % of Revenue
|23.4%
|25.5%
|27.4%
|36.6%
|39.7%
|30.53%
|30.53%
|30.53%
|30.53%
|30.53%
|-
|Defferred Liabilities, Current as a % of Revenue
|0.0%
|0.0%
|0.0%
|0.0%
|0.0%
|0.00%
|0.00%
|0.00%
|0.00%
|0.00%
|-
|Other Current Liabilities as a % of Revenue
|0.0%
|12.4%
|13.4%
|13.9%
|13.3%
|10.60%
|10.60%
|10.60%
|10.60%
|10.60%
|}
{| class="wikitable"
|+
|Fixed Assets Schedule
|
|
|
|
|
|
|
|
|
|
|-
|Fiscal Year
|2018A
|2019A
|2020A
|2021A
|2022A
|2023E
|2024E
|2025E
|2026E
|2027E
|-
|Beginning PP&E
|
|41,891
|50,551
|50,269
|55,362
|66,671
|64,989
|67,732
|70,591
|73,571
|-
|D&A
|3,925
|5,661
|5,753
|6,025
|7,362
|7,431
|2,861
|2,982
|3,108
|3,239
|-
|CapEx
|45,816
|14,321
|5,471
|11,118
|18,671
|5,749
|5,604
|5,841
|6,087
|6,344
|-
|Ending PP&E
|41,891
|50,551
|50,269
|55,362
|66,671
|64,989
|67,732
|70,591
|73,571
|76,676
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Assumptions
|
|
|
|
|
|
|
|
|
|
|-
|Fiscal Year
|2018A
|2019A
|2020A
|2021A
|2022A
|2023E
|2024E
|2025E
|2026E
|2027E
|-
|D&A as a % of Beginning PP&E (to revenue)
|
|4.6%
|4.5%
|4.3%
|4.2%
|4.4%
|4.4%
|4.4%
|4.4%
|4.4%
|-
|CapEx as a % of Beginning PP&E (to revenue)
|
|11.7%
|4.3%
|7.9%
|10.6%
|8.6%
|8.6%
|8.6%
|8.6%
|8.6%
|}
{| class="wikitable"
|+
| colspan="3" |Weighted Average Cost of Capital (WACC)
!
|-
|Market Cap (mn)
|
|352,130
|
|-
|Book value of debtDebt (mn)
|
|25,784
|
|-
|
|
|
|
|-
|Cost of Debt
|
|2.00%
|
|-
|Tax Rate (5 year average)
|
|19.64%
|
|-
|D/(D+E)
|
|6.82%
|
|-
|After Tax Cost of Debt
|
|1.61%
|
|-
|
|
|
|
|-
|Risk Free Rate (10-Yr Treasury Yield)
|
|3.90%
|
|-
| colspan="2" |S&P500 Market Return yearly for last 10 years 2012-2022
|13.79%
|
|-
|Market Risk Premium
|
|9.89%
|
|-
|Beta
|
|0.29
|
|-
|E/(D+E)
|
|93.18%
|
|-
|Cost of Equity
|
|6.77%
|
|-
|
|
|
|
|-
|WACC
|
|6.41%
|
|}
{| class="wikitable"
|+
|Unlevered Free Cash Flow (mn)
|
|
|
|
|
|
|
|
|
|
|-
|Fiscal Year
|1900A
|1900A
|1900A
|1900A
|1900A
|2023E
|2024E
|2025E
|2026E
|2027E
|-
|Unlevered Free Cash Flow
|41,631
|47,699
|55,424
|65,434
|65,433
|103,163
|70,944
|80,367
|90,840
|102,636
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Projection Year
|
|
|
|
|
|1
|2
|3
|4
|5
|-
|Present Value of Free Cash Flow
|
|
|
|
|
|109,780
|80,338
|96,846
|116,488
|140,056
|-
|
|
|
|
|
|
|
|
|
|
|
|-
| colspan="2" |Implied Share Price Calculation
|
|
| colspan="7" |Sensitivity Table
|-
|Sum of PV of FCF (5 year projected Assumption)
|
|543,508
|
|
|
|
|
|
|
|
|-
|Growth Rate
|
|10.40%
|
|
|
| colspan="5" |Growth Rate
|-
|WACC
|
|6.41%
|
|
|198.17
|9.40%
|9.90%
|10.40%
|10.90%
|11.40%
|-
|Terminal Value
|
|2,839,967
|
| rowspan="5" |WACC
|5.41%
|202.96
|225.00
|225.00
|202.96
|172.13
|-
|PV of Terminal Value
|
|2,081,179
|
|5.91%
|188.01
|205.47
|205.47
|188.01
|162.63
|-
|Enterprise Value
|
|2,624,687
|
|6.41%
|188.01
|205.47
|205.47
|188.01
|162.63
|-
|(+) Cash
|
|23,574
|
|6.91%
|202.96
|225.00
|225.00
|202.96
|172.13
|-
|(-) Debt
|
|25,784
|
|7.41%
|247.71
|287.40
|287.40
|247.71
|198.17
|-
|(-) Minority Interest
|
| -61,129
|
|
|
|
|
|
|
|
|-
|Equity Value
|
|2,683,606
|
|
|
|
|
|
|
|
|-
|Diluted Shares Outstanding (mm)
|
|2257.00
|
|
|
|
|
|
|
|
|-
|Implied Share Price
|
|198.17
|
|
|
|
|
|
|
|
|-
|Current Price
|
|156.6
|
|
|
|
|
|
|
|
|-
|Upside
|
|26.54%
|
|
|
|
|
|
|
|
|-
|Valuation
|
|TRUE
|
|
|
|
|
|
|
|
|}
The result of base case of the DCF valuation indicating the implied shared price is 168.30, comparing to the current price, it has a 7.47% increase margin, where the growth rate and the WACC is 10.40% and 6.41% respectively. The Beta is 0.29, which indicating that it is less correlated to the S&P market, which is a typical number for medical companies on medicine that is not focusing on technologies such as medical devices and robotics.

For the bull case and bear case, it has a 26.54% increase and -5.09% decrease respectively. In these 2 cases, a different approach has been applied by comparing the earnings using EBITDA and free cash flow equity. The 3-year EBITDA Growth Rate per share is 13.9, which is above the median of the range over the past 10 years of 13.2, and also 59% higher than other companies in the biotechnology industry. The 3-year revenue growth rate per share is 14.9, which is also higher than the median of the range over the past 10 years of 10.1, and it is 61.1% better than other companies in the Biotechnology industry. Furthermore, the 3-year Book Growth rate per share is 15.6, which is almost at the highest value of the range over the past 10 years of 18.4. Finally, the 3-year FCF Growth rate is 23.6 which is stronger than 73% of the companies in the Biotechnology industry.

====== '''Assumption:''' ======

# The growth rate is obtained using the difference between the terminal value in the next 5 years comparing to the actual value in the past 5 years.
# WACC: Risk free rate taking the current 10 year treasury yield rate at 3.90%, S&P500 market return for the last 10 years from 2012-2022 of 13.79%.
# Base case: constant average of numbers in the past 5 years. The logic behind is that NVO is company focusing on medicine, which has a strong economic moat in the industry and a usually parking of money during a bear market according to the Dow's theory.