Overview
Final case for the Advanced Corporate Finance course. Simulating Deutsche Bank’s role as investment bank, we valued Douglas AG, Europe’s leading omnichannel beauty retailer, at its March 2024 IPO and assessed the €26-30 offering range.
The project was delivered as a slide deck covering key assumptions, cost of capital, DCF, APV and multiples valuation, with a final investment recommendation, backed by an Excel model with all the computations.
Key Tasks
- Built the operating forecast to FY2029: decelerating sales growth, EBITDA margin expanding from 17.7% to 20.0%, capex normalising from ~3.5% to ~3.3% of sales, and terminal growth of 2.0%
- Estimated WACC under two betas: the prospectus beta and a risk-adjusted Damodaran sector beta (Retail, Special Lines, Europe)
- DCF valuation with sensitivity on long-term growth and EBIT margin
- APV valuation as a cross-check, separating operating value from tax shields
- Multiples valuation on beauty and retail peers (EV/EBITDA, EV/EBIT)
Core Insights
Risk-adjusted WACC of 11.91% (vs 9.63% with the prospectus beta) brings the DCF value down from €45.51 to €30.82 per share
DCF, APV (€34.00) and EV/EBITDA multiples (8.34x peer median, €31.38) converge on a fair value range of €30-34 per share
Valuation is highly sensitive to long-term growth: a constant-growth DCF gives €37.49 vs €30.82, as the terminal value drives most of the firm value
Recommendation: Buy. At the €26 IPO price the margin of safety is up to ~31%, while the €30 upper bound leaves limited protection