Carrefour SA: Equity Research

Abstract: With a multi-format and omni-channel network, Carrefour is one of the world’s eadingl food retailers. This research report commences with some basic information about Carrefour, giving a presentation of business description and corporate governance. Next, an overview of the industry dynamics is described, including some discussion of the key drivers of revenues and costs, as well as supply and demand. Also, the competitive intensity of the industry is analysed through SWOT analysis and Porter’s Five Forces analysis. For the valuation part, the consolidated financials of the company were used. The time period used for the valuation is from 2016 to 2021, and the forecast period considered is from 2022 to 2027. To carry out a valuation for Carrefour, both absolute and relative valuation methods were considered. The absolute valuation method takes the form of discounted cash flow models to derive the intrinsic value of an asset. In this regard, a 2023YE price target of €21.11 per share with 25.04% upside compared to the closing price on June 30, 2022 is obtained using the WACC method. For the relative valuation method, a relative value of Carrefour shares is estimated based on a number of different metrics, which include EV/EBITDA, EV/Sales, P/S ratio and P/E ratio. Finally, the risks to the target price are also assessed through risk map, sensitivity analysis and Monte Carlo simulation. Carrefour’s long-term transformation plan is generating results through improved cash flows, going forward further cost savings and digital investments are expected to help support top lines and profitability. Carrefour’s investment recommendation is therefore BUY with medium risk.