Equity Research Sonae SGPS SA: The Retail Market in the Aftermath of the Covid-19 Pandemic

In an early beginning, this report has been developed as an Equity Research on Sonae SGPS, SA (SON). This report follows the standard rules of the CFA Institute Research Challenge and for its production we have gathered public information up to January 15th. This document has been awarded with the 2nd place Portugal level. This report also includes an additional chapter aimed to explore how the Covid-19 pandemic tailored the consumption habits of the Portuguese population. In particular, it is assessed whether changing consumption habits might trigger an acquisition of Dia by Auchan Retail Group Portugal. The consequences on SON from such a scenario are also analysed. SON is a Portuguese conglomerate that is present around the globe through its eight business units operating in five different industries: retail, telecommunications, real estate, financial services, and investment management. The company was valued through a sum-of-the-parts approach, using mostly a discounted cash flow approach per business unit. All in all, we ended up with a final SON’s price target of €1.25/sh, which implies a buy recommendation with an upside potential of 75% from the January 14th closing price of 71 cents, with a medium to low risk. As for robustness, a DDM approach, the APV method and a relative valuation was performed to assess SON equity value, which all corroborate the buy recommendation on SON.