Equity valuation of Lufthansa AG

: is Lufthansa trading at a fair value?

Abstract

The purpose of this thesis is determining a target price for the shares of Lufthansa AG, a German airliner, and subsequently to provide an investment recommendation, based on the current stock price and the target price. The stock has performed well since the recovery of the Corona crisis, reaching a share price of EUR 10.57 in March 2023, and thereby approaching the pre-pandemic era stock price. This raises the question whether the stock is trading at a fair value, given the current economic environment. The valuation methods presented are, the discounted cash-flow method, comparable company analysis, and precedent transaction analysis. Three alternative scenarios: an upside, downside and base case, were constructed within the DCF. The model has established assumptions for each scenario that best reflect the current economic and geopolitical situation, taking into account relevant factors such as: volatile oil and gas prices, persistent inflation, tight labor markets and environmental regulations. The resulting investment recommendation is identified as a Strong Buy, with a target price of EUR 14.22, representing a substantial premium of 77% in comparison to the stock price observed on December 27th, which stood at EUR 8.01.

Date of Award	25 Jun 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Bruna Brunella (Supervisor)