General Mills Valuation - Irvan Anggriawan.pdf

GIS Valuation for UBS stock pitch competition by Irvan Anggriawan.

1. IRVAN ANGGRIAWAN
Boston University – MBA Candidate
as per January 11
th
2025
STOCK PITCH COMPETITION 2025

2. Agenda
❖Introduction
❖Macroeconomic Context
❖Industry Overview
❖Company Analysis
❖Valuation & Sensitivity Analysis
❖Recommendation & Risk Factor
Agenda
Irvan Anggriawan – UBS Stock Pitch Competition 2025

3. Factor Analysis
Political
Geopolitical uncertainty, new government affecting
trade policies: subsidies, import/export tariffs.
Economic
Commodity price volatility.
Global economic slowdown and inflations impacting
demand and buying power.
Social
Consumer preferences shift towards organic, healthy,
and plant-based foods. Humanization of pet food.
Technological
AI, automation, e-commerce expansion, and R&D in
food innovation.
Legal
Strict food industry regulations, different in each
country / region.
Environmental
Rising ESG initiatives pressure, Climate change risks,
water conservation efforts, sustainable packaging,
responsible supply chain, and carbon footprint
reduction.
Risk of higher raw
material cost
Price pressure
Higher cost of
capital.
Core product
(cereal) market
shrinking.
Distribution
channel shifting
Rising ESG-
related expense.
PESTLE Analysis
Macroeconomic Context
Potential Impact
Irvan Anggriawan – UBS Stock Pitch Competition 2025

4. Packaged food industry is the business of preparing and
selling foods and drinks in containers like boxes, cans,
bottles, jars, and bags.
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Market Capitalization
(US Based Company)
Ratio Current
ROA (%) 6.47
ROE (%) 13.31
Gross Margin (%) 28.58
Net Margin (%)
DAR (%) 37.25
DER (%) 141.98
FCF to Debt (x) 0.41
Inventory turnover (x) 5.50
Days in inventory (days) 72.05
P/E Ratio (x) 18.35
Trends:
●Fairly consistent sales growth, projected to grow at a
CAGR of 7.43% during 2025-2030.
●Consumer preference shifting to a healthy, low-calorie,
free of artificial additives, and high in protein products.
Plant-based Packaged Food are growing.
●Asia-Pacific is the fastest growing market.
●For the majority of categories across the packaged food
landscape, especially categories that are consumed more
regularly, like breakfast cereal, savory and sweet snacks,
and fruits and vegetables, demand tends to be relatively
inelastic.
●Intangible asset (brand equity) is one of the most important
competitive advantage, firms need strong marketing
programs to bolster growth, increase brand awareness, and
tout the benefits of the products.
Top 20 US packaged food company (Bloomberg)
Industry Overview
Irvan Anggriawan – UBS Stock Pitch Competition 2025

5. Competition
from Rivals
Potential of New
Entrants
Supplier Power
Threat of
Substitutes
Customer Power
Intense competition from Nestlé, Kraft Heinz, and
Mondelez; innovation and branding are critical.
Highly regulated industry, capital requirement, and
distribution channel create high barrier to entry.
But private label & niche brands pose threats.
Vulnerability to commodity price fluctuations and
sustainability pressures.
Consumer preferences shift towards fresh food,
private labels, and meal kits impacts traditional
packaged goods.
Large retailers like Walmart & Amazon dictate
pricing and demand lower costs.
Low Moderate High
Industry Competitive Landscape
Irvan Anggriawan – UBS Stock Pitch Competition 2025

6. General Mills (NYSE: GIS) is a global leader in the
production and marketing of branded consumer
foods. It operates across six continents, offering a
diverse range of food products under more than 100
brands in 100 countries.
The company operates in four segments: North
American retail; International; Pet; and North
American Food service.
Company Overview
Irvan Anggriawan – UBS Stock Pitch Competition 2025

7. Solid management and good governance practice
❖Experienced board with diverse industry backgrounds and
diverse expertise in consumer goods, finance, retail, and digital
transformation.
❖Independent Board Composition: 12 Directors, including 11
independent members.
❖Proactive governance policies enhancing shareholder interest.
❖ESG-focused initiatives aligning with global sustainability goals.
Company Analysis
Irvan Anggriawan – UBS Stock Pitch Competition 2025

8. Key Audit Observations
❖No material weaknesses in internal controls.
❖No restatements or fraud concerns.
❖SOX compliance confirmed (Sarbanes-Oxley Act
ensures strong internal controls).
Auditor opinion for General Mills FY 2024
financial report is unqualified (fair opinion),
meaning no significant issues, concluding
that the statements are presented fairly
and accurately, without any material
misstatements
Critical Audit Matters
•Valuation of goodwill ($14.75B) and brand
intangible assets balances ($6.73B).
The impairment tests for these assets indicate
that impairment may have occurred, which
require the Company to estimate the fair value
of the reporting units.
•Inventory valued by using LIFO (59.79%) and
FIFO (40.21%).
Company Analysis
Irvan Anggriawan – UBS Stock Pitch Competition 2025

9. Profitability Ratio2020 2021 2022 2023 2024 Peers*
ROA 7.08% 7.35% 8.71% 8.25% 7.93% 6.47%
ROE 24.52% 22.55% 25.10% 24.24% 25.88% 13.31%
GPM 34.78% 35.57% 33.71% 32.58% 34.91% 28.58%
Liquidity Ratio 2020 2021 2022 2023 2024 Peers*
Current ratio 68.36% 69.62% 63.46% 68.69% 65.13% N/A
Quick ratio 43.96% 38.03% 28.20% 30.11% 30.06% 80%
Solvency Ratio 2020 2021 2022 2023 2024 Peers*
DAR 71.13% 67.41% 65.30% 65.98% 69.34% 37.25%
DER 2.46 2.07 1.88 1.94 2.26 1.42
ICR 5.57 6.80 8.46 8.22 6.32 N/A
FCF to Total Debt117.21 125.83 136.57 154.48 139.86 408.76
Market Value Ratio2020 2021 2022 2023 2024 Peers*
P/E Ratio 15.05 14.62 14.32 18.13 15.41 18.35
EPS 3.59 3.81 4.46 4.36 4.34 N/A
Efficiency ratio 2020 2021 2022 2023 2024 Peers*
Inventory turnoverN/A 7.19 6.83 6.71 6.35 5.50
Days in inventory N/A 50.74 53.45 54.41 57.47 72.05
Financial Distress2020 2021 2022 2023 2024 Peers*
Altman Z-Score 1.80 1.89 2.09 2.14 2.14 N/A
Key intake from Financial
Performance:
❖High profitability compared to
peers*
❖Stable EPS
❖Lower P/E ratio (14–18x)
compared to peers (18.86x),
relatively underprice.
❖Efficient inventory turnover
❖Low to moderate risk of
bankruptcy
❖High debt ratio
❖Declining liquidity ratio
*) Average of top 20 US packaged food company (Bloomberg)
Company Analysis
Irvan Anggriawan – UBS Stock Pitch Competition 2025

10. Strategic
Decision
●Shrinking core product market
●Strict and complex food regulations,
different in each country
●Rising competition from private label
●Price Volatility of Raw Material
Commodities
●Highly leveraged
●Potential short-term slowing performance
●Broad Products Portfolio
●Strong brand equity
●Strong retailers / distribution partnership
●Strong financial performance
●Portfolio reshaping, focused on market trend,
health and wellness product
●Long-term growth focus
●Strong leadership & corporate governance
Key Strength Key Risk
Focus on growing
and high margin
business segment
(Pet Food)
Divesture of low
profit business
segment
(Yogurt Business)
Stock Repurchase
$2.1B
Cost efficiency
initiatives
Sustainable
Success
Company Analysis
Irvan Anggriawan – UBS Stock Pitch Competition 2025

11. Parameter Source / Assumption Value
Market Risk Premium Bloomberg US stock market risk premium data (Jan 11, 2025) 5.40%
Risk Free Rate 10-year treasury US bond (Jan 11, 2025) 4.66%
Tax Rate 10-K – Federal Statutory Income Tax (Jan 11, 2025) 35.00%
Cost of Debt Bloomberg GIS Cost of Debt data (Jan 11, 2025) 5.26%
Common Equity Beta Bloomberg GIS Equity Beta data (Jan 11, 2025) 0.23
Cost of Equity Bloomberg GIS Cost of Equity data (Jan 11, 2025) 5.90%
Cost of Capital Parameter
Financial Projections Source / Assumption 2024 2025 2026 (Terminal)
Sales Growth Rate CAGR 2020-2024 2.53% 2.53% 2.00%
NOPAT / Sales Average 2020-2024 14.35% 14.35% 14.35%
Beg. Net Working Capital / Sales Average 2020-2024 -6.28% -6.28%
Beg. Net Long-Term Assets / Sales Average 2020-2024 115.91% 115.91%
Net Debt / Book Value of Net Capital Average 2020-2024 57.11% 54.05% 54.05%
Preferred Equity / Book Value of Net CapitalAverage 2020-2024 0.00% 0.00% 0.00%
Shareholders' Equity / Book Value of Net
Capital
= 1 – (Net Debt / Book Value
of Net Capital)
42.89% 45.95% 45.95%
Financial Projection Parameter
Irvan Anggriawan – UBS Stock Pitch Competition 2025
Key Assumptions

12. Accounts Historical
31 May 2020 30 May 2021 29 May 2022 28 May 2023 26 May 2024
ASSETS
Cash and Marketable Securities 1,677.80 1,505.20 569.40 585.50 418.00
+Accounts Receivable 1,615.10 1,638.50 1,692.10 1,683.20 1,696.20
+Inventory 1,426.30 1,820.50 1,867.30 2,172.00 1,898.20
+Other Current Assets 402.10 790.30 961.00 735.70 568.50
=Total Current Assets 5,121.30 5,754.50 5,089.80 5,176.40 4,580.90
Long-Term Tangible Assets 3,580.60 3,606.80 3,393.80 3,636.20 3,863.90
+Long-Term Intangible Assets 21,019.00 21,213.00 21,378.40 21,478.80 21,730.60
+Other Long-Term Assets 1,085.80 1,267.60 1,228.10 1,160.30 1,294.50
=Total Long-Term Assets 25,685.40 26,087.40 26,000.30 26,275.30 26,889.00
TOTAL ASSETS 30,806.70 31,841.90 31,090.10 31,451.70 31,469.90
LIABILITIES
Accounts Payable 3,247.70 3,653.50 3,982.30 4,194.20 3,987.80
+Short-Term Debt 2,610.50 2,825.10 2,485.60 1,740.80 1,625.90
+Other Current Liabilities 1,633.30 1,787.20 1,552.00 1,600.70 1,419.40
=Total Current Liabilities 7,491.50 8,265.80 8,019.90 7,535.70 7,033.10
Long Term Debt 10,929.00 9,786.90 9,134.80 9,965.10 11,304.20
+Deferred Taxes 1,947.10 2,118.40 2,218.30 2,110.90 2,200.60
+Other Long-Term Liabilities 1,545.00 1,292.70 929.10 1,140.00 1,283.50
=Total Long-Term Liabilities 14,421.10 13,198.00 12,282.20 13,216.00 14,788.30
TOTAL LIABILITIES 21,912.60 21,463.80 20,302.10 20,751.70 21,821.40
Minority Interest 291.00 302.80 245.60 250.40 251.80
EQUITIES
Preferred Stock 0.00 0.00 0.00 0.00 0.00
+Common Shareholder's Equity 8,603.10 10,075.30 10,542.40 10,449.60 9,396.70
=Total Shareholder's Equity 8,894.10 10,378.10 10,788.00 10,700.00 9,648.50
TOTAL LIABILITIES & EQUITY 30,806.70 31,841.90 31,090.10 31,451.70 31,469.90
Irvan Anggriawan – UBS Stock Pitch Competition 2025
Valuation

13. Accounts 31 May 2020 30 May 2021 29 May 2022 28 May 2023 26 May 2024
Sales 17,626.60 18,127.00 18,992.80 20,094.20 19,857.20
Cost of Goods Sold 11,496.70 11,678.70 12,590.60 13,548.40 12,925.10
Gross Profit 6,129.90 6,448.30 6,402.20 6,545.80 6,932.10
SG&A 3,176.00 3,303.50 2,926.40 3,112.00 3,500.40
Other Operating Expenses
Operating Income 2,953.90 3,144.80 3,475.80 3,433.80 3,431.70
Investment Income
Other Income, net of Other Expense 0.00 0.00 0.00 0.00 0.00
Other Income
Other Expense
Net Interest Expense (Income) 466.50 420.30 379.60 382.10 479.20
Interest Income 0.00 0.00 0.00 0.00 0.00
Interest Expense 466.50 420.30 379.60 382.10 479.20
Minority Interest 29.60 6.20 27.70 15.70 22.00
Pretax Income 2,457.80 2,718.30 3,068.50 3,036.00 2,930.50
Tax Expense 480.50 629.10 586.30 612.20 594.50
Unusual Gains, Net of Unusual Losses 112.80 132.90 113.40 88.80 75.80
Net Income 2,090.10 2,222.10 2,595.60 2,512.60 2,411.80
Preferred Dividends 0.00 0.00 0.00 0.00 0.00
Net Income to Common 2,090.10 2,222.10 2,595.60 2,512.60 2,411.80
31 May 2020 30 May 2021 29 May 2022 28 May 2023 26 May 2024
Net operating margin 14.04% 15.28% 14.02% 14.07%
* Operating asset turnover 0.89 0.90 0.93 0.92
= Operating Return on Beginning Assets 12.44% 13.70% 13.05% 12.95%
+ Spread 10% 11% 10% 10%
* Net financial leverage 1.38 1.10 1.05 1.06
= Financial gain (loss) from leverage 13.39% 12.06% 10.78% 10.13%
= Return on Beginning Equity 25.83% 25.76% 23.83% 23.08%
Irvan Anggriawan – UBS Stock Pitch Competition 2025
Valuation

14. PRO-FORMA BALANCE SHEET HISTORICAL FORECAST TERMINAL
31 May 2020 30 May 2021 29 May 2022 28 May 2023 26 May 2024May 2025May 2026 May 2027
Beginning Net Working Capital -1438 -1191 -1014 -1204 -1244 -1312 -1338 -1365
+Beginning Net Long-term Assets 21902 22374 22607 22774 23153 24196 24680 25173
=Beginning Net Operating Assets 20465 21182 21593 21570 21909 22884 23342 23809
Net Debt 11862 11107 11051 11120 12512 12368 12616 12868
+Preferred Stock 0 0 0 0 0 0 0 0
+Shareholder's Equity 8603 10075 10542 10450 9397 10516 10726 10941
=Net Capital 20465 21182 21593 21570 21909 22884 23342 23809
PRO-FORMA INCOME STATEMENT HISTORICAL FORECAST TERMINAL
31 May 2020 30 May 2021 29 May 2022 28 May 2023 26 May 2024May 2025May 2026 May 2027
Sales 18127 18993 20094 19857 20360 20875 21293 21718
NOPAT (Net Operating Profits After Tax) 2545 2903 2818 2794 2922 2996 3056
-Net Interest Expenses After Tax 323 307 305 382 428 423 431
=Net Income 2222 2596 2513 2412 2495 2573 2625
-Preferred dividends 0 0 0 0 0 0 0
=Net Income to Common 2222 2596 2513 2412 2495 2573 2625
PARAMETER HISTORICAL FORECAST TERMINAL
31 May 202030 May 202129 May 2022 28 May 2023 26 May 2024May 2025May 2026 May 2027
Sales Growth 4.78% 5.80% -1.18% 2.53% 2.53% 2.00%
NOPAT / Sales 14.04% 15.28% 14.02% 14.07% 14.35% 14.35% 14.35%
Beg. Net Working Capital / Sales -7.93% -6.27% -5.05% -6.06% -6.11% -6.28% -6.28%
Beg. Net Operating Long Term Assets / Sales 120.83% 117.80% 112.51% 114.69%113.72%115.91% 115.91%
Net Debt / Book Value of Net Capital 57.96% 52.43% 51.18% 51.55% 57.11% 54.05% 54.05%
Preferred Equity / Book Value of Net Capital 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Shareholders' Equity / Book Value of Net Capital 42.04% 47.57% 48.82% 48.45% 42.89% 45.95% 45.95%
Irvan Anggriawan – UBS Stock Pitch Competition 2025
Valuation

15. RESIDUAL INCOME VALUATION FORECAST TERMINAL
2025 2026 2027
Return on Equity ratio 26.55% 24.47% 24.47%
Cost of Common Equity 5.90% 5.90% 5.90%
Net Income to Common 2,495 2,573 2,625
- Charge for Common Equity 555 621 633
= Residual Income 1,940 1,953 1,992
Present Value of Residual Income 1,832 1,741
Present Value of Terminal Earnings 51,048
Beg. Book Value of Equity 9,649
+ PV of Residual Income (forecasted years 1-2) 3,573
+ PV of Residual Income (terminal value, beginning year 3) 45,517
= Estimated Value of Equity ($B) 58,739
= Number of Shares Outstanding (MM) 755
Estimated Value Per Share ($) 77.84
*) % of valuation in terminal value = 77%
Irvan Anggriawan – UBS Stock Pitch Competition 2025
Valuation – Residual Income

16. FCFE VALUATION FORECAST TERMINAL
May 2025 May 2026 May 2027
+ NOPAT * 2,922.40 2,996.36 3,056.29
- Reinvestment 975.22 457.68 466.83
- Net interest expense after tax 427.79 422.87 431.33
+ Increase in debt -143.79 247.37 252.31
= FCFE 1,375.59 2,363.18 2,410.44
Estimated Value of Equity per May 2025 58,486.89 60,563.20 61,774.46
Estimated Net Debt per May 2025 12,512.10 12,368.31 12,615.67
Estimated Value of Firm per May 2025 70,998.99 72,931.50 74,390.13
Equity value / Firm value 82.38% 83.04% 83.04%
Number of Shares Outstanding (MM) 755
Estimated Value Per Share 77.51
*) NOPAT = Net Operating Profit After Tax, represents a company's theoretical income from operations if it had no debt (no interest
expense)
**) FCFE = Free cash flow to equity, represents how much cash a company can distribute to its shareholders after paying all expenses,
debt, and reinvestments
Irvan Anggriawan – UBS Stock Pitch Competition 2025
Valuation – FCFE

17. Valuation Conclusion & Sensitivity Analysis
Based on Residual Income valuation and FCFE valuation, the estimated fair price for GIS
share price around $77.51 to $77.84.
Using Residual Income Valuation, based on the sensitivity analysis, the share price most likely
will fluctuate around $56.44 to $118.72.
Terminal growth rate
77.84 1.0% 1.5% 2.0% 2.5% 3.0%
Cost of
equity
4.0% 106.93 125.22 152.65 198.37 289.81
5.0% 79.95 89.18 101.49 118.72 144.56
5.9% 65.07 70.73 77.84 87.05 99.42
7.0% 52.99 56.44 60.57 65.63 71.95
8.0% 45.29 47.63 50.35 53.57 57.44
Irvan Anggriawan – UBS Stock Pitch Competition 2025

18. Recommendation
Key strengths:
★Strong brand equity and retailer network
★Broad products portfolio
★Portfolio reshaping to Healthy / organic products and pet
food segments
★Solid management team & corporate governance
Key risks:
❖Macroeconomic and Geopolitical uncertainty
❖Highly competitive industry
❖Shrinking core business market
❖Commodity price volatility
❖Global supply chain challenges
❖Strict food regulation
Other Consideration:
★General Mills strategic decision to reshaping its portfolio to
align with market trends and long-term growth will create
short-term financial underperformance, but once
implemented successfully will give long-term competitive
advantages and drive the share price.
★Proceed from Yoplait (Yogurt Segment) sales of $2.1B, to
be completed in 2025, will be used for stock repurchase,
which theoretically will increase the share price.
Low TP
$56.44
Target Price
$77.84
High TP
$118.72
Current Price
$58.50
BUY
Target Price
$77.84
*) as per January 11
th
2025
Irvan Anggriawan – UBS Stock Pitch Competition 2025

19. Reference
Irvan Anggriawan – UBS Stock Pitch Competition 2025
•General Mills Annual Report 2019 – 2024
•General Mills Notice of 2024 Annual Meeting and Proxy Statement
•General Mills presentation to the Consumer Analyst Group of New York
•https://www.mordorintelligence.com/industry-reports/packaged-food-market
•https://www.morningstar.com/lp/packaged-food-industry-landscape
•Bloomberg terminal
•Yahoo! finance

20. Q & A
Irvan Anggriawan – UBS Stock Pitch Competition 2025