Icelandair Group hf. – Valuation as of 1 Jan 2025

Key assumptions

• Operating revenue is projected to grow by 7–8% annually in 2025–2026, and by 6% per year from 2027 onwards throughout the forecast period.
• Operating profit (EBIT) is estimated at 2.5% in 2025, increasing to 5% in 2027 and remaining at that level for the rest of the forecast period.
• Depreciation of operating assets, right-of-use assets, and intangible assets (excluding goodwill) averages 16% per year during the forecast period.
• The average cost of interest-bearing debt is assumed at 6.5% per year during the forecast period, with financing primarily in USD.
• The return on the book value of equity holdings in associates is projected at 12% per year during the forecast period.
• Income tax is assumed to be 20% per year during the forecast period and is calculated on profit excluding the share of results from associates.
• Capital expenditure on operating assets, right-of-use assets, and intangible assets (excluding goodwill) follows income growth and corresponds to an average annual investment level of 13.7% of operating income.
• The company is assumed to begin paying dividends amounting to 30% of the owners’ total comprehensive income from the previous year, starting in 2031 and continuing thereafter.
• Taking into account the assumed dividend payments, the equity ratio increases from 16% at year-end 2024 to 28% at year-end 2034.
• The terminal growth rate at the end of the forecast period is 5%, equivalent to 2% real growth.
• See other general assumptions under “Valuation”.
• A nominal required return on equity of 10% is assumed when discounting the forecasted results for 2025–2034.

Results

• Based on the above assumptions, the estimated share value is ISK 1.80 as of 1 January 2025 (USD 1 = ISK 138).