DWS: Model update

Research evidence excerpt

DWS: Model update

DWS Group GmbH & Co. KGaA

Target/Upside/Downside Scenarios Investment summary

We have an Outperform rating and a €68 price target for DWS.DWS Group GmbH & Co. KGaA

75 125 Weeks 30DEC23 - 21MAY26 Net flow resilience. An improving share of the passive / ETF

70 TARGETTARGET 68.0068.00 market and a return to inflows for alternatives generates

60 CURRENTCURRENT 61.0561.05 industry-leading net flows for DWS (c. 4-5% of opening AUM

55 over FY25E-27E). Alternatives net flows are supported by a

45 slowdown in real estate redemptions, fundraising for its latest

40 vintage of its infra fund and first EU CLO launch.

25 Self-help strategy to improve efficiency. At its 2022 CMD,

3m we believe the new CEO set out an overall sensible self-

2m 1m help strategy for DWS to continue its transition to an

2024 2025 2026 independent standalone AM business. Cost discipline has now

J F M A M J J A S O N D J F M A M J J A S O N D J F M

A M been evidenced, and we expect DWS to be able to achieve its DWS GR Rel. MSCI EUROPEAN INDEX MA 40 weeks

Source: Bloomberg and RBC Capital Markets estimates for Target efficiency targets to FY27.

Valuation Valuation attractive. While there have been severalWe value DWS shares at €68, using a DCF approach to challenges (IT transformation scope creep, alternatives net

value the asset management operations, in addition to our flows), we believe the company continues to improve; we see

expectation of surplus capital at the financial year-end. We scope for re-rating. DWS shares trade on a 12m fwd P/E of

apply a discount rate of 13% pa, reflecting our view of the c11x, broadly in line with the peer group where we believe a

relative risk of DWS’s business model. We use a long-term premium is justified given its superior growth.