EQT AB (EQTAB.ST): Adding Downside 30-Day Catalyst Watch

Research evidence excerpt

EQT AB (EQTAB.ST): Adding Downside 30-Day Catalyst Watch

r ongoing operations. We discount cash flows using WACCs of c10.5% for FRE and c15% for PRE

(consistent with peers) and apply a 4.1% terminal growth rate for both. This results in a fair value of cSEK315.<br><br>For the

P/E valuation, EQT has historically traded within a 15-31x range for 2-year forward earnings or on 23x excl. 2021. We use a

multiple below the mid-point of the range; while EQT's multiples were previously overstated, in our view, equally we believe

that the business is better quality vs the past, while the recent acquisition of Coller and improving dynamics in Real Assets

should support an attractive growth trajectory. This results in a fair value of cSEK315.

Risks

We highlight the following risks to achievement of our target price.<br>1. Underperformance of funds. With funds in more

mature strategies having reached significant scale, carried interest will account for an increasing part within the Group’s

earnings mix. Underperformance of funds would impact future potential for carried interest generation.<br>2. Lower than

expected fundraises. We note ambitious fundraising expectations for EQT. Whilst overall the market remains supportive of

these ambitions, lower than expected fundraises would immediately impact the Group’s topline and future potential for

carried interest.<br>3. Failure to improve operating margins. EQT has grown its cost base to support future growth. The

Group’s EBITDA margin target implies strong margin accretion. <br>4. Timing of fundraises. EQT, in comparison to the

other European alternative asset managers, raises fewer funds at larger scale. The increased product concentration bears the