3i Group (AO) | Reduce | 3i's FY 2025/26: Action guidance looks increasingly stretched

研报英文原文证据摘录

3i Group (AO) | Reduce | 3i's FY 2025/26: Action guidance looks increasingly stretched

3i Group Reduce | Target Price: 1950p

Company description Management

3i is an investment company with complementary private equity and David Hutchison, Chairman

infrastructure business segments. Investments are made with capital from the Simon Borrows, CEO

group’s own balance sheet and/or from funds which the group manages for third James Hatchley, CFO

parties. The PE portfolio (focusing on mid-markets) makes up much of the Key shareholders

group's NAV, while the top 20 portfolio assets account for over 90%. The top Free float 100.00%

holding, EU discount retailer Action, accounts for more than 70% of NAV and has Blackrock 8.47%

thus been instrumental in 3i's growth story. Capital Group 6.66% FMR 4.96%

Investment case Valuation methodology

3i's clear investment strategy has led to consistent NAV growth We use an SOP valuation, which includes a DCF model (8.3%

over the last decade, notably delivering c. 25% ROE over the WACC) for Action, and to which we apply a fair value holding

period from a virtually ungeared balance sheet. discount of 10%.

Action's outperformance has led it to represent over 70% of 3i's Risks to our rating

portfolio, with net sales CAGR of 22% between 2014 and 2024 (+/-) EUR/GBP currency volatility given 3i Group and Action

and an average LFL growth of 8.5%, while raising its operating currency mismatch.

EBITDA to 15.1%. (+) Timing and scale of a potential US expansion plan.

Implicit valuation assigned by market to Action has risen (+) Evidence of recovery in the French market.

substantially, while we believe that the company its past its

peak in net sales LFL growth and relative pace of store openings.

Catalysts

Stalling LFL growth publications.