We value Amundi on a DCF valuation approach while also factoring in a price/earnings valuation approach. These two approaches together result in a fair value of EUR75.6, which we set as our target price. For the DCF, we explicitly forecast net profit out to 2028E and use these as a proxy for cashflow. We extend these out for a further 7 years at 3.5% pa whilst also applying a profit margin decline (c.2% pa) to reflect the increasing maturity of the business. We then assume growth in cashflows into perpetuity at 3% pa long-term growth rate, again at declining margins. We discount cashflows at c.12-12.5% cost of equity and then add on the value of surplus capital as well as the market value of Amundi's stake in Victory Capital, albeit net of a 10% discount (for conservatism). We consider a P/E valuation suitable for asset managers gatherers like Amundi, which has historically traded in a 10-13x range (excl. surplus capital). We use a multiple below this range, given both multiple contraction (industry pressures), concerns over long-term sustainability of the business model, and higher discount rates.

The main risks to the achievement of our investment case and target price include: 1) The loss of assets currently managed for Société Générale. SocGen sold its entire 20% stake in Amundi at the IPO, so there is some risk that revenues on assets distributed by SocGen are not sustainable in the longer term. Near term, retail banking assets are covered by a five-year “quasi-exclusivity” contract (excludes passive funds, ETFs and private bank clients), and the insurance assets are covered by a long-term mandate. The contract applies for a five-year term following the IPO completion date. Amundi believes the quality of service it offers, and the performance of its fund products, should mean SocGen renews the contract.  2) Execution risks. Both of the Pioneer transactions, including the risk of achieving the targeted revenue and cost synergies, and of anticipated further M&A.  3) Risks to AUM growth owing to market conditions. Weaker markets, investor sentiment, political risk, or longer term, changes in the European fund distribution model under MiFID 2.  4) Volatile growth in retail flows, due to macro concerns, performance issues, or more attractive competing products.  5) More or less fee margin decline than we anticipate – due to mix of lower margin areas (e.g. money market) or competitive pressure.  6) Uncertain regulatory cost and/or capital burden – due to changes in regulatory requirements, or changes in seeding / other more capital-intensive activities by Amundi.