We use a blended approach to value AGL. This comprises 1/3 DCF to reflect the high capex needed to replace coal capacity, 1/3 EV/EBITDA (NTM) and 1/3 P/E (NTM). Our blended valuation is $11.48/sh which we round to $11.50/sh.

For the DCF component, we assume a risk-free rate of 4%, Beta of 0.4, expected market risk premium of 7%. This give a cost of equity of 6.8%. We assume a LT debt to EV of 20%, 8% cost of debt and a effective tax rate of 30%. This gives a WACC of 6.6%. The DCF component is $7.61/sh.

We apply a 6x EV/EBITDA (NTM) and a 12x P/E (NTM) which are below AGL's LT averages. The EV/EVITDA and P/E valuation is $15.36/sh and $11.46/sh, respectively.

Risks to our investment thesis and target price include the following: AGL faces key risks from aging thermal assets, where unplanned outages could significantly impact earnings, and delays or cost overruns in growth project development that could challenge its energy transition goals. Additional risks include regulatory uncertainty, rising retail competition squeezing margins, potential future government scrutiny over BESS returns, and strategic uncertainty following the departure of a key executive.