Our SEK 450/share target price is based on our DCF and implied EV/EBITA against Alfa’s growth and ROCE. Our DCF is assuming: 1) >4 mid-term growth; 2) 3% terminal growth; 3) 17% through-the-cycle EBITA margin; and 4) 7.7% WACC. Our implied 2026 EV/EBITA of 14.2x assumes 24% ROCE, 7.7% WACC, 3.1% g and >25% tax.

We identify the following risks that could prevent the shares from achieving our target price:

Downside risks are more significant growth slowdown in the green Energy verticals and should Alfa be successful in execution on any potential M&A. Upside risks are from stronger-than-expected growth in the green Energy verticals and if the product tanker cycle continues to accelerate towards the significant 2013 peak which we see as unlikely.