Our SEK 408/share target price is based on our DCF and implied EV/EBITA against Alfa’s growth and ROCE. Our DCF is assuming: 1) MSD mid-term growth; 2) 3.5% terminal growth; 3) 16-17% through-the-cycle EBITA margin; and 4) 8.1% WACC. Our implied 2025 EV/EBITA of 15.5x assumes >25% ROCE, 8.1% WACC, 3.5% g and 26% 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.