You can expect room for a 20% increase! Goldman Sachs: TPG (TPG.US) leverages insurance giants to build a long-term profit moat with a low-cost model

The Zhitong Finance App learned that Goldman Sachs published an in-depth research report on TPG Inc. (TPG.US), focusing on the long-term strategic partnership between TPG and US pension and life insurance service provider Jackson Financial. This partnership not only brought TPG stable asset management and fee revenue, but also laid a solid foundation for future growth. Goldman Sachs rated TPG a “buy” and kept its 12-month target price of $80 unchanged.

According to Goldman Sachs's research report, TPG will be responsible for managing Jackson Financial's asset portfolio worth up to $12 billion, covering a wide range of investment areas, including investment-grade bonds and potential asset-backed financing instrument (ABF) investments, as well as direct loan business, and it is expected that within the next five years, the asset management scale will steadily expand to $20 billion.

In return, Jackson will receive $150 million in TPG shares, while TPG will invest $500 million in Jackson. According to Goldman Sachs analysis, TPG is expected to have a positive contribution to its free cash flow per share (FRE) starting in the fourth quarter of 2026, and will have a positive impact on diluted earnings (DE) per share from 2027.

Goldman Sachs shows through an illustrative predictive analysis model (Illustrative Pro Forma) analysis that TPG's free cash flow per share is expected to grow by 1.2% to 2.1% by 2028, while diluted earnings per share will increase by -0.2% to 1%. Although the increase in diluted earnings per share may be moderate in the short term, Goldman Sachs believes that in the long run, the net present value (NPV) of the entire $20 billion asset class will have a positive impact of about 2% to 3% on TPG's 2027 estimated earnings per diluted share.

In terms of fee structure, TPG will charge a management rate of at least 50 basis points from Jackson's assets. Goldman Sachs anticipates that as the proportion of direct loan strategies increases, the actual rate may be between 60 and 75 basis points. Furthermore, TPG's incremental free cash flow margin is expected to remain high at 85% to 100%, mainly due to the partnership's limited demand for capital investment.

Goldman Sachs also pointed out that this partnership not only brought TPG a long-term stable source of capital, but was also consistent with its balance-sheet-light strategy. TPG management emphasized that this cooperation is non-exclusive, and it is expected to establish partnerships with other similar organizations in the future. Additionally, TPG also plans to raise approximately $20 billion in credit funding in 2025, of which it is expected to raise $8 billion in the fourth quarter, which will further boost its credit management fee revenue.

From an investment perspective, Goldman Sachs rated TPG as a “buy” and kept the target price of $80 unchanged for 12 months. The target price is based on the comprehensive valuation (SOTP) of TPG's cash flow in each business line. Goldman Sachs believes that TPG's strong growth potential in asset management and credit, as well as the stable revenue streams brought by the partnership with Jackson Financial, will create long-term value for its shareholders.

However, Goldman Sachs is also alerting investors to potential risks, including rising employee equity incentive costs, slowing fundraising progress, and declining demand for “impact investing” and fundraising in the renewable energy sector. Despite this, Goldman Sachs believes that TPG's overall business model and growth prospects are still strong, and its stock price still has room to rise by about 20% compared to Wednesday's closing price of $65.965.

Overall, Goldman Sachs is optimistic about the strategic cooperation between TPG and Jackson Financial, believing that this cooperation will bring TPG stable revenue growth and capital sources, while enhancing its overall profitability and market competitiveness. For investors seeking long-term stable returns, TPG is certainly an investment target worth paying attention to.