SMALLER COMPANIES

GERMANY
Janaury 2011

SMALLER
COMPANIES
REVIEW
77 companies covered
Market cap below ~EUR4bn

Smaller Companies Team
+49 (0)69 47897 525

www.cheuvreux.com

Disclosures available on www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

Cheuvreux's Smaller Companies Team
FRANCE

BENELUX

Coordinator - Carole Rozen
(+33 1) 41 89 73 18
crozen@cheuvreux.com

Robert Van Overbeek - (+31 20) 573 06 81
rvanoverbeek@cheuvreux.com

NORDIC

Hubert d'Aillières - (+33 1) 41 89 74 58
hdaillieres@cheuvreux.com

Johan Eliason – (+468) 723 51 77
jeliason@cheuvreux.com

Emmanuel Fourret - (+33 1) 41 89 73 06
efourret@cheuvreux.com
Mourad Lahmidi - (+33 1) 41 89 75 29
mlahmidi@cheuvreux.com

GERMANY

Amandine Latour - (+33 1) 41 89 75 46
alatour@cheuvreux.com

Craig Abbott - (+49 69) 47 89 75 25
cabbott@cheuvreux.com
Hans-Joachim Heimbürger – (+49 69) 47 89 75 40
hheimburger@cheuvreux.com
Oliver Reinberg - (+49 69) 47 89 75 26
oreinberg@cheuvreux.com

AUSTRIA
Markus Remis - (+43) 1 227 12 70 13
mremis@cheuvreux.com

TURKEY
Ilgin Erdogan - (+90) 212 37 11 907
ierdogan@cheuvreux.com

SWITZERLAND

GREECE

Beat Keiser - (+41 1) 218 17 06
bkeiser@cheuvreux.com
Levon Babalyan - (+41 1) 218 17 07
lbabalyan@cheuvreux.com
Olivier Girakhou - (+41 1) 218 17 23
ogirakhou@cheuvreux.com

Mary Psyllaki - (+30) 210 37 34 006
mpsyllaki@cheuvreux.com

SPAIN

ITALY

Adrian Zunzunegui - (34 91) 495 16 28
azunzunegui@cheuvreux.com

Marco Baccaglio - (+39 2) 80 62 83 20
mbaccaglio@cheuvreux.com

Iñigo Egusquiza - (34 91) 495 16 33
iegusquiza@cheuvreux.com

2

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

CONTENTS
I— Our small cap universe & analysts

4

II— German smaller companies universe – key figures

6

III— Sector top picks and focus list

8

IV— Overview of the German smaller companies segment

13

V— Valuation multiples

22

VI— Company profiles

25

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ADVA Optical Networking
Aixtron*
Aurubis AG
Axel Springer
BAUER
BayWa
Bilfinger Berger
BRENNTAG
Carl Zeiss Meditec
Centrotherm*
CropEnergies*
CTS Eventim
DEMAG Cranes
Dialog Semiconductor
Douglas
Draegerwerk
ElringKlinger*
Fielmann
Fraport
Fuchs Petrolub
GEA Group
Gerresheimer
Gerry Weber
GfK
H&R WASAG
Heidelberger Druck
HHLA
Hochtief
Hornbach Holding
Hugo Boss
Jenoptik
Jungheinrich
Kabel Deutschland
KLOECKNER
Kontron
KRONES
KSB
Kuka
Lanxess

26
28
32
36
38
42
46
50
54
58
62
66
70
74
78
82
86
90
94
98
102
106
110
114
118
122
126
130
134
138
142
146
150
152
156
160
164
168
172

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Leoni
MANZ AUTOMATION*
MLP
MTU
MVV Energie
Nordex*
Pfeiffer Vacuum
Pfleiderer
Phoenix Solar*
PRAKTIKER
ProSiebenSat.1 Media
Puma
Q-CELLS*
Rational
Rheinmetall
Rhoen Klinikum
Roth&Rau*
SAF-HOLLAND
Sartorius
SGL Carbon
SKW Stahl
SMA*
Software AG
SolarWorld*
Stada
Stratec Biomedical Systems
Ströer
Suedzucker
Symrise
TAKKT
Tipp24
Tognum
TOM TAILOR Holding
TUI
Vossloh*
VTG*
Wacker Neuson
Wincor Nixdorf

176
180
184
188
192
196
200
204
208
212
216
218
222
226
230
234
238
242
246
250
254
258
262
266
270
274
278
282
286
290
294
296
300
304
308
312
316
320

* Green tech companies
Please note: this publication includes profiles of five companies, ADVA Optical Networking, Axel Springer, Kabel
Deutschland, ProSiebenSat.1 Media and Tipp24, which were not covered by CA Cheuvreux Germany at the time this
publication went to print but will attend our German Corporate Conference that takes place in Frankfurt from 17-19
January 2011.

3

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

I - OUR SMALL CAP UNIVERSE & ANALYSTS
Market Cap
Company

Target

Upside/

(EURm)

Price

Price

downside

AIXTRON SE

3,102

31.2

41.5

33%

AURUBIS

Rating

1/Selected List

Analyst

Klaus RINGEL

Telephone No.

+49 69 47897 542

1,810

44.3

40.0

-10%

2/Outperform

Alexander HAISSL

+49 69 47897 534

BAUER

641

37.5

38.0

1%

2/Outperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

BAYWA

1,189

34.9

35.0

0%

2/Outperform

Philipp BUMM

+49 69 47897 527

BILFINGER BERGER

2,730

61.9

70.0

13%

1/Selected List

Craig ABBOTT

+49 69 47897 525

BRENNTAG AG

3,687

71.6

52.0

-27%

3/Underperform

Sebastian KAUFFMANN

+49 69 47897 524

CARL ZEISS MEDITEC

1,148

14.1

14.5

3%

3/Underperform

Oliver REINBERG

+49 69 47897 526

CENTROTHERM PV

540

25.5

27.0

6%

3/Underperform

Philipp BUMM

+49 69 47897 527

CONERGY AG

193

0.5

0.4

-17%

4/Sell

Philipp BUMM

+49 69 47897 527

CROPENERGIES

471

5.5

2.4

-57%

3/Underperform

Philipp BUMM

+49 69 47897 527

1,090

45.4

42.0

-8%

3/Underperform

Oliver REINBERG

+49 69 47897 526

CTS EVENTIM
DEMAG CRANES AG

808

38.2

44.0

15%

2/Outperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

DIALOG SEMICONDUCTOR

1,146

17.5

20.0

15%

2/Outperform

Bernd LAUX

+49 69 47897 512

DOUGLAS

1,624

41.4

47.2

14%

2/Outperform

Jurgen KOLB

+49 69 47897 426

DRAEGERWERK

1,121

63.2

70.0

11%

3/Underperform

Oliver REINBERG

+49 69 47897 526

ELRINGKLINGER

1,610

25.4

24.0

-5%

3/Underperform

EUROKAI KGAA

452

33.6

36.0

7%

2/Outperform

FIELMANN

2,835

67.5

57.0

-16%

3/Underperform

Craig ABBOTT

+49 69 47897 525

FRAPORT

4,436

48.3

56.0

16%

1/Selected List

Craig ABBOTT

+49 69 47897 525

FUCHS PETROLUB

2,412

106.2

115.0

8%

2/Outperform

Martin ROEDIGER

+49 69 47897 763

GEA

4,001

21.8

26.0

19%

2/Outperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

GERRESHEIMER

1,004

32.0

32.5

2%

2/Outperform

Oliver REINBERG

+49 69 47897 526
+49 69 47897 426

GERRY WEBER
GFK SE
H&R WASAG
HEIDELBERGER DRUCK

Alexander NEUBERGER

+49 69 47897 384

Hans-Joachim HEIMBUERGER

+49 69 47897 540

730

35.3

39.0

10%

2/Outperform

Jurgen KOLB

1,328

37.0

40.0

8%

2/Outperform

Craig ABBOTT

+49 69 47897 525

633

21.1

19.0

-10%

3/Underperform

Martin ROEDIGER

+49 69 47897 763

863

3.7

5.8

56%

2/Outperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

HHLA

2,514

34.6

44.0

27%

2/Outperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

HOCHTIEF

4,285

61.2

64.0

5%

2/Outperform

Craig ABBOTT

+49 69 47897 525

397

99.1

74.4

-25%

3/Underperform

Jurgen KOLB

+49 69 47897 426
+49 69 47897 426

HORNBACH HOLDING AG
HUGO BOSS

3,527

53.2

57.0

7%

2/Outperform

Jurgen KOLB

JENOPTIK

307

5.4

6.6

23%

2/Outperform

Alexander HAISSL

+49 69 47897 534

JUNGHEINRICH

997

29.3

30.0

2%

3/Underperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

1,458

21.9

17.5

-20%

3/Underperform

Alexander HAISSL

+49 69 47897 534

513

9.2

7.0

-24%

3/Underperform

Bernd LAUX

+49 69 47897 512
+49 69 47897 540

KLOECKNER & CO SE
KONTRON
KRONES

1,482

46.9

37.0

-21%

3/Underperform

Hans-Joachim HEIMBUERGER

KSB

1,086

620.0

700.0

13%

2/Outperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

KUKA AG

571

16.8

13.0

-23%

3/Underperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

LANXESS

4,630

55.7

63.0

13%

2/Outperform

LEONI

966

32.5

40.0

23%

1/Selected List

MANZ AUTOMATION AG

269

49.1

69.0

41%

2/Outperform

MLP

826

7.7

7.0

-9%

3/Underperform

MTU

2,524

51.1

50.0

-2%

2/Outperform

MVV ENERGIE

1,810

27.5

19.0

-31%

3/Underperform

Sebastian KAUFFMANN

+49 69 47897 524

372

5.6

9.0

62%

4/Sell

Philipp BUMM

+49 69 47897 527

Michael HAID

+49 69 47897 967

NORDEX

Martin ROEDIGER

+49 69 47897 763

Alexander NEUBERGER

+49 69 47897 384

Philipp BUMM

+49 69 47897 527

Michael HAID

+49 69 47897 967

Antoine BOIVIN-CHAMPEAUX

+33 1 41 89 73 25

OVB

385

27.0

13.0

-52%

4/Sell

PFEIFFER VACUUM

749

88.0

87.0

-1%

2/Outperform

Craig ABBOTT

+49 69 47897 525

PFLEIDERER

142

2.4

4.0

69%

4/Sell

Craig ABBOTT

+49 69 47897 525

PHOENIX SOLAR

176

23.9

45.0

88%

2/Outperform

Philipp BUMM

+49 69 47897 527

PRAKTIKER

433

7.5

6.1

-18%

3/Underperform

Jurgen KOLB

+49 69 47897 426

4

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

Market Cap
Company

PUMA

Target

Upside/

(EURm)

Price

Price

downside

3,579

236.4

250.0

6%

3/Underperform

Rating

Analyst

Jurgen KOLB

Telephone No.

+49 69 47897 426

Q-CELLS

274

2.3

7.0

200%

3/Underperform

Philipp BUMM

+49 69 47897 527

QIAGEN

3,528

14.7

13.5

-8%

3/Underperform

Oliver REINBERG

+49 69 47897 526

RATIONAL

1,786

157.1

155.0

-1%

3/Underperform

Craig ABBOTT

+49 69 47897 525

RHEINMETALL

2,398

60.6

75.0

24%

2/Outperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

RHOENKLINIKUM

2,235

16.2

19.0

18%

2/Outperform

Craig ABBOTT

+49 69 47897 525

ROTH&RAU

206

12.7

36.0

183%

2/Outperform

Philipp BUMM

+49 69 47897 527

SAF-HOLLAND

148

7.2

11.0

53%

2/Outperform

Alexander NEUBERGER

+49 69 47897 384

Oliver REINBERG

+49 69 47897 526

SARTORIUS AG
SGL CARBON
SKW STAHL METALLURGIE HOLDING
SMA

478

28.0

30.0

7%

2/Outperform

1,767

27.1

24.0

-11%

3/Underperform

130

19.9

23.0

16%

2/Outperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

Alexander HAISSL

+49 69 47897 534

2,367

68.2

130.0

91%

2/Outperform

Philipp BUMM

+49 69 47897 527

SMARTRAC N.V.

301

18.4

19.0

3%

3/Underperform

Bernd LAUX

+49 69 47897 512

SOFTWARE AG

3,085

108.2

120.0

11%

1/Selected List

Bernd LAUX

+49 69 47897 512

SOLARWORLD

814

7.3

12.0

65%

2/Outperform

1,565

26.0

25.0

-4%

STADA
STRATEC BIOMEDICAL SYSTEMS

Philipp BUMM

+49 69 47897 527

3/Underperform

Oliver REINBERG

+49 69 47897 526

361

31.4

31.0

-1%

3/Underperform

Oliver REINBERG

+49 69 47897 526

STRÖER

1,137

27.0

23.0

-15%

2/Outperform

Craig ABBOTT

+49 69 47897 525

SUEDZUCKER

3,758

19.8

21.5

8%

2/Outperform

Klaus RINGEL

+49 69 47897 542

SYMRISE

2,328

19.7

18.0

-9%

3/Underperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540
+49 69 47897 525

TAKKT

722

11.0

11.5

5%

2/Outperform

Craig ABBOTT

TOGNUM AG

2,560

19.5

15.5

-20%

2/Outperform

Craig ABBOTT

+49 69 47897 525

TOM TAILOR

276

16.7

19.6

17%

1/Selected List

Jurgen KOLB

+49 69 47897 426

TUI

2,731

10.9

11.3

4%

2/Outperform

Jurgen KOLB

+49 69 47897 426

VOSSLOH AG

1,267

94.9

103.0

9%

2/Outperform

Craig ABBOTT

+49 69 47897 525

VTG AG

318

14.9

12.0

-19%

3/Underperform

Sebastian KAUFFMANN

+49 69 47897 524

WACKER NEUSON SE

886

12.6

12.0

-5%

3/Underperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

WINCOR NIXDORF AG

1,849

58.0

49.0

-16%

3/Underperform

Hans-Joachim HEIMBUERGER

+49 69 47897 540

5

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

II - GERMAN SMALLER COMPANIES UNIVERSE-KEY FIGURES
Rating

P/E
(X)
11E

EV/Sales
(x)
12E

12E

EV/EBITDA
(x)
11E

EBITDA
margin (%)
11E

12E

ROCE (%) Div Yld (%)
12E

12E

FCF (MC)
(%)
12E

P/BV
(x)
12E

ROE
(%)
11E

AIXTRON SE

1

15.9

13.6

2.8

7.5

5.8

37.2

NS

2.2

5.7

3.8

AURUBIS

2

13.3

11.2

0.3

6.6

5.7

3.9

14.2

2.8

6.2

1.4

11.8

BAUER

2

10.9

8.6

0.9

6.0

5.3

15.6

13.3

2.4

0.2

1.3

14.1

BAYWA

2

14.7

11.5

0.2

7.1

5.9

3.3

9.9

1.3

4.4

1.2

9.2

BILFINGER BERGER

1

10.1

9.4

0.6

9.9

8.9

6.1

23.8

5.5

10.0

1.5

16.2

BRENNTAG AG

3

13.5

12.3

0.6

8.4

7.7

7.6

16.5

3.1

4.6

2.1

17.8

CARL ZEISS MEDITEC

3

18.4

16.8

1.2

7.8

6.7

15.6

35.8

1.8

5.9

1.8

10.8

CENTROTHERM PV

3

11.8

11.3

0.8

4.9

4.9

15.3

15.1

2.7

0.3

1.2

11.0

CONERGY AG

4

4.3

3.6

0.3

4.4

3.7

7.4

16.2

0.0

7.4

0.8

28.8

CROPENERGIES

3

28.4

22.8

1.5

10.8

9.5

14.2

6.5

0.0

7.9

1.3

5.1

CTS EVENTIM

3

18.3

15.9

2.5

12.8

10.8

19.7

52.2

2.8

6.9

5.4

28.7

DEMAG CRANES AG

2

14.4

9.8

0.8

7.7

5.6

10.2

28.3

3.6

8.8

2.5

21.2

DIALOG SEMICONDUCTOR

2

23.5

17.4

3.4

17.0

12.0

19.8

104.0

0.0

4.5

4.3

27.7

DOUGLAS

2

16.0

14.5

0.5

5.2

4.8

8.9

17.6

3.5

5.3

2.0

13.3

DRAEGERWERK

3

12.3

11.1

0.8

6.1

5.6

12.4

17.9

2.1

8.1

1.7

16.0

ELRINGKLINGER

3

16.2

12.6

1.9

7.3

5.9

26.2

29.3

3.5

7.4

2.8

20.0

EUROKAI KGAA

2

15.5

11.9

1.3

5.7

4.6

22.1

14.2

0.9

8.8

1.0

8.9

FIELMANN

3

20.6

18.7

2.5

11.6

10.4

21.8

51.3

4.2

4.4

5.6

26.9

FRAPORT

1

20.3

18.7

3.3

9.6

8.3

34.3

9.2

2.7

0.1

1.6

8.4

FUCHS PETROLUB

2

12.4

11.5

1.4

7.1

6.1

20.2

46.2

2.5

8.5

3.2

35.0

GEA

2

13.5

10.1

1.0

8.0

6.2

12.2

15.6

3.0

8.7

1.8

15.3

GERRESHEIMER

2

19.6

15.4

1.4

6.6

5.9

20.7

14.6

1.5

6.9

1.8

11.5

GERRY WEBER

2

12.7

10.9

1.1

6.7

5.5

15.9

43.0

2.4

7.5

2.8

28.1

GFK SE

2

14.4

12.1

1.3

8.1

6.9

16.6

17.2

1.8

7.1

1.8

14.8

H&R WASAG

3

14.3

12.1

0.8

8.7

7.3

9.3

17.4

3.3

5.5

2.5

19.9

HEIDELBERGER DRUCK

2

15.8

10.3

0.5

5.5

4.8

9.1

8.0

0.0

NS

0.8

5.9

HHLA

2

24.5

20.4

3.1

10.1

8.7

31.2

23.9

3.0

5.9

3.7

16.4

HOCHTIEF

2

18.1

15.0

0.5

8.7

7.3

5.7

36.9

3.5

4.9

1.7

9.8

HORNBACH HOLDING AG

3

10.9

10.2

0.3

3.7

3.6

7.5

10.2

1.4

NS

0.9

9.1

HUGO BOSS

2

18.5

16.6

2.1

10.7

9.5

19.3

38.6

2.4

5.1

8.0

60.8

JENOPTIK

2

13.2

11.3

0.7

5.8

5.2

12.3

11.0

0.0

8.8

1.0

8.3

JUNGHEINRICH

3

12.3

10.5

0.5

3.7

2.9

13.2

17.0

1.7

13.4

1.4

12.7

KLOECKNER & CO SE

3

16.4

10.0

0.3

6.5

4.9

5.0

14.6

3.0

10.1

1.1

7.4

KONTRON

3

19.0

14.5

1.0

8.4

6.6

11.6

16.3

2.7

6.3

1.5

8.5

KRONES

3

18.3

15.7

0.6

7.9

6.8

7.9

12.8

1.4

4.9

1.7

10.7

KSB

2

10.5

8.1

0.5

4.7

3.7

10.9

19.7

2.5

6.1

1.3

14.2

KUKA AG

3

24.0

16.4

0.6

8.9

7.5

7.3

14.9

4.2

2.6

3.1

14.6

LANXESS

2

10.5

9.4

0.8

6.3

5.6

13.2

14.9

1.4

6.2

1.8

22.8

LEONI

1

8.9

7.0

0.5

4.8

4.0

9.6

19.4

4.3

9.1

1.6

22.2

MANZ AUTOMATION AG

2

18.5

10.8

0.9

6.6

3.6

13.3

23.9

0.0

1.6

1.2

7.7

MLP

3

18.1

16.0

NS

NS

NS

0.0

NS

5.9

NS

2.1

0.0

MTU

2

15.1

12.3

1.0

7.2

6.0

13.7

20.4

2.9

6.3

2.5

19.5

MVV ENERGIE

3

17.5

17.7

0.9

7.9

7.8

11.2

8.5

3.6

6.5

1.6

9.6

NORDEX

4

4.3

2.6

0.3

4.1

2.7

7.5

20.3

0.0

NS

0.6

19.9

OVB

4

38.1

33.5

NS

NS

NS

0.0

NS

2.2

NS

4.5

0.0

PFEIFFER VACUUM

2

18.3

16.8

3.0

11.1

9.9

27.2

51.4

4.7

5.5

5.0

27.4

PFLEIDERER

4

NS

32.9

0.6

6.1

4.6

10.3

6.4

0.8

24.8

0.3

-5.6

PHOENIX SOLAR

2

8.1

6.1

0.2

3.7

3.0

5.2

38.8

1.6

6.0

0.9

14.1

PRAKTIKER

3

16.0

8.9

0.2

4.0

3.3

4.2

7.9

3.0

4.9

0.5

3.1

PUMA

3

13.7

12.5

1.0

6.6

5.6

15.5

35.7

1.2

8.2

1.9

17.1
8.0

31.2

Q-CELLS

3

4.6

3.1

0.2

1.2

1.0

16.1

10.4

0.0

NS

0.3

QIAGEN

3

28.7

24.0

3.7

11.3

9.6

32.6

14.8

0.0

5.4

1.6

7.2

RATIONAL

3

21.3

18.5

4.3

13.8

11.8

31.0

108.4

4.6

5.1

8.9

39.9

RHEINMETALL

2

10.8

8.5

0.6

5.4

4.3

11.5

18.0

3.6

11.7

1.6

17.5

RHOENKLINIKUM

2

13.1

11.0

1.0

7.2

6.2

13.3

12.7

2.3

6.7

1.3

11.1

ROTH&RAU

2

7.2

5.7

0.3

1.8

1.1

16.3

25.8

0.0

9.7

0.7

11.1

SAF-HOLLAND

2

6.4

4.3

0.6

5.3

4.1

10.2

20.3

4.7

17.2

1.9

54.1

6

www.cheuvreux.com

8 15.6 2.7 8.0 7.1 8.2 0.8 11.4 19.1 0.4 31.3 18.6 16.5 1.0 7.9 1.1 3.9 2.5 2.5 11.1 7.8 0.3 14.6 1.5 50.0 4.6 8.9 6.0 WACKER NEUSON SE 3 22.3 14.3 10.5 8.4 SKW STAHL METALLURGIE HOL 2 11.1 5.7 25.6 7.3 2.0 3.1 0.7 5.7 23.0 13.8 1.6 1.1 1.6 6.7 20.0 VTG AG 3 14.7 13.8 11.6 9.7 6.9 1.9 19.0 14.3 9.0 18.0 25.3 9.4 13.6 12.4 5.2 0.4 2.8 15.2 2.6 SYMRISE 3 15.8 4.4 10.2 3.0 8.7 2.8 5.9 2.0 7 www.5 4.9 3.5 SGL CARBON 3 22.7 1.5 8.9 TOGNUM AG 2 13.1 5.9 22.9 8.0 2.9 15.9 13.1 16.1 2.4 24.9 0.0 SMARTRAC N.8 0.6 3.2 1.0 1.5 STADA 3 11.9 5.3 7.0 16.0 3.3 13.6 5.3 1.8 20.6 6.com 11.1 2.8 8.4 0.9 9.5 2.7 1.7 1.0 1.3 7.9 25.6 12. 3 22.1 3.2 9.1 4.3 9.0 26.7 14.2 30.7 2.6 12.3 .2 STRATEC BIOMEDICAL SYSTEM 3 18.6 8.8 1.0 60.5 16.8 0.5 24.5 0.2 6.4 9.1 2.4 19.5 8.0 5.2 12.3 7.0 1.8 8.6 7.2 37.7 11.1 12.7 STRÖER 2 28.4 5.1 8.0 7.4 4.8 1.7 TOM TAILOR 1 16.4 2.6 20.2 7.3 9.7 5.3 3.1 16.2 SUEDZUCKER 2 13.2 TUI 2 27.8 17.2 7.1 10.8 TAKKT 2 13.cheuvreux.7 6.7 16.7 7.1 7.6 3.0 52.1 1.4 2.9 2.4 9.2 10.3 SOFTWARE AG 1 15.3 3.6 6.0 5.1 5.9 WINCOR NIXDORF AG 3 16.5 VOSSLOH AG 2 12.4 1.2 13.January 2011 GERMANY Smaller Companies Review Rating P/E (X) 11E EV/Sales (x) 12E 12E EV/EBITDA (x) 11E EBITDA margin (%) 11E 12E ROCE (%) Div Yld (%) 12E 12E FCF (MC) (%) 12E P/BV (x) 12E ROE (%) 11E SARTORIUS AG 2 15.7 4.0 11.3 16.3 4.8 6.5 20.1 2.1 8.9 13.1 1.V.7 9.4 8.1 19.4 1.6 31.4 3.8 13.9 15.3 9.3 5.3 8.6 SMA 2 8.5 2.0 18.2 1.7 8.7 5.7 20.2 26.5 SOLARWORLD 2 8.0 12.7 9.

January 2011

GERMANY

Smaller Companies Review

TOP PICKS
Aixtron

EUR30.42

To 31/12

2009

2010E

2011E

2012E

Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

302.9
44.8
0.45
0.4
52.4
0.7
37.1
32.5
55.2
11.5
5.9
(5.5)
0.15
0.6

760.0
186.1
1.86
1.9
14.8
1.8
7.3
8.3
NS
37.9
5.2
(1.7)
0.56
2.0

871.3
195.5
1.96
2.0
15.5
5.0
7.3
8.5
NS
31.2
4.5
(2.0)
0.59
1.9

1047.3
229.7
2.30
2.3
13.2
5.9
5.6
6.5
NS
29.4
3.7
(2.2)
0.69
2.3

Bilfinger Berger
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

EUR61.31
2009

2010E

2011E

2012E

7382.0
140.0
3.78
3.8
14.3
10.5
12.5
21.7
12.2
9.5
1.6
4.8
2.00
3.7

7953.8
271.2
5.90
5.9
10.7
NS
10.3
15.2
25.8
17.1
1.8
4.0
2.72
4.3

8151.8
281.4
6.12
6.1
10.0
7.9
9.8
14.1
23.5
16.2
1.6
3.8
2.87
4.7

8357.4
301.8
6.56
6.6
9.3
10.1
8.9
12.7
23.8
15.9
1.5
3.2
3.42
5.6

Dialog Semiconductor

EUR17.98

To 31/12

2009

2010E

2011E

2012E

Sales ($ m)
NAP rest. ($ m)
Clean EPS ($)
Reported EPS ($)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend ($)
Yield (%)

217.6
25.2
0.46
0.6
22.9
4.7
13.9
17.3
100.4
23.3
3.7
(3.4)
0.00
0.0

296.0
43.3
0.66
0.7
34.3
1.5
24.3
28.1
93.7
24.2
7.4
(2.6)
0.00
0.0

390.0
64.3
0.98
1.0
23.7
3.0
17.2
19.3
98.4
27.7
5.8
(2.5)
0.00
0.0

480.0
87.0
1.33
1.3
17.6
4.5
12.2
13.4
104.0
28.2
4.3
(2.5)
0.00
0.0

Fraport
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

EUR47.90
2009

2010E

2011E

2012E

1972.6
149.8
1.64
1.6
22.2
NS
9.3
17.7
6.4
6.1
1.4
3.0
1.15
3.2

2126.7
165.2
1.80
1.8
26.2
NS
9.9
16.9
8.1
6.5
1.7
3.3
1.15
2.4

2268.4
218.6
2.38
2.4
20.1
NS
9.6
16.0
8.1
8.4
1.7
3.6
1.15
2.4

2475.7
237.2
2.58
2.6
18.6
0.1
8.3
13.7
9.2
8.7
1.6
3.2
1.29
2.7

8

www.cheuvreux.com

1/Selected List - Target: 41.5
AIXA is a natural M&A target given its excellent market
position and high free float of roughly 90%. Potential
predators: major semiconductor equipment players like
Applied Materials. We think AIXA will continue to benefit
strongly from the emergence of LEDs in LCD screen
backlighting units and lighting. Client orders are set to
remain strong as it seems LED capacities are still short of
demand. The competitive environment is favourable for
the company: a duopolistic world market for MOCVD
tools with AIXA as the dominant player with some 70%
market share.

1/Selected List - Target: 70
Strategically shifting more towards Services: the focus is
on downsizing construction and reinvesting proceeds
from the recent disposal of Valemus (est. net proceeds of
c.EUR500m) in further expansion of its market-leading
Services businesses, which proved more resilient than
expected in the downturn. Incoming orders in Industrial
Services now reaccelerating strongly. Power Services
(26% of EBIT) should see significant growth in emerging
markets and from lifetime extension capex in Germany. At
9.5x PE, 6.3 adj EV/EBITDA, 4.5% yield, re-rating still not
complete.

2/Outperform - Target: 20
With Dialog in the sweet spot of market growth
(smartphones, portable media devices) and its products
gaining increasing share at customers, top-line growth in
excess of 30% y-o-y and bottom-line expansion of more
than 50% p.a., it is likely to maintain its momentum,
probably even beyond 2011E. The company has won new
business from major customers and has key products
under development that could generate sizeable
incremental sales from H2-11E. Dialog shares, Europe's
best way to play the 'Apple-mania', are a highly attractive,
inexpensive tech investment.

1/Selected List - Target: 56
PAX traffic trends/operational leverage to continue to
surprise on the upside. Above average PAX traffic growth,
scheduled aviation fee increases (+25% through 2015),
the inauguration of R-4 from Oct 2011 and the 50%
increase in high-yielding retail space from summer 2012
to drive EBITDA CAGR of 13.8% (2010-12E) vs 6% for the
European peers on avg. At the mid-point of major capex
cycle running below budgeted costs, execution risks now
diminishing. Also combines low-cost financing with
inflation hedge. SOP (EUR55), DCF (EUR57) suggest
further upside.

January 2011

GERMANY

Smaller Companies Review

Fuchs Petrolub
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

EUR102.50
2009

2010E

2011E

2012E

1178.1
121.5
5.14
5.1
12.6
11.2
7.5
8.4
35.2
36.5
4.4
(0.2)
1.70
2.6

1437.3
173.2
7.32
7.3
15.2
3.1
9.1
9.9
40.0
39.4
5.5
(0.3)
2.10
1.9

1588.2
203.1
8.58
8.6
11.9
7.4
6.8
7.5
44.2
35.0
3.9
(0.6)
2.50
2.4

1659.7
219.4
9.27
9.3
11.1
8.8
5.9
6.5
46.2
29.9
3.1
(1.0)
2.70
2.6

GEA Group
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

EUR21.00
2009

2010E

2011E

2012E

4411.2
160.6
0.87
0.9
17.8
11.1
9.0
12.4
9.3
9.7
1.7
(0.0)
0.30
1.9

4450.0
140.1
0.76
0.8
28.4
NS
14.3
20.0
6.9
8.0
2.2
1.7
0.24
1.1

5022.0
295.6
1.61
1.6
13.1
5.7
7.8
9.9
12.6
15.3
1.9
0.7
0.48
2.3

5577.9
395.4
2.15
2.2
9.8
9.0
6.0
7.3
15.6
18.1
1.7
0.2
0.65
3.1

GfK
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

EUR36.89
2009

2010E

2011E

2012E

1164.5
51.0
1.42
1.4
17.0
15.2
9.6
16.5
9.1
10.2
1.7
2.8
0.30
1.2

1272.7
76.0
2.12
2.1
17.8
6.8
9.9
14.1
13.3
13.8
2.3
1.9
0.42
1.1

1366.1
92.1
2.57
2.6
14.4
7.2
8.1
11.1
15.5
14.8
2.0
1.3
0.53
1.4

1453.7
109.4
3.05
3.0
12.1
7.1
6.8
9.2
17.2
15.6
1.8
0.8
0.67
1.8

HHLA

EUR34.46

To 31/12

2009

2010E

2011E

2012E

Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

990.7
53.0
0.73
0.7
37.0
2.0
13.1
22.7
15.2
10.4
3.9
0.7
0.40
1.5

1068.8
71.7
0.99
1.0
35.0
0.1
13.4
22.3
16.1
12.8
4.5
0.8
0.61
1.8

1164.8
102.7
1.41
1.4
24.4
5.1
10.0
15.9
20.7
16.4
4.1
0.3
0.85
2.5

1254.6
123.0
1.69
1.7
20.3
5.9
8.7
13.5
23.9
17.6
3.6
(0.1)
1.02
3.0

9

www.cheuvreux.com

2/Outperform - Target: 115
Fuchs Petrolub benefits from its strong positioning in
niche markets. Its performance in each of the last five
quarters has been far better than assumed. Besides Air
Liquide, Fuchs is the only chemical company that was
able to increase its EBIT, EBIT margin and dividend in the
crisis year 2009. Due to its fixed-cost reductions it is now
even leaner. Its focus on innovations and cost discipline
will drive its margins further. The company benefits from
rising volumes in an upturn and from lower raw material
costs in a downturn.

2/Outperform - Target: 26
We advise purchasing GEA shares now to capture the
benefits of the group reorganisation that are likely to
emerge over the next 1-2 years. While GEA will not remain
unaffected if macro conditions worsen, the company does
have considerable restructuring potential in our view. The
market is completely ignoring the company's margin
expansion potential and appears to discount sales of
EUR5.1bn and an EBIT margin of just 9.6% for 2013E vs.
our estimates with EUR5.2bn and 12.4%(!), respectively.

2/Outperform - Target: 40
Offers a fundamentally strong franchise with solid growth
potential at attractive multiples. GfK's crown jewel, the
Retail & Technology division (60% of EBIT), still has
significant growth potential as it expands its global
footprint in emerging markets. Assuming cont'd macro
recovery, GfK is on track to approach the upper end of its
targeted adj. operating margin range of 13 - 15% by
2012E. Margin expansion is driven by operational
leverage in Custom Research, continued robust organic
growth in R&T, BISS cost saving measures and
discontinuation of investments in Media.

2/Outperform - Target: 44
The trading environment remains positive: the likely
recovery of Hamburg's regional advantage among North
Range ports (close proximity to Germany, EE and Baltic
states) will be driven by 1) rising fuel prices, as the total
cost of transport to final destinations is important; and 2)
a likely positive Elbe dredging decision. CAPEX is
expected to drop to maintenance levels from 11E
onwards. Given its current low capacity utilisation, HHLA
will be able to accommodate a recovery in volumes
without needing much additional growth CAPEX.

January 2011

GERMANY

Smaller Companies Review

Jenoptik

EUR5.25

To 31/12

2009

2010E

2011E

2012E

Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

473.6
(38.9)
(0.68)
(0.7)
NS
NS
34.7
NS
NS
(15.0)
0.9
16.4
0.00
0.0

503.6
15.0
0.26
0.3
20.6
26.8
7.3
13.6
7.8
5.8
1.2
1.7
0.00
0.0

531.0
23.3
0.41
0.4
12.9
6.8
5.7
9.8
10.0
8.3
1.0
1.2
0.00
0.0

556.0
27.1
0.47
0.5
11.1
8.9
5.1
8.4
10.9
8.9
0.9
0.8
0.00
0.0

Leoni
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

EUR32.64
2009

2010E

2011E

2012E

2160.1
(123.5)
(4.50)
(4.5)
NS
NS
94.8
NS
NS
(28.7)
1.2
48.2
0.00
0.0

2850.0
79.5
2.68
2.7
12.3
3.8
5.9
10.1
14.0
19.3
2.2
1.9
0.50
1.5

3130.0
109.2
3.68
3.7
8.9
4.6
4.8
7.9
16.6
22.2
1.9
1.5
1.10
3.4

3320.0
138.6
4.67
4.7
7.0
9.1
4.0
6.3
19.4
23.8
1.6
1.1
1.40
4.3

Rheinmetall
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

EUR59.41
2009

2010E

2011E

2012E

3420.0
(58.0)
(1.60)
(1.6)
NS
8.2
11.4
NS
0.6
(5.3)
1.7
(0.1)
0.30
0.7

3975.0
171.6
4.33
4.3
13.9
NS
6.4
10.4
11.6
15.2
2.1
(0.2)
1.30
2.2

4600.0
221.3
5.59
5.6
10.6
8.0
5.3
7.8
14.5
17.4
1.8
(0.4)
1.55
2.6

5200.0
283.2
7.15
7.2
8.3
11.9
4.2
5.8
18.0
19.3
1.5
(0.7)
2.15
3.6

10

www.cheuvreux.com

2/Outperform - Target: 6.6
We expect the business environment to improve further
due to continued strong demand from the semiconductor
industry and better prospects for the company's
Metrology business, in particular in the automotive
industry. As a result of asset disposals and more efficient
working capital management, company was able to
reduce net debt below EUR100m from c.EUR160m end of
FY-09. Our EVA model yields a fair value of EUR6.5/share
for FY-12E, based on a pre-tax RoCE of 10.6%. In
addition, Jenoptik has tax-loss carry-forwards of
EUR1.5/share.

1/Selected List - Target: 40
We continue to rate Leoni a 1/Selected List and the stock
remains on our German Top Picks list for a second
consecutive year for the following reasons: 1) the
company's unprecedented growth track record (CAGR
04-10 14%) has established it among the top 4 in global
wiring systems production; 2) more than 90% of its staff
are employed in low-cost regions, which allows it to keep
a tight control on its costs; 3) the shares are still trading
below the peers despite Leoni's superior growth profile
and the huge earnings rebound that looks set to continue
in 2011E.

2/Outperform - Target: 75
Although Rheinmetall's Defence division will be affected
by budget cuts, we expect it to remain relatively resilient
given its successful internationalisation strategy: While we
expect budgets within NATO to be under pressure, strong
growth outside NATO is expected. Rheinmetall adopted
to the internationalisation trend at an early stage.
Automotive is likely to reach its peak sales of the last
cycle, i.e. EUR2,2bn in 2007, in 12E with a new peak EBIT
margin of 7-8% compared to just 5.6% in 2007. Valuation
remains inexpensive!

January 2011

GERMANY

Smaller Companies Review

Software AG

EUR107.15

To 31/12

2009

2010E

2011E

2012E

Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

847.4
141.0
4.92
4.9
15.5
8.2
9.7
11.4
19.7
25.3
3.7
1.1
1.15
1.5

1098.0
172.0
6.06
6.1
18.1
4.3
10.5
12.4
23.6
25.9
4.4
0.5
1.30
1.2

1173.0
206.4
7.24
7.2
14.8
7.9
8.5
9.8
27.8
25.5
3.5
(0.1)
1.50
1.4

1260.0
239.0
8.38
8.4
12.8
8.4
7.1
8.0
31.8
24.3
2.9
(0.6)
1.80
1.7

TOM TAILOR Holding AG

EUR16.59

To 31/12

2009

2010E

2011E

2012E

Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

300.2
(5.6)
(1.12)
(1.1)
NS
NS
5.0
11.6
9.4
8.6
NS
5.0
0.00
0.0

329.9
2.1
0.18
0.2
87.5
NS
9.1
21.2
8.4
2.8
3.4
1.4
0.00
0.0

368.3
17.3
1.05
1.0
15.9
1.0
6.4
10.7
15.9
20.2
3.1
0.9
0.31
1.9

420.9
24.1
1.46
1.5
11.4
3.7
5.2
7.8
20.1
23.9
2.6
0.7
0.44
2.7

Vossloh
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)

EUR93.60
2009

2010E

2011E

2012E

1173.7
87.9
6.57
6.6
10.6
NS
7.4
8.7
19.6
20.5
2.1
0.4
2.00
2.9

1335.6
93.2
7.00
7.0
13.6
NS
8.4
10.2
17.4
19.0
2.5
0.6
2.50
2.6

1415.6
99.4
7.45
7.4
12.6
3.6
7.5
9.3
17.4
17.9
2.2
0.5
2.71
2.9

1588.8
108.9
8.14
8.1
11.5
5.5
6.6
8.1
18.1
17.6
2.0
0.3
2.96
3.2

11

www.cheuvreux.com

1/Selected List - Target: 120
An innovation leader in the business process excellence
(BPE) software arena, its main growth area, Software
should deliver sustainable, high-1-digit top-line growth
flanked by the acquisition of product vendors in adjacent
software areas. Thus, Software is poised to double its
group sales every 5-6y. Thanks to cost and revenue
synergies from IDS Scheer, an improved product mix
(product sales outgrowing services) and traditionally
strong execution, we expect co. to expand its EBIT
margin from 24% in 10E to 28% by 12E and deliver avg.
EPS growth of ~18%. Co. targets mid-term a 30% EBIT
ROS (IFRS), which the market is far discounting. At 14x
earnings and less than 10x EV/EBIT (both 11E), the shares
remain significantly undervalued, trading at discounts of
15-25% to the EU software peers.

1/Selected List - Target: 19.6
We believe Tom Tailor offers convincing growth potential,
mainly via its own retail expansion, which we expect to
result in a 33% sales CAGR between CY09 and CY12E.
As its infrastructure is well placed to handle the additional
sales volume, we anticipate a cost leverage that will lead
to EBIT margin expansion from 5.6% in CY09 to 9.7% in
CY12E. As private equity group Alpha Funds sold its
entire remaining 17.1% stake in Tom Tailor as of 1
December, the risk of a share overhang has been reduced
considerably and now only applies to the 11.6% Morgan
Finance stake. As a consequence of this, we reduced our
discount on our DCF-based fair value of EUR21.70 from
20% to 10%. This was the sole reason for the rise in our
target price to EUR19.60.

2/Outperform - Target: 103
Offers a pure play on the global emerging market rail
growth theme with above-average earnings visibility and
still undemanding valuation. Strong JV partnerships
formed in major early stage growth markets Russia
(Fasteners) and China (Switches), augmenting its
successful Chinese Fasteners business. Initiatives to
increase share of insourcing of key components/new
models to structurally increase profitability in locomotives.
Earnings growth resumed in 2010 (est. 9% EBIT CAGR
2010-12E). Absolute valuation models (EV/CE & DCF)
suggest further upside.

12

www.cheuvreux.com

Environment for port operators remains positive, Elbe River dredging

Great management execution: smooth integration of IDS, extraction of maximum synergies.
Growth from leading BPM offering.

Modularized business model allows mgmt to concentrate on growth and brand building; sales Quarterly releases
leverage to drive margins

Comment
Transitioning to mostly Services focus reducing risk and increasing share of stable, cashgenerative businesses

Purchase now to capture the benefits of the group reogranisation likely to emerge over the
next 1 - 2 years

Benefiting from strong demand in semiconductor and in its Metrology businesses; high FCF
to further de-leverage balance sheet

Winner of sector consolidation which is regaining momentum post the crisis.

Outlook for defence better than market believes; automotive to reach new peak margins in
the next cycle
Play on global emerging market rail growth theme. Earnings growth regaining momentum.
Combines good visibility with modest valuation

HHLA

SOFTWARE AG

TOM TAILOR

Defensive or Value
BILFINGER BERGER

GEA

JENOPTIK

LEONI

RHEINMETALL

VOSSLOH AG

On track to approach upper end of 13 - 15% Adj Optg margin target by 2012E (Operationall
leverage, robust R&T growth)

GFK SE

Potential contract wins; FY 10
results 31 Mar

Potential acq./DPS
announcement/CMD 24. Mar
FY10 prelims early Feb

2010 prelims due 8 Feb.

Analyst conf 10/11 March

Catalyst/Next news
Potential Services
acquisitions/Prelims 14 Feb

Release of prelim. 2010 results
on 27 Jan 11

FY10 prelims due early Feb

17.4%

10.9%

27.8%

8.1%

12.0%

16.0%

14.5%

103.0

75.0

40.0

6.6

26.0

8.5%

26.4%

23.0%

23.1%

19.4%

TP (EUR) Upside %
70.0
13.1%

19.6

120.0

44.0

40.0

115.0

56.0

20.0

TP (EUR) Upside %
41.5
33.0%
GERMANY

Capital Markets Day 24th/25th
Jan

Upside earnings surprises likely. Product mix evolution to further drive margins (rising share
of high-margin specialities)

Prelims early Feb

Prelims due 11 Mar

FUCHS PETROLUB

Traffic + fee increases + modest wage agreements = significant operational leverage

Rapid, sustainable growth amid exposure to smartphones/tablet PCs/portables. Great
Release of PM-OLED early
customer base (Apple). Highly promising product pipeline (PM-OLED, 2D-3D conversion, etc.) adopter customer

DIALOG
SEMICONDUCTOR

FRAPORT

Comment
Catalyst/Next news
Leading LED equipment supplier (MOCVD tool) benefitting from strong grwoth trends, > than Potential major orders/2010
expected acceptance of LED lighting
prelims due 1 March

Growth
AIXTRON SE

Cheuvreux German small-/ mid-cap focus list

January 2011

Smaller Companies Review

January 2011

GERMANY

Smaller Companies Review

IV – Overview of the German smaller
companies segment
Our Cheuvreux German small- and mid-cap universe, defined as those companies with a
market capitalisation of less than EUR4.0bn, currently consists of 77 companies. Since
the June 2010 edition of this review, we have added Gerry Weber, Ströer and Tom Tailor
to our research coverage. In this edition of our German Smaller Companies Review we
have compiled updates on those stocks within our universe with a market capitalisation of
between ~EUR200m and ~EUR4bn.
ADDITIONS TO THE CHEUVREUX GERMAN SMALLER COMPANIES COVERAGE LIST SINCE JUNE 2010
Company

Sector

GERRY WEBER
STRÖER
TOM TAILOR

Rating*

Target price (EUR)

Mkt. Cap (EURm)

Retail - Textiles

2

39.9

730.0

Media - Advertising

2

23.0

1,137.7

Retail - Textiles

1

19.6

276.0

*Current rating; Source: CA Cheuvreux

Performance small cap vs. large cap
The year 2010 drew to a close on a very friendly note. For investors, 2010 consisted of
two distinct phases: in the period from January to August, returns on equity investments
were generally low in both the large and mid/small-cap segments. However, a sudden
trend reversal in early September proved to be the starting point for a sustained equity
rally, driving the German indices for a second consecutive year of significant gains. Once
again, for the eighth time in the past ten years, German mid-caps outperformed the large
caps with the MDAX having risen 34.9% in 2010 vs. 16.1% for the benchmark DAX index.
The smaller companies index SDAX reported even stronger gains, up 45.8%. The
TECDAX, weighed down by the strong under-performance on the solar sector, reported
only a modest 4.0% gain.
ANNUAL PERFORMANCE OF GERMAN INDICES
DAX

MDAX

SDAX

TECDAX

2001

-19.8%

-7.5%

-23.0%

-59.9%

2002

-43.9%

-30.1%

-27.7%

-68.8%

2003

37.1%

47.8%

51.3%

50.9%

2004

7.3%

20.3%

21.6%

-3.9%

2005

27.1%

36.0%

35.2%

14.7%

2006

22.0%

28.6%

31.0%

25.5%

2007

22.3%

4.9%

-6.8%

30.2%

2008

-40.4%

-43.2%

-46.1%

-47.8%

2009

23.8%

34.0%

26.7%

60.8%

2010

16.1%

34.9%

45.8%

4.0%

Source: Thomson Reuters, CA Cheuvreux

13

www.cheuvreux.com

5% 5 NORDEX -47.cheuvreux.9% 17.6% 52.7% 13 ELRINGKLINGER 60.5% 10 FUCHS PETROLUB 69.8% 21 CROPENERGIES 46. returning rapidly to precrisis levels and in some instances already exceeding previous peaks.4% 21 CARL ZEISS MEDITEC 14.6% 44.5% 24 SOFTWARE AG KUKA AG 42.5% 10 MANZ AUTOMATION AG -25.2% 18 PFEIFFER VACUUM 49.0% 9 CONERGY AG -25. BEST AND WORST PERFORMERS IN 2010 – CHEUVREUX GERMANY SMALL/MID-CAP UNIVERSE BEST WORST Company YtD Company YtD 1 2 HUGO BOSS SAF-HOLLAND 128.8% 13 QIAGEN -5.7% -60. considering the fact that 1) from a risk/reward perspective investors have had little alternative to equities. whilst having stabilised public confidence and private consumption.4% 11 12 SMA MVV ENERGIE -24.9% 16 17 KONTRON PRAKTIKER -1.5% 19 20 PUMA HEIDELBERGER DRUCK 5.2% 55.7% 18.4% 24 AIXTRON SE BAUER 17.6% 5 JUNGHEINRICH 116.9% 18 STADA 4. For Germany in particular it remains to be added that the government's 'short-time work' scheme has proven a welcome element in terms of providing outstanding flexibility for corporates with regards to staff utilisation (thus giving them a true competitive edge).3% 11 12 TOGNUM AG GERRY WEBER 68. CA Cheuvreux 14 www.6% 1 2 Q-CELLS ROTH&RAU -72.8% 67.2% 126.3% 9 SARTORIUS AG 78.1% 8 OVB -30.2% -36.2% 122.5% -51. 2) global monetary policy has been particularly expansionary and supportive.9% 101.1% 6 7 PHOENIX SOLAR CENTROTHERM PV -44.7% 46.1% 6 7 DRAEGERWERK LEONI 103. consistently beating market expectations amid greater than projected economies-of-scale. with the notable exception of commodities. on the one hand to avert deflation (H1-10) and on the other hand to prevent a further spreading of the sovereign debt crisis in parts of Europe.1% 3 4 PFLEIDERER SOLARWORLD -59.8% 8 TUI 78.8% 6.7% 22 23 KSB HORNBACH HOLDING AG 45.0% 16 17 WACKER NEUSON SE DEMAG CRANES AG 54.1% 19 20 BRENNTAG AG AURUBIS 48.8% -9.1% 3 4 DIALOG SEMICONDUCTOR LANXESS 123.4% 22 23 BILFINGER BERGER KLOECKNER & CO SE 15.January 2011 GERMANY Smaller Companies Review In retrospect.0% -4.5% 42.4% 14 15 MLP RHOENKLINIKUM -5. and 4) investors have displayed increasing willingness to assume risks again (probably encouraged by the highly depressed level of bond yields).9% 25 25 Source: Thomson Reuters.1% 1.5% 14 15 GFK SE TAKKT 57.com . 3) corporate earnings have developed very favourably. the robust performance of equities in 2010 is understandable.

At the same time.com . although a return to full normality may take some time. lack of labour market flexibility. While further painful restructuring has shifted down management agendas. 15 www. as soon as the EU rescue scheme was finalised and a collapse of the euro avoided.cheuvreux.). German equities were hit by the 'Greek disease' until the summer. bureaucracy. corporate Germany will not rest on its laurels but will continue to optimise its portfolios/market positions and to globalise value-added. and c) abundant liquidity thanks to investors' reduced risk aversion (in the second half of 2010). we are convinced the rise in domestic wages/salaries and the limited availability of skilled labour will not throw a spanner in the works. However. The rise in the German stock market in particular has been fuelled by a) recovering global economic activity and sustainably surging demand for German exports. With productivity outweighing the drawbacks of their location (high wages and payroll expenses. thereby gaining increasing market shares and expanding earnings rapidly. On average. We are convinced corporate Germany will continue to exploit its very healthy competitiveness. German stock prices have also been boosted by corporate earnings growth exceeding original expectations and the global credit market returning to a more normal state of affairs. etc.January 2011 GERMANY Smaller Companies Review With the vast majority of global economic imbalances far from resolved and government debt going through the roof. with very few breaks for consolidation within the final four months of the year. equities started to climb the wall of worries. b) the accelerated domestic economy. German enterprises should continue to fare better than many of their counterparts in other countries. excessive taxation.

CA Cheuvreux .cheuvreux. CA Cheuvreux SDAX INDEX – 5-YEAR PERFORMANCE GERMAN SMALL CAP INDICES VS. DAX (2010) 140 160 150 130 140 120 130 120 110 110 100 100 90 80 Jan 90 Feb Mar Apr May Jun Jul Aug MDAX Sep Oct Nov Dec Jan DAX Source: Thomson Reuters. CA Cheuvreux 2010 MDAX 2011 DAX Source: Thomson Reuters. CA Cheuvreux MDAX VS. CA Cheuvreux Source: Thomson Reuters.GERMANY January 2011 Smaller Companies Review MDAX INDEX – 5-YEAR PERFORMANCE TECDAX INDEX – 5-YEAR PERFORMANCE 9000 1150 8000 1050 7000 950 6000 850 5000 4000 750 3000 650 2000 550 1000 450 0 2006 2007 2008 2009 2010 2011 350 2006 2007 2008 2009 MDAX 2010 2011 TECDAX Source: Thomson Reuters.com 80 Jan Feb Mar Apr May Jun Jul Aug SDAX Sep Oct Nov Dec Jan DAX Source: Thomson Reuters. DAX – LAST 5 YEARS 210 7000 6500 6000 140 5500 5000 4500 4000 70 3500 3000 2500 2000 2006 2007 2008 2009 2010 2011 0 2006 2007 2008 SDAX SDAX 2009 TECDAX Source: Thomson Reuters. DAX (2010) SDAX VS. CA Cheuvreux 16 www.

Hence. the headwinds from continued deleveraging. We believe Germany AG will continue to play its cards well in 2011 by taking further market shares and optimising its global competitiveness via restructuring. the slowly abating credit crunch. as well as the belief that Germany will lead central Europe on its way back to growth.com . whilst at the same time making use of its balance sheet strength to fuel growth. As long as there is no major credit market incident and as long as FY rates remain not too far from current levels. 2) optimise their product portfolios and competitive positioning. and hence improved confidence. pushing many companies beyond their pre-crisis highs. and 3) strengthen their global presence (many private-equity-held assets are poised to be put up for sale and many German corporates have well-filled war chests). but not as important as in earlier years. Based on considerations such as balance sheet strength. declining unemployment. the extent to which expectations may be trumped remains to be seen. as Germany's relative competitiveness is unparalleled and restructuring in this country is still being taken very seriously. Of course. more pronounced breather in 2011. our Best Picks for the first half of 2011 are as follows: 17 www.cheuvreux. consensus underestimation of the positive impact of operational leverage on earnings and cash flow and dividend payouts. Best Picks for H1 2011 Against this backdrop. The German stock market is well positioned in the European context. With few attractive alternatives in other asset classes. stocks will likely draw a sizeable share of the abundant liquid funds available for investment. rock-bottom risk premiums for corporate bonds. and further cost improvements (economies-of-scale outweighing rising headcount and raw materials costs) could make 2011 another fruitful year. Assuming continued strong y-o-y global economic growth (3. In this context. R&D and administrative functions.January 2011 GERMANY Smaller Companies Review Outlook for 2011 Looking ahead. investors should expect more growth/restructuring/corporate action in 2011. earnings growth will probably provide the fuel needed for the equity market to maintain its ascent. government spending cut-backs and the rise in both wages/salaries and commodity prices should be compensated for by continued global economic growth (with the US and western Europe on a moderate recovery track and the emerging world mostly growing rapidly). recurring free cash flow generation.8% in 2011E following 4. restructuring will also continue to play an important role. While some of that is certainly discounted by now. not least with Germany being well positioned to supply the world with capital goods and infrastructure goods and systems. the rebound of the USD after a long period of weakness. we believe. We believe 2011 will be another positive year from a corporate earnings perspective (assuming further top-line growth and a modest average rise in EBIT margins). organically as well as through acquisitions. we expect the German stock market to climb before taking a first. increasingly. the members of Cheuvreux Germany's analyst team have singled out a number of mid/small caps that we believe represent an attractive portfolio of investment ideas with the potential to outperform the market as a whole.2% in 2010). supply chains and. In particular. German exports are set to continue to blossom. For Germany this means we expect companies to continue to 1) optimise their manufacturing networks.

portable media devices) and its products gaining increasing share at customers. Despite the shares' recent strong outperformance.7% and non-recourse debt-adjusted EV/EBITDA of 6. This should drive AIXA's shares.5. Besides Air Liquide. We estimate an EBITDA CAGR 2010-12E of 13. which is estimated will generate net cash proceeds of ~EUR500m. the CAPEX cycle for LED lighting is expected to be the next major driver for AIXA's new bookings. they still offer attractive value. Dialog shares. however.5% on average for the European peers. but some bears in the market will have to adjust their overly negative views on the company's future business prospects. upside 33%): The global LED equipment (MOCVD) market remains duopolistic for the time being.3x P/BV with a sustainable ROE of ~16%. After having proven its resilience during the recession. upside 12%): Fuchs Petrolub benefits from its strong positioning in niche markets. upside 15%): Bilfinger continues to successfully execute its strategic plan to downsize its construction activities.cheuvreux. EBIT margin and dividend in the crisis year 2009. trading at just 9. The company has won new business from major customers and has key products under development that could generate sizeable incremental sales from H2-11E. combined with the scheduled aviation fee increases – by 24% in several steps through 2015 – and the 50% rise in high-yielding retail space. top-line growth in excess of 30% y-o-y and bottom-line expansion of more than 50% p. a dividend yield of 4. Its performance in each of the last five quarters has been far better than assumed. will drive earnings growth. Due to its fixed-cost reductions it is now even leaner. We had already assumed at least stable bookings. Half way through the company's major investment programme. it is likely to maintain its momentum.a. 6. 1. Fraport (price target: EUR56.3x (all multiples 2011E).8% vs. Now. we now estimate that the Aviation division will meet its target to cover its cost of capital by 2015. should serve as a catalyst.com . execution risks are declining (costs 10-15% <budget) and its new capacity is coming on stream just as PAX growth trends are being fully restored. especially in the key Industrial Services division (+23% in Q3 after +19% in Q2) and it raised its guidance twice in 2010. This weighed on the company's shares. with AIXA being the undisputed market leader.January 2011 GERMANY Smaller Companies Review Aixtron (price target: EUR41. The significantly higher than expected pace of PAX growth. Following the CAPEX cycle for LCD backlighting. Its focus on innovations and cost discipline will drive its margins further. 18 www. its incoming orders have picked up sharply. upside 16%): Fraport offers investors an attractive bet on the global air traffic growth theme: the operator of the Star Alliance's largest European hub. Fuchs Petrolub (price target: EUR115. resulting in a decline in AIXA's new bookings. especially bearing in mind the added capacity from 2011/12. Bilfinger Berger (price target: EUR70. inexpensive tech investment.5x P/E. there are tangible signs that the LED lighting market is gearing up earlier than widely expected. are a highly attractive. The company benefits from rising volumes in an upturn and from lower raw material costs in a downturn. is strategically well positioned to outpace its major European competitors. Fuchs is the only chemical company that was able to increase its EBIT. Furthermore. upside 12%): With Dialog in the sweet spot of market growth (smartphones. Operationally. Europe's best way to play the 'Apple-mania'. Bilfinger has consistently exceeded expectations throughout 2010. to fundamentally reduce its risk profile and earnings volatility and free up significant capital to invest in the further expansion of its market-leading positions in each of its Services businesses.. especially as >40% of the stock are held as shorts. probably even beyond 2011E. Dialog Semiconductor (price target: EUR20. including the potential IPO of its Australian business Valemus. During 2010 concerns arose that there may be a noticeable pause between the two cycles. The recent disposal of Valemus.

Automotive is likely to reach its peak sales of the last cycle. in particular in the automotive industry. upside: 23%): We expect the business environment to improve further due to continued strong demand from the semiconductor industry and better prospects for the company's Metrology business. EE and Baltic states) will be driven by 1) rising fuel prices. The market is completely ignoring the company's margin expansion potential and appears to discount sales of EUR5.January 2011 GERMANY Smaller Companies Review GEA (price target: EUR26.e. and 2) a likely positive Elbe dredging decision. we expect it to remain relatively resilient given its successful internationalisation strategy: While we expect budgets within NATO to be under pressure. Margin expansion is driven by operational leverage in Custom Research. GfK is on track to approach the upper end of its targeted adj. operating margin range of 13-15% by 2012E.2bn in 2007. The trading environment remains positive: the likely recovery of Hamburg's regional advantage among North Range ports (close proximity to Germany. Assuming cont'd macro recovery. strong growth outside NATO is expected. our estimates with EUR5. Jenoptik has tax-loss carry-forwards of EUR1. upside 10%): GfK offers a fundamentally strong franchise with solid growth potential at attractive multiples.5/share for FY-12E based on a pre-tax RoCE of 10. Given its current low capacity utilisation.4%(!).6% for 2013E vs. i.60. Valuation remains inexpensive! 19 www. in 12E with a new peak EBIT margin of 7-8% compared to just 5. BISS cost saving measures and discontinuation of investments in Media. as the total cost of transport to final destinations is important. Rheinmetall (price target: EUR75. upside 28%). upside 19%): We advise purchasing GEA shares now to capture the benefits of the group reorganisation that are likely to emerge over the next 1-2 years.5/share. upside: 26%): Although Rheinmetall's Defence division will be affected by budget cuts.6%.1bn and an EBIT margin of just 9. In addition.2bn and 12. Our EVA model yields a fair value of EUR6. respectively. the company does have considerable restructuring potential in our view. HHLA (price target: EUR44. Its crown jewel. GfK (price target: EUR40. HHLA will be able to accommodate a recovery in volumes without needing much additional growth capex.cheuvreux. upside: 23%): We continue to rate Leoni a 1/Selected List and the stock remains on our German Top Picks list for a second consecutive year for the following reasons: 1) the company's unprecedented growth track record (CAGR 04-10 14%) has established it among the top 4 in global wiring systems production. As a result of asset disposals and more efficient working capital management.EUR160m end of FY-09. 2) more than 90% of its staff are employed in low-cost regions. CAPEX is expected to drop to maintenance levels from 11E onwards. continued robust organic growth in R&T. 3) the shares are still trading below the peers despite Leoni's superior growth profile and the huge earnings rebound that looks set to continue in 2011E. EUR2. While GEA will not remain unaffected if macro conditions worsen. Leoni (price target: EUR40. still has significant growth potential as it expands its global footprint in emerging markets. which allows it to keep a tight control on its costs. company was able to reduce net debt below EUR100m from c.com . Jenoptik (price target: EUR6. the Retail & Technology division (60% of EBIT).6% in 2007. Rheinmetall adopted to the internationalisation trend at an early stage.

which we expect to result in a 33% sales CAGR between CY09 and CY12E.com . it is poised to double its group sales every 5-6 years. upside: 11%): Software AG has successfully positioned itself as an innovation leader in the business process excellence (BPE) software arena. Vossloh (price target: EUR103. Due to the realisation of cost and revenue synergies from IDS Scheer. As its infrastructure is well placed to handle the additional sales volume. This was the sole reason for the rise in our target price to EUR19.70 from 20% to 10%. its main field of growth. trading at discounts of 15-25% to the EU software peers.cheuvreux. upside: 17%): We believe Tom Tailor offers convincing growth potential. At 14x earnings and less than 10x EV/EBIT (both for 2011E). 9% EBIT CAGR 2010-12E). the risk of a share overhang has been reduced considerably and now only applies to the 11. an improvement in the product mix (sales of products growing faster than services) and traditionally strong execution. The company's mid-term target stands at 30% EBIT return on sales (IFRS). we reduced our discount on our DCFbased fair value of EUR21. we expect Software AG to expand its EBIT margin from 24% in 2010E to 28% by 2012E. Tom Tailor (price target: EUR19. Hence.7% in CY12E.1% stake in Tom Tailor as of 1 December. the shares remain significantly undervalued. Strong JV partnerships formed in major early-stage growth markets Russia (Fasteners) and China (Switches). to be complemented by the acquisition of product vendors in adjacent software areas.6% in CY09 to 9. Absolute valuation models (EV/CE & DCF) suggest further upside!" 20 www. a level that the market is far from having discounted.60. The company can be expected to deliver sustainable. we anticipate a cost leverage that will lead to EBIT margin expansion from 5.6% Morgan Finance stake. Initiatives to increase its share of insourcing of key components/new models to structurally increase profitability in locomotives. As a consequence of this.January 2011 GERMANY Smaller Companies Review Software AG (price target: EUR120. augmenting its successful Chinese Fasteners business. upside: 9%): Vossloh offers a pure play on the global emerging market rail growth theme with above-average earnings visibility and stillundemanding valuation. mainly via its own retail expansion.6. delivering annual EPS growth of roughly 18% on average. Earnings growth resumed in 2010 (est. high-single-digit top-line growth. As private equity group Alpha Funds sold its entire remaining 17.

BREAKDOWN BY RATING CATEGORY 40 35 30 25 20 15 10 5 0 1/Selected List 2/Outperform 3/Underperform 4/Sell Source: CA Cheuvreux 21 www.com .January 2011 GERMANY Smaller Companies Review Rating distribution The distribution of our ratings across the German small-/mid-cap universe is currently fairly balanced with 44% of our mid-cap universe stocks carrying a 2/Outperform rating and 43% rated 3/Underperform. We rate 8% 1/Selected List and have a 4/Sell rating on just 5%.cheuvreux.

9 PFLEIDERER WINCOR NIXDORF AG SYMRISE FUCHS PETROLUB PUMA SOFTWARE AG AIXTRON SE CTS EVENTIM HUGO BOSS CARL ZEISS MEDITEC QIAGEN STRATEC BIOMEDICAL SYSTEMS FIELMANN PFEIFFER VACUUM DIALOG SEMICONDUCTOR RATIONAL 33.0 LEONI PHOENIX SOLAR 4.8 16.0 1.4 DIALOG SEMICONDUCTOR CARL ZEISS MEDITEC 17.53 5.1 3.8 4.2 SKW STAHL METALLURGIE HOLDING 8.30 4.7 3.4 5.4 15.1 3.45 5.62 3.6 CONERGY AG ROTH&RAU 3.2 9.4 14.33 4.5 3.11 4.1 1.7 11.0 22.2 1.1 1.0 2.7 3.1 SMA 7.0 5.0 12.1 Q-CELLS Q-CELLS PFLEIDERER 2.7 SMARTRAC N.58 4.0 2012E P/BV (x) SOFTWARE AG KUKA AG FUCHS PETROLUB STRÖER HHLA AIXTRON SE STRATEC BIOMEDICAL SYSTEMS DIALOG SEMICONDUCTOR WINCOR NIXDORF AG OVB PFEIFFER VACUUM CTS EVENTIM FIELMANN HUGO BOSS RATIONAL Highest WACKER NEUSON SE TUI EUROKAI KGAA JENOPTIK VTG AG PHOENIX SOLAR HORNBACH HOLDING AG SOLARWORLD HEIDELBERGER DRUCK CONERGY AG ROTH&RAU NORDEX PRAKTIKER Q-CELLS PFLEIDERER Lowest 2.60 3.0 3.2 4.9 12.3 SAF-HOLLAND 5.9 0.5 8.3 2012E SYMRISE DEMAG CRANES AG WINCOR NIXDORF AG MVV ENERGIE TOGNUM AG FIELMANN KUKA AG LEONI 3.6 8.9 1.62 3.2 4.66 4.9 10.V.6 3.8 0.6 0.2 13. 17.1 STRÖER CROPENERGIES HHLA 24.com PRAKTIKER 16.5 18.5 2.1 www.0 0.9 0.cheuvreux.8 4.8 QIAGEN 32.3 4.7 18.9 PRAKTIKER SOLARWORLD 8.3 14.3 13.8 0.7 0.1 1.5 9.8 TUI FRAPORT 20.5 3.4 4.5 5.22 6.2 3.0 11.3 0.7 16.3 3.16 4.8 0.2 4.5 0.1 2.64 4.7 MVV ENERGIE PFEIFFER VACUUM 18.VALUATION MULTIPLES January 2011 Smaller Companies Review .0 8.7 FIELMANN RATIONAL 18.5 OVB BAUER HEIDELBERGER DRUCK JUNGHEINRICH HOCHTIEF LEONI Highest 9.3 TOGNUM AG TUI SOLARWORLD Highest 9.6 NORDEX P/CF (x) Lowest 2012E Lowest P/E before goodwill (x) V .4 19.8 16.6 2.0 10.0 8.87 2012E Source: CA Cheuvreux SKW STAHL METALLURGIE HOLDI RATIONAL PFEIFFER VACUUM SAF-HOLLAND TAKKT BILFINGER BERGER MLP Highest Dividend yield (%) GERMANY RHEINMETALL 8.3 10.74 5.9 3.0 1.16 4.1 4.6 BAUER KSB ROTH&RAU VTG AG SAF-HOLLAND CONERGY AG NORDEX 9.

3 KLOECKNER & CO SE 0.0 3.0 2012E EV/EBITA (x) SYMRISE SMARTRAC N.3 4.6 4. CONT'D January 2011 Smaller Companies Review .1 1.6 5.2 0.9 10.4 12.2 STRATEC BIOMEDICAL SYSTEMS HUGO BOSS 2.7 12.5 9.4 0.2 31.2 PHOENIX SOLAR Q-CELLS EV/EBITDA (x) Lowest 2012E Lowest EV/Sales (x) VALUATION MULTIPLES.6 6.3 13.7 17.4 5.1 5.2 NORDEX SOLARWORLD PRAKTIKER PHOENIX SOLAR JUNGHEINRICH NORDEX ROTH&RAU 8.3 CONERGY AG DOUGLAS 0.3 8.23 www.9 0.com 2.6 PFEIFFER VACUUM DIALOG SEMICONDUCTOR 1.9 2.0 3.8 2.9 1.2 0.3 3.7 2.8 0. HUGO BOSS VTG AG STRÖER HOCHTIEF FIELMANN MVV ENERGIE RATIONAL BILFINGER BERGER CTS EVENTIM DIALOG SEMICONDUCTOR HHLA FRAPORT CROPENERGIES Highest LEONI GERRY WEBER JUNGHEINRICH RHEINMETALL PRAKTIKER SAF-HOLLAND HORNBACH HOLDING AG CONERGY AG KSB MANZ AUTOMATION AG SMA PHOENIX SOLAR NORDEX Q-CELLS ROTH&RAU Lowest 11.7 5.7 3.4 3.4 10.8 0.1 3.7 8.2 3.V.1 8.6 3.0 2.9 0.3 6.7 2012E EV/CE (x) FUCHS PETROLUB GERRY WEBER CARL ZEISS MEDITEC BILFINGER BERGER SMA HHLA PFEIFFER VACUUM HUGO BOSS HOCHTIEF FIELMANN 2.cheuvreux.4 0.7 3.6 0.2 12.8 5.2 PRAKTIKER BAYWA 0.3 SOFTWARE AG 2.7 3.8 0.5 13.1 4.8 2.1 1.6 0.6 ELRINGKLINGER AIXTRON SE 1.3 15.3 2012E Source: CA Cheuvreux STRATEC BIOMEDICAL SYSTEMS CTS EVENTIM DIALOG SEMICONDUCTOR RATIONAL AIXTRON SE Highest VTG AG SUEDZUCKER PFLEIDERER SKW STAHL METALLURGIE HOLDI JENOPTIK KLOECKNER & CO SE ROTH&RAU BAYWA NORDEX KSB TUI HEIDELBERGER DRUCK HORNBACH HOLDING AG PRAKTIKER Q-CELLS Lowest GERMANY LEONI 0.2 AURUBIS 0.0 5.2 QIAGEN CTS EVENTIM DIALOG SEMICONDUCTOR 3.1 FRAPORT FIELMANN 3.8 12.1 4.7 9.6 12.6 9.6 3.4 0.4 JUNGHEINRICH HOCHTIEF 0.8 0.3 4.4 2.6 0.0 4.5 6.7 1.5 4.6 4.8 8.2 STRÖER SYMRISE 2.6 12.9 9.0 12.6 0.5 9.6 RATIONAL STRÖER SGL CARBON FRAPORT HHLA SYMRISE BILFINGER BERGER HUGO BOSS CROPENERGIES QIAGEN STRATEC BIOMEDICAL SYSTEMS PFEIFFER VACUUM FIELMANN CTS EVENTIM RATIONAL Highest SAF-HOLLAND LEONI CONERGY AG TUI KSB SMA HORNBACH HOLDING AG MANZ AUTOMATION AG Highest 0.1 13.8 2.8 11.8 HHLA 2.3 2.8 12.0 12.8 9.8 0.7 3.9 0.3 6.9 3.7 0.7 2.3 3.2 Q-CELLS TUI 0.4 12.5 0.9 5.9 1.0 8.3 HORNBACH HOLDING AG 0.4 0.2 ROTH&RAU 0.8 13.

8 8.5 HEIDELBERGER DRUCK 10.3 46.9 4.4 52.7 3.4 4.2 51.8 9.2 8.4 STRATEC BIOMEDICAL SYSTEMS PFEIFFER VACUUM 60.1 4.5 PFLEIDERER FRAPORT FCF yield (market cap) Lowest 2012E Lowest ROCE (Pre-tax) (%) VALUATION MULTIPLES.0 DIALOG SEMICONDUCTOR GEA JENOPTIK EUROKAI KGAA DEMAG CRANES AG LEONI SUEDZUCKER ROTH&RAU BILFINGER BERGER KLOECKNER & CO SE RHEINMETALL SOLARWORLD JUNGHEINRICH SAF-HOLLAND PFLEIDERER TUI PRAKTIKER 108.7 12.4 9.9 FRAPORT SUEDZUCKER TUI 9.7 10.1 SMA CTS EVENTIM 104.7 RHOENKLINIKUM HOCHTIEF RATIONAL 11.0 PRAKTIKER HORNBACH HOLDING AG SKW STAHL METALLURGIE HOLDI 7.6 9.0 10.4 17.24 www.6 2.8 38.1 11.6 0.com 43.3 Source: CA Cheuvreux DIALOG SEMICONDUCTOR Highest 10.9 VTG AG 0.2 FIELMANN 52.7 8.1 2012E GERMANY BAYWA KUKA AG 7.2 WACKER NEUSON SE Q-CELLS 8.6 MVV ENERGIE 9.1 9.8 8.0 38.7 2.8 35.9 35.9 4.6 4.4 2.4 12.0 JENOPTIK BRENNTAG AG 0.4 3.2 1.8 50.7 31.5 4.4 6.9 8.8 PHOENIX SOLAR HUGO BOSS HOCHTIEF CARL ZEISS MEDITEC PUMA SOFTWARE AG FUCHS PETROLUB GERRY WEBER 51.2 8. CONT'D January 2011 Smaller Companies Review .1 13.2 24.cheuvreux.6 36.7 FIELMANN BAYWA TOM TAILOR SGL CARBON WACKER NEUSON SE MANZ AUTOMATION AG CENTROTHERM PV Highest 10.5 CROPENERGIES BAUER 6.

cheuvreux.com .Company profiles 25 www.January 2011 GERMANY Smaller Companies Review VI .

1) P/E (x) Yield (%) 0.6 40.cheuvreux. Egora Hold. with Alcatel-Lucent.4 38.5 EV/EBITDA (x) 4. driven by stronger enterprise business in North America (high frequency trading and financial applications) and continuing growth in Ethernet access and carrier infrastructure. up 38% y-o-y and 17% q-o-q.January 2011 GERMANY Smaller Companies Review SECTOR No rating Rating N/A Target price (6 months) ADVA Optical Networking Riding the good waves Q Reuters: ADAG.7m in Q1 and EUR1.2m and gross debt of EUR40m).6 13. Thanks to the operating leverage.4m or 5.6 50.6 0. of shares.6 60.0%.0 ROCE (%) - - - - EV/Capital empl.0 5.1 17.6 01/01 04/02 07/03 10/04 01/06 Price/TECDAX 04/07 07/08 10/09 01/11 Price Sector focus Sector Top Picks Least favoured Shareholders Free Float 86.6 8.6 20.5m.6 30.cheuvreux.6 30.6 10.0 0.2 7.39m Performances 1 month 3 months 12 months 16.2m (gross cash of EUR66. Going forward.9 4.1) (0.0) (1. Q EUR6.6 20. It will also compete with companies offering end-to-end solutions.com (44) 207 621 51 79 Disclosures available on www.0 Net debt/EBITDA (x) (1. At the end of Q3. (x) - - - - Source: Factset Cheuvreux does not currently cover ADVA Optical Odon de Laporte Research Analyst odelaporte@cheuvreux.DE Bloomberg: ADV GR Stock data Recent developments – Back to growth Nine-months (Jan-Sept) 2010 revenues grew 23% y-o-y to EUR212.2% 142.com Q Q 26 www. 70. selling solutions combining IP routers and optical equipment. it will face a highly competitive environment on the pricing front. 14.6 40. Market capitalisation Free float Enterprise value No.0 0. adjusted Daily volume EUR308m EUR264m EUR309m 47.6 60. In that respect.0 0. Q2 and 300bp vs. it is confident it can deliver double-digit growth. the partnership signed with Juniper is likely to provide significant opportunities.4% Absolute perf.42 Price (07/01/2011) Outlook – Sustainable growth ADVA expects to report revenues between EUR76m and EUR81m for Q4 with a pro-forma operating margin between 2% and 6%.2 Attrib. Its gross margin came in at 40% in Q3-10. ADVA's proforma operating income increased in Q3 to EUR4. 2) the explosion of mobile data traffic in Ethernet access.com .3 6.0% 2009E 2010E 2011E 2012E 92. Relative perf. In Q3 ADVA reported revenues of EUR80.6 0. Whilst ADVA will certainly benefit from powerful drivers.9) (1.7% -0. the company had a net cash position of EUR26. Q1 as the company has cut prices to gain access to strategic customers with major longterm business potential.6 70.3m. for instance.1% 139. and 3) continuing growth of video content in carrier infrastructure. down 100bp vs.9m in Q2).5% of sales (EUR2.4% 8. driven by 1) the tremendous growth of cloud computing in enterprise networks.4% 12.6 50. FCF yield (%) 8.6 10.6 2.992m EUR 1.

Q Tremendous growth in mobile data traffic. „ Partnership Investment case ADVA is a good vehicle to play trends such as: From a regional perspective ADVA generates 72% of its sales in the EMEA region. which forces mobile operators to invest heavily in their backhaul infrastructure to avoid the congestion of their networks.cheuvreux. We also believe ADVA is a takeover candidate as the telecoms equipment industry is still on the consolidation path. ADVA now has a balanced customer base and a product portfolio with three pillars: Q Infrastructure solutions for carriers/operators (45% of revenues in 2009) Q Q Ethernet access for carriers (30%) Transmission technologies for enterprises (25%).GERMANY January 2011 Q Smaller Companies Review Company profile Q Global provider of communication infrastructure solutions ADVA was founded in 1994 in Meiningen and Munich.000 enterprises worldwide. making it the global leader in Ethernet access devices and the fourth player worldwide in metro WDM (no. Its solutions are deployed at more than 250 carriers and >10. which need to invest accordingly in their telecoms infrastructure. SWOT analysis Strengths Weaknesses „ Focuses „ Resellers on growth segments within the telecoms equipment industry High level of dependency on key staff „ with Juniper Threats Cloud computing „ Growth are squeezing margins Opportunities „ „ Pricing pressure in mobile data traffic „ Continuing Q Adoption of cloud computing solutions by enterprises.100 employees. Originally focused on storage solutions for enterprise. Q Q growth in video traffic 27 www. ADVA has 1.com . 23% in the Americas and 5% in Asia-Pacific.2 in Europe).

0m (cons: EUR200.2m. AIXA's order backlog at the end of September 2010 stood at EUR279m.9 31. AIXA raised its EBIT margin outlook for 2010 from 33% to ~35% (we predict 35%).9 61.9 1.0% 24. an increasing proportion of LED lighting-related equipment orders.8 5.9 1. of shares.com (49) 69 47 89 75 42 09/09 . Net profit came in at EUR56.4% 9. Q EUR31. STMicroelectronics Least favoured Shareholders Free Float 90.8% 49. adjusted Daily volume Performances According to a Digitimes article.4 14. (x) 17.9 61. TV vendors have clearly now completed the inventory adjustments that led to a deceleration of growth in LED demand for backlighting in summer/autumn of this year and were a burden on all LED-related stocks.g. The company also surprised the market with a high Q3-10 order intake of EUR200. LED lighting is set to become the main driver for further market growth and will probably displace TV backlighting as the biggest application from 2014-2015.8 4.6m vs. FCF yield (%) 0. beating our estimate of EUR200. LED orders for LCD TV backlighting started to pick up again in November 2010 and are set to increase significantly in March 2011 when TV vendors launch new models. Relative perf.9 21.0m). The company's management is now less concerned there will be a pause between the LCD backlighting and the LED lighting CAPEX cycles than it was a few months ago.0 1.71m 03/02 07/03 10/04 12/05 03/07 Price/TECDAX 06/08 Sector focus Sector Top Picks Dialog Semiconductor. it should come as a positive surprise.6 Disclosures available on www. also clearly ahead of our EUR50.1 7. Micronas.8m. e.9 01/01 Outlook – Improving momentum for LED lighting AIXA issued bullish statements regarding the improvements in momentum in the emerging LED lighting market and now sees tangible signs of an earlier than widely expected market development.9 81.6m. Camma 9.9 21.7% 22. Sales came in at EUR212. The recent news flow offers further confirmation that the drop in LED demand from the TV segment was just a temporary issue and LEDs remain a growth market.7m forecast and consensus of EUR50.1% 32.50 Target price (6 months) Aixtron Reuters: AIXGn.7%.7) (2.DE Bloomberg: AIXA GR LED lighting is gearing up Q Recent developments – Strong Q3 results & better outlook AIXA's Q3-10 results were better than expected. In Q410 so far it has seen a continuation of the healthy demand for equipment and has noted some improvement in momentum for LED lighting-related tools.3 24.5 5.2) Yield (%) 0.6 2.424m EUR 44. As street consensus currently does NOT anticipate a smooth transition between these two cycles. indicating that vendors have started placing orders to meet demand in 2011.7m.2 NS NS NS EV/Capital empl.9 101. EUR3102m EUR2813m EUR2439m 99.5) (1.com 12/10 Price Klaus RINGEL Research Analyst kringel@cheuvreux.9 81.8% Absolute perf.9 41. 1 month 3 months 12 months 16.9 13.8 15.9 41.4m (+14% q-o-q). Due to the strong business recorded in the first nine months of 2010 and the good visibility for the remainder of this year.9 2.20 Price (07/01/2011) Stock data Market capitalisation Free float Enterprise value No. 11% ahead of our forecast of EUR180m and consensus of EUR184m. Leading LED producer Epistar noted that orders from Koreabased packaging houses have begun to pick up.com Q Q 28 www.0% EUR41.cheuvreux.6 EV/EBITDA (x) 37.7 1.7 Net debt/EBITDA (x) (5.9m forecast and consensus of EUR71. 101.2 ROCE (%) 55. whilst reiterating its sales target of ~EUR750m (we: EUR760m).cheuvreux.3 7. our EUR72.3% 2009 2010E 2011E 2012E P/E (x) 52. It reported ongoing healthy demand for new LED equipment and expects new bookings to remain strong around the current level going forward.0) (2.8 Attrib.January 2011 GERMANY Smaller Companies Review SEMICONDUCTORS 1/Selected List Rating +33.9 27. currently driven largely by the products' growing penetration in TV backlighting units. Looking ahead. EBIT came to EUR82.

with AIXA as the undisputed market leader. it is by far the world market leader in this area. Its customer base is broadly diversified (LED. With a MOCVD market share of 68% in 2009. especially from LCD TVs and improving momentum from LED lighting. consumer/optoelectronics. telecom suppliers. – mainly using the MOCVD process) and silicon semiconductors (based on CVD technology). the company's own valuation history. „ Investments in probable future markets may not pay off „ Valuation AIXA's shares are trading at 14x PE.g. and memory makers). 29 www. In 2005 the company entered the silicon production equipment (SPE) industry by acquiring Genus Inc. none of the mentioned newcomers has yet succeeded in delivering a MOCVD tool to match those of the incumbents'. LEDs are considered to be a strong growth market. The LED equipment (MOCVD) world market remains duopolistic for the time being. push-outs and cancellations of equipment deliveries and a significant pause between the LCD backlighting and the solid state lighting investment cycle are exaggerated and we are convinced the market will have to alter its negative view of AIXA. Q SWOT analysis Strengths Weaknesses Market and technology leadership in a duopolistic MOCVD market with high barriers to entry (production process expertise) „ High FX sensitivity (AIXA generates over 90% of its sales in USD vs. OLEDs. Continuing strong LED growth is triggering demand for additional equipment. thus triggering a significant need for additional LED production equipment to meet the growing demand. However. blue-ray lasers) as well as ALD/AVD.g. e. general illumination (solid-state lighting) is seen as the next mass market for LEDs.cheuvreux. Q Investment case We expect AIXA's order intake to remain stable around the current high level of EUR200m for at least the next two quarters. if ever. Carbon Nanotubes) „ Powerful new competition from silicon chip tool makers entering AIXA's territory (e. with 93% of its revenues generated in Asia. Market researcher Strategies Unlimited expects the high brightness LED market to expand to USD19bn in 2014 from USD5. LEDs. The biggest application is currently backlighting for LCD screens (51% of LED market). displays. 6. keeping only R&D and assembly in house. market share losses at AIXA vs. strong balance sheet „ Dependent on the cyclical semiconductor industry „ Highly scalable business model „ Opportunities Threats Sound long-term growth prospects for many end-markets using MOCVD-made devices (incl. Despite numerous rumours. For 2011E and 2012E we assume average orders per quarter of EUR177m and EUR249m respectively. The remainder is for silicon semiconductor manufacturing systems.5x EV/Sales (all for 2011E).. for the production of LEDs and OLEDs (approximately 99%). Q Q Very flexible management of production capacities Aixtron outsources 80% of its production process. We see a genuine chance for further a acceleration in new bookings from YE-11E with the emergence of the LED lighting market. peers and vs. Lingering concerns about new competitors entering the duopolistic MOCVD market. followed by Europe (3%) and the USA (4%). etc. Moreover. Current valuation levels are attractive vs. Veeco.com . We believe the market currently has an overly pessimistic view of AIXA's shares. just 20% of its costs) „ AIXA is only a small player in the silicon semiconductor equipment area „ No bank debt. LEDs. Applied Materials). We see further upside for the shares due to the special situation in the LED equipment arena (duopolistic MOCVD world market with AIXA as the dominant player) and ongoing strong demand for LEDs. we do NOT expect this to happen soon. and this application is expected to become several times bigger than LCD backlighting.January 2011 Q GERMANY Smaller Companies Review Company profile Q World market leader for MOCVD equipment Aixtron develops and produces equipment for the production of compound semiconductors (HBTs.3bn in 2009 (CAGR09-14 29%). „ Early strategic positioning in promising future markets (OLEDs. a specialist in atomic layer deposition (ALD).2x EV/EBITDA and 2. Q LED equipment is Aixtron's main growth driver The vast majority of Aixtron's EUR279m order book (30 September 10) relates to compound semiconductor systems.

0 17.9% (45.0 (21.7 1.3 NS (39.5) NS 135.5) 9.0 0.0 4.8 8.7 0.0 0.4% (60.3) NS (10.3% 0.6 36.2 4.3 22.0 332.0 0.1) (2.6) (480.7) 37.6 6.8) 0.9 10.0 0.0 17.7) (2.6) 43.7 0.3 22.1% (18.0 186.6) 0.5 0.1% 0.0 18.0 62.0 32.0 (14.0 229.0 11.0 0.8 (524.0 0.1) (3.9 0.0% 214.1 (302.9) 5.7 0.0 23.1 284.4) (187.0 1.6 NS 0.2% 274.0 0.0 195.0 0.4) (52.8 92.0 5.7% (57.9% 0.8 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 30 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 140.047.2) (27.2 4.3 413.0 0.5) 2.7% (12.3) (18.0 (1.0 0.0) NS 45.0 0.1 0.1 2.1 1.0 (5.9 (71.0 0.3) 0.9 19.5 0.3% (54.0 (58.2 91.0 20.0 240.1 (75.0 44.8 0.0 (0.1 0.4) (390.4 0.5 156.0 1.8% 7.8) 15.3) 64.5) 0.0 1.0) (136.1 0.9 0.9) 0.0 0.6 20.7 (10.2 0.5 39.5 0.0 0.0 0.7 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.3) (17.0 0.0 6.9 0.2) 0.6 0.5 5.7 92.5) (8.7 139.5 58.3) 332.0 0.4% (41.9 0.7 124.8 94.4 0.7 110.0 7.0 0.0 (83.0 0.4 -0.1 2.8) 0.4) NS 143.7 0.0 229.3 (32.0 0.8) 0.0 94.0 0.6% 0.0 (53.7 724.0 0.9 (6.2 183.0 0.0 0.9 0.2) 0.0 (8.3% (29.3) (25.3 29.0 0.6 58.9) 0.5) (173.0 0.6) 54.5 NS (150.0 119.0 0.0 0.0 0.0 0.8) 32.1% (45.0 0.1 21.4) (43.0 9.5) 65.3 (663.9% (63.6 152.6 5.0 0.0 0.3 58.0 100.0 (40.0 0.0) (114.5 3.7% (11.5) 386.5 0.0 17.4 5.8 136.0 1.0 (5.0 31.9) 5.0 0.3 22.0 0.0 195.9 1.3) 306. for exceptional items Net attrib.0 0.8 (46.6% (66.0 0.0 0.6) 0.0 0.0 0.0 0.0 (87.1% (6.0 5.0 0.7 23.8 0.7 14.3% 139.7) 0.6) (3. profit [loss].1% (6.6) (42.0 53.0 1.0) 9.0 0.8) 3.0 (5.0 0.8 25.0 0.0 3.5 183.0 20.1% 1.2% (69.0 0.9) (590.0 (108.9% 302.2) (0.0 0.0 5.8) (3.7) 0.8% 760.8 0.7 0.2 0.0 186.7 14.3) 0.0 5.7 11.7 5.3 22.9 0.4 6.9 0.4) NS 156.7) 0.7 6.1 (50.0 0.1) (30.5) (2.3% (10.4) 266.1) 0.6 1.8 0.0 7.0% (75.1 895.5) (94.0 0.1 7.9 0.2) 279.8% (20.4 4.0 0.8) (20.0 0.0 0.5 71.0 9.5% 13.0 0.0 18.4 135.0 7.0 44.3 14.6) NS 122.0 0.0 (6.0 0.1 0.0 (55.5 65.0 195.1 3.0 0.7 0.3) 33.9 26.0) NS 64.0 0.7) NS 65.3) (51.0 35.0 13.0 0.1 3.0 0.0 0.0) (5.8) 0.7) (12.7) NS 0.7% (63.0 7.0 (19.4 225.5) NS 171.0 23.0 0.3 193.0 279.1 58.0 150.0 0.0 0.0 0.6% (27.0 0.6 58.0 0.0 266.3 0.0) 15.9 0.7 37.0 0.0 23.3) 0.cheuvreux.3 0.7) 113.0 0.0 0.2 0.9 2.7 (17.3 0.0 (2.0 0.8 37.5) NS 92.9) (1.4) (27.5 35.1 NS 871.0 0.0 186.0 (17.0 0.0 0.2 0.2) (1.6 0.0 0.0 0.0 229.3 4.7) 49.8 0.1 0.1) (140.0 0.7 23.9 111.0 (52.5 198.8) (6.0 0.5 114.8% 0.3) (8.3) 178.2 33.0 0.0 0.0 0.0 0.0 0.7 0.9% (9.0 30.4 27.0 (12.8% 0.0 0.3 0.0 0.1) 15.0 0.1) 0.0 0.0 (77.0 0.0 0.3) 324.0 0.9 0.8) 3.0 1.9 NS 0.0 (2.0 0.2% (42.0 0.1) NS 113.8 62.0 44.5 57.com .6) 149.4 143.January 2011 GERMANY Smaller Companies Review Aixtron FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.7) 45.5 42.0 1.0 0.5) 0. [inc.0 0.9 9.8 0.4 122.0 0.9 (855.5 4.4 www.3 20.2) 159.1) NS (0.6 19.6 212.1 4.5 0.0 32.0 16.0 0.7 183.6 136.7 0.4) (15.0 0.0 0.0 25.5 137.0 0.9) 20.5 174.0 0.0 5.0 (53.9 0.0 (53.7 59.6 584.7 17.0 0.5 0.4) (18.

9 15.1 NS NS 18.8 2.4 63.797 82.9 8.424 99.6 11.000 99.4 13.3 8.70 2.00 0.9 23.6 13.3 NS 0.0 15.870 0.com .21 152.3 3.45 27.9 37.12 124.8 NS NS NS NS 4.45 95.0 48.336.00 0.0 NS 39.71 23.8 10.1% 2.1 32.7 3.221.5 6.7 15.870 0.6 42.8 21.0 4.7 NS 1.102.0 NS NS 15.30 17.86 NS 1.3 2.4 3.1 1.8 8.0) 15.2 NS NS 29.1 NS NS 37.1 3.4 0. restated 31 www.3 243.7 47.31 6.2% 2.7 5.6 48.96 5.5 360.05 9.3% 0.4 1.8 NS NS NS 0.000 87.7 NS 30.0 5.84 18.00 (0.7% 6.1% 2.424 99.4 55.0 2.1 774.444 99.9 0.95 3.35 89.5 13.9 31.6 3.0 0.1 2.37 9.56 2.34 -3.5 11.19 31.4 3. adjusted Av.1 1.9 52.0 10.7 27.0 47.2% 1.4 7.164 1. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.2 293.01 11.2 1.9 0.4 29.0 0.424 99.3% 0.09 11.04 4.10 18.7 56.7 NS NS 15.54) NS 2. restated EV/EBITA.8 6.8 3.9 17.7 25.1 NS NS 36.102.50 25.8% 4.71 3.00 0.8 5.2 31.26 NS 5.7 2.1 0.00 0.3 1.61 29.4 1.45 95.4% 0.000 99.00 0.1 NS 2.9 249.424 99.00 0.25 4.2 9.8 NS 2.439.1 0.96 5.6 4.5 1.111 2.1 11.3 35.3 5.6 14.000 3.20 31.12 124.3% (0.4 0.248.8 4.05 7.000 99.7 3.9 9.24 31.18 134.0 NS NS 9.8 11.9 5.4 0.13 2.15 0.3 0.41 6.7 NS 33.0 2.870 0.98 2.09 0.20 192.1% 8.832 0.07 0.7 20.744.0 NS NS 11.3 64.98 3.2% 0.0 NS NS NS NS 1.7 20.6% 0.6 1.6 8.5% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.81 23.86 NS 1.8 1.20 188.8 5.8 14.1 24.8 851. reported % Change 0.77 2.4 37.32 27.8 1.67) NS (0.4 No.1 23.3 17.444 88.6 18.3 3.870 0.4 NS 30.5 8.4 1.9 13.3% 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.59 2.January 2011 GERMANY Smaller Companies Review Aixtron FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.8 12.6 0.7 14. of shares.76 10.7 14.35 3.00 0.1 0.8 NS 35.65) NS 0.1 9.00 0.4 NS NS 40.30 17.2 6.42 29.7 152.799 87.8 2.1% 1.4 52.78 3. number of shares.0 22.1 37.7 5.07 110.57 (5.5 9.61 26.1 25.5 6.5 2.6 1.4 430.07 110.0 2. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.00 0. adjusted Treasury stock.3 11.9 7.6 11.23 17.6 9.0 NS 0.31 11.9 NS 0.3% 0.69 2.824 1.9 1.9 13.5 NS 0.000 99.3 0.7 0.4 11.2 32.20 - 198.00 0.76 6.5 2.6 1.2 0.5 15.6 2.2% 2.2 NS 2.4 2.960 90.42 16.36 2.5 7.1% 2.1 NS 30.1 20.9 NS NS 31.2 38.7 NS NS 1.00 0.34 4.000 89.5 NS NS 37.44 3.1 8.cheuvreux.7 14.5 11.51 9.5% 0.7 0.035.6 218.23 15. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.310 90.5% 2.832 64.870 0.2 23.

EUR1810m EUR1357m EUR2224m 40.3 2011/1 2E 11.5m and EUR20. up 5.0m forecasts.65 for the previous year.1 EV/Capital empl.0 1. up 37. Voestalpine SSAB Least favoured Shareholders Free Float 75. USD4.6 01/01 7.6 NS 13.0%. 2.9% 28. Thus.9 1.06m 09/04 12/05 Price/M DAX 03/07 06/08 Sector focus Sector Top Picks RAUTARUUKKI.6 17.1 6. of shares.3m and EUR17. although the growth rates are likely to be somewhat lower.7 2.2 1. EUR0.2 Net debt/EBITDA (x) 1.3 2.6 6.5 2. Strong growth in copper product volumes: The company's concentrate throughput totalled 2. Its cathode production came to 1. Q EUR44.69/share.6 7. our EUR12.6 12. with EPS of EUR4. FY-09/10 operating EBT totalled EUR159m. which is the main source of profits for the company's primary copper business unit.0% 14.cheuvreux. Its wire rod production totalled 766tk.2% y-o-y.com 2010/1 1E 13.com Q 12/10 Price Alexander HAISSL Research Analyst ahaissl@cheuvreux.7% 29.6 17. FCF yield (%) 40.00 Target price (6 months) Aurubis AG Reuters: NAFG. FY-09/10 sales climbed ~48% to EUR9.6 37.8m for the current FY.6 32.5 8.2 5. Operating EBT came to EUR37m vs.3% y-o-y.6 Attrib.6 14.095kt in FY08/09. Salzgitter Ag 25.3 2009/1 0E 15. volumes are expected to grow further in FY-10/11.8 Q 32 www. and continuous-cast shapes came to 210kt.3% y-o-y.29 Price (07/01/2011) Stock data Market capitalisation Free float Enterprise value No.6 04/02 06/03 Outlook – Earnings recovery to continue Although Aurubis has refrained from providing a detailed outlook for FY10/11.7% EUR40.6 12.479/t).4% Absolute perf. the availability of copper scrap/other recycling materials should remain solid.6 27.6 37. Thyssen Krupp.036/t vs.144kt.063kt in FY-09/10 vs.1 1. Recycling and Precious Metals operating EBT came to EUR12. management indicated a continuation of the volume and earnings growth.2 0.DE Bloomberg: NDA GR Market environment to continue to improve Q Recent developments – Q4-09/10 in line with expectations Operating EBT in Q4 in line: Aurubis reported Q4-09/10 figures broadly in line with expectations. Aurubis is set to pay a dividend of EUR1/share vs.6 22.6 42.8 ROCE (%) 7.2m respectively vs. TC/RCs are set to improve from the current multi-year lows – treatment and refining charges for spot deliveries have improved to USD80/t of concentrate and 8 cents per pound of copper in recent weeks from 30/3 in FY09/10.6 27. Strong earnings growth in FY-09/10: FY-09/10 EBT before LIFO came to EUR258m. up 23.cheuvreux. With regards to copper products. 42. our EUR11.1% -0. Primary copper reported EUR13. adjusted Daily volume Performances 1 month 3 months 12 months 9. Higher TC/RCs to drive primary copper: Supplies of copper concentrate in the market are expected to improve as a result of the increase in concentrate production.87m EUR 8. (x) 1.1m vs.6 22.com (49) 69 47 897 534 09/09 .9 Yield (%) 1. our forecast of EUR39.0% 8. We forecast group operating EBT of EUR191. As a result of the strong earnings improvement.0 Disclosures available on www.6 32.2 10. Relative perf.0% P/E (x) EV/EBITDA (x) 2008/0 9 27. up from EUR159m in FY-09/10.2 1.January 2011 GERMANY Smaller Companies Review STEEL 2/Outperform Rating -9. Good availability of copper scrap/continued positive volume trend in wire rod and shape business: Due to continued economic growth and higher copper prices.0m estimate.1 12.7 8.865bn due to the significant rise in copper prices (average of USD7.8m.

Salzgitter AG.700 employees. Q Investment case Q We expect Aurubis' market environment to stay favourable. Compared to our steel peer group. we expect the company to drive consolidation outside Europe to increase its global footprint. Recycling / Precious Metals (copper production. TC/RCs are the main profit driver for the company's primary business unit.1 million tonnes of copper cathodes and has capacity for more than 1. Q SWOT analysis Strengths Weaknesses European market leader with production in Germany. Q Norddeutsche Affinerie AG was founded in Hamburg in 1866 with its largest production site and administrative headquarters also located in Hamburg.cheuvreux. 54% of sales). shapes and rolled products as well as special wire made of copper and copper alloys.8m fro the current FY. as costs are mainly EUR-denominated „ Secured energy supply due to long-term contract with Vattenfall „ Opportunities Threats Financial strength could enable company to drive industry consolidation/ M&A outside Europe (major shareholder Salzgitter (25% stake) supportive „ Increased competition from Chinese players (smelting capacities) „ Improved profitability due to synergies with Cumerio „ 33 www. Q We stick to our 2/OP rating and TP of EUR40 based on a normalised earnings model and a peer group comparison. Italy and Eastern Europe „ Fluctuations in copper spot prices impact revenues and working capital (earnings are dependent on TC/RC and cathode premiums) „ Long-term treatment/refining contracts (TC/RC) with mining companies provide earnings stability „ FX risk. Its customers include companies in the copper semi-finished products (copper semis) industry. Belgium.3 million tonnes of copper products annually with production sites in seven European countries and a total workforce of about 4. the stock is trading at an average discount of 20%. in contrast to steel producers. These are processed into continuous-cast wire rods.com Valuation Our normalized earnings model assumes normalized EBITDA of EUR311m in 10-11E (below peak to trough average of EUR345m) with an EV/EBITDA multiple of 7. Q Q As a second valuation approach we use a peer group comparison. The IPO was carried out in 1998. copper scrap and recycled raw materials. Q As the market leader in Europe with a ~40% share in cathodes. Q For the Aurubis group we forecast an operating pre-tax profit of EUR191. The company's product portfolio also includes precious metals and a number of other products. Aurubis AG (formerly Norddeutsche Affinerie AG) is Europe's largest integrated copper producer and the international leader in copper recycling. electrical engineering.January 2011 Q GERMANY Smaller Companies Review Company profile Q Largest copper producer in Europe Following its acquisition of Cumerio. will likely support such deals. with copper prices remaining high (above USD7. Its main shareholder. This model yields a fair value of EUR39 per share.000/t) due to rising copper demand. . the electronics and chemical industries as well as suppliers in the construction and car industries.0x. up ~20% y-o-y due mainly to higher contributions from primary copper and copper products. which is not justified in our view given Aurubis' ability to generate at least its cost of capital over the cycle. diversified customer base Aurubis has three business units: Primary Copper (29% of sales). 17% of sales). and Copper Products (copper processing. such as sulphuric acid and iron silicate. The company generates some 1. Q Market conditions in relation to treatment/ refining charges (TC/RCs) are expected to improve from the current multi-year lows due to the increase in concentrate production. Treatment and refining charges for spot deliveries improved to USD80/t of concentrate and 8 cents per pound of copper in recent weeks from 30/3 in FY-09/10. Q Three business units on the copper value chain. Q Diversified product portfolio Aurubis' core business is the production of marketable copper cathodes from copper concentrates.

0 90.0 35.0 0.0 0.5) (2.0 0.6) 8.9) 317.7 -53.3 1.1 0.5 960.0 0.8 9.4 0.4 (215. [inc.7 1.0 0.4) 0.0 49.2) 0.2 0.9 53.6) 0.5 1.0% 9.201.0 (42.7 2.4 118.0) 136.0 (1.0 (26.845.5 148.0 (40.0 1.9) 0.2 25.1 4.8) 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 0.0 0.0 0.8 232.5% (57.3 999.5 217.6 202.7% 6.0 0.4 943.9) 0.468.3% (278.1) 0.359.0 99.0 110.0 0.5 4.0 53.5 693.0 626.6% (266.5) (6.6 116.0 (29.6) 0.9% (32.8 175.5 160.6 134.400.4) 0.1% 0.6) 110.0 0.644.1 100.4 -54.0 (381.7 23.4) 59.0 161.7 745.3) (33.4) 0.0 (8.6 167.5 0.8 4.2) 301.5) 262.0 110.6) 110.3) 0.1 80.0 15.0 25.0 0.5% (108.0 0.0 237.9) 97.0 0.8 614.0% (75.0 254.723.1 0.0) 52.4 49.1) 59.596.0 53.4 0.0 0.0 0.0 0.935.1% 8.0) 0.0 156.8 55.1 946.5) 0.0 16.2) 157.8) 0.0 11.9 25.8 12.2 18.0 0.6) 218.9 2.025.117.0% 5.5) 214.7 11.0 157.0 0.0 (176.0 226.0) (8.7% 0.1 53.0) 382.0 26.0) 114.0 0.0 116.2) 0.396.6 (240.4 54.1 0.0 (21.8) 235.6 (9.9 1.965.6 13.8 0.7) 0.0 (103.3 66.6 0.0 0.9) (114.888.9 330.3 48.2) 336.0 0.2) (140.0 (1.7 0.0 0.0% 0.0 71.115.9) 0.0 0.3% (109.9) 0.0 164.5) 0.0 874.9 -20.7 25.3% 0.349.0 785.2 1.5 34.0 112.0 138.733.0 4.6 30.908.0 0.0 0.0 136.5) 0.1 93.2 0.3 395.0 (63.4 0.0 (20.2 364.8 55.8 1.4% (275.0 59.8% (75.0 0.0 245.2 334.5 108.136.8 58.6 (31.4 (50.0 0.0 1.8) 93.0 (53.5 1.0 0.2 4.9 744.686.149.1 0.0 235.5 15.5 137.0 8.8 (121.3% (92.0) 0.3) 193.0 (40.6) 1.0 44.0 0.0 0.022.0 60.0 (65.7% 0.0 262.4 -0.0 (42.0 0. profit [loss].6 0.8% (269.0 591.0 (2.0 13.6 17.0 0.4 358.9) 0.0% 0.5 3.0 (39.7 0.1 19.4) (5.0 0.9 65.7) 0.0 (92.1 0.0 (1.0) 380.8) 243.8 25.8 (7.4 2.7% 8.0 1.3 -77.6 29.3 166.0 0.0 21.0 0.2 0.0 47.0 48.2 337.5 159.3 4.0) 216.2 0.7) (94.8 1.8 0.965.6 84.7 32.8) (186.8) 0.9 12.8 (37.8 1.January 2011 GERMANY Smaller Companies Review Aurubis AG FY to 30/9 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 0.8 0.0 0.5 (34.0 0.6 0.3% (194.6 9.0 0.0 0.0 0.5) (47.2% (269.0 193.0 378.0) 0.0 (26.0 114.0) 0.0 0.596.0 (2.0 639.4 1.0 3.5 71.0 2.6) 99.6 (34.5) 474.8 0.2) 0.0 0.3 0.1 41.226.0 0.6 1.4% 6.1) 162.0) 0.4 25.5) 0.5 www.9 25.9 8.0 (45.cheuvreux.8 323.6 71.0 0.0 (229.0 0.670.4 0.9 1.5 95.8) 210.9 2.0 750.4% (215.0 0.0 59.0 -7.2 9.0 60.7 1.8 -71.070.2 (9.6) 162.0 0.3 285.7 0. for exceptional items Net attrib.7% (399.0 52.0 259.9 12.0 500.1 999.8 870.8% 0.5 48.4 53.5 95.9 278.1) (7.2 0.0 (1.6 25.9 39.6 74.8) 0.8% 9.9% 123.3 0.0 0.2% (51.1 3.1 0.0 (53.0 0.8) (8.8% (287.0) 0.384.0 158.8 108.6 -16.7 0.0% 0.4 0.1% (117.0 0.8 910.4 0.0 825.0) 161.1 0.0 (217.1 0.4) 0.9) 259.0 11.845.0 (33.4% (267.0 0.070.2 18.0 25.360.4) 226.com .1 0.6% 545.0 21.1 11.0 7.0 0.9) 0.0 382.6 1.0) (8.5 744.0 -0.8 0.3 71.0 (1.0 72.1 0.908.0 (3.753.0 17.4% 129.2 0.0 1.0 0.0% (189.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 34 2005 2006 2007 2008 2009 2010E 2011E 2012E 3.7 (111.457.3 51.0) (5.3% (105.0% (63.0 918.8 11.7 0.4 2.0 0.

6 11.1 4.2 5.97 16.33 19.5 13.9 4.5 5.0 1.7 13.7 4.1 2.17 8.00 0.45 5.4 18.833.7 5.8 NS 1.1 NS 1.1 2.1 0.3 9.12 16.30 20.82 37.6 1.3 7.4% 26.0 5.3 64.000 40.275.0% 3.6 3.1 11.5 12.3 10.9% 29.6 9.00 1. adjusted Av.0 4.9 4.601 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.1 23.9 32.6 6.5 5.4 27.9 55.000 40.77 0.2 30.77 44.46 26.601 33.00 0.87 28.January 2011 GERMANY Smaller Companies Review Aurubis AG FY to 30/9 (Euro) 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS. adjusted Treasury stock.69 48.0 11.00 1.4 13.9 1.1 5.7 5.63 36.8 25.0 5.5 2.37 21.3 9.155.870 0.5 0.3 4.5 0.810.5 5.0 0.7 7.2 1.2 5.2 1.8 0.7 12.com .463 40.463 0.9 3.8 4.041 36.64 -7.24 159.8 0.2 5.00 1.5 8.0 1.6 1.6 3.2 9.2 11.9 15.7 0.33 19.1 18.4 0.3 5.48 38.39 44.7% 2.0 2.28 -78.34 42. restated EV/EBITA.2 1.1 7.2 7.80 28.0 23.0 2.8 4.80 118.35 44.0 1.2 1.cheuvreux.0% 2.1 12.870 40.6 0.97 4.870 0.1 7.5 1.7 1.3 2.65 3.8 8.2 2.2 5.1 40.6 12.041 0.2 0.4 1.29 - 625.0 947.3 3.0 1.9 0.9 8.870 40.1 65. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.2 0.77 13. reported % Change 1.94 18.6 4.86 0.0% 1.4 13.2 1.1 1.6 0.11 24.05 3.1% 5.3 8.6 1.8 1.2 6.8 15.00 1.4 1.7 1.8 8.0% 24.9 12.6 1.6 4.99 17.2% 5. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.2 12.8 12.1 13.428.0% 3.7% 3.000 36.4 0.4 12.7 8.1 23.4% 4.8 11.3 5.1 6.25 5.9 56.9 22.1 2.3 4.0% 13.00 1. number of shares.5 705.8% 23.2 4.6 8.60 8.00 3.6 1.96 31.6 3.7 2.1 2.9 4.870 0.3 13.000 40.000 40.0 4.2 1.2 11.4 4.0 769.1 10.29 44.9 23.224.232.7 4.1 0.9 31.446.29 28.8 9.2 12.8 1.000 21.4% 3.9% 31.6 0.6 1.870 40.9 6.870 0.01 -21.6 2.8 14.810. of shares.3 2.1 7.5 16.7 1.77 0.6 2.8 10.4 1.5 1.70 44.0 2.6 27.20 5.2 5.7 14.0 17.2 10.1% 4.146.25 6.26 5.8 33.870 40.051.4 3.00 1.2 0.9 0.28 -78.33 19.85 35.3 9.810.3 27.2 1.82 37.0% 1.6 13.24 159.154 0.67 21.64 -7.7 No.9 18.6 9.9% 18.154 37.29 45.00 5.00 42.80 118.9 18.3 11.4% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.3 34.0% 1.83 -54.0% 26.5 34.05 27.59 22.48 27.1 NS 1.0 4.4 NS 1.80 34.000 37.87 94. restated 35 www. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.8 4.0 2.94 18.3 4.4% 1.6 NS 1.4 1.24 18.65 5.4 6.000 40.7 30.9 2.8 7.3 6.2% 1.8 50.

Previously. Relative perf. of shares. but adjusted for consolidation effects the increase came to just 2. Despite the 50/50 ownership structure the activities of the joint-venture.cheuvreux.6 6.98m EUR 5.0 79. Springer and Ringier AG bundled their E.0 59. in September Springer acquired a 12. European media activities in a joint-venture Ringier Axel Springer Media AG.0 79.0 119. the company's liquidity improved from a net debt position of EUR193m (Sept. However.7%) both reported declines.8% margin).07bn 32.2% Absolute perf. Step Stone and Digital Window). Sales in Q1-Q3 climbed 10%.5%. Free Float 40.DE Bloomberg: SPR GR Stock data Market capitalisation Free float Enterprise value No.6%.0 0. the leading provider of real-estate portals in France.59bn EUR4.6% margin. as per agreement.145bn.1 12. EUR34 per share.7% 55. it expects a significant rise in revenues. adjusted Daily volume EUR3.6 (0.2 11.4%. we would expect Springer to make further acquisitions as part of its strategy to become one of the leading pan-European multi-media companies. Advertising revenues for the group as a whole rose 21. although pro forma sales also climbed 20. EBITDA growth reached 46% for an 18.7% margin).0 139.6 5.3m Performances 1 month 3 months 12 months 1.0 99. to strengthen its positioning in European online marketplaces.0 119. Für Publizis. The latter was.4%.8) Yield (%) 0.2) (0. Axel Springer Ag 0. EUR119. At the divisional level. Despite acquisitions.com 12/10 Price Craig ABBOTT Research Analyst cabbott@cheuvreux.0%. 139. have been fully consolidated by Springer.4 11. rose 39% (11.3 8. Friede Springer 7.0 04/03 19. by 62. 09) to a net cash position of EUR39m.7 13.com (49) 69 47 89 75 25 05/10 .0 39.January 2011 GERMANY Smaller Companies Review MEDIA No Rating Rating N/A Target price (6 months) Axel Springer On the path to Digital and International Expansion Recent developments – Modest organic growth plus major consolidation effects drive strong earnings rebound Q In line with the media sector in general. on the other hand.9 Net debt/EBITDA (x) 0. in particular. Due to operational leverage.1% 5. valuing the company at EUR566m. whilst circulation sales were down 2%. It also announced a takeover offer at the same price.5) (0. Given the strength of its balance sheet (net cash EUR39m) and its access to unutilised credit facilities worth EUR1.2 11. whilst Print International reported a 19.0 39. also heavily impacted by consolidation effects (i.cheuvreux. to be driven entirely by the International Print and Digital Media divisions. FCF yield (%) 9. 51.95 Price (07/01/2011) Reuters: SPRGn. during the summer.2% 18.9bn EUR1.com Q Q 36 www.2 EV/EBITDA (x) 8.0 09/05 03/07 10/07 06/08 Price/M DAX 02/09 09/09 Sector focus Sector Top Picks Least favoured Shareholders Axel Springer Ges. net income declined by 19%.0 0.7% -1. Axel Springer reported a pickup in sales and earnings in the first nine months of 2010 thanks to the economic recovery and improvements in advertising spending. The structural shift in demand from print to online continued unabated in 2010. despite what Springer referred to in its Q3 report as 'recently more subdued market conditions'. Q Outlook – Still on the acquisition path As the next step in its strategy to increase its digital offering and.e. Newspapers National (-1. however. With regards to its FY10 guidance. driven in particular by growth in Digital Media. (x) - - - - P/E (x) Source: Factset Cheuvreux does not currently cover Axel Springer Disclosures available on www.4% increase.com SA. mostly attributable to the first-time consolidation of the eastern European companies contributed by Ringier to the JV Axel Springer Media in the third quarter. just 1.0 99.0 19.6% 2009 2010 2011 2012 23. Digital Media sales rose sharply.8 Attrib.3% and adjusted further for positive FX effects.0 7.8%. It also expects its EBITDA to return to the previous high of ~EUR486m reported in 2008.4% stake in SeLoger. with EBIT up 53% (15.0 59.9%) and Magazines National (-5.0 ROCE (%) - - - - EV/Capital empl. due to PPA charges and higher net financial expenses.0 0.2% 22. The offer was approved on 30 November by the French Securities Regulator. Operating cash flow.5%.

strong free cash generation (FCF margin 12% of sales) and access to EUR1. though still dominant. Axel Springer is currently trading at 11E and 12E PEs of 11.145bn should enable it to continue to pursue its strategy of growing internationally and. substantially increased the shares' long-term attractiveness for potential investors. while maintaining a high level of profitability relative to its peers. the German share of revenues. in particular.January 2011 Q GERMANY Smaller Companies Review Company profile Q A leading European multimedia group Axel Springer is one of Germany's largest media companies (sales ~EUR2. The increase in the free float in September 2010 to nearly 41% through the placement.8% (2010). Sales split by segment: National Newspapers (42%). with an integrated offering of a broad range of internet. International Print (13%). „ „ Well diversified product portfolio Opportunities Threats „ Geographical expansion „ Digitisation Integration of acquired companies „ Cross-media „ „ Overpaying for digitisation strategy 37 www.6% to just 0.2x and 6. valued at ~EUR500m.4% stake from Hellman & Friedmann (previously held by Deutsche Bank) and the reduction in Springer's treasury stake from 9.8bn). internet and radio services. National Magazines (18%). Digital Media (24%) and Services (3%). Q Q Investment case Springer continues to pursue its strategy to become Europe's leading integrated multi-media company. Since 1998 it has grown from being a predominately national player with a presence in just 7 countries and electronic revenues of just 2% of sales to a major European multi-media group with a presence in more than 35 countries and digital revenues accounting for 24% of sales. with a forecast dividend yield of 3. print and Web TV products. and is the German number 1 in magazines and newspapers. . has declined further to 73%. now accounting for 47% vs. Springer's balance sheet strength (net cash). Advertising has now surpassed Circulation as the biggest source.7x and at EV/EBITDA multiples of 7.6x respectively. expanding its digital activities. with a focus on publications with broad popular appeal. Q Q Advertising now exceeds Circulation Due to the international acquisitions in Digital Media and the expansion of its E. In terms of revenues.8x and 10.cheuvreux. European print media business. Springer considers itself to be one of Europe's leading multimedia groups. 42% for Circulation and 12% for Other. Q SWOT analysis Strengths Weaknesses Germany's leading newspaper and magazine publisher „ Still rather low share of international business „ „ Strong brands „ Strong market shares Print. In addition the company has holdings in many TV. of the 8.6%.com Valuation Based on consensus data. faces stagnant (at best) demand due to the ongoing migration to digital media channels.

0% 3. also given the already gained order intake from Hong Kong for railway systems. larger equipment. However.0 65.g. Construction saw the highest disappointment with orders worth EUR102m.0 45. FCF yield (%) NS NS 5.5% 22.00 Target price (6 months) BAUER Reuters: B5AG.0 5.com (49) 69 47 897 540 06/10 .6 7. we believe a joint venture between Bauer and Revi is unlikely as each partner would have to guarantee for the other.6 13.0% and net profit came in at EUR17. 2) The sale of the company's first deep-drilling rig to an already specified customer has been hit by payment delays.4 6.January 2011 GERMANY Smaller Companies Review MACHINERY 2/Outperform Rating +13% EUR42. 75. On the order intake side. Prof.0% 11. to be booked in Q4-10.0 8. Rolls-Royce Shareholders Free Float 51.1 1.0 55.0 Disclosures available on www. EADS. are already selling well.1 1. Bauer Family 48.9% -15. But discussions with clients are ongoing. Nexans.0 35. trench cutters. We believe Bauer deserves more than 50% of the project's profits as it does the high-risk work due to its unique equipment technology. Also on the positive side. 03/08 09/08 Price/SDAX Outlook – 2011 market expectations are reasonably low We see at least three topics that could be the source of a positive surprise in 2011E: EUR641m EUR332m EUR1132m 17.6 10.7 0. SIEMENS AG Alstom. Relative perf. the excellent 8.8%. which are needed for special projects. +27% y-o-y and +1% q-o-q.6 6.8 15. (x) 1.0 25.4 ROCE (%) 9.3 2.9 8.1 1. Bauer continues to see deep drilling rig potential in the medium term and aims to sell at least two large TBA 300 (ASP: EUR15m) and at least 1 small TBA 200 rig (ASP: EUR12m) in 2011. -13% y-o-y and -58% q-o-q.2 Net debt/EBITDA (x) 3.0 35. However.2% Resources margin in Q310 (Q3 and Q4 are always seasonally the strongest quarters) showed that margin potential of 8-10% in this division for the FY is feasible.cheuvreux. 3) Discussions with the Iraqi government regarding the Mosul river dam are ongoing. In addition.0 55. we believe the excellent 8.45 Price (07/01/2011) Stock data Market capitalisation Free float Enterprise value No. However.04m 04/09 11/09 Sector focus Sector Top Picks Least favoured ABB.131m EUR 1. Bauer recently stated that he does not expect the small equipment market to recover before 2012. Bauer is now looking to sell the rig to another client but appears to be experiencing problems due to the difficult markets – clients are relying more on peers with long track records and competitors are trying to prevent Bauer's market entry via aggressive pricing. We share his optimism.0 2.0 65. adjusted Daily volume Performances 1 month 3 months 12 months 16.2% 20. Q EUR37.2% P/E (x) EV/EBITDA (x) 2009 2010E 2011E 12.com 2012E Attrib.3% Q3-10 EBIT margin in Construction could explain the weak Q3-10 Construction order intake. estimated at EUR50m.com Q 01/11 Price Hans-Joachim HEIMBUERGER Research Analyst hheimburger@cheuvreux.0 45. e. The current level of utilisation of small equipment among clients is far too low for them to switch back to growth mode.5 2.0 15.6% Absolute perf.3 EV/Capital empl. Bauer appears to be pursuing a strong margin-before-volume policy when accepting projects.0 3.0 15.0 25.1 1.8 11. Q3-10 group external sales reached EUR315m. Q3-10 order intake in Equipment (+19% y-o-y to EUR158m) and Resources (+8% yo-y to EUR58m) came in as expected. of shares. Bauer indicated that this was not to be seen as a trend and predicted that Q4-10 order intake in Construction would rise q-o-q.5m.3 Q 38 www. during the results conference call CEO Prof.0 07/06 01/07 08/07 1) CEO Prof. The EBIT margin reached 9.0 75.0 2.cheuvreux.1 Yield (%) 2.DE Bloomberg: B5A GR Reasonably low expectations for 2011 could lead to a positive surprise Q Recent developments – Very late-cyclical out of the crisis Bauer released solid Q3-10 numbers in mid-October and now expects to report flat y-o-y sales for FY10 and a net profit of EUR35-40m.

our DCF model yields a fair value of EUR42 per share. We see four topics as a potential source of a positive surprise in 2011E: 1) A quicker than expected recovery in small standard equipment. Bauer AG is now the holding company for the following five subsidiaries: a) Bauer Spezialbau GmbH (Construction segment). It is a global player. Americas 11%. Construction generated revenues of EUR587m and EBIT of EUR26m. b) Bauer Maschinen (Equipment segment). Others 9%. Based on these parameters. EU ex Germany 17%.3% and a terminal growth rate of 2%. Middle East 16%. it is easier to gain approval for a dam renewal project than for many other infrastructure measures as resistance from neighbours. Q Investment case We believe Bauer has a good chance to surprise on the upside in 2011E given that the stock has underperformed throughout 2010 and market expectations for 2011 are reasonably low. In 2009.cheuvreux. Bauer trades at a premium of 2% based on 12E EV/EBITDA. Moreover. with the typical costs of globalising distribution and value-added already having been widely digested in earlier years. 3. Trevi.January 2011 Q GERMANY Smaller Companies Review Company profile Q A company with a 218-year history Having begun its 218-year history as a small copper forge. Equipment EUR605m and EUR51m.) Positive surprises in winning new Construction projects: we consider dam renewal projects one of the most important future areas for Bauer given its state-of-the-art technology (trench cutters able to reach 250 metres) and the fact that it has already landed a prestigious win at the Hoover Dike in Florida at the expense of Keller. . Compared to its closest peer. sales and services network globally proven „ „ Typical costs of internationalisation already fully digested One of the two world market leaders in specialist foundation equipment „ Opportunities Threats Strong structural growth drivers „ „ New low-cost market entrants „ Slowdown in innovation could hurt pricing power Market launch of deep drilling rigs in 2011 „ Expansion in the Resources segment „ 39 www. a WACC of 8. Europe ex EU 8%. Q SWOT analysis Strengths Weaknesses Outstanding track record in project management „ Potential vulnerability to cyclicality of its main industries „ Production. Q Q Premium position in niche with high barriers to entry Bauer AG operates in a) the specialist foundation engineering sector. The company's 2009 geographical revenues split was as follows: Germany 28%.com Valuation Q DCF: we assume sales and EBITDA CAGRs of 2. This makes it a truly global player. We rate the stock a 2/Outperform with a target price of EUR42. 2) Better than expected development of large deep drilling rig sales in 11E after the weak market entry in 2010. d) Schachtbau Nordhausen. and e) Spesa Spezialbau/ Sanierung.3% and 6. with 85% of its equipment sold outside Germany. and b) an estimated 60% of projects being government-based with the rest non-residential. and c) the resources segment. b) the manufacture and supply of equipment for specialist foundation engineering. environment and materials). Far East 11%. Q A true global player with strong exposure to infrastructure Bauer benefits globally from individual market trends via a) its penetration of all major geographical markets. Q In our multiple comparison Bauer trades at a discount of 22% to the overall peer-group average based on 12E EV/EBITDA.4% respectively for 2010-19E. c) Bauer Resources (Resources segment). environmental groups and governments is normally very low as they all have a vested interest in the dam's safety. and Resources EUR164m and EUR6m. where it operates three divisions (mining.

3 46.0 84.7% (32.3) (2.4 23.9 200.3 81.5 4.0 0.2 6.0 (16.0) 29.4 (5.2 14.0 (1.9 0.5 19.9 420.0 0.2) 0.0 74.0 139.4 27.5 50.0 (0.8) (112.0) 24.0 0.0 501.0 -62.0 35.1) 123.0 (15.6 0.3% (15.2) 2.0 (41.0 0.7) (23.7 3.4 24.0 35.1) 34.9 0.7) 1.064.0 10.7% (36.202.0 34.2 0.2) 31.0 0.4 432.3) 4.0 0.0 167.9 0.0 (10.0 (39.2 245.8 32.0 0.3 276.5) 113.1 0.0 (20.0 0.0 960.0 -29.0 (30.9 52.0 38.0 (2.0% 0.9) 72.1) (30.0 0.0) (1.4 784.0 0.6) 228.4) 0.2 7.3 0.6 165.4 357.0 0.4 44.9 14.5 0.9% (75.0 0.8 80.0 (2.9) (18.4% 0.6 90.7 0.8) 139.2 0.0 0.0 (0.6% 1.4 119.0) (130.0 107.4) (26.0 0.2 43.7 -5.0 7.1) (114.4% (175.2 25.2% 1.0 47.0 0.8 (18.7 0.5 0.2 43.9) 0.2 0.0 0.6 0.290.5 -15.3 0.0 0.2 46.0 0.4 31.0 0.7 0.4 (32.0% (12.9 784.0 0.1) 0.7 41.5 955.3) (467.8) 0.8 480.0% 0.0 (17.4 443.8) 187.0 39.4 3.5) 3.3 0.4 986.6 212.7 3.3) 94.6) 0.0 0.0 23.9) 167.5 169.0) 38.0 0.0% (250.0 147.5 0.0 7. for exceptional items Net attrib.0 73.9 24.0 113.4) 0.7 43.0 0.6 46.9 0.7% 0.3 8.0 0.3) (30.6) 0.0 503.2% (74.0 0.9 29.0 0.5 0.2% (60.1 622.9% (71.0 0.6 420.0 22.5 420.9 28.0 (12.0 0.6 11.033.0% 717.0 (3.9) 0.0 33.6 11.2% 835.0 28.9 32.2 168.6) 84.6) (113.4 0.6% (65.com .0 0.6 -30.0 (3.5) 21.4 505.1 80.8) 0.5 (23.0 0.0 0.5 (18.8) (811.0 (0.9) 121.0 279.3) 0.0 0.9) 0.5 960.0) 214.0 39.0 0.6 135.3) (30.5% 0.5 27.0 11.January 2011 GERMANY Smaller Companies Review BAUER FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 0.064.6 446.0 338.0 0.3 90.4) 0.0 83.6 382.4 -49.6% (74.0 0.3 www.0 (7.0) (673.2) (30.0 0.0 (17.9) (632.0 0.0 0.0 0.0) 3.7) 74.0 17.0 26.5% (53.4 0.7 99.3 29.0 0.290.6 0.3% (263.0 104.3 459.0 0.6% 0.0 61.1) 0.1 6.8 0.2 158.4 66.0) 1.0 0.2 38.0 485.0 0.8 0.8 5.0 58.2) 3.3 0.0 0.096.3% 51.6% (257.1 418.7 0.0 75.1 -1.1 986.4) 0.1 149.4 222.4 0.0 8.8 151.0 40.0 (6.3 268.4 485.5 112.1 33.8 11.0 (8.9) (377.6) 11.9 0.0 0.0) 0.9 47.3 1.4 214.0 19.4 27.0 0.0 0. profit [loss].4 16.2) (30.0 (0.0 559.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 40 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 602.0) 39.5) (82.2 8.0) 39.5 0.0) 0.5 10.8% (50.6 11.1) 104.0% (149.7 142.0% 1.7 0.4 (28.9% (257.0 0.0 (17.5% 0.0 (33.0 (0.0 42. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 21.0% (43.0) (10.9) (697.4 427.2 235.0 0.0 0.2 184.5 33.5 29.0 7.0 0.3 (0.5 15.0 (17.6% 1.5 34.2) 73.7 955.6 (17.8 334.6) 18.6) (163.0 (24.2 3.9) 0.2% (68.2) 0.0) 75.0 0.0 (29.9% (47.8 25.0 (26.0 49.0) (0.9) (756.8) (812.0 23.0 36.0 0.1 45.6) 0.4 398.0 (13.4% 1.4 7.1) (537.0 77.9 0.0) (30.8% 1.0 (6.0) (57.1% 0.4) (30.9 26.0 0.5) 58.0 0.106. [inc.0 (1.5) 4.7% (214.0 0.0 128.0 0.8 622.5) 160.5 23.0 27.0) 0.1% (155.4 0.3 382.6 11.9) 109.5 1.4) 47.4 33.7 9.3 -7.2 3.1% (263.1 0.7 27.2 0.1 (28.4 212.2% (84.2 15.4 0.0 72.5 0.9 139.5 35.0 14.7 108.0 0.8) 7.0) (6.0 (1.4 23.3) 151.0 (2.0 31.0 0.0 18.7) 2.4 7.9 461.0 (7.7) (30.1 0.4 36.0 0.0 374.0 0.0 0.5 25.cheuvreux.1 0.9% (16.8 417.0 0.5 90.4) 0.3 45.0 0.5 349.0 521.3) 0.0 131.4 50.0 0.7) 185.3 26.0 6.7 -0.2 8.6) 13.4 0.3% 0.0) 38.9 4.6) 131.0 31.5 117.0) 0.2 29.0 53.0 85.6) 83.4) 10.6 3.0 0.1% (3.3) 0.

2 0.131 17.1 2.00 0.2 90.0 16.5 1.7% 28.9 5.30 37.0 11.0 6.9 1.000 17.2 3.00 1. of shares.00 29.2 3.8 12.7 8. adjusted Av.38 -7.2 4.8 4.1 10.0 0.132.389 0.00 27.5 26.136.3 17.5 20.6 1.31 0.1 10.2 501.60 26.3 14.10 48.52 6.9 5.6 4.9 0.1 8.2 11.0% 2.131 0.8 1.1 22. number of shares.00 7.2 6.0 23.28 -62.00 0.3 780.47 37.4 9.4 7.3 1.1 13.7 NS NS NS NS NS - NS NS NS NS NS 0.15 49.91 139.1 14.000 17.131 17.2% 7.7 6.000 17.2 108.9 641.6 2.6 1.6 10.0 830.2% 3.5 1.00 0.4 NS NS NS NS NS NS NS NS 6.0 8.17 31.3 0.131 17.4 7.9 16.0% 6.0 5.000 15.45 37. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.3% 4.6 2.7 15. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.3 11.6 9.6% 2.0 17.131 0.January 2011 GERMANY Smaller Companies Review BAUER FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.6 15.2 15.6% 2.1 1.0% 50.4 5.7 7.09 44.3 641.79 29.5 6.00 1.82 33.0 10.31 0.5 10.00 16.17 -72.7 0.0 7.44 52.6 3.2 34. restated EV/EBITA.00 0.2 1.389 0.25 34.85 37.7 604.05 37.389 2.3 14.7 13.cheuvreux.4 14.1 0.0 NS 1.1 2.7 11.2 9.7% 14.0 8.6 5.3 4.69 4.131 0.6% 4.7 99.10 8.9 7.4 3.2 17.000 2.0 8.4 5.6 4.44 52.5 1.2% 2.6 2.75 35.2 81.45 71.1 6.5 11.1 3.2 1.6 8.38 27.8% 2.131 17.3 8.3 NS 1.1 15.91 139.000 17.7 4.0 504.0% 7.000 17.000 17.17 -72.73 0.81 17.23 95. adjusted Share Price [Adjusted] Latest price High Low Average price 2.com .50 5.1 23.134.3% 25.3 0.3 2.6 2.00 0.1 7.23 95.45 - - - 553.0 6.38 27.53 22.051.4 5.88 8.389 2.60 6.1 5. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.4 1.7 6.3 9.733 0.6 8.6 7.5 NS 1.76 7.9 6.4 4.74 67.3 2.5 NS 3.7 3.83 35.00 0.2 21.00 28.3 13.1 1.4 12.7 0.93 24.000 - - 32.7 90.7 1.6% 13. restated 41 www.3 10.9 6.3 1.3 21.1 6.1 1.1% 22.91 31.2 6.00 9.8 4.2 1. adjusted Treasury stock.9 34.131 0.0% 3.131 0.0 15.1 14.6% 2.4 13.3 1.0 23.2 1.7 149.7 1.3% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.8 3.4 5.2 119.93 8.5 6.9 10.6 1.3 16.3% 6.0 1.131 0.5 3.0 Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.3% 4.09 44.6 13.1 4.6% 19.3 15.86 11.1 14.7 1.8 6.7 1.3 0.1 8.7 0.00 45.2 10.83 31.733 15.8% 3.131 17.87 -30.8 7.6 165.5 1.9% 59.131 17.9 12.7 0.17 28.2 31.6 9.43 -80.2% 4.4 4.4 1.13 21.20 37.2% 21.5 1.9 31.8 90.26 -0.0 2.5 11.00 0.9 2.1 12.8 6. reported % Change 3.6 2.9 16.1 0.129.1 17.1 15.6 12.9 4.5 1.6 1.6 No.5 889.3 0.60 19.28 -62.2 13.7 5.26 -0.0 8.

1 5.5 29. It does not rule out purchases of listed companies. In November.0 0.9 Attrib.9 EV/Capital empl. but rather developers and service companies.5 4. Stock data Market capitalisation Free float Enterprise value No.5 44.9 18.29m Performances 1 month 3 months 12 months 0. As BayWa targets renewable energy revenues of EUR1bn in the medium term. Q EUR34.1% -0. No details have been announced so far as to whether the division will be sold or if it will be place in a JV. Rwa Deutschland Gmbh 10.5 01/01 4. BayWa anticipates a positive impact from the recovery in the agriculture sector. in line with expectations. EUR15m of this improvement is likely to come from new renewable energy activities.8 7.9 9.3% 2009 2010E 2011E 2012E 18.e. BayWa is benefiting from the strong demand for photovoltaic systems in Germany.5 34.9 0.5 39.00 Target price (6 months) BayWa Reuters: BYWGnx.8 P/E (x) EV/EBITDA (x) Disclosures available on www.1bn. The company plans to make further acquisitions and say it has 10-15 acquisition targets on its radar screen. Revenues rose 4% y-o-y to EUR2.0 Yield (%) 1.1% Absolute perf.3%.0% 35. One of BayWa's main points of focus is renewable energy. Bay. left the company. Such acquisitions would represent a good fit for BayWa.5 9. We expect its renewable energy business to contribute revenues of EUR400m (5% of group sales) already in 2010E and EBIT of EUR25m (16% of group EBIT). Raiffeisen Bet. Relative perf. EBIT was up 20% to EUR30m.5 44. BayWa announced it is seeking a strategic solution for its building materials division.4 8. FCF yield (%) 18. 49.4 1. EUR9m from logistics-related cost savings and EUR8m from the sale of non-operating real estate.5 9. as its customer base (farmers) are a major customer group in the renewable energy industry.5 03/02 06/03 09/04 12/05 Price/M DAX 03/07 06/08 Sector focus Sector Top Picks Least favoured Ahold. its overall group margin will improve.0 8.4 Net debt/EBITDA (x) 3.5 9.5 39.9% 1.5 24.4% EUR35.3 1.1 2. Lli 14. in our view. 32.3 1. Carrefour Colruyt Shareholders Free Float 43. Frank Hurtmans.2 1.8 7.0 8.5 14.9% 5.0 1.5 49.2%.5 24. EUR75m) to EUR107m.3%. adjusted Daily volume EUR1189m EUR514m EUR1990m 34.January 2011 GERMANY Smaller Companies Review DISTRIBUTORS 2/Outperform Rating +0.527 09/09 .105m EUR 1.com Q Q 42 www.0 4. which is above the company's guidance of EUR300-350m and EUR20m respectively. with a probable 43% y-o-y rise in adjusted EBT from EUR65m (reported. (x) 1.5 1. producers of photovoltaic modules or biogas systems).7 11. EUR10m from grain price effects.cheuvreux. Overall sentiment has improved as a result of demand gradually returning to normal levels in the operating resources business and thanks to the rise in milk prices seen in recent months.com 12/10 Price Philipp BUMM Research Analyst pbumm@cheuvreux.6 1. while renewable energy margins will likely generate a margin of 6-7% this year.2 14.5 19.5 29.com (49) 69 47.5 14.5 34. In this context the board member responsible for this division.897. of shares.6% 16.3 ROCE (%) 5.5 19.cheuvreux.DE Bloomberg: BYW6 GR Benefitting from firm soft commodity prices Recent developments – Solid Q3 and change in the management board Q BayWa reported very solid Q3-10 results. but made it clear that it does not intend to acquire production companies (i.87 Price (07/01/2011) Outlook – Good years ahead In 2010E BayWa is set to achieve its strongest earnings growth since 2006. and net income increased an even stronger 53% to EUR8m due to book gains from the sale of the financial asset AniMedica. as its core business generates EBIT margins of 1-2%.

We expect farmers to invest more (i. we expect further improvements in BayWa's agriculture division and we see additional potential for the company to realise more of its underlying value for example by selling non-core activities and focusing more on ROCE. it generated 45% in its agriculture division. probably 6-7% in 2010E in renewable energy. In 2009 it recorded revenues of EUR7. the wheat price has jumped >30% in 2010. despite declines in the agricultural and construction industries Agricultural sales are strongly dependent on the weather and EU farming subsidies. Global harvest forecasts have been reduced due to the drought in western Europe and fires in Russia. BayWa is not earning its cost of capital „ „ Strong long-term relationships with farmers Opportunities Threats „ Divestment of financial assets to finance growth „ „ New „ Sales Investments in eastern Europe could fail CEO will focus on profitability. 43 www. calling for new machinery).9% in 10E and 2.3bn. BayWa clearly benefits from the current strong demand for photovoltaic systems in Germany. Leading agricultural institutes (e.5x and a P/B 11E of only about 1. Q Q Divisional sales split (2009) Agriculture 45%.73x for 11E. seeds. As BayWa targets renewable energy revenues of EUR1bn in the medium term. machinery) and then to sell on the farmers' harvests to grain mills or the food industry.e.16x. previous CEO retired after 18 years in July 2008 in the building materials division are dependent on the German construction industry „ Renewable energy activities offer significantly higher margins (4-7% EBIT) Valuation BayWa is now trading at an EV/Capital employed multiple of only 0. In terms of operating profit.g. It is important to note that BayWa can also be considered a value play as it carries real-estate properties at a book value of about EUR900m (fair value of EUR1. energy 25%.5x). which is 16% below its average for 2004-2009 (range: 0. USDA) have recently reduced their global harvest assumptions.g. BayWa will continue to benefit from firmer soft commodity prices. building materials 24%. agriculture accounted for 33%.1% in 11E. It has a strong focus on its agriculture division. its overall group margin should improve as its core business generates EBIT margins of 1-2% vs.6% in 09 to 1.com . The shares are currently trading at a P/E 12E of 11. building materials 8%. Q Q Investment case We rate the stock a 2/Outperform with a target price of EUR35. We expect its renewable energy business to contribute revenues of EUR400m (5% of group sales) already in 2010E with EBIT of EUR25m (16% of group EBIT). to increase their harvest areas and boost yields. which compares to its current market cap of about EUR1bn. Looking ahead. energy 31% and others 28% of the total. Q SWOT analysis Strengths Weaknesses „ BayWa „ has consistently managed to grow its sales over the last 20 years.cheuvreux. Of this total. We see no justification for this discount. others 6%. The company's overall EBIT margin is thus poised to increase from 1. 25% in energy and 24% in building materials. leading to further sales potential for BayWa in the years ahead. It basically aims to sell farmers everything they need (e. As a result.January 2011 Q GERMANY Smaller Companies Review Company profile Q Europe's largest agricultural trading company BayWa is the largest agricultural trading company in Europe.2bn). fertilizers.6-1.

0 2.9 11.2 2.3 9.0 72.0) 143.1) 111.9 1.0 0.January 2011 GERMANY Smaller Companies Review BayWa FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 0.8) (24.0 0. for exceptional items Net attrib.6) (5.3 9.0 (15.0 18.0 270.0 0.8 1.0 613.3 1.7) 0.0 0.8) 209.0 38.0 152.8 169.2 427.6) 258.0 22.0 26.2 0.8) 181.8 130.0% (555.0 0.8 581.0 81.0 0.6) (8.0 0.0 0.4 0.8 426.7% (535.0 45.5 14.2 1.073.9 0.4 (26.0 565.0 0.0 0.0 0.059.8 11.3 11.9 283.7 (153.4 36.0 0.816.0 0.5) 0.505.2 0.7% (607.0 0.3) (76.2 255.5) 157.0 0.0 (8.928.4 425.373.7 4.5) 81.4 988.0 11.9 9.1 7.8) (113.3 835.0 0.7 29.7 238.4 324.3 www.403.7% 9.5 0.109.0 0.2 951.0 1.6) 0.0% (91.6 5.7) 0.344.8 12.068.0 0.0 111.0 0.7 425.3 138.0 0.8) 0.0 0.0 (56.373.3 965.0 47.6) 72.9 0.361.7) (47.4) 0.0 0.8 15.0 103.7 60.116.5 0. [inc.7) 0.0 (17.6 10.0 121.3% (106.0 (13.1 421.2 -1.0 58.0 0.6 13.0 0.4% (84.1 307.2 2.5 643.8% (48.9% 8.7 311.6 854.0 (15.5) (50.1 292.8% 0.0 (18.2 292.0 (12.2 2.0 0.1 13.4% (619.2 55.0 0.6% (650.0 14.0) 0.031.0 0.0) 65.8 307.8) 0.0 0.0 0.4) 162.0 0.0 0.0 0.1) 0.0 181.0 0.0 2.0) (64.2 1.6 423.0) 0.0 (26.0 (14.0 0.0 0.2 29.6) (6.0 (15.0 0.1 264.0 0.4 0.8 9.181.8 74.4 265.0 (207.0 0.4 429.6 14.5 673.8 0.0 59.8 867.9) 114.7% (65.2% (100.816.0 149.1) (25.0 17.0 0.0 0.4 36.0 97.1 959.0 0.8 787.0 0.3 227.3 4.8) 171.0 0.0 0.5) (130.5% 0.9) 0.7 268.3) (5.5) 0.6) 0.9 28.3 9.1 -9.0 39.042.9) (97.3 1.4) 45.5 2.7) 234.0 23.0 0.058.0 0.7) 26.0 (7.0 (129.2) 0.8% 0.7) 0.7 9.430.0 0.9 12.8) 0.5 0.4 385.1 0.8 928.2 2.8) (48.8 2.5 198.6) (6.294.4 730.0 115.9 154.7 204.0 189.6 425.260.8 26.0 (32.5 7.3 15.0 161.2) 103.8 912.7% (577.1 0.6) (102.0 292.0 0.0 0.5% 0.0) 208.1% 6.0 0.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 0.0 (18.0) (43.5 13.7 (109.7) 206.3 (100.2) 0.6% 8.2% (696.0 0.2% 7.9 0.0 (8.0 (14.0 (40.0 (13.0% (96.5 2.2) 161.0 651.7% 151.0 0.0) (36.3) 0.0 0.3 9.8) 46.8 12.7% 0.4 10.0 0.8 154.0) (40.4 0.0 208.0 (4.0 67.105.437.0 0.2 18.0 0.416.2 1.5 11.8 1.0 (12.0 17.0 0.2 2.9 7.7) 62.0 (15.6 0.6 348.2 1.922.0 0.0 86.9) 247.com .0% 205.9 (32.8 -18.9) (7.3 2.0 0.3 31.1 427.4) 58.0 46.0 0.7) 157.1% 0.5 44.2 (37.294.0 (13.5) (194.794.0 0.0% 7.5% (281.065.8 2.0 0.922.405.3 13.9) (6.8 0.0 71.5) 14.7) 169.3 446.227.2) 0.352.3 0.0) (7.0 65.0 (25.4 -22.8 100.4 36.1) 152.8% (91.5 55.0 14.8 40.8) 39.0 80. profit [loss].0% 43.361.064.0 0.0 (31.2 10.5 186.2 0.0 0.352.3 14.0 (18.2 -17.3) 0.3 9.5) 0.9) 314.2 12.0 0.0 (16.9 (27.7 38.4) 0.2 417.7) 0.8 625.0 143.0 0.8 9.7 683.0 0.0 11.6 0.6 21.1 29.4 2.1 10.6 28.1) 0.0 100.0) (7.8 123.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 44 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 6.9 (46.3% 8.009.2 447.9 0.344.9) 79.1) 0.6 15.9 35.0 0.0 762.9) 99.2 776.0 0.8 2.6 (22.0 0.7) 0.0% (89.0 0.0 0.0 79.7 259.6 16.0 0.8) 23.521.4% 115.0 14.537.7% (161.7) 282.2) 0.0 0.0 174.0 23.8 11.3% (60.105.6% 16.1% (640.299.0 56.8 (26.4) 115.8 977.4) (100.0 (26.0% (586.2 81.8 0.0 0.8 (12.0 (17.1 9.2 27.3 3.4 14.3 802.0 0.0 0.809.0 0.9) 0.0 0.5) 146.9 17.3) 200.7 89.9 32.5% 0.2 1.8 388.0 77.1 49.4% 0.0 0.4% 7.7% (94.cheuvreux.403.7% (94.3 29.7 904.8 2.1 (112.0 (3.1 10.4 -28.9 92.2 292.0 0.0 20.4 36.0 0.7% 0.5) (100.0 921.0 83.5) 0.7 12.

5 15.0 11.9 7.898.461.0 2.850 0.39 36.6 3.87 21.713 33.87 35.33 35.04 35.9 21.9 55.cheuvreux.38 11.1 1.1 6.3 0.0 7.9 2.0 8.6 820.100 0.5% 21.16 17.22 7.4 1.1 1.6 4.0 0.1% 0.5 5.0 55.853 33.98 3.00 0.6 4.969 33. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.100 0.2 9.49 24.4 10.5 0.8 573.2 4.46 25.4 1.1 11.9 20. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share EV/EBITDA.9 18.2 8.847.0 7.5 18.2 6.850 0.97 25.00 11.8 9.1 NS 1.42 5.0 1.0 1.5% 0.33 -23.9 0.5 6.2 2.36 17.87 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.8 0.8 7.7 3.0 1.990.730 0.7 1.5 7.4 20.4 0.3% 24.3 18.189.6 0.9 4. of shares.00 0.00 0.6% 26.20 32.38 23.8 1.0 3.8 8.943.100 0.7 21.2 6.8 0.4 1. restated 45 www.105 34.2 0.0 21.9 0.0 0.970 0.4 NS 0.9 4.52 -9.9 4.8 5.0 60.68 15.80 44.6% 3.2 1.85 22.24 3.4% 19.44 5.4 2.4 0.6% 1.8 1.000 33.7 4.28 26.2 0.3% 1.9 1.22 34.2 30.2 26.95 34.7% 17.6% 1.6 5.6 2.3 9.2% 1.770.1 1.0 1.60 16.1 1.195.5 21.3 0.9 7.7 0.5 7.4 5.3 0.3 7.0 1.6% 22.00 0.2 4.6 0.0 74.82 13.2 25.9 4.6 NS 1.100 0.9 3.6 16.69 15.00 47.20 7.3% 2.65 16.000 34.8 5.90 29.2 4.6 1.6% 1.1 No.1 3. adjusted Treasury stock.7 6.00 0.com .3 0.00 0.2 9.03 27.30 4.3 11.31 11.5 0.9 4.8 15.1 5.7 5.03 27.70 13.7 14.70 15.4% (0.38 23.40 4.5 10.3 2.9 14.3% 19.1 0.80 34.06 34.05 24.5 4.000 34.9 7.0 8.189.6 1.0 1.9 5.3 26.4 3.3 0.9 14.32 4.81 11.2 0.2 14.6 1.1% 0.01 24.7% 29.9 0.0 25.45 7.3 8.46 6.0 5.7% 1.069.105 34.6% 2.5 5.6% 1.000 33.9 5.7 1.6 4.0 8.65 34.2 7.5 7.6 0.5 11.1 1.620 0.50 13.8 4.92 44.12 13.0 16.105 34.16 48.0 1.2 1.2 1.3 4.105 34.6 852. adjusted Share Price [Adjusted] Latest price High Low Average price 33.9 34.2% 1. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.1 1.4 2.9 1.0 5.2 18.33 -23.9 1.2 0.2 18.9 8.27 10.73 27.4 6.16 48.000 34.2 6.36 17.7% 1.5 4.67 14.8 10.4 1.9 1.3 4.0 2.73 27.24 8.8 4.4 2.2 3.000 33.2 23.8 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.3 33.790 33.1 38.2 83.January 2011 GERMANY Smaller Companies Review BayWa FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.6 18.7% 1.78 10.16 27.00 0.0 3.7 9. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 480.6 67.1 24.26 3.7 7.4% 3.8 14.7 17.92 44.5 5.78 12.5 1.8 1.6 18.32 4.80 21.2 21.9 1.3 9.5 2.7 5.4 8.2 3.0 1.9 6.01) 0.6 9.35 13.165.8 18. number of shares.9 0.4 1.0 12.853 33.8 19.5 2.000 34.8 1.8 874.4 92.8 3.7 3.6 8. adjusted Av.2 2.9 5.000 33.3 1.197.000 14.30 17.0 10.8 1.150.6 4. restated EV/EBITA.88 12.9 6.8 0.8 1.5 0.8 3.00 0.1 4.9 5.3% 23.

3 9.6 3. FCF yield (%) 10. Bilfinger reiterated its strategy to reinvest the net proceeds in expanding its Services activities. it expects to be able to finance c. adjusted Daily volume EUR2730m EUR2620m EUR4918m 46m EUR 14.0 22. they still offer attractive value. incoming order growth in the key Industrial Services division (40% of group EBIT) continued to gain momentum with orders in Q3 up 23% organically (vs. The group already exceeded its 4% EBIT margin target in Q3 (4.0% 2009 2010E 2011E P/E (x) 14.4% and nonrecourse debt adjusted EV/EBITDA of 6.0 72.0%. certainly in Industrial & Power Services.5x.7% 11.3x (11E).9 EV/Capital empl.3 10.8 3.0 01/01 04/02 07/03 10/04 01/06 Price/M DAX 04/07 07/08 Q 46 www.1% EUR70.com (49) 69 47 89 75 25 EUR61.0 3. Bilfinger Berger Shareholders Free Float 96. EUR700m. Bilfinger also recently sold 50% stakes in four of its concession PPP projects at a 54% premium to NPV.0 32.5 ROCE (%) 12. Bilfinger paid just 6x EV/EBIT for this highly profitable (EBIT margin 16-17%) niche services provider. Notably. Despite the shares' recent strong outperformance.0 12.1 9.2 25. If we assume it can realise acquisitions with an average EV/EBIT multiple of 6.8 4.DE Bloomberg: GBF GR Stock data Market capitalisation Free float Enterprise value No.0 42.9 8. of shares.2% -0. a dividend yield (10E) of 4. suggesting its NPV for the entire portfolio is probably very conservative.3 4. and the EBIT margin progression beat our forecasts in all divisions. Including debt financing. (x) Disclosures available on www. The disposal also generated a capital gain of EUR18m.7 3. Bilfinger has a successful M&A track record. Bilfinger recently completed a small bolt-on acquisition of Rotring Engineering.5% -13.9 Attrib.3x P/BV (ROE 11E 15.4%). Most importantly. where significant investments are expected. To date. this suggests it could potentially acquire c.4%.0 32. further enhancing its power and oil engineering services offering.com 01/11 Price Sector focus Sector Top Picks Least favoured ADP.8 10. EUR155m additional EBIT or +45% from our 2010E estimate of EUR332m. Bilfinger increased its guidance again. the Building & Facility Services division reported a 4. EUR500m.cheuvreux. After the repayment of a EUR125m inter-company loan and a potential cash-out of risk provisions the net proceeds are likely to be c. In Power Bilfinger ideally aims to expand geographically into high-growth markets such as Russia or India and potentially into new areas such as turbine or distribution grid servicing. successful transactions Bilfinger's solid Q3 results again beat expectations with output volume up +5. 1. EUR1bn acquisitions.00 Target price (6 months) Bilfinger Berger Strategic transition still evolving Q Recent developments – strong Q3.8 2.0 22.2 2.3% 16. Craig ABBOTT Research Analyst cabbott@cheuvreux.0 Net debt/EBITDA (x) 4. on the back of which we raised our forecasts 3% for 2010/11E. Q Outlook – Valemus successfully sold/Lifetime extensions Bilfinger continues to execute its strategy to downsize its construction activities both organically and via the recent disposal of its Australian operations (Valemus). rechanneling the freed-up capital into growing its more stable. Treasury Shares 4.2 Yield (%) 3.4 EV/EBITDA (x) 12. From 2012 at the latest we expect it to begin to benefit from increasing capital spending on power plant lifetime extension projects in Germany. trading on ~10x (11E).02bn) as orders in Q4 picked up strongly and include a major EUR460m modernisation order in Poland. 19.7 4.0 52.5 NS 7.0 12.7 10.8 23. We are increasingly confident Power Services' 2010 incoming orders will exceed its 2009 level (EUR1.cheuvreux. 72. In late December it sold Valemus to Lend Lease for c. Relative perf.5 23.0 52. higher-margin Services businesses.0 42.7%).com Q 10/09 2012E .6 5.January 2011 GERMANY Smaller Companies Review CONSTRUCTION & INFRASTRUCTURE 1/Selected List Rating +13.4% margin due to higher utilisation and benefits from the integration of M+W Zander.2% 2.2% in Q2). Bilfinger is the dominant independent provider of high-pressure piping and boiler installation.5% Absolute perf.16m Performances 1 month 3 months 12 months 1.0 62.5 10.0 62. maintenance and lifetime extension services and is very well positioned.90 Price (07/01/2011) Reuters: GBFG.

Furthermore. . „ Risk of significant cost overruns in construction projects.3x. For Valemus we apply the estimated net cash proceeds (EUR535m) and we apply a P/E multiple to the central costs. Bilfinger has to date a successful acquisition and integration track record. Services. reporting just a 2% decline in output/EBIT in 2009. Bilfinger is the European market leader in Industrial Services.cheuvreux. Bilfinger's valuation remains attractive as the shares are still trading on a single-digit P/E for 2011E of ~10x.1x (11E) for the Services divisions (Power 9x. making Bilfinger an attractive defensive alternative.com Valuation Investment case Bilfinger's new strategic focus. P/BV of 1. Under its 'new' structure we estimate an output volume in 2010E of ~EUR8bn and EBIT of EUR332m. For the Concessions portfolio we apply a 30% premium to the company's published NPV (based on recent partial disposals which generated >50% premium to NAV). „ Future flow of social infrastructure PPP projects „ Integration risk for acquired companies. „ Loss from Cologne tube project could potentially exceed insured amounts.7% and offer a dividend yield of ~4. We estimate Services will return to at least 3-5% organic growth and an EBIT margin of >5%. and we keep it as one of our top picks in the construction and infrastructure sector. „ Recent track record of losses on large civil projects. which is in a severe downturn. built up via a series of acquisitions since 2002 as well as robust organic growth. and occupies leading positions in its niche segments in Power Services. which should lead to a further re-rating of the shares. The first major step in this process was completed in late December with the disposal of its Australian subsidiary Valemus. the largest Facility Services provider in the stillfragmented German market. Even in its current form the resilient Services activities already account for ~80% of group EBIT. which will include a EUR18m disposal gain (Concessions). Industrial 8x and Facility Services 7x) and applying EV/EBIT multiples of just 3. „ Potential execution risks during planned downsizing of construction activities. have become the group’s main earnings contributor. adjusted EV/EBITDA (excluding non-recourse debt) of ~6. and potentially c) small regional disposals.7% (multiples all 2011E). especially in Industrial Services. proved far more resilient than the market had feared. the main value driver The Services divisions. b) organic downsizing of its remaining construction activities. Power Services (13%/28%). Building and Facility Services (33%/22%). Construction (25%/EBIT loss) and Concessions (5% of EBIT). Q Q SWOT analysis Strengths Weaknesses Significant proportion of earnings (~85%) already contributed by the relatively stable Services divisions. „ Exposure (albeit limited) to the commercial building sector. Capital freed up from the downsizing will be reinvested in the further expansion of its Services businesses.3bn in 2009 to <EUR2bn by 2012 via a) disposal of its Australian operations. „ German construction market remains highly fragmented. „ Amongst the market leaders (in Europe) in each of its Services units.5x for both the Construction division and the building activities. Q Q Services.January 2011 Q GERMANY Smaller Companies Review Company profile Q Reorganised into five divisions Bilfinger was reorganised into five divisions beginning with its Q1-10 report and now reports its Australian operations as discontinued pending their planned IPO: Industrial Services (29% of output/45% of EBIT). with 96% free float Bilfinger could potentially become a takeover target. „ Opportunities Threats Funds raised from potential IPO of its Australian business (targeted for spring 2011) can be reinvested in expanding its service offering and geographic footprint in Services. accounting for ~60% of group output and ~80% of EBIT in 2009).3x with a ROE of 15. The company's plan is to reduce its construction activities from ~EUR5. if successful. will fundamentally reduce the group's risk profile and earnings volatility and enable it to further strengthen its already market-leading positions in each of its Services businesses. Our target price of EUR70 is derived applying a blended EV/EBIT multiple of 8. „ 47 www. „ Price pressure in some facility management and industrial services segments „ Scalable platform in Services.

0 0.943.0 0.0 (645.1) 77.4 1.3) 0.5) 0.0 0.0 0.8 152.5 97.0) 0.7 3.4) 281.6 25.8 41.8% (15.3% (151.0) 200.9) (101.5% (154.3) 66.0 134.0 (153.0 301.8 1.0 20.1 1.6 905.4% 7.2 1.5 8.3 (436.1 59.2 35.7) 0.1) 4.0 109.9 0.1 0.0 229.3% 56.6) 373.6 1.2% (1.0 0.4% 94.9 659.1% 7.0 0.367.750.0 (34.474.5) 0.310.5) (113.1 31.9 0.7 1.5) (3.0 218.0 -42.2 0.9) 3.0 0.5) 0.8) 264.9 19.1% 0.0 0.0 0. profit [loss].306.001.5 599.0% (2.8 7.7% (2.0 (40.0 173.4 0.0 87.1) 0.5) (183.1 4.0 (36.0 27.0 0.9 (209.0 0.0 346.0) 271.7 130.105.0 (525.8 1.0 0.7) 271.275.0 0.0 0.0 -30.4) 301.2 (1.3) 0.1% (1.4 3.4) 127.8 546.5) (6.0 58.9) 122.283.0 0.527.0 (386.5) 376.3) (4.0 (448.2) 129.3) 0.0 -27.8 2.2) 0.0 0.3% (2.1 (75.5) 434.9) 0.809.1) 0.8 7.0 8.8) (92.8 183.2) 0.8) (12.0 298.874.3) 0.3% (2.0 0.2) 214.0 0.0 87.4 5.7) (5.7 697.285.0 0.0 0.0 (1.9 0.0 140.0 71.8) (11.2 27.3 4.0 0.8 676.0 (47.1 (49.0 (911.8 47.5) 467.7) 267.653.953.043.5) 0.5) 0.8 1.5% (2.0 0.129.0 (366.189.0% 57.0 (951.923.991.cheuvreux.7% (5.0 0.667.6) 708.5) (83.5) 301.0 0.9 14.8 581.9) 0.5) (5.1) (5.9) (230.0 (3.9 161.0 56.1) 114.2 0.7 29.0 (45.9 163.3) (4.8 0.1) 338.0 0.6 (391.4 4.2 1.0 -35.9% 0.0 0.9 2.7 0.0 0.2% 0.0 0.2 196.3 -12.4) 4.0 (4.5 -62.0 0.3 (574.744.4 23.4% (127.8 39.0 0.003.7 98.9) 0.0% (0.382.2) 0.8) 0.162.0 0.2 55.0 110.0 -24.5 50.1 1.2 1.0 51.4% (97.4 0.6) (121.7 0.5% (163.0 283.6) (65.2% 142.5 5.8 (28.0 310.7) 486.9 2.1) (10.1) (5.8) 134.3 1.4 (924.0 (962.0 0.027.9 78.7) 211.0 (79.8 1.1) 0.205.2) 0.3% 8.0 32.0 169.4 (31.3) 169.7 260.7) 0.5) (2.0 (87.0 0.0 200.9% 0.0 96.2 0.0% 0.5) 0.1 86.0 139.0) 298.6) 427.0 (757.0 60.2 170.6) (8.0 0.8) 539.8 (195.3 1.0 0.0) 211.120.0 0.0 (7.0 0.6% 0.1) (5.0 0.1 45.367.7% (2.0 0.0) 0.6 700.0 0.9 20.1) (12.8 1.282.0 (215.0 332.5 0.0 0.4 331.5) 1.2 www.6% (168.0 -35.4) 1.457.6% (128.0 271.January 2011 GERMANY Smaller Companies Review Bilfinger Berger FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.2 93.580.0 286.5% (2.7 14.6 795.0 0.0 (44.5 0.513.0 (124.1 2.3 2.6% (9.357.2 0.0 0.2 1.6) 0.5) 51.275.0 0.0 91.413.0 (367.6% (243.6 1.8 3.3 (101.1 28.5) (129.0 0.227.8 (99.161.0 0.8 (100.0 143. [inc.0 (92.4 0.151.437.0 (52.8 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 48 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 5.9 0.0 (5.0 300.4 4.8% 6.4 93.5 607.1 30.0 0.2 57.1 1.3) 81.9) 86.6 800.0 0.3) 0. for exceptional items Net attrib.2 18.4 84.002.809.0 (683.0 0.3 21.0 0.3 566.5 (111.1 475.0 346.1% (169.2) NS 1.0 0.4% 17.9 170.2) 229.7 10.0 0.666.5 467.8) 4.7 512.9) (75.4) 0.0 (350.0 (4.8 2.6% 9.0 0.1) 166.6) 0.9 160.0) 0.667.367.5 54.6 21.336.6) 356.0 273.4 0.8% (57.5) (9.474.987.372.3) 2.6) (4.0 0.4) 4.5) 0.0 0.6 1.0 847.4 302.125.0 0.0 304.4 2.0 0.8 159.0) 140.8% (85.0 0.3 1.717.0 92.4% 7.0 -20.0 0.0 0.9 304.0 345.2) 274.2) 0.0 (963.757.0 (37.4 16.com .0 80.0 (641.0 0.0 (41.4 49.0 0.0) 173.0 (38.306.0 0.110.2 (42.0 204.1 (608.5 98.0 (46.0 (2.0% 0.6 1.0 73.0 (5.240.0 (132.477.864.9 27.0) (82.8% 8.4 39.2 15.7 45.1 13.8 0.538.8 0.8% (40.0 2.8 516.0 376.0) 0.4) (180.1 4.4 523.2) 497.7% 8.001.636.0 0.1 (14.0 0.0 0.7) (11.0) 0.1 0.0 114.413.002.0 (77.891.0 (47.758.0 281.633.3 0.0 (2.9 1.7) (305.0 0.0) (209. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.3 1.0 80.0) 0.0 21.7 1.3 135.0 0.0 0.6 2.7) (13.0 0.0) 346.0 61.6) NS 708.082.8 7.0 0.710.1) 92.9 2.8 0.367.0) 332.340.0 (2.041.4) (39.3 0.

14 1.1 2.9 EV/EBITDA.6 NS NS 3.4 46.1 13.00 59.9 12.969. adjusted Treasury stock.3 6.00 2.756.39 38.700 0.5 2.8% 6.6 NS 0.87 9.6 2.800 0.4 6.0 No.6 8.8% 2.5 8.28 7.4 14.8 1.1 4.78 -32.5% 29.2 13.00 7.29 26.3 0.6 2.6 7.00 3.4 2.9 5.6 0.3 3.8 3.6 9.827.9 NS 3.7 25.1 17.3 2.3 10.1 10.32 -29.6 0.7 5.0 9.5 9.3 1.473.3 1.4 13.8 10.4 8.8 1.48 37.4 NS 71.000 46.00 4.1 6.6 1.1 1.729.8 3.00 3.72 63.8 9.0 16.11 53.4 6.40 -59. of shares.2 110.729.56 23.5 6.0% 33.3 7.4 7.200 37.0 12.9 11.9 0.90 55.3 14.5 98.8 NS 1.90 55.1 2.7 4.9 5.45 1.5 4.00 1. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.5 NS 55.0 5.8 2.14 4.71 46.4% 5.9 14.8% 34.1 0.7 35.45 40.2 3.6 9.1 4.3% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.7 1.7 4.7 10.2 16.60 55.20 64.9 15.com .000 46.17 7.000 46.7 21.75 37.8 9.35 62.3 10.9 24.9% 1.787.62 19.56 7.9 5.038.33 9.8 752.110.2 0.1 4.700 36.7 15.80 28.5 12.30 46.0 1.9 9.4 0.44 30.8 3.4 2.806.50 28.9 14.000 37.2 23.5 5.3% 3.3 0.5 7.2 1.0 5.6 3. restated 49 www.100 37.78 74.6 3.95 25.5 9.3% 6.76 53.6 19.1 10.1 7.000 0.7 6.4 52.932.7 3.90 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.9 0.00 10.73 47.90 62.4 7.2 24.000 0.4 22.7 6.5 3.52 55.2 1.3 3.8 4.9 1.8 3.6% 41.3 3.7 10.3% 1.1 5.4 1.4 4.69 61.1 57. adjusted Av.000 0.7 2.9 1.6 7.5 25.479.1 46.000 0.00 2.9 5.2 93.61 45.2 50.0 17.7 2.2 4.43 45.000 37. reported % Change 1.8% 37.3 1.800 35.3 84.75 50.9 12.563.4 6.000 46.5 4.4% 30.3 14.33 10.7% 6.000 46.12 3.72 9.5 1.94 38.1 8.200 0.7 12.5 4.4% 3.000 46.43 55.342.1 22.12 37.4% 1.6% 3.2 5.200 37.8 15.3 22.0 4.8 0.6% 2.7 7.6 10.7 0.8 2.4 20.00 2.cheuvreux.18 38.8 8.3 15.8 49.000 0.4 1.8 17.5 2.12 3.7 NS NS 3.21 50.9% 30.1 11.5 16.7 4.8% 3.3 14.4 10.6 50.00 2.7% 6.48 27.000 37.6 9.40 -62.4 0.200 0.2 0.0 2.2 3.1 23.78 -32.2 8.00 1.25 7.3 52.32 61.000 37.8 3.56 7.90 64. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1. number of shares.3% 5.7 0.61 45.1 5.5 1.3 1.5 2.000 30.2 98.000 44.87 -35.80 7.6 0.714.8 34.01 1.029.2 21.77 61.8 4.5 21.1 10.4 10.918.7 1.21 52.1 2.7 7. restated EV/EBITA.6 11.7 1.34 35. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.7 15.3 0.25 31.7 3.2 0.92 54.25 8. adjusted Share Price [Adjusted] Latest price High Low Average price 36.8% 5.8% 32.18 1.5 15.6 5.5 NS 2.0 4.1 10.4 9.7 6.6 14.2 35.3% 29.5 22.3 3.0 38.60 55.7 4.7 19.4 6.35 40.January 2011 GERMANY Smaller Companies Review Bilfinger Berger FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.000 35.42 10.6% 5.9 12.

05 cents will impact the group's EBITDA by EUR10-15m.3 15.7m.0 60. excluding IPO costs of EUR5. Sector focus The company continues to forecast operating EBITDA for the full-year 2010 of EUR570-600m. but volatile US economy.com Q Q 50 www. FCF yield (%) NS NS 3. broadly in line with consensus.0 03/10 04/10 06/10 For the full year 2010 management expects to report a rise in group sales and gross profit based on positive macroeconomic trends.2 2. Q Outlook – FY outlook confirmed Reuters: BNRGn.0 75. on a full-year basis.com 01/11 Price Sebastian KAUFFMANN.0 65.6 13. Business in Latin America was hit by the difficult political situation in Venezuela. On a group level.0 55.5 1.1%.com (49) 69 478 97 524 11/10 . The weaker USD will have some negative translational impact.7 10. Net income came in at EUR43m. The company's free cash flow declined from EUR135m in Q3-09 to EUR91m in Q3-10.0 55. Brachem Acquisition S.6 4. The growth in EBITDA was not sufficient to offset the higher capex. EUR+12m).4 7.7 Attrib. a change in the EUR-USD exchange rate of 0.0 2.0 75.00 Target price (6 months) BRENNTAG AG Limited value from hazardous expansion Q Recent developments – Q3-10: strong top. weak bottom On 11 November 2010. Further.1 ROCE (%) 9.6% 10. Europe was in line and Rest of the World was a little weaker.5 12. While Asia/Pacific came in just a touch above estimates in absolute terms. and the higher working capital outflow (EUR-48m vs. which the company attributed to the strong.January 2011 GERMANY Smaller Companies Review TRANSPORT LOGISTICS 3/Underperform Rating -27. net income was also burdened by a write-down on financial assets.60 Price (07/01/2011) 07/10 08/10 Price/M DAX 09/10 10/10 Sector Top Picks Least favoured Free Float 50.DE Bloomberg: BNR GR Stock data Market capitalisation Free float Enterprise value No.0 Yield (%) 0.9% 2009 2010E 2011E 2012E P/E (x) NS 27.0 60. North America was stronger than expected. EUR71. Operating profit.2 12.27m Performances 1 month 3 months 12 months -0.2% - Absolute perf.3 2. although going forward the company expect a slight softening of the macro-growth trend.6 Net debt/EBITDA (x) 5.0 45. CFA Research Analyst skauffmann@cheuvreux. was just in line with our estimate and 5% below consensus due to higher amortisation charges.0 50. Shareholders We estimate operating EBITDA for 2010E of EUR589m. around 5-6% below our estimate and consensus.cheuvreux. Brenntag released its Q3-10 results. By division. According to our estimates.2% -2. 2/3% ahead of our estimate and consensus respectively.9 1. Besides the higher amortisation. 49.A.0 65. operating EBITDA came to EUR160m (+17% y-o-y).0 70.6 1. 80. which rose by EUR7m.0 8.C.4 Disclosures available on www.1% -3.0 45.cheuvreux. of shares.8 3. which were negatively affected by the stronger USD.9 16. management regards the outsourcing trend for chemicals distribution as fully intact.5m EUR 5. Relative perf.4% EUR52.5 2.3 EV/EBITDA (x) 5.0 80. adjusted Daily volume EUR3687m EUR1847m EUR5422m 51.0 2.5 EV/Capital empl.0 70.0 50. however. (x) 0.

000 customers. to its shareholder structure. Q Q SWOT analysis Strengths Weaknesses Global market leader and usually among the largest players in each of its regions „ Potential share overhang from selling shareholder „ Enormous amount of goodwill on the balance sheet.January 2011 Q GERMANY Smaller Companies Review Company profile Q Global leader in chemical distribution With a 6. in terms of both sales and EBITDA. The indirect selling shareholders were funds managed by BC Partners. product mixing. its future growth. inventory management etc. since its goodwill is likely to almost equal equity in 2010E and this might become a problem in case of a rise in cost of capital or declining cash flows. The proceeds from the capital increase of around EUR500m have been used largely to repay a mezzanine facility agreement. will come largely from Latin America and the Asia-Pacific region. Furthermore. It operates around 400 distribution facilities in over 60 countries and delivers some 10. which Brenntag only entered in late 2008. c) repackaging in smaller quantities. Q Intermediary between chemical producers and consumers Its main business activities include a) the purchase of chemicals from producers such as BASF. Also. we favour instead chemicals producers. which derives its parameters from a peer group. which yield a fair value of EUR52 per share on average. The shares' high premium to the company's book value and capital employed imply strong capital market expectations. from our perspective it is questionable whether the numerous acquisitions made in the past have generated any meaningful value. Even if we adjust for the amortisation of customer relationships. d) distribution of chemical products and e) the provision of additional services such as just-in-time deliveries. Hence. Q Investment case We believe the market is over-excited with regards to Brenntag's long-term earnings potential. We believe Brenntag should in fact be trading at a discount to the peers due. for example. its significant goodwill and its limited track record. the company's ROCE has failed to exceed its reported cost of capital in the past three years. though the company has failed to earn its cost of capital in recent years. Bain Capital. the two former private equity owners. . particularly in Asia „ „ Business model has proven relatively resilient to the economic downturn Potential failure to integrate acquired competitors „ Write-down of inventories in case of price drops or overestimation of customer demand „ Generation of synergies and economies of scale and scope „ Further outsourcing of chemical distribution by large producers to reduce complexity Accidents or environmental damage or changes in laws and regulations „ „ 51 www.com Valuation We value Brenntag based on a broad mix of approaches. is able to justify the current share price. both organic and via acquisitions. where profitability has still to be proven Opportunities Threats Operating profit growth through organic investments or acquisitions. GSMP (a Goldman Sachs affiliate) and two management vehicles. Given Brenntag's low operational leverage. Q Q Core markets are Europe and North America Except for in the Asia-Pacific region. we are concerned about the company's acquisition course. have already raised Brenntag's operating efficiency significantly.9% market share Brenntag is the global leader in the distribution of industrial and specialty chemicals. which in many cases also offer a lower valuation. Bain Capital and BC Partners. b) storage of largescale quantities of chemicals in its own warehouses. In fact.cheuvreux. Its core markets are Europe and North America.000 chemical products to more than 150. IPO at the end of March 2010 The stock began trading on 29 March 2010 at an IPO price of EUR50 per share. the company is among the leading players in each of its sub-markets. Only our SOP model. However. BP and Exxon. which implies that any room for improvements is likely to be much more limited going forward. given that the majority of the current EPS growth stems from the non-recurrence of private equity-related expenses as well as abnormally high economic growth rates. we estimate the company's organic EPS growth potential to be in the mid-single-digit region going forward rather than matching the doubledigit rates of the past five years. roughly equating to shareholders' equity „ Solid cash flow generation enables the company to maintain capex and financial investments „ „ Recent entry into the AsiaPacific market.

0 397.0) 0.0 0.2 254.5) (95.6) 0.8 495.3) (42.0 (7.1 73.0 272.3 1.2% (185.031.0) 0.9 (205.7% (104.415.4) 0.0 0.1) 645.0 0.0 0.2 1.9) 270.2 221.1% 0.7) 278.8) 480. [inc.2) (6.576.0 0.0 0.7 8.0 29.9 17.2 512.8 1.3) 0.0 (40.0 (686.8) 583.1 234.8 0.584.0) 506.3) 0.8 62.0 164.669.429.1% 0.2) 0.0 0.4 195.0 583.0 0.4 1.0 (181.2 255.0 0.9 (94.3) (5.0 (21.3% (389.6 -11.0 (117.0 (83.0 (29. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 (63.0 278.8) 0.0 6.5) 0.0 0.1) (45.5) 0.9) 135.5 193.6% 0.2 2.9% (205.1 84.2 54.0 1.0 0.4% (681.1) 34.0 308.0 (0.7 (87.0 135.1 3.9% (202. profit [loss].0 2.7 (223.0 0.1) 0.3) (178.2) 0.9 0.7 1.7 0.0 0.3% 239.7) 476.0 (43.9 78.9 356.0 (116.6 101.0 11.0 0.726.5 22.2 (4.6 10.0 0.0 0.4 -44.0 0.6 241.2 (279.8 222.0 0.3 www.cheuvreux.576.1 42.2 3.0 0.4) 0.0% (112.6) (0.955.0 0.9 8.030.2 184.6) 0.8) 303.8 5.9) 540.0 279.6 2.1 46.0 8.8) (288.5 97.5) (215.0 0.472.2 NS 3.7 (4.8) (64.0 0.9) 0.425.0 (0.7) (136.0 202.2 0.4 910.429.2) (7.4 7.0 0.3) (5.7 0.5 0.0 0.0) 403.0) (189.2 459.0 (145.5) 397.4 7.1 8.335.855.2 NS 8.2 526.5 29.3 36.6) 696.0 (64.5 11.0% (37.0 (88.com .6% (582.3) 282.0 0.7) (77.7) 202.3) 272.2 1.2 550.5) 40.4) 0.0) 174.4) 0.8) (193.4 53. for exceptional items Net attrib.0 141.0 0.5 14.6 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 52 2007 2008 2009 2010E 2011E 2012E 6.0 0.3 433.0 0.1 6.519.265.364.0 0.299.7 6.7 0.0 0.0 (41.3 0.9) (6.0 0.0 (0.7) (204.5 0.0 0.548.6 10.8% 7.0 0.7 NS 3.5 1.2 1.0 0.7 1.2% (848.0 (164.0 0.1 13.450.8 3.7) (106.0) 0.0 (6.9) 0.1% (203.0 29.2 (271.0 (0.379.369.0 1.1) 250.0 57.6% 9.299.3 (96.0 29.0 0.6 -13.0 0.0 0.0 0.335.8% (53.8) 0.9) (127.492.1) 26.4 0.8 1.9) 26.0 0.0 3.064.8 0.9) 405.5 7.4) 505.2 6.1) 0.2 0.205.1 (172.0 540.1 1.6) 135.2 6.0 (42.7) 0.297.0 29.7 3.1 3.6 -0.7% 0.6 22.2% 6.2 37.1) 99.4 446.8 19.535.2% (777.0 (7.7 1.0 0.0 0.2 898.453.4 52.9 9.0 0.335.6 0.1 71.3) 407.7 3.0) 582.3 (5.9 NS 2.1) 0.315.671.265.0 270.0 0.4 332.3 (537.453.0 0.5 887.8) 300.6 2.3 206.598.3 1.1) (324.0 (7.9 197.2 389.0 3.512.0 300.4 4.5) (221.0 0.958.0 0.0 44.7% 0.2) (5.958.0 5.0 (46.0 0.2 10.2% (105.8% (590.2) (1.844.3 0.January 2011 GERMANY Smaller Companies Review BRENNTAG AG FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.5 0.7 -2.118.1 118.3 13.9) (126.2) (7.

4 2. restated 53 www.0 27.500 51.60 - - - - 3.0 NS NS NS NS NS 0.000 0.6 6. reported % Change 2007 2008 2009 2010E 2011E 2012E (1.0 17.1 10.880 0.5 4.2 NS 0.6 27.00 12. number of shares. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.9 10.000 51.000 51.4 17.000 41.8 16.5 3.6 2.5 0.0 3.6 73.1 NS NS 12.87 8.com .4 5.6 41. restated EV/EBITA.77 NS 2.0 NS NS NS NS NS 0.3 3.500 0.11 -11.5 0.9 0.1 1.8 1.7 9.7 (1.500 51.2 6.05 73.422.2 0.000 51.3 2.0 1.00 1.12 60.0% 33.89 -44.00) 99.7 17.5 13.4 5.500 0.50 7.796.4 3.00 6.5 7.25 8.3% 4.5 15.5 10.2% (1.687.3 0.60 76.56) (1.1 8.7 54.5 NS 2.7 10.5 9.2 5.8 12.6 10. adjusted Av.3 8.03) 34.6 0.5 6.2 NS 0.00) 99. of shares.24 71.84 10.56) Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.000 41.1 3.6 6.4 3.000 41.44 48.4% 5.1 NS NS NS NS NS NS NS NS NS NS NS NS 10.42 7.47 70.3 97.0 0.3 12.7 9.1 3.369.5 9.500 48.1 7.5 6.4 0.8 NS 2.7 NS NS 8.7 3.03) 34.8 17.00 2.7 1.2 37.4 7.929.5 5.4 3.2 1.29 91.00 0.8% (0.4 10. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.77 NS 5.6 2.3% 5.4 3.6 11.2 0.4 4.0 2.9 2.6 3.35 No.0% 30.5 84.29 91.January 2011 GERMANY Smaller Companies Review BRENNTAG AG FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.8 7.84 10.1 NS 0.000 0.29 19.5 4.0 38.2 7.7 6.8 NS NS NS NS NS 0.0 2.3% 4.687.0 14.000 0.00 7.000 41.00 6.8% 2.00 0.000 41.5 NS NS NS 9.0 0. adjusted Treasury stock.0 NS 2.8 12.00 0.30 76.5 2.28 71.6 2.4 1.3 7.5 5.00 2.4% 5.7 5.6 10.1 7.cheuvreux.0 13.000 - - - 76.2% 2.2% (0. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.2% 27.

8 42. as announced earlier. William Demant Least favoured Shareholders Carl Zeiss AG 65. As we continue to believe small deals in the range of EUR10-30m are more likely than a meaningful transactiom. At its full-year analyst meeting in mid-December CZM also disclosed some details of its new company excellent programme MEGA 2015.4 16. but we believe this reflects a minor one-time gain from the sale of the pharma business.9 6.1) (3.0 2.3% 19.0%. we consider this a disappointment in view of the lack of deal flow in recent years.com 10/09 .8 52.4% EBIT margin and implied 19% EBIT growth in Q4. Rating 3/Underperform Target price (6 months) +2.22 dividend plus a one-time special dividend of EUR0. we reiterate our 3/Underperform rating.8 12.8 12.8 2.5% 8.1 20.3 5.cheuvreux.January 2011 GERMANY Smaller Companies Review HEALTHCARE EQUIPMENT Carl Zeiss Meditec Hidden value not to be unlocked in near term Q Recent developments – Momentum improved CZM announced its Q4 results in an ad hoc release as they exceeded consensus expectations. On a full-year basis. after two challenging years.5 3. Given that the special dividend only accounts for 8% of the company's current net cash position. We were slightly disappointed by this target as the company had already said a year earlier that it aimed to realise a 15% margin target in the mid-term . despite the higher margin of 12. This was driven by strong year-end business in Asia and a trend towards highermargin products. This seems to have materialised.2) Yield (%) 1.8 52.5 2.4 1. However.mid-term was so far defined as a 3-5-year horizon.12 Price (07/01/2011) Reuters: AFXG.6% -6. we believe the key potential catalyst for the stock remains an improvement in its highly inefficient capital structure.2 35. Q4 sales rose 15% y-o-y to EUR186m.9 Net debt/EBITDA (x) (3. which translated into a record 14. We understand that CZM continues to expect an acceleration of growth next year despite the now slightly higher base (5% organic). Free Float 35. Relative perf.8 62.8 6. Furthermore.8 ROCE (%) 26. it has yet to provide quantified guidance.6% 9.4 1.8 EV/Capital empl. given the unchallenging comparison base (sales fell 7. we understand that.8 32.7% reported) and a 12. Net income growth in Q4 was even stronger at 21%. FCF yield (%) 6.3m EUR 0. of shares.9 6. We predict a 40bps increase next year.2% Absolute perf.8 EV/EBITDA (x) 7.8 01/01 2. CFA Research Analyst oreinberg@cheuvreux.50 EUR14.8 2.6 1.7 Attrib. While we expect Q1 results to be strong. 11.8 42. and hedging gains also contributed.8 32.3 30. 62.9 7.8 22.com Q Q 54 www.com (49) 69 478 975 26 Disclosures available on www.2%.3 33. we estimate 8.4) P/E (x) (2. Stripping out FX effects. After our upgrade the stock performed impressively and we downgraded it again on 8 December as our target priced left hardly any room for upside.33.DE Bloomberg: AFX GR Stock data Market capitalisation Free float Enterprise value No. a moderate margin improvement is likely.9% organically in Q109/10). this implies estimated organic growth of about 5% (5.7% EUR14.0% 08/09 09/10E 10/11E 11/12E 20. In early December CZM announced its dividend proposal.9% in FY08/09).6 18. adjusted Daily volume EUR1148m EUR401m EUR893m 81.5% organic growth. With this CZM aims to achieve a 15% EBIT margin by 2015. looked set to improve (see our note dated 13 Sept).8%.8% margin (vs.2% 6.8 03/02 06/03 09/04 12/05 Price/TECDAX 03/07 06/08 Price Sector focus Sector Top Picks DiaSorin. Getinge. Following the Q4 results announcement we increased our 10/11E EPS forecast by 7.4 5. which foresees a regular EUR0.9) (3. (x) Oliver REINBERG. Orpea.cheuvreux. Q Outlook – Likely strong Q1 but limited M&A expected We upgraded the stock in mid-September as we felt the magnitude of its underperformance was exaggerated and its momentum. which follows its RACE 2010 programme.89m Performances 1 month 3 months 12 months 0.8 22.

The company was founded via the spin-off of the Ophthalmology division of Carl Zeiss in 2002. Note that this multiple is not adjusted for the company's massive EUR330m net cash position. Based on our target price. From a medium-term perspective. Q Q SWOT analysis Strengths Weaknesses Several of the company's products are industry gold standard „ Smaller and less profitable than major competitors „ Free float shareholders remain in a minority „ Strong Zeiss brand recognised for superior quality „ Inefficient capital structure (heavily overcapitalised) „ Carl Zeiss AG. The "Zeiss" brand underlines the company's premium strategy. Carl Zeiss AG holds a 65% stake Carl Zeiss AG remains the company's largest shareholder (65%). At this level CZM would be trading at 17. including its OCT technology. whilst its consumables business (recurring revenues) is more or less limited to roughly 15-20% of group sales. . However. IOL Master and Humphrey Field Analyzer. Given the company's massive excess cash pile. A number of its products are gold standard in the industry. a powerful financing vehicle „ „ Strong cash flow generation Opportunities Threats „ Value-accretive acquisitions financed by excess cash „ More global launch of its IOL offering „ Recurring revenues limited to 15-20% of total. Q Investment case Carl Zeiss Meditec has a strong franchise with leading market positions and a strong brand. CZM's revenues constitute primarily equipment sales. Carl Zeiss Meditec is a member of the TecDax. 49% of the Japanese business belongs to minority shareholders. after the recently strong share price performance. we believe its momentum is set to improve (we predict 7. sales trend may hence remain volatile „ Missing out on new technological developments MEGA 2015 programme to accelerate sales „ „ Market growth rebound 55 www. this has to be taken into consideration. technological innovations and increasing healthcare spending in emerging markets also play a crucial role.2x 2011/12E earnings. Q The American market is the largest The Americas constitute the company's largest market (35% of 09/10 sales). Carl Zeiss Meditec acquired Carl Zeiss Surgical in 2006. which accounts for 30% of its market capitalisation. After its lack of growth over the last three years. followed by Europe (36%) and Asia/Pacific (29%). which was subsequently merged with Asclepion-Meditec AG. equating to 30% of its market cap. Although we do not anticipate a material nearterm improvement. we believe M&A and alternative uses of the excess cash are necessary to catalyse further upside. the stock is likely to tread water after its recent strong performance.January 2011 Q GERMANY Smaller Companies Review Company profile Q Leading player in ophthalmology (and microsurgery) Carl Zeiss Meditec is a leading player in the global ophthalmology market. the stock would be trading at only 11.4x 2011/12E excess-cash-adjusted earnings. as the unadjusted P/E multiples are rich. the ophthalmology market is expected to grow by 5-7% per year. However. Since we believe only small deals are likely in 10/11E. but we note that it is unlikely CZM will put its entire cash position to work in the near term.5 price target. CZM has hidden value reserves.5% organic growth in 10/11E) and Q1 results will benefit from an unchallenging comparison base.cheuvreux. which also extended its business focus from the ophthalmology market into microsurgery (Neuro/ENT).com Valuation We reiterate our 3/Underperform rating and EUR14. Q Q Strong drivers but limited consumable sales Demand in the ophthalmology market is driven by the aging global population and the increasing prevalence of diabetes.

8% (182.2 39.8% (74.5 14.0 0.2 488.0 (15.2 (8.0 12.4 (106.0 (4.8) 70.4 0.0 0.5 26.5) 62.0 0.1 561.9) 0.8 (12.5) 80.7) (438.4 16.cheuvreux.1% 0.9 31.0 15.3% 11.5 (39.1 34.7 29.0 0.4% 0.0 0.5) 0.0 0.6% 0.0 26.0 13.0 0.8) 16.0 (23.8 41.0 50.6) 54.2 23.0) 0.6% (12.0 520.0 1.5) NS 323.0 (9.0 23.3 207.0 0.8 14.0 (23.0 0.0 12.5) 0.9 113.0 102.4) 26.4% 390.0 0.2) 0.0) 0.0 29.3) NS 207.0 95.8 0.0) 26.9% (141.0 65.3 59.5 43.0) (9.1% (17.0 0.8) (7.0 (3.9 111.2 35.4 205.9 14.7% 0.0 0.9% 0.1 6.0 0.8 0.0 (4.0) 0.4 328.0 62.0 0.0 98.4 25.7) 0.7 29.2) 28.5% (10.7 29.2% 0.3% 0.5 0.0 0.0 56.5 12.0 35.0) 0.2 0.1 10.0 20.3) (9.5) 0.0 49.2 0.3) 45.0 0.0 0.3 331.1 (2.0 26.1 0.8 34.8 36. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.5% 3.8) (238.7 17.7 45.3% (60.0 0.5) 0.6% 22.0 0.8 -16.6% (159.7% 0.0 0.8) 92.1 8.4 5.2) 54.3 0.3 (15.7) (459.8 79.0 0.6 0.9 8.8) (369.4 46.7% (167.1 0.0 0.9 31.7 (2.6 16.3 0.4 113.9) 47.0 (18.1 656.2 12.8 22.6 11.0 0.3 103.7 (368.4 13.0 47.0 (35.0 0.3 (1.1) 67.1) 82.0 (2.2 0.5% 0.0 105.8 2.3% (9.9 0.1 0.0 (1.7 12.0) 6.4 59.7 35.2 0.1) 103.7 17.6 5.0 0.7 0.1% (2.1 11.0 49.8) 0.5) (4.0% (17.8 20.7% 736.0 55.7% 776.3) 0.6 471.0 0.9 0.2% (15.0 0.9) 58.0 0.6% (1.0 0.4 35.8) 106.0 68.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 56 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 234.0 0.0 35.0 13.0 0.0 16.9) NS 331.9 113.0 0.7 12.7 3.0 86.0% (3.0 59.2) (2.4 (3.0 (2.7 35.7 37.3 0.5 321.0 0.2 -3.0 0.0 97.0 0.0 (16.5) (8.0 0.2 0.0 0.0 0.0 74.7% 323.1 5.5 1.8 50.2 42.9 18.4% 9.0 0.0 0.7 204. for exceptional items Net attrib.1 8.4% (149.4) 76.5) 0.3) 115.2 (72.0 0.0 0.1 11.4 13.1 (227.7 63. [inc.5% 676.7 0.4 0.0 50.7 (4.0 30.0) 41.9) 97.9) NS 204.1) 0.9 13.0 (5.9) (204.2 7.3 6.5 0.8) (17.7 12.5 0.4 34.6 (243.0 0.0 0.7 0.3) 0.2 (0.5) 0.1% 0.1) 0.0 0.1) 74.5) (2.7) 46.0 0.8) (14.2 0.0) 1.3 41.9 38.0 (18.5% (18.0 47.0 0.0 0.7) 1.0 0.4 8.3) (4.4 9.8) (387.5% (192.9 11.0 0.4 24.8 (319.7% (92.0 0.0 0.8) 0.9) NS 319.9 324.0 (3.8 (11.3 (423.3 29.2 25.1 9.0 (19.0 0.0 70.6 5.9 8.0 35.9) 68.9 35.9 (1.6 33.0 (1.2) (16.2 0.6 31.0% 640.7 5.0 39.0) 0.7 32.2% (5.0) 0.0) 44.0 97.0 (5.8 12.6) (6.6) 0.0 (31.8) 31.8 223.7 41.8 www.0 0.0 0.1 14.0 111.0 (14.0 0. profit [loss].2 5.0 0.0 68.6 38.0 (14.0) 86.9 (6.5 0.8) NS 287.0 55.1 13.0 0.7) NS 328.8 18.9 -1.2 35.8) 75.3 607.3% (16.0 42.1) NS 321.0 (3.2 (11.5) 0.0 0.6) 0.3 45.4 (268.0 0.1) 0.0 76.7) 68.0 (13.7 21.0 0.0 (29.6 1.3 22.0 0.5 -6.6% (11.0 (5.7) 12.1 8.January 2011 GERMANY Smaller Companies Review Carl Zeiss Meditec FY to 30/9 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.6 9.0 43.9 (19.1 14.0 28.3 0.8 (48.6 28.0 0.4) 167.0 27.0 0.1 2.1) (0.com .3) NS 88.0 0.1 320.0 (26.9) 71.1 29.7 13.0 29.6) 50.0 0.9 -0.6 85.0 48.0 0.0 (11.0 32.7 88.2 76.4) (346.4) (142.0 0.0 0.8) 48.0 106.1) 35.0) 124.1) 193.3 131.5 101.0 0.1 113.5 93.3 38.0) (12.9) (405.9) (0.0 (2.1 1.3) 0.4 0.4 56.0) 66.2 0.0 0.8 94.0 67.9% (5.0 54.3 287.0% 600.1 6.0 54.8% 569.0 0.0 3.0 0.0 0.0 0.6 20.5 31.

5% 4.6 0.2 1.25 1.00 0.44 6.1 8.300 0.com .61 -25.74 -19.77 13.6 0.7 6.16 1.9 813.7 23.49 15.5 2.82 53.6% 5.9% 5.300 81.8 12.2 NS 70.8 11.1 630.1 3.3 2.1 13.January 2011 GERMANY Smaller Companies Review Carl Zeiss Meditec FY to 30/9 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.7 12.6 20.3 1.3 7.0 0. restated EV/EBITA.2% 6.0 310.6% 7.53 14.3 2.7 11.82 53.5% 0.9 1.000 30.147.1 939.2 10.3 12.18 0.6 2.43 0.00 0.2 3.0 7.03 14.0 590.8 16.2 1.0 24.5 11.5% 0.68 8.000 81.4 8.7 2.000 0.4 5.3 2.2 1.000 32.8 511.5 19.9 17.7 9.4 1.00 0.32 10. restated 57 www.5 1.0 NS NS 14.2 4.0 1.000 78.7 893.3% 0.4 6.1 3.8% 6.cheuvreux.7% 0.2 10.41 7.8 7.0 Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.3 21.4 18.500 0.61 -25.68 8.6 NS NS 15.94 12.94 1.2 12.2 NS NS 13.300 81.4 16.44 74.9 3. adjusted Av.8 25.1 10.5 12.5 1.23 1.66 8.6 14.147.8 2.000 9. adjusted Treasury stock.5 12.1 2.77 13.2 1.1 NS 27.7% 0.00 0.6 11.04 14.78 14.7 27.5 3.14 1.49 11.004.3 5.6 12.2 0.1 8.0 NS NS 16.8% 0.300 81.9 10.12 - 315.48 3.3 10.1 7.1 NS 17.5% 0.7 7.8 1.8 9.400 28.29 14.18 0.4 2.6 0.2 7.2 2.2 23.31 6.5 10.1 20.5 11.80 17.1 13.4% 0.3% 0.2 6.7 11.27 13.16 48.8 1.6 2.2 10.9 19.2 14.5 17.5 187.0 7.8 NS 29.4 1.300 0.00 0.400 0.00 0.18 10.2 30.500 32.0% 7.66 8.6 16.8 9.29 11.5 22.87 8.9 0.9 2.1 NS 0.4 9.3 8.41 20.7 0.97 11.00 0.0 11.0 6.400 0.6 13.2 11.33 10.0 NS NS 13.2 16.4 2.46 12.9 1.54 20.8 No. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.4% 0.7 26.6 13.7 11. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.49 8.88 12.00 0.8 5.190.7 10.33 9.4 5.8% 0.8 35.2 6.300 81. adjusted Share Price [Adjusted] Latest price High Low Average price 28.8% 6.7 34.36 10.300 0.4 12.1 1.5% 0.1 0.300 81.96 9.6 2.6 2. of shares.0 2.84 9.8 10.1 11.83 12.15 13. number of shares.8 10.8 8. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.5% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.000 81.1 710.000 81.2 19.95 18.9 NS NS 13.12 14.5 13.4 1.4% 0.92 -34.5 11.8 6.7 726.4 1.07 14.62 -6.84 9.1 NS NS 14.76 14.8 2.1 13.0 NS NS 15.4 13.3% 6.7% 0.2 9.7 2.00 0.54 20.09 13.8 11.70 12.5 1.18 15.2 2.62 -6.300 0.0 3.1 12.29 14.4 NS 29.2 901.9 9.2 19.3 18.0 11.2 9.4% 0.0 3.5 NS 30.98 10.000 78.1 20.2 1.9 8.8 0.6 NS 29.7 24. reported % Change 0.300 0.9 1.8 9.8 NS NS 15.05 12.00 0.000 81.5 1.1 19.9 8.7 8.4 18.9 3.7 836.9 21.2 0.6 210.05 11.2 NS 29.1% 0.7% 0.20 0.4 20.7 0.0 22.15 8.400 30.000 81.70 8.93 26.3 33.6 13.3 25.

3 1.7) Yield (%) 0. of shares.8% EUR27.0) (0.5 16. Autenrieth Beteiligungs Gmbh 9.0 53.0 10/07 13.5 16.0 23. EBIT of EUR20. adjusted Daily volume EUR540m EUR183m EUR449m 21. FCF yield (%) NS 3.0% -19. (x) Research Analyst pbumm@cheuvreux.4 0.4% -27.5 15. The company reiterated its FY10 sales guidance of EUR580-600m but said its EBIT margin will be around 11%.5 2. As selling prices for polysilicon stabilised at around USD50/kg in June/July before rising to >USD70-80 in October and USD90-100 in November.com 01/11 Sector focus EV/Capital empl. Stock data Market capitalisation Free float Enterprise value No.2 14.8 11. they would not have ordered equipment that will only be up and running from 2011.8% -8.0 5. we see the threat of polysilicon overcapacity vanishing. Cell customers anticipate ongoing strong demand for photovoltaic from end-customers.52 Reuters: CTNG.3 Net debt/EBITDA (x) (2.527 08/10 .cheuvreux.162m EUR 0.4m (+110% y-o-y) beat our EUR18. On the other hand.9 2.0 63.0 03/08 08/08 01/09 05/09 Price/TECDAX 10/09 03/10 Price Sector Top Picks Least favoured SMA.cheuvreux.4% Absolute perf. it also removed about EUR290m older polysilicon orders from its order book.9%.0 4.9% -47.0 33. polysilicon is set to rise.0 2. Its total order backlog after 9M-10 stood at EUR748m.9 Attrib.0 23.0 63. It is also important to mention in this context that the orders received are for production capacity expansion rather to replace existing equipment. Centrotherm again received very strong order intake of in Q3. SolarWorld Conergy Shareholders Hartung Beteiligungs Gmbh 52. Free Float 33. If this were not the case.0 43. The continuous flow of cell equipment orders from China shows that the cell producers are confident the markets will show further growth.0 53.7 1.DE Bloomberg: CTN GR Recent developments – Excellent Q3 but write-downs Centrotherm reported solid Q3 figures: sales of EUR180m (+63% y-o-y) exceeded our estimate of EUR170m and consensus of EUR161m. demand for wafers and.com Q Q 58 www.5m forecast (cons.0 73.4m (+99% y-o-y) came in above our EUR12.897.0 43.com (49) 69 47. Q 3/Underperform Price (07/01/2011) Polysilicon order intake to follow Q Rating Outlook – Polysilicon equipment orders will come Given the massive order intake for cell equipment. Hence.5 Philipp BUMM Disclosures available on www.9 1.0 73.4m).0% -46.0 13.7m estimate (cons.9 4.7 11. we expect major polysilicon orders to come in 2012E rather than 2011E. EUR12.5) (1.3% 2009 2010E 2011E 2012E P/E (x) 33.0 33. largely for cell equipment.7 4. Nonetheless.7 ROCE (%) 14.85m Performances 1 month 3 months 12 months -2. EUR17m) and net income of EUR14. in particular.January 2011 GERMANY Smaller Companies Review RENEWABLE EQUIPMENT Centrotherm Target price (6 months) +5.3 EV/EBITDA (x) 11. polysilicon producers are likely to make investments in new equipment.0 83.00 EUR25. Relative perf.1 3.0) (1. down from EUR922m after 9M-09 and from EUR864m after H1-10. However. 83. and bearing in mind the fact that equipment producers are promising production costs of USD20-30/kg.8%.

. In terms of EV/Sales 11E it is trading at 0. we see a pick-up of new orders in 2012E rather than in 2011E. Its product range is supplemented by reactors and converters for the manufacture of polysilicon.com Valuation Investment case Centrotherm is well prepared to show revenue growth in 2011E by working down its estimated end-2010E order backlog of about EUR900m.1 in c-Si turnkey and no. trailing world market leader Roth & Rau). The company is trading at a P/E-11E ratio of 12x. which represents a 56% premium to Roth & Rau. trading at 4. 2 in c-Si antireflective coating equipment. On an EV/EBITDA 12E basis Centrotherm also looks more expensive than Roth & Rau. Although major order intake for the company's polysilicon business will probably start earlier than previously expected (as a result of strong cell capacity expansion). Q Q Top tier player in almost all areas With the exception of its newly established thin-film business. Based on 2012E multiples we see Centrotherm trading at a premium to Roth & Rau and Manz Automation.9x or at a 45% premium. Q SWOT analysis Polysilicon order intake cycle „ Reduction Client's strong demand for the company's new CIGS thin-film turnkey line might result in significant new orders of political support „ New competitors from the semiconductor equipment area and low-cost competitors from Asia may invade Centrotherm's turf „ 59 www.January 2011 Q GERMANY Smaller Companies Review Company profile Q Leading manufacturer with broad product range Centrotherm PV is one of the world's leading technology and service providers for the manufacture of solar cells and solar silicon. the company is a top-two player in terms of global market share in all its business areas (no. Q Strengths Weaknesses „ Strongly „ established solar cell equipment supplier Strongly dependent on execution of high-volume polysilicon orders „ Huge order backlog extending into 2011 „ Well diversified product portfolio Limited visibility on the potential success of its CIGS thin-film activities Opportunities Threats Contributions from solar silicon business faster than expected „ „ Push-outs and cancellations in the order backlog „ „ Our DCF-based target price stands at EUR27.72x.cheuvreux. The company's broad product spectrum comprises key equipment and turnkey production lines for crystalline and thin-film solar cells.

] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 60 2006 2007 2008 2009 2010E 2011E 2012E 71.5 0.0 (0.9 4.2) 0.0 0.0 0.1% (28.9 0.3% 374.0 85.7) 62.9) 0.0 54.8 2.1) 9.0 (53.3 5.9 5.0 45.0 (8.0 0.7% 6.6) 0.2% 0.0 0.1 0.5) (439.6) (45.0 0.6 (3.6) 0.0 0.0 0.4 (1.1 0.4 129.0 (9.6% (35.1 0.0 26.0 5.4 0.8) (19.0% 509.0 8.0 (19.0 34.3 99.5) (56.7 125.0 0.8 18.4) NS 133.4) 57.7 0.0 0.7) 0.0 440.0 64.0 0.9) 7.8) NS 258.0 33.0 0.8) 0.0 13.0 0.0 0.2 44.4% (14.0 26.5 13.3 3.5% (8.0 (121.7) (136.7) 1.8% (8.0 0.7 1.5) 0.0 21.0 0.2 0.5 18.8% 0.4) (3.6) (5.2) 2.0 0.2 0.0 0.7 5.0 (0. [inc.0 0.2 79.2 133.4 -84.7 0.2) 9.0 0.4% (62.1 (120.1 129.4) NS 428.0 (14.9) (10.6) 67.6 0.0 50.0 0.7 0.4 28.9 2.1% (65.0 42.9 (69.0 0.9 0.3 99.3) 0.0) 43.0) (45.0 0.8 0.1 129.0 0.4 NS (60.8% 0.1) 0.0 0.6) 228.8 7.4) 0.0 0.8 44.7) 16.9 1.8 0.4 www.2 (90.2% 595.8 (199.0 0.2 45.0 0. profit [loss].7% 0.0 0.0 43.0 0.cheuvreux.5 5.7) NS 371.6) 0.0 (17.0 61.3 99.9 0.0 0.2 0.1% 567.8) (289.1 0.0 0.0) NS 307.3 0.0 61.8% 0.4 -84.0 0.0 9.0 (245.8 9.2 7.0 (11.0 0.0 7.0 (18.0 0.0% 0.4 0.0 0.0 0.0) 0.0 14.4 12.2 26.9% (37.0 (0.0 0.6 0.0 -89.0 0.9% (61.0 (15.0 34.4) 0.0) 1.9) (30.7) (147.1 371.1 0.5% (0.2 0.3 3.4) 21.1 0.8 5.8 0.0 (11.3) 1.7 0.1 0.0) (48.0 100.0 0.0 38.6 0.0 0.8 19.0 0.0 0.0 15.9 -22.6 0.8% (2.4 474.1) 64.9 (60.0 (3.2 162.2) 307.9 0.0 0.3% (23.6 143.2 38.2 2.0 141.9) NS 2.6) 13.0) 0.0 0.4) 96.0 5.0 3.6) 79.3% (32.0 0.8 6.0) (34.1 -23.1% (0.5 21.2% 0.0 45.0 0.0 0.8) 61.5 167.0 0.0 6.0% (29.9 0.0 (7.0 0.0 0.0 0.1) (379.0 0.5 22.3 0.4% (27.8 53.5 406.1 (12.5 105.6 130.0) 21.6 0.5 129.0 (3.3) 68.0 0.2 20.3 99.5) (32.0) (1.0) (43.2 (0.3 99.5 23.6) (474.0 NS 12.0 (7.0 12.5 128.6 0.6 428.8 0.5 375.7% (70.4 (0.0 0.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0% 641.4 0.0 0.0 0.0) (33.5) (23.6) 33.8 0.0 47.1 11.0 0.4 129.0 0.0 0.2 34.0 0.4 (163.1) 0.2 47.0 0.1 0.0 (4.3) 91.0) 0.0 0.1) 5.0 0.0 0.com .5) (69.1 3.7) 0.0 138.4% 9.9 166.8 75.6) 0. for exceptional items Net attrib.1 35.1 15.January 2011 GERMANY Smaller Companies Review Centrotherm FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.7 14.0 0.1 0.0 0.0 0.9 0.5% (6.4) 50.4) (425.2 5.7) 125.3 (0.5) (59.0 0.8 48.0) 144.0 0.6 154.0 0.0 38.0 44.9 (135.0 0.1 126.1 (0.7 4.6 0.0 0.0 47.0 (13.6) 0.6% 0.5 0.0 0.4) 151.0 0.0 (8.3 318.0 0.1) 23.0 0.

00 0.00 0.84 44.9 0.5 6.1% 1.1 11.00 76.162 0.7 9.5% 1.5 11.7 570.0 11.00 0.1 7.6 NS 30.55 3.0 22.162 0.06 51.1 10.0 179. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.000 21.9% 2.997 0.7 6.5 0.5 2.52 27.9 14.84 44.0 NS NS 13.2 33.0 NS NS 15.4 0.0 15.000 9.0 NS NS 15.9 11.8 7.000 16.4 13.7% 10.17 7.2 0.2 13.7 8.20 46.9 1.0 9.35 31.9 10. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.8 1.4 NS 0.7 8.1 471.162 21.56 12.1 450.0 423.0 11.00 13. number of shares.36 44.27 -38.52 - - 865.1% 18.000 16.88 97.7 20.162 0.162 21.4 7.27 4.10 29.2 4.000 21.000 21.5 11.3 7.162 21.94 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.9% 2.77 5.5 NS 0.000 6.8 8.06 51.4 3.0 0.50 25.9 2.8 540.8 6.1 10.7 NS NS NS NS 32.00 40.90 42. of shares.4 NS 7.1 0.9 702.5% 17.8 28.7 2.2 2.27 4.2 2.0 757.3 NS 2.0 3.000 21.8% 21.4 1.0% 2.4 1.0 33.73 20.2 14.com .6 0.8 6.00 0.3 6.75 23. adjusted Av.6 NS NS NS NS 8.1% 1.275 0.3 0.3 1.2 4.7 8.95 2.0 1.9 7.9 7.1 8.0 11.26 25.02 43.1 449.94 1.46 52.5 14.3 11.6 9. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.1 4.000 - 75. adjusted Treasury stock.8 NS 30.7 7.00 74. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.1% 1.39 25.8 11.4 1.68 3.5 12.0 6.5 11.January 2011 GERMANY Smaller Companies Review Centrotherm FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.3 893.3 0.6 7.0 NS NS 12.1% 2.20 15.7 1. reported % Change 2006 2007 2008 2009 2010E 2011E 2012E 0.3 1.45 26.60 5.16 17.30 56.00 0.5 NS NS 0.9 0.7% 2.6 540.5% 2.49 26.162 21.6 10.0 10.0 NS NS 13.8 113.36 44.5 5.0 NS NS 15.9 5.cheuvreux.0 9.16 17.7 5.00 1.1 1.6 0.65 3.2 NS 29.00 2.00 0.162 0.22 49.0 16.7 14.7% 7.8 0.96 No.2 1.1 51.9 NS NS 14.4 16.0% 1.7 33.5% 20.94 48.27 -38.0 55.5 NS 30.2 224.5 11.3 10. restated 61 www.9 12.5 3.820 0.7 NS 0.3 0.5 10.820 16.9 10.4% 18.00 0.3 11.1 55.38 2.00 0.0 NS 1.2 0.9 4.7 1. restated EV/EBITA.1 NS NS NS NS NS 0.

Szvg 7. we assume the company has secured most of its wheat needs (well above 80%) for the full year. we continue to see CropEnergies as a risky bet on commodity prices as the company's profitability still depends on the bioethanol price on the selling side and soft commodity prices such as wheat and sugar thick juice on the input side. up from EUR2. Since the company has now given more specific forecasts for 2010.0 28.9 6.7 .9 4. For the full year.7% 35.0 3. The final results were fully in line with the previously published preliminary figures.3% 33.8 1.7 10.cheuvreux.8 9.9%. our estimate of only 10%.9 2.DE Bloomberg: CE2 GR Stock data Market capitalisation Free float Enterprise value No.4m in Q2-09.9 0.0 ROCE (%) 1.9 2.4 EV/EBITDA (x) 14.1% 2009/10 2010/11E Q 62 www. which we regard as positive. we expect the company to grow sales by 34% y-o-y thanks to the expansion of its available bioethanol capacity. FCF yield (%) 16. we assume a tax rate of 25%.9 3.1% 16.9 09/06 1.2% 49.9 5.5 EV/Capital empl. In recent quarters the tax rate was positively affected by the Wanze/Belgium operations.com 2011/12E 2012/13E P/E (x) 74. Crop Energies seems to be able to pass on the increased wheat prices. which does not favour CropEnergies.5% Absolute perf.9 Disclosures available on www.5 Attrib. (x) 0.0 0.9 6.0%.9 8.9 4.7 4. Specifically.3 Yield (%) 0.9 7.1 2.7% EUR2.0 0. Net income fell short of our expectations due to the tax rate of 27% vs.cheuvreux. This ability is largely attributable to the reduction in Brazilian ethanol production as Brazilian companies are currently focusing more on sugar production due to the high prices for sugar in the global market.54 Price (07/01/2011) Reuters: CE2G.49m Performances 1 month 3 months 12 months 24.6 27.0 0.com Q 12/10 Price Philipp BUMM Research Analyst pbumm@cheuvreux. This guidance had been revised on 20 September. 8. However. Q Rating 3/Underperform Target price (6 months) -56.40 EUR5.527 06/10 22. For FY 2010-11E we expect a further slight profitability improvement despite the fact that wheat prices have risen and currently stand at more than 50% above 2009 levels of EUR120-130 per tonne. its original guidance was for sales of well above EUR400m and a more than doubling of its 2009 operating profit of EUR12m.9 1.9 3.January 2011 GERMANY Smaller Companies Review RENEWABLE EQUIPMENT CropEnergies Wheat prices are very firm again Q Recent developments – Solid H1 FY 09-10 CropEnergies reported final Q2 revenues of EUR121m (+27% y-o-y) and EBIT of EUR15m.5 5.4 7.1% 33.9 3.897.com (49) 69 47.9 04/07 10/07 05/08 11/08 Price/TECDAX 06/09 12/09 Sector focus Sector Top Picks Least favoured SMA.9 5. we regard the company's future profitability as rather difficult to predict and reiterate our 3/Underperform rating.9 7. The company's reported tax rate for H1-10 stands at 22%. adjusted Daily volume EUR471m EUR103m EUR657m 85m EUR 0. since the bioethanol market is highly competitive given its exposure to cheap imports from Brazilian bioethanol producers (made from sugarcane). SolarWorld Conergy Shareholders Suedzucker 71. Free Float 21. However.9 Net debt/EBITDA (x) 7. the non-recurrence of ramp-up costs. Relative perf.6 6.1 7. Outlook – ongoing soft commodity concerns With the release of the H1 results CropEnergies also confirmed its fullyear 2010 guidance for sales of >EUR420m and operating profit of >EUR30m. and higher ethanol prices. of shares. and EBIT of EUR31m due to scale effects.2 9.0 0.3 4.

CropEnergies' revenues will be affected by this market trend. CropEnergies. Although the near-term outlook for CropEnergies has improved due to already secured input costs.85x and 0. we remain cautious in view of volatile commodity prices. CropEnergies is one of Europe's leading producers of biofuel (bioethanol) with a current annual production capacity of about 760k m³ since the end of FY 08-09 (28 February 2009) in Germany and Belgium. Q Investment case We continue to see CropEnergies as a risky bet on commodity prices as the company's profitability will depend on the bioethanol price on the selling side and soft commodity prices such as wheat and sugar thick juice on the input side.cheuvreux. making investments in the stock rather uncertain in our view considering the high volatility of soft commodity prices. Q Feedstock: mainly wheat but also sugar The company processes feedstock such as wheat and sugar into its main product bioethanol but also sells a by-product "ProtiGrain".com Valuation Our DCF-based target price suggests a fair value of EUR2. which is used in animal feeds. thereby expanding its activities in the important French market. as planned. CropEnergies has no control over either bioethanol prices or wheat feedstock prices.January 2011 Q GERMANY Smaller Companies Review Company profile Q Biofuel company with 760m³ of capacity Taken public by Südzucker AG in September 2006. The company targets an EU bioethanol market share of about 10%. .8x for (both for 2011-12E). should be in a position to forge strong relationships with the oil industry „ Opportunities Threats Lower feedstock prices would increase margins „ Bioethanol is so far only competitive in Europe due to subsidies in the form of mandatory blending ratios and tax exemptions „ The cost of producing bioethanol in Europe is about twice as high as in Brazil and more than 50% higher than in the US due to higher feedstock (wheat) costs Second-generation biofuel production technology may be more economical. CropEnergies will start to suffer from this situation starting next year (when its secured supply at fixed prices for 2010 starts to end). CropEnergies most likely has a secure supply of sugar juice as a feedstock for its bioethanol production „ „ As an early mover in the European bioethanol market. as a major bioethanol supplier. Q At the end of June 2008 CropEnergies acquired French alcohol producer Ryssen Alcools (capacity of 100k m³). Belgium. Bioethanol prices have risen in sympathy with the crude oil price: we saw prices above EUR600 per m³ in 2008 fall strongly to EUR460 (as of May 2010) due to overcapacity and weaker demand. „ „Further 63 increasing wheat prices www. Currently we see prices of EUR570.80x respectively. and the P/B ratios at 0.4. Its ROE for these two years stands at 8% and 7%. We maintain our 3/Underperform rating. Wheat prices have also increased strongly from lows of about EUR120 per tonne in 2009 to currently about EUR200-230. CropEnergies is trading at a P/E of 28x and an EV/EBITDA of 10. using the whole plant – not just the fruit/grain – and thus displacing CropEnergies' technology. We assume the company will be able to run at a high utilisation rate of 95% going forward given the successful ramp-up of its plant in Wanze. Hence. Q SWOT analysis Strengths Weaknesses As a subsidiary of Südzucker AG.

9% 2.6 9.0 0.8 -71.4 (8.0 16.2 0.6% (8.2 13.9 0.5% (30.0) (20.0 0.0 3.8% 42.0 5.4 0.3 0.8 357.6 0.2% (8.0 11.6 215.8) 0.9 0.5) NS 312.0 (31.1 134.7% 7.7 8.0 8.0 0.2 (15.9 0.6 130.0 0.4 500.0 (12.0 0.8 0.0 0.9 308.9) 36.3 (31.1 81.0 0.1) (6.6) 26.8% 427.8 488.0) 32.0 0.0) 14.0 0.0 11.0% 6.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 64 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11E 2011/12E 2012/13E 60.9 0.0 0.4 69.6 42.0 25.6% 0.0 (31.9 0.4 -24.0 0.1 0.0 0.7 24.0 0.0 0.8 311. for exceptional items Net attrib.0 0.0 0.0 -8.0 0.8) (160.8 0.0 0.0 0.7 0.0 0.2) (132.0 4.0 0.0 0.7 0.6 (35.3 5.1 0.0 0.5) 230.6 0.0 2. [inc.4 32.0) 35.0 0.6) (114.0 0.5) 65.0 20.0 (8.0 0.0) (150.8 0.0 8.0 0.0 0.8% 2.7 16.9) 0.0 0.0 0.4 65.0 9.4 2.2 336.0 0.8) www. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 (114.8 473.0 11.7 (116.0 0.0 24.0 0.3 186.8% (17.8) (157.0 0.0 20.9 (3.0 0.0 0.0 2.0 0.3) NS 186.0 30.6 (0.0 0.4 0.0 0.5) 0.6% (5.7% (30.4 16.2 0.0 0.2 50.7 -31.0 12.4 (97.8 27.0 17.0 0.0 0.8 459.6) 1.2% (23.0 0.0 61.9) (18.4 (8.4 0.5 308.0 0.0 5.1 0.0 0.0 0.7% (24.0 20.0 19.1 52.1% 416.0 (9.1) 0.0 18.6 0.0 33.3 552.0 70.1 0.3 167.0 0.1 11.3) 25.0 0.5 552.0 0.6 1.3 0.7 9.3) 0.0 35.5 215.4 0.2 16.3) 9.5 5.0 0.5) 19.3) 0.1 0.4 80.0 0.0 0.1 0.5 146.8 0.4 0.0 11.0 0. profit [loss].1 55.2 152.7 (8.0 0.9 67.0 0.4 NS 142.0 0.0 0.6 177.0 0.7 0.6 33.7 46.0 0.2) (293.4 0.0) 25.1 553.2 0.0 7.1) (69.0 (31.1 0.0) (18.0 0.6) 7.6) 0.9 500.0 0.5 553.0 (6.1 (1.0 0.0 8.0 0.0 2.0 3.0 4.4 (7.0) (321.8 186.0 20.8 0.0 31.0 19.5) 30.0 29.0 0.4% (4.0 26.6) (30.1) (348.3% 15.0 72.0) (337.2 41.0 68.0 (6.0 0.9) 17.0 0.0 0.6 NS 0.0 7.8 0.0 0.January 2011 GERMANY Smaller Companies Review CropEnergies FY to 28/2 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.cheuvreux.0 (18.0 12.2 0.0 8.9 312.0 0.4 170.3 0.0 (0.3) 0.6 540.7) 55.0 0.1) (4.0 20.0 3.2 282.4 0.8 0.0 0.0 0.6 319.0) 0.1 160.7 20.4) 0.2) (36.3% 0.9% 186.0 0.0 0.5) (152.0 20.1% 328.4 7.9) (139.0) 16.0 0.8 34.0 2.9 1.4% 0.8) 0.8) 0.9% 0.9 476.6% (30.5 134.2% 0.1) 0.0 0.0 30.5) 0.7 55.1 0.9 303.4 75.5) (12.0) (342.6) (1.5 0.7 540.6 0.1 (3.5 (51.0 0.0 0.0 0.0) 30.0 16.0 0.5) 0.8) (139.0 (135.7% (25.7 73.6 16.0 4.4% (21.0 0.9% (22.7 0.0 (5.1% 1.0 10.0 0.2) (115.7) 0.0 0.0 0.1) 0.7% (10.0) 18.5 -43.9 -2.2 29.0 8.9 0.1 -58.5) 0.0 (11.0 4.2% 0.6 NS (8.0 0.9) 0.4 565.com .4 15.0 0.7 (182.0 12.0 0.0 0.8) (31.0 16.0) (175.4) 25.0 0.6 142.0 (4.0 0.0 5.6 (13.6 0.0 0.8 483.0 6.0 10.0 0.8 0.9 54.0 0.0 0.9% 439.0 4.0 12.8) 0.7) 60.8 142.0 (4.4 181.2 (15.5) 17.0 22.0 37.7 0.0 0.8) 0.0 10.6) 270.1% 374.8) 0.0 42.0 0.5 565.0 0.0 0.8 37.

1 3.3 0.0 5.8 1. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.9 1.4 456.0 314.6% 3.1 24.9 0.9 1.8 0.3 0.5 3.0 6.0 0.4 11.4 8.2 5.89 5.55 9.8 16.8 470.5 3.4 28.00 0.7% 3.4 1.4 5.15 180.0% 0.31 159.9 1.000 85.0 NS NS 18.43 24.41 3.60 8.6 NS 0.76 6.000 60.0 NS NS NS NS 10.53) 0.7 54.4 2.3 11.00 0.6 12.4 1.27 5.9 623.20 33.8 1.0 11.32 78.8% 0.8 6.0 6.54 - - 570.0 8.0 14.1% 0.4 0.000 0.3 0.00 0.3% 0.3% 0. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.6 74.5 0.60 8.2 1.0 27.49 5. adjusted Av.4 320. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.2 3.7 37.000 85. number of shares.47 49.1 12.7 3.5% 0.9 NS 0.30 55.05 -23.0% 0.0% 0.5 482.76 3.3 24.2 7.4 1.3 36.7 6.5% 0.53) Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.0 74.0 NS NS NS NS NS 0.000 85.1 4.2% 3.3 6.6 0. reported % Change 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11E 2011/12E 2012/13E (0.0 5.4 1.000 85. restated EV/EBITA.7 7.8 0.5 NS NS NS NS NS 0.0 28.0 4.7 9.0 NS NS NS NS 17.1 1.20 33.000 85.07 -79.14 6.8 NS 0.000 0.9 1.000 62.0 470.05 3.0 36.00 0.000 0.1 10.9 536.6% 0.1 0.000 0.5 4.January 2011 GERMANY Smaller Companies Review CropEnergies FY to 28/2 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.7 22.000 0.4 0.8% 4.0% 0.0 0.1 2.1 13.9 4.0 0.8 1.4 4.com .0 436.32 78. adjusted Treasury stock.0 NS NS 13.000 85.1 0.7 67. restated 65 www.4 0.18 134.00 0.0 3.86 4.4 9.9 0.45 1.2 5.06 3.4 NS 0.54 5.1 7.0 6.000 0.00 0.76 8.2 46.2 2.24 2.2 4.6 0.000 0.00 0.0 10.1 654.000 85.0 NS 1.24 25.6 1.3 67.9 6.19 -58.0 4.0 22.0 (0.1 10.3 5.5 42.3 1.0 5.3 7.000 85.6 8.7 21.5 6.7 14.6% 0.4 2.56 2.53 3.000 - 6.68 5.5 1.7 69.15 180.6 4.9 657.000 0.00 0.000 85.4 9.7 8.8 55.2 60.47 21.4 4.5 17.000 61.000 85.0 42.0 1.9 9.3 3.1 6.8% 4.24 7.1 5.0 7.05 -23.5 12.11 23.53) No.7 0. of shares.0 7.0 0.90 4.9 8.8% 0.0 14. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.1% 0.3 1.8 42.5 641.7 0.4 221.00 0.8% 3.3 21.0 0.74 5.5 27.00 0.07 -79.1% 3.00 0.4 10.00 (0.8 21.00 0.2 7.18 134.2 0.75 3.6 11.0 0.6 0.1 4.5 14.1 NS 2.29 3.50 65.7 0.00 0.02 5.9 0.cheuvreux.1 1.8 0.00 0.00 0.0 27.24 25.8 0.000 85.000 85.0 2.

8 ROCE (%) NS 33.7 52.0 Attrib. its H2-10 EBIT was only adjusted for one-time costs). In H1-11 we expect the final decision from the German antitrust authorities on the CTS' TicketOnline deal. After the stock's recent impressive performance and as triggers are only likely to emerge in H2.0% 35. CFA Research Analyst oreinberg@cheuvreux.2 2. We estimate that these contributed about EUR10-11m sales in Q3 (but seasonality is hard to estimate).January 2011 GERMANY Smaller Companies Review MULTI-SERVICES 3/Underperform Rating -7. Bearing this in mind. reflecting EUR1m one-time start-up costs for Tutanchamun and a minor deconsolidation effect. Relative perf. The division's sales in Q3 climbed 48%.6% -3.6 40. Note.2% 22.3 12. legal fees).2m in Q3-09. Overall.6 5. which overall appeared light when we stripped out the contribution from consolidation effects.4 1.9% 2009 2010E 2011E P/E (x) 20. and once the legal case with Live Nation has been resolved in H2. Shareholders Klaus-Peter Schulenberg 50. Ticketing remains key for CTS. Once the decision has been taken.7% -4. in our view driven largely by consolidation effects: Swiss TicketCorner (TC) since 1 March and TicketOnline (TO) since 1 July. which we believe was almost offset by moderate organic growth. Furthermore. we believe CTS may also consider seeking alternative paths for its UK market strategy.6 15. but the UK operations may be also up for sale. (x) NS 6.3 10.6 40. representing 40+% of annual net income.6 03/02 06/03 09/04 12/05 Price/SDAX 03/07 06/08 09/09 01/11 Price Sector focus Sector Top Picks Least favoured Outlook – M&A. however. we would not read too much into the results. Free Float 49. Q4 is the most important quarter.com (49) 69 478 975 26 Disclosures available on www. CTS' adjusted Ticketing EBIT rose 17% in Q3 to an estimated EUR9. 2010 was a more challenging year for Ticketing given the lack of big headline events to support presales and other cross-selling activities.4 18.6% Absolute perf.8m costs in 9M-10.6 30. Live Nation compensation.1%. we believe the second half of 2011E will be important. remain possible. an arbitration decision will be reached between CTS and Live Nation.6 35.6m (note that CTS adjusted its 9M EBIT for one-time costs and non-cash amortisation charges.cheuvreux. AEG seeks an alternative to Ticketmaster. discussions may continue. which suggests Ticketing adj. but we and the mkt already predict adjusted EBIT of EUR86.6 15.4 6.1 NS 6. EBIT was slightly down.6 10.56m Performances 1 month 3 months 12 months 1. 45.1 6.6 35.6 01/01 0. though both are likely to also impact Q4 with legal costs also running into 2011 (Live Nation).2 6. EBIT was down slightly from EUR8. In terms of strategic issues.5m to consolidation effects. FCF yield (%) 4. including France and Spain.6 0. of shares.6 10.3) Yield (%) 2.3 15.6 45.3 Oliver REINBERG.9 Net debt/EBITDA (x) (1.6 0. LE is usually volatile and barely contributes in Q3 due to seasonal effects.com 2012E .6% 3. we remain on the sidelines.DE Bloomberg: EVD GR Option value only to materialise in H2-11 Q Recent developments – A weaker Q3 result CTS published Q3 results in November.2 EV/Capital empl. that the termination of the Live Nation contract in July had an adverse impact. This resulted in the 31% decline in reported EBIT.com Q Q 66 www.6 20. and a compensation payment to CTS may be on the cards. Q4 results will be important.6 30. Finally. again supported by consolidation gains. AEG Looking ahead. Note that. We allocate some EUR2. On an unspecified date in H2-11.8) 0.5m were one-offs (for M&A.6 5.6 15. seasonally. Q3 is a soft quarter.6% EUR42 Target price (6 months) CTS Eventim Reuters: EVDG.6 20.8 EV/EBITDA (x) 10. adjusted Daily volume EUR1090m EUR543m EUR1317m 24m EUR 0.5m. So far CTS says the business has performed favourably.1 (0. EBIT was adjusted for EUR8.5 21. Q EUR45.6 25.cheuvreux.0 41.9 2. bolt-on acquisitions in other countries.43 Price (07/01/2011) Stock data Market capitalisation Free float Enterprise value No. We note that See Tickets only sold its German business (TicketOnline) so far. of which we estimate EUR4.6 25.

January 2011 Q GERMANY Smaller Companies Review Company profile Q Dominant German ticketing force Online ticketing (www. we prefer to remain on the sidelines. the scalability of its business model and its strong cash flow generation profile. Q Live Nation collaboration ended CTS had a global collaboration agreement with Live Nation. although note that the gross cash includes ticket revenues that have yet to be settled. translating into positive cash flow from working capital. However. given that the option values are only likely to materialise in H2-11E and that the recent operational development was softer in Q3 if one strips out consolidation effects. Q Attractive balance sheet and cash flow characteristics In both divisions CTS receives revenues before costs apply. Q Q Live Entertainment division provides crucial content The Live Entertainment division comprises various majority stakes in promoters of live concerts (incl. CTS effectively dominates the German market. b) bolt-on M&A. After this. flexible pricing „ Artists and promoters seeking to participate in ticketing profits High returns may attract new capital / more competitors „ TicketOnline deal not yet cleared by antitrust authorities „ 67 www. CTS may seek alternative ways to enter the new markets. We see option value for the stock: a) Live Nation compensation payment. after the shares' strong performance. While we understand the likelihood of this happening is low. at which CTS would be trading at 16.de) is the company's cash cow. it would have a major adverse impact on earnings forecasts.com Valuation We reiterate our 3/Underperform rating and EUR42 target price. a 51% stake in Marek Lieberberg). CTS has little net debt on its balance sheet. Q Investment case We give CTS' business model high marks in view of its dominant German market position. . An arbitration decision on a potential compensation payment is due in H2-11. generating highly profitable revenues of EUR6-7 per ticket versus about a EUR1 system fee on tickets sold at a retail outlet via CTS' network. This is a low-margin business but is of strategic importance for the Ticketing division as it provides crucial high-class content. Capex requirements are very limited in this scalable business model.5x 2011E and 15.eventim. strong cash flows „ Increasing internet penetration lowers barriers to entry somewhat „ Incremental ticket sales incur very limited incremental costs „ Artists need to go on tour as record sales continue to decline „ Opportunities Threats „ Increasing number of internet tickets sold „ Live Nation compensation payment „ Further international expansion „ Potential ticketing deal with AEG „ Successful resale (fansale) roll-out.cheuvreux. Live Nation terminated the collaboration in most countries with effect from mid-2010. negative working capital. c) potential AEG contract. A residual risk remains that antitrust may refrain from approving the TicketOnline deal. The increasing penetration of online ticket sales is a key growth driver. Q SWOT analysis Strengths Weaknesses Dominant leader in Germany „ Strong ties to top live entertainment firms secure access to high-class content in Germany „ „ German and other market positions dependent on content supply „ Limited visibility in the volatile Live Entertainment division Limited asset base requirements.1 global tour promoter.0x 2012E earnings. the no.

0 (86.7% (49.4 41.0 0.6% 508.7% 61.6 (11.3) 44.0 70.9 4.0 (8.9) 73.9 0.2% (7.0 (135.0 45.9) 0.0 (125.5 6.8 3.0 85.5 0.0 0.0 0.3 0.0) (341.2) 0.9 30.7% 0.0) 53.1 11.0 32.3) 0.2 24.0 0.2 2.0 (77.0 28.0 (8.0 0.9 3.0 0.0 0.0 84.9) (19.0 0.0 20.7% 342.0) 57.4% (45.6% 256.0 81.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 68 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 222.8% 0.9 36.2) 89.January 2011 GERMANY Smaller Companies Review CTS Eventim FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT (post one-timers+PPA) Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.5) (178.4% 0.8) 0.8 7.2) (25.9 (2.3 5.9 96.8) 0.9) (196.1 (145.1) (389.3 39.3 11.com .8 6.0 (141.7 4.4) 25. profit [loss].6 5.0% 0.7% (7.2 5.1 51.0) NS 38.0 0.4) 123.1 4.6 (2.0 (19.2 0.0 0.4) 0.6 27.8) 54.1) 0.9) 0.cheuvreux.3) 18.6) 228.0 0.5 13.7 39.7 2.0% (4.8 0.0 5.0 29.0 0.0 0.8) 8.0 0.0 (136.8) NS (7.0 195.8) 0.2 2.0 0.8 (4.0 0.0 (9.8% 12.2) (2.7) (18.8% 466.0 92.4 14.0 (4.4 -0.1) 19.8 1.3) 102.7 0.0 0.9 3.9 167.3 3.6 0.8 2.5 0.0 77.9) 0.4 27.1% (21.0 (13.3) 29.3 250.7 1.2) 39.0 (9.0 (47.8% 0.0 0.0 0.0 39.5) (307.0 0.0 (10.0% (6.6) (386.0 0.2 0.5) 50.9 119.9 17.0 (11.6 250.4 45.0% 7.0 (57.0 0.7% 0.0 0.0 (19.1) (26.0 0.0 0.0 101.0 (24.1 0.3 1.0 0.0 0.0 0.7) 0.0) 0.9) (190.0 35.1) 41.4) 0.6 211.4 (19.9) (26.9 28.9) NS 11.1 0.8) 0.3) (21.5) 0.5 47.7 9.1) 46.2) (15.5 4.9 74.4% (8.0 0.7 15.8 4.8) 0.0 0.8 0.5 0.7 -0.0 (7.2) (372.0 0.7 7.8 2.5 0.0 (19.0 (4.0 0.1 0.1 5.0 73.8% (27. for exceptional items Net attrib.0 0.5 7.0) (263.0) 9.0 (7.0% (4.0 0.9 20.0) 91.3 0.0 30.3% (14.2% 15.4% 404.6 0.8% (18.4) 0.0 0.3 31.1) 85.2) 17.6) 15.0 0.1 0.0 0.0 0.0) 0.9 3.3 2.0 46.0 58.9 15.4) (23.0 0.4) 21.0 (112.0 (2.0 0.0 71.3 0.0 0.6 14.6) (32.0 (4.0 40.6 0.3% 34.0 (59.6) 79.0 0.4 0.0 0.0 21.3) 45.9) 0.9 0.1 22.9 18.6) (9.2 5.0 (143.8 (5.0 (24.7) 80.4 0.0 13.1 1.1 (12.2 91.2 5.5 11.5) 0.7 www.4 0.7 6.0) 0.7 8.0 9.9 74.9 (57.0% 564.7 15.1 93.3) NS (12.7 9.1) 144.0 0.2) 107.7% 19.5 (77.0 0.0 0.5 15.7 35.1) 211.0 50.3 66.5 0.8) (7.0 (110.0 0.9 20.2 0.2 (11.2) 89.2) 0.0 58.0 0.0 (10.2 0.3 5.0 0.0 0.7) 71.0 0.9 (3.8% 384.7 41.2 0.0 10.9 2.3 7.9) 37.5 0.0 39.8 29.8) 50.0 0.3 41.5 1.1% (31.0 0.5 (0.4) 200.0 15.5 4.9 33.0 0.5 4.5 69.3% (3.0 (6.2 0.7 59.9) 52.8 3.0 (23.0 0.6% 0.3% 8.3 5.4 (0.8) 23.4 (194.5) (12.0 0.2 15.1 8.7) 53.3 231.0) 38. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 0.0 48.9 0.0 19.0 2.0 8.1 59.0 0.8) 0.4 0.0 (17.7) 0.2 75.7 2.0 0.2) 44.0 (8.0% 12.1 15.0 38.6) 0.3) 0.0% (21.0 (14.0 0.1% 542.5 0.9) NS (2.0 0.0 0.8 1.3 49.9 6. [inc.0 (6.4) 0.0) 60.0 34.8 7.5 0.0 (8.0 0.8) 0.9 250.3 38.7 0.0 0.8) 0.4 12.0 0.1 7.2) 11.3 2.8) 49.9) 42.5 0.2 15.0 23.3) 101.0 (3.0 0.9% 0.1 6.9 227.0 (28.0) 23.0 9.0 0.1 0.0 87.2 9.0 (72.0) 0.7 52.0 23.2) (26.9) 0.0% (52.8) (298.8% (21.9 3.2 58.0 0.0 0.0 22.7) NS 8.0 0.6 2.0 (21.4 27.5 0.0 50.1 0.0 86.0 (5.2% (39.8 (11.5% 0.0 (21.5 3.4 5.3) 0.2) (22.0 (7.0% (47.0 (132.4 2.7) 32.5) 0.2 (41.4 (7.0 (11.6) NS 200.4) 67.9 21.7 5.6% (15.

5 23.9 18.31 44.8 18.7 29.6 6. number of shares.49 1.78 7.0 NS 1.4 10.3 NS NS 15.00 24.cheuvreux.000 24.7 636.2 16.9 NS 49.88 15.5 NS NS 29.2 1.7% 2.0 746.000 24. of shares.3 NS NS 49.6 11.1 30.61 9.16 30.00 0.8 0.4 0.6 7.1 2.9 NS NS 0.5 20.34 1.3 1.000 24.4 13.9 12.000 0.5% 2.49 1.2 6.4 21.13 8.000 24.0% 8.23 45.00 1.2 7.3 1.4 16.6 29.0 12.61 24.4% 0.6 9.8 0.1 17.5 23. adjusted Av.000 0.0 52.1 1.38 93.8 11.8 15.9 NS 1.22 24.09 25.000 24.3 15.26 31. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.98 -0.000 0.94 15.9 2.4 21.5 NS 2.94 31.61 1.4% 1.26 3. restated 69 www.4 1.38 93.1 NS NS 17.000 24.80 45.4 10. reported % Change 0.8 8.00 0.1 0.03 27.2 2.000 24.4 No.9 12.0 12.8 23.7% 4.4 6.7 27.40 30.66 36.3 12.8 11.0 23.7 25.000 0.2 7.2% 2. adjusted Share Price [Adjusted] Latest price High Low Average price 24.9% 0.95 32.6 NS 2.66 36.6 250.76 9. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.98 -0.9 NS 0.8% 1.7% 0.7 17.6 5.3 18.00 17.5 10.7 29.53 23.10 4.090.6 89.66 74.2 741.6% 2.0 NS NS 51.5 0.8 15.7 11.000 0.2 37.367.9 31.15 41.43 46.9 NS 0.9 1.7 15.000 24.January 2011 GERMANY Smaller Companies Review CTS Eventim FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before one-timer+PPA % Change EPS.8 4.98 47.2 27.2 11.66 74.6% 1.3 2.0 12.6 564.1 1.2 0.33 23.6 15.000 0.6 552.6 148.78 14.000 24.6 2.2 15.8 16.8 9.7 19.000 24.4 845.0% 2.2 14.14 35.6 14.6 41.90 9.4 8.000 0.33 20.3 12.85 14.3 NS NS 14.000 24.9 9.090.3 28.00 0.5 20.43 - 213.1 19.2% 2.8 NS NS 50.00 0.22 46.4 819.9 25.3 18.83 15.2 NS NS 11.7 36.83 2.3 702.97 20.02 3.3 16.1 29.2% 6.6 12.16 17.0% 7.0 NS NS 14.1 31.2 13.3 13.000 0.000 24.2 NS 50.3 2.1 8.89 2.00 0.49 15.8 19.4 10.109.9 494.00 16.1 35. restated EV/EBITA.24 23.9% 0.50 38.5 1.7 12.8% 3.0 NS NS 14.83 6.5 14.41 19.4 16.7 NS NS 27.3 NS 1.69 46.9 6.000 8.4 2. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.48 27.5 2.4 6.4 3.4 5.98 47.0 31. adjusted Treasury stock.8 NS NS 31.3% 5.1 15.com .47 45.1 6.9 1.3 10.000 24.000 24.4% 0.16 15.9 7.0 2.000 0.317.9 29.43 31.7 NS 7.1 0.31 26.00 0.3 0.8 10.6 NS 0.04 14.232.4% 0.2 1.3 NS NS 50.9 NS NS 16.7 1.9 19.22 24.9 5.8 11.8% 1.1 574.82 27.1 Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.2 14.00 0.7% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.1 4.00 1.3 9.4 NS NS 23.2 36.1% 1.6 2.9 33.33 34.0 NS NS 21.4 0.6 28.54 38.99 17.7% 0.000 24.6 50.000 24.6 6.4% 3.3% 2.9 49.8 27.40 10.000 24.4 13.7 17.8 2.00 0.3 8.78 29.

Demag's management has consistently stressed that it intends to remain a stand-alone company and is not interested in deeper talks with either Konecranes or Terex.0 36. Cevian Capital 10.0 51.8 (0.0 16.2 27. reported on 7 Dec.0 21.0 11. Relative perf. Demag now sees peak margins at the latest in FY 14-15 due to planned sales growth and a more competitive cost structure.1 0.) stands at EUR7. Net cash (company def.5m.8 Net debt/EBITDA (x) Hans-Joachim HEIMBUERGER Research Analyst hheimburger@cheuvreux. Group order intake rose +44% y-o-y and +10% q-o-q to EUR267. Demag beat its 09-10 sales and EBIT guidance (~EUR900m.0 06.1%. We now estimate 10-11E sales of EUR1045m and EBIT of EUR73m. EBIT margin > 5.com 9. ships that can handle 10.com (49) 69 47 897 540 2011/12E . Demag's 10-11 guidance (sales EUR970-1000m.January 2011 GERMANY Smaller Companies Review MACHINERY 2/Outperform Rating +15.0 41.09 06. EADS.0 31.173m EUR3. EBIT came in at EUR24.com Q Q 70 www.1% 6.0 46.0 1. In fact.5) Yield (%) 0.0 26.9 7.0 41.000 TEUs) to smaller feeder vessels which then transport volumes to the final destination) is growing structurally as the share of post-Panamax ships (i. Management 2.0 31. about 1/3 of Demag's Services business is on peers' products.6 7.7) Attrib.07 08.4% 21.2m as of YE 09-10.10 01.2% 49. Demag guides for first revenues from the mid-segment by FY 11-12 and revenue potential in the low 3-digit EURm range by FY 14-15 (we estimate EUR120-150m).5m.0 16. still down -2% y-o-y) short-time work has been stopped almost completely. In PT.0 1.6 2.6 1.2 14.3 EV/Capital empl.11 Price Outlook – Promising longer-term growth drivers Port Technology (PT) and Industrial Cranes (IC) face different pricing situations.5% -0. Sector focus Sector Top Picks Least favoured ABB. The restructuring is now finished and cut annual expenses by EUR60m.1 (0. Apart from the actual amount of containers transported globally. Nexans. however.4 8.cheuvreux.09 11.6 12. with EUR10-15m likely in FY 10-11.cheuvreux. Given the improved order situation (backlog: EUR307m. those too big to pass through the Panama Canal) deployed on intercontinental routes is growing steadily due to cost considerations for shipping lines.0 26.7 5. 51.17 Price (07/01/2011) Reuters: D9CGn. 2/3 within its own installed fleet. (x) 1.07 03.8 Disclosures available on www.8 2.06 01.1% 2008/09 2009/10E 2010/11E P/E (x) 12. FCF yield (%) 0.5% 16.0 11.6 ROCE (%) 4.4 EV/EBITDA (x) 15.3 28.6 4.3% EUR44 Target price (6 months) DEMAG Cranes Services a harbour of stability Q Recent developments – Late-cycle recovery finally arrives Q4 sales. pricing returned to healthy levels already in Q4 09-10 and continues to improve.08 09. of shares. and Demag is trying to reduce discounts to list prices granted during the crisis with limited scope to increase list prices.3% Absolute perf. Rolls-Royce Shareholders Free Float 87. IC's situation remains tough.9 3.0 36. rose +13% y-o-y and +41% q-o-q to EUR290m.65m Performances 1 month 3 months 12 months 1.8%) looks conservative. assuming 60% low-margin products).8%.0 46.08 Price/M DAX 04.0 21. Company now seems to target a 40:60 ratio here. EUR45-50m) with EUR931m and EUR54m resp. SIEMENS AG Alstom. We estimate R&D expense for the mid-price segment will burden EBIT for the next 2 FYs by an estimated EUR20-25m combined.7 21. we see structural grow in transhipment as a key growth driver for PT as this drives demand for handling equipment. The company reiterated its break-even points for PT (EUR200m) and IC (EUR470m. Currently. The transhipment biz (unloading containers from large ships (often more than 10.6 9. Q EUR38.9 6. adjusted Daily volume EUR808m EUR709m EUR865m 21.e.000 TEUs or more make up nearly half of all cargo ships currently being manufactured in the world today and are mainly earmarked for deployment on the AsiaEurope-Asia route.DE Bloomberg: D9C GR Stock data Market capitalisation Free float Enterprise value No.

As FY09-10E EPS will likely mark the cycle trough. Demag consistently achieves price premiums vs. These decisions by port operators take time despite the recent pick-up in volumes as their decisions are based on trends lasting a decade rather than quarters.1 in mobile harbour cranes with 45% world market share). Q A divisional ROCE model based on normalised assumptions yields a FV of EUR44. We stick to our positive view on Demag and reiterate our 2/OP due to the very promising strategic outlook. its focus on expanding emerging market products by starting new mid-price product lines. its investments in promising products and services. and 2. Q Q Service division: the company's gem With capacity utilisation rising amongst clients and a corresponding increase in high-margin spare parts sales. Market entry barriers are very high here as Demag protects its own fleet against new entrants with technological requirements and its dense services network that is needed to meet client needs.2%) equates to a large proportion of the company's current market capitalisation. flexible business model (high degree of outsourcing) the company supplies a blue chip customer base of more than 100k industrial clients and roughly 100 port customers globally. Q SWOT analysis Strengths Weaknesses Strong brand name based on superior product quality and innovation „ Highly volatile profitability in Industrial Cranes and Port Technology. Q Industrial Cranes: extremely high customer retention rate This division offers high-quality components (e. Q Port Technology: pioneer in automated handling and storage Also known by the brand name Gottwald Port Technology (GPT). In addition. it has an extremely high customer retention rate. and attractive valuation. 5. we believe the shares of financially very robust DEMAG Cranes are priced significantly below their fair value. rope and chain hoists) and complete cranes. we find a multiple of 13x more appropriate. At 0.1-2 worldwide in industrial cranes with about 12% world market share.cheuvreux.5x price/book (all 2011-12E). Q Investment case While the sentiment amongst Port Technology (PT) clients has improved recently. Q Q Our SOP approach confirms the undervaluation: our fair value of EUR506m (applying EV/sales of 1. We regard Demag as very well positioned to benefit from structurally growing end markets due to its significant restructuring programme implemented during the crisis.8x 2011-12E earnings. A divisional EVA model based on normalised assumptions for the three divisions yields a FVpS of EUR44. its competitors. which we estimate at 5%. Demag does not expect business to increase materially until the resurrection of large new port projects. „ Large installed base of 660k cranes and hoists.com Valuation Q DEMAG Cranes shares are trading at 9.g. WACC of 7. and its growth potential in Services both within its own installed base (world's largest installed base (660k) in Industrial Cranes) and in third-party business. Thanks to its strong reputation. no. the Services division is likely to generate a healthy EBIT margin of 20% in FY10-11E. suggesting >30% upside. .4% and a 2% terminal growth rate. this division's products include mobile harbour cranes and services/software to facilitate and improve container handling and other logistics activities at terminals and ports. takeover speculation.6x EV/EBITDA. With its cashgenerative.8% for EBITDA.5 for FY11-12E) for the resilient Services unit (FY11-12E EBIT margin: 20. Q Our DCF model yields a FV of EUR45 with the following inputs: CAGR FY 11-20E for sales of 2.January 2011 Q GERMANY Smaller Companies Review Company profile Q A world market leader in crane manufacturing DEMAG Cranes is a leading crane manufacturer (no.67x EV/Sales.2% and 2. a source of recurring high-margin maintenance and spare parts revenues „ Opportunities Threats „ Fast growth in emerging markets „ Rising penetration of the installed base with in-house services „ Sharply weaker USD „ Component supply shortage Surging raw material costs (steel) „ „ Depressed investment in new port capacity for years to come due to the current crisis „ Technology leadership Pioneer position in automated materials handling systems „ „ Structural growing transhipment business 71 www. which we estimate at 90+%.

0 (0.5 112.0 0.0) 0.0 44.0 0.3 0.5 68.9 1.0 10.9) (692.5) 141.3 55.0) 102.0 0.6) 24.9 1.2) (2.0 0.2 160.0 0.7% 1 225.7 0.4 15.0 0.7 (26.0 27.1 61.3 30.0 (10.8 0.0 169.0 (0.9 160.2% 15.4 120.0 0.9 (8.0 56.1 124.9) (6.1) 0.5 59.0 0.2 124.5 38.7 0.0) 0.0 0.1) 163.0) 132.3 1.0 82.0 13.0 (19.0 0.0) 0.2 532.0 (1.1) 86.9 22.6) 0.2 491.5 489.0) 0.0 (21.0 127.7 39.1 35.4) NS 439.3 118.0 56.5% (324.6) 44.0 7.6) (627.0 (0.9 0.2) 0.0 104.0 1.4 13.6% 19.9% (367.2 65.5 60.1) 112.4 35.9 6.4) 0.7% (11.1 2.8 (12.4 454.2 80.0 0.1 46.0) 45.5% (351.0 (11.3 0.2 -74.0 0.0 (0.1 0.5) (638.0 32.5 426.0 0.1) 52.0 (14.2) 7.0 50.5 -55.2% (11.6 0.9 119.0 18.6) 147.8) 117.3% (16.3) 22.4 26.0% 0.cheuvreux.0 4.0 (0.9) 0.4 (33.1) NS 458.5) 18.7 60.0 (1.0 (214.0 0.0 (29.0 0.5 0.0 67.3 0.5) 82.0 6.2 52.0 135.0 (21.9 55.3) 0.7 305.8 188.8) 0.9 73.8% (22.3) 32.1) 27.0 0.4% 881.0 0. profit [loss].0 0.0 24.0) 51.2% 1 107.2 0.2% (4.9) (507.1 74.9 236.0 0.5 571.4 225.2 51.4 60.0 127.6 16.0 0.8 (8.9 11.9) 0.0 (7.9 17.7 42.3 90.5 55.0 (35.0 18.3) 0.1 17.6 72.5 NS (21.4 5.6 8.8) 0.3 (37.2) 0.0 0.1% (11.1 0.2) 0.7% (385.2% (21.6 0.0) 0.3) 56.8 -73.3) 0.9) (710.5 19.0 0.2 40.1) 22.6 454.0 (765.0 0.0 0.0 (19.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 72 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 810.1) 0.2 426.9% (20.3) 0.1 70.0 100.6 (20.4 269.0 0.9 32.7 130.3) 125.0 0.4 -1.6 63.0 (0.0) 15.0 0.0 (29.0 0.6 -86.0 13.5% 0.6 118.7 17.0 (42.8 0.0 80.9 351.5 11.0% 0.1) 0.9) (513.4 120.5 0.9 0.9% (22.9% (22.5 21.2 0.0 0.4 120.6 40.8 132.4) (592.7) 20.2 0.0 35.0 69. [inc.0 233.0 18.3 0.0 82.2 39.0 0.January 2011 GERMANY Smaller Companies Review DEMAG Cranes FY to 30/9 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0) 29.1) (24.4% 1 225.7 17.0 13.7 0.8% (58.7 133.3 469.8) 0.5 60.0 0.7 (0.0 (19.0% 0.2 53.1 532.1 489.3 -11.0 (0.9) (654.0 0.0 0.0 (23.6 40.6 113.0 0.9 123.0 (18.5 0.5% (351.3 44.7) 43.8% (5.0 146.0 178.2 (108.0 0.4 9.1 34.0) 0.9 12.2 90.8) 146.6) 0.4 0.4 40.0 0.3% 1 047.0 121.0 0.1% (9.7% (21.1 -4.2 128.8) 0.0 79.0 (1.6 120.4) (19.2 439.9% 986.6 0.0 0.6) 0.7 1.8 0.0 (11.8 0.0 (1.6) 0.3 (10.7 16.7 52.2 120.0) 48.5 426.6 17.0 122.0 29.5 0.8 13.0 (5.0 0.0 125.0 0.6% (1.6 120.0 0.3) (3.0 0.5% (23.4) 0.0 0.4) 89.0% 1 080.0 0.6 www.0 0.5 17.7) 0.6 -14.2) 0.0% 931.5 55.6 0.2) 0.7 2.0 (36.5) 68.5 0.4) 0.0 77.1 0.4 134.1) 65.0 0.2 571.6 116.4) 0.0) (1.0 10.1 42.0 135.8 12.5 0.7 (59.8 132.2 0.0 89.0 39.8 0.5 (19.5) 80.8) 0.0 (20.1% 0.2 208.8 179.9 (10.4 293.6% (5.5 0.0 0.2 0.6) 0.9 (21.2 (11.8) (23.5 -27.3) 0.0 0.0 0.7 426.7) (10.0 12.0 179.4 5. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.5) 0.1% (351.8) 9.0) 71.3% (21.4 49.0 0.1 109.0 0.8 13.0 53.8 (1.3 0.0) 0.2 147.4 225.2 (8.8 115.5 491.0) 0.4 120.0 0.0 (0.6 3.0) 56.4 -24.7) (29.4 0.0) 39.9) 93.0 0.8 16.0 80.3) 72.0 (25.6 59.0 0.7 2.0 34. for exceptional items Net attrib.0 162.0 (16.0) 33.3 162.9% (308.8 26.5) 41.0 1.1 139.4 40.0 (23.7% 43.0 0.0 139.4) 0.5 0.7 28.2 458.0 (14.6 119.0 (2.5 0.0 (64.1 17.3% 65.1 0.8% (299.0 173.8 49.8 62.0 82.com .2 118.5) (3.5) 0.8 118.

4 3.1 0.05 11.26 0.2% 4.173 0.2 28.88 46.7 9.173 21.7 8. restated 73 www.5 0.9 0.6 34.04 NS 2.5% 1.6 3.173 21.2 1.83 11.6% 10.62 18.9 3.40 5. adjusted Av.16 61.0 4.65 102.54 5.55 0.74 38. adjusted Treasury stock.2 4.53 1.0 9.8 8.00 40.173 21.2 5.7 0.2 643.0 2.58 1.17 - - - 571. of shares.6 14.000 21.173 21.05) No.5 16.6 921.8 6.7 7.0 2.95 32.2 2.65 90.4 11.6 147.8 13.7 9.4% 8.0 2.2 16.6 1.173 0.6 18.5 0.0 29.0 2.1 0.4 9.6 2.2 523.2 4.00 25.6 0.6 469.3 665.1 35.4 12.1 5.1 10.5 71.0 37.0% 0.8 0.8 13.95 28.173 0.4 24.7 4.7 2.9 3.6 NS NS NS NS NS NS NS NS 9.000 - - 40.1 21.7 8.6 36.85 19.4 15.55 37.6 2.0 NS 7.0 2.34 72.34 53.6 26.07 1.8 NS 35.1 70.5 NS NS NS NS NS - NS NS NS NS NS 0.00 (0.2 21.7 817.8 2.January 2011 GERMANY Smaller Companies Review DEMAG Cranes FY to 30/9 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS. restated EV/EBITA.7 716.3 0.9 13.000 21.4 1.6 0.81 40.173 0.17 38.8 7.4 3.cheuvreux.2 13.36 29.173 21.25 44.3% 1.8 10.2 0.000 21.2 2.9 9.38 4.3 0.1% 15.00 1.5 12.8 1.8 12.3 21.11 3.6 2.000 21.75 60.2 1.8 9.9 0.8 0.1 7.2 21.8 6.6 4.6 2.0 20.3 19.173 0.2% 3.4 13.6% 2.2 817.7 0.5 1.32 26.5 45.28 39.3 13.7% 0.2 NS 5.39 -27.80 39.09 87.7 15.20 11.26 1.173 21.2 6.7 2.2% 1.7 10.6 NS 1.00 (0.2% 12.00 2.4% 1. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.00 1.5 6.1 2.5 1.8 21.2 6.00 1.3 NS 10.42 21.000 21.5 0.1 4.0 27.6 NS 42.88 46.9 9.173 0.05) 0.1 1.2 3.0 5.6 0.0% 7.5 5.0 2.5 7.1 7.000 21.8 699.6 551.9 1.31 NS 2.8 13. number of shares.2 19.4 14.9 10.4 8.53 47.36 -73.1 0.6 3.com .8 9.41 36.92) Goodwill per share Dividend per share Cash flow per share % Change Book value per share 1.9 595.173 0.7% 2.10 3.3 2.7% 3.12 0.99 173.1 1.1 32.31 38.4 26.04 -98. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.4 16.173 21.19 28.9 13.6 24.5 96.9 28.2 6.5 0.4 14.0 2.8 1.0 18.19 19.2 17.1 8.1 13. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.0 7.4 4.5 7.7 1.7 0. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.85 12.0 8.7 5.60 2.3 14.4 10.9 3. reported % Change 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.7 0.08 0.6 0.86 23.8 3.7 0.60 27.4 1.6 2.000 21.2 865.1 1.6 6.173 0.5 12.7% 11.1 2.91 -55.9 3.79 147.173 21.1 12.1 8.6 NS NS 8.173 21.0 NS NS 11.0% 10.6 0.9% 1.02 102.07 36.173 0.67 NS 7.4 (0.3 55.95 -1.2% 3.38 22.7 0.1 1.2% 3.2 808.4 808.000 21.7 4.

…).6) (2. etc. Jp Morgan Am 7. The company has huge upside in the medium term.5 50.1% 33.9 34. Hence. hit USD13.5 0. Atom™ companion chip. in the longer run.0m deferred tax gain.0 Q 74 www.9% 12. that have barely been discounted so far. Auto. adjusted Daily volume $1512m $1150m $1313m 65. the company remains positioned in the sweet spot of the market (3G wireless. and 3) the shrinking EMP business. STMicroelectronics Least favoured Shareholders Free Float 76. At 17x earnings and 12x EV/EBITDA (2012E).0 0. Relative perf. medical home care.0 100.0 0.1% EUR20.7 98. driven mainly by market share gains.4) (2. Bosch. a takeover target. consistently adding strong design wins/new customers (audio ICs.6% 91. We view Dialog as a highly attractive chip-cycle-independent growth investment and.3m (up 51% y-o-y).5 30.g.9 13.5% Absolute perf.9% 50. for years to come.5m. the group's growth profile is about adding new customers/sockets (e.5 3.) as well as processor partners.3%). Smartphones.4 93.00 Target price (6 months) Dialog Semiconductor Rapid growth to be sustained Recent developments – Q3-10 results very healthy Q Dialog Semiconductor reported very robust results for Q3-10. of shares. addressing new end-markets (e.a. Our medium-term target price of EUR25+/share lies materially higher than our near term target of EUR20.7 1.5 Net debt/EBITDA (x) (3. (x) 0.5 20.5 40.0 0. PM-OLED display drivers. Adtran 4.0 12. Sales were up 35% y-o-y and 16% q-o-q to USD79. new customer wins. etc.15m Performances 1 month 3 months 12 months 19.3%.5%.6%.5 04/02 07/03 10/04 01/06 Price/TECDAX 04/07 07/08 Sector focus Sector Top Picks Dialog Semiconductor.0% 93.January 2011 GERMANY Smaller Companies Review SEMICONDUCTORS 2/Outperform Rating +12.2%. implying a level below its normal seasonality. The company is addressing the fastest-growing consumer end-markets (mainly smartphones and tablet PCs) and serves the most successful customers (Apple. the shares are not expensive considering Dialog's growth prospects.com (49) 69 47 89 75 12 10/09 .5 17. sports. as well as expansion in the market as a whole. Due to tight working capital management. Outlook .30% p. EUR17. Bank Ny Mellon 4. we are not concerned about reduced growth for Q4-10 as this should be a onetime phenomenon caused by 1) the acceleration of sales of c. Samsung. boosted by a USD1.5) Yield (%) ROCE (%) EV/Capital empl. Micronas.5 40.5 01/01 0.4% margin. We thus see further upside and recommend investors to buy on dips. launching new products (recently audio. whilst steadily expanding market share.0 9.3 17.5 20.5 10. Management 4. However. and increasing ASPs from the current USD1.USD4m into Q3 (early Xmas build). Net profit for Q3-10. …).0 17.9m translates to a strong 17. stemming from its unique PM-OLED driver IC technology as well as promising 2D-3D video conversion chip. EBIT of USD13.9 24.3 Disclosures available on www.DE Bloomberg: DLG GR Stock data Market capitalisation Free float Enterprise value No. For Q4-10 Dialog Semiconductor has predicted of USD81-86m.cheuvreux. the company generated a very strong USD14m in free cash flow from operations.) with its highly scalable business model.5) (2. However. 2) cont'd production constraints within the supply chain.1 4.84 Price (07/01/2011) Reuters: DLGS. driven by economies of scale (very solid gross margin of 46.5 10.6. more to come in 2011E and beyond).4 EV/EBITDA (x) 13.cheuvreux.com 2012E Attrib.4 104.g.Tremendous growth prospects not fully priced in Q We are convinced Dialog Semiconductor will continue to grow its topline by c.61m $ 11. X-Fab 3. and its growth profile will continue to be broadened materially in this manner.3 18. 2D-3D video conversion.5 30.3% 2009 2010E 2011E P/E (x) 22. FCF yield (%) 4.com Q 01/11 Price Bernd LAUX Research Analyst blaux@cheuvreux. LED lighting …). Sony.1%. 50. Samsung. RIM.3 23.

Dialog reports in USD as the company generates almost all of its revenues and has all its cost of materials in USD (thus being USD functional). Independent of the chip cycle. portable consumer and automotive & lighting industries. SonyEricsson and Zumtobel). With its differentiated products it shows great momentum in terms of winning new customers. the shares are trading at 2. especially for ultra-low-power display drivers „ Fast innovation cycle at customers means limited visibility and low barriers to entry „ Company owns valuable IP. In 2009 it generated one-third of its sales with products developed within the previous 12 months. Dialog Semiconductor should be able to triple/ quadruple its 2009 EPS in three to four years while generating constantly high free cash flows. Its main customers (total: around 60) are Apple. Chartered) may temporarily curb short-term growth „ „ „ Well exposed to the most attractive end-market segments 75 www.6x EV/sales and at a price/tangible book ratio of 4.com Valuation Based on typical multiples. adding sockets.8x.3x (2012E). office rent) on a 12-month basis. In light of the company's scalable. in coming years. Samsung. Assuming Dialog's display driver projects take off (mainly PM-OLED) and/or the company is acquired a few years down the road. RIM. Bosch and Zumtobel. One of the fastest growing chipmakers worldwide Dialog Semiconductor (390 staff) has been one of the fastestgrowing semiconductor vendors in the world since 2008 and has been profitable at the EBIT level for the past twelve consecutive quarters. Thus. Samsung. With 11% of the company's current market capitalisation covered by net cash. lifting its share of the wallet at existing clients.a. with SonyEricsson losing share „ Strong customisation of products requires considerable R&D Very experienced. On top of that comes the potential take-off of its unique PM-OLED display driver technology. On our DCF model renders a fair value per share of at least EUR20 (our price target) – without considering much of the anticipated very significant contribution from PM-OLED and 2D3D conversion. LG. The company currently has forward hedges on its predictable EUR and GBP expenses (labour. RIM. though currently little more than an option. promising R&D. The group operates sales offices in Germany. and hence gaining market share. LG. given its strong product IP and customer access. . well connected top management „ Profitability still below that of best-in-class „ Great base of high-volume reference customers „ „ „ Limited operating scale Spotless balance sheet Opportunities Threats Increasing penetration of customers (Apple. could multiply Dialog's size in the long run. we remain confident the company will continue to expand its top line organically by a minimum of 30% p. we are convinced its gross margin can be expanded from the current 45% towards 47%.January 2011 GERMANY Smaller Companies Review Company profile Q Q Fabless analogue/mixed-signal chipmaker Dialog Semiconductor. substantially higher share prices in excess of EUR25 are likely to come within reach. Dialog Semiconductor shares offer highly attractive value provided investors buy into the sustainable growth story. the company's P/E stands at 17x – in line with fabless semiconductor industry peers – which fails to reflect its superior growth profile. and if PM-OLED succeeds they may rise to more than EUR25.cheuvreux. lifting the EBIT margin from 15% toward 20% within three years. and ultra-low-power differentiated colour display driver ICs. low-capitalintensity business model. making it a takeover target Potential limitation of foundry capacity (DLG: TSMC. founded in 1981 as a UK registered PLC and listed in Germany since 1999. LG. fastest growing end-market segments. Based on our 2012E earnings forecast. the UK. SonyEricsson. is a fabless semiconductor maker that specialises in providing analogue/mixed-signal ASIC (70%) and ASSP (30%) solutions to the wireless. we expect the company's shares to continue climbing to at least EUR20. higher ASPs. Bosch. As a result. Q SWOT analysis Q Strengths Weaknesses „ Technological leader in analogue/mixed-signal chips for battery management and audio codec applications „ Highly scalable business model given move to true fabless structure „ Strong dependence on a limited number of end-customers (Apple. which. RIM. the US. despite listing in EUR Although its shares are listed in Germany and quoted in EUR. Japan and Korea. Q Investment case Dialog Semiconductor is a narrowly focussed semiconductor developer that concentrates on what are currently the most exciting. Q Reporting currency is USD. Q Q Narrow focus on power management and audio The group's main products are highly integrated (up to 40 functions) power management and audio codec ICs. Adjustments for net cash bring the 2012E P/E down to 15. …) „ Trend towards more highly integrated mobile phone platform solutions could sideline Dialog going forward „ Growth due to rising integration. Taiwan.

0 43.0 0.6 0.0 5.8 0.0% (14.7% (21.2 (31.0 32.9) 77.9% 86.0) 0.1) 0.5) (7.0 21.9 72.0 0.1 12.3 48.3 (36.8 8.0 0.0 (3.0 0.6 0.0 0.1 NS (16.0 0.0) NS 101.0 0.0 (19.0) (3.7 10.0 31.0 0.9) (1.2 22.3 71.0 0.0) 0.0 (241.5) 25.0 0.0 (16.1 14.0 (30.6) 62.1 176.3 65.8 0.0 (121.0 (0.0 0.0) 1.0 0.0 0.0 64.5 0.0% (8.6 32.5) (128.0 6.0 0.0 0.1 0.0 1.8 6.5) 0.8 0.3 9.5) (20.0 (19.0 12.0) NS 79.9% 161.0 6.0 31.2) 0.7 (0.0 0.7 53.5 7.0 11.0) 0.8) NS 22.6 7.1% (12.0 0.3% 14.6) 13.4 0.6 56.0 (17.0 (10.0 0.1) 13.7 6.3 0.4% (9.0 0.0) 0.2 20.0 4.0 0.0 3.9 0.9 0.0 0.1 11.0 0.3 0.7) (1.1 0.4) (24.0) (14.1 71.0 (7.6% 217.0 0.2 0.2 0.0 0.8) (2.2 (20.0 (8.2 0.5) NS 78.0 32.0 (124.0 87.0) 68.2 0.0 0.0 28.7) (8.5% 0.0 0.com .5) 2.0) (41.1% (7.0 54.5) (20.0 (30.7) 6.0 (6.0 (19.9 78.7 NS 0.5% (28.7 44.4) (17.8 264.0 (0.4 40.7) (1.4 www.0 0.0 (376.7 70.0 47.2 0.9% (8.0 0.0 (44.0 0.2% 0.3) (5.6 34.0 (30.6) 94.4) (1.0% (7.0 1.0 0.0 43.0 0.4 33.6 1.3 (0.3 46.0 3.1% 0.0 0.0 2.2) (1.2) 69.8) 0.7 NS (7. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.6 (12.0 64.0 6.1) 0.0 0.0 0.6 (8.7 5.0 (34.0 0.0 (2.0 0.0 (181.4 (51.6% 170.7 -0.3 0.0 (44.0) -42.0 (148.0 36.5 14.1) 28.0 4.0) 46.0 1.7 53.0 0.0 53.0 (6.0 0.0 (312.4) 103.0) 29. [inc.9) 35.8 47.6 22.3 (16.0 5.0 2.0 (44.0 134.0 9.7) (10.8) 0.7 0.0 0.2) 1.0 0.0 (6.7 0.0 0.0 0.5% 480.0 0.0 0.3 0.5 68.8 24.2 (2.8 86.9) (1.3 3.9 351.cheuvreux.0 13.0 0.0 0.0 0.0 0.9 0.7 161.4) NS 20.0) NS 71.0 0.3) 54.4 0.4) (1.0) 0.5 108.8) NS 37.0 101.0 0.3 (0.7) (1.0 2.6) (80.9 0.0) (19.0 0.8 0.9) 64.0 0.0 (2.8 (256.8) (13.0 0.1 41.0 0.0 23.6% 0.4 0.3 1.0 0.0 1.7 0.0 0.8% 0.0 64.0 0.9) (1.7 50.0 (143.0 0.0 (6.6 12.8 135.0 11.0 0.5 26.0 0.1) 0.3) (5.2% (1.7) (0.1 21.8 NS (11.6 0.3 37.8 -7.2% 0.0% 0.3) (1.6) 0.0 4.0 1.0 0.5% 0.0 36.5 NS (5.0 0.6 34.0 6.7 0.2 24.0 0.3 (42.4) 0.9) (30.7 45.8 86.1) 0.0 0.5) NS 59.3) 1.3 0.1 24.2 0.0 0.0 0.0 1.6) 0.0 87.0 0.0 43.9) 37.0) 56.1 0.0) 1.7 0.0 0.0 0.9 5.0 0. for exceptional items Net attrib.0 0.9) NS (10.7 0.0 0.3 (189.3 0.0 0.0 41.7 0.3 0.3 200.1 0. profit [loss].7 0.4) 0.0 0.0) 14.8% (6.0 2.2 NS 296.0 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 76 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 115.0 3.8 113.5 20.4) 13.0 68.0 0.0 43.5 4.0 0.0 (3.0) 0.0 0.0 (1.9% (1.7% (10.7 0.4 1.0 0.0 0.0 (41.3) 57.2 0.0 0.8% 0.0 0.6 157.9 -45.0) NS 0.0 94.0 6.5% 0.9) 0.9) (0.0 87.0 0.0 0.0% 0.0) (0.0 3.3 120.0 0.0 0.0 2.2) 0.0 0.3 46.5% 0.5 10.0 35.0 11.2 0.9) (1.7) 0.0 0.3) 0.1) (0.3 0.0 0.8) NS 93.0 29.9% 0.1) 3.0) 22.7 2.7 0.8) 0.0% 0.0 59.2) 0.3 16.January 2011 GERMANY Smaller Companies Review Dialog Semiconductor FY to 31/12 (Us Dollar m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.5 (3.0 0.0 0.0) 0.0 (31.3 1.4) 68.0) (8.0 0.0 0.4) 47.0) 0.0 0.0 1.7% 390.0) 0.0 (3.7 0.0 9.0 5.7 10.4 10.0 79.9) NS 24.0 3.8 60.0 (97.1) 0.0 0.0 0.0 0.0 0.8 96.

2% 1.73 0.2 NS NS 6.0 NS NS 19.77) 2.57 23.47 32.32 NS 2.2 19.06 0.6 19.98 48.0 17.7 104.4 24.9 0.00 0.610 0.3 NS NS 11.7 1.00 0.2 NS NS 0.5 NS NS NS 4.1 5.0 NS NS NS NS 2.7% (0.3) 0.9 2.9 22.0% 0.4% 2.313.00 0.3% (0.410 45.6 16.43) 57.2 0.3) 0.63 0.5 NS NS NS 5.9 17.0 NS NS 16.3% 0.58 23.9 25.5 20.6 5.5 93.9) 80.3 1. adjusted Av.9 100.38 3.3 0. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.7 17.1 5.66 42.5 4.512.94 3.3% 1.0 13.9 11.9 23.610 0.480.6% 3.5 12.0 NS 1.00 0.0 23.245.68) NS (1.610 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.00) -46.4 0.0% 0.79 2.1 4.550 0.170 0.3 29.7 3.180 0.48 (28.0 11.3 12.2 15.0 6.5 26.4 113.9 625.000 65.43) 57.000 65.6 18.5 23.48 22.8 0.0 EV/EBITDA.9 6.0 NS NS NS NS 1.32 NS 1.2 98.3 0. adjusted Share Price [Adjusted] Latest price High Low Average price 77 www.9 3. restated EV/EBITA.180 45.5 1.00 0.9 17.60 1.88 3.0 1.6 0.460 54.0 NS NS 8.6 NS 0.5 0.00 0.2 2.9 0.00 0.4 0.05 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.3 0.1 NS 2.8 44.3 43.6 NS 0.000 44.3% 0.15 135.60 NS 0.8 0.2 NS 0.4 15.14) 69.46 3.5 3.00 1.4 NS 0.2 1.0 NS NS 5.000 54.6 13.4 1. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share No.610 65. of shares.0 2.6 NS 0.4 6.9 3.0 11.28 3.1 3.6 124.5 0.7 27.9 0.00 (0.000 45.000 2.7 13.9 NS 0. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 75.5 5.26 1.5 8.9 14.4 17.68) NS (0.9 0.030 44.4 82.0 7.98 48.0 0.7 86.0 22.02 2.8 3.610 65.14 2.000 65.0 NS NS NS NS 0.8% 0.8 NS 0.3 NS 0.28) 63.2 24.cheuvreux.7 NS 0.46 NS 0.00 1.5% 0.0 22.00 0.0 1.56 22.2 1.5% 0.0 19.88 1.0 NS NS 8.2 6.4 27. number of shares.0 2.550 44.8 NS 0.32 22.05 1.00 0.0 0.58 10.2 1.6 0.11 44.327.0 93.610 65.5 16.23 2.0 14.13 5. adjusted Treasury stock.00 23.02 15.5% 1.0 NS NS 21.00) -46.2 2.com .7 4.14) 69.030 0.460 0.6 13.00 0.8 17.75 1.3 24.3 (7.00 (0. restated 3.0 0.15 135.512.2% (1.5 7.05 24.79 4.170 44.410 0.2 0.0 2.1 0.4 13.3 2.4 44.3 28.5 495.5 NS 0.3 34.8 46.4 4.2% (0.3 9.3 28.77 4.35 3.1% 4.000 45.0 14.2 2.1 45.4 89.66 9.6 NS NS NS NS NS NS NS NS NS NS 24.41 2.2 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.33 35.33 35.7 4.74 130.0 NS 0.0 NS 1.0 34.52 (3.00 0.3 17.000 44.60 11.9% 5.70 10.0 NS NS 18.78 1.7% (0.00 0.January 2011 GERMANY Smaller Companies Review Dialog Semiconductor FY to 31/12 (Us Dollar) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E (0.58 1.2 1.00 0.3 0.4 18.2 28.00 0.00 0.4 18.

0 6.0 19.20 Target price (6 months) Douglas Reuters: DOHG.0 42.1% EUR47. On the other hand.0 37.com Q Q 78 www.0 32. FCF yield (%) 7.279m EUR 5.8% 22. Bank Sarasin 6.8 3.5 1. which was about 1% above our forecast.January 2011 GERMANY Smaller Companies Review SPECIALIST RETAILERS 2/Outperform Rating +14.8 5. Since Dr Oetker increased his stake in DOH to 25.319bn.cheuvreux. DOH has generated about 95% of its annual EBT in the Christmas quarter.9 16.0 27. Russia. 52.1%. though he refrained from going into any detail.0 32.8%. it is fair to assume they were break-even at best. The group's FY10 EBT guidance – before one-offs .0 5.0 12.7 0. Rive Gauche.5 EV/EBITDA (x) 6.cheuvreux. As we expect it to report a strong Christmas business. has expressed interest in DOH's 31 stores in Russia. has not reported any additional purchases since then.remained unchanged at the high end of the range of EUR120m-EUR130m.0 42. we at least expect its eastern European operations to stop deteriorating further and we thus believe DOH is on track to deliver sales and margin growth. Relative perf. DOH is still in the process of reviewing its country portfolio with a view to potentially exiting those countries in which it feels it is unlikely to increase its profitability substantially or where it has no leading market position.6 1.11m Performances 1 month 3 months 12 months -4. This is not a huge amount.0 27.4 0.8 17. Denmark and the US together represented ~2% of DOH's group sales in FY09 and. (x) Disclosures available on www. he once mentioned that he could see his stake rising to about 15%.5 P/E (x) EV/Capital empl.5% -5. Oetker 25.com 01/11 Price Jurgen KOLB Research Analyst jkolb@cheuvreux.com (49) 69 47 89 74 26 10/09 .4% 08/09 09/10E 10/11E 11/12E 23. he stopped buying shares.1 Yield (%) 3.0 22.3 5.0 2. The reported FY10 trading statement released in early October revealed group sales of EUR3.3% 9. Both increasing wages and a declining unemployment rate will help DOH increase customer traffic and raise its average prices. he recently disclosed that between 15 and 23 November he again bought 15. Sparinvest Holding 5. adjusted Daily volume EUR1624m EUR586m EUR1615m 39.2 3.0 37.0 47.2 0.0 14. CEO Dr Henning Kreke said he was pleased with the ongoing Christmas business.2%.0 17.5 14.3 Net debt/EBITDA (x) 0.61.4%. DOH is well placed to benefit from the expected positive macro trends in Germany. who in August 2010 officially disclosed his stake of 6.5 4.000 shares at EUR36.2 4.0 01/01 04/02 07/03 10/04 01/06 Price/M DAX 04/07 07/08 Sector focus Sector Top Picks Least favoured Ahold.DE Bloomberg: DOU GR Fine execution of different retail formats Q Recent developments – Pleased with Christmas business In an interview with Euro am Sonntag in December. Dr.0 22. Carrefour Colruyt Shareholders Free Float 36.0 47. when the company will also give details of its Q1-FY11 sales performance. scheduled for 13 January 2011.7% -3.4%. However. with a 2. but we will closely monitor whether or not he continues.de). However.1% Absolute perf.0% -5.5 1. Kreke Family 12. of shares.8 Attrib. Müller 6. Q EUR41.2 16.0 17.0 52.5 ROCE (%) 11. Stock data Market capitalisation Free float Enterprise value No.8% in early 2009.3% l-f-l sales increase and ~14% EBT growth (compared with Q1-FY10 excluding the non-cash write-up on Buch. It has already left Denmark and confirmed in November that it will exit the US.6 1. According to the Russian press. a perfume and cosmetics chain.35 Price (07/01/2011) Outlook – Good Christmas business ensures growth Historically. as we estimate that about 70% of its EBIT stems from Germany. we believe the company has earned the necessary cash flow to accelerate its expansion and open about 50-70 new perfumery stores. Our estimate stands at EUR132m. Furthermore. drugstore owner Müller. Additional information will be provided at the FY10 analyst meeting. in terms of profitability.0 12.2%. In late autumn DOH also indicated that Russia may be on its non-continued countries list.

Q Strategic focus – lifestyle retailer With its range of divisions DOH strives to be a lifestyle-oriented retailer. However. As we expect the positive trend in the German retail sector to also continue in 2011E. „ Follows a clear a service strategy which proved resilient during the crisis. For FY10E we expect DOH to report an 8. In 1989 the group changed its name to Douglas Holding. Additionally.20 is based on a DCF calculation with a WACC of 8% and a terminal growth rate of 2%. The short-term component has included the company's focus on 2010 Christmas business. books (banner: Thalia). On a divisional basis. As DOH depends heavily on Christmas business it should be a significant beneficiary. reflecting the fact that perfumery had become the largest part of its business. Q SWOT analysis Strengths Weaknesses „ Successful execution in all its retail formats except fashion „ Well-known retail banners offering high levels of service.5% from FY13E. which compares with an average of 17. „ Opportunities Threats Increase penetration in already active foreign markets to gain market share and thus boost purchasing power vs. we believe DOH is well positioned to deliver positive surprises.de. In 1986 Hussel AG added fashion business with Appelrath Cüpper. suppliers. Portugal and the Baltic states. The improvement will be driven by its exit from non-performing countries. Christ contributes 9% to group sales and ~15% to group EBIT. an increase in its exclusive/private label products business. High exposure to nonperforming international markets such as Spain. was the corporate starting point of DOH. jewellery/watches (banner: Christ). „ 79 www. „ Hardly any synergies between the individual retail formats. we estimate a stable EBITDA margin of 8. The long-term component sees a steady improvement in the company's operating margins towards its peak level of 5.4% EBITDA margin. marking its entry into the jewellery business.January 2011 Q GERMANY Smaller Companies Review Company profile Q History Confectioner Hussel. both at the perfumery and jewellery/watches divisions. With positive macroeconomic indicators. specifically in Germany where we believe DOH generates about 70% of its group EBIT. „ Growth in German-speaking countries for books division.5% increase. with its main focus being on service. Q Divisional details DOH generates about 65% of its group sales in Germany. „ Competitive landscape in European perfumery industry remains difficult. Based on our FY11E estimates DOH shares are trading at 16x P/E. the German retail association HDE expects German 2010 Christmas sales to show a 2. It acquired the German perfumery chain Douglas in 1969 and expanded internationally from 1974. The fashion and confectionary businesses contributes 3% to group sales and 3% to group EBIT. founded in 1949. The group – still called Hussel AG – acquired Uhren Weiss in 1979. In the same year it began its books business with Montanus. which would mark the highest growth rate since 2004. Q Q Business lines DOH is active in five retail segments: perfumery (banner: Douglas). Both decisions will support its profitability and thus its valuation multiples going forward. and leverage effects recorded by its books division after the full integration of Buch. Thalia contributes ~26% to group sales and ~28% to group EBIT. .cheuvreux. fashion (banner: Appelrath Cüpper) and confectionaries (banner: Hussel). „ Further exploit the Internet as a distribution channel not only for its books division. „ High fixed-cost base due to high service approach. This division also has the highest international exposure at 50%.7x in the period FY07-FY09.com Valuation Our TP of EUR47.6% in IFRS terms. Thalia is also present in Austria and Switzerland. its perfumery chain contributes ~58% to group sales and ~72% to group EBIT. We believe the company has made two core strategic decisions: to exit some non-profitable markets and to increase the share of private label offering. unusually cold and snowy weather conditions may have negatively affected Q1-FY11 sales. Q Investment case Our investment case has a short-term and a more long-term component. such as unemployment rates and an expectation of rising net wages.

0 (43.0 0.4 14.4) (8.7) 227.0 170.1 18.0 96.6 10.0 (53.071.6 218.0 (0.0 0.0 141.4) 0.0 0.6 206.0 115.3) 0.4 15.0 0.2) 0.6 800.2 2.0 0.1 0.0 4.1) 111.6) 550.0 0.0 (29.3 1.5 303.3) (210.6 508.1) 0.0 0.0 60.9) 0.0 0.3 3.0 6.0 0.9% (773.0 62.0 0.0 0.9 31.7 3.0 0.2) 0.0 0.1 NS (1.9) 0.2) 0.3) (2.0 157.0 0.0 0.3 29.5% (136.0 (62.0 0.0 0.5 8. for exceptional items Net attrib.857.0 0.0 8.5 0.6 118.0 75.6 932.1 (3.2) 0.0 (0.9 6.0 28.0 0.6 1.330.6 6.7% 3.1 (6.4 26.5 274.0 57.8 457.3% (100.2 78.7 153.3) 241.0 0.0 0.7% (13.0 0.3 205.2 16.com .0 0.2) 114.0 97.1 197.1 0.1) 0.2) 0.9 7.8 27.1) 0.8 9.660.1) 0.8 11.7 230.5 36.3 0.0 (54.3) 0.5 240.0 29.1) 52.9) 0.575.0 231.0 (35.8 32.1 0.5 -7.8) 141.1 7.0 0.0 (12.0 0.3 72.0 (0.7 165.0 0.112.4 0.0 0.6 0.9 0.6 227.000.3% (683.0) 159.2) 327.7 0.8 8.0 (6.7 777.3) 75.0 111.1 NS 2.8) 0.3% (15.1 8.7 12.119.0 (57.5% 8.2 78.0 1.0 0.2) (2.0 173.8 0.7% (92.0 0.9 15.4 7.0% 3.130.8) (1.2 340.4) (15.1) 0.1 0.0 150.0 0.5 238.9 5.3 27.8 29.3 (18.5 207.1) 62.2 24.5 -4.0% (117.7) 157.434.0 (43.4 60.0 88.2% 0.3 (3.1 32.0 (120.5 0.3) 0.0 0.171.3) 0.6% (499.2% (698.135.6 (161.0 84.0 (45.3 203. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.1 15.6 0.6 752.4) (1.3 808.0 0.7 0.0 85.0 15.0 0.3 4.9% (138.5 (4.7 207.0 0.1) 50.6 205.9) (2.6 233.2 28.1) 84.0 (47.0 217.4 4.3) 88.9 161.1% 0.0 10.8) (24.4% (9.7 49.3 11.0 (52.0 (0.0 0.1 1.0 0.0 0.6 407.5) 0.5 205.0 84.0 149.2 29.8 -2.0 0.0 (0.7 710.9% (99. [inc.0% (652.2) (6.6 1.0 (47.0 0.2 29.0 0.2% (23.7 0.6 29.1) (8.8) (84.162.6 69.1% (142.8) (156.288.3 18.1) 0.7) (2.0 0.145.5 291.4 23.9 777.7) 210.4 0.0 0.135.0 (89.0 76.5) 214.1) (7.0 (6.9% (580.8 2.8% (734.7) 213.5 (16.547.1 639.5 255.7 0.8) 0.0 -5.0 (0.5 7.5) 135.January 2011 GERMANY Smaller Companies Review Douglas FY to 30/9 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.cheuvreux.0 (23.417.4) 56.2 255.8) (2.0 135.4 462.8) 0.3) (1.1 (4.0 0.5 www.3 1.2 1.3% (0.1) 0.0 185.4 31.2) 0.162.2 205.1 14.112.0 78.6) 0.0 101.0 10.1 478.0 1.4 532.4 73.3 162.1 19.0) 254.0 (54.5 0.0) 276.6 206.0 (41.4) 0.5 0.3 1.2 78.0 169.0 8.0) (189.8 1.7 24.4 178.4% 3.0 (52.4% 0.7 9.0 (38.6) 0.1 587.1) 97.7 8.4% 2.2) (16.1) 101.0 (96.0 97.4% (5.071.478.4 69.9) 115.200.6 143.0 (43.0) 173.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 80 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2.3 932.4 34.2 0.0 0.1) 309.0 0.5 260.7 13.5 0.5% 3.0 0.8 472.2 88.9) 0.0) (1.3 35.0 0.3 30.8 8.4% 0.8 6.0 0.7 53.0 0.9% (108.0 101.0% 0.2 26.6% (529.2 45.9% (129.8 431.5) 0.8) 196.0 88.1 28.1 115.5) 0.0 159.0 (4.0 10. profit [loss].4 5.6 12.0 (7.2 29.3) 185.1 11.1) 29.0 0.7% (708.4) 57.3) 199.4 58.1% (12.2) 0.8) 279.3 4.5% 132.0 0.0 132.0 0.082.0 696.4) 150.7 -35.1) 265.0 0.0 (0.4% 169.0 0.2 78.2) (194.1 0.0 86.5 800.1) (2.4 82.3 157.0 8.0 (39.0 0.3 1.2 867.4% 0.2) 0.2 0.6) (0.3) (122.1 1.248.680.5) 0.6 (4.5 (58.3 3.7) (9.119.0 (43.0 0.1 163.6% 3.9) (134.0 0.2 1.4) 0.8) 0.6 463.7 8.1) 0.0 0.6 -27.0 64.0% 3.3) 0.6 5.0 96.8 0.145.4 1.4) (114.0 (0.0 113.0 0.319.0 62.0 (29.648.6) 0.1 55.4 7.8 169.1 17.0 0.9 0.9 116.1 4.0 111.4 82.3 390.2 2.2% (16.3 29.2) 0.9 (86.0 214.8) 0.5 5.0 (17.0 0.0 5.0 56.0 108.4% 0.

83 39.6 5.767 36.51 7.7 1.9 3.00 4.4 18.279 39.2 14.5 3.3 2.4 1.9 9.35 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.5 6. adjusted Treasury stock.4 14.5 2.4 1.3 17.9% 17.67 32.1 8.2% 2.0 7.2 2.8 0.3 6.36 31.45 38.2 10.4 10.4 13.6 6.000 39.40 6.03 1.8 15.10 25.000 39.3 7.3 5.72 41.1 1.51 7.91 39.3 1.6 13.1% 20.3 3.0% 1.6 4.200 0.55 -0.8 15.3 5.200 0.2 19.195 0.1 9.5 0.6 0.08 11.225.15 5.6% 2.00 1.00 26.2 5.94 26.1 9.5 14.5 2.00 1.0 17.1 4.52 2.0 1.3 7.8 10.53 29.5 7.00 1.8 2.2 9.0 15.622 0.com .4% 2.1 1.9 NS 0.0 0.443.8 10.0 3.02 45.00 4.45 50.562 0.0 19.29 13.665.7 0. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1.3 1.6 8.9 5.1 3.10 5.9 1.000 38. reported % Change 1.4 0.3 15.6 51.5 0.2 1.348.6 2.8 8.622 0.3% 2.2% 19.2 1.4% 2.9 16.8 2.1 1.3% 16.62 163.4 8.5 1.2 0.9 9.7% 2.4 4.8 53.6 12.5 64.6 5.217. number of shares.00 1.0 23.000 39.0 5.0 13.6 50.5 NS 0.2 NS 0.88 41.7 18.3 8.19 32.60 23.40 36.1 1.33 6.3% 1. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.47 7.7 19.2 44.75 36.8 8.56 NS 1.073 36.8 1.4 3.2 1.49 8.7 3.7 No.35 43.7 64.02 29.9 5.7% 2.505.41 -4.9 13.4 5.0 31.9 1.577.4 23.624.4 14.43 6.4 9.9% 2.0 0.2 1.2 NS 1.17 41.0 6.90 44.6 NS 1.5 10.6 3.3 2.0 1.36 31.56 8.6% 14.200 38.236 38.9 2.43 6.1 3. adjusted Av.2 0.00 4.47 6.1 3.00 1.160 37.0 8.7 NS 2.2 9.0 16.2 23.4 5.28 13.7% 18.1 19.7 Goodwill per share Dividend per share Cash flow per share % Change Book value per share EV/EBITDA.8 1.9 3.39 -2.6 17.59 35.3 13.717.3% 2.69 20. restated EV/EBITA.9 9.3 0.4 8.2 32.5 9.000 26.08 -5.2 48. restated 81 www.000 39.8 2.4 0.10 41.5 11.5 1.13 41.2 9. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.0 2.1 0.5 7.624.5 5.0 1.0 15.9 1.624.8 6.8 8.279 39.3 0.7% 1.000 39.6 1.5 2.279 39.607 0.2 10.6 1.5% 13.3 17.15 34.200 0.4 17.10 5.10 5.615.3 24.8 9.9 11.08 12.279 39.8 5.981 0.8 5.42 NS 1.85 10.1 13.015.33 41.7% 2.5 6.818.6% 2.60 -35.5% 12.36 30.231.85 10.2 7.8 16.6 2.49 9.8 11.7 13.3 49.58 19.000 39.1 3.0 11.2 NS 0.3 10.75 32.2 1.15 34.00 1.00 1.8 14.8 12.3% 15.0 1.0 5.5 23.4 5.7% 2.1 0.0 3.8 0.58 19.534.4 5.4 7.0 2.5 3.3 68.4% 0.5 6.1 0.7 0. of shares.8 NS 2.5 4.0 0.9 8.8 13.000 39.0 9.4 3.83 35.5 6.8 3.0 5.5 3.8 23.6 11.00 1.25 39.5 2.0 11.8 10.067.2 14.7 0.446.3 2.4 19.8 3.8 16.17 25.60 -35. adjusted Share Price [Adjusted] Latest price High Low Average price 39.January 2011 GERMANY Smaller Companies Review Douglas FY to 30/9 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.cheuvreux.35 42.50 33.5 3.2 11.61 9.4 NS 0.

Orders continued to increase but at a lower run rate. Q4 will be another strong quarter.9% 92. 06/03 .3% in H1-10). DRW is experiencing a number of tailwinds: ongoing strong demand.8m EUR 2.1% in Q3 cc (vs. favourable FX and product mix. In November DRW released strong Q3-10 results with sales up 15. which we attribute primarily to lower-thanexpected financial result due to certain fees incurred for unused credit lines.13m Performances 1 month 3 months 12 months 8.0 257. We currently predict a 9. FCF yield (%) 23.7 17.8 8. adjusted Daily volume EUR1121m EUR0m EUR1640m 17. The key point of the Q4 release. Ords: Dräger Family 71%.0 57.1 Net debt/EBITDA (x) 2.5% reported.3 9.6 Attrib. EBIT bridge: We assume net positive one-time effects (Siemens option. Safety sales increased 6. Organic growth in 2011E should be more than offset by a likely deterioration of the product mix. rising an estimated +5.DE Bloomberg: DRW3 GR Key is 2011 outlook after an impressive year Q EUR63.0 Order momentum deteriorated. albeit short of H110's 13.3 1.7 17.0% in H1-10).com Q Q 82 www.5% above consensus) and up an est'd 10.0 307.0 Medical posted another impressive quarter with 20% sales growth (est'd 15% at cc) and another strong 10% margin.0 207. falling an estimated -4. 107. however.0 157.1% in Q3 (vs. 7-8% previously).6-9.2 17.1 5. which should not reoccur to this extent going forward. Net income after minorities/GS was 4% below expectations.6% ex option vs.2 1.8% EUR70.3% margin for 2010E (guidance 8-9%) and 9.com (49) 69 478 975 26 10/09 Sector focus Least favoured We will remain on the sidelines until guidance for 2011 is clarified.4% 95. Leveraged by the strong sales growth. Shareholders DiaSorin. We leave our numbers unchanged at this stage but see a slight downside risk to our forecasts.3 6. disposal gains) of EUR4m in 2011E.0 157. William Demant Prefs: Free float 100.9 EV/Capital empl. Siemens synergies add EUR5m. Stock data Market capitalisation Free float Enterprise value No.4% at cc in Q3-10 (versus 9. of shares.0 03/02 12/05 03/07 07/08 Sector Top Picks DRW predicts low-single-digit sales growth for 2011 and its EBIT margin not above the 2010 level.2% at cc/organic. 7.cheuvreux.8 0.com 01/11 Price Oliver REINBERG.4% in H1-10).8 1. CFA Research Analyst oreinberg@cheuvreux.6% on a reported basis (a full 3.0%.5 5. 09/04 Price/TECDAX Without question.0 207.3 11. translating to a net EBIT decline in 2011E. deep diving system. outlook unclear Drägerwerk raised its 2010 guidance in October and now expects 10% sales growth in reported terms and an EBIT margin of 8-9% incl.1 8. with orders increasing only an estimated 2. free float 29% 2009 2010E 2011E 2012E 25.5 1. as well as earlier realisation of costs savings under its Turnaround program.4 P/E (x) EV/EBITDA (x) Disclosures available on www.0 257.1 ROCE (%) 7.0% 1.9 2.3% at cc. a mark-to-market charge on the Siemens option (= 8.18 Price (07/01/2011) Recent developments – Strong Q3 results.0 Q Outlook – Outlook for 2011 will be key 01/01 7.8% -14. 3. Orpea.5 11.8% level. which still appears conservative to us given EUR137m in 9M-10 and seasonal strength in Q4.1% for 2011E.4 1.7 0. likely in Feb 2011.January 2011 GERMANY Smaller Companies Review HEALTHCARE EQUIPMENT 3/Underperform Rating +10. The stock is however not expensive and its new synergy program to be announced in March may provide a positive catalyst.0 107. will the outlook for 2011.cheuvreux. however.9 0.6 6. and an est'd 1. which also implies it could be below the 2010 level.5 Yield (%) 1. This implies an EBIT range of EUR168-189m. Relative perf. while higher R&D offsets both factors.6% Absolute perf. (x) 1. EBIT was 4% above expectations. 12. Order momentum deteriorated.0 57. 307.9% -4.00 Target price (6 months) Draegerwerk Reuters: DRWG_p.3 12. Getinge. we even expect DRW to beat its guidance.

which suggest some upside potential from current levels. The market exhibits certain pricing pressure. followed by the Americas (18%) and AsiaPacific (13%). Draegerwerk would be trading at 12. which we expect in Feb 2011.2x 2012E earnings. synergies between the two divisions are minor. monitoring and other products on a global basis. . However.cheuvreux. Q Q Draeger Medical – leader in anaesthesia and ventilation Draeger Medical is focused on the acute point of care market (APOC). „ brand „ Mixed track record Opportunities Threats „ Expansion in the high-margin US market beyond anaesthesia „ Potential reduction of pricing pressure „ Pricing pressure remains a key challenge. Q Draeger Safety Draeger Safety offers detection and protection equipment as well as safety solutions on a global basis. DRW intends to integrate marketing and sales between its Medical and Safety division. At this. In the interim the stock fell back and offers catch-up potential. Q Shareholders remain in a minority position After the capital increase mid-2010. The preference shares are 100% free float. anaesthesia. may imply slight downside risk to our and market forecasts.com Valuation We reiterate our 3/UP rating and EUR70 target price for Draegerwerk. it has market-leading positions in its specific product areas. holding 71% of votes. the Draeger family continues to control the company. Draeger Safety has outperformed its market in recent years. Europe remains the group's biggest market (63% of 2009 sales). customers face substantial cost pressure „ Capex spending may be cut as a result of high public deficits Infinity ACS and platform strategy to improve profitability „ Significant investment backlog in the German market „ 83 www. KGaA corporate structure. While market growth is limited. We expect details on this to be announced at its analyst meeting in March 2011. While the company is a small player in the medical technology market as a whole.January 2011 Q GERMANY Smaller Companies Review Company profile Q "Technology for life" – the theme of two divisions Draegerwerk is the holding company for its two business divisions "Draeger Medical" (100% ownership after they acquired Siemens 25% minority stake) and "Draeger Safety" (100% ownership). ordinary shares represent 62% of total capital. Q Investment case We downgraded the stock when Draegerwerk reached our target price. We have so far not upgraded Drägerwerk back to 2/UP as we fear that the clarification of its margin guidance. of which 29% are free float (listed for the first time). offering ventilation. the valuation leaves limited downside scope for the stock in our view and its new synergy program may be taken positively. While both follow the theme "Technology for Life". Its product portfolio is very broad and tends to have low average ticket prices. ventilation) „ „ Sound „ Draeger remains a small player compared with competitors such as GE and Philips „ performance of Draeger Safety „ Strong Some pricing pressure Shareholders remain in a minority position. Q SWOT analysis Strengths Weaknesses Market-leading positions in specific niche areas (anaesthesia.

1) 140.9 172.7) 0.0 82.9) (37.0 0.3) 146.0 630.0 104.6) 0.4 6.5) 0.0 189.9% 0.3 16.0 0.0 43.6% (775.0 (16.1 0.101.0 0.0 0.1 145.2 (18.4 (42.8) (1.1 1.9 562.0 298.2 1.7% 0.0 (14.8% (748.5% (57.4 47.4) 105.3) (1.6 1.0 0.0 0.4 9.6) (65.0 0.0 (6.5% 1.9 0.0 0.0 (34.6 389.7% (27.6) 0.5% (68.0 (64.8) (1.0 14.0 0.0 119.8 0.3 0.0 0.0 0.0 0.179.0 (22.6) 124.8 50.2) (32.7 29.8 135.0 0.9) 93.8 180.2) 21.5) 14.0 124.6) (2.3) 285.1) 0.0) 267.9) (59.8 40.5 251.0 0.8 302.9 132.6) 94.3 0.0 621.5 1.9) (82.520.3) (66.1 243.2 193.5 47.3 213.6) 79.0 63.0 (4.0 0.2 51.5% (594.3) (3.006.8 1.5) 195.3% 2.3 260.4 -10.6 102.0 182.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 0.5 0.0 0.2 (34.6) (3.8 (10.179.1) (1.0) 200.0 0.3% 1.3) 174.January 2011 GERMANY Smaller Companies Review Draegerwerk FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.2% (46.1 338.3 10.6 243.0 46.7) (4.153.5 105.8) 0.5% 1.6% (74.4 0.3 198.7 618.1) 32.0 0.8 288.1) 0.911.1) 0.8) 99.207.9 -54.0 0.0) 25.0 32.2 0.3 1.6% (727.1) (71.1% (56.175.3) 196.0 0.2) (21.0 0.0 0.1 31.0 0.9 0.7) (1.3 0.232.005.0 105.7% (663.9 NS 1.3% (570.0 (31.5% 0.1 167.0 -10.0 0.175.0 196.3) 90.1% (49.0 32.9 98.6 33.0 (5.7) 0.9) (3.4 (29.8 7.2 27.7 245.8 250.3 294.4% 0.3% 0.0 665.0 608.0 0.0 (8.0 254.4 38.5 194.7 (14.5 0.0 0.8 2.0 74.9 1.3 (32.7 259.4 0.0 (6.9 240.1 192.2 -9.1) 211.7) 32.9) 80.1) (13.5 80.0 211.6 169.0 522.5 132.2 172.0 143.com .5 NS 2.7 85.3 10.7 1.0 91.174.0 0.4 www.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 84 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.6) 0.7 48.6 27.0 0.6) 180.9 47.0 0.1 12.1 -0.1 1.8 37.7 -7.9 132.1% 0.8 7.1 10.9 42.1 0.0 0.0 (30.0 (28.5) 2.5 0.0 0.6) 0.0 94.9 1.3) 0.6 245.0 0.0% (622.0) (3.8% 0.cheuvreux.5) (19.207.0 0.6) 82.0 4.8 63.1% 95.2) 0.5) (79.0 101.0 0.7 1.6 182.8 47.231.9 (23.0 0.4 (33.1) (3.5 179.8 (27.6) (25.3) (6.9 0.1 -5.231.1 (30.0 0.0 0.0 0.174.9 240.5% (45.171.7 18.4 39.4 173.0 201.0 577.4) 148.0 0.0 255.0 59.5% 0.5 -29.0 0.0 0.5 1.3 (11.095.4 326.0 676.0 0.7 1.0 0.5 151.5% (65.9) 0.6 1.7) 125.0 124.6 0.9) (76.7) 36.123.1 46.3 4.2 0.0 0.0 (8.1) 90.8% (637.7 0.3 7.0 0.1 -24.4 226.9 28.1 152.101.138.0 623.005.2 0.9 1.0 0.2% (32.8 (31.2 113.2 231.0 0.0 0.0 0.1) 133.8 394.1) (886.0 0.0 36.6) 163.5) (1.0) (1.2 0.5 0.1) 1.0 132.0 46.2 0.8 11.0 186.0) (2.0 195. [inc.6% (71.273.0 (56.3 (27.0 0.3 29.5 8.6 0.0 0.4 40.0 3.4) 4.0 0.0 62.273.819.8) 0.1 (17.0 (58.0 (30.9 21.3 218.3 0.5 6.801.9 177.1) 0.6 322.6 (12.0 0.2 32.0 47.0 0.0 0. for exceptional items Net attrib.1 100.6% 0.5 170.314.0 0.630.0 526.6) (63.7) (1.4) 15.0 0.5) (75.8% (41.0 0.0 -33.0) (38.0 0.0 0.0 (6.9) 0.3) (4.4 1.0 191.2 221.5 5.9 64.4) 3.1 169.0 108.3) (1.8 -14.3) 43.7% (17.7) 94.3) (34.0 (36.0% (52.4) 0.1 186.9% (565.6 257.0 180.1) 124.0 0.0 0.7 1.7% 32.5 5.101.0 (22.8) 139.8 131.6% (82.314.0 0.4 101.0 0.8) 0.3) (68.0 60.6 1.0 (14.016.9 0.0 148.2% 100.2 18.9) 91.8) (71.8 0.8) (30.0 0.7 0.6) 46.9 198.7% (59.0 (37.0 (125.6 15.1) 263.9) (814.0 43.4 24.1 5.0 80.0 9.6 192.924.0 0.1 173.7 137.8% 1.0) 0.0 0. profit [loss].8 34.9 0.6 1.0 0.8) 0.8 31.1 687.7 1.6 329.2% 2.1 0.8) 136.0 0.5 0.5 (4.5 26.0 (9.3) 101.104.0 0.4 179.0 (39.7) 0.2) 29.5 137.2 151.3 -16.0 0.3 38.

6 9.2% 1.9 11.7 5.2 332.2 11.7 47.00 0.2 0.7% 25.2% 5.5% 1.6 6.40 71.4 4.8 12.3 5.4 1.6 5.0 2.121.3 25.4 1.4 0.68 10.5 5.6 NS 2.0 1.5% 2.7 974.5 0.9 33. adjusted Share Price [Adjusted] Latest price High Low Average price 12.9 7.8 15.1 1.9 3.7 7.3 1.7 11.7 1.5 1.85 36.8 8.000 12.7 3.9 1.5% 3.60 26.4 13.0 0.9 0.9 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.200 0.3 2. adjusted Av.7% 19. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.3 11.3 10.000 15.2 9.2 15.8 1.5 15.3% 2.700 0.6 50.3 4.4 9.2% 22.8 1.1 12.00 1.9 2.6 9. of shares.43 NS 5.1 5.40 7.73 7.7 15.1 10.0 1.8 33.2% 35.89 7.13 11.200 15.1 1.3 6.1% 5.6 0.00 49.700 12.2 3.9 14.5 1.92 7.470.700 12.1 1.44 18.0 9.8 379.65 63.56 -29.4 8.1 558.640.20 52.4 1.3 2.26 63.5 22.7 717.29 21.240.15 45.2 1.6 20.0% 33.7 0.92 8.7 15.89 31.4 1.6 1.19 62.0 3.3 0.6 6.7 11.3 5.00 38.2 0.53 44.5 2.8 5.8 9.9 17.3 1.8 12.7 4.1 8.5 1.0% 5.1 8.5 1.45 7.96 61.2 1.6 7.6 5.2 7. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share EV/EBITDA.3 12.8 9.00 0.56 -29.20 29.30 10.6 7.3 9.5 1.50 58.00 0.50 7.60 49.18 10.63 5.6 4.7 13.9 6.000 12.5% 2.8 10.2 2.2 6.95 13.9 21.6 7.4 16.121.2 6.3 11.598.9 10.700 0.90 131.5 4. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.7 4.25 NS 1.7 1.96 29.1 23.5 15.36 55.7 0.16 -5.0 16.2 1.com .5% 3.1 1.1 7.2 6.4 6.2 935.3 12.7% 3.4 6.4 15.6 15.9 11.00 0.800 17.2 10.664.83 9.7 22.4 2.January 2011 GERMANY Smaller Companies Review Draegerwerk FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.03 48.8 0.800 17.7 46.700 0.5 2.000 12.1 16.90 45.68 10.55 9.6 1.0% 5.0 16.63 5.8 9.7 5.52 5.5 0.7 1.3 11.8 3.17 -54.43 NS 5.18 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.6 6.6 8.8 100.5 25.000 42.8 8.44 18.cheuvreux.6 1.700 12.25 49.2 0.1 10.97 10.395.2 4.18 61.55 10.2 2.30 63.5 0.4 2.4 5.6% 17.9 17.700 0.000 12.7 7.3 No.8% 26.700 0.700 12.1 15.7 7.7 13.800 0.700 12.0 5.11 -11.3 1.000 12.7% 37.1 9.10 41. restated EV/EBITA.7 63.00 0.800 0.4 8.2 15.32 -33.1 34. adjusted Treasury stock.37 63.2% 30.7 63.91 53.8 1.0 17.1 11.4 1.2 5.3 0.91 56.4 9.2 1.9 1.0 3.2 16.00 0. restated 85 www.9 31.2 1.6 1.9 40.90 -7.4 0.350.00 1.8 0.3 7.9 10.1 16.9 22.000 17.1 4.8 17.5 0.80 74.0 1.17 -54.000 17.0 10.18 64.7 10.4 11.325.5 4.0 5.3 12.2 1.68 46.2 8.2 NS 2.4 1.9 11.4 1.1 1.00 1.5% 2.99 14.6 1.6 7.16 -5. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 538.7% 3.700 0.9 15.7 15.2 0.72 51.4 16.700 12.09 21.5 7.0 13.09 -5.00 44.1 1.7 632. number of shares.1 7.35 10.1% 0.51 5.4 1.

1 22.0% 47.36m EUR 3.2 6. we still expect solid growth for the ElringKlinger group with the top line expanding 9% y/y in 11E and even 14% in 12E.4% 14. (x) Disclosures available on www.3) P/E (x) Net debt/EBITDA (x) 1.1 3.0 7. and parts for fuel cell should add another EUR40m. 08/05 .1 7.4 0. adjusted Daily volume EUR1610m EUR713m EUR1595m 63.06m Performances 1 month 3 months 12 months -4.3 2.3 5.3% gross margin – almost twice as high as most peers – was as good as in Q2.3% 2009 2010E 2011E 2012E 28.39 Reuters: ZILGn. Apart from the above new technologies. the recovery of global truck production is certainly an important growth driver within ElringKlinger's established business around the engine (gaskets.7%.8% EBIT margin was on a par with its pre-crisis level (Q208). This business also benefits from the rising penetration of turbochargers for gasoline engines.8 24.1 22.e. cam covers. FCF yield (%) 5. which would still be enough to hit the upper end of the 2010 guidance range.00 EUR25. Moldflon.1 2. even these outstanding perspectives are in our view fully reflected in the current share price. i. Going forward.1 22.5% EUR24.1) Yield (%) 1.4 (0.1 07/03 07/04 09/06 Price/M DAX 10/07 11/08 Sector Top Picks Least favoured Daimler. The much quicker rebound of global auto markets and a strengthened business model for ElringKlinger justified this performance.com 01/11 Price Alexander NEUBERGER Research Analyst aneuberger@cheuvreux.5 2. Volkswagen FIAT Shareholders Lechler Families 55. Gaskets used in the exhaust gas aftertreatment section of the car but also heat shields around the turbocharger command substantially higher prices than traditional gaskets.2 (0. while its 16.9 2. sales and EBIT only moderately below Q3.cheuvreux.1% 14. while the further emerging-market-induced expansion of global light vehicle production should help growth in engine-parts for passenger cars. Q 3/Underperform Price (07/01/2011) New products will drive growth in '11 and beyond Q Rating Stock data Market capitalisation Free float Enterprise value No.1 17.1 17. Relative perf.1 7.5 ROCE (%) 11. oil pans).4 19.4 7.5 29. Elring's growth profile remains superior to almost all competitors. of shares.2 12.9 Attrib.6 EV/EBITDA (x) 8. New machines and equipment for battery parts and Moldflon have already been expensed. Elring needs ~ 6 months to fully ramp-up series production.7% Absolute perf.2 1. battery components for electric cars. As most European automakers won't do their usual production break in December. ElringKlinger's shares rose from EUR5 at the trough in early 09 to EUR24 in one nearly unbroken upward sweep.1 12. this product is required to maintain the power of downsized engines.1 2.com Q Q 86 www. Those components open new areas of activities for ElringKlinger without massive investments going forward.4% -5.6 9.1 06/02 2.3 EV/Capital empl. We expect EUR25m sales for H2-11. Sustainable fixed-cost cuts in the crisis of EUR9m (~4% of cost of goods sold) help to grow profitably.cheuvreux.January 2011 GERMANY Smaller Companies Review AUTO COMPONENTS ElringKlinger Target price (6 months) -5. However.DE Bloomberg: ZIL2 GR Recent developments – Strong business in every respect ElringKlinger delivered a strong Q3-10 in every respect. Elring's new diesel particulate filter arrived at two big German carmakers' laboratories for final testing and the company is waiting for a firm order. Its 31. we anticipate a strong seasonal pattern for Q4.9% 0.1 27. Outlook – New products becoming an important driver 2011E should be the year when new product developments outside Elring's traditional footprint contribute significantly to group top-line growth. 27. Free Float 44. The group order book suggests a solid Q4.6 2.com (49) 69 47 89 73 84 12/09 Sector focus All in all.1 12.2 16.8 3.

Q Investment case ElringKlinger is a rarity among European suppliers: It commands high market shares in almost all areas it is active in. especially in gaskets for passenger car engines. and at low prices per unit is a core competence of the group that will also help the company return to and sustain its pre-crisis EBIT margin level of >17% in 11E or 12E. SWOT analysis Q Strengths Weaknesses Strong. This makes ElringKlinger a rarity in the automotive industry.76 ElringKlinger shares trade at a P/E of 15x vs. which we consider justified given Elring's outstanding profitability and its superior growth and market position. It also enters new areas that are good fits for its core competence. These multiples translate to a 50% premium to the peer group. Production at very high quality standards. Based on our 11E EPS estimate of EUR2. Huge hurdle rates in the cylinder head gasket business and a highly concentrated market limits the risk of new entrants into Elring's home turf. 4. A very efficient group structure and a limited number of production sites keep EK's cost structure lean.cheuvreux.com Valuation After a very strong Q3-10. does not dilute its huge profitability and hence remains the most profitable listed supplier in Europe. Its EV/EBITDA11E is 6.8x vs. Its most recent portfolio additions are diesel particulate filters and injection moulded parts for several industries.January 2011 GERMANY Smaller Companies Review Company profile Q Q World leader in gaskets and heat shields EK designs and manufactures special-purpose and cylinder-head gaskets (its core product group). Almost all products that Elring develops and produces serve to lower vehicle weight and hence CO2 emissions. which allows tight quality control for all products.6x for the sector. Its high capital intensity and low labour intensity allows the group to keep a high share of its production in Germany. sealing systems and modules for noise insulation and heat-shielding applications in diesel and petrol engines. a sector P/E of 9. in huge quantities. .5x. and fuel cells could double the company in size within a decade „ 87 www. Q Highly innovative EK continually develops new applications for existing products using new materials that in most cases reduce production costs per unit. This unique mix is well known among investors and in our view fully reflected in the share's valuation.a. diesel particulate filters. Q Q Huge market shares in oligopolistic markets ElringKlinger commands market-leading positions in most of its product areas. The hurdle rate for new businesses (EBIT Margin 18%) guarantees that Elring's planned growth of 5-7% p. profitable market position appears sustainable thanks to high entry barriers in gasket business Still little activity in eastern European truck engine markets Opportunities Threats Basically all EK products lower CO2 emissions High capital intensity and aboveaverage R&D expenses require high levels of profitability to maintain solid returns on invested capital „ Moldflon. we reduced our rating to 3/UP without making any changes to our estimates or target price.

for exceptional items Net attrib.4 21.2) 25.2 3.0 96.2) 42.0 2.2% (9.0 (26.0 62.0% 0.0 0.5 (26.9 0.5 35.0 0.1 0.3) 0.0 0.9 124.1 (5.5) 69.0) 192.0 0.4 15.1 16.0 78.0 (26.3 440.0 0.0 (2.4) 0.8) (4.0 63.3 19.4 620.9 -47.0) 123.5% 0.8 273.0 9.0 80.2 (3.6 629.1 130.0 (118.7 22.0 (25.2% (94.0 0.5) (0.8 22.0 0.7) 96.3) 0.5 79.0 (31.0 (31.6 291.0 (24.5 363.9 74.6) 145.9) (115.8 8.8) (41.0 0.6) (1.0) 134.1 1.0 0.2 0.2% 830.0 53.4 (4.4 12.2) 258.0 (42.3 128.0 0.4% 0.0 13.4 (46.0 0.4% 0.6 90.6 5.5 42.6 588.3 0.7 32.0 0.1 (2.4 238.2 (98.0 32.7 (3.4 0.8) (351.9 17.9 0.9 628.2) 0.0 0.0 (34.9) 0.9 58.2 1.2) 115.3) 180.6) 0.0 26.0 129.1% 40.0 18.6% (61.6% (48.1) 57.3) 171.6) 0.5 0.7) (245.4 11.7) 0.4 210.6 14.0 20.7) 116.5) (63.1 9.9 256.0 31.2 180.0 18.3 18.3 -11.0 57.1 0.8 15.8 36.5 304. [inc.7 194.0 0.5) (286.1% 0.8 www.3% (40.2 42.7) NS 659.4 82.3) 39.3 13.7 43.2 26.2 (89.0 39.6 18.9 613.8 61.3) 0.5 0.2) 282.6) 75.8) 152.5 361.6 16.cheuvreux.2 25.0 (24.0 0.4) 75.0 (6.0% (72.0 (11.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.9 36.6) 0.0 0.0 (14.0 0.9) 141.0 0.0 0.2% (95.7) 217.0 53.1 362.4 0.0 10.7 44.6% (97.8 110.0 0.9 15.0 0.0 70.0 123.0 (7.5 0.0 0.3 0.0 47.9 19.4 7.7 4.9) 0.5 -2.6 23.3) (78.6 207.0 72.9 -18.6 32.1) 0.0) (208.9) 107.com .4 588.6 17.4 1.7 547.1 620.5 8.8 27.3 1.6) 0.5 17.0 118.0 34.7 56.0 13.9% (93.0 (4.0 0.0 (2.6 32.4 43.0 74.7 613.2% 0.3 47.0 75.7% 474.7 (0.9) 0.0 75.2% (104.0 0.2) 0.0 42.5 73.3) (5.5 386.0 (8.0 99.2) 22.7 0.6) 33.4 16.9 31.0 103.8 (3.0 0.2 1. profit [loss].0 0.0 47.2 659.5) 0.9 291.0 0.8% 760.2 53.0 (4.2 0.8) (213.8 13.1 28.5 54.3) (473.7% (45.3% (76.6 4.8) (40.0 0.2% (71.0 (39.8) 0.0 41.1 20.4) 0.7% (0.0 0.1% 0.6% 943.0% 84.0 (25.0 0.2 22.0 0.0 0.0) 0.0 (44.0 0.4% (12.2 79.0 0.8) 0.2 59.7 14.0 0.8 16.5 83.5 38.4 6.0 0.0 (4.6) (96.8% (135.8 0.9 61.4 25.5% (10.0 28.4) (3.1 106.6 15.5 -19.0 (2.3 1.4 56.7) 0.8 36.9 0.7 74.4 40.0 0.3 -16.0 6.2) 0.5 363.6% (6.2) 63.5 8.0 0.9) 0.7 29.0 (24.0 127.0 2.0 13.7% (10.3 14.0 46.4 2.5% (77.7) 0.0 0.4) 3.4% 579.7) (2.9 1.0 (25.3% 0.7% (139.8) 104.0 33.5 1.6 0.0 0.2% (28.8) (219.8 (27.1) 0.0 180.6) (84.0 52.0 53.5 265.0) 0.7) 109.7) 0.7% (39.0 116.1 81.9% 528.0 0.0 0.3 170.0 (14.2 16.3 215.4) 38.0 0.8) 134.5 347.4 14.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 88 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 453.0 145.4) 0.7 440.1 87.4) 137.9 14.7 31.5 174.7 24.2) 0.0 (4.0 0.0 161.0 (6.5) 99.0 0.6% 607.5) 123.1 19.6 35.4 28.4% 0.3 88.3 17.0 (3.6) 0.0 0.5 74.2 0.0 0.6 26.1% 657.0 (29.7) 0.0 0.0% (150.5 38.7 1.2 (23.8 2.5 28.5) (516.4 480.0 69.0 6.0 0.3 0.9 41.2 -16.0 0.9 125.0 102.8 19.0 75.6) (64.6% (35.0 (50.6) NS 630.0 0.6) 1.0 (19.3 0.0 0.January 2011 GERMANY Smaller Companies Review ElringKlinger FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 (1.4 16.0 3.0 0.0 83.9 1.5 360.7) 75.6 34.8) (587.1) 70.0 42.3 (13.5 0.5 68.4) 0.9 371.7 33.0 0.6 (4.6 15.7 (4.1) 0.8 -38.9) (415.5) 127.8 (11.0 10.6 137.9 0.0 43.4 347.0 0.3) 2.4) 0.8 0.0 0.0 (16.0 0.7 107.3% (140.3) 4.8) 0.2 211.6) 0.2) 0.

79 20.1 1.7 12.33 28.6 18.8 4.7 15.33 8.3% 7.10 10.7 1.9 44.6 10.58 -16.8 21.5% 1.87 23.8 685.7 15.90 9.0 14.5% 1.66 16.6 12.600 57.600 57.6 1.51 5.2 13.0 39.2 2.1% 0.8 18.1 2.7 26.8 6.1 8.9% 1.6 56.9 8.2 13.9 0.46 20.000 63.8 4.95 21.60 41.3 3.3 0.99 25.7% 2.7% 2.9% 1.50 27.9% 0.0 687.3 20.6 21.2% 5.6 2.3 10. reported % Change 0.0% 7.1 1.0 15.6 1.73 26.74 10.90 25.2 9.000 10.5% 1.3 0.8 15.cheuvreux.47 2.4 45.00 0.609. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.000 57.40 17.5 1.521.32 31.9 9.9 26.01 5.2 10.5 6.00 0.2 3.5 1.8% 0.1 4.70 2.7 0.8 23.1 0.7 36.7 5.8 5.560 0.2 17.8 NS 1.737.6 7.com .0 5.1 28.4 15. restated EV/EBITA.000 57.2 14.0 61.8 5.4 15.42 1.9 3.4 1.1% 1.9 9.7 11.2 1.600 57.January 2011 GERMANY Smaller Companies Review ElringKlinger FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.20 16.00 10.600 57.17 16.1 2.3 1.0 6. restated 89 www.19 106.1 20.360 0.5 Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.37 8.57 31.4 2.5 21.53 10.2% 4.8 1.8 8.360 0.7 0.4 12.600 57.52 7.67 5.737.5 931.42 10.7% 1.00 0.00 0.5 19.1 82.0 10.67 61.0 1.86 13.5 7.33 1.3 1.6 1. number of shares.00 0.3 NS 0.1 16.41 16.0 2.7 1.27 18.600 0.2 22.53 6.4% 3.23 19.1% 2.8 8.6 15.9 NS NS 26.3 661.57 31.1 22.632.000 57.0 10.19 12.1 41.000 57. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.8 1.42 1.84 1.4 2.7% 1.3 13.600 0.000 57.609.7 20.95 6.0 1.1 8.0 3. of shares.6 1.4% 0.680.5 6.29 1.6 9.01 36.6 5.360 63.2 15.69 -47. adjusted Share Price [Adjusted] Latest price High Low Average price 57.1 0.3 11.4 1.5 12.0 2.004.51 3.01 28.00 0.4 8.3 35.3 1.3 3.7 21.00 0.8 9.25 25.5 NS 44.48 15.3 7.4 34.6 9.5 41.1% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.33 29.9 11.600 0.0 9.600 0.3 24.39 26.7 1.2 16.9 24.0 20.7 60.2 22.0 10.5 32.1 3.8 24.2 2.595.5 17.000 63.2 25.2 3.58 -16.9 5.1 6. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.3 586.01 36.9 0.74 2.600 0.1 18.9% 0.72 53.6 26.2 6.0 28.7 1.7 1.1 10.5 NS 0.4% 0.7 24.0 1.95 29.7% 9.4 3.9% 1.1 31.2 6.90 3.3 1.2% 4.5 42.153.3 16.20 1.5 11.8 2.69 -47.1 1.1 30.3 NS 0.4 15.4 19.56 25.0 No.7 29.2 3.3 2.1 1.360 58.7 2.70 15.6 7.3 21.5 12. adjusted Treasury stock.19 106.0 29.76 6.2 15.9 13.00 0.0 14.1 11.360 63.600 57.3 1.5 2.8 14.7 28.50 2.8 13.3 33.5 33.00 0.82 -18.8 7.2 11.3 9.6 26.000 63.25 13.1 0.0 400.9 6.3 9.8 12.1 9.9 16.5 22.6 NS NS 27.1 31.4 NS 44.8% 0.2 2.2 10. adjusted Av.600 0.01 28.0 24.32 31.6 7.90 11.39 - 576.6 933.8 0.7 1.7 1.6 1.44 7.9 0.

Revenue growth through the first three quarters of 2010 came to 4.0 63.7 EV/EBITDA (x) 10. finally. Recent sales growth.1%.25 for a yield of 3.8) (0.8%.0 33.45x.2 3. Free Float 29. of shares.1%.00 Target price (6 months) Fielmann Reuters: FIEG. dependable dividend (estimated DPS for 2010E: EUR2.0 13. 5. Carrefour Colruyt Shareholders Günther Fielmann 36. due to wage inflation and a probable rise in marketing expenditure.2% -3.a.4 3. Q EUR67. Inter Optik Gmbh 11.2% margin.5% -6. The shares have begun to stagnate and we expect that to continue in the coming months unless Fielmann begins to report a rapid increase in unit sales growth. FCF yield (%) EV/Capital empl.10m Performances 1 month 3 months 12 months -5.cheuvreux. while volumes have remained flat.6 18.5 11. Given the company's spotless balance sheet (net cash 6% of market cap). also limited.7 4.0 63. Although its balance sheet strength would clearly enable Fielmann to enter new markets via acquisitions.0 33.0 43. at least in the first three quarters of 2010.4 24. were it not for the valuation.1 50.0 53.4 Net debt/EBITDA (x) (0.9) (0.6% -15.and this continues to increase as Fielmann further penetrates the older segment of the population.2%) and defensive characteristics.7 4. should the price mix effect begin to slow and volume growth fail to reaccelerate.0 20. In particular the price mix has improved as the proportion of higher-priced vari-focal lenses has risen as a percentage of sales – we estimate currently ~19% .9% and was fairly consistent across the quarters (4. Stock data Market capitalisation Free float Enterprise value No.8%.0 23.0 03/02 06/03 09/04 12/05 Price/M DAX 03/07 06/08 Price Sector focus Sector Top Picks Least favoured Ahold. has been driven entirely by prices (mix).a.0 73. Over time.DE Bloomberg: FIE GR It's a gem.8 5.cheuvreux.0%.35-1.7% 2009 2010E 2011E P/E (x) 19.com Q Q 90 www. (x) Research Analyst cabbott@cheuvreux. Relative perf.6% EUR57.com (49) 69 47 89 75 25 10/09 . Due to lower advertising spending and.January 2011 GERMANY Smaller Companies Review SPECIALIST RETAILERS 3/Underperform Rating -15. the company's pre-tax earnings in 9M-10 rose 8.0 43. our clear impression is that for the foreseeable future it is likely to continue to focus on the organic growth opportunities within its existing markets.2x. 4.com 2012E Attrib.4 49.0 53. Further multiple expansion from the current already lofty level is therefore unlikely. this trend would eventually begin to erode margins.4 Craig ABBOTT Disclosures available on www. The shares are trading at a forward PE of ~21x for a PEG ratio of ~2. In the same period it opened just 12 new shops (+2%).0 01/01 13.50 Price (07/01/2011) Outlook – Price mix the key driver Operationally we have one concern and that is the recent lack of volume growth.9% for a 17. Marc Fielmann 7.5 10. this could admittedly be described as a high-class concern.6 13. 73. Fielmann's top-line growth could decelerate further and fall short of the targeted 5-7% p.4%. Added to this comes an average annual price increase of ~EUR5 per pair of glasses (+3%).3 6.2 51.9%) and cash flow generation. adjusted Daily volume EUR2835m EUR822m EUR2706m 42m EUR 2.3 6.2 3.5 3. Given Fielmann's defendable dominant market position. Bearing in mind that Fielmann is investing in expanding its floor space by ~2% p. but fully valued Q Recent developments – Consistent performance Operationally Fielmann has continued to deliver consistent results.1% 0.9%).3% 28..9 3.9) (0.0 23. high profitability (estimated FY10E pre-tax margin: 17.8) Yield (%) 3.3 5. however.2 ROCE (%) 49. the downside risk is. in our opinion.0% Absolute perf. Fielmann Family Foundation 15. Historically they have typically traded at a forward PE between 18x and 20x for a PEG ratio of 1. the containment of personnel costs.

January 2011

Q

GERMANY

Smaller Companies Review

Company profile

Q

Europe's largest optical retail chain, dominant in Germany
Fielmann is the largest optical retail chain in Europe, with 655 stores
and 2010E revenues of ~EUR1bn. Offering the broadest range of
spectacles, lenses and services at the lowest prices (typically 30% 50% lower than the competition), Fielmann is the dominant market
leader in Germany in terms of volumes. With just a 5% share of the
market in terms of numbers of stores, the company accounts for
19% of total optical retail sales with 48% of all units sold.
Q

Q Successful replication of business model outside Germany
Fielmann has successfully replicated its business model in
Switzerland, where it is has become the market leader in just ten
years with a 35% market share (units), and in Austria where it
occupies 24% of the market (units).

Valuation

Our target price of EUR57 is based on a DCF
valuation model (WACC 8.1%, terminal growth
2.5%).
The shares are richly valued, trading at a PEG of
2.2x. This is above the historical average of 1.4x
despite the similar forecast revenue growth
profile going forward – we estimate a 6.3% sales
CAGR 2010-13E vs. 6.6% over the past 10
years. Earnings growth, however, is likely to be
slightly slower than in the previous 10 years (we
estimate 9%-10% net earnings growth per year
in 2009-12E vs. 14-15% in the past 10 years).

Germany accounts for 80% of sales and 82% of pre-tax earnings.
Switzerland accounts for 10% of sales and 12% of pre-tax
earnings.
Austria accounts for 5% of sales and 5% of pre-tax earnings.
Fielmann also has small retailing operations in the Netherlands,
Poland and in the Baltic countries (via franchisees).

Q

SWOT analysis

Strengths

Weaknesses

„ Clear

„

market leader in German
optical retailing with 48% market
share (measured by unit sales).

Lack of experience in
M&A/integration, which could be
key in a consolidating European
optical market and for establishing a leading position in the
German hearing aid retail market.

Enormous cost advantages by
excluding the wholesaler/ scale
effects (purchasing volumes,
economies of scale in
production/logistics).
„

Opportunities

Threats

Significant store expansion
potential in existing markets.

„

Store expansion potential in
Germany will gradually approach
saturation – expansion abroad in
non-German-speaking markets
entails higher risk.

„

New market entrances;
balance sheet would facilitate
acquisitions.
„

Eventual CEO succession risk
(Mr Fielmann is 71).

Hearing aids. The German
retail hearing aid market, worth
an estimated EUR900m-1bn with
a fragmented retail structure,
offers significant growth
potential.

„

„

Demographic trends: as the
population ages, the number of
presbyopia cases & hearing
impairments rises.
„

91

www.cheuvreux.com

Q

Investment case

In spring 2010 we downgraded Fielmann after a
significant re-rating starting in Q3 2009, on
valuation grounds. Further multiple expansion
potential and/or significant upward estimate
revisions are unlikely.
Fielmann's superior qualities remain firmly intact:
dominant market position with high barriers to
entry, pricing power, solid growth potential, high
margins/ROCE, attractive defensive growth
characteristics and a very strong balance sheet
(net cash ~6% of market cap).
Indeed, we expect Fielmann to be able to
maintain its historical sales growth rate of 6-7%
p.a. for the forecast period (2010-13E) due to the
combination of store expansion growth (~3%
p.a.) and organic growth of ~3.5% p.a., driven
by market share gains, a rising ASP resulting
from the rising proportion of multi-focal glasses,
and hearing aid sales. Assuming a further 50bps
gross margin rise and scale effects as the store
base expands, we estimate that FIE can
increase its PBT margin by ~200bps to ~19%,
resulting in a net earnings CAGR 2010-13E of
9.3%. The current share price, however, already
fully reflects the company's growth outlook.

January 2011

GERMANY

Smaller Companies Review

Fielmann
FY to 31/12 (Euro m)
Profit & Loss Account
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
Goodwill amortisation before OP
Goodwill amortisation [impairment test]
Non recurring operational items
EBIT
Net financial items
Non recurring financial items
Other exceptional items
Tax
Associates [contribution]
Discontinuing activities
Goodwill amortisation
Net profit [loss] before minorities
Dividend to preferred shares
Minorities
Net attributable profit [loss]
Restatement [impairment test]
Adj. for exceptional items
Net attrib. profit [loss], restated
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Financial investments
Net buyback of treasury shares
Disposals
Dividend paid
Capital increase
Other cash flow
Dec. [inc.] in net debt
Balance Sheet
Shareholders' equity [group share]
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
Working capital requirement
WCR as a % of sales
Capital employed

92

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

667.5
-18.0%
(240.3)
(317.0)
110.2
-30.5%
(30.3)
79.9
-30.9%
(5.2)
0.0
0.0
74.7
1.4
0.0
0.0
(27.8)
0.0
0.0
0.0
48.3
0.0
(2.0)
46.3
0.0
0.0
51.5
-29.2%

733.1
9.8%
(278.9)
(337.9)
116.3
5.5%
(31.1)
85.2
6.6%
0.0
0.0
0.0
85.2
1.8
0.0
0.0
(29.3)
0.0
0.0
0.0
57.8
0.0
(2.7)
55.1
0.0
0.0
55.1
7.0%

792.9
8.2%
(298.2)
(353.4)
141.3
21.5%
(36.6)
104.7
22.9%
0.0
0.0
0.0
104.7
2.2
0.0
2.5
(35.1)
0.0
0.0
0.0
71.7
0.0
(2.7)
69.0
0.0
0.0
69.0
25.2%

839.2
5.8%
(314.7)
(359.7)
164.8
16.6%
(32.0)
132.8
26.8%
0.0
0.0
0.0
132.8
3.6
0.0
0.0
(54.3)
0.0
0.0
0.0
82.1
0.0
(3.0)
79.1
0.0
0.0
79.1
14.6%

903.9
7.7%
(344.4)
(371.2)
188.3
14.3%
(31.1)
157.2
18.4%
0.0
0.0
0.0
157.2
4.7
0.0
0.0
(47.9)
0.0
0.0
0.0
113.9
0.0
(3.3)
110.6
0.0
0.0
110.6
39.8%

952.5
5.4%
(363.6)
(396.1)
192.8
2.4%
(33.2)
159.6
1.5%
0.0
0.0
0.0
159.6
2.9
0.0
0.0
(48.1)
0.0
0.0
0.0
114.4
0.0
(3.3)
111.1
0.0
0.0
111.1
0.5%

1,010.3
6.1%
(387.8)
(409.6)
212.9
10.4%
(37.0)
175.9
10.2%
0.0
0.0
0.0
175.9
4.7
0.0
0.0
(52.9)
0.0
0.0
0.0
127.7
0.0
(3.0)
124.7
0.0
0.0
124.7
12.2%

1,077.1
6.6%
(405.4)
(437.3)
234.4
10.1%
(40.0)
194.4
10.5%
0.0
0.0
0.0
194.4
5.7
0.0
0.0
(59.0)
0.0
0.0
0.0
141.0
0.0
(3.3)
137.7
0.0
0.0
137.7
10.4%

1,147.7
6.6%
(428.5)
(461.4)
257.8
10.0%
(44.0)
213.8
10.0%
0.0
0.0
0.0
213.8
6.1
0.0
0.0
(64.9)
0.0
0.0
0.0
155.0
0.0
(3.5)
151.5
0.0
0.0
151.5
10.0%

85.4
-24.6%
(50.8)
(44.8)
(24.8)
(10.2)
(4.8)
0.0
1.7
(33.6)
0.0
0.0
(46.9)

88.9
4.1%
(26.2)
(57.9)
(35.9)
4.8
(1.9)
0.0
(8.8)
(33.6)
0.0
0.0
(39.5)

108.3
21.8%
14.7
(46.6)
(22.8)
76.4
(12.6)
0.0
23.7
(33.6)
0.0
0.0
53.9

114.0
5.3%
(2.3)
(41.7)
(16.6)
70.0
(5.6)
0.0
1.4
(50.4)
0.0
0.0
15.4

145.0
27.2%
(30.4)
(35.1)
(8.0)
79.5
(11.5)
0.0
0.0
(58.8)
0.0
0.0
9.2

145.4
0.3%
(29.7)
(36.9)
1.2
78.8
(3.2)
0.0
(1.0)
(81.9)
0.0
0.0
(7.3)

164.7
13.3%
(21.7)
(46.0)
(5.6)
97.0
(4.6)
0.0
0.0
(84.0)
0.0
0.0
8.4

181.1
10.0%
(20.5)
(54.0)
(10.9)
106.6
(4.9)
0.0
0.0
(94.8)
0.0
0.0
6.9

199.0
9.9%
(14.4)
(56.0)
(10.1)
128.6
(5.1)
0.0
0.0
(106.1)
0.0
0.0
17.4

335.1
1.0
0.7
43.5
(96.0)
NS
284.3
34.0
3.9
165.9
0.0
0.0
80.5
12.1
284.3

356.5
2.0
2.0
25.3
(55.3)
NS
330.5
40.6
6.1
189.3
0.7
0.0
89.5
12.2
326.2

384.0
0.0
0.0
36.9
(97.2)
NS
323.7
40.9
7.5
195.4
1.6
0.0
78.4
9.9
323.8

412.3
0.0
0.0
28.4
(139.3)
NS
301.4
41.1
10.0
201.1
1.8
0.0
47.4
5.6
301.4

468.3
0.1
0.0
51.8
(186.9)
NS
333.3
44.4
11.3
202.3
1.6
0.0
40.1
4.4
333.3

498.0
(0.3)
0.0
47.4
(178.2)
NS
366.9
45.0
11.5
209.5
1.0
0.0
57.1
6.0
366.9

538.7
(0.1)
0.0
53.9
(186.6)
NS
405.9
45.0
17.5
212.5
41.9
1.0
83.0
8.2
405.9

581.7
0.1
0.0
48.4
(194.8)
NS
435.4
45.0
23.5
220.5
41.9
2.0
98.0
9.1
435.4

627.1
0.3
0.0
51.3
(213.6)
NS
465.1
45.0
29.5
226.5
41.9
3.0
115.4
10.1
465.1

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

Fielmann
FY to 31/12 (Euro)

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

Per Share Data (at 7/1/2011)
EPS before goodwill
% Change
EPS, reported
% Change

1.23
-29.2%
1.10
-31.6%

1.31
7.0%
1.31
19.1%

1.64
25.2%
1.64
25.2%

1.88
14.6%
1.88
14.6%

2.63
39.8%
2.63
39.8%

2.65
0.5%
2.65
0.5%

2.97
12.2%
2.97
12.2%

3.28
10.4%
3.28
10.4%

3.61
10.0%
3.61
10.0%

Goodwill per share
Dividend per share
Cash flow per share
% Change
Book value per share

0.12
0.80
2.03
-24.6%
7.2

0.00
0.95
2.12
4.1%
7.5

0.00
1.20
2.58
21.8%
7.9

0.00
1.40
2.71
5.2%
8.4

0.00
1.95
3.45
27.2%
9.2

0.00
2.00
3.46
0.3%
9.9

0.00
2.26
3.92
13.3%
10.6

0.00
2.53
4.31
10.0%
11.3

0.00
2.81
4.74
9.9%
12.1

No. of shares, adjusted
Av. number of shares, adjusted
Treasury stock, adjusted
Share Price [Adjusted]
Latest price
High
Low
Average price

42.000
42.000
0.000

42.000
42.000
0.000

42.000
42.000
0.000

42.000
42.000
0.000

42.000
42.000
0.000

42.000
42.000
0.000

42.000
42.000
0.000

42.000
42.000
0.000

42.000
42.000
0.000

26.10
26.50
17.95
22.82

28.62
31.87
25.25
28.06

48.82
49.08
29.00
36.98

45.00
53.63
40.75
46.93

46.50
53.50
32.80
45.41

51.36
53.81
40.56
47.66

71.14
74.00
50.87
62.81

67.50
71.68
65.20
68.88

67.50
-

Market capitalisation
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
Attrib. FCF yield [%]
P/BV
Enterprise value / Op CE
Yield [%]

1,092.0
1,047.0

1,199.1
1,207.6

2,050.4
2,036.5

1,890.0
1,825.4

1,953.0
1,826.5

2,157.1
2,042.3

2,987.9
2,872.8

2,835.0
2,706.9

2,835.0
2,684.1

23.7
21.3
12.8
NS
3.6
3.7
3.1

21.8
21.8
13.5
0.4
3.8
3.7
3.3

29.7
29.7
18.9
3.6
6.1
6.3
2.5

23.9
23.9
16.6
3.6
5.3
6.1
3.1

17.7
17.7
13.5
3.9
5.1
6.1
4.2

19.4
19.4
14.8
3.5
5.2
6.3
3.9

24.0
24.0
18.1
3.2
6.7
6.3
3.2

20.6
20.6
15.7
3.7
6.0
5.8
3.7

18.7
18.7
14.2
4.4
5.6
5.4
4.2

9.5
13.1
1.57
11.8

10.4
14.2
1.65
13.1

14.4
19.5
2.57
18.3

11.1
13.7
2.18
15.7

9.7
11.6
2.02
12.5

10.6
12.8
2.1
13.8

13.5
16.3
2.8
17.3

11.5
13.9
2.5
14.9

10.4
12.6
2.3
13.4

NS
NS
16.5
12.0
7.2
2.3
NS
72.6

NS
NS
15.9
11.6
7.9
2.3
NS
72.4

NS
NS
17.8
13.2
9.0
2.5
NS
73.0

NS
NS
19.6
15.8
9.8
2.8
NS
74.3

NS
NS
20.8
17.4
12.6
3.0
NS
74.1

NS
NS
20.2
16.8
12.0
2.9
NS
75.6

NS
NS
21.1
17.4
12.6
2.8
NS
76.1

NS
NS
21.8
18.0
13.1
2.8
NS
77.2

NS
NS
22.5
18.6
13.5
2.8
NS
77.9

28.1
17.8
14.8
14.8

26.2
17.4
16.8
16.8

32.5
21.8
19.7
19.7

44.3
26.7
21.2
21.2

52.7
37.1
26.8
26.8

49.4
34.8
25.1
25.1

49.1
34.7
26.2
26.2

50.2
35.4
26.9
26.9

51.3
36.2
27.5
27.5

EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
EV/Debt-adjusted cash flow
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Capital turn [Sales/ Op. CE]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
Return on equity, restated

93

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

CONSTRUCTION & INFRASTRUCTURE

1/Selected List

Rating

+16.0% EUR56.00

Target price (6 months)

Fraport

Reuters: FRAG.DE Bloomberg: FRA GR

Still in ascent stage

Stock data

Recent developments – Traffic consistently surprising on
upside

Q

The rapid restoration of PAX growth has consistently surprised on the
upside with Fraport having revised its PAX and EBITDA guidance
upwards 3x in 2010 despite the volcanic ash cloud disruption and a
high comparison base in H2 09. In the first three quarters of 2010 FRA
reported sales +8.5% and EBITDA growth of 24.5% due to operational
leverage.
Q

EUR48.28

Price (07/01/2011)

Outlook – Traffic, fee hikes, retail sales driving earnings

FRA is guiding for FY10 PAX growth of >4% (at Frankfurt Airport) and
EBITDA of ~EUR700m, an implied increase of ~27%. The initial outlook
for 2011 PAX growth is ~4% with the low base effect from the volcanic
ash disruptions expected to broadly offset the probable negative
impact from the Eco tax. We estimate 4.3% PAX growth, which could
also prove conservative considering the seat capacity increase of 6.4%
for the winter flight season. Fraport is now in the early stages of its next
growth cycle driven by its capacity expansion. We estimate a CAGR in
PAX from 2010-15E of 4.9%, which, combined with the scheduled
aviation fee increases of 26% (cumulative) from July 2010 – 2015 and
the 50% increase in high-yielding, airside retail space to ~30 000 sqm
by mid-2012, will drive earnings growth. We estimate CAGR in EBITDA
2010-12E of ~14%, more than double the 6.5% on average for the
European peers. Currently at the mid-point of its ~EUR7bn
expansionary capex programme through 2015, FRA is fully on schedule
and running 10-15% below budget. As a result, capex for 2010/11 is
now expected to be ~EUR900m p.a. (~EUR100m p.a. lower than
previously assumed), declining to ~EUR600m p.a. for 2012-15E, then to
~EUR400m p.a. thereafter. Combined with our recently raised forecasts
we now estimate that FRA will succeed in achieving its target of
covering its cost of capital in the Aviation division by 2015 and
becoming FCF generative already from 2012 (FRA officially targets
2013). With financing also fully secured, the associated risks with the
expansion programme are now declining.
From October 2011, when the new runway R-4 goes into operation –
which will increase Frankfurt Airport's theoretical capacity by 50% to
126 ATMs (air traffic movements) per hour – we expect FRA to outpace
the growth of its major competitors, certainly in terms of ATMs.
However, we also expect PAX per PAX flight to increase as the share of
wide-body, long-haul flights, which currently account for ~25% of
flights at Frankfurt, is likely to increase as well, especially as the global
A380 fleet expands; to date only 38 of the 234 A380s on order are in
operation (4 of which with Lufthansa). Frankfurt, which will soon be
equipped with 15 A380-compatible slots, will be particularly well
positioned amongst European hubs.

Market capitalisation
Free float
Enterprise value
No. of shares, adjusted
Daily volume

EUR4436m
EUR1237m
EUR7464m
91.9m
EUR 4.04m

Performances
1 month 3 months 12 months
-0.3%
8.3%
27.7%
-1.9%
-4.9%
-0.6%

Absolute perf.
Relative perf.

65.0

65.0

55.0

55.0

45.0

45.0

35.0

35.0

25.0

25.0
15.0

15.0
06/01

08/02

10/03

01/05

03/06

Price/M DAX

05/07

08/08

Sector focus
Sector Top Picks
Least favoured

ADP, Bilfinger Berger

Shareholders
State Of Hessen 31.7%, Free Float 27.9%, City Of
Frankfurt 20.2%, Artio 10.3%, Lufthansa 9.9%

2009

2010E

2011E

2012E

22.2

26.2

20.3

18.7

EV/EBITDA (x)

9.3

9.9

9.6

8.3

Attrib. FCF yield (%)

NS

NS

NS

0.1

Net debt/EBITDA (x)

3.0

3.3

3.6

3.2

Yield (%)

3.2

2.4

2.4

2.7

ROCE (%)

6.4

8.1

8.1

9.2

EV/Capital empl. (x)

1.1

1.3

1.3

1.2

P/E (x)

Disclosures available on www.cheuvreux.com

Q

Q

94

www.cheuvreux.com

12/10

Price

Craig ABBOTT
Research Analyst
cabbott@cheuvreux.com
(49) 69 47 89 75 25

10/09

January 2011

Q

GERMANY

Smaller Companies Review

Company profile

Q

Frankfurt Airport, the dominant asset
Fraport's primary business is the operation of Frankfurt International
Airport, the world's 9th largest airport in terms of numbers of
passengers (~51m) and Europe's 3rd largest airport. In 2009
Frankfurt Airport accounted for 84% of group sales and ~74% of
EBITDA. Frankfurt Airport operates under a dual-till regulatory
mechanism.
Q

Q Mid-way through major expansion capex programme
Fraport is in the midst of a EUR7bn investment programme at
Frankfurt Airport: during the period 2007-15 it will invest in capacity
expansion (~EUR4bn) and the FRA North (existing infrastructure)
capex programme (~EUR3bn). Upon completion of Runway 4
(scheduled for the winter season 2011/12) capacity at Frankfurt will
increase by 50% to 126 ATMs (aircraft movements) per hour.

Structured into four divisions
Group operations are structured in four divisions (2008):
Q

- Aviation (34% of sales and 21% of EBITDA)
- Retail & Property (18% and 43%)
- Ground Handling (31% and 7%)
- External Activities (17% and 29%).

Q

SWOT analysis

Strengths

Weaknesses

„

Owns/operates world's 9thlargest airport with high share of
international transit PAX (~53%).

„

The main European hub for
Star Alliance, largest alliance in
the airline industry, which
accounts for ~70% of PAX at
Frankfurt Airport.

„ Growth

Will be FCF negative at least
through 2011 due to
expansionary capex
in airport participations
abroad entail higher geopolitical/
FX risks.

„

„ PAX

traffic is closely linked to
changes in GDP growth

Large catchment area (~40m
inhabitants and ~60% of German
GDP) in centre of Europe
„

Opportunities

Threats

Expansion of capacity with
runway 4 (planned for winter
2011/12) increasing capacity
50% to 126 movements per hour
(84 currently).

„

Significant increases in interest
rates/construction costs could
lead to cost overruns in capacity
expansion capex programme.

„

Disruptions in air travel
(prolonged recession,
geopolitical shocks, pandemics,
volcanic eruptions)
„

Expansion of its high-margin
retail & property business (retail
space at Frankfurt to be
increased 50% from 2010-12)
„

„

Increasing competition (i.e.
from Dubai, Munich and Zürich
hubs).
„

Development of its land bank.

Acquisitions of airport
participations.
„

„ Impact

of Eco tax in 2011
could greater than anticipated
„ Risk

of potentially overpaying
for acquisitions.

95

www.cheuvreux.com

Valuation

We continue to apply a combination of our DCF
and SOP valuation models in deriving our new
target price of EUR56.
Our DCF model (terminal WACC 6.7%,
terminal growth of 1.5% and terminal EBIT
margin of 21.5%) renders a fair value of
EUR57.
Q

In deriving our SOP-based fair value of EUR55,
we value the Aviation RAB (12E) at 1x and apply
conservative gross yields of between 7.5-8.5%
for the retail & real estate activities, sector
EV/EBITDA multiples for Lima, Twin Star and
FM/IT Services, and use a DCF for Antalya.

Q

Investment case

Our 1/Selected List rating is based on the
following:
1) PAX growth momentum continues to
surprise on the upside. Fraport has revised
upward its PAX guidance 3x in 2010 and now
forecasts >4% despite the volcanic ash cloud
effect; for 2011 it is indicating ~4% despite the
Eco tax. From Oct 11 Frankfurt will begin to
benefit from the added flight capacity (+50%) as
R-4 goes operational.
2) In early stages of next major growth phase.
We est. ~14% CAGR in EBITDA at Fraport from
10-12E vs. ~7% CAGR for its peers. Besides the
general PAX recovery and the first full-year
consolidation of T-2 at Antalya, this growth will
be driven by retail investments and from Q4-11
the inauguration of R-4 (capacity +50%).
3) Operational leverage. The combination of
stronger-than-expected PAX growth, which also
drives retail sales, combined with the scheduled
24% total increase in aviation fees through 2015
is having a greater operational leverage effect
than previously estimated.
4) Risks associated with major capex
programme are declining. At the mid-point of
its major expansionary capex programme
Fraport is fully on schedule and currently 1015% below budget. Its new capacity is now set
to come on stream just as it is needed to enable
Fraport to avoid capacity constraints and
outpace its major European competitors.
5) Fraport is strategically very well positioned
(large catchment area in heart of Europe, high
quality PAX mix, high-yielding long-haul flights)
and offers investors a play on the global air
travel growth theme with a superior growth
profile amongst the major European hubs.

January 2011

GERMANY

Smaller Companies Review

Fraport
FY to 31/12 (Euro m)
Profit & Loss Account
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
Goodwill amortisation before OP
Goodwill amortisation [impairment test]
Non recurring operational items
EBIT
Net financial items
Non recurring financial items
Other exceptional items
Tax
Associates [contribution]
Discontinuing activities
Goodwill amortisation
Net profit [loss] before minorities
Dividend to preferred shares
Minorities
Net attributable profit [loss]
Restatement [impairment test]
Adj. for exceptional items
Net attrib. profit [loss], restated
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Financial investments
Net buyback of treasury shares
Disposals
Dividend paid
Capital increase
Other cash flow
Dec. [inc.] in net debt
Balance Sheet
Shareholders' equity [group share]
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
Working capital requirement
WCR as a % of sales
Capital employed

96

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

1,998.1
8.9%
(974.5)
(507.4)
516.2
11.8%
(229.2)
287.0
28.1%
(5.9)
0.0
0.0
281.1
(15.2)
0.0
0.0
(127.5)
0.0
0.0
(5.9)
138.4
0.0
(2.0)
136.4
0.0
0.0
148.2
-4.9%

2,089.8
4.6%
(1,032.4)
(514.9)
542.5
5.1%
(235.8)
306.7
6.9%
0.0
0.0
0.0
306.7
(21.2)
0.0
0.0
(123.9)
0.0
0.0
0.0
161.6
0.0
0.0
161.6
0.0
0.0
161.6
9.0%

2,143.9
2.6%
(1,076.9)
(488.6)
578.4
6.6%
(248.0)
330.4
7.7%
0.0
0.0
0.0
330.4
9.8
0.0
0.0
(111.3)
0.0
0.0
13.6
228.9
0.0
0.4
229.3
0.0
0.0
215.7
33.5%

2,329.0
8.6%
(1,143.3)
(605.2)
580.5
0.4%
(245.1)
335.4
1.5%
0.0
0.0
0.0
335.4
(37.8)
0.0
0.0
(83.9)
0.0
0.0
0.0
213.7
0.0
(5.0)
208.7
0.0
0.0
208.7
-3.2%

2,101.6
-9.8%
(925.2)
(575.3)
601.1
3.5%
(240.0)
361.1
7.7%
0.0
0.0
0.0
361.1
(87.4)
0.0
0.0
(93.1)
0.0
0.0
0.0
180.6
0.0
(7.2)
173.4
0.0
0.0
173.4
-16.9%

1,972.6
-6.1%
(866.9)
(552.9)
552.8
-8.0%
(262.5)
290.3
-19.6%
0.0
0.0
0.0
290.3
(89.3)
0.0
0.0
(43.9)
0.0
0.0
0.0
157.1
0.0
(7.3)
149.8
0.0
0.0
149.8
-13.6%

2,126.7
7.8%
(891.7)
(534.3)
700.7
26.8%
(291.3)
409.4
41.0%
0.0
0.0
0.0
409.4
(159.0)
0.0
0.0
(75.1)
0.0
0.0
0.0
175.2
0.0
(10.0)
165.2
0.0
0.0
165.2
10.3%

2,268.4
6.7%
(935.3)
(556.0)
777.1
10.9%
(312.7)
464.4
13.4%
0.0
0.0
0.0
464.4
(137.2)
0.0
0.0
(98.2)
0.0
0.0
0.0
229.1
0.0
(10.5)
218.6
0.0
0.0
218.6
32.3%

2,475.7
9.1%
(982.8)
(584.8)
908.1
16.9%
(358.4)
549.7
18.4%
0.0
0.0
0.0
549.7
(195.2)
0.0
0.0
(106.4)
0.0
0.0
0.0
248.2
0.0
(11.0)
237.2
0.0
0.0
237.2
8.5%

353.0
6.1%
96.7
(189.7)
(122.2)
260.0
12.6
0.0
0.0
(39.7)
0.0
0.0
232.9

423.0
19.8%
70.7
(641.1)
(505.9)
(147.4)
21.3
0.0
0.0
(68.0)
0.0
0.0
(194.1)

503.2
19.0%
(18.3)
(467.3)
(457.9)
17.6
46.5
0.0
0.0
(87.2)
0.0
0.0
(23.1)

458.8
-8.8%
113.1
(701.5)
(1,434.4)
(129.6)
38.3
0.0
0.0
(104.8)
0.0
0.0
(196.1)

420.6
-8.3%
183.5
(979.1)
(787.4)
(375.0)
(59.1)
0.0
0.0
(104.8)
0.0
0.0
(538.9)

419.6
-0.2%
146.0
(1,038.9)
(943.3)
(473.3)
20.6
0.0
0.0
(104.8)
0.0
0.0
(557.5)

466.6
11.2%
70.9
(1,098.6)
(842.3)
(561.1)
0.0
0.0
0.0
(104.8)
0.0
0.0
(665.9)

541.8
16.1%
19.3
(933.1)
(819.7)
(372.0)
0.0
0.0
0.0
(104.8)
0.0
0.0
(476.8)

606.6
12.0%
9.2
(611.2)
(487.4)
4.6
0.0
0.0
0.0
(104.8)
0.0
0.0
(100.2)

2,030.8
12.2
25.5
491.2
(5.7)
NS
2,554.0
116.8
141.1
2,381.5
99.6
0.0
(185.0)
(9.3)
2,554.0

2,142.5
15.4
21.4
503.8
188.4
8.7
2,871.5
108.3
50.2
2,587.4
300.5
0.0
(174.9)
(8.4)
2,871.5

2,324.0
22.1
20.6
502.8
211.4
9.0
3,080.9
97.1
42.3
2,729.5
424.7
0.0
(212.6)
(9.9)
3,081.0

2,460.3
33.0
19.4
498.7
407.6
16.3
3,419.0
22.7
594.2
3,735.0
398.6
0.0
(1,192.0)
(51.2)
3,558.5

2,449.8
60.2
19.0
461.8
1,086.0
43.3
4,076.8
22.7
630.9
3,886.3
386.2
0.0
(849.3)
(40.4)
4,076.8

2,548.6
34.3
20.3
510.5
1,643.5
63.6
4,757.2
40.0
936.3
4,521.1
252.4
0.0
(992.6)
(50.3)
4,757.2

2,609.1
44.3
28.0
484.8
2,309.4
87.0
5,475.6
40.0
936.3
5,178.4
402.4
0.0
(1,081.6)
(50.9)
5,475.5

2,722.9
54.8
28.0
512.7
2,786.3
100.3
6,104.7
40.0
936.3
5,798.9
402.4
0.0
(1,073.0)
(47.3)
6,104.6

2,855.2
65.8
28.0
514.6
2,886.5
98.8
6,350.1
40.0
936.3
6,051.7
402.4
0.0
(1,080.2)
(43.6)
6,350.2

www.cheuvreux.com

of shares.2 NS 1.45 48.4 9.2 26.2 0.7 NS 2.6 (0.0 0.5 4.9 28.09 10.75 3.000 91.6 28.2 4.7 6.9 0.1 3.900 91.555.4 10.6 7.16 49.9 2.0 7.143.2 1.7 2.7 5.0 9.3 60.143.0% 24.29 33.27 -9.464.500 0.0% 2.7 0.8 19.0% 2.6 5.500 91.70 30.9 5.1 5.7 0.000 31.912.00 1.35 32.1% 2.8 7. adjusted Share Price [Adjusted] Latest price High Low Average price 91.3 25.60 56.34 11.36 47.6 2.7 0.99 -9.8% 2.4 26.7 16.900 0.000 91.100 90.9 NS 1.4 18.64 44.0% 29.2 9.28 39.1 3.29 29.90 15.7 2.27 -3. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.2 5.0 6.5% 2.0 11.900 91.00 1.52 53.051.4 8.9 6.0 7.0 1.64 -5.8 14.100 91.3 16.1 1.1 1.5 0.3 8.48 18.9% 28.00 1.0 14.000 0.9 32.1 8.56 41.9 15. adjusted Av. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share EV/EBITDA.6 0.9 9.4 5.9 8.6 10.2 1.7 8.1 21.60 -7.5% 2.9 14.900 91.5% 0.4 10.96 43.9 19.96 4.93 8.8 7.0 6.3 2.14 54.6 16.6 43.9 7.7 7.2 2.4 25.5 9.cheuvreux.90 -16.96 40.15 5.8 No.0 46.7 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.7 2.0 1.01 48.9 3.00 1.0 2.87 64.2 2.55 31.6% 1.4 100.5 8.2 6.1 3.1 8.02 67. number of shares.000 91.0 15.90 53.77 17.39 31.1 1.4 10.7 5.00 0.5 6.7 8.3 NS 1.500 0.3 8.800 0.0 9.1 5.6 8.4 8.2 9.9 NS NS 25.9 14.0 0.15) 1.4 6.2 20.7 10.7 NS 1.3 13.3 4.28 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.4 16.3 4.7 6.700 0.8 50.1 9.7 4.3 50.3 20.000 91.4 98.3 6.3 6.4% 1.1 NS 0.2 22.5 7.80 10.8 0.7 22.6 0.000 91.8% 25.3 20.45 7.2% 1.77 8.06 9.17 36.436.58 8.8 7.7 22.00 1.6 17.897.3 48.59 -0.3 11.9 16.9 24.4% 2.334.00 1.60 12.319.86 25.300 0.500 91.0% 25.64 -13.6 6.000 91.8% 22.38 32.0 6.0 63.828.1 16.74 47.21 21.9 0.0 0.8 9.6 10.90 45.80 22.90 -16.January 2011 GERMANY Smaller Companies Review Fraport FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.4 1.4 27.3 4.500 91.7 6.28 48.3 2.1 0.8 5.4 4.38 32.100 0.29 6.2% 26.2 0.933.7 23.0% 1.64 18.15 5.32 48.3 17.2 7.4 9.09 44.921.91 6.15 4.8 NS 2.5 7.301.0 2.4 10.1 4.4 87.1 3.3 11.400 92.15 4.91 54.8 12.7 NS 0.2 10.3 1.6 1.51 18.837.8 36.4 8.7 54.8 NS 49.7 1.4 4.5 1.80 10.2% 1.2 0.com .58 8.3 0.4 20.1 34.8 8.900 0.7 8.3 7. restated 97 www.14 36.1 23. adjusted Treasury stock.9 8.0 14.1 6.5% 2.1 4.1 9.40 10.3 2.091.000 91.1% 1.4 9.2 26.7 4.6% 1.5 10.5 0.4 2.6 2.50 40. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 2.9% 27.2 8.7 1.000 92.4 63.455.13 0.6 23.5 8.7 18.0% 21.64 -13.1 7.60 21. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op. restated EV/EBITA.0 11.4 4.1% 1.6 70.7 7.15 4.2 3.4 0.7 3.0 15.4% 1.7 11.15 5.436.9 2.3 9.

Mr.2 3.5 ROCE (%) 35. Hambrecht is well connected in global industry and should help Fuchs Petrolub to generate additional contacts and (more/additional) orders from (new) customers. Dr.4% 6.6 104.2 12. Jürgen Strube (head of supervisory board) and Prof. Fuchs Petrolub.3% of common shares. is progressing well.com 01/11 Price Martin ROEDIGER Research Analyst mroediger@cheuvreux. Hambrecht will be proposed as head of supervisory board.2 3.3% EUR115.DE Bloomberg: FPE3 GR Stock data Market capitalisation Free float Enterprise value No. Fuchs Petrolub expressed its confidence for the future. During its prelims Fuchs also raised its 2010 EBIT guidance from >EUR200m to c.1 6. CEO of BASF and Ines Kolmsee.6 64.7 EV/Capital empl. We see this statement as an important relief factor. 14% above consensus and thus even higher than in Q2-10.0) P/E (x) EV/EBITDA (x) Yield (%) 2. will be proposed for the supervisory board. The Q3-10 EBIT margin was 17. We understand this to mean volume growth.2% 57.0 2.6 44. while we currently see no further significant raw material price inflation. virtually unchanged from Q2-10 (17.000).6 24.2) (0.0 44. beating its earlier guidance for H2-10 (38%) and providing relieve to the market as it showed the company was able to manage the adverse impact of rising raw material costs.6%).com (49) 69 47 897 763 10/09 . (x) Disclosures available on www.1 7. we conclude there may be a small delay with a few customers (of 100. Prof.18m Performances 1 month 3 months 12 months 1.5%. This is a very astute move as Mr.1 7.6 01/01 4. Dr.66m EUR 4.6) (1.0% -0. We expect ongoing EBIT and EBIT margin growth at Fuchs Petrolub thanks to its strong positioning.8m. EBIT was up 19.3) (0.2 46. Jürgen Hambrecht. as the price increases implemented in summer 2010 as well as in Q4-10 will of course have a positive spill-over effect on sales in 2011. scheduled for Q4-10.7% of common shares 2009 2010E 2011E 2012E 12.6 84. of shares.6 44. Bernd Gottschalk will resign as of 11 May 2011 (at AGM) to allow for some invigoration of the supervisory board.5 9.20 Price (07/01/2011) Reuters: FPEG_p.1% y-o-y to EUR382. Fuchs reported a gross margin of 38. Sales rose 26. CEO of SKW Stahl-Metallurgie.9 2. adjusted Daily volume EUR2412m EUR1814m EUR2274m 23.4 3. 104. 17% % above our former estimate.5% in Q3-10.com Q Q 98 www. 40%).4% 22. Thus. But that is no concern for us.5 Net debt/EBITDA (x) (0. Fuchs family: 51.1% Absolute perf.00 Target price (6 months) Fuchs Petrolub No end of favourable prospects in sight Q Recent developments – excellent Q3-10 results Due to its outstanding performance in Q3-10. After the strong prelims we raised our gross margin assumption for Q3-10 to 39% from 38%.4 2. This in connection with price hikes will lead to earnings growth and margin expansion thanks to economies of scale.6 15. Fuchs Petrolub was forced to publish prelims for Q3-10 in an ad-hoc release. If elected.6 84. Lanxess Shareholders Free float: 100% of pref. Barring an (unexpected) external shock. As the price increases are still a work in progress. shares and 48. We predict EUR249m after our recent EPS estimate increase. which enables it to grow and thus gain market share.6 03/02 06/03 09/04 12/05 Price/M DAX 03/07 06/08 Sector focus Sector Top Picks Least favoured BASF. The higher price levels will be in place also in 2011.0 3. FCF yield (%) 11.6 64. EUR106.1 8. Quite the contrary.9m.EUR240m. Dr.6 24. The imminent changes in the supervisory board should offer additional chances for the company.cheuvreux.2 40.cheuvreux.1% 21.6 1.1 Attrib. Relative perf.6 4. the company expects modest growth (top line) in 2011. we expect Fuchs Petrolub to restore its gross margin to close to the level before Q3-10 (c.4 11. which is still conservative in our view. Q Outlook – Earnings and margin expansion to continue We learnt from Fuchs Petrolub that the second round of price increases.5% to EUR66.January 2011 GERMANY Smaller Companies Review DIVERSIFIED CHEMICALS 2/Outperform Rating +8.5 7.

EBIT margin and dividend in 2009 vs. its second most important customer generates 2% of sales. The trade customer group accounts for 26% of Fuchs's group sales. 27. where Fuchs has a strong market position „ Strong position in highperformance lubricant niches „ „ Leading independent player in lubricants and greases Some time delay in passing on raw material costs to customers which could weigh on quarterly margins Upturn may not be sustainable. which we adopt as our price target. rising from 15. but no.000 customers in more than 100 countries worldwide with lubricants for hundreds of applications – including automotive. corrosion preventives or lubricating greases. Fuchs Petrolub is not vulnerable to individual clients. 9 globally. Due to its innovations.5% of group sales. speed and flexibility.January 2011 Q GERMANY Smaller Companies Review Company profile Q No. 9 in global lubricants.5% of its finished lubricants are metalworking fluids. the producer goods industry 14%. and cost discipline. resulting in another top-line hit for the company „ „ Margin expansion via mix improvement/increased focus on high-margin specialties Valuation The stock is trading at 12. products for forging etc.000 clients globally The company provides more than 100. Q SWOT analysis Strengths Weaknesses „ Strongly positioned in highperformance lubricant niches „ Well balanced portfolio with more than 100. which makes Fuchs superior to other independent lubricant providers. In terms of EV/EBITDA 11E it is trading at 7. customized products and highly appreciated level of service.9% versus the European peers' average of 13. 2008. We rate the stock 2/Outperform. We think Fuchs Petrolub is set to increase its profitability even further going forward thanks to top-line growth. as it has done in the past. Its independence allows it to achieve greater customer and market proximity. Q Focus on specialties Fuchs supplies mainly specialities and occupies world-marketleading positions in areas such as metalworking fluids. 1 independent supplier Founded in 1931. gives it greater responsiveness. which usually account for a fraction of their production costs.0x). We expect its EBIT margin to reach new record levels. based on a WACC of 8. an improving portfolio mix (increased focus on high-margin specialties). Thus. Such resiliency in the crisis also make Fuchs Petrolub a defensive stock.4x).com . Fuchs is one of just two chemical companies in the European chemicals sector able to increase its EBIT (the other was Air Liquide). We see no justification for these discounts in view of a) Fuchs Petrolub's visible earnings stream.3% in 2009 to 19. 99 www. Compared to all lubricant producers (including oil majors).1x.1% in 2012E.5% and a 1% terminal growth rate. and b) its high ROCE 11E of 30. Due to its innovations. Q Q More than 100. Fuchs ranks no.000 clients in over 100 countries „ Slow overall volume growth in lubricants (CAGR96-09:-1%) „ Stagnation of lubricants consumption in major endmarkets such as the Americas and western Europe Opportunities Threats „ Trend towards high-tech and biodegradable lubricants. It is a full-line supplier with a global presence. 11% below the peer group average (8. Fuchs Petrolub's biggest customer accounts for about 3. industrial and speciality applications. Q Investment case Fuchs Petrolub is the world's leading independent player in lubricants and greases. Our DCF analysis. Q Many different customer groups Fuchs's customer base is broadly diversified. Fuchs Petrolub will generate shareholder value by trying to acquire small competitors at favourable prices and will continue to pay a sustainable dividend. According to an earlier analysis by the company. which constitute an advantage over major oil companies. 20% below the average of the European chemicals sector (15. customers realize the added value of Fuchs's products. renders a fair value of EUR115. and vehicle manufacturing industry 11% among many other customer industries. Fuchs should be able to pass on raw material costs to customers.1x P/E 11E. Fuchs Petrolub is the largest of the world's 590 lubricant suppliers not affiliated with an oil concern.cheuvreux.2%. lubricating greases.

2) 0.4 199.6% 1.6 77.4 173.2 83.2 0.0 234.7) 179.0 12.8% 17.7 391.076.0) (1.1 17.5) (981.January 2011 GERMANY Smaller Companies Review Fuchs Petrolub FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.1 67.0 294.7% (11.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 100 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.0 (14.2) 170.0 201.8) (13.1 1.2 (8.1 0.0 97.5 (5.0 102.0 7.1% (21.6) 96.7) NS 521.2 34.0 0.1) 165.9 0.2 555.5% (8.5 2.4 466.0 180.0 (0.0 120.0 0.5) 0.0 118.0 171.7 81.cheuvreux.5 219.4 83.1 20.2 (24.4) 113.0 0.7 (8.0 (94.9 521.0 (52.8 0.0 119.3 (20.2) 0.2% 108.0 0.1 8.5 49.2 18.6 0.8) 195.0 325.1) 161.4) (859.7 2.4 91.9 1.4% 57.0 0.0 (51.3 -9.5) 0.3% (60.3 487.0 0.1% (191.0 0.3 22.0 0.5 203.5 11.3 3.9) 0.2 238.7 1.6) 216.9 7.0 0.0 0.5 11.0 0.9% 0.2 8.5% 0.6) (6.3) (5.588.9 19.0 179.0 14.5) (14.2 698.9 47.5 2.0 155.2 555.0 (11.9 78.0 0.2 -8.5 0.1 (36.8) (32.2% (181.5 0.6) (793.0 (87.3) 321.9% 1.7 -12.7) (2.1 0.9 (91.8 11.6) (14.8) 0.0 0.4 335.2) 18.0 0.5) 0.8 www.0 (52.0 16.6) (16.323.6 0.0 0.6) 0.2) (1.0 0.9 4.7) 103.9 58.0 0.2% (29.6 0.5% (75.6 0.5 108.7) (967.7 2. profit [loss].2 240.7 94.7 4.com .2 486.6 141.2 21.0 0.6) 272.2 (11.0 86.5% (197.0 0.1 0.0 16.3 -69.8 1.7% (22.437.0 249.4 7.7) 0.3% (30.7) 113.8 (15.0 83.8) (48.3 3.0 108.0 486.2 198.3 11.0 (32.6 -0.7) (190.0 0.0 218.2 (2.9% (22.9 1.6 5.2 56.4) (45.7) 0.0 0.6) 38.3) 0.0 (70.2 130.1 (3.3 37.0 171.3 5.178.1 38.0 (72.8 0.114.0) 171.0 12.9 8.5% (190.6 487.4) 348.7 128.3 1.7 3.5) NS 698.0 (31.0 161.0 368.0 17.1 57.5) (802.0 0.4) (43.0 27.8) 0.0 281.5 83.3% (173.2 10.0 0.0 (27.0 (66.0 98.0 0.0% 22.9% 0.8% 0.0 0.1 54.9 231.393.7) 0.1) 294.5 (1.0 39.1) 77.4 (344.0 1.2 54.0 47.6 0.0 1.6) 0.2 6.7 150.3 161.1 0.7 93.8 17.3 22.7) (13.659.4 70.3% 1.8 76.3) (8.7 (0.8 35.0% (183.1 (0.5 302.0 0.0 0.8) 94.6 32.0 0.0 0.0% 0.1 -15.6% 1.0 0.4 1.0 0.4% (23.6 -2.9) 81.0 0.3) 0.0 0.6 (1.0 128.0 356.0) 218.5 7.0 0.1% 1.5% (181.7 -11.2 2.1 0.6 221.0 0.4% (8.3) 204.0 1.0 (46.6 (0.8 110.7 121.4 679.2 (31.0 251.6) (39.4 0.8 0.6 23.4) 144.3% 1.3 56.0 2.4) (3.9 0.6) 158.1 83.1% 0.7% (174.6 83.9 0.0 15.2 17.6) 120.9 372.0 (39.3 15.2 1.6 12.6 372.1) 0.5 86.7) 0.6 33.9 1.0 0.096.2 5.9 (7.7 1.192.0 (58.3 5.9) 202.2 134.4 78.0 0.0 0.0 22.0 NS (79.365.9 3.6 0.6) 202.3 11.0 0. for exceptional items Net attrib.5) 0.9) 138.1) (39.3% (20.8% (25.7 (1.2) 0.9 0.7) (3.0 0.0 67.7 73.8) 0.9 149.5) 183.2 31.7 (2.6 65.0 4.7 6.7 (195.3 18.5 0.0 (10.0 0.2 0.3) 0.4 0.6) 317.0) 191.8) (3.0 0.3 841.2 104.7 88.0% (27.5 (0.8) 172.0 0.6 313.0 0.0 79.9 55.9 6.8) NS 677.3) (15.7 131.2 12.0 5.0 0.7) 119.4) 0. [inc.0 (20.4) (3.011.2 (18.0) (2.0 0.0 0.4 466.4 17.0 0.6 18.5 154.5 207.5 12.1) 249.1% 0.7) NS 634.7 210.2 42.0 0.8 0.6% 1.2 25.5) (29.2) 0.4) 128.9 7.0 (49.7 2.0 317.0 0.0 0.2) (64.2 232.5 10.0 0.0 107.3% 1.6 22.9 55.0 0.8% (20.0) 0.3) (12.6 11.7) 0.9) 0.0 0.5 525.0 84.0 0.4 677.0 0.0) 73.0% (181.3 19.0 (38.0 0.1) 106.0 96.4 8.6) (1.2) 120.2% 0.0 73.1 0.0 0.5 1.0 (37.0 0.5) (0.0 195.5) (958.9) 109.0 0.1) 39.0 17.7 634.0 0.2) (1.3) 120.0 168.

10 48.126.9 NS NS 17.30 43.54 32.37 NS 10.6 3.3 27.2 13.8 NS NS 20.2 1.8 19.5 13.4 7.1% 4.76 106.2 30.8% 4.3 1.0 15.4 43.48 22.8 12.8 15.6 1.2 34.3 8.5 44.2 6.2% 3.4 2.660 0.1 5.5 36.8 6.8 2.1 2.2 22.cheuvreux.8 11.62 -14.13 26.412.40 48.5 8.000 21.2 2.25 8. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.7 12.0% 8.0 NS 0.59 75.94 34.70 6.4 11.7 1.9 31.57 23.50 64.5 1. adjusted Av.60 5.4 3.3 10. of shares.517.493 21.9% 5.4 9.00 60.19 11.2 42.1 2.3 12.6 28.493 0.660 0.7 12.1 26.00 2.10 8.5 NS 3.2 11.2 1.6 7.4 10.3% 5.00 69.93 64.4 42.2 38.38 -15.8 10.15 42.5% 20.5 6.7 36.81 17.3 NS NS 18.2 2.6 0.1 2.1 6.10 23.0 7.40 31.6 33.660 23.84 9.com .49 31.8 0.5 12.9 35.8 6. number of shares.3 8.7 1.9 30.618.5 0.4 6.000 23.493 0.73 110.90 111.January 2011 GERMANY Smaller Companies Review Fuchs Petrolub FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2.8 0.26 58.493 0.4 7.00 5.1 2.660 0.051.55 1.8% 14.493 21.3 NS 28.64 14.7% 4.6% 13.58 27.3% 8.00 2.4 39.1 9.3 2.1 0.4 7.1 22.8 12.00 0.006.4 3.0 8.660 23.5 8.9 1.2 3.1 4.50 9.5 3.0 28.2 15.1 5.5 6.484. reported % Change EV/EBITDA.75 7.3 29.6% 7.65 8.2% 5.9 7.6 10.493 -0.5 41.2 10.861 0.75 104.9 12.2 32.8 13.5 7.8 7.7 2.1 15.3 28.8 23.1 0.7 2.5 10.445.38 37.6 11.42 19. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.479.4 7.59 -17.4 1.98 25.4 NS 29.6 1.6 12.470.2% 6.1 0.0 34.9 2.2 NS 0.6 35.2 4.2 1.660 23.44 55.0 35.861 23.493 21.3 10.1 1.1 7.50 6.3 2.2 25.6 2.4 13.9 No.000 23.9 12.577.2 7.412.3 1.4% 14.14 11.6 28.91 34.9 17.2 0.6 30.5 11.000 23.00 2.0 13.00 1.3 2.4 4.6 3.8 14.0 2.4 37.2 2.3% 3.520.3 7.1 46.22 -2.27 8.3 2.4 1.0% 9.000 21.00 1.70 10.493 21.1 18.0 67.4 12.35 13.1 1.3 9.5 8.57 79.1 2.3 3.6 9.49 19.7 40.0 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.3% 11.00 1.1 38.3 9.5 12.0 19.1 13.66 60.92 41. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1.04 -69.2 39.426.5% 32.20 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.7 0.0 839.4% 7.6 15.1 0. restated 101 www.770 23.274.2 NS NS 21.0% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.9 1.4 1.2 9.7 895.32 44.41 87.40 0.3 4.32 42.70 4.4 20.56 17.000 23.1 8.2 15.660 23.0 1.9% 1.9 4.6 56.1 2.09 19.2 9.2 18.000 21.3% 9.2 24.00 1.3 10.10 13.1% 26.6 21.6 38.9 1.5 43.660 0.9 2.58 17.7 11.10 58.80 67.15 12.9 2.82 31.3 3.0 2.1 1. restated EV/EBITA.14 106.5 3.6% 5.01 32.7 3.8 8. adjusted Treasury stock.9 2.6 15.0 8.75 107.20 112. adjusted Share Price [Adjusted] Latest price High Low Average price 21.1 12.3 NS 33.7% 4.322.3 10.8 4.3 2.1 3.000 23.1 0.11 11.4 NS 29.

02 07. Management considers F&B clients more healthy and the sector less dependent on legislation and political influences.1 2. of which EUR20m are non-cash.08 10.9 1. estimated EBIT margin of 8% with mid-term potential for >12%).6 15. with average capacity up (positive for economies of scale) and the number of sites in high-labour-cost countries down. Kuwait Investment Office 8. We clearly expect it to have reached the high end of this range.cheuvreux.5 10.8 28. EADS.0 04. Refrigeration Technology was the problem child in early 2010. 29. -1% q-o-q).0) 1.2 3. 2.0 14.81m EUR11.8% Absolute perf.0 9.04 01.06 Price/M DAX 04. Relative perf. Blackrock 9.424bn. Q EUR21. FCF yield (%) 11.09 01.1% Q3-10 EBIT margin vs.0 14.com (49) 69 47 897 540 Disclosures available on www.2 Attrib. of shares.3 8. Splitting this by order size. On the negative side. The recent acquisitions make GEA's customer portfolio less cyclical by shifting it away from Oil & Gas and Power (19% of 9M-10 order intake) towards the Food & Beverage sector (46%). adjusted Daily volume EUR4001m EUR3272m EUR4908m 183.8% 5.0 24. JBT and Weber group. To meet our full-year estimates GEA therefore needs to have recorded order intake of EUR372m in Q4-10 that were converted to sales within the quarter.1 9.2 1. (x) 1. SIEMENS AG Alstom. implying a 3-15% order intake increase in Q4-10. at least flat margins and 7-10% y-o-y order intake growth.7% 5.11 Price Sector focus Sector Top Picks Least favoured ABB. Rolls-Royce Outlook .0 4.1x (estimated 10E sales of EUR400m.2 Yield (%) 1. management reiterated that pricing remains tough.7 Net debt/EBITDA (x) (0. CFS has low capital employed and a high ROCE.com Q Q 102 www.DE Bloomberg: G1A GR GEA taking its fate into its own hands Q Recent developments – Creating a sixth segment Q3-10 order intake came in at EUR1. Its underlying EBIT margin in Q3-10 reached 8.7 0. GEA reiterated its 2010 guidance of flat y-o-y sales.0 19.January 2011 GERMANY Smaller Companies Review gMACHINERY 2/Outperform Rating +19.01 4.07 07.8%.3 6. but added that it is not currently getting any worse.0 9. but the new divisional management has found ways to boost profitability (5.4% EUR26 Target price (6 months) GEA Group Reuters: G1AG. it predicts restructuring costs of EUR120m.time to start believing the 12% EBIT margin target GEA's 9M-10 figures show that the restructuring of the Heat Exchanger business is making progress.2%.7 0. of which EUR950m were billable in FY10.9%.4% 20.5 8.03 10. We expect the deal to be closed in Q2-11E and include 7 months of CFS's 11E sales in our estimates. Shareholders Free Float 81.0 29. accounting for 14% or EUR159m of Q3-10 group sales. Due to the fragmented competitive landscape.153bn (+20% y-o-y. The backlog after Q3 stood at EUR2.0 6. GEA sees scope to double CFS's sales over the next 3-4 years via acquisitions. With the recent acquisition of Convenience Food Systems (CFS).com . a supplier of animal protein processing equipment.3 1.3% 2009 2010E 2011E 2012E 17.cheuvreux. Peers include Marel.22m Performances 1 month 3 months 12 months 7. To meet this target.0% Q3-09 EBIT margin despite a 6% y-o-y sales decline) without eliminating an activity with annual sales of an estimated EUR200m that formerly generated no margin.4 1.9 12. CFS's customers are already-existing GEA clients. we see that the recovery visible in Q2-10 in larger projects continued.0 24. In Q3-10 China became GEA's largest national market.0 14. GEA continues to predict a 12% EBIT margin after the crisis.2 P/E (x) EV/EBITDA (x) Hans-Joachim HEIMBUERGER Research Analyst hheimburger@cheuvreux. which opens potential for cross-selling.4 13.6 EV/Capital empl.5% 4. We estimate the CFS purchase price at EV/sales of 1. Now it seems only EUR100m in annual sales will be eliminated.0 01.765 Price (07/01/2011) Stock data Market capitalisation Free float Enterprise value No. Nexans. GEA has created a sixth segment. Similar to GEA Process Engineering.1 NS 5. a 73% y-o-y increase.1% 34.0 19.0 ROCE (%) 9.

the company renamed itself GEA. We also employ a normalised earnings model. All approaches indicate undervaluation. Additionally. But GEA has made dramatic changes over the last 2 years. Following mg technologies' portfolio restructuring programme from 2004 to 2007. Given GEA's track record of low returns and frequent earnings disappointments in the years 2005-2008. its transformation into a market leader capable of generating EBIT margins of 12%. although still highly diversified. Further portfolio management Price over volume strategy: pricing power. 28% in western Europe. GEA offers considerable self-help potential. also with regard to the 12% across the cycle EBIT margin target. 13% in North America. Q Speciality mechanical engineering Today.e. GEA is a speciality mechanical engineering company. 9% in eastern Europe & CIS.g. 5% in Africa. although of course it would not remain unaffected. Our EVA model yields a FV of EUR30 based on 2012E multiples. Sales geographically well diversified GEA offers geographically well diversified sales with 13% of its group sales generated in Germany. 12% in China. This news thus further underlines management's creditability. a WACC of 8. EUR20m noncash costs). Q We reiterate our 2/OP rating with a TP of EUR26. The biggest part of these costs are expected to be booked in 2010. and an EVA model. Q Investment case GEA's long-term transformation story. shift to smaller orders away from low-margin turnkey projects „ Estimated 35% emerging markets exposure „ 103 www. From 12E. It is the global market leader in 90% of its activities. 9% in Asia ex China.0% terminal growth rate. 1-2 market positions in core divisions with strong acquisition track record „ Margin gap to closest peer Alfa Laval (given different sales mix) „ „ Legacy issues Overall lower risk profile following recent divestments (e. (Figures based on 9M-10) Q Q SWOT analysis Strengths Weaknesses No. Q Our normalised earnings model renders a fair value of EUR25 assuming a 12% EBIT margin in 2012E. in which the entire chemical and plant engineering activities were divested in 2005 and 2007 respectively. and 4% in the Middle East. We advise buying GEA shares now to capture the expected benefits of the group reorganisation that will emerge over the next 2 years. most importantly in its management and its mindset. Q Q Simplified group structure from January 2010 onwards GEA simplified its group structure with effect from January 2010. plant engineering and Ruhrzink) „ Opportunities Threats Support for margins by increasing low-cost base „ „ „ Macroeconomic risk „ Raw Cross-segmental synergies material price risk „ Competitive pressures Reduced number of legal entities „ „ Valuation Our PT is based solely on our DCF model as we believe it best captures the company's growth prospects. By YE-11 it will also reduce its legal entities by 50%. Q Peer group multiple comparison: based on 2011E EV/EBITDA GEA trades at an 11% discount to its peer group. Q DCF: We assume sales and EBITDA CAGRs of 4.4% (2011E) and a 2. the group reorganisation is expected to achieve gross annual cost savings of EUR65m in the Heat Exchanger division and EUR25-30m in Mechanical Equipment on overall restructuring costs of up to EUR120m (incl.3% and 8.cheuvreux. i. Based on these parameters our DCF model yields a fair value of EUR26 per share.com . The two recent acquisitions are exactly in line with what GEA's management had promised for over a year regarding a larger acquisition. continues to progress. investors' hesitance to believe the new management's 12% post-crisis EBIT margin target is understandable. a peer group multiple comparison. which means that even if macro conditions should deteriorate. No individual customer accounts for more than 2-3% of group sales. GEA intends to realise the full synergy potential of its heat exchangers segment. consolidating 9 sub-divisions into 5 (6 after recent CFS acquisition).9% respectively for 2010-19E. 6% in Latin America.January 2011 Q GERMANY Smaller Companies Review Company profile Q GEA sprang from Metallgesellschaft GEA Group was acquired by mg technologies (formerly Metallgesellschaft) in 1999.

8 13.8 5.7) 56.2 (4 869.0 0.0 105.4) (3 343.0 (64.0 (127.8 94.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 161.9% (1 059.0 7.1 3 108.8% 4 450.5 410.0 0.0) (70.4) 0.0) (70.0 0.0 77.2% 3 390.0 0.0 475.6 205.9% (1 068.0 248.6% (74.0 11.0 (217.8 41.5) (3 306.1 0.0) (109.0 970.0) 753.0 (193.0 0.0% (74.5) 268.0 556.0 (159.5 0.0 219.0 (248.0 0.0 (85.1) 0.1% 5 179.6 -0.0 0.4 0.8 16.0) 295.0) 140.0 (549.0 0.6) 86.0 0.0% (129.0 0.9 3 884.4) 132.0 286.0 663.0 1 187.0 0.3) (596.0 0.6% 0.0 0.9 468.0 (36.2) 6.0 1 299.0 (55.1 0.6) 355.1 3 081.6 1 410.0 0.0% 5 577.0 0.2) (150.4 0.0 0.4) 0.0 254.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 104 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 4 058.8 205.0 0.5 0.3 2.7) 285.0 0.5 -5.5) 0.7 0.9 8.0 0.2) 0.0 142.4 33.0 577.0 594.9) (3 736.7% (1 174.7% 0.3 NS 4 856.3 705.2 1 331.3 3 108.8) 0.0 0.0 673.8) NS 2 723.3% (133.1) 429.0 (475.1) 236.1 28.2) (116.0 0.0 6.9% (81.2 366.0 0.8% 5 022.9 21.0 (2.0 835.1) (24.1 (55.7 48.8) 0.5) 0.0 0.9 4 040.3% (59.3) 0.0 (2.2) 256.0 0.1 (56.0 0.1 1 584.3 4 185.0 (166.7 1 280.2 28.5 681.0) (70.0 (3.0% (128.4 763.0 (38.3 0.9 11.4) 99.0 0.6 0.7% 241.2) (66.0 0.7) 504.4 1 530.9 4 185.0 225.4% 0.7 0.1% (1 088.0 0.0 1 452.0 0.0 0.3 30.9 21.0 401.0 (193.0 (1.2 32.4) 0.5) 368.0 (0.0 237.1 0.4) 1 415.0 11.0 395.0 0.0 298.6 19.6 0.8 0.0 (361.2 32.5) 0.cheuvreux.0 0.4 (152.4 347.1) 0.2) (3 418.8% (1 193.0 0.0 (190.0 482.6) 0.0 (204.2 1 186.1 19.9 159.1) 0.9 134.0 NS 1 245.6) 482.7 -16.3 -97.0 504.0 0.8 0.6 2 074.0 0.0 23.7 72.0 0.1) 160.6 3 884.1 89.2 689.4) 0.0 (1.0 (85.3 161.8) NS 2 680.0 0.0 (114.4) 0.4 0.1 128.0 0.0 0.7) 372.0 (56.0 (85.3 182.1 (94.0 717.0) 0.0 0.5% (868.0 80.3) 0.1% (79.0 (6.7 1 188.3 461.5 2 680.4% (129.1 288.8) 0.0 0.0% (129.0 0.9) NS 2 411.0 268.6 -53.2 238.7 -37.2 3.6 47.2% 971.3) (3 035.1 3.1) (24.1) (24.3 0.0 0.3% 4 411.5) 0.0 0.January 2011 GERMANY Smaller Companies Review GEA Group FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.8 0.7 6.0) (2 849.2 (176.1 (535.9) 6.5 1 250.1 139.2) (10.3 (44.2 607.1) 298.3 21.7 1 259.5) 0.7) (66.5) 0.9) 585.6 38.9 120.1 19.3 (111.0 0.0 166.5) (110.0 (288.0 885.0 (193.5) 0.0) (2 237.0 0.5 0.1) 0.0) 610.4) 0.2 0.9) 619.0 295.4 0.1 4 040.1 878.4) 0.6) 0.0 0.0 619.0 (88.1 -12.2 (304.8) (0.6 0.7% 0.7 178.8 0.0 (306.4) 0.2 20.1 26.1 -3.9) 0.4% 0.5) 0.2 25.2 675.0 0.0 140.3 2 383.2 (45.9 (34.0 (2.2) (288.4 32.8) 289.5 12.2) 0.0 1 633.4 98.4 801.9 530.2 1 530.7% (242.9 413.7) 0.5) NS 4 346.1% (100.3 0.0 976.0 667.4) 0.0 0.5) 2 411.0 (66.0 86.1) 1 079.7 95. profit [loss].5 2 723. for exceptional items Net attrib.0 0.0 101.0 347.9 205.1) 0.3 1 128.2 (44.3 24.2 (59.5 70.5 1 530.7% (1 068.0 0.0 0.0 826.0 16.4% (99.6) 0.8 144.4) 0.6) 254.2% (956.5 1 822.2% 121.0 3 130.0 0.7) (79.8) 0.0 1 058.9) NS 3 130.0 297.7% (100.2 (5.7 0.7) 480.0 236.4 (71.7) (40.5% 0. [inc.0 0.7 233.6) 0.0 160.6 205.0) 0.2) (3 017.7 29.0 0.0) 395.4 1 069.0 0.8% 0.6) 401.6 0.0 0.1) 160.5) 0.9) NS 3 081.8 0.8 209.6 111.7) (16.7) 225.0 (19.0 0.2 1 735.0 0.2 0.7 187.1 (32.0 0.2 NS (54.0 831.0 0.1 (49.5% (56.0 163.9 72.5 896.0 662.0 686.9 (92.5 1 530.0 0.4% 0.0 0.5 0.0 (2.3) 0.8) 0.0 (1.0 (47.0 0.3 29.0 69.0 0.0 (44.0 12.0 349.9 106.2 -14.0 (167.2 1 138.9 696.1 255.1 34.0 0.3) 0.5 611.2 -46.0 0.4 562.com .1) 163.0 397.4 www.1% 0.5 (55.8) (4.1 0.

1 0. adjusted Treasury stock.10 15.0 10.1 7.810 183.0 10.15 33.2 32.20 0.00 0.03 0.8% 1.51 13.4 1.2 3 524.3% 30.6 11.1 15. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1 682.03 -97.2 9.52 21.0% 1.000 183.24 21.3 24. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share EV/EBITDA.1 NS NS 0. adjusted Av.8 5 089.0 12.1 1.3 15.33 10.69 18.3 4 000.2 3.5 13.7 1.27 19.77 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.000 0.35) NS (0.4 6.5 9.0 12.0 12.5 NS 34.January 2011 GERMANY Smaller Companies Review GEA Group FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.8 11.810 0.6 31.00 0.9 4 000.9 2 860.87 -53.6 8.3 4 467.4 6.8% 0.00 1.8 13.53) NS 1.7 6.07 17.2 3.63 21.5 11.2 2 035.81 55.8% (0.2 1.1 13.4% 12.20 8.3 2.4 6.0 18.7 1.3 7.5 0.150 188.48 17.9 8.56 15.00 0.9 4.7 NS 2.78 7.87 61.7 NS 0.9 NS NS 3.7% 9.0 12.26 26.8 17.0% 0.2 NS 8.7 0.000 183.3 19.3 10.810 183.26 9.000 187.8 9.25 21. restated EV/EBITA.7 0.4 7.54 -57.4 28.8 0.3 8.3% 0.0% 24.000 52.1 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.9 0.00 0.0 18.4 NS 8.9 NS NS 12.00 0.7 1.50 11.85 182.1 13.2 1.1 10.89 50.0 2 042.0 0.7 NS 4.0 8.30 1.8% 0.3 9.4 0.3 18.4 0.1 11.00 0.7 9.74 17.4 NS 8.3 18.7 NS 9.3 13.00 0.6 6.4 2.03 0.99 13.1% 1.9 30.8 15.5 0.9 NS 1.0 17.00 0.0 14.0 6.9 0.76 -12.72 NS 7.3 6.0% 7.2 10.40 94.1 3 330.8 0.29 8.300 0.2 10.1 1.150 188.810 183.25 NS 8.810 183.93 21.810 0.95 9.08 10.4 NS 0.000 183.76 -12.9 3 975.7 1.31 12.0 9.5% 1.73 21.0 1.7 0.9 18.7 0.5 9.2 1.7 2.9 85.2 9.0 8.9 6.9 1.01 NS 4.1 1.7 1.com .1 17.6 5.000 0.3 15. adjusted Share Price [Adjusted] Latest price High Low Average price 192.85 182.00 0.000 8.0 1.70 10.4 8.34 15.00 0.300 192.3 2 235.03 29.4 2 853.0 9.6 4 908.2 1.5 2.000 183.810 0.63 23.3 1.20 11.0 10.0 6.7 3.9 1.80 28.2 12. of shares.8 1.5 10. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.00 0.7 1.00 0.1% 0.0 0.5 10.9 29.6 4 641.1 3.0 12.2 9.0 5.8% 2.810 183.65 3.810 0.6 NS 1.6 0.000 52.61 111.2 10.0 NS NS NS NS 0.810 0.5 0.3 4.7 3.58 12. number of shares.1 18.8 NS 0.3 20.15 33.70 22.3 No.cheuvreux.9 NS 1.4 6.7 0.1 15.48 2.4 0.69 13.8 11.7 NS 0. restated 105 www.4 0.8 1.0 3 209.4 13.8 7.55 18.24 1.000 183.77 22.3 17.6 17.7 NS 16.3 5.4 5.0 1.9 11.2 6.4% 10.2 1.2 1.2 7.00 NS (1.34 48.8% 0.8% 0.300 0.3 9.1 8.1 0.3 4 901.26 182.9 5.2 10.61 111.3% 9.1 27.6 8.35) NS 1.9 8.2 8.0% 2.300 187.1 7.1 4.15 26.50 6.0 2 345.5 11.6 1.7 23.4 16.3 36.0 1.8 8. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.0 2.9 28.

0 32.97 Price (07/01/2011) Reuters: GXIG.3 1.7 13. EUR31.1% Absolute perf.0 42.1% EBITDA margin (19.9% 11.9 Net debt/EBITDA (x) 2.6 5. we believe GXI will still come out at the upper end of its constant FX sales guidance.2 EV/EBITDA (x) 7.4 14.0 32.5 ROCE (%) 9.1 12.0% 08/09 09/10E 10/11E 11/12E 17.0 06/07 12.3 0. we believe Moulded Glass and Plastics Systems should develop favourably. We predict 3.3 14.5% as indicated. but M&A should tend to be taken positively.3 P/E (x) Disclosures available on www. note that IMS expects accelerated global pharma growth of 5-7% in 2011 (after 4-6% this year).6 5.8% of Q4 group basis). Relative perf.0%).9 6.7% EUR32.0 12.9 Attrib.4 1. GXI announced an adjustment to its RTF production lines. Any deal will depend on the price tag and strategic fit.06. Orpea. with the rest of the business delivering a strong performance and with an improvement in cosmetics. William Demant Least favoured Shareholders Free Float 100.cheuvreux. EUR4.6 11. Even if it can only refinance at 6. FCF yield (%) 4. This will have led to a 20% capacity decline in Q4-10 (est. Gerresheimer's corporate bond can be bought back in mid-Feb at 102% (104% earlier) and the company is likely to take action.com Q Q 106 www.3 1. this would boost our EPS forecasts by 2-3%.4m EUR 2.1% -1. In terms of operational performance: while Tubular Glass will have a softer H1-11E. with 5. but we consider this conservative. beating market expectations at that time by 3.0 62.8% 1.4 1.com (49) 69 478 975 26 07/10 . We clearly believe growth in RTFs remains on track and the company's decision taken in Dec 2010 to build a fourth line illustrates its confidence in this product area. the decline in bulk syringes business is likely to have continued.5m sales loss) and production will be ramped up again in Q1-11. We like the stock.6 14.8 6. Finally.5%. leading to an estimated 6% decline at constant FX in TG in Q4-10E.0 52. Q Outlook – Refinancing and M&A likely in 2011E We believe the outlook for 2011 is promising.0 22.cheuvreux. Nevertheless. In particular the rebound in Cosmetics/MG was positive.0 1. M&A is part of Gerresheimer's plan to increase its EM sales from an estimated EUR100m in 2010 to EUR200m in 2013.4 1.27m Performances 1 month 3 months 12 months 12.50 Target price (6 months) Gerresheimer Packaged for a strong 2011 Q Recent developments – Sound Q3 results GXI reported sound Q3 results in October 2010. During its Q3 conference call. The fourth line will be completed in 2012 and will generate sales in 2013 (est. As in Q2 and Q3.4 6. the company will combine the refinancing with an M&A transaction to increase its funding volume.9% 29.9% 11.0 6. CFA Research Analyst oreinberg@cheuvreux. Getinge.6 1.8% organic growth and a significant 28% EBITDA increase. also bearing in mind the company's attractive valuation levels. 62. before probably returning to full capacity again in summer 2011. structural growth and strong cash generation. In an ideal case. of shares. (x) 1.com 12/10 Price Oliver REINBERG.9 Yield (%) 0.2 1. EUR33m annual sales if fully utilised).9% (guidance 3-4%) organic growth and a 20.0 11/07 04/08 10/08 03/09 Price/M DAX 08/09 02/10 Sector focus Sector Top Picks DiaSorin.0 22.January 2011 GERMANY Smaller Companies Review HEALTHCARE EQUIPMENT 2/Outperform Rating +1.DE Bloomberg: GXI GR Stock data Market capitalisation Free float Enterprise value No.0 52.0 42. Areas of interest include targets in emerging markets and the company also lacks a plastics offering in the US market. due to the two factors discussed above. adjusted Daily volume EUR1004m EUR1004m EUR1469m 31.6 EV/Capital empl. We estimate this will depress TG sales growth by ~5% in Q4 (1.5-20.

2) M&A transactions are likely in 2011E.4% and 15. cosmetics (11%) and life science research industries (9%).9% yield. inhalers and pens. Note that our earnings forecasts do not include potential benefits from refinancing or (obviously) M&A. healthcare reforms).cheuvreux. Q Pharma clients benefit from growth. Quality is an important focus for its clients and pricing has been less in the spotlight despite the significant challenges facing the pharma industry (patent expiries. We predict average sales and EPS growth (10E-12E) of 5.3x 2011E and 12. not adequately reflected in the stock's valuation levels.5 target price. changes in input costs may have an impact on the company's profitability. which is showing structural unit sales growth in most areas. While a large proportion of its contracts include price-adjustment clauses. the supplier market is consolidated. Furthermore.4% respectively.4x 2012E P/E. In particular. these will increase cost-cutting pressure in the supply chain „ Some cyclicality in demand from cosmetics and life science research industries Emerging demand from generic and biotech manufacturers „ Bolt-on acquisitions „ 107 www. but face challenges The company generates 74% of its sales in the pharmaceutical industry. high barriers to entry.January 2011 Q GERMANY Smaller Companies Review Company profile Q Leading supplier of packaging products Gerresheimer is a leading supplier of glass and plastic packaging products for the pharmaceutical (74% of 2009 continuing sales). we see two issues that will likely trigger further upside: 1) GXI is likely to refinance its outstanding EUR126m bond. These characteristics and the implied growth are. Gerresheimer's significant operational and financial leverage should work in its favour. Q Q High operational and financial gearing Looking ahead. At this level. Q Investment case We give Gerresheimer's business model high marks (solid top-line growth. it observes strong growth in ready-to-fill (RTF) syringes. The company's client base is fragmented (largest customer: <5% of sales). for which it currently pays a 7. Q M&A to remain part of the business model External growth remains on the company's mid-term agenda to allow it to complement its product range from a geographical as well as a product-specific perspective. particularly after the company's impressive deleveraging. given stability and nearly 100% of recurring revenues the operational and financial leverage should work in its favour. Furthermore. most products offer limited scope for differentiation „ „ High exposure to energy costs Significant goodwill and intangible assets „ Diversified client base Pharma clients benefiting from structural growth in various areas „ „ Nearly entirely recurring sales Opportunities Threats „ Company's high operational and financial leverage should work in its favour „ Plastic Systems . low R&D productivity. In pharmaceutical packaging Gerresheimer is protected by high barriers to entry due to validation and capex requirements. the stock would be trading at 14. Q SWOT analysis Strengths Weaknesses „ Broad product offering in an oligopolistic market „ High barriers to entry: validation and capex requirements „ No IP protection. Its main geographical markets are Europe (66% of total 2009 sales) and North America (28%). . fragmented client base).com Valuation We reiterate our 2/OP rating and EUR32. Raw materials (20% of sales) and energy costs (8%) are important input factors.a new area being successfully built up „ Client base faces structural challenges. it holds leading market shares in key product areas. in our view.

0 (3.0 367.0 76.0 0.0 116.0 0.4 1.0 0.0 0.0 0.0 36.0 0.0 53.0) 71.0 (13.0 0.0) (33.0 64.0 176.0 0. profit [loss].1% (86.0) 0.2 -5.0 0.3) 174.0) (53.0 42.January 2011 GERMANY Smaller Companies Review Gerresheimer FY to 30/11 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0) 0.0 (3.0 436.0 -27.0 (4.7) 0.0 0.0 (2.1) 42.0 0.0 192.069.0 10.8) 0.0 326.0 438.8 1.1 10.0) (47.2 1.0 (38.3 1.0 4.0 58.0 42.4% 1.0 434.9) 148.071.3 42.2% 1.0 42.0) 0.051.0 0.0 (15.0 (31.0) 0.0) 2.7 0.9% (20.0 67.0 0.2) 151.063.3 0.0 .0 0.5 88.0 125.0 58.0 482.0 (6.3 0.0 167.0 128.0 385.0) 0.0 374.0 183.139.0 0.0 7.0 585.0 42.9) 99.0 0.0 0.2 0.0) 30.0) (49.0 174.0 131.0 18.0 (2.0) 72.0 60.055.0) 70.6 4.0 0.0 0.0 43.0 105.0) (506.000.9 0.0 143.0 278.068.0) 57.2) 98.0 165.0 0.4% (38.0 0.060.8) 118.0) (532.3 (77.com 2007 2008 2009 2010E 2011E 2012E 957.8) 0.5 1.1) 0.3) 70.0 39.0 48.2 (34.0 396.4% 12.0 42.9 1.2 0.0 0.0 14.0 0.0 124.0 42.9% (82.0 220. [inc.5 0.0 91.4 1.0 367.0 0.117.5) 240.0 0.5% (33.5 15.2) 0.1 0.0 0.117.8) 134.0 0.0 484.0 (4.0 151.0) 0.0 528.0 45.0 114.0) (96.0 125.0) (495.0 (1.9% 1.0) 40.7 (303.0 (13.0 (14.0 39.0 20.9 2.6) 61.0 0.7) 170.0 69.0 60.0) 86.0 0.0 0.0 374.0 466.0 61.2% (326.0 0.0 0.0 9.0 10.0 0.0 0.9% (362.6% (15.5% (70.8% (342.0 154.0 443.0 0.0 125.7% (319.0 92.0 80.0 365.135.0 (96.2 15.cheuvreux.0 0.8% (26.0% (38.0 413. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 (3.0 (43.2) 0.0 (15.0 167.0 (2.0 0.7% (327.1) (1.4 (40.0 6.0) 61.0) 60.0 78.0 62.0 0.0 48.0 64.0 0.0 -31.8 0.7) 0.0 0.4 10.4% 92.0 1.0 0.6 (28.0 0.6 13.051.0) (508.0 42.2 2.5% (17.0 0.0) (503.2) 5.6 0.0) (51.0) 0.3) 0.8 10.0) (38.2 19.7 8.4 1.7 -0.0 6.0 (87.0 34.7 46.0) (87.5) 0.062.0 0.0 0.0 0.0 186.0 0.0 45. for exceptional items Net attrib.8% (65.3 0.7 36.0 0.0) (79.2 1.8% (12.0 (15.0 0.5 57.8% (38.0 61.2) 0.0 (5.0 373.6) 0.0 461.0 428.0 60.0 149.0 46.2) 221.9 1.0) (91.1) 82.0 5.7) 0.0 426.054.0 60.4 12.0 7.0) (48.2 5.8) 0.140.0 0.022.0 0.0) 11.0 (25.0 (12.0) 0.0) (562.0 25.0 8.0 0.0 37.6% (76.4 1.2) 201.7% (91.5 1.2 15.0 441.0 53.4% 1.0 146.3 NS 1.0) (217.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 108 www.8 (26.3) 0.6) 0.0 0.0 73.5) 0.5 47.0 95.0 62.0 10.6% (15.8% 12.

of shares. number of shares. adjusted Av.8 2.com . reported % Change (0.6 3.2 19.003.7 13.44 5.7 11.41 32.9 1.6 10.2 2. adjusted Share Price [Adjusted] Latest price High Low Average price 28.8 725.54 0.4 0.400 0.6% 18.9 78.80 23.4% 1.34 -27.January 2011 GERMANY Smaller Companies Review Gerresheimer FY to 30/11 (Euro) 2007 2008 2009 2010E 2011E 2012E 1.51 32.7 1.400 0.4 7.19 31.5 1.8 NS 2.4 7.9 1.4 1.000 38.2 7.32 10.8 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.5 10.00 3.8 14.8 1.1 6.0 80.0 1.7 6.2 14.75 19.7 1.40 3.8 24.50 38.0 8.1% 13.003.7 1.2 12.4 1.1 0.408.2 6.83 0.400 31.0 4.2 No.8 11.02 18.9 1.9% 16.4 1794.4 5.3 1.49 1.9 2.3 15.0 4.8 8.94 36.2 1.2 5.cheuvreux.50 25.7 7.1 6.5 NS 25.22 0.8% 15.3 9.3 3.4 (945.6 4. restated 109 www.0) 3.0 5.2 13.83 9.97 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.8 11.2 1.25 EV/EBITDA.1 48.27 15.000 31.400 0.0% 2.3 0.9 1.0 24.7 1.49 26.3 1.2 4.350 0.4 1.300. restated EV/EBITA.40 4.1 NS 17.1 0.17 0.4 15.5 9.6 14.7 12.25 16.6 1.82 42.25 31.400 31.6 14.62 15.0 5.199.2% 0.000 31.000 31.4 13.8 16.61 31.4 19.48 5.7 1.3 4.2 0.9 9.400 0.6 1.2 NS NS 2.5 6.400 31. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.9% 1.7 1.4% 2.3 31.7 8.2 21.34 -31.28 NS 2.9 0.1 1.467.6 8.00 31.7 6.0 9.8 2.350 28.20 40.99 21.6 5.400 31.92 31.1 21.4% 1.8 9.37 13.39 8.000 31.40 4.3 10.6 10.5 1.1 885.2 1.64 0.4 0.0 0.4 12.23 0.5 1. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1.7 17.4 8.9 10.19 NS 1.5 12.6 7.469.0 1.9 21.5 1.6 5.5 1.4 0.2 9.832.2% 0.6% 16.400 31.400 0.8 1.6 1.91 19.000 31.3 1.3 0.9 11.3 11.04) Goodwill per share Dividend per share Cash flow per share % Change Book value per share 1.0 91.99 32. adjusted Treasury stock.24 22.97 33.97 46. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.0 0.0 62.5 9.6 802.6 11.8% 14.90 51.1 34.0 1.7 1.5 1.6 7.8 1.6 4.8 2.02 152.9 6.387.0 31.0 1.7 20.84 23.4 1.81 43.1 9.4 2.

Gerhard Weber 26.7 10.6 37. In August it achieved the strongest like-forlikes sales growth in its history.5 Net debt/EBITDA (x) 0.0 0. we predict strong sales growth (CAGR10-12E: 9%).com EUR730m EUR259m EUR710m 20. Looking ahead.7 25. Carrefour Colruyt Shareholders Free Float 35.forlike basis.6%.4 5. Treasury Stock 10.4 2. This.2 (0. It now targets 65 new own retail stores in FY11.5) Yield (%) 0.7 01/05 11/05 09/06 07/07 Price/SDAX 06/08 04/09 02/10 01/11 Price Sector focus Sector Top Picks Least favoured Ahold. Furthermore.7 35.7 30.5%.0) (0.7 10. not only due to the expansion but also due to higher levels of acceptance for the new collections. Relative perf. and 60-70 new franchise stores.4% -3.4 ROCE (%) 35.2 12. of shares.7 5. which will drive l-f-l sales in the company's own stores. which grew by only 8% in the same month. Its retail sales rose 26% on a like.0 0.7 10. with the margin remaining at 49.9% -9. FCF yield (%) NS 4. together with the strong order intake development (23% y-o-y increase) for its spring/summer 2011 collection underlines our investment case. Hence. both in Germany and in its international markets.7 25. in November. The main reasons behind this positive development have been the company's improved lead times and the increase in its number of proprietary retail stores.3 3.com (49) 69 47 89 75 35 Q 110 www.7 EV/Capital empl.8%.8% Absolute perf.5 Attrib.2 43.com (49) 69 47 89 74 26 Research Analyst jgaussman@cheuvreux.0 2.1% 58. the first month of its FY11.9 EV/EBITDA (x) 0.00 Target price (6 months) Gerry Weber Reuters: GWIG.5 7.69m EUR 1.7 20.January 2011 GERMANY Smaller Companies Review TEXTILE RETAILERS 2/Outperform Rating +10. adjusted Daily volume Jürgen KOLB Jennifer GAUSSMANN Research Analyst jkolb@cheuvreux.4 39. Q Outlook – Strong sales and EBIT margin increase In late 2010 Gerry Weber also announced plans to accelerate its expansion via company-owned retail and franchises stores.9%. Market capitalisation Free float Enterprise value No. The company has also announced it will raise its retail prices in 2011 to cover the rise in input costs. This puts it closer to customer preferences and therefore facilitates higher sell-through rates.2) (0.9% 14.com .2%.7 30.7 03/04 5.5% EUR39.cheuvreux. we believe Gerry Weber will be able to provide not only sustainable sales growth but also margin growth in the period FY10E to FY12E.DE Bloomberg: GWI1 GR The growth continues Q Stock data Recent developments – Retail in the fast lane Gerry Weber reported a like-for-like sales increase for July to September 2010 of 14.2 8. which allow it to present more fashionable collections.0 2. up from ~50 in FY10E.7 15.70m Performances 1 month 3 months 12 months -4.30 Price (07/01/2011) Disclosures available on www. Higher retail prices will take the pressure off its gross margins.7 5.cheuvreux. recording an 11% increase in like-for-like sales. Udo Hardieck 17.7 15. This compares with our former forecast of a flat trend.1 3. mainly owing to the increase in cotton prices and the production bottleneck in Asia.0%.0 6. As a result we now expect its gross margin to also increase slightly in FY11E to 50%. Ralf Weber 9. significantly outperforming the sector.7 20.0% 11.9% 2009 2010E 2011E 2012E P/E (x) NS 15. the company also showed a strong performance in retail. (x) Q EUR35. up from ~35 in FY10E. 35.

which together account for 28% of group sales. Its target group are women in the 30+ age range. Q Three core brands Gerry Weber's portfolio comprises three core brands: Gerry Weber.3% between FY10E and F12E. Although its strong EBIT margin growth in recent years is likely to decelerate on higher input costs. the successful performance of the peer group over the last three months has led to a 15% valuation increase. Q SWOT analysis Strengths „ Weaknesses Innovations as margin drivers Large share of German business „ Strong reputation with wholesale customers „ „ Dependence on CEO Gerhard Weber „ Strong cash flow generation Opportunities Threats Company-owned retail stores Maximum order limits to increase flexibility and improve lead times „ Deterioration in German consumer sentiment „ „ Loss of innovative power after CEO's retirement „ 111 www. its more price-aggressive label. bring the peer group average to a 2011E P/E of ~15x. this should lead to an improvement in the company's working capital as a percentage of sales from 14.W.6% now to 12. Q Looking ahead. Taifun and Samoon. in line with where the peers stood in August 2010.4% in FY12E. Around 60% of group sales are still generated in Germany. Q Investment case Q Innovative power has been Gerry Weber's main margin driver in the past and will remain so in the future. We estimate that this will help boost its sales by 5%. Markets in Asia.. The Gerry Weber brand has two sub-labels: Gerry Weber Edition and G. Q Q Core markets Gerry Weber is active in over 40 countries across the globe. Outside Germany. the most recent innovations in its proprietary retail business.6% to 50. Q Vertical integration Today Gerry Weber is a vertically integrated women's apparel retailer.cheuvreux. its core markets include Benelux.com Valuation GWI shares are currently trading at a 2011E P/E of 12. It is active as a wholesaler and retailer in over 40 countries.4% in FY12E. Our TP of EUR39 implies a P/E of 14x.January 2011 Q GERMANY Smaller Companies Review Company profile Q Founded as a manufacturer of women's trousers Gerry Weber was founded in Germany in 1973 by Gerhard Weber and Udo Hardieck as a manufacturer of women's trousers. all of which operate in the upper mid-price segment. an increase of 130bps. Nevertheless. England. the Middle East and the Far East are of growing importance for the company and currently contribute about 12% to group sales.9% in FY12E. should lead to an estimated EBIT margin of 14. We believe the discount to be sufficient. Q The company's innovative steps also facilitate shorter lead times and therefore allow it to present collections that are more up-to-date. i. .1% in the current FY to 14. 7% and 11% in the years FY10E to FY12E. Its portfolio was expanded item by item until it became a full women's apparel manufacturer and wholesaler. This is based on an assumed 70bps rise in the gross profit margin from 49. Ireland. Samoon addresses plus-size women. thanks to the company-owned retail business and to cost-saving potential resulting from RFID and flexibility in procurement and production. We also assume a rise in its inventory turns to 11x in FY12E from 10x currently. Eastern Europe.e. While Taifun concentrates on a younger fashion group than the Gerry Weber brand.5x. Switzerland and Scandinavia. The company's strong innovative power leads to fast growth in sales and margins. taking into account GWI's low free float and liquidity. maximum order limits and RFID and EDI technologies. Austria. Together with its strict claims management. we anticipate strong EBIT margin growth over the next three FYs from 13.

0 22.1 0.8% (10.0 0.0 16.0 (0.0 0.0 (23.1 0.2% (87.9 0.2 93.3 0.6) 106.1 97.5) 83.0 (4.0 0.0 0.3% 0.7% (10.9% (113.9 14.7 193.8 45.7 21.2 0.7 (4.0 21.1% (15.5 126.0 67.1 0.1 31.1 (19.3% 0.0 16.6 71.0 86.0 12.2 41.8) 0.0 50.2 0. profit [loss].0% (12.0 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 112 2005 2006 2007 2008 2009 2010E 2011E 2012E 386.5 (58.6 15.2% 0.1 15.3 15.0 0.2) 1.2 108.7 41.0 283.0 24. [inc.4 (5.0 0.0 7.0 (2.0) 48.9 27.4 145.1% 0.0 244.7 0.0 0.0 0.7% (3.0 0.1 0.8 42.0) (1.4) 0.0 0.2) 41.6 79.7) (1.0) 0.2 16.8 208.6 0.6 64.6) (19.5 0.2) (294.7 1.3 12.1% (28.5% 594.0) (0.6 0.4 196.0 0.7 (3.0 (15.3 25.0 41.7 0.0 0.0 12.7 (2.0 50.4% 0.0 0.9% 47.8) 55.3 12.6 13.0 57.0 0.6) 74.0 43.7 15.2) 0.4 0.0 (17.0% (13.7 23.4 www.0 (27.2) (0.0 0.1 137.0 0.6 0.1 95.2 118.4 (3.0) 0.2% (5.4 54.0 40.4) (10.0 13.0 0.2 218.0 0.0 0.0 0.1% 507.0 12.4% (7.5% 668.4) 0.0 (36.0 0.1 0.3 0.2 27.0 81.0 0.4 46.7) NS 236.9 0.6) 0.0 (19.5% (67.8 0.0 43.9) (434.6 129.0 0.0 0.0 0.0 13.2 10.1 0.0 0.7) (25.0 51.3 0.0 0.1 107.2) 0.9) NS 248.0 0.0% 741.1 100.5 0.0 0.3 85.0 0.4) (418.0) (0.0 236.8 0.0 0.8 21.8 32.0) 0.0 9.1 158.5) 0.5 0.0 0.0 13.8 (1.0 33.0 50.1 27.0 0.6 14.9 173.0 16.8) 0.7 0.1 0.4) 0.8 0.2% (104.0) 106.0) (26.6) 0.4 (5.4 24.0 21.5 0.0 0.3) 62.9) 0.0 0.0 13.0 0.7 0.0 0.5 196.4 0.6) 0.0 0.3) 0.6% 0.2 0.0 (3.5) (1.2 20.0 10.3) (19.0 19.9 0.0 0.1 0.8 12.3 0.6) 0.1) 0.7) 62.1) 41.0 (9.0 (16. for exceptional items Net attrib.2 46.2 (4.0 0.0 26.0) 26.5% (58.0 (17.8 51.3 (3.7) (336.0 0.2 13.0 71.9) 0.0 0.2) 0.7 25.0 (11.3) (377.0 0.0 (16.0 0.5 248.0 (43.0 15.0 12.8) 35.3 13.January 2011 GERMANY Smaller Companies Review Gerry Weber FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 0.0 (18.0 0.0 8.9 0.1 14.6) 122.0 17.0 0.0 0.0) 0.6% 0.5 0.0 39.0 0.4) 51.0 0.4 83.4) (0.0 0.0% (94.7 26.0 67.5 122. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.4 34.1 4.2 233.2 0.1 89.1) NS 218.0 21.0 106.0) 92.6 (51.0 244.5 208.0 39.0 0.0 0.0 6.2 1.8 0.4) (21.0 24.0) 3.0 25.8) 0.9) 0.2 15.0 0.4 0.6 109.5) 0.4 0.5% 570.6) 0.4 0.0 62.4) 71.8 0.2 10.0 35.7) 0.0 200.0 0.3 98.0 15.0 0.9) (8.4 14.0 (1.0 6.5% (14.1 0.0 0.0) (423.0 0.0 54.1 28.cheuvreux.1 0.0 (31.0 26.0 0.4 0.0 (15.5 13.0) (458.2 0.0 17.0 0.0 57.6 (16.0 26.0 57.1 16.0 39.7) 0.0 0.0 0.1 15.com .9 0.6 181.0 0.0 67.0 (6.4% (77.0 0.3) 94.6) (20.8) 0.0) 0.3 7.2) 0.3) 0.0 0.1 0.6 0.3) (505.0 43.0) 31.9% (7.0 5.6 0.2) (11.4 6.0 200.7) 0.2) 0.0 0.9 0.4 15.0 0.0 21.0 17.2 16.3 173.0 0.5% (0.1 68.6 13.6 22.0 (19.7) 0.0 4.0 12.0) 39.6 (3.1) 81.0 92.0 0.1% 623.5% (5.7 5.0 0.7 442.0 0.0 (8.3 108.0 0.2% (11.0 (9.

690 20.9 20.3% 1.0 42.34 35.0 13.2 6. restated EV/EBITA.8 0.8 8.00 0.40 0.8 2.00 0.000 22.9 3.8 10.1 730.1 3.78 15.5 14.96 No.2 11.00 0.0 10.71 41.75 37.8 1.953 22.85 4. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.17 27.0 6. restated 113 www.0 43.92 29.4 0. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.2 5. reported % Change 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.9 13.000 22.0 12.4 0.08 18.com .8 24.953 22.9 9.2 4.000 20.7 12.06 35.68 27.99 35.30 34.690 20.17 27.0 15.0 NS NS NS NS NS 0.6 15.8% 1.9% 2.5 14.6 20.25 16.0 21.9 10.00 0.4 25.4 37.2 20.000 20.7 29.2 15.2 34.7% 7.1 43.690 0.19 35.2 5.00 0.7 39.4 710.42 16.509 0.953 0.25 16.00 0.2 11.2 0.9 NS NS NS NS NS 0.0 17.5 3.0 9.7 2.5% 5.6 35.9 26.30 37.000 20.42 16.9% 12.January 2011 GERMANY Smaller Companies Review Gerry Weber FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.4 10.433 0.9 0.7% 4.30 - - - - - - 760.4 NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS 8.8 23.4 3.2 3.5% 1.5% 6.4 3.3 0.4 20.0 11.8 24.4 670.5 1.4 31.75 49.1 8.0 36.85 3.8 7.662 20.0 21.1 12.0 26.4% 9.7 0.7 2.9 56.5 14.2 2.0% 3.0 7.7 730.00 0.0 2.0 NS NS NS NS NS 0.9 24.02 15.71 0.3 37.690 20.3 0.8 NS 0.0 2.75 2.3 2.3% 2. adjusted Treasury stock.7 10.7% 3.68 16.7 7. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.7 9.3 1.2 39.5 6.9 13.4 35.21 26.0 NS NS 15.0 15.9 NS 0.9% 2.9 4.08 18. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.2 13.509 22.4 9.9 7.8% 0.5 NS NS 16.78 15.7 19.4 758.2 10.71 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.8 17. of shares.09 15.8 11.9 0.2 28.4 14.000 22.3% 2.0 NS NS NS NS NS 0.3% 5.50 1.000 - - - - - 36.690 0.3 31.5% 1.3 2.4 29.0 NS 26.690 0.8 NS 30.9 8.3 25.0 NS NS NS NS NS 0.8 42.3 4.0 0.662 0.4 43.0% 2.cheuvreux.30 21.2% 10.47 12.3 0.5 5.5 2.40 1.00 0.0 NS NS 15.953 0.3 42.6 31.3% 2.4 24. adjusted Av.6 2.433 23.9 2.7 1.1 9.92 29.2 12. number of shares.8 25.75 2.00 3.000 20.1 28.75 49.

operating margin range of 13-15% by 2012E. As of 9M-10. 8% and 7.2% Q1).0%. c) the discontinuation of one-off investments in the Media division (roll-out of Ad Measure).6 9. and GfK's results in the first three quarters have also consistently beaten expectations.1 9.January 2011 GERMANY Smaller Companies Review ADVERTISING 2/Outperform Rating +8.9 8. for which we estimate sales growth of 10%.8 1. Stock data Market capitalisation Free float Enterprise value No.3%. b) operational leverage.83m Performances 1 month 3 months 12 months 13.4 12.3 27. assumed market share gains of ~2% plus acquisitions made in 2010.0% 2009 2010E 2011E 2012E 17.7%) whilst Media sales (+5%) have yet to fully regain momentum.8 Yield (%) 1. The company's margin expansion is being driven by a) continued robust organic revenue growth in the high-margin R&T area. adjusted Daily volume EUR1328m EUR571m EUR1834m 35.5 1.4 P/E (x) EV/EBITDA (x) Disclosures available on www.5% in Q3-09) and 12. 37.3%.9% Absolute perf.8 7.9% 7.0 17.3 17. GfK posted organic sales growth of +7.5%).3 32. and we estimate another 60bps increase in the adjusted operating margin. and also via small acquisitions.3 37. +5. Although Custom Research has seen a rebound as expected (organic 9M-10 +6. its crown jewel. GfK's main absolute earnings driver remains the R&T division. 1 in R&T in China (and many other emerging markets) – we expect this share to continue to grow both organically on the back of its global OEM customers. As of 9M-10 net gearing had been reduced to 63%. new end-market verticals (e. we see its guidance as minimum of what will be achievable.3% in Q2.3 12.5 17.g.4 1.3 17.cheuvreux.1 13.3 22.2 1.9%). Assuming a continued modest recovery in global economic growth. 27% in 2009) and operational leverage in Custom Research (6% vs.DE Bloomberg: GFK GR Organic growth. in particular in Custom Research.8% 16.V.3 22. we see GfK on track to approach the upper end of its targeted adj.cheuvreux. Network Intelligence Solution).2% organic) and an adjusted operating margin of up to 13.g. 13.com (49) 69 47 89 75 25 10/09 . FCF yield (%) 15.9 1.9m EUR 0.4% -0. leverage.com Q Q 114 www.5% 53. comprising ~4% market growth.3 15.2 7. 9.1 6. (x) 1. 13. Pages Jaunes. tourism and fashion). Q EUR37. and new product innovations (e. investments paying off Q Recent developments – accelerated recovery in MR demand The pace of recovery in market research has consistently surprised on the upside. also as part of the group's BISS cost improvement programme.8 ROCE (%) 9.4%). Given the seasonal strength of Q4 and the fact that the order backlog as of end-October already covered 98% of budgeted sales growth in 2011 (+3%). and d) data collection cost improvements in Custom Research. Relative perf.3 7.9% for 9M-10 driven by the continued strong performance in R&T (29. Free Float 43.3 0.5% (est.3 03/02 06/03 09/04 12/05 Price/SDAX 03/07 06/08 Sector focus Sector Top Picks Least favoured Lagardere. of shares.9 Attrib. While emerging markets already account for 20-24% of sales – GfK is for instance no. the real positive surprise has been the further acceleration in top-line growth at Retail & Technology (R&T) (+11.3 27. Operating cash flow was also strong (+18%) and has been primarily used to de-leverage the balance sheet.1 Net debt/EBITDA (x) 2.3 12.1% EUR40.00 Target price (6 months) GfK Reuters: GFKG.3% margin in 9M-10 vs.2 EV/Capital empl.3 32.com 01/11 Price Craig ABBOTT Research Analyst cabbott@cheuvreux.3 01/01 7. The group adjusted operating margin in Q3-10 was 15% (vs.6% with momentum picking up from quarter to quarter (Q3 +9. GfK's emerging market growth potential is still significant. Reed Elsevier NV Seat Pagine Gialle Shareholders Gfk-Nürnberg E. 57.6 1.4% 8.8 14.2 6. We estimate for 2011E sales growth of +7. 6.1 1.5 1.2% after +8.00 Price (07/01/2011) Outlook – Robust growth in R&T driving earnings GfK confirmed with its Q3-10 results that it expects to reach the upper end of its guidance for sales growth of up to 6% (est. 3.5% in 2010/11/12E driven by continued geographic expansion in emerging markets.

but the current discounts on EV/EBITDA (11E/12E) of ~22% and ~26% are still unjustifiably high considering the two companies now have similar organic growth rates and especially given GfK's structurally higher profitability due to its high share of high-margin Retail & Technology EBIT (~60%). Western Europe/Middle East/Africa 37%. due to tougher competition/increasingly complex consumer habits A prolonged slump in demand in Custom Research could result in intensifying price pressure „ „ „ 115 New market entrants www. „ Custom research more economically sensitive than previously perceived „ Flexibility regarding acquisition opportunities currently constrained by still relatively high debt level „ Global market leader in retail tracking of technical consumer goods. It offers tailor-made information services for various areas.27bn (2010E) adj. Our main assumptions include: Q WACC of 8. The group's crown jewel is the Retail & Technology division. 60% of group adj. 30% of group adj.January 2011 Q GERMANY Smaller Companies Review Company profile Q The world's 4th-largest market research group GfK is the world's 4th-largest market research company with sales of ~EUR1. As the world's fourth-largest market research firm. Q High share of continuous research One of GfK's main advantages vs. Q Custom Research Custom Research (61% of group revenues.8% Q Investment case Q Q Retail and Technology – the growth driver R&T (29% of group revenues. 1 globally for Retail Tracking of technical consumer goods). competitors is its high proportion of continuous research. operating income) includes the sub-segments "Custom Research". operating income) offers tailor-made surveys as well as continuous data collection regarding media consumption. We expect this discount to unwind further. high-margin panel research. especially in Custom Research. „ Risk of overpaying for acquisitions/integration risk „ Migration of some data collection online leading to price pressure in some product segments „ Market growth that has consistently exceeded GDP/advertising growth „ Structural demand growth for quality market intelligence. including consumer markets and healthcare. GfK was not immune to the economic crisis. The valuation gap to its closest European peer Ipsos has narrowed in recent quarters. operating income) gathers retail information through continuous data collection. Opportunities Threats Entering into new products/geographical regions. and Media. Q SWOT analysis Strengths Weaknesses Strong market positions (no. and ~53% of its sales stem from stable. GfK is well positioned and has several well-entrenched positions. North America 17%. with several cost-cutting measures in addition to the BISS efficiency programme. especially in Retail & Technology and Media. Its workforce numbers ~9700. which accounts for ~63% of revenues and makes the business model more stable and more profitable. and Latin America 4%. and margins are quickly being restored. increasingly. Since 2008 GfK has operated three sectors (previously split into five): Custom Research. which accounts for ~60% of group earnings and still has significant growth potential as it expands its global footprint in emerging markets. 10% of group adj. „ „ High percentage of highmargin. Central & Eastern Europe 7%. operating income of ~EUR177m. Q Revenues by region GfK's geographic revenue split is as follows: Germany 26%. especially in panel research.cheuvreux. Market intelligence remains crucial to enable companies to make the right product and marketing decisions and historically has proven resilient. Valuation Our target price of EUR40 is DCF-based. relatively stable panel research (~53% of sales).0% Q Terminal growth of 3% Q Terminal EBIT margin 11. Asia-Pacific 8%. . The company responded. however. Q Media Media (10% of group revenues. Retail and Technology. "Consumer Tracking" and "Healthcare" (which were all still individual segments in 2007). 4 globally for Market Intelligence and no.com GfK offers small-cap investors a fundamentally strong franchise with still-solid growth opportunities at decent multiples.

126.0 0.0 0.9) 73.7 524.5 438.7 47.1 1.2 18.9 (50.1 745.0 0.0) 65.155.3 (2.3 44.0 -3.6% (477.7) 226.0 0.0% 937.9 -0.2) 1.5 232.6% 0.0 165.9) (587.0 0.6) 0.1 33.6 16.2 -6.3 0.8 123.0 0.0 (53.0 0.4 1.0 0.0 85.3) (614.4 237.1 209.0 140.0 80.7) (4.0 92.8 1.9) 111.0 0.6) 143.0 (11.6) (6.0 0.0 0.7) 3.9 45.1% (61.6 79.5 0.0 0.3 25.0 (10.1 61.1) 0.5 (30.0 (12.8% 0.3 296.4 101.8) 0.2 68.3 86.162.7 9.6) 187.0 49.8 60.6% (23.0 0.1 14.5 0.0 0.5 13.5% (19.0 11.4 791.8 448.150.0 (35.4 0.7) 139.5) 109.0 65.0 (74.3) (497.0 (28.1 21.0) (13.7 -9.8 46.7 0.7 260.0 66.0 0.3) 115.0 0.0 0.5) 84.8% 1.3) (534.1 201.6 757.5) 0.0 87.4 791.0 (14.1 216.0 0.8 50.0) 0.0 34.0 0.1 12.9 15.1 7.2% (59.7) 0.0 0.0 0.0 (24.9 0.3 0.7 242.1% (373.4) 0.4 5.5 12.4 146.4) 0.3% 0.0 0.3 www.4 46.0 0.4) (5.6 1.075. [inc.0 (0.3 0.5) 0.7 98.0 (16.220.0 187.150.0 42.0 -16.0 0.0 (24.2 11.3 88.2 38.3 502.2% 1.2) 132.8 104.0 (61.0 0.2 0.5% 1.0 71.6 0.0 0.075.112.1 124.0 92.0 0.2) 105.2) 58.6 736.9 39. profit [loss].5 -4.9) 0.4 18.8 1.0 87.0 0.0 (12.2) (21.5 (22.8 272.0 109.7 791.8) 0.0) (29.8 735.164.7 0.3 0.2 484.0 0.9) 3.1) (435.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 116 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 669.8) 121.9 7.0 0.5 14.3 27.5 40.4 (780.2 17.2 0.122.0 64.5) (17.0 60.8 -4.3) 0.0 (21.8 (16.5) 1.5 22.2) 3.126.453.0 0.7% 0.0 (17.0 0.2) (62.5) 0.6 20.8) 42.0 83.7 105.083.4 0.6% 4.0 0.1 24.0) 1.0 (11.9 1.0 0.0 0.5 (60.0) (2.9 21.9 17.1 107.366.3 (29.2 764.0 0.2% 0.5) (5.3) 0.0 0.5) 140.cheuvreux.2% 1.6 21.0 132.0 (22.7) 199.0 (11.9 41.2 (44.4 0.4 13.7 164.4) (4.8 (26.0 0.5% (465.0 76.0 0.0 0.0 (18.272.0 (16.0 73.0 (11.0 (25.0 0.0) 3.0 0.6 0.January 2011 GERMANY Smaller Companies Review GfK FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.3 8.0) 79.1 0.8 0.0 (61.9 27.3 27. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.6% 17.9 12.2% 1.0 139.0 (10.3) 4.0 (9.3 0.9 19.3) 0.0 0.0 0.0 0.1 4.0 53.0 (37.8 0.050.6 38.3 62.0 (66.050.7) 3.4% 15.8) 1.9 666.0 0.0 17.0) (25.1) (1.1 0.0 (49.5 (472.3) 108.3 41.0 (75.0 65.7 15.3 0.0 211.3) 92.5 93.8 (19.0 1.0 0.0 82.7 4.1) 192.8 -30.3% (551.088.3) 128.0 791.0 0.5% (50.7% 20.0 (8.0 0.3 0.8) 172.0) 200.0 58.4% (587.3 0.0 (15.3% 1.4 3.5 14.0 0.4% (282.8% 0.9) 107. for exceptional items Net attrib.4 46.0 51.6 (3.0% 1.9 404.0) (25.7% (59.6 28.3) 4.3) 0.0 8.4 20.5) (527.4 589.0 (9.4) 107.7 0.155.0 (8.0 30.0 (66.0 (9.7 1.1 146.0) 160.0 (30.9 190.9 (28.0 0.088.8) 3.4 25.6 155.7) (5.8 82.8 51.0 0.8 0.5 72.6) (5.2 47.0 0.0 0.8 440.0 209.8 141.5) 51.8) (1.2) 0.123.8) 0.2 34.5) 165.3 40.0 23.5% (11.7) (278.4 (14.0 0.4 0.0) 83.0 (8.7 65.4) 252.7% (67.0 0.7) 1.4) 1.4 22.2) 121.2) (497.6) 316.0 0.8 60.0 (64.1 0.0 103.0 0.7) 104.0) 76.0 (6.4) (21.083.1 389.0 0.3% (64.7% 0.6 316.1) (0.2) 83.0 (44.9) 0.2 477.0 91.4) 1.5 58.8 18.5 0.2) 92.4 (13.2% (45.4) 63.1 1.6% (59.3 121.0 0.6% 6.0 121.6 0.7 82.6 453.7) 0.8 (17.1% 0.6 113.0 0.2) 0.7% (442.6% 2.4% 0.3% (515.2) 0.8 60.0 (31.0 -30.0 92.2) 4.1 212.2 0.0 (51.0 0.6) 151.0 0.5 93.0) 0.7 6.4) (0.0 23.0 0.4) (557.6 0.com .0 83.2 185.0 120.8 60.9 11.0% 17.1 -12.5) 0.6) 127.3 489.0) 0.0 0.0% (494.0 0.8% 76.0 84.0 (6.2 15.

5% 18.5 7.8% 1.9% 1.1 1.2 8.1 1.7 8.149.8 15.8 15.8 1.834.00 0.528.58 24.6 22.2% 2.5 13.1 82.29 32.93 37.2 3.04 -12.1 2.44 -3.85 5.30 23.0 1.000 35.2 61.349.82 38.6 11.6 13.166.400 31.30 3.2 12.9 982.59 12.2% 1.00 0.08 37.1 21.000 35.7 3.7 0.1 7.35 5.8 10.2 18.6 1.8% 13.900 0.0% 2.60 38.1 15.84 37.3 1.900 35.1 14. restated EV/EBITA.12 49.3 9.2 12.6 18.7 17.2% 2.4 1.50 26.2 2.33 26.29 37.328.9 2.42 -30.9 22.9 14.4 14.23 22.3 0.8 19.42 -30.900 35.6 12.5 11.6 9.4 1.12 8.65 28.1 0.05 18.7 15.17 12.9 1.56 -9.cheuvreux.7 11.75 29.726.7 1.8% 11.7 1.4 No.0 7.58 25.0 0.4 1.1 17.1 1.1 1.0% 2.75 23.7% 2.6% 1.7 13.6 9.90 30.6 Goodwill per share Dividend per share Cash flow per share % Change Book value per share EV/EBITDA.3 2.6% 14.67 5.1% 12.6 18.5 1.8 13.3 0.9% 2.1 12.3% 7.3 0.9 113.6 9.09 27.2 10.7 19.6 12.3 18.0% 2.5 10.2 6.900 0.0 3.8 14.2 16.8 9.8 17.3 1.200 35.57 21.3 9.0 1.3 8.80 18.6 21.0 19.62 11.84 36.63 22.7 9.1 1.4 20.00 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.3% 12.3 1.1 6.2 1.80 33.3 1.3 9.2 17.1 1.000 35.36 3.2 15.328.0 15.00 23.57 21.6 7.6 15.1 12.30 2. reported % Change 1.2 9.46 3.34 36.27 13.5 19.8 0.3 10.00 0.6 1.000 35. number of shares.7% 1.0 2.3 21.6 10.8 16.2 1.2 1.34 8.551.1 5.4 1.8 5.8 1.5 1.3 1.0 7.500 33.2% 3.7 10. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 898.January 2011 GERMANY Smaller Companies Review GfK FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.00 0.1 1.1 NS 0.0 16.69 13. of shares.3 25.25 25.7 1.8% 3.9 1.45 4.3 4.8 13.2 16.50 39.7 17.9 8.1 10.5% 20.8 13.8 19.1 7.8 11.6 1.796.74 11.00 0.9 9.1 1. adjusted Treasury stock.7 1.80 29.8 866.8 14.1 11.8 6.700 35.0 6.584.05 18.1 11.00 0.02 31.2 16.7 15.9 6.4 8.2 8.000 28.3 1.3 NS 4.1 12.04 -12.0 6.9 15.24 28.900 0.9 6.3 9.900 0.7 10.4 8.29 13.93 -7.3 13.2 87.8% 0.1 1.0 28.85 5.42 4.0 5.3 12.8 10.6 13.9 2.200 0.1 7.3 2.3 11.0 0.4 1.900 35.6 16.6 15.8 22.2 17.7% 16.000 33.8 11.8 9.8 1.000 35.6 9.2 13.3 41.29 32.00 0.00 0.700 0.3 13.5 10.0 4.0 107. adjusted Share Price [Adjusted] Latest price High Low Average price 31.7 1.00 0.5 1.9 12.000 35.45 3.33 26.6 1.1 17.1 7.1 86.6 10. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.6 7.6 932.5 8.900 35.7 7.4 14.53 4.8 7. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.8% 1.4 12.33 3.6 1.1 1.35 5.6% 1.8 2.900 0.6 16.368.9 18.67 18.0 1.1 791. restated 117 www.12 49.4 6.5 1.5 1.9 17.7 8.9 4.0% 2.8 1.900 35.08 14.30 34.00 37.4 0.8 17.6 1.1 2.980.1 15.13 24.2 7.0 17.000 35.com .2 1. adjusted Av.500 0.400 0.0 10.75 29.

It does not rule out an acquisition per se. though.1 8.9m. H&R Wasag's most promising product. Thus. Thus.0 12. Nevertheless. but H&R Wasag is unable to fully participate as its two refineries are already running at full capacity. Prof. The company is optimistic that the gradual improvement in its market will continue with competitors shutting down production units in "grade 1" base oils every 2-4 years as oil majors cut back their refinery capacity. 43. is rising strongly. Free Float 43.5 Net debt/EBITDA (x) 1.5 1. H&R Wasag increased its EBITDA guidance range for 2010 from EUR85-95m to EUR90-100m after Q3-10 reporting. H&R Wasag hopes this situation can continue into next year.3 12.1 33.1 38.1 18. Fuchs Petrolub.cheuvreux.5% y-o-y to EUR267. the company sees better chances to grow organically. This is a concern for us.1 13. EBITDA rose 59% y-o-y to EUR27.1 28.1 28. H&R Wasag reiterated that it will stay with its currently loss-making business Plastics. FCF yield (%) NS NS 1.9%. (x) Disclosures available on www. a stand-alone specialty refinery is difficult to find. falling a disappointing 8% short of our estimate (EUR292.1 38.5) and 6% below consensus (EUR284m).1 15.8% 14.9 8.8 3.1%.1 7.3% -0. whilst its volumes at Chemical/Pharmaceutical Products National rose just 3% y-o-y .5% 2009 2010E 2011E 2012E 18. In base oils the supply/demand situation is currently balanced.7 EV/Capital empl. of shares. Lanxess Shareholders Nils Hansen 46.7 19.8m. adjusted Daily volume EUR633m EUR277m EUR814m 29. Wilhelm Scholten 6.3 14. as it follows an opportunistic approach.9% -2. it sees opportunities to further invest in higher-quality products beyond that programme.January 2011 GERMANY Smaller Companies Review DIVERSIFIED CHEMICALS 3/Underperform Rating -10.7 7. Sales in H&R Wasag's Chemical/Pharmaceutical Products International segment suffered from increased competition in Asia. As it revealed after its huge capex programme of EUR55m for its propane de-asphalting (PDA) plant in 2010/2011.3 ROCE (%) 12.3 Attrib. Market capitalisation Free float Enterprise value No.1% 39.0% EUR19.com (49) 69 47 897 763 09/09 . It posted just 5% segment volume growth in Q3-10.0 2.1 18.1 03/02 06/03 09/04 12/05 Price/SDAX 03/07 06/08 Sector focus Sector Top Picks Least favoured BASF.7 17.5%.1 23. but has no way of foreseeing how long it will last. Wolfgang Thum 3. However. we prefer other chemical stocks.4 1.8 1. which still prevail. Moreover.48m Performances 1 month 3 months 12 months 4.11 Price (07/01/2011) Outlook – Earnings drop likely in 2011 H&R Wasag is not willing to invest in a fuel refinery and denied any interest in acquiring Shell's refinery in Hamburg. Q EUR21. and reiterate our 3/Underperform rating on the stock. This is now in line with market expectations. We see the stock's valuation as stretched.1 P/E (x) Yield (%) 3. Relative perf.com 01/11 Price Martin ROEDIGER Research Analyst mroediger@cheuvreux.1 8.1 13.1 33.cheuvreux.9 2. demand for label-free plasticizers. which continue to benefit from positive earnings momentum.1m and consensus of EUR27.DE Bloomberg: WAS GR Stock data Recent developments –Q3-10 results were in line H&R Wasag's Q3-10 results were in line with expectations.9m.1% -2.1 EV/EBITDA (x) 9. leading to very comfortable base oil margins.1 43. This will improve H&R Wasag's positioning and thus its earnings in future. weighing on the share price.7 1.1 3. in line with our estimate at the time of EUR28. while earnings should shrink in 2011E.9 1.1 01/01 3.3 1.1 23.973m EUR 0. Sales rose just 26.7 1.com Q Q 118 www.00 Target price (6 months) H&R WASAG No trigger in sight Q Reuters: WASG. Base oil prices moved up substantially in H1-10. It hopes that due to the change in strategy (away from automotive towards medical) it can return to former profitability (EBITDA margins 2002-2005: 11-19%) – but we doubt it.0% Absolute perf.4 5.

b) selling prices. Thus. the stock trades at 9. For the time being.g.0x).0% and a terminal growth rate of 1%. This segment accounts for 100% of group EBITDA as the remaining Plastics segment (5% of sales) generated a loss in 2009. as in 2010 its earnings were buoyed by very favourable circumstances that are unlikely to reoccur soon: a) production problems at competitors (refineries) enabled H&R Wasag to increase its volumes and thus gain market share.6x. 4% above the average of the European chemicals sector (9. 18% in rest of Europe and 18% in the rest of the world. when the "Golden Cut" investment programme is expected to boost EBITDA by EUR12-14m. 64% of its sales were generated in Germany. 9% above the average of the European chemicals sector (8. our price target is EUR19. leading to shrinking earnings and most certainly margins in 2011E. The company's negative earnings momentum and inferior profitability justify a valuation discount to the chemicals sector. Its products include among others white oils for the cosmetics industry and plasticizers for tyre rubber.2x). suggesting 10% downside. we see no triggers for the share price in near term. The company will investigate the various options for the extraction of the deposits. However. In 2009 the company achieved EBIT of EUR45m on sales of EUR762m. e.com Valuation The stock is trading at a EV/EBITDA 11E of 8. After postponements due to financial constraints. H&R Wasag's ROCE is inferior to the chemicals sector. Moreover.January 2011 Q GERMANY Smaller Companies Review Company profile Q Niche supplier of raw materials for chemical companies H&R Wasag is a niche supplier of raw materials for chemical companies. Our rating is 3/Underperform. we expect the margin between base and crude oil prices to normalize. Q Investment case We believe H&R Wasag's earnings have peaked for the time being. Q Golden Cut project finally to commence in 2010 H&R Wasag is currently strengthening its chemicals/ pharmaceuticals pre-products business with investments (capex for "Project 40"). Our DCF model renders a fair value of EUR19 based on a WACC of 8. rose stronger than raw material costs (crude oil derivatives) leading to significant windfall profits in 2010. H&R Wasag's aim with this project is to switch production of certain low-margin (commodity) products into high-margin (specialty) products. Our peer group comparison shows no upside. Q Q Additional business in silica possible H&R WASAG AG finally obtained its licence to mine deposits of silica sand on the property owned by the group at Haltern am See.cheuvreux. Q Chemical-Pharmaceutical Pre-Products = 95% of sales WAS's 2004 acquisition of BP's specialty refinery more than doubled group sales and increased its sales exposure to the main chemicals and pharmaceutical pre-products segment from 66% (2003) to 95% (2009) of total group sales. Geographically. we believe investors will focus on stocks that can offer earnings and margin growth in 2011. this should already be largely discounted in the share price. The company is unlikely to report any earnings growth in 2011. the company kicked off its "Golden Cut" investment project in spring 2010. For 2011. just a price taker – dependent on pricing set by oil majors „ „ Niche player with leading technological edge „ „ „ Dependent on major shareholder H&R for distribution in Germany (64% of sales) Opportunities Threats Taking over non-core activities of major oil companies „ Growth opportunities in eastern Europe and Asia „ Introduction of tyre labelling in EU in 2012 could boost sales „ No 1 player in label-free plasticizers in Europe with 25% market share in that region Increasing competition from Asian companies „ Regulatory risk (REACH programme) „ 119 www. Thus. H&R Wasag expects an EBITDA contribution of EUR1214m from this project by 2012. . This project is not expected to have any major impact on earnings in the near term. however.7x. In terms of P/CF 11E. We see H&R Wasag's valuation as stretched. Investors will have to wait until 2012 for earnings and margin expansion at H&R Wasag. base oils. Q SWOT analysis Strengths Weaknesses Leading position in crude-oilbased specialties for the chemical and pharmaceutical industries „ Time lag in passing on raw material costs to customers „ Adverse cost structure due to huge exposure to Germany „ Cost leader in lubricants blending in Europe Not a price leader. while other chemical companies will probably increase earnings in 2011.

0 11.0) 0.0 38.0 33.7 6.2% 0.0 44.2 181.4 0.5 3.7 49.8 3.8 245.1) 46.1 0.0 (2.0) 0.5 0.1 5.0 31.7 0.0 (18.0 0.4 18.4 -42.8 99.2 294.0 0.0 0.0 0.0 19.1 5.0 -4.5 (8.2 29.0 (8.6% (39.6) 0.4 0.9 -2.7 0.8 35.4% (19.0 (5.2 89.0 (2.0 0.3 19.2 -27.0 0.7% 816.9% (21.2 113.1) 83.9 65.0 142.3 0.8 -8.8 60.4 129.1 3.0) 0.7) 6.4 40.4 0.3 49.9 0.4 35.1 62.1 2.6) (64.com .0 0.0 (17.0 0.0 22.1 1.0) 6.4 48.2) 109.5 203.4 11.1 2.0) (627.0 0.2 51.7 -2.3 0.1 0.9 164.0 45.0 0.2 152.0 0.0 133.3 164.0 51.1 50.7 4.0 43. profit [loss].5% (16.4) 102.0 0.0 (0.3 268.8 22.1 30.0 0.9 11.0 0.6 162.9) 0. [inc.057.0 0.2 96.0 51.7) 0.0 0.099.6) 74.0 37.3) 0.4) (60.3% (84.0 (2.0 (11.4 23.5) (7.3 NS 797.7 0.0 0.8) (29.2) 100.1) 0.0 0.1) 0.5 470.4 58.1) 43.0 0.0 (13.9) (394.0 (1.6) (24.0 (9.0 33.7 126.0 220.7% 0.3 80.0 88.0 0.5 0.9 (9.0 0.5 (74.3 0.4 19.9) 84.2 365.1 20.2 (6.0 0.0 (8.0 52.0 0.6 -8.0 0.2 29.0 (8.0 0.0 0.9 37.0) (11.7 (8.0 365.4% (69.5 145.6 48.8 50.0 0.7 29.1) 0.6 35.9 0.9 11.0 25.6) 0.6) 79.5 0.0 0. for exceptional items Net attrib.3 305.0 (14.0 45.6) (47.1) (4.0 0.9 35.5 38.0) 93.0 (10.7 20.006.5% (0.7% (62.2) 0.4) 0.4 1.1) 3.7 132.0 0.1 135.7 -1.0 (5.0 0.0 48.0 0.3 0.3 0.8 60.7% (2.4 293.9 122.5 196.9 30.7% (20.0 0.5) 0.0 490.7 -11.3% (78.0 190.0 0.0 0.0 268.5 19.6% (26.5 72.6% (92.7% (75.0 0.7) 0.9 56.January 2011 GERMANY Smaller Companies Review H&R WASAG FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.035.8% 1.7) 19.3) 37.2 -5.6) (906.9) 10.2 139.2 168.1 63.2 19.0 0.2 0.0 0.2 180.0 0.5 22.0 0.8) 0.7 0.9 85.8% 650.9) 0.6 105.0 0.0 81.0 (29.4) 0.1 0.1 2.0 28.7 www.0 44.4) (8.0 44.0 0.0 (12.0 0.8 25.1 -53.1) 92.0 (22.0) (22.3) 43.9 35.6) 0.0 0.7 -2.0 71.2% 0.0 0.2 1.3 361.0 3.2 104.6 11.6 0.0) (880.0) 0.2% (16.0 0.0 44.7) 71.6 26.5% 1.3 120.2 35.5% 5.7% 8.6 (39.9% 762.0 0.3) 0.0 0.3) 14.4) (835.0 0.9) 65.0% (16.5 118.1 16.0 (9.8 305.9 9.0 6.5 172.4 38.4) 79.0 0.0 0.0 0.5 218.8 218.0) 0.0 (21.0 0.9 7.3 24.3 (43.0 0.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.5) 0.0 0.7) (919.0 33.0 (1.1 15.0% (13.0) 9.0 117.0 0.8 0.3) 32.0) 0.3 -12.3) (14.3 0.9 470.8) 44.0 7.0 16.7) (623.0 81.0 (24.6 (60.0 26.1 0.4 113.6 35.0 84.7 0.4% (18.7) 7.3 1.2) 0.8 33.3% (21.0 33.2% 0.9) (628.0 (0.1) 53.0 0.4 44.0) 0.9 32.4% (67.3 0.0 0.1 5.0 5.0 (0.0 162.4% (51.1 (11.9 294.0 51.0 0.8 361.9 217.0 0.0 (0.2 436.0 (2.0 (18.0 0.7) 0.7% 0.0 11.1) 0.1 55.3) 0.5% 0.0 79.8 40.3) 0.8 14.0 0.0) 0.1) (42.9 0.9% (77.0 0.3 43.0 34.0 52.0) 9.4) 0.7 -19.0) 0.4) 0.4 49.7) 0.0 25.4 71.0 0.1 0.1) 0.4) (526.9 0.8 490.0 0.9 0.0 126.8% 1.5 436.0 25.9 -11.3) 45.3 (7.2 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 120 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 497.8 46.3 19.7 55.3 -26.0 83.0 (29.1 2.0 28.1) 81.6 53.6 0.7 42.0 (12.1 0.7) (33.6 7.3 -13.5 279.0) 35.0 0.7% (18.6 0.3% 29.7) (3.0 (18.0 (5.2 71.9 50.0 -25.8 7.1 4.5) 28.0 0.4% 0.5 (7.7 (62.0% 40.9 30.9% 1.0 15.6 6.0 0.cheuvreux.0 121.6) 0.0 34.0 52.3 0.1) 25.3) (21.4 34.9 293.1% (13.8% (78.

0 4.7 11.05 12.0 7.9 3.20 17.0 0.71 21.6 NS NS 2.9% 0.3 7.9 17.8% 0.2 3.3% 6.2 7.6 9.2 1.30 0.20 14.8 449.5 26.6 0.3 9. restated EV/EBITA.52 52.973 0.45 -12.8% 1.4 2.7 12.62 -1. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.75 18.7 0.000 29.24 42.1 8.7 47.8 12.6 0.0 18.1 4.7 8.01 98.4 57.9 11.00 0.5 17.07 8.4 368.8% 1.6 18.4 10.8 8.3 2.4 2.7 20.1 9.9 14.5 9.021 21.32 10.00 0.8 2.1 5.7 5.3 20.4 7.9 0.4 22.7 2.9 9.00 0.6 8.0 12.5 2. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share No.0 26.6% 0.6 3.0 40.2 3.1 1.6 17.6 18.1 12.7 8.8 11.916 0.9 804.06 NS 2.7 4.3 11.3 9.6 0.57 10.916 0.75 18.1 1.44 20.6 5.0 635.5 10.0 8.5 15.05 22.1 12.2 56.27 40.000 29.0 87. number of shares.6 3.6 0.916 18.8% 1.0 1.54 -48.6 2.02 20.5 303.8 18.5% 1.8 1.9 5.7 11.6 326.8 14.54 10.1 19.43 38.45 8.4 4.5% 1.8 9.7 1. adjusted Treasury stock.1 17.4 NS 2.7 6.73 10.3 22.9 1.55 11.916 18.3 2.3 14. adjusted Av.00 0.0 10.1 4.75 6.7 7.6 NS 2.7% 5.3 630.11 21. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.3 42.8% 0.5 20. of shares.5 26.7 632.60 2. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.3 1.8 1.1 1.8 10.3 8.48 71.4 1.34 32.4 5.8 19.8 8.0 47.6 7.11 9.4 10.3 5.40 1.83 -25.8 0.9 7.5 17.5% 4.52 4.1 4.3 203.5 0.63 30.9% 1.21 30.000 29.973 0.3 7.4 0.2 15.1 13.3% 0.4 7.70 2.6 2.0 9.3 8.1 4.3 0.3 22.000 21.60 3.67 14.7 0.80 1.82 7.973 29.com .00 0.3 723.000 18.4 8.35 17.00 0.19 -11.2 1.000 8.4 2.6 12.000 29.0 632.85 7.7 23.7 24.9 853.48 -13.4% 8.8% 4.75 10.7 797.8% 1.1 7.6 1.2 1.5 4.973 29.4% 5.45 1.0 597.9 118.021 0.8 72.7 NS 6.00 0.88 21.90 21.5 1.8 14.48 -13.7 4.29 0.9 40.8 12.9 58.3 69.000 29.10 0.9 4.8 2.12 -2.8 553.973 29.7 9.11 - 161.cheuvreux.1 NS 3.16 -43.7 1.8 14.00 0.8% 0.6 8.5 13.11 21.71 22.2 54.71 104.7 www.55 21.1 13.January 2011 GERMANY Smaller Companies Review H&R WASAG FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.3 12.7 9.8 8.3 35.3 5.7 18.9 19.0 0.8 12.30 1.4 1.4 6.4 10.973 0.5 60.0 5.64 20.9 13.7 814. restated 121 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.60 2.8 22.3 3.9 2.973 0.4 12.1 0.61 56.973 0.0 4.12 -2.4 12.6 12.5 35.65 9.83 -25.98 16.0% 2.1 15.3 9.2 29.3 2.1 9.06 NS 1.973 29.0 3.16 -43.5 16.3% 1.8 14.0 3.7 465.9 0.89 13.81 10.973 29.8 0.66 7.71 104. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.8 29.1 2.1 10.7 3.80 12.973 29.973 0.8% 1.0 12.8 2.5 NS 3.7 3.000 29.2 62.3 2.3 162.5% 7.

In the current economic recovery. America +7% to EUR81m (all y-o-y). Europe (+2% to EUR63m) and N.71 Price (07/01/2011) Reuters: HDDG.8 10.6 1.4 71. We are at the upper end of guidance and exp. driven by extremely strong business in Brazil.4 61.8 NS Net debt/EBITDA (x) (13. SIEMENS AG Alstom.4% -39. services. adjusted Daily volume EUR863m EUR712m EUR1475m 232. we do believe the stock market is willing to play the speculation again and again. EADS.2%.DE Bloomberg: HDD GR Stock data Market capitalisation Free float Enterprise value No.4 for moderate y-o-y sales increase and break-even EBIT.0 7. The q-o-q decline stemmed from the order boost in Q1 of ~EUR100m from the IPEX trade fair.5% -2.com Q Q 122 www.4 21.3m.4% 15. E.4 LatAm provided the strongest order intake growth in Q2 10-11. (x) 0. Relative perf.3% -53.8 Attrib. sales growth of 12% y-o-y to EUR2.6 Disclosures available on www. Asia/Pacific +33% to EUR228m.84bn (+11-20%). we expect HDD to emerge strengthened from the crisis. During the CC management guided for order intake of EUR600-700m per quarter in H2 10-11.2% 09/10 10/11E 11/12E 12/13E P/E (x) NS NS 15.0% Absolute perf. Having faced the toughest period in its history the past 3 years.9% 1. +5% y-o-y and -17% q-o-q. 1. After years of underinvestment in printing equipment. together with reduced capacity among all industry players.4 51.64-2. implying FY 10-11 orders of EUR2. Rwe 4. but crisis not over Renewed rumours of a potential merger between HDD and Manroland are positive in our view.0 ROCE (%) NS 1.4 Q Outlook – Better prospects.January 2011 GERMANY Smaller Companies Review MACHINERY 2/Outperform Rating +56.4 5. 71.929m EUR 3.6 1.80 Target price (6 months) Heidelberger Druck Resurrection of a world market leader Q Recent developments – capital increase HDD announced on 12 Sept a subscription price of EUR2.cheuvreux. Disagreement about the joint leadership and cultural issues could be solved by pressure from main shareholder Allianz. or a y-o-y order intake growth range of 7% to +9% for H2 10-11.4 31.0 0. is likely to improve pricing.0 0. Nexans. FCF yield (%) NS NS 0.6 0.3 0. Rolls-Royce Shareholders Free Float 82.4 41. We expect order intake to remain robust for the balance of FY 10-11E at EUR690m in Q3 and EUR710m in Q4. This. of shares.0 EV/Capital empl. we expect HDD's financial result to be less negative at ~EUR-135m for FY 10-11E (March) and EUR-95m for FY 11-12E.com (49) 69 47 897 540 10/09 .6%. 61.58bn and EBIT of EUR21. Allianz Ag 13.4 31. capital increase) and will make optimal use of the profitable growth opportunities that lie ahead (emerging markets. consumables).4 51.cheuvreux. We believe it has taken the right steps (deep restructuring. However. Q2 10-11E order intake remained strong with the final figures matching the preliminaries at EUR650m.3% EUR5.42m Performances 1 month 3 months 12 months -1.2 8. We currently exp.com 01/11 Price Hans-Joachim HEIMBUERGER Research Analyst hheimburger@cheuvreux. demand is returning.5 4. public criticism of job losses would probably be milder. Although w doubt this combination will actually happen.4 During its Q2 10-11 release.4 21. HDD reiterated its FY 10-11 guidance 11.4 41.7 to raise gross proceeds of EUR420m.6 0. Q3/Q4 10-11E orders of EUR690m/EUR710m. Due to the capital increase.4 04/02 07/03 10/04 01/06 Price/M DAX 04/07 07/08 Sector focus Sector Top Picks Least favoured ABB. a +74% y-o-y jump to EUR47m. 01/01 1. the fact remains that Heidelberger Druck is active in a structurally declining industry that will never return to its former peak. but still a net loss. EUR3. Order intake in other regions was as follows: EMEA +17% to EUR231m. Serious antitrust issues surmountable through plant closures or divestments.4 11. The 155m new shares have been included in the existing listing on the stock exchange since endSeptember.3 EV/EBITDA (x) NS 12.6 0.1) 3.0 Yield (%) 0.

The past two FYs have been loss-making again.com Valuation We use three different valuation approaches for HDD shares: A normalised earnings model. net working capital of less than 35% of trailing 12M sales. and capex of 2%.5x to its current equity position. a net debt/EBITDA ratio of below 2. however. With a market share of ~41% (3x that of its closest competitor).GERMANY January 2011 Q Smaller Companies Review Company profile Q World's largest manufacturer of sheet-fed offset printing presses Founded in 1850. and will make optimal use of the profitable growth opportunities that lie ahead (emerging markets. demand is returning. it is the world's largest manufacturer of sheet-fed offset presses. This. a pre-tax ROCE of 15%. We believe it has taken the right steps (deep restructuring. and c) a highly negative financial result despite relief from the capital increase. China and the USA. 1 manufacturer of sheet-fed offset printing presses with ~41% global market share. b) significant opportunities in emerging markets.57x is well below its historical 10-year average of 0. Key end-markets include commercial and packaging printing. especially for lower-end machines. Q Mid-term targets are optimistic Mid-term. HDD guides for sales of above EUR3bn. a historic price/book value analysis. ~3x that of its nearest competitor „ Opportunities Threats „ Growth „ „ prospects in emerging markets and in packaging „ Intensified Cost base still highly exposed to high-cost countries „ Huge negative financial result despite capital increase Structural customer concentration and price erosion in industrialised countries production shift to China „ Exchange „ Rising remote services (internet) could lock out third-party service providers 123 rates (EUR/USD. Q SWOT analysis Strengths Weaknesses Global no.7x. Slovakia. After years of underinvestment in printing equipment. .500. we reiterate our 2/OP and with a TP of EUR5. Q Our normalised earnings model yields a FV of EUR6.000 machines worldwide which provides huge services potential that the company has neglected in the past. consumables).cheuvreux. Heidelberger Druckmaschinen (HDD) has been listed since 1997. and we expect another loss in 10-11E of EUR79m due to a) the sharp sales drop during 2009-10 which it has not fully recovered from. we expect HDD to emerge strengthened from the crisis. services. Heidelberg divested loss-making activities (digital and web systems) that had accounted for 17% of FY 03-04 group sales and returned to the black. Q HDD's current 2010-11E EV/Sales ratio of 0.000 printing machines were sold over the past 15 years offering huge potential for Services. together with reduced capacity amongst all industry players. R&D below 5% of sales. 60. Its manufacturing sites are located in Germany. b) structural problems within the printing industry. and a historic EV/Sales analysis. covering the complete product range from pre-press to finishing (including software solutions). an equity ratio of 33%. Its workforce numbers 16. a post-crisis EBIT margin of >5%.7.6/share. material and energy prices „ Increasing share of online advertising in overall ad spending www. The company should achieve its ambitious midterm targets (see company profile) thanks to a) an installed base of 240. HDD offers a proprietary sales organisation with a presence in over 170 countries. Q Q Still expected to be loss-making in FY 10-11E Following the first losses in its history in 2004-05. USD/JPY).5x. capital increase). we arrive at a FV of EUR5. is likely to improve pricing. Q Investment case Having faced the toughest period in its history the past 3 years. Q Applying HDD's 10-year historical average P/BV of 1.8. All in all. Switzerland. c) the fact that HDD offers by far the best and most up-to date product portfolio in the industry as it did not cut back R&D during the crisis as sharply as some peers.

5 251.0 (1.224.1 0.2 954.0 (228.3 (160.0 (25. for exceptional items Net attrib.7 0.3 133.0 0.9) (33.0 0.6 1.3 2.163.0 0.0 132.9% 169.2 0.0 0.2) 58.0 0.7 2.4) (158.9) (58.696.0 0.2 157.496.4 -20.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 124 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11E 2011/12E 2012/13E 3.0 (2.5) 8.9 24.3% (1.5) 0.7 0.3) (4.0 (77.0 223.0) 262.1 0. profit [loss].3% 0.1 1.544.5 26.0 267.0 (50.0 116.0 0.0 0.9) 0.5% 2.5) (116.1 107.0 198.3 (30.3% (1.0 0.1) (30.4 NS (1.6 2.0 (55.583.5 1.0 154.4) 0.9 206.6) (1.8 (68.9 788.1 420.4% 0.6) 30.0 0.6 (94.0) (44.7) 198.0 0.890.201.2 694.0 13.0 0.0 (228.0) (128.0 0.1% (816.3 2.065.5) 277.301.9 35.077.1) 0.2 666.6% 0.0 1.0 0.8) 212.0 277.9 123.6 0.0 883.0 0.8 49.1) 119.1) 0.0 1.8 -46.2 157.4% (94.3 2.7 24.0 (158.5 2.0 0.3 579.0 167.1) 134.1 (98.8 (62.096.4 611.7 55.0 (78.6 164.2) 167.3% (134.0 (46.7) 0.0% 0.0 0.3% (96.1 175.940.8 620.0) (53.5 NS (98.0 (1.1) (1.8% (113.0 0.2 2.3 (128.4) (31.4) (30.0 61.0 0.1) 55.9 0.5 2.8 NS (56.3% 3.0 0.0) (8.0 219.0 1.6 0.488.0) 141.3 113.8 490.1 110.2 8.2% (128.2) (13.0 (37.0 647.0 0.5 53.0 54.6 190.0 0.0 0.0 0.9) 0.cheuvreux.0 0.5% 0.4 467.5) (338.0 157.2) 0.5 125.0 0.0 0.9 10.4 725.0 0.0 (248.0 0.0% (784.7) 0.5% (105.3 2.7 0.5) (9.560.0 0.0 1.679.8) 0.1 (1.9) 0.9 0.0 0.0 0.0 1.5 0.7 0.0 (78.853.2% (92.3 33.6) 0.8 2.3) (227.9 413.5 424.7) 40.8 0.7 1.1 35.6 167.2 (20.5 796.0 0.7% (1.0 142.5) 0.670.0 54.0) 134.2 141.0 0.3 549.0) 7.0 0.0 0.0 0.0 0.0 49.5 51.3 2.1 157.0 0.560.4) 0.0 51.7) 0.5 169.4 103.0 0.8 30.3 12.1% 2.4 900.195.0 317.8% 0.3 -10.4) 0.1% (1.8) 361.0 (57.0 0.0 361.0 (248.3 0.0 0.7) (2.0 55.9 0.579.0 83.0 (248.2) 21.487.0 (3.062.0) 0.2 219.0 103.0 0.0 0.0 116.0 27.5 2.0 1.4) (80.0 0.4 -23.802.0 0.0 38.6 475.8 150.0 0.4% 40.1% 0.0 0.4) (30.5 0.5 652.6) 266.1 24.0 0.6) NS 0.5 2.380.0 (6.8 85.9 0.8) 174.0 211.242.9) 490.5) 0.6 49.4) (124.6 171.5 0.7 45.1% 3.6 46.5 103.0 0.6) (1.0 54.7 0.3) (2.1 107.0 0.0% (805.7 3.0 0.5 102.0 (21.5) (1.7% (114.099.310.4) 15.0 137.1 413.6 NS 0.7) NS 165.0 92.0 0.0 0.0 1.0 0.8 490.138.8 549.1 (46.0 0.6 82.1 16.0 (78.590.1% 2.6) 267.6) (2.5 -18.0 225.7 697.1 65.0) (108.5 0.1) (1.0 www.0 0.038.9) 65.487.9 0.0 0.9% (14.4 (113.1 440.182.4 2.590.6) (127.9 0.1 2.7 43.0 (94.0 0.0 0.0 57.9) 0.0 0.3 -3. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 0.0 0.8) 311.7) 0.9 47.0 0.8 16.6 19.3) 170.5) 0.5) 0.0 0.7) (32.0 21.0 0.0 0.1) 0. [inc.103.1 24.919.8 6.2 169.3) 411.1) (52.0 1.5% (1.594.0 265.3) NS (99.7 0.0 0.2 2.179.5) 0.0 0.0 70.0 0.4% 26.9% 3.0 64.0 0.2) (123.2 856.1 0.8 -26.3) (30.0 0.0 170.4 402.6 164.8 1.2) (162.1 263.0) 412.192.0) (759.0 2.999.0 0.7) 27.0 (74.0% (798.1 (47.1 0.1 125.0 83.8) (2.0 125.5 -42.2% 175.495.9 125.0 0.0 (0.2) 391.5 187.360.1) 55.0 0.137.5 6.9 594.306.0 0.0 (227.9) 0.0 0.9) 4.8 101.January 2011 GERMANY Smaller Companies Review Heidelberger Druck FY to 31/3 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.8 0.327.3 594.6 0.0 225.224.0 (228.3 45.0 137.242.9) (96.380.5) 0.1% 3.4 29.543.0 0.7 43.0) (52.6 788.5 599.0) (49.2% (123.4 812.9 582.3 680.4 0.0 0.437.2) 0.007.0 0.2 12.0) (124.0 56.0 1.6 720.8 0.0 596.8 6.9) 281.669.0 1.0 400.6 0.9 47.585.4 40.0 (36.594.0 98.579.3) (142.148.0 83.com .729.8 0.0) 419.9 2.0 0.1 (77.7) NS 2.6) (55.9 120.6) (119.0 (78.3) 0.0 0.7 -25.

99 3.000 85.35 26.71 3.81 NS 4.6 34.3 0.9 8.6% 1.1 32.6 NS 2.0% 0.5 2.2 12.8 1.00 0.7 863.0 0.2 5.4 6.2 1.1 12.0 6. adjusted Av. adjusted Share Price [Adjusted] Latest price High Low Average price 85. number of shares.000 232.64 2.8 NS 1.929 0.32 33.0% 0.00 (1.77 3.2 0.0 1.5 8.8 11.7 NS NS 7.90 30.1% 3.00 34.2% 4.6 12.2 5.9 1.95 5.05 6.January 2011 GERMANY Smaller Companies Review Heidelberger Druck FY to 31/3 (Euro) 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11E 2011/12E 2012/13E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.33 7.073.9% 0. adjusted Treasury stock.64 107.2 85.6 0.9 9.2 20.000 77.8 0.1 11.50) 27.1 3.82 -43.00 0.3 10.0 39.00 0.357 0.8 4.4 43.0 9.8% 1.03 0.2 NS 0.929 0.400 0.3 4.90 3.5% 0.8 NS NS 0.6 12.000 78.1 41.6 0.7 4.600 77.0 5.6 7.929 232.6 7.747.9 NS 4.4 EV/EBITDA.4% 13.7 1.59 32.126 78.00 0.9 0.5 0.0% 0. of shares.21) NS (3.74 23.5 1.89 10.5 24.6 12.7 3.760.7 863.307.3 2.2 47.400 81.8 1.64 107.01 0.0 4.0 4.7% 3.4% 7.6 0.26 101.0 4.117.64 35.2 7.6 1.8 8.00 40.22) 85.5 8.6 14.000 25.00 0.0 11.34) 88.52 3.5 12.3 46.908 85.8% (3.96 3.8 1.6 0.36 53.126 0.908 0.0 8.0 12.1 6.7 12.6 1.2 9.2 0.1 NS NS NS NS 0.600 0.30 2.2 1.6 0.0 15.6 0.391.96 NS 12.000 77.8 5.4 863.4 0.483.04 133.357 85.98 19.84 13.5 5.0 0.0 10.5 6.6 0.00 (2.5 No.0 2.113.2 40.23 169.600 0.840.41 3.7 4.3 1.95) 8.9 9.3 NS 1.8 4.48 5.000 81.0% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.22 -40.3) NS NS 0.8 0.21) NS (2.6 (88.5% (0.07) NS 10.7 0.6 1.00 0.5% 14.9 29.95) 8.80 4.0 6.0 120.0 1.65 6.36 32.6 8. restated 125 www.8 15.0 10.0 10.64 56.1 2.0 NS NS NS NS NS 1.3% 3.95 3.6 0.cheuvreux.30 34.7 52.5 3.7 5.1% (0.0 0.4 0.91 14.000 232.7 1.0 1.34) 88.5 6. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.9 1.8 4.4 0.87 5.04 0.6 10.8 412.929 232.9% 1.7 6.5 33.9 268.475.5 5.7 3.2) 12.1 5.00 0.74 2.6 10.8 7.929 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.8 8.30 21.00 0.5 0.5 0.5 38.1% (2.5 1.9 0.71 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.3 3.60 21.0 0.5 2.000 232.02 5.5 7.41 -22.600 77.6 0.482.83 -43.9 39.8 0.1 0.3 0.9 3.58 146.5 0.6 NS NS NS NS NS NS NS NS 1.6 0.1 13.23 104.00 (0.8 1. reported % Change 0.5 0.4 8.0 NS NS NS NS 1.71 8.7 11.6 0.6 14.0 1.3 0. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 2.299.9 5.0 NS NS NS NS 0.4 69.5 12.4 5.2 43.8 18.88 41.23 169.com .71 3.3 NS NS NS NS NS 1.0 2.8 1.35 26.36 (14.4 5.3% 13.7 7.61 151.6 2.8 2.6 24. restated EV/EBITA.36 53.9 1.9 1.9% 1.929 232.047.5 20.89 6.7 0.0 0.

0 35.0 25.cheuvreux. sales in excess of EUR1bn and EBIT of around EUR180m. They are earmarked mainly for deployment on the Asia-Europe-Asia route.0 65. Relative perf.January 2011 GERMANY Smaller Companies Review SHIPPING & LOGISTICS 2/Outperform Rating +27. Having said that. defined as ships which can handle 10.9 ROCE (%) 15.4 10. we now assume FY10E Rev/TEU of EUR103. the dredging of the Elbe River to deepen its bed by one metre is of paramount importance for the Port of Hamburg since large ships. which is also of paramount importance for Hamburg as TEUs on this route account for 59% of Hamburg's total container throughput.0 24.6. This sturdy growth showed that HHLA is actually winning back market share at the expense of both Rotterdam and Antwerp. rising 28% yo-y and 17% q-o-q to 1.4 EV/EBITDA (x) 13.63m EUR 3.05m Performances 1 month 3 months 12 months 4. While HHLA expects to see a recovery in storage charges once the global container shortage eases.3 EV/Capital empl. the statement was fully in line with the timeline we apply in our model. implying Q410 Rev/TEU of EUR100. which we estimate at EUR16-18 per TEU.9 3. Furthermore. Such ships can currently only use the Elbe River during high tide.0 35.8% 18. the financing for this infrastructure project is secured.00 Target price (6 months) HHLA Reuters: HHFGn. with Intermodal volumes up by more than 11% y-o-y.5.7 0.1 8. FCF yield (%) 2.1 20. as shipping lines have learned to operate their logistics operations more efficiently.DE Bloomberg: HHFA GR Delayed Elbe River dredging a burden Recent developments – Strong business momentum in H2 but delayed Elbe River dredging a burden Q In Q3-10 HHLA's group sales climbed 17% y-o-y and 7% q-o-q to EUR287m. a y-o-y rise in group revenue to around EUR1bn and an EBIT margin of at least 15%.3% 3. with a rising proportion of lowermargin feeder volumes. but could use a dredged Elbe at all times of day.0 15. We see Rev/TEU rising again to EUR104. it does not anticipate a return to pre-crisis levels. while the Container division's EBIT margin reached 30% in Q3.5 20.1 3.1 5. at EUR101. i.619m (our estimate: 1.0 55. Net profit came to EUR27m.5 1.0 45. The company had previously predicted 2010 volume growth of more than 10%.0 35. (x) Disclosures available on www. Germany's federal government and the City State of Hamburg stated that they still expect the dredging work on the Elbe River to start by year-end 2011. driven mainly by a rising proportion of low-margin transhipment volumes and lower storage charges. This statement came as a slight disappointment as we had hoped for a positive dredging decision in Q4-10 with construction work to start in early 2011E.1 5.7 Attrib.4 3. 65.3 (0.5 in FY11E followed by EUR105.e.5 2.8 0. Free Float 32.7 23. predicting more than 15% y-o-y growth in Container TEU volumes in 2010.0 0.5 in FY12E.3 3. account for nearly half of all cargo ships currently being manufactured in the world today. The group EBIT margin was very strong at 21%.0%.0 25.2 16.1% EUR44. where Q3 volumes were up by less than 20% y-o-y. After the strong Q3-10.cheuvreux.4% -7.0 55.com Q Q 126 www.com (49) 69 47 897 540 08/10 . of shares.2% 4. Q EUR34. we expect the Elbe to be dredged for 2012E. Stock data Market capitalisation Free float Enterprise value No.1 13.1) Yield (%) 1.9% 19.8 2. HHLA raised its guidance.000 TEUs or more.com 12/10 Price Hans-Joachim HEIMBUERGER Research Analyst hheimburger@cheuvreux.62 Price (07/01/2011) Outlook – Elbe dredging of paramount importance Clearly. With revenue per TEU handled (Rev/TEU) having reached its lowest level since Q4-07 in Q3-10.0% 2009 2010E 2011E 2012E P/E (x) 37.9 Net debt/EBITDA (x) 0.0 45.0 11/07 15. In a statement released on 8 November.49m).2% Absolute perf. adjusted Daily volume EUR2514m EUR804m EUR3659m 72.0 04/08 08/08 01/09 06/09 Price/M DAX 10/09 03/10 Sector focus Sector Top Picks Least favoured Shareholders Freie Und Hansestadt Hamburg 68. Its Q3 container TEU volume was very strong.

400km) accounts for 97% of the total distance but just 70% of the total transport costs. based on 12E forecasts. After 9M10 we estimate HHLA's market share to be back at >17%. and its top 15 87%. Q Transport cost advantage due to attractive inland position The Port of Hamburg is a crucial transport link between Asia and Central/Eastern Europe. time and regional location are gaining importance again vs. handling prices. its top 10 customers 75%. vertically-integrated port operator and logistics company holding market shares of 71% in Hamburg and 16.com Valuation DCF: assuming sales and EBITDA CAGRs of 2. This scenario offers 28% upside potential to our current 12E estimates and the FV could rise to as much as EUR50. Its customers appreciate HHLA's highly efficient hinterland connections. our DCF model renders a FV per share of EUR41.6m TEUs (mainly transhipment) lost to other North Range ports in 2009. Q Q Investment case HHLA winning back market share: in 2009 HHLA's market share in the Hamburg-Antwerp range fell from 19. yields a FV per share of EUR47 with the following inputs: EV/sales of 4. when transporting a container from Shanghai to Prague via Hamburg.cheuvreux.January 2011 Q GERMANY Smaller Companies Review Company profile Q Germany's top port operator with deep vertical integration Hamburg-based HHLA (Hamburger Hafen und Logistic AG) is a leading.1x for Intermodal and 1. . Normally.4-0. In its Intermodal business (29% of sales) HHLA transports containers by rail. Q Q Extensive service offering in addition to container handling In Container Handling (2009: 57% of sales. 93% of EBIT).4% and 1. 1. recording a 28% y-o-y rise whilst Rotterdam and Antwerp both showed less than 20% y-o-y growth. Hence. starting in 12E HHLA can regain an estimated 0. This indicates that handling quality. HHLA offers intermodal and logistics services.9% respectively for 2010-19E. The remaining 3% of the distance and 30% of the transportation costs arise between Hamburg and Prague.5% terminal growth. Q SOP: our SOP model.8% and 2. in Q3-10 HHLA began to win back market share and outperformed on TEU volumes. Q SWOT analysis Strengths „ Weaknesses Market leader in Hamburg One port with one access 'bottleneck': the Elbe River „ Customers appreciate high level of vertical integration „ „ Long term: visibility of growth „ Highly capital-intensive „ High share of minorities Transport cost advantages due to location „ Opportunities Threats Strongly benefits from an economic recovery „ „ Delay of Elbe River dredging Long-lasting global recession hitting global trade flows „ 127 www. In Logistics (14% of sales) the company offers a comprehensive range of services for a variety of cargos.000km). Multiple comparison: our peer group valuation shows HHLA to be trading in line with other ports and at an 8% discount to its transport/logistics peers based on 11E EV/EBITDA. Huge upside if positive Elbe dredging decision comes soon: We believe that if the Elbe dredging is finished by start of 12. However. Besides operating three container terminals in the Port of Hamburg and one in Odessa. We expect this trend to continue.8x for the Container division.9% to just 16. the two most important emerging markets. sea or road from the ports to the hinterland in Germany and to Eastern/Central Europe. The distance from Hamburg to Prague (700km) is shorter than Rotterdam-Prague (1. Q Q Normalised earnings model: indicates a FV of EUR39 in a base case and EUR48 in a bluesky case. these multiples fail to capture HHLA's strong recovery potential and its positive upside potential from a swift Elbe River dredging decision that may lead to completion by YE-11. the transport from Shanghai to Hamburg (roughly 20. In 2009 HHLA's top 5 customers accounted for 48% of its total sales. container shipping lines pay HHLA to load their containers onto or off ships and to store and repair the containers.6% due to weakness in key end-markets and a temporary shift of transhipment volumes to its peers. In a blue-sky scenario (completion of Elbe River dredging by the start of 2012) the FV rises to as much as EUR50. for example.100km) or AntwerpPrague (1. the final transport segment from port to final destination is more expensive from these other two ports than from Hamburg and raises overall transport costs appreciably. It has a structural/geographical advantage due to its location 100km inland. However. This trend continued in H1-10. a WACC of 8.3x for Logistics.6% in the Hamburg-Antwerp range.

8% (11.9% 0.154.266.240.4) 0.7) 239.6% 1.5 (38.7 (83.6 102.6% (133.6) 0.2 325.0) (18.8 9.8 313.3 13.0 0.5 0.7 29.2 0.0 78.6 31.0 0.1) (515.0 111.0 0.1 64.0 0.0 0.0 0.2 (21.3) (100.8) 0.6 14.3 0.0 323.7) (183.0 71.9) 0.1 66.1 (18.2) (564.9 857.0 55.0 0.5 (12.8) 0.2 12.6 957.6 (34.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 128 2006 2007 2008 2009 2010E 2011E 2012E 1.0 0.1) 219.2) 160.0 99.0 (1.1% 34.8 0.8) 362.0 112.0 -66.3) (5.3 18.0 0.7) 0.5 1.8 0.2% (236.3 208.9 10.1 23.0 101.0 0.1 (102.1 8.1) 53.com .6 7.0 38.January 2011 GERMANY Smaller Companies Review HHLA FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.4 0.0 0.0 0.0 0.0 0.0) 152.7 186.0 (29.0 0.8% 0.7% (288.6 32.7) 111.4) 229.044.5 212.1 0.0 0.4 873.7) 0.1 377.8) (484.2 22.6 1.0 0.9) 0.8% (143.0 80.6 (30.0 68.8 12.4) (37.0 0.8) 244.1 7.4) 0.5 91.7 -25.5 329.0 193.8 598.7 0.4% (280.0 (71.0 0.0 10.9) 65.6 0.7 0.0 0.6 323.044.326.4 3.3) 218.3 276.9% (247.0) 102.7 68.0 250.3 0. for exceptional items Net attrib.0 9.0 0.0 0.1 13.3% 71.0 287.0 160.0 106.5 -39.3) 0.0 (43.0 97.4) (5.3% 1.1 (202.0 0.0% (266.0) 2.4 186.018.296.7 1.0 258.0 0.8% 204.0 0.0 19.5 0.0 133.3 534.0 (61.0 16.9 0.0 0.2 0.6) (70.0 0.0 0.0 (36.2 0.0% (78.0 (44.8 0.7 0.6 676.0 89.5 0.0 53.5 761.2) (535.4 127.0 0.0 218.2 -54.8 86.7 0.9) 378.9 186.0 0.0 0.0 106.4% (27.2 (56.4 22.254.0 (34.8) 97.3 0.5 8.4 59.3% (284.019.0 139.3% (122.0 (106.4 53.9% 0.0 0.6) 71.0 (69.8 102.6) 0.0 123.4 -34.326. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.1) (100.7% 990.0 1.2) (34.0 0.240.1 7.0 102.2 0.9% 1.0 102.0 229. [inc.5 0.0 0.0 166.2 0.7% (91.0 (43.2% (12.0 (59.9 20.0 0.326.0 (57.0 0.7 35.017.0 0.1 103.7) (428.8 186.2 0.4) 0.0) 0.0 (127.6) (33.266.154.9) 0.6% 0.6 www.0 0.6% 0.0) 200.1 (31.7% (101.0) 287.7) 258.0 (15.0 160.0 63.0) 123.0 0.7 312.3 1.4 (30.7) 306.2% 1.0 (36.0 907.6) (90.2 5.3 0.1) 0.0 (19.0 82.5 1.0 0.0) 0.0 183.9 203.2 325.1 108.2) 296.1 0.9% 0.164.1 48.1 61.0 1.5 152.4 41.8) NS 1.0 0.5) 277.0 111.068.8 (113.0 0.9 1.5) (539.4 24.1) 0.0 0.0 0.3 250.0% (261.9) 0.7) (101.2 0.4 15.7 163.2 (34.1 56.5) 0.7 0.5 300.0 0.4 325.0 93.0 (104.0 123.2 70.2) 456.9 755.5 0.0 (2.7 32.0 (37.7 43.8 0.7 0.7) (589.4) 183.5) 401.0 217.0 (143. profit [loss].0 0.0 0.cheuvreux.3 1.0 0.2 12.1 0.0 0.0 0.1 74.5 325.0) 19.3) 213.0) 174.3% (45.296.0) 116.8 18.4 181.6 0.3 1.1 (31.7 100.8 7.3% (117.0 1.0 0.2) 0.1) 0.180.4 231.3 916.3 574.1) 0.5 0.0 10.0 0.4 1.1 1.6 50.3% 1.5% 0.6 230.0 116.0 (11.0 115.2 42.0 0.0 109.6 27.8) 355.1 29.6) 13.1 681.9 482.0 (40.2 0.0 355.3) 160.

9% 0.73 -66.3 0.99 35.8% 1.6 0.5 0.31 13.9 0.7 60.1% 6.6 3.7 13.6 29.5 35.9 16.1 21.5 2.5 14.1 4.2 25.26 43.8 8.7 4.7% 2.com . restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.3 2.4 22.000 72.8 32.1 4.5 20.8 0.3 16.21 42.7 12.4 12.0 9.089.4 2.630 72.4 20.1 1.8 8.03 0.99 35.88 20.000 72.36 1. reported % Change 1.5 3.4 11.6% 2.0 54.5 1.8 0.0 37.73 -66.1 11.0 0.5 16.4 1.55 13.0 35.8 2.0 9.706.4 31.00 2.430.9 10.3 19.1 18.9 32.1 9.4 5.525.42 35.82 No.1 1.3 3.9 0.630 0. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.5 5.45 22.00 1.15 25.9 1.61 2.40 2.00 0.1 3.630 0.630 72.8 1.01 0.4 23.69 19.5 2.000 72. restated 129 www.664.0 12.6 0.6 17.9 3.509.8% 8.5 24.1 37.0 1.1 26.0 24.4 4.960.8 24.8 11.8 12.00 1.69 19.97 34.630 0.3 37.2% 0.00 4.1 5.0 3.1 22.514.4 18.630 0.62 35.63 34.630 72.8 12.7 10.5 3.44 28.7 33.2 NS 60.7 10.4 8.5 1.78 16.5 72.8 16.4 16.3% 7.99 32.5 7.9 0.94 0.85 3.636.7 13.0 11.3 2.5 3.0 60.8 0.2 3.2 8.9 32.3 0.5 16.00 0.00 67. adjusted Treasury stock.000 72.659.7 14.3 8.630 72.2 9.1% 9.7 3.4 10.6 13.2 1.85 3.45 29.41 43.2 2.000 72.630 72.1 24.0 3.4 16.493.9 NS NS NS NS 12.630 72. adjusted Av.0 1.4 12.2 10.3% 5.0 5.0 16.3% 1.4 15.6 4.62 - - 4.1 NS NS NS NS NS 0.95 17.1 28.34 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.4 1.4 32.4 32.1 1.48 23.4 NS 32.4 1.1 10.0 45.92 -34.90 5.cheuvreux.4 15. of shares.70 23.630 0.2% 1.4 2.3 2.630 0.2 9.4% 7.02 26.8 39.1 19.0 39.4 26. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.0 0.3 3.6 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.1 55.13 34.8% 2.81 34.3 10.000 - 61.2 127.January 2011 GERMANY Smaller Companies Review HHLA FY to 31/12 (Euro) 2006 2007 2008 2009 2010E 2011E 2012E 1.9 3.8 20.41 43.7 3. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.4 10.0 12.3% 1.630 0.3 61.21 44.630 72.1 16.3% 1. restated EV/EBITA.53 14.3 34.02 4. number of shares.7 17.4 60.00 0.000 72.9% 0.7 5.81 29.5 17.7 26.50 57.4 4.6 17.6 13.514.0 28.5 1.5 9.50 61.7 9.0 20.0% 0.55 35.50 61.

2% margin).1% 2009 2010E 2011E 2012E 18. an additional acceptance period was extended to 18 Jan (terms unchanged). In addition to gaining a new strategic shareholder. need to sell assets initially to raise the funding that would be required to achieve the 50%.0 10.0 70.98% to 27.0 9.7 per share.0 40.0 EV/EBITDA (x) 8.0 30. either via a trade sale or an IPO. Treasury Shares 4. enabling it to consolidate Hochtief. Given its leveraged balance sheet.1) P/E (x) Yield (%) 2.2 0.0 70.January 2011 GERMANY Smaller Companies Review CONSTRUCTION & INFRASTRUCTURE 2/Outperform Rating +4. with the biggest positive 2010 surprise so far being its strong margin performance in the Americas division.7 0. which at the current share price would cost ~EUR850m. Stock data Market capitalisation Free float Enterprise value No.0 90. adjusted Daily volume EUR4285m EUR2785m EUR9293m 66.4% -7.34%) by the end of the initial tender period.cheuvreux.6 28.cheuvreux.0 4.32m Performances 1 month 3 months 12 months -5. with the shares to be acquired by Qatar Holding LLC. however.6 5.0 90. despite the sharp declines in orders in 2009 in its US building activities at Turner (pre-tax profit Q1Q3 +31%. the disposal of its Concessions business in 2011. Clearly a low-balled offer – Hochtief's share price was already above the offer price at the time – ACS' strategy was to simply exceed the 30% threshold by the end of the offer period and then to expand its stake further over time.com (49) 69 47 89 75 25 10/09 .0 80. the move initially diluted ACS' stake from 29.7 NS 4. Hochtief's largest shareholder.0 04/02 07/03 10/04 01/06 Price/M DAX 04/07 07/08 Price Sector Top Picks Least favoured ADP. which initially valued Hochtief at just EUR55.6 8. (x) Research Analyst cabbott@cheuvreux. Hochtief reconfirmed its FY10 guidance for sales in line with 2009 but with pretax and net income both slightly above 2009 levels.DE Bloomberg: HOT GR ACS exceeds the 30% threshold Q Recent developments – ACS increases stake beyond 30% In September ACS. announced a voluntary exchange offer for Hochtief shares.6 18. Hochtief announced ambitious measures to crystallise the value of its portfolio of assets to include the consolidation of its three European divisions (expected annual savings ~EUR40m).2 20.3 (0.7 7.0 100.9% 8.0 60.3 0.0 60. Free float 56. 100.3%.9 4.5 2.1 15. Bilfinger Berger Shareholders ACS 30. Relative perf.5m EUR 18. Qatar Holding LLC 9. FCF yield (%) 3. which ended on 29 Dec.com Q Q 130 www.00 Target price (6 months) Hochtief Reuters: HOTG.7 32.46%.22 Price (07/01/2011) Outlook – ACS likely to gradually increase to majority stake Having increased its stake beyond the 30% threshold.8 Craig ABBOTT Disclosures available on www.6% -3. In early December Hochtief also announced a 10% capital increase excluding subscription rights. of shares. At least partially in response. Q EUR61. ACS is likely to be a natural buyer in the market – over time – until it is eventually able to acquire a majority stake.5 ROCE (%) 29.0 20.0 01/01 10.0 40.3%.9 3. ACS in the meantime increased its offer to 9:5 (equating to EUR64 per share). ACS may.1 5. Because of provisions made previously.0 80.1 36. and according to a press statement (4 Jan) it succeeded in increasing its stake to above the 30% threshold (30.09%. It offered 8 ACS shares for 5 Hochtief shares.0 30.8 2.0 50.0 50. Operationally Hochtief reported solid results through the third quarter.5% EUR64.3 Attrib. Hochtief was able to largely offset the AUD120m project-related writedowns that had been previously announced by Leighton. ideally eventually to over 50%.0% -15.0 20.9 Net debt/EBITDA (x) 0. and pulling forward the planned disposal of its Aurelis real-estate portfolio to 2012 (1 year ahead of plan).com 12/10 Sector focus EV/Capital empl.6% -15.6% Absolute perf.

it generates less than 10% of its group sales in Germany today. 64% of PBT). real estate and industrial facilities. High correlation to Leighton Hochtief's Asia-Pacific division. 4% of PBT). accounting for ~42% of sales and ~65% of pre-tax profit. Furthermore.5x for Services. multinational customers „ German construction market remains highly fragmented with poor pricing discipline resulting in low profitability in European construction „ Increasingly diversified portfolio of business activities. Europe (12% of sales but just 4% of PBT). including now trying to accelerate the disposal of its Aurelis property portfolio. Although it is still the largest construction company in Germany (based on market cap). but the move also underlines that there is hidden value in Hochtief. Leighton Holdings Ltd.0x for Turner. We value the Concessions division at EUR1. Regardless of the outcome. however. Q Q Operates six divisions The group operates six divisions: Americas (334 of sales.January 2011 Q GERMANY Smaller Companies Review Company profile Q A global. Applying a P/E of 10x. Hochtief operates a diversified but inter-linked portfolio of businesses designed around covering the entire lifecycle of infrastructure. which it is confident will generate a significant gain. Hochtief has been prompt in stepping up measures to crystallise the value of its portfolio.cheuvreux. Q Investment case Hochtief's share price performance in the near future is likely to continue to be dominated by how ACS's tender offer develops. EV/EBIT multiples (based on 10E estimates) of 6. Concessions (generates only marginal reported sales of 1% but accounts for 12% of PBT). and Services (3% of sales. a move which is expected to generate ~EUR40m in savings p. 15% of pre-tax earnings). Real Estate (4% of sales. 3% of PBT).a. especially in the US and Australia „ „ Tendering for PPP concessions projects (Road & Social Infrastructure) „ „ Project risks (construction) and asset revaluation risks (property management) Amid lower activity. long-term contract mining business of Leighton and Services „ Commercial building activities may face prolonged downturn „ Leighton's Australian mines produce above-average yields making them less susceptible to shutdowns „ Opportunities Threats Well positioned to benefit from economic-stimulus-driven infrastructure and public building projects. reducing exposure to new building demand „ Share price highly correlated with the share price of its listed subsidiary. diversified construction services company. . is the group's main earnings contributor. Hochtief plans to consolidate its three European divisions. Qatar's recent investment in Hochtief was a strategic move to 'acquire expertise as it builds out its infrastructure ahead of the 2022 World Cup'. 5x for the Europe division.3bn. risk of rising price/margin pressure on bids for new projects „ Stimulus-based orders may not be able to offset decline in orders in commercial building „ Acquisitions in Services Traffic and tariff recovery at airport and road concessions FX risks (USD & AUD) (translation) „ „ 131 www.5x for Flatiron. Our key assumptions are 90% of the value of its 55% stake in Leighton Holdings. and pursuing a dual-track disposal process for its Concessions business in 2011.com Valuation Our target price of EUR64 is based on a SOP valuation approach. diversified construction services company Hochtief is a globally leading. Hochtief's share performance has historically exhibited a high correlation to that of Leighton's shares. 5x for Real Estate and 7. comprising predominately the activities of its listed subsidiary Leighton Holdings (55% stake) in Australia. 7. Q Q SWOT analysis Strengths Weaknesses Global footprint – an increasingly important factor in winning/retaining large. Asia-Pacific (46% of sales. this implies a further EUR400m or ~EUR5 per share. Therefore. (55% stake) „ Relatively stable.

0) (13.6 7.2% (68.9% 19.7) 567.3) 287.4) 1.591.0 0.6 0.2 (661.377.8) 0.0) 1.7) 0.7 11.505.0 407.455.3) 435.3 1.0 0.2 75.4 0.6 0.0 (212.4) (0.563.5 158.0) 0.608.7) 5.0 0.7 4.3) 0.0 0.6 3.2 14.7 1.0 0.703.0 0.6 11.2 24.9 4.465.9 0.7 538.306.039.8) (223.726.6 3.0 (112.0 (244.4 751.0 (136.0 270.823.8% 0.0 81.3) 1.0 0.3) (440.0 225.0 (105.497.January 2011 GERMANY Smaller Companies Review Hochtief FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.161.758.9 2.4% (2.8 71.3% (2.8 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 132 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 11.6 56.7) 0.5 0.0 0.1 -29.5) 123.0 324.0 0.0 (62.0 (88.9% 16.3 7.0 140.3 133.6 0.6) (0.1) (13.7 703.4 563.1) 0.4% (286.0 0.7) 156.119.6 1.3 1.7 0.0 33.892.8 58.6 266.4) (428.3% (2.0) 0.0 156.0 (124.0 80.1) 63.3 2.373.0 323.6 288.6 1.1 41.3 4.0 75.0 530.4) 0.5 -5.0) 604.5) (0.319.0 (897.4) 0.0 0.109.6 1.6) (1.4 329. [inc.664.0 0.807.7 1.373.3% 18.5) (98.8 745.4 0.4 5.4 0.0 0.2 31.3) 418.0 0.0 0.0 0.071.0 0.3) 270.3) 140.0 0.8 74. for exceptional items Net attrib.5 (128.0 0.1) 0.0 (261.5 0.0 33.6 7.0) (531.0 0.3) (201.305.9 (202.0 (40.210.0 (221.4) (10.0 0.4) 1.4 www.1 8.1 1.0 0.8 -3.0 0.0 0.723.064.0 41.5 227.806.9) NS 1.0 0.9 1.2) (904.1 0.653.7 929.7) 138.0 (104.5 -35.4 299.6 3.703.4 (496.5 0.9% 19.3) 0.8 52.545.1 72.2 9.7 0.8 6.2 76.9 0.726.9 2.703.1 72.001.499.0 4.0 (249.791.305.8) (750.8 0.8 615.5) (4.625.6 21.2 82.283.943.6) 0.0 0.0 151.7 1.4) 0.8 20.8 94.0 0.0 366.7% 59.358.1 7.0 0.2 172.1 (84.3) (29.4 5.026.3 1.608.2 79.196.7% 195.0 (1.5 1.3 682.166.157.6) NS 1.2) 156.1 (737.0 (302.8% (3.3 14.0 0.451.0 (167.2 232.9) 440.0 0.8) (14.2 10.9) (1.8 1.5% (428.5 0.4 (184.6) NS 4.210.1 0.1% (392.0 0.0 (260.9 0.4) 4.0 (112.6 0.5) 179.6% 17.7) 679.0) 0.073.8 5.2 924.7) 1.5 2.6 51.1% (324.3% 0.4% (55.2) 5.0 195.1 71.634.319.0 525.310.7 11.2 5.8 0.924.3 1.3 1.0) 526.com .6 0.0 383.0 (198.2 431.6) (14.0) 675.1 35.5) (9.4) (357.0 (653.8) 0.0 (129.0 0.0 276.1 -2.7 545.0 0.3) 89.0 0.0 (124.2 0.503.7) 0.0 0.0 89.0 0.4) (645.423.9) 288.2 16.cheuvreux.7 900.0 0.0 466.6) 4.6% (312.0% (44.0 895.5 29.0 675.0 (217.5) (271.319.3 209.3 (91.9) 0.591. profit [loss].0% 343.0 123.9) 280.0 0.0 0.834.8) NS 5.1% (1.0 0.0 341.305.0 0.1% 353.0 0.0 280.4 (650.0 604.0 0.1 29.7 71.1 72.583.1) (5.8 537.0 1.0 0.157.9% (460.3) 225.243.9) 0.310.1% 0.0 (952.0 0.0 0.1 13.5) (6.224.0 526.5 0.0 205.6% 0.6% (470.101.1 0.4% (3.8) 3.0) 0.4) 525.0 0.6 1.8 0.5 406.8) 504.8 0.5 9.548.0 0.0 0.9% 0.8% 0.9% (3.9 -1.8) 1.0% 18.842.9 0.1% (501.0 156.6 0.0 0.6 1.4 2.0 0.2 4.0 0.9) (703.791.9 (111.5 -13.0 0.6 1.0 278.256.0 (192.3 0.0 80.0) (262.6% 13.6 (1.6 1.2 0.501.8% 15.690.4% (1.0 0.2 48.2) 0.0 477.4 431.7% (3.0 (160.0 (177.0 (211.2) NS 3.145.8 28.0 0.0 408.9 18.4) (1.2 294.5) 62.9) 195.4) 930.0 (124.1 0.6) 0.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 0.265.9% (460.2 0.0 0.1 72.9 431.0 0.0 -31.0 2.4% 0.4 71.0) (393.0 0.7) (13.9 654.4) 986.530.002.0 201.5 (936.7 0.0 494.0) (1.0 (112.0) 882.931.0 469.3) 205.3) (14.0 0.1 1.5 431.0 -11.1 0.0 422.7 4.6 3.0 (200.3 2.626.2) (297.2) (374.3 86.757.0 (1.0 0.9) (12.1% 18.0 0.873.0) 0.5 1.2 85.7% 0.8 0.638.7 356.0 287.0 0.0 179.892.397.1) 410.5 (71.0 0.3 24.0 313.5% 0.569.0 0.7) 5.301.0 0.7% (262.0 0.6 105.0 (106.0 0.7 13.0 235.7 13.3 6.297.0 62.1% (3.1) (93.764.027.8 211.0 378.7 0.0 0.0 0.0 0.6 0.3) 716.1) 169.6 0.0) 41.0 0.5 1.5 0.163.0 (173.3 2.0 (195.

1% 2.900 64.29 5.1 9.285. adjusted Share Price [Adjusted] Latest price High Low Average price 63. of shares.30 9.1 2.2 2.13 15.447.179.400 63.07 51.1 38.1 11.8 9.0% 2.7 62.500 0.7 19.3 NS 1.000 69.8 8.1% 4.5 29.3 5.500 66.7 NS 0.89 19.5 6.6 2.93 62.2 8.1 17.2 10.7 2.9 1.00 0.8 1.22 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.5 NS 2.33 46. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.27 -5.4 0.5 8.3 3.64 10.com .4 0.7 35.2 8.05 7.8 9.7 1.8 9.2 6.39 9.2 36.1 11.20 59.1 4.00 1.1 6.8 7.5 9.900 67.9 3.100 0.0 15.6 NS 80.00 1.8 36.98 5.748.83 37.3 12.30 5.8 5.99 26.2 19.4 40.10 8.4 0.501.100 63.575. adjusted Treasury stock.1% 3.6 2.3 8.1% 23.0 NS 0.53 40.37 38. restated EV/EBITA.9% 2.00 1.50 36.99 52.0 44.4 44.60 4.7 10.3 18.7 0.1 NS 62.1 11.6 NS 52.6 9.0 8.8 0.9% 2.0 5.43 4.000 66.16 37.9 2.2 37.99 35.6 6.07 20.3 5.2 1.000 63.5 9.61 13.0 2. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share EV/EBITDA.2 1.669.0 2.5 8.74 91.65 153.8 3.94 30.7 2.1 4.28 92.40 10.500 66.6 0.8 4.500 0.9 2.7 3.9 20.5 0.00 0.3% 0.500 0.31 50.5 13.71 20.7 12.440.34 29.7 1.77 13.7 4.9 7.7 0.4 9.3 1.0 2.5 8.43 55.1 10.9 5.9% 3.2% 1.2% 33.3 6.9% 4.41 4.94 22.400 0.8 32.78 54.94 30.9% 32.000 64.0 0.000 66.32 7.679.2 0.3 0. number of shares.5% 1. adjusted Av.4 0.5 7.400 69.1% 25.3 32.5 3.2 NS 115.6 NS NS 3.39 9.6 17.4 2.1 1.4 2.617.500 0.1 5.3 7.000 23.5% 2.2 38.5 NS 1.9 0.400 0.2 NS 0.67 60.4 9.285.2 40.648.8 3.00 2.9 NS NS 3.6 12.26 8.50 13.09 5.7% 0.3 9.85 14.7 15.cheuvreux.55 60.3 4.4 0.0 4.5 2.0 15.4 8.2 28.6 3.985.900 0.00 98.7% 36.1 18.January 2011 GERMANY Smaller Companies Review Hochtief FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.8 4.00 1.1 9.3 9.1 NS 0.293.1% 0.5 1.5 18.0 0.0 NS 90.5 4.4 NS 1.847.4 3.8 0.8 0.8 36.6 0.1% 3.90 6.80 21.09 5.7 6.75 5.500 66.1% 2.07 20.9 25.3 5.8 3.95 24. restated 133 www.4 2.37 38.0 16.1 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.4 52.2 3.4 3.65 -29.2 22.1 3.91 77.1% 26.99 52.69 25.26 8.7 3.69 45.0 3.4 52.2 5.1 NS NS 2.9 3.2 2.7 4.09 56.0% 3.16 53.402.40 35.6 20.46 61.90 16.5 13.508.0 51.00 1.4 15.1 21.54 67.5 1.5 5.07 51.6 17.2 9.4 4.1 NS 0.8 2.3 24. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.1 1.0 0.22 64.4% 34.8 28.5 4.000 66.8 20.92 61.8 4. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1.6% 31.000 67.1 0.2 NS NS 5.1% 26.000 66.8 3.1 2.8 5.455.8 15.5 3.5 No.39 63.2 18.1 NS NS 4.5 4.9 15.9 18.0 5.4 9.6 1.6 20.7 2.900 0.500 66.5 5.00 1.6 4.2% 0.1 5.

com (49) 69 47 89 75 35 Q 134 www.5 1.7 3. (x) Q EUR99.6%.40 Target price (6 months) Hornbach Holding Turbulent times ahead Q Reuters: HBHG_p. This resulted in it reporting 2.0 80. The only remaining weak links are now Hornbach's Czech and Rumanian stores.4 NS NS NS Net debt/EBITDA (x) 1. Relative perf. of shares.7% 48.cheuvreux.2 0.0 100.2 EV/EBITDA (x) 3.0 01/01 04/02 07/03 09/04 11/05 Price/SDAX 01/07 06/08 10/09 01/11 Price Sector focus Sector Top Picks Least favoured Ahold.5 0.7 3. Hornbach was able to offset the 1.0 70.14 Price (07/01/2011) Disclosures available on www. adjusted Daily volume Jürgen KOLB Jennifer GAUSSMANN Research Analyst jkolb@cheuvreux.com . The positive trend was sustained in Q3.6 10.4%. with less unemployment and a positive outlook in terms of household income. Q2 sales were also boosted by the company catching up on gardening sales lost in Q1-10 as well as by the positive trends in terms of economic and consumer sentiment.9 2. The company's German business also reported positive l-f-l sales growth of 4. returning positive like-for-like growth of 2. In 9M-FY10 Hornbach was able to increase its sales.1%.0 110.0 80.0 40. Market capitalisation Free float Enterprise value No.0 50.5 EV/Capital empl.0 90.4 ROCE (%) 11.0 60.5 1. in FY09 and FY10E to a planned 6-7 new stores p. King Fisher Plc 17.9% in Q2-10 after an unsatisfying Q1-10 with a l-f-l sales decrease of 2.2 10.0 2.0 30.4% 09/10 10/11E 11/12E 12/13E P/E (x) 7.0 90.4% 37. 110.7% l-f-l sales growth in 9M-10.1% 4. international sales picked up speed again in Q2-10.0% -4.9 1.0 60.com EUR397m EUR327m EUR856m 8m EUR 0. we see little potential for further positive developments in terms of gross profit and EBIT margins after FY10E.0 50.a. After the negative trend in Hornbach's international markets in FY09 and Q1-FY10.0 100. Carrefour Colruyt Shareholders Free Float 82.1% Absolute perf.com (49) 69 47 89 74 26 Research Analyst jgaussman@cheuvreux. The main reasons for the positive development in Q2 and Q3-10 were the overall economic stability in Germany.1 10.5 0. Additionally.0 40.9 11. With its strong Q2 and Q3-10.5 0. Q Outlook – …weaker quarters expected Looking ahead. which have yet to feel the positive impact of the economic upswing.3%. as well as the sunny weather.0 Yield (%) 1.4% 17.6% in 9M-10 for its international markets.13m Performances 1 month 3 months 12 months 0. Hence.cheuvreux.6 Attrib. with a l-f-l increase of 6. we see a rising risk of declining gross profit margins as 1) the company has indicated that suppliers have begun to exert pressure in terms of purchasing prices and 2) Hornbach already reported lower retail prices in H1-FY10.January 2011 GERMANY Smaller Companies Review SPECIALIST RETAILERS 3/Underperform Rating -25.a.0 30.7 1.0% EUR74.3 10. gross profit margin and EBIT margin. the increase in store openings in the company's international markets beginning from FY11E (from 2-3 stores p.DE Bloomberg: HBH3 GR Stock data Recent developments – Positive 9M-10 but ….0 70. from FY11 – in line with its annual level of new store openings in the years prior to the global financial crisis) will also lead to higher opex.5% Q1-10 like-for-like sales decline and therefore reported slightly positive l-f-l sales growth of 0. Its success was attributable to lower input costs and a positive sales trend in both nominal and like-for-like terms in Germany and its international markets thanks to the economic rebound.0 3. FCF yield (%) 28.9 10.

Q SWOT analysis Strengths Weaknesses „ Strong „ reputation and expertise in service Fragmented German DIY market opens the door to aggressive pricing and thus low margins „ Above-average sales per capita due to project focus „ High dependence on private housing and renovation market Opportunities Threats Energy-saving projects supported by the 'energy passport' in Germany „ Consumers postponing building and renovation projects „ „ Consolidation „ Slow recovery of eastern European markets of the German DIY market 135 www. but the company remains family-controlled. The shares are currently trading at a 2011E P/E of 11x. a 1% terminal growth rate and a peak EBITDA margin of 7. 94% of Hornbach Holding's sales stem from its DIY business. 4 and Europe's no. which are trading at 12x for the same period.4% are held by Kingfisher.000m².com Valuation We derive our target price of EUR74. we think this ~10% discount is justified by the shares' low liquidity and low transparency. Nevertheless. with the arising risk of lower gross profit margins due to higher input costs and lower retail prices. In terms of its business model. both in Germany and abroad. and its low ROE of 9% vs. Group and shareholder structure Hornbach Holding consists of three subgroups: 1) Baumarkt. However. which consists of parts of the group's real estate and 3) Baustoffunion. the rest is owned by the Hornbach family. The company's expansion with large-format DIY stores began in 1980 with the first DIY store of 8. Hornbach expanded to become a construction materials retailer in 1900. We believe the stock is close to its fair value at current levels and we therefore reiterate our 3/UP rating. Q Investment case Hornbach is Germany's no. In 2001 Kingfisher and Hornbach formed a strategic alliance. opened the first combined DIY and gardening store in Europe.GERMANY January 2011 Q Smaller Companies Review Company profile Q History Founded as a craftsman's enterprise in 1877.3% by Kingfisher.2%. as well as higher opex. Q Q Regional distribution Besides Germany (92 stores). 6 DIY retailer. we find very little to criticise. we believe the group's belowaverage operating margin of 5%.4 from a DCF calculation based on a WACC of 7. Furthermore. Q Q Strategy Hornbach relies on organic growth in its large-scale DIY stores. Luxembourg (1).cheuvreux. which are 77. Switzerland (5). Hornbach operates stores in the Czech Republic (6). 2) Real Estate. the great grandson of the founder. Austria (11). Slovakia (2). of which 17. Romania (3). we see little potential for a positive development in terms of EBIT margins.and Europe's sixth-largest DIY retailer. marking a discount to the peers. the Netherlands (8) and Sweden (3). 14% for the peers. Foreign sales contribute ~39% to group sales.2% owned by the Holding and 5. 2) Hornbach Holding preferred shares. . 4% from real estate and 2% from the construction materials division. In 1968 Otmar Hornbach. To finance growth it uses either its free cash flow or sale-and-lease-back transactions. The following shares are listed on the stock exchange: 1) Hornbach Baumarkt ordinary shares. compared to a peer group average of 6% in 2011E.6% in 2010E. with Kingfisher taking a shareholding in Hornbach. which is the DIY retail operating business. also justifies the high discount. Of the unlisted Hornbach ordinary shares Kingfisher owns 25% plus one share. Hornbach is currently Germany's fourth. the construction materials retailer.

3% (494.100.2 1.3) 48.5 -27.7 1.7) (1.0 0.2 (38.4) 0.0 2.0 5.0 0.1) (0.0 77.0% 117.3 2.3) 0.0 86.1 133.0 13.4) 0.3 23.0 92.9 10.1 437.7 157.0 155.5 3.7 102.4) 0.4 44.0 -17.0 0.9) 0.0 0.8) (1.5) (2.0 0.018.8 1.0 0.0 (36.0 2.0 (31.9) 0.2 9.1) 0.1) 25.9) 0.5 42.9) 0.147.3 19.4 161.9% (71.0 0.8) 0.3 82.9 494.2 7.0) (92.1 (12.936.4 (135.6) 0.5 3.0 0.1) 0.9 0.8 3.0 29.471.9) 243.6 3.5) 2.5) (1.1) 22.4) 0.018.6 0.0 30.0 (10.8) 2.3 12.9 183.6 1.4) 0.0% (368.8) 0.0 334.0 0.0 0.6 125.0 0.0 152.0 0.1) 0.9 (37.1) 222.0 77.3% (73.0 0.0 0.0 101.7% 2.4% (76.7) 225.0 82.0 (10.7 154. [inc.5% (410.0 74.5 517.3) 179.0 (9.1 (37.9 0.5 0.5 65.1% (94.4) 0.9% (421.1% (77.0 (8.3 10.0 357.0 1.7) (46.6 931.0 99.4) (0.9 -7.0 0.0 253.0 0.3 198.0 0.7 28.3) 0.0 0.4 4.1 (10.0 0.7 1.9) 119.1 6.853.0 (8.7% 0.0 0.0 88.0 0.1 2.3 (36.0 57.4) 0.4 706.236.9 -14.9 0.6 769.0 10.162.0 (37.6 1.0 9.357.0 84.0 305.0 0.0 72.3 15.3 4.7) 0.0 0.0 66.0 1.0 0.0 0.9 1.544.0 6.7 (41.0 (14.0 (26.7 2.8 1.5 -11.0 297.0 91.9) 0.4% 0.4) 159.1 (9.9 1.5 118.1) (2.6 3.8) 0.287.0 (16. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.9) 0.4% 0.4% 0.8 1.7 2.8) 177.2 10.8% 3.0 -2.8 1.1% (70.0 (40.3 90.0 0.0 365.5% (7.0 0.4) 0.1 75.5) 1.5 169.1% (446.6% (393.6) 91.0 27.9 159.3 1.4) 0.0 -23.373.8 1.0 (20.9 3.3 13.0 0.2 473.0 5.0 0.5 901.676.3 0.9) 0.5 (81.0) 151.0 81. profit [loss].0 144.0 (33.0 0.8) 0.0 0.0 0.5% 2.2) 50.7) 162.9 13.8 3.0 0. for exceptional items Net attrib.6) 66.0 179.1 45.9% 86.5% (2.0 0.0 71.1 1.256.0 0.3) (169.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 136 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11E 2011/12E 2012/13E 2.0 0.2 8.9 84.1) 0.3 16.0 27.3 0.0 (8.2% 0.0 (11.0 119.3) 0.0 64.7) (38.0) (2.2 832.1) 190.6 46.9% 2.8 0.696.8 0.0 173.3 (15.2 1.2 (0.1) (0.0 0.3 3.1 (15.0 119.0 1.3 581.3 (58.2% (1.3 (16.5% (70.375.7) 0.2 492.5) 101.0 0.0 0.2) 175.8% (87.1 4.3) 77.7) 0.3) 0.0 (24.5 1.9 116.2 413.0 (7.9 www.4) 197.4) 179.0 (8.273.0 0.2 1.3 33.053.3 0.8 1.3) (0.0 0.January 2011 GERMANY Smaller Companies Review Hornbach Holding FY to 28/2 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 0.251.5% (70.7 1.3 0.0 0.5 (0.5) 72.0 (11.1 0.9) 0.2% 2.8 0.4 1.3 3.2 2.1) (0.9 132.367.0 0.6) 165.0 312.365.0% (2.0 75.1) 91.0 0.0 2.0 111.8% 2.3 (14.0 0.cheuvreux.367.0 0.8) 155.752.4) 0.3 135.8 1.1) 108.0 (18.4 0.0 (10.5 (37.471.0 0.0 154.9 645.9) 0.1 954.293.2 6.0 0.0 25.048.0 95.577.1 1.6 1.0 0.503.5 (2.3 22.6% (5.0 673.696.4 -9.0 0.3) (2.9) 99.1 975.1) 0.0 109.220.0 0.0 1.0 92.9 0.0 (24.375.1 0.2 1.1) (1.6 10.0 0.8 3.0 151.0 1.6) 0.6% 0.0 0.5 3.0 0.357.2 14.0 63.972.8 0.7% (468.8) 0.6 1.3 1.0 (8.8% 58.0 100.2) 87.8 7.0 85.0 232.8% 0.3 17.6 (101.617.0 (8.0 93.0 0.3 21.3 3.0) (182.9 (33.0 (22.0 63.com .0 0.2) 252.7 -19.0 16.2 660.265.2) 0.1 (5.0 0.7 0.0 104.2 2.3) 1.0 90.3 3.0 162.6 1.1 (33.8) (1.2% 2.9) 0.5) 453.2 1.278.9) (45.0 0.5 1.4) (97.0 48.0 302.1 (21.7 0.4% 3.6 0.1% (100.7) 63.577.1 29.5 1.0 0.0 (54.7 0.0 5.224.5 -15.2 462.8 13.5) (2.0 0.2) 173.8 0.1 527.5 0.2 3.7 0.6% 0.0% (509.7 1.7) (2.1 0.9% (75.0 0.0 985.4 2.7 (4.2) (173.0 (8.0 0.0 0.4 570.8 5.1 (34.7 4.7) 233.2% (480.9) 71.794.0 3.0 0.1) 0.8 48.3 44.367.0 0.4 3.

7 12.0 0.4 0.3 1.33 4.0 7.00 54.7 396.8 NS 0.7% 7.7 3.45 81.9 4.2 396.3 5. adjusted Treasury stock.000 0.5 1.000 0.7 9.14 103.40 91.50 70.8 13.4% 9.2 9.2 2.02 89.8% 2.0% 0.5% 102.7 7.3 4.8 2.2 11.14 60.2% 8.2 0.5 45.000 8.000 8.0 924.000 0.3 4.3 4.9% 6.45 19.5 1.9 44.1 0.5 58.3 2.0 63.1 4.0 0.7 40.0 4.2 4. restated EV/EBITA.3 5.00 1.02 99.41 90.000 8.cheuvreux.1 9.38 -2.8 3.62 99.2 9.5 16.91 33.9 10.000 0.2 11.2% 8.000 8.3 3.6 836.5 10.6 856.7 125.2 0.6 9.0 45.8 5.8 14.000 8.3 4.000 8.2 NS NS 1.0 7.14 101.1 82. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.1 5.7% 3.3 10.0 5.3 4.7 1.9 0.000 8.2% 7.00 0.00 1.73 7.2 0.8 5.9 2.5 1.2 7.8 118.09 -19.4 4.88 6.8 5.0 2.7 NS 7.000 63.79 36.2 15.5 1.00 74.0 3.7 6.14 19.9 5.95 97.4 NS 1.4 948.15 1.9 4.4 5.1 8.8 22.5 28.3 5.25 99.7 1.8 264.7 6.14 16.96 1.3 2.31 -27.5 10.6 9.7 5.88 55.6 5.20 104.00 1.9 2.7 1.27 3.5 5.1 10.00 70.1 5.6 3.79 44.6 929.7 7.2 7.2 6.0 46.0% 9.0 13.00 90.01 65.00 -23.8% 8.4 4.6 19.6 4.5% 111.8 1.42 35.3 320.8 1.52 19.9 7.7 4.36 76.5 5.2 3.66 3.9 84.20 46.66 3.64 1.6 831.0 NS 1.60 58.1 6.000 8.3 10.50 60.1 44.73 7.0 0.9 5.3 0.000 8.00 77.5% 3.7 0.000 8.09 2.0 0.5 0.83 8.10 77.2 7.8 7.00 1.88 6.1 2.14 19.8% 87.78 71.00 1.1 0.4 9.4 6.31 -27.8 0.4 14.4% 9. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.000 0.4 0.1 285.7 11.3 0.000 8.9 7.7 1.3 2.36 90.09 2.4 1.50 -17.9 2.0% 94.000 0.2 1.5 1.6% 6.5 4. of shares.6 7.5 0.6 7.90 63.000 8.6 2.40 6.2 No.6 5.2 10.0 NS 1.3 18.3 0.7 0.0 5.8 8.5 1.2% 8.1 5.000 0.0 21.3 0.3 10.1 0. number of shares.000 0.9 10.2 2.4 2.9 1.0 675.9% 11.January 2011 GERMANY Smaller Companies Review Hornbach Holding FY to 28/2 (Euro) 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11E 2011/12E 2012/13E 3.2 9.000 8. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share EV/EBITDA.1 7.6 5.8 396.14 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.9 7.6 3.3 0.5 5.00 1.1 5.1 22.4 5.6 10.8 0.9 2.2% 11.00 74.000 8.00 1.9 15.000 8.89 133.1% 70. adjusted Av.6 3.3 8.9 3.2 35.0 2.36 6.4 5.7 7.00 -23.4 730.0 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.000 8.1 9. adjusted Share Price [Adjusted] Latest price High Low Average price 8.9 9.6 2.2 14.89 144.80 99.00 54. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 252.6 886.5 241.8 0.43 20.6 17.7 5.64 66.46 28.7 12.9 1.0 9.3 0.14 0.3 9.1 48.000 0.23 14.14 23.9 349.7 10.000 8.com .5 5.3 7.5 5.8% 9.2 5.4 3.14 14.0 6.9 14.41 90.2% 79.9% 64.00 60.2 4. restated 137 www.1 0.

we feel the company's 20% EBITDA margin target is almost too conservative.9 4.0% 2009 2010E 2011E 2012E 16.2% 1.4 4.0 0. and from the further roll-out of its BOSS woman. Q EUR53.5 37. Even though we understand that some infrastructure investments may be necessary to deal with the higher sales volume and the product mix might change going forward.9% Absolute perf. predicting 5% FX-adjusted growth and about 8% in EUR terms.3 Yield (%) 3. For CY10E we expect it to report an EBITDA margin of about 19%.4 36. Relative perf. Sector focus Sector Top Picks Least favoured L'Oréal.6 2. thereby outpacing fashion retail sales.9 4.7 5.cheuvreux.00 Target price (6 months) Hugo Boss Reuters: BOSG_p. 57. Free Float (Ord Shares) 12.5bn and EUR500m EBITDA.5 17.0%.9 2.3 23. Historically.DE Bloomberg: BOS3 GR The growth story continues Q Recent developments – Q3-above expectations Q3-10 reported sales were up 19.5 17. BOSS Green and Orange collections.0%. adjusted Daily volume EUR3527m EUR997m EUR3769m 70.5 P/E (x) EV/EBITDA (x) EV/Capital empl.com (49) 69 47 89 74 26 Disclosures available on www.3% 21.5 37.January 2011 GERMANY Smaller Companies Review LUXURY GOODS 2/Outperform Rating +7. whereas its wholesale business saw an 8% decline.9 4.6% 104. Free Float (Pref Shares) 45.8 1.8 13.1% EUR57.5 7.4m EUR 2. It also forecast about 20% growth in adj. of shares. In Germany BOS' recorded 4. Thanks to the strong sales and gross profit margin growth BOS' Q3-10 adjusted EBITDA margin showed a 446bps y-o-y increase. accessories.0 18.5 01/01 04/02 07/03 10/04 01/06 Price/M DAX 04/07 07/08 10/09 01/11 Price Outlook – Detailed 2015 targets BOS has provided clearly detailed CY15 targets: sales of EUR2. whilst its 9M-10 adjusted EBITDA margin was up 308bps y-o-y. The company kept its CY10 sales growth guidance unchanged. fewer rebates and the strong growth of its own retail business – including outlets and online business – BOS' 9M-10 gross profit margin increased by 540bps y-o-y to 58%.3 2.5 47. After 9M-10.8% in CY00.3 4.9 38. BOS' sales had increased by 5. where it aims to open around 50 new stores per year.5 7.1 Net debt/EBITDA (x) 1.5 27.7 9. The core element of the company's 'Drive' concept aims to substantially reduce lead times from currently 53 to 38 weeks. Pref: Permira 55.6% y-o-y and by 2% in FX-adj. colours and fabrics are selling best.6 0. which grew by roughly 1%.5 47. Due to better sourcing and greater manufacturing efficiency.7 33. given its already achieved performance.5 Attrib.5 16.94m Performances 1 month 3 months 12 months 3.7% 6.0 10. FCF yield (%) 18.7% 9M-10 sales growth. terms.8% 58. hence an EBITDA margin of 20%. The company's own retail business reported a l-f-l sales increase of 15% in Q3-10.com . This will mean designers working on collections for the next season will already have first information about the sell-through rates of the current collection and hence more indications about which styles.6 8. though that was under German GAAP and with a higher share of royalties. hence 'just' short of its CY15 target of 20%. A major operational change is still to come.5 27.20 Price (07/01/2011) Stock data Market capitalisation Free float Enterprise value No. which increased by 4%. This was driven by 27% growth in its retail channel.5 57.cheuvreux.9 1. produced and delivered to retailers under the 'Drive' concept will be for H2-11. and in particular the men's segment. The first collection to be designed. CY10 EBITDA.0%.4 ROCE (%) 22. The company's growth potential stems from its own retail operations. Richemont Bulgari Shareholders Ord: Permira 88. the company recorded its margin peak at 19. (x) Jurgen KOLB Research Analyst jkolb@cheuvreux.com Q Q 138 www.4% and FX-adjusted sales showed a 14% increase.

Q Q SWOT analysis Strengths Weaknesses Excellent global brand recognition with authenticity for formal and leisure wear. and shoes & accessories for men and women „ „ Unique brand positioning. Under the brand BOSS umbrella the company offers five collection lines accompanied by accessory lines: BOSS Black (men and women. Q Investment case After focusing strongly on fixed cost reductions and repositioning in 2009. we would arrive at a TP of EUR62. to get closer to the market with fresh products and to thus increase sales productivity in its own stores. It also licenses out its brand name for fragrances. BOS preferred shares are trading at an EV/EBITDA multiple of 12.cheuvreux. incl. a 2% terminal growth rate and a peak EBITDA margin of 19. We expect 'Drive' to be a core element in enabling BOS to increase the speed of its inventory turnover. We hence feel BOS' valuation still offers upside potential.5x. as we see potential for the company to exceed its EBITDA margin target. which aims to reduce lead times from 53 to 38 weeks. which reduces complexity. BOS has evolved into a manufacturer of high-end clothing and accessories. BOSS Selection (premium men's label. and the expansion of collections such BOSS Green. which compares with 13.com Valuation Our TP of EUR57 for the pref. Asia/Pacific: 12%. shares is based on a DCF calculation with a WACC of 8. However. BOS has now reached a point from which sales growth and efficiency improvements will become the earnings drivers. Q Q Geographical sales split Group sales split by region: Europe (incl. Its main geographical growth areas are Asia and the US.45 for the preferred shares. We expect BOS to record an adjusted CY10E EBITDA margin of 19%. BOS is now focusing on efficiency improvements to drive its margins. recorded in CY06. to reduce its excess inventories. Germany): 65%.4x. elegant modern classics for business and leisure). Thanks to its 'Drive' concept. The remaining 2% stem from global royalties. With the combination of a substantial lead time reduction. sales growth driven by expansion in Asia and the US.7% as of 2013E.3x in CY11E. . just below luxury brands „ Financial situation of franchise partners still critical in some markets Balance sheet ratios not yet back to historical strength but clearly improving „ „ Successful working capital management leads to free cash flow generation Opportunities Threats „ Growth potential due to own retail „ Better inventory turns thanks to 'Drive' concept secures cash flow generation „ Fewer pre-orders from retailers shift inventory risk to manufacturers „ Higher own retail share makes BOS more vulnerable to economic trends Cost consciousness and fixed cost cuts will support margin growth „ Clearer brand segmentation helps BOS approach target customers better „ 139 www. Based on our CY11E estimates. In terms of peers. America: 21%.5bn) and EBITDA margin (20%) by 2015 into our DCF calculation. we believe the company's 2015 financial targets are within reach and may even be exceeded. It acquired BOS with the acquisition of the Valentino fashion holding and thereafter made a takeover offer at EUR48.1%. BOSS Orange (stylish leisure collection for men and women). This would put it back close to its historical peak of 5. Q Shareholder structure Since September 2007 Permira has owned 88.5x at Burberry. HUGO (unconventional fashion for men and women).January 2011 Q GERMANY Smaller Companies Review Company profile Q Collections Founded in 1923 as a manufacturer of work-wear and occupational clothing.28% of the preferred shares. the Tailored line).02% of the ordinaries and 55. we see further upside potential from a blue-sky scenario perspective. BOS' business model is probably closest to that of Burberry. BOSS Green (sportswear line for men). Strategy and positioning BOS aims to grow organically in its niche as a high-end fashion manufacturer with a full line of accessories.33 for the ordinaries and EUR43. If we were to incorporate BOS' targeted sales (EUR2. Following its clearer brand separation and an SKU reduction at BOSS Black of ~50%.5x in CY09 to 5. we expect BOS' average inventory turns to increase from 4.

0 127.1 890.6 80.0 0.8 26.7 13.0 0.2 494.9 20.5 259.9 698.0 (55.0 804.2 13.9) (118.4) 218.0 (454.3% 1.0 13.0 -7.0 34.9 220.0 (84.0 0.0 444.0 0.8% (18.7 0.8) (984.6) 287.4 25.5% (76.3 (78.0 361.4 0.0% (353.0 90.2) (867.0 0.5) 8.0 12.0 128.0) 193.0) 227.2 25.5 14.0 180.0 10.0 103.0 0.0 (67.0 168.3) 233.2 107.0 0.3) 0.3 (7.0 0.0 0.6 75.4 0.1 0.0 0.6 79.7 712.0 0.3 14.3 23.2 0.3) 0.2 25. [inc.9) 352.5 25.0 0.8 (0.5 0.8 0.2 8.1) 154.4 18.4) 172.4 15.0 12.8) 0.5 0.0 112.8 32.0 (62.4 746.5 17.3 0.0% 0.4% (331.9% 1.8 37.0 0.003.9) 275.2% 0.cheuvreux.1) 0.5 103.0 108.7 174.0 290.4 791.7 660.0 161.1 0.0 83.3% 0.0 0.0 147.0 0.3 1.6% 0.4 (14.9 23.9 19.0 0.6 75.2 10.3) 0.0) 184.561.7 88.0 326.6 6.5 25.3% 56.0 0.3 25.0 (45.0 0.5) 56.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 140 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.0 349.9 9.4 (22.9% 10.8) 0.9 (4.8 154.0 0.9) 0.0 13.0% 1.0 490.0 0.0 221.0 0.0 392.9 546.7) 0.0 0.0 0.0 27.2) 0.8 82.0 0.1% (299.9) 0.5 0.4 14.2 18.7 712.3) 0.985.5 0.9% 0.5% (72.8% (198.1% 1.686.3 0.5% (61.0 0.0 190.1% 160.044.5 249.1% (238.0 791.4 698.2 207.0 0.7) 42.5 (89. profit [loss].6 48.0 0.0 (53.309.4 -17.3 0.9 641.9) 0.6 0.2 0.1 (83.0 458.3% (1.7 1.5 0.4 13.0 0.0 0.0 169.0 14.0 21.6 890.0 0.0 0.6% 6.0 12.6 36.6 18.1 30.0 (70.7 0.2% 1.2% (41.4 294.0 128.5) 238.4) (74.8) 0.0 (37.8 8.4 32.0 110.0) 136.0 109.7 74.2 0.5 36.3 18.1 22.6 305.4 117.0 0.0 1.7 25.5) 0.0 (87.0 158.0 0.7) 0.com .0 0.2) (20.5 303.7 14.6) 387.9) 0.0 0.7% (69.0 0.4 0.8 8.3) 0.6) 161.0 109.9 -7.2% (277.081.0 18.0 27.4 (13.0 (36.5 604.3 277.0 104.495.3) 162.5 36.8) 305.3% (67.9) 0.6) (1.7) 310.4 25.0 (49.0 0.0 0.4) 0.0 50.4 (0.7 12.0 23.0 0.7) 51.0 198. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.6) 0.1) 0.8 243.8) 0.3) 0.7) (1.2% 0.0 0.6% (15.0 32.0 167.4 0.0 32.9% (81.0 0.2 19.0 0.7% 0.5) 0.0 220.3 (48.8 229.182.2 (19.0 305.0 108.0 -27.0 0.6 0.1 0.0 198.0 0.6 48.0 314.0 0.2 151.4) 87.0 16.8 0.0 0.8 0.0 0.0 0.0 (114.0 344.0 (41.0) 190.0 467.3 (5.168.8 0.0 0.3) (84.0 (48.8 128.8 11.1 303.6 71.0 (53.5 22.4) 0.0 0.4 29.4 12.3 28.0 687.0 0.0 0.0 (51. for exceptional items Net attrib.8) (63.3) 0.4 1.0 0.0 0.1% (103.0 350.7 222.3 178.5 (0.0 (58.0 0.0 9.7) 0.0 0.4) 0.0 0.0 0.0 0.2) 0.8 0.5) 0.1) 0.3% 1.0 0.4) 78.7 10.0 439.2 201.8% (41.0 0.0 415.7 23.3 1.5% (416.0) (1.0 135.5 -9.0 197.0 0.2 84.0 154.0 13.1 804.0 248.0 0.5) 0.0) (0.8 270.830.1) 88.0 0.0 0.4 0.0 0.5) 251.0 0.8 (26.0 0.5% (382.2) 78.8 -12.5 69.0 0.0 (50.0 0.1) 158.4 0.9 630.0 0.0 104.9% 1.3 0.7% 136.0 0.January 2011 GERMANY Smaller Companies Review Hugo Boss FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.9 408.5 www.3 13.0 0.1 3.0 162.4 0.095.8% 1.0 221.0 (4.6 59.3 560.0 0.8 52.7 20.2) 0.3% (50.4 199.4 0.0 (15.0 19.0 0.4 746.4 62.686.0 0.8 654.0 238.0 0.1) 112.0 (76.0) 204.4) (1.1) 0.0 (32.0 259.8 0.8) (1.5% (36.2 9.9 245.0 169.0 0.1) 0.8 -12.4% 0.0 (15.5 1.3) 0.0 0.0 0.0 220.4 10.1) (68.0 0.0 275.0 0.0 (53.2 25.0) (1.4 (4.0 (1.3% (352.0 0.4 10.7 -26.6 77.5 425.022.3% (49.0 (96.4 202.632.0 0.0 0.4 75.2 619.2) 0.0 184.6 0.0 0.3) (797.1 0.0 107.4) (16.

6 29.1 19.7 3.8 19.5 17.0 1.4 19.23 22.9 37.7 NS 1.8% 6.4 14.9 27.6 NS 1.2% 1.400 0.0 39.1 13.5 3.6 2.00 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.400 70.23 22.2 1.6 6.767.1 2.8% 3.0 17.07 1.6% 1.5 12.0 4.8% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.2 2.000 70.1 1.1 9.2 NS 3.6 4.14 26.3 49.46 62.1% 2. restated 141 www.50 28.00 1.9 9.00 1.6 1.70 31.50 24.6 12.4 2.8 1.769.3 78.04 26.051.6 12.23 4.6 1.00 0.3 11.6 3.7 23.5 12.1% 1.3 13.9% 1.7 13.040 0.0 12.000 70.0 3.9 3.11 2.4 16.74 27.25 6.53 36.8 17.1% 1.1 1.3 69.3 0.8 11.400 70.7 6.2 15.4% 1.6 1.4 63.12 8.016 0.3 14.9 18.4 2.1 6.2 26.4 19.1% 2.5 2.73 14.4 49.6% 6.5 13.27 4.4 10.50 56.3 22.687.6 15.75 19.8 19.1 10.6 10.2 2.2 21.21 11.8 0.2 29.00 49.3 14.9 29.7 2.88 17.400 69.8 1.7 17.6 2.6 NS 0.117.3 8.5 18.400 69.0 10.6 16.2 26.88 17.7 14.46 62.60 9.0 13.6 NS 0.1 6.6 84.4 42.2 23.9% 2.400 0.3% 5.243. of shares.6 16.8 38.9 2.016 0.0 60.9 2.8 0.3 6.016 0.5 21.4 EV/EBITDA.814.6 3.29 9.400 69.0 1.40 42.3 9.5 4.0 5.5 4.0 2.3 16.54 19.2 13.9 10.735. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1.9 1.40 53.20 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.3% 1. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.45 3.9% 1.9 0.83 18.15 10.7 11.4 13.4 10.8 3.9 4.8% 3.526.7 13.37 2.4 15.07 3.9 303.0 289.00 1.1 2.51 -7. adjusted Share Price [Adjusted] Latest price High Low Average price 70.9 5.5 52.0 1.000 70. adjusted Treasury stock.5 77.9 0.7 32.9 2.5 1. number of shares.62 -27.000 70.3 19.0 22.5 12.1% 3.1 2.cheuvreux.6 1.000 70.1 4.58 10.2 3.8 21.0 2.2 0.9 11.997.5 23.5 36.3 2.5 15.016 0.6 0.1 26.January 2011 GERMANY Smaller Companies Review Hugo Boss FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.20 43.43 10.20 58.35 29.7 3.400 0.54 21.000 70.1% 1.16 53.0 23.400 69.8 32.21 11.62 -27.9 8.9 0.54 22.7 23.29 39.3% 1.4 8.com .1 14.5 13.9 6.2 202.961.3 17.8 2.7 No.19 16.03 9.71 14.9 4.91 56.855.00 0.3 16.6 NS 0.05 24.2 78.117.8 60.400 69.526.00 1.6 12.96 2.7 15.8% 4.39 38.000 70.6 19.3% 6.34 -26.0 32.7 14.51 -7.69 34.9% 1.3 18.0 10.4 103.0 1.7 2.7 43.55 29.9 4.676.400 70.1% 1.97 15.3 21.8 12.9% 2.4 69.2 4.92 40.4 0.5 0.716.0 2.2 9.3 17.6 8.39 56.000 24.7 24.4 9.44 52.000 70.9 11.400 69.80 34.17 35.4 9.573.3 10.1 8.3 0.5 18.1% 2.016 0.3 19.00 6.5 8.9 23. adjusted Av.50 15.2 5.46 18.4 12.4 25.94 18.59 13.4 33.7 7.2 2. restated EV/EBITA.0 NS 0.8 3.5 16.948. reported % Change 1.9% 2.0 16.04 0.4 77.9 2.83 18.7 16.07 2.4 11.93 22.0 4.0 9.7 1.9 28.81 13.9 17.02 13.8 NS 0.

3% 23. Nexans.7%.8 5. of shares.15.0 0.3% 2009 2010E 2011E 2012E NS 20.8m. This figure includes a one-off stemming from the caverion disposal.8 0.8m. with EBIT of EUR37. Ece Industriebeteiligungen 25.2% 24.cheuvreux.DE Bloomberg: JEN GR Strong earnings momentum and healthy balance sheet Q Recent developments – Strong Q3-10 ahead of expectations Positive order momentum continued: Q3-10 order intake came to EUR158m.6 22.2 0. Relative perf.6 22.8 Net debt/EBITDA (x) 16. well ahead of our EUR7. Q EUR5. up ~41% y-o-y and ~2% q-o-q. The main driver was Laser&Optical Systems with EUR67. The disposal of Optronik was expected to be finalised in Q4. (x) 0. which to us is still overly conservative given the fact that it already booked EUR22. EADS.3 5. down from EUR144m after Q2-10. adjusted Daily volume EUR307m EUR213m EUR377m 57. up ~5% y-o-y. Aside from the increase in sales/earnings we also expect Jenoptik to deliver a healthy free cash flow. and a large order in traffic solutions.6 01/01 04/02 07/03 10/04 01/06 Price/TECDAX 04/07 07/08 10/09 01/11 Price Outlook – Business environment to remain strong in 2011 In 2011E we expect the business environment to remain strong for Jenoptik due to ongoing high demand from the semiconductor industry and better prospects for the company's Metrology business. SIEMENS AG Alstom.5m in Q2.6 42.6 42.4 1.1% -11.6 2.6 72. Defense & Civil Systems also looks set to remain solid with its order backlog of ~1.9m.6 2. FCF yield (%) NS 26. which we estimate at ~EUR1.7 1.9% vs.0 10.5m intake vs.60 Target price (6 months) Jenoptik Reuters: JENG. EUR30.9 EV/Capital empl. which will not recur in the coming quarters). which should have brought net debt below EUR100m. EPS in Q3 came to EUR0. which we estimate will grow by ~7% in terms of sales. 8.6 72.8 6.January 2011 GERMANY Smaller Companies Review ELECTRICAL EQUIPMENT 2/Outperform Rating +23. especially in the automotive industry.73m Performances 1 month 3 months 12 months -5.0 0. implying a 7.6 12. Rolls-Royce Shareholders Free Float 69.6 52.3m order intake.com .6 32.6 52. For 2011E we forecast sales of EUR531m. which we estimate at ~EUR3m (was incorporated into our estimate). but including one-offs: EBIT in Q3-10 came to EUR12m.8 Alexander HAISSL Research Analyst ahaissl@cheuvreux.0%.6 32.41/share. Varis Vermögensverwaltung 5.8 P/E (x) EV/EBITDA (x) Yield (%) 0.5% 9.36 Price (07/01/2011) Stock data Market capitalisation Free float Enterprise value No.com Q Q 142 www.2 11.2 Attrib. with net debt to be reduced by a further ~EUR17m to EUR75. Further deleveraging: Net debt at the end of Q3 stood at EUR126.8 10.1% EUR6.0 0.7% 22.9 0. which was much better than our EUR0.6 82.07 forecast.6 62. We estimate EPS at EUR0.6 12.7 8.5m. The main driver is likely to be Laser&Optical Systems.4x sales. Sector focus Sector Top Picks Least favoured ABB. Conservative guidance confirmed: The company confirmed its 2010 guidance for sales of ~EUR500m and EBIT of >EUR25m. EBIT ahead of expectations. with further EBIT margin expansion to 8.1% margin.5m in 9M-10.6 13. up ~33% q-o-q (~EUR8m stemmed from a large medical systems order.0% in 10E.7 7.9 0.0 ROCE (%) NS 7.3 34.com (49) 69 47 897 534 Disclosures available on www.24m EUR 0. Metrology also showed a further sequential improvement with EUR33. 82.6% Absolute perf.9m forecast.6 62.cheuvreux.

143 www. France and Switzerland as well as in India.4x sales. China. It is represented in nearly 70 countries and has major production sites abroad in the US. medical technology. in particular in the automotive industry (following a pick-up in the auto industry with a ~6-month time lag). We estimate the NPV of the tax loss carry-forwards at ~EUR1. Furthermore.com . the company has no relevant comparable peers.cheuvreux.5 per share on an 11E and 12E basis. Jenoptik still has tax loss carryforwards on its balance sheet amounting to ~EUR490m (meaning only 40% of its German profits need to be taxed).January 2011 Q GERMANY Smaller Companies Review Company profile Q Comprehensive optoelectronic group Created in 1991 from Jenoptik Carl Zeiss Jena GmbH. Based on our 11E estimates. automotive/suppliers. assuming pre-tax RoCE of 9. Moreover.0x EV/EBIT. Industrial Metrology. Q Q Five divisions with semiconductor & automotive as its main industries As a comprehensive optoelectronics group.5/share.60. Korea and Japan. We stick to our 2/OP rating with a TP of EUR6.8x EV/EBITDA and at 10. in the German state of Thuringia. The company is headquartered in Jena. Defense & Civil Systems also looks set to remain solid with its order backlog of 1. Traffic Solutions and Defense & Civil Systems. the stock is trading at 5. In valuing the stock we therefore focus on an absolute return model (EVA). Its customers are mainly in the following industries: semiconductor/semiconductor equipment. SWOT analysis Strengths Weaknesses Highly innovative development team „ „ Lack of critical mass Lack of the financial means to accelerate expansion „ World-leading proprietary optics technology „ Opportunities Threats Rapid organic expansion of high-margin Laser & Optics and Sensors units „ The integration of numerous small independent entities is difficult to execute successfully „ Small complementary acquisitions „ Expansion of international distribution to open up new markets „ Q Investment case Strong earnings momentum to continue Looking ahead.6% respectively. implying a ~20% discount to its own historical figures. and has several major sites in Germany. security and defence technology and aerospace. Q Valuation Due to its broad.4 and EUR6. thereby reducing its net debt further.7% and 10. Jenoptik has a total headcount of ~3. With higher operating cash flow and CAPEX discipline Jenoptik should be able to generate solid free cash flow (~EUR20m annually) going forward. we expect the business environment to improve further for Jenoptik due to the ongoing high level of demand from the semiconductor industry and better prospects for the company's Metrology business. Our EVA model yields 'fair' values of EUR5. Healthy balance sheet and solid free cash flow Asset disposals and more efficient working capital management enabled the company to reduce its net debt position substantially from ~EUR160m at the end of FY09 to an estimated ~EUR93m in 2010E. Jenoptik divides its activities into five divisions: Laser & Material Processing. diversified product portfolio.100. Optical Systems.

0) (19.7 (57.8 (10.1 175.0 0.6) (1.6 768.1) 29.1) 0.2% 159.0) 0.0 0.9) NS 503.7 7.1) 38.7) 13.1) (38.0 (34.7) (269.9 26.7 44.8 (5.0 38.6 6.7) 65.1 (11.9 75.5 467.3 193.9% (5.0 0.8 170.0 0.6) 0.0 0.4 42.1 43.3) 0.7 135.0 0.5 NS 67.4 317.4 432.0 (0.9 276.2 138.3 55.1 18.2% 556.0) 41.4 59.2 52.0 0.2 22.0 0.3) 0.0 0.0 11.2 3.8) 75.5 4.6 -13.2 NS 0.1 -2.6) 81.7 www.6) 54.8 19.0 0.4 365.4 233.0 0.0 153.0 (12.0 0.0 0.0 -71.4) (19.5% (27.5 6.1 27.1 (11.0 60.7) (1.0 0.0 (204.3 5.0 (8.3 336.7 0.0 191.6) 0.2) 0.7 (24.1 4.0 0.0 0.3) 0.1 -74.8 0.0 0.0 0.0 0.9) NS 485.0 41.5) 0.8) (27.5 NS 63.6 0.0 56.7) (129.0 0.0 39.0 0.0 48.6 40.6 42.7) 37.9 21.0 0.7) 56.1) 0.0 0.5 0.6 -49.1) (296.4 0.0 36.5 754.403.5% 0.3 103.9 75.9) (170.1% (47.0 0.0 (16.0 0.2 115.0) 0.5 542.0 0.3 (27.1 191.0 0.1 23.2 28.5 119.1) 0.5 6.0 (5.0 15.9) 0.6) 131.0 0.4 58.2 52.0 26.5) 0.9) 0.1 0.4 146.5 9.2) NS 548.1% (194.8% 0.8) NS 0.6 346.0 0.8 0.0 0.4) (10.0 271.7% (34.2 542.854.3 0.7) NS 0.6) 0.0 (8.4) 0.7) (10.2 0.6) (8.0 0.0 0.9 47.8 423.1) (85.0 (6.0 0.5) (4.5) 69.0 0.5 (5.0 0.0 0.7) 11.0 (16.0 0.6 6.8) 48.7 423.9 6.8) 0.7 46.0 0.0 (19.6% (27.9) (20.0 (165.6 0.9% 0.4) 0.1 15.0 (86.8) 38.3 140.0 0.5 53.0 0.3 NS (0.3) 0.0 81.6 259.0 (5.0 165.6) 58.1) 29.0) (5.2 29.9 -4.0 (9.0% 521.8) (22.4) 68.8 13.0 0.9 (17.0 0.3% (184.0 0.7 768.3% (536.8) 73.0 0.4) (30.7 365.0 239.0 0.2 NS (25.0 (3.4 0.0 (3.9 206.3) 0.0 0.0 7.8) 0.0 0.1 NS 0.6 1.8 29.8 22.4 -24.0 0.0 0.0 16.0 0.2 375.4 716.0 0. for exceptional items Net attrib.9 53.0 (4.0 20.3 3.3 0.3 -7.7 (26.2 0.5 170.5) 0.1) 37.4 61.8 -85.0 0.0 0.1) 0.7% (180.1) (150.0 33.0 13.0 0.0 (4.1 754.3) (259.0 (92.2 0.0 27.1% (50.0 (74.4) 57.9) 0.2 53.2) 0.January 2011 GERMANY Smaller Companies Review Jenoptik FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 82.9 6.8% (27.0 19.5 16.7 159.1 164.3 39.0) 0.0 432.4 267.7 53.3 (138.4) 0.0 0.523.8 (41.6 317.7 0.0 0.7% (29.5% (192.3 19.9% (35.0 0.0 0.6% 531.6 126.6 548.5 118.0 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 144 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2.2 89.0 35.2) NS (105.0) 60.0 0.0 (2.4 61.0 0. [inc.5 0.0 4.0 0.3 26.9 113.6% (194.0 38.1 26.7) (264.0 23.4 57.6 53.8 0.5 (9.1 32.1) (231.0 59.5% (31.9 152.9 467. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.cheuvreux.0 0.5) 35.1 230.8 NS 473.1 16.6) 0.3 129.9) (277.1 NS 0.4 0.6% 1.9) 0.0 (8.0 (69.0 (2.0) 0.1 (33.0 0.9 64.914.0 (0.2) 12.0 0.9 58.1) 0.2) 9.6) (0.5 20.2 34.8 0.4) (5.2 (14.2 290.0 0.9) (21.6 6.0 30.4 63.5) (21.0 0.7 6.7 68.6 1.4) (7.0 (4.0 0.0 (129.3 21.6 65.5 29.3 92.6 29.4) 68.0 41.0 0.2) 0.4 66.6 6.4 55.6 145.0 23.0 (38.3) (32.0 (4.0 0.7 131.3 93.0 (4.com .0 37.0 16.6) 0.1% (10.0 (0.4% (187.0 270.3% 84.6 53.1% (472.0 13.6) 0.0 29.0 0.7% (191.0 20.4 64.9 0.8) 11.3 438.0 67.0 37.9 (5.3 54.7) (5.7 238.0 31.0 5.0 0.9 70.7 59.8 48.7) 36.7) (285.0 16.3 43.7 0.0 27.7) 0.2 12.3 7.9) NS (48.0 9.2 0.5 438.5) (74.7 716.3 0.0 (3.0 (18.0 0.7 25.4) 0.4 548. profit [loss].0 138.9% 0.1 0.1) 1.0 15.8) (9.0) 16.

8 5.4 1.9 NS 2.1 4.0 NS NS 3.6 8.9 15.8 3.8 3.4 4.6% 4.76 12.1% 5.0 0.1 6.6 4.0 20.7 354.9 309.8 115.00 0.6 29.00 0.870 0.2 0.8 3. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.7 482.0 1.6 0.4 426.2 0.20 6.00 0.44) NS (1.0 0.79 6.81 5.3 7.5 6.000 7.4 1.1 7.26 124.76 3.8 8.0 4.5 1.4) 6.3% 0.240 57.3 8.3 10.6 0.1 NS NS 1.8 1.870 0.26 118.0% (1.870 51.4% 0. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.870 0.0 5.9 0.60 10.8 10.00 0.2 0.28 6.2 0.78 8.6 5.0 46.6 4.00 6.13 3.920 56.cheuvreux.0 6.8 779.3 34.1 0.52) NS 5.5 0.00 0.9 www.00 (0.0 28.0 24.4% 4.0 397.41 55.0 0.9 0.1 1.0 12.7 NS 1.49 5.0 0.0 11.0 2.240 57.1 66.8 10.9 9.7 0.1 0.00 0.30 5.00 0.9 0.41 (95.9 4.4 29.0 13.40 5.25 123.000 57.000 57.2 3.6 306.00 0.2 284.7 0.2 0.0 NS NS 12.41 55.7 1.44) NS 0.00 0.04 5.8 5.5 0.8 0.1 5.000 56.00 0.63 NS 6.3 0.6 5.9 6.000 56.8 2.240 0.0% (0.1 68.1 0.8 0.91 43.240 57.2 119.3 11.4% 0.5 4.5 1.2% 0.0 5.3 11.36 - 402.5 6.0 NS NS NS NS 0.240 0.0 NS NS NS NS 1.4 6.0 784.3 8.000 56.0 4.5 13.5 0.5 NS NS NS 7.25 5.52 -53.8 0.0 7.1 4.76 8.40 5.61 11.8% 0.870 51.7 7.16 7.7 NS 0.4 355.95 3.26 138.10 6.7 337.0 0.00 0.6 20.77 48.000 51.8 6.7 NS 2.9 28.920 0. adjusted Av.47 16.5 NS 1.5 697.82 4.5 0.68) NS (0.09) NS 4.9 1.7 402.0 8.82 7.9 13.0 6.2 6.5 16.7 215.5 10.8 3.7 6.15) NS 0.9% 5.22 7.26 138.7 0.2% 0.7 63.24 2.3% 0.0 5.910 56. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share No.35 6.00 0.6 10.910 0.68) NS 0.10 4.2 1.000 57. restated 145 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.0 34. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.6 427.36 5.000 51.6 0.6 20.0% 0.5 26.2 24.1 NS NS NS NS 6.3 13.7 0.6 NS 0.3 5.4 0.26 118.8) 10.910 56.4 1.5 0.9 6.64 NS 4.9 8.6 51.4 6.00 0.50 8.82 3.3 0.47 16.1 5.1 65. adjusted Treasury stock.24 5.2 20.21 NS 0.9 0. number of shares. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.6 0.92 (3.2 5.4 NS NS NS NS 7.2 0.0 2.4 12.50 5.0 6.00 1.00 (0.0 12.0 1.00 0.4 3.8 5.3 7.12 NS 5.2 5.9 3.5 12.2 13.8 1.25 8.240 0.5 8.2 5.4 1.3 8.57 8.4 26.January 2011 GERMANY Smaller Companies Review Jenoptik FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.00 1.9 64. restated EV/EBITA.15) NS (0.7 377.0 1.4 1.9 1.870 51.84 3.6 8.21 NS (0.5 0.840 0.com .1 0.6 5. of shares.2 8.8 NS 1.2 306.3 0.26 7.

8bn and EBIT of EUR92m. b) the already demanding consensus. Nexans. Although Jungheinrich differs in some key aspects from KION (indebtedness. EUR997m EUR468m EUR947m 34m EUR 1. EADS.7 12. For Q4-10E our estimates imply sales of EUR509m. Jungheinrich continues to benefit from the ongoing positive mix shift. Rolls-Royce Shareholders Family Shareholders 53. +14% y-o-y.9% 24.DE Bloomberg: JUN3 GR Excellent company but limited share price upside Recent developments – Strong Q3 and guidance raised as expected Q In mid November.7% 113. 36. Q Rating Stock data Market capitalisation Free float Enterprise value No.32 Price (07/01/2011) Reuters: JUNG_p.1m due to the revaluation of tax losses carried forward. With its Q3-10 results Jungheinrich raised its guidance. which foresees 33% net profit growth in 2011 and 18% in 2012.cheuvreux.7) Yield (%) 0. EUR15. time to take some profits Given the expected strong 10E and already demanding consensus for 2011.4) (0.3% EUR30.com 01/11 Price Hans-Joachim HEIMBUERGER Research Analyst hheimburger@cheuvreux.1 1.9 Attrib.00 EUR29. Q3 order intake reached EUR475m . we believe the company is already close to the peak level we expect it to reach in the next cycle. Our downgrade was in no way related to company or industry fundamentals. When speculation regarding a pending IPO of key peer KION flares up again. whilst keeping our TP at EUR30. +14% y-o-y and +3% qo-q.3 6. Thus.com Q Q 146 www. taking into account the probable pressure from higher raw material and personnel costs in 2011E and management's expectation that the company will need some time before it can increase its list prices.8% (FY08: 5. 10/04 01/06 Price/SDAX Outlook – Peak margins are close.2 26.7%). The EBIT margin in Q3-10 reached 5. Free Float 47. We estimate EUR1. +114% y-o-y.2 21.0 17.0 EV/Capital empl. sales mix branding.86bn order intake.4 Net debt/EBITDA (x) (1. With a Q3-10 EBIT margin of 5. we see better value elsewhere. sales of significantly more than EUR1. The shares currently appear fully valued relative to their own history.3% -2.1 7. further upside surprise potential in terms of the 2011 outlook appears limited.1% 50.2 11.2 01/01 6.2 21. Q3 is normally weaker.7 13.0%.2 11. and EUR470m order intake.2m). unchanged q-o-q. EBIT of EUR28m.3 4. Currently.0) (0.4 3. sales of EUR1. +16% y-oy and -1% q-o-q.4 1. at least in the near term. +30% y-o-y. seasonally.e.6m (est. i.6 2. adjusted Daily volume Performances 1 month 3 months 12 months 2.January 2011 GERMANY Smaller Companies Review MACHINERY Jungheinrich 3/Underperform Target price (6 months) +2. After Q3 the company's order backlog stood at EUR293m. no reductions in discounts to list prices are possible.2 04/02 07/03 After having upgraded Jungheinrich in August 2009.7 1. Net profit amounted to EUR23. c) the fact that the stock is a consensus buy. after-market business.0 1. Jungheinrich reported a strong Q3 with almost no traditional summer lull.cheuvreux.9 1.2 36. SIEMENS AG Alstom. Relative perf.0 Disclosures available on www.25m 04/07 07/08 Sector focus Sector Top Picks Least favoured ABB.3 10. of shares.2 26. we downgraded the stock after the Q3-10 results.com (49) 69 47 897 540 10/09 .2 14.2 6.85bn.2 31. including an extraordinary gain of EUR2.2 16. despite the healthy order intake situation. high-margin large diesel and electric-counterbalanced truck sales outgrowing lower margin warehouse technology. (x) 0. predicting FY10 order intake of roughly EUR1. This downgrade reflected solely a) the shares' strong outperformance since mid-2009.5) (0.2 16.5 EV/EBITDA (x) 5. it might be worth taking a closer look at investing in Jungheinrich. profitability of new vs. +10% y-o-y.0% 6.8%. FCF yield (%) 40.7 ROCE (%) NS 11.0% 2009 2010E 2011E 2012E P/E (x) NS 16.2 31. Sales came in at EUR458m. and geographic production structure) it is its closest peer.0% Absolute perf. customer structure.75bn and EBIT in excess of EUR80m.2 1. which is extremely strong bearing in mind that.

Q DCF: we apply sales and EBITDA CAGRs of 1% and 1. 2 in Europe and no. whilst keeping our TP at EUR30. The downgrade was in no way related to company or industry fundamentals. Counterbalanced and narrow-aisle trucks are manufactured in Moosburg. 34% with after-sales services and 18% with rentals & sales of used equipment. is one of the world's leading providers of equipment for material handling.8% already in Q2-10 (FY08: 5.cheuvreux. Q Q Production > 95% based in Germany Jungheinrich produces nearly all its engine-powered materialhandling trucks in Germany. with Europe ex Germany accounting for 67%. lowering its break-even to sales of ~EUR1. b) the already demanding consensus. We regard this as unjustified. Since 2007 it has been more or less a management holding company. The risk-averse company prefers organic growth to acquisitions. Three divisions but the money is clearly earned with services Jungheinrich provides a comprehensive range of forklift trucks. .2x for 2006) are not applicable.5% terminal growth rate.0 and EV/EBIT of 15. Q Q Overwhelming majority of sales generated in Europe In 2009 28% of group sales were generated in Germany.2% and a 1. Taking both valuation approaches into account. The Rest of the World accounted for a still small 5% of group sales. and small-series and specialised trucks at the Lueneburg plant. and c) the fact that stock is a consensus buy. we rate the stock a 3/Underperform with a target price of EUR30. even taking into account its slightly lower margins and corporate governance issues. The shares currently appear fully valued relative to their own history. on the one hand because we think Jungheinrich will always trade at a discount to KION. After having upgraded Jungheinrich in August 2009. Based on these parameters our DCF model renders a fair value of EUR30. This downgrade was solely related to a) the shares' strong outperformance since mid-2009. We therefore see better value elsewhere.GERMANY January 2011 Q Smaller Companies Review Company profile Q Amongst the top four global players in material handling Jungheinrich. Q SWOT analysis Strengths Weaknesses Three divisions offering a onestop solution „ High (94%) sales exposure to Europe makes the company especially vulnerable to the weakening European market „ Highly centralised production structure leading to strong economies of scales „ „ „ Inadequate Opportunities Threats Long-term: Eastern Europe and Asia „ „ „ financial disclosure Strong balance sheet Increasing demand for services „ Mail-order Recession in Europe „ Further business intensification of price pressure sparked by new Chinese competitors „ Raw 147 material prices www.5% respectively for 2010-19E. Jungheinrich manufactures warehousing equipment in Norderstedt. shelving systems and related services covering the complete area of intralogistics. founded in 1953.6bn. This explains why its EBIT margin bounced back to a healthy 5. China for the Asian market. Peer group comparison: in our multiple comparison Jungheinrich is shown to be trading at a discount of 42% based on EV/EBITDA for 2011E. It was ranked no. and on the other also due to the control premium.com Valuation We apply a DCF valuation and a peer group comparison to calculate our price target. warehousing and material flow engineering. at least in the near term. 3 worldwide in 2009. Some trucks are produced in Qingpu. which predicts 33% net profit growth in 2011 and 18% in 2012.7%) and was maintained at this level in Q3. Q Investment case In 2009 Jungheinrich carried out a drastic costcutting programme which probably nobody expected from a family-owned company. together with a WACC of 9.5 per share. Germany. Q Q KION's takeover multiples (EV/sales of 1. The company generated 48% (including 22% from financial services) of its 2009 sales with new business. with major parts of its operations run by four fully owned business units and transferred to legally independent limited partnerships. we downgraded the stock after the Q3-10 results.

0 0.0 661.0 0.0 81.0 81.0 91.1) 0.3 -65.3% (517.0 0.0% (147.0 77.0 140.6 0.3 10.7 0.2 -45.525.0 0.7 16.3 129.0 (46.0 0.5 (140.9 7.0 0.0 19.2) 0.0 118.0 0.2 227.8 14.3 0.2) 0.0 56.1 0.0 0.9 0.0 16.9 39.8% 0.3% (170.5) 0.0 86.4 216.6 196.0 0.0 0.0 3.8% 7.8 8.1% 0.0 81.6 167.2 (297.0 94.0 (18.9 830.7 45.0 0.8% 0.0 0.9) 0.7 192.4 8.6 0.0 0.4) 200.6 272.0 0.0 (56.0 (17.3 10.7% (138.0 118.6 (176.0 0.5 0.0 0.0 0.9) 0.4) 0.6 0.0 0.5 198.0 (23.1) 0.7 -5.6 10.0) 237.5 25.0 (14.2) 0.0) 106.2) 0.7) NS 648.3 4.9 225. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.027.6) NS 825.0 0.6 210.6 605.0 0.1 12.9 0.7) 132.5 7.0 0.3) 0.0 (85.3 825.5) 0.1% 2.7) (70.0 60.0 0.0 0.1 6.4 245.0 0.4% 2.1) (104.0 0.2 321.1) 19.7 0.2) (972.0 66.6 22.8) 274.0 824.3 0.0 0.0 163.0 76.0 0.1) (920.0 184.3 (2.3 484.4 (92.7% (58.7 611.7 (4.0 34.0 13.4 5.3 NS 1.8 4.0 94.0 0.2 436.0 (15.2) NS 1.2% (594.4 11.2 47.4 (94.7% 0.0 0.6 0.7 0.8 44.0 62.cheuvreux.0 0.0 39.6 13.0 0.1 2.3 (0.9 12.0 139.9 16.5 39.9) 0.5 7.5) 0.0 62.0 164.6 4.644.2% (50.7 6.5% (56.9 37.7 (0.January 2011 GERMANY Smaller Companies Review Jungheinrich FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.7 0.6) 0.0) 0.3 0.3 4.4) 138.3 625.6 0.0 0.4 (0. profit [loss].7 1.2 28.0 133.4 7.0 527.0 81.6 261.3 244.0 48.4 676.0 0.0 (17.676.0 0.3 4.0 0.4 11.1 987.0 10.3% (4.4% (564.0 (16.0 (85.0 143.3 648.5 0.7% 0.017.7) 78.4 17. for exceptional items Net attrib.0 0.3 14.1 62.0) 76.3) 285.3 18.0 0.6% (172.7) 0.8 127.8 4. [inc.7) (116.0 66.0 0.8) 0.0 0.3% 1.7 314.4 -1.0 0.3 195.0 138.0 0.1) 0.1 (53.1 0.9 45.0 0.9 4.4 3.4) (1.0 81.7 0.5 0.9 36.5% (119.3 855.5 17.7 546.0 204.0 0.9) (1.0 0.2 188.9% 1.799.0 76.0 (102.6) 0.5) 291.0 (71.7) 0.7% (9.0 (55.7) 0.9% 172.9 10.8 62.3) 0.0 60.8 126.1 28.0) (141.6) (1.7% (488.0 1.0 140.8 (3.9 0.0 (9.0 0.1 14.4) 0.6 0.7) (2.5 1.6 619.8 230.969.com .8 10.9 36.3) 230.8% (141.7 -12.8 0.0 60.5% (45.0 0.0) 0.4 (4.2 17.0 (1.4 www.3) 100.0 132.4 7.0 494.000.0) NS 833.0 61.9 927.2 72.7% (124.6 0.0% (587.5) 0.5 11.0 0.9) 220.161.1 7.4 0.0 106.8 NS 0.0 0.0 0.0) 217.7) (993.0 8.5 (1.0 0.0 0.3% 2.7 14.5) 259.0 (169.0 7.3% (551.1 0.4 11.7 -21.1 (1.1) (106.3 0.0 48.0 (102.0 76.0 0.0 0.0) 118.4 10.8 553.0 160.9 10.3 222.0 20.748.0 (44.0 (86.8 181.7) 0.0 94.0 66.0 0.0 121.9) 0.0 0.0 139.3) 0.8 0.6) 0.0 0.0 (55.0 0.0 0.0 560.4 5.4% (580.027.2 830.7) 0.1) 0.9 16.0 70.0 0.128.0 146.5 88.9 1.0 0.1 (70.9 35.0 2.2% 7.0 0.0 0.9 756.8% (604.0 81.0 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 148 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.6 7.0 0.2) (1.0 153.174.0 0.1 0.9% 0.0 (39.4) (70.8) (34.7) 0.0 (28.4 520.1 0.0 (55.2 392.0) (71.7 0.0 38.4) 0.9 (0.0 0.6% (135.145.2 43.0 (14.8) 0.4 3.0 60.4 4.258.8) 0.0 0.0 0.0 987.0 (1.9 0.0) 121.4 11.0 (85.4) 0.5 13.3 21.0 0.0 0.5) 0.0 0.0 0.4 4.1 13.3 244.1 563.3 833.7) NS 855.0 81.0 (51.3) (75.7 14.0 76.0 0.6 12.047.0 9.7 0.9% 144.0) 139.9 308.5 489.2) (836.6 239.2 176.8) 118.9) (1.7 0.5 15.3) 0.2 0.3) 0.9% (503.0 48.6) 0.6) 91.0 (44.2) 0.0 0.3 0.3) NS 824.2% 1.2% 0.6 13.7) NS 0.6 927.2% (114.

26 -6.3% 1.32 - 472.2 2.7 1.6 5.8 2.2 3.4 1.79 17.0 NS NS 2.7 7.cheuvreux.3% 2.4 13.2 NS 0.5% 17.54 5.77 NS 1.00 0.000 18.74 47.9 24.8 1.2 13.08 98. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.5 6.000 34.6 0.7 2.4 40.3 1.56 13.0 1.0 0.4 1.71 19.4) NS NS 12.4 13.1 7.000 34.38 34.8 0.53 8.8 NS NS 14.1 2.12 3.2 6.4 NS 0.9 785.0 9.74 21.00 0.00 28.0 0.7 2.1 13.4 NS 25.00 0.70 16.0 8.0% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.8 11.9 NS NS 13.000 34.62) NS (1.005.000 0.26 -6.7 14.000 34.7 3.1 NS NS NS NS 11.1 2.8% 11.8 4.6 5.8 3.7 9.7% 19.000 34.8 NS 0.6 10.5 4.6 533.0 12.50 12.1 11.6 5.6 0.89 -45.30 5.1 0.5 0.9 6.0 11.0 7.8 13.1 2.6 13.50 7.00 0.1 13.5 0.43 129.7 12.19 7.0 0.3 13.7 17.000 0.6 7.5 0.2 13.1 1.5% 2.3 8.7 14.7 5.January 2011 GERMANY Smaller Companies Review Jungheinrich FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1. adjusted Share Price [Adjusted] Latest price High Low Average price 34.8 0.3 4.51 29.54 17.4 11.7 947.8 1.3% 2.9 27.4 15.8 0.000 13.4 6.7 5.7 7.0 0.5 14.3% 2.0 14.4 10.4 3.1 1.2 816.85 16.099.18 22.7 2. of shares.33 2.2 21.8 1.1 5.00 0.1 7.3 15.7 16.05 27.1 1.2 6.0 0.92 23.40 22.25 9.10 29.7 1. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.000 0. adjusted Treasury stock.8 2.9 3.18 12.9 12.2 996.79 -42.6 11.96 -43.2% 34.0 8.5 1.6 2.0 4.3 4.07 25.2 671.000 34.8 2.6% 26.4% 1.79 17.000 34.00 17.1 3.000 0.4 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.1 13.40 22.3 11.95 19.3% 1.51 10.000 34.1 24.0% 2.55 5.4 13.7 14.46 29.2 455.6 6.3 0.2 4.55 4.9 4.58 6.0 4.56 26.8 5.000 34.00 0.024.0 1.8 4.0 7.9 16.32 30.000 0.38 34.9% 16.000 0.0 9.000 16.7% 17.90 20.0 15.com .5 1.5 4. restated EV/EBITA.3% 21.7 1.23 29.0 3.3 0.73 29.1 2.2 2.2 13.0 4.000 34.000 16.5 NS 17.4 7.5% 2.8 8.7 828.58 10.9 15.3 NS 16.8 0.96 -43.38 10. reported % Change Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib. restated 149 www.8 4.46 142.4 NS NS 13.2 0.2 7.7 1.4 13.1 4.6 506.50 4.3 27.2 13. number of shares.6% 29.4% 3.1 NS (7.50 23. adjusted Av.73 37.36 5.000 34.3 12.4 2.61 29.7 8.2 14.24 2.4 960.000 0.5 6.8 No.5 4.43 13.1 8.5 10.000 34.4 996.000 16.60 12.00 0.2 307.77 NS 2.6 0.8 0.55 7.7 523.1 2.98 6.2 0.00 0.5 3.2 NS 16.0 8.7 0.58 30.4 NS NS 6.1 NS NS 3.40 6.0% 2.00 0.5 10.6 NS 0.0% (1.62) NS 1.1 5.6 2.40 14.9 12. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.46 142.000 34.9 0.0 6.000 0.000 0.4 12.0 4.72 20.6% 3.2 1.8 908.3 NS 0.8 0.6 8.2 0.64 13.

Though capex/sales remains high at 20% free cash flow is positive at EUR16m.9m EUR5.6 Yield (%) 0.0 0.6 16.com . Capex guidance has been lowered by EUR10m to EUR340-350m.239m Performances Performance (%) Absolute Relative perf.0 0. Cable Holding 43. Peter Kurt Nielsen Shareholders Free Float 56. driven by upselling of Internet/phone and Premium TV services to existing cable television customers.961.2m 90m EUR0.com 150 www. Q Stock data Market capitalisation Free float Enterprise value No of shares. Importantly.8 3. up from 1. revenues and EBITDA.736. and net profits are approaching break even point.5% to EUR179m.0% and EBITDA growth of close to 10% The recent refinancings and ongoing deleveraging should result in higher underlying growth in EPS.085.0%.1 is a 10% increase y-o-y. the company has redeemed and/or refinanced EUR818m in bonds and credit facilities. adjusted Daily volume EUR3. Kabel Deutschland looks well positioned to meet its guidance for 2010/11 revenue growth of close to 7. supported by improved network capabilities and the recently reduced price offerings. Management still expects to achieve a total of around 250k net broadband internet/Phone subscriber additions for the year 2010/11. illustrating the rapid ongoing deleveraging.3 3. down from 4.2m EUR1. 1m -6.January 2011 GERMANY Smaller Companies Review SECTOR Kabel Deutschland Rating No Rating N/A Target price (6 months) EUR34.cheuvreux. Revenues are up by 7. The subscriber base stands at 7.28 Price (07/01/2011) Reuters: KD8Gn.6% y-o-y to EUR396m. Kabel Deutschland added 55k new internet and phone subscribers equalling an estimated markert share of net broadband additions in its footprint above 100%. With the completion of the refinancing project this month.this is an improvement versus previous quarters.7x one year ago.1 Net debt/EBITDA (x) 4. FCF yield (%) - 5. (x) - - - - Source: Factset Cheuvreux does not currently cover Kabel Deutschland Research Analyst pnielsen@cheuvreux. total RGUs per sub is 1.5-7.0 ROCE (%) - - - - EV/Capital empl.7 8.2% -8. By mid-2012 the DOCSIS 3.9 Attrib.2 9. While we do not expect a continuation of the strong Q2 performance with a market share of broadband net adds above 100%.8% 3m N/A N/A 44 43 39 38 34 33 29 28 24 23 19 14 03/ 10 18 01/11 08/10 Price Price/ M DAX Sector focus Sector Top Picks Least favoured Outlook – Network upgrades driving growth In February 2010 Kabel Deutschland launched its DOCSIS 3.0x. implying capex/sales of around 23%.5 8. with EBITDA up by 9.1 6. subscriber intake should remain solid. benefitting from new promotions and offers launched in August. While Kabel Deutschland reported a net loss of EUR6m for the period – mainly due to high interest expenses .2%.2m Internet/phone subscribers.0 0.4. with EBITDA similarly at the upper end of the EUR715-725m range.DE Bloomberg: KD8 GR Seizing the growth potential Q Recent developments – Strong operational performance The most recent quarterly results for the Q2 2010/11 fiscal year showed strong momentum in KPI's. Net debt is EUR2.3 12 months ago.0 network upgrade enabling broadband internet access with transmisison speeds of up to 100Mbs.876m.1 7. implying a net debt/EBITDA ratio of 4.3%.9% 4. By end-November Kabel Deutschland offered 60Mbs and 100Mbs speeds in around 35% of its (two-way) upgraded footprint (around 12m households). saving around EUR50m in interest costs per year.2 2.0% 2m 17. At the Q2 results Kabel Deutschland management updated its guidance for the 2010/11 fiscal year and expects revenue growth at the upper end of the targeted range of 6.5m direct CATV subscribers and 1.cheuvreux.com (44) 207 621 5181 Disclosures available on www. Blended ARPU per subscriber of EUR13.0 upgrade will be completed and the offering available in the entire upgraded network.7% 2010 P/E (x) - EV/EBITDA (x) 2011E 2012E 2013E - 36. The EBITDA margin reached an all-time high of 45.

Q Investment case The investment case for Kabel Deutschland is based on the company's strong position as the largest cable operator and the second largest network access operator in Germany. and internet access Kabel Deutschland offers television and telecommunications services to its customers. With more than 15m residential home passed (65% of coverage) the company is also the largest cable operator in a single European country. improving balance sheet and cash flows. Q Triple play: television. While we do not anticipate similar outstanding share price performance as in 2010.1x 2010/11E and 7. from which it was sold in 2003. Q Q Docsis 3. additional services to existing customers Increased competition in basic television services from new competitors and alternative technologies. and the bandwidth advantage combined with competitive Triple play pricing positions the company well versus competitors. including Level 4 cable network operators Revenue generating units (RGUs) per subscriber and ARPU low compared to other markets Economies of scale provides leverage on earnings margins The incumbent telecom operator is rolling out fibre and VDSL to households Intensified price competition in bundled (double and triple-play) services Deleveraging of balance sheet to improve earnings and cash flows 151 www. Q Listed in March 2010 Kabel Deutschland was listed on the Frankfurt Stock Exchange in March 2010. The Docsis 3.A. improving reported earnings and free cash flow.. Kabel Deutschland's strong growth profile. Kabel Deutschland was the best performing stock in the Telecoms sector in 2010. Q SWOT analysis Strengths Weaknesses Kabel Deutschland operates Germany's second largest TV and telecoms network Little scope for expanding coverage areas for basic cable TV services DOCSIS 3. P/E is a high 36. While basic CATV services provide stable and predictable revenues and cash flows. In May 2009 the company also launched a mobile phone voice and data offering as a service provider on O2's network. Stable and predictable cash flows from basic CATV services Inherent cable technology disadvantages versus fibre/VDSL Experienced management team with strong track record Highly leveraged balance sheet limits scope for shareholder distributions Opportunities Threats Significant growth potential from upselling of new.0 upgrade launched in early 2010 The company originated from the Deutsche Telekom group. While revenues and cash flows from basic CATV services are stable. telephony.0 network upgrade provides superior transmission speeds versus competitors 20% of network still does not facilitate two-way communications. around 70% of capex is success driven.1x 2011/12E. and experienced management team.1x and 4. revenues from new services are growing by 26% y-o-y. Q Free cash flow yields are currently low and to date Kabel Deutschland has not distributed dividends.6x 2011/12E and 16. While capex remains high at above 20% of sales. The remainder is free float. telephony and Broadband internet access. provide the shares with an appealing investment profile for 2011.0 network upgrade will provide Kabel Deutschland with superior transmission speeds. In 2010 the company embarked on a network upgrade to the next generation cable technology standard DOCSIS 3. hold material scope for ARPU and revenue growth. Since then extensive network upgrades have enabled it to offer telephony and internet access in addition to cable television. Measured on consensus forecasts the shares are valued at EV/EBITDA multiples of 8.5x 2012/13E due to comparatively low net earnings.0x and reported net losses will also limit the scope for dividend payments in the near term.cheuvreux. premium TV services. The network covers 13 out of the 16 German federal states with a combined population of 47m and close to 24m homes. which is controlled by the Private Equity fund Providence. Improved cash flow from operations will facilitate deleveraging and hence a reduction of interest expenses. still holds 43. vs the European sector averages of 5.0. The leveraged balance sheet with net debt/EBITDA of 4. The scalable cost structure and economies of scale imply that revenue growth from upselling of new services. Providence has agreed a lock up on further share sales until March 31 2011.5m direct subscribers. The selling shareholder Cable Holding S.7% of the shares and votes.9x respectively. .com Valuation With the shares up by 55% since the IPO in March 2010. and fixed line telephony services. which will allow download speeds of up to 100Mbs. including basic cable television. and now make up 34% of total revenues.January 2011 Q GERMANY Smaller Companies Review Company profile Q The largest cable operator in Germany Kabel Deutschland is the largest cable network operator in Germany in terms of subscribers and revenues with 7. the upselling of new services such as Premium TV services. Broadband internet access. increasing RGUs and ARPU per subscriber should translate into continued earnings margin improvements.

1 55. We forecast volumes of 5.9% 19. Europe came in down ~7%. Reuters: KCOGn.3 1.3 1.368kt. with EBITDA also down q-o-q. EUR21. Klöckner retained its guidance for 2010.7mt.0 0.1 35. 16x P/E and 1.9 0.2x P/BV (all 2011E estimates). given the rise in steel prices into Q1-11 (cost push). Following the recent share price rally.5 4.5m EUR 14.92 Price (07/01/2011) 04/09 11/09 06/10 01/11 Price Sector focus Sector Top Picks RAUTARUUKKI.January 2011 GERMANY Smaller Companies Review STEEL 3/Underperform Rating -20.1 65.3%.com (49) 69 47 897 534 Disclosures available on www. 2009 2010E 2011E 2012E P/E (x) NS 22. down ~6% qoq and in line with our 1.0 NS 5.1 5.1 Yield (%) 0. as Becker remained particularly strong – the company's EBITDA margin in Europe came to 5.6% Absolute perf. underlying margin to remain depressed Although we expect further volume growth in the quarters ahead.9 0.370kt forecast.1% in Q2-10.com Q Q 152 www.5m. with North America at 2.7% estimate and down from 7.8 Alexander HAISSL Research Analyst ahaissl@cheuvreux. KCO needs to gain further market shares in Europe and North America.4bn beat expectations due to higher average selling prices (ASPs) – EUR1.5x EV/EBITDA.DE Bloomberg: KCO GR Stock data Market capitalisation Free float Enterprise value No.7% -10. FY10 guidance unchanged Q Shipments in Q3-10 totalled 1.9 0.46m Performances Q For 2011 management confirmed its previous guidance of 10% organic volume growth y-o-y. EUR1458m EUR1458m EUR1796m 66.4 10. in line with our EUR60m estimate. predicting group EBITDA of more than EUR200m (margin >4%). Voestalpine SSAB Least favoured Shareholders Free Float 100. of shares.1 35. implying a margin of ~5%.com .1 06/06 5. It predicted a q-o-q decline in Q4 volumes.024/t booked vs. Relative perf. up 8.6 EV/Capital empl.1 15.0 Net debt/EBITDA (x) 2.6% l-f-l growth as Becker has been consolidated since 1 March).cheuvreux. Becker remained strong at the Q2-10 level – we estimate a volume of 251kt and EBITDA of ~EUR18m. we find little attraction in the company's valuation.8 3.1 01/07 08/07 03/08 10/08 Price/M DAX Outlook – Mini cycle to be short-lived.9 Attrib. our EUR938/t estimate and EUR978/t achieved in Q2-10.9% 1. after having already booked EUR190m in 9M-10. As the markets are set to grow by 7-8%.2% EUR17. we expect this mini cycle to end already in Q2-11E.cheuvreux.3 11. North America down ~1% sequentially.5% 36.2%. Thyssen Krupp. EBITDA consensus for 2010 stands at EUR235m. adjusted Daily volume 1 month 3 months 12 months 3.8% y-o-y (5.0 EV/EBITDA (x) NS 8.1 45.0% Although the short-term momentum for KCO shares remain favourable. The rise in prices vs.9 16.0 6.0 14.1 45. indicating ~EUR45m for Q4. Europe was the main driver. trading at 6. slightly below our 4.1%.1 15.6 10.1 25.0 ROCE (%) NS 8.3% 14. The margin came to 4. Group sales of EUR1. For 2011E we estimate EBITDA of EUR278. (x) 0.1 25. 65.1 55. Q3-10 EBITDA came to EUR61m. which puts us ~15% below consensus.0 1. FCF yield (%) 41.5 0.50 Target price (6 months) KLOECKNER Too early to adopt a positive stance Recent developments – Q3-10 in line with expectations. we do not expect KCO to return to its underlying EBITDA margin target of ~6% before 2012E. Q2-10 stemmed from a time lag and mix effect (less construction in the summer period).

roughly 250 locations.5. predicting 2011 EBITDA of ~EUR320m (5. Reuters consensus) vs. we focus our valuation approach on a normalised underlying margin of ~6% at the EBITDA level. business model highly geared to steel cycle Klöckner & Co SE is the largest producer-independent multi-metal distributor in the combined European and North American market (geographical sales split: Germany 29%. North Rhine Westphalia (Germany). As we expect the cost-driven steel spot price rally to end in Q1-11E. Hence. Q SWOT analysis Strengths „ Weaknesses Strong balance sheet Underlying EBITDA margin of ~6% unlikely to be achieved before 2012E „ Strong M&A track record (18 successful acquisitions since IPO in 2006) „ Solid business model in downturn with strong FCF generation „ Business highly geared to steel cycle/prices with high earnings volatility (windfall profits/losses) „ Opportunities Threats „ Firepower for further M&A activities „ Further industry consolidation in highly fragmented markets „ Negative pricing expectations adversely affecting customers' buying behaviour „ Expansion strategy in Brazil/China Strong volumes/earnings recovery in case of pick up in underlying demand/re-stocking „ 153 www.5x EV/EBITDA for 11E and 4.7% margin.5m. valuation unattractive: In our view the market's expectations are already demanding.5/share.000) it serves around 185.5x (in line with the long-term average) and a discount period of two years. In Q4-09 it announced the acquisition of the Becker Stahl-Service Group. Klöckner's business model is highly geared to the steel cycle and steel price movements. The acquisition strengthened KCO's position in flat product business. France 20%.500. We rate the stock a 3/UP with a TP of EUR17. on the basis of the average price method applied for inventories. Market expectations already demanding for 2011. The company has a global presence covering more than 15 countries. this should clearly put a floor under the share price.January 2011 Q GERMANY Smaller Companies Review Company profile Q Largest producer-independent distributor. machinery/manufacturing ~19%. its inventory holding generates windfall profits/losses. Moreover.9x for 12E. Q Q Growth via acquisitions strategy KCO's growth is generated mainly via acquisitions – since its IPO in 2006 it has successfully acquired and integrated 18 service centres around the globe. Q Investment case Highly geared to the steel cycle – we do not expect the upwards trend to be sustainable into Q2-11E: Klöckner's business model is highly geared to the steel spot market (~85% of revenues in Europe and ~15% in North America. headquartered in Bönen. We therefore stick to our 3/UP rating with a TP of EUR17. and a total workforce of ~9. . UK 7%. conditions look set to get tougher again in Q2-11E. a multiple of 5. Based on normalised EBITDA of EUR340m. Becker has roughly 460 employees and annual sales of ~EUR600. we find the company's valuation unattractive at 6.000 customers in various sectors (construction ~38%. Switzerland 15%.com Valuation Since we expect the company's underlying profitability to remain volatile in the quarters ahead.5. With net working capital (adjusted for financial liabilities) accounting for ~60% of the company's current market capitalisation (~50% incl. Spain 6%. Netherlands 6%. pensions). automotive ~12%). With its wide range of products (more than 200. our model yields a 'fair' value of EUR17. US 15%).cheuvreux. with construction accounting for 38%. automotive 12% and Machinery/ Manufacturing 19%). our estimate of EUR278.

0 191.1 198.6 84.7 0.9 14.8) (68.0 8.3 0.0 0.0 (79.1 174.2) (5.3) 0.0 (18.0 (178.0 0.9 1.0 0.7 1.0 8.4 223.0) 0.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 1.1 91.9% 5.4) (165.0 0.7 564.0 (188.5) 0.5 180.6) NS 1.2 398.5) 429.4 15.7) 369.4 11.063.4) 533.3 63.5) 89.0 0.3 154.5 22.3 93.0 0.0 22.3 17.4% 5.0 14.0 0.8 www.0) 145.733.0 0.7) 283.0 (69.9) 305.359.409.0 0.0 (37.0 0.5 -42.1 101.5) NS (109.860.0 0.0 0.4 30.8) (188.0 33.4 12.1) (61.0 0.1) 0.0 0.9% 0.2) (3.3 188.5 1.3 (365.0 0.3 (18.8% (441.1 176.7) 61.7) 340.0 148.0 0.0 398.0 0.7) NS 586.0 5.4 479.9 16.6% 0.1 1.0 90.5) 354.7 0.900.487.9 450.5 0.969.6 131.9% (24.0 0.0 (63.1 101.1 0.0 0.0 33.8% (476.0 (185.0 45.7) 0.287.5 1.140.0 (41.9 426.0 0.8) 0.2) 278. for exceptional items Net attrib.140.0 61.0 0.6) (60.0 (22.3 1.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 154 2007 2008 2009 2010E 2011E 2012E 6.0 (38.1 0.6% 0.2 179.460.0 0.0 (119.746.5 2.1) NS 0.3 (509.3) (5.733.1 321.0 0.5 0.0 533.0 305.0 0.0 18.9 1.4) 114.0) 0.7 20.0 0.1 0.5 149.3 (48.7 1.0 479.5 (81.746.1 2.2 NS (363.079.8) 0.3 1.0 145.0 (65.0 82.0 147.6) (178.0 156.2 15.283.4 159.6 (25.5) 0.5 93.6 217.3 (97.5 0.2 (155.0 (7.2 (63.4 1.108.0 136.6 27.0 0.0) (64.0 193.6 141.0 0.0 383.6 19.0 0.0 0.1 101.9) 600.January 2011 GERMANY Smaller Companies Review KLOECKNER FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.9) 0.0% (514.0 (15.0 252.1% 0.2 14.8) 0.4 482.0 0.0 180.1 0.5 (65.0 74.5) NS 5.1% (88.7) 0.2 16.0 62.0 (61.0 0.0) 252.1 6.5 203.169.4 93.9 0.0 2.6% (43.0 (26.6 7.9 2.3) 0.0) 0.7 0.9) 0.749.0 0.274.2) 0.602.0 143.062.9) (4.1 0.5) 1.5) 191.0 0.0 (319.0 153.5 14.0 1.7) 0.0 0.3 0.0 31.0 (2.0 (1.0 (53.0 0.9 0.3) (4.6) (55.2) 0.0% (87.9 474.5 52.3) (5.0 132. [inc.7) 133.4 18.9 154.0 0.7) 0.8 1.2 NS (84.0 54.0) 0.1 237.0 (1.0 0.7% 18.0 14.9 1.0 0.9) 181.0 (2.7) 0.0 133.1) 0.0 0.3 (12.2 86.com .0 648.1 91.4% 3.0 0.9 17.166.2) 0.045.0 (37.0 (374.7 1.0 0. profit [loss].395.1 0.9 506.739.1 101.843.4 760.2 105.0 0.6 0.6) 1.0 1.2) 0.283.7 104.0 4.9 93.0 0.5 732.8% (498.0 0.0 1.7) 143.2 0.8 20.3 19.0 0.4 62.0 399.0 0.3 0.7 69.0 0.cheuvreux.739.9) 228.9 1.5 0.018.0 0.3% (282.0 1.1 180.6% (67.620.4 0.0 1.6% (546.4 18.969.0 89.240.

1 20.1 NS NS NS NS 8.396.1 1.0 7.2 0.66 3.5 1.0 NS NS NS 41.63 13.9 0.3 16.46 13.9 NS NS NS 3.00 0.40 21.19 63.9 8.3 11.85 20.0 1.73 17.cheuvreux.40 2.2 19.3 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.0 30.2 1.000 66.2 25.7 5.3% 2.6 0.1 0.4% 1.4 71.9 1.4 0.2 0.8 10.3 0.19 63.8 1.2 0.00 0. of shares.2 52.com .2 3.9% 2.37 5.500 66.56) NS 16.92 21.500 0.01 23.500 66.00 0. adjusted Treasury stock.57 31.457.4 2.4 8.8 46. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1.174.2 11.00 0.5 9.4 14.92 125. reported % Change 2.0 6.500 46.34 45.3 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.9 7.5 11.670.7% 22.000 27.9 22.6 10. adjusted Av.5 0.500 52.93 21.269 0.0 18.8 1.000 66.0 1. number of shares.4 2.6 3.500 0.56 198.4 7.5 0.January 2011 GERMANY Smaller Companies Review KLOECKNER FY to 31/12 (Euro) 2007 2008 2009 2010E 2011E 2012E 2.6 19.1 NS 1.9 1.9 5.7 NS 1.5 1.49 - 17.3 580.00 0.92 21.3 8.500 0.4 2.3 0.2 2.4 4.00 0.4 11. adjusted Share Price [Adjusted] Latest price High Low Average price 46.61) NS 0.6 0.6 0.5 2.1 46.81 EV/EBITDA.9 4.500 46.000 46.23 91.5 7.500 66.68 21.6 6.9 6.0 1.4% (3.457.2 15.92 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.0 10.8 3.0 5.9 1.6 0.4 1.6 1.0% 19.3% 15.19 2. restated 155 www.9 2.0 3.8 0.30 - 12.7 9.3 6.7 1.28 2.4 0.65 17.9 8.0 6.3 2.0 3.80 4.4 16.79 21.61) NS (3.1 2.9 0.9% 1.6 1.00 9.0 12.9 1.0 22.000 66.92 125. restated EV/EBITA.3 5.5 5.32 NS 17.7 3.5 3.6% 18.0 NS 0.4 8.500 0.7 27.4% 8.289.269.8 1.7 1.4 5.38 7.8 5.9 4.7 NS NS 0.8 4.403.2 11.000 66.0 NS 1.3 7.87 8.9 9.1) 8.3 30.87 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.1 10.56 198.2 86.8 No.1 0.8 1.814.1 5.5 9.2 3.8 3.5 4.5 0.00 (1.5 3.0 1.187.9 29.7 0.3 (35.34 45. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.4% 0.7 7.5 1.3 6.797.500 0.

5x book.cheuvreux.1 17. success will require improved management execution and a more favourable market environment (improved availability of components. Management 2. At end-November. In our opinion.5% 16. rising utilisation.2) (0.1m.1 17.5 8.6 Attrib.683m EUR 2.1 12. (x) Research Analyst blaux@cheuvreux. but will remain available to Kontron as an external advisor.1% from 4.DE Bloomberg: KBC GR Transformation not finished yet Q Rating Recent developments – mediocre earnings. boosting the backlog to a record EUR468m.3m amid higher working capital. The CFO position is to be filled again as soon as possible.0% 2009 2010E 2011E 2012E 20.1 22.3 Net debt/EBITDA (x) (1. if successful. at 19x 2011E EPS. The benefits of the company's makeover will likely begin to be felt from 2011E onwards and in a gradual pattern. 47. and its execution issues (translating growth into profit).1 7. and take decisive steps to recover from the fraud suffered in Malaysia. It will take time for the company to recover investors' lost trust. At EUR8. Cash flow from operations came in at EUR-1.4) Yield (%) 2.1 1. a realignment of Kontron's management structure has been necessary given its recent top-line expansion (with more targeted for the future).3) 1.5 16.1 2. the group's reorganisation (shifting to a more centralised geographic organisation structure adequate for further globalisation).6% 38.2 1. However.2 31. Ubitronics). Kontron announced that Chief Production Officer Dr Martin Zurek and Chief Financial Officer (CFO) Dieter Gauglitz will leave the Board of Management with effect from 1 January 2011. with further upside for the years beyond.1 01/01 03/02 08/03 11/04 01/06 Price/TECDAX 04/07 07/08 Price Sector Top Picks Dialog Semiconductor.1 2. the shares are not expensive. That should ultimately lead to more balanced workloads among board members and a hence reduced workload for CEO Ulrich Gehrmann.2%.7 ROCE (%) 10.0 14. Mr Gauglitz has resigned.5 EV/EBITDA (x) 9. However.4 NS 12. FCF yield (%) NS NS 7. Outlook – Transformation continues.9 (0. Turnaround within reach Q The change in top management is linked to the company's ongoing transformation and is likely to be followed by some redistribution of responsibilities within the Board of Management.7 6. Warburg Pincus 8.cheuvreux.1 32. Kontron will remain in transition for the coming months and continue to streamline its group structure (merger of entities) and operations.3% 10. Kontron may see an impressive turnaround in 2011E.com 12/10 Sector focus EV/Capital empl.1% EUR7.2 2.22 Price (07/01/2011) Reuters: KBCG.1 32.1 42.8%.0% a year earlier on improved cost control despite higher component prices. but it is too early to turn outright bullish.0 2. The low-margin ODM business was deliberately terminated. While Dr Zurek will remain with the company.1 7.1% Absolute perf. fuelled by the rebound in Automation. Micronas.00 EUR9. better mix). STMicroelectronics Least favoured Shareholders Free Float 89. lifting Kontron's Q3-10 EBIT margin to 6. Q3-10 EBIT was flat q-o-q and up 77% y-o-y. assuming responsibility for supply chain optimisation (outside the Board of Management).1 47. Order intake reached a new high of EUR204m. Stock data Market capitalisation Free float Enterprise value No. 0. integrate recent acquisitions (Digital Logic.1 37.9x EV/sales and 1. Relative perf. AP Labs.4 6.1 22.January 2011 GERMANY Smaller Companies Review ELECTRONICS Kontron 3/Underperform Target price (6 months) -24. mgmt change Kontron reported Q3-10 sales up 15% y-o-y to EUR133m.5 0.1 12.1 27.3 1. adjusted Daily volume EUR513m EUR457m EUR515m 55. At the same time.5% 23.1 27.4% 11.com Q Q 156 www.com (49) 69 47 89 75 12 10/09 .4 1.1 37.17m Performances 1 month 3 months 12 months 24.1 42.5 NS 19. of shares.1 P/E (x) Bernd LAUX Disclosures available on www.

strong design-wins. and 1. energy generation. In response. . The usual shipment size ranges from 100-300k units. frequent restructuring charges. Kontron appears to have a huge opportunity to strongly expand its profitability given its low base. being hit by the collapse of Automation (2009). Q Q Addressing a highly attractive growth market Kontron addresses a USD6bn market that has the potential to grow at a pace of 10% p. Ubitronics). If it should need additional funds. and automation.a. The company provides a full range of ECT products. That may appear "fair". For a more rapid recovery. and the fraud at its Malaysian entity. In addition. in addition to the continued Profit Improvement Programme. Kontron's valuation multiples reflect the financial market's lack of confidence in sustainably higher returns stemming from the company's sub-par execution in the past. special-purpose computer systems containing a combination of hardware (40% average) and real-time software (60%). inventory rising to excessive levels. acquisition activity is likely to be limited. We fear the benefits of these transformation and cost reduction processes will be felt only gradually despite the strong economic improvement and rebound of the Automation sector. transportation. and healthy order backlog into earnings.500. Kontron develops and produces embedded computer (EC) systems.com Valuation Kontron shares are priced at very moderate multiples. POS/gaming. resulting in suboptimal margins „ High re-use quota of 54% of technology/IP for different vertical markets thanks to module-based structure „ Control of a track record in turning growth into higher returns „ Technology leadership in vertical solutions Opportunities Threats „ Ongoing „ trend to outsource EC development supports industry growth „ Strong potential to expand in Asia „ Industry of working capital „ Lack consolidation to proceed Low entry barriers for highly fragmented EC industry „ Rising input costs (microprocessors. (in units) amid sustainably buoyant demand driven by outsourcing and new applications. Its client base numbers roughly 3. merger of entities and operations. Q Investment case On numerous occasions over the past two years Kontron has disappointed expectations for its bottom-line. 11x cash flow.e. Most likely. Q SWOT analysis Strengths Weaknesses „ Cost-efficient „ No engineering with roughly 38% of all engineers located in eastern Europe proprietary products „ Production efficiency still not satisfactory. and increasing sales/healthy end-markets. But it all comes down to quality of execution. Kontron has not been able to convert its market share gains. Q Global market leader With a market share of 11% Kontron is the world's largest EC technology manufacturer. Based on our 2011E projections. electronic components) amid supply shortages „ Rising price erosion due to currency shifts „ Turning strong order book and market share gains into earnings 157 www. defence. it will take Kontron and its renewed management time to rebuild that lost trust. Kontron requires electronic components to become more easily and cheaply available again. Q Net cash position gone.cheuvreux. with no individual client accounting for more than 4% of total sales. i. strong order book. especially considering its turnaround situation.9x EV/Sales. integration of recent acquisitions Digital Logic.8%) is standing by to expand its stake in the company and may be prepared to finance further external growth. the company accelerated the transformation process it started in 2009 (further streamlining its group structure. medical systems. This reduces the company strategic flexibility going forward. Nonetheless.January 2011 Q GERMANY Smaller Companies Review Company profile Q Full-range embedded computer technology provider Founded in 1962. From our standpoint. strategic flexibility limited Following the EUR34m fraud at its Malaysian entity.5x book value. The company continues to steadily expand its share of this market as it generates the fastest organic growth. Kontron likely finished 2010 with a moderate net debt position of EUR25m (12-09: EUR54m net cash). the shares are trading at 19x earnings. 8x EV/EBITDA. but does not discount Kontron's opportunity to substantially increase profitability going forward. 0. Its biggest customer industries are telecommunications equipment. AP Labs. shareholder Warburg Pincus (holding 8. shortages in electronic components.

0) 0.5 (70.1 24.0 0.8 28.3 11.1 0.0 (73.0 49.0 0.5) 15.0 14.5) 35.0 0.0 105.0 (0.0) 42.0 0.0 3.0 6.0 45.0 0.0 (1.6% (75.2) 0.0 (4.3 31.0 0.5 346.9 21.2 27.0 25.8 0.9 11.8) 59.7% (119.4) 48.0 16.0 10.0 0.0 0.5) 0.3 0.1 30.0 36.0 0.8 16.9 0.4) (66.0 0.0 (14.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 158 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 262.0 28.4 www.0 0.0 (24.0 (1.3 0.0 (14.0 (13.0 0.0 NS 589.6) 23.7) 22.0 0.9 11.2 (28.8 42.7 229.1 11.0 (1.0 0.1) 16.0% 0. [inc.0 0.0 0.5) 0.0 0.0 46.7% 0.0 34.5% (13.0 0.0 0.2 (12.1) (5.3 6.5% (8.3 1.5) 0.1 -81.7 354.0 0.7 11.0 (11.6 10.5) NS 189.1% (0.7) 56.0) 42.0% (7.0 0.5) 0.4) NS 293.0 (100.6 0.3 11.1 21.7 82.2) 0.0 0.8 20.4 8.4 (32.2) 19.1 -37.0 22.0) 0.0 42.0 5.0 27.0) 0.7 5.0 0.7 0.0) 0.0 (6.7 0.3 1.4% (1.2% (89.0 0.4% (112.6 (1.7) 1.5 NS 0.1 25.0 30.3) 17.6) 34.0 19.0 4.8) 34.0) 31.0 0.5 0.3 2.2) 23.0 0.0) NS 0.0 85.6 140.5 10.7 330.9) 40.0 0.0 0.0 2.9 7.7% (123.2 12.3% 496.7% (1.0 30.1 (40.0 (4.9 47.0 0.0 (11.6 0.6 91.0 0.5 (4.0 23.9) 33.0 3.0) 0.0) NS 532.6) 0.4 10.5 2.5 84.5) 120.3) 120.2 22.0) 0.4 0.4 0.0 0.8 23.0 0.0% 446.0 8.0) 27.0 20.0 34.5) (323.0 0.0 (39.5% 5.2 0.1) 0.5) (117.9 0.0) (5.1) 0.3 -53.5) 120.0 0.0 21.5 -55.0 (3.1) (71.0 31.5 38.1) 13.2) 45.4 (50.3 (11.9 (2.0 0.0 189.0 (7.8) (20.0 28.0% (8.0) 0.0 0.0) (2.0 81.1 14.2 0.6) NS 233.2 13.7 25.6 (42.0 0.8) (50.3 26.0) (15.2 80.0 0.8 81.6 -37.0 21.0 2.3 30.3% 468.9) NS 234.1 0.0 40.9) 7.cheuvreux.6% (7.0% (17.0 (7.0 (11.5 0.0 0.0 132.0 (1.0 0.0 (9.January 2011 GERMANY Smaller Companies Review Kontron FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.4 -93.8 0.2% 300.0 (15.0 0.1) 0.3 42.0) 0.0 110.2) 0.8) 0.3) (196.0 0.0 0.9 47.0 (10.0 0.0% (28.4 -29.0 (5.4 14.5) (358.0 0.1 5.6 1.0 55.8 22.0) 0.5 (17.0 0.5) 14.0 (1.6) (18.2 360.0 (15.7 3.0 52.9) (350.1) 8.7% (11.6) 18.2 10.5) 62.4 6.0 34.5 277.0 (29.7 19.1) 42.2) NS 346.7% (16. profit [loss].0) 29.5 0.1 37.9) 75.3 188.2 229.5 NS (19.9 40.0 0.0 0.0 (0.1 0.0 0.2 2.0 135.0 139.3) (300.8% 485.0 0.1 11.0 (43.9) 0.7 0.0 -67.1 54.0 15.0 0.0 0.1) 0.1 286.0 32.3 0.0 48.5) 30.0 151.3% (104.5 0.0 (9.4 3.8% (90.9) (1. for exceptional items Net attrib.3 (1.0 NS 11.0 0.9 -5.8 18.5) 0.0 (10.0 0.3% (71.4 (12.8 0.0) 56.8 2.1 0.9 26.7) 47.1) NS 354.4% 405.0 (10.0 35.0 0.1 2.0 0.5 0.9 241.0) 46.0 9.1) 0.5 305.1% (10.7% 0.0 (2.7 0.0 0.6 10.0 0.0 56.0 (2.6% (103.0 0.7) 0.1 (25.1% (6.0% (19.5) 0.0 0.2) (273.5 35.9 (56.8 2.0 0.6 5.0 140.4 47.8% 0.1 (12.7 24.6) 61.3) 21.0 0.7 2.5 24.0 0.0 5.0 (5.9) 27.0 (0.5 140.0 0.6 0.0) 0.5 (121.2 -28.5) NS 260.7) 0.2 10.0 32.9 (0.0 (2.2 233.7 15.3 27.0 (72.0 0.8 28.com .0 0.2) 13.5) (162.9 333.9) 0.0 (85.0 111.7 -45.0 233.1 0.9) 0.5 260.0 0.0 36.6 361.0 0.3 0.4) (332.0 0.1 14.7) 0.2 2.1) (390.7% 21.0) 0.7) NS 229.0 0.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.8) (56.8% 0.1 0.5 25.2 31.6 23.5) 21.0 121.8 23.0) (3.0 0.0 0.3) 30.1) (32.0 22.2) 49.3 293.6 6.0% (12.6% 0.5 40.0 (1.6 358.1 (0.

69 5.4 12.683 55.000 6.22 - 309.8 NS NS NS NS 12.00 0.85 22.2 5.8 6.9 22.71 11.5 0.94 5.9 12.2 NS 2.7 7.0 11.15 0.6% 0.1 8.69 38.6 7.4 366.6 11.January 2011 GERMANY Smaller Companies Review Kontron FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.14 13.2 18.7% 0.4 515.2 579. reported % Change 0.6 8.1% 4.22 13.4 10.4 Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib. of shares.33 9.4 8.5 1.1 19.00 0.3 15.9 440.3 0.683 55.25 7. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.7 9.9 10.4 NS 11. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.0 14.8% 0.4 1.50 7.000 50.9 513.95 7.683 0.954 48.00 0.9 14.5 6.6 5.39 -43.3 2.8 9.5 10.5 11.3 1.7 6.20 0.3 2.9 NS 2.4 7.3 1.2 2.1 23.1 370.6 7.49 NS 0.5 18.3 1.01 0.5 9.5 14.99 8.5 19.9 14. adjusted Treasury stock.00 11.20 0.683 0.5 1.0 15.88 7.6 686.00 18.59 25.000 55.6 0.52 14.63 30.8 444.60 9.3 23.3% 0.4 2.67 6.9 14.0 9.9 299.5 9.8 20.5 NS NS NS NS 1.7 11.69 6.3 23.2 1.5 NS 10.32 14.1 16.6 3.9 6.72 6.0 540.9 58.5 7.84 NS 5.00 0.1 0.47 44.20 0. restated 159 www.9 0.733 50.0 12.6% 5.6 NS 51.5 10.4 10.11 7.0 22.4 4.8 0.2 6.39 -43.20 0.9 NS NS 1.47 7. number of shares.8 8.3% 4.3 1.3 11.00 0.84 7.0 NS 29.30 111.95 8.000 55.7 1.00 0.0 19.6 0.7% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.2 14.04 -93.4 5.9 0.4 496.683 0.1 2. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.0 0.1 18.4 1.683 55.20 5.8 13.00 0.5 NS 0.4 7.7 NS 39.69 16.8 389.31 -81.com .5 10. adjusted Av.00 0.000 55.4% 4.0% 5.6% 5.72 17.3% 0.47 44.28 7.7 NS 31.75 8.7 NS NS 12.2 14.3 14.7 10.954 0.6 NS 41.000 55.6 1.0 NS 33.0 NS NS 9.6 7.33 5.5 21.95 10.4 10.2 7.2 1.2 13.0 19.3 2.9 10.1 0.3 2.22 9.00 0.8% 0.0 0.5 1.9 6.4% 0.cheuvreux.1 7.3 1.8 NS 12.5 1.3 1.905 45.27 14.33 5.0 NS NS 9.00 0.4 23.1 1.654 45.733 0.8 12.683 0.5 16.2% 0.6 1.06 9.61 -35.99 5.284 0.1 31.7% 6.0 1. restated EV/EBITA.5 8.27) NS 0.47 13.2 443.654 0.6 8.5 20.5 22.69 16.6 8.59 25. adjusted Share Price [Adjusted] Latest price High Low Average price 45.7 0.8 NS NS 12.0 340.1 10.10 0.4 7.1 6.9 7.0 677.03 7.2 7.1 18.95 12.0 9.4% 0.9 1.59 6.905 0.5 0.000 50.5 1.9 7.8 6.5 13.8% (0.8 0.0 NS 1.0 6.000 48.01 9.284 50.7 1.4 NS 0.43 14.0 2.0 10.2 No.3 NS 30.0% 0.000 45.7 1.63 30.47 -53.0 5.8 13.2 15.6 9.6 NS NS 9.8 11.683 55.3% 5.97 9.5 NS 1.6 NS 1.82 9.7 7.9 396.9 NS 1.25 1.3% 0.27) NS (0.6% 0.8 513.49 NS 0.

Nexans.4 1. implying Q4-10E order intake of EUR532m (+6% y-o-y and +4% q-o-q). the key momentum drivers being China.2 1.2 0.3%.0 29. thus.2%. Compared to peers (e. Krones has issued an EBT-margin target of around 3% (our estimate: 3. falling 5% y-o-y and 8% q-o-q to EUR513m.8% 2009 2010E 2011E 2012E NS 31.3% Absolute perf. Rolls-Royce Shareholders Kronseder Family 53.com Q 160 www.3 12.5 7.5% -1. ensures roughly 5-6 months visibility.3 1. In addition. In an interview after the Q3-10 release. Krones continues to guide for sales growth of up to 15% y-o-y in 2010. Outlook – Profitability expected to stay below peers Q EUR46.7 EV/EBITDA (x) 35.93 Price (07/01/2011) Krones's structural growth drivers remain intact: 1) global population growth (+80m people annually per year).59m EUR 1. 59.91m Performances 1 month 3 months 12 months 1. we believe the company's profitability will lag that of other capital goods companies in the coming years due to structural factors. we found Q3-10 order intake disappointing. due to price wars in the industry.a.9% -0.0 04/02 06/03 09/04 12/05 Price/M DAX 03/07 06/08 Q Sector focus Sector Top Picks Least favoured ABB. Indeed.0 9.January 2011 GERMANY Smaller Companies Review MACHINERY 3/Underperform Rating -21.0) (1. the company recently conceded that price pressure is still very high. Krones regards itself as a total solutions provider and intends to strengthen its turnkey business further (targeted group sales exposure: 20-30% or 4-5 large projects p. EADS. Stock data Market capitalisation Free float Enterprise value No.7 3. We attribute this more to customers' ordering reluctance rather than a general move by Krones towards a "margin over volume" policy.7 1.00 Target price (6 months) KRONES Reuters: KRNG. Africa and South America.2 1. We also appreciate Krones's additional qualities such as its market leadership and rock-solid balance sheet.58x and EV/EBITDA of 6.0 49.2) (1. GEA).DE Bloomberg: KRN GR Strong sales recovery? Yes.3% -4.3% 8.0 19.8% 26.com 01/11 Price Hans-Joachim HEIMBUERGER Research Analyst hheimburger@cheuvreux.2) P/E (x) Yield (%) 1. but concedes that EBT margins of ~3% are completely unsatisfactory and targets 7% and a ROCE of 20% by 2012.8x) already seems to reflect a V-shaped recovery.2% EUR37. Pricing discipline improved only modestly in 05-08. 2) a health & wellness trend underpinning the demand for packaged beverages. a period of sales growth. Recent developments – V-shaped sales recovery Q Krones released its Q3-10 numbers on 27 Oct. we are concerned that Krones could remain well below the average profitability of the capital goods sector also in the next profit cycle.cheuvreux. Management believes it can achieve 2008 peak sales (EUR2. SIEMENS AG Alstom. of shares. We estimate 2010E order intake at EUR2150m.38bn) by 2012 or 2013. CFO Thaus stressed that 2010 y-o-y order intake growth will be in the low 2-digit percentage range. Krones's EBIT margin fell from 7.com (49) 69 47 897 540 09/09 . Although the H1-10 order intake pattern was excellent and last year's Q3 benefited from the Drintec trade fair. which we would welcome. Sales. despite its excellent market position. adjusted Daily volume EUR1482m EUR693m EUR1392m 31. Free Float 46.7 0.0) (1. Closing margin gap to sector? No.1 11.0 01/01 9. The current order backlog of EUR923m. Asia. However. (x) 1. which is up +4% y-o-y.4 ROCE (%) NS 7.9 Net debt/EBITDA (x) (4.cheuvreux.) in order to secure a certain minimum level of capacity utilisation. FCF yield (%) 10. and this remains our key concern for the stock: From 2003-05. up +12% y-o-y.g.0 59.6% to 5.5 11. and 3) strong growth in PET applications.8 Attrib. EBT and net profit were in line while order intake disappointed.0 19.0 39.2 Disclosures available on www. the Middle East.9 4.2%).0 49.2 18.8 EV/Capital empl.0 39.9 6.0 29. Relative perf. the current valuation (12E EV/Sales of 0.3 15.

Q Investment case We appreciate Krones's qualities: a) intact longterm structural growth drivers (population growth.58x and EV/EBITDA of 6. Q Q Global market leader in bottling machinery Krones is the global market leader in bottling machinery for the beverage industry. filling. b) market leadership. Krones's EBIT margin fell from 7. given currently high capacity utilisation at Krones and the industry at large and good market momentum. The Kronseder family remains the majority shareholder with 53% of the outstanding capital. Opportunities Threats „ Rising share of after-sales business. a subsidiary set up for the sole purpose of preventing the market entry of new competitors. 39% alcoholic) and roughly 15% to food. „ Rock-solid balance sheet „ Earnings dilution from Kosme (low output range). the company recently conceded that price pressure is still very high. and this remains our key concern for the stock: From 2003-05. IT. our DCF model renders a fair value of EUR38 per share. logistics. Indeed.cheuvreux. CEO and CFO joined the board in 1989 and 1997 respectively. Indeed. and a terminal growth rate of 2. price discipline in the industry has been low 161 www. labelling and packaging machinery. offering single machines and complete production lines including. DCF: We assume sales and EBITDA CAGRs of 2. „ Strong mismatch between geographic sales structure (90% outside of Germany) and workforce (80% in Germany) „ Stable management. pharmaceuticals and cosmetics. Its 2012E EV/Sales multiple of 0.com Valuation We apply a DCF valuation to derive our price target of EUR37 per share.0%. rising variety of beverages). We reiterate our 3/Underperform rating with a target price of EUR37. we believe the company's profitability will lag that of other capital goods companies in the coming years due to structural factors. 53% of voting rights with Kronseder family Krones was founded in 1951 by Hermann Kronseder and taken public in 1984. Q SWOT analysis Strengths Weaknesses „ Global market leader in packaging machinery for beverages (leader in PET). „ Price wars: historically. In addition. About 80% of group revenues are generated with PET applications. GEA (11. In addition. which are said to offer higher growth rates than the beverage packaging market as a whole. whilst its 2012E EV/EBITDA multiple of 6. PET stretch blow moulding.g. Volker Kronseder is the company's CEO and Norman Kronseder is a member of the supervisory board.58x is 29% above its 10-year average.8x is 43% above its historical average. and c) rock-solid balance sheet. However. the current valuation (12E EV/Sales of 0. Based on these parameters.7% and 6. we are concerned that Krones could remain well below the average profitability of the capital goods sector again in the next profit cycle. Management plans to strengthen the company's competence in process technology (e. Pricing discipline improved only modestly in 0508. we believe management will be more selective with the orders and margins it accepts in H1-11. Q 85% of group sales related to beverages In 2009 some 85% of Krones's group sales were related to beverages (46% soft drinks. a period of sales growth. Krones appears expensive. Q Q Historical multiples comparison: From a historical multiples perspective. Good track record. management EBT margin target of 7% by 2012 is expected to be well below the estimated 2012E margins at e.6% to 5. for example.2%). . „ Rising competition from manufacturers located in or expanding into low-cost countries. from ~15% to at least 25% of group revenues.g. „ Growth in non-beverage packaging and process technology. „ No operating leverage visible (less scalable tailor-made project business).6% respectively for 2010-19E. local production: 80% We believe the company's production and transport costs constitute a competitive disadvantage to peers as 80% of its workforce is based in Germany but it generates only 10% of its sales in Germany. a WACC of 8%.January 2011 Q GERMANY Smaller Companies Review Company profile Q IPO'd in 1984.3%. thus. despite its excellent market position. chemicals. warehousing) via acquisitions. water. Q International sales: 90%.8x) already seems to reflect a V-shaped recovery. due to price wars in the industry. However.

6% (46.9% (64.8) 1.2 0.0 0.9 -21.7% 172.5 0.0 (16.0 (0. profit [loss].0 0.6) NS 958.0 0.3 0.3 (1.0 4.156.0 (13.1 0.5 -1.4 25.1 (113.3 0.9% 0.8 0.6 0.3) (35.5 0.6) NS 0.0 0.025.4 418.0 101.0 (49.1) 0.1 15.0 54.4 107.0 0.2% 0.461.5 0.7 5.0 74.695.7) 130.3 16.5 147.4) 208.0) 73.126.0 0.3 5.6 30.6 0.2 708.0 0.6 0.7) 0.2 (1.0 112.0 0.3) 101.0 0.8 1.0 (20.0 0.0 378.0 0.8 0.0 0.0% 51.1 154.2 0.3) (1.0 61.0 0.4) 208.6 162.0 27.4 20.0 0.0 77.3 0.3) 0.1 113.0 (0.3 64.8 1.0 557.7) NS 877.0 58.8 (0.8 (126.3 0.0 111.2 0.8 231.3% (9.3 0.4) (30.3% 1.6 0.5 0.2 NS (57.0 (11.8 875.0) 157.6 3.2) 112.0 (40.0 0.0 0.9) 0.2) 80.7% (615.5 995.219.5 0.3 2.0 (34.8 386.6) NS 2.6) (30.0 0.0 0.0) (21.7) 13.1 0.5) NS 995.3 22.5) (1.5 13.8 274.3 (1.0) NS 1.0 790.0) 176.4 728.0 0.0 (51.0 0.0 0.0 (17.2% 2.6 5.2) (34.0 381.0 63.0) 113.0 0.0 102.0 (27.1 -85.0 0.5 10.0% 1.0) 0.8 NS 0.0 0.cheuvreux.0 75.5) 40.3 2.0 (0.5) 0.2) 63.1 11.0 0.0 0.0 47.2 (80.5) 1.3 2.1 288.0 (0.7) 197.5 790.4 20.4 6. for exceptional items Net attrib.2 190.8 995.2) (1.0 0.5) 0.0 6.381.0 (49.4 349.0 94.511.0 426.4 (3.0 0.0 101.8 44.0 21.0 130.0 477.3) (82.0 0.2 1.511.2 433.0 0.0 0.2) (16.0 0.8% 0.9) 9.7 0.2 0.0 80.0 0.9 20.0% (622.3 0.0) 0.0 102.0 106.4 22.036.8 696.0) 9.0) 92.5 0.864.025.1 38.6 0.0 0.5% (51.0 0.6 4.5) NS 995.0 81.0 157.0 (63.2) 47.0 0.0 (34.0 107.0 (29.0) 0.6 (227.4 (14.0 11.5 0.7) 0.7 267.0 (15.0 0.7 15.0 695.1 0.4 30.9 59.4) 61.0) 157.5) 1.0 157.0 1.4 2.8 62.514.5% (58.0 86.6 0.6 (3.2 -6.4) (1.6 0.6) 90.8 958.0 (36.6) 150.8 -6.0% 0.4) (1.2 -10.0% 2.0 63.4 5.0 0.0 80.7 3. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.6 113.3 0.0 0.4) 67.3) (78.0 (49.1) 0.4) NS 696.3 154.0 0.3 2.0 0.7 16.4% (22.0 0.8) 0.3 0.0 90.0 79.5) 1.6% 107.7 2.1 14.0 0.9 0.6) 110.5 877.8% (640.2) 94.0 94.0 0.0 0.0 0. [inc.5 287.358.5% (661.0 0.4) (30.7 0.7 0.0 0.6 0.5% 51.0 94.0 (11.4 24.6% (47.5% (45.0 0.0 (0.8) 0.381.3 735.0 513.0 (22.6 NS 2.0 0.8 386.7) 125.1 0.4 523.9 979.0 0.0 2.9 70.0 0.0% 0.0 (16.3) 61.6) 30.7 0.0 43.1 296.0 (34.0 79.6) (80.6) 0.6 0.5) 68.0 80.5 194.0 0.0 0.0 4.1 60.4) NS 995.4 0.0 0.0 14.2% (640.4) 197.8) (30.0 798.7) 0.com .0 0.5) 1.9% (521.8) NS 735.0 74.0 360.1) 0.5% (487.5 (171.0 0.3 (122.0 0.6) (29.4) 0.3 147.6 0.1 0.7 62.9 41.5 0.1 0.4) (30.0 0.0 2.7 15.6 0.0 (13.0) 92.6) (10.0 0.0 35.4 0.0 150.6) 0.378.5% 0.0 0.0 (0.0 0.6) (1.9 0.6 4.4 11.0 442.2% (599.0 0.299.6) 136.9 2.9) 0.2% 2.0 0.0 21.January 2011 GERMANY Smaller Companies Review KRONES FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0) 57.0 (37.0 103.4) (113.0 513.0 0.0) (23.0) 0.3 NS (26.0 106.4 10.0 0.5 194.0 0.0% (661.8 123.2 2.9) (59.1 (113.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 162 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.0 62.6% (66.0 0.8 1.0 www.9 979.4 107.5 995.3% (64.236.0% (51.0 (12.0 (16.5) 146.3) 61.0 0.6 20.0 0.2 14.9% 0.6% 2.0 0.0 (63.0 0.6% (59.5) (1.1 407.0 76.0 0.7 66.0 107.5) (1.0 0.8) (76.3) (880.3 6.0 67.0 (13.0 10.7) (37.8) 1.2 66.8) (30.1% (6.0 464.0 0.1 0.9 23.5) (30.9 34.0 0.2 568.6 (3.5 0.0 -85.0 47.9) 0.419.

8 10.7 0.7 1.6% 3.3 1.6 2.9 3.4 0.3% 2.6 9.41 6.60 0.3 0.5 981.4 1.4 6.9% 2.5 0.5 14.4 EV/EBITDA.67 44.7 6.00 0.2 0.2 2.000 28.3 7.1 11.1 4.7 6.89 4.336.483.71 34.7 0.590 0.6 2.482.5 2.2% 3.3 14.00 30.January 2011 GERMANY Smaller Companies Review KRONES FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.99 16.43 3. adjusted Share Price [Adjusted] Latest price High Low Average price 31.3 9.68 34.3% 1.590 31.590 31.25 27.7 2.00 0.754. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1.2 5.9% 2.442.1 2.590 0.0 11.392.5 14.16 41.4 1.0 3.00 0.789.2 31.590 0.5 1.3 9.121.000 31.801.8 1.03 23.3 10.7 31. restated 163 www.7 1.590 31.00 2.6 7.57 46.cheuvreux.3 0.7 2.5 8.65 28.6 NS NS 2.7 4.7 2.3 1.51 NS 1.0 6.56 4.7 10.2 35.2% 24.2 1.51 NS 2.00 0.70 4.2 NS NS 7.7 1.5 14.6 10.70 4.5 NS NS 8.19 16.67 30.8 1.482.7 NS NS 8.8 2.39 4.0 3.6 4.3 17.8 6.5 NS NS NS NS 7.4 8.10) NS 1.com .95 47.07 60.7 10.590 31.1 4.9 11.5% 21.00 33.6 4.0 9. adjusted Av.2 1.590 31.2 NS 22.2 7.5 0.3 15.3 1.0 4.7 15. restated EV/EBITA.9 10.2 1.8 6.83 24.725.5 21.0 No.000 31.70 4.274.9 1.000 31.0% 24.3 NS NS 9.56 69.1 19.35 3.590 31.1 5.00 0.590 31. of shares.1 NS (54.0 14.0% (1.8 8.00 2.4 1.59 8.9 0.95 5.6% 2.44 35.590 0. adjusted Treasury stock.2 1.8 1.5 1.45 46.32 46.5 6.000 31.3 0.7 9.3 12.3 14.1 9.8 1.7 4.3 18.4 NS 23.48 2.2 9.000 31.8 1.5% 24.2% 3.3 1. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.28 54.3 NS 1. number of shares.6 8.9 1.0% 3.39 0.5 2.5 NS 0.6 5.93 47.39 4.4 0.2 13.1 1.5 12.8 11.6% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.3 3.93 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.2 1.5 1.39 22.7 13.590 0.8 15.8 1. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.4% 17.2 15.3 NS NS 50.9 1.739.6 11.3 10.4 0.89 34.5 1.6 1.1 15.9 11.56 69.55 38.59 NS 22.0 14.3 2.2 0.40 6.00 0.2 6. reported % Change 1.9 21.2 0.4 1.4 11.737.1 0.5 14.000 31.219.4 NS 20.89 0.1 2.10) NS (1.00 0.8 16.0 NS NS 8.1 5.70 -85.9 NS NS 8.6 15.14 10.50 36.590 0.2 11.6 16.9 8.7 18.2% 3.55 28.8 11.8 6.06 16.000 31.5 12.590 31.5 NS 0.6% 2.9 5.66 5.3 1.590 0.23 46.1 11.99 16.50 39.67 52.7 12.5 972.9 1.33 38.063.00 0.3 NS 22.74 46.73 11.3 8.0 2.25 62.3 1.5 16.7 0.9 12.9% 16.2 0.35 28.83 19.95 5.6 34.8) NS NS 5.83 65.7 2.8 8.4 NS 20.46 31.3 NS 21.5 8.97 29.00 0.2 0.7 12.47 3.1% 27.000 31.590 0.590 31.2 2.4 1.7% 21.2 16.25 62.4 12.39 0.2 NS 1.2 NS 23.8 NS 1.9 1.8 11.590 0.2% 3.

Pumps require continual maintenance.0 160.cheuvreux.9) (1.com Q 164 www.0 360. The services arena is protected by high entry barriers thanks to KSB's high market shares (KSB pumps are used in almost all German. The company reports profitability only on a half-year basis. mainly in the energy industry.9 15.2) (1. and this is likely to be a key growth driver for KSB.9 6.3% 5. In addition to this contract. Nexans. of shares.3) (1.4% 23.4 6.0 660.6 Disclosures available on www.8% Absolute perf.1 EV/EBITDA (x) 3. outstanding product quality. Market capitalisation Free float Enterprise value No.0 360.3) Yield (%) 3.0 10. Q EUR620 Price (07/01/2011) Outlook – Structural growth drivers + strong market position The structural growth drivers for KSB in the oligopolistic market in which it is active include rising demand for new power stations around the world as well as the scarcity of water and other resources.0 160.DE Bloomberg: KSB3 GR A hidden pearl Q Stock data Recent developments – Outlook lifted slightly At the beginning of November KSB reported strong Q3-10 sales and order intake.9 19.7 10.January 2011 GERMANY Smaller Companies Review MACHINERY 2/Outperform Rating +12. In order to benefit to the fullest from this market situation. SIEMENS AG Alstom. adjusted Daily volume EUR1086m EUR553m EUR1060m 1.0 560. and low total cost of ownership. KSB anticipates a moderate recovery in its standard business. plans to build 60 new nuclear power plants over the next 10 years. It generates 15-18% of its group sales in the highmargin services business. Rolls-Royce Shareholders Free Float 51. The company already won a prestigious contract in 2009 worth EUR50m to supply 16 pumps by 2012.0 60. its strong market share gives it a competitive advantage in spare parts business given the legal requirement in many parts of the world that most replacement parts for power station pumps come from the OEM.9 0.0 460. it will also generate fees thorough the provision of maintenance services every 11. Moreover.7 0.39m Performances 1 month 3 months 12 months 8.5 years.0%.0 260.0 460.7 3.5 2.7 0.4 3.0 1.com (49) 69 47 897 540 02/10 . It expects 2010 earnings to show a sharp drop compared to 2009 due to rising price pressure resulting from overcapacity and higher D&A as a consequence of higher CAPEX in earlier years.1 2.8 0. hence above our forecast of EUR530m.7% 47.0 60.9% EUR700 Target price (6 months) KSB Reuters: KSBG_p. Relative perf. especially pumps for power plants. Ksb Foundation 49.5 16.5 ROCE (%) 19.4 4. KSB formed a German-Chinese joint venture already in 2008 called SEC-KSB Nuclear Pumps & Valves. FCF yield (%) Hans-Joachim HEIMBUERGER Q 01/11 Sector focus EV/Capital empl. EADS. KSB has one of the largest service networks in the world and the densest in Europe.4 5. (x) Research Analyst hheimburger@cheuvreux. half of all European and 1/3 of all global power plants).0 260.2% 3. Q3-10 sales came in at EUR485m (+4% y-o-y and +2% qo-q).cheuvreux.751m EUR 0. China. At the same time.6% 3.com 2012E Attrib.0 01/01 01/02 04/03 07/05 01/07 Price/SDAX 02/08 02/09 Price Sector Top Picks Least favoured ABB.1 Net debt/EBITDA (x) (0. while its project business looks set to remain sluggish.5 8. the company now expects to report slight y-o-y sales and order intake growth. However. KSB raised its outlook slightly for FY10: it had previously predicted 2010 order intake and sales on par with 2009.0 560. order intake came to EUR561m (+27% y-o-y and +4% q-o-q). 660.4 12.0% 2009 2010E 2011E P/E (x) 6. We currently expect 3% y-o-y sales growth for 2010E and a 7% rise in order intake. for example.

mainly in the energy industry. Although partly justified by its lower margins and shareholder structure (80% of KSB's ordinary shares are held by the KSB foundation). The remaining 20% of the ordinary shares and 100% of the preferred shares are free float. 'Buy local' requirements in China „ Low-cost competition from China increase in raw material prices 165 www. ranging from clean water to aggressive and explosive liquids. purification. despite its limited liquidity/free float.1% and a terminal growth rate of 1.com Valuation Q DCF: we incorporate sales and EBITDA CAGRs of 1. comprising more than 100 service units globally.2% respectively for 201019E. Pumps require continual maintenance.2x. Taking everything into account. we believe the current discount is excessive. While developed countries still dominate KSB's geographical sales split. KSB generates 15-18% of its group sales with its high-margin services business. Based on these parameters. Q Investment case Given strong structural growth drivers. 14% in Asia/Pacific and 14% in the Americas. In addition. treatment. mainly in the energy industry. KSB's excellent market position in a highly oligopolistic market. it also holds a top-5 position in applications for industry & building (47% of 09 group sales) as well as water & waste water (20% of 09 group sales). the BRIC countries have been its growth engine in recent years and we expect this trend to continue after the economic crisis. a WACC of 9. We are convinced that its conservative outlook for 11E offers upside. 4% in the Middle East & Africa. Q Q 15-18% of group sales related to high-margin services With one of the largest service networks in the world. Shareholders: majority of voting rights at foundation With the stock having been listed for more than 100 years. we strongly advise investors to revisit KSB. roughly 80% of KSB's ordinary shares are held by the KSB foundation (and have been since 1964). KSB thus transports almost every sort of fluid. Q Q SWOT analysis Strengths „ Weaknesses Strong global service network „ „ Strong position in a highly oligopolistic market Shareholder structure „ Majority of value-added still generated in high-cost countries Superior product quality and reliability „ „ 14% of sales in Asia/Pacific vs. discount period of two years.9% and 3. the UK and the US. KSB already won one prestigious contract in 2009 valued at EUR50m – excluding services. Russia. KSB has one of the largest service networks in the world and the densest in Europe.January 2011 Q GERMANY Smaller Companies Review Company profile Q A world market leader for pumps and valves As a global player with production in 19 countries. etc. Pentair and Flowserve) based on 11E EV/EBITDA. Its intention is to keep the majority of voting rights (>50% of ordinary shares) within the foundation. KSB is a leading supplier of pumps (80% of group sales) and valves (20% of group sales) that help to move fluids. India. It generates 15-18% of its group sales in the high-margin services arena. 9% discount rate. Q Strong exposure to Europe (68% of group sales) In 2009 the group generated 68% of its total sales in Europe. Sulzer. high barriers to entry. a rock-solid balance sheet and an inexpensive valuation. 28% of employees in this lowcost region Opportunities Threats Construction of new nuclear power plants in China. Weir. Q Multiple comparison: KSB trades at a 52% discount to its peer group (ITT. we rate KSB a 2/Outperform with a TP of EUR700.cheuvreux. our DCF model yields a fair value of EUR700 per share. . Q Normalised earnings model: our normalised earnings model yields a FV of EUR700 based on the following assumptions: EV/EBIT normalised 8. Strong structural growth drivers are working in KSB'S favour: rising demand for new power stations worldwide and the growing scarcity of water and other resources. normalised EBIT assumed very conservatively at EUR185m. 1 position as a supplier of pumps to the energy/power (both nuclear and conventional) and mining industries (32% of 09 group sales). with accompanying Services business „ „ Scarcity „ Drastic „ of clean water around the globe requiring more pumps for water transport.5%. when financing becomes more readily available again. China for example plans to build 60 new nuclear power plants over the next 10 years. especially pumps for power plants. KSB's strong service network offers a competitive edge relative to the company's peers. It occupies the global no. especially at power plants. As pumps need continual maintenance.

0) 131.0 (11.0 192.7) 11.7 30.171.9) 0.0 0.5) (818.1 (10.0 0.4) 46.5) (0.0) 27.2) NS 1.3 -12.8% (33.9) (1.0 0.0 29.8 46.7 766.0) 71.3 (14.0 (48.9 2.5 61.5) 0.6 0.0 0.8 28.9 10.0 0.0) 69.2 374.4 231.1) 199.2 (350.0 (38.8 1.1 0.8 33.0 0.6 0.0% 0.0 (35.0 0.6 135.0 (35.0 107.0 0.3 419.0 0.2% (26.0% (16.2 57.com .1 60.8) 0.9 0.0 (60.9 0.6 384.0 (30.2) 98.2 0.8 246.8 8.0 0.7% (645.2 -11.7 10.2 (16.9 0.3 (10.0 0.0 213.9 (100.0 110.0 445.2 202.9% (16.8 39.5 174.0 (62.1 0.3 20.5 221.0) 85.0 0.020.8 1.0 0.4 435.0 (40.8 (16.8 55.0 86.8 18.6) 149.0 0.9) (30.1 27.9 781.3 9.5% (34.0 0.8 426.1) 0.2% 1.0 0.1 6.4) (30.0 0.3 www.8 1.0 537.9 0.8 30.0 0.0) 134.3) 169.0) 67.0 (22.0 0.9 0.3 (12.277.8) 218.0 (9.0 (120.4) NS 1.1 118.0 40.6% 1.4 33.4 (11.0 0.6) NS 988.1 0. [inc.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 166 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.8) 0.7) (72.0 0.0 0.3 43.3 (297.5 49.7) 107.0 (15.4 179.0 0.4 27.6 0.8 (229.0 0.8) (30.7) 0.5) (30.2 81.6 61.0 (4.7 61.4 0.5 -5.0 98.7 246.0 40.2 104.0 0.6 8.0 0.0 8.196.0 103.0 0.5) (106.991.7) 0.0 0.0 0.6 0.6 201.6) (1.7) 92.3 524.4% 0.0 (50.0 (0.0 0.0) NS 845.0) 103.5 -15.2) 40.3% (34.6 -6.4 365.0% (34.4) (30.6 0.0 0.cheuvreux.2 0.0 0.6% 2.8 254.8% (616.1) 224.4 139.0 (8.5) 0.2% (581.0 27.7% (521.1) 76.7% 0.607.0 0.0 0.8 0.4 36.0 (13.9) 2.0) 44.0 0.8 1.8) (25.0 (18.0 0.3 29.4 36.3 (11.0 14.7) 4.2 0.1 1.6 9.080.0) 19.8) 242.0 0.6% 0.6% (52.4 (100.0 610.7) 0.9 0.6% 61.6) NS 725.0 0.0 184.1 133.4 27.171.3% (53.1) NS 955.1 887.3) 74.6) (1.8 1.0 (29.6 27.0 0.0 0.9) (113.0 0.0 (11.January 2011 GERMANY Smaller Companies Review KSB FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 0.6 27.8) 2.4 (8.4 -24.2% 0.0 0.4 (11.8 39.0 519.401.5% 2.5% (33.3 (13.0 0.0 123.0 11.0 61.0) 75.2 0.1 93.4 0.5 235.0 0.6 -21.9% 0.8) NS 766.6 13.1) (1.7) 0.0) 0.5 (12.197.7 51.0 (9.0 224.4) (8.9 70.6 (13.4% (35.3% 1.0 134.0 0.5) (44.2 37.0 (16. for exceptional items Net attrib.0 218.6 21.5) 0.9 249.0 0.6) 134.1) 0.0 540.5) 0.4 988.1% (43.4 696.3) 74.4% (49.7 76.5 2.5) NS 1.0 (22.8% 2.4) (30.080.0) 84.9 20.6) 4. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 192.5 143.5) 34.4 225.9) 49.0 0.0 (27.8) 272.0 49.0 955.130.0 0.0 15.892.9% 20.8 30.9) 0.0 11.0 28.0) 207.0 0.6% (24.0 76.1 0.7) 0.0) 0.0) 43.8 235.9) 227.6 0.0 172.028.0) (30.9 61.2 9.0 0.8 390.5 627.770.8) 1.3 0.0 0.1% (22.028.4) 184. profit [loss].3 9.0 7.0 100.0 0.7) 11.1 33.3 60.2 -20.0 207.0% (508.5 (10.2 228.0 (8.2) 40.7 (17.0 (25.401.7) (30.1% 0.3 232.7% (635.0 134.2 725.0 149.4 179.3) (1.5) 172.945.1% (508.0 18.5 0.134.6) 168.4 14.6 44.057.8) (68.2 725.8) 1.0 0.0 80.7 -18.0 483.4 31.0 571.0 0.0 0.6 223.5 2.6 -12.4 21.9) 0.5 33.0 8.0 0.4) 5.7) (1.2 -22.7 (214.0 12.8 390.0 85.0 422.0 0.8) 4.0 (10.4) 0.0 0.0 0.8) 0.7 56.3 54.0 18.0 201.0 224.6 0.0 0.1 0.0% 1.8 -5.7) (954.6 0.0 0.0 0.6) NS 725.0 131.3 5.0 (4.1% 0.6 27.0 0.4) 0.4 (15.4 12.0 (15.0 (0.0 0.5% (614.5 266.6% (19.4) 123.0 (62.7 30.0 0.3 0.0 59.3 0.0 422.5) (818.9 26.0 126.046.3 69.0 0.0) 0.3 164.3 845.5 NS 1.7) 4.6 (10.7 12.0 187.8% 0.0 (15.5 12.9 27.0) 0.0 244.8 30.0 11.0 0.0 0.7 12.0% (618.8 313.

27 5.0 9.00 582.4 10.9 5.9 3.4 7.6% 59.9 774.00 583.000 1.4 NS 5.000 1.6% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.751 1.3 8.751 1.4 4.4 17.0 12.4 6.35 3.9 2.0 13.2 10.2 22.17 21.6 9.3 2.0 827.00 12.7 2.085.6% 76.27 NS 28.751 1.83 30.4 NS 5.0 NS 0.7 6.00 107.5 2.085.4 0.0 11.0 5.0 696.000 1.0 764.12 20.0 9.2 0.27 NS 43.9 1.00 13.2 0.9 2.0 0.34 -61.6 0.3% 70.0 6.00 12.7 7.01 96.00 180. number of shares.00 0.00 152.2 NS 17.751 1.751 0.5 0.4 NS 9.7 0.000 110.00 129.5 0.3 23.95 -5.9 3.5 6.80 489.00 695.00 8. adjusted Treasury stock.3 9.00 591.0 5.0 7. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.4 3.000 1.7 0.9 2.8 4.6% 491.9 0.8 13.6% 48.5 NS 8.00 93.5 4.00 9.2 14.9 8.8% 48.751 1.4 3.8 3.com .751 0.4 16.00 395.3 4.6 26.9 1.1 23. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.1 19.069.30 60.0 370.00 - 193.5 10.00 463.4 3.86 55.0% 222.8 18.90 620.70 29.4 6.3% 6.6 6.751 0.88 20.45 -12.3% 61.6% 61.0 12.00 522.50 99.751 1.7 6.7 4.751 1.00 258.5 1.9 0.6 6.000 1.5 11.22 4.1 0.5 6.3 6.4 1.2 NS 7.00 34.7 2.30 44.1% 239.2 0.6 1.6 NS 12.8 14.9 6.34 0.5 10.8% 286.2 7.8 15. of shares.0 310.4 4.4 0.95 -23.060.0 NS 22. adjusted Av.1 26.751 0.47 5.0 745.86 55.00 348.751 0.0 NS 0.0% 6.6 0. reported % Change 6.9 2.4 1.8 16.4 5.66 -20.3 1.6 19.5 4.00 329.2 4.00 390.95 0.1 16.January 2011 GERMANY Smaller Companies Review KSB FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.2 6.6 1.2 19.2 3.6 0.9 1.3 574.00 137.5 1.751 0.2 1.0 NS 19.1 0.4 2.6% 76.0 0.7 0.5 4.6% 433.6 2.00 321.34 0.751 0.34 -50. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.8% 222.17 21.8% 59.751 1.2% 389. restated EV/EBITA.cheuvreux.0 11.00 15.00 115.6% 6.00 2.9% 346.3 5.5 5.0 16.2 0.1 1.5% 241.5 0.1 0.9 3.4 1.0 0.2 10.5 5.003.9 1.9 11.5 2.1 8.2% 43.00 52.0 22.0% 28.0 NS 17.5 NS NS 12.751 0.00 76.00 274.1 5.30 60.2 7.0 7.6 0.1 11.00 180.8 5.9 14.0 12.5 10.000 1.7 4.00 0.000 1.9 10.6 1.0 NS NS 12.5 0.00 128. restated 167 www.00 141.0 0.7 4.3 NS 10.00 478.751 1.83 620.00 628.5 7.94 51.0 NS 20.00 103.6 16.8 253.66 -20.8 657.3 19.00 613.1 18.9 2.34 115.4 2.6 1.3 17.6 5.7 1.7 708.00 34.3 0.9 13.019.0 2.7 13.1 8.4 5.5 0.0 6.7 9.00 312.46 7.4 7.1 1.4 3.1 2.9 2. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.00 408.56 79.3 NS 20.8 13.9 2.3 17.751 0.70 29.1 2.3 2.45 -12.3 NS 10.00 380.1 0.9 19.67 -15.5 12.000 1.2% 70.9 2.9 3.4 No.7 1.3 12.1 3.3 3.

SIEMENS AG Alstom.3 27.0 16. Robotics Q3-10 order intake rose +95% y-o-y and 4% q-o-q to EUR138m. By division. Oppenheim Funds (Pref) 5. The company has undertaken significant efforts to cut capacity and lower its break-even point in 2010 to sales of EUR300350m in Robotics and EUR600m in Systems. KUKA holds a top-2 position in Europe with ThyssenKrupp. and EBIT of EUR4. EBIT was EUR8.3 12.01 7. Its key competitors here are: Yaskawa.1 1. Robotics' Q3 sales (early cycle) rose +58% y-o-y to EUR119m.9% 2009 2010E 2011E 2012E P/E (x) NS NS 24. KUKA reiterated its 2010 guidance for sales of >EUR1bn with EBIT of EUR20-30m pre restructuring expenses of EUR10m.1 8. Systems (late cycle) generated sales of EUR172m. Its position in Robotics/General Industry is weaker.9m.4 13.84 Price (07/01/2011) Stock data Recent developments – Ongoing recovery in Q3 Kuka's Q3-10 sales rose +26% y-o-y and +1.3 22. and even >10% for Advanced Robotics (Professional Services.2% 2.5 Yield (%) 0.2m. Fanuc. probably the highest order intake level for Robotics for some time to come.2%.4% 20.5% Absolute perf.11 Price Hans-Joachim HEIMBUERGER Research Analyst hheimburger@cheuvreux.0%. and in the US a top-2 position with Comau. Wyser-Pratte 4.1 14.1% q-o-q to EUR274m. with EBIT of EUR7.5m. Outlook – Recovery and strong market position. its Automotive business is no. Medical Technology). and top 5/10% share globally.8 0. driven by y-o-y growth of +206% in Automotive.0 0. of shares. the 11E EBIT consensus of EUR60m seems ambitious. Relative perf.03 10.3 17.92m EUR1. FCF yield (%) NS NS NS 2. 1 in Europe with a market share of 45% and no. Nonetheless. (x) 1.1bn (2010E: EUR1035m). though. General Industry).04 01.79m Performances 1 month 3 months 12 months 9. The better-than-expected order intake was mainly driven by the low-margin Systems division.5 1. Stäubli. In Systems.com (49) 69 47 897 540 10.3 17.8% EUR13 Target price (6 months) Kuka AG Reuters: KU2G.3 27. Grenzebach 25.3m. but consensus expectations already high Q KUKA intends to capitalise on its strong competitive position: In its Robotics division.cheuvreux. 10% for Industry Robotics (Automotive.2 0.07 07. +54% in General Industry. Given the automotive industry's strong bargaining leverage (high average contract size.7%.3 01.2 Disclosures available on www.com Q Q 168 www.3% 31.4 EV/EBITDA (x) NS 15. 1-2 globally (25% share). Key peers are Fanuc.com 01.0 0.cheuvreux.6% 4. To meet these ambitious mid-term targets KUKA would need to generate sales of EUR1.9 EV/Capital empl.02 07.08 Sector focus Sector Top Picks Least favoured ABB.8) 1.DE Bloomberg: KU2 GR Robots for the future Q EUR16. with just a top-3 position and 20% market share in Europe.4 1. adjusted Daily volume EUR571m EUR348m EUR709m 33. Yaskawa.6 Net debt/EBITDA (x) (1.2 ROCE (%) NS 5. ABB. Rolls-Royce Shareholders Free Float 61.5 Attrib.06 Price/SDAX 04.3% -7. KUKA recently maintained its mid-term EBIT margin targets of 5% for the Systems division. Market capitalisation Free float Enterprise value No.09 .2%. while order intake rose+52% y-o-y and +11% q-o-q to EUR314.3 04.2m. Kuka Ag 3. 32. limited number of customers).3 22. we expect the pricing environment in this area to remain tough. However.3 12. .3 7.January 2011 GERMANY Smaller Companies Review MACHINERY 3/Underperform Rating -22. EADS. we are more optimistic for the General Industry area. Nachi and ABB.9 7. Nexans.0 4.3 32. and +49% in Services. The introduction of the new Quantec robot family in 2011 to the Automotive industry and in 2012 to clients from the General Industry is also part of the company's plan to meet its mid-term margin targets. Systems Q3 order intake rose +34% y-o-y and +17% q-o-q to EUR196m. net profit EUR-0. +14% y-o-y.

Q Q SWOT analysis Strengths Weaknesses „ Market/technology „ Strong leader Limited experience in new markets „ innovative power „ Tailor-made solutions Opportunities Threats Shortening model lifecycles in the automotive industry „ „ „ Increasing demand for robotics from general industry „ Trend towards improving efficiency of production processes by automation 169 Volatile and unpredictable capex in cyclical automotive sector. reduce consumption of costly materials and energy. vs.3% and 11. and make work processes more flexible. plastics. glass and wood. a peer group multiple approach. KUKA has reiterated its mid-term (EBIT) margin targets of 5% for the Systems division. Q Megatrends for robot-based automation KUKA sees the future of robot-based automation resting on three pillars: 1) expanding industrialisation. Germany. 10% for Industry Robotics (Automotive. Q Focus on two divisions: Robotics and Systems After the sale of its packaging division in 2007. assembly systems and foundries. we are more optimistic on the pricing environment for General Industry. .5% terminal growth rate. In 2009 Robotics accounted for 37% group sales.000 active customers and an average contract size of about 3 robots in general industry. we see limited upside potential in the stock and reiterate our 3/UP rating. and an EVA model. Nonetheless. Q Investment case Given the Automotive industry's strong bargaining leverage. a WACC of 8. America. KUKA focuses on two core businesses: Robotics and Systems. with 20 active customers. improve product quality. we rate the stock a 3/Underperform with a target price of EUR10. However. 33% in Germany. In 2007 it changed its name from IWKA to KUKA and moved its headquarters to Augsburg.GERMANY January 2011 Q Smaller Companies Review Company profile Q Solutions provider for automation of industrial processes German-based KUKA sees itself as an advanced solutions provider for the automation of industrial production processes to help its customers increase their productivity.1% respectively for 2010-19E.7x despite lower margins). Taking all three valuation approaches into account. We estimate the average size of contracts for automotive companies at ~600 robots. an estimated 6. the group generated 28% of its 2009 sales in N.g.6x vs. also in small and mediumsized companies. Q EVA: Assuming a pre-tax ROCE of 13% by 12E and a pre-tax WACC of 10%. Q Geographic sales split: strong exposure to Europe Geographically. including automotive. electric cars and joining and processing technologies for new materials. 2) sustainability.cheuvreux. a move designed to increase its equity ratio.7% and a 1. Systems for 63%. and 13% in Asia and RoW. our EVA model yields a FV of EUR16. e. DCF: We incorporate sales and EBITDA CAGRs of 3. 11E EBIT consensus of EUR60m seems ambitious. Based on these parameters our DCF model yields a fair value per share of EUR10. 26% in Europe ex Germany. aerospace. Q Q Multiple comparison: KUKA trades at a significant premium to its peer group based on 12E EV/EBITDA (18.com Valuation We derive our price target from a DCF valuation. 7. we expect the pricing environment in this area to remain tough. Given that consensus expectations are already pricing in a very rapid turnaround and the stock is a 75% consensus buy. General Industry) and even >10% for Advanced Robotics (Professional Services. KUKA's main sales driver „ Dependence on large customers (especially in the automotive industry) with related risk of price pressure www.2. Medical Technology). The company serves customers in a wide range of industries. and 3) the demographic shift leading to higher demand from the healthcare sector.

6 25.5 68.1 49.0 118.5 (7.0 0.7 (16.6) 0.6 0.4) 16.0 0.8 0.3 1.0 0.9) NS (26.1 (13.3) 55.6 111.0 (75.0 (12.5) 0.4) (85.0 0.0 0.0 (11.0 0.0 (64.0 0.6 425.9 0.4 48.6 29.7 49.0 34.0 0.9 0.1 117.0 (0.5) 0.6% (332.3 66.7 73.2 20.3 104.3 4.6 34.6 232.8% (26.7% (330.0 0.8 26.5 NS 0.0 0.1 (75.0 0.9 91.1 1.0 (69.4) (116.0) 0.9) 67.6 19.January 2011 GERMANY Smaller Companies Review Kuka AG FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.8) 0.0 0.0) (52.2 306.0 0.7) 48.9) 0.6 49.6) 0.3 23.5) 45.8) 20.5) (690.7) NS 1 034.2 110.8) 0. [inc.2) 0.4 1.7) 0.6 56.0 1.0 0.6 -60.0 0.0 0.8) 0.1) 0.8 0.0 20.0) 97.0 (16.1 0.2 (24.0 (8.4 0.0 0.0 86.0 75.8) 64.5 NS (24.2) 0. for exceptional items Net attrib.0 144.9) 70. profit [loss].4% (25.0 0.0 0.9) NS 0.1 1.0) (830.0 0.0 34.6 31.8 488.0 0.0 0.6) 0.6% (9.0 196.9 46.0 0.0 4.0 69.1) 78.1% (26.6 22.0 0.2 (92.4 (318.6 16.3 74.6 1 286.8 22.0 92.3 453.8) 0.0 0.0 0.6% 1 103.3 0.0 233.1 (38.0 (5.0 0.0 0.6 2.0 0.5) 0.8% (49.1) 48.4 2.0 8.5) 93.0 34.6% (358.0 (8.3 (116.0 0.1) 0.0 (8.1 454.0) 52.9% (26.0 262.0 0.6 93.0 (52.2 132.0) 0.6% 0.2) (26.8) (609.0 15.0 (8.0 94.2) 0.0 0.0 212.9 1.8 60.0 0.3 16.0 (75.1 (332.8 (5.1) (0.0 0.0 0.0) (245.0 -19.0 0.0 0.2 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.2 25.3 1.3 425.com .7 49.0) (857.0 0.0 0.0 (0.0 0.6 2.9 162.5 11.2 488.0 0.6 14.5 382.0 0.3 1.5 70.9 (163.8) 0.4 76.0 (116.0 0.8% (319.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 170 2006 2007 2008 2009 2010E 2011E 2012E 1 164.3 1.4 73.1 20.1 -28.7 103.0 0.0 (116.0 52.2) (791.2 24.0 0.9 453.0 0.6 454.0 -26.0 0.0 (9.4 64.0 55.5 174.8) 0.6) 0.1 124.0 0.0 (15.0 0.6 212.0 23.5 6.9 0.1% 0.0 0.0 0.0 67.1) 0.4 www.0 0.3 150.0 70.cheuvreux.2% 0.8) (0.1) 30.0 143.8 25.0 17.1 -1.6) 0.0 0.0 0.0 0.5 54.8 175.7 (6.0 0.2 (64.5 118.6 382.0 (82.4 30.0 (116.8 53.6) (658.6% 0.6) 1.5 159.8% (336.0 0.6) 119.6 208.0 0.8) 0.9 50.9) (11.3) (36.7) (5.7 169.2% 0.0 286.0 0.0 23.5) 0.6 24.6 29.6 90.0 0.9 403.7 0.0 1.0 (247.5 0.5 23.0 0.1) 117.8 NS 1 178.0 0.1 403.9) (33.9) (748.8 22.8) 0.5% 1 266.8 97.0 6.6) NS 306.5 1.6) 0.0 30.0 23.0 0.0 16.7 151.3 195.7 (20.0 0.0 0.7 153.4) 0.5 -37.7 (13.0 0.4 49.6 90.6) (0.1 16.5 140.7% (24.0 (64.2 35.0 0.7 139.3 77.2 (15.8) NS 59.9% (187.0 30.5) 80.0 0.2 105.5% 902.0 (62.6 49.0 0.0 (17.6 0.0 0.0 245.3) 55.8 0.7 1.0 0.1) 0.8) 0.0 0.0 0.6) 88.2 37.3 72.0) 0.

00 5.70 NS 0.8% 4.600 0.7 3.7 6.4 64.70 1.1 1.42 156.3 7.6 0.1 23.3 NS 7.2 4.920 29.2 694.000 26. restated EV/EBITA. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.0 459.0 0.9 68.com .6 12.82) NS (0.3 5.5% 5.7 NS NS 23.600 0.2 8.82) NS (2.00 0.8% 8.7 0.99 12.8 4.5 11.00 0.0 12.5 0.3 1.January 2011 GERMANY Smaller Companies Review Kuka AG FY to 31/12 (Euro) 2006 2007 2008 2009 2010E 2011E 2012E (2.1 7.3 4.1 0.920 0.4% (2.910 0.00 0.820 25.0 NS NS 30.2 13.2 NS 0.9% 0.01 31.4 16.8 25.5 (12.2 709.6 5.000 28.1 33.63 48.6 14.67 26.8 NS 1. reported % Change (2.38 16.2 30.4 NS NS NS 13.75 9.6% 1.00 2.6 571.2 0.1 NS 3.000 33.5 0.18 -35.5 0.2 0.0 NS 4.0 16.00 0.2 2.0 14.4 7.6 37.84 - 515.00 0.1 2.0 NS 2.0 11.3 1.920 33. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.00 19.1 2.4 340.920 0.00 0.9 5.2 602.40 26.00 0.55 129.45 4. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.6 NS NS NS NS 4.7 (2.7 5.84 18.7 10.51 17.07 16.9 10.7 0.5 10.6) 15.0 2.03 46.03 46.6% 0.43) 1.5 15. number of shares.35 11.5 1.0 571.90 8.9 14.6 0.00 0.0 730.1 0.85 14.18 -73.390 0.47 4.1 337.6 9.00 (1.0 1.93 9.3 0.43 25.6% 5.0 2.2 0. of shares.0 2.5 NS NS NS NS 5.8 7.2 18.1 20.4 0.49 12.00 1.0 NS NS NS NS 2.3 3.920 33.5 0.0 0.0 5.3 0.4 9.6 3.4 2.000 19.8 0.70 10.36 7.2 4.79 18.3 458. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.81 18.85 16.5 8.6 23.0 24.7 1.5 9.0 NS NS NS NS NS 2.820 0.3 693.9 6.1 0.7 35.22 16.70 NS 1.43 NS 1.95 12.000 25.85) NS 5.6 0.0 24.79 26.600 26.00 0.4 2.600 26.1 1.0 15.000 33.5 15.1 0.6 14.cheuvreux.3 43.9 8.1 563.43) Goodwill per share Dividend per share Cash flow per share % Change Book value per share No.9 NS 3.00 0.4 26.19 -59.2 14.1 689.0 5.9% 1.7 1. restated 171 www.6% (0.36 24.4 3.7 0.5% 4.000 33.7 NS NS 0.8 13.480 26.2 4.6 3.4 NS 2.2 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.1 3.9 12.4 2.29) 89.2 4.0 10. adjusted Treasury stock.6) 8.29) 89.0 6.5 7. adjusted Av.60 16.83 175.5 0.7 68.0 18.

e. ROCE/WACC (1.6 Attrib. Additionally.5 9. Volumes grew 9.51x) suggests 15% upside.0 10. b) the very favourable improvement of previous problem children like Functional Chemicals.0 1.4 7. Lanxess Shareholders Free Float 100.4 1.8 0.8 NS 3. Q EUR55.65 Price (07/01/2011) Stock data Market capitalisation Free float Enterprise value No.847bn. (x) 1. At Performance Polymers underlying EBITDA rose 89% y-o-y to EUR144m (CA Cheuvreux: +97% to EUR150m).9 1.2 Net debt/EBITDA (x) 2. We expect underlying EBITDA of EUR900m in 2010E.9% 92.5 14. In the reconciliation. while sales rose 34. and Performance Chemicals rose 24% to EUR83m (CA Cheuvreux: +21% to EUR81m).5% to EUR1. and c) more and more visibility thanks to capex projects with high ROCE.0 40.0 20.0 10/05 07/06 04/07 01/08 Price/M DAX 10/08 07/09 04/10 12/10 Price Outlook – Mid-term target with increased confidence Lanxess has substantially improved the cost structure of its business units (e.2 14.4x). investment in Mesamoll production capacity).0 1. A maintenance shutdown forced Lanxess to put some products on allocation.0 30.0% We are confident that Lanxess will continue to benefit from strong growth in emerging markets and strong growth in customer industries such as automotive/tires. Based on our peer-group comparison.2x).com 2012E . Our rating is 2/Outperform.1 Martin ROEDIGER Research Analyst mroediger@cheuvreux. saying it expects improving momentum there. underlying EBITDA was EUR-38m vs. and Lanxess sees no downturn in demand in sight in the near term. Advanced Intermediates rose 38% to EUR55m (CA Cheuvreux: +30% to EUR52m).g.4 ROCE (%) 4. Our DCF-based price target stands at EUR63 and is supported by other valuation approaches.2% EUR63.2 6.9 12.2% y-o-y while prices were up 17% y-o-y in Q3-10.2x.0 30.1 0. FCF yield (%) 5. of shares. Functional Chemicals). Sector focus Sector Top Picks Least favoured BASF.6% 49. adjusted Daily volume EUR4630m EUR4630m EUR5932m 83.0 40. Its P/CF 11E is 6. As we had expected. the company raised its guidance for 2010 with the Q3 release to underlying EBITDA of EUR900m (EUR800m). Based on a) higher EBITDA in 2010 than previously assumed (EUR900m vs.2 14.0 60.5 Yield (%) 1. This discount is exaggerated given Lanxess's ongoing strong earnings growth.31x) vs. Both figures beat expectations driven by price and volume increases. Q3-10 earnings were somewhat depressed by the fact that the company could not supply all its customers. it spoke of several capex projects that had not previously appeared in its budget (e. EUR800m).g. 33% below the peer average (9. Lanxess has a higher level of confidence that it will reach its mid-term target of EUR1.January 2011 GERMANY Smaller Companies Review COMMODITY CHEMICALS 2/Outperform Rating +13.3 1. in butyl rubber. 32% below the European chemicals sector (15. our expectation of EUR-37m. the stock trades at 10. All segments contributed to earnings growth.2 6.5x P/E 11E.com Q Q 172 www. Lanxess's underlying EBITDA sky-rocketed 71% y-o-y to EUR244m.2m EUR 21.4 8. Relative perf.57m Performances 1 month 3 months 12 months -3.2 5. Especially for emerging markets the company remains optimistic. P/E (x) EV/EBITDA (x) 2009 2010E 2011E 26.9 EV/Capital empl.0 1.0 50.2 1.0 10.6% Absolute perf.cheuvreux.0 50.g.00 Target price (6 months) Lanxess Reuters: LXSG.3% -5.4bn EBITDA by 2015. The company's EV/CE 11E (1. 60.0 01/05 10.8% 25. Fuchs Petrolub.DE Bloomberg: LXS GR Earnings growth continues Q Recent developments – Strong Q3-10 earnings performance In Q3-10.0 20.3% 10.com (49) 69 47 897 763 Disclosures available on www.cheuvreux.

This implies 13% upside.1bn and EBITDA before special items of EUR465m.January 2011 Q GERMANY Smaller Companies Review Company profile Q Mid-sized chemical company Lanxess is a mid-sized chemical company based in Germany. Europe ex Germany 31%. top-2. These discounts are not justified.2x). Through cost cuts and capex postponements. Profitability gap to peers already closed in 2008 In 2008. We are impressed with the commitment of company's workforce in agreeing to accept to a ~10% wage cut in the crisis – previously agreed to remain in force until the beginning of 2012 and now abandoned due to strong recovery. Our DCF model (WACC: 8. Due to aggressive restructuring in the past.2x EV/EBITDA 11E. resulting in another downturn hitting earnings Lanxess is trading at 6. In Performance Polymers.0%. and thus c) CO2 emissions.cheuvreux. „ Structural shift in automotive industry towards lighter materials could enable Lanxess to supply more SCP plastics to the auto industry 173 Valuation www. Advanced Intermediates (22%). efficiency improvements. however. which is also our price target. Germany accounted for 21% of group sales. thereby reinforcing management's credibility. Lanxess will benefit from megatrends such as the substitution of plastics for steel in cars as this reduces a) production costs for car manufacturers. 32% below the European peer group (15. and top-4 positions. the company met its target to raise profitability (EBITDA margin before special items) to the level of its peers (11%) via its "price before volume" strategy. divestments and organic growth. b) fuel consumption. For us. and Performance Chemicals respectively. including the disposal of poorly performing assets and acquisitions of high-margin activities. It is only fair that employees receive an one-time payment of EUR20m in 2010. Latin America 10% and Asia/Pacific 23% in 2009. Moreover. Fine Chemicals „ Impeccable track record in terms of meeting targets „ Successful restructuring has begun to pay off „ Very high exposure to Asia and LatAm enables Lanxess to benefit strongly from those regions' huge growth prospects Opportunities Threats Capacity expansion in Performance Rubber in promising Asian market „ Regulatory „ burdens (REACH programme) „ Double-dip „ Structural shift towards highperformance tyres requiring highperformance rubber (where Lanxess is the market leader) recession.e.com . Geographically. given the company's strong earnings progression and rapid catch-up in profitability. restructurings. Lanxess is also benefiting from the structural shift among its customers towards high-performance tyres. On a P/E 11E basis Lanxess trades at 10. We thus maintain our 2/Outperform rating.g. 23% below the European chemicals sector average (8. management is best-in-class and the workforce is highly committed to the company – a big advantage over other competitors. it holds top-3. In 2009 it generated sales of EUR5.4x). Looking ahead. Such tyres require high-performance rubber. Lanxess's portfolio has improved substantially and the company is now strongly benefiting from the current economic upturn. e. Q Investment case Lanxess has consistently beaten street forecasts. one year sooner than previously scheduled. Advanced Intermediates.2x. the company reacted quickly to changes in the marketplace/economy and demonstrated its high degree of flexibility. North America 15%. i. Q Transformation underway Lanxess is currently undergoing a structural transformation. Q Q SWOT analysis Strengths Weaknesses „ Strong „ market positions in 70% of its portfolio Weak margins at some business units. Its first milestones were reached after its disposal of underperforming assets combined with the acquisition of high-margin activities.5x. (figures as of YE-09) Q Strong market positions in most of its activities Lanxess holds strong market positions in 70% of its businesses. Lanxess is therefore likely to enjoy strong earnings and margin growth – to a far greater extent than in the past. Q Q Performance Polymers its biggest segment Lanxess divides its activities into the segments Performance Polymers (47%). and area where Lanxess is market leader. On P/CF 10E. terminal growth rate: 1%) renders a fair value of EUR63.0x). 33% below the sector average (9. Performance Chemicals (30%) and others (1%). it is trading at 6.

0) 0.0 0.0 1.459.0 11.7 21.3 145.6 0.0 2.0 441.6 0.0 0.0) 0.6) (20.0 393.403.8% 0.087.594.0 0.0 9.6 NS 0.1% (981.0 -42.6 0.0 27.8% 0.0 2.0 0.0 10.0 0.465.0 31.0 41.0 0.0 699.4 630.985.8% (248.0 17.0 (49.6 0.0 0.0 591.0 -29.0 545.501.6 1.9 -7.0 0. profit [loss].0) (54.1 3.0 2.0 (111.350.9 0.2 811.0 7.0 0.0 22.0 0.5 9.9 20.0) (267.0 (124.077.9 29.412.0 0.0 285.192.0 0.0 76.0) 285.0) 0.350.0) (16.0 0.0) 719.0 149.0 23.0) (184.0 (34.0 123.2) 0.0) 0.2 737.0 470.9 8.0 0.0 (138.4% (277.0) 149.0 1.0 13.0) 197.7 3.0 (73.9% 0.775.0 (85.613.0% (65.0 56.064.9 0.0 0.0 0.9) 0.0 0.0) 638.0 1.5 29.2% (1.0 203.0) (3.158.0 0.0 602.0 0.0 197.7 535.613.608.0 27.com .326. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 2.0 1.3 (30.944.675.6) 216.0 38.0 66.9% (1.9% (1.0 0.0 1.0 (1.0) 661.0 -23.5 7.9 0.5 (74.0 778.185.0) (184.6) (460.0 0.6 11.4) 325.0 30.9 30.0) 0.6) 0.5 645.2) (5.4) (460.0 29.0 490.3% (279.8) 0.0 0.0 0.0 (98.0 (68.0 0.0 408.0 -19.0 111.0 0.926.0 0.0 0.0 89.576.3) (5.0) (220.5% (1.8% (1.0 (284.0 166.0 0.0 58.4) 0.018.113.8 278.8) 1.0) 602.0 759.2) 0.0 4.4 0.0 805.0 0.1 2.2 3.0 925.0 (48.148.0 -53.809.0 79.0 80.0 376.0 314.0 50.0 72.0 477.1% (1.646.2) 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 174 2006 2007 2008 2009 2010E 2011E 2012E 6.0 (5.0 0.2% 7.989.432.0 202.925.0 0.8) 0. for exceptional items Net attrib.062.0 0.0 441.0) 0.5 4.0 3.0 0.3 1.6% (46.5) (550.0 0.0 0.137.0) (113.6 108.6% (298.0% 445.2 3.4) (21.0) (4.5% (400.5 123.1 541.0) 376.0 7.0 0.0 6.0 (58.0 661.136.0 0.1% (262.6) 0.0 67.9% (273.0 188.0 (10.4 4.0 (20.031.0 -2.0 215.0 1.2 581.0 520.103.0 758.8) 26.0 719.0 317.0) 147.0 42.8 79.122.4 4.0) (19.2) 949.0) 392.5 -74.0 0.5% 6.0 8.0 40.5 156.323.0 0.0 1.0 (41.5 2.0 1.0) 602.6) 0.0 -0.3 51.9 -14.0 (41.0 0.2% 0.3% 6.0 129.0) 422.5 4.6 666.501.2) 0.0 13.0 0.0 76.0 378.0 0.0 9.6) 0.0 10.9 www.9 29.0 0.0 (125.0 44.0 0.0) 0.1) (1.0 (66.0 569.0 27.0 27.0 8.0 -4.675.0 665.7 1.002.3 3.0 270.0% 89.0 841.5 81.3 2.0 2.0 490.508.0 905.0 441.2 3.2) (5.0 0.0 0.5 4.6 NS 7.0 79.0 111.0) (106.0 123.0 0.0 0.0 16.490.7) 63.6 3.047.0 123.0 1.137.192. [inc.0) (100.0 24.2% (299.0 16.250.7 1.0 0.8% 5.0 (60.6) 119.0) (5.2) 743.0 75.0 20.4 0.2 40.0) 21.4) 128.0 87.January 2011 GERMANY Smaller Companies Review Lanxess FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 0.0 39.0) (251.0 0.0 (83.208.3 1.502.9 (160.9 0.9% 198.8) 0.0 25.057.0 0.0 0.527.0 0.0 1.cheuvreux.0 578.0 (58.0) 513.0 1.9% (288.0 0.8 79.7 41.6 (78.0) 323.0 490.0 188.0 1.358.0 (42.0 0.170.2) 879.0 (251.056.654.0 38.0 1.0) 0.0 150.912.0 498.581.1 35.0 34.0) 215.0 0.5 4.0 NS 0.0 323.0) (5.0 -42.0 17.0 73.0) (100.7% 0.118.0 0.

31 8.10 59.48 -78. adjusted Share Price [Adjusted] Latest price High Low Average price 84.0 1. reported % Change 2.75 26.423.620 0.7 12.7 7.6 20.50 3.5 12.7 0.3 5.4 6.6 51.89 38.1 5. adjusted Treasury stock.594. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 3.0 1.0 21.2 8.7 4.9 0.91 55.1 24.3 22.8 22.28 22.1% 5.429. number of shares.9 2.2 2.191.8 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.1 3.8 0.5 7.90 54.917.9 14.65 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.January 2011 GERMANY Smaller Companies Review Lanxess FY to 31/12 (Euro) 2006 2007 2008 2009 2010E 2011E 2012E 2.5 10.0% 0.cheuvreux.7 12.6% 1.0 12.4 2.7 6.77 -42.6 5.2 9.000 83.37 3.2 10.25 5.0 6.90 11.0 5.1% 15.0 0.3 1.3 38.6% 5.3 2.2 4.2 12.61 -12.2 3.1 2.1 6.7% 4.200 0.1 15.00 0.60 9.6 21.1 NS 2.4% 2.33 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.200 0.2 18.000 83.64 18.2 1.2 1. adjusted Av.000 83.81 12.90 11.7 13.9 1.6 9.6 8.5 3.6 6.0 3.65 59.142.34 28.6 1.620 84.6 2.5 7.00 0.00 4.990 83.2 9.5% 20.3 6.9 2.000 83.2 3.33 3.3 74.00 1.5 13.0% 16.630.4 0.9 0.0 4.4 1.9 26. of shares.2 10.39 13.11 32.1 6.4 58.37 10.7 3.1 12.8 1.1 20.2 14.60 43.4% 17.49 25.5 0.00 0.com .2 1.0 7. restated EV/EBITA.0 13.200 0.4 8.19 33.6% 25.2 6.932.3 15.6 7.7 0.594.4 23.0% 16.85 26.9 7.4 4.8 1.31 12.6 1.94 -7.0% 5.7 1.2 No.4 7.8 5.0 11.2 1.66 9.2 11.9 11.9 2.9 12.4 5.2 1.200 83.7 1.6 3.2 4.7 18.0 7.2 104.795.8 3.200 0.5 0.6 1.2 9.9 67.80 9.2 2.6 5.62 59.3 0.5 0.2 0.8 1.5 6.705.91 NS 4.98 -74.4 9.00 0.200 0.72 37.68 156.000 83.2 5.3 27.6 8.9 9.48 25.26 68.39 45.7 15.52 8.00 0.8 14.8 4.551.6 9.1 2.200 83.8 1.0 14.4 5.8 6.2 2.70 8.8 7.000 42.3 7.2 5.50 41.1 0.52 56.2 1.00 0.7 15.35 -42.1 1.3% 0.2 3. restated 175 www.200 83.200 83.9 26.9 8.6 35.75 9.7 9.200 0.1 1.6 12.2 0.73 34.3 9.630.03 10.9 0.6 1.51 55.4 2.48 42. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.4 9.0% 30.50 6.7 2.3 2.200 83.7 4.0 10.72 NS 5.2 1.0 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.4 13.2% 3.9 7.7 8.6 26.7 20.6 22.330.0 0.26 EV/EBITDA.1 5.5 11.9 7.2 2.1 7.200 83.9 0.3 31.

0 NS 3. indicates the concentration process is regaining momentum after the crisis.com 2012E Attrib.1% -1.8 01/01 03/02 06/03 09/04 12/05 Price/M DAX 03/07 06/08 Sector Top Picks Least favoured Price Daimler.8 15. since Leoni passes copper price fluctuations on to its customers. Although the recent bid does not concern a competitor in automotive cables.00 Target price (6 months) Leoni EUR32. (x) 1. Relative perf. but also because of its high value-added that includes the production of the core cables in contrast to almost all peers.cheuvreux. However.8 35.8 25.53 Price (07/01/2011) Reuters: LEOGn. Nexans and Prysmian.000 two years ago is a potential threat to Leoni's mid-term target of a 7% ROS.com (49) 69 47 89 73 84 09/09 .8 20.0% EV/EBITDA (x) 2009 2010E 2011E NS 12.0% Absolute perf.8 30.5 1. of shares. The avoidance of goodwill impairments despite the big crisis shows how smooth the integration process went and illustrates that management is not overpaying – even in deals close to the peak.3 1.0 94. Leoni itself has a long-standing track-record of acquiring competitors.cheuvreux. Leoni is a cost leader in this field not only because of its low-cost plant footprint.6% 48.8 20.0% EUR40.0 1.3 8.8 4.5% 90. exploding commodity prices only inflate its top-line but have no meaningful impact on earnings.9 1.1 Net debt/EBITDA (x) 48.8 10.4 EV/Capital empl.1 Yield (%) 0.4 4.8 5.2 1. adjusted Daily volume EUR966m EUR966m EUR1425m 29. Q Leoni was the first global cable and wiring systems manufacturer to consolidate the field of cable producers with the acquisition of Valeo's automotive cable activities in 2008.8 15. 45.8 10. Hence.January 2011 GERMANY Smaller Companies Review AUTO COMPONENTS 1/Selected List Rating +23.6 19. Outlook – Concentration in the cables sector gaining momentum Stock data Market capitalisation Free float Enterprise value No.8 25.7m EUR 5.5 3.com Q 176 www.8 40.9 4.4 1.8 5.3 ROCE (%) NS 14.8 45.8 7.0 1.4% 30.000/ton from USD3.8 30. we would not be concerned if Leoni misses this target.8 40.7 9. a Dutch-based competitor for Leoni's Wires&Cables division with average profitability clearly below Leoni.8 35.0 16. Volkswagen FIAT Shareholders Free Float 100. A recent bid from two European competitors.DE Bloomberg: LEO GR Winner of sector concentration Recent developments – Exploding copper price hardly affects group EBIT Q The recent explosion of the copper price to levels above USD8.8 4. (Q4-10) for Draka.92m Performances 1 month 3 months 12 months -0. mostly family-owned businesses with sales around EUR20-100m. we assume more deals will follow simply because the production process for many industrial and automotive cables is basically the same and hence. comparable to the years 06 and 07 when a similarly high copper price level prevented the achievement of the same target.9% 14.8 5. economies of scale play an enormous role in a commodity sector such as cables.3 Disclosures available on www. FCF yield (%) Alexander NEUBERGER Q 01/11 Sector focus P/E (x) Research Analyst aneuberger@cheuvreux.

In EV/Sales terms. cost leadership in cable manufacturing and wiring systems „ Saturated European auto markets limit long-term growth of Leoni's European activities „ „ Balanced Limited scope to diversify outside cable business Opportunities Threats „ portfolio with 70% automotive and 30% industrial customers Rising presence in Asia provides new growth opportunities Unmitigated price pressure combines with limited additional cost-cutting potential from plant relocations to low-cost areas „ „ 177 www. telecoms. Draka is valued at 0. but also a decent order book (new models. It has expanded its customer portfolio with names it was previously missing (PSA. (Leoni 0. solar industry.34x. due to its mediocre profitability level.com Valuation Despite a decent run in 2010 and an almost unmatched growth track record (sales CAGR0410: 14%) and a strong outlook for 11. .January 2011 Q GERMANY Smaller Companies Review Company profile Q Global player in automotive and industrial cables Leoni is a globally operating manufacturer of wiring systems/ harnesses. Leoni shares are trading below their European peer group. recovering profitability and the deleveraging of its balance sheet are key reasons why we maintain Leoni shares as a top-pick for mid-cap investors in auto space. why Leoni numbers among the most profitable peers. Ukraine). Most of its products are considered commodities by its clients in the automobile industry.49x). Its most relevant competitors are Yazaki (Japan) and Delphi (US). Assiduous cost-cutting in the crisis.49x). Leoni produces the core cables itself and also sells the cables to its peers. Q Q Cost leadership is the name of the game Management has reallocated the bulk of production from Germany to countries with the lowest labour costs in Europe. SEAT) and established itself as the European no. Such products account for some 70% of Leoni's sales. In contrast to basically all its competitors. medical. It acquired Valeo's restructured Cable business for a very decent price (EV/Sales 0. valued the business at 16x our assumed net earnings for 11E. A recent bid for Draka. By so doing. Its higher in-house valueadded is the second reason. one of Leoni's competitors in Europe.1 (Globally no 4). capital/installation goods). Renault. Romania and North Africa. Top-line growth. in addition to its production footprint. avoiding any goodwill write-down in the crisis. Chinese automakers) are the right prerequisites for further profitable growth. the geographic mix of its plant network with almost all of its plants in the lowest-cost areas on the planet (North Africa. which is almost twice the current valuation for Leoni. cables and wires. The other 30% are target many different industrial applications (energy. Q Investment case Leoni is a winner within the consolidation process of the global wiring systems business. including Ukraine.cheuvreux. Q Q SWOT analysis Strengths Weaknesses Impressive cost-cutting skills. Gaining market share The acquisition of Valeo's cable business in 2008 established Leoni as the number 1 in Europe and number 4 globally. Leoni has achieved cost leadership in wiring systems as well as EBITA margins of 6% prior to the crisis.

6 7.0 37.366.0 0.2) 138.4% 3.081.5 24.0 297.5 39.0) 0.8) 110.5% (64.1 32.4 647.5 -11.4 554.0 0.0 (123.1 0.1 37.0 0.3 117.8 153.6 147.0 9.2 0.0 (51.7) (8.0 87.0 43.7 (98.0 276.0 218.8 0.1 185.8 236.0 (0.063.6 14.5) 0.0 0.4 35.0) 0.8 4.7 0.8) 78.6) 136.3) 7.0 0.0 0.0 0.4 (13.0 23.0 67.0 0.0 0.0 22.9 7.2 0.9) (2.0 0.7 8.3 152.9 -12.2% (72.8 123.2) 0.0 (123.0 (26.0 0.0 0.3) (164.0 45.0 (16.0 164.0 49.8% 2.6 0.0) 104.5 0.2 0.7) 102.9) 0.0 38.4 36.2) (846.2% 0.6) 0.0 0.7) (1.5% (290.9 49.3 99. [inc.0 97.130.2 15.9 164.0 0.1) 19.0 (0.5 14.036.160.1% (44.4 150.0 0.7 -48.3 0.4 1.9) (96.4 24.5 40.4) (1.8) 181.7 0.2) (2.6 26.0 (15.0 0.8) 0.0 146.7) 10.036.0 (10.6 0.0 31.0 (0.514.4 393.0 (1.0 109.3) (116.0% (596.0 0.0) 15.8 1.0 0.0 (0.8 545.7) 0.3 481.3% (110.3) (1.4) 250.2 0.076.8) (0.5 0.1 21.0 138.9 4.January 2011 GERMANY Smaller Companies Review Leoni FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.5 0.3 NS (104.5) 1.0 0.0 33.0 0.0 138.3 230. for exceptional items Net attrib.0 50.247.5 0.7) 158.1 482.3 1.1% (330.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 178 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.3 0.5% 2.6 91. profit [loss].8) NS 0.0 (7.3) 0.9) 346.0 651.7 164.9) 177.2) 67.0 0.6 0.7 0.4) 0.4) 0.9) 0.129.3) 0.1 11.158.1 427.8) (36.3 1.2) 56.0) 0.2 307.0% (111.2 15.3 25.6 447.2 50.4) 0.0 20.7 65.2% 1.0 0.2) 0.0 257.4) 0.4 1.0 (0.2) 79.4 451.8) 0.102.0 0.129.4 40.8 647.5 52.7 78.0 (57.0 139.8) 0.0 0.2% (56.3 0.0 0.1% (592.0 48.6) 0.0 0.0 (0.0 6.0) 85.5) (100.0 (29.3) 0.3 (9.0 0.3% 2.108.0% (49.5) NS 2.3 0.6 447.0 50.8 0.9 9.6 101.0 19.1 269.2 0.0 231.0 0.0 0.3 113.0 0.0 0.0 0.8 1.137.2 1.6 525.0 0.6% 0.9 44.0 79.0 19.0 20.0 (40.2 (14.0 48.2 36.9) (7.618.3) 1.4 (401.4) (1.1) 0.0 79.0 33.1) (139.5) (0.2 8.3 69.0 0.6) (1.0 24.7) 0.6 82.7 0.0 NS 0.8 573.7% (128.0 0.0 102.0 1.7) 0.5 0.0 0.8) (2.0 0.0 0.6) 60.3) 0.3) 2.2 (21.1) 194.1) 86.7 0.com .8) (7.1 798.5 NS (31.0 (23.0 272.0 130.0 0.0 0.0 0.7 39.0 0.2) (0.0 0.9 43.0 82.7 124.3 17.8 54.0 60.076.9) 0.0 167.6% (117.8 12.6) (88.3% 0.0 19.0 0.3 (4.3 105.0 (32.4 742.9% (5.9 14.0 0.2% (399.5 21.8 35.0 78.0 181.1% (236.7 516.1 44.4) (144.9% 82. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.7 22.263.3) 35.0 (226.4 66.3 0.4) 0.0 2.8% (567.0 0.9 1.8 www.0 0.0 47.5) 2.0 336.2 -77.0) (144.0 (12.4 27.1) (123.0 56.912.2% 314.7 0.3 19.2) 109.0 (5.0 0.3 369.2% (41.3) 130.0 (0.6 414.3) 4.3 1.2) 218.0 36.548.8 1.7 (32.0% 0.2 -0.2 371.9% (536.9% (42.2 0.2 798.1) 123.0 (17.1) 2.4 553.8) 0.058.4 (18.850.2 87.2 0.5) 0.6 0.0 105.2 37.0 0.664.8% (530.0 (0.158.6) 202.0 85.0 0.7 0.2% (40.5 164.0 (11.5 (22.9 76.2) 0.3 16.0 86.0 0.6% 0.8) 0.0 0.102.2 2.0 0.0 0.0) (2.2 0.0 (37.2 68.2 (5.8 477.1 0.0 (30.0 225.3 43.4 0.0 (100.7) 299.7 -94.3) NS 69.8 0.1) 33.9) 31.4 (100.0 92.4 (18.3) 146.8 19.1 -25.4 26.2 0.2 742.1 1.0 33.3 0.7) 130.0 0.6 (15.cheuvreux.8 5.0 0.0 130.7 397.0 0.0 (36.0 331.4% 3.7 114.0) 159.0 49.2 8.081.5 (32.0 (29.3) (2.0 0.8 0.0 202.0 530.3% 0.0 (14.0 0.8 161.5 0.6) 0.0 0.1% 0.320.0 0.7 105.0 (37.7 (36.0 0.0 79.3 37.380.7 8.3 92.0 56.4 552.6 36.9) 0.3% (499.0 (23.5 557.3 124.2 60.0 0.6% 2.0 109.3 551.0 0.

6 4.7 2.000 29.8 12.34 25.5 3.4 10.68 159.5 5.68 -9.3 30.8 7.9 43.4 7.425.50) NS (4.18 4.3 0.2 9.000 29.5% 3.January 2011 GERMANY Smaller Companies Review Leoni FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.87 8.000 29.2 22.430 27.3 12.0 0.6 17.2 91.8 3.95 34.1 2.2 3.7 11.40 35.5 0.40 16.7 19.87 8.10 7.00 0.6 11.1% 16.9 11.700 29.35 17.1 14.1% 13.3 799.0 1.0 17.700 0.1 8.4% 4.6 3.6 6.3 3.2% 17.2 9.07 12.4 9.0 7.0 3.78 0.7 1.00 0.8 0.4 NS NS NS NS 14.6 9.1% 0.700 29.9 4.5 10.8 5.700 0.0 6.53 - 496.67 13.0 0.27 20.56 30.9 2.56 7.25 NS 14.8 31.1 11.4 14.0 94.25 32.179.93 32.3 6.07 16.1 0.com .000 16.9 18.504.5 2.3 19.700 29.6 2.3 1.2 23.98 32.4 6.0 6.64 26.8 966.7 997.9 2.0 1.700 0.3 16.40 9.3 30.9 14.76 24.8 23.3 0.4 4.65 39.7 105.00 0.0 60.7 19.98 19.9 1.9% 20.6 4.90 69.4 4. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.20 4.8 2.6 10.0 10.57 16.5 NS 2.4 14.00 (0.7% 15.0 1.000 29.3 9.1 39.5 NS NS 2.3 0.7 2.1 5.5 NS 1.2 1.7 6.700 0.1 1.4 4.7 11.2 6.6 1.000 27.0 1.00 0.9 4.7 123.6 8.0 12.700 0.3 6. of shares.52 24.5 46.6 9.3 17.8 2.8 0.1 9.98 13.2 9.6 5.7 3.6% 2.66 -77.183 29.0 29.9 1.90 15.18 50.1% (4.9 10.3 0.50 6.5 NS NS NS NS 1.7 0.6 1.6 1.2 139.2 NS 2.7 385. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.4 4.1 485.9% 4.1 2.8% 1.0 8.00 0.70 17.34) NS 13.9 14.2% 15.67 26. number of shares.8 4.183 0.0 0.5 6.4 11.68 159.10 29.1 4.9 6.1 0.3 14. adjusted Treasury stock.3% 2.55 7.6 5.83 31. restated EV/EBITA.000 29. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.3 NS 0.50) NS 2.468.42 2.8 2. adjusted Av.4 0.4% 3.8% 12.6% 1.8 12.33 6.8 8.68 37.2 19.1 14.2 6.7 0.7 49.3 3.8 951.1 10. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.1 1.00 0.0 NS 1.4 1.9 0.2 14.9 5.5 8.00 1.2 1.4 0.014.9 1.60 46.3 4.4 2.2 19.17 33.12 31.3 5.700 0.6 0.cheuvreux.8 17.68 22.9 9.92 34.80 4.8 NS 0.64 8.8% 2.7 1.7 2.4 6.9% 0.2 30.90 69.00 0.65 39.68 37.2 1.0 9.7 1.66 -77.1 0.6 11.64 7.4 1.4 7.8 0.6 12.9 0.99 36.1 16.5 2.8 www.5 29.0 683.8 4.2 4.12 50.6 1.4 37.90 5.700 29.4 6.4 2.15 7.74 12.0 6.000 29.4 6.1 966.700 29.67 26.000 29.9 8.57 4.9 1.3% 1.7 7.1 2.34 6.8% 2.7 6.9 82.00 1.3% 0.371.2 3.40 32.2 30.8 0.700 29.8 986.430 0.2 978.7 918.1 22.93 29.700 29.7 9.2 11.6 1.5% 2.5 14.81 28. restated 179 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share No.53 33.700 0.

5m).9) (2. resulting in a net loss of EUR-1.com Q Q 180 www. Manz Automation targets further revenue growth from its guided level for 2010 of EUR170-175m.48m EUR 1.7% EUR69.0 0.0 195.9 EV/Capital empl.0 75.0 35. These orders primarily include automation and system solutions for the production of crystalline solar cells and will be reflected in revenues and earnings in the coming fiscal year.0 135.05 Price (07/01/2011) Reuters: M5ZG.0 115.0 115.0 55.0 155. of shares.8 23. Management increased its 2010 guidance to total revenues of EUR170–175m (previously: "at least EUR140m") and may even exceed this target depending on further developments in the market. iPad). Relative perf.6 Net debt/EBITDA (x) 9.com (49) 69 47.7) Yield (%) 0.7 1.8 2.9 15. As of Q3-10 Manz Automation had cash and cash equivalents of EUR42.DE Bloomberg: M5Z GR Stock data Market capitalisation Free float Enterprise value No. but LCD and touch panels too Q Recent developments – 9M-10 still loss making Manz Automation reported 9M-10 revenues of EUR121m (9M-09: EUR47m) with Q3-10 revenues alone totalling EUR54m (EUR18. Furthermore.0 175. Q EUR49.9% -30.0 15. Despite the sales growth.0% -10. Manz Automation is strongly benefitting from the demand for touch screen panels (e.0 175.2 (6.1 Philipp BUMM Research Analyst pbumm@cheuvreux. Sector focus Sector Top Picks Least favoured SMA.3m (EUR-16.0 55. 195.0 0.6 3.0 75.January 2011 GERMANY Smaller Companies Review RENEWABLE EQUIPMENT 2/Outperform Rating +40.6% 0.897. The company expects at least one order of about EUR150m in 2011E. in particular from Asian customers. SolarWorld Conergy Shareholders Manz Family 49.00 Target price (6 months) MANZ AUTOMATION Not just solar.0 95. the company forecasts EBIT break-even due to what has proven to be a strong final quarter.cheuvreux. This target can be easily achieved if the company receives a thin film order.0 ROCE (%) NS 6. (x) 1. especially the market for thin-film technology.7 1. In October 2010 Manz Automation received orders of about EUR25m.8 1. Manz recorded an EBIT loss in 9M-10 of EUR-3. The increase was primarily driven by the new products for the production of crystalline solar cells.0 95.2%.6 0.1m).15m Performances 1 month 3 months 12 months 1.8% 2009 2010E 2011E 2012E P/E (x) NS 41.0 135. Regarding LCD.4 6.6% -5.0 35.6m (EUR-11.6 Attrib.cheuvreux.g.com .5 10.0 0. FCF yield (%) 16. adjusted Daily volume EUR269m EUR127m EUR170m 5.9 18.2) (3.5m).5 1. it received new orders in the Li-ion segment for the installation of pilot lines in Germany. we expect the positive trend to continue.527 Disclosures available on www. Free Float 50.0 155.0 04/07 10/07 04/08 11/08 Price/TECDAX 05/09 12/09 06/10 01/11 Price Outlook – Working off the order backlog For 2011E. The order backlog thus increased to around EUR125m as of the end of Q3-10.5% Absolute perf.1 million and an equity ratio of around 69%.1% -29.8 EV/EBITDA (x) NS 13. In addition.0 09/06 15.

The company targets being profitable already with the first line it delivers.com Valuation Investment case Manz automation will continue to benefit from its LCD business in 2011E. Germany. The company is trading at a P/E-11E ratio of 18. Q Q Company structure The company's key strategic divisions are photovoltaic (systems. Its core competencies are in robotics. the company is less dependent on the solar market as it is a strong supplier to the LCD industry.5x. On an EV/EBITDA 12E basis. In terms of EV/Sales 11E it is trading at 0. Roth&Rau) „ Opportunities Threats Emerging solar markets. Spain. India and the Middle East „ Push-outs and cancellations from order backlog „ „ Our DCF-based target price stands at EUR69.January 2011 Q GERMANY Smaller Companies Review Company profile Q One of the world's leading technology providers Manz Automation is one of the world's leading technology providers in terms of its market shares in systems for automation.cheuvreux. However. AMAT. Q Strengths Lithium-ion battery orders „ Reduced political support „ New competitors from the semiconductor equipment area and low-cost competitors from Asia may invade Manz's turf 181 www. but at least two CIGS production lines can be sold in 2011. In general. Manz has production sites in China. Hungary. Germany. Based on 2011E multiples we see Manz Automation trading at a premium to Roth & Rau and Centrotherm. quality assurance and laser process technology for the photovoltaic and LCD industries „ Strong dependence on new order intake levels „ Strong client relationships with world market leaders in solar and LCD (e. Taiwan and South Korea).9x. and hence suggests additional growth potential. LCD (systems. This is not included in our estimates. wet chemicals and control and drive technology. which represents a 50% premium to Roth & Rau.g.g. quality assurance and laser process technology for the photovoltaic industry and for automation and wet chemicals for the LCD industry.6x or a 50+% premium. Manz Automation will work off its order backlog of EUR125(as of 9M-10). Manz Automation also looks more expensive than Roth & Rau. India. image processing. e. We expect the company to sign at least one major contract for its thin-film (CIGS) equipment. trading at 3. which should be about EUR150m per line. We and the company are confident that not only one.LCD) and OEM systems (systems. laser technology. . Slovakia and Taiwan. or indirectly via cooperation partners Applied Materials and Roth & Rau AG.AICO: systems for automation in various industrial sectors and the life sciences industry). Its production equipment is distributed either via its own sales force and local representatives in the countries of its major clients (China. Q SWOT analysis Weaknesses Outstanding technological know-how in automation.solar).

0 (0.7% (37.4 0.1% (1.0 0.0 0.0 0.1 12.3 0.0 0.0 1.6 50.7% (2.1 0.5 NS (41.0) 0.6) NS 151.9 0.9 27.2) 0.3 0.0 6.5) 9.7% 0.0 0.3 (0.0 22.0 21.0 0.6 171.0 42.9 8.3 1.0 14.0 0.7) (94. profit [loss].0 0.6 (0.5% (6.0 10.0 0.0 52.0 5.0 0.5) (5.3) 0.0 19.8 49.8 0.7 29.0 0.0 6.0 0.2) 7.2 59.0 32.0 0.3 (83.9) (200.0 (9.5) 4.6) (9.9) NS 142.0 (9.0 0.8% 286.8 0.0 0.9 7.7 0.7 0.4) NS 36.0 0.3 (4.0) (1.4% 195.0 0.3 13.4) 7.5% 71.9 17.7 21.0 0.3) (57.0 0.0) (7.3 221.7 52.0 0.0) 0.9 27.6 (0.0 0.0 2.0 0.3 62.7) 35.0 0.2 76.3 43.1 (5.5 64.9 (0.4) 0.0 0.0 0.3 45.1 (2.0 7.0 (2.8) NS 53.0) NS 121.7 3.7) (38.9% 236.9) (75.2 75.0 (9.4% (11.5) 7.1% (19.8 33.8 21.6 0.8) 44.6 0.0 5.0 1.4 34.0 8.8 7.2 1.3 0.6 3.2) (4.0 0.0 (10.1) (9.1) 0.9 1.0 2.8 21.7 9.6% (16.9 0.0 10. for exceptional items Net attrib.5 (102.3) 37.0 0.0 6.6 120.9) 2.3 27.0 0.0 0.6 0.6 www.2) 7.0 82.8 21.0 0.0 0.8 3.3 NS (6.0 73.cheuvreux.0 0.4) (11.3) 0.0 0.9 49.7) (4.2% (42.9 3.6) 12.0 0.8 2.5) 26.3) (2.0% (37.5 0.6 168.8 1.0 0.5 0.8% (7.9 0.6 0.0 0.0 0.0 0.0 14.1) 13.0 0.7 9.0 0.8) (99.0 0.2 16.1) 6.1 0.2 0.8 26.2 4.6 146.0 0.0 0.6 2.com .0 8.7) NS 23.0 46.0 0.5% 0.0 1.0 0.0 0.1 0.0 53.1 0. [inc.6 156.0 (2.0 0.0 (15.0 (9.9 124.6) (5.2) 4.1 (9.3 196.5 0.0 0.9) 19.9 109.6 0.8 (88.0 (0.0 (3.4) (7.0 0.0 0.0 4.0 25.8% 85.1 6.6 181.8) NS 114.0) (7.4 30.6 (47.0 0.0 (18.0 3.1) (6.9 16.0 0.0 0.0 0.1) 4.6 9.8 0.0 (7.0 3.0 0.0 0.2 21.7) (159.9 1.0 53.9 18.8 145.0% (18.1) (130.0 0.5) 0.9 22.0 21.0 0.9 76.7) 2.9) (5.4 0.3) (35.4 0.4% (39.6 (20.3 0.0 NS 6.3 0.0 (6.5% (1.9 0.9 0.0 0.1) (2.7) 0.0 0.1 0.9 31.0 0.0 0.0) (5.0 (1.3 41.1 25.9) NS 156.9 27.6 0.2 121.6) 0.7) 0.9 149.9 27.1 40.2 0.6% 0.January 2011 GERMANY Smaller Companies Review MANZ AUTOMATION FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 24.3 0.3) 0.6 175.3) 0.5) 29.0 114.0 0.8 0.6% (1.0 5.1 NS (4.2) 33.0) NS (6.8) 0.0 0.0 3.0 13.2 1.0 0.0 0.5) 0.0) 0.3 1.3) 0.0 0.0 65.1 (0.8 0.6) (41.0) 0.8 15.0 0.0 0.0 0.0 0.5 0.1 18.4% (3.0 21.2 142.2) 14.4 0.4 21.9 17.1) NS 105.9) (15.0 0.0 0.2 (117.5) 2.1% (6.6 142.0 0.0 0.8 3.0 0.1 2.3) 1.6 0.7) 0.6 24.0 3.9 -63.0 22.0 0.0 0.3) (23.8) (10.8 (5.1 14.6 21.0 28.1 25.3 0.9) NS 0.0 2. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.8 0.1 157.0 0.5) (14.8) 7.0 (7.5% (9.0) 43.1 4.0 0.4% (63.0 (1.6 3.0 (0.8 7.5 181.0 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 182 2005 2006 2007 2008 2009 2010E 2011E 2012E 29.0 14.0 33.0 0.0 0.0 46.0 96.0 0.0 0.0 0.0 0.9) 8.9% 0.7 0.0 0.4 21.9% (5.0 71.3 0.0 0.0) 0.

9 0.7 17.00 0.000 5.00 5.2 8.1 0.6 4.4 3.7 3.9 55.7 NS NS NS NS NS 0.7% 2.8 11.00 47.8 0.8% 2.66 120.1 NS NS NS NS 0.1% 40.9 268.1 4.cheuvreux.2 0.7 12.9 8.00 0.2 4.8 1.480 0.8 11.8% 40.9 16.2 1.9 21.9 6.1% 4.7 0.430 0.00 3.9 268.8 6.0 10.com .8 1.58 0.7 15.1 16.0 65.9) 13.78 -54.74 22.6 2.9 8.9 1.6% 4.2 4.480 0.8 NS 0.7% 4.4% 5.54 -56.480 5.50 69.4 0.97 -19.450 0.000 3.7 2.480 0.5 1.480 5.68 49.7 70.9 0.9 14.0 NS 0.7 16.8 7.39 NS 33.30 122.7 27.66 42.3 15.3% 2.1 0.69 -71.8 NS 0.0 1.0 511.75 199.90 104.35 71. restated 183 www.12 72.00 0.7 6.000 4.56 71.7 23.91 66.5 0.6% 10.9 16.20 168.8 0.04 49.8 21.05 53.8 0.9 12.4 1.0 41.480 5.5 8.56 71.1 187.5 4.7% (1.6 2.0 0.0 12.000 1.2 (37.29 41.82 3.4 1. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.574 0.92 64.8 12.8 29.480 0.00 2.24 59.0 3.9 41.8 NS 27.60 15.000 5.8 6.00 6.4 1. reported % Change 2005 2006 2007 2008 2009 2010E 2011E 2012E 12.0 142.7 16.1 11.8 NS 0.4 46.0 NS NS NS 16.6 0.9 1.0 12.66 120.9 190.4 31.7 0.574 1.480 5. of shares. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.17 52.9 6.8 13.7 8.76) NS (1.3% 1.60 5.00 5.0 8.480 4.8 0.000 5.0 NS NS NS NS 7.5 NS 0.3 1.6 1.4 1.0 NS NS 9.78 80.8 10.00 0.6 36.9 3.6 NS 0.84 17.67 18.1 22. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.00 (0.76) NS 1.1 12.0 NS NS 19.1 NS 10.22 0.78 No.0 NS 1.5 1.480 0.7 7.9 18.56 22.6 268. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.89 0.93 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 8. restated EV/EBITA.3 11.7 NS 0.1% 35.000 5.9 NS 1.0 43.0 NS NS 13.01 28.9 0.19 50. number of shares. adjusted Av.000 - 22.4% 15.31 166.05 - - 70.00 43.0 18.2 1.4 24.91 0.1 40.5 12.5% 1.9 4.5 18.6 8.94 107.00 2.0 0.86 12.00 2.1 1.2 7.0 NS NS 14.8 154.0 12.5 0.6 13.4 24.88 22.3 0.51) NS 32.5% 2.3 NS 0.3 9.5 275.8 52.8 46.39 34.9 NS NS NS NS 6.75 50.4 491.5 2.430 3.5 8.89 52.4 5.0 NS NS 15.8 170.450 0.4 NS NS 2.98 157.7 189.January 2011 GERMANY Smaller Companies Review MANZ AUTOMATION FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.1 7.8 7.0 3.2 NS 20.0% 13.9 1. adjusted Treasury stock.20 168.

Total revenues in Q3-10 came to EUR116m.0 P/E (x) Payout ratio (%) Disclosures available on www. +38% y-o-y (exp.0 0.8m.6 3. adjusted Daily volume EUR826m EUR247m EUR826m 107.3bn. EUR7.0 0.6 5. EBIT was at EUR8.0% y-o-y to EUR20.January 2011 GERMANY Smaller Companies Review ASSET GATHERERS 3/Underperform Rating -8.1 104. of which EUR7m were achieved in 9M-10. MLP's management is nevertheless right in retaining discipline in the hiring process and focusing on advisor quality.6% EUR7. we expect an EBIT margin of 10.2m). indicating that clients are still reluctant to invest in long-term savings products.0m (exp. Stock data Market capitalisation Free float Enterprise value No.1 16.317.1 24. value (x) New business value (m) Non-life comb.1% to EUR12.7m).cheuvreux.com Q Q 184 www.8m (exp.1 84.5% in 2011E.5m).1 24.9%. Talanx Group 9. driven by the recovery of the capital markets. which should have led to cost savings of EUR10m in 2010.2% -32.861m EUR 0. Without significant growth.0 133. Manfred Lautenschläger 29. EUR13.9% Absolute perf. Outlook – EBIT margin target of 15% by YE 2012 too ambitious Q MLP has become more a cost-cutting story than a growth story. value/share 3.1 64.1 44. EUR63.8 94. Relative perf.0 0.0 0.1 124.7 93.1 44. Revenues from health insurance rose 23.DE Bloomberg: MLP GR Not a growth story at this time Recent developments – Sale of old-age provision products sluggish Q MLP reported Q3-10 figures in line with expectations. Starting from 7.1 4. of shares.0 2.4%.3% -4.3% -15.6% -7. -1. Swiss Life 9.21m Performances 1 month 3 months 12 months -2. and net profit at EUR6. however.com 01/11 Price Michael HAID Research Analyst mhaid@cheuvreux.360 (our exp.7 4.8 Net yield [%] 3. While its growth in numbers of advisors is disappointing.0%. up 3% from EUR18. While advisor turnover in Q3-10 remained normal.2 5.0 0. which should have lowered its fixed cost base by EUR10m.8m). the company's EBIT margin target of 15% by YE 2012 looks to be out of reach. With MLP trading at a P/E 2011E of 18x. we reiterate our 3/UP rating on the stock. Revenues from wealth management climbed 7. EUR19.7 0.66 Price (07/01/2011) Reuters: MLPG. based on our estimates.9 21.8 97.9 Emb. from EUR295m to EUR285m. Its number of financial advisors has been under pressure for years now.7bn in Q2-10. The bottom line in 2010E will be supported by MLP's cost-cutting programme. MLP is having difficulties finding new.2 18. Any dilution of the quality of its existing advisor force must be avoided.1 04/02 07/03 10/04 01/06 Price/SDAX 04/07 07/08 Sector focus Sector Top Picks Least favoured MLP Shareholders Free Float 30. qualified advisors. ratio (%) 2.1 104. Revenues from old-age provision products amounted to EUR64. still driven by clients' reluctance to commit funds to long-term pension products.360). The strong improvements in EBIT and net profit were a result of MLP's efficiency programme.1 01/01 4.8 P/Emb.00 Target price (6 months) MLP EUR7. EUR6.3% in 2010E and 12.9% 2009 2010E 2011E 35.1 124. We expect it to report flat total revenues for 2010E followed by a 3% rise y-o-y in 2011E. +48% y-o-y (exp.7m.7% -0.0 0. Q3-10 assets under management totalled EUR19. The number of financial advisors at the end of Q3-10 amounted to 2.9% in 2009. +4% y-o-y (expected: EUR115m). 2.9 2.8 2.1 64.2 2.0 0.5% y-o-y (our exp. reflecting clients switching from public to private health insurance.cheuvreux.5m). 144.com (49) 69 47 89 79 67 10/09 2012E .8 2. down 43 q-o-q from 2.1 144.1 84.1m.

0%. however.00 for MLP. we believe the company's EBIT margin target of 15% by YE-12 is out of reach. giving the stock approximately 8% downside.7%. old-age provision. acquisition of Feri In Q2-05 MLP sold its life and P&C insurance activities in a move that was the logical outcome of its strategy announced in Q4-04 to focus solely on distribution/financial advice and to become a fully independent financial advisory firm. banking.000 clients MLP currently has approximately 2. Q About 2.5% the Lautenschläger family. from EUR295m to EUR285m. In 2006 it announced the acquisition of wealth management company Feri Finance. Q Q Strategic reorientation: sale of insurances. which should have lowered its fixed-cost base in 2010 by EUR10m.000 clients „ No international diversification „ Limited free float: only 30% „ Well-educated financial consultants „ Opportunities Threats Increased need for financial advice in Germany's complex product world „ Financial crisis: fear leads to lack of demand for financial products. In light of the limited growth MLP currently offers. Without growth. based on our estimates. Q Investment case Even though the German economy recovered significantly in 2010.350 (9M-10: 2. MLP placed 10% of its stock with friendly product providers. MLP's core business.2%.317). Taking advantage of expected industry consolidation.com Valuation Our DCF valuation suggests a FV of EUR7.1x.325-2. This means that about 35% of MLP is in free float. with Azimut trading at 8x 2011E earnings. The current shareholder structure is: 1) 29. we cannot justify a P/E (2011E) of 18x .0% Allianz Leben.2% AXA 4. MLP trades at a P/E (2011E) of 18.0% Barmenia. its operations are now essentially 100% in Germany. Our FV of EUR7. Its number of financial advisors has been under pressure for years now. Swiss Life reduced its stake in MLP to below 10%. in January 2009 MLP took over ZSH (80 consultants). 3) 9. and 6) 4. The bottom line will be supported by its cost-cutting programme 2009/2010. The company's 9M-10 revenues from old-age pension products showed a decline (-2.317 consultants. serving both private households and corporate clients. Following the sale of its Austrian activities. 2) 9. which we consider expensive in light of the limited growth potential suggested by the low level of growth the company has experienced in recent years. we expect MLP clients to remain reluctant to invest in old-age pension products.9% Talanx. and HBOS/Lloyds' 0. we expect MLP's number of financial advisors to stay essentially flat in the range of 2. Harris's 5. To defend itself against a hostile takeover and maintain its independence.9% Swiss Life.000 clients. Compared to its peers MLP also looks expensive.cheuvreux. Following this successful defence against a takeover.hence our 3/UP rating. about 771. on the basis of increased uncertainty regarding the currency system and potential inflation. As competition for financial advisors remains fierce and new talent is difficult to find. It offers the full range of tailor-made insurance.00 implies a fair P/E (2011E) of 1617x. not counting Berenberg's 4. The company has meanwhile become more of a cost-cutting story than a growth story. 4) 6. about 200 branch offices and about 771. 5) 6.January 2011 Q GERMANY Smaller Companies Review Company profile Q One of Europe's leading independent advisory companies MLP is one of Europe's leading providers of financial services products for private and corporate clients.8% y-o-y). In 2011E we expect its total revenues to increase by 3% y-o-y to EUR557m. wealth management and financing products. thereby entering into the wealth management market.317 financial consultants. Banca Generali at 10x and Mediolanum at 11x. .8%. Q SWOT analysis Strengths Weaknesses Strong client base: 771. Q Balanced shareholder structure after failed takeover attempt In Q3-08 Swiss Life acquired a 27% stake in MLP. clients reluctant to invest in long-term products „ „ Industry consolidation Productivity gains: 7-9% reduction in fixed costs targeted „ 185 www. Based on our estimates.

8 71.9% 0.266.266.3 1.8 64.4 (26.0 455.5 1.4% 690.8 60.8) (91.0 45.3 96.1) 0.8 0.1 429.475.7 752.3 (514.1 119.3 31.9 0.1% (8.7% 688.8 1.5 232.6 578.2 1.7) 60.621.3 1.8 15.2 0.9 0.4% 36.8 553.8 (101.9% 597.6 201.3) 51.8 24.1% 556.1 974.0) 54.2 1.3 1.5) 39.4 7.7 261.424.6) 103.072.8 9.1 53.1 (48.4 323.9 1.8 -60.1 532.4) (31.5 556.7 (36.2) 87.4 91.0 3.5 418.8 -19.2 1.4) 90.5 4.7 136.1 803.4 17.4 1.6 432.6) 532.8 2.0 38.4 1.6 371.137.7 (488.0 91.9 1.5 1.6 213.7 (61.7 355.8 65.8 -67.0 20.2 893.4 51.3 (492.564.6% 78.5 3.2 3.9) 597.9 0.7% (35.5 216.1 1.8 1.0 289.1 357.2 24.6 1.1 -11.5 102.5 18.0% (0.5) 690.9) 199.7 18.8 0.1 -11.6 65.9 1.6% 55.cheuvreux.4 91.8 424.com .7) 119.534.553.4 1.5) 38.2 499.1 (485.5 45.8 13.7 (61.7 16.4 424.8 82.5 9.1 455.5 1.6) 24.8% 553.1 323.8% 4.8 553.9 264.3 227.534.9 (5.6 1.5) 45.3) (16.475.1 285.5) (0.5 539.4 599.4 1.0 119.5 91.2 139.4 51.2 3.2) 78.0% 69.1 (486.9 1.4) 539.9 301.3 31.2 -2.3 (27.6 199.7 (6.5 246.7 139.173.5 771.6 38.4 31.4% 539.8 1.1) 49.491.1% 0.9 287.7 24.3) 578.0% 0.7 22. [%] of which AM [%] of which Banking [%] of which Holding [%] Balance sheet Goodwill Intangible assets Total financial assets of which Participations of which Equities of which Bonds of which Property of which Unit Linked Deferred acquisition costs [Ins] Banking assets [B] Other assets Total assets Shareholders' equity [group share] Total shareholders' equity Subordinated liabilities Net debt Funds for future appropriation [Ins] Total technical reserves Banking liabilities [B] Other liabilities Total liabilities 186 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 688.5 418.7 199.3) 597.5 221.5 441.7 339.0) 556.1 (540.5 3.8 -19.0 212.1 (16.3 1.8 51.5 65.6 10.4% (1.6 337.1 (500.0% 578.1% 40.553.5 www.3 (34.1) 62.491.7 51.182.0 (23.2 1.214.1 -5.January 2011 GERMANY Smaller Companies Review MLP FY to 31/12 (Euro m) Profit and loss account Gross sales % Change Net revenues Change in unearned premiums Net investment income Total ordinary income % Change Underwriting costs Other income [expenses] Acquisition costs Administrative expenses Pre-tax operating profit Exceptionals Taxes Profit from associates Goodwill amortisation [Ins] Net profit before minorities Net attributable profit [loss] % Change Pre-tax net profit Net attr.0) (12.0 432.621.2 441.2 (9.4% 0.6) (537.113.8 24.7 (3.2 339.3 688.4 597.959.3) 161.8) (27.8 185.3 0.3 332.7) 51.9 28.6 67.1% 93.3 265. restated of which Life [%] of which Non-life [%] of which Life Reinsurance [%] of which Non-life Reins.2) 69.086. profit [loss].0) (2.4 232.4 429.5) (477.3 45.7) 65.6 59.1% 597.9 1.6 4.0 (48.7 342.1 62.5 1.0% 532.6 4.5% 93.2 791.7 215.0% 87.8 845.2 968.424.5 (8.4 7.2 117.6 904.7 62.3 (47.9 690.5) 24.086.2 289.9 141.2 (0.1 12.182.995.1 258.3) 0.8 597.7 112.

0 0.0 23.8% 3.7 40.6 1.0% 2.2 16. [%] Restated ROE after goodwill Return on allocated equity [%] Per share data (Euro) EPS [restated after goodwill] % Change EV per share % Change EPS before goodwill Net equity per share as published Total AUM per share Dividend per share Share price (adjusted) (Euro) Latest price High Low Average price Av.013 1.26 98.35 0.3 0.0 0.03 10.7% 2.6 429.0 0.0 0.16 17.7 404.7 297.0 0.7 0.9 265.6 43.0 594. rev.2 21.9% 0.02 14.6 226.0 0.8 0.9 7.58 0.70 0.5 32.8 297.48 3.3 10.0 16.000 2.8 13.8 30.3 429. prov.427.973.0 2.048. AUM [%] Bank operating margin [%] Return [%] Return on avg.0 2.66 7.4 0.1 17.03 10.771.63 -0.0 0.7 0.000 2.0 16.7 (98.83 7.0 5.22 -8.4% 0.0 0.36 3.06 5. invest.0 0.000 4.92 8.0 18.com .1 18.47 31.1 2.7 191.1 3.482.0 100.0 76.6 415.0 10.903.8 131.8 3.52 17.7 2.2 2.0 0.8 1.3 386.9 300. res) P/Embedded value P/AUMPS (year end) [%] Net yield [%] 187 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 289.50 0.3 2.3 30.0 0.6 0.7 48.5 424. net profit / Avg. operating margin [%] AM rest.00) 9.40 0.5% 0.8 37.5 10.19 8.3 3.84 0.0 6.7 5.7 13.2 0.5 0.9 www.cheuvreux.9 (8.5 0.5 9.4 11.7 0.1 17.8 15.644.9 819.02 13.1 30.4% 1.1 17.8% 0.86 13.1 455.9 35.70 14.0 11.2 0.8 404.84 5.4 40.000 3.0) 91.3% 4.48 13.5 0. number of shares.63 2.36 59.6 2.7 16.6 432.5% 0.3 0.0 16.80 108.04 16.7 23.6 252.8 110.5 9.40 0.28 0.66 107. costs / Avg.0 (0.94 101.0 0. techn.0 0.83 14.80 14.1 -26.8 0.2 36.03 108.1 (0.20 7.22 1.2 11.0 323.30 0.1 2.3 7.1 64.24 -61.1 594.7 1.6 1.84 3.60 8.1% 0.0 9.January 2011 GERMANY Smaller Companies Review MLP FY to 31/12 (Euro m) Net asset value Shareholders' equity [group share] Ordinary dividends Valuation reserves on balance sheet Valuation reserves off BS after tax In force Life In force Other lines Goodwill Other NAV items Embedded value Future business value Appraisal value Financial ratios Life gen.53 7.6 1.70 7.06 11.2 2.8% 4.8 300.9 869.0 0.0 91.000 3.8 339.64 2. retention ratio [%] Non-life reins.04 22.98 0.59 20.9 826.4 0.1 265.585.5 4.000 4.5 9.8 30.03 10.2 2.42 3.43 107.6 415.60 0.47 2.9 53.64 -65.9 0.2 48.88 103.0) 0.8 6.1 2.0 0.9 36.5% 4.42 17.8 100.1 117.1 429.3 119.45 107.0 0.4 15.056.3 136.8 1.9 826.7 17.6 0.3) 91.7 23. Non-life reins.9 35.24 16.5 125.4 23.2 21.1 438.1 18.7 7.6 18.4 31.2 119.61 0.9 9.7 0.6% 0.59 0. [%] Life operating margin [%] Non-life retention ratio NL combined ratio [%] excl.2 0.0 73.1) 91.2% 0.4) 0. combined ratio [%] Life reins.5 386. prov.0 18.4 39. adjusted Market capitalisation Valuation P/E P/E before goodwill P/Non restated EPS P/BV (incl.0 1.4 7.1 418.2% 3.0 -11.9% 2.0 0.28 6.64 0.90 10.45 14.6 -9.69 107.61 0.8 8.44 8.44 14.6 438.9 14.22 3.75 19.93 10.8 (11.0 6.8) (316.2 0.35 14.4 0.4 (18.0) (104.9 0.8 -28. equ.7 21.000 5.27 3.7 441.000 5.

2% 8.4 2.0 52.e.5 1.0 47. Last but not least. FCF yield (%) 6. MTU will have a 15% share of this new GTF engine.992m.2 2. 5-10% in spares and MRO. Rolls-Royce Shareholders Free Float 100.7% versus our previous 4.9 ROCE (%) 14. MTU's EBIT sensitivity to the USD is EUR50m for 10 cents.0 05/05 01/06 10/06 06/07 03/08 Price/M DAX 11/08 08/09 Sector focus Sector Top Picks Least favoured ABB. adj. Relative perf.0 17.).e a 15-20% impact on EBIT or EUR8-10 per share. of shares. a margin of 11.0 17.4m EUR 11. Net profit was EUR100m. EBIT came to EUR226m.768bn in our est.high sensitivity to the USD and spare parts Whilst our current EUR50 target price is based on a EUR1=USD1. as MTU spares did not decline significantly last year and as the MTU installed base has been renewed considerably. 2011 Outlook – Some momentum acceleration expected MTU indicated for 2011 it is looking for 15-20% sales growth in OEM. which no longer shows any upside (after having outperformed the German index by 31% in 2010). up 2%. 52.4 EV/Capital empl. Commercial OEM (EUR822m). Similarly.7 16.2 6.7 7.992m.8 6.00 Target price (6 months) MTU Reuters: MTXGn. and a decline of 10% in military.10 Price (07/01/2011) Valuation .0 27.3 EV/EBITDA (x) 6.0 20. We now anticipate 7.75bn (EUR2.2) P/E (x) Net debt/EBITDA (x) 0.0 32. i.0 Attrib.e. the GTF engine should provide an additional TP contribution (still to be determined).4 17.4 0. Q Stock data Market capitalisation Free float Enterprise value No.3%.2 0.4 1.7% 30.0 42.cheuvreux.0% 2009 2010E 2011E 2012E 13. Nexans. adjusted Daily volume EUR2524m EUR2524m EUR2948m 49.0 22.January 2011 GERMANY Smaller Companies Review AEROSPACE & DEFENCE 2/Outperform Rating -2.0 32.). derived from the existing GTF made for the Bombardier C-Series.4 4. This means the current USD level would add EUR4-5 to our current TP. with a EUR4 impact on the TP for every 500bp growth difference while assuming 7. Military (EUR378m) and MRO (EUR814m) were relatively in line.com 01/11 Price Antoine BOIVIN-CHAMPEAUX Research Analyst aboivinchampeaux@cheuvreux. Spare parts and MRO activities still lagging a bit.6% 2.4 2.DE Bloomberg: MTX GR Towards higher multiples in 2011 Q Recent developments – 9M-10 sales in line.0 12. could be raised by some EUR10+. and FCF EUR143m. Military business down but in line with expectations.0 12.1 Yield (%) 2.0 37.43m Performances 1 month 3 months 12 months 3. The group confirmed all its FY guidance targets. sales at EUR2.7m est.0 37.3% estimate. No major surprises for MTU’s 9-month results. This clearly means that our current TP.com (33) 1 41 89 73 25 04/10 . Sales totalled EUR1.2% EUR50. but the main difference comes from the loss-making OEM series.0 47.8 4.7 7. i.6% 1. Spares and MRO will grow next year but only modestly at 5-10% (in line with our forecast). SIEMENS AG Alstom. EBIT at EUR226m: in line.5% spare parts growth for the time being. Concerning the GTF engine powering the A320 NEO. EADS.com Q Q 188 www. but give it a clear advantage for the long term (spare parts flows).0 17.38 assumption. the sensitivity to spare parts growth is rather high. i.5 1.1 12.6% Absolute perf. EBIT of EUR310m (EUR310.0 42.0 27. FY guidance too 9M-10 sales at EUR1. Adj.cheuvreux.8% 23.5 1. leading to high single-digit sales growth overall.5 15. (x) Disclosures available on www.0 22. net profit of EUR140m (EUR143m) and FCF of EUR120m (EUR119m). limiting shop visits. it will cost the group EUR70-80m in R&D over four years according to our estimates.3 (0. Q EUR51. MTU said that the 10% drop expected in the military business in 2011 is a one-off issue linked only to the aftermarket business (Tornado) and mainly due to the German operations.

better than most of its peers. Strengths Weaknesses „ Strongly cash-generative business model „ Little influence on pricing (dictated by engine OEMs) Q „ Aftermarket business represents about 60% of total sales and offers good visibility „ Earnings generated mainly via spare parts and MRO in commercial business Opportunities Threats MTU posted a very strong outperformance in 2009 and 2010E.0x. „ Emancipation from P&W opening up new opportunities „ Increase in military margin due to exports outside the EU (Saudi Arabia etc. it is the leading OEM-independent supplier of maintenance and repair overhaul (or MRO) services for commercial aircraft engines (No. installed base: 15.9%. our DCF leads to a EUR50 TP (with a EUR1=USD1. peer comparison and DCF).38 assumption). 29% world market share) with well-established risk-and-revenue-sharing partner positions in numerous major aircraft engine programmes. although we focus more on our SOP and DCF valuations. The euro at USD1. yields a fair value of EUR53 per share. Relative to its European peers.January 2011 Q GERMANY Smaller Companies Review Company profile Q One of the world's largest suppliers of engine modules MTU Aero Engines is one of the world's largest manufacturers of aircraft engine modules and components (LPC and HPC turbines and compressors. 4 global MRO service provider with a 7% market share).com . terminal growth of 2%). a 10% variation has a 20% impact on EBIT according to our calculation.000 aircraft. EV/EBITA is 10% higher than peers (2011E) Our SOP valuation. Sensitivity to the dollar is quite high in the case of MTU. Last but not least. Q SWOT analysis Valuation We value the stock using three methods (SOP.) „ Industry overcapacity for MRO services Potential cutbacks in German/European military budgets „ Investment case We think this should continue in 2011. Q Strong position in military engines The company generates 20% of its sales with military engines and services. which implies a 2011 EV/adjusted EBITA multiple of 9. the cost-cutting plan will bring in additional savings in 2011. Tiger and A400M). The group has limited exposure to delayed programmes. control units. 189 www. MTU’s current multiples remain relatively low and we are therefore confident the stock will continue to outperform. Eurofighter.cheuvreux. Q Q Leading OEM-independent supplier At the same time. We attribute this achievement to its resilient model linked to its favourable mix of engines and its positioning in defence. Based on what we consider to be appropriate assumptions (WACC 8. MTU is trading at a discount on P/E and EV/Sales multiples. in which we split the OEM business further into military and commercial. predominantly for European armed forces (the Tornado.30 clearly helps a great deal and the aftermarket is expected to be up in 2011 after two difficult years. albeit to a lesser extent.

0 143.0 (58.7% 0.cheuvreux.0 0.678.0 (2.0% 99.0 0.0) (1.0 0.0 403.0 845.0) (131.0 33.0 562.0) 285.0 16.0 0.0 0.0% (121.0 (25.0) 0.0) 1.0% (150.6 0.0) 0.0 -0.0 3.0 (74.0 (51.0 0.678.0 267.738.0 0.0 0.0) 0.0 158.0 46.0 0.0 0.0 (102.0) (3.0 28.0) (2.0 167.0 (62.0) 388.0 0.0 0.0 0.1) 1.0 184.0 419.0 285.0 (28.0) 131.0 16.7% (471.0 31.0) 295.0 15.0 412.753.0 (90.0 61.0 528.0 (6.0 13.7% (492.0 (64.0) 0.0 23.4% (124.0 81.2 1.0) (3.768.0 421.680.0 0.1% 0.0 180.0 -46.0) (3.0 236.0 89.0 -4.0 0.0 730.0 (124.0 (2.0 (68.0 488.1% 0.1% (485.8% (55.0 0.0 141.0 0.0 0.0 0.0 0.0 0.7% 2.0 159.0 0.7% 2.0) 0.576.0 0.0 390.0 557.0 73.0) 0.9% (16.0 0.0 0.1% 0.0) 0.753.0) 267.0 0.0 0.0 377.0 223.0) 0.0 0.0) 0.0 248.0 15.0 0.0 0.416.0) 393.0 1.0 6.0 32.0 0.735.0 0.0 0.990.0) 0.0 0.0 (456.0) (4.0 247.0 838.8% 0.0 0.0) 0.0 827.0 217.0 35.2% (132.0 -10.0 938.0 617.0) 0.0 569.0 0.0 417.0) 0.0) 0.627.0 154.5) 0.0 0.0 0.2 1.0 33.0 10.0 0.0) NS 1.9 1.0 0.075.0 0.0) 243.0 0.0 0.0) 0.0 259.0% 0.8 1.0 (33. [inc.760.0) 66.5% (16.739.0 0.0 2.9% 218.0 0.0 33.0 145.0 42.0) 0.0 -0.0) (4.0 119.0 0.0 0.0 5.0 412.0) 0.8% (160.0 40.9% (152.0 120.5% 0.0 95.0 386.7% (506.0 0.0 1.3) 1.0 797.0 0.0 343.0) 476.705.0 0.0 131.0 540.9) 1.0 40.0 0.0 845.0) 0.0) (1.0 www.0 10.0 224.0 58.0) 0.0) 0.0 213.0 (6.0 (38.0 0.0) 184.7) 1.0 (81.0 479.628.0 38.0) (2.0) (9.0 551.0 0.0 (1.0 0.721.0 167.0 0.0 141.0 6.6) 1.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 190 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.0 0.0 394.0 562.8 1.0 16.0 (49.0) (44.6 0.0 (40.0 (78.0) 408.666.5 1.1 1.721.0) 185.0 0.0 2.0 0.0 0.0 154.0 16.0) (1.7% 0.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 237.com .0 1.0 (134.0 392.0 53.4% 0.0 0.0 0.0 577.0 243.0) (94.0 (28.0 (112.0 0.0) 0.0) 247.0 (75.0 586.0 0.0 0.0 0.0 0.0 206.0 0.0 123.0) 0.0 0.3 1.0 169.0 (282.0) (51.0) 248.0 40.665.0 121.0 43.0 0.0) 0.0) 336.083.0 867.0 180.0 408.0 0.9% 2.0) 0.8) 1.0 (118.724.0 3.0) 0.0 124.0 13.0% (506.0 383.6% (48.0) (2.0 845.3% (119.0 (133.0 (73.0 (61.0 412.0 393.0 525.0 3.0 395.0 0.0 0.0 (26.0% 2.0) 219.0) 46.January 2011 GERMANY Smaller Companies Review MTU FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 8.0 16.0 538.0 206.918.0 267.0 2.0 0. for exceptional items Net attrib.0 0.4% 188.0 0.0 0.705.0% (506.183.7% 34.0 (48.0 1.0 0.0) 409.0 8.0 -28.0 537.0 8.0) 0.0 4.8 1.0 17.874.0 0.8% 3.0) 0.0 21.5% (164.0 206.0 21.0 0.0 40.0 65.0 6.0) 0.0 0.0 0.0) 213.0 16.0 (73.0 0.4% 2.0 0.0 0.0 (18.0 0.0 484.0 0.0 359.199.0 6.721.0 261.0 272.0) (1.0 0.0 298.0 89.0 403.0) (1.0 0.4% (129.0 (220.0 0.611.0 0.0 0.0 0.0) (77.0 0.0) 0.0 0.0 5.0 378.0 (63.0 74.0 154. profit [loss].0 143.2% 121.0 2.0 0.0 0.3% 10.0 305.0 12.0 0.0) (1.0 0.0 5.268.363.0) 0.0 0.0 2.0) 24.0) 366.0 141.0) 0.0 0.0 376.0 (3.0 32.0 90.0 0.0 122.0) (124.0) (1.0 180.6% (503.250.0 47.0) 81.0 744.0 (59.0 0.8% (525.0 0.0) 2.0) (2.0 14.0 307.0 0.0% (506.0 40.824.0 0.0 2.0 89.0 552.0 845.0 0.0) (105.0 347.0 3.0 -21.0 33.609.722.0 403.8 0.0 0.0 (131.0 0.0 0.0 0.5) 0.0 46.0 143.0) 347.0 3.0 0.0) 0.0 (3.0 167.0 0.0 412.0 0.0 (115.0 (51.0 818.737.0 0.0 325.0 0.0 1.0 0.0) (2.0) (6.0 51.0 551.0 0.0 403.0) 65.0 (46.

28 27.8 3.6 3.3 13. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.4 16.5 6.2 14.5 2.3 1.7 9.4 1.7 3.6 7.0 10.9 39.7 10.9 10.9 4.4 40.0 0.0 6.06 10.2 1.000 49.64 173.95 4.75 16. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share No.986.5 17.839.31 28.5 19.28 16.4 2.1 2.90 1.9 15.6 10.000 52.6 43.2 1. number of shares.3 0.9 15.70 12.2 14.00 0.3 NS NS NS NS NS - 43.00 0.0 2.2 15.00 24.0 10.00 0.00 4.300 0.2 NS NS 7.8 1.3 2.600.6 2.2 21.8 14.73 19.5 7.22 9.61 50.8 13.38 16.4 18.445.17 23.93 5.17 16.60 1.400 0.17 23.220 54.9 11.91 43.79 34.9 NS 36.9 4.0 4.8% 4.8 43.5 1.6 13.9 17.1 0.400 0.0 11.0 17.000 55.58 50.19 39.3% 4.73 7.500.5% 2.9 0.11 30.8 3.5 6.53 2.441.9 8.7 0. restated 191 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.2 1.524.82 4.1 9.1 31.00 0.5 17.9 0.45 26.3% 0.44 51.00 1.3 2.9 1.3 5. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.0 3.4 5.7 4.5 1.0 5.7% 2.4 21.000 52.1 13.000 49.7% 3.9 1.6 6.com .4 2.8 21.2 34.8 2.4 13.0 9.6 8.7 6.400 49.5 11.400 0.6 0.5 28.4% 3.50 6.5 121.0 21.64 23.4 2.6 5.4 8.2 0.8 0.000 0.1 12.3 6.3 1.4 12.4 0.62 62.64 23.9 0.95 79.1% 10.1 4. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.60 0.1 2.89 49.1 0.00 0.59 4.9 6.3 51.080.79 20.87 24.6 8.00 1.6 6.00 0.000 - 26.85 -21.00 0.0 34.000 55.000 55.4 3.4 14.6 0.0 9.0% 9. adjusted Treasury stock.80 50.70 5.7 1.0 www.1 13.2 1.6 1.4 13.5 6.5 2.6 0.5% 3.6 8.6 21.5 2. restated EV/EBITA.400 49.43 -28.080.7 14.0 959.0 7.9 4.1 1. of shares.0 37.5% 1.13 4.00 1.4 1.000 49.8% 3.5 0.886.000 49.00 0.5% 2.4 1.0 1.570. adjusted Av.10 - - 1.55 35.7% 2.8 2.2 12.2 386.January 2011 GERMANY Smaller Companies Review MTU FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.2 NS 1.8 3.7% 13.8 31.9 18.2 10.38 16.58 40.90 1.5% 17.0 14.94 42.0 9.7 10.9 0.7 14.05 7.948.6 2.3 2.400 49.400 0.3 13.00 21.950.000 0.0 1.46 35.3% 15.3 12.7 9.9 0.000 54.5 46.000 49.5 20.2 4.8 7.70 38.cheuvreux.0 1.4 17.38 51.7 9.8 3.3 8.6 13.93 4.10 51.7% 2.6 1.5% 9.5 9.000 40.95 79.25 5.6 3.0 8.9 21.0 7.93 6.5 11.2 17.524.0 6.64 173.3 1.5 11.3 2.2 0.5 42.9 NS NS NS NS 7.9% 20.9 7.8 32.3 2.1 15. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.3 2.11 -46.701.5 2.00 52.4% 2.85 -21.6 2.400 49.23 38.16 40.400 0.7 1.8 0.6 6.4 6.3 2.1 15.0 1.0 19.0 NS 14.6 21.220 0.1 6.4 0.7 11.4 1.3 25.2 50.5 5.1 11.1 31.4 6.1% 8.3 9.5 0.5 5.9 3.

the previous year) compared with our estimate of EUR241m. Group revenues excluding energy taxes increased 6% y-o-y to EUR3.1 6.0 26.9 3.9 7.5%. adjusted EBIT was just EUR239m (unchanged vs.1 3.7 21.0 21.6 3. 26. This will require restructuring expenses of EUR31m.0 31.17m Performances 1 month 3 months 12 months 11. of shares.9m EUR 0. GDF Suez.0 36.95.2 1.3%.00 Target price (6 months) MVV Energie EUR27.219bn.5 7. which overall were a touch below our expectations.6 ROCE (%) NS 8.1%.0 46.8 8. which will not be booked in adjusted EBIT.0 04/02 06/03 09/04 12/05 Price/SDAX 03/07 06/08 09/09 01/11 Price Sector focus Sector Top Picks Least favoured EDF.0 MVV Energie will pay a constant dividend of EUR0.2 5.0 Yield (%) 2.0 36.36bn. we find the results fairly uninspiring. During the release of the preliminary FY-10 results.5 Net debt/EBITDA (x) 7. TERNA ACEA Shareholders City Of Mannheim 50.4 17.7 8.January 2011 GERMANY Smaller Companies Review ELECTRICITY UTILITIES 3/Underperform Rating -30. Hence. The full final details were released on 30 December 2010. (x) 1. 46.0 16.com Q Q 192 www. management forecasts group revenues excluding energy taxes in the region of the previous year's level of EUR3. beating our estimate of EUR3. Rheinenergie 16.0 Q Outlook – Flat sales expected For the full fiscal year 2010-11. our estimate of EUR102m. FCF yield (%) 1.90 per share. Adjusted net income declined 3% to EUR95m vs. Relative perf. However.0 21. mainly due to higher-thanexpected tax payments. MVV MVV Energie pre-released full preliminary results for FY 2009-10.cheuvreux. which is a touch below our forecast of EUR0.1% 08/09 09/10E 10/11E 11/12E NS 18.0 16.0 Bearing in mind.4 6.3 3.46 Price (07/01/2011) Reuters: MVVGn.3 1. that the company recorded a 23% increase in its electricity sales volume. 41.5% -20.8 Attrib.5 3.com (49) 69 478 97 524 Disclosures available on www. in particular.4 8. Free Float 18.0 3.1 P/E (x) EV/EBITDA (x) Sebastian KAUFFMANN.cheuvreux. Stock data Market capitalisation Free float Enterprise value No. management said it aims to lower its annual costs by EUR20-30m by FY 2012-13. adjusted Daily volume EUR1810m EUR334m EUR3111m 65. mainly through the release of 450 employees. Enbw 15. the company achieved its fullyear guidance of flat EBIT y-o-y.2% -11.0 01/01 11.DE Bloomberg: MVV1 GR Premium without a cause Recent developments – full year FY 2010 results a touch lower than expected Q On 17 December 2010.0 31.1% 6.3% -37.com .8% EUR19.1 1. 11. CFA Research Analyst skauffmann@cheuvreux.8% -6.5 EV/Capital empl.5 17.5% Absolute perf.359bn.0 41.

3%. but in most cases is one of the largest players. The relative stability of the share price at around EUR30 seems to be attributable solely to M&A support. As a result. regulators. it is surprising to see the stock trading at a significant premium to the sector (EV/EBITDA: 30%.a.cheuvreux.0%). These are considered core activities and accounted for 82% of its FY08-09 group revenues and 63% of its EBIT. where the company occupies a number three position. Q Q Usually among the leading players MVV is not the leader in any of its markets. is the second-largest shareholder. though to 2018. and antitrust authorities Opportunities Threats „ Increase in supply margins „ Demand for energy services from municipals and energyintensive industries „ „ Mild or highly volatile winter temperatures put pressure on sales and margins „ Pressure from 2013 due to the full auctioning of CO2 certificates Acquisition of further stakes in municipal utilities and generation of synergies „ Large utilities aiming to increase/maintain market share through (temporary) reduction in supply margins „ Market entry in UK waste energy business „ 193 www.1% since 2004. EV/EBITDA: 30% and EV/EBIT: 27% all on 2012E numbers) is unjustified in our view given a) its low EBIT growth prospects. This holds true particularly for the district heating division. MVV Energie's current valuation premium (P/E: 77%. forecast at a CAGR of just above 1% for the coming ten years. Q Investment case None of our valuation approaches justifies the current share price. the City of Mannheim still holds a majority 50. P/E: 77%). In light of the above. gas. RheinEnergie.January 2011 Q GERMANY Smaller Companies Review Company profile Q Largest municipal network MVV Energie. today holds stakes of between 10-100% in seven municipal utilities across Germany and is Germany's largest listed municipal utility network. which now officially holds 16. which we estimate will be around 150% of depreciation.3% p.com Valuation Applying a DCF model (WACC: 7. as well as for the environmental energy business and value-added services.1%. But to achieve even this relatively low growth rate. formerly the municipal utility of the City of Mannheim. Q SWOT analysis Strengths Weaknesses Close. Q Operating in all traditional utilities activities The company is active in the fields of electricity. EnBW is the third-largest shareholder and has held a stake of 15. The core divisions are accompanied by so-called growth divisions: value-added services and the environmental energy business. And as we expect M&A support to fade. A third party such as RheinEnergie may be interested in building up a minority stake in the company. and b) its lack of sustainable improvement in the ROCE due to the company's ambitious investment programme in the coming years. heat and water.1% stake in MVV.1% stake to RheinEnergie in 2007. long-term customer relationships lead to belowaverage customer churn rates „ Limited electricity and gas sales from own sources „ High dependency on weather conditions and general commodity price trends „ Expertise in acquisition and integration of other utilities „ Limited refinancing needs in the medium term and an overall solid balance sheet structure „ Low foreign revenues mean high dependency on German politics. 96% of its external sales are generated in Germany. long-term growth rate: 1. 3/Underperform. . capex of more than EUR2bn will be required. we derive a share price target for MVV Energie of EUR19. Q Majority-owned by city of Mannheim After having sold a 16. MVV Energie's share price is bound to fade with it. but a full takeover is unlikely in our view. sustainable improvement in the group ROCE is unlikely. and the stock offers little or no prospect of shareholder value creation. We can see no justification for the current share price level. We forecast group EBIT growth of just 1.

152.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 194 2006 2007 2008 2009 2010E 2011E 2012E 2.6 1.0 (50.0 0.1 117.9 0.0 0.0 0.3) (1.200.8 0.9 755.0 9.6 9.3 3.3 1.4 339.0 0.7 (224.0 101.0 0.2 8.0 0.6 1.6 9.0 0.0 819.5% (142.4 184.742.2) (2.3) (2.9 2.830.0 1.2% (346.0 (13.0 (59. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.5 (90.2 0.3 (76.0 0.0 0.6) 0.0 0.7) 322.5 798.3 3.313.2) (91.2) NS 3.0 (50.200.4 0.002.2) 0.0 (22.0 0.7 75.618.5) 103.2% 3.2 -3.4 3.0) (22.0 429.5) 348.9 3.0 (75.0 21.0 (83.2 89.3) 0.1 2.9 131.0 215.6 56.3) 0.2 68.3) 188.2 14.8) 134.0 0.0 0.0 0.0 201.4 1.1 3.5% 0.876.625.707.5) 0.8% (97.369.1 0.1 (225.8) 19.942.0 (169.6) 0.0% 0.4 40.5) (19.9 (17.0 0.5) 118.0 (15.197.183.8) 125.2) (76.9) (70.8 2.0 341.6% 0.0 388.010.4) 336.188.762.0 0.724.3 (169.4) 0.8 2.8% (154.0 0.1) 225.0 (117.1 156.0 0.139.1 319.5) 244.0 0.0 126.5 12.3) 90.2% 0.4) (20.2 5.1% 2.2) 0.388.0 77.3 (75.0 36.1 104.0 170.430.127.153.1 224.8 3.5 1.1 316.6 1.3) (28.1 (8.7) (2.0) (2.5 89.4 -0.0) 0.0 0.0 0.8 2.0 0.4) 0.3 115.7) 241.4) 0.8 271.8) 0.0 234.0 145.194.5 8.2 0.7 116.0 (12.507.2 (57.096.0 0.2 19.cheuvreux.2 429.8) (51.388. [inc.7 2.3) 0.0 117.0) (190.1 101.4) 0.9) (237.0 (105.0 (14.6 (41.7 75.0 185.5 95.6 0.1 535.0 0.2 118.6 219.0 0.6 224. profit [loss].0) 2.0 31.0 0.9 29.2 0.7 75.314.068.7 1.0 0.1) 170.0 (73.0 35.898.3 1.0 103.5 429.4 34.9) 53.7 (251.2 0.0 0.7 1.6) NS 0.0 (59.7% 3.0 0.0 0.2 80.9 NS 3.5 813.0 (63.1) (1.0 336.0 0.3 NS 0.1 (76.0 3.2) (81.0 0.9) 399.7 (78.268.6 207.3 0.5) 384.0 0.3% 30.4 1.8 1.1) 0.0 0.5) 486.3) 201.9 146.3 (71.0 0.3% (149.0 109.4 732.1 35.January 2011 GERMANY Smaller Companies Review MVV Energie FY to 30/9 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.2 105.4 1.5) 392.0 0.809.6 (164.5) (2.8 224.0 0.3) (58.3 221.6 2.3) 329.8 41.3% 3.1 322.0 0.0 (224.3 3.276.1 546.2 0.7 0.0 0.0 (14.0 (56.0 0.7) 370.com .0 0. for exceptional items Net attrib.6 (67.962.5 224.312.0 291.0 245.830.0 0.6 17.8 94.6) 50.1) 0.2 93.4) 0.1 103.9) 355.7) (208.6) 102.0 0.8 15.1) 215.6) 0.0 0.0 44.0) (109.0) 0.3 568.0 0.3 39.0 429.235.8% (304.9) (2.3) 101.0 117.3 37.0) 245.4 0.405.0 (49.6) 156.0 (14.9) 0.0 102.2% (115.0) (20.8) 0.0 (91.0 63.4 1.8) 0.8% (339.3 829.191.0 0.0 1.871.2 (280.0 116.3 3.0 74.0 215.9 2.152.6) (73.314.8 3.018.5 1.1 3.0 55.8 2.0 (64.6 107.0) 109.6 811.5 143.7 0.1 2.3 1.7 224.7 3.5% 1.1 104.8) (58.0 0.0 101.7 www.235.0 0.4 -67.3 2.2 1.2) 0.0 (69.0 (17.185.1 7.1 2.0 0.7 75.0 241.7) 377.0 0.6 -12.9% (314.1 317.7% (71.6) 0.8% (179.3 13.3% (352.7) 359.0% (144.2 2.0 (16.7) (52.0 (62.7% (303.0 0.0 0.3% (148.4% 2.0 0.724.8 1.0 244.4 16.0 0.0 50.

9 NS 2.18 3.6 5.6 12.4 NS 1.57 1.55 -0.900 65.831.7 5.9 14.9 7.90 5.91 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.809.184.6 2.3 3.0 7.5 5.60 33.07 25.800 0.78 0.000 65.9 15.1 3.9 5.16 21.4 8.29 33.2 3.5 11.6 7.4 1.3 2.8 1.9 12.1 3.2 4.900 65.2 3.95 5.1 3.7 1.7 17.900 0.0 3.6 3.745.7 12.2% 17.6 3.944. adjusted Share Price [Adjusted] Latest price High Low Average price 55.4 12.78 30.2 94.1 1.60 33.5 1.9 1.46 28.6 14.8% 2.2 1.8 3.00 0.1 1.6 NS NS 1.1 5.800 55.32 7.8 1.3 101.2 6.80 5.8 2.000 65.38) NS 1.2 1.4 9.809.20 27.09 27.398.000 25.111.8 12.3 64.55 17.8% 1.0 4.6 8. of shares.0 5.0 8.4 0.21 7.1 9.4 5.8 40.9 156.0 No.91 1.8 NS NS 6.00 -13.95 5.00 5.388.2 0.4 18.94 34.1 7.8 0.9 143.5 17.3 0.7 5.6 0.5 17.20 21.900 0.80 4. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1. number of shares.26 EV/EBITDA.0 3.55 NS 1.cheuvreux.100 0.0 8.6 1.1 3.74 27.5% 15.00 24.57 1.000 65.0 1.3 17.6 7.4 5.com .1 89.8 60. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.0 9.46 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.6 27.0) 5.2 0.2 2.00 29.8 6.105.7 4.1 2.4 1.09 28.2 7.3% 1.5 13.63 32. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.3 2.1 3.8 1.900 65.2 2.3 1.9 5.0 6.6% 13.6 2.1% 16.800 55.1 1.00 0.19 30.7 0.6 2.900 65.5% 14.265. restated 195 www.0% 16.0 6.3 8. adjusted Av.40 2.3 0.78 35.6 9.4 5.0 3.4 7.300 0.30 27.15 31.1 (65.9 3.01 33.00 0. restated EV/EBITA.4 1.2 10.7 15.0 9.2 27.7 14.122.1 14.5 5.9 18.0 10.3 89.6 8.7 34.3 11.96 115.74 23.3 107.6 16.0 16.January 2011 GERMANY Smaller Companies Review MVV Energie FY to 30/9 (Euro) 2006 2007 2008 2009 2010E 2011E 2012E 0.29 2.0 7.0 9.00 0.3% 1. reported % Change 0.000 65.4 7.4 11.0 10.3 12.38) NS (1.8 88.9 NS NS NS NS 8.0% 2.5 2.9 8.96 115.9 1.00 1.1 6.0% (1.6 0.24 9.2 16.55 -0.040.21 28.9 7.2 3.900 65.5 21.00 0.3 2.8% 12.0 61.8% 1.1 1.0 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.0 17.2 7.00 0.5 1.000 55.900 0.900 0.1 7.5 6.21 35.349.3 1.6 14.6 8.000 65.9 6.6 4.34 31.5 0.1 8.80 31.3 1.1 3.90 5.7 6. adjusted Treasury stock.6 1.1 3.55 NS 1.2 1.

9 0.6 EV/EBITDA (x) 11. 161.com (49) 69 47.7 Attrib.4 61. especially from Vestas and Siemens.0 0.0 1. Vestas issued a profit warning in 2010. implying sales of >EUR1. b) the low natural gas price and c) the lack of renewable energy subsidies at federal level.7% -51.4 03/01 06/02 08/03 11/04 01/06 Price/TECDAX 04/07 07/08 10/09 12/10 Price Sector focus Sector Top Picks Least favoured SMA.4 81.7 10.4%. Net income of EUR5.0 ROCE (%) 10.00 Target price (6 months) Nordex Reuters: NDXG.3% -29. Order intake picked up in Q3. Its Q3-10 sales of EUR264m were clearly below our EUR290m forecast and even further below consensus of EUR319m.7 0. Goldman Sachs 10. Nordex faces a disadvantage in vendor financing due to its relatively small balance sheet (vs.1 14.3 1. EBIT came in at only EUR10m.527 Disclosures available on www. Siemens and Vestas). Relative perf.0 0. we expect competition. ~EUR4m below our estimate and ~EUR3m below consensus.9% EUR9. the US market probably fell 40-50% y-o-y in 2010 in terms of new installed wind energy/turbines capacity due to a) low energy consumption. but visibility in terms of the market's size in 2011 remains poor. Q EUR5.07m Performances 1 month 3 months 12 months 11.4 41. We thus expect competition and price erosion to remain strong in 2011E and beyond. Hsh Nordbank 2.897. The company cut its sales guidance and now expects to report revenues of only ~EUR1bn for 2010.6 4. this represents a significant cut in revenues.5 2. thereby increasing pressure on turbine prices. Skion 21. Also.4 4. FCF yield (%) NS NS NS NS Net debt/EBITDA (x) (1.com Q Q 196 www.4 121.DE Bloomberg: NDX1 GR Ongoing strong competition Q Recent developments – Profit warning Nordex issued a profit warning with the release of its Q3-10 results.cheuvreux. mainly due to tough competition in Europe from Siemens and GE combined with low demand.4 61. of shares.2 8.January 2011 GERMANY Smaller Companies Review RENEWABLE EQUIPMENT 4/Sell Rating +61. Cmp Capital Partners 14.0% -50. to intensify further.6% 4. SolarWorld Conergy Shareholders Free Float 47.1 2.4 21.7 EV/Capital empl.6% -21. Stock data Market capitalisation Free float Enterprise value No.4 1.9 0.4 141.6%.4 101.1% 2009 2010E 2011E 2012E P/E (x) 29. (x) Philipp BUMM Research Analyst pbumm@cheuvreux. adjusted Daily volume EUR372m EUR177m EUR709m 66.8%.0) 1.4 121.4 141.4m also fell short of expectations.845m EUR 3.com .56 Price (07/01/2011) Outlook – Ongoing strong competition and price erosion Looking ahead.3 2. Due to the disappointing sales.4 21. it still expects to report a y-o-y increase for 2010.4 81. Overall.2% Absolute perf.6%.cheuvreux.4 1.4 161. It had previously guided for singledigit revenue growth y-o-y. Asian wind turbine producers are also entering the market.0 0.9 20.1 5.2bn. Furthermore. Hence.4 101.3 Yield (%) 0. In terms of EBIT.4 41. In 2011 Nordex expects to return to positive revenue growth.

coastal and. Q The company is one of the world's ten leading suppliers and manufacturers of wind turbines and no. the price pressure will be sustained. while the US and Asia accounted for 11% and 7% in 2009.52. despite the fact that it produces locally.5 MW. Nordex's workforce currently numbers roughly 1850 and the company is represented by offices and subsidiaries in 18 countries. Its principal focus is on turbines with a capacity of 1. which we do not consider to be as well positioned in the US as Vestas or Siemens. Despite the recent improvement in order intake in the US. GE and Vestas. Q Investment case On a global scale. Hence. Vestas and GE „ 197 www. Nordex belongs to the smaller wind turbine producers vs. which have so far supplied over 3. thereby burdening Nordex's profitability. offshore locations. combined with significant price pressure. We reiterate our negative stance on Nordex. production facilities in Rostock and China (Dongying. since its decision to enter the market was postponed. Denmark. competition is set to remain high. to a limited extent. and a production site in the US since mid-2010. 4 in Germany. the outlook for 2011 remains rather uncertain and hurt from price erosion.January 2011 Q GERMANY Smaller Companies Review Company profile Q One of the world's top 10 suppliers Originally founded in 1985 in Give. The company's product array includes windmills with rated capacities ranging from 1. Yinchuan). accounting for >96% of total sales. As the global market is still in an oversupply situation this year. Its service business and others account for the remaining 4% of total sales. Q Q SWOT analysis Strengths Weaknesses „ Product „ Lack portfolio well positioned in the attractive 1. We believe Nordex is at a disadvantage due to the fact that it so far has no local production facilities in the US. Turbine construction is by far its largest revenue generator. Q Geographical split In Europe the company generated 82% of its total sales in 2009. larger players such as Siemens. We continue to believe Nordex will find it hard to sell its wind turbines in the Chinese market.300 wind turbines with a total capacity of almost 4000 MW.5MW. but it also offers smaller units for international markets.com Valuation Nordex is currently trading at a P/E for 11E of 4x and at EV/EBITDA of 4x.3MW to 2.5-2.cheuvreux. . Company structure Nordex generates sales from turbine construction and services.5MW capacity wind turbine class for on-shore locations of vertical integration „ Dependence on component suppliers „ Not active in off-shore business in the near term „ Lower warranty provisions compared to competitors Opportunities Threats SKion (Susanne Klatten) may increase its stake further from currently ~25% „ Competition from larger wind turbine producers such as Siemens. Nordex is now a German-based management holding company with its main office in Norderstedt. as the 'Buy Chinese' clauses and strong Chinese competition. will prevent it from realising a major rebound in group profitability. It will probably only reach full capacity utilisation in the US in 2012E. supplying wind turbines for inland.

January 2011

GERMANY

Smaller Companies Review

Nordex
FY to 31/12 (Euro m)
Profit & Loss Account
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
Goodwill amortisation before OP
Goodwill amortisation [impairment test]
Non recurring operational items
EBIT
Net financial items
Non recurring financial items
Other exceptional items
Tax
Associates [contribution]
Discontinuing activities
Goodwill amortisation
Net profit [loss] before minorities
Dividend to preferred shares
Minorities
Net attributable profit [loss]
Restatement [impairment test]
Adj. for exceptional items
Net attrib. profit [loss], restated
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Financial investments
Net buyback of treasury shares
Disposals
Dividend paid
Capital increase
Other cash flow
Dec. [inc.] in net debt
Balance Sheet
Shareholders' equity [group share]
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
Working capital requirement
WCR as a % of sales
Capital employed

198

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

280.8
43.1%
(43.1)
(252.8)
(15.1)
71.2%
(13.6)
(28.7)
54.6%
0.0
0.0
0.0
(28.7)
(6.5)
0.0
4.8
(0.3)
0.0
0.0
0.0
(30.8)
0.0
0.0
(30.8)
0.0
0.0
(30.8)
NS

309.0
10.0%
(34.1)
(263.1)
11.8
178.1%
(11.7)
0.1
100.3%
0.0
0.0
0.0
0.1
(3.0)
0.0
5.4
0.0
0.0
0.0
0.0
2.6
0.0
0.0
2.6
0.0
0.0
2.6
108.4%

513.6
66.2%
(41.8)
(442.2)
29.6
150.8%
(13.0)
16.6
NS
0.0
0.0
0.0
16.6
(3.9)
0.0
0.0
(0.1)
0.0
0.0
0.0
12.6
0.0
0.2
12.8
0.0
0.0
12.8
NS

747.5
45.5%
(55.0)
(638.4)
54.1
82.8%
(14.0)
40.1
141.6%
0.0
0.0
0.0
40.1
(1.1)
0.0
0.0
8.9
0.0
0.0
0.0
48.0
0.0
0.9
48.9
0.0
0.0
48.9
NS

1,135.7
51.9%
(81.7)
(975.2)
78.8
45.7%
(15.9)
62.9
56.9%
0.0
0.0
0.0
62.9
1.0
0.0
0.0
(14.4)
0.0
0.0
0.0
49.5
0.0
(1.9)
47.6
0.0
0.0
47.6
-2.7%

1,182.8
4.1%
(105.8)
(1,019.0)
58.0
-26.4%
(18.0)
40.0
-36.4%
0.0
0.0
0.0
40.0
(5.2)
0.0
0.0
(10.6)
0.0
0.0
0.0
24.1
0.0
0.2
24.3
0.0
0.0
24.3
-48.9%

1,566.9
32.5%
(115.0)
(1,357.7)
94.2
62.4%
(25.1)
69.1
72.8%
0.0
0.0
0.0
69.1
(9.5)
0.0
0.0
(17.9)
0.0
0.0
0.0
41.7
0.0
1.0
42.7
0.0
0.0
42.7
75.7%

2,299.8
46.8%
(167.9)
(1,959.3)
172.6
83.2%
(29.9)
142.7
106.5%
0.0
0.0
0.0
142.7
(21.2)
0.0
0.0
(36.4)
0.0
0.0
0.0
85.0
0.0
1.0
86.0
0.0
0.0
86.0
101.4%

3,144.0
36.7%
(264.1)
(2,612.3)
267.6
55.0%
(34.6)
233.0
63.3%
0.0
0.0
0.0
233.0
(26.3)
0.0
0.0
(62.0)
0.0
0.0
0.0
144.7
0.0
0.0
144.7
0.0
0.0
144.7
68.3%

(28.2)
NS
51.0
(2.8)
(2.8)
20.0
0.0
0.0
0.0
0.0
(11.6)
3.6
12.0

14.3
150.7%
(16.5)
(8.8)
(8.8)
(11.0)
0.0
0.0
0.0
0.0
58.4
(6.8)
40.6

27.5
92.3%
43.3
(19.1)
(13.9)
51.7
0.0
0.0
0.0
0.0
72.5
(4.5)
119.7

63.0
129.1%
(10.1)
(28.5)
(21.0)
24.4
0.0
0.0
0.0
0.0
75.3
(20.7)
79.0

65.5
4.0%
(214.7)
(72.3)
(60.9)
(221.5)
0.0
0.0
0.0
0.0
3.0
(3.9)
(222.4)

42.1
-35.7%
(41.0)
(55.5)
(43.7)
(54.4)
0.0
0.0
0.0
0.0
1.1
33.3
(20.0)

66.8
58.7%
(140.4)
(150.6)
(135.0)
(224.2)
0.0
0.0
0.0
0.0
0.0
0.0
(224.2)

114.9
72.0%
(175.1)
(127.1)
(104.1)
(187.3)
0.0
0.0
0.0
0.0
0.0
0.0
(187.3)

179.3
56.0%
(180.6)
(44.6)
(3.7)
(45.9)
0.0
0.0
0.0
0.0
0.0
0.0
(45.9)

2.5
0.0
0.4
12.0
28.1
NS
43.0
10.0
38.9
23.3
5.5
0.0
(34.7)
(12.4)
43.0

63.5
0.0
0.4
12.6
(12.4)
NS
64.1
10.0
40.5
21.4
9.8
0.0
(17.6)
(5.7)
64.1

146.2
2.3
0.4
46.8
(132.0)
NS
63.7
10.0
45.4
27.8
7.2
0.0
(26.6)
(5.2)
63.8

270.4
1.4
0.5
57.5
(211.1)
NS
118.7
10.0
75.5
35.2
3.9
0.0
(5.7)
(0.8)
118.9

321.1
3.3
0.5
106.7
(95.9)
NS
335.7
10.0
89.3
78.8
6.7
0.0
151.0
13.3
335.8

345.3
4.3
0.6
89.9
(59.2)
NS
380.9
10.0
75.7
97.5
5.9
0.0
192.0
16.2
381.1

388.5
1.3
0.5
115.4
139.6
35.8
645.3
10.0
89.3
253.1
6.7
0.0
332.4
21.2
691.5

474.5
0.3
0.5
150.7
337.6
71.1
963.6
10.0
89.3
350.3
6.7
0.0
507.5
22.1
963.8

619.2
0.3
0.5
180.4
353.9
57.1
1,154.3
10.0
89.3
360.3
6.7
0.0
688.1
21.9
1,154.4

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

Nordex
FY to 31/12 (Euro)

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

Per Share Data (at 7/1/2011)
EPS before goodwill
% Change
EPS, reported
% Change

(59.12)
NS
(59.12)
NS

0.05
100.1%
0.05
100.1%

0.21
NS
0.21
NS

0.75
NS
0.75
NS

0.72
-4.0%
0.72
-4.0%

0.36
-49.8%
0.36
-49.8%

0.64
78.0%
0.64
78.0%

1.29
101.4%
1.29
101.4%

2.17
68.2%
2.17
68.2%

Goodwill per share
Dividend per share
Cash flow per share
% Change
Book value per share

0.00
0.00
(54.13)
NS
4.8

0.00
0.00
0.26
100.5%
1.2

0.00
0.00
0.44
67.8%
2.4

0.00
0.00
0.96
116.7%
4.1

0.00
0.00
0.98
2.5%
4.8

0.00
0.00
0.62
-36.7%
5.1

0.00
0.00
1.00
60.4%
5.8

0.00
0.00
1.72
72.1%
7.1

0.00
0.00
2.68
56.0%
9.3

0.521
0.521
0.000

54.133
54.133
0.000

62.042
62.042
0.000

65.595
65.595
0.000

66.595
66.595
0.000

67.595
67.595
0.000

66.845
66.845
0.000

66.845
66.845
0.000

66.845
66.845
0.000

6.50
11.50
5.90
8.14

4.97
6.80
1.45
3.78

13.76
23.15
4.98
11.27

31.55
39.60
13.76
28.37

10.00
33.35
8.00
21.77

10.48
14.76
7.15
11.11

5.51
11.77
4.25
7.69

5.56
5.82
5.51
5.65

5.56
-

Market capitalisation
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
Attrib. FCF yield [%]
P/BV
Enterprise value / Op CE
Yield [%]

31.2
59.7

217.6
205.6

889.2
757.6

2,109.0
1,898.3

668.5
573.1

700.5
641.9

368.0
508.1

371.7
709.8

371.7
726.1

NS
NS
NS
64.0
1.4
1.6
0.0

NS
NS
18.8
NS
4.2
3.8
0.0

66.7
66.7
31.0
5.8
5.8
13.4
0.0

42.3
42.3
32.9
1.2
7.7
16.5
0.0

14.0
14.0
10.2
NS
2.1
1.7
0.0

29.2
29.2
16.8
NS
2.1
1.7
0.0

8.6
8.6
5.5
NS
0.9
0.9
0.0

4.3
4.3
3.2
NS
0.8
0.9
0.0

2.6
2.6
2.1
NS
0.6
0.7
0.0

EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
EV/Debt-adjusted cash flow
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Capital turn [Sales/ Op. CE]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
Return on equity, restated

NS
NS
0.21
(2.8)

17.4
NS
0.67
11.9

25.6
45.6
1.48
24.2

35.1
47.3
2.54
29.5

7.3
9.1
0.51
8.9

11.1
16.0
0.5
14.0

5.4
7.4
0.3
6.9

4.1
5.0
0.3
5.5

2.7
3.1
0.2
3.7

NS
NS
NS
NS
NS
7.5
NS
0.0

3.9
NS
3.8
0.0
0.8
5.7
NS
0.0

7.6
NS
5.8
3.2
2.5
9.1
NS
0.0

NS
NS
7.2
5.4
6.4
6.5
NS
0.0

NS
NS
6.9
5.5
4.4
3.5
NS
0.0

11.2
NS
4.9
3.4
2.0
3.2
NS
0.0

9.9
2.1
6.0
4.4
2.7
2.3
35.8
0.0

8.1
2.9
7.5
6.2
3.7
2.4
71.1
0.0

10.2
2.0
8.5
7.4
4.6
2.7
57.1
0.0

NS
NS
NS
NS

0.2
0.2
4.2
4.2

29.3
29.1
9.2
9.2

34.9
42.9
19.9
19.9

19.1
14.8
16.0
16.0

10.7
7.4
7.3
7.3

10.1
7.1
11.6
11.6

14.9
10.4
19.9
19.9

20.3
14.2
26.5
26.5

No. of shares, adjusted
Av. number of shares, adjusted
Treasury stock, adjusted
Share Price [Adjusted]
Latest price
High
Low
Average price

199

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

ELECTRONICS

2/Outperform

Rating

-1.1% EUR87.00

Target price (6 months)

Pfeiffer Vacuum
Taking a giant leap
Q

Reuters: PV.DE Bloomberg: PFV GR

Stock data

Recent developments – great results/transformational deal

In November Pfeiffer announced plans to acquire Alcatel's Adixen in
what will be a transformational transaction for the company.
Operationally, the existing business performed very strongly in the first
three quarters. Sales in Q3 jumped 52% - albeit against the trough
quarter in 2009 – and were up 15.3% after 9 months. Growth was
strong in all segments except coating (-40%) due to the high base
effect (large Solibro order). Notably the semiconductor business
continued its strong recovery, with sales +125% (Q1-Q3), albeit from a
low base. EBIT (Q1-Q3) rose 34% for a 23.4% margin (vs. 20.2% in
9M-09) due to operational leverage and the non-recurrence of costs
incurred in 2009 to enhance its Asslar production site. Pfeiffer raised its
guidance: sales ~EUR210m (+6% despite non-recurrence of Solibro
order), EBIT margin >23%.
Q

EUR88.00

Price (07/01/2011)

Outlook – Pros and Cons to planned acquisition of Adixen

Pfeiffer will pay EUR200m for Adixen, an attractive price implying an
EV/EBITDA multiple of ~5x on the expected 2010E results (sales
EUR280m, EBITDA EUR40m). The deal will be partially financed
through a 10% capital increase that was completed in November and
raised EUR74m. With the placement of its treasury shares, the
company has raised a further EUR37m. Hence the deal will be 55%
equity financed.
When pondering the potential merits of the deal we see both pros and
cons. Pfeiffer will more than double in size to sales of ~EUR485m and
will become the no. 2 globally in backing pumps. It will have an
integrated product portfolio (turbo & backing pumps plus chambers &
fittings) and Adixen, though far more cyclical, is across the cycle a
faster growing company, in particular due to its higher exposure to the
Asian solar market.
There are however also risks. The execution risks are potentially high
considering that Pfeiffer has limited experience in acquiring and
integrating companies and this deal will entail merging two large
companies with quite diverse corporate cultures. Secondly, the
combined entity will become significantly more cyclical due to Adixen's
high exposure to the semiconductor industry (roughly 30% of combined
sales will be to the semiconductor industry vs. <10% at Pfeiffer today).
The deal will initially also be margin-dilutive (combined EBIT margin 11E
estimated at 17.8% vs. 23.7%). The company has verbally
communicated that it targets an average EBIT margin for the combined
entity of >20% in the medium term (post integration). However, as yet
the company has not communicated a detailed integration/restructuring
plan.

Market capitalisation
Free float
Enterprise value
No. of shares, adjusted
Daily volume

EUR749m
EUR599m
EUR694m
8.51m
EUR 2.49m

Performances
1 month 3 months 12 months
-1.2%
27.3%
46.7%
-7.6%
13.3%
44.9%

Absolute perf.
Relative perf.

265.0

265.0

215.0

215.0

165.0

165.0

115.0

115.0

65.0

65.0

15.0
01/01

15.0
04/02

07/03

10/04

01/06

Price/TECDAX

04/07

07/08

Price

Sector Top Picks

Dialog Semiconductor,
Micronas, STMicroelectronics

Least favoured

Shareholders
Free Float 80.0%, Arnhold & Bleichröder 14.9%, Legg
Mason 5.0%

2009

2010E

2011E

2012E

P/E (x)

18.0

20.0

18.3

16.8

EV/EBITDA (x)

10.6

12.6

11.1

9.9

Attrib. FCF yield (%)

4.4

1.6

4.8

5.5

Net debt/EBITDA (x)

(1.5)

(0.9)

(1.0)

(1.1)

Yield (%)

4.2

3.4

3.8

4.7

ROCE (%)

47.2

46.4

49.0

51.4

5.5

5.0

4.6

4.3

Craig ABBOTT
Disclosures available on www.cheuvreux.com

Q

Q

200

www.cheuvreux.com

01/11

Sector focus

EV/Capital empl. (x)

Research Analyst
cabbott@cheuvreux.com
(49) 69 47 89 75 25

10/09

January 2011

Q

GERMANY

Smaller Companies Review

Company profile

Q

Market leader in turbo vacuum pump technology
Pfeiffer Vacuum (PFV) designs, manufactures and services vacuum
pumps. Its key product line in terms of sales and profitability is turbo
molecular vacuum pumps, which accounts for 38% of group sales.
Here it claims to be the global market leader with an estimated
market share of 30-35%. PFV is not structured into divisions but
reports sales by geographical region, product and industry.
Q

Q Europe the dominant region
Geographically, Europe is PFV's dominant end-market, with
Germany accounting for 38% of sales and the Rest of Europe 27%.
The US accounts for 20% and Asia 14%.
Q Product split: turbo pumps are key
Turbo pumps account for ~40% of sales and we estimate that they
account for nearly half of group earnings. Measuring devices
generate ~21% of sales, services ~16%, backing pumps ~14% and
systems ~10%.
Q Customer split
Analytics (25%), coatings (26%) and industrial applications (20%)
are the largest customer segments. Semiconductors (6%) and
chemistry & process engineering (4%) account for the rest.

Q

SWOT analysis

Strengths

Weaknesses

World market leader in turbo
pumps with an estimated market
share of 30-35% and now
technology leader in dry backing
pumps.

„

Short order book visibility,
typically only 2-3 months, due to
short delivery times for standard
products of just 5-7 days

„

Will become 2nd largest
integrated vacuum company
behind Edwards

Close correlation to capital
spending cycles in many endmarkets (especially
semiconductor)

„ Brand

„

„

„

name and product
reputation with its turbo pumps
offering lowest lifecycle costs

FX exposure (UDS/YEN)

„ Diversified

Acquisition increases
complexity of the firm (5
production sites from 2)

Opportunities

Threats

„ Cross-selling potential

„

„

customer base
(>8,000, none accounting for
more than 5% of sales)

Integration risks, potential
restructuring costs

„ New end-market applications

High margins/ROCE in turbo
pump segment may attract more
competition

„ Strengthened position in
coating (i.e. Asian solar segment)

„

Potential raw material and
energy cost inflation
„

201

www.cheuvreux.com

Valuation

We take the mid-range of Adixen's historical
peak/trough EBIT margin range of 10% to 15%,
then apply a premium to the Cheuvreux Capital
Goods Sector for the combined entity, given its
superior profitability. Applying then an
EV/EBITDA multiple of 8.5x and a P/E of 14x, we
arrive at a fair value of EUR87 per share.
Q

Q

Investment case

Pfeiffer operates one of the highest quality
businesses in our universe. With a marketleading position in turbo pumps, a premium
product that commands premium prices,
streamlined production and a pure-play focus on
vacuum technology, PFV is highly profitable
(estimated trough EBIT margin 21%) and cashgenerative, and remained so even during the
trough of the recession. The company also has
solid medium-term growth potential through new
applications and the expansion of its product
range, particularly in backing pumps and
increasingly also in systems. This all suggests
the shares deserve to trade at a premium.
Furthermore, given Pfeiffer's ever-broadening
range of applications the company is becoming
more early-cyclical than in the past. Its current
multiples are undemanding considering its
premium qualities, its high cash conversion rate,
balance sheet strength (net cash ~11% of
market cap) and medium-term growth potential
through new applications.
The acquisition of Adixen will transform the
group significantly, making it the 2nd largest
vacuum pump technology company behind
Edwards. The combined group will have a broad
product portfolio across the entire spectrum,
two internationally acclaimed brands and a very
broad geographical spread. In particular it will
significantly increase Pfeiffer's presence in Asia.

January 2011

GERMANY

Smaller Companies Review

Pfeiffer Vacuum
FY to 31/12 (Euro m)
Profit & Loss Account
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
Goodwill amortisation before OP
Goodwill amortisation [impairment test]
Non recurring operational items
EBIT
Net financial items
Non recurring financial items
Other exceptional items
Tax
Associates [contribution]
Discontinuing activities
Goodwill amortisation
Net profit [loss] before minorities
Dividend to preferred shares
Minorities
Net attributable profit [loss]
Restatement [impairment test]
Adj. for exceptional items
Net attrib. profit [loss], restated
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Financial investments
Net buyback of treasury shares
Disposals
Dividend paid
Capital increase
Other cash flow
Dec. [inc.] in net debt
Balance Sheet
Shareholders' equity [group share]
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
Working capital requirement
WCR as a % of sales
Capital employed

202

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

151.5
9.3%
(45.9)
(66.1)
39.5
39.6%
(4.9)
34.6
42.4%
0.0
0.0
0.0
34.6
1.8
0.0
(10.2)
(14.6)
0.0
0.0
0.0
11.6
0.0
0.0
11.6
0.0
0.0
11.6
-9.4%

159.5
5.3%
(44.0)
(75.9)
39.6
0.3%
(3.2)
36.4
5.2%
0.0
0.0
0.0
36.4
2.5
0.0
(1.0)
(15.0)
0.0
0.0
0.0
23.0
0.0
(0.1)
22.9
0.0
0.0
22.9
97.4%

179.5
12.5%
(47.2)
(84.4)
47.9
21.0%
(3.1)
44.8
23.1%
0.0
0.0
0.0
44.8
1.4
0.0
0.0
(16.6)
0.0
0.0
0.0
29.8
0.0
(0.2)
29.6
0.0
0.0
29.6
29.3%

192.0
7.0%
(44.7)
(91.2)
56.1
17.1%
(3.3)
52.8
17.9%
0.0
0.0
0.0
52.8
6.6
0.0
0.0
(22.1)
0.0
0.0
0.0
37.3
0.0
(0.3)
37.0
0.0
0.0
37.0
25.0%

198.1
3.2%
(43.3)
(99.8)
55.0
-2.0%
(3.5)
51.5
-2.5%
0.0
0.0
0.0
51.5
2.7
0.0
0.0
(16.1)
0.0
0.0
0.0
38.1
0.0
(0.1)
38.0
0.0
0.0
38.0
2.7%

182.0
-8.1%
(46.2)
(94.3)
41.5
-24.5%
(3.7)
37.8
-26.6%
0.0
0.0
0.0
37.8
0.7
0.0
0.0
(10.7)
0.0
0.0
0.0
27.7
0.0
(0.1)
27.6
0.0
0.0
27.6
-27.4%

214.0
17.6%
(49.6)
(108.5)
55.9
34.7%
(5.2)
50.7
34.1%
0.0
0.0
0.0
50.7
2.7
0.0
0.0
(15.5)
0.0
0.0
0.0
37.9
0.0
(0.4)
37.5
0.0
0.0
37.5
35.9%

230.6
7.8%
(50.1)
(117.8)
62.7
12.2%
(6.2)
56.5
11.4%
0.0
0.0
0.0
56.5
1.7
0.0
0.0
(16.9)
0.0
0.0
0.0
41.3
0.0
(0.4)
40.9
0.0
0.0
40.9
9.1%

246.9
7.1%
(51.1)
(127.3)
68.5
9.3%
(6.9)
61.6
9.0%
0.0
0.0
0.0
61.6
1.8
0.0
0.0
(18.4)
0.0
0.0
0.0
45.0
0.0
(0.4)
44.6
0.0
0.0
44.6
9.0%

16.5
-1.2%
9.9
5.5
(0.4)
31.9
0.0
0.0
0.0
(6.1)
0.0
0.0
25.8

26.2
58.8%
(1.8)
(3.1)
(0.7)
21.3
0.0
0.0
0.0
(7.8)
0.0
0.0
13.5

32.8
25.2%
(1.1)
(5.6)
(2.0)
26.1
(11.6)
0.0
0.0
(11.7)
0.0
0.0
2.8

40.5
23.5%
(12.2)
1.4
(0.8)
29.7
0.0
0.0
0.0
(21.8)
0.0
0.0
7.9

45.7
12.8%
(2.7)
(4.4)
(6.7)
38.6
0.0
0.0
0.0
(27.8)
0.0
0.0
10.8

31.4
-31.3%
(8.0)
(1.5)
(2.4)
21.9
0.0
0.0
0.0
(29.6)
0.0
0.0
(7.7)

43.1
37.3%
(6.2)
(25.0)
(0.7)
11.9
0.0
0.0
0.0
(20.9)
0.0
0.0
(9.0)

47.6
10.4%
(5.6)
(5.8)
(1.2)
36.2
0.0
0.0
0.0
(25.5)
0.0
0.0
10.7

51.9
9.0%
(4.1)
(6.2)
(1.2)
41.6
0.0
2.0
0.0
(28.5)
0.0
0.0
15.1

99.4
0.0
1.5
0.0
(53.1)
NS
47.8
0.0
6.4
24.1
1.0
0.0
16.1
10.6
47.6

111.4
0.6
4.5
0.8
(64.2)
NS
53.1
0.0
7.7
21.3
7.1
0.0
17.0
10.7
53.1

138.3
0.6
3.9
13.9
(76.4)
NS
80.3
0.0
8.3
22.9
19.0
0.0
30.2
16.8
80.4

148.6
0.7
1.6
12.6
(83.5)
NS
80.0
0.0
6.3
26.3
13.0
0.0
34.5
18.0
80.1

137.3
0.5
1.7
10.8
(68.3)
NS
82.0
0.0
6.1
34.3
6.1
0.0
35.5
17.9
82.0

137.8
0.6
1.5
8.9
(62.0)
NS
86.8
0.0
0.8
36.8
6.7
0.0
42.5
23.4
86.8

154.4
1.0
2.0
11.5
(53.0)
NS
115.9
0.0
4.1
53.3
6.7
0.0
51.8
24.2
115.9

169.8
1.4
2.0
12.5
(63.6)
NS
122.1
0.0
3.4
53.5
6.7
0.0
58.5
25.4
122.1

185.9
1.8
2.0
13.6
(76.7)
NS
126.6
0.0
2.6
53.5
6.7
0.0
63.7
25.8
126.5

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

Pfeiffer Vacuum
FY to 31/12 (Euro)

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

Per Share Data (at 7/1/2011)
EPS before goodwill
% Change
EPS, reported
% Change

1.34
-8.7%
1.34
-8.7%

2.64
97.4%
2.64
97.4%

3.39
28.7%
3.39
28.7%

4.19
23.4%
4.19
23.4%

4.37
4.3%
4.37
4.3%

3.24
-25.8%
3.24
-25.8%

4.41
35.9%
4.41
35.9%

4.81
9.1%
4.81
9.1%

5.24
9.1%
5.24
9.1%

Goodwill per share
Dividend per share
Cash flow per share
% Change
Book value per share

0.00
0.90
1.90
-0.5%
10.5

0.00
1.35
3.02
58.8%
11.5

0.00
2.50
3.76
24.6%
13.3

0.00
3.15
4.58
21.9%
13.7

0.00
3.35
5.25
14.7%
12.4

0.00
2.45
3.69
-29.8%
13.7

0.00
3.00
5.07
37.3%
15.1

0.00
3.35
5.59
10.4%
16.6

0.00
4.10
6.10
9.0%
17.7

No. of shares, adjusted
Av. number of shares, adjusted
Treasury stock, adjusted
Share Price [Adjusted]
Latest price
High
Low
Average price

8.690
8.690
0.000

8.690
8.690
0.000

8.730
8.730
0.000

8.840
8.840
0.000

8.700
8.700
0.000

8.510
8.510
0.000

8.510
8.510
0.000

8.510
8.510
0.000

8.510
8.510
0.000

33.00
35.15
25.40
31.84

46.17
47.25
31.60
39.77

64.40
66.60
44.45
51.66

55.00
78.00
51.30
66.46

46.93
68.78
38.14
56.42

58.50
60.59
36.11
49.49

88.00
90.97
52.52
64.85

88.00
89.85
86.00
88.70

88.00
-

Market capitalisation
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
Attrib. FCF yield [%]
P/BV
Enterprise value / Op CE
Yield [%]

290.1
238.5

405.9
348.2

566.1
496.5

483.5
405.0

414.9
349.1

497.8
438.8

748.9
706.2

748.9
694.8

748.9
681.0

24.7
24.7
17.4
11.0
3.1
5.1
2.7

17.5
17.5
15.3
5.2
4.0
7.6
2.9

19.0
19.0
17.1
4.6
4.8
8.1
3.9

13.1
13.1
12.0
6.1
4.0
6.0
5.7

10.7
10.7
8.9
9.3
3.8
4.6
7.1

18.0
18.0
15.9
4.4
4.3
5.5
4.2

20.0
20.0
17.4
1.6
5.8
5.0
3.4

18.3
18.3
15.7
4.8
5.3
4.6
3.8

16.8
16.8
14.4
5.5
5.0
4.3
4.7

6.0
6.9
1.57
15.2

8.8
9.6
2.18
14.0

10.4
11.1
2.77
15.5

7.2
7.7
2.11
11.0

6.3
6.8
1.76
8.0

10.6
11.6
2.4
14.2

12.6
13.9
3.3
16.9

11.1
12.3
3.0
14.8

9.9
11.1
2.8
13.3

NS
NS
26.1
22.8
7.7
3.3
NS
67.4

NS
NS
24.8
22.8
14.4
3.5
NS
51.2

NS
NS
26.7
25.0
16.6
2.9
NS
73.7

NS
NS
29.2
27.5
19.4
2.9
NS
75.3

NS
NS
27.8
26.0
19.2
2.6
NS
76.7

NS
NS
22.8
20.8
15.2
2.3
NS
75.5

NS
NS
26.1
23.7
17.7
2.0
NS
68.1

NS
NS
27.2
24.5
17.9
2.0
NS
69.7

NS
NS
27.7
24.9
18.2
2.1
NS
78.2

74.2
32.9
12.4
12.4

79.1
48.0
22.9
22.9

73.0
46.8
24.0
24.0

78.7
49.3
28.4
28.4

67.9
47.7
32.1
32.1

47.2
34.0
22.3
22.3

46.4
33.0
27.6
27.6

49.0
34.8
27.4
27.4

51.4
36.5
27.3
27.3

EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
EV/Debt-adjusted cash flow
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Capital turn [Sales/ Op. CE]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
Return on equity, restated

203

www.cheuvreux.com

the still-weak housing market and price pressure from European imports.0 0.3x.18bn. Germany.8 3.9 0.9 0.20m Performances 1 month 3 months 12 months 22.3%.76m EUR 1.1 11. A further EUR9m in restructuring costs are expected for the Gschwend closure.9 0. Q EUR2. the Gschwend-based particle board plant. EBIT returned. Although sales were up 9. H. but more importantly net debt/EBITDA stood at 7.2% Absolute perf. however. Weak demand in many end-markets coupled with structural overcapacity and high material costs were again the main culprits. if there is no sustained improvement in the market situation soon. the company's continuing existence could even be jeopardised. slightly.6 Attrib.cheuvreux. The closures are expected to lead to one-off costs of ~EUR42m for the Nidda and Ebersdorf plants. responding by shutting down capacity. The company further warned that its credit lines could become more expensive or even fall due.0 0. By the end of December 2010 it will have closed its particle board plant in Ebersdorf.com 204 www. The company expects.8 Net debt/EBITDA (x) 8.cheuvreux.00 Target price (6 months) Pfleiderer Reuters: PFDGn.6 3. Stienstra 3% 2009 2010E 2011E 2012E NS NS NS 32. adjusted Daily volume EUR142m EUR94m EUR980m 59.1 21. net gearing 314% and net debt/EBITDA 9.8% 16.4 EV/Capital empl. Relative perf.3 8.DE Bloomberg: PFD4 GR Still too risky Q Stock data Recent developments – market conditions remain tough Pfleiderer's operational and financial difficulties continued in Q3-10. which had been on short-time work.8%.1 16. volumes in laminate flooring declined and pricing. net debt was actually EUR1. In the worst case.1 1.1 21.F.1% -75.4 Yield (%) 0. One Equity 23.7%. its reported net gearing was 141%.8 ROCE (%) NS 0.3 4. Against this backdrop.2% -36.2x. With a negative EBIT in 9M-10. Pfleiderer also cautioned in its Q3 report that no significant recovery of the market for raw particleboard is to be expected in the short term and that margins are likely to remain under pressure due to major price increases in raw material costs.com 01/11 Price Craig ABBOTT Research Analyst cabbott@cheuvreux. Saint Gobain Least favoured Shareholders Free Float 67. Although the company managed to reduce its net debt slightly in Q3-10 to EUR914m.January 2011 GERMANY Smaller Companies Review BUILDING MATERIALS 4/Sell Rating +68. and by June 2011 it will close its MDF plant in Nidda. Whilst volumes in particle boards were up. was weak due to the product mix (demand shifting to lower-priced products). EBITDA again declined 6% for a margin of just 6.1 26.5m.4 6. will also be permanently shut down. the Gschwend and Ebersdorf plants represent an estimated 10% of total particle board manufacturing capacity in Germany.com (49) 69 47 89 75 25 10/09 .1 16.1 24.4% -46. interest cover was virtually non-existent.9 12.1 6.5 6. to negative territory (EUR-1m).37 Price (07/01/2011) Outlook – debt servicing is the issue/plant closures Pfleiderer's debt situation remains precarious. (x) 0.1 11. Pfleiderer Family 6%. Furthermore.8 P/E (x) EV/EBITDA (x) Disclosures available on www. Pfleiderer is. which it is optimistic will generate ~EUR25m.1 01/01 03/02 06/03 09/04 12/05 Price/SDAX 03/07 07/08 Sector focus Sector Top Picks Heidelbergcement. and their permanent closure should begin to have a positive impact on prices already in 2011. of shares. Market capitalisation Free float Enterprise value No. FCF yield (%) NS NS 26. of which ~EUR25m will be cash costs. On a positive note. Germany.7% -64.1 6. however.8% EUR4. Pfleiderer may not be able to fulfil the (unspecified) financial covenants previously agreed with the banks and may therefore have to resume negotiations with the banks. In particular market conditions deteriorated more than expected in North America. and the bottom line was negative at EUR-31. Including the hybrid bond. in particular.0 0.1 6.0 4. 26.1 1. to partially offset these costs through the sale of property and plant.5%.H.

3 worldwide in its core markets. the trend amongst homeowners in the US toward lower-priced flooring materials could potentially erode Pergo's premium pricing over time. Q SWOT analysis Strengths Weaknesses Operates modern.January 2011 Q GERMANY Smaller Companies Review Company profile Q Leading engineered wood manufacturer Pfleiderer is a pure-play engineered wood manufacturer.2 and no. putting the gross margin under pressure „ „ 205 www. less minorities (EUR47m).e.com Q Investment case We retain our 4/Sell recommendation on Pfleiderer because the risks. Furthermore. Given Pfleiderer's extremely high debt burden and still very difficult operational conditions. Q Valuation Our target price of EUR4 is based on the company's book value (EUR654m) less the hybrid bond (EUR258m). at least in the German particle board market. Europe could intensify further „ Increasing share of the laminate flooring market in North America Material prices (wood.cheuvreux.10% of the German market's total particle board capacity) and reductions indicated by competitors Kronospan and Glunz suggest pricing. glues & resins) and energy costs could increase. and in laminate flooring. . Opportunities Threats Structural growth in consumer demand for furniture likely to resume in eastern Europe after the recession.3 in the engineered wood industry (particle board/ MDF) and is no. Q End-markets: kitchens. furniture and laminate flooring The group's main customers are furniture and kitchen manufacturers as well as specialised wood retailers. the risk remains that a major recapitalisation may yet be required. Q Organised in three regions Pfleiderer is structured on a regional basis with three divisions: Western Europe (54% of sales and 53% of EBITDA). Material cost inflation is likely to remain a structural issue due to tight supply conditions and increasing demand for wood (i. outweigh the potential upside. Following the acquisition of Kunz in November 2005 it became the European and global no. Operationally. highly efficient production facilities for engineered wood in structural growth markets Poland and Russia „ Industry is highly vulnerable to cyclical fluctuations in demand and pricing „ „ Very highly geared with net debt/EBITDA (reported) of >7x or >9x including the hybrid bond. where consumer spending on furniture is at only ~20% of the EU level „ Still-weak „ Market-leading positions with key products demand and declining capacity utilisation rates likely to keep pressure on margins „ Competitive price pressure in W. With the Pergo acquisition (March 07) it became market leader in the US for laminate flooring and a leading player in Europe in the upper priced segment. the DIY chains and specialist flooring retailers. the capacity reduction measures being taken both by Pfleiderer (permanent closure of c. with a discount of 30% of goodwill (EUR118m) to account for potential impairment charges. should begin to improve in 2011. Nevertheless. even at this level. from the wood pellet industry) and the consistently high oil price (glues & resins). Eastern Europe (20% of sales and 26% of EBITDA) and North America (26% of sales and 21% of EBITDA). the furniture and interior design industries. there are still many dark clouds on the horizon for Pfleiderer.

5 578.7) 0.9 1.0 0.9% 27.4 92.3) (163.2 90.2) 62.6) 0.0 33.7% (75.1% (116.8% 1.3 77.5 4.4 0.0 (6.4 78.0 (58.5 2.8) (146.4 260.0 4.1) 84.8) 34.1 27.5) 0.0 (24.0 0.4 0.2 388.4) (234.3 843.8 (21.0 0.0 7.8 37.0) 4. profit [loss].5 177.6 0.5 19.4 7.5 89.8) (0.0 (16.0 0.0 0.0 0.0 0.5 122.4) 54.3) 0.9 -3.0 0.4% (238.8 829.8 9.1) 0.0 0.0 (54.0 15.0 0.4 17.4) (1.135.0 5.0% (126.4) (106.1) (48.8) (1.2 116.0 0.0 0.3% (38.2 135.8% (116.0 74.8 804. for exceptional items Net attrib.4 138.0 22.199.8) 45.6 146.1) 1.1 74.9% (64.0 (12.0 0.0 0.0 0.1) (530.0 0.0 0.0 59.125.0 0.8) 0.4 NS 0.6 0.9) (1.0 0.0 40.0 (19.7) 53.0 33.0 (54.1 87.3 12.0 6.541.4) 0.4 (267.3 152.454.0 4.4) 172.0 20.7 0.0 43.1% 1.4 -24.0 0.0) 77.2 27.4 388.0 132.0 (15.0 0.5 11.2) 0.8) (33.0 0.9) (178.5) 56.9 26.3 677.652.5) (15.735.0 53.7% (284.0 97.1 8.0 0.0 4.2) 0.0 39.3 606.5) 5.0% 0.2 603.8 0.9 2.8 -89.5) 0.7) (288.6 103.4 (63.0 -58.0) (580.7) 162.100.8) 1.2 0.0% 0.3 0.5) 15.9 47.0 0.1 100.0 45.8 101.0 0.2) 0.0 0.5 0.7 15.0 573.9 1.9 0.8 693.0 0.3) (69.0 0.3 70.582.8 104.4) 0.6% 0.1 159.0 0.9% 830.0 (61.9 144.0) 0.0) 0.0 0.8) 0.0 388.0 0.0 0.0 0.0) 0.4 16.4) 100.8 562.3 75.0 39.032.0 83.8 (53.3) 33.2 40.7) (5.2 28.1 90.2 1.0 (50.3 145.5 2.6 3.0 627.0 0.566.0 0.0 54.0 0.3) 0.4 1.8 64.0 1.1) 57.9 742.2 33.0 28.4 50.0 (14.0 (69.9 143.6 0.0 49.8 689.285.5) 57.4 408.0 0.0% 1.6 (46.3 762.7 1.0 0.0 0.0 0.0 0.3 77.2) 132.1) 10.2 (288.5 14.4 -55.4 1.086.4 372.2) 28.4% (116.5) (145.7 (91.0 0.0 0.566.0 0.6% (159.7 160.0 136.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 206 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 766.8% 1.0 (385.8) (82.1 159.0 0.5) 176.125.0 0.0 0.4% (297.0 1.5 8.0) (46.4 (182.1) 0.9 0.2 77.6% (312.1% 0.4) (97.0 86.3 748.9) 185.0 2.0 0.0 0.0 49.9) 0.6% (120.0) (27.0 (19.2% (101.415.7) 223.2 1.0) 74.0 (88.7 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 24.5 -20.3 65.3 1.4 1.1% 1.0 0.0 0.4 388.541.0 0.1) NS 0.8 5.January 2011 GERMANY Smaller Companies Review Pfleiderer FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 0.5 16.5 81.6) (567.4 92.0 5.2 0.8 (75.9 561.6 -28.527.9 143.5 435.3 0.3 16.9% 0.8) 39.0 0.2 869.5) (1.9 175.5 228.7) 126.0 (10.9 106.8) NS 1.0 0.2 8.5 0.8% 1.0 0.0 56.6) (968.0 0.5 31.0) (738.4% (248.0 (31.1) (139.9% 1.0 0.9) 148.9) 136.801.0 0.4 172.9) 0.3 2.8 74.8 0.7% (48.3 866.0 1.381.0) (32.433.5% 106.3% (8.0 (6.6 (40.9 (10.0 0.0 11.0 0.com .0 57.0% 88.3 802.0 (27.8) (15.0 0.5 21.7) 28.9) (79.9 1.2 159.1) 34.3 0.0 92.8% 0.9 -9.2 392.8 635.0 5.0 0.4) (237.1) 97.6 0.3 4.9 0.8 67.0 (385.085.0 279.0 45.0 0.9) 0.4) 11.2 0.0 0.9 146.1 4.0 0.3 618.8 -13.7 -10.3% (160.0 4.0 0.0 82.0 10.0 (20.0 (17.497.4 0.0 33.5% 1.8 147.8 750.0 0.0 0.480.8) 248.5) (1.6) (27.9) (132.3 113.0 0.0 0.0 0.4% (269.3% 11.6% (111.5 0.0 0.8 (25.9 36.0 54.2 196.0 0.4 1.7) (1.5) (16.151.4) 0.5 854.2 1.527.0) (50.0 (13.0 0.5 0.9) 207.0 0.0 71.9% 1.0 (16.5 92.1 62.5 15.6 (80.8 (197.8 167.0 76.0 50.8) (35.4 www.cheuvreux.454.5% 0.8 102.0 268.8 90.0 (20.0 84.8) 83.4 155.0 0. [inc.8 25.0) 0.0 0.0 0.7 (61.0 (33.3 0.4 15.480.0 0.1 62.9 422.9 159.0 41.0 (13.5 104.0 (16.1 17.3% (266.6 (8.3) 203.1) (4.1) 83.4) 102.0 0.5) 0.433.0 0.

9 NS NS NS NS 0.86 6.0 NS 0.8 6.3 10.9 0.4 14.1 6.000 59.4 1.5 21.00 0.0 1.9 7.1 122.43 2.1 8.49 27.2 1.00 1.44 7.4 77.00 0.0% (0.22 -58.67 146.8 0.9 1.1 1.9 1.2% 10.7 16.6 1.9% 0.000 50.00 0.9 15.9 23.8 12.7 NS 0.0 12.7 No.17 4.00 0.1 13.8 8.84) 39.0 (0. adjusted Av.37 - 362.4 8.2 5.7% 1.6 15.00 0.00 0.1 1.5 1.5 76.2 3.cheuvreux.760 59.56 2.00 8.9 32.0 1.18 18.6 6.00 47.760 59.68 -13.5 1.8 228.3 21.4 89.49 8.2 10.4 2.000 8.11 -89.1 6.1 12.78 172.5 8.5 7.0 5.2 13.1 7.9 0.55) 34.0% 0.0% 13.3 1.685 42.5 0.4 2.5 0.3 0.5 NS NS 6.0 2.8% 3.760 0.9 0.7 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.7 1.1 95.00 1.00 2.2 116.4 1.97 5.591 52. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.7 7.938 0.38) NS (1.000 59.3 77.70 4.4 0.52 3.2 0.5 0.67) 0. reported % Change Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.02 5.3 12.7% 8.0 2.9 NS 1.000 42.2 0.50 61.3 8.35 2.8 2.60 17.5 2.0 NS NS 1.760 0.0 4.4 778.943.9 32.40 5.78 172.0 NS NS 1.00 1.0 2.733.2 0.685 0.9 0.0 3. restated EV/EBITA.8 0.1 0.000 59.8 NS 2.6% 1.91 12.000 50.5 27.44 6.30 3.6 1.9 10.0 NS NS 5.9 0.9 17.6 4.9 5.4 6.028.4 9.8 1.8 7.8 0.14 8.591 0.2 0.9 13.09 -34.35 20.3 20.3% 9.2 0.8 146.2 0.17 10.January 2011 GERMANY Smaller Companies Review Pfleiderer FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.0% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.682 0.8 0.0 135.760 59.00 2.3% 1.3 6.7 9. number of shares.5 5. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.6 11.0 24.8 7.3 NS 0.1 10.68 -13.07 92.2 1.10 20.9% 0.2 27.30 14.24 25.73 21.743.2 0.0 21.2 2.6 4.8 1.0 22.0 58.5% 4.0% 0.4 3.5 141.0 23.9 1.1 58.8 10.300 0.0 32.9% 9.00 0.93 6.1 751.38) NS (0.682 50.84) 39.3 104.19 7.0 20.938 50.600 42.5 8.3 9.300 50.3 336.7 6.0 13.6% 0.5 1. of shares.7 0.2 12.58 2.3 690.8 7.3 NS NS 1.688.5 1.4 0.3 5.42 2.4 5.5 0.2 2. adjusted Share Price [Adjusted] Latest price High Low Average price 42.7 1.6 5.74 6.7 19.000 50.9 12.6 980.07 113. restated 207 www.7 NS 1.11 -89.55) 34.0 1.8 0.14 14.9 11.6 6.43 40.7 0.2 0.12 3.25 16.42 16.4 27.1 5.11 5.760 0.3 27.2 0.038.com .09 9.6% (1.02 2.8 4.7 17.8 0.0 1.7 1.7 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.91 -22.0% (0.5% 0.6 NS NS 3.0 10.4 26.0% (0.45 1.5 4.25 3.1 5.6 930.24 16.00 0.6 0.9 0.9 8.55 2.0% 11.8 12.1 13.7% 1.000 52.09 11.0 2.9 4.0 3.2 2.3 1.6% 0.235.4 0.5 NS 4.07 113.600 0.15 2.37 2.2 0.2 2.3 4.5 0.0 4.9 141.5 312.6 0.1 7. adjusted Treasury stock.20 20.7% 13.4 7.

4 6.8m estimate (consensus: EUR4. EBIT: EUR36m-40m).9 15. Relative perf.9 1.0% 6.9 45.3m vs. while net income of EUR2.0% 2009 2010E 2011E 2012E P/E (x) 33.9 40.8 3.0 2. though it has said on more than one occasion that Q4 revenues will come in below the record Q2-10 level of EUR284m. Due to seasonality effects it expects to report a significantly stronger Q4 than Q3. Italy.3% EUR45.7) (1.9 1.9 50.com Q Q 208 www. which was in line with the promised 20% for the full year 2010.7m). However.January 2011 GERMANY Smaller Companies Review RENEWABLE EQUIPMENT 2/Outperform Rating +88.9 45. of shares.2m. Despite the slightly weaker than expected Q3 revenues.7 3.8 5.com (49) 69 47.9 30.9 35.9% -15. (x) Philipp BUMM Research Analyst pbumm@cheuvreux.3 NS 4.3 8. the company will also benefit from the German residential market in 2011 as it is not only a project developer but also a wholesaler for solar modules. According to the company's CEO.9 25. the US and maybe also the UK will all be key markets for Phoenix Solar going forward.9) (0.7 58.7% Absolute perf. inverters etc.9 15.897.9 40.cheuvreux. Q Outlook – Internationalisation is on track Phoenix Solar needs to expand abroad.3 37. This is positive news as it needs to expand abroad to compensate for its shrinking project revenues in Germany.7 1. no further subsidies will be paid for PV projects on arable land.6 ROCE (%) 24.DE Bloomberg: PS4 GR Stock data Market capitalisation Free float Enterprise value No.5 1. Phoenix Solar generated 55% of its revenues abroad in Q3 (to some extent clearly because Germany was rather weak).9 38.3 1.4 EV/Capital empl.527 Disclosures available on www.9 25.com .4% -5. SolarWorld Conergy Shareholders Free Float 100.2m but below consensus of EUR3.0) (0.90 Price (07/01/2011) Reuters: PS4G.cheuvreux. EBIT came to EUR4.9 5.9 20.9 35. our estimate of EUR100m and consensus of EUR119m.9 10.00 Target price (6 months) Phoenix Solar Successful steps abroad Q Recent developments – Weaker Q3 after a record Q2 Phoenix Solar reported Q3-10 sales of EUR95m vs.0 Attrib. demand already picked up in September in the German wholesale business.9 30.8) Yield (%) 0. EUR23.3m was almost bang in line with our forecast of EUR2. particularly as its project business in Germany is poised to deteriorate as.2 1.9 10.3% -46.9 11/04 5. In 9M-10 it generated 21% of its total revenues abroad. from 2011. FCF yield (%) 17. France. our EUR3.1 6. adjusted Daily volume EUR176m EUR176m EUR140m 7.9 08/05 05/06 03/07 12/07 Price/TECDAX 09/08 06/09 03/10 01/11 Price Sector focus Sector Top Picks Least favoured SMA.1 EV/EBITDA (x) 20.37m EUR 1.01m Performances 1 month 3 months 12 months 14. 50.1 5.9 20.7% -46. the company kept its FY10 guidance unchanged (sales: EUR660-700m.0 Net debt/EBITDA (x) (1.

4%. In view of the strong project business potential.4% of outstanding shares) „ 209 www. up from previously 4. It has a market cap of EUR176m with 100% free float (7.6% EBIT margin for 2010E.com Valuation Our target price of EUR45 is based on a DCF valuation. Q Strong exposure to Germany The company is strongly exposed to Germany. Asia and Australia. In 9M-10 it already generated 21% abroad. up from 6% in 2009. we expect an immediate positive impact on the group's overall EBIT margin. In 2009 the Power Plants division accounted for 37% of the company's total sales and 50% of EBIT. Its headquarters are located in Sulzemoos. Phoenix Solar is trading at a P/E of 8x (peers: 11x) and at EV/EBIT of 5. we are increasingly convinced the company will prove able not only to expand successfully in non-domestic markets. Phoenix Solar is one of the least expensive stocks in our universe. followed by 5. founded in 1999. Its typical customer is a local installer or electrician.9x). 23%. Q SWOT analysis Strengths Weaknesses „ Pure downstream player with no technology risk „ PS4 will benefit from declining module prices as the balance of power in the market has shifted from producers to endcustomers and installers „ PS4 will probably not benefit from strong demand from China No expertise in solar thermal power plant project development which. operation and maintenance service packages for constructed photovoltaic power plants. 4. and it has sales offices throughout Germany and subsidiaries in southern Europe. The company generated EUR403m revenues (+18% y-o-y) in 2009 with EBIT of EUR12m (-64% y-o-y). In terms of 2011E multiples. Margin increase business abroad due to more project As the international business will comprise largely high-margin project business (average EBIT margin: 6%).3% respectively. In 2009 the division accounted for 63% of the company's sales and 50% of its EBIT. . Q Investment case The most important issue for us is the fact that Phoenix Solar aims to report about 20% of sales abroad for 2010. as well as project development. Germany (near Munich). mounting systems and complete systems. The company plans. but it also sells to small local wholesalers.4% are held by management and the supervisory board). but to generate 18%. solar modules and accessories. where it generated about 94% of its revenues in 2009. builds and operates large photovoltaic plants and is a specialist wholesaler for complete power plants. is growing strongly „ Strong relationship to thin-film module market leader First Solar „ „ Low capital intensity Opportunities Threats First results of tightened working capital management may have already emerged in 2009 „ Renegotiation of module supply prices may not suffice to offset market price declines „ Reduction in feed-in tariffs. This clearly reduces its risk profile as its dependency on the German market is diminishing.2x (peers: 6. We now forecast a 6. inverters. Components & Systems: This division is active in trading. planning services. 39% and 50% of its sales abroad in 2010E-2013E.January 2011 Q GERMANY Smaller Companies Review Company profile Q Strong photovoltaic downstream player Phoenix Solar.cheuvreux. along with PV.3% and 4.0% in 2011E and 5. Phoenix Solar currently has more than 250 employees and entered the TecDAX in 2009. mainly of modules. Most of its remaining business is generated in Europe. especially in Italy and France. which would put pressure on selling prices per MW „ PS4 is a takeover target due to its 100% free float (management and supervisory board hold about 7. Q Q Operating two divisions Power Plants: Phoenix Solar offers turnkey construction.1% in 2012E. is a leading international photovoltaic systems integrator.

1 (4.0 28.3) 0.0 0.0 0.3 (11.2) 0.0 0.4% (19.0 0.3) 2.2) 5.8 NS (2.0 0.0 0.0 0.0 0.4) 0.5 NS (0.8 0.8) 0.4 0.4 51.0) NS 35.com .8% (1. for exceptional items Net attrib.3% (2.5 0.0 0.7 0.0 0.8 (0.5 0.0 0.5 0.0 0.8 0.4 www.3 10.1 118.0 0.0 0.0) (9.4 115.9% (0. profit [loss].0 0.0 30.0 0.2) (1.0 0.0 0.0 0.0 0.2 NS (22.0 7.3 12.0 0.0 0.0) 5.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 210 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 67.8 1.0 2.0 0.9% 44.3 1.2) 0.7 47.3) (1.0 0.1% (4.4) 0.0 4.0 28.0 74.0 0.5) 7.1 65.9 10.0 0.5) (17.1 192.9% (36.0 0.6) (10.8 2.0 (32.1% 119.3) (1.0 89.0 8.4) 0.1 0.0 0.0 0.0 0.0 0.2% (56.3 0.9) 0.5) (1.8) 48.0 (0.0 2.0 0.0 (1.9) 0.9 32.0 (21.9% (10.9 0.0 0.2) (2.5 33.7) 47.8 0.8 0.0 28.9 0.2) NS 9.5 -63.4) 33.0 0.6 0.0 0.0 0.5 0.0 (1.0 0.0 0.2) 0.0 12.0 (39.0 (7.5 0.0 0.0 0.0 17.0) NS 26.2 NS 0.7 21.0 21.6 0.5) 45.5% (0. [inc.6 0.0 18.6) (61.5 9.0 0.0 21.6 2.0 0.0 6.7 60.0 0.7) 44.0 0.6) (638.0 8.3 23.0 0.0 0.3 147.0 0.7) (1.3 0.0 0.0 14.0 -23.0 22.8% (43.0 0.1 19.0) 37.0 0.0 0.0 2.1 0.8 -28.6) (31.8 26.0 0.3) 19.0 0.3) 6.1) (17.0 23.6 0.7 (1.0 0.0 0.0 0.9) (1.2 (0.3 3.1) (648.2) (1.6% 0.0 0.0 -27.2) (0.2 0.5) (355.0 3.0 83.0 (0.2) (2.0 (3.0 0.0 4.5% (16.0 0.8 0.4 0.5 2.0 21.1 NS (0.3 -22.0 0.0 31.0 0.2 1.1 165.1 2.5% (3.9 23.0 8.3 0.5 54.3) 22.7 0.1 0.0 NS (0.7) 22.1) NS 6.0% 0.5) 0.2% (14.0 0.6 (1.6 0.7 2.6) 7.5 0.0 0.0 4.0 4.5 -21.0 0.January 2011 GERMANY Smaller Companies Review Phoenix Solar FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.2) 10.0 124.7) (100.1) (34.0 23.8) (35.0 (2.5) (0.8 -62.9 0.0 7.5 1.1 15.7% (12.0 0.8) 4.0 14.3 0.2) 4.0 0.6 1.1) NS 115.cheuvreux.4 (19.5 0.0 3.0 0.8% 0.1 23.0 0.0% 0.3 0.0 42.6% (8.4 0.0 33.0 3.0 0.2 (0.1) (5.9) 48.5 30.5 19.0 (0.0 7.7) 8.9 51.6) 0.0 0.0) (444.2) 0.0 0.4 97.5 35.1 0.0 (9.0 0.0 0.0) (229.5 0.5 0.4 91.5% 260.0 (13.0 0.1) NS 93.1% (0.0 0.3 -27.2 1.9 9.7% 473.0 0.7) (767.0 0.3 0.8 (14.7 0.0 (1.5 NS 111.8 0.9) (4.8 52.0 8.3 0.5 4.8 32.7 0.5 4.0 23.8 0.0 0.0 2.0 0.0 0.9) NS 97.5 4.0 0.1 12.1) 7.0 3.5) (10.3 0.4 0.0 (2.2 50.0) (38.8) 34.0 18.2 186.0 0.8) (109.0 7.1 0.0 64.3) 0.0 0.5 4.0 86.2) NS 51.3% 0.0 0.0 11.9 0.8 (1.0 (9.5 NS 402.8 -30.3) 0.0 4.3 2.0 0.0 0.0 0.0 0.1) 0.8) 0.0 0.5 97.5) (24.7 (5.0 0.7 0.7% 0.5 0.0) (3.2 (1.5 0.8 NS (6.0 4.7 136.0 10.0 22.3) 20.4) 3.3 NS 0.0 0.0 0.0 1.0 0.0 31.0 0.0 0.7) NS 83.0 47.0 (1.6 -63.0 0.0 0.4) 36.8% (1.0 0.0 0.1 (0.9% (0.3 15.7) 12.5 0.3) (0.0 44.6 0.0 8.0 0.5) (5.3 89.0 9.0 (12.8 NS 0.0 (2.9) 0.2 -64.0 31.2) 12.0% 2.5% 3.0 (32.2% (28.9) 0.0 0.4) (2. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 2.0 56.0 0.3 (2.0 36.2 21.2 (4.0 14.7 63.3) 0.4) 0.0 2.0 0.9% 715.9 6.7) 14.7 0.3) 0.1) 46.2 (1.0 23.6) 0.0 4.5 31.8% 857.0 (2.3 0.4) 4.0 0.2 52.1 -23.0 0.4 0.0 0.0 0.5 NS 721.0 0.

40 6.030 0.50 NS 0.1 7.2 NS NS 4.7 89.20 2.1 10.4 13.3 3.7% 4.3% 0.2 166.52 13.04 23.370 5.2 3.8 NS 10.8 2.8 4.59 16.6 7.00 20.91 32.9 4.3 6.8 27.5 0. adjusted Share Price [Adjusted] Latest price High Low Average price 211 www.3 84.90 24. of shares.7% 1.0 20.6 0.000 7.1% 1.8 282.1% 22.20 18.cheuvreux.54 -26.8 9.9 6.0 3.3 6.9% 4.2 9.000 7.0 14.0 0.7 8.370 0.8 0.6 18.54 -26.2 33.62 52.50 7.1 0.5 23.540 6.January 2011 GERMANY Smaller Companies Review Phoenix Solar FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.9 2.2 0.370 0.00 0.540 0.28 -64.48 NS 4.3 0.4 5.0 3.90 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.7 12. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.0 3.1 NS 3.0 3.3 5.9 8.87 16.370 7.1 1. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 35.7 5.96 -33.2 3.550 0.7 3.1 0.8 23. adjusted Av.6 NS 5.13 53.0 0.63 17.6 14.00 0.30 3.5 5.0 30. restated EV/EBITA.3 NS 2.30 3.0 3.5 5.0 22.6 24.0 5.080 0.4 NS 8.1 7.6 NS 10.43 NS 7.00 0.370 0.00 0.19 20.2 36.4 1.8 7.20 13.2 No.1 176.00 0.0 21.2 16.9 37.63 35.91 32.2 9.1 36.030 5.6 73.00 0.9% 3.7 15.5 23.6 20.3 5.3 27.0 29.39 4.1 16.72 41.1 140.9% 6.86 14.7 237.28 -64.9 11.6 4.000 6. reported % Change 0.00 0.2 26.8 20.2 NS 0.1 14.3 40.7 1.1 14.9 34.8 1.4 NS NS 8.3% 0.24 10.1% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.5 70.5 18.6 NS 10.1 138.9% 2.7 19.2 176.00 22.00 15.4 14.5 9.6 4.74 22.3 0.50 NS 0.1 3.4 29.7 0.30 19.1% 3.4 7.7 8.0 NS NS 6.1 37.7 2.com .9 1.2 12.0 NS 5.4 0.6 18.7 9.1 33.040 0.5 4.6 223.2 5.58 NS 20.1 6.5 5.9 0.7 2.23 43.4 0.00 29.14 31.5 6.1 2.28 -64.2 NS 0.2 0.1% 0.5 8.62 22.7 NS 8.4 27.2 4.9 NS 1.0 162.90 23.3 5.0 10.8 135.70 45.38 NS 3.000 7.6 1.6 4.9 26.20 29.1 5.6 30.1 38.3 3.0 22.2 4.20 8.74 46.0 17.7 4.8% 14.2 0.700 0.1 8.16 -31. number of shares.00 0.4 1.1 33.2 4.9 1.00 0.0% 13.56 NS 2.5 121.62 49.28 23.00 0.6 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.2 16.7 NS NS 6.70 12.2 16.700 6.45 4.2 58.5 168.1 257.000 5.7 NS 0.20 1.6 70.1 17.0 44.00 41.2 17.1% 3.0 NS NS 8.4 8.6 NS 15.550 5.55 36.6 EV/EBITDA.4 6.9 0.9 9.5 66.59 -24.26 25.48 NS 2.9 6.3 0.0 7.370 7.0 NS NS 4.24 23.000 5.00 0.9 0.96 -33.80 6.74 46.2 NS 1.000 6.2 5.3 10.75 42.080 6.5 0. adjusted Treasury stock.00 0.40 23.1% 2.2 1.9 23.0 2.4 30.9 10.5 27.2% 25.78 40.8 6.000 6.9 1.62 52.2 NS 2.000 7.7 6. restated 11.040 7.38 NS 2.8 0.5 0.

3% 2.1 6.6 2.6 17. of shares.8 Yield (%) 1.3 4.0 3. and further reduce its 20%-off campaign days at Praktiker Germany. Mackenzie Cundill 2. 5.x% at Praktiker Germany (we expect 0.cheuvreux. PRA came out broadly in line with its reduced CY10 sales guidance of a mid-singledigit decline.1 4. introduce more private label lines. The company did not comment on its CY10 adjusted EBIT.7% 5. -7% l-f-l.447m. of 6.com 2012E Attrib.x% in the international activities. b)~150-200bps from better processes.6% in CY10E). all of the above factors are expected to support margins.1% y-o-y FX-adjusted and -10. -6. and 6.6%. Potential cost-cutting areas will be defined in late 2010/early 2011 and presented at the analyst meeting in March 2011. Eton Park 8. also on a l-f-l basis. l-f-l terms. and c) ~ 50 bps from cost savings at HQ.DE Bloomberg: PRA GR Stock data Market capitalisation Free float Enterprise value No. For CY10.0 8. Praktiker in Germany saw a l-f-l sales setback of 12. In its international markets the 9M-10 trend continued with markets like Romania.9 Net debt/EBITDA (x) 1.6 32.4 Disclosures available on www. In the international markets.6 22.9 EV/Capital empl.4 0.3 0.3% EUR6. International sales were EUR996m. Additionally.7%. We leave our EUR67.5 0.cheuvreux. group sales declined 5.6 12.5% in FX-adjusted l-f-l terms to EUR749m. -7. CY11 will most likely be a year of transition for PRA as it will be implementing some adjustments in logistics.3% y-o-y.6 27.8% y-o-y. l-f-l terms to EUR3.2% y-o-y and 7.5 1.10 EUR7.6% and 9. Allianz Global Investors 3.com Q 05/10 .451m. Poland and the Ukraine continued to deliver sales increases. The reported sales figures suggest that brand Praktiker is losing market share in Germany.5% in CY10E).64m Performances 1 month 3 months 12 months -4.6 22.47 Price (07/01/2011) Reuters: PRAG. L-f-l sales declined in Q4-10 in Germany by 6. Domestic sales reached EUR2. The aim is to achieve EBIT margins of 3.6 11/05 07/06 03/07 10/07 06/08 Price/M DAX 02/09 09/09 Price Sector focus Sector Top Picks Least favoured Ahold. Relative perf.4% internationally. We had estimated sales of EUR782m and an FX-adjusted l-f-l sales decline of 3.9 6. Q Outlook – Praktiker 2013 is the target PRA defined its longer-term targets within its Praktiker 2013 program.3 Q 212 www. Odey Asset Mgmt.9% CY10 sales decline.4%.9% and 8% in FX-adj.7 1.6 17. 32. when the fall-off was -7.8% 16.7% in CY10E).6 7. but it also requires core markets like Greece or Romania to get back on their feet.6% in FX-adj.4 0. FCF yield (%) NS 5.3% l-f-l sales increase.6 7.x% at Max Bahr (4.6% -6. whereas Turkey.3% 2009 2010E 2011E P/E (x) NS NS 16. 4.2 7.7% respectively.6 12.6 2.com (49) 69 47 89 74 26 Rating 3/Underperform Target price (6 months) -18.6 27.5 2.8m CY10 forecast unchanged. Carrefour Colruyt Shareholders Free Float 80. especially from more efficient logistics.8% Absolute perf. Both Germany and its international markets saw Q4-10 y-o-y sales decreases. (x) 0. This represented a further deterioration vs.0 1.1 4. Additional cost savings are possible in central functions and via process optimisation.1 0. The margin drivers at Praktiker Germany will be a) ~100bps from increasing the share of private label products from 27% to 40%. Jurgen KOLB Research Analyst jkolb@cheuvreux.5% and 5. adjusted Daily volume EUR433m EUR349m EUR594m 58m EUR 3.9 ROCE (%) 4.9 EV/EBITDA (x) 4. (2. 9M-10. PRA attributed this mainly to its new pricing strategy to cut back radically on its 20%-off campaign days.0%. PRA expects its Praktiker 2013 program to provide first cost savings in the mid-single-digit EURm range as of CY11. With the 5. Whereas Max Bahr delivered a Q4-10 7. Greece and Bulgaria showing no improvement.1%.9 3.4%.January 2011 GERMANY Smaller Companies Review SPECIALIST RETAILERS PRAKTIKER AG Transition phase in 2011 Q Recent developments – trading statement CY10 Q4-10 group sales fell 6.5% -17.

Q Geographic split In CY09. where it is number four. all of Praktiker's foreign operations are located in eastern Europe.5% in 2013E where PRA's Praktiker 2013 program targets a group EBIT margin of at least 4%. Based on our CY11E estimates and a share price of ~EUR8. Q Product assortment In Germany. Max Bahr's gardening focus is an even stronger at 28%. Q Q Market positioning Under the Praktiker brand PRA operates a discount format in Germany and a full-price format outside of Germany in currently nine countries. However. In 1996 ASKO merged into the Metro group and PRA became a subsidiary of Metro. we believe this reflects scepticism in the capital market regarding PRA's net profit delivery. PRA trades at 16. sanitary products (19%) have a higher share of sales than gardening (14%). but it will be difficult to replace them with new customers. Q SWOT analysis Strengths „ Long-established Weaknesses brand name German market consolidation has not happened and Praktiker's E2S ("easy to shop) conversions have been stopped „ in DIY retailing Hard discounter with a reputation for low prices „ „ Greece is PRA’s largest foreign market Solid balance sheet „ High fixed-cost base due to lease contracts „ Various formats at Praktiker Germany make banner clarification difficult for consumers „ Opportunities Threats „ Increase avg. the German business accounted for 71% of group sales vs. . Additionally. FY11 P/E of 16. In its international markets. Praktiker's main product category is gardening (23% of sales). only 48% of group EBIT.GERMANY January 2011 Q Smaller Companies Review Company profile Q History At the end of the 1970s PRA opened its first DIY stores in Germany and Luxembourg. a terminal growth rate of 2% and an EBIT margin of 3.9x P/E and a 8.90. EV/EBIT of 9. In November 2005. PRA is Europe's fourth-largest DIY operator. PRA's core markets Romania and Greece are still far from delivering positive l-f-l sales growth. For CY11E. With the exception of Luxembourg. prices via lower number of 20%-off campaigns „ „ Increase EBIT margin on higher private label share „ Greek crisis leads to market consolidation „ Eastern European markets show no signs of recovery Internet business gains market share also in DIY business Strategy adjustments may not lead to an increase in customer transactions „ 213 www. this is where we see the greatest risk for PRA: It will happy to lose its 'price junkie' customers who only focus on the 20%-off campaigns. Metro IPOed PRA at an opening price of EUR14.cheuvreux.3x. Q Investment case Our 3/UP rating is based on two pillars: 1) At Praktiker in Germany. If one compares this with specialty retailer Douglas (EBIT margin of 5%.com Valuation Out TP is based on a DCF calculation with a WACC of 7. The shares trade at a CY11E P/tangible BV multiple of 0. Greece and Romania make up the lion's share of its international business. Since February 2007 PRA has owned Max Bahr. This will be difficult to find a differentiation factor in a market where service.2x EV/EBIT. For the time being we don't see the international business at PRA serving as a sales and margin booster. Its parent company at that time was ASKO Deutsche Kaufhaus AG. deep assortments and availability of locations are already present.5x) we do not consider PRA shares cheaply priced. the company aims to make smarter use of its marketing spend and achieve less negative impact on its P&L than with the 20%-off campaigns.1%. a German full-assortment and service-oriented DIY chain. we see some risk for our earnings forecast and the consensus. In Germany. 2) Although we are entering the period where the comparison base are beginning to get easier. In its international markets PRA either holds market leadership or number two positions except for Poland. Praktiker and Max Bahr combined constitute the second-largest DIY operator behind Obi. While it is unusual for a retailer to trade below a P/TBV multiple of 1x. with potential changes in the customer structure. To put it another way: a change in the customer base requires PRA to communicate its adjusted values from now on.65x. mainly in eastern Europe. contributing about 49% of its international sales. differentiation requires marketing and most likely higher expenditure.

9) (2.0 (1.0 496.0 (1.8) 77.0 38.5 125.0 0.0 0.4) 0.5 120.951.1 0.3 1.8 12.250.9) 54.0 22.3) 6.0 (1.0) (50.6 0.8) (2.3 -39.7 67.5% 104.395.8 95.0) 138.0 116.1) (3.3% 16.1 13.0 (1.4) (2.0 84.6 322.7) 38.5 0.7) (80.4% (10.4 2.0 (0.5 15.0 47.9) 200.1) 93.2% (503.0 0.271.0 83.7 0.0 63.7 71.3 0.3 14.0 483.0 0.5 0.0 (13.5 899.8) 120.0 0.4 944.4% 0.0) (1.0) (23.9) 0.7 506.0 (6.0 (1.4 1.0) (1.7 -83.0 0.1 15.4 0.9 0.4 1.0 495.0 (27.3 214.1 (26.8 273.3 869.7) 0.7 70.5) (2.0 0.6 160.0 4.0 (10.0 101.2) 176.6) (35.8 0.7% 104.8 13.6 8.4 18.6 1.8) (3.9 3.0) (24.7) (92.6) 0.995.4) (0.1 4.0 1.7 0.3 85.4% 31.0 0.212.7 189.8 0.5 0.1 147.0 64.6 12.9 463.0 0.0 0.8) (10.0) 17.0 0.0 (1.0 0.com .4 1.3 942.5 19.5 192.6 188.0 (75.8) 135.250.0% 0.0 (0.7 205.0) 148.5 (167.0 0.6) (0.5) 0.0 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 214 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2.4 (8.0 0.7 202.9 0.0 0.2 24.0) (133.7 22.0) 67.2) (26.8 192.0 0.906.0) (2.5 41.0 -20.663.0 0.0 67.6 493.7 17.6 26.5 0.January 2011 GERMANY Smaller Companies Review PRAKTIKER AG FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0) 24.7) 17.9 12.2) 0.0 0.0 0.7 0.8 1.1) (5.5 192.1) 98.0 28.0% (561. profit [loss].5) (76.1 0.0 0.474.3 0.1 (71.8) 131.1 NS 3.2% (71.0 111.8) (2.0 24.9) (4.1 240.9) 0.5% (40.0 0.6 15.5) NS 903.9) 3.4 192.0 0.7% (74.9) (50.6 68.8 (33.291.1) 117.2) 0.2) (75.0 (20.3 (32.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.3) 87.0 0.6% 33.2) (10.0 0.1) 0.8% 3.2% (535.2% (434.0% 3.0 140.2 (172.8 1.5 (10.281.0 0.4) 0.1 1.0 (1.8% (553.2 0.9) 114.0 36.0) 21.0 0.2) 105.9 903.0 424.6 191.7% (40.0) 0.0 (20.890.3 115.0 (1.472.6 1.2 0.294.1 0.5 870.0 (28.0 0.0 (1.0 0.8 0.7 116.0 (23.5 0.9 0.1 0.9 127.0 68.7 0.0) 62.2 0.8 -1.6% (62.8) NS 791.7) 129.2 0.1 0.7) (2.0) 0.0 0.8 (28.4 939.6) (50.0 (1.4% (425.0 62.3 14.0 80.3 1.0 791.6) NS 3.0 0.3 9.9% 0.1) 78.9% (506.4) 0.0 (69.7 844.6) (6.6 53.0 0.8 -34.0 172.0 (1.0 (1.0 (61.3 17.5 1.2 0.3% (417.4 0.0 (8.4 -36.5 192.9 20.0 (17.8 -51.7% 0.7 72.0 0.0 1.8) 0.6 10.579.0 0.6) 0.0 0. [inc.2 (204.1) (26.0 (117.7 13.3) (65.9 1.945.4 125.2) (13.0 3.0 0.0 129.5 0.0 1.0 (73.0 0.5 130.4% (69.0 0.0 4.0 49.9) 62.7% 3.7 (31.0) 27.0 0.6 0.1 18.7 195.0 (9.0 0.0 0.8 13.7 67.144.2) (72.6) 0.4 20.1 16.1 7.1) 3.2) 109.5) (60.0 0.8 NS (101.5 0.0 535.0 0.7 102.4 0.0 514.271.0 27.0) 0.0 (83.8 0.3% 0.291.5) 101.8) (1.0 0.5 196.0) 0.3 13.0 0.1) 0.0 48.0 185.3 18.1 (4.0 (0.0 0.6 188.3) 0.530.0 0.4 2.0 62.0% 0.0 (5.3) (2.934.162.4% (70.4 192.8 1.6 14.9 1.0 120.0 0.1 897.0 83.0 0.6% (491.3 1.0 95.7 107.7 79.0 0.3% 0.2 145.0) 0.0 0.0 23.7 1.0% 3.0 1.1 1.0 (1.294.033.1 844.0 520.2% 0.4) 148.7 0.3 21.6 0.5 496.0 0.1) 630.8) 124.7) 0.0 0.7) 0.0 0.8) (50.0) (29.6 10.1% (5.6 -72.8 877.3% (66.0 (20.240.0 77.5 -34.8) 1.866.8 31.5% 0.6 (26.7 1.0 0.3) 0.5 -5.634.6 0.0 0.2 1.0 0.7 0.7 NS 3.0 (1.1 0.2% (79.0 5.7 1.9 178.4 -6.6% 3.6) 0.0 478.cheuvreux.0) 0.3) 178.4 9.7 116.0 502.1) 22.0 (24.0 (0.1) 0.281.6 0.0) 83.4% (37.2 15.5 0.0 543.9 116.3% 3.240.3 0.1 0.6 1.0 0.5 524.2) 0.7 13.0 0. for exceptional items Net attrib.1) 0.2) 0.4 www.8) (3.6) 0.0) 48.0 (21.2) (100.1) 0.0 0.

60 27.2 9.4 0.2 0.4 0.5 11.1% 15.2 5.9% 0.9 2.2 5.3 NS NS 7.0 13.48 15.0 2.5 0.18) NS (0.2 433. number of shares.80 20.9 20.00 0.8% 15.1 16.7 NS 2.8 1.11 18.00 0.0 168.844 0.31 -34.0 0.9 22. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.5 10.0 7. restated 215 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.6) NS NS NS (1.3 594.4 449.4 10.1 0.000 0.1 7.2 3.3 NS 0.8 17.40 34.0 14.4% 16.1 6.000 58.2 1.47 - - - - 1.3 9.3 579.02) 88.22 2.60 23.6 0.0 0.8 2.2 4.0 2.5 646.2 3.06 -82.8 15.1 3.1 0.8 2.5 8.8 3.0 0.8 NS 42.9 461.4 15.5 0.3 www.1 NS NS 4.000 0.7 13.4 NS 4.8 1.9 8.844 0.00 1.000 0.2 8.54 5.7 0.00 0.3 NS 0.9 10.0 0.9 0.1 12.2 9.5 0. adjusted Treasury stock.3% 15.5 5.2 8.1 3.2 NS NS 5.2 3.000 62.8 NS NS 8.3 0.00 0.70 53.2 5.1 NS NS NS 6.3 0.2% 15.000 0.183.2 5.8 0.9% 0.4 4.0 7.7 59.9 3.com .68 6. of shares.3) 7.32 24.5 1.2 4.5 NS NS NS NS NS - 14.3 5.0% (0.5 15.7 NS 1.0 16.9 5.1 4.07 1.45 1.2 2.7 433.45 2.5 0.1 9.000 58.8 3.00 0.34 -73.4 59.9 3.31 24.1 3.330.96 8.000 58.5 0.47 8.0 4.9 3.000 - 15.7 2.1 2.67 7.4 0.00 0.0 8.January 2011 GERMANY Smaller Companies Review PRAKTIKER AG FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.8 8.6 3.00 0.75 10.0 12.1 NS 2.7) 3.00 1.7 2.5 NS 34.000 58.4 1.0 3.0% 0.34 12.000 58.0 1.47 NS 0.7 640.1 4.000 58.84 79.4 5.4 4.04 7.4 0.3% 1.5 NS 1.0 16.4 2.2% (0.5 6.2 4.000 58.2 13.00 0.8 0.2 2.6 4.18) NS (0.7 20.59 2.000 58.0 21.6 3.6 3.000 58. restated EV/EBITA.45 1.32 11.0 4.11 1.0 8.0% 0.47 NS 0. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.16 6.8 8.36 -72.66 27. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.000 62.15 26.19 20.4 1.3 1.000 62.9 0.86 3.50 17.844 0.3 0.1 705.7% 0.5 2.9 NS NS NS NS NS NS NS (1.8% 0.5 4.3% 15. reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share No.8 11.00 0.7 NS NS 3.4% 0.000 58.30 15.47 12.000 58.3% 15.5 2.02 8. adjusted Av.6 8.33 16.000 58.6 125.6 0.00 0.4 (54.84 79.02) 88.cheuvreux.4 26.7 14.9 4.7 0.000 0.45 1.50 7.5 0.4 2.07 27.0 0. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.10 0.4 642.4 2.8 20.76 7.00 0.3 1.726 0.4 3.7 3.000 58.5 11.1 7.8 4.00 1.3 5.3 10.8 23.2 1.1 NS 2.6 1.6 1.1 15.03 7.06 -81.7 0.4 3.9 452.67 7.000 0.05 0.19 6.6 14.10 15.47 4.94 -36.62 7.

9% 151. With a strong start into Q4-10. The most important strategic task for PSM's management will be to use the power of its TV brands to drive growth initiatives in adjacent business areas. disposal of MAZ&More).9 5.7 Yield (%) 0.7%.com (49) 69 47897 512 Disclosures available on www.1 2.9 20.1 is a beneficiary of the economic recovery of large parts of western Europe. In light of positive free cash flow.7 3. the y-o-y growth rate is likely to slow.2 11. That is unlikely to change going forward.9 10.9 01/01 04/02 07/03 10/04 01/06 Price/M DAX 04/07 07/08 10/09 01/11 Price Sector focus Sector Top Picks Least favoured Shareholders KKR&Permira 62.9 5. However.8 7. the company's seasonally most important quarter. Consolidated net profit came in at EUR32m (Q3-09: EUR-13m).0 ROCE (%) - - - - EV/Capital empl.5% 97.cheuvreux. Free Float 37.5 3.9 0.9 15.0 0.0 0.3% P/E (x) EV/EBITDA (x) Attrib.9 20. Relative perf. EUR23.0 13.8% 1.1 9. thus accelerating from the y-o-y growth rate in Q2-10. The predominant driver of the company's sharply improved profitability has been higher advertising revenues in Germany. more than twice the year-ago level.9 35.0 8.0 7. (x) - - - - Source: Factset Cheuvreux does not currently cover Pro SiebenSat 1 Media Bernd LAUX Research Analyst blaux@cheuvreux. FCF yield (%) 2009E 2010E 2011E 2012E 26. reported EBITDA reached EUR144m.1 Media Increase in advertising fuelling growth Recent developments – Impressive operating turnaround Q In Q3-10.3m 109. music and ecommerce.9 30.1 14.3 8. of shares. PSM is confident it will continue to achiebve healthy revenue growth and recurring EBITDA in excess of the previous year's result.9 10. ProSiebenSat.0 0.6% 34. relocation to Munich. adjusted Daily volume EUR2611.9 15.cheuvreux.284bn.9 40. with recurring costs as well as OPEX almost flat y-o-y amid tight cost control and increasing benefits from the group's efficiency enhancement programme (incl. the group reduced its net debt position by another EUR251m to EUR3.9 25. Free TV advertising revenues in Germany/Austria/Switzerland grew an even faster 15% y-o-y. with year-ago comps getting increasingly difficult to beat.87 Price (07/01/2011) Reuters: PSMG_p. production.3m EUR974.5% Absolute perf.4m EUR 10.DE Bloomberg: PSM GR Stock data Market capitalisation Free float Enterprise value No.1 (PSM) increased revenues by 12% y-o-y to EUR627m. 40.2 11. Recurring EBITDA surged 64% y-o-y to EUR155m.2% 19.3 Net debt/EBITDA (x) 4.19m Performances 1 month 3 months 12 months 3. Outlook – Healthy growth to be continued Q ProSiebenSat.9 0.9 25.January 2011 GERMANY Smaller Companies Review SECTOR No rating Rating N/A Target price (6 months) ProSiebenSat.0m EUR2611.9 35.6 8.1 8. with television advertising showing particular strength.9 30. such as the digital world.com Q 216 www.com .

Q Q FTA TV achieved eached pan-European footprint with SBS acquisition In June 2007. EBIT of EUR717m.January 2011 Q GERMANY Smaller Companies Review Company profile Q Information not available as the stock is currently not covered. serving over 78m households in 14 different countries. extending the footprint of its FTA TV operations to the Nordic countries (Finland. and Net income of EUR293m.1 operates a multichannel approach and enjoys first or second rankings in terms of audience in almost all markets of presence. Greece and CEE (Bulgaria. Norway. EBITDA of EUR858m (67% from FTA TV German speaking. In Germany the company is the first FTA TV provider and no. and live event and artist management Q Consensus forecast: 2010E EBIT at EUR717m Consensus expects ProSiebenSat. free TV. 30% share of audience. Romania. has stakes in radio stations. Sweden. Telegraaf controls the remaining 12% of the voting capital while 74. internet. 9% from Diversification). Benelux. Q Q SWOT analysis Strengths Weaknesses „ Audience leadership „ „ Geographic diversification „ „ Programming quality Exposure to advertising collection >90% of Group EBIT „ Effective cost management „ Opportunities „ Recovery of German economy „ Development of CEE „ Diversified business growth Excessive financial leverage Leveraged control chain Threats Audience fragmentation (multiplication of platforms.1 Group is the second-largest broadcasting group in Europe and a leading European FTA TV player. Its core market is German speaking Europe (Germany. music Beyond its core business. 1 in TV advertising. Denmark).1 to report 2010 revenues of EUR2. 13% from Diversification).97bn (62% from FTA TV German speaking. content digitalisation) „ „ „ Disposal of non.7% of the preferred stock is free-float. the company acquired SBS Group. magazines. KKR and Permira still at 88% of voting shares KKR and Permira (through Lavena holding) control 88% of PSM's voting shares and 25% of its preferred stock. 25% from FTA TV International. print and new media companies. Valuation . and works in related business areas such as music business. 23% from FTA TV International. Hungary). ProSiebenSat. operating 4 stations that command a c.com Q Investment case Information not available as the stock is currently not covered. KKR and Permira are consider a disposal of their shareholding.strategic assets (magazines. Austria and Switzerland). .cheuvreux. the company owns numerous Internet brands. Q Diversification in radio. radio) 217 Sky Deutschland re-launch www. According to the press. Leading European FTA TV with core activity in Germany ProSiebenSat.

0 212.January 2011 GERMANY Smaller Companies Review TEXTILE & APPAREL 3/Underperform Rating +5. The remaining 20% will stem from regional categories such as outdoor.7 6.0 312.3 17. hence about EUR400m.5%. Russia and Mexico.8 0. fitness. India. of shares.0 12. In the same period sales in PUM's other two regions. EUR3579m EUR1037m EUR2854m 15. 42% of the company's expected sales growth is set to stem from: China. In 9M-10 the sales growth driver in regional terms was America. leaving about EUR100m for a potential acquisition.0 03/02 06/03 PUM's CFO has defined CY11 and CY12 as transition years and CY13CY15 as an expansion period. Brazil.0 1. 362. PUM has issued no specific CY10 guidance on EBIT.9 2.6) Yield (%) 0. 2011.5 EV/EBITDA (x) 12.047m EUR 4. sailing and golf.0 62.6% and 7.1 29. Relative perf.9) (1.9% respectively. Korea.6% -4.1% 0.cheuvreux.3) (1.0 62. In addition.2%.0 312.7% Absolute perf.0 162. In terms of distribution channels.com (49) 69 47 89 74 26 09/09 Sector focus In terms of regions. Group EBIT increased by 7. Q EUR236.com Q Q 218 www.9 2. motorsport and lifestyle. with the EBIT margin expanding by 25% to 14.0 01/01 12.com 12/10 Price Jurgen KOLB Research Analyst jkolb@cheuvreux. Europe and Asia/Pacific.0 262. Stock data Market capitalisation Free float Enterprise value No. This will give it better control and will enable it to manage the brand better in China.0 362. adjusted Daily volume Performances 1 month 3 months 12 months -2.6 5. where FX-adjusted sales climbed 17.cheuvreux.9 6.4% -21. In autumn 2010 PUM announced it had bought back the remaining 49% stake in its JV in China/HK as of 1 Jan. thereby exceeding the highest forecasts in the market and beating our estimate by 1. Of these EUR400m. he gave no indication as to what this means for margins.2 2.0 33.2 8. Italy and the UK.0 262. PUM expects its gross profit margins to remain at the current level whilst OPEX declines.7 3. Germany.5% and 6.2 Net debt/EBITDA (x) (1. France.41m .3%. Japan.DE Bloomberg: PUM GR Two transition years ahead Q Recent developments – Q3 and 'Phase IV revisited' Q3-10 sales rose 16.0 162. ecommerce is expected to deliver ~EUR110m sales by CY15. By CY15 PUM expects its sales breakdown to comprise 90% PUM branded sales and 10% non-PUM brand sales.6 Attrib. showed declines of 5.40 Price (07/01/2011) Outlook – Growth by category like all other peers PUM has defined three growth contributors: 1) categories. 80% of its sales growth is expected to be generated by its core categories: team sports.8% EUR250. about EUR300m are expected to stem from Tretorn and Cobra Golf. PUM raised its CY10 sales growth guidance to 'mid-to-high single-digit sales growth' from 'low-to-mid single-digit growth'.0 112. other than to say that it expects an improvement.2 ROCE (%) 20.0% 2009 2010E 2011E 2012E P/E (x) 27. The remaining 38% will come from the mature markets: the US. 09/04 12/05 Price/M DAX 03/07 06/08 Sector Top Picks Least favoured Shareholders Ppr 71.9% -7.9 8.0 112.5% FX-adjusted to EUR784. (x) Disclosures available on www.0 212.8) (1. Free Float 29. In terms of categories.6% in 9M-10. 2) regions and 3) non-PUM brands.6 2.4% -18. FCF yield (%) 4.0 13.7 12.8 1. even though its marketing expenditure will rise as a % of sales. training.0%. Generally. During its investor day on 26 October PUM provided some information about its longer term outlook: In CY15 it expects group sales to reach EUR4bn with an EBIT margin on par with or above that of the industry leader. Following its somewhat better than expected sales performance. running.1 35.4 EV/Capital empl. PUM predicts a 6% sales CAGR for its retail business and 8% for wholesale.3m. Its targeted sales growth implies a 9% sales CAGR between CY10 and CY15. However.00 Target price (6 months) Puma Reuters: PUMG.

1%. Here we see a substantial implementation risk as we currently fail to see what PUM can bring to the market in terms of uniqueness to gain substantial market shares.3%.1% stake in PUM from Mayfair. from our perspective. PPR owned 62. . These markets are seeing fierce competition from both international and local brands and from nonathletic brands such as H&M. PPR arrived at its current stake of 71% mainly via the cancellation of PUM treasury shares but it also bought shares outright in the market. we see some implementation risk for PUM as it starts from a weak basis in markets such as China and Russia. Especially as the free float is low and the extent of PPR's influence at PUM is unclear.January 2011 Q GERMANY Smaller Companies Review Company profile Q Roots in football Puma was founded in 1948 as a shoe manufacturer with a strong focus on football boots. a 2% terminal growth rate and a peak EBIT margin of 13. To round off its product range it has sold licences for watches. Q Q Production 100% outsourced PUM has exchanged its entire own production facilities for a 100% outsourcing business model. ~35% from apparel and ~11% from accessories. We believe the late buildup of a brand franchise in these markets will be more expensive and take longer than expected.cheuvreux. compared with PUM's target of EUR4bn. The stocks is currently trading at an ~8% discount. which we believe leaves little room for substantial upside. Q SWOT analysis Strengths Weaknesses „ Industry-leading operating margins „ Lifestyle Ultra conservative balance sheet structure with 62% equity ratio and no debt „ PUM Opportunities Threats PPR could take out minority shareholders. but it already indicated that it currently has no plans to do so „ Changed category carries a higher design risk lacks the uniqueness it used to have „ „ Low free float order pattern from retailers transfers operating risk to the suppliers „ „ Design appeal and brand image are the core operating risks for PUM Increase exposure to China where PUM is still underrepresented „ „ PUM failed to establish a strong foothold in the emerging markets and has now to catchup with its peers „ Revival of the share buy-back programme will cushion the share price „ Management and PPR have little incentive to deliver positive surprises that could benefit minority shareholders 219 www.3bn by 2015E. At the end of a voluntary takeover offer in July 2007. PUM's 12-month forward EV/EBIT discount to adidas between 1999 and 2009 came to 11%. cosmetics and glasses to third parties.com Valuation Our TP is based on a DCF calculation with a WACC of 9. which would require a build-up of PUM's own retail activities. The vast majority of its sourced pieces (about 90%) stem from Asia. PUM has to correct its missed opportunities in the emerging markets. Q Product range from apparel to watches About 55% of PUM's consolidated sales stem from footwear. Additionally. especially as PUM has lost its unique market positioning as a combined sports and lifestyle manufacturer. Q Investment case As PUM's Phase IV revisited is very much based on sales growth. From there it has expanded its brand into the sports-lifestyle arena and its aim is to establish itself as the number one sports-lifestyle brand. The calculation also assumes a sales volume of EUR3. followed by about 8% from EMEA and roughly 3% from the Americas.9% by 2015E. this justifies a valuation discount to adidas. Q Shareholder structure In 2007 PPR acquired a 25. a market like Russia is very much based on mono-branded stores.

0 371.7 208.4 0.3 145.2 473.0 43.0 (130.373.0 0.0 27.9 347.4) NS 312.6) 269.0 0.5) 0.5 0.0 7.6) 0.5 0.0) 0.0 0.0 293.6 18.4 562.3 4. for exceptional items Net attrib.0 (2.4 0.3 0.6 77.2 0.0 585.0 192.2 6.0 0.8) (186.0 21.0) 0.2% (278.0 0.8) 315.1 (33.0 0.0 451.8) 431.0 180.3 291.8 0.146.0 221.1) 72.0 (44.2) 421.8 56.cheuvreux.4) 0.1 0.1 (487.3) NS 1.929.0 0.6% 0.1 2.3 18.0 (11.7 0.6) 371.9 99.7% (33.5) (2.8% 32.3% 2.0 (1.9 0.0 0.0 (110.2 387.9 120.9 53.1 22.0) 372.0 (1.7 0. profit [loss].022.6 831.4) (107.0 (16.2 155.3% 2.5) 0.0 291.655.7 (27.2) 406.1 0.018.3 (430.0 122.6 233.524.0 0.9% 2.0 269.5) 0.0 (40.4 20.5 16.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 220 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.7) 0.4% 0.0 0.2) 0.3) 0.131.5% (320.0 (40.4) 186.836.9 -7.3 154.0 (58.0 285.0) 317.0 0.4 -40.116.777.7% (60.8 8.2% (199.4 (28.1) 108.7 41.3) 0.0 0.0 0.9 110.0 397.0 0.3 1.914.7 104.7 15.0 17.4 48.0 (19.8 0.0 0.9 20.9 8.8) 0.5 787.0 0.3% 279.5 1.4) (1.0 128.0 562.1 959.8 5.7) 0.0 (2.2 0.8 2.8% (55.0 18.2) 0.0 0.0 0.0 1.6 8.6 0.0 402.0 0.5 39.7 2.1 26.7) 0.8) 0.3 128.2 319.3% 0.0 0.0 125.7 4.0 0.018.0 507.0 0.7 9.0 0.8) 0.0 0.1 1.0 47.6 0.0 0.1 2.1 72.9 44.1 11.9% (319.7 15.677.0 (89.1 0.0 0.0 0.5 32.0 (104.1 10.8 0.0 371.6 10.2) NS 831.0 (1.2) 0.0 56.7) 258.0 (106.0 0.6 (393.5 153.0 0.0 0.5) 0.2) 0.1) 0.2 194.0 219.0 0.0 0.8 218.1% (163.0 0.0 439.2 42.198.7 -13.1 (325.0 0.1 (356.0 0.0 69.0 0.3% 188.530.3 20.0 0.1 870.0 231.0 0.9 4.2 26.0 13.2 -2.0 0.7 312.0 285.6 (2.2% (61.2 -44.3 -3.1 0.3% (306.7 34.0 (117.1) 0.432.9 0.3) (1.0 0.0 0.7 160.7) 0.7% (38.0 0.0 0.4) (988.0 325.5 261.January 2011 GERMANY Smaller Companies Review Puma FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.887.0 273.0 1.3) (45.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.4) 367.0 0.9% (46.1 25.9 0.1 0.8) 263.7 0.1) 285.0 0.7 304.2 97.0 2.1% 0.0 (8.4 43.0 1.4) (1.6% (24.1% 2.0 261.0) (1.198.0 271.2 33.0 (34.8% (8.6 6.3) 402.6 242.0 15.2) 192.1 (87.0 547.3 20.0 194.8 161.5 (27.9% (331.9 6.0 1.0 0.9) 0.9) 0.6 275.131.3 1.7 287.0 0.8) NS 959.0 239.7 8.3) 0.0 17.0 261.0 0.5 21.9) NS 1.2) 0.6) 381.0 0.9) (122.6 -33. [inc.0 0.3) (39.239.0 (151.1 196.1 0.664.0 0.5 0.5 121.0 (94.3 -12.697.6 34.0 260.4) 418.9 1.1 (202.5% (95.0 263.0 15.5% (118.7 0.2 311.2 1.0 (116.1 -35.7) 260.2 33.0 0.1 232.0 1.9% (59.4) (2.4) NS 562.1 0.3% (56.4) 0.1 84.0 0.7) (1.8 1.1 (37.0 361.9% 0.0 0.4 0.1 1.0 0.6) 360.0 0.0 372.0) 0.0 0.0 0.2 0.9 5.0 291.232.0 0.2 0.2 www.7) NS 787.3% (265.4 49.9% 2.369.8 0.5) NS 1.4 (5.0 0.0 0.5 285.0) 0.8 (34.9) 325.1 20.5 0.0) 0.2 63.0 284.8 0.5 -9.0 108.8% 0.0 0.9) 0.3 7.8 (672.7) (122.3 12.0 0.6 0.9) 252.8 (448.2% (347.5% 2.4 (8.3 1.0 33.0 1.4 19.3) 0.0 0.5% 2.5% 0.7) 0.1 0.0 247.0 0.0 441.1 25.9 11.0 265.0 0.7) 378.7 -2.6% 1.7 21.0 0.0 358.4 (904.0) NS 1.5 22.6% (1.2) (1.com .0 290.6 95.3) (1.0 0.7 0.0 0.0 286.4 21.9 9.8 0.0 367.0 0.156.2 1.785.2 (6.2 -8.0 232.4 17.3) 397.0 34.0 237.0 -7.2) 0.7 0.5) 465.174.0 (461.3% (169.460.963.0 315.0 0.041.1 1.8% 0.5 221.4) (49.0 171.232.2 55.4% 7.2 142.7) 372.0 0.5% (17.4 (43.1% (63.3 276.5 0.3 245.0 0.0 (108.9 38.0 561.

950.0 1.1 1.9 2.00 2.9 8.7 13.8 31.8 2.2 2.78 295.6 2.6 17.7 9.2 7.8 5.1 0.3 27.30 -7.000 15.7 0.047 15.2 4.5 13.9 NS 4.9 9.2 5.12 285.7 11.6 0.9 9.138 0.7 11.578.7 33.138 0.3 1.2 39.1 NS NS 15.047 15.5 82.6 16.8 13. reported % Change 16.7 16.0 NS 12.9 1.9 13.078 15.00 2.381.5 12.9 1.5 NS 18.3% 18.50 -39.9 8.1 EV/EBITDA.5 11.3% 16.8 16.6 2.7 10.86 18.00 2.86 22.6 1.7 4.3 NS NS 17.1 23.50 234.0 8.9 22.85 14.4 4.4% 69.7 NS NS 17.5 10.1% 93.7 22.3 14.8% 32.1 13.3 0.99 11.754.4 18.90 1.3 8.04 248.6% 58.906.241.3 1.50 250.26 48.3% 80.9% 14.7 10.3 0.6 8.23 44.26 38.9 6.90 171.93 136.68 9.cheuvreux.3 No.6 6.61 71.00 2.8% 50.75 17.9 3.90 10.12 -11. adjusted Treasury stock.9% 17.4 4.3% 17.2 16.30 222.9 4.6 3.12 15.6 15.9 2.1 15.8 4.4 6.50 207.5 5.21 0. number of shares.938.55 240.7 1.71 -10.4 11.1 14.6 26.9 10.854.1 3.016 15.7 22.79 3.6 7.2 3.4 4.78 3.2 14.4 16.2 46. adjusted Share Price [Adjusted] Latest price High Low Average price 16.6 6.0 27.8 5.890 16.5 12.00 1. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.70 17.2 17.3 0.000 202.4 NS NS 24.30 277.67 338.77 101.1 12.00 2.6 50.7 NS NS 15.016 16.875 16.092 0.8% 8.542.0% 14.0% 15.45 108.3 0.00 19.00 351.1 12.00 232.9 2.84 241.4 8.3% 18.2 NS 5.6 1. adjusted Av.496.2 2.7 23.9 0.2 3.6 31.175 17.4 1.5 61.6 9.7 3. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.0 17.2 39.9 2.49 7. of shares.0 1.7 8.33 -29.360 -1.2 3.2 6.7 0.January 2011 GERMANY Smaller Companies Review Puma FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.6 1.50 -43.378.2 NS NS 10.000 15.3 7.1 0.61 71.6 2.28 18.1 16.5 NS 13.9 5. restated 221 www.6 10.67 191.70 256.6% 17.578.89 9.2 NS NS 14.6 NS 21.3 2.0 11.8 26.00 1.9 7.89 9.2% 17.2% 15.15 -9.4 10.1 17.2 0.31 140.6 12.2% 16.28 18.0 4.20 240.97 8.160 -0.0 3.3 9.40 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.6 3.0 3.2 16. restated EV/EBITA.0 8.47 176.138 0.605 16.680 15.11 205.9 28.4 NS 12.00 1.0 13.7 17.249.8 18.3 9.40 255.80 12.1% 70.2 28.0 20.9 9.17 -4.8% 15.9 NS 14.00 236.00 18.9 NS NS 15.74 6.2 2.2 1.7% 108.35 39.66 12.8 70.3 18.31 246.00 267.50 18.34 231.3 NS NS 23.0 12.6 NS 15.030 -0.8 11.2 11.9 2.com .4 0.26 21.1 115.05 9.4 12.4 0.750.1 2.120 15.932 -0.4 16.000 15.0 4.1 35.4 3.8 61.45 -7.9 0.6 0.595.7 2.7 25.175 16.6 0.9 29.7 3.4 2.7 33.6% 16.073.7 8.4 0.8% 8.863.4 2.44 299.047 15.227 16.5 17.9% 14.85 236. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 3.8% 124.8 17.0 22.10 199.7 2.9 44.1 5.81 273.7 3.167.0 20.140 -0.3 2.3% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.

4 1.cheuvreux.4 21.cheuvreux.2 0. 101. With the release of its Q3-10 results Q-Cells raised its 2010 guidance.0% 2009 2010E 2011E P/E (x) NS NS 4.4% Absolute perf.3 0.a. Via a 50% capital increase it generated gross proceeds of around EUR128m.4 10/05 06/06 01/07 09/07 05/08 Price/TECDAX 01/09 09/09 05/10 01/11 Price Sector focus Sector Top Picks Least favoured SMA. At the same time.00 Target price (6 months) Q-CELLS Reuters: QCEG. (x) 1.com 2012E .4 21.4% EUR7.4 41. Q EUR2. Although we do not anticipate a major oversupply situation in 2011E.1) 2.January 2011 GERMANY Smaller Companies Review RENEWABLE EQUIPMENT 3/Underperform Rating +200.76m Performances 1 month 3 months 12 months 9.2-1. adjusted Daily volume EUR274m EUR110m EUR285m 117.0% -81. we expect demand in Q1-11E to be depressed due to the weather and to a seasonal weakness following several feed-in tariff cuts across Europe – especially in Germany.2 1.0 Attrib.4 41.3bn) and EBIT of around EUR75-80m.6 10.4 1. FCF yield (%) NS NS NS NS Net debt/EBITDA (x) (2. Relative perf.0 ROCE (%) NS 2.897.3bn (previously EUR1.5%.532m EUR 7.3 Philipp BUMM Research Analyst pbumm@cheuvreux.7 Yield (%) 0.527 Disclosures available on www.75% p.9 0.5%.4 81. Q-Cells received net proceeds of EUR242m. SolarWorld Conergy Shareholders Good Energies Investments 49.4 61. which generated gross proceeds of EUR129m. We expect cell prices to come under pressure again in 2011 once the 10-15GW of new equipment already ordered has been installed and is up and running. In total. predicting total sales of more than EUR1.1% -42. of shares. and an initial conversion price of EUR4.3 0. Fidelity 10.DE Bloomberg: QCE GR Price pressure expected Q Recent developments – refinancing completed On 22 October Q-Cells finished its long-expected refinancing. If cell producers refrain from reducing their production output in Q1-11.33 Price (07/01/2011) Outlook – Price pressure on cells expected in Q1-11 Q-Cells has said it anticipates a more challenging market environment in 2011.com Q Q 222 www. Free Float 40.9 1.4 81.com (49) 69 47. Stock data Market capitalisation Free float Enterprise value No.4 EV/Capital empl. the company bought back 57% of its outstanding convertible bonds (duration 2012) at 94.1% 2.0 0.8% -81.7 8. The company also issued a new convertible bond due in 2015.6 3.4 0.0 0. The terms were set with a coupon of 6.1 EV/EBITDA (x) NS 2.4 101.5% for EUR282m (cash outflow: EUR266m).4 61.3% -34.0 0. we are likely to see a temporary oversupply at the beginning of the year.38.

Chinese) competitors are able to produce more cheaply due to lower personnel expenses „ „ Q-Cells has been able to renegotiate wafer contracts with its suppliers „ Currently weak customer base as customers have been hit by global overcapacity and price erosion in modules Opportunities Threats Improving costs due to restructuring programme „ Thin-film activities will increase Q-Cells' group margins once it is successful „ Continued price erosion in solar cells and modules „ „ Further write-downs on subsidiaries Financing of capex depends on market conditions and could be put on hold. It will also take some time for QCells to establish a strong distribution network. which is in our view one of the most important issues.cheuvreux. formerly known as QCells International. indium.9%. compared to 27-28 cents in Germany.0 per share. but is now also developing solar projects on its own initiative with the aim of selling them to investors at a later stage. We appreciate management's strategy to produce not only solar cells but also modules. Q Q Thin-film activities will be developed further Beside its core Cells business. The company will likely report break-even again for 2010E. we believe Q-Cells will be prevented from returning to double-digit EBIT margins. the company is already able to produce with a module efficiency of 12. down from 7. its profitability in its solar cell business looks set to remain weak. However. which brings Q-Cells closer to its endcustomers. It is currently pinning its hopes on Solibro. Q Valuation Based on our DCF valuation we arrive at a target price of EUR7. Hence. In 2009 Q-Cells had a market share of 4. from our perspective QCells does not enjoy the same reputation and/or branding as SolarWorld.4% in 2008.8%.com Q Investment case Q-Cells expects to realise COGS (excluding wafer costs) of 18 cents (EURO) in Malaysia. In our view the company will be unable to compete with its Asian peers in terms of costs in the long run and will need to focus on its Asian capacity expansion. According to Solibro's management. it will not be able to charge high prices in line with those of SolarWorld. In this division the company develops solar projects for financial investors. However.January 2011 Q GERMANY Smaller Companies Review Company profile Q 3rd largest cell producer Q-Cells is a major solar cell producer with 800MW of production capacity as of the end of 2009. However.e. as Chinese competitors are able to produce at even lower cost (estimated 15-16 cents) than QCells' Malaysian plant. a thin-film module producer with a CIGS (copper. In 2008 it was the world's largest cell producer. which is very good for thin-film modules in general. . Hence. with an output of 574MW. selenium) technology and a current capacity of 80MW. Solibro is still in the ramp-up phase. gallium. It is currently trading at a P/E 11E of 5x and at an EV/EBIT multiple of 4x. leading to lower competiveness „ 223 www. Q-Cells has also invested in several thin-film subsidiaries. Q SWOT analysis Strengths Weaknesses One of the world's largest cell producers. We maintain our cautious view on the stock. offering economies of scale „ Asian (i. based on polysilicon. Increasingly focusing on System business Q-Cells adjusted its objectives during 2009 and is currently focusing strongly on its downstream System business.

0 0.0 95.5) 0.2 111.176.0 (109.0 0.0 0.0 60.114.0 98.0) (159.0 0.com .0) (111.0 52.0 (1. profit [loss].5 123.0 (25.9) (17. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.2% (66.2) (44.0 0.0 (0.4% 858.0 0.937.0 (37.0 0.2 2.2) 233.114.6 206.9) 0.0 56.6) (34.2) NS 1.6 148.5 (176.0 0.3 321.0 (5.0) (28.8% (25.0 1.2% 0.6 90.345.5 NS (11.480.8 0.0 0.6) (355.0 0.0 12.0 0.2) (32.3 0.2) (493.0 (64.7 27.2) 19.2 1.207.1) 0.9 732.6 31.2% 0.3) 0. for exceptional items Net attrib.4) 60.6 1.7 0.0 61.3 0.0 0.0 1.4) 0.1) 185.3 13.3 1.5 216.2 1.0 0.2) (34.743.0 2.0 0.0 0.5 0.0 (20.1 (31.7 875.0 89.0% (124.5) 0.9 0.0 (76.1) (1.0 (14.3 48.7 194.0 12.0 0.0 0.7 0.1% (45.6 726.0 15.9 59.0 0.1 143.0 (42.1 www.0 (1.0 0.0 (14.4 52.6) (36.6 0.6) (244.0 0.4) 33.2 0.0 326.251.0 115.0 (1.3) 245.0 1.0 19.0 (21.0 0.0 0.0 166.9 664.1 NS 1.9 0.4) 250.0% (45.8 (303.7 93.102.0 0.0 202.4 132.0) 10.5 1.0) (1.6% 1.0 0.0 0.4 27.2) (1.9 10.0 0.1% 0.937.0 (17.9) (242.3) 0.5 12.9% (108.8 287.9 3.0 0.8 1.3 202.5 376.443.847.0 0.5 0.8) 232.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 224 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 128.3) 0.3 4.0 0.4 106.0 (0.3) 282.6) 0.0 0.1 22.6 12.8 13.4 1.048.0 3.2 0.1) 0.0 227.291.017.8) 1.0 391.3 0.2 (3.0 184.2) NS 194.2 0.356.6) (1.0 0.8 0.3 (12.0 148.0 129.4 0.0 205.2) (1.5) 222.5 1.0 0.6 66.3 190.7) (31.0 0.822.4 0.0 0.0 0.2 15.0 0.9 0.8 111.6% (28.3) 63.2 (119.9 0.0 0.0 0.0 0.7) 144.0 0.0 1.0) (333.9 0.7) 47.644.0 0.0 0.4) 0.0 0.8) 0.125.6 26.0 39.6 0.0 82.0 49.0 0.0 0.0 29.0 367.8 0.6) 24.0 109.6) (485.7 23.7 1.0 166.9) NS (82.0 205.0 44.480.0 (4.3) (91.5 5.443.5) 0.6% (12.0 (85.9) (144.8 154.4 104.6 18.8) 147.2% (167.8 59.0) 0.1 (30.3 28.5% (116.3 2.0) 22.0 (6.6 0.0 0.9 21.5) (150.4 1.8 39.4 8.0) 197.9 NS 539.3) (144.8 295.0 0.0 0.8% 1.7) 246.6 0.0 0.6 799.0 0.0% (58.1) (383.1 0.0 99.0 50.1 NS (35.0 0.2 NS 0.0 (8.7 76.4 4.4 843.0 0.3) NS (241.0 39.6 0.8) 74.5 (0.500.7) 12.2) 0.1 (5.0 2.1 38.0 0.0 60.1 4. [inc.6 786.0 63.3 (1.0 39.9 90.1) (86.0 0.0 145.5) 89.0 0.6 -35.6 0.230.5 23.7 299.2 11.0 97.2% 801.0 174.6) 109.January 2011 GERMANY Smaller Companies Review Q-CELLS FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.7 0.375.3 106.5) 0.0 197.2) 0.0 (485.0 166.0 0.0 0.2) (517.0 144.4 1.6 0.6) 0.8) 129.6) 0.1 0.356.0 0.0 186.0) 0.8) (195.0) 0.6 0.1) (528.9) (0.9) (76.1 111.345.2 32.0) (76.5% (62.0 12.0 0.7) 205.0 0.6 0.6 426.0 (21.2 97.6) (44.0 0.4 1.2 28.6 36.0 (1.0 (8.1% (138.7% 0.4 1.0 0.8 13.0 0.0 237.0 166.148.4 894.7 0.5) 132.0 12.8 5.5 0.5) 0.0 0.9 503.0 416.3 45.0 0.7% (93.0 0.9) 99.7 68.8% (33.8 (5.0 0.5) (348.1 12.0 0.0 0.6 488.2 0.7) 170.0 14.0 0.1% (109.2 0.0 0.7) (1.4% (99.385.0 29.248.9) NS 376.148.4 32.7) 0.0) 0.0 0.0 0.3) (937.3 0.0 (85.3) (109.1 NS 0.0 0.7) 0.2% (43.0 68.0 88.7 17.5 80.8 0.9% 0.9) (381.3 0.6% (17.8) (76.0 0.4) (421.4) 228.3 97.8 12.6 1.1) (196.375.0 0.4) 34.6 0.4 0.4 (40.9 127.4) 0.0 0.4 93.0 22.0 0.6 366.5) (1.6 (1.8) 0.cheuvreux.6) (307.0 (5.3% (131.8 0.0 13.9) NS 0.8) 170.452.0 190.9 144.0 89.4 913.3) (175.1) (4.0 0.2) 7.2% (52.0 33.3 0.1) (907.0 1.4 99.0 0.500.4 108.2 (29.4) (570.0 0.3 0.143.7 0.

8 1.3 0.2 NS NS 8.6 10.2 63.9% 15.85 34.4 1.9 NS NS NS NS 2. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.6 2.532 117.3 16.12 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.9 17.9 285.3 0.5 NS 0.000 117.9 10.643.94 23.89 25.532 0.2 1.3 26.0 1.8 NS 1.532 117.00 1.730 74. reported % Change 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 0.0 17.6 10.3 0.000 117.6 295.7 46. restated EV/EBITA.532 0.8 22.2 38.3 15.2 NS 0.0 26.00 0.6 15.259 0.10 9.6 38.8 0.01 19.000 74.9 11.0 4.6 25.2 26.59 2.3 0.532 0.0 26.857 0.13 1.00 0.0 NS 0.9 271.0 NS NS NS NS 22.2 13.6 12.98 28.5 0.00 0.515.0 18.00 0.00 1.532 117.44 12.80 108.4 0.0 NS NS 2.5% 7.7% 1.7% 0.4 0.0 (2.3 0.4 32.4 0.40 28.259 111.0 39.0 0.54 7.00 1.0 15.2 9.00 0.3 0.76 48.0 NS NS NS NS NS 0.9 NS NS NS NS NS - 45.62 21.1 20.0 21.8 8.89 16.1 25.1% 5.17 56.9 7.7 27.2% 6.9 10.0 1.43 2.2 2.00 0.2 8.532 0.0 NS NS 24.6 0.9 14.2 1.15 No.3 0.2 0.7 10.9 0.3% 1.360.9 273.0 1.63 27.62 21.049.50 34.000 117.31 2.1 0.2 73.0 14.6% 1.0 1.00 0.8 2.0 0.00 1.0 8.8 NS 6.2 NS 0.00 0.03 23.6 68.9 0.1 7. adjusted Av.57 98.2 1.0 0.4 1.0 5.0% 6.1 10.827 73.6 NS 1.1 16.com .75 24.619.51 13.4 1.5 1.51 NS 0.48 33.6% 1.8 10.81 2.294.00 0.7 0.1 12.816.30 140.0 NS NS NS NS 1.7 0.7 273.6 NS 0.0 9.4 0.76 48.30 2.000 117.3% (11.0 7.07 48.7 23. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.6% (0.6% 0.8 5.0 16.532 0.1 13.cheuvreux.1 1.12 0.1 11.2 0.54 NS 0.00 0.4 1.3 24.6 NS 0.54 NS 1.2 0.43 124.9 26.7 25.54) NS (0.7 42.8 19.38 23.9 3.000 111.0 NS NS 3.9 2.4 14.7 9.33 2.9 0.3 2.1 13.0 18.97 5.1 27.33 2.6 6.6 1.0 7.8 1.6 4.0 380.29 34.30 140.00 1.33 2.54) NS (11.7 34.05) 99.0 NS NS 27.52 14.01 62.7% 1.73) NS 6. number of shares.0 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.3% 16.2 2.30 100.1 3.641.33 - - 1.5 4. restated 225 www.3 3.5 8.2 0.21 97.5 100.6 45.64 NS 4.264.6 NS 5.7 2.000 117.0) 2.4 0.2 23.7 42.000 - 24.9 21.532 117.2 52.3 3.000 73.4 0.9 17.2 4.4 0.4 8.95 64. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.0 3.2 23.00 11.827 0.7% 0.6 12.818.4 2.7 7.05) 99.5 1.1 10.00 (9.51 NS 0.2 14.January 2011 GERMANY Smaller Companies Review Q-CELLS FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.857 100.00 0.6 NS 6.2 16. of shares.0 3.00 0.5 15. adjusted Treasury stock.3 1.532 117.60 102.0 73.5 2.730 0.7 0.8 0.7 0.

4% 1.2% 36. universities. 164.3 94.3 13. but ~3ppt of the growth was attributable to positive FX effects. growth of ~11% in Q2 after a sluggish start in Q1 (-1%). adjusted Daily volume EUR1786m EUR517m EUR1628m 11.0 104. growing just +3.0 144.2%).2 Disclosures available on www. Rolls-Royce Shareholders Founding Shareholders 71.7 16.9% (gross margin 63.4 5.8 Q 226 www.3) (1. Whilst Rational quickly restored its outstanding margins already in 2009. schools.3 18.1 Net debt/EBITDA (x) (1.3 16.8 4.0 144.0 84. was down from the exceptionally high level in Q3-09 but was a still very high 29.DE Bloomberg: RAA GR Great company but expensive Q EUR157.4 108.0 164. of shares.00 Target price (6 months) Rational Reuters: RAAG. Outlook – structurally a 2-digit grower.0 124.10m Performances 1 month 3 months 12 months -4.com 2012E Attrib.0 25.6 ROCE (%) 87.0) (1.0 104. but some potential speed bumps again in 2011 Q We remain convinced that Rational can return to double-digit revenue growth in 2011E (est. Free Float 28. which we estimate comprise ~40% of group sales.7% jump. RoW – down 4. There is risk to this assumption.0 01/01 24.0 03/02 06/03 09/04 12/05 Price/M DAX 03/07 07/08 Sector focus Sector Top Picks Least favoured ABB.4% 2009 2010E 2011E P/E (x) 20. Furthermore.0 3.7 4. Asia – still sluggish. 2) increasing market penetration of the VarioCooking Center (VCC) and 3) Rational's investment in increasing its sales and distribution capacity by ~15% focused mostly in emerging market countries.8% -11. Relative perf.January 2011 GERMANY Smaller Companies Review MACHINERY 3/Underperform Rating -1.7%.05 Price (07/01/2011) Recent developments – great margins but sales still soft We downgraded Rational to 3/Underperform for valuation reasons following the Q3-10 results – which were broadly in line with our expectations. The EBIT margin. This latter risk applies especially to Europe.0 3.3% EUR155.3 21.com (49) 69 47 89 75 25 10/09 . EPS CAGR 2010-12E 14%) driven by 1) continued gradual macro recovery. SIEMENS AG Alstom.0 44.0 84. FCF yield (%) 6.cheuvreux. Americas – a 26.0 3.4%.0 24.9% -5.0 44.com Q 01/11 Price Craig ABBOTT Research Analyst cabbott@cheuvreux.8 11. however. Stock data Market capitalisation Free float Enterprise value No.1%. where austerity measures are beginning to take their toll.3) (1. Europe ex Germany – up 11. we assume that the nextgeneration SelfCooking Center (SCC) will be launched in 2011 considering that historically the product introduction cycle has been seven years (the first generation SCC was launched in Spring 2004). (x) 12. its top-line growth has actually remained less dynamic in 2010 than we had anticipated.37m EUR 1. This marked a clear slow-down from the rather robust FX-adj.0 64.1 15.4 EV/Capital empl.5%. as expected.5% Absolute perf. Nexans. prisons).0 124.0 17.8 99. EADS.4) Yield (%) 3. Another risk in 2011 could be potential capital spending cutbacks amongst public institutions (such as hospitals.1% 6. Sales growth by geographic market was as follows: Germany – slowed to 2.5 EV/EBITDA (x) 12.0 64.2%. since the company can neither confirm nor deny – for commercial reasons – whether the next generation launch will actually be in 2011.6%.cheuvreux. Reported sales in Q3-10 were up 9.

of which ~9% are in USD and ~8% in GBP. which is based on the same intelligent cooking technology as the SelfCooking Center (SCC) but covers all non-oven-based cooking applications that require direct contact with a heated surface. and given its defendable market positioning. however. 22. The forecast growth rates. Q With the VarioCooking Center (VCC) product line. Therefore. Its competitors are private companies some of whom are subsidiaries of large conglomerates such as Convotherm (Manitowoc).5% Q Terminal EBIT margin 26% There are no directly comparable listed peer companies for Rational. 13% in Asia and 7% in the Rest of the World. with an estimated global market share of 53%.5x compared with EPS growth of 24. Lainox (ALI Group) and Eloma (ALI Group) which we do not consider relevant for a peer multiple comparison. however. . Our main assumptions are: Q WACC of 9% (99% equity weighted) Q Terminal growth 2.1%. one-technology strategy. Rational operates one of corporate Germany's premier business models. 50% in the Rest of Europe including Eastern Europe.2x. high margins and cash conversion rate. As a result. Q Investment case Without a doubt. Growing global footprint Rational generates 17% of its sales in Germany. Some 32% of sales are non-euro based. We currently forecast EPS growth for 2010E/11E/12E of 10. 28. NOPLAT ROCE ~40%). The FCF yield and DPS also do not suggest further multiple expansion. Following the shares' phenomenal performance through mid-summer 2010. Electrolux (Zanussi).2%/12. The company's 30-year track record has been built purely organically. unless Rational starts to report a significant acceleration in its top-line growth. 13% in the Americas.1x and 23. which may reduce capex budgets „ Very strong balance sheet Exposed to contraction in capital spending „ Opportunities Threats „ An estimated 75% of its potential market (for the SCC ovens alone) is still untapped „ The ultimate market potential of the VarioCooking Center (VCC) is similar to that of the SCC „ Exceptionally high margins/ROCE may attract fresh capital to the industry FX exposure. its multiples (P/E and EV/EBITDA) are back to historical highs seen during the high-growth period of 2004-06. The introduction of the combi-steamer oven technology 30 years ago created a new investment cycle in the catering/gastronomy industry. the shares clearly deserve a premium rating. Rational now addresses 100% of the professional cooking equipment market. financed primarily through internally generated cash. are markedly lower. putting us 3% to 6% above consensus. its balance sheet is very strong with a year-end (09) net cash position of EUR102m and no goodwill. The average forward P/E multiple in 2005/06/07 was 23.January 2011 Q GERMANY Smaller Companies Review Company profile Q World market leader in thermal cooking applications Rational is the world market leader in advanced thermal cooking technology.9%/15%.1% and 18.com Valuation Our target price of EUR155 is DCF-based. Rational's profitability is outstanding (EBITDA margin ~30%.cheuvreux. further multiple expansion from these levels is unlikely. „ Increased penetration of fastfood chains „ 227 www.5%. Q Q SWOT analysis Strengths Weaknesses Dominant market leadership with an estimated 53% share of the addressable world market „ Revenues comprise mostly new equipment sales „ Relatively low share of recurring revenues (<20% of sales) „ An estimated 5-year technological lead over its competitors „ „ High share of public customers (~40%). Q Strategic focus on one technology yields high profitability Due to its dominant market position and focused.

cheuvreux.9 0.0% 314.4 282.6) NS 83.6) 46.1 (134.3) NS 109.0 3.2) (11.3% 381.4 11.8) 0.9 61.7 0.5 23.8 41.6% (5.2% (10.4 0.0 0.0 0.4 11.7 81.0 2.6% (76.6) (117.0 92.0 (22.9 18.1) (148.4 27.1 23.4) NS 115.3) (161.0 53.6 0.6 0.0 0.7% (7.0 0.7 3.0 1.0 96.0 0.0 0.4 15.0 (56.9% 0.0 0.6 56.5) NS 121.1 104.0 0.0 (33.6% 8.0 0.0 0.2) NS 72.4 17.0 0.3% (7.8% (4.6 0.0 0.3% (4.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.7 20.2 0.8% 0.2 0.0 90.7 20.0 0.0 0.1 -10.0 80.0 0.1 20.2 0.0 0.4 0.0 0.0% 342.1) 0.2 19.9 81.7 97.7 0.1) 97.0 0.0 61.5 0.5 8.0 0.3) 83.7 105.0 (0.3 0.3) NS 107.0 44.0 0.9) 0.0 0.0 (31.3 23.0 0.8 (40.5 18.0 0.6% 283.8 (2.0 (0.7 0.6) 55.0 28.0 3.8 0.0 0.0 0.8) 0.2 0.0 66.2) 0.3 (18.0 0.9 225.5) 0.0 0.0 72.0 0.6 19.7 18.6) (4.2 0.0 0.0 61.0 0.2) 0.0 74.4) 0.5 0.0 0.0 34.0 0.3 9.1 83.0 0.7 27.0 110.0 46.0 0.1 3.1) 0.0 0.2 0.2 (31.3) (14.1 0.5 20.0 0.4 www.8 0.0 0.6 (185.7) (175.7 107.0 83.0 83.0 (33.1 0.7 (33.0 0.4 1.0 0.8) 136.0 0.0 0.0 (1.6% (63.5 14.8 (8.4% (9.1 0.9% (9.0 0.0 0.3) 0.6% 0.0 0.0 (32.9 0.4) (26.9 0.1 0.6 134.2 10.0 (1.4) 2.1% 0.3) 0.5 51.9 0.0 43.3 0.0 0.6 11.8) (186. [inc.0 0.0 16.2) (0.4 15.5 17.1 0.0 (28.0 0.0 0.7) (4.2 15.7 0.0 59.0 0.0 126.5) 40.2 9.0 59.0 (24.6 14.4 0.3) NS 122.3 0.3) (7.1) (6.6) 118.7% 246.0 122.5 26.2 15.0 106.4 -8.6 18.1 78.0 0.7 0.7) (1.2 0.5 47.0 0.6% (7.8) 0.4 0.January 2011 GERMANY Smaller Companies Review Rational FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.9) 0.8) 0.3) 67.6 26.4 124.6) 99.3) 37.0 74.6 1.1% (57.9% (72.2 0.0 96.0 54.1% (81.5 66.0 61.3) 92.3 46.9 1.8) 0.8 9.8 18.3) 71.1 5.2) 98.2) (5.0 0.0 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 228 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 221.0 0.8 15.4) 0.0 0.0 91.1) 0.7 1.1) 126.2 28.0 0.9) 56.8 0.4) (221.0 74.1 3.2) 5.0 51.7 24.6 (2.0% 0.1 0.0 0.3 0.0 54.0 0.6 0.0 0.0 0.com .9 0.3 251.0 42.9 8. for exceptional items Net attrib.4 18.0 61.3 0.0 0.1 14.9 7.5) 71.0 51.5 0.0 90.5) 42.0 83.0 96.4) 0.3% (68.1 8.0 71.0 0.7) NS 45.1% 338.9% (44.3 0.3 0.0 (32.6 10.0 0.4 (0.8% (70.4 18.5% (7.1 2.4 -7.6 0.4) (121.9) 0.0 15.4 16.4) 107.9 8.6) 90.5 (0.0 61.7 0.7 14.0 53.0) (141.1) 0.0 0.0 0.7% (27.0) 0.2) 90.4% 336.0 (34.6 0.0 2.1% 38.7 15.5 115.6) 110.5 0.0 19.7) 0.0 0.8 (5.9 0.0 51.9 0.5% (1.0 0.8) (5.0 0.4 (157.0 0.0 (56.8) 0.9 0.5) 0.6) 59.8% 4.6 45.8 16.9) 32.4 22.8) 84.1 18.5 0.2 10.0 (59.8 0.0 0.0) 0.0 0.0 0.0 36.1 1.0 0.2 (32.4) 34.3 0.9% 4.0 (26.0 0.7 17.8) 0.1% (53.3 15.1 (0.0 (39.0 67.5 0.0 2.7 0.4% (4.3 15.4 (44.0 83.3% (7.2% (5.4 69.6 19.8) 0.0 67.0 0.0 (25.3 0.0 0.0% 0.1 3.0 (0.9 7.7 0.1) 0.4 0.5 121.0 0.2 109.0 0.8 19.4 91.0 99.0 (65.6 0.9 33.8% 439.2 0.0 0.0 (13.0 (20.0 51.4 0.7 12.5% (0.0 0.2% (5.7 0.4) 0.0 61.4) 0.2 14.8) 0.3) (180.9 36.5) 74.2% 0.9 0.0 67.3) 80.0 68.3 0.1 4.0 (21.0 190.5 (1.6 12.3) NS 99.8 (102. profit [loss].0 0.0 3.1 0.6 18.0 (29.0 0.6 0.

January 2011

GERMANY

Smaller Companies Review

Rational
FY to 31/12 (Euro)

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

Per Share Data (at 7/1/2011)
EPS before goodwill
% Change
EPS, reported
% Change

3.25
34.0%
3.00
27.6%

3.82
17.6%
3.73
24.3%

4.56
19.4%
4.56
22.2%

5.37
18.0%
5.37
18.0%

5.43
1.0%
5.43
1.0%

5.92
9.1%
5.92
9.1%

6.53
10.3%
6.53
10.3%

7.36
12.8%
7.36
12.8%

8.47
15.1%
8.47
15.1%

Goodwill per share
Dividend per share
Cash flow per share
% Change
Book value per share

0.25
4.99
3.40
25.2%
4.2

0.09
3.00
4.11
20.7%
4.9

0.00
3.75
4.93
19.9%
5.5

0.00
4.50
5.84
18.6%
6.4

0.00
1.00
6.07
3.9%
10.8

0.00
3.50
6.59
8.6%
13.3

0.00
5.00
7.19
9.2%
14.8

0.00
5.75
8.04
11.7%
16.4

0.00
7.20
9.36
16.4%
17.7

No. of shares, adjusted
Av. number of shares, adjusted
Treasury stock, adjusted
Share Price [Adjusted]
Latest price
High
Low
Average price

11.370
11.370
0.000

11.370
11.370
0.000

11.370
11.370
0.000

11.370
11.370
0.000

11.370
11.370
0.000

11.370
11.370
0.000

11.370
11.370
0.000

11.370
11.370
0.000

11.370
11.370
0.000

68.46
69.35
43.96
55.28

112.27
112.27
67.75
87.74

141.15
171.00
100.81
135.83

140.00
164.68
122.00
144.41

84.40
145.89
68.38
115.98

118.50
120.95
56.01
84.79

165.40
174.45
106.00
135.28

157.05
163.85
155.95
159.01

157.05
-

778.4
719.3

1,276.5
1,245.0

1,604.9
1,565.0

1,591.8
1,548.1

959.6
928.9

1,347.3
1,245.7

1,880.6
1,746.8

1,785.7
1,628.8

1,785.7
1,600.7

22.8
21.1
20.1
4.9
16.4
16.1
7.3

30.1
29.4
27.3
1.2
NS
17.2
2.7

31.0
31.0
28.7
2.6
NS
18.8
2.7

26.1
26.1
24.0
2.9
NS
15.9
3.2

15.6
15.6
13.9
4.2
7.8
7.9
1.2

20.0
20.0
18.0
6.0
8.9
12.0
3.0

25.3
25.3
23.0
3.8
11.2
17.3
3.0

21.3
21.3
19.5
4.4
9.6
16.1
3.7

18.5
18.5
16.8
5.1
8.9
15.2
4.6

12.1
13.1
3.24
18.7

17.4
18.5
5.05
26.8

18.4
19.4
5.52
28.1

15.8
16.7
4.60
23.5

10.3
11.2
2.71
13.5

12.7
13.8
4.0
16.6

16.3
17.5
5.2
21.4

13.8
14.7
4.3
18.1

11.8
12.7
3.6
15.4

NS
NS
26.9
24.8
15.4
5.0
NS
166.4

NS
NS
29.1
27.4
17.2
3.4
NS
80.4

NS
NS
29.9
28.4
18.3
3.4
NS
82.3

NS
NS
29.1
27.5
18.2
3.5
NS
83.7

NS
NS
26.4
24.2
18.0
2.9
NS
18.4

NS
NS
31.2
28.8
21.4
3.0
NS
59.1

NS
NS
31.6
29.4
21.9
3.2
NS
76.6

NS
NS
31.0
29.0
21.9
3.4
NS
78.1

NS
NS
31.0
28.7
21.9
3.8
NS
85.0

122.8
77.3
39.2
39.2

93.0
58.6
61.6
61.6

96.9
61.8
64.9
64.9

95.0
62.1
65.2
65.2

70.5
52.1
59.5
59.5

87.3
65.2
42.9
42.9

94.8
70.6
39.5
39.5

99.4
74.0
39.8
39.8

108.4
80.8
41.0
41.0

Market capitalisation
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
Attrib. FCF yield [%]
P/BV
Enterprise value / Op CE
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
EV/Debt-adjusted cash flow
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Capital turn [Sales/ Op. CE]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
Return on equity, restated

229

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

MACHINERY

2/Outperform

Rating

+23.9% EUR75.00

Target price (6 months)

Rheinmetall

Reuters: RHMG.DE Bloomberg: RHM GR

Need to defend against budget cuts
Q

Recent developments – 2010 guidance not that bad for Q4

RHM published Q3-10 numbers in mid-November: Defence Q3-10
sales were up +24% y-o-y and +21% q-o-q to EUR502m. Q3 Defence
order intake was EUR384m, -36% q-o-q, translating to a book-to-bill
ratio of 0.76.
Although this was disappointing at first sight, management confirmed in
the call that the weak Q3-10 order intake in Defence should not be seen
as a trend, that it was fully in line with internal planning, and that it is not
an indication of structural weakness going forward. RHM stuck to its
FY10 guidance for a book-to-bill ratio > 1.0, which implies Q4-10 order
intake of at least EUR600m, up +56% q-o-q. The Defence EBIT margin
was 10.4% (est. 10.2%). The order backlog now stands at EUR4.88bn.
Q3-10 Automotive sales were up +24% y-o-y (vs. Triad market light
vehicle production growth of +10% y-o-y) and down -4% q-o-q to
EUR490m, with an EBIT margin of 4.1%.
Following Q3-10, RHM expects full year group sales of EUR3.9bn and
group EBIT of EUR270-280m, with Defence sales of >EUR2.0bn and
EBIT >EUR215m and Automotive sales of EUR1.9bn and EBIT of
EUR70-80m. This guidance appeared a little disappointing at first sight,
as RHM had not disclosed before the conference call that it already
included an EUR10m restructuring provision for its Italian Auto
operations. Thus, Q4 for Automotive does not look as bad as the initial
guidance would have indicated, and the underlying EBIT margin in
Automotive should reach 4.5% for 2010E or 5.7% in Q4-10E,
influenced in part by positive mix effects in Q4.
Q

EUR60.55

Price (07/01/2011)

Outlook – Defence growth driven by internationalisation

Although RHM's Defence division will be affected by budget cuts, we
expect it to remain relatively resilient given its successful
internationalisation strategy. While we expect budgets within NATO to
be under pressure, growth outside NATO is expected to be strong, and
RHM continues to predict healthy 2011-12 Defence budget CAGRs for
Australia (+8%), Brazil (+8%), India (+10%), Middle East (+6%), and
South Africa (+5%).
RHM has adjusted to the internationalisation trend at an early stage:
since 2007, eight of its 11 acquisitions were outside Germany, and
RHM predicts a mid-term international order intake ratio of 80% (9M10: 75%). Its recent EUR87m order intake from Canada offers an
example of how RHM is becoming less dependent on its German
domestic market. The contracts include: 1) EUR70m to supply grenade
launcher systems and ammunition. Under this contract RHM will supply
304 automatic grenade launchers by January 2012. In addition, it will
supply 250,000 rounds of 40mm practice and service ammunition. 2)
EUR17m to modernise and overhaul 42 Leopard battle tanks, which will
be taken over by the Canadian army from the Dutch army by the
beginning of 2012.

Stock data
Market capitalisation
Free float
Enterprise value
No. of shares, adjusted
Daily volume

EUR2398m
EUR2398m
EUR2835m
39.6m
EUR 12.69m

Performances
1 month 3 months 12 months
11.3%
30.8%
38.2%
9.6%
14.9%
7.5%

Absolute perf.
Relative perf.

68.9

68.9

58.9

58.9

48.9

48.9

38.9

38.9

28.9

28.9

18.9

18.9

8.9
01/01

8.9
04/02

08/03

11/04

01/06

Price/M DAX

04/07

07/08

Sector focus
Sector Top Picks
Least favoured

ABB, EADS, SIEMENS AG
Alstom, Nexans, Rolls-Royce

Shareholders
Free Float 100.0%

P/E (x)
EV/EBITDA (x)

2009

2010E

2011E

NS

13.9

10.8

8.5

11.4

6.4

5.3

4.2

Q

230

www.cheuvreux.com

2012E

Attrib. FCF yield (%)

8.2

NS

7.8

11.7

Net debt/EBITDA (x)

(0.1)

(0.2)

(0.4)

(0.7)

Yield (%)

0.7

2.2

2.6

3.6

ROCE (%)

0.6

11.6

14.5

18.0

EV/Capital empl. (x)

1.0

1.2

1.1

1.0

Disclosures available on www.cheuvreux.com

Q

01/11

Price

Hans-Joachim HEIMBUERGER
Research Analyst
hheimburger@cheuvreux.com
(49) 69 47 897 540

10/09

GERMANY

January 2011

Q

Smaller Companies Review

Company profile

Q

Focus on Defence and Automotive
Rheinmetall was founded in 1889 as Rheinische Metallwaren- und
Maschinenfabrik AG. In recent years, the company's strategy has
focused on two key industries: Defence and Automotive, with all
non-core businesses being divested.
Q

Automotive mainly exposed to Europe
The Automotive business, parented by Kolbenschmidt Pierburg AG
with its Pistons, Air Supply, Pumps, Aluminium Technology, Plain
Bearings and Motor Services divisions, specializes in modules and
systems relating to the engine. Geographically, Germany is this
division's largest individual national market accounting for ~32% of
divisional sales, followed by the rest of Europe (~44%) and North
America (~10%). Its largest customer is VW/Audi, with ~17% of
divisional sales, followed by Ford with ~11%.
Q

Q Leading supplier in the market for land forces equipment
Rheinmetall's Defence business (56% of 2009 group sales)
encompasses land systems, air defence systems, weapon &
munitions and defence electronics. The company is one of Europe's
leading suppliers and foremost specialists in the market for land
forces equipment. Its top customer is Germany with ~36%, followed
by the rest of Europe with ~30%, North America with ~10% and Asia
with ~16%.

Q

Strengths
„

DCF: We incorporate sales and EBITDA CAGRs
of 2.4% and 2.9% respectively for 2010-19E, a
WACC of 8% and a terminal growth rate of
1.5%. Based on these parameters, our DCF
model yields a fair value of EUR74 per share.
Multiple comparison: Rheinmetall trades at a
21% discount to its Defence peers and at a 4%
discount to its Automotive peers based on
2012E EV/EBITDA. However, a peer group
valuation has limited applicability for Rheinmetall
in its current situation, as it fails to capture the
company's superior growth opportunities in
Defence and the fact that Automotive completed
a major restructuring programme in 2009 that
could – provided market conditions remain
positive – lead to new peak margins for the
division in 12E.
SOP: Given that Rheinmetall consists of two
very different business areas, we also run a SOP
valuation. Based on 11E estimates this approach
indicates a FV of EUR73 per share applying an
EV/Sales multiple of 0.95x for Defence and 0.4x
for Automotive.

Q

SWOT analysis
Weaknesses

Automotive: top three player

„ Defence:

Defence: leading supplier to
German Bundeswehr; improved
profitability in defence due to
internationalisation; highly
profitable and growing
ammunitions business

sales

Opportunities

Threats

„ Rheinmetall

is an active
consolidator in the European
defence industry

„

„ Automotive:

„ Defence:

„

partly project-driven

„ Automotive:

structurally low

margins

Automotive: concentration on
few customers with large
individual sales contribution

further cost

reductions

vulnerable to budget

cuts

„ Defence:

high market entry
barriers, further successful
internationalisation of the sales
base

231

www.cheuvreux.com

Valuation

Investment case

Defence outlook not that bad: Although
Rheinmetall's Defence division will be affected
by budget cuts, we expect it to remain relatively
resilient given its successful internationalisation
strategy: While we expect budgets within NATO
to be under pressure, strong growth outside
NATO is expected. Rheinmetall has adopted to
the internationalisation trend at an early stage:
Since 2007, 8 of its 11 acquisitions were outside
Germany, and Rheinmetall guides for a mid-term
international order intake ratio of 80% (9M-10:
75%).
Automotive is likely to reach its peak sales of
the last cycle, i.e. EUR2,2bn in 2007, in 12E with
a new peak EBIT margin of 7-8% compared to
just 5.6% in 2007. Higher profitability is driven
by a) strong restructuring efforts (B/E at
EUR1.55bn of sales); b) globalisation (market
entry in India and China, successful JVs); c)
innovation (e.g. broad range of EU-5,6 products
available); and d) portfolio effects (Pierburg,
Bearings and Aftermarket growing faster than
Pistons and ATAG; shift from commodity to
high-tech products).

January 2011

GERMANY

Smaller Companies Review

Rheinmetall
FY to 31/12 (Euro m)
Profit & Loss Account
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
Goodwill amortisation before OP
Goodwill amortisation [impairment test]
Non recurring operational items
EBIT
Net financial items
Non recurring financial items
Other exceptional items
Tax
Associates [contribution]
Discontinuing activities
Goodwill amortisation
Net profit [loss] before minorities
Dividend to preferred shares
Minorities
Net attributable profit [loss]
Restatement [impairment test]
Adj. for exceptional items
Net attrib. profit [loss], restated
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Financial investments
Net buyback of treasury shares
Disposals
Dividend paid
Capital increase
Other cash flow
Dec. [inc.] in net debt
Balance Sheet
Shareholders' equity [group share]
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
Working capital requirement
WCR as a % of sales
Capital employed

232

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

3,454.0
-18.7%
(992.0)
(2,078.0)
384.0
-11.7%
(157.0)
227.0
11.3%
0.0
0.0
0.0
227.0
(55.0)
0.0
0.0
(52.0)
(2.0)
0.0
0.0
118.0
0.0
(5.0)
113.0
0.0
0.0
113.0
79.4%

3,454.0
0.0%
(992.0)
(2,078.0)
384.0
0.0%
(157.0)
227.0
0.0%
0.0
0.0
0.0
227.0
(55.0)
0.0
0.0
(52.0)
(2.0)
0.0
0.0
118.0
0.0
(5.0)
113.0
0.0
0.0
113.0
0.0%

3,626.0
5.0%
(1,038.0)
(2,224.0)
364.0
-5.2%
(151.0)
213.0
-6.2%
0.0
0.0
0.0
213.0
(51.0)
0.0
0.0
(41.0)
2.0
0.0
0.0
123.0
0.0
(3.0)
120.0
0.0
0.0
120.0
6.2%

4,005.0
10.5%
(1,052.0)
(2,522.0)
431.0
18.4%
(168.0)
263.0
23.5%
0.0
0.0
0.0
263.0
(57.0)
0.0
0.0
(63.0)
7.0
0.0
0.0
150.0
0.0
(5.0)
145.0
0.0
0.0
145.0
20.8%

3,869.0
-3.4%
(1,079.0)
(2,380.0)
410.0
-4.9%
(166.0)
244.0
-7.2%
0.0
0.0
0.0
244.0
(62.0)
0.0
0.0
(49.0)
2.0
0.0
0.0
135.0
0.0
(1.0)
134.0
0.0
0.0
134.0
-7.6%

3,420.0
-11.6%
(1,068.0)
(2,174.0)
178.0
-56.6%
(165.0)
13.0
-94.7%
0.0
0.0
0.0
13.0
(61.0)
0.0
0.0
(6.0)
2.0
0.0
0.0
(52.0)
0.0
(6.0)
(58.0)
0.0
0.0
(58.0)
NS

3,975.0
16.2%
(1,128.0)
(2,400.1)
446.9
151.1%
(172.0)
274.9
NS
0.0
0.0
0.0
274.9
(55.0)
0.0
0.0
(57.2)
9.0
0.0
0.0
171.6
0.0
0.0
171.6
0.0
0.0
171.6
NS

4,600.0
15.7%
(1,174.8)
(2,895.2)
530.0
18.6%
(174.0)
356.0
29.5%
0.0
0.0
0.0
356.0
(46.5)
0.0
0.0
(85.2)
6.0
0.0
0.0
230.3
0.0
(9.0)
221.3
0.0
0.0
221.3
29.0%

5,200.0
13.0%
(1,233.6)
(3,329.1)
637.3
20.2%
(182.0)
455.3
27.9%
0.0
0.0
0.0
455.3
(39.1)
0.0
0.0
(114.0)
6.0
0.0
0.0
308.2
0.0
(25.0)
283.2
0.0
0.0
283.2
28.0%

248.0
-17.1%
(16.0)
(183.0)
0.0
49.0
(10.0)
0.0
0.0
(26.6)
0.0
402.6
415.0

248.0
0.0%
(16.0)
(183.0)
0.0
49.0
(10.0)
0.0
0.0
(26.6)
0.0
402.6
415.0

279.0
12.5%
(58.0)
(765.0)
0.0
(544.0)
(41.0)
0.0
0.0
(32.4)
0.0
438.4
(179.0)

312.0
11.8%
(119.0)
391.0
0.0
584.0
5.0
0.0
0.0
(36.0)
0.0
(593.0)
(40.0)

293.0
-6.1%
65.0
(298.0)
0.0
60.0
4.0
0.0
0.0
(46.8)
0.0
18.8
36.0

127.0
-56.7%
95.0
(91.0)
0.0
131.0
(6.0)
0.0
0.0
(46.8)
9.0
344.8
432.0

350.9
176.3%
(137.4)
(238.5)
0.0
(25.0)
0.0
0.0
0.0
(11.9)
(9.2)
210.5
164.4

423.1
20.6%
(61.8)
(165.6)
0.0
195.7
0.0
0.0
0.0
(51.5)
0.0
(11.4)
132.8

508.2
20.1%
(37.1)
(166.4)
0.0
304.7
0.0
0.0
0.0
(61.5)
0.0
76.1
319.3

828.0
47.0
514.0
397.0
151.0
17.3
1,937.0
357.0
60.0
1,052.0
110.0
0.0
358.0
10.4
1,937.0

828.0
47.0
514.0
397.0
151.0
17.3
1,937.0
357.0
60.0
1,052.0
110.0
0.0
358.0
10.4
1,937.0

894.0
43.0
519.0
434.0
205.0
21.9
2,095.0
365.0
74.0
1,057.0
151.0
0.0
448.0
12.4
2,095.0

1,014.0
43.0
522.0
422.0
236.0
22.3
2,237.0
391.0
93.0
1,046.0
146.0
0.0
561.0
14.0
2,237.0

1,059.0
59.0
523.0
410.0
205.0
18.3
2,256.0
419.0
111.0
1,092.0
142.0
0.0
492.0
12.7
2,256.0

1,070.0
64.0
610.0
502.0
(24.0)
NS
2,222.0
422.0
133.0
1,044.0
148.0
0.0
475.0
13.9
2,222.0

1,211.3
73.3
733.2
596.5
(101.2)
NS
2,513.1
422.0
122.9
1,120.6
148.0
0.0
699.6
17.6
2,513.1

1,379.0
84.4
693.1
644.0
(205.3)
NS
2,595.2
422.0
113.9
1,121.2
148.0
0.0
790.1
17.2
2,595.2

1,610.4
99.7
703.2
728.0
(458.6)
NS
2,682.7
422.0
99.9
1,119.6
148.0
0.0
893.2
17.2
2,682.7

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

Rheinmetall
FY to 31/12 (Euro)

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

3.20
82.7%
3.20
82.7%

3.20
0.0%
3.20
0.0%

3.42
7.0%
3.42
7.0%

4.14
21.1%
4.14
21.1%

3.88
-6.4%
3.88
-6.4%

(1.60)
NS
(1.60)
NS

4.33
NS
4.33
NS

5.59
29.0%
5.59
29.0%

7.15
28.0%
7.15
28.0%

Goodwill per share
Dividend per share
Cash flow per share
% Change
Book value per share

0.00
0.90
7.02
-15.5%
22.1

0.00
0.90
7.02
0.0%
22.1

0.00
1.00
7.95
13.4%
23.8

0.00
1.30
8.92
12.1%
26.9

0.00
1.30
8.48
-4.9%
28.1

0.00
0.30
3.50
-58.8%
26.7

0.00
1.30
8.86
153.2%
29.3

0.00
1.55
10.68
20.6%
33.3

0.00
2.15
12.83
20.1%
38.5

No. of shares, adjusted
Av. number of shares, adjusted
Treasury stock, adjusted
Share Price [Adjusted]
Latest price
High
Low
Average price

36.000
35.350
0.000

36.000
35.350
0.000

36.000
35.080
0.000

36.000
34.990
0.000

36.000
34.540
0.000

39.600
36.300
0.000

39.600
39.600
0.000

39.600
39.600
0.000

39.600
39.600
0.000

39.25
42.47
23.05
32.71

53.26
55.23
38.15
45.27

57.48
68.00
47.01
56.96

54.38
76.89
46.57
62.93

22.90
54.93
16.09
40.02

44.74
45.67
19.01
32.47

60.17
60.41
41.79
48.91

60.55
60.98
57.06
59.95

60.55
-

Market capitalisation
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
Attrib. FCF yield [%]
P/BV
Enterprise value / Op CE
Yield [%]

1,399.6
1,954.6

1,709.9
2,264.9

2,781.8
3,424.3

1,904.1
2,581.6

791.4
1,383.3

1,771.7
2,026.4

2,382.7
2,866.7

2,397.8
2,835.1

2,397.8
2,706.0

12.3
12.3
5.6
3.5
1.8
1.1
2.3

16.7
16.7
7.6
2.9
2.4
1.2
1.7

16.8
16.8
7.2
NS
2.4
1.8
1.7

13.1
13.1
6.1
29.7
2.0
1.2
2.4

5.9
5.9
2.7
7.5
0.8
0.7
5.7

NS
NS
12.8
8.2
1.7
1.0
0.7

13.9
13.9
6.8
NS
2.1
1.2
2.2

10.8
10.8
5.7
7.8
1.8
1.1
2.6

8.5
8.5
4.7
11.7
1.6
1.0
3.6

5.1
8.6
0.57
6.5

5.9
10.0
0.66
7.8

9.4
16.1
0.94
10.6

6.0
9.8
0.65
7.1

3.4
5.7
0.36
4.1

11.4
NS
0.6
11.3

6.4
10.4
0.7
7.3

5.3
8.0
0.6
6.0

4.2
5.9
0.5
4.6

7.0
0.6
11.1
6.6
3.4
1.9
17.3
28.2

7.0
0.6
11.1
6.6
3.4
1.9
17.3
28.2

7.1
0.7
10.0
5.9
3.4
1.9
21.9
29.2

7.6
0.8
10.8
6.6
3.7
1.9
22.3
31.4

6.6
0.7
10.6
6.3
3.5
1.8
18.3
33.5

2.9
NS
5.2
0.4
NS
1.6
NS
(18.8)

8.1
NS
11.2
6.9
4.3
1.7
NS
30.0

11.4
NS
11.5
7.7
5.0
1.9
NS
27.7

16.3
NS
12.3
8.8
5.9
2.1
NS
30.1

12.4
12.4
14.6
14.6

12.4
9.3
14.6
14.6

11.0
8.2
14.4
14.4

12.6
8.9
15.4
15.4

11.5
8.5
13.5
13.5

0.6
0.7
NS
NS

11.6
8.7
15.2
15.2

14.5
10.6
17.4
17.4

18.0
13.1
19.3
19.3

Per Share Data (at 7/1/2011)
EPS before goodwill
% Change
EPS, reported
% Change

EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
EV/Debt-adjusted cash flow
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Capital turn [Sales/ Op. CE]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
Return on equity, restated

233

www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

HEALTHCARE PROVIDERS & SERVICES

2/Outperform

Rating

+17.5% EUR19.00

Target price (6 months)

Rhoen Klinikum
Defensive growth at reasonable price +
potential M&A catalyst
Q

Recent developments – lack of M&A and healthcare reform

Rhön shares have underperformed significantly in the recent past,
especially since mid-summer 2010, due to a lack of M&A deal flow and
health care reform measures that have sparked downward estimate
revisions. Operationally, organic sales growth remained robust in 9M10, but due to higher material and personnel costs, the margin
progression has been slightly below our expectations. 9M-10 sales
were up 10.5% (organic +6%); EBIT increased nearly in line with sales
(+9.7%), resulting in an unchanged margin of 7.8%. EPS growth
(+11.6%) was broadly in line with expectations due to lower-thanexpected net financial expenses.
Q

Outlook – Marburg-Giessen: day of reckoning in 2011

Rhön refined its 2010 net income guidance to ~EUR145m (we estimate
EUR146.5m), which appears achievable given the seasonal strength of
Q4. For 2011, the Healthcare Ministry has agreed a 1.15% change in
the rate of average revenues and most likely a discount of 30% for
surplus treatment volumes (for treatments beyond the negotiated
increases per hospital), which is expected to generate ~EUR500m in
savings for the health insurance funds. Against this backdrop, Rhön's
2011 guidance calls for revenues of EUR2.65bn (+4%) and EBITDA of
~EUR340m (+/- 5%), implying a ~60bps increase in the EBITDA margin
to ~12.8% and net income ~EUR160m (+/- 5%). The biggest earnings
growth contributor in 2011 will be the Marburg-Giessen (M-G)
University Hospital. The new hospital at Giessen will be completed in
Q1 with the move scheduled for April/May. The company has been
adamant that it definitely expects M-G to generate the targeted 10-12%
EBIT margin from YE-12, implying potentially a >20% increase in group
EBIT by 2013 (vs. 2010) from the pick-up in profitability at M-G alone.
For 2011 the company feels "very comfortable" with consensus
expectations of an EBIT margin of ~5%. The margin rise at M-G will be
driven by headcount reduction post the move into the new hospital,
volume growth (rising patient numbers but also further increases in the
Case Mix Index), and patient flow efficiency gains. In 2010 Rhön made
only one very small acquisition, Salze Klinik, a geriatric hospital. Rhön
also says it is in talks with three potential acquisition candidates, and
management remains convinced that the pace of privatisations, despite
improving financials for many municipalities, will pick up in 2011.
Though many investors have been disappointed that the pace of deals
completed has not accelerated quicker – the only meaningful
transaction since the capital increase in summer 2009 was Medigreif,
price EUR110m – we certainly welcome the fact that management has
not risked overpaying for an acquisition simply to get a deal done.
Following a sharp under-performance in H2-10, the shares offer good
value, combined with a defensive growth element. A potential major
catalyst could be the privatisation of the Kiel-Lübeck University Hospital
should it be given the green light to proceed in 2011.

EUR16.17

Price (07/01/2011)
Reuters: RHKG.DE Bloomberg: RHK GR

Stock data
Market capitalisation
Free float
Enterprise value
No. of shares, adjusted
Daily volume

EUR2235m
EUR1776m
EUR2658m
138.2m
EUR 4.69m

Performances
1 month 3 months 12 months
1.4%
1.1%
-7.3%
-0.1%
-11.2% -27.9%

Absolute perf.
Relative perf.

23.9

23.9

21.9

21.9

19.9

19.9

17.9

17.9

15.9

15.9

13.9

13.9

11.9

11.9

9.9

9.9

7.9

7.9

5.9
01/01

5.9
03/02

06/03

09/04

12/05

Price/M DAX

03/07

06/08

Sector focus
Sector Top Picks

DiaSorin, Getinge, Orpea,
William Demant

Least favoured

Shareholders
Münch.Family 12.5%, Free float 87.5%

2009

2010E

2011E

2012E

16.0

15.5

13.1

11.0

EV/EBITDA (x)

9.1

8.7

7.2

6.2

Attrib. FCF yield (%)

NS

0.0

6.3

6.7

Net debt/EBITDA (x)

1.5

1.4

0.9

0.6

Yield (%)

1.7

1.7

1.9

2.3

ROCE (%)

9.8

10.3

11.4

12.7

EV/Capital empl. (x)

1.4

1.4

1.3

1.2

P/E (x)

Disclosures available on www.cheuvreux.com

Q

Q

234

www.cheuvreux.com

01/11

Price

Craig ABBOTT
Research Analyst
cabbott@cheuvreux.com
(49) 69 47 89 75 25

10/09

the pace of acquisitions in the German hospital industry did in fact accelerate in 2010 with some 14 transactions taking place. Rhön is also Europe's only major listed pure-play hospital operator – a uniqueness factor that should support its valuation.cheuvreux. Compared to public hospital operators. given the long-term nature of Rhön Klinikum's business model. We believe stocks that offer stable. „ Medium-term potential to enter foreign markets with similar structures (e. The company aims to raise its market share from ~3% today to >8% in the medium term. Q Acquisitive growth model focused on Germany Rhön operates solely in Germany and currently has no plans to expand abroad. „ Management's solid track record for acquisitions and restructuring. „ Foreign operators could enter the market. The pace of acquisitions is difficult to forecast. Furthermore. in our view. implementing its patient flow model and turning around their profitability. Q SWOT analysis Strengths Weaknesses Germany's largest listed and one of the top three private hospital operators. the turnaround in earnings at Marburg-Giessen alone should boost EBIT by 11% by 2012E.com Valuation Our target price of EUR19 is DCF-based – the most appropriate approach. „ www.g. . four different stages of care/accommodation. future healthcare reforms could put margins under pressure. considering that they are currently inflated by margins suppressed by its recent acquisition spree. Given its financial strength. We assume a WACC of 8. but from a medium-term perspective Rhön still has significant acquisitive growth potential. „ Pricing regulation. The privatisation process in the German hospital industry is set to continue as pressures on the public hospital sector. A potential major catalyst could be the KielLübeck University Hospital privatisation if approved. The company owns and operates 53 hospitals with a total capacity of ~16. Rhön's organic revenue growth should remain robust (3-5%). Q Investment case M&A catalyst to gradually emerge. Rhön generates significant cost savings through procurement. which has however laid the groundwork for earnings growth for the next 3-4 years. which reflects both organic and acquisitive sales growth (through 2015E). „ Greater margin drag from newly acquired clinics than in the past due to deteriorating profitability at public hospitals. somewhat limiting short-term visibility on the M&A pipeline.5% terminal growth. market share gains) and an increase in the proportion of higher yielding treatments (Case-Mix-Index). non-cyclical demand growth will begin to outperform again in 2011.000 beds. which is a very political process. Defensive growth qualities are still key. Our DCF model is based on our earnings model.5% and 1. Given the ongoing financial pressure on states and municipalities and the huge investment backlog in the public hospital sector – estimated to be ~EUR50bn – the pace of acquisitions is likely to continue to accelerate in 2011. will persist and probably intensified after the recent recession. Poland) „ 235 Tight supply conditions for specialist doctors may keep wage pressure high. with sales in 2010E of EUR2. „ Low visibility on timing of acquisitions. better coordination among staff and departments and. „ Opportunities Threats Significant acquisitive growth opportunities due to the privatisation process in the German hospital industry. lower staffing requirements. which suffers the effects of structural underinvestment.6bn and net earnings of ~EUR145m. Rhön still has significant acquisitive growth potential. driving up acquisition prices. „ Rhön's financial strength (especially after the recent capital increase) and management experience should enable it to remain a leading consolidator in the German hospital industry. over time.January 2011 Q GERMANY Smaller Companies Review Company profile Q Leading private hospital operator and consolidator Rhön Klinikum is one of three leading private hospital operators in Germany. driven by patient volume growth (shorter average duration. Q Its business model is based on acquiring ailing public hospitals. Rhön currently is in negotiations with 3 hospitals and claims that its M&A pipeline is beginning to fill. Although Rhön has only completed one very small acquisition since buying the Medigreif chain at the end of 2009. The company's multiples are not demanding.

0 0.7 12.8) 144.0 0.0 0.0 200.0 0.0 5.0 0.0% (12.5% (21.2) 0.1 (20.756.3% 0.3% 0.2 0.8) (584.4 365.8% (1.2) (155.0 0.1 6.1 2.3 1.2 419.8) 0.cheuvreux.6% (26.0 207.4) (122.2) (656.6 (11.6 0.0 343.7 1.9) (204.8) 207.3 26.9 223.7 41.5) 1.0 80.0 (30.0 0.754.4) 213. for exceptional items Net attrib.038.4) 0.933.8 1.0 0.0 29. profit [loss].0 182.0 (120.0 (34.349.749.0 0.0 0.0 (3.0 0.0 0.0 0.1 24.0) (3.1) (405.0 25.4% 0.1) 123.0 0.0 175.0 123.9) (192.2% 9.1 16.876.7 3.0 (3.0 1.6 449.8% 0.6 -3.2) 0.1) 5.8) (3.3 12.4) 0.0 88.0 24.3 0.6 0.0 0.4 14.7 0.127.270.0 0.0 (20.0 0.1% (102.0 0.415.8% (67.4 1.1 31.785.5 7.5 (20.3 0.6 6.4) 0.2 (310.0 0.4 www.8) 155.5 2.3) (265.0 0.0 109.0 (23.7) 0.3 5.0 0.0 0.7 12.0 122.1 545.0 0.5 12.0 (35.9) (16.3) 153.8) 76.077.6% (75.6) 0.4 18.0 157.0 (20.2) (210.9% (1.6 0.9) 106.0 255.0 (25.3 11.1 20.794.0 146.3) 0.2 620.2) 0.2) (842.0 341.3 691.0 0.4) 2.039.3 12.4 7.3 10.0 (137.0 1.0 36.5 45.2) 234.5 353.7% 1.0 40.8 0.8 1.3 24.639.8 0.9) (265.7% (33.3% 3.1 4.4) (30.0 0.9 0.0 (41.3 0.9) 262.6 39.7) 0.5% (1.0 106.0) 0.0 269.1% (8.6) (202.0 234.6 6.9 12.199.0 0.January 2011 GERMANY Smaller Companies Review Rhoen Klinikum FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.3% (6.0 0.0 (42.0 151.0 0.2 0.0 (4.4 14.7% (144.1 0.024.3) 0.8 0.1 0.6 24.0 9.0 0.8 (24.876.0 0.0 (5.0 (137.0 0.9 0.0 1.0 0.9) 105.0 0.2) 0.2) 170.3 12.8% 0.0 0.7 29.387.4) 249.9) (1.5 845.2% (1.1) (1.6) (781.0 0.0 0.0 (5.0 117.0 0.7) (6.0 (5.492.1 46.0 0.0 0.0 (114. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 (4.0 0.0 250.3 231.6% (1.4 57.044.2 0.9) 125.0 (31.4 2.5 69.1 15.3 2.0 0.2% (116.0 0.0 (27.130.0 0.2 9.3 0.0 202.8) (749.0 0.3% 11.542.6 (25.791.6) (414.0 (29.0 (6.9 269.1 13.5) (120.0 0.0 172.199. [inc.1) 0.3 609.0 (38.1) 835.0 0.4) 0.0 (11.542.0 83.8) (74.0 (5.0 (66.3 1.5) 184.7% (1.8) 207.0) 0.3) (63.3 835.0 23.9) 2.0 170.4% (136.0 (82.8 5.1% 0.4) (78.0 0.1 (29.5% (793.7 0.8 1.0) 146.8 11.9 43.9 22.9 30.4) (5.141.0 0.1 (16.349.0% 2.3 1.320.0 0.0 (78.0 0.0 2.0 0.7) (10.613.9) 0.5) 202.4 0.0 0.3% 0.1 8.5) 202.7) (2.7) 422.9 769.5) (68.7) 172.3 0.5 (19.6% 137.7 13.6 302.205.0 18.141.0 (19.0 0.8 341.5 1.8) 269.0 0.0 0.7 4.3) 0.0 111.0 0.8 11.0 (25.0 105.6 7.0 146.2 24.9) 0.0 0.0 111.7 7.8% (91.0 0.9) 0.1) 324.0 (29.0 0.011.0 0.8% 2.539.0 0.0 12.0 0.4% (90.0 (17.8 0.1 62.0 (87.0 (35.0 (67.6) (317.0 (29.077.0 (16.7 16.3) (1.8) 1.8 234.2 1.5 8.1% 1.136.6) 1.8) 157.0 0.9) 414.0 0.7 790.0 0.6 13.2) (337.7) 0.0 14.7 24.3) 2.0) 0.5 7.376.5 33.0 0.0) 146.5 506.1) 221.2 25.0 76.9 353.0 140.8 11.1 37.0 105.8) 987.9 24.2 0.0) 182.7) 0.0 208.0) (571.2% 2.0 47.0 0.6 14.5 14.0 0.0) 371.0 (88.3) 0.6) (596.2 0.8 9.1 987.4) 312.1 63.1 9.8 0.1 0.9 5.9) 0.1% 0.625.0 0.1 7.1 973.599.8% 2.8% 0.0 0.6) 83.6 1.2) 0.9) (6.8 35.9 51.204.4) 0.5) 0.3 5.0 8.5 1.2 32.9% (1.0 0.9) (2.0 0.0 1.0 0.0) (5.0 (203.1 (277.2) (193.9) (174.3) (3.7) (106.0 131.0 0.0 0.8) 1.6 0.3) 117.4 1.6 9.3 46.2 439.6 0.7 11.1 8.9) 284.0 0.0 83.2) (115.5 23.6) 0.0 0.6 9.3% (546.0 0.4% (57.8) 0.0 (30.0 (55.8 16.6 60.5) 180.0 0.8% (64.9) (37.3 1.0 125.9 0.3) 0.379.5) 233.3) 140.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 236 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.com .8 13.3% 2.

7 10.01 25.13 10.4 21.January 2011 GERMANY Smaller Companies Review Rhoen Klinikum FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.1 5.3 1.25 10.3 1.0 10.550.700 0.41 12.1 2.4 1.9 2.17 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.770.0 2.4 7.6 9.95 -2.8 2.8 11.1 13.5 NS 2.814.1 9.4 NS 2.9 0.8 6.000 138.3% 1. of shares.1 12.9 14.3 1.9 6.1 21.8 12.85 15.5 1.4 15. number of shares.5 0.1% 1.17 10.7% 5.40 9.3 9.17 16.8 2.1 NS 0.03 1.23 21.6 1.89 16.8 5.00 0.2 1.1 28.0 1.234.000 103.0% 11.3 11.2 9.20 1.2 1.237.95 13.700 103.96 16.700 103.3 39.78 21.2 9.24 16.13 17.7 14.9 6.24 16.5 1.28 1.5 10.7 2.58 24.3 10.3 10.0 14.63 9.4 14. reported % Change 0.23 1.3 8.464.000 11.1 2.1 13.3% 12.07 54.658.15 19.9 1.2 1.3% 1.3 8.7 1.6 12.0 6.2 2.2 1.70 15.5 11.7 13.6 1.47 19.8 20.29 1.37 20.4 18.7 15.00 17.55 15.200 138.6 60.9% 1.1 9.9 9.7 12.9 14.4 69.3 24.1 12.4 0.2 1.6 0.3 1.8 1.95 9.2 12.5 0.0 15.7 2.06 -0.07 -5.25 1.00 0.8 8.7 14.2 2.7 15.0 2.9 9.4 12.74 1.4 15.5 0.8% 1.419.5 11.4 7.3 1.3% 1.3 1.9% 1.28 1.200 138.30 11.000 138.7 11.99 -3.25 17.0 11.5 15.3 9.700 103.0 7.00 0.0 EV/EBITDA.5 27.855.4 25.1 9.06 5.9 5.5 16. restated 237 www.8 7.2% 1.31 16.7% 0. restated EV/EBITA.4 27.1 1.903.1 15.47 18.9 2.23 16.4 1.8 1.45 11.0 12.8 8.4 9.37 2.1 18.5 0.1 11.3 8. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.3 8.1 NS 3.1% 0.2 11.00 0.4 1.2 6.00 0.2% 11.1 1.4 10.700 103.172.56 13.1 14.2% 10.3 14.cheuvreux.2 2.1 8.8 14. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.6 10.01 25.8 1.2 7.3% 6.7 10.6 16.00 0.5 8.000 103.13 10.700 0.276.03 1.52 17.1 1.2 1.6 1.4 7.4 0.47 18. adjusted Av.8 5.0% 0.1 0.64 16.12 18.200 0.3 15.6 1.9 2.74 4.4 11.0 8.2 2.3 27.81 9.8 1.200 138.7 13.6% 7.06 -0.581.6% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.8% 7.05 14.6 1.700 103.3 1.9 11.7 1.3 NS 2.3 2.200 0.5 1.5 25.9 1.0% 5.300 117.9 12.0 2.3 6.9 2.6 15.054.3 11.4 2.4 47.41 14.5 18.4 6.6 17.700 0.9 14. adjusted Treasury stock.33 6.6 5.15 16. adjusted Share Price [Adjusted] Latest price High Low Average price 103.3% 1.86 11.6 NS 1.000 103.234.2 1.0 20.644.7 1.000 138.700 0.1 0.6 2.3 29.16 14.7 14.00 0.300 0.1 10.5 No.6 9.9 16.6 1.2 14.000 103.25 11.2% 1.00 0.77 18.com .7 12.481.1 7.8 6.8 8.07 -5.8 16.5 12.8 12.4 8. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1.26 16.6 1.3 7.8 NS 2.1 11.9 10.200 0.5 62.81 9.049.1 11.00 0.28 2.4 1.50 13.7% 1.6% 1.7 13.1 1.31 17.6 10.7 15.3 29.6 12.12 17.700 0.8 24.6 9.1 1.8% 1.1 26.0 16.31 2.000 117.1% 1.4 20.6 9.

Its former EBIT guidance was for a margin of 8-9%.897. OTB 6.9 NS NS 9. we also expect the company to generate order intake from cell equipment upgrade packages. we expect further orders to follow.com Q 238 www.30m Performances 1 month 3 months 12 months 7.5m.3 0. 56. global new installed PV demand of about 16GW.527 06/10 . Due to the probable cancellation of turnkey projects in India.0 36.3) (2. cell equipment.com 2012E Attrib.6% -61.0 56.com (49) 69 47.0 16.207m EUR 2. we expect R8R to significantly increase its EBIT in 2011E.0 05/06 6. Its sales forecast remained unchanged at EUR285m.9% Absolute perf. the company booked additional development expenses in the context of a key account project for which a new production step was realised in mass production. in line with our EUR194m estimate. of shares. Roth & Rau families 11.7 13. R8R lowered its EBIT outlook for 2010 to EUR9-9. The company said sales were line with its expectations and that EBIT was hit. turnover that was already partially recognized in Q3-10 had to be booked to the company's own stocks and written down.0 25.0 0. Q EUR12. in particular.4) Yield (%) 3. implying an EBIT margin of just ~3%.cheuvreux.0 26.0 6.3%.2 1.0 26.0 46.January 2011 GERMANY Smaller Companies Review RENEWABLE EQUIPMENT 2/Outperform Rating Target price (6 months) Roth&Rau Reuters: R8RG. (x) Q 01/11 Sector focus P/E (x) Research Analyst pbumm@cheuvreux. Further negative impacts came from delays in two turnkey projects in Spain as well as the depreciation of working capital and allocations to provisions.8 1.9 2.DE Bloomberg: R8R GR Recent developments – Profit warning due to write-downs On 9 November. Roth und Rau issued a profit warning with the release of its preliminary Q3-10 results.0 12/06 07/07 01/08 08/08 Price/TECDAX 04/09 11/09 Price Sector Top Picks Least favoured SMA.5m.3 22.7% -61. 9M-10 sales were EUR189m (+19% y-o-y). SolarWorld Conergy Shareholders Free Float 82.00 Outlook – Working off the order book We expect no significant order intake in 2011E. We had expected EUR12m.3% EV/EBITDA (x) 2009 2010E 2011E NS 12. Additionally.2 1. Stock data Market capitalisation Free float Enterprise value No.70 Price (07/01/2011) Working down the order backlog Q +183.8 Philipp BUMM Disclosures available on www.1 0.4%.0 0.2 5. We expect about 30GW of cell equipment to be installed in 2011E vs.7 Net debt/EBITDA (x) (3.0 16. Relative perf. Reminder: wafer equipment is a new field for Roth &Rau and the company received only one major order in 2010 from a Indian company.8 2.5% EUR36.4% -26.7 1.0 36. If Roth&Rau manages to successfully ramp up the lines. adjusted Daily volume EUR206m EUR178m EUR117m 16.1 15.4% 0.4) (1.1) (1. Given the relative shortage of wafer equipment vs.cheuvreux.4% -34.0 ROCE (%) 13.0 46.3 7. FCF yield (%) EV/Capital empl. For 2011E. but 9M-10 EBIT was only EUR3m due to unscheduled write-downs and increased provisions. Given that recent order intake has been for higher-margin business.0 0. we can expect further wafer equipment orders in 2011E. As a result. and so look for the company to work off its huge order backlog of EUR365m (as of 9M-10). by depreciation charges totalling EUR8.

Q Investment case Despite Roth & Rau's disappointing operating performance in 2010 (profit warning).2x. We regard the current valuation as very attractive as the company is trading at a discount of 35+% compared to Centrotherm and Manz Automation.com Valuation Our DCF-based target price stands at EUR36. Here Roth & Rau is the world number two with a market share of 25% after by Centrotherm PV with a dominant market share of approximately 50%. we expect the company to benefit from very strong order intake in the course of 2010. . According to the company. the company also supplies components and process equipment to the automotive and semiconductor industries. We also believe Roth & Rau has seen its trough.cheuvreux.January 2011 Q GERMANY Smaller Companies Review Company profile Q Leading supplier in the photovoltaic industry Roth & Rau is a leading supplier of plasma process systems for the photovoltaic industry. Centrotherm and Manz Automation are trading at similar EV/Sales multiples (0. Through the acquisition of CTF Solar GmbH. Q Q Supplier to automotive and semiconductor industries Based on its plasma and ion-beam technology. The company suffered in 2010 from low-margin orders during the financial crisis. we expect significantly higher profitability in 2011E than in 2010E and forecast an EBIT margin of 10%. The company is trading at a P/E 11E ratio of only 7. the company also offers turnkey solutions for the production of silicon solar cells in its photovoltaic division. Roth&Rau became the only independent supplier worldwide of a CdTe technology-based thinfilm turnkey line (the same technology First Solar is producing). R8R is the world market leader with a global share of approximately >50% (incl.50. Therefore. However. The three German solar equipment producers Roth & Rau. final assembly and distribution of its plasma process systems as well as their control software. Q Turnkey solutions In addition to selling single items of production equipment. Its main competitor in this business is Centrotherm PV (share: roughly 25%). Roth & Rau focuses on the development.7x) for 2011E. India and the Middle East Push-outs and cancellations in the current order backlog „ „ „ Reduction in political support „ New competitors from the semiconductor equipment area and low-cost competitors from Asia could invade Roth&Rau's turf „Further order intake in the wafer business 239 www. due to the cyclicality of the cell equipment business. Q SWOT analysis Strengths Weaknesses „ Firmly „ Covers the key steps of the solar cell production process with in-house products „ established solar cell equipment supplier Low visibility on order intake due to the current economic situation „ Not focused so far on turnkey solutions Opportunities Threats Generating business in emerging solar markets.g. In its core market. anti-reflection coating equipment for silicon solar cells. e. we see Roth & Rau trading at a discount of 33-50% to Centrotherm and Manz based on 2012E figures. its recently placed orders carry significantly higher margins. OTB acquisition).

0 0.8) (2.7) (254.0 0.0) 4.2 44.3 135.0 0.2 26.6 122.5 0.0 35.0 2.5) (32.5 0.3 28.0 80.0 0.0 0. profit [loss].0 19.0 0.0 40.3) 0.com .4) 0.0 NS 397.0 (86.2% 197.9) 0.0 11.3 (3.0 0.0 (117.4% (99.0 0.0 27.0% (16.6 63.3 -29.4) 34.0 0.9 -53.0 (1.3 www.0 0. for exceptional items Net attrib.0 0.0 27.9 0.3 0.0 (80.7 0.8 273.1) NS 28.0 0.9 309.7 13.1) 16.2 16.2 0.0 0.6 20.0) (54.8) 5.9 -58.0 0.0 0.4 1.5 0.5 0.0 199.5 82.0 2.5 0.4) (2.0% 0.0 0.0 6.2 0.7 0.1 11.0 0.9) 64.3 206.0 (1.3% (77.5) (25.0 16.9 0.2 71.4 11.8 0.January 2011 GERMANY Smaller Companies Review Roth&Rau FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 7. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.7 11.0 103.8) 5.0 (0.3 27.6 63.0 13.0 3.2 45.7 9.0 0.4 42.0 0.0 0.2 0.2 (3.0 (9.1) 0.0 0.6 0.2 0.5 -34.2) 16.5) NS 214.0 0.6 NS 20.0 0.2 16.1) 1.5) 18.0 (89.0 0.6 0.0 28.8 3.0 (10.0 0.0 0.6 0.0 0.0 0.8 75.8 0.3) 83.2 NS (7.3 216.6 0.0 0.2 31.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 240 2005 2006 2007 2008 2009 2010E 2011E 2012E 33.0) 371.0 (2.0 0.9 0.0 0.0) (1.4) 0.7% (8.0 0.3 2.0 0.0 0.2% 146.0 0.5 0.7 0.0 0.2 31.9) 8.1 (61.8) 35.0 0.7 59.4% (60.8) NS 133.1 28.7) 13.4% 0.0 0.0 0.0 0.0 (11.0 (31.0 28.0 0.0 100.0 14.0 (16.0 0.3 (84.0 0. [inc.6% 0.3) 0.8 0.8 37.6 9.4 3.7 NS 272.3 244.0 6.0) 0.9 0.2) 0.7 3.0 6.9) (170.4 28.3% (4.4) 0.0 0.0 1.9 4.4) NS 273.6) 52.9% (1.0 0.3 22.6 180.0 0.1) 28.0% 0.2) (6.9 3.0 28.0 (3.0 0.0 (1.0 0.0 0.0 0.1 29.8 3.9 11.0 17.6) 0.3 0.5 0.2 33.6) (1.0 0.0 0.3 0.3% 0.0 0.2 0.9 0.0 18.0 0.0 0.1 -43.0 (3.0 (2.0 23.1% (62.0 NS 38.5) 489.4) 23.2 0.7 0.0 8.6 113.4 2.6) (123.1) 191.6 2.4 0.1 0.6) 0.0 0.8) (327.9 8.0 0.1) 36.6 0.3 14.0 0.0 (1.0 0.1 1.0 0.0 0.0 0.0 0.4 NS (7.0 13.0 36.0 0.9 0.2 21.8 11.0 6.7 0.4% (30.3 0.1 86.2 0.9 26.0 2.3) 0.5 0.0 (1.2 234.0 73.6 183.2 16.0 0.2 16.0 4.0 (20.3) 67.0 0.0 0.4 13.9 0.1 133.0 29.5 6.0 0.0 0.0 0.0 0.0 (6.0 0.1 12.9 -86.5 0.3) 0.0 0.0 (5.1% (20.0 0.9) 0.1) 22.6) 1.0 2.0 0.8 206.4 0.0 0.0 29.0 (4.9 0.0 0.3 0.0 73.0 0.3 31.1) (5.0% 0.6 19.3% (38.0 NS 4.1) 15.0 (1.0% (23.2 (85.1 (0.4% (6.4) NS 231.3 1.3 3.7) (20.0 (13.4 0.0 0.0 0.0 8.9) (7.2) (217.6 19.1) 28.1 11.9 28.0 15.3) 33.0 52.2 72.0 0.8% (27.7) 0.0 (2.8) 40.0% 510.7) (134.6 1.2 22.4% (22.1 3.9) 39.9 -27.4 38.9% (1.2% 0.0 0.2 77.0 0.9 1.8 0.9 0.9) 24.0 0.6% 0.0 53.0 0.7 79.2 35.0 11.0 6.4) (8.0 (8.2 0.2) 53.9 0.5 -47.0 0.0) (21.1) NS 180.0 0.1 20.6 106.0 36.2 16.0) (30.0 0.0 16.7) NS 139.0 37.0 0.0 0.0 0.8 27.cheuvreux.0 13.9 NS 0.1) (22.0 0.8 (28.0 11.3% 0.

29 33.72 6.64 64.34 -74.0 NS NS 16.5 12.5% (0.8 0.98 12.6 118.6 0.0 337.31 57.6 NS 1.207 0.3 7.9 2.0 5.8 5.2 1.5 2.03 23.4 2.22 NS 1.0 NS NS 12.85 10.77 76.3 2.3 10.00 0.1 25.2 2.7 10. adjusted Av.639 9.77 31.0 9.5 8.0 0.0 1.3 NS 7.5 NS 0.207 15.0 0.19 26.3 8.997 0.23 26.3 2.2 0.20 14.90 60.6 50.6 NS 0.000 - 9.7 5.00 4.0 27.4 11.2 NS 0.7 205.25 60.19 -2.4 NS NS NS NS NS 0.5 205.3 169.58) 0.7 43.0 0.26 61.23 26.7 0.34 -74.9 0.7 19.7 2.71 12.207 16.7 8.000 16.0 8.2 0. adjusted Treasury stock.56 30. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.1 1.0 7.1 NS NS NS 15.5 6.3 NS NS 25.00 3.3 205.3 10.2 NS 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.7 3.1 11.8 27.6 86.9 0.3 2.207 16.7 87.5 20.1 574.0% 15.800 13.4% 14.8 18.3 17.9 21.5% 19.1 15.8 3.684 0.8 6.000 10.6 0.1% 2.65 21.0 0.8 22.2 38.1 NS 0.3 33.3 2.00 NS 1.5 8.7% 0.474 0.0 NS NS NS NS 15.140 0.40 NS 7.5 25.8 NS 0.6 6.7 0.0 141.1 12.00 0.207 0.9 20. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.1 NS 1.81 12.0 NS NS NS 0.0 11.5% 3.44 4. reported % Change 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.7 3.99 30.00 NS 1.00 0.7% 1.2 3.9 10.7 49.10 NS 15.0 49.2 1.0 37.25 12.9 15.70 13.5 6.00 2.8 1.000 16.43 20.00 1.29 -87.3 513.com .40) NS (0.51 41.95 10.3 7. restated 241 www.8 (0.40 12.0 1.2 7.7 NS NS 33.1 0.8 2.35 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.4 4.1% 0.83 8. number of shares.6 NS (252.6 9.8 1.8 89.000 9.6% 1.2 2.35 0.0 NS NS 10.76 44.40) NS 1.5 8.3 1.0 5.7 88.0 15.77 76.3 12.2 3.4 13.0 NS NS 12.8% 1.565 0.January 2011 GERMANY Smaller Companies Review Roth&Rau FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.9 11.52 10.4 1.8% 2.4 12.3 2.00 0.1 3.000 13.8 117.46 -71.34 8.7 0.0 NS NS 12.70 - - 86.1 6.684 0.00 0.6 8.3 NS 0.4 13.00 0.0) NS NS 14.3 12.6 1.8 115.0 6.8 20.000 13.1 23.7 0.6 0.308 5. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.3 5.00 1.0 NS NS 16.64 10.7 0.00 0.800 12.8 417.5 6.62 No.9 NS 0.8 NS 0.22 NS 1.672 8.cheuvreux.8 18.00 2.2 3. restated EV/EBITA. of shares.000 16.00 1.00 0.22 32.3 11.8% 16.

com 2012E Attrib.5 Yield (%) 0.9 6. This impressive top-line growth translated to a clean EBIT margin of 5.4 6.cheuvreux.4 10.4x (pre-dilution) for 11E would grow to 8.cheuvreux.4% EUR11.com Q 01/11 Price Alexander NEUBERGER Research Analyst aneuberger@cheuvreux.3% Absolute perf.1 1.4 8. Even management's mid-term targets for sales of EUR1bn and EBIT of EUR100m – although slightly above our expectations – appear within reach.9 1.4 18. Its P/E of 6.4 8.com (49) 69 47 89 73 84 07/10 .0 0. of shares.2 Net debt/EBITDA (x) 29.3 4.2 5. 20m total outstanding shares today.4 2.4 4. The big issue on the agenda is that SAF needs to massively cut its group indebtedness. A substantial rise in the liquidity of the shares. With excess inventories of trailers having been sold into the market.4 4. Q3-09 was an outstanding performance. We are strongly convinced that SAF will quickly meet or even surpass profitability levels reported before the crisis.4 16.January 2011 GERMANY Smaller Companies Review AUTO COMPONENTS 2/Outperform Rating +53. (x) 0.4 14.DE Bloomberg: SFQ GR Stock data Market capitalisation Free float Enterprise value No.702m EUR 0.9 8. Relative perf.1%.4 6.9% P/E (x) EV/EBITDA (x) 2009 2010E 2011E NS 16.4 16. EUR7.7 ROCE (%) NS 9. Even after a 2-for-1 capital increase.17 Price (07/01/2011) Reuters: SFQN.7% 7.4 0. Assuming a rights issue for 15m new shares vs. 16m deferred) or 3. and so its improvement in profitability in Q3-10 was even more cost-driven than that of its auto peers. 18.4 4. which resulted not only from losses in the crisis but even more from its past before the company went public. However. a more solid balance sheet and substantial earnings growth prospects make SAF Holland shares a unique investment opportunity.41m Performances 1 month 3 months 12 months 20.9% of our group sales estimate of EUR765m for 2011E. Management/Founder 20.00 Target price (6 months) SAF-HOLLAND Recovering from worst crisis in decades Recent developments – Full participation in nascent truck recovery Q Q3-10 was the first quarter post-recession that all global heavy-truck markets recovered at double-digit y/y growth rates.4 12/07 06/08 11/08 04/09 Price/SDAX 09/09 02/10 Sector focus Sector Top Picks Least favoured Daimler. Interest bearing debt of EUR310m results in total interest expense of some EUR30m (~14m cash-out.4 14. the shares would remain highly attractively valued.5% in Q1.0 Disclosures available on www.4 12.0% 103.4 12. unlike many automotive suppliers.3 EV/Capital empl. This situation makes a capital increase essential.4 07/07 0.0 3.4 2. Global truck sales rose 26% y/y to 117k units.1 Q 242 www. Moreover.5 3. the measure would trigger a 75% gross dilution. Its 66% top-line expansion in Q3-10 vs.8% 189.3% after 4. SAF's recovery is clearly gaining traction. Sales in its core Trailer division even rose 124% y/y in Q3-10.2 1. SAF Holland benefited from an even more pronounced rebound of its respective markets.4 10. Group gearing stands at an abnormally high 1280%.1 4.1% 14. Management held an extraordinary AGM on 14 December 2010 to obtain shareholder approval for authorized capital to double its existing capital.4 2.6 5. Outlook – A capital increase is essential to solidify the balance sheet Q SAF had reported very strong numbers in the aftermath of the crisis. which caused us to raise expectations substantially already before the Q3-10 release.3 29. netting out reduced interest expense the dilution would be just 32% in our scenario.4 8.4% 25.5 16.1 17.6 20. SAF did not benefit from cancelled summer production breaks. FCF yield (%) NS 9.7% in Q2 and 2.9x post capital increase. Volkswagen FIAT Shareholders Free Float 79. adjusted Daily volume EUR148m EUR117m EUR417m 20.

and suspension modules for trucks/trailers as well as modules (landing legs & kingpins) required for parking trailers after they are decoupled from the truck. Powered Vehicle Systems is currently by far the most profitable business. SAF just launched trailers with disk brakes in the US to replace old-style drum brakes since new US regulation requires a substantial cut in trailer braking distances. „ Strong presence in two of the world's three largest truck and trailer markets (US/EU) „ Negligible presence in Russia. Its customers include most of the leading truck and trailer manufacturers in western Europe and the US. The crisis took its toll on SAF's balance sheet: A capital ratio of 5%. reducing its domestic workforce by 50%. accounting for 40-50% of adjusted group EBIT. a clear upswing in global transportation demand. Meanwhile. However. Business mix The SAF-Holland group has three divisions: Roughly 50% of sales come from Trailer Systems (trailer products). „ Highly cyclical business.cheuvreux. Q Q Group strategy focuses on innovation and service SAF-Holland mostly produces trailer axles but also equipment for the interface between trucks and trailers. One of its core technologies is to make such products as light as possible to reduce fuel consumption and maximise a truck's loading capacity. although this share is likely to decline with the rebound of profitability in Trailer Systems. was founded in September 2005 as the umbrella company for the merger of SAF and US-based truck supplier Holland. Q Investment case Hardly any other industry is as cyclical as the truck equipment and trailers industry. is the basis for the group's return to profitability.9x and even 6. and annual interest expense above EBIT undoubtedly make a capital increase unavoidable. averted bankruptcy. Q Q SWOT analysis Strengths Weaknesses „ Global top 3 with its products for trailers. a 90% drop in order activity for some of this equipment wiped out companies with histories of more than 50 years.com Valuation SAF's most recent quarter (Q3-10) shows the group's recovery is gaining traction with gross margins already above pre-crisis levels. SAF operates one of the world's largest (non-captive) global service networks for its products. In some cases. We consider the shares highly attractively valued – even after an expected 2-for-1 new share issue. SAF's group sales fell 48% y-o-y in 2009. its EUR305m interest-bearing debt load is a massive drag on the group's recovery. A harsh restructuring plan implemented in the crisis. and these two markets account for 95% of group sales.2x for 12E. . SAF Holland is the only European pure play to participate in the recovery of the EU truck supplier industry.January 2011 Q GERMANY Smaller Companies Review Company profile Q Supplier of the global truck industry SAF-Holland S. and a streamlined competitive landscape have clearly improved the environment for SAF-Holland – apart from its severe cost cutting. bearing risk of severe losses in the next cyclical downturn Opportunities Threats Huge growth potential from substitution of drum brakes for trailers in the US to shorten braking distances „ Any return to losses could wipe out remaining equity (equity ratio FY09: 5%). which is essential to reduce its EUR310m interest bearing debt Rising fuel prices spur market share gains for SAF's lightweight truck components „ Substitution of trailers for semitrailers grows business in fifth wheels and landing legs „ 243 www. Some of SAF's peers or clients saw their sales drop by as much as 90% in the recession. SAF-Holland basically produces eight different modules for trucks and trailers. including a far-reaching restructuring plan. We consider such a massive discount to peers as exaggerated – despite the stretched balance sheet situation. „ „ Falling equity markets could jeopardize the company's large capital increase (an estimated EUR80m). the world's biggest truck market in 07. But even after a 2-for-1 rights issue. SAF's fully diluted P/E for 11E in our scenario is 8. Three successive quarters have shown that the company's cost-cutting measures were sufficient to lower costs to a sustainable level without eradicating too much capacity that would now otherwise be missing to benefit from the industry recovery. 4-digit gearing. A massive cut in interest expense would limit the dilutive impact from the increased share count. Management has already communicated this and targets a capital-raising for H1-11. We stick to our EUR11 fair value offering huge upside of 53%. Hardly any other industry is more cyclical than the global truck/trailer supplier business. while Powered Vehicle Systems (truck products) and Aftermarket contribute each about 25% of sales. the reduction of unsold trailer inventories. we consider the shares as highly attractively valued.A. Its rapid response to the crisis.

4 218.8 44.3 132.9 39.0 0.5 0.0 0.4 16.com .1 13.0 5.0 25.5 (2.9 19.7) (0.6% 0.0 (26.7) (31.0 5.6) NS (11.9) (2.0 11.0 0.7 360.0 0.2) 0.0 23.8 -77.7) 0.4 0.5) 50.7 0.1) (48.0 0.0 14.8) 0.0 0.0 13.0 0.0 (28.8) 71.0 0.3) 96.3 (25.1) 0.0 23.7 4.0 (1.3) (32.0 12.3 NS (0.2% (13.0 0.2 0. for exceptional items Net attrib.3) (63.0 6.2 56.4 72.9) 0.8 (9.5 (14.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 244 2007 2008 2009 2010E 2011E 2012E 812.8% (23.0 0.0 0.0 0.8% (25.7 44.2 0.0 0.0 0.6 16.0 7.6) 0.0 24.3) 0.6 108.5) (352.0 0.0 -53.2 0. profit [loss].4% (16.0 0.8 (129.9 243.0 0.0 0.0 (21.0 0.0 (29.0 7.6 54.5 57.4) (504.6) 0.0 46.0 3.0 14.6% (61.0 0.5 36.1 0.2 29.2 54.0 (5.6 0.1) (5.1 26.7 0.0 23.5) 0.8) 31.8 76.0 7.5 410.0 38.6 1.0 49.0 (62.3 117.9) 78.1) 0.0 0.0 14.3% (3.0 34.9) 42.8) 108.0) 19.0 15.0 (16.0 10.9 www.0 0.January 2011 GERMANY Smaller Companies Review SAF-HOLLAND FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.5 0.0 (25.4 68.7 108.3 9.9 46.8 6.6 -25.3) 0.0 34.4) 3.5 0.1) 0.0 10.0 0.6 13.6% (82.9 45.9 0.9 289.2) (9.2 0.0) 0.1 NS (18.0% (28.7) (26.0 10.0 0.5% 419.5 0.0 107.5 (10.2 NS 845.5% (66.0 0.0) 0.3 148.6 19.0) (2.0 10.0 353.0 0.3) 0.0 0.4) (18.0 (26.0 0.6 -49.9 48.0 (4.1% 0.0 7.0 (0.9) (624.6) 0.0 0.7) NS 614.3 69.0 57.0 0.0 (48.0 0.4) 0.8 31.0 0.3 131.6 (26.4 487.2 44.0 11.1 265.8 23.1 44.9) (681.0 7.1) 0.6 -47.0) (25.0) 0.0 7.0 -37.4 14.4) NS 30.5% (57.0 0.0 7.0 11.6) 0.8 422.5 (0.0 34.7) 0.0 0.1% 765.3 12.5 798.0 (11.1 304.2) 57.3 NS 0.9) (13.8 0.0 82.0 11.6 60.9 0.1 236.2 9.5 7.2 (13.7% (82.7 410.5 0.1) 0.8 277.4 340.9 84.5) (625.0 6.7 49.3% (59.0) 68.0 0.1 7.0 0.2 17.6) 0.0 31.6 17.2 5.0 126.4 0.7) 38.0 (61.2 0.5 371.6) 0.3 137.0 11.0 7.9 44.7 (32.9 288.5 128.2) (9.7) 0.0 0.8% (0.0 0. [inc.0 7.7 0.0 0.7 0.9) 0.4 (18.3 341.1 353.0 0.4 23.7 0.0 14.7 0.8 -1.6 NS 341.8 NS 340.9 0.0 0.0 24.6 360.0 10.2 0.0 371.3) (673.0 0.0 0.0 71.1 118. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.3 133.0 119.5 0.0 (8.6) 57.0 0.6) 6.3) 9.0 0.cheuvreux.0 0.0 0.1% (21.0 0.

1 408.38 7.7 2.0 4.35 11.com .7 4.75 19.0 10.07 0.5 0.2 7.58 7.5 1. restated EV/EBITA.0 2. restated 245 www.7 7.0 0.5 NS 2.8% 3.3 51.20 14.9 NS 0.22 2.6 20.702 20.4 4.5 27.0 16.7 0.2 1.9 5.702 20.2 5.6 1.7 92.08 2.7 0.6 8. of shares.2% (1.4 2.1 1.3 27.9 4.1 3.000 20.14 6.0 19.837 75.January 2011 GERMANY Smaller Companies Review SAF-HOLLAND FY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.00 0.0 2.1% 0.3 218.15 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.45) NS 1.36) -83.3 16.2 0.4 6.94 6.5% 5.000 20.49 1.5 5.6 3.7 7.8 92.0 0.6 16.12 NS 1.6 8.3 2.702 20.9 NS NS NS NS NS NS 9.29 3.4 417.702 0.9 10.7 18.2% 3. reported % Change 2007 2008 2009 2010E 2011E 2012E 0.9 0.0 1.0 11.7 17.3 8.9 NS 0.cheuvreux.0 NS NS NS 2.9 1.4 3. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.523 0.6 0.0 1.36 143.6 54.00 0.29) NS (2.9 4.8 148.0 NS 3.9% 2.00 0.30 1.5 4.702 0.1 4.7 0.000 20.3 20.5% 1. number of shares.7 34.000 13.1 54.5 17.2 15.99 8.000 20.68 49. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.00 0.7 6.67 4.6 0.65 0.1 5.2 487.9 10.15 68.0 1.00 0.27 NS 1.3 1.3% 1.1 1.5 8.438 0.1 3.5 3.9 7.4 0.4 NS 2.1 4. adjusted Av.4 0.3 11.60 0.2 0.72 81.40 No.00 0.3 4.7 51. adjusted Treasury stock.08 14.7% 0.7 4.17 - - - - 127.9 16.5 9.98 7.7 0.1 20.6 29.0 10.4 288.7 1.0 6.3 2.3 0.0 422.16 6.00 1.12 NS 1.17 7. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.34 2.4 4.97 4.92 36.8 7.36 115.0 6.1 2.700 19.29) NS (1.702 0.3 0.15 0.9 4.8 9.3 0.7 4.702 0.68 49.3 NS NS 1.3 NS 0.702 20.00 0.36 128.8 0.6 NS 5.5 0.2 13.3 7.4 148.00 (0.74 1.0 0.000 20.4 396.0 11.8 1.2 1.64 6.

0%.1% 76.05m EUR 0.9 32. maybe with its FY-10 results.00 Target price (6 months) Sartorius Reuters: SATG_p. the division's fixed cost base has improved significantly.9 37.0%.cheuvreux.9 22. Adjusted for swine flu. adjusted Daily volume EUR478m EUR239m EUR890m 17.20m Performances 1 month 3 months 12 months 19.6 1.9 12.0 EV/EBITDA (x) 11.9 7.1 EV/Capital empl.0 1.4% 59. CFA Research Analyst oreinberg@cheuvreux.4 12. 16% margin (15%).9 42.9 2.5 ROCE (%) 5. Getinge.2 2. Mechatronics: +7% (low single-digit). Since the restructuring measures.3 8.9 7.com (49) 69 478 975 26 Disclosures available on www. Sector focus Sector Top Picks DiaSorin.6% at cc in Q3-10.9 37.8 Attrib.9 27. Orpea.01 Price (07/01/2011) Market capitalisation Free float Enterprise value No.0 8.9 32. Q EUR28.5% at cc and orders even up 10. with sales up 7.January 2011 GERMANY Smaller Companies Review HEALTHCARE PROVIDERS & SERVICES 2/Outperform Rating +7.9 2.2% in 9M-10 at cc. Family Sartorius 3.9 03/02 06/03 09/04 12/05 Price/SDAX 03/07 06/08 09/09 12/10 Price Outlook – Biotech momentum set to improve We believe the outlook for Sartorius is promising. After the results Sartorius upped its FY EBITA margin guidance to +250bps (100-200) and confirmed its group sales guidance.7 6. Management confirmed that its single-use business in Europe rose by nearly 10%.com Q Q 246 www.9 7.9 7. Relative perf. Also bearing in mind the company's very successful deleveraging.8% 13. sales in Europe climbed about 2%. smaller bolt-on acquisitions may be possible.5% 2009 2010E 2011E 2012E P/E (x) 13.4 13.2%.0 1. 6% margin (5%). (x) 1. The muted growth at Biotech nonetheless remained a fly in the ointment. Bio-Rad 12. which realised an impressive turnaround after having experienced considerable headwinds from the economic crisis in 2009. Q3 EBITA rose 18%.9 22. and c) the fact that some fermenter orders received in 2010 should translate into sales in 2011E.1 Oliver REINBERG.9 12.1 1.1% EUR30. but the equipment business was a drag. driven by a strong order intake and its refocusing on the pharma and food industry.4% Absolute perf.4% 24. b) equipment business.0 Yield (%) 2.5%.2 1. thanks to its strong cash flow generation. This should improve in 2011E.4 5. Sales at the division rose by 4. driven by Mechatronics but also by a healthy Q3-10 Biotech margin of 17.9 27.5 14. While sales in North America and Asia-Pacific both increased at a double-digit rate at cc. but we do not believe any deals are imminent.2 Net debt/EBITDA (x) 3. Biotech: +5% sales growth (high single-digit).9 47.9 42. We expect normalised Biotech growth of 7% in 2011E.9 17.6 11. Sartorius Ag 9. Europe (estimated 54% of 9M Biotech sales) was down 2.0 12. of shares. Mechatronics should also continue to develop favourably.9 01/01 2.0%.8% 35. similar to in H1-10. FCF yield (%) 0.com . 47.9 2. Growth in Biotech should improve in 2011E due to a) the non-recurrence of H1N1 base effects. William Demant Least favoured Shareholders Free Float 50. but still remained below the divisional run rate. We also believe Sartorius will at some stage provide guidance on the mid-term potential of the division.5 1.0%. This performance was driven primarily by the strong momentum in Mechatronics.5 16.cheuvreux. Executor 25.DE Bloomberg: SRT3 GR Impressive turnaround Q Stock data Recent developments – Remarkable Mechatronics recovery Sartorius reported strong Q3 results at the end of October 2010.9 17.

Q Europe is the largest market On a group level. 3). demand from industrial clients is sensitive to the overall economic environment. Its biotech activities are fully consolidated and in 2009 contributed 67% to sales and nearly 100% to group EBITA. as most sell-side analysts do not cover its actively. Our forecasts are 12% above consensus for 2011 and 20% for 2012. followed by North America (21%) and Asia-Pacific (18%). In Biotechnology (Sartorius Stedim Biotech) Sartorius acts as a thirdparty supplier to the biopharma industry. Q SWOT analysis Strengths „ Weaknesses Leading market position Still underrepresented in the US and smaller than key competitors „ Pricing power in Biotech: fragmented client base. Sartorius Stedim Biotech is listed separately at Euronext. consolidated competitive environment. Europe remains Sartorius' largest market (57%). Q Q Mechatronics – the second division In the Mechatronics division (33% of 2009 sales. A third investment option is the French-listed Sartorius Stedim Biotech. Q Sartorius family holds the majority of voting shares The capital of Sartorius AG is divided into ordinary and preference shares. scalability of the business model.2) and industrial clients. Sartorius would be trading at a moderate 11. 25% of the Biotech business belongs to minority shareholders. 1). In our view the stock is still largely ignored by the market. offering filtration equipment (global no.cheuvreux. high barriers to switch bioprocess suppliers due to revalidation requirements. Based on our TP. While Mechatronics checks fewer boxes. breakeven EBITA) Sartorius supplies high-end balances. scales and services to labs (global no. some 75% of sales are recurring revenues. Note that our forecasts are 12% and 20% above those of the market for 2011 and 2012. with 50% of the ordinaries being controlled by the Sartorius family. We believe this quality is still not adequately reflected in the company's valuation levels despite an impressive recent performance. With the return of business momentum. Q Investment case We see Sartorius as a gem in the small cap space thanks to its Biotech business model: high single-digit top-line growth. Bio-Rad holds a 25% financial stake in the ordinary shares. low ticket prices „ Complex corporate structure. investors' attention is likely to return and we expect the stock to benefit. only 10% free float of ordinary shares „ 75% share of recurring revenues in Biotech „ Opportunities Threats Structural growth in biotechnology combined with substantial economies of scale / high operating leverage should support margin progression „ Turnaround in Mechatronics „ More cautious FDA approval procedures could reduce number of biotech drug launches „ Mechatronics dependent on general economic trend „ Significant financial leverage with a large share of debt subject to variable interest rates „ „ 247 FX risk www. Biotechnology and Mechatronics.8x 12E P/E. In particular. fermenters (global no.2) and single-use bags (global no. the division has realised a very successful turnaround and in the lab market Sartorius is a leading player beside Mettler Toledo. Part of the Biotech business stems from the Stedim acquisition in 2007. fragmented client base. . consolidated supplier base. The preference shares are the more liquid investment vehicle.com Valuation We reiterate our 2/Outperform rating and EUR30 target price for Sartorius.January 2011 Q GERMANY Smaller Companies Review Company profile Q Biotech – the gem of Sartorius AG Sartorius has two divisions.

0 32.0 82.8 148.7 22.4% 673.6) 0.1 0.0 0.9) 0.3) 57.2) (31.0 0.5 30.5) 27.9 22.0 23.5 (8.9 (13.7) 38.5% (26.9 149.1 311.0 0.3) 0.6 65.9) 12.6 151.5% 8.3) 0.0 0.5) (3.0 (105.0 27.4 4.8) 99.2 291.4 14.4% 484.2 69.3% (25.5) 1.4% (19.6) 71.0 0.6% (191.4) 43.6% (7.3 643.6 0.7 0.9 0.7) (299.0 0.2) (258.5 0.6 46.0 0.0 (29.5 (23.3 649.6 20.8 31.0 0.0 0.6% (4.8 87.January 2011 GERMANY Smaller Companies Review Sartorius FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.8% (258.7 25.0 0.0 0.3) (0.0 20.0 22.4 -49.0 37.9% 90.1) 76.8% 644.0 60.2 0.9 114.3) 14.2 13.0% (220.3) 0.1 0.0 0.0 0.7 40.3) 38.0 0.8 22.3 42.9 21.3 0.0 32.0 0.5% (18.3 10.0 (11.0 0.2 136.0 0.1) 127.8) (1.0 92.1 22.5 272.8% (14.4 26.4 155.9 38.8) 0.6) (15.8 112.1 -2.0 (16.2) 30.0% (240.0 (11.7 619.9) 0.2 0.3) 0.5 289.0 0.0 36.0 0.0 1.6 151.3) (234.5 217.4) 55.2 -48.5 241.5 122.0 (3.0 0.0 79.3) 43.3 113.2 643.9 642.8 110.5) (27.0 0.2 (10.2 8.2 0.4) 0.5) (317.9 23.4% (6.8 34.0 0.9 30.0 8. [inc.4 www.6) (327.0 0.0 29.2 0.0 (7. for exceptional items Net attrib.0 0.0 40.6 50.8 45.0 5.0 52.1 -1.6 151.0 (11.4 18.0 (11.4) 33.5 30.0 60.4 0.4 (14.0 36.3) 0.3) 15.0 0.0 (25.0 27.3) 47.0 22.0 0.0 0.3 31.0 (13.7) 0.0 0.0 (10.0 69.0 31.3 14.0 0.3 60.2) (106.0 17.7 26.7 44.4 281.0 0.0) (1.2) 52.0 115.5 23.0 0.8 -4.2 199.2 60.0 0.9 281.0 0.0 (9.0 0.0 (8.6) 0.0 123.0 16.4) (1.0 0.3 3.6 5.5 619.5 74.3 16.0 52.0 0.0 0.0 0.0 (23.0 0.0 61.2 276.9 12.0 (0.8 0.0 (2.5 147.1 22.1% (27.2 11.7) (310.2 642.0 0.7 35.0) 0.0 10.0 (12.3 16.7) 5.2) 0.5% (247.2 276.6 0.8) 54.8 224.4) (286.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 248 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 467.4 32.7 5.1 45.0 0.8) 62.1) 59.0 0.2 10.1 53.4) 30.5 281.6 336.7) 39.9) 34.8 49.0 57.9 101.0) 0.4) 0.7) 0.0 16.7 66.0 68.6% 712.7 43.1 58.1 19.1 0.0 0.7 58.0 0.6) 0.3 641.8) 80.3) 56.0 0.8 189.6% (7.0 29.2 13.0 0.6 150.0 0.0 (2.7 0.0 29.9 168.7 (8.0 (9.1% (6.0 (10.3 0.0 44.0 0.1) (118.1 0.cheuvreux.7) 101.0 (8.7) 7.3 -28.7 150.0 68.6 56.7% (23.1% (4.3 15.7) (22.6 77.3) 39.0) 0.0 37.0 0.4 0.7 0.0 50.7% (182.2 8.7 37.7) 0.6% 521.2% 0.2) (26.5) (6.0 (9.0 0.6 20.9 0.0 72.0 50.4 0.0 (13.9 32.0) (230.9 290.5 77.1 129.0 25.0 31.0 (4.1 286.1) 69.0 645.2 3.0 291.9 277.5 79.3) 89.0 43.0 0.1 0.6% (19.3% (7.5) 43.2 44.3% (10.5) 0.6% (187.0 0.2) (302.2 13.0 16.2 0.0 0.9) 1.7% (2.2% 602.0 30.3) (94.6 167.0 0.5% (7.6) 0.4) 0.4% (5.0 0.8 11.4) (44.0 (3.9) 0.1 31.1 (6.2% 0. profit [loss].6 54.8 108.1 35.7 10.6% (227.5 7.0 0.0 0.0) (7.3 121.0 15.2 0.9 -45.0 0.6 (26.0 0.0 0.0 (4.2) (7.2 114.1) 30.3 30.1 57.2% 37.0 0.3 0.7) (25.1 25.2) 0.5% (26. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.3) 82.1) (1.2) 0.5% 611.0 15.1 645.0 97.0 641.0) 0.6) 0.0 0.4 0.6 292.4) 0.9 124.8% (231.1 11.4 22.0 (128.8 -8.5 (4.0) (1.0 (7.7 58.2 11.8 291.0) 0.0 0.4) 115.0 (4.0) 0.3) (11.4% (23.3 4.2 291.0 62.6 0.0 0.7) 0.6% (4.6 3.3) (7.3 13.0 9.0 0.0 0.0 0.6 0.3 0.3 0.0 107.2% 589.com .8% (4.9 (13.0 13.7) 0.7) 0.4 649.2) (6.0 0.0 54.0 (10.3) (8.0 0.0 0.6 0.7 70.1 7.3) 0.0 22.8) (114.

9 5.1 10.8 17.5% 1.7 10.67 28.2 1.16 27.4 3.1 13.7 11.3 11.5 16.8 12.050 17.1% 17.56 66.7 57.1 13.1 11.050 0.6 1.2 5.01 28.1 20.4 (98.8 4.050 17.8 8.43) NS 2.78 4. number of shares.06 15.5 9.1 17.0 418.1 6.050 0.4 2.9% (0.00 28.4 12.2 13.7 6.00 0.2 1.9 40.05 72.8 15.41 0.5 9.57 12.050 0.4 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.83 26.38 26.5 NS 5.55 11.cheuvreux.3% 1.7 2.5 0.5 5.89 8.9 6.9 0.3 8.2 1.5 5.9 32.32 27.4% 9.6 1.000 17.90 -49.76 28.6 1.95 33.0 311.0 1.25 23.3 2.1 521.0 31.54 -48.5 7.30 45.4 1.000 17.3 12.1 14.25 20.1 10.51 4.4 5.8 18.5 6.1 2.1 2.5% 1.9 7.9 14.5 15.7 38.0 7.5 11.6 6.6 0.0 604.3 57.5 4.2 6.8% 1.70 31.6 1.1 1.3 1.3% 8.1 12.01 - 205.0 30.4 9.70 5.8 15.42 2.0 70.050 0.1 9.9 31.73 -58.90 18.28 27.4 686.89 NS 1.2 14.95 19.9 40.7 1. restated EV/EBITA.8 16.6% 1.5 1. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.2 12.2 5.3 1.7 9.6 857.6 1.2 8.8 3.7 5.1 19.8 11.000 17.9 17.55 14.0 1.1 2.77 3.0 5.0 No.050 0.3% 1.050 17.6 2.com .0 4.5 NS 1.64 NS 2. adjusted Treasury stock.6 1.000 15.6% 1.93 15.3 12.41 0.67 7.9 11.7 15.6 15.000 17.3 0.55 20.01 10.9 323.2 37.000 17.9 9.52 2.98 11.64 2.4 514.0 65.8 9.1 18.00 27.33 -8.4 1.000 17. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.2% 2.5 1.27 16.8% 0.6 2.68 1.050 0.70 31.8% 19.2 0.4% 2.16 11.82 32.0 12.1 13.9% 15.85 6.3 10.00 14.5 16.6% 16.14 0.2 10.22 21.3 11.4 19.86 8.4% 1.9 15.8 271.8 9.0 5.5 0.20 6.0 468.1 5.3 9.0 1.6 890.0 2.6 9.0 0.95 19.2 11.1 11.2% 0.8 7.4 7.08 74.0 56.3 139.1 11.6 6.1 2.7 10.42 2.3 21.03 151.1 7.8 1.41 0.0 904.4 6.92 47.050 17.4 11.1 5.2 0. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.9 47.4% 16.050 0.1 17.050 17.05 18.7 8.5 3.4 0.9 11.8 5.1) 11.2 1.23 8.8 11.1 7.6 0.6 16.7 1.8% 16.January 2011 GERMANY Smaller Companies Review Sartorius FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 1.61 4.2 32.6 7.6 0.9 1.000 17.0 8.0 3.30 25.1 0.1 58.000 17.0 1.2 NS 0.5 8.8 1.3 9.5 17.6 0.7 10.6 6.72 14.0 1.11 17.2 9.00 0. adjusted Av.41 0.050 17.1 2.5 3.4 6.4 2.1 649.45 28.9 15.7 13.0 8.6 0.050 0.5 1.1% 0.7 7.050 0. reported % Change Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.050 17.35 6.11 11.3 2.8 13.05 38.1 16.2 10.1 44.5 460.2% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.6 19.42 2.6 7.3 477.0 11.2 7. restated 249 www. of shares.25 0.11 6.5 1.6 477.67 20.5% 7.4 13. adjusted Share Price [Adjusted] Latest price High Low Average price 17.19 31.0 13.8 0.17 18.37 0.7 2.0 1.0 10.6 1.050 17.050 17.

Skion 22.DE Bloomberg: SGL GR Limited upside potential Q Recent developments – Guidance upgraded twice in 2010 Group sales reached EUR357.4 1.1 1. We believe high raw material costs (needle coke) and price competition in graphite electrodes are putting pressure on margins.1 Attrib. SGL has said the Q2-10 PP margin of 21.4 10.8% Absolute perf. Rolls-Royce Shareholders Free Float 72.2 2.6%.com Q Q 250 www. margin progression in 11E might be hindered by likely still relatively high needle coke prices. at the same time.3% EUR24. with group EBIT up 20% y-o-y to EUR130m.6 1.4m EBIT loss) CFC was still burdened by start-up costs. Moreover.8 8. For 2011 it forecasts EBIT of EUR155-165m (our estimate: EUR161m).6 64.6 14.6 34. However.9 22. CAPEX continues to be determined by the company's 50% gearing target and SGL now expects to report a 10% y-o-y capex drop for 2010 (old guidance: flat).6 24.6 14.cheuvreux.2% 22.8 8. although the negotiations with needle coke producers are not yet finished.3 Yield (%) 0.0 ROCE (%) 2.0% 6.cheuvreux.com . CFC in the red at EUR-1. Relative perf. held back by sluggish cathodes sales for the aluminium industry. business has begun to recover strongly in most end-markets. up 20% y-o-y and 11% q-o-q. FCF yield (%) 5. (x) 1. adjusted Daily volume EUR1767m EUR1282m EUR2410m 65.0 0.8 11.6 54.4% -6.January 2011 GERMANY Smaller Companies Review MACHINERY 3/Underperform Rating -11. Nexans. We anticipate a recovery in cathodes order intake in early 2011E.4% -4.4%.86m Performances 1 month 3 months 12 months -3.1% 2009 2010E 2011E 2012E NS 30.0 14.4 Net debt/EBITDA (x) 1. with the division recording an EBIT loss of just EUR1m. This situation improved slightly in Q3-10.0 0.3%. In the GMS division sales rose 20% y-o-y and 3% q-o-q to EUR103m. The CFC division is likely to break even in 2011E: in Q1-10 (EUR3.6 44. we believe the volume recoveries will be partly offset by the ongoing tough pricing situation in both GEs and cathodes in an industry that is characterised by capacity utilisation 20-30% below peak levels.4m.com (49) 69 47 897 540 Disclosures available on www.6 01/01 4.00 Target price (6 months) SGL Carbon Reuters: SGCG.2%. Q EUR27. implying EUR140m.6 4.6m in Q3-10 (16% y-o-y and 5% q-o-q) compared to our estimate of EUR356m. Given the lead time from order negotiations to sales recognition. For FY10E we now estimate 6% y-o-y sales growth to EUR386m with an EBIT margin of 9. GMS: 11.6 44. Voith Group 5. driven by a strong volume recovery in graphite electrodes for the steel industry but. unchanged y-o-y and -10% q-o-q. project postponements and price pressure related to low capacity utilisation amongst the peers.2% was the 2010 peak.0 0. while CFC sales totalled EUR55. After having lifted its projections already after Q2. accounting for roughly 50% of final GE production costs.4%. SGL again raised its full-year guidance after Q3 and now expects group sales to show roughly a 10% rise.9 12. of shares. SIEMENS AG Alstom.05 Price (07/01/2011) Stock data Market capitalisation Free float Enterprise value No. Sector focus Sector Top Picks Least favoured ABB.32m EUR 6. In GMS.6 04/02 07/03 10/04 01/06 Price/M DAX 04/07 07/08 10/09 Price Outlook – Recovery in cathodes expected in H2-11E Based on our channel checks. The Q3 EBIT margin came to 10.8% -4. EADS. with cathode sales likely to pick up in H2-11E. For 2010E we expect 6% CFC sales growth y-o-y to EUR221m with a EUR7m EBIT loss.8 2.6 54.6% at GMS.8 EV/Capital empl. given recent statements from peers on tough pricing. with visibility for H2-11 remaining cloudy.6 24.6 9.0m. Q3-10 sales in Performance Products (PP) hit EUR198m.7 1.5 1.8m EBIT loss) and Q2-10 (EUR1. we believe SGL already has quite good visibility in PP for Q1 and Q2. Divisional Q3-10 EBIT margins: PP: 19.4 P/E (x) EV/EBITDA (x) Hans-Joachim HEIMBUERGER Research Analyst hheimburger@cheuvreux.6 34. Its former guidance was for single-digit y-o-y sales growth and EBIT growth of up to 10%. we expect graphite electrode (GE) volumes to continue their volume recovery in 2011E.9 9. 64.0 NS 0.

8% respectively for 2010-19E. 30% by GMS and 18% by CFC. We reiterate our 3/UP rating with a TP of EUR24 based on a 6-month horizon. Q 3 units: PP.976 at the end of 2009. The group's workforce totalled 5. GMS and CFC benefit from the replacement of traditional materials with more innovative materials and alternative energy. While PP is driven by the demand for steel and aluminium resources. Q EVA: our EVA model yields a FV of EUR25. energy and aerospace. bearing in mind the fact that Performance Products has underinvested over the last 5-8 years (even figuring in the new Malaysian plant) and assuming the huge longterm growth potential of the CFC division will indeed materialise (SGL's CEO Koehler estimates that CFC sales can increase ten-fold over the next 10 years). In 1996 SGL was listed on the NYSE with 100% free float. Q SWOT analysis Strengths Weaknesses „ Only „ integrated producer of carbon fibres & composites in Europe „ SGL may lack credibility with some investors due to its antitrust past Costs advantages (Malaysia) „ Strong exposure to cyclical movements. Based on these parameters our DCF model renders a fair value of EUR20 per share.4 per share. which in turn consists of two business units: Graphite Materials & Systems (GMS) and Carbon Fibers & Composites (CFC). chemicals. This negative mix effect might change to a certain extent in the longer term. for the ramp-up of its CFC capacities (roughly EUR150m between 2007-2009). Post IPO.January 2011 Q GERMANY Smaller Companies Review Company profile Q SGL created via the merger with a former Hoechst unit In 1992 Hoechst's former subsidiary SIGRI merged with Great Lakes Carbon (US) to become SIGRI Great Lakes GmbH. at least at the ROCE level. Q Investment case For years now SGL has been spending huge amounts of its cash generated by Performance Products. Q Peer group multiple comparison: based on 2012E EV/EBITDA. graphite electrodes) and Advanced Materials. However. driven by the trend towards traditional heavy materials being substituted with materials that offer a lower weight combined with a high level of stiffness. normalised EBIT margins and ROCEs in CFC will be far below PP levels.cheuvreux.6% and 4. a historical valuation and a peer group multiple approach. 26% in Asia. Q SGL: geographically well diversified In 2009 SGL generated 20% of its total sales in Germany. . The solutions it delivers are used in a wide range of industries with a focus on steel. a WACC of 7. an EVA model. Q DCF: we assume sales and EBITDA CAGRs of 1. incl. All in all. The growth opportunities for its CFC technology appear very healthy in the mid-term. its cash cow division. applying 12E pre-tax ROCE of 12. 50% of SGL's shares were free float and 50% were held by Hoechst. GMS and CFC all driven by fundamental trends SGL is organised into two business areas: Performance Products (PP. 28% in Europe ex Germany.8% (2010E) and a 2. North America and Asia.8% and a pre-tax WACC of 10%. and provides a comprehensive portfolio of materials and relevant technologies. aluminium.0% terminal growth rate. we reiterate our 3/UP rating with a target price of EUR24. 19% in North America.com Valuation To determine a fair value for SGL's shares we apply a DCF valuation. Q Q A leading manufacturer of carbon-based products SGL sees itself as one of the world's leading manufacturers of carbon-based products. It offers its customers a global distribution network underpinned by more than 35 production locations in Europe. SGL trades at a 9% premium to the peer group. The company was renamed SGL Carbon Group and IPOed on the Frankfurt Stock Exchange in 1995. automotive. and 7% in ROW. 52% of 2009 group sales were generated by PP. at least in the next 23 years. at least in PP Opportunities Threats „ Rising exposure to Asia via shift of capacity to low-cost hub in Malaysia „ GMS/CFC: „ Recovery „ Commercial in cathodes business for aluminium industry emergence of new substitutes may lead to pricing pressure potential of SGL's growth technologies may fail to materialise „ Price negotiations with needle coke suppliers and GE clients 251 www.

475.3 166.4 112.0 735.0 0.0 0.1 29.6) 0.3 0.8% (65.8 36.0 170.0 (35.0 130.9 3.0 (130.0 (69.2) 0.0 0.5 21.8 1.2 112.4) 0.6 167.4% 0.068.7 0.0 0.8 9.6) (881.7) 305.7 458.2 0.7) 0.5 1.0 0.6 94.0 0.6% (134.467.4 0.0 0.3 18.3 66.9 146.8 237.7) (1.9) 0.5 806.2) (42.7 79.1 24.8 32.6 216.9) (150.7 30.6 1.7 (6.0 0.3% (69.3) 0.2 155.0 (25.1 0.0 4.0 44.2 427.3 445.0 0.0 0.8 (34.7% 1.9) 0.0) NS (24.2) 0. profit [loss].January 2011 GERMANY Smaller Companies Review SGL Carbon FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.8 0.0 (53.0 0.0 194.0 0.5) 0.0 66.6 48.6 729.1 0.8 19.560.4) 170.0 0.3 (36.6 1.2 82.1 23.3) (70.7 235.2 142.0 3.0 36.7% (98.1 422.0 0.5 6.8 763.4% (369.0 (60.6 0.0 43.7 145.0 0.0 (12.0 0.0 1.0% (49.3 0.8 96.5 49.0 0.1 (30.0 753.4 0.0 (46.4) 0.2 0.0 122.8 20.3 37.1 0.1 49.0 57. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 (19.3 70.0 0.9) 0.0 0.4 0.2) (913.5) 80.9 629.0 3.5) 0.9) 4.1 49.1 1.4) (30.373.5 170.0 40.3) (734.0 0.5 223.0 5.1 28.0 0.0) 164.6) 0.8 51.4) 130.6) 0.0 0.4) (57.0 890.1) 245.2 0.3 47.5 (34.9 22.0 50.5 17.0 0.8 346.9 1.8% (59.0 (31.8 (52.5) (581.6 42.0 3.4) 177.9 1.8 50.0 (2.0 28.8) (721.8) 0.7% (54.2 -11.7% (315.6% 101.0 (0.0 NS 1.5 (46.9) 303.2 1.9) 0.0 42.1) 112.7 92.0 254.5 71.4 39.9) (70.0 (19.9 www.0 0.1% 0.0 73.6) 0.574.0 0.0 45.6 117.0 124.9 63.0 5.9) (35.3 (47.0 (85.5) 0.6 23.4) 0.7% 1.6 8.4 25.0 (60.4 (41.0 3.3% (334.2 0.0 0.9) 144.0 (1.372.6 44.0 (12.0 0.2) 0.7 95.9 82.2) (10.0 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 252 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 926.4) 30.0 4.8 0.0 (10.0) 0.8 11.7 0.0 0.125.0 0.2 6.0 28.4 809.9) (161.702.2 248.4 146.1) (132.7% 0.5 47.8 236.8) 0.8 0.0 80.6% (53.0 0.0 112.5 (12.5) (8.4) 0.0 0.5) 292.0 57.6 0.7 0.5 (70.8 108.0 242.0 0.0 85.9 380.8) 179.8) 189.0 0.2 788.0 (0.2) 164.0 0.7% 0.8 52.0 0.9 902.7) (9.0 (0.2) 40.7 281.4) (85.0 0.3) 36.0 2. [inc.0 0.8 36.3 17.2) 0.7) 82.0 (44.4 90.4% 0.4) 57.1 1.1 12.0 -67.0 0.4% (309.8 9.2 NS 1.1 1.9% (71.0 131.0 0.9 348.0 130.7 1.1 49.9% (81.0 550.0 15.0 NS 0.2 49.0 0.6) (141.0 112.7% 0.7) 85.1% 0.0 (0.3 90.3) 223.0) (70.4 (65.cheuvreux.4) 0.9) 201.0 7.0 40.0 0.7% 1.3 26.3 1.5 40.3% (28.2 345.0 190.0 (40.8 19.8 97.4) (499.3% (9.7 750.7 -52.9 0.0 0.0 0.9 155.0 504.1) (13.7 322.5 228.225.0 223.0 0.792.1 93.1 1.0 0.0 (133.0 0. for exceptional items Net attrib.7 19.2 40.6) 223.8 0.467.9 38.9) (965.5) 0.5 4.6% (68.8) (7.1) 0.346.0 0.0 189.0 0.6% (317.3) 0.0 0.0 644.372.3) 170.0 98.0 3.8) (647.4 948.7) 122.0) 0.0 0.0 (1.2 (50.5) 0.7 76.8) 0.9% (333.0 22.4 806.0 40.3) 254.1) (60.2 194.1 0.4% (121.5) (830.0 0.8 385.9 902.0 0.1 44.0 0.2 235.702.2% 0.5% 42.0 1.5 (39.0 7.3 52.4 47.0 547.3% 1.560.0 0.0 0.0 0.9% (314.2 5.5 632.8 49.0 131.3% 1.3 (92.5 48.8 0.6 48.3 4.8 15.0 0.792.4 -88.com .4 948.2 449.6 299.5% (281.0) 0.125.0 0.6 41.0 305.3) 0.9 112.4) 0.0 164.0 671.1 28.6) (116.0 0.9 19.5 865.7 61.5 0.4% (319.0 0.5) (85.9 35.1 17.2 167.5 18.2 1.0 0.9% 112.9) (68.8 0.3 26.0 0.8 -23.0 6.5 36.2) 131.0 0.0 0.9 3.013.611.0 0.5) 108.0 81.190.4) 360.0 (5.0 (0.0 164.4 (20.4) 78.3) (85.0 0.5) 0.1 NS (93.7 282.4 223.6 634.7 44.4) NS 1.

7 7.9 7.00 0.9 0.6% 1.3% 1.0 5.98 18.com .6 16.00 0.7 1.000 65.860 0.79 14.22 -67.1 2.003.34 13.5% 0.0 22.0% 0.5 8.9 3.50 107.359.4 1.25 15.7 5.0 30.000 63.5 0.4 0.00 0.150 15.150 56.4 9.2 0.74 11.2 1.3 3.00 0.33 8.9% 0. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.4 1.96 9.89 27.9 7.8 9.00 2.41 20.3 22.12 NS 2.766.7 1.2 1.4 0.5 1.320 0.545.4 0.000 9.0 9.000 65.6 2.95) NS (0.2 7.70 34.7% 0.0 10.5 0.January 2011 GERMANY Smaller Companies Review SGL Carbon FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.1 0.842.5 1. reported % Change 0.7 9.2 9.000 63.23 40.7 0.6 0.4% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.16 11.0 28.320 65.6 1.3 11. restated EV/EBITA.00 0.6% 5.0 8.4 1.1 5.0 1.08 (145.6 0.1 1.381.38 13.9 18.0 NS NS 17.0 1.2 8.9 5.71 20.23 40.0 5.95) NS 0.4 19.02 46.4% 1.4 0.2 2.87 52.25 30.63 15.0 5.6 9.36 27.0 8.7 15.5 9.4 0.1 2.87 52.4 0.9% 0.6 2.9 1.0 1.900 63.3 1.2 76.150 61.6% 0.0 6.0 9.0 5.8 No.1 0.9 7.3 2.000 65.9 47.6 1.05 27.3 3.4 2.7 802.50 107.986.480 0.7% 2.5 17.381.0 11.00 3.97 40.69) NS 6.3 1.4 12.410.5 0.53 27.5 52.6 2.2 18.320 65.2% (0.6 2.1 18.2 3.8 13.1 6.000 52.0 22.910 0.87 10.3% 13.2% 11.1 0.80 17.2 0.8 1.37 11. of shares.1 0.9 NS NS 2.6 NS 2.5 12.7 9. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.3 15.4 12.3 0.6 9.1 1.141.4 9.26 27. restated 253 www.24 110.02 29.3 9.0 27.5 9.9 39.75 30.8 9.3 3.8 14.4 1.3 48.95 14.5 1.5 0.2 2.900 63.70 8.6 1.00 0.8 2.4 0.389.52 NS 8.0 17.150 61.5 0.4 28.0 4.8 23.3 NS 2.9 52.8 14.7 4.1 0.9 7.2 36.3) 6.8 1.2 40.9 0.0 1.000 52.1 2.3 2.3 0.5 1.24 112.6 5.25 24.00 1.1 9.0 6.8 9.5 12.0 12.5 9.9% 11.8 14.8 12.0 12.764.6 14.766.7% 12.8 50.00 0.3% 15.3 15.355.05 27.910 0.0 10.80 31.99 63.3 18.6 0.0 14.9 13.1 3.40 19.00 0.00 2.9 1.5 28. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.2 23.70 13.4 NS NS 8.00 1.97 23.1 50.6 10.2 0.00 2.6 22.5 10.320 0. number of shares.66 31.9 1.2% 2.6 1.05 - 516.0 9.0 3.74 37.2 1.6 12.3 2.0 4.0 10.52 26.00 0.cheuvreux.3% 1.4 NS 16. adjusted Av.4 748.8 1.9 30.3 7.00 1.6 22.9 37.6 1.88 192.4 1.24 18.0 18.1 40.4 1.5 10.88 192.66 31.5 0.00 (0.6 1.90 90.1% 12.320 0.4 14.1 8.67 135.1 15.6 11.320 65.4 1.0 8.154.4 1.7 1.0 1.8 0.9 0.3 NS 2.90 50.5 28.000 52.0 NS 0.30 6.97 40.3 79.900 0.00 2.900 0.2 21.12 NS 2.3 0. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.6 2.1 10. adjusted Treasury stock.9 27.52 22.

cheuvreux.3m. The company's acquisition of a 2/3 stake in Tecnosulfur enables it to elevate its position in the attractive Brazilian market whilst also boosting margins.January 2011 GERMANY Smaller Companies Review STEEL 2/Outperform Rating +15. as we estimate Tecnosulfur's EBITDA margin at ~15% vs.cheuvreux.4m.3 EV/Capital empl.com (49) 69 47 897 534 07/10 .3 12/06 06/07 12/07 06/08 12/08 Price/SDAX 06/09 12/09 Price Sector Top Picks RAUTARUUKKI. thereby falling short of expectations due to a higher-than-expected tax rate. 41.3 31. at EUR6.3 ROCE (%) NS 7.2 EV/EBITDA (x) NS 10. EBITDA in 9M-10 totalled EUR22. Voestalpine SSAB Least favoured Shareholders Free Float 100.3 9.3 6.7 6.4% -3.DE Bloomberg: SK1 GR Hidden gem with strong position in the value chain Recent developments – Q3-10 in line with expectations.3 16.7 1.7% EUR23.2m. up ~8% y-o-y. Q3-10 EPS came in at EUR0. Moreover. was slightly below our estimate of EUR6. down ~8% q-o-q and in line with our EUR95m forecast.9 1.4m.3 41.9 0.3 36. adjusted Daily volume EUR130m EUR130m EUR184m 6. Relative perf. Stock data Market capitalisation Free float Enterprise value No.9 3.com 2012E Attrib.52m Performances 1 month 3 months 12 months 0.0 12. EUR24m previously (~13% increase). In addition to its improving market environment. outlook raised again Q SKW reported Q3-10 sales of EUR96. so the supply/demand balance is likely to be favourable for SKW's products going forward.8% margin. It expects further growth in 2011. Group EBITDA. Cored wire EBITDA came to EUR2.7% EBITDA margin.7 5. b) tight supply of/strong demand for its products.88 Price (07/01/2011) Outlook – market fundamentals remain strong We expect market fundamentals to remain favourable for SKW as global crude steel output is likely to have grown ~6% y-o-y in 11E.0 1.com Q 254 www. both in line with expectations. We predict 11E sales of EUR316.0) 2.5 4.3 26.3 16.3 26.6% -15. Q EUR19.3 36.0% 2009 2010E 2011E P/E (x) NS 25.2m.9 Net debt/EBITDA (x) (82. driven mainly by continued improvements in underlying demand. with the EU27 up ~9% and NAFTA up ~11%.9 0.9 0.5 2.00 Target price (6 months) SKW Stahl Reuters: SK1G.3 21. SKW's ~8%.545m EUR 0.2 NS 7.4 0.5m and Powder and Granules came to EUR5m. Thyssen Krupp.3 11.3 6.6 1. we see SKW's expansion strategy as a key for it to accelerate growth and boost its profitability. and an 8.9% 11.3 31. FCF yield (%) Alexander HAISSL Q 12/10 Sector focus Yield (%) Research Analyst ahaissl@cheuvreux. and c) benefits from Tecnosulfur (starting in 10E) and Bhutan (11E).1 13. Driven by a) increased global steel output.9% 31. Global output in 11E will probably reach a new record level.3 11.13. of shares.3 21.8 Disclosures available on www. also driven by new plants in Russia and Bhutan.2% 20. (x) 0.3% Absolute perf. we expect SKW to show strong top-line growth combined with substantial margin expansion.6 11. SKW increased its full year 2010 guidance again and now projects EBITDA of EUR27m vs. the company's project in Bhutan (due to be finished by the end of 2010) will enable it to integrate backwards to a low-cost base and will secure independent raw material supplies. implying a 7.

January 2011 Q GERMANY Smaller Companies Review Company profile Q World-leading provider of desulphurization and secondary metallurgy solutions for the steel industry SKW Stahl-Metallurgie Holding AG is a world-leading provider of desulphurization and secondary metallurgy solutions for the steel industry and is also a key player in 'Quab' special chemicals. we see SKW's expansion strategy as another key to accelerating growth while at the same time increasing profitability. whilst also boosting margins. a global market leader SKW's Affival group produces and sells wire filled with special chemicals – so-called 'cored wire'. the US. With a market share of ~30% (global ex China) Affival is a global market leader with branches in France. an EV/EBITDA multiple of 7. Q Investment case Supply/demand balance remains tight We expect market fundamentals to improve further for SKW as global crude steel output in 11E will probably reach a new record level. Q Q SWOT analysis Strengths Weaknesses „ Superior position within the steel value chain „ Supply/demand balance for SKW's products remains tight due to rising global steel output „ Little pricing power. not steel prices. Q Q Cored Wire (~40% of sales) – Affival.com Valuation Normalised earnings model: In our valuation we apply a normalised EBITDA of EUR31m. its project in Bhutan (to be finished by the end of 10) will enable it to back-integrate into a low cost base and secure independent raw material supplies.cheuvreux. as both our valuation approaches (normalised earnings model and peer group comparison) indicate further upside potential. The group is divided into three segments: Cored Wire. . we stick to our 2/OP rating with a TP of EUR23. Others (Quab) – non-core business SKW Quab Chemicals Inc. Based on the abovementioned assumptions our model yields a 'fair' value of EUR22. Moreover.0x and WACC of 9%. and b) its better position within the value chain. discounted back 2 years. sells cationizing reagents in over 40 countries around the world. German-based SKW Stahl-Metallurgie GmbH (mainly active in Europe) uses the product brand 'SKW Metallurgie' and Brazilian Tecnosulfur uses the brand 'Tecnosulfur'. Valuation indicates substantial upside We stick to our 2/OP rating with a TP of EUR23. The company's recent acquisition (2/3 stake) of Tecnosulfur will enable it to elevate its position in the attractive Brazilian market. M&A and vertical integration to lift margins Aside from the improving market environment. which is unjustified in our view given a) SKW's ability to generate excess returns on capital (16. business is mainly driven by steel volumes – link to steel output „ High exposure in Europe/NAFTA Tecnosulfur acquisition lifts margin/position in Brazil „ Opportunities Threats Bhutan project enables backward integration into low cost base and will secure an independent raw material supply (finished end of 2010) „ „ 255 Decline in global steel output www. The company is geared solely towards steel volumes. which imparts specific metallurgical properties to steel.6% between 20052009). Basically Quab cationizing reagents (annual sales of ~EUR27m) can be used in the production of almost all forms of paper. Q Powder and Granules (~54% of sales) – 3 brands with global footprint The Powder and Granules segment markets three product brands. Taking both approaches into account. Peer group comparison: The stock is trading at a ~10% discount to peers.8/share. meaning that the supply/demand constellation is likely to remain favourable for SKW's products going forward. Powder and Granules and Others (Quab). as it will benefit from higher volumes without being impacted by low steel prices/margins. Japan and South Korea.

0 (1.5% (3.0 0.1) 21.2 4.0 0.9 81.0 0.8 0.1) 0.0 125.3 32.2% 336.0 74.7 13.7 178.2 NS 316.8) 0.0 0.9) (0.5) (6.1 25.0 1.0 12.0 1.0) 0.5) 26.0 (5.1 0.9 (2.6% 15.4) 5.7) 0.8 20.0 0.2) 0.7 1.0 0.0 0.1 -17.0 6.0 0.5 0.0) NS 292.1) (0.9 9. [inc.4 62.5% (6.8 15.5 0.3% (31.1 (2.4 32.0 0.6 191.0 (2.6 0.7 13.7) (258.0 0.0 11.0 0.com 2007 2008 2009 2010E 2011E 2012E 239.7% 377.0 0.0 0.2 0.6) (273.1 46.9% 0.1) 0.6) (200.0 18.4) 19.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 256 www.0 1.8 18.0 0.0) 0.2 4.1 (5.6 74.0 0.0 0.0 (5.0 0.0% 0.0 0.7 19.0 0.8 7.0 0.5) 2.4) 0.9 14.5% (29.8) 18.4 16.3 (11.8 7.0) (2.0 13.3 1.4 114.7 40.0 1.1 4.9 0.0 (4.0 0.0 0.3) 0.0 10.0 (12.0 0.0 0.0 45.2 8.8 30.0 0.5) 0.3 21.5 121.3 3.January 2011 GERMANY Smaller Companies Review SKW Stahl FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.1 1.0 6.5 0.6) (7.8 43.7 40.0 0.2% (8.9 53.0 5.1) 27.0 (3. profit [loss].7 10.4 0.4% 2.6% (10.0 0.0 (2.0 24.0 0.0 18.0 0.0 0.0 0.3 44.8 54.9 119.0 (1.5) 0.0 (5.0 (0.7% (6.0 4.6% (17.8 27.1) 24.9) 0.0 12.0 (6.0 10.0 0.6 0.7 41.8 .0 0.4 50.0 0.5) 11.0 57.6 12.2) 24.0 (7. for exceptional items Net attrib.0 0.4 181.0 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 (2.8 98.8 35.5) (20.0 (0.6) 16.5 4.1 191.8 7.0 14.8 2.0 0.0 65.6% (23.3 0.1 23.0) NS 0.1 22.3) (20.9 1.5 17.2) (28.2) 0.6 -41.3 17.8 58.7 NS (12.5 0.0 0.6 (29.4) 17.9) 0.0 0.0 0.0 13.0 0.5) 0.0 19.0 0.0 (7.0 0.0 (20.4) (244.0 0.5 0.8 44.3 33.2 46.0 58.1 (0.8 53.3% (24.0 (2.0 0.6% 0.0 0.0 0.4 -91.7 10.8 152.7 (2.5 0.3 0.0 0.9) (6.0 4.0 21.5 1.8 42.0 0.7 24.4 12.8) 0.3% 0.4 42.5 19.cheuvreux.5 (20.0 0.9% 220.7) 0.4 62.4) NS (6.0 55.1 0.0 0.7 137.1) 12.0 28.0 8.5 181.7 40.1) (197.0 0.5 137.0) (3.3 (2.3 1.3 76.2 31.0) 0.0 0.4 57.9) 19.0 15.2) (321.0 178.7 7.0 0.4) 0.1 152.7 (0.6 119.9 16.3) 21.4) 31.4) 0.2 NS (6.0 12.0 0.1% (6.4 41.5) 14.0 0.1 50.4 0.1 10.4% 29.1) 12.7 1.8 19.0 10.9 8.1% (30.0 10.0 17.0 (16.0 (1.8) 0.7 40.0 104.7 11.7) 0.1% (30.1 NS 0.0 0.8) 0.0 0.4 18.5 3.6) 0.6 4.6) 0.

2 13.15 22.6 13.80 20.8 2.30 1.1 0.8 5. restated 257 www. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 111.5 11.28 -17.2 9. of shares.29 14.8 7. adjusted Treasury stock.0 0.00 0.00 0.94 NS 15.9 48.5 9.4% 17.00 0.8 53.3 0.1 NS NS 0.7 46.6 8.00 0.1 0.5% 0.0 NS NS NS 2.7 0.4 10.1 39.0 9.000 6.6 2.4 5.545 6.9 NS NS NS NS NS NS 0.2 18.545 6.2 7.1 12.69 3.6 8. reported % Change 2.545 0.7 1.1 184.545 0.8 4.56 EV/EBITDA.77 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.8 35.3 6.9 152.422 4.7 4.0 14.7 8. number of shares.8 NS 2.76 121.4 28.8 7.5% 2.79 172.1 5.2 4.35 21.9 5.1 54.000 - - - 20.9 5.5 30.5% 1.3 11.3 8.000 4.6 92.1 9.3 9.2 194.000 4.6 138.0 4.cheuvreux.9 15.7 6.6 10.8 9.9 1.92 50.00 0.7 13.3 1.3 No.10) NS (1.7 16.9 7.9 2. restated EV/EBITA.8 6.3 11.5% (1.88 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.9 NS NS NS NS NS 1.50 2.0 0.00 0.3 0.15 22.9 1.2 6.7 130.10) NS 0.2 2.50 3.6 133.79 172.7% 22.6% 18. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.000 6.32 13.5 NS 1.35 16.545 0.6% 18.3 NS NS NS NS NS NS NS NS NS NS NS NS 10.9 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.3% 1.6 13.5 21.3 130.6 25.0 NS NS NS 1.7 2.422 0.442 0.1 2.31 -91.8 31.0 25.6% 16.20 19. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.8 93.0 18.5 7.1 183.86 3.3 6.000 6.0 37.1 1.88 20.422 4.3% 2.9 18.6 1.6% 2.77 2.9 11.7 0.50 3.00 0.2 NS NS 0.7 8.0 6.2 NS NS NS NS 7.7 4.28 -17.76 121.3 11.99 19.45 19.0 3.January 2011 GERMANY Smaller Companies Review SKW Stahl FY to 31/12 (Euro) 2007 2008 2009 2010E 2011E 2012E 2.2 0.1 8.9 2.566 0.4 4.422 4.4 0.3 0.5 11. adjusted Share Price [Adjusted] Latest price High Low Average price 4.2 2.1 0.2 6. adjusted Av.6 10.545 6.com .

1%.0 52. SolarWorld Conergy Shareholders Free Float 27.527 09/10 .cheuvreux.8 3.0 92.0 5. 22.0 We also expect Q4 demand to have been solid. We expect the average selling price for inverters to drop 13% in 2011E to about 21cents per watt peak (already included in our numbers). Having said that.0 06/08 22.4 4.7 Attrib. Hence.1%.9 8.0 92.8 117.8% -17. Werner Kleinkauf 15.1%.3% -31. We expect SMA to release 900 temporary workers as a result of seasonal weakness anticipated in Q1-11 (winter in Germany and reduced feed-in tariffs). Our estimates are broadly in line with consensus and company guidance.20 Price (07/01/2011) Clear market leader – not only in Germany Q +90. Relative perf. SMA is likely to have recorded a significant drop in orders in Q4-10E and this trend will probably continue in Q1-11E.0 3. We predict a 5% sales decline for 11E despite 9% output growth.8% -26.0 72.1 3.com 01/11 Price Philipp BUMM Research Analyst pbumm@cheuvreux. This explains why its Q3-10 revenues came in >20% stronger than the market had expected. The company spoke of an inventory build-up in the value chain as installers anticipated further strong demand in Q4 (especially in Germany).0 82.6% 2009 2010E 2011E 2012E P/E (x) 18.com Q Q 258 www.7 3. We also expect the EBIT margin to decline from 27.0) (0.1 3. but without a year-end rally as was seen in 2009. FCF yield (%) 2.0 3. SMA hired >1000 employees last year to meet peak demand in Q2-Q3. We do not regard the company's statements as news.3 8.00 Outlook – We expect the global market to grow to 16GW Stock data Market capitalisation Free float Enterprise value No.6% EUR130. Günther Cramer 19.1%.0 62. should come as no surprise to investors.0 EV/EBITDA (x) 11. In 9M-10 its foreign sales accounted for 37% of the total.7) (0. We assume EPS will drop by 20% y-o-y.1 EV/Capital empl.1 ROCE (%) 86. 42. As a consequence.1 7. As the German market looks set to decline in 2011.0 10/08 02/09 06/09 09/09 Price/TECDAX 01/10 05/10 Sector focus Sector Top Picks Least favoured SMA.0 42.8) Yield (%) 2. Peter Drews 19.8 4. This issue should already be reflected in estimates for 2011.January 2011 GERMANY Smaller Companies Review RENEWABLE EQUIPMENT 2/Outperform Rating Target price (6 months) SMA Reuters: S92G.3 60.com (49) 69 47. Phoenix Solar's CEO Dr Hänel has confirmed our view.0 102.cheuvreux.6 4.897. in particular. Reiner Wettlaufer 19. Q EUR68.0 62.3% -31. SMA expects the inventory build-up in early Q4-10 to result in pricing pressure in 2011.1% -5.0 72. the likely weak Q1-11E. 102.72m Performances 1 month 3 months 12 months 0.0 We reiterate our global demand assumptions of 13GW in 2010E and 16GW in 2011E.0 52.7m EUR 5.5 6.DE Bloomberg: S92 GR Recent developments – Very strong Q3 but stock fell Despite the very strong Q3 results.5% in 2010E (32% in Q3-10) to 23%. of shares.8) (0.5 8. adjusted Daily volume EUR2367m EUR641m EUR1807m 34. SMA's shares fell significantly on the day the figures were released.0 82.8 67.0 32. this is no surprise to us.3 Net debt/EBITDA (x) (1.2 Disclosures available on www.9% Absolute perf.0 32. To cover the higher-than-expected demand in 9M-09. as Q1 also accounted for only an estimated 19% of FY revenues in 2010E and only 9% in 2009. SMA predicts that about 70% of its revenues will stem from outside Germany. (x) 11.

We therefore reiterate our 2/Outperform rating. produces and sells photovoltaic inverters.January 2011 Q GERMANY Smaller Companies Review Company profile Q Companies activities Founded in 1981. EV/EBIT: 8x). These product series carry brand names such 'Sunny Boy'.g. SMA heavily depends on regulatory support „ 259 www. up from 44% in 2009E. monitoring systems for photovoltaic facilities. high development costs. and electronic components for railway technology. The photovoltaic inverter is a central component in any solar power system that converts direct current (DC) into alternating current (AC). we expect SMA to maintain a market share of >40% going forward. The HPS division assembles inverters for larger projects under the brand name 'Sunny Central'. it is able to exploit its high available capacity (a decline in global capacities has the opposite effect). ABB) „ Like every solar company. . Hence. highest available efficiency in the market – up to 99%). service structure with direct access to 400 relevant customers. 41% and ~44% in 2007E. the world's largest solar inverter manufacturer. based on CA Cheuvreux market estimates.com Valuation SMA is trading at a P/E-11E of 8x and at an EV/EBIT of 6x. 2008E. The photovoltaic inverter business is split between Medium Power Solutions (MPS) and High Power Solutions (HPS). Q Q Well positioned in the solar sector SMA achieved global market shares of 34%. It will probably report a pre-tax ROCE of 120% for 10E and 72% for 11E. is seen as a strategic partner by more and more suppliers. the company is trading at a 20+% discount to the sector (P/E: 10x. and 2009E respectively. Despite its high profitability (EBIT margin >20%). As we believe global new installed capacities will again be dominated by residential demand in Germany in 2011E and 2012E. accounted for about 98% of group sales in 2009. We believe SMA recorded a 52% market share in 2010E. consisting mainly of the photovoltaic inverter business. which has relatively high barriers to entry (e. Q Investment case SMA benefits more than any other solar equipment manufacturer from strong global demand due to its flexibility in production (11GW capacity). In the MPS division SMA produces and sells solar inverters with a maximum capacity of 17kW. Whenever global new installed capacities increase. Here the company offers inverters with capacities of >1MW.cheuvreux. Q SWOT analysis Strengths Weaknesses World market leader in solar inverters with a market share of 44% in 2009 „ No order backlog/no binding contracts with customers – only framework contracts valid for up to 1 year „ „ High barriers to entry Excellent distribution structure with wholesalers „ „ No top-line visibility Considerable seasonality during the year „ Broad range of products that address every market segment in the photovoltaic arena „ Highly flexible and scalable production „ Opportunities Threats Cost of materials (electronic components) may come down if demand in the electronics industry cools down „ New potential market entrants (e. designed mainly for small and midsized solar systems for the residential market. 'Sunny Mini Central' and 'Sunny Tripower'. We regard the company as very solid and well positioned in the solar sector. thus converting the electricity produced by a solar panel into gridconvergent electricity.g. we expect it to have better access to component supplies than its competitors. Q Divisions The two Photovoltaics Technology divisions. SMA Solar Technology AG develops. The estimated rise in market share is attributable to the fact that SMA.

0 59.0 0.9 0.0 36.0 613.6) (89.3 134.0 0.7 0.9% (25.7 0.0 0.0 NS 86.5 1.3 0.8 712.3 0.6 273.1) 0.5% 1.5 436.0 0.3 76.9 8.0 15.0 (130.8 328.6 0.8% (207. for exceptional items Net attrib.1) 0.0 0.5 0.0 (125.0 0.7 38.7) 187.4) 0.8% 0.2) 122.0 0.4 117.0 0.0 33.9 95.6) 0.5% (191.0 0.0 4.0 0.0 (154.1 0.0 (71.2 2.0 0.0 0.0) (132.4) 0.0 98.2% (32.0 0.5 0.1) 176.0 0.0 0.0% (31.0 0.0 0.6 0.5 10.6 10.5 0.0 4.0 284.0 (51.5 40.8) 128.0 (45.0 0.0 117.6 (42.6) 454.3% 0.9% 0.3 407.0 20.0 139.0 0.0 0.0 59.0 295.1 92.3 37.8) 0.3) 502.9) 124.0 0.7 0.4 327.0 0.881.0) 435.3 (55.1) (7.1 0.0 0.0 0.4) NS 92.0 284.6 0.8 79.4) (584.5% (182.0 0.8 10.5 0.9 327.0 0.4 4.5 0.9) 75.1 0.0) (5.8 0.7 909.7 www.0 20.0 15.8 10.5 0.5 -17.4 -19.6) 107.1% (8.9 0.9) (1.2) (421.0 (34.3 3.com .3 5.0 350.3 118.0 0.0) 10.9 8.7 77.1 10.0 0. profit [loss].0 0.8 66.1) (150.8 0.0 0.0 167.3 0.0 (471.0 (12.0 (13.0 150.0 (71.1) 42.2) (168.0 19.0 502.1% 15.7 0.7 0.0 0.0 5.0 (87.4 0.7 115.8 (9.0 (13.0 0.7 -18.6) 29.5 29.5 0.7) (1.5 NS 934.3 17.January 2011 GERMANY Smaller Companies Review SMA FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj. [inc.7) 0.8 (210.0 (10.8) NS 272.3 0.6 (83.4 180.4 0.4 182.2 64.2) 0.3% (30.8 0.0 0.0 0.0 78.4 (7.2 0.0 0.1 34.0 3.0) 533.0 49.0 0.0 295.8% 1.7 0.1) (17.2% (84.134.1 (205.4% 0.7 0.8 0.0 0.0 82.6) (77.0 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 260 2006 2007 2008 2009 2010E 2011E 2012E 192.3) NS 436.826.0 0.7) 421.0 142.3) (9.0 119.7 (218.6 108.0 0.9 26.0 405.0 0.0 0.0 34.0 0.2% 0.6 7.0 0.0 0.0 15.0 126.1) 31.0 119.4 18.cheuvreux.6% (57.4) NS 711.0 0.8) (67.0 161.0 0.1 0.0 0.0 0.220.2) (95.1 381.0 0.9 52.6) 0.2) NS 180.5) 0.5 4.0) 0.8 0.0 0.3 (0.0) 59.0 0.0 (22.0 161.0 0.0 284.0 350.4 3.0 0.0 0.0 161.2 0.0 421.8 0.0 0.4 149.0 (3.8) 67.0 119.0 70.3) 405.0 0.0) (0.0) (120.7 -4.0) 33.0 0.5 94.0 0.8 0.4 0.0) (191.4 447.2) 197.9 0.4 0.0 20.7) NS 613.4 0.4 36.8 4.0 711.8 177.8 0.1 0.1) 0.4 (0.8 4.0 0.0 0.0 0.117.0 0.2) 244.4 314.744.3% (20.0 71.0 228.2) 26.0 75.0 0.0) (1.7% (16.0 0.0 11.0 0.2 0.3 77.9) 167.0 36.0 0.4 38.3) (72.3% (18.6) 0.1% 0.0 0.5% (11.9% 1.4 0.111.0 0.6% 681.4% 0.0 45.0 0.6 0.0 0.4 3. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 47.4 534.2) 33.0) (101.6 280.0 0.3 143.0 0.0 295.1% (105.0 36.0 15.0 350.0 1.0 0.0 119.2 -18.8 0.1 (351.0 0.0 0.8% (16.9 31.7 0.3) 228.8 (343.0 (25.0 49.6 0.

00 2.0 4.5% 30.1 50.6% 10.9 6.6 3. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.103.6% 24.6 2.8 857.2 16.3 2.3% 7.3 10.5 4.01 143.15 68.7 2.0 9.2 0.000 34.00 0.8 3.13 9.0 2.4 2.20 70.7 6.2 2.30 4. restated EV/EBITA.5 1.5 18.00 46.January 2011 GERMANY Smaller Companies Review SMA FY to 31/12 (Euro) 2006 2007 2008 2009 2010E 2011E 2012E 0.com .2 27.9 5.00 2.882.8% 1.3% 9.0 37.6 NS 50.366.700 34.000 32.2 24.411.19 -18.20 69.5 19.65 77.000 34.8 4.2 2.2 8.00 98.8 79.8 4.1 11.3 2.2 3.0 NS NS NS NS NS 0.8 81.4 3.2 65.000 - - 37.00 1.2 4.5 3.30 68.9 24.2 65.000 34.1 NS NS 25.6 17.0 5.1 10.1 64.50 23.7 2.5% 3.000 0.7 1.8 94.366.93 No.2 3.7 1.00 1.3 117.0 23.8 5.3 8.1 86.2 NS NS NS NS NS 0.3 49.4 17.8 2.06 -17.9 5.4 15.3 65.3 67.000 0.5 31.1 54.1% 0.0 39.99 84.70 66.8% 5.5 0.7 79.807.00 2.9 54.0 8.74 NS 5.03 34. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.83 68.64 Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0. of shares.5 NS 87.235.1 NS NS NS NS NS NS NS NS 4.05 11.5 1.8 NS 34.5 16.000 32.1 11.9% 8.90 69.2 3.10 100.8 11.14 9.1 17.1 16.9 6.700 32.000 32. adjusted Av.3 46.8 3.52 4.50 67.5 0.8 2.700 0.52 4.0 30.15 79.9 NS 26.5 2.04 93.5 3.8% 10.0 NS NS 24.4% 18.03 34.000 0.700 0.3 NS NS 25.9 49. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.0 4.00 1.0 7.3 NS 20.50 103.cheuvreux.700 34.2 67.1 41.52 5.15 79.5 1.00 2.000 32.5 30.835.6% 8.7 3.43 53.19 -18.3 7.1 NS NS 29.5 0.74 NS 3.700 0.1 0.7 NS 25.26 6.000 0.6 3.9 5.1 22.9 0.0 10.1 4.0 60.25 97.3 7.000 32.5 18.663.1 1.73 0.3 3.0 8.0 10. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.8 3.8 59. number of shares.000 34.64 1.1 NS NS 22.1 NS NS 23.0 3.0 18.55 38.5 32.4 37.1 8.1 67.5% 1. adjusted Treasury stock.2 3.10 100.9% 8.20 - - - 1.9 NS 114.59 28.0 Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.0 0.1% 8.8 12.8 NS NS 26. restated 261 www.700 34.47 4. reported % Change 0.

higher-margin BPM projects. b) faster realisation of IDS Scheer integration cost synergies.1) Yield (%) 1.7 2. ultimately targeted at EUR35m (instead of EUR30m).5 8.1 0. improved maintenance revenues (up 19% to EUR97m). strong Services revenues (up 56% y-o-y). we feel confident that Software AG will benefit from reinforced indirect channel activity going forward. Amid increasing traction among consultancies.2 2. Software AG's transformation focus will shift to its Services/Consulting staff.4 57. we believe. The only weaker-than-expected number was webMethods new licences. Logica Least favoured Shareholders Free Float 70. which has been unaffected so far.2% 31. Software Ag Foundation 29.4 207.3 (0.DE Bloomberg: SOW GR Executing to perfection Stock data Recent developments – Strong Q3 results. c) strongly growing Services revenues and hence improved utilisation. with improved margins in all three business lines. (x) Research Analyst blaux@cheuvreux.4 03/02 06/03 09/04 12/05 Price/TECDAX 03/07 07/08 Price Sector Top Picks Alten. though successful reference projects are set to boost the indirect channel from H2-11E (making further inroads into the SAP client base).com (49) 69 47 89 75 12 10/09 .5 1.3 7.6) P/E (x) Net debt/EBITDA (x) 1. commoditised SAP integration services will be scaled back in favour of more complex.4 307.6 27.5 (0. the rebound of ETS (+6% y-o-y).4 7.2 4.4 01/01 7.3%.4 1.4 357. the low-margin.8 8. Group EBIT was up 20% y-o-y to EUR69m.9 EV/EBITDA (x) 9. Market capitalisation Free float Enterprise value No. operations and product (bundling of webM and ARIS in one BPM suite from 2011) virtually completed by end-2010. 357.2 Attrib. Capgemini. While Software AG is poised to continue to expand its profitability by cutting expenses.4 Bernd LAUX Disclosures available on www.7 10.8 31. FCF yield (%) 8. Initially.2% 33.4 157.4 257. Net income rose 20% y-o-y to EUR46m due to a) the company's strong execution. which rose only 6% y-o-y (-5% cc). adjusted Daily volume EUR3085m EUR2168m EUR3088m 28.7% Absolute perf.81m Performances 1 month 3 months 12 months 6. and material FX effects (!).9% EUR120. Software AG will eye further sizeable acquisitions again.1% margin. which typically also come with much bigger deal sizes.51m EUR 8.7 ROCE (%) 19.January 2011 GERMANY Smaller Companies Review SOFTWARE 1/Selected List Rating +10.1 14.7% 2009 2010E 2011E 2012E 15.cheuvreux. Starting in H2-11.4 307. driven by the consolidation of IDS. sales will continue to be dominated by the direct channel. The company. In 2011. First project-related successes in cross-selling the group's broadened portfolio should be enhanced by the introduction of the first fully harmonised Business Process Excellence suite by the beginning of 2011.8 2. An equity capital increase for this purpose is not being considered. and d) positive hedging effects.2 1. Relative perf.4 207.4 57. equating to a 25.4 107.5 2.7 23. In addition. can finance transactions up to a value of EUR1bn solely from cash flow and additional debt.7% 19. of shares. except for webM licences Q For Q3-10 Software AG reported a 29% rise in group sales to EUR275m. the company's ARIS sales force will be merged with that of webM.6 7. Free cash flow was excellent at EUR43m (though down 9% y-o-y).00 Target price (6 months) Software AG Reuters: SOWG.com Q Q 262 www.4 107.4 157.20 Price (07/01/2011) Outlook – Transformation not over yet With the integration of IDS Scheer's back office. Dassault Systemes.cheuvreux.5 18.3% 6.com 01/11 Sector focus EV/Capital empl. Q EUR108.4% -0. the investment case is likely to change in the coming years as top-line synergies are realized and hence growth becomes increasingly important.9 12.4 257.

34% recurring maintenance and 39% services. 2. will be the company's main driver of growth.0% terminal growth). the company will generate EPS of about EUR10. Our DCF model yields a fair value of EUR120. reducing the contribution from low-margin services. a level that the market is far from having discounted. expertise in mainframe integration „ Unique. given Software AG's world-leading. The company's IT services offer will remain focussed on a few end-markets (public sector. Assuming Software AG achieves management's 30+% EBIT margin goal by 2013E. Going forward. of IT suppliers. Software AG is Germany’s second-largest software firm. high-single-digit top-line growth. Software AG is poised to double its group sales every 5-6 years. although we incorporate what we consider to be conservative assumptions (WACC 7. sales CAGR10-14E of 7%.7%. an improvement in the product mix (sales of products growing faster than services) and traditionally strong execution. Hence.000 customers in more than 70 countries spread across a broad range of industries – has increasingly been shifting its focus towards integration/business process management software. Due to the realisation of cost and revenue synergies from IDS Scheer. indicating 11% upside from the current level. the main source of future growth will probably be integration software (webMethods business line. financials. combining webMethods middleware and ARIS process design. service-oriented middleware and BPM software portfolio. complemented by ARIS). indicating an average discount of ~1525% to our peer group. EV/EBITDA 9x. especially given the company's faster growth. The company's mid-term target stands at 30% EBIT return on sales (IFRS). Services to be streamlined We estimate Software AG's 2010E revenues split at about 27% new licences. production.a highly profitable cash cow Having said that. While the share of new licence revenues is likely to remain economy/IT spending budget-driven (in particular at webMethods). EUR190m (gearing: 24%) is likely to be paid back within twelve months. to be complemented by the acquisition of product vendors in adjacent software. Q Investment case Software AG has successfully positioned itself as an innovation leader in the business process excellence (BPE) software arena. we expect Software AG to expand its EBIT margin from 24% in 2010E toward 28% by 2012E. IBM. Q Strong free cash flows to allow fast repayment of debt Software AG's financial position remains very healthy.January 2011 Q GERMANY Smaller Companies Review Company profile Q Focus shifted to systems integration software Established in 1969. While historically rooted in the mainframe database management software segment. telecommunications). limited systems integrator collaboration Previously limited access to enterprise applications software customer base of SAP Small share in customers' IT wallets „ Limited know-how of verticals (ex IDS Scheer) „ Opportunities Threats Margin expansion via product mix improvement and synergies (IDS) „ Exploitation of group-internal cross-selling opportunities. is likely to be standardised over time. a DCF model renders a fair value of EUR140+ per share assuming that margin is sustained.cheuvreux. given strongly enlarged customer base „ Rising market awareness and customer relevance for Software AG. Oracle) „ „ USD and GBP weakness vs. . higher ROE and strong balance sheet. EUR weighing on top-line growth and earnings (translation risk). likely to attract new partners Strong global competition at webMethods (e. that is not a concern for Software AG given its leading position. Q SWOT analysis Strengths Weaknesses „ Fastest and most reliable mainframe database.g. 2 globally behind IBM) still accounts for some 46% of total licence revenues and about 36% of total group revenues (2010E).7x (all based on 2011E).com Valuation Despite their 2010 run-up. average 25% EBIT margin. Software AG shares are trading at undemanding multiples: P/E 15x. bearing in mind the group's impressive free cash flow generation capacity. We see no fundamental justification for this. At 15x earnings and less than 10x EV/EBIT (both for 2011E) the shares remain materially undervalued. BPE. The company can be expected to deliver sustainable. focusing on database management systems and systems integration software. highly cashgenerating business model „ Excellent management track record „ Partner channel still fairly weak. and EV/sales 2. delivering annual EPS growth of roughly 18% on average. the mature and highly profitable mainframe business (ETS business line. Q Q Mainframe software . which is currently mainly customised. the company – with roughly 10. Q Revenue split to be improved. though to a reduced extent due to IDS „ Customers reducing their no. no. Their 15-25% discount relative to EU software peers does not appear justified. Its current net debt of c. Although process optimisation. technologically leading SOA /BPM integration suite „ „ Profitable. the share of high-margin maintenance is set to increase over time.0. At the same time. cutting IT budgets „ 263 www. Notwithstanding.

0 11.6 13.0% 0.4 4.0 83.0) 313.0 (314.4 7.4 17.4 0.0 17.7 (238.5 (299.7 0.0) 111.0) 266.0 61.5% (8.2 22.5 0.0 0.3 1.4% 0.0 0.6 20.0) 115.3) NS 1.0 140.0 111.3 32.0 29.0 0.0 (42.2 0.5% (213.6 139.0) 0.8 323.0 0.5 176.6) (185.5) 0.7% (46.0 172.0 133.7 0.5% 3.1 43.3 29.0 0.4 -2.0 (28.6% (7.9 27.3 167.9) (133.7 549.0 (140.9) NS 321.0 0.6) (5.8 NS (28.0 0.0) 242.0 (24.129.6 421.4 14.0 73.0 0.0 0.January 2011 GERMANY Smaller Companies Review Software AG FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.1 1.4 36.8% (532.0 60.0) 0.8 14.0 193.0 0.0 0.8 31.0 16.0 13.111.0 0.4% (1.0 108.7 150.0% 483.0 0.2) 85.9) 96.1% 0.0 0.7 7.9 107.0 (0.6 188.0 61.9 3.0 313.0 21.1 46.0 (98.4 25.9 18.2 17.0 24.7% 1.7) 4.4% 0.3 49.1 5.8 0.0 0.1) 0.4) 0.5 206.3 28.2) (9.0 61.9% 0.0) 0.5 150.6 58.0 (2.0 0.0) 132.0 14.0 15.0 0.5) (120.6 15.3 12.0 0.1) (1.0 0.7% 18.1 15.0 0.0) (183.8 42.2 26.0 182.7 676.1 749.7% (46.0 0.3 0.6 38.0 NS 438.8 0.0) 68.4 (356.0 0.111.0 0.7) (1.0 0.7 17.8 0.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 264 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 411.3% (54.2 0.9) (37.5 (0.0 88.0 NS (11.260.7 15.0 180.4 1.2 704.0 33.0 83.6 1.0 119.0 (33. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 7.0 172.0 (182.0 (0.0 (0.0 (8.3) (17.3) 257.0 0.2 155.1 304.0 (31.1) 136.6) 206.3 (22.1) 104.6) (1.3) NS 282.0 (20.0 0.3 14.6) (208.9 8.8 16.2) NS 304.0 72.0 392.0 0.1) 61.0 (79.0 0.8% 0.0 (0.4 0.9) 218.4 20.2) 0.0 115.132.1 35.8 23.2 141.1% 847.0) (199.0 (37.103.7 0.6 162.2% (15.9) 1.0 0. profit [loss].8 0.0) 88.0 (0.0) 53.0 0.9 19.0 5.2 150.2 0.0 0.0 207.3) (281.1 84.2 48.6 67.2 271.6 -22.3 0.0 0.2% 720. [inc.0 0.0) 0.0 0.6 16.0 0.1% (15.8 0.129.0) (98.0 61.9% (9.6 24.0 0.6% (25. for exceptional items Net attrib.8 755.098.0 0.4% (565.0 0.8% 85.1 1.6 (5.0 0.7 35.0 28.3% 0.5) 172.6 38.0 176.0 0.0 170.0 0.4 0.0 0.0 196.6 0.0 0.7 288.5) 180.0) 61.1 1.0 (1.4) 97.9 16.9% (8.6) 0.0 0.8 0.6% (391.0 (14.0 (45.0 0.1 35.0 21.0 0.0 0.6) 0.7% 0.0 0.0 136.7 431.173.0 461.0 0.0 0.7 627.2 (12.9) 33.1 0.0 14.120.0 174.0) 0.2% 37.6% (286.5 5.6 0.7) 359.0% (10.0 1.6 24.0) 116.5 (34.7 0.0) (294.0% 1.5 181.0) 255.0 (48.0 0.0% 1.8 54.3 2.0 (39.0 77.4 21.120.5) 0.7) 119.5) 2.0 22.7 704.0 218.0 0.com .6 0.0 0.6 0.2 7.0 0.0 6.0) 239.6% (527.9 (33.2 20.7 0.4 0.0 266.0 (131.2 20.8) (257.0) 179.3) (5.0 177.6 (101.2) 111.0 10.6 1.1 682.3% (229.9) (1.2) 72.3% 621.5 (112.9) 0.0 0.7 70.7) 67.3) 72.2 224.0 0.0) 0.0 (65.2) (5.0 0.0 115.3) 151.4 (32.5) (19.0 6.0 0.6) 15.7 442.5 44.0 (1.0 47.2 15.7) 0.7) NS 1.0 0.1 0.0 0.9 0.5) 0.1 64.0 0.0 (24.3) 73.7 5.8 676.0) 401.1 20.8% (38.3 1.0 79.3 1.5 0.3 13.6 32.0 0.1) 145.0 206.6 282.0) 255.0 0.4) 0.1 6.1 24.4) (6.5 31.3 -16.2 913.0 21.0 (68.7 0.0 (59.0 (0.3) 313.1 0.2 0.4) 0.4 12.9) 0.7 0.1 1.0 0.4 71.0 0.1) 77.3 0.7 1.2 322.9 32.0 355.5) 0.7) (6.0 0.6 0.7% (47.9 47.0) 355.0 0.0 141.2 (8.0 (113.0 (0.132.9) 206.2 301.0 (22.7 44.2 64.7 704.0 0.5 236.1) 0.5 0.0 96.0 0.0% (305.0 240.0 0.0) (12.2 (16.9 188.7 119.0 4.cheuvreux.8 www.0 0.0 0.0 6.0 0.7) 0.0 239.1 755.9 0.0 0.0 88.7 (157.0% 0.5) 0.

9 1.1 1.8 3.5 6.1 6.0 20.000 28.510 0.470.5 13.70 36.76 26.15 6.4 0.540 0.3 24.8 1.80 28.0 1.10 5.5 15.9 2.7 17.570 0.1 0.11 64.0 6.4 23.80 109.38 15.7 558.6 11.7 1.2% 4.05 18.53 108.00 0.10 21.570 28.5 19.6 19.2 21.510 28.1% 13.9 27.4 30.7 3. reported % Change 2.7 28.05 30.23 -23.9 28.610 0.1 31.1 1.3 1.1 16.1 2.24 19.00 1.3 1.4 15.7 1.2 18. adjusted Av.2 21.06 23.9% 4.4 2.6 20.5% 25.630.4 18.7 2.0 14.4 1.9 12.2 8.6 0.6 2.7 8.8 18.000 28.23 -21.3 2.8 3.5 12.0 3.7 11. restated EV/EBITA.5 30. of shares.9 1.56 14.08 32.0 14.4 2.3 NS 0.January 2011 GERMANY Smaller Companies Review Software AG FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.7 0.3 2.2 4.726.5 NS 35.00 1.2 3.5 28.9 23.4 18.27 48.15 43.1 2.8 15.8 10.3 3.01 17.09 41.80 74.1 2.000 27.9 7.1 18.1% 36.6 26.0 3.2% 6.9 25.2 1.6 16.92 21.80 2.3 4.2 19.6 25.15 NS 11.2 14.38 15.400 0.1 NS 21.00 109.92 21.9 20.9 4.2 1.1 8.540 28.0 NS 20.9 18.10 35.8 42.6 1.400 28.58 16.5 24.0 2.9 2.270 27.2 1.2 3.4 12.2 0.8 3.40 80. restated 265 www.91 59.2 7.8% 18.12 13.146.4 8.000 28.8 1.75 89.3% 6.4 8.50 23.1% 30.8% 8.3 25. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.3 4.cheuvreux.3 25.0% 2.20 111.7 16.8 6.10 21.000 28.486.000 28.9 NS NS 23.510 28.98 27.00 3.9 19.5 NS NS 23.0 15.300.9 9.95 13.2 3.540 28.6% 7.6 24.00 1.7 23.74 60.610 27.9 14.9 4.1 27.3 8.8 22.0 12.06 23.4 20.8 28.05 30.8% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.7 13.123.8 32.6 16.2% 20.9 27.0 14.3% 4.26 14.1 4.5 22.875.084.1 1.55 76.00 1.50 8.9% 13.5 2.8 1. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.680 0.5% 2.1 0.0 23.com .5 17.54 40.8 7.57 78.56 14.6% 8.5 10.25 60.6 23.73 109.75 107.50 46.5% 3.5 31.58 -17.1 21.5 0.680 28.6 19.92 17.3 13.7 5.75 3.4 NS 35.5 1.30 7.2 1.9 23.20 - 649.1 NS 1. adjusted Treasury stock.9 12.7 21.5 NS 26.1 0.8 27.088.08 108.2 9.5 10.3 2.90 23.1 15.000 28.227.0 17.00 1.7 9.2 25.4 NS 0.6 21.8 NS NS 24.3 12.5 18.98 15.8 2.8 21.270 0.9 10.5 12.3 3.24 19.00 61.1 13.2 27.83 NS 2.3 25.5 1.9 25.8 1.2 NS 1.2% 3.1% 2.4 3. number of shares.3 No.7 NS NS 31.5 25.74 32.80 10. adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.5 4.05 33.6 9.1 1.118.5 NS NS 30.00 0.50 44.000 23.6 1.9 12.0 34. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.9 18.3 13.5 11.868.3 23.07 0.1 7.3 9.2 24.000 28.9% 4.61 54.6 9.4 2.2 24.90 NS 2.36 6.2 15.4 2.4 989.540 0.00 1.190.2 0.084.7 9.2% 15.90 2.9 0.510 0.1 3.70 8.2% 7.

EBIT of EUR51.6% EUR12. EBIT of EUR1.com Q Q 266 www.3 40.527 09/09 .3 9.1 EV/Capital empl.7 8.3 0.3 100. We expect the US market to reach 1.3 1. 140.85m 03/07 06/08 Price Sector Top Picks Least favoured SMA.3 100. which should have a total capacity of 500MW by the end of 2011 at the latest.2 ROCE (%) 13. The company reported a high 42% tax rate because its US capacities are still lossmaking.4 1. Solarparc was founded by SolarWorld's CEO Frank Asbeck in 1993 and was IPOed in 2001.3 60. Its clean financial result of EUR13-14m was in line with our expectations. we expect SolarWorld to also enjoy a high level of brand awareness outside of Germany.DE Bloomberg: SWV GR Brand and quality leader Q Recent developments – Very good profitability SolarWorld reported sales of EUR337m in Q3-10.5m. adjusted Daily volume Performances 1 month 3 months 12 months -1.00 Target price (6 months) SolarWorld Reuters: SWVG. Its EUR-19m financial result was hit to the tune of EUR56m by non-cash items due to interest rate hedging.cheuvreux. of shares.7 11. of which it actually owns 57MW and 3MW respectively.4m and consensus of EUR21m.9% -56.January 2011 GERMANY Smaller Companies Review RENEWABLE EQUIPMENT 2/Outperform Rating +64.6 15.3% -22. which puts SolarWorld's share at an estimated 17%.cheuvreux.3 2. in line with expectations.3 80.3 12.3 20. On 15 November SolarWorld offered Solarparc's shareholders (EUR39m market cap as of 14 November) one SolarWorld share for one Solarparc share.1% -7. whilst net income of EUR18m fell short of our forecast of EUR20. We reiterate our 2/OP rating with a target price of EUR12.3 60.2 1.6% Absolute perf.4 1. SolarWorld will pay for the deal with its treasury shares.3 140.2 EV/EBITDA (x) 9.3 01/01 0.0 13. EUR814m EUR443m EUR1254m 111. Based on our latest information.72m EUR 5.3 120.6 4.1 Net debt/EBITDA (x) 1.897.4m came in much better (22%) than we and consensus had expected (EUR42m).com 12/10 Sector focus P/E (x) Research Analyst pbumm@cheuvreux.3 20. FCF yield (%) NS NS 19. (x) Philipp BUMM Disclosures available on www. The company's CFO expects that about 200MW or about 40-50% of its US production capacity will be sold in the US in 2011.3% -56. which for the company is the key to success.2GW in 2011E.3 80.29 Price (07/01/2011) Stock data Market capitalisation Free float Enterprise value No.0 3. since it will strengthen SolarWorld's position as a fully integrated photovoltaic producer.4% 2009 2010E 2011E 2012E 29.0 10. SolarWorld will benefit from increasing demand in the US thanks to its local production site.3 120.8 1.9m (17% EBIT margin) and net income of EUR3. implying that demand in the US will be there.7% -31. The clear surprise in the Q3-10 figures was the fact that SolarWorld was able to report a 15% EBIT margin despite having lowered its prices in the quarter. SolarWorld Conergy Shareholders Free Float 54. Relative perf. In 2009 it achieved revenues of EUR11m.3 1.4 Attrib.0 Yield (%) 7. Solarparc has 59MW of wind parks in operation and ~88MW of solar parks.2 5.5 1.9 1.com (49) 69 47.3 03/02 06/03 09/04 12/05 Price/TECDAX Outlook – Strong brand also abroad We regard the Solarparc acquisition as positive.3 40. Q EUR7.1 1. Generally speaking.

cells and solar modules Its vertically integrated business model makes SolarWorld a fully integrated solar group based on four strategic business areas: Polysilicon. Q Q Largest player in the US Following its Shell Solar acquisition in 2006. Cells and Modules. cells and modules by the end of 2011. SolarWorld manufactures and sells mono. Q Polysilicon. We expect the US market to reach a size of 1. wafers. The company is trading at a P/E 11E of 8x. Generally speaking. Spain. One of the world's major players in the photovoltaic industry. .g. Via a JV with Degussa and another with Qatar it is also involved in pure silicon production. „ As a pure solar player. with about 50% of its sales in terms of MW to be generated with external cell customers and the remaining 50% of wafer production being processed internally to generate solar cells and modules. Wafer. South Africa. which implies SolarWorld will have a 17% market share. which is its key to success. a breakthrough in the form of equally efficient thin-film technology requiring no silicon could make the considerable investments planned for cell and wafer assets unprofitable „ Renegotiation of long-term prices due to price collapse in wafers and cells 267 www. SWV can sell at a premium contracts in polysilicon may prove negative if spot market prices fall below the agreed long-term prices Opportunities Threats „Cost „ „ „ Long-term „ improvements due to increasing US production capacity As the company focuses solely on silicon-based solar modules. with its latest strategy shift SolarWorld aims to also strengthen its cells and module business and to reduce its dependency on external customers. we expect the company to enjoy a high level of brand awareness outside of Germany. Q Investment case SolarWorld will benefit from increasing demand in the US as it has a local production site that will have a total capacity of 500MW by the end of 2011 at the latest. We reiterate our 2/OP rating with a target price of EUR12. cells and modules). wafers.January 2011 Q GERMANY Smaller Companies Review Company profile Q Fully integrated photovoltaic company As one of the world's largest photovoltaic companies. It aims to strongly expand its production capacity in the US to 500MW in wafers. Tokuyama and Hemlock „ Strong distribution network production is not based in low-cost countries „SolarWorld faces margin pressure from Chinese competition Thanks to its strong brand name. SolarWorld will be able to compensate falling prices thanks to a) economies of scale. Despite a further price decline for modules. Focusing more on modules The company's strategy has so far been to focus on its profitable wafer business.3x and 6. triggered by subsidy cuts in Europe (e. Germany).com Valuation Based on our DCF valuation we arrive at a target price of EUR12 per share.cheuvreux. at a P/E 12E of 9x and at EV/EBIT multiples of 6. SolarWorld is now the largest solar company in the US (in terms of crystalline-based capacity). Asia and the US. SolarWorld is strongly exposed to polysilicon supply and prices „ „SolarWorld's Long-term contracts with several established polysilicon producers including Wacker Chemie. b) a turnaround in its US operations and less expensive sourcing. However.4x respectively – representing discounts to Q-Cells and REC. we expect SolarWorld to maintain a double-digit EBIT margin going forward.2GW in 2011E. The company currently employs >2500 staff at its sites in Germany. cells and solar modules. Q Q SWOT analysis Strengths Weaknesses Full integration (polysilicon.and polycrystalline silicon wafers. We predict 12% EBIT margins for 2011E and 2012E.

2% 356.0 87.4 0.3 29.0 0.0 0.6 52.0 30.0 0.0 0.012.5) (79.1) 0.2 1.4) 0.3) 0.6% (201.8% (42.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 268 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 199.0 0.6) (117.3) 157.6 -39.1 205.4% (146.6 1.0 52.0 3.0 2.0 3.0 0.3 575.5 0.0 23.0 0.8 6.5 57.0 3.8) (209.8 841.8) (135.2) 263.7% (221.7 994.2 (57.0 0.4 6.7 178.0 0.7) 151.0 198.8 17.3% (63.1) (20.2 31.2 476.4 57.8 68.0 0.9) (416.6 7.3 29.0 0.3) 98.0 0.0 113.0 (79.9) 108.169.5) (300.3 15.8) (0.0 (42.0 0.0 339.6) (13.1 0.0) 259.5 0.0) 0.2% 1.8) 0.4) (1.3) (134.0) (240.4 71.0 (11.6) 219.2% 1.8 0.6 72.8 2.0 0.0 0.0 0.8 0.4) 34.096.2 44.cheuvreux.0 0.6 37.0 0.0 78.0 130.0 0.6 0.5) (233.0 0.3) 0.0 (11.6) 0.0 0.3 1.8) (23.0% 161.7 (48.376.3 0.4 (217.7 145.8) 241.3 -8.0 0.1 30.9) 0.0 0.0 0.6 0.7 -3.0 32.0 0.4) (277.6% (16.0 0.0 0.0 184.5) 182.5) 0.0 0.8) (110. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 0.8 8.4 124.0 0.0 52.5 24.9 7.0 0.0 0.4 0.6 (32.0 88.9 (269.8 0.3) 0.0 151.156.4 865.7) NS 562.6 7.0 78.585.7 31.2% 900.3) 12.2 24.0 78.5) 252.9 1.8) (697.0 0.0 0.6 12.2) 2.4 0.2 (4.3) 215.0) 340.3 NS (19.0 0.4) 39.2) 0.9) 213.0 0.7% 1.1 (1. [inc.8 217.0 0.0) 14.4 11.5 0.9) (85.7% (42.8) 0.January 2011 GERMANY Smaller Companies Review SolarWorld FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.7 787.3% 0.0 (8.6 25.5 0.7% (55.0 0.0 0.0 0.6% 19.6 151.0 128.5 10.2 732.7% 9.2 (132.1) 0.0 0.0 59.6% (158.1 29.8) (89.0 0.1% 0.0 0.2% 0.5 0.8) (1.2 141.4 (18.6 (395.6 4.5 588.0 0.0 0.0) 0.6) NS 172.0 (128.9 1.7) 0.0 12.8) (4.0 (79.2) 122.7) (11.0 5.8 35.0 (49.4) (931.0 2.2 -4.4) 0.9 12.8 156.0 0.0 25.0 0.3 0.2% 698.8 31.7 1.0 -60.4) 217.7) NS 476.2 14.0 0.0 9.5) 7.0 88.2 815.6 7.0 263.4) (0.5 -32.0 48.3 1.0 148.4) 172.5 173.0 0.8 25.0) (57.6 35.0 0.0 39.0 173.2) 0.0 24.169.0 182.0 (139.7) 171.6) 198.3) 42.8 2.7 (151.3 32.376.9 102.5 32.0 0.1 50.7 5.2 0.1 349.8 0.6% (75.8 -42.0 59.0 (18.7 0.5% 0.7 NS (35.0 (65.0% (174.0) 177.6 28.6 (158.0 17.0 148.7 (47.8 0.3) (43.0 0.1) 198.4% 0.0 (72.0 64.6 57.0 148.3 (75.4 58.0 (31.0 (47.0 (53.9 31.3) (24.651.0 113. profit [loss].5 0.8 -9.1 0.0 0.0 0.6 NS 0.0 0.3) 0.6 1.6 102.1% (115.9) 0.0 0.9 701.2% 73.0 0.0 32.2 0.0 18.096.0 0.0 0.6% (51.7) 88.2 29.0 286.0 0.0 88.0 177.7 290.6) 42.0) (382.4) 0.070.9 (23.0 52.4 0.1 982.0 279.4 352.0 NS 515.5 5.9 0.1 0.0 148.0 0.0 0.0 0.7) 318.8 0.0% 0.6 (11.6 57.0 0.0 0.8) (134.0 59.0 0.0 0.2 25.0 3.0 114.7) (36.0 0.1) (491.3 28.5 205.5) 18.4 22.7 247.365.8 24.0 0.1% (181.2 www.0) NS 732.0 88.0 0.0 0.4) 259.2 599.5 -83.0 130.0 (10.2% 0.0 41.5) 203.0 198.5) 0.2 30.1% 24.7 29.com .0 78.0 0.9 -44.9 10.429.1 0.0 0.365.9% (148.8 (20.429.3% (93.0) 313. for exceptional items Net attrib.330.1 39.3 -13.3 29.0 (308.8) (180.2) (23.0 20.8 (2.3 0.2 1.6) 0.0 0.0 0.1 -9.0 (115.5% (99.4) (8.1) 159.0 3.0 31.6 100.0 0.7 440.0 98.6 3.0) 0.7) (105.6 2.3 0.0 0.4) (7.7 1.0 98.0) (318.2% (55.9% (30.7) (1.0 0.9% 1.3 40.0 (38.6 7.0 0.0% 0.0) (246.1) 0.0 (33.3 (55.9 0.0 130.0 0.8% (90.2 0.0) (1.9 2.3 18.2 -21.8 0.6 0.1% (37.1 904.0 0.0 0.6 0.0 113.6 (4.0 0.0 98.4 562.0 159.0 0.2 0.8 32.5 1.

8% 1.80 35.0 14.90 14.7 22.6 0.04 -83.9% 6.7% 8.3 1.53 -60.2% 7.8% 0.8 8.January 2011 GERMANY Smaller Companies Review SolarWorld FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.6 27.000 111.5 13.3 4.1% 0.2% 0. restated EV/EBITA.55 119.1% 0.3 1.8 8.5 27.21 15.000 101.1 5.80 23.2 4.2 12.2% 0.14 1.2 3.10 -39.435.4 0.1 0.4 NS 13.29 - 380.720 0.9 3.82 30.3 8.1 1.7 1.8 1.0 29.387.4 39.8 0.3% 1.3 0.992.720 0.8 7.16 7.720 111.10 1.1 11.2 9.4 6.00 0.0 1.3% 1.4 814.5 16.0 10.8 5.9 53.1 2.2 4. adjusted Treasury stock.254.0 24.664.3 1.39 7. restated 269 www.3 24.555.00 1.1 0.7% 7.9 NS 6.5% 5.0 29.1 28.2 29.400 92.0 15.4 29.5 2.2 NS 35.17 128.com .720 111.83 27.5 28.22 41.6 39. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.53 -60.2% 1.0 0.7 10.5 5.3 0.6% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.00 24.88 25.5 14.4 9.9 1.6% 0.1 8.5 NS 34.5 25.9% 0.9 1.00 0.11 4. reported % Change 0.00 0.2 NS 11.3 8.6 8.720 111.46 26.8 9.78 34.0 2.51 NS 0.9 9.6 33.7 0.4 20.2 10.6 1.4 41.000 111.720 0.12 9.720 0.7 NS NS 42.687.7 17.4 11.01 -13.4 8.000 111.75 48.01 -13.4 24.2 35.600 0.82 16.6 11.65 7.9 4.9 1.06 0.89 14.720 0.9 2.96 15.71 NS 2.6 20.3 11.000 111.5 2.cheuvreux.0 1.09 2.5 10.7% 6.720 111.0 5.2 41.0 1.9 1.1 2. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA.0 NS 6.0 12.3 1. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.7 3.3 3.4 1.2 NS 8.68 1.0 17.33 30.19 10.8 4.0 32.8 15.04 -83.1 15.5 5.9% 0.1 23.3 15.4 9.51 NS 1.00 0.7 4.7 19.7 4.3 12.3 0.720 111.4 21. adjusted Share Price [Adjusted] Latest price High Low Average price 92.6 10.33 24.1 6.600 101.4 1.720 111.3 48.4 NS 4.90 18.512.3 0.2 3.2% 0.4 24.1 0.4 1.2 3.66 23.0 6.29 7.6 11.400 0.3 21.720 0.02 0.73 6.422.72 11.8 1.000 111.4 15.00 0. adjusted Av.0 1.4 19.720 111.4 0.17 128.000 4.3 27.4 20.91 24.48 7.7 No.0 9.1 8.4 29.7 6.3 217.5 Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.1 1.6 18.40 -9.5 9.1 52.00 0.5 1.4 6.3 13.15 1.10 20.88 25.26 7.9 NS 1.1 7.89 10.4 2.42 14.1 1.5 11.000 111.3% 1.6 8.5 5.658.6 814.519.0 5.8 19.0 5.5 11.7 6.1 2.720 0.6 34.712.53 39.1 19.000 111.1 3.0 0.80 -9.00 0.7 2.167.1 7.9 14.9 1.6 17.2 1.2 1.6 2.2 40.5 834.9 11.56 4.1 10.3% 1. of shares.0 NS 2.9 2.33 30.2 0.2 13.3 19.70 32.8 0.70 32.5 11.4 0.10 1.18 0.0 NS NS 19.2 27.4 4.47 16.8 NS NS 30.9 32.4 420.15 1.9% 8.3 10.6 1.36 15.2 16.0 12.84 6.0 72.9 5.80 -9.00 0.0 12.3 NS 11.9 2.3 0.08 1.22 -44.10 53.8 4.1 2. number of shares.2% 0.12 17.2 11.1 1.2 2.

adjusted Daily volume EUR1565m EUR1252m EUR2416m 60.8 33. and the regular and currently huge one-offs call the quality of adjusted earnings into question.4 8. in which Stada had a material 18% share (currently delayed).5m one-time charges and a weaker operational performance. During its Q3 call.0% margin. which was 10% ahead of market expectations and will allow Stada to clearly match its FY09 result.3 7.3m. with at least a stable operating margin. On the positive side: a takeover bid remains possible (or merger with e.10m Performances 1 month 3 months 12 months 9. Doctors&Pharmacists 20.4 1.8 23.8 18. management stressed its confidence that the situation will improve going forward. Relative perf. but still only represented about 2% organic growth. Actavis).8 8.2 P/E (x) EV/EBITDA (x) EV/Capital empl.8 03/02 06/03 09/04 12/05 Price/M DAX 03/07 07/08 10/09 01/11 Price Outlook – Outlook for 2011 is key Following the stronger than expected adjusted results.3 12.8 38.3 2.1 3.4 1.7 2.4 9. we believe the Q4 results will be positive.3 Yield (%) 2. FCF yield (%) 10.8% ahead of expectations. Q3 results better than expected In September 2010 Stada announced a significant restructuring of its Serbian operations. hence meeting its guidance.00 EUR26. In November Stada announced its Q3 results. The company has so far focused purely on profitable sales.cheuvreux.8 43. Furthermore.3 2.5 8.2 3. came to EUR75.1 6. Adjusted EBITDA. Sales increased by 4.8 Net debt/EBITDA (x) 3.3 1.7 11. but at some stage it will refocus on volumes as generics is an economies-of-scale business. in our view.8 18. the (probably vague) guidance for 2011 (margin) will be of key importance.0% 2009 2010E 2011E 2012E 12. Novartis Shareholders Free Float 80.3% in the quarter.8 28.8 43.7% 19.8 01/01 8.8% Absolute perf.com Q Q 270 www. of shares.3 2. The reported operating result came in close to break-even in Q3 at EUR6. Serbia accounted for 8% of Stada's 2009 sales.0 Attrib.8 13.8 23.6 5. 48.4 13.9% -22. This result was supported by massive one-time benefits. Q4 should have benefited from the fact that the supply channels have dried out and the company has installed a new management team. Stada will clearly meet its guidance for 2010.com (49) 69 478 975 26 Sector focus Sector Top Picks Least favoured Ipsen.2m EUR 7. Hence. EBITDA Stada's financial firepower ex rights issues is limited. which was 2. the key figure. Roche Astra Zeneca.8 2. Oliver REINBERG.DE Bloomberg: SAZ GR Stock data Recent developments – Adj. though such a strategy carries a risk in an industry in which scale effects play a key role. This is noteworthy given the challenges it has faced in Germany and Serbia and raises question marks concerning its sustainability.4 10. which came to EUR50m (!) alone in Q3. (x) Disclosures available on www. also bearing in mind the completely dried out supply channels in Serbia as well as the company's improved German performance in the quarter. Stada remains a high risk investment.4% -0.8 48.com .1% 4. implying a material 14.g. Glaxosmithkline. but with a 2. M&A may be back on the agenda in 2011. however.8 28.8% EUR25. adjusted for one-time special effects. These led to significant EUR29. It predicted growth in sales and operating profit.0 11.January 2011 GERMANY Smaller Companies Review PHARMACEUTICALS Stada Target price (6 months) -3. This reflects the company's strategy to focus on profitable growth.8 ROCE (%) 11.6m in Q3.6 1. but note that this is only expected to yield meaningful savings from H2-11E onwards.8% 8. In fact.00 Reuters: STAGn.9x current ND/adj. CFA Research Analyst oreinberg@cheuvreux. This will prompt the question of what it implies for the current high margin. the BtF programme should improve the company's cost base.cheuvreux. The Q3 adjusted operating result came in at EUR56m. It is small compared to the large industry leaders it competes with in most of its markets.3 9. Q 3/Underperform Price (07/01/2011) The wild card Q Rating Market capitalisation Free float Enterprise value No. the outcome of the renewal of the AOK tender contract.0%.8 38.8 13.8 33.

9x ND/adjusted EBITDA. Market volume growth is driven by the flow of patent expiries. However.com Valuation We reiterate our 3/UP rating and EUR25 target price. However. its financial firepower ex rights issue remains restricted given its current leverage of 2. which offers significant growth „ Focus „ on commodity products „ Production still makes intense use of third-party suppliers with limited short-term flexibility Portfolio of strong. followed by Russia (12%). wellpositioned OTC brands and strong relationships to German pharmacists „ „ Free cash flow generation remains limited in the past Opportunities Threats „ Increased flow of patent expiries in 2011 „ Eastern European countries. bearing in mind the dried out supply channels in Serbia and the still strong development in Russia. smaller exposure to biogenerics Stada has significant exposure to OTC medication. Q A potential takeover target given its 100% free float Due to its 100% free float and the rapid consolidation in the global generic market. Stada is also evaluating its options to develop biogeneric monoclonal antibodies in the medium term.0x 2012E P/E. 5 globally. Note that these P/E multiples are based on fully adjusted earnings as reported by Stada. Russia and Belgium are key markets The company focuses on two core segments. We acknowledge that Q4 results are likely to be strong. given the risk from incremental austerity measures. but is increasingly in-housing the development of new generic compounds. Belgium (8%) and Serbia (8%). It does not conduct its own R&D activities for new active ingredients. but we believe this strategy may only be of short-term nature as Stada is operating in a commodity market in which volumes play a key role. we prefer to remain on the sidelines until we are more convinced that its Western European markets and Germany will generate no further headwinds.January 2011 Q GERMANY Smaller Companies Review Company profile Q Generic copycat STADA is the no. The stock's largest chance on the upside remains a takeover bid.cheuvreux. which manages its biogeneric activities. At this level Stada would be trading at 11x 2011E and 10. Q Q Significant OTC offering. Q Investment case In our view. Its products are currently distributed in 30 countries via local sales subsidiaries and in additional countries from centrally located countries. Stada remains a high risk investment. Generics (71% of 2009 sales) and Branded Products (25%). Q Germany. Germany remains its largest market (34% of 2009 sales). rebate contracts using tender processes becoming increasingly prevalent Build the future programme Falling behind in global consolidation of the generic industry A takeover bid can never be ruled out „ „ Potential larger M&A would likely be equity-financed „ 271 www. Stada is considered a potential acquisition target. It has focused on profitable sales that have clearly supported its underlying margin development. 3 generic player in Germany (second-largest global generic market) and no. In addition. . which are less dependent on reimbursement issues „ Significant financial leverage and major intangible assets on the balance sheet „ „ Pricing pressure. Germany and Russia being its most important markets. Its exposure to the commercial success of biogenerics is more limited following the partnering agreement with Hospira. Stada has maintained semi-exclusive marketing rights for EPO in Germany and an option to acquire the remaining shares of Bioceuticals. Q SWOT analysis Strengths Weaknesses Strong local position in Russia.

0 8.0 (20.7) 0.3 7.5) 0.6 8.0 969.0 92.2 814.0 (34.167.671.4 19.9) 0.0 103.5 0.0) (72.0 106.0 0.8% (253.7 773.7) 289.5% 0.2 105.2) 0.7 958.0 (0.0 0.0 0.0 0.0 115.1 26.0 107.6 0.2 9.0 77.0 0.3) (1.953.7 146.3 140.1 20.671.8) 109.4) 91.1 0.0 0.5) 105.7) 153.6 342.3 3.9 (41.5 24.7 31.7 195.0 (168.0 103.0 (458.4) 103.0 0.9% 1.6 4.9 0.0 (36.4) 94.1 8.898.7% 0.9 669.1 289.9 80.3 17.3) 100.8 -4.0 (40.9 28.2 0.8 31.0 1.0 (20.0 0.0 0.2% (53.3) 71.2 34.3 940.6 0.0 0.0 197.6 (47.0 0.0) 56.3 www.6 44.0 0.5) 0.0 28.0 126.7 29.0 (0.041.0% (272.8 14.5 0.8% 1.0% (33.1) 0.1 1.1 97.0 (32.5 317.7 120.7 (23.2 97.0 0.6 0.0 39.0 48.0 15.2% (100.1 0.3 92.0) 0.9 35.1 367.0 0.6 16.884.9 8.0 0.2 21.4 (162.5 9.0 10.3% 59.245.7) 0.0 0.7% (87.4 1.4) 0.7 0.0 (0.8 (37.0 (12.5 15.0 10.0 0.0 187.1) 1.0 441.0 374.0 0.0 0.831.6 6.2 21.3 843. for exceptional items Net attrib.9 21.8) 78.3 0.6) 253.2% (43.9 684.6) 338.0) 0.9% 0.1 25.4) 0.4 -11.0) 242.0 0.9) 168.0 0.782.0 97.3 (102.7% (247.5 77.5 0.7) 107.2 349.6 136.8 9.4) (112.2) 175.3 1.6 27.9 21.0 30.7 -9.1 (52.0 88.5) (125.7 70.4) (130.2 (111.5 471.7% 0.0 97.0 0.5) 1.0 0.0 (18.2% 53.6% (160.0 0.0 376.1 25.2 (69.5 720.0 392.0 55.5) 280.1 0.7) 187.0 0.137.0 0.3) (67.7 1.0) 191.898.1 0.1 -15.0 23.0 192.3) (45.0 0.0 0.7 0.9) 122.0 (55.5 102.5 1.7) (25.0 485.7 -0.7 57.1 13.4 6.6 16.8% 81.8 0.3 702.0 52.6 343.4) (1.0 (0.0 48.0) 0.0 (38.9) 88.0 (119.6) 0.2 1.2 306.2) 144.7 28.3 25.5 759.6) 91.4% (90.3 311.4 89. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 (0.1 1.730.6 5.6 1.1 21.568.8) 255.7) (1.6 105.3 (42.0 (28.5 0.0 -21.0 (29.0 2.7 -16.3 357.0 0.884.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 272 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 813.2 4.8 21.802.0) (60.0 0.7 9.0 (65.2 759.0 0.6) (1.0 0.4 0.2 31.2 1.0 (44.3% 0.0 0.9 0.7) (126.7) (824.0 (0.3 39.802.2 9.0 (41.0) (41.0 49.5 0.8 43.5 0.5% (166.0 168.1 6.022.1 234.5) (48.0) 0.3 (106.2 0.3 6.0 0.8 -14.9) 0.1) (44.8 116.0 0.0 33.8% (16.2) (47.1% (272.5 (50.0) (121.0) (65.0 0.4 3.3% 0.5) (29.8% (187.0 0.0 -1.9 (49.3% 0.5 0.8) (485.0 0.1 49.6% 0.8) 76.5) 0.782.5% (287.825.6 0.0 175.0 0.2 103.0 (28.9) (38.0 0.9 7.8 83. [inc.0% 1.199.0 142.6) 192.6 22.4 34.0 0.8 837.8) 0.2) (1.7 343.0 10.8) (5.4) 201.6 1.8 11.8 7.5 0.4 12.1% (18.015.4 260.5 9.831.0 242.6) 289.4) (700.8% (96.0 61.0 163.0 0.0 72.2% (39.2 940.1% (257.1) 0.0 207.0) (554.0 0.com .3) 17.9) 0.2 912.0 0.4) 141.7 43.0 (30.5 2.5 64.5) 0.5 0.0) 7.3% (0.0) 0.0 (52.0) (13.0 89.4 656.2 4.2 682.6 1.5 30.0 0.7) 0.6 0.570.7 309.8) 1.5 150.9) (43.9 5.8% 1.0 0.5 20.1 9.0) 0.8% 1.5% (101.8 0.5 861.0 0.4 238.0 162.0 354.2 102.0 52.8 1.7 94.1) (120.6) 0.9) (61.9 1.0 0.0 (1.2 0.cheuvreux.5 26.6 764.6 657.6 0.7% (63.January 2011 GERMANY Smaller Companies Review Stada FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.646.121.0) 0.1 (9.0) (1.2 (10.0) (52.0 156.8) 232.632.0 0.1) 0.9) 168.0 100.5 1.0 0.008.5) 0.0 0.5) (63.0 (20.2 1.8) 0.5 899.1 0.2 13.3 655.7 -3.1 827.4 0.9) 197. profit [loss].2 -6.3 30.0 60.2 28.6% 1.070.3% 1.953.7 900.0 396.8 116.0 0.0 41.4) 51.0 11.2) 0.3 1.3 115.9% 43.2% (91.1 376.2% (136.0 0.1 298.4 324.0 (0.0 0.0 0.9) 160.0 0.3% 1.8% (80.5 0.6 0.6) 163.1 638.4 21.0 0.

6 0.5 7.0 6.60 26.74 35.366.20 26.6 5.00 0.70 3.7 10.5 3.0 92.0 1.3 1.200 60.6 4.8 89.062.4 7.52 2.72 26.70 -16.4 0.900 56.00 0.0% 2.com .900 0.5 22.2 12.4 0.3 12.1 13.5 22.0 1.0 1.3 12.351.1% 14.000 60.77 26.0 9.89 26.6 7.5 2.71 43.7 1.2 1.64 27.88 -6.3 9.5 12.2 1.96 21.05 51.2 43.3 0.4 24.0 2.5% 0.46 20.45 13.4 6.0 9.2 40.5 2.6 40.8 7.4 0.5 12.4 NS 1.6 11.39 1.17 26.5 14.1 No.900 0.5 10.74 7.2 2.93 30.5 1.9 120.5 10.72 3.9 12.39 1. adjusted Treasury stock.45 43.000 60.29 -26.6 38.1 10.1 15.4 14.9 3.85 -14.300 0.8 1.5 7.9 7.39 42.35 37.1 16.4% 1.200 60.11 7.4 10.6 1.3 7.00 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.8 7.8 4.27 7.5 10.38 19.900 0.55 3.6 2.5 12.1 15.1 11.2 1.4 2. adjusted Share Price [Adjusted] Latest price High Low Average price 54.5 7.000 56.2 1.1 3.3 7.1 16.9 12.0 11.3 6.8 1.80 10.4 6.600 56.3 1.8 3.00 26.6 2.900 54.78 17.8 11.3 0.200 60.000 60.0 NS 3.5 18.4% 1.42 58.451.35 43.5% 1.7 17.4 0.8 7.180.19 -30.2 15.0 13.9% 1.4 9.493.8% 14.2 1.4 6.300 59.8 1.1 18.8% 17.0 1.7% 2.2 13.4 2.7 10.2 7.38 32.9 2.8 18.4 8.4 1.2 2.80 27.33 22.1 24.0 70.71 3.2 1.9 5.50 48.6 13.89 -17.6 5.5 10.8 1.4 32.3 15.250.420.1 0.2% 1.315.416.000 58.5 1.4 10.9 6.00 0.1 EV/EBITDA.000 19.5 19.1 11.319.71 40.5 9.91 2.3 11.3 2.527.2 44.1 1.4 12.5% 1.9 5. restated 273 www.49 20.3 17.58 2.15 25.25 14.9 102.84 27.2 7.2 9.52 18.1 1.9 14.2 0. reported % Change 0.1% 2.3 15.200 0.7 6.4 11.6 NS 2.96 0.6 9.4 8.3 2.0% 1.7 10.00 0.0 15.6 1.5 1.61 24.2 16.4 17.9 1.1 2.3 8.7 0.0 4.71 32.3% Goodwill per share Dividend per share Cash flow per share % Change Book value per share 0.2 18.9 2.00 0.5 10.8 1.9 12.9 103.8 9.1 16.5% 13.600 0.96 -19.0 1.7 1.43 34. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 1.5 12.3 4.5 5.9 1.0% 1.000 59.5 13.565. number of shares.63 19.4 0.7 1.3 12.0 12. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.6 2.3 8.7 6.7 13.5 4.05 45.0 1.5 2.2 2.8 1.3 8.2% 0.9% 1.0 19.2 15.5 14.500 0.8 11.7 15.500 60.3 12.900 58.4 1.43 36.25 20.0% 11.00 17.1 1.0 12.48 -13.5 1. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.4 6.476.8 30.0 1.137.cheuvreux.62 2.2 34.0 18.41 10.4 2.50 9.8 4.00 0.5 5.70 15.7% 14.33 25.75 13.4 10.0 83.565.0 9.1% 15.65 31.7% 1.3 13.9 10.5 10.7% 2.1 9.23 15.00 0.85 36.9 40.4% 11.8% 2.7 6.6 12.01 0.4 0.000 60.75 25.00 0.739.0 3.8 0.2% 14.6 2.2 17.401.5 8. of shares.200 0. adjusted Av.000 56.8 16.2 8.4 12.1 48.62 79.January 2011 GERMANY Smaller Companies Review Stada FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.200 0. restated EV/EBITA.

com Q Q 274 www. new deal. FCF yield (%) 2. Qiagen and DiaSorin approve serial production of their new instruments.5% full-year forecast (guidance >19.2) Yield (%) 1.0%) we expect a strong Q4.7 15.cheuvreux.9 52. strong Q3 results Stratec announced in mid-December the signing of a new development deal with Abbott. guidance update).1 5. The amount of disclosed details remains very limited. For longer-term investors we continue to like Stratec.7 10.7 47. adjusted Daily volume EUR361m EUR203m EUR331m 11.5 EV/EBITDA (x) 16.7 5. Q Outlook – Update of mid-term guidance We downgraded Stratec in mid-October after the stock reached our target price.0) (1. but no details were provided.1 2. Relative perf. but that there was a risk that the recent adverse industry news flow could also provide a slight headwind for Stratec in 2011. but the launch is more likely to come in 2014. Orpea.7 01/01 0. 30.1% 1.1% 15.com 12/10 Price Oliver REINBERG. but we feel the current valuation already reflects a significant part of its positives while there are some clouds over the market in 2011.6% Absolute perf.7 5.0 5.4 Net debt/EBITDA (x) (0.January 2011 GERMANY Smaller Companies Review HEALTHCARE EQUIPMENT 3/Underperform Rating -1. which will in our view suggest that Stratec will also deliver about 10-15% growth in 2013. William Demant Least favoured Shareholders Free Float 56.) Thus.5 EV/Capital empl. and so far Stratec has not seen an impact on their operations and confirmed its FY forecasts. Various industry players have recently been more cautious in their outlooks (e.1% EUR31 Target price (6 months) Stratec Biomedical Systems Strong outlook but some market challenges Q Recent developments – New Abbott deal.7 9.3%. We felt that the market was aware of the upcoming positive news flow (Q3.3 11. of shares.7 Attrib.7 15. This new guidance is likely to provide a sales bandwidth for 2011 and a CAGR sales growth rate assumption for 2012+13.52m EUR 0.7 10. Management had been guiding for this deal basically since the end of 2009.4 6. Leistner Family 43. Stratec delivered on its promise of accelerated growth in H2-10.7 25.7% 2009 2010E 2011E 2012E P/E (x) 26.7 03/02 06/03 09/04 12/05 Price/SDAX 03/07 06/08 Sector focus Sector Top Picks DiaSorin. Qiagen).5 6. (x) Disclosures available on www. This was one reason for our downgrade. To achieve our 19. which is however the usual seasonal pattern at Stratec.74m Performances 1 month 3 months 12 months 5. The bandwidth for 2011 may however be wider given the recent industry developments.7 30.35 Price (07/01/2011) Reuters: SBSG.7 25.7 0. Getinge. Note that an acceleration was also necessary to reach the market's and our full-year sales estimate of EUR100m (guidance range: EUR96-102m). (The consolidation of Ballista contributed an estimated 2. that their clients' timetables had shifted slightly.9 38.8 18.7 20.5 5. Biomerieux.4 6. The company reiterated that they will provide an updated mid-term guidance once Genprobe.4 2. In late October 2010.2% -14. Stratec reported its Q3 results with sales up a strong 34% y-o-y (+24% in 9M-10).5% was flat with the H1-10 level due to Ballista consolidation and a lower share of consumables.8 2.5%. however.7 1.0 24.7 15.DE Bloomberg: SBS GR Stock data Market capitalisation Free float Enterprise value No. We believe this will be the follow-up system for an existing instrument rather than a new MDx instrument.com (49) 69 478 975 26 09/09 . The Q3 EBIT margin of 18.8 15. They did commented.7% 0. however. EUR31.9) (0.g. CFA Research Analyst oreinberg@cheuvreux.7 20. The industry weakness has still not impacted the stock.8) (1. Immucor. We suspect that first sales from prototypes may be expected in 2011 already. however. Q3-10 EBIT and net income increased by 37% and 31% respectively.0% -18.cheuvreux.9 ROCE (%) 32.

Q Broad industry competence secures new deals In the IVD field. however. Stratec focuses on luminescence immunoassays. but further progress in diversification to come from new systems Platform strategy allows for cost. but reagent-rental deals provide some buffer „ Major replacement potential for old systems „ Potential expansion of business model into OEM commodity assays Consolidation in medical diagnostics industry brings some uncertainty and may shift pricing power „ „ Losing out on new key technologies „ 275 www. due in part to the fact that new deals have a material impact on the group's accounts due to the low base. We are therefore more cautious on the the stock's short-term potential despite its overall strong fundamentals. we fear that the recent challenges in the industry may also translate into slight headwinds for Stratec in 2011. develops and produces fully automated analyser systems for its clients – mainly global players in the in-vitro diagnostic (IVD) industry. Q Some exposure to capex spending trends Stratec is exposed to laboratories' propensity to invest. . Q SWOT analysis Strengths Weaknesses Global market leader in a specific niche „ Limited disclosure on individual systems due to confidentiality of OEM contracts „ „ Strong industry reputation Top two clients account for about 50% of sales. Genprobe and Bio-Rad.com Valuation We reiterate our 3/Underperform rating on Stratec and our EUR31 target price. Stratec develops the systems and its clients sell them under their own brand names to end-customers. Stratec's competence has allowed it to sign new deals with Abbott. Siemens and DiaSorin accounted for roughly 50% of its 2009 analyser system sales. however. other immunoassay and point-of-care systems.and time-efficient development of customer-specific solutions „ „ Asset-light business model as production is focused on assembly „ Opportunities Threats New development project wins from existing or new clients „ „ Delays in projects possible Restricted global capex. At the start of a development contract Stratec's clients commit themselves to certain milestone payments and minimum system purchases. Qiagen. While we also expect a strong guidance update around Feb 2011. amongst others. Q Q Bayer and DiaSorin are two key accounts Aside from systems sales (68% of 2009 group sales). that most of the positive catalysts have now materialised (Q3 results.cheuvreux. such as clinical laboratories at hospitals and blood banks. Q Investment case Stratec has established itself as a leading outsourcing supplier in a growing niche market. We feel.3x 2012E P/E. It does not develop any reagents. We also think the micro-cycles of its individual instruments are still more important than overall market trends. given that a large proportion of these instruments are sold by Stratec's clients within the framework of reagent-rental deals.6x 2011E and 15. Stratec generated 23% of its 2009 revenues via highly profitable disposables sales and 9% via its services/advisory business.January 2011 Q GERMANY Smaller Companies Review Company profile Q OEM of fully automated IVD analyser machines Stratec Biomedical designs. At our target price Stratec would trade at 18. We think its risk profile is limited. It growth potential over the coming years is unmatched in the industry. blood grouping and typing. Qiagen and Genprobe will start to contribute meaningfully to sales going forward. molecular diagnostics. Abbott deal). It allows its partners to accelerate their time-to-market and benefits from the outsourcing trend in the industry.

0 (3.5% (20.7 0.4 9.4 5.0 0.7) 0.1 68.1 0.4) NS 29.0 1.4 59.7 0.4% 3.3) (0.1 1.0 0.4 (29.0 0.2) (0.0 14.0 0.3% 0.7) 0. for exceptional items Net attrib.2 15.0 0.0 -9.6% (3.2 0.7% 100.3 0.9% 61.4 40.6 29.0 0.0) 4.8 52.8 0.0 9.9% (1.3% (37.0) 7.6% (13.7) 0.5 0.6) 17.1) (4.3) 11.0 33.6% 0.1 34.0 0.1) (1.4) (0.7 31.7) 13.0 7.0 7.7 56.0 7.2) 0.0 27.2 20.0 (6.0 23.7% 0.0 22.3) 0.2 53.7% (32.0 0.2% (0.4 0.0 0.8 0.1 4.0 36.0 51.1 (6.0 0.2 (0.0) 0.8 0.0 0.3 30.0 0.3 0.1% (4.1) (71.3 28.7) 0.1 4.0 0.6 30.3% (26.0 0.2 16.0 11.0 1.0 0.4 44.5 8.0 0.8) 13.1 8.1) (0.4 3.7) (30.2) 19.0 23.0 0.0 0.4 0. profit [loss].0) (2.9% (3.5) (2.1% 68.8 45.6) NS 54.5 0.0 0.3 21.0 0.2 43.9) NS 37.7) 0.0 (4.0 0.0) 0.2 29.3 26.8 0.1 0.7 38.2 40.3 17.1) 0.January 2011 GERMANY Smaller Companies Review Stratec Biomedical Systems FY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj.0 0.1 2.1 0.0 0.0 11.2 0.3) (27.1 2.6 0.0 0.0 0.6% (4.8) 7.6) 14.2) 2.0 0.0 0.8) NS 45.0 0.0 0.0 0.2 0.7 46.0 10.4 8.6 21.0 10.0 0.4 0.9) NS 52.4 8.2 0.1 31.4 0.0 0.0 23.8 15.2 5.4% 0.3 22.1) 22.7 42.0 19.0) 0.0 0.0 0.7 0.4 34.3) 2.0 0.0 0.3 2.4% (10.0 4.4 28.7) 0.0 0.5 26.7 67.0 (5.4) 25.8% (3.5 -1.9 www.4 33.2 2.5) 9.0 (3.6% (2.2) (2.0 0.1 2.2 0.7 0.0 19.0 0.2 (1.0 0.0 0.4 0.4 0.0 41.1 0.0 0.0% (1.0 19.0 27.0 3.3 0.8 (39.7 6.0 14.0 52.0 38.4 0.0 29.5% (3.9 0.0 0.0 0.0 14.0 1.6) 29.3) 1.0 0.0 0.3 48.0 0.0 3.0 (3.8 0.8 (8.0 (8.4 0.9 19.0 (7.0 0.0 4.9 0.7 0.4 27.7 9.0 14.0 0.0 0.3 0.8% (2.7% 0.7% 47.7) 5.6 29.5) (3.3) 0.0 25.0 (2.0 0.0 0.8 0.0% 67.1 29.7% (2.0 11.0 (0.0 0.8) 8.0 0.3 0.2% 0.0 (1.6 18.0 0.8 2.0 4.0 0.0% (5.0 (0.0 0.2 0.1% (11.0% 0.9 0.0 0.0 29.0 0.1 4.7 12.1) 16.3) 0.0 0.0 (1.1 0.7 0.6) (51.0 (5.1) (3.0 2.0 2.5 0.1) (2.1 2.0 0.7) 12.0 16.4) (1.7% (2.5) 28.0 0.6 33.0 0.1 2.6 21.3% (15.0 0.0 0.5) 0.0 29.0 23.0 0.8 0.0% 79.0 0.1 2.0 10.5 0.0 0.1 49.0) (24.0 0.8) 0.9 45.9) (6.0 0.0 4.2 0.9) 6.7 (0.0 5.2 0. restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec.0 0.1 4.6 29.5) (3.1) 0.0 (2.3 36.0 (18.2) 0.0 4.com .5) 0.6 96.1 0.8 64.2 37.0 0.0 11.2% (2.0 6.7% 142.8 56.3 0.0 (0.0 0.7 75.0 0.0 0.9 0.0 0.0 0.4 0.3 0.0 6.0 0.0 2.0 0.4 10.0 0.9 (13.2 0.6 0.2 -18.6) (5.0 0.0 0.7) (2.0 0.0 (1.0 6.7) 12.4 57.9) (41.5 47.7) (41.4 0.4) 0.4) NS 38.9 5.8 52.0 0.0 (1.3 52.3% 0.2) 0.0 0.0 11.8 26.0 19.5 -18.4) (62.0 0.1 0.6 18.0 10.0 4.0 (4.5 26.4 0.1 6.3 56.5) 19.0 0.1 22.5% 123.9) 33.0 2.0 0.5) 18.4 24.0 0.8) (35.0 0.cheuvreux.6 2.4 0.0 0.1) NS 59.2 -21.4 (14.2% (1.1 0.3 0.0 19.4) (1.7 0.0 0.0 0.0 14.1% (2.6) (5.4) 0.0 0.0 2.7) NS 34.6 0.2 51.0 0.8 4. [inc.6 25.0 0.6 0.0 (4.0 0.0 7.1) (0.8% 0.6 3.0 0.8 31.6 0.6 -30.1 81.3) 14.0 0.6% (16.0 0.2 4.6 (15.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 276 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 40.8) 11.1% (1.0 0.0 11.

38 50.58 1.4 NS NS 21.440 0.8 233.2 42.0% 1.2% 0.520 0.70 26.7% 1.0 0.5% 5.6 32.56 37.5 14.6 2.67 29.0% 2.7 19.08 26.9 20.55 22.28 63.2 21. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity.7 29.7 NS 23.48 24.8 NS 44.8 14.15 0.24 18.0 1.7 19.510 0.87 29.2 NS 22.2 NS NS 24.January 2011 GERMANY Smaller Companies Review Stratec Biomedical Systems FY to 31/12 (Euro) 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS.7 19.0 17.00 0.0 23.8 24.9 26.76 -29.7 13. of shares.77 4.9 0.2 18.91 34.00 22.4 16.2% 1.6 22.7 2.8 1.1 18.42 50. adjusted Share Price [Adjusted] Latest price High Low Average price 10.85 54.2 12.1 2.5 NS 22.6 27.6 348.00 0.2 21.0 26.4 0.4 3.96 25.3 1.4 11.7 14.00 0. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] 54.0 15.1 11.000 11.2 3.4 2.8 16.6 57.6 26. restated 10.1 5.02 21.430 11.9 219.35 - Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib.7 16.68 61.8 14.6 35.7% 2.8 3.53 17.3 15.5 2.0% 7. restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op.1 NS NS 17.4% 2.000 11.2% 0.5% 1.03 22.2 303.2 7.00 10.92 2.4 40.430 0.5 145.5 5.83 31.43 14.7 20.3 17.76 1.8 2.3 20.7 26.01 31.1 5.1% 0.0 NS 5.3 15.6 277 www.31 14. adjusted Av.4 21.07 24.6% 0.9 22.400 0.9 21.6 25.9 38.0 0.0 NS NS 22.5 13.000 11.6 2.5% 1.2 14.9 36. reported % Change 0.10 0.2 5