Document 1048565401

13 May 2015
Europe/United Kingdom
Equity Research
Specialty Chemicals
Victrex (VCTX.L)
Rating OUTPERFORM*
Price (11 May 15, p) 1,994.00 INITIATION
Target price (p) 2,400.00¹
Market cap. (£ m)
Enterprise value (£ m)
1,703.33
1,651.2
PEEK not Peaking yet
*Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
We initiate coverage on Victrex with an Outperform rating and a target
¹Target price is for 12 months. price of £24. Victrex has a strong pipeline of growth opportunities and
Research Analysts
significant barriers to entry, in our view. We believe the risk of product
Mathew Waugh
substitution is low and that Victrex can maintain market leadership over the
44 20 7888 0194 foreseeable competitive period. We forecast average 2015-2018E CAGR of 7%
mathew.waugh@credit-suisse.com sales, 41% EBIT margins and 35% ROCE. We believe this is not fully reflected
Chris Counihan in the current share price.
44 20 7883 7618
chris.counihan@credit-suisse.com ■ Competition growing, but market growing faster: Victrex is a one-product
Joseph Bradley business (PEEK plastic) in which competition has been accelerating since
44 20 7883 1875 2006. However, during this period, pricing has increased and we believe that
joseph.bradley@credit-suisse.com
the entry of new players has encouraged novel markets/applications and
Specialist Sales: James Brady
44 20 7888 4267
increased acceptance with customers (lower supply risk). We estimate the
james.brady@credit-suisse.com expansion of existing markets alone creates the opportunity to more than
triple annual PEEK demand by 2025E (c.12% CAGR market growth).
■ Victrex moat remains wide: We believe Victrex can sustain its No.1
position in the market due to its leading capacity expansions, balance sheet
strength and first mover advantage in semi/finished products. We think the
threat of product substitution is low.
■ Downside risk overdone: We acknowledge temporary headwinds from O&G
markets and FX (-£6m and -£7.5m in 2015E, respectively) and risks associated
with a single product line. However, we highlight that EV/tonne capacity has
declined by >20% since 2011. We believe the market is overly discounting
competitor risk given our view on the sustainability of the business model.
■ Catalyst and valuation: 19 May – H1 results (revenue already announced)
CSe £53m PBT. We derive a target price of £24 using the average of our
SOTP £22.53 and DCF £25.15.
Share price performance Financial and valuation metrics
Year 09/14A 09/15E 09/16E 09/17E
2059 Revenue (£ m) 252.6 254.7 271.8 294.5
1859 EBITDA (£ m) 112.20 117.31 125.43 137.68
1659
Pre-tax Profit Adjusted (£ m) 102.70 105.81 111.93 123.33
CS adj. EPS (p) 94.28 96.58 101.57 111.27
1459
May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 ROIC (%) 30.25 27.12 26.75 27.91
Price Price relative P/E (adj., x) 21.15 20.65 19.63 17.92
P/E rel. (%) 140.6 124.6 135.0 138.6
The price relative chart measures performance against the
EV/EBITDA 14.4 14.1 13.2 12.1
FTSE 100 IDX which closed at 6914.08 on 11/05/15
On 11/05/15 the spot exchange rate was £.72/Eu 1. - Dividend (09/15E, p) 88.29 IC (09/15E, £ m) 302.90
Eu .89/US$1 Dividend yield (%) 4.4 EV/IC 5.5
Performance Over 1M 3M 12M Net debt (09/15E, £ m) -52.1 Current WACC 7.70
Absolute (%) -3.0 -2.2 9.4 Net debt/equity (09/15E, %) -14.7 Free float (%) 94.06
Relative (%) -0.5 -3.6 8.4 BV/share (09/15E, £) 4.2 Number of shares (m) 85.42
Source: FTI, Company data, Thomson Reuters, Credit Suisse Securities (EUROPE) LTD. Estimates.
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST
CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do
business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a
conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®

Client-Driven Solutions, Insights, and Access
13 May 2015
Victrex VCTX.L
Price (11 May 15): 1,994.00p, Rating: OUTPERFORM, Target Price: 2,400.00p
Income statement (£ m) 09/14A 09/15E 09/16E 09/17E Per share data 09/14A 09/15E 09/16E 09/17E
Revenue (£ m) 253 255 272 294 No. of shares (wtd avg) 85 85 86 86
EBITDA 112 117 125 138 CS adj. EPS (p) 94.28 96.58 101.57 111.27
Depr. & amort. (10) (12) (14) (15) Prev. EPS (p) — — — —
EBIT (£) 102 105 111 123 Dividend (p) 95.15 88.29 90.79 95.63
Net interest exp. 0.50 0.50 0.50 0.50 Div yield 4.77 4.43 4.55 4.80
Associates — — — — Dividend payout ratio 100.92 91.42 89.38 85.95
Other adj, — — — — Free cash flow per share 61.95 77.48 104.06 120.78
PBT (£) 103 106 112 123 (p)
Income taxes (22) (23) (25) (27) Key ratios and 09/14A 09/15E 09/16E 09/17E
Profit after tax 80 83 87 96 valuation
Minorities — — — — Growth (%)
Preferred dividends — — — — Sales 13.8 0.8 6.7 8.3
Associates & other — — — — EBIT 8.7 3.0 5.8 10.2
Net profit 80 83 87 96 Net profit 10.0 2.9 5.8 10.2
Other NPAT adjustments — — — — EPS 9.6 2.4 5.2 9.5
Reported net income 80 83 87 96 Margins (%)
EBITDA margin 44.4 46.1 46.1 46.8
Cash flow (£) 09/14A 09/15E 09/16E 09/17E EBIT margin 40.5 41.4 41.0 41.7
EBIT 102 105 111 123 Pretax margin 40.7 41.5 41.2 41.9
Net interest 0.50 0.50 0.50 0.50 Net margin 31.7 32.4 32.1 32.7
Cash taxes paid — — — — Valuation metrics (x)
Change in working capital (5) — — — EV/sales 6.4 6.5 6.1 5.6
Other cash & non-cash items 21 2 10 9 EV/EBITDA 14.4 14.1 13.2 12.1
Cash flow from operations 118 108 121 132 EV/EBIT 15.8 15.7 14.9 13.5
CAPEX (66) (42) (32) (28) P/E 21.1 20.6 19.6 17.9
Free cashflow adj. — — — — P/B 4.8 4.8 4.7 4.5
Free cash flow to the firm 98 88 101 112 Asset turnover 0.61 0.61 0.63 0.65
Acquisitions — — — — ROE analysis (%)
Divestments — — — — ROE stated-return on 24.0 23.3 24.2 25.6
Other investment/(outflows) — — — — ROIC
equity 30.3 27.1 26.8 27.9
Cash flow from investments (66) (42) (32) (28) Interest burden 1.0 1.0 1.0 1.0
Net share issue/(repurchase) 3 — — — Tax rate 21.9 22.0 22.0 22.0
Dividends paid (37) (81) (75) (78) Financial leverage — — — —
Issuance (retirement) of debt — — — — Credit ratios (%)
Other (21) (23) (24) (27) Net debt/equity (25.4) (14.7) (11.4) (10.8)
Cash flow from financing (55) (104) (100) (105) Net debt/EBITDA (0.80) (0.44) (0.33) (0.30)
Effect of exchange rates
activities — — — — Interest coverage ratio (204.4) (210.6) (222.9) (245.7)
Changes in Net Cash/Debt (2) (38) (10) (0)
.
Net debt at start (92) (90) (52) (42) Source: FTI, Company data, Thomson Reuters, Credit Suisse Securities
Change in net debt 2 38 10 0 (EUROPE) LTD. Estimates.
Net debt at end (90) (52) (42) (42)
Balance sheet (£ m) 09/14A 09/15E 09/16E 09/17E

Assets
Cash and cash equivalents 90 52 42 42 2059
Accounts receivable 33 32 34 37
Inventory 44 56 60 65 1859
Other current assets 5 5 5 5
Total current assets 172 145 140 148 1659
Total fixed assets 228 258 276 289 1459
Intangible assets and goodwill 10 10 10 10
May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15
Investment securities — — — —
Other assets 7 7 7 7 Price Price relative
Total assets 416 419 433 454
Liabilities The price relative chart measures performance against the FTSE 100 IDX which
Accounts payable 27 29 31 33 closed at 6914.08 on 11/05/15
Short-term debt — — — — On 11/05/15 the spot exchange rate was £.72/Eu 1. - Eu .89/US$1
Other short term liabilities 10 10 10 10
Total current liabilities 37 39 41 43
Long-term debt — — — —
Other liabilities 26 26 26 26
Total liabilities 63 64 66 69
Shareholders' equity 353 355 367 385
Minority interest — — — —
Total equity & liabilities 416 419 433 454
Net debt (£ m) (90) (52) (42) (42)
Victrex (VCTX.L) 2
13 May 2015
Key charts
Figure 1: PEEK pricing positive despite new entrants… Figure 2: …we think performance warrants price holding...
130 140
Pricing has remained positive despite new entrants
120 PEEK
120
Victrex Average PEEK Price
110
Evonik enter market 100
100 China enter market
Market Price ($/kg)

Tungsten Carbide
90 PPS
80
Solvay enter market
80 PAI
60
70 Titanium
60 40 PES
PVDF
50 PSU
20 PA 12
PP PI
40 HDPE POM
0 PVC ABS
0 20 40 60 80 100 120 140 160 180
Price (USD/kg) Price (GBP/kg) Price (EUR/kg)
Strength-to-weight ratio
Source: Company data, Credit Suisse research Source: Makeitfrom.com, Alibaba.com, Credit Suisse estimates
Figure 3: …even as further production capacity ramps... Figure 4: …Victrex should sustain No1. market position…
90% 70% 15
80% Victrex
Downstream Integration of PEEK 13
70%
65% 11
60%
9
50%
Solvay
60% 7
40%
5
30% Jilin
55% 3 Evonik
20%
Panjin
10% 1
0% 50% -1 0 2 4 6 8 10 12
-3
Engineering Plastic Product/Composite Offering
Utilisation Rate (LHS) Victrex Gross Margin (LHS)
Source: Company data, Credit Suisse estimates Source: Credit Suisse estimates, company data (Jilin and Panjin)
Figure 5: … and improve ROCE with utilisation rate… Figure 6: …however, the market is discounting future
production
0 Recent heavy capex into new facilities and flat volumes 40 0.30
Market pricing-in a discount on future capacity
0 have depressed ROCE... 35
0.25
0 30
0 0.20
25
0
20 0.15
0
15
0 0.10
0 10
0 ...but this should improve as Capex spend 5 0.05

comes down
0 0
0.00
ROCE Production to PPE EV/Capacity 2 Yr FWD
Source: Company data, Credit Suisse estimates Source: Company data, the BLOOMBERG PROFESSIONAL™
service
Victrex (VCTX.L) 3
13 May 2015
Table of contents
Investment overview 5
Bull & Bear 6
Investment thesis 7
Credit Suisse vs. market & earnings bridge 10
Earnings sensitivities 12
Valuation 13
Credit Suisse HOLT® 18
Quantifying the business lifecycle 19
Underlying trends in Victrex / PEEK 20
Competitive position of PEEK 23
Competitive position of Victrex 26
Corporate longevity 29
Balance sheet and cash 33
Acquisition environment 34
Group overview 35
VPS division (79% sales, 71% EBIT) 37
Invibio division (21% sales, 29% EBIT) 38
Profit & loss forecasts 39
Balance sheet forecasts 40
Cash flow forecasts 42
Appendix 43
Management 43
Shareholder structure 43
Properties of ultra-high performance plastics 44
Credit Suisse PEERs 45
Victrex (VCTX.L) 4
Victrex (VCTX.L)
Investment overview
Figure 7: Investment overview
Victrex
OUTPERFORM
TP £24/share
- Sustainable product and company barriers to entry

- Strong pipeline of opportunities
- CS forecast 10-15 yr sustained competitive position
- Returns warrant >50% premium to peers - Market could >triple over next ten years
- Currently trading at PE discount to range vs peers - Transport/electronics increased penetration
- Future production capacity priced at a discount - Medical market further opportunity
SOTP £23/share Strong pipeline of

DCF £25/share opportunity
Sustainable barriers to entry
- PEEK to remain best in class

- Victrex to retain No. 1 market position
Resilient pricing despite

PEEK barrier to entry Victrex Barrier to entry
competitor additions
- Pricing increases despite increasing competition - Superior strength-to-weight performance - High end technology
- Competition accelerating market not destroying pricing - Competitive price point - Largest capacity & established customer base
- Further opportunity to improve cost position - Easy processing - Semi-finished offereing
Source: Credit Suisse research
13 May 2015
5
Victrex (VCTX.L)
Bull & Bear

Figure 8: Bull & Bear assumptions based on Credit Suisse base case, bear case and bull case
Victrex - 2015 Bull/Bear
Key Drivers Bear Case Credit Suisse base Case Bull Case
Contribution to
Contribution to Contribution to group
View group EBITDA View View
group EBITDA growth EBITDA growth
growth
Oil & Gas market impact -8.0% Market down 45% -5.3% Market down 30% -3% Market down 15%
New Facility Operating Costs -1.8% High end guidance -0.9% Mid Guidance -0.4% Low end guidance
Penetration of electronics run Penetration of electronics run Penetration of electronics run

Above Market Growth 10.0% 15.0% 22.5%
rate decelerates rate continues rate accelerates
Real Pricing -4.0% Down 2% 0.0% Flat 4.0% Up 2%
FX Impact -7.1% High end guidance -6.7% Mid Guidance -6.2% Low end guidance
Other/Organic 0.0% No underlying growth 2.5% Market Growth 10.0% Bullish organic
Bear case EBITDA growth Credit Suisse base case EBITDA Bull case EBITDA growth
Total EBIT growth -10.9% 4.6% 27.1%
2014/15 growth 2014/15 2014/15
2015 EBITDA (mn) £100 £117 £143
Source: Credit Suisse estimates
13 May 2015
6
13 May 2015
Investment thesis
We initiate coverage on Victrex with an Outperform rating and a £24 target price.
Victrex has a strong pipeline of growth opportunities and significant barriers to entry, in our
view. We believe the risk of product substitution is low and that Victrex can maintain
market leadership over the foreseeable competitive period. We forecast average 2015-
18E CAGR of 7% sales, 41% EBIT margins and 35% ROCE. We also believe Victrex can
sustain above average returns over the next 10-15 years. We believe this sustainable
competitive position is not fully reflected in the current share price.
Competition growing, but market growing faster

Victrex is a one-product business (PEEK plastic) that has operated as the sole global
producer between 1980-2005. Since 2006, competitors have entered the market; however,
we note that during this period pricing/gross margin has actually increased. Furthermore,
we estimate that the entry of new players has encouraged novel markets/applications and
increased acceptance with customers (lower supply risk). We estimate expansion of
existing markets alone creates the opportunity to more than triple annual demand by
2025E.
Figure 9: Estimated supply/demand analysis for PEEK

PEEK Capacity (RHS) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Victrex 2,300 2,300 2,500 2,800 2,800 2,800 3,525 4,250 4,250 4,250 4,250 4,250 4,250 5,983 7,150 7,150 7,150
Solvay 120 150 188 234 293 366 458 572 850 900 1,400 2,500 2,500
Evonik (Jida) 500 500 500 500 500 500 500 500 500 500 500 500 500 500
Panjin Zhongrun 100 300 500 700 900 1,000 1,000 1,000 1,000 1,000
Jilin Zhongyan 0 0 300 600 700 700 900 1,000 1,000 1,000 1,000 1,000
Gharda 120 120 120 120
Kingfa 200 200 200 200 200 200 200 200 200 200
Total 2,420 2,420 2,620 3,420 3,420 3,450 4,213 5,584 6,143 6,516 6,808 7,322 7,800 9,583 11,250 12,350 12,350
8% 31% 0% 1% 22% 33% 10% 6% 4% 8% 7% 23% 17% 10% 0%
PEEK 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Victrex 1,205 1,481 1,802 1,972 2,339 2,508 2,626 1,547 2,535 2,860 2,904 2,920 3,551 3,958 4,219 4,591 4,987
Solvay 80 100 140 196 274 384 538 753 850 948 1,010 1,099 1,194
Evonik 50 63 78 98 122 153 191 238 300 334 356 388 421
Panjin Zhang 40 120 200 280 360 400 446 475 517 562
Jilin 120 300 350 350 450 500 557 594 646 702
Gharda 50 50 50 50
Kingfa 100 100 100 100 100 100 100 100 100 100
Total 1,255 1,531 1,852 2,022 2,469 2,671 2,844 2,101 3,451 4,047 4,363 4,821 5,701 6,344 6,754 7,341 7,966
Growth 22% 21% 9% 22% 8% 7% -26% 64% 17% 8% 11% 18% 11% 6% 9% 9%
Utilisation Rate (LHS) 63% 71% 59% 72% 77% 68% 38% 56% 62% 64% 66% 73% 66% 60% 59% 65%
Victrex Gross Margin (LHS) 55% 55% 55% 57% 62% 64% 65% 62% 64% 68% 66% 67% 65% 64% 64% 64% 64%
Victrex EBIT Margin 32% 32% 34% 37% 39% 39% 24% 40% 43% 43% 42% 40% 41% 41% 42% 42%
Source: Company data (company websites), Credit Suisse estimates for Victrex, Solvay and Evonik
Victrex moat remains wide

Product substitution risk low
Victrex's sole product is PEEK (Polyethyletherketone) which is classed as an ultra-high
performance polymer due to its high strength, low weight plus good temperature and
chemical resistance. The material was developed in 1978 by ICI, and Victrex was later
spun out through management buyout. Victrex has developed a global market for PEEK
over the past 30 years. The product is now used in a multitude of applications.
We estimate the threat of product substitution is low based on an analysis of PEEK
performance/price vs. competitor products. PEEK outperforms the competition on
strength-to-weight characteristics and in our view will continue to justify its high price
premium (>$100/kg)
Victrex (VCTX.L) 7
13 May 2015
Market position sustainable

Victrex occupies the No. 1 position in PEEK and we believe this is sustainable in the mid-
to-long term. We believe the following barriers to entry support this: (1) Largest nameplate
capacity and recently expanded production capabilities, (2) strong balance sheet (low risk
supply for customers), (3) best-in-class technical ability and (4) first mover advantage in
semi-finished/medical products.
Figure 10: Performance (strength-to-weight) versus price

140
PEEK
120
100
Market Price ($/kg)
Tungsten Carbide
PPS
80
PAI
60
Titanium
40 PES
PVDF
PSU
20 PA 12
PP PI
HDPE POM
0 PVC ABS
0 20 40 60 80 100 120 140 160 180
Source: Makeitfrom.com, Alibaba.com, Credit Suisse estimates
Downside risk overdone

We acknowledge temporary headwinds from O&G markets (17% group) and FX (-£6m
and -£7.5m in 2015E, respectively) and risks associated with a single product line.
However, we believe the market is more than discounting this risk given our view on the
sustainability of the business model.
We note that EV/tonne capacity has declined by >20% since 2011. We believe the market
is unduly discounting the value of future production capacity due to concerns over
increasing oversupply in the global markets. We believe the additional capacity will not
affect pricing and will serve to further expand market opportunities. This is given the
specialty nature of the product and the large potential market opportunities.
Figure 11: Oil & gas exposure and estimated revenue impact in 2015
Exposure Sales exposure % Exposure of 2015 growth 2015 revenue
(£mn) group impact (£mn)
Oil & Gas 43 17% -31% -13
of which Exploration 28 11% -31% -9
of which Machinery 14 6% -31% -5
Source: Company data, Credit Suisse estimates
Victrex (VCTX.L) 8
13 May 2015
Valuation: Our £24 target price is derived using the average of our SOTP of £22.53 and
DCF of £25.15.
Figure 12: Target price valuation

GBp
SOTP 2,253
DCF 2,515
Average 2,400
Catalyst timeline
Figure 13 and Figure 14 highlight our catalyst timeline and valuation sensitivities for
Victrex:
■ We believe the interim results and FY results should act as positive catalysts for the
stock given our positive view on markets and gross margin progression.
■ We estimate the probability-weighted valuation range is skewed to the upside. Our

target price is 20% above the current share price.
Downside risk to our target price in the short term would result from greater-than-expected
pressure from oil and gas markets (low end of consensus). In the longer term, the
downside risk comes from the extent to which the market could price in premium returns
and growth (competitive period)—we assume 12.5 years—a 5-year competitive period
would reduce the valuation to £15/share.
Upside risk to our target price in the short term would likely result from better-than-
expected volumes in the Invibio business (we forecast flat FY). In the longer term, upside
risk could come from an extension of the competitive period for Victrex—we assume 10
years before returns fade—a 15- to 20-year competitive period would increase the
valuation to £30/share.
Figure 13: Valuation sensitivities on an range of measures

Valuation sensitivity (p)
5-year competitive period only 1,500
Low end consensus on CS multiple 1,934
Credit Suisse 2,400
High end consensus on CS multiple 2,761
15- to 20-year competitive period 3,000
Source: Credit Suisse estimates, IBES consensus
Figure 14: Catalyst timeline

Catalyst Timeline
Event Date
H1 2015 Interim Results 19/05/2015

BoE rate rise Q3 2015?
FY Results (Special Dividend?) Dec-15
Victrex New Capacity 2015
Solvay De-bottleneck 2015
Solvay/Victrex new capacity 2015/16
Victrex (VCTX.L) 9
13 May 2015
Credit Suisse vs. market & earnings

bridge
Figure 15 highlights that our EBITDA forecasts are slightly below consensus. We forecast:
■ Average 9% growth per annum in volumes. This is 5% ahead of underlying market

assumptions. We note Victrex has historically outperformed underlying markets by
7%;
■ Sustained pricing power despite additional competitor supply additions. We believe

Victrex will hold/increase margins through the forecast period. This is a function of
average selling price declines as electronics volumes increase, offset by
distribution/production efficiencies and operating leverage;
■ Successful execution on c.1/2 of the growth pipeline.
Figure 15: Victrex forecasts—Credit Suisse vs. consensus

2015 2016 2017
£m CS Consensus Difference CS Consensus Difference CS Consensus Difference
Revenue 255 266 -4% 272 287 -5% 294 308 -4%
EBITDA 117 118 -1% 125 129 -3% 138 142 -3%
Operating profit 105 105 0% 111 114 -2% 123 125 -2%
PBT 106 105 0% 112 115 -2%
Net Income 83 83 -1% 87 90 -3% 96 100 -4%
EPS (Diluted) (p) 97 97 0% 102 106 -4% 111 120 -7%
DPS (Ordinary) (p) 48 49.5 -2% 51 57 -11% 56 64 -13%
DPS (Special) (p) 40 40 40
Source: Company consensus, IBES, Credit Suisse estimates
Figure 16 to Figure 18 outline our 2014/15 earnings bridge; specifically we note:
■ Oil & gas headwind: We forecast 30% volume declines in Victrex's exploration and
machinery business lines (17% group). This equates to a £13m revenue impact and
£6m EBITDA impact in 2015E.
■ Currency: We forecast a £7.5m EBITDA headwind in 2015 due to hedging in place

from 2014. We forecast £2-3m EBITDA benefit in 2016. Every 10% move in USD/EUR
would affect EBITDA by 9% and 7%, respectively.
■ New facility operating costs: Victrex has started production at its third facility in the
UK. We estimate this adds £1m in operating costs this year and £1m next year.
■ Market volumes: We estimate weighted market volumes of -1% due to declines in oil
and gas activity. However, we forecast 12% market outperformance as Victrex
continues to secure further product penetration in consumer electronics (electronics
led).
■ Electronics penetration: We estimate additional electronics volumes of 350 tonnes

yoy at c.£24 EBITDA/kg. We estimate this should benefit EBITDA by c.£8-9mn in
2015.
■ Organic growth of c.10%: We estimate the underlying business should continue to

grow at c.10%, a function of 5% above market volumes and small gross margin
benefits (distribution/production benefits).
Victrex (VCTX.L) 10
13 May 2015
Figure 16: 2014A/15E earnings bridge (£m)

£m
2014 EBITDA 112
Drilling activity -5.9
Currency -7.5
New facility operating costs -1.0
Electronics penetration 8.4
Total non-organic EBITDA -6.0
2015E EBITDA 117
Organic EBITDA 11
Organic growth 9.9%

Figure 17: 2015E volume estimates (tonnes)—We assume volumes 12% above market
growth led by electronics product penetration
Tonnes production Market growth estimate
2014 3,551
Underlying market impacts

Drilling -188 -31%
Industrial 42 3%
Transport 48 5%
Electronics 41 4%
Medical 29 8%
Total weighted market impact -28 -1%
2015E volume 3,958 11%
Implied growth above market 436 12%

Figure 18: Oil & gas exposure and estimated revenue impact in 2015E
Exposure Sales exposure % Exposure of 2015E growth 2015E revenue
(£m) group impact (£m)
Oil & Gas 43 17% -31% -13
of which Exploration 28 11% -31% -9
of which Machinery 14 6% -31% -5
Victrex (VCTX.L) 11
13 May 2015
Earnings sensitivities
Figure 19 highlights the key earnings drivers for Victrex; specifically, we highlight:
Market volumes: Victrex volumes remain most sensitive to underlying market volumes in
Electronics (portable devices and semi-conductor equipment), Automotive (premium bias),
Oil field (mechanical parts), Industrial (mechanical parts) and Medical (spine).
Real pricing: We estimate every 2% change in real pricing (beyond raw material pass
through) affects EBITDA by 4%.
Currency: The dominant currency drivers are USD, EUR and JPY. We note that Victrex
hedges 90-100% of projected transactions six months forward and 75-100% for the
subsequent six months.
Figure 19: Credit Suisse estimated sensitivities for Victrex

Sensitivities Change EBITDA impact
Market volumes
Industrial +10% 2.0%
Automotive +10% 3.2%
Oilfield +10% 2.0%
Electronics +10% 3.2%
Medical +10% 0.6%
Real pricing
VPS +2% 3.0%
Invibio +2% 0.9%
Currency (excluding hedging)

USD vs. GBP +10% 9.0%
EUR vs. GBP +10% 7.0%
JPY vs. GBP +10% 1.3%
Victrex (VCTX.L) 12
13 May 2015
Valuation
Our target price of £24 is the average of our SOTP and DCF valuation methods.
Figure 20: Target price valuation

GBp
SOTP 2,253
DCF 2,515
Average 2,400
SOTP
Our SOTP valuation is GBp2,253/share. We value group EBITDA on 15.7x 2015E and
14.7x 2016E. This represents a 50% premium to peers Evonik, Solvay and Croda. We
calculate the warranted premium based on relative ROIC, CFROI® and growth metrics. We
value VPS at a 65% premium to peers and Invibio at a 35% premium to peers—this is
given the greater risk/lower visibility in Invibio (regulatory approvals, qualification and
market acceptance risk).
Figure 21: SOTP valuation

(£m) EBITDA 2015E Multiple EBITDA 2016E Multiple EV
Victrex Polymer Solutions - VPS 91 16.2 95 15.6 1,474
Invibio 31 13.2 35 12.7 430
Other - Unallocated costs -5 15.4 -5 14.8 -70
Group 117 15.6 125 14.6 1,834
Net Debt (Cash) (FY14A) 90
Minorities (FY14A) 0
Pensions (FY14A) -8
Market Value 1,916
no of shares 85.1
GBp/share 2,253
We attribute a 50% premium to key peers.
Figure 22: Peers multiples

EV/EBITDA
Peers 2015E 2016E
Evonik 8.1 8.3

Solvay 8.0 7.6
Croda 13.4 12.4
Average 9.8 9.4
We estimate the warranted premium for Victrex is 50% vs. key peers, and see this as a
function of:
■ 70% ROIC premium,
■ 70% CFROI premium to peers' average,
■ 10% growth premium, and
■ Greater total dividend/FCF yield.
Victrex (VCTX.L) 13
13 May 2015
Figure 23: Warranted premium for Victrex multiple

2015E EV/EBITDA ROIC CFROI 2 year EBITDA Growth Dividend Yield FCFE Yield
Evonik 8.1 11% 4% 7% 3.6% -1.5%
Solvay 8.0 11% 6% 6% 2.6% 3.7%
Croda 13.4 25% 17% 8% 2.4% 0.0%
Average 9.8 16% 9% 7% 2.9% 0.7%
Victrex 27% 15% 8% 4.3% 2.5%
Premium/Discount 73% 67% 10% 52% 229%

Average Premium/Discount 50% 50% 50% 50% 50% 50%
Implied Multiple 14.8

Victrex (VCTX.L) 14
13 May 2015
DCF
Figure 24 highlights our DCF valuation for Victrex of GBp2,515/share. This is premised
upon:
■ Beta of 1.2x, equity risk premium of 5.5%, target gearing of 27% (longer-term
financing assumption) and WACC of 7.7%.
■ Mid-term growth of 10% and an EBIT margin of 40% (2014A 40.5%) over a 12.5-year
sustainable competitive advantage period. Our analysis of the pipeline of opportunities
and competitive position of the product and the company suggest this is warranted.
■ Long-term growth of 2.5% (GDP) and 20% operating margin. This represents the
longer-term outlook for a specialty chemicals company.
■ Net debt, pension liability and minority interests of £82mn cash positive.
Figure 24: DCF valuation (£m)

DCF
Derived EV 2,058
MV debt (+ve cash) (2014A) 81.8
Derived market cap (£m) 2,140
No of shares (m) 85.1
Derived Value per share (GBp) 2,515

Figure 25: DCF Valuation for Victrex (£m) – All forecast years
Middle Terminal
Period Period
(First cashflow) cashflow
Forecast Year 2015 2016 2017 2018 2019 2032
Turnover 254.7 271.8 294.5 315.9 347.5 1,066.0

Operating profit (EBIT) 105.3 111.4 122.8 132.6 139.0 213.2
Margin 41.4% 41.0% 41.7% 42.0% 40.0% 20.0%
Add back Depreciation 12.0 14.0 14.8 15.4 17.0 52.0
EBITDA (post except) 117.3 125.4 137.7 148.1 156.0 265.2
Taxation (23.3) (24.6) (27.1) (29.3) (27.8) (42.6)
Less increase/add decrease in Working Capital 9.1 4.0 5.3 5.0 (7.9) (5.2)
Acquisitions / Disposals - - - -
Less Capex (42.0) (32.0) (28.0) (28.0) (25.5) (52.0)
Free Cashflow for the Firm (FCFF) 61.1 72.8 87.8 95.8 94.8 165.4
Discount rate (WACC) (%) 7.7

Annual discount factor 0.93 0.93 0.93 0.93 n/a n/a
Cumulative factor for period 0.93 0.86 0.80 0.74 13.15 19.2
Discount factor to start of first forecast period 0.69 0.29
Total discount factor 0.93 0.86 0.80 0.74 9.07 5.66
Discounted value (£m) 57 63 70 71 861 936

Derived EV (£m) 2,058
Victrex (VCTX.L) 15
13 May 2015
Relative valuation
Victrex is trading on 13.8x 12m fwd EV/EBITDA on IBES estimates (ex. pensions). This
represents a 51% premium vs. peers – in line with 1-2 year average.
Figure 26: 12m fwd EV/EBITDA (IBES)

Victrex Solvay Evonik Croda Peers average Victrex vs. peers
International
VCTX.L SOLB.BR EVKn.DE CRDA.L
Current 13.8 7.2 7.1 13.0 9.1 51%
12-month average 12.9 6.9 7.0 11.5 8.5 52%
2-year average 12.4 6.8 6.7 11.2 8.2 51%
4-year average 11.0 6.3 6.7 10.6 8.1 36%
Source: 12m fwd EV/EBITDA (IBES) – ex. pensions
Victrex is trading on 19.9x 12m fwd P/E on IBES estimates (ex. pensions). This represents
a 13% premium vs. peers and is a 5% discount to the two-year average premium (18%).
Figure 27: 12m fwd P/E (IBES)

Victrex Solvay Evonik Croda Peers Euro STOXX Victrex Victrex
International average 600 relative to relative to
peers market
VCTX.L SOLB.BR EVKn.DE CRDA.L .STOXX
Current 19.9 16.0 15.8 20.9 17.5 16.5 13% 20%
12-month average 18.6 15.0 15.0 18.3 16.1 14.7 15% 27%
2-year average 18.3 14.4 14.3 17.9 15.5 14.0 18% 31%
4-year average 16.8 13.2 14.3 17.0 14.8 12.2 14% 38%
Source: 12m fwd P/E (IBES)
Figure 28: P/E relative to peers Figure 29: EV/EBITDA relative to peers
180
140
135 170
130
EV/EBITDA Relative
125 160
120 150
PER
115
110 140
105
100 130
95 120
90
110
Victrex vs Peers Average Victrex vs Peers Average
Source: 12m fwd P/E (IBES) Source: 12m fwd EV/EBITDA (IBES) – ex. pensions
Victrex (VCTX.L) 16
13 May 2015
Figure 30: Victrex EV/EBITDA ex. pensions (12m fwd) Figure 31: Victrex P/E (12m fwd)
15.0 22.0
14.5
14.0 20.0
13.5
13.0 18.0
EV/EBITDA
PE
12.5
12.0 16.0
11.5
11.0 14.0
10.5
10.0 12.0
10.0
Victrex Average
Source: 12m fwd EV/EBITDA (IBES) – ex. pensions Source: 12m fwd P/E (IBES)
Figure 32 highlights the annual average enterprise value over the current year and two-
year forward capacity for Victrex. We highlight a period of re-rating coming out of 2008/09
in which EV per tonne capacity increased from £100k to £250k. However, we believe the
market is yet to value the oncoming capacity fully given the declines to EV/tonne on a two-
year forward basis.
Figure 32: EV/capacity (two-year forward £m/tonne/annum)

0.30
Market pricing-in a discount on future capacity
0.25
0.20
0.15
0.10
0.05
0.00
EV/Capacity 2 Yr FWD
Source: Company data, Credit Suisse research
Victrex (VCTX.L) 17
13 May 2015
Credit Suisse HOLT®

HOLT has a warranted price of £24.84/share based on Credit Suisse explicit estimates to
2025 and standard HOLT fade thereafter (2.5% asset growth and 6% CFROI®). Our
forecasts imply a sustainable competitive position to 2015 with c.20% CFROI, 45% margin
and 0.5x asset turns. We believe this extended period of high returns is justified based on
our analysis of product, market and company barriers to entry.
Figure 33: HOLT warranted price £25/share
VICTREX PLC (VCTX)

Current Price: GBP 20.38 Warranted Price: GBP 24.84 Valuation date: 08-May-15
Sales Growth (parallel % point change to forecasts) Sep 13A Sep 14A Sep 15E Sep 16E Sep 17E
GBP -2.0% -1.0% 0.0% 1.0% 2.0% Sales Growth, % 1.0 13.8 2.1 8.5 10.8
EBITDA Margin (parallel % point change
EBITDA Mgn, % 46.8 44.9 46.0 46.9 48.6

-2.0% -5% 5% 15% 27% 40%
Asset Turns, x 0.46 0.5 0.5 0.5 0.5
-1.0% -2% 8% 18% 30% 44%

CFROI®, % 16.8 16.7 17.1 18.3 19.9
to forecasts)
Disc Rate, % 4.2 4.4 3.9 3.9 3.9

0.0% 1% 11% 22% 34% 48%
Asset Grth, % 9.9 8.3 0.6 3.1 4.1
1.0% 4% 14% 25% 38% 52%

Value/Cost, x 4.3 4.5 4.4 4.3 4.0
Economic PE, x 25.3 27.1 25.8 23.2 20.2

2.0% 7% 17% 29% 42% 56%
Leverage, % 1.0 0.8 0.8 0.8 0.8
HOLT - Credit Suisse Analyst Scenario Data
More than
More than
Sales Growth (%)
10% Within 10% 90
10% upside
downside 80
70
60
CFROI & Discount Rate (in %) 50
40
25
30
20
20 10
0
15 2010 2012 2014 2016 2018 2020 2022 2024
10
EBITDA Margin
60
5
50
0 40
2010 2012 2014 2016 2018 2020 2022 2024
Historical CFROI Historical Transaction CFROI 30
Forecast CFROI Forecast CFROI
CFROI Discount Rate 20
10
Asset Growth (in %)
0
16 2010 2012 2014 2016 2018 2020 2022 2024
14
12
Asset Turns (x)
10 0.7
8 0.6
6 0.5
4
0.4
2
0.3
0
2010 2012 2014 2016 2018 2020 2022 2024 0.2
0.1
Historical Asset Growth Rate Forecast Growth Forecast Growth RAGR
0.0
2010 2012 2014 2016 2018 2020 2022 2024
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
Source: Credit Suisse HOLT ®, Credit Suisse estimates, company data
Victrex (VCTX.L) 18
13 May 2015
Quantifying the business lifecycle

We believe the key question to understanding the future value creation/destruction for
Victrex shareholders is to form an understanding of where the company sits in the
business lifecycle.
During the 1990s, Victrex established a market for PEEK, growing the business through
the early 2000s as the sole global producer. Between 2005–2009 a number of competitors
(Evonik, Solvay, Jilin, Panjin) entered the market and have rapidly expanded capacity.
Understanding where we are in the business cycle is key, namely:
■ Whether we are now entering an expansionary juncture in which Victrex (and peers)
can increase the market with greater product penetration and new applications, or
■ Whether the increased production capabilities and competition in PEEK lead to a

maturation of the market and compete away excess economic returns.
In summary, we believe that Victrex can continue to sustain above market growth and
pricing, PEEK will retain its premium value and that Victrex can sustain a leading market
position. We forecast:
■ Sustainable growth and returns: We forecast sustainable above market volume

growth and pricing power, noting increasing Average Selling Prices (ASP) despite
increased competition since 2005. We note gross margin has remained resilient
despite the volatility of global operating rates as new capacity has come online.
Furthermore, we believe the company can leverage an improving cost position as it
fills new production capacity.
■ Sustainable product position: We believe PEEK will remain the first choice material
for high-end applications due to its superior strength-to-weight properties and
competitive price point.
■ Sustainable market position: We believe Victrex will continue to occupy the No.1
position in the market supported by capacity increases, superior technological know-
how and first mover advantage in semi-finished applications,
■ Corporate longevity: We believe Victrex can sustain premium returns beyond the
next decade due to (1) sizeable market opportunities to 2025 that can accommodate
all players (>triple market, c.12% CAGR), and (2) opportunity to move the portfolio
further downstream towards semi-finished and medical implants (Victrex has first
mover advantage).
Victrex (VCTX.L) 19
13 May 2015
Underlying trends in Victrex / PEEK

We forecast volume growth >5% above market over the next 10-15 years. We believe
ASP should continue to hold pricing power and track raw materials/inflation. We forecast
margins/returns improvement as new facilities ramp and operational efficiencies continue.
Volumes
Victrex has outpaced underlying market growth by an average of 7% over the past 10
years (Figure 34). We believe 2014 marked a return to sustained volume growth after the
slowdown in 2013 led by destocking cycles in electronics (capex downturn in
semiconductors, volatility in consumer order patterns), medical (Obama Care uncertainty
over insurance payments and customer consolidation in 2014) and transport (weak end
markets in H1). We now forecast 12% market outperformance in 2015 and an average of
5% over the next 10-15 years. This is a function of:
■ Product penetration in 2015—continued penetration of electronics—we note Victrex

increased electronics tonnage from 628 in 2013 to 1,031 in 2014 (+64%). Victrex
reported 28% group volume increases in H1 2015A. We believe this is led by
continued penetration in electronics.
■ Strong pipeline of opportunities in electronics, transport and medical (see Figure 52

to Figure 59 later in the report).
■ Further penetration of existing applications as acceptance/use of PEEK continues

to increase with existing/new customers.
Figure 34: Victrex tonnage growth vs. the underlying market

Market growth by industry 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Average
Automotive 5.3% 2.8% 3.9% 5.4% -3.8% -12.1% 24.7% 3.7% 6.4% 3.5% 3.5% 4%
Industrial 6.9% 8.7% 7.3% 3.1% 2.8% -21.3% 19.1% 9.4% 1.5% -0.8% 3.8% 4%
of which 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0%
Industrial 3.6% 2.8% 3.9% 3.7% -1.5% -11.7% 8.6% 2.6% 1.4% 1.4% 2.7% 2%
Oil & Gas 10.2% 14.7% 10.8% 2.4% 7.1% -30.9% 29.6% 16.1% 1.5% -3.0% 4.9% 6%
Electronics 2.0% 2.0% 11.3% 7.6% 3.9% 4.9% 3.6% 1.8% -3.8% 1.0% 2.3% 3%
Medical 15.3% 8.2% 9.8% 11.6% 8.2% 3.2% 3.5% 3.9% 4.1% 5.5% 4.0% 7%
Weighted underlying market growth % 6.4% 4.9% 7.8% 6.1% 2.0% -9.4% 16.1% 5.6% 1.9% 1.4% 3.4% 4%
Victrex Growth By Industry 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Average
Industrial 17% 23% 22% 16% 7% -29% 53% 11% -2% 0% 6% 11%
Transport 4% 10% 12% 6% 10% -41% 59% 10% 0% 7% 20% 9%
Electronics 65% -4% 18% -2% -3% -54% 96% 16% 11% -12% 64% 18%
Medical 0% 12% 27% 6% 4% -51% 68% 20% -1% 13% -2% 9%
Total 22% 9% 19% 7% 5% -41% 64% 13% 2% 1% 22% 11%
Victrex Growth vs Market 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Average
Industrial 10% 14% 14% 13% 4% -7% 34% 2% -3% 1% 3% 8%
Transport -1% 7% 8% 1% 14% -29% 34% 6% -6% 4% 17% 5%
Electronics 63% -6% 7% -10% -7% -59% 92% 14% 14% -13% 62% 14%
Medical -15% 4% 17% -5% -4% -54% 64% 16% -5% 8% -6% 2%
Total 15% 5% 11% 1% 3% -32% 48% 7% 0% -1% 18% 7%
Source: Company data, Credit Suisse estimates, the BLOOMBERG PROFESSIONAL™ service, Statistica, Accenture, Baker Hughes
Victrex (VCTX.L) 20
13 May 2015
Price
Figure 35 and Figure 36 highlight the 10-year trends for Victrex's ASP and gross margins.
We note that ASP has increased by 30-70% in $, € and £ terms over the past 10 years
despite competitors Solvay, Evonik and China (Jilin and Panjin) entering the market. We
note:
■ Small ASP declines in 2014 due to mix impact from greater electronics volumes (lower
selling price due to the large order size per customer—bulk discounting, but margin
offset from operating leverage and lower distribution costs/tonne), and
■ Strong correlation to gross margin improvement in 2002-2014.
Figure 35: Victrex pricing in USD, EUR, GBP / kg Figure 36: Victrex gross margin vs. USD PEEK pricing
130 70% 130
Pricing has remained positive despite new entrants Pricing has driven gross margin improvement
120
120
Victrex Average PEEK Price
110
Evonik enter market 65%
100 China enter market 110
90
Solvay enter market 100
80 60%
70 90
60
80
50
55%
40 70
50% 60
Price (USD/kg) Price (GBP/kg) Price (EUR/kg)
Victrex Gross Margin (LHS) Price (USD/kg)
Source: Company data Source: Company data
Further analysis of returns trends (Figure 37 to Figure 40) demonstrates that utilisation
rates of available capacity is the key driver of ROCE. We note:
■ CFROI and ROCE are currently around the longer-term average despite price
increases and higher gross margins,
■ Asset turns are the key driver of the change in ROCE (vs. margin, which is relatively
steady),
■ We note tonnage production vs. PPE has a large impact on asset turns given the
relatively small production base from which Victrex is growing,
■ The recent decline in ROCE is due to the large PPE additions from the third
production line, and
■ Victrex has the opportunity to increase ROCE as the new facility ramps up.
Victrex (VCTX.L) 21
13 May 2015
Figure 37: ROCE and CFROI Figure 38: Asset turns and EBIT margin
45% 120%
ROCE and CFROI around Longer Term
40% average but trending down since 2011 Asset Turns the key driver of
100% ROCE
35%
30% 80%
25%
60%
20%
15% 40%
10%
20%
5%
0% 0%
CFROI ROCE
EBIT Margin Asset Turns
Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research
Figure 39: Asset turns and production to PPE Figure 40: Production to PPE vs. ROCE
110% 40 55% Recent heavy capex into new facilities and flat 40
100% 35 volumes have depressed ROCE... 35

45%
30 30
90%
25 35%
80% 25
20
70% 25% 20
15
60%
15
10 15%
Production vs PPE key driver of Asset Turns 10
50% 5 ...but this should improve as Capex spend comes
5%
down 5
40% 0
-5% 0
Asset Turns Production to PPE ROCE Production to PPE
Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research
Victrex (VCTX.L) 22
13 May 2015
Competitive position of PEEK

We estimate the threat of product substitution is low based on an analysis of PEEK
performance/price vs. competitor products. We believe Victrex can sustain its No.1
position in the market vs. peers given its leading capacity expansions, balance sheet
strength and first mover advantage in semi-finished products.
PEEK (Polyethyletherketone) is classed as an ultra-high performance polymer due to its
high strength, low weight plus good temperature and chemical resistance. The material
was developed in 1978 by ICI, and Victrex was later spun out through a management
buyout. Victrex has developed a global market for PEEK over the past 30 years. The
product is now used in a multitude of applications. We review performance characteristics
to assess the threat of product substitution.
Figure 41 breaks down the ultra-high performance plastics into three classes. Each class
is suited to different applications highlighted in Figure 42
Figure 41: Overview of ultra-high performance plastics characteristics

Class Materials Pro Con
Amorphous PEI, PES, PSU Strength Lower continuous use temperature only, Lower chemical resistance
Thermoplastics
Semi-Crystalline PPS, PEEK, PPA Strength to weight Medium temperature only, can lose shape at higher temp (PEEK does have
ThermoPlastics higher temperate grade option)
Thermosetting PAI, PI High temperature Requires high temperature (400C) processing equipment and/or secondary
Resins processing steps (e.g. ,15 days post curing to get to max properties)
Figure 42: Overview of ultra-high performance plastics characteristics

Engineering Full name Date of industrial Main use Main property Phase of lifecycle
plastic production
ABS Acrylonitrile-Butadiene-Syrene 1950 Appliances, All rounder Commodity
Automotive
LCP Liquid Crystal Polymers 1980 Electronics, Drug Chemical inert/ heat Mid-stage Growth
delivery deflection 271C
PBT Polybutylene Terephthalate 1970 Fibre optics Strength High End Commodity
PEEK Polyethyletherketone 1980 Cars, planes, High Strength/high Mid-stage Growth
electronics temperature
PMMA Polymethyle methacrylate 1930 PlexiGlass High light Commodity
transmission/ Surface
hardness
PA PolyAmide 1960 Casing Friction Commodity
PSU Polyarylsulphone 1980 Electrical Electrical resistance Late Stage Growth
PC Polycarbonate 1960 CD/DVD Durability Commodity
PI Polyimide 1955 Insulating coatings Temperature/ Niche Applications
resistance
POM polyoxymethylene 1960 Gears/bearings Stiffness Late-stage Growth
PPA Polyphalamide Fuel modules Temperature extremes Growth
PPS Polyphenylene Sulphide 1970 Fuel systems Chemically inert Late-stage Growth
PVDF Polyvinylidene fluoride 1980 Sensors Piezoelectric Late-stage Growth
TPE Thermoplastic polyester elastomer 1970 Catheters Rubber properties
Source: PlasticsEurope.org, Credit Suisse research
Victrex (VCTX.L) 23
13 May 2015
PEEK tends to be chosen for applications that require its best-in-class strength-to-weight
ratio, good chemical/temperature resistance and better processability vs. metal. The
closest competing products are PPS, PSU and PI. Figure 43 highlights a matrix of the four
key performance properties by polymer. We note:
■ PEEK is a winner on strength-to-weight characteristics
■ PPS is the nearest competing plastic to PEEK on strength-to-weight properties
■ PSU scores well on strength-to-weight and is easier to process than PEEK. However,
it cannot withstand continuous high temperature use due to deformation
■ PI has good strength-to-weight characteristics and temperature resistance; however,

the material is difficult to process during product manufacture.
Figure 43: Ultra-high performance plastics characteristics (full details see Figure 75)
Strength to Strength to Strength to
PEI Weight PES Weight PSU Weight
Amorphous
Temperature Temperature Temperature

Processability Processability Processability
Stability Stability Stability
Chemical Chemical Chemical

Resistance Resistance Resistance
PPS Weight PEEK Weight PPA Weight


PI Weight PAI Weight PBI Weight

Crystalline
Victrex (VCTX.L) 24
13 May 2015
Figure 44 details the strength-to-weight ratio of the various plastics vs. the price of the
material. We highlight that PEEK commands the highest price; however, we believe this
price is sustainable given the relative performance of the competing products. We believe
PEEK will remain the material of choice for high-end applications that require strength and
low weight materials.
Figure 44: Strength-to-weight ratio vs. price

140
PEEK
120
100
Market Price ($/kg)
Tungsten Carbide
PPS
80
PAI
60
Titanium
40 PES
PVDF
PSU
20 PA 12
PP PI
HDPE POM
0 PVC ABS
0 20 40 Aluminum
60 80 100 120 140 160 180
Source: Makeitfrom.com, Alibaba.com, Credit Suisse research
Victrex (VCTX.L) 25
13 May 2015
Competitive position of Victrex

Victrex occupies the No. 1 position in PEEK and we believe this is sustainable in the mid-
to-long term. This is due to the following barriers to entry: (1) Largest nameplate capacity
and recently expanded production capabilities, (2) strong balance sheet (low risk supply
for customers), (3) best-in-class technical ability and (4) position in semi-finished/medical
products. We review each of these attributes in the following sections.
Capacity
Victrex has begun production at its third facility in the UK, which will take its total
nameplate PEEK production capacity to 7,150 tonnes/annum. This investment benefits the
business through (1) sustaining its leading production capability in the market, (2) de-
risking potential supply issues for customers, and (3) minimising turnaround time when
switching between PEEK grades (greater efficiency of production).
Figure 45: Estimated supply/demand analysis for PEEK

PEEK Capacity (RHS) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Victrex 2,300 2,300 2,500 2,800 2,800 2,800 3,525 4,250 4,250 4,250 4,250 4,250 4,250 5,983 7,150 7,150 7,150
Solvay 120 150 188 234 293 366 458 572 850 900 1,400 2,500 2,500
Evonik (Jida) 500 500 500 500 500 500 500 500 500 500 500 500 500 500
Panjin Zhongrun 100 300 500 700 900 1,000 1,000 1,000 1,000 1,000
Jilin Zhongyan 0 0 300 600 700 700 900 1,000 1,000 1,000 1,000 1,000
Gharda 120 120 120 120
Kingfa 200 200 200 200 200 200 200 200 200 200
Total 2,420 2,420 2,620 3,420 3,420 3,450 4,213 5,584 6,143 6,516 6,808 7,322 7,800 9,583 11,250 12,350 12,350
8% 31% 0% 1% 22% 33% 10% 6% 4% 8% 7% 23% 17% 10% 0%
PEEK 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Victrex 1,205 1,481 1,802 1,972 2,339 2,508 2,626 1,547 2,535 2,860 2,904 2,920 3,551 3,958 4,219 4,591 4,987
Solvay 80 100 140 196 274 384 538 753 850 948 1,010 1,099 1,194
Evonik 50 63 78 98 122 153 191 238 300 334 356 388 421
Panjin Zhang 40 120 200 280 360 400 446 475 517 562
Jilin 120 300 350 350 450 500 557 594 646 702
Gharda 50 50 50 50
Kingfa 100 100 100 100 100 100 100 100 100 100
Total 1,255 1,531 1,852 2,022 2,469 2,671 2,844 2,101 3,451 4,047 4,363 4,821 5,701 6,344 6,754 7,341 7,966
Growth 22% 21% 9% 22% 8% 7% -26% 64% 17% 8% 11% 18% 11% 6% 9% 9%
Utilisation Rate (LHS) 63% 71% 59% 72% 77% 68% 38% 56% 62% 64% 66% 73% 66% 60% 59% 65%
Victrex Gross Margin (LHS) 55% 55% 55% 57% 62% 64% 65% 62% 64% 68% 66% 67% 65% 64% 64% 64% 64%
Victrex EBIT Margin 32% 32% 34% 37% 39% 39% 24% 40% 43% 43% 42% 40% 41% 41% 42% 42%
Source: Company data (company websites), Credit Suisse estimates for Victrex, Solvay and Evonik
Figure 45 gives our estimated supply-demand history and forecasts for the global PEEK
market. We highlight the large additions to capacity this year and next from Victrex and
Solvay. Large increases to nameplate capacity raises some concern for any product.
However, we believe that given the niche markets and specialty nature of PEEK there
should be no impact on real prices/gross margins. This is further backed up by the data
shown in Figure 46, which show little correlation between industry utilisation rates and
Victrex's gross margin.
Additionally, we would highlight that the Chinese product is of lower quality and sold only
into compounders rather than for pure PEEK applications. We believe the consistency of
product is a major consideration for pure PEEK applications in which China cannot
compete. Therefore, we believe the risk of competing on price with Victrex's customers is
low.
■ We believe 60-70% operating rates globally will not prove an issue for industry pricing.
The limited number of suppliers, the extent to which PEEK is integrated into
engineering critical designs, and rapid growth means that a capacity overhead is
required.
Victrex (VCTX.L) 26
13 May 2015
■ The lack of margin correlation highlights the specialty nature of the product and B2B
negotiated pricing based on quality, surety of supply and expertise rather than a
homogenous commodity product.
Figure 46: Victrex gross margin vs. industry utilisation rate

90% 70%
80%
70%
65%
60%
50%
60%
40%
30%
55%
20%
10%
0% 50%
Utilisation Rate (LHS) Victrex Gross Margin (RHS)
Balance sheet/portfolio opportunity

We forecast a £50mn net cash position for Victrex at the end of 2015 (post special
dividend from 2014). We believe management would be hesitant to run a net debt position
in the near term (see Balance Sheet section); however, the ongoing FCF (>c.£45mn p.a.)
provides ample opportunity for technology acquisitions, in our view.
Figure 47: Portfolio position of PEEK producers (bubble size represents capacity)
15
Victrex
Downstream Integration of PEEK
13
11
9
Solvay
7
5
Jilin
3
Evonik
Panjin
1
-1 0 2 4 6 8 10 12
-3
Engineering Plastic Product/Composite Offering
Victrex (VCTX.L) 27
13 May 2015
Victrex currently has the greatest PEEK production capacity and best technical capabilities
Figure 48. However, given Victrex produces only PEEK and PEEK derivatives, we do
acknowledge a portfolio gap compared to Solvay, which has the broadest range of ultra-
high performance polymers on the market.
We believe Victrex and Solvay will continue to move in two different strategic directions
within ultra-high performance polymers, with Solvay pushing for a broader portfolio offering
and Victrex pushing downstream into semi-finished and medical.
We believe building out a semi-finished offering and medical device market will allow
Victrex to (1) capture additional value through the chain, (2) diversify the market, and (3)
reduce the price risk/commoditisation for PEEK in the longer term (15+ years). We do
highlight that this strategy is not without risk and we believe the growth estimates of the
Invibio division should be discounted as such. We highlight risk from:
1) Regulatory acceptance in knee, and
2) Investment cost of building new markets
Figure 48: Pure PEEK performance

Victrex Solvay Evonik
Basic High temperature Keta-Spire VestaKeep
Melting point (C) 343 373 340 340
Glass transition (C) 143 160 150
Density (g.cm-3) 1.3 1.3 1.3 1.3
Tensile strength yield (Mpa) 100 100 96.5 98
Strength to weight (tensile/density) 77 77 74 75
Flexural strength (Mpa) 170 170 146
Source: Company data
Figure 49 gives our SWOT analysis for PEEK production at each of the PEEK producers.
We believe Victrex will remain a best-in-class producer through a combination of superior
technology, semi-finished/medical product capability and close customer ties.
Figure 49: SWOT analysis between PEEK producers

Victrex Solvay Evonik Jilin Panjin
Strength No.1 on technology, customer No.2 on technology. Portfolio Cost of manufacture Cost of manufacture
base and focus Best portfolio
Weakness Portfolio offer vs. Solvay No semi-finished Technology Technology Technology
Opportunity Semi-finished/Medical Downstream product Expansions Market share outside Market share outside
compounders compounders
Threat Undercut on pricing Undercut on pricing Higher performance Higher performance Higher performance
requirement requirement requirement
Victrex (VCTX.L) 28
13 May 2015
Corporate longevity
We believe Victrex can sustain its market, company and product moat over the mid-term.
In the following section, we assess the longer-term pipeline to understand better the likely
corporate longevity of the business.
We believe there is ample opportunity in existing markets to triple total PEEK demand by
2025E (c.12% CAGR) with further opportunity to expand into new markets.
Figure 50: Victrex's pipeline of opportunities—as given by the company—bubble size

represents peak sales potential, timing to meaningful revenue of £1-2mn
100%
Probability of success
75%
50%
25%
0%
0 2 Time to meaningful
4 revenue6 of 1m-£2m) 8 10
Horizon 1 Horizon 2 Horizon 3

(0-2 years) (2-5 years) (5 years +)
Pipeline
Figure 51 highlights Victrex's pipeline of opportunity as given by the company. We risk
weight the market opportunities in Figure 52. The combined average probability of success
is 61% based on company guidance. This would drive 8% CAGR if we assume all projects
reach peak revenue by 2025 (timing not given by management) (Figure 53). This excludes
underlying growth in other areas of the business.
We estimate 8% CAGR over the next four years. We justify this sustained growth
assumption in the following sections.
Victrex (VCTX.L) 29
13 May 2015
Figure 51: Victrex's pipeline of opportunities—as given by the company
Figure 52: Split of potential revenue from Victrex' pipeline of opportunities (£mn)
Revenue
Revenue in Uncertain
weighted Risk rate
peak year revenues
probability
1-2 Years to material revenue (not peak) 40 80% 20% 8
2-5 Years to material revenue (not peak) 355 61% 39% 138
5+ Years to material revenue (not peak) 50 45% 55% 28
Pipeline 5+ years 445 61% 39% 173

Figure 53: Implied revenue contribution from Victrex' pipeline of opportunities (£mn)
2015 2016 2017 2018 2025 (CS est) CAGR Implied Probability
Victrex Revenue Pipeline 445 100%
Victrex Probability Weighted Pipeline 272 61%
Victrex Revenue based on Probability Weighted Pipeline 526 8%

CS Forecast Group Revenue 255 272 297 320 8%
Victrex (VCTX.L) 30
13 May 2015
Market potential
Figure 54 outlines Credit Suisse forecasts for aerospace production and automotive
production to 2020. We estimate that each Being 787 uses 1 tonne of PEEK (Airbus
380/350, 0.4 tonne), average mass market cars 6 grams per vehicle and premium cars
100g per vehicle. Assuming no further penetration of PEEK into aerospace/automotive
applications, this would support c.6% CAGR growth.
Figure 54: Estimated potential PEEK consumption from Aerospace and Automotive
Production Data 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E
Boeing 787 Production 0 0 0 3 46 65 114 122 132 144 168 168 168
Airbus 380/350 12 10 18 26 30 25 31 45 78 114 127 149 149
Automotive Production 67 59 74 77 81 84 87 92 96 101 105
of which
Mass Market 61 53 66 69 73 76 79 82 86 91 95
Premium 7 6 7 8 8 8 9 9 10 10 11
Peek Useage
Boeing 787 (tonne) 1 1 1 1 1 1 1 1 1 1 1 1 1
Airbus 330 (tonne) 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
Mass Market Auto (gram) 6 6 6 6 6 6 6 6 6 6 6
Premium Auto (gram) 100 100 100 100 100 100 100 100 100 100 100
Implied PEEK use aerospace 5 4 7 13 58 75 126 140 163 190 219 228 228
Implied PEEK use Auto (tons) 1037 911 1136 1178 1254 1298 1344 1411 1477 1554 1623
Total PEEK consumed in Transport 1042 915 1143 1192 1312 1373 1470 1551 1640 1744 1842
Growth -12% 25% 4% 10% 5% 7% 5% 6% 6% 6%
Change YoY -127 228 48 120 61 97 81 89 104 98
Victrex Transport Volumes 723 425 674 741 744 799 962
YoY Volume Change -298 249 67 3 55 163
Source: Credit Suisse estimates, Company data, IHS
Figure 55 to Figure 59 outline our estimates for potential PEEK market tonnage by 2025
including further market penetration. Victrex believes that the potential PEEK market has
the opportunity to grow to an excess of 80kt (no timing given). We believe the market has
the potential to grow to >17kt (from 5.5kt) by 2025. This would support c.12% volume
CAGR through the period, ahead of our more conservative forecasts (high-single-digit
estimates). Our assumptions are based on the following:
Transport: Assumes mass market cars consume 12g PEEK per vehicle (from c.6g
currently). Premium vehicles use 200g PEEK (from c.100g currently). Boing 787 uses 1.5
tonnes (from 1 tonne) and Airbus uses 1 tonne (from an estimated c.0.4 tonnes currently).
This creates a c.4kt market that would be three times bigger than the current market and
represents 11% CAGR.
Electronics: Assumes audio film penetrates 2bn mobile devices (from 1bn currently), and
5% of structural plastic components in mobile phone handsets are replaced by PEEK. This
creates a c.8kt market that would be four times bigger than the current market and
represents 16% CAGR.
Industrial: Assumes 5% market growth and 30 new offshore rigs using PEEK-based
pipelines (risers, jumpers, flowlines). This creates a c.5kt market that would be two times
bigger than the current market and represents 9% CAGR.
Medical: Assumes 8% market growth in line with the industry. This creates a c.1kt market
that would be two times bigger than the current market and represents an 8% CAGR.
Importantly, while we highlight the market potential of 12% CAGR, our volume
estimates remain more conservative (c.9%).
Victrex (VCTX.L) 31
13 May 2015
Figure 55: Potential PEEK transport market volume Figure 56: Potential PEEK electronic market volume
(2025E) (2025E)
Potential Transport PEEK volumes in 2025 Potential Electronic PEEK volumes in 2025
Market 2025 (tonne) Market 2025 (tonne)
Boeing 787 (to 1.5 tonne) 252 Current Market @ 5%CAGR 2,799
Airbus (to 1 tonne) 373 Audio Film (2bn unit penetration) 155
Mass Market (to 12g/car) 1,207 Structural Components 4,749
Premium (to 200g/car) 2,235 Total 7,702
Total 4,066
Current Market 1,718
Market Now 1,470
Total Growth 448%
Total Growth 277% CAGR 16%
CAGR 11%
Source: Credit Suisse estimates Source: Credit Suisse estimates
Figure 57: Potential PEEK industrial market volume Figure 58: Potential PEEK medical market volume (2025E)
(2025E)
Potential Industrial PEEK volumes in 2025 Potential Medical PEEK volumes in 2025
Market 2025 (tonne) Market 2025 (tonne)
Current Market @ 5%CAGR 3,247 Current Market @ 8%CAGR 782
Oil Sub-sea infrastructure 1,366
Total 782
Total 4,612
Current Market 362
Total Growth 216%
Total Growth 231% CAGR 8%
CAGR 9%
Source: Credit Suisse estimates Source: Credit Suisse estimates
Figure 59: Potential total PEEK market volume by 2025E

Total Potential Market by 2025 17,162
Multiple 3.1
CAGR 12%
Victrex (VCTX.L) 32
13 May 2015
Balance sheet and cash

Victrex is currently running a net cash position (we estimate +£50mn YE 2015 post a
£0.50/per share special dividend from 2014). We believe management will remain
conservative with the balance sheet in order to reassure customers (concerned with future
supply risk). This is a key consideration for Victrex given, (1) the small number of players
in the PEEK market, (2) long-term contracts (e.g., aerospace) and (3) engineering design
requirements built into customer's pipelines.
We forecast increasing FCFF over the coming years as earnings increase and capex
requirements decline. We estimate that to operate a comfortable £30-40m net cash
position Victrex can pay a special dividend of £35m p.a. (£0.40/share) in the absence of
acquisitions. This takes the total dividend yield to 4.5-5% and we believe the most likely
use of cash beyond a smaller technology acquisition in medical.
Figure 60: Balance sheet, cash and returns to shareholders (£m)

Cash Flow 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Operating Income (reported) 55 25 75 94 94 94 102 105 111 123 133
Capex -25 -7 -5 -9 -27 -41 -66 -42 -32 -28 -28
Change in Working Capital -5 -6 10 -11 -13 -4 5 -9 -4 -5 -5
Tax/D&A/Other -41 -21 -155 -131 -92 -87 -72 -97 -140 -167 -185
Free cash flow to the Firm 16 9 75 57 39 38 30 43 65 77 86
Dividend 15 16 63 27 32 36 81 75 78 83 87
FCF 1 -7 12 30 7 1 -51 -33 -13 -5 -1
Dividend/share (p)
Ordinary 18 19 25 33 37 43 45 48 51 56 60
Special 0 0 50 0 0 0 50 40 40 40 40
Total 18 19 75 33 37 43 95 88 91 96 100
Dividend Yield (total) 4.5% 4.6% 4.9% 5.1%
Balance Sheet (£m)

Net Debt / (Net Cash) -24 -19 -77 -72 -84 -92 -90 -52 -42 -42 -45
EBITDA (adj) 62 33 83 103 104 104 112 117 125 138 148
Net Debt/EBITDA -0.4 -0.6 -0.9 -0.7 -0.8 -0.9 -0.8 -0.4 -0.3 -0.3 -0.3
Figure 61: Operating cash flow vs. net debt (cash) (£mn)
200
150
132.4 143.1
100 118.3 121.4
100.9 108.2
90.9 91.2 89.9
50
61.9
26.8
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-50
-100
-150
Operating Cash flow Net debt / (cash)
Victrex (VCTX.L) 33
13 May 2015
Acquisition environment
Victrex is a high quality, high returns specialty polymers business that makes the company
an attractive target for M&A activity. We highlight that the majority of large cap European
specialty chemicals seek acquisitions in the specialty end of the space with strong cash
flows and a strong technology position.
We believe possible acquiring companies include BASF, Evonik and Solvay given their
size and stated acquisition strategy. However, valuation remains a sizeable hurdle.
Competitor takeout bid: Victrex market cap c.USD2.5bn

We believe the more likely potential bidders would be either BASF or Evonik for the
reasons highlighted below; however, we estimate a relatively low likelihood given valuation
hurdles.
We note that BASF has up to $6bn of balance sheet headroom and a strategic impetus to
move into downstream business. However, near-term cash flow is likely to come under
pressure for BASF (given lower oil price) and we believe Victrex's valuation would be
prohibitive in regard to BASF's acquisition KPI of >8% ROI.
Evonik also has substantial balance sheet headroom given its net cash position. It is
targeting acquisitions of up to $6bn in consumer/resource efficiency. Victrex would bolster
its strategic position in PEEK and improve the quality of the portfolio. Again valuation
remains the key hurdle, in our view.
Solvay already has a strong position in PEEK, and we believe it aims to grow the business
organically.
Figure 62: Likelihood of competitor takeout bid

Competitors Readily available balance FCF 2015E Comment Likelihood
sheet (0=None, 10=High)
BASF USD 6bn USD 300m Target downstream consumer business, but cash flow not 3
supportive in near term
Solvay USD 2.5bn USD 600m Potential B/S headroom following portfolio restructuring 2
Net cash, looking for acquisition <USD 6bn in
Evonik USD 6bn USD (750)m consumer/resource efficiency 5
Victrex (VCTX.L) 34
13 May 2015
Group overview
Victrex produces the ultra-high performance engineering plastic PEEK for industrial,
transportation, electronic and medical applications. Victrex also produces semi-finished
products for the electronics, medical and oil & gas markets. The company occupies the
No.1 position in PEEK (60% market) and generates c.45% EBITDA margins, c.40% ROCE
and 15% CFROI.
The high returns are sustained through the high value offering of PEEK in niche
applications. We estimate the total PEEK market is currently c.5-6 kt and growing at a high
single/double digit rate. We believe growth opportunities, capex plans and market growth
supports the following:
■ Volume: We forecast 12% volume growth in 2015 (H1 strength from electronics; the
Credit Suisse Chemicals team is more cautious on further growth in H2 given
additional volumes support from competitor capacity constraints) and mid- to high-
single-digit growth through the forecast period.
■ Price: We forecast c.10% price declines in 2015 as lower input costs (oil derived) are
passed onto the customer and lower ASP in electronics affects mix. In the mid-term
we forecast raw material price pass-through only. We believe Victrex should hold
underlying selling prices despite increasing capacity in the industry.
■ Operating leverage: We forecast 150 bps margin increases to 2018, a function of
increasing leverage from the third production facility that commenced production in H1
2015.
Figure 63: Geographic revenues 2014A Figure 64: Group forecasts

350 50%
45%
3% 300
40%
22% 250 35%
Revenue (£mn)
200 30%
25%
43% 150 20%
100 15%
10%
50
5%
32%
0 0%
Group Sales (lhs) Group margins (rhs)

UK EMEA Americas Asia-Pacific
Source: Company data, Credit Suisse research Source: Company data, Credit Suisse estimates
Victrex (VCTX.L) 35
13 May 2015
Figure 65: Group overview for Victrex

Costs to Geographic Revenues Operating Description Customers Market Share
EBITDA Mix 2014 Profit
2014
Industrial
39% Industrial: Seals, connectors, VPS:
bearings and pipes for industrial Airbus,
Audi, Victrex
machinery and oil and gas 60%
Boeing,
COMAC,
General Motors,
VPS =79%
EMEA Transport
27% Magma,
Cost of 43% Victrex
Polymer Transport: Clutch , transmission, Sharp
Sales
64% Solutions gears and fuel system components
71% used in automotive and aerospace
Electronics
22%
Electronics: FAB equipment,

acoustic film for mobile devices,
Medical
Americas 13%
mobile phone components. Solvay
32% 15%
Invibio:
Medical,
SG&A
Invibio BioMaterial = 21%
Healthcare business
18%
Spine Stryker, Panjin
77% Spine: Spinal implants Zimmer, Zhongrun &
Invibio
Biomaterial Synthes Jilin
Arthroscopy: Hip implants, knee
APAC Solutions 15%
treatment
R&D 22% 29%
12%
Arthroscopy
Target markets: Dental disc,
11% trauma and knee Evonik
5%
Other Target
6% markets
UK 3%
11%
Figure 66: Timeline of PEEK
PEEK
Victrex Solvay Evonik Chinese Producers
1978 PEEK invented by ICI
1993 Managament buyout forms Victrex
1995 Victrex Floated on LSE
1999 Victrex buys upstream BDF facility
2000 Victrex Launch Invibio
2005 Victrex buys upstream BDF facility Evonik Launch Jida JV (PEEK)
2006 Victrex Opens Technical Centre in Asia Buys Gharda (Indian PEEK business)
2008 Victrex opens 2nd PEEK facility Expands PEEK production
Jilin/Panjin enter the
2009 PEEK market
2015 Victrex launches 3rd facility Further de-bottlenecking
2017 New PEEK facility in US
Victrex (VCTX.L) 36
13 May 2015
VPS division (79% sales, 71% EBIT)

Victrex Polymer Division (VPS) provides PEEK material and semi-finished PEEK products
for industrial, transport, electronics and medical device markets.
Victrex aims to sustain its leading global market position through the addition of a third
production line, which will increase its capacity by 60% once fully ramped. Victrex aims to
maintain high returns/margins through a continued push into semi-finished PEEK
products. Victrex currently produces specialty film for audio applications in portable
electronics and some semi-finished goods for the oil and gas industry.
■ Volume: We forecast 9% volume growth through the forecast period. In the near term,
we believe oil & gas markets will constrain end-market demand for VPS; however,
robust demand from product penetration in electronics markets should more than
offset this. In the mid-term, we estimate that Victrex can continue to outpace its
weighted market growth (3-4%) by more than 5%, in line with its historical average.
■ Price: We forecast price pass-through of raw materials only.
■ Operating leverage: We forecast 200 bps of upside potential to margins as Victrex

ramps up new production capacity.
Figure 67: Divisional overview—Victrex Polymer Solutions

Victrex Polymer Solutions High performance materials for a diverse range of markets Basic Model Drivers Proxy
Revenue Volume Market + Penetration + De/re-stock
Growth rating Good - 10% CAGR above market driven by product penetration and
replacing metal in specialist applications
Price B2B negotiation with cost pass through
Stability rating Medium - leading position, dominant market share, high margin, net Mix Electronics lower selling price
cash but de/re-stocking cycles Production in UK, hedge c85% 12m
Cash rating Strong - High margin, robust cash generation
FX
forward
Divisional Overview PEEK (Engineering Plastic) material and semi finished products for Cost Base Variable (50%) Benzene and propylene derivatives
Industry/Energy, Automotive, Aerospace and Electronics markets
Fixed (50%) CPI / New investments costs
Capacity After new investements coming on stream Victrex will have 7kt
capacity, occupying c70% of the market. Global Demand 5-6kt/annum.
Market Risk New entrants into PEEK production
Revenue Drivers
Contractual Terms 15% spot, 85% contract (average 2.5 yrs duration) with pass through
raw materials 10%
Volume Volumes driven by Industrial market 34%, Transport 27%, Electronics Industrial
29% and Medical 10%
34%
Pricing Pricing is set on specification, application and raw materials pass Transport
through
29%
Electronics
Cost Base Fixed costs 50%, variable costs 50%
Largest component of raw materials is benzene derivatives (75% of Medical
raws) and propylene derivatives (25%)
Operating rates globally slightly below 75% declining to c60% by 27%
2016E.
Market Position Global leader in PEEK based polymer production with c70% of market
share. 4 major competitors inlcude Solvay, Evonik, Panjin Zhongrun and 300 50%
Jilin Zhongyan 40%
200
30%
Customers Airbus, Audi, Boeing, COMAC, General Motors, Magma, Sharp
20%
100
Strategy Maintain a global leader in PEEK based polymer production and 10%
accelerate growth by moving downstream towards end customers with 0 0%
new products and technologies. Keep capacity investments ahead of
demand
Victrex Polymer Solutions Sales
Regional Sales 43% EMEA, 32% Americas, 22% Asia-Pacic, 3% UK Victrex Polymer Solutions margins
Victrex (VCTX.L) 37
13 May 2015
Invibio division (21% sales, 29% EBIT)

Invibio provides PEEK-based semi-finished parts for the medical device market. The
division was launched in 2000 and has grown to over 20% of group sales. The core
markets at present is spine; this comprises fusion cages and rods used in spinal fusion
operations. Victrex is looking to develop markets further in arthroscopy, knee, trauma and
dental applications.
In the longer term, we forecast:
■ Volume: We forecast flat volumes in 2015 (destocking) and 10% volume growth
thereafter as Victrex continues to outpace the underlying medical technology market
(c.5%) by more than 5%.
■ Price: We forecast price pass-through of raw materials only.
■ Operating leverage: We forecast flat EBIT margin as volumes increase in the spine
business and increasing capex is invested into the division.
Figure 68: Divisional overview—Invibio

Invibio Biomaterial Solutions PEEK based polymer solutions to the implantable medical device market Basic Model Drivers Proxy
Revenue Volume Driven by medical market demand/ de/re-stock
Growth rating Good - >10% CAGR - expanding the business into new applications Price B2B negociation
Stability rating Medium - Risk from regulatory approvals, Government policy risk, de/re-stocking Mix
cycles FX UK production, Hedge c85% 12m fwd
Cash rating
Cost Base Variable (50%) Benzene and propylene derivatives
Divisional Overview Invibio is a market leader in providing versatile and high performance PEEK based Fixed (50%) CPI / New investments costs
polymer solutions for the medical market
Products Predominantly focused around implantable medical devices. Spine remains their Market Risk New entrants into medical PEEK production, regulatory approvals
core market, but arthroscopy, knee, dental and trauma are developing areas.
14%
Revenue Drivers
10% Spine
Contractual Terms B2B negotiated
Volume Volumes driven by Medical industry demand and customer acceptance Arthroscopy
Pricing Pricing is set based on application/value add Target markets
75%
Cost Base Fixed costs 50%, variable costs 50%
Largest component of raw materials is benzene derivatives (75% of raws) and
propylene derivatives (25%)
80 65%
Market Position Market leader - only PEEK producer AND semi-finished manufacturer 60
Barrier to entry Regulatory hurdles and proof of performance 60%
40
Customers Medical and healhcare business 55%
20
Strategy Focus on Spine market and key emerging economies particularly China. Further 0 50%
acceleration of growth in new areas eg dental, trauma and knee.
Regional Sales 65% Americas, 27% EMEA, 7% Asia-Pacic Invibio Biomaterial Solutions Sales Invibio Biomaterial Solutions margins
Victrex (VCTX.L) 38
13 May 2015
Profit & loss forecasts

Figure 69: P&L statement (£m)
P&L (£m) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Revenue 122.5 131.0 141.1 103.8 189.5 215.8 219.8 221.9 252.6 254.7 271.8 294.5 315.9
% growth 21% 7% 8% -26% 83% 14% 2% 1% 14% 1% 7% 8% 7%
Cost of Goods Sold (46.7) (46.6) (49.5) (39.3) (68.9) (69.4) (74.1) (74.1) (89.4) (91.7) (97.9) (106.0) (113.7)
COGS as % of Sales 38.1% 35.5% 35.1% 37.9% 36.4% 32.2% 33.7% 33.4% 35.4% 36% 36% 36% 36%
Gross Profit 75.8 84.5 91.6 64.5 120.6 146.4 145.7 147.8 163.2 163.0 174.0 188.4 202.2
Gross margin % 61.9% 64.5% 64.9% 62.1% 63.6% 67.8% 66.3% 66.6% 64.6% 64.0% 64.0% 64.0% 64.0%
Sales, marketing & administration expenses (overheaads

(30.7)inc D&A)
(33.2) (37.0) (39.4) (45.7) (52.6) (51.7) (53.8) (61.0) (57.7) (62.5) (65.6) (69.6)
Overheads as % of Sales 25.1% 25.4% 26.2% 38.0% 24.1% 24.4% 23.5% 24.2% 24.1% 23% 23% 22% 22%
EBITDA 61.6 33.4 83.4 102.6 103.6 103.5 112.2 117.3 125.4 137.7 148.1
EBITDA margin % 43.6% 32.2% 44.0% 47.5% 47.1% 46.6% 44.4% 46.1% 46.1% 46.8% 46.9%
% growth -45.8% 149.8% 23.0% 1.0% -0.1% 8.4% 4.6% 6.9% 9.8% 7.5%
Depreciation & Amortization 7.0 8.3 8.5 8.8 9.6 9.5 10.0 12.0 14.0 14.8 15.4
% growth 18.5% 2.4% 3.5% 9.1% -1.0% 5.3% 20.0% 16.7% 6.0% 3.9%
Operating profit 45.1 51.2 54.6 25.1 74.9 93.8 94.0 94.0 102.2 105.3 111.4 122.8 132.6
EBIT margin % 36.8% 39.1% 38.7% 24.2% 39.5% 43.5% 42.8% 42.4% 40.5% 41.4% 41.0% 41.7% 42.0%
% growth 31.6% 13.7% 6.5% -54.0% 198.5% 25.2% 0.2% 0.0% 8.7% 3.0% 5.8% 10.2% 8.0%
Victrex polymer solutions 41.1 6.3 48.3 66.8 68.5 68.6 77.2 79.5 82.7 90.0 95.8
Invibio Biomaterial solutions 14.5 20.0 28.1 30.3 29.2 29.3 29.6 30.4 33.3 37.4 41.4
Unallocated central costs (1.0) (1.2) (1.5) (3.3) (3.7) (3.9) (4.6) (4.6) (4.6) (4.6) (4.6)
TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE
EBITDA (£/kg) 21.6 32.9 35.9 35.7 35.4 31.6 29.6 29.7 30.0 29.7
EBIT (£/kg) 16.2 29.5 32.8 32.4 32.2 28.8 26.6 26.4 26.8 26.6
Financial income 0.7 0.7 0.6 0.1 0.1 0.5 0.6 0.8 0.6 0.6 0.6 0.6 0.6
2.5% 0.5% 0.1% 0.7% 0.7% 0.9% 0.7% 1.2% 1.4% 1.4% 1.3%
Financial expenses (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.2) (0.1) (0.1) (0.1) (0.1) (0.1)
#DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Net financial income 0.6 0.6 0.5 0.0 0.0 0.4 0.5 0.6 0.5 0.5 0.5 0.5 0.5
Profit before tax 46.1 52.0 55.0 25.1 74.9 94.2 94.5 94.6 102.7 105.8 111.9 123.3 133.1
Tax (14.3) (15.6) (16.0) (7.3) (20.9) (23.0) (22.6) (21.7) (22.5) (23.3) (24.6) (27.1) (29.3)
Tax on exceptionals 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Income tax expense (14.3) (15.6) (16.0) (7.3) (20.9) (23.0) (22.6) (21.7) (22.5) (23.3) (24.6) (27.1) (29.3)
Effective tax rate % 31.0% 30.0% 29.0% 29.0% 27.9% 24.4% 23.9% 22.9% 21.9% 22.0% 22.0% 22.0% 22.0%
Profit to owners of the parent 31.8 36.4 39.1 17.8 54.0 71.2 71.9 72.9 80.2 82.5 87.3 96.2 103.8
Per share Data:
Weighted number of shares (mn):

Basic 81.7 82.3 82.9 83.3 83.9 84.3 84.8 85.3 85.8 86.3 86.8
Diluted 82.4 82.7 83.8 84.3 84.5 84.7 85.1 85.5 86.0 86.5 87.0
Change 0.6 0.6 0.4 0.6 0.4 0.5 0.5 0.5 0.5 0.5
0.4 1.1 0.5 0.2 0.2 0.3 0.4 0.5 0.5 0.5
EPS
Basic (p) 39.4 44.9 47.8 21.7 65.1 85.3 85.7 86.5 94.6 96.8 101.8 111.5 119.7
Diluted (p) 38.9 44.4 47.4 21.6 64.4 84.4 85.1 86.0 94.3 96.6 101.6 111.3 119.4
Basic EPS Growth % 34.5% 14.0% 6.5% -54.6% 200.0% 31.0% 0.5% 0.9% 9.4% 2.3% 5.2% 9.5% 7.3%
Diluted EPS Growth % 34.1% 14.1% 6.8% -54.4% 198.1% 31.1% 0.8% 1.1% 9.6% 2.4% 5.2% 9.5% 7.3%
DPS (ordinary)
Interim DPS as % of total ordinary 29.2% 27% 28% 27% 26% 25% 24% 24% 25% 25.2% 25.2% 25.2% 25.2%
Interim (p) 4.2 4.7 5.2 5.2 6.4 8.0 9.0 10.4 11.4 12.2 12.8 14.0 15.1
Final (p) 10.2 12.6 13.1 14.0 18.6 24.5 28.4 32.7 33.8 36.1 38.0 41.6 44.6
Special (p) 50.0 50.0 40.0 40.0 40.0 40.0
Total ordinary DPS (p) 14.4 17.3 18.3 19.2 25.0 32.5 37.4 43.0 45.2 48.3 50.8 55.6 59.7
Total DPS (p) (Ordinary + Special) 18.3 19.2 75.0 32.5 37.4 43.0 95.2 88.3 90.8 95.6 99.7
Victrex (VCTX.L) 39
13 May 2015
Balance sheet forecasts

Figure 70: Balance sheet (£ mn)
Balance Sheet (£m) 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Assets
Non-current assets
Property, plant & equipment 112.8 129.9 129.5 125.3 125.5 143.6 175.7 227.6 257.6 275.6 288.8 301.3
Intangible assets 11.5 10.9 10.3 10.1 10.1 10.1 10.1 10.1 10.1 10.1 10.1 10.1
Investments 0.0 0.0 0.0 0.0
Deferred tax assets 5.8 8.1 7.1 9.7 9.0 7.1 6.3 7.1 7.1 7.1 7.1 7.1
Other receivables 0.0 0.0 0.0 0.0
Japanese JV Investment 0.0 0.0 0.0 0.0
Total non-current assets 130.0 148.9 146.8 145.1 144.6 160.8 192.1 244.8 274.8 292.8 306.0 318.5
Current assets
Inventories 27.9 31.7 37.2 34.5 45.0 48.6 51.1 44.2 56.2 60.0 65.0 69.8
Current income tax assets 0.4 0.2 1.0 0.8 0.8 1.6 1.2 0.7 0.7 0.7 0.7 0.7
Trade & other receivables 15.9 18.2 15.7 19.1 24.2 26.8 26.5 33.0 31.6 33.7 36.5 39.2
Derivative financial instruments 2.1 0.9 1.7 2.2 0.9 4.0 5.1 4.0 4.0 4.0 4.0 4.0
Cash & cash equivalents 17.1 23.5 18.6 77.3 72.3 83.9 91.6 89.6 52.1 42.0 41.7 45.3
Total current assets 63.4 74.5 74.1 133.9 143.2 164.9 175.5 171.5 144.6 140.4 147.9 158.9
Total assets 193.5 223.4 221.0 279.0 287.8 325.7 367.6 416.3 419.4 433.2 453.9 477.5
Liabilities
Non-current liabilities
Deferred tax liabilities (12.7) (14.7) (15.6) (15.7) (14.8) (14.0) (15.6) (17.8) (17.8) (17.8) (17.8) (17.8)
Retirement benefit obligations (7.1) (6.4) (10.8) (9.5) (6.2) (4.0) (3.6) (7.8) (7.8) (7.8) (7.8) (7.8)
Total non-current liabilities (19.8) (21.0) (26.4) (25.2) (21.0) (18.0) (19.2) (25.6) (25.6) (25.6) (25.6) (25.6)
Current liabilities
Derivative financial instruments (1.5) (10.5) (6.3) (2.3) (3.2) (0.3) (0.4) (2.3) (2.3) (2.3) (2.3) (2.3)
Short term borrowings (3.4) 0.0 0.0 0.0 0.0
Current income tax liabilities (11.1) (8.3) (5.4) (15.1) (12.5) (13.0) (10.7) (7.9) (7.9) (7.9) (7.9) (7.9)
Trade & other payables (16.2) (16.8) (14.6) (25.1) (29.5) (23.3) (23.6) (27.1) (28.6) (30.5) (33.1) (35.5)
Total current liabilities (32.2) (35.5) (26.3) (42.5) (45.2) (36.6) (34.7) (37.3) (38.8) (40.7) (43.3) (45.7)
Total liabilities (52.0) (56.6) (52.7) (67.7) (66.2) (54.6) (53.9) (62.9) (64.4) (66.3) (68.9) (71.3)
Net assets 141.5 166.8 168.2 211.3 221.6 271.1 313.7 353.4 355.0 366.9 385.0 406.2
Equity
Share capital 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.9 0.9 0.9 0.9 0.9
Share premium 18.1 20.7 21.7 24.3 27.1 29.1 31.3 34.4 34.4 34.4 34.4 34.4
Translation reserve (0.6) 0.5 2.4 2.6 3.0 2.0 1.5 0.8 0.8 0.8 0.8 0.8
Hedging reserve 0.0 (5.6) (1.7) 0.1 (1.6) 2.1 3.3 0.9 0.9 0.9 0.9 0.9
Retained earnings 123.1 150.3 145.0 183.5 192.3 237.1 276.8 316.4 318.0 329.9 348.0 369.2
Total equity attributable to owners 141.5 166.8 168.2 211.3 221.6 271.1 313.7 353.4 355.0 366.9 385.0 406.2
Victrex (VCTX.L) 40
13 May 2015
Figure 71: Working capital, PPE and balance sheet ratios (£m)
Working Capital 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
NWC 27.5 33.1 38.2 28.5 39.7 52.1 54.0 50.1 59.2 63.2 68.4 73.4
NWC as % of sales 21% 23% 37% 15% 18% 24% 24% 20% 23% 23% 23% 23%
Impact 13.1 5.5 5.2 -9.7 11.2 12.4 1.9 -3.9 9.1 4.0 5.3 5.0
Inventories (£mn)
Cost of sales 46.6 49.5 39.3 68.9 69.4 74.1 74.1 89.4 91.7 97.9 106.0 113.7
as % of COGS 60% 64% 95% 50% 65% 66% 69% 49% 61% 61% 61% 61%
Impact 4.9 3.8 5.5 -2.7 10.5 3.6 2.5 -6.9 12.0 3.8 5.0 4.7
At the year end 27.9 31.7 37.2 34.5 45.0 48.6 51.1 44.2 56.2 60.0 65.0 69.8
Trade debtors (£mn)
Sales 131.0 141.1 103.8 189.5 215.8 219.8 221.9 252.6 254.7 271.8 294.5 315.9
as % of COGS 12% 13% 15% 10% 11% 12% 12% 13% 12% 12% 12% 12%
Impact 3.7 2.3 -2.5 3.4 5.1 2.6 -0.3 6.5 -1.4 2.1 2.8 2.7
At the year end 15.9 18.2 15.7 19.1 24.2 26.8 26.5 33.0 31.6 33.7 36.5 39.2
Trade creditors (£mn)
Cost of sales 46.6 49.5 39.3 68.9 69.4 74.1 74.1 89.4 91.7 97.9 106.0 113.7
as % of COGS 35% 34% 37% 36% 43% 31% 32% 30% 31% 31% 31% 31%
Impact -4.5 0.6 -2.2 10.5 4.4 -6.2 0.3 3.5 1.5 1.9 2.5 2.4
At the year end 16.2 16.8 14.6 25.1 29.5 23.3 23.6 27.1 28.6 30.5 33.1 35.5
Property, plant and equipment 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
PPE at the beginning of the period 112.8 129.9 129.5 125.3 125.5 143.6 175.7 227.6 257.6 275.6 288.8
Capex 25.0 7.5 4.5 9.0 27.0 40.7 65.6 42.0 32.0 28.0 28.0
Capex to sales (%) 0% 18% 7% 2% 4% 12% 18% 26% 16% 12% 10% 9%
Capex to D&A 3.5 0.9 0.5 1.0 2.8 4.3 6.6 3.5 2.3 1.9 1.8
Group
Maintenance 10.0 12.0 14.0 16.0 18.0 20.0 20.0 20.0 20.0 20.0 20.0
Growth 15.0 -4.5 -9.5 -7.0 9.0 20.7 45.6 22.0 12.0 8.0 8.0
Total 25.0 7.5 4.5 9.0 27.0 40.7 65.6 42.0 32.0 28.0 28.0
Check TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE
D&A Total 6.2 7.1 8.4 8.5 8.8 9.6 9.5 10.0 12.0 14.0 14.8 15.4
Acquisitions/Disposal 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
PPE at the end of the period 112.8 129.9 129.5 125.3 125.5 143.6 175.7 227.6 257.6 275.6 288.8 301.3
Metrics 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Total ST/LT Debt -3.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net debt / (Net cash position) -20.5 -23.5 -18.6 -77.3 -72.3 -83.9 -91.6 -89.6 -52.1 -42.0 -41.7 -45.3
Net debt (inc Pensions) -13.4 -17.2 -7.7 -67.8 -66.1 -79.9 -88.0 -81.8 -44.3 -34.2 -33.9 -37.5
Company Net Debt / (Net cash) -20.5 -23.5 -18.6 -77.3 -72.3 -83.9 -91.6 -89.6 -52.1 -42.0 -41.7 -45.3
Capital employed 143.3 149.7 134.0 149.3 187.2 222.1 263.8 302.9 324.9 343.3 360.9
EBITDA (adj) 61.6 33.4 83.4 102.6 103.6 103.5 112.2 117.3 125.4 137.7 148.1
Net Debt / EBITDA (0.4) (0.6) (0.9) (0.7) (0.8) (0.9) (0.8) (0.4) (0.3) (0.3) (0.3)
ND (inc Pensions)/EBITDA (0.3) (0.2) (0.8) (0.6) (0.8) (0.9) (0.7) (0.4) (0.3) (0.2) (0.3)
Equity ratio (equity / total liabilities) 295% 319% 312% 335% 497% 582% 562% 551% 553% 559% 570%
Book Gearing (Net Debt / Equity) -14% -11% -37% -33% -31% -29% -25% -15% -11% -11% -11%
Quick ratio 90% 105% 84% 107% 148% 156% 130% 144% 148% 154% 159%
Current ratio 132% 141% 198% 216% 302% 326% 273% 225% 212% 215% 223%
Return on capital (annualized):

RoA (%) 17% 8% 19% 25% 22% 20% 19% 20% 20% 21% 22%
RoE(%) 23% 11% 26% 32% 27% 23% 23% 23% 24% 25% 26%
RoCE (%) - (EBIT, Adjusted) 38% 17% 56% 63% 50% 42% 39% 35% 34% 36% 37%
RoCE (%) - (Company Definition) 23.4% 10.6% 25.6% 32.1% 26.5% 23.2% 22.7% 23.2% 23.8% 25.0% 25.6%
Assets Turnover 0.7 0.6 0.6 0.9 1.0 0.8 0.7 0.7 0.7 0.7 0.8 0.8
EBITDA margin (%) 44% 32% 44% 48% 47% 47% 44% 46% 46% 47% 47%
NAV per Share (cents) (Book / Equity value per share) 202.5 203.4 252.0 262.8 320.9 370.2 415.5 415.4 426.8 445.3 467.1
EV / NAV 9.7 9.6 7.8 7.5 6.1 5.3 4.7 4.7 4.6 4.4 4.2
Victrex (VCTX.L) 41
13 May 2015
Cash flow forecasts

Figure 72: Cash flow statement and free cash flow (£mn)
Cash Flow (£m) 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Profit after tax 39.1 17.8 54.0 71.2 71.9 72.9 80.2 82.5 87.3 96.2 103.8
Income tax expense 16.0 7.3 20.9 23.0 22.6 21.7 22.5 23.3 24.6 27.1 29.3
Net financing income (0.5) (0.0) 0.0 (0.4) (0.5) (0.6) (0.5) (0.5) (0.5) (0.5) (0.5)
Dividends received from subsidiaries
Operating profit 54.6 25.1 74.9 93.8 94.0 94.0 102.2 105.3 111.4 122.8 132.6
Adjustments for:
Depreciation 7.1 8.4 8.5 8.8 9.6 9.5 10.0 12.0 14.0 14.8 15.4
Amortisation
Loss on disposal of non-current assets 0.6 0.6 0.2 0.3 1.3
Increase in inventories (3.8) (5.5) 2.9 (9.7) (4.3) (3.6) 6.7 (12.0) (3.8) (5.0) (4.7)
Decrease/(increase) in receivables (2.3) 2.5 (3.2) (5.5) (2.6) 1.3 (6.5) 1.4 (2.1) (2.8) (2.7)
Decrease/(increase) in payables 1.5 (2.7) 10.2 4.5 (6.5) (1.3) 4.5 1.5 1.9 2.5 2.4
Equity-settled share-based payment transactions 1.6 0.7 1.8 1.6 1.7 1.3 1.1
Change in fair value of derivative financial instruments 2.5 0.4 (2.2) (0.1) (1.1) 0.5 (0.1)
Retirement benefit obligations charge less contributions 0.1 (2.8) (2.2) (2.2) (0.9) (1.1) (0.9) 0.0 0.0 0.0 0.0
Cash generated from operations 61.9 26.8 90.9 91.2 89.9 100.9 118.3 108.2 121.4 132.4 143.1
Net financing income received 0.4 0.0 0.0 0.4 0.5 0.8 0.6 0.5 0.5 0.5 0.5
Tax paid (15.7) (11.2) (13.7) (25.7) (24.4) (21.7) (21.1) (23.3) (24.6) (27.1) (29.3)
Net cash flow from operating activities 46.6 15.7 77.2 65.9 66.0 80.0 97.8 85.4 97.3 105.8 114.3
Cash flows from investing activities

Acquisition of property, plant & equipment (25.0) (7.5) (4.5) (9.0) (27.0) (40.7) (65.6) (42.0) (32.0) (28.0) (28.0)
Dividends received
Acquisition/Disposal of business 0.0 0.0 0.0 0.0
Net cash flow from investing activities (25.0) (7.5) (4.5) (9.0) (27.0) (40.7) (65.6) (42.0) (32.0) (28.0) (28.0)
Cash flow from financing activities

Proceeds from issue of ordinary shares exercised under option 2.6 0.9 2.6 2.8 2.0 2.2 3.2 0.0 0.0 0.0 0.0
Purchase of own shares held (0.9) (1.0) (1.0) (0.8) (0.9) 0.0 0.0 0.0 0.0 0.0
Decrease in short-term borrowings (4.2)
Dividends paid (14.5) (15.1) (16.9) (63.8) (28.0) (32.7) (37.3) (80.9) (75.5) (78.0) (82.7)
Net cash flow from financing activities (17.0) (15.1) (14.3) (62.0) (26.8) (31.4) (34.1) (80.9) (75.5) (78.0) (82.7)
Net increase in cash & cash equivalents 4.5 (6.9) 58.4 (5.1) 12.2 7.9 (1.9) (37.5) (10.1) (0.2) 3.6
Effect of exchange rate fluctuations on cash held 1.9 1.9 0.3 0.1 (0.6) (0.2) (0.1)
Cash & cash equivalents at beginning of year 17.1 23.5 18.6 77.3 72.3 83.9 91.6 89.6 52.1 42.0 41.7
Cash & cash equivalents at end of year 23.5 18.6 77.3 72.3 83.9 91.6 89.6 52.1 42.0 41.7 45.3
Free Cash Flow
Operating Income (reported) 54.6 25.1 74.9 93.8 94.0 94.0 102 105 111 123 133
Tax (15.7) (11.2) (13.7) (25.7) (24.4) (21.7) (21.1) (23.3) (24.6) (27.1) (29.3)
D&A 7.1 8.4 8.5 8.8 9.6 9.5 10.0 12.0 14.0 14.8 15.4
Purchase of property, plant and equipment & intangibles (25.0) (7.5) (4.5) (9.0) (27.0) (40.7) (65.6) (42.0) (32.0) (28.0) (28.0)
Proceeds from sale of property, plant and equipment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Change in Working Capital (4.7) (5.7) 9.9 (10.7) (13.4) (3.6) 4.7 (9.1) (4.0) (5.3) (5.0)
Free cash flow to the Firm 16.3 9.2 75.1 57.2 38.8 37.5 30.2 42.9 64.8 77.3 85.8
Finance Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free Cash Flow to Equity 16.3 9.2 75.1 57.2 38.8 37.5 30 43 65 77 86
FCFE to Sales 12% 9% 40% 27% 18% 17% 12% 17% 24% 26% 27%
Dividend 15 16 63 27 32 36 81 75 78 83 87
FCF 1.2 (6.7) 12.2 29.8 7.2 1.1 -51 -33 -13 -5 -1
Share Count 82 83 84 84 84 85 85 85 86 86 87
FCFF/Share 19.8 11.1 89.6 67.8 45.9 44.3 35.5 50.2 75.4 89.4 98.6
FCFE/Share 19.8 11.1 89.6 67.8 45.9 44.3 35.5 50.2 75.4 89.4 98.6
Price ($ cent) 1,961 1,961 1,961 1,961 1,961
FCFF Yield 1.8% 2.6% 3.8% 4.6% 5.0%

FCFE yield 1.8% 2.6% 3.8% 4.6% 5.0%
Victrex (VCTX.L) 42
13 May 2015
Appendix
Management
Figure 73: Management
Position Name Background
Chairman Larry Pentz Larry Pentz was appointed to the board in 2008 and became chairman in 2014. Larry has over 30 years
of experience within multi-national corporations in a variety of operational and general management
positions. Larry has been instrumental in the acquisition and integration of multiple catalyst and chemical
companies for Johnson Matthey Plc, and was formerly executive director responsible for Emission
Control Technologies of Johnson Matthey Plc. Larry is currently an executive director of Johnson Matthey
Emission Control Technologies.
Chief Executive David Hummel David Hummel assumed responsibility for VICTREX PEEK worldwide in 1992 and has more than 25
years of experience of the global high performance polymer industry. Formerly with Diamond Shamrock,
GE Plastics and ICI, David was appointed to the board in 1993 following his leading of the successful
MBO of Victrex from ICI.
Group Finance Director Louisa Burdett Louisa Burdett was appointed as group finance director in February 2014. Louisa formerly held the
position of chief financial officer at Optos plc. Before this, Louisa was chief financial officer at the
Financial Times Group from 2008 to 2012. Louisa has also held roles at Chep Europe, a division of
Brambles Ltd, the Australian listed pallet distribution company, GE Healthcare and GlaxoSmithKline plc.
Louisa has also worked as an M&A consultant at Charterhouse Bank and spent four years at KPMG in
London.
Executive Director of VPS Tim Cooper Tim Cooper was appointed to the board in October 2012, and continues in the position of managing
director of Victrex Polymer Solutions, a position Tim has held since joining Victrex in January 2010. Tim
has over 30 years of international business management and commercial experience, having held senior
leadership positions in a number of industries. Before joining the Victrex business, Tim was with Umeco
Plc, initially as managing director of Aerovac Systems Ltd, but later becoming group managing director of
Umeco Composites Process Materials. He has been managing director of Tellermate Plc and of Avery
Berkel Ltd, having developed his international career with GEC, BP and Land Rover.
Executive Director of Invibio Martin Court Martin was appointed to the board in April 2015, and continues in the position of managing director of
Invibio, Victrex's medical business, a position Martin has held since joining Victrex in February 2013.
Martin has significant proven international experience in the medical and high performance materials &
chemicals industries, including with Cytec Industries, and in a number of senior roles at both ICI and
UCB. He is an INSEAD alumni, holds a doctorate in the field of surface chemistry and fracture mechanics
and a BSc (Eng) degree in mineral technology from Imperial College of Science and Technology.
Shareholder structure
Victrex (VCTX.L) has 100% free float. The list of the top holdings is highlighted in the table
below:
Figure 74: Major shareholders

Shareholders % Holding
Blackrock 9.9%
Mondrian 6.5%
T.Rowe Price 5.7%
Schroder Investment Management 4.0%
Hummel (David Richard) 3.8%
Baillie Gifford & Co 3.8%
Legal & General 3.7%
Aberdeen Asset Management 3.6%
Montanaro Asset Management 3.1%
Royal London Asset Management 3.0%
Kames Capital 3.0%
M&G Investment Management 2.9%
Source: Reuters – Thomson One
Victrex (VCTX.L) 43
13 May 2015
Properties of ultra-high performance plastics

Figure 75: Properties of ultra-high performance plastics
Property Units Description PEEK PAI PI PBI PPS PES PSU POM
Density g/cm3 Weight per volume 1.32-1.51 1.41-1.61 1.33-1.65 1.3 1.34-1.65 1.37 1.24-1.56 1.42-1.56
Compressive Mpa Squeezing force at which 120-300 350
Strength material fails
Elastic Modulus Gpa Stiffness (rigid is high) 4-24 4-8.3 3.7-20 5.9 2.5-2.7
Elongation at % Stretch up to breaking point 1.3-50 2.5-10 1.8-6 3 2.5-20 40-80 2-75 7-60%
break
Flexural Strength MPa Bendiness 160-345 160-205 170-330 220 129 2.7-14 2.8-4.3
Glass Transition C Temperature where the 145 275 260 400 220
Temperature material changes ductility
Heat Deflection C Temperature where heat will 160-316 430 202
Temperature flex the material
Melting Onset C Temperature of melting 340 None 290 180
Strength to kN-m/kg Tensile Strength vs Density 70-161 69-102 88-152 123 63-136 61-66 56-121 43-68
Weight ratio
Tensile strength MPa Force where a cross section of 92-230 100-160 120-215 160 85-190 84-90 70-160 60-70
(ultimate) material ruptures
Water Absorption % Increase in weight after 0.22-0.5 1.5-1.7 0.4 0.1 0.37 0.5
at Saturation immersion in water
Thermal um/m-K Change in dimension per 15-48 9-31 23 53
Expansion temperature change
Limiting Oxygen % Minimum oxygen concentration 38 43 34 58
Index to support burning (22% in
ambient air)
Price Point ($/kg) 135-150 40-70 10-14 1400 68-85 40 18-25

Source: Makeitfrom.com, Credit Suisse research
Victrex (VCTX.L) 44
13 May 2015
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insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
The table below highlights the Credit Suisse PEERS relationship mapping for Victrex. The
table highlights key competitors and customers including: relevancy, trading and analysts
ratings.
Figure 76: PEERs
Source: Credit Suisse PEERs
Victrex (VCTX.L) 45
13 May 2015
Companies Mentioned (Price as of 11-May-2015)

Airbus Group (AIR.PA, €62.09)
BASF (BASFn.DE, €87.54)
Boeing (BA.N, $145.89)
Croda International (CRDA.L, 2851.0p)
Daimler (DAIGn.DE, €88.06)
Evonik (EVKn.DE, €33.3)
General Motors Corp. (GM.N, $35.22)
Solvay (SOLB.BR, €129.05)
Stryker Corporation (SYK.N, $94.36)
Victrex (VCTX.L, 1994.0p, OUTPERFORM, TP 2400.0p)
Zimmer Holdings (ZMH.N, $113.18)
Disclosure Appendix
Important Global Disclosures
Mathew Waugh and Chris Counihan, each certify, with respect to the companies or securities that the individual analyzes, that (1) the views
expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her
compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's
total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which
consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and
Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total
return relative to the analyst's coverage universe which consists of all companies cove red by the analyst within the relevant sector, with Outperforms representing the
most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings
are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd Oc tober 2012 U.S. and Canadian
ratings were based on (1) a stock’s absolute total return potential to its current share price and (2 ) the relative attractiveness of a stock’s total return potential within
an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and
a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-
15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanes e ratings were based on a stock’s total return
relative to the average total return of the relevant country or regional benchmark.
Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,
including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other
circumstances.
Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24
months or the analyst expects significant volatility going forward.
Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or
valuation of the sector* relative to the group’s historic fundamentals and/or valuation:
Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.
Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.
Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.
*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sector s.
Victrex (VCTX.L) 46
13 May 2015
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)
Outperform/Buy* 43% (53% banking clients)
Neutral/Hold* 38% (50% banking clients)
Underperform/Sell* 16% (43% banking clients)
Restricted 3%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely
correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to
definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other indivi dual factors.
Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the
market that may have a material impact on the research views or opinions stated herein.
Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer
to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-
analytics/disclaimer/managing_conflicts_disclaimer.html
Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot
be used, by any taxpayer for the purposes of avoiding any penalties.
Price Target: (12 months) for Victrex (VCTX.L)

Method: Our Victrex target price is £24/share - this is the average of our SOTP (£22.53) and DCF (£25.15). We value Victrex on 15.6x 2015
EBITDA and 14.6x 2016 EBITDA (a 50% premium to peers). Our DCF valuation is based on a WACC of 7.7% and 10% growth rate in the
mid-term (12.5 years).
Risk: Key risks to our target price include: 1) de/re stocking cycles, 2) impact from Oil & Gas markets, 3) Currency, 4) Change to Victrex's
competitive position.
Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the
target price method and risk sections.
See the Companies Mentioned section for full company names
The subject company (SOLB.BR, AIR.PA, BA.N, GM.N, SYK.N, ZMH.N) currently is, or was during the 12-month period preceding the date of
distribution of this report, a client of Credit Suisse.
Credit Suisse provided investment banking services to the subject company (SOLB.BR, BA.N, GM.N, ZMH.N) within the past 12 months.
Credit Suisse provided non-investment banking services to the subject company (AIR.PA, GM.N) within the past 12 months
Credit Suisse has managed or co-managed a public offering of securities for the subject company (BA.N, GM.N, ZMH.N) within the past 12 months.
Credit Suisse has received investment banking related compensation from the subject company (SOLB.BR, BA.N, GM.N, ZMH.N) within the past 12
months
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (VCTX.L, SOLB.BR,
CRDA.L, AIR.PA, BA.N, GM.N, SYK.N, ZMH.N) within the next 3 months.
Credit Suisse has received compensation for products and services other than investment banking services from the subject company (AIR.PA,
GM.N) within the past 12 months
As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (CRDA.L, BASFn.DE).
Credit Suisse has a material conflict of interest with the subject company (SOLB.BR) . CS is acting as exclusive financial advisor to Solvay SA on its
Eco Services sale to affiliates of CCMP Capital Advisors LLC
Credit Suisse has a material conflict of interest with the subject company (ZMH.N) . Credit Suisse Securities (USA) LLC is acting as financial advisor
to Zimmer Holdings Inc. (NYSE and SIX: ZMH on its announced acquisition of Biomet Inc.
For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-
suisse.com/disclosures or call +1 (877) 291-2683.
Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (VCTX.L, SOLB.BR, CRDA.L,
EVKn.DE, AIR.PA, BA.N, GM.N, SYK.N, ZMH.N, BASFn.DE, DAIGn.DE) within the past 12 months
Victrex (VCTX.L) 47
13 May 2015
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;
SVS--Subordinate Voting Shares.
Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not
contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.
For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-
suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.
The following disclosed European company/ies have estimates that comply with IFRS: (SOLB.BR, CRDA.L, AIR.PA, BASFn.DE, DAIGn.DE).
Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (SOLB.BR, BA.N, GM.N,
ZMH.N, BASFn.DE) within the past 3 years.
As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
Principal is not guaranteed in the case of equities because equity prices are variable.
Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.
To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important
disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research
analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the
NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
research analyst account.
Credit Suisse Securities (Europe) Limited ............................................................................... Joseph Bradley ; Mathew Waugh ; Chris Counihan
Important Credit Suisse HOLT Disclosures

With respect to the analysis in this report based on the Credit Suisse HOLT methodology, Credit Suisse certifies that (1) the views expressed in this
report accurately reflect the Credit Suisse HOLT methodology and (2) no part of the Firm’s compensation was, is, or will be directly related to the
specific views disclosed in this report.
The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary
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all the companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of
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The adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national
borders. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a
user then may adjust the default variables to produce alternative scenarios, any of which could occur.
Additional information about the Credit Suisse HOLT methodology is available on request.
The Credit Suisse HOLT methodology does not assign a price target to a security. The default scenario that is produced by the Credit Suisse HOLT
valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The
default variable may also be adjusted to produce alternative warranted prices, any of which could occur.
CFROI®, HOLT, HOLTfolio, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or service marks or registered
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Victrex (VCTX.L) 48
13 May 2015
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13 May 2015

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®

Balance sheet (£ m) 09/14A 09/15E 09/16E 09/17E

Market Price ($/kg)

0 ...but this should improve as Capex spend 5 0.05

ROCE Production to PPE EV/Capacity 2 Yr FWD

- Sustainable product and company barriers to entry

SOTP £23/share Strong pipeline of

- PEEK to remain best in class

Resilient pricing despite

Source: Credit Suisse research

Bull & Bear

Penetration of electronics run Penetration of electronics run Penetration of electronics run

Real Pricing -4.0% Down 2% 0.0% Flat 4.0% Up 2%

2015 EBITDA (mn) £100 £117 £143

Source: Credit Suisse estimates

Competition growing, but market growing faster

Figure 9: Estimated supply/demand analysis for PEEK

Victrex moat remains wide

Market position sustainable

Figure 10: Performance (strength-to-weight) versus price

Downside risk overdone

Figure 12: Target price valuation

■ We estimate the probability-weighted valuation range is skewed to the upside. Our

Figure 13: Valuation sensitivities on an range of measures

Figure 14: Catalyst timeline

H1 2015 Interim Results 19/05/2015

Credit Suisse vs. market & earnings

■ Average 9% growth per annum in volumes. This is 5% ahead of underlying market

■ Sustained pricing power despite additional competitor supply additions. We believe

■ Successful execution on c.1/2 of the growth pipeline.

Figure 15: Victrex forecasts—Credit Suisse vs. consensus

Figure 16 to Figure 18 outline our 2014/15 earnings bridge; specifically we note:

■ Currency: We forecast a £7.5m EBITDA headwind in 2015 due to hedging in place

■ Electronics penetration: We estimate additional electronics volumes of 350 tonnes

■ Organic growth of c.10%: We estimate the underlying business should continue to

Figure 16: 2014A/15E earnings bridge (£m)

2015E EBITDA 117

Organic growth 9.9%

Underlying market impacts

2015E volume 3,958 11%

Implied growth above market 436 12%

Figure 19: Credit Suisse estimated sensitivities for Victrex

Currency (excluding hedging)

Figure 20: Target price valuation

Figure 21: SOTP valuation

We attribute a 50% premium to key peers.

Figure 22: Peers multiples

Evonik 8.1 8.3

■ 70% ROIC premium,

■ 70% CFROI premium to peers' average,

■ 10% growth premium, and

■ Greater total dividend/FCF yield.

Figure 23: Warranted premium for Victrex multiple

Victrex 27% 15% 8% 4.3% 2.5%

Premium/Discount 73% 67% 10% 52% 229%

Implied Multiple 14.8

Figure 24: DCF valuation (£m)

No of shares (m) 85.1

Derived Value per share (GBp) 2,515

Turnover 254.7 271.8 294.5 315.9 347.5 1,066.0

Discount rate (WACC) (%) 7.7

Discounted value (£m) 57 63 70 71 861 936