European Software & IT Service

J P M O R G A N Equity Research
17 November 2022
European Software & IT Services

Investor feedback from coverage launch; providing full
discussion and our thoughts on key areas of debate
Following our European Software & IT Services launch in October (SAP, European Software & IT Services
Dassault Systemes, Amadeus, Hexagon, Sage & Capgemini), we provide Toby Ogg AC
a full discussion of investor feedback and questions in this Note, as well
as our view on these areas of debate. On the European Software sector J.P. Morgan Securities plc
overall, investors are attracted by the compressed valuations (much more
consistent with historical averages), though are still nervous on the
earnings trajectory into 4Q. We have also recently concluded our Digital
Twin & Industrial Software week (involvement from all major players in
the Industrial Software landscape), with feedback included in this Note.
Overall, we continue to see SAP as our top pick in European Software Snapshot of SAP earnings quality
GAAP EPS as a % of non-GAAP EPS (23-25 avg)
(upgrade to Overweight) on EBIT inflection, upgrade cycle, defensive 120%
100%
characteristics into a recession and valuation upside; we continue to 100%
80%
78%
72% 70%
60%
rate Dassault Systemes as an Underweight (downgrade following 3Q) 60%
40%
34%
22%
on license/subs risk, cyclical risk and valuation risk. 20%

0%
-20% -12%
Microsoft Adobe Oracle SAP Intuit ServiceNOW Salesforce Workday
● SAP: investors doing the work, interest building: We are fielding Source: Bloomberg Finance L.P.
more deep-dive sessions on SAP and our sense is that work is still in
progress for many investors; key areas of pushback include back-office
upgrade risk and cyclicality, mid-term target risk given incoming CFO,
scale of cloud gross margin ramp, EBIT ramp, competitive situation and
share based compensation. We provide our thoughts on all of these
elements in the report.
● Broader coverage debates continue to centre on cyclical elements of
narratives: 1) DSY: is the 3Q license miss the early warning sign, 2)
AMS: positives include upside drivers to numbers linked to pricing and
passengers boarded implementations, but more negative investors
pointing to bookings risk in adverse macro 3) HEX: debate is around
cyclicality, given lower recurring revenues and end-market mix, 4)
SGE: most are positive on Sage given growth, margin upside, £
reporting and high recurring revenues, 5) CAP: focus is on the estimates
into 2023 and whether there is downside given the macro backdrop.
Equity Ratings and Price Targets

Mkt Cap Price Rating Price Target
Price Cur Prev Cur End Prev End Date
Company Ticker ($ mn) CCY Date
SAP SAP GR 128,685.10 EUR 105.38 OW n/c 116.00 Dec-23 n/c n/c
Dassault Systèmes DSY FP 49,575.26 EUR 36.56 UW n/c 31.00 Dec-23 n/c n/c
Hexagon HEXAB SS 29,832.06 SEK 120.35 N n/c 107.00 Dec-23 n/c n/c
Sage Group SGE LN 9,254.69 GBp 756 N n/c 725 Dec-23 n/c n/c
Capgemini CAP FP 30,969.19 EUR 179.10 OW n/c 200.00 Dec-23 n/c n/c
Amadeus IT Group SA AMS SM 23,897.94 EUR 51.26 OW n/c 61.00 Dec-23 n/c n/c
Source: Company data, Bloomberg Finance L.P., J.P. Morgan estimates.All prices as of 16 Nov 22 except for SAP GR [15 Nov 22] SGE LN [15 Nov 22].
See page 35 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, users should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report.
This material was originally prepared by a J.P. Morgan entity (as identified in the material) in connection with its business and is being
provided to you as a courtesy in a modified format only for informational and educational purposes (not investment purposes), and on
a delayed basis.
Toby Ogg Equity Research
17 November 2022 JPMORGAN
Table Of Contents
Company-specific feedback ............................................................... 4
SAP: sentiment continues to improve ............................................. 4
Dassault Systemes: Cautiousness building ................................12
Capgemini: Cyclicality the focus ....................................................15
Amadeus: All eyes on travel recovery ...........................................17
Hexagon: Questions around cyclicality ........................................19
Sage: Investors like the story...........................................................19
Digital Twin & Industrial Software Feedback ...............................20
2
a delayed basis.
Company-specific feedback
SAP: Sentiment continues to improve
Mid-term targets getting cut given new CFO and macro
Most of our investor conversations feature the mid-term targets and the degree to which
there is any risk to these targets given that SAP will have a new CFO in March 2023
(Dominik Asam). Investors have asked us whether the new CFO will want to set himself
a lower bar to outperform and perhaps use the macro as a reason to justify this.
Our view is that the mid-term targets are underpinned, with a number of factors driving
our confidence levels
1. Christian Klein (CEO) has committed to the mid-term ambitions (i.e. not just
incumbent CFO Luka Mucic) and thus any resetting of the mid-term targets would
go against this.
2. FX is a tailwind: The mid-term targets were set when the EURUSD was 1.18 back
in 2020 (cloud revenues have a significant portion linked to the USD which acts as a
notable tailwind - we model an FX tailwind to cloud revenues of ~10% in 2022).
3. Cloud momentum is tracking ahead of expectations due to the S/4HANA private
cloud helping accelerate adoption beyond what would have been possible with just
S/4HANA public cloud.
4. SAP key peer Oracle recently announced a $65bn 2026 revenue target at its
annual Financial Analyst Meeting which at the time was above $61bn consensus and
described as “not that aggressive of a growth number” (and implies multi-year
extension of 10-11% revenue growth which was a big shift from the <5% annual
growth rates in prior decade). Given Oracle’s relevance across many on SAP’s
software end markets, we believe this should underscore mid-term growth
confidence for SAP.
5. Our bottom- up cloud model gives us further confidence: We show our bottom-
up cloud product model (spanning SAP’s ~10 cloud assets, S/4HANA,
SuccessFactors, Customer Experience, Business Technology Platform, Qualtrics,
Concur, Ariba, Fieldglass, Business ByDesign and Signavio). Our model illustrates
a cloud revenue trajectory above SAP’s mid-term targets, underscoring our bottom-
up confidence.
6. Installed base led growth: Whilst SAP is still adding a healthy number of net new
S/4HANA customers each quarter (added an average of ~420 net new customers
over past 12 months), we believe it is the larger customers from the installed base
that are driving the bulk of SAP’s S/4HANA bookings and thus revenue growth.
SAP has long-dated relationships with many of the customers it has as part of its
installed base (>30,000 on-premise ERP customers). This installed base should
contribute substantially to SAP’s mid-term and should also give SAP itself better
visibility.
7. Recent CCB was strong: SAP’s leading indicator current cloud backlog (CCB) was
+26% in 3Q, ahead of expectations against a tougher macro; we believe this should
help underscore confidence in the cloud revenue runway.
3
a delayed basis.
Figure 1: Bottom-up cloud model illustrates growth trajectory for the cloud business
SAP's cloud asset portfolio (€, bn) 2021 2022E 2023E 2024E 2025E '21-'25 CAGR
Ariba 1.5 1.9 2.2 2.4 2.7 16%
Concur 1.1 1.3 1.5 1.7 1.9 15%
Fieldglass 0.2 0.2 0.3 0.3 0.4 16%
HXM (SuccessFactors) 1.8 2.2 2.6 2.9 3.2 16%
S/4HANA Cloud 1.1 2.0 3.1 4.6 6.7 58%
Business Technology Platform (BTP) 0.9 1.3 1.7 2.2 2.8 35%
Customer Experience 1.0 1.2 1.4 1.5 1.7 16%
Qualtrics 0.8 1.2 1.4 1.7 2.1 30%
BusinessByDesign 0.2 0.2 0.3 0.3 0.4 16%
IaaS 0.9 1.0 1.0 1.0 1.0 3%
Group cloud revenues (JPMe) €9.4bn €12.6bn €15.4bn €18.8bn €23.1bn 25%
Source: J.P. Morgan estimates.
Macroeconomic risk given spending pressure and mounting warnings in software

Investors continue to ask around macroeconomic risk, given the trajectory towards a
recession; these concerns have built further following recent reporting from industry
bellwethers (e.g. Microsoft and Amazon), which saw signs of softening in their cloud
businesses. Moreover, in Europe we have seen warnings from SUSE, Temenos and
Dassault Systemes. As such, investor focus on macroeconomic risk has increased.
Our view is that on a relative basis SAP is well-positioned to navigate through a more
turbulent macroeconomic environment given its high recurring revenues at ~80% of
sales; further, licenses are just ~7% of sales and we already expect them to decline
substantially thus they have less scope to de-rail numbers. We also see multiple sources
of growth which can help insulate SAP’s financial profile.
1. Cyclical licenses are small and largely de-risked: Licenses are just ~7% of sales
now and we already expected them to decline substantially and thus see them as
largely de-risked; we model -45% ex-FX growth in 4Q.
2. Recurring revenues are high at currently ~80% of sales: This is up from ~40% in
2008 and thus we see SAP’s revenues are heavily protected into a downturn.
3. SAP has a broad portfolio of enterprise applications (the broadest portfolio of
applications across the ecosystem) and thus is well positioned to meet the needs of
the specific prioritisation profile of its different customers.
4. S/4HANA product cycle adds an extra layer of support as SAP benefits from the
‘ecosystem effect’ whereby system integrators act as an incremental source of
distribution; I.e. system integrators (Accenture, PwC, Deloitte, IBM,Infosys, TCS
etc) and hyperscalers (Amazon, Microsoft and Google) building their practices and
services around S/4HANA and acting as an additional go-to market and distribution
mechanism for SAP. Our extensive conversations with a range of system integrators
and hyperscalers at SAP’s Sapphire Conference in Orlando back in July suggested
there was significant momentum in the ecosystem for RISE & S/4HANA. Further,
the introduction of RISE in 2021 has helped to turn S/4HANA upgrades from simply
technical to transformational, which unlocks a stronger business case for CIOs.
Particularly in an environment where CIOs and organisations are looking at cost
optimisation, modularised back-office upgrades and enhancements can provide a
source of ROI and cost savings.
4
a delayed basis.
Figure 2: SAP’s recurring revenues are >80% of sales which protects financials in a downturn
Recurring revenues as a percentage of sales
100%
85% 86%
90% 79% 82%
80% 72% 75%
70%
60%
50% 39%
38%
40%
30%
20%
10%
0%
2006 2007 2020 2021 2022E 2023E 2024E 2025E
Source: J.P. Morgan estimates, Company data.
Cloud gross margin ramp implies ~800bps of expansion, which is high

Investors are frequently asking us about the confidence levels on SAP’s ability to ramp
its cloud gross margins from the ~70% in 2020 to the ~78% in 2025, given the scale of
the margin ramp required to hit the guide and the consensus and also given that
S/4HANA private cloud is expected to be much larger than the public cloud version than
under the initial mid-term plan (S/4HANA private cloud carries a lower gross margin
than S/4HANA public cloud).
Our view is that there are a range of clear drivers of the underlying cloud gross margin
ramp from the ~71% we model in 2022 to the ~78% we model in 2025 and thus have
confidence in SAP’s ability to hit this ramp as the business scales, harmonisation costs
roll away and higher gross margin cloud assets become larger in the mix.
1. Cloud harmonisation costs rolling off in 2H23: These costs have been in place to
improve the efficiency of SAP’s cloud portfolio operations through the
decommissioning of acquired datacentres and consolidation SAP’s cloud asset
infrastructure footprint into a converged structure with hyperscaler leverage).
2. Underlying margin improvement from the investments mentioned in point (1)
as the actual cloud operations themselves become more efficient.
3. Higher gross margin and faster growing assets like Qualtrics and the Business
Technology Platform becoming a larger part of SAP’s cloud portfolio over time.
4. Concur (another high gross margin asset) recovery, SAP’s travel and expense
management asset, returning back to pre-covid levels.
5. Infrastructure as a Service (IaaS), SAP’s lowest cloud gross margin asset,
becoming smaller in the context of SAP’s overall cloud business as SAP de-
emphasises this part of its portfolio.
6. S/4HANA private cloud factored in: The higher portion of S/4HANA private
cloud (which comes at a lower gross margin than S/4HANA public cloud) does act
as a headwind to the gross margin versus a purely S/4HANA public cloud mix,
though this mix effect is captured in the ~78% 2025 cloud gross margin (vs the
original ~80% cloud gross margin indicated when SAP first presented its mid-term
plan).
5
a delayed basis.
7. Last quarters progression has been solid: Moreover, SAP’s cloud gross margin
performance over the past ~2 quarters has been better than expected, with ~200bps
in annual expansion despite the presence of the cloud harmonisation costs.
Figure 3: Cloud GMs have expanded despite costs Figure 4: SAP cloud GM trajectory to ~78%
SAP cloud gross margin JPMe cloud gross margin
73% 80% 78%
72% 72%
72% cloud gross margins expanded 78% 76%
72% 200bps despite harmonisation 76%
71% cost headwinds 74%
71% 74%
70% 70%
70% 72% 71%
70%
69% 70%
70% 69% 70%
69% 68%
69%
66%
68%
68% 64%
Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 FY21 FY22 FY23 FY24 FY25
Source: J.P. Morgan estimates, Company data. Source: J.P. Morgan estimates, Company data.
EBIT margin ramp implies a step up despite lackluster margins historically

Aside from the gross margin dynamics, investors have also been asking us on
confidence levels for the EBIT margin ramp up given the implied margin expansion in
expectations currently is meaningful.
Our view is that SAP’s EBIT margins should improve as the cloud gross margin
improves and as opex ratios begin to fall as a percentage of sales, enabling margin
expansion to materialise through opex leverage; also we expect SAP’s margins to be at
~26% in 2022 and so the starting point is very low
1. Cross-sell and up-sell motion helps drive sales efficiency: Maintenance customers
shifting to S/4HANA - $1maintenance can yield $2.5 of cloud as SAP is able to
upsell onto S/4HANA and cross-sell other products as customers go through their
transformations.
2. Sales scale effect as recurring cloud business grows in size: Renewal business
becomes larger (lower sales commissions versus new business) , driving sales &
marketing leverage.
3. Drivers of leverage in research & development include: (1) Lower R&D ratios:
significant amount of investment has already been made towards integrating the
cloud assets and harmonising data models (~15% of R&D spending was indicated to
have been allocated towards integration), meaning R&D resources can be used
elsewhere now that the heavy lifting has largely completed. (2) Focus on ecosystem
leverage (i.e. partnering and leveraging system integrators to build out Industry
Cloud solutions), (3) Streamlined portfolio: focus on profitable core (i.e. portfolio
optimisation via disposals).
4. Cost discipline more broadly: SAP are also being stricter on expenditures, limiting
travel and hiring given the investments already made in 1H’22.
5. Licenses are much smaller now and thus have less scope to de-rail any margin
expansion: Historically, licenses (high margin) have been much higher as a
percentage of sales and thus any weakness in this revenue line has hampered margin
6
a delayed basis.
performance; today SAP is much lighter on licenses and so its potential to de-rail the
margin expansion is no longer the risk it once was.
6. Further G&A efficiencies: SAP can also drive further G&A efficiency from current
levels through scale and automation.
7. No large M&A: Other drivers of margin weakness historically have been large-
scale M&A of cloud assets with lower margins and thus this has impacted margin
trajectory in the past.
Figure 5: SAP’s EBIT margin trough FY22 with the setup for expansion in place
SAP adj. EBIT margin
35% 31%
30% 30% 30% 30% 29%
29% 29%
30% 27%
26%
25%
20%
15%
10%
5%
0%
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
Competitive intensity is high with well resourced competition across segments

Investors’ pushback on competition has centred around the nature of the competition
across all of the different segments SAP competes in, with well-resourced US tech
companies all going after the same addressable markets. As such, investors have been
asking on the competitive positioning of SAP across the different domains (core
financials, HR, procurement, supply chain, travel & expense management, experience
management, customer relationship management, contingent workforce management
and platform layer).
Our view on this topic is that SAP is entrenched in its customer base given stickiness of
enterprise ERP software and thus see SAP’s positioning as broadly stable in its core,
with growth coming from installed base migration, upsell, cross-sell and new customer
additions.
1. SAP’s entrenchment within its customer base and high switching costs add
barriers: SAP operates at the most mission critical end of the software spectrum,
with core financials (general ledger) the financial backbone of an organisation,
connected into many different processes with many different users of the software.
As such the software is very sticky and switching costs are high, adding barriers to
SAP in this domain; this gives us a degree of comfort on SAP’s competitive
positioning.
2. Unless it’s badly broken, would rarely change: We have spoken with CIOs who
have illustrated this point and indicated to us that unless something was broken on
the core financial system then it would rarely make sense to undergo a switch given
the execution risk attached; CIOs have indicated to us in the past that they wouldn’t
7
a delayed basis.
get fired for an SAP upgrade, yet if they attempted to replace it with another vendor
and there was an implementation issue it could be risky for them.
3. SAP’s manufacturing customer base is a barrier: The manufacturing industries
that SAP addresses has a need for highly complex functionality and tight integration
through the manufacturing back office software (MES, SCM etc), shop floor and
financial backbone; this is the area where SAP’s ERP functionality resonates most
highly with customers and as such we believe SAP’s competitive positioning is the
strongest in these domains - end-markets were last disclosed in 2016: ~25%
consumer (wholesale distribution, retail, and life sciences), ~18% discrete
manufacturing (autos, aerospace & defence, high tech, industrial equipment), ~23%
energy & natural resources (chemicals, mining, O&G). This combined is ~66% of
SAP’s revenue base, which is significant. The remainder is ~15% services, ~10%
public sector and ~9% financial services.
4. Other areas of the cloud portfolio: a) procurement - SAP is strong in direct
procurement and indirect procurement, with direct much more complex, b) travel &
expense management - SAP Concur is able to deal with complex enterprise
requirements (e.g. many corporate spending & travel policies, multiple levels of
approval flows and entities with multiple subsidiaries), c) HR - strength in Europe
given the higher complexity with many different countries and languages which
SAP can cater for. SAP has a broad payroll capability (45+ countries which have
been localised) which gives SAP the ability to address international organisations
that operate across many regions. d) CRM - SAP is strong on the commerce side
with Hybris and has other assets like Gigya and Callidus which give it strength
across identity & access management and CPQ. e) Qualtrics has a strong offering
having innovated heavily in its platform and architecture enabling high levels of
scalability and granularity across data.
Share-based compensation stepped up meaningfully in 2021

SAP’s share-based compensation (SBC) has been a topic of heightened focus in our
conversations with investors with questions around valuation when accounting for the
share-based compensation. The SAP-specific context here is that SAP’s SBC expense
rose substantially in 2021 to €2.8bn, from an average of €1.2bn 2018-2020.
Our view is that a large portion of the step up in 2021 for SAP’s share-based
compensation can attributed to the IPO of Qualtrics, as key Qualtrics management and
executives received equity compensation awards linked to the IPO; going forward, the
IPO SBC expenses should fall each year, and be almost gone and completely gone in
2025. This should act as a strong source of downward pressure on SAP’s overall share-
based compensation expense and should help SBC as a % of sales fall by 2025.
1. ~50% of SAP’s total SBC in 2021 linked to Qualtrics, most of this IPO related:
As per SAP management (2021 conference call), these expenses linked to Qualtrics
accounted for ~50% of SAP’s total SBC for 2021, equating to ~€1.4bn of SAP’s
total ~€2.8bn booked in 2021. We believe ~80% of this ~€1.4bn was linked to the
IPO of Qualtrics itself, equating to ~€1.1bn; leaving ~€300m of underlying Qualtrics
share based comp (i.e. linked to normal business operations). Going forward, the
IPO related share based compensation expenses should fall each year, and be almost
gone and completely gone in 2025. We believe this should help to keep SAP’s group
share based compensation expenses under control and enable share based
compensation as a percentage of sales to fall.
8
a delayed basis.
SAP CFO Luka Mucic, GS Conference February 2022
“So in absolute terms, in absolute dollars or euros, we actually don't expect to see
further increases because the Qualtrics portion will continue to come down. Those
one-off step-ups in our own programs will not be around, and then it will more be
more a normal progression, so to say. Therefore, as a proportion of revenues, the
share will also come. So that's kind of what needs to be expected. I would anticipate
that in 2025, we'll probably end up again at the total company level, even including
Qualtrics with a share of roughly 7% of the revenues that we expect in 2025, which
again I think is a healthy ratio.”
2. SAP’s initial share-based compensation guidance for €3.0-3.3bn was based on

higher share price: When SAP initially outlined its share-based compensation
guidance for 2022 the expectation was €3,000m-€3,300m. CFO Luka Mucic also
indicated that this share-based compensation level should be the plateau; as per the
quote below, this level was based on the assumption of an increase in the share price
of the company.
SAP CFO Luka Mucic, GS Conference February 2022
“When you take this into account, plus the fact that, indeed, we had to step up our
volumes of so-called move SAP, share-based compensation in line with the kind of
developments that we see in the market. This explains the difference. Perhaps, the
last point, of course in that range the assumption was and is as well, we will see
an increase in the share price of the company, which obviously if it doesn't
happen, then of course would also reside in less share-based compensation.
Then for the future, as you rightfully noted, we see that we're reaching a plateau
now.”
3. ~5% 2025 FCF yield fully loaded for share-based compensation: We currently
see SAP on a ~5% 2025 FCF yield, which includes share-based comp. SAP’s
financial profile for this yield offers accelerating topline growth (into high-single
digit) and accelerating EBIT growth (over double digit in 2023 and accelerating into
the mid-to-high teens towards 2025). We would also point out that European
Software has limited alternatives with an attractive equity story and thus we see
scarcity value for SAP.
4. Many of SAP’s competitors have higher SBC: When looking at SAP’s SBC (% of
sales) in the context of back office / enterprise software set of companies, it screens
lower than companies such as Workday, ServiceNOW, Salesforce etc, but higher
than peers Oracle and Microsoft. Given SAP competes directly with many of these
companies, we think it’s relevant to consider how much SBC they are paying their
employees as it is ultimately a tool to attract and retain talent (SAP does need to be
competitive). See figure 6 below.
5. Difference between GAAP and Non-GAAP earnings is wide for many US peers:
Whilst SAP’s GAAP and non-GAAP earnings have diverged due to the growth in its
share based compensation, we would also point out that many of SAP’s US
competitors also have a notable gap between their GAAP and non-GAAP earnings.
9
a delayed basis.
Figure 6: SAP versus US enterprise / back-office software group

Bloomberg GAAP EPS vs Bloomberg EPS, adj+ (non-GAAP)
Company Bloomberg GAAP EPS Bloomberg EPS, adj+ GAAP as a % of non-GAAP
FY23 FY24 FY25 FY23 FY24 FY25 FY23 FY24 FY25
Workday -1.2 -0.4 0.6 3.4 4.5 5.7 -36% -10% 10%
Salesforce 0.4 1.4 2.2 4.7 5.6 6.9 9% 25% 32%
ServiceNOW 2.5 3.7 6.2 9.1 11.5 15.1 28% 32% 41%
Oracle 3.3 4.1 4.8 4.9 5.6 6.3 67% 73% 76%
Intuit 7.3 10.1 12.0 13.8 15.9 19.0 53% 63% 63%
Adobe 11.7 13.3 15.5 15.4 17.7 18.9 76% 75% 82%
Microsoft 9.7 11.2 13.3 9.7 11.2 13.3 100% 100% 100%
SAP 3.7 4.7 5.0 5.4 6.3 7.5 69% 75% 67%
Source: Bloomberg Finance L.P.
Figure 7: SAP middle of the pack on quality of earnings relative to US software group
GAAP EPS as a % of non-GAAP EPS (FY23-FY25 average)
120%
100%
100%
78%
80% 72% 70%
60%
60%
34%
40%
22%
20%
0%
-20% -12%
Microsoft Adobe Oracle SAP Intuit ServiceNOW Salesforce Workday
Source: J.P. Morgan estimates.
10
a delayed basis.
Dassault Systemes: Cautiousness building

Subscription & license mechanics can be absorbed over time and thus aren’t a risk
Investors are asking us about the license and subscription mechanics and impact for
Dassault Systemes, given the recent developments in 3Q and also given the broader
industry trend towards cloud and subscription revenue.
Our view is that 3Q was the first quarter we saw a notable financial impact (4-5pts on
licenses) from the license/subscription mechanics and also felt the rhetoric was
incremental with respect to the focus on recurring revenues
1. License to subscriptions is a cause for concern on the licenses if trend

accelerates: Whilst there has been ongoing questions around the implications for
Dassault Systemes from a subscription shift (as prior to 3Q Dassault has been
largely unaffected despite software companies all around seeing the impact), we do
believe 3Q marks a shift in this and the implications are now becoming visible in the
licenses. Qualitative comments from the earnings also felt incremental with respect
to the focus on subscriptions; as such, we believe this trend is now more likely to
accelerate and soften license growth. Longer term the shift to subscriptions is a
positive for Dassault as the company becomes more predictable (due to lower
licenses and higher subscriptions), however the near-term outlook is more clouded
as this trend evolves and softens license growth.
2. Industrial peers Siemens and PTC have both embarked on this journey:
Elsewhere, Dassault’s closest peers Siemens Software (who guided flat revenue
growth y/y in 2022 and~200bp margin compression from SaaS shift) and PTC have
both embarked on their journeys to subscriptions (PTC’s margins went from ~25%
to ~15% back in 2016 as they transitioned).
3. Outside of Industrial Software there are other examples: Moving beyond
industrial software and looking elsewhere in software, we see many examples in
Europe of transitions impacting companies initially and whilst they go through the
transition - SAP cut mid-term targets >20% when they announced the shift, Temenos
cut FCF >25% when they announced the move from licenses to on-premise rental
contracts, Sage’s margins have compressed ~7-800bps over the past few years as
they’ve invested and shifted away from licenses.
4. Opex-linked software may be easier to sell than capex; customers holding onto
cash: As the macro becomes more challenging, we believe spending on software
will require additional management approvals and extra levels of assessment to
ensure there is clear ROI. We believe that large capex expenditures (on licenses as
its upfront) could well require more input from various stakeholders given that it
would involve a much larger cash outlay upfront. In contrast, subscription contracts
(more opex linked) require less cash to leave a business day 1 and thus it can be a
smoother conversation with the customer. Whilst Dassault offers both the traditional
upfront licensing model and subscription models, this could drive a greater
preference amongst customers to go down the subscription route, where they can
spread out payments over many year.
11
a delayed basis.
Figure 8: PTC’s margins suffered from transition Figure 9: Siemens Software flattening of growth
PTC’s operating margin Siemens 2021 CMD
40% 35% 37%
35%
29%
30%
25% 24%
25% 22%
20%
18%
20% 16%
15%
15%
10%
5%
0%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Company reports. Source: Company reports.
Christian Klein, CEO SAP (Conference September 2022)
“The relevance of our portfolio is completely different when I compare today to the
situation we have in 2008. And then on-premise, when you do a Capex business
case, a CFO wants to look at this two or three times. Opex cloud is also a different
discussion.”
PLM products are tied to the R&D budget and thus more resilient in a downturn
Investors have asked the extent to which Dassault Systemes is really cyclical given it
sells into the R&D budget (as opposed to more cyclical IT budget) of its customers and
thus spending can often be tied to multi-year R&D projects.
Our view is that this is helpful and can be a source of resilience, though R&D spending
is not fully immune and Dassault’s revenue mix is on the more cyclical end of the
software scale (given licenses ~20% of sales)
1. High licenses hard to get comfortable with in current environment: Dassault

Systemes’ is one of the companies in the European software ecosystem which still
has a meaningful portion of its revenues in licenses (~20%), thus presenting more
near-term risk in a more difficult macroeconomic scenario. Software licenses are the
cyclical part of a software company’s revenue mix.
2. Prior periods of economic weakness illustrate the sensitivity of licenses:
Licenses sales growth during the course of the pandemic (between Q1’20 and
Q4’20) declined significantly as customers reduced their spending (trough was -32%
in 2Q’20). During 2009 when spending was cut due to the macroeconomic outlook
flowing through into the spending decisions of corporates. In 2009, Dassault’s
overall group revenue growth declined ~9% (ex-FX). adj. EBIT margins fell from
25.6% in 2008 to 25% in 2009 to 28.6% in 2010 during the GFC. Licenses also
declined in 2013 when macroeconomic activity worsened
3. Signs of softening showing: We hosted Stan Przybylinski (VP at PLM Consultant
CIMdata) at our Digital Twin & Industrial Software conference - the indication was
that there had been some softening of spending linked to CIMdata services (which
12
a delayed basis.
leads installations). Our expert noted extended lead times on decision making for the
consulting business as a sign. Also if we look at peer Ansys they recently called out
some softening in Europe in smaller deals.
Figure 10: Licenses declined ~18% in 2020 Figure 11: Licenses declined ~29% in 2009
DSY license growth (ex-FX) DSY license growth (ex-FX)
30% 40% 36%
23%
20% 30%
11% 20% 15%
10% 6%
10%
0% 0%
-10% -3% -2%
-10%
-20%
-20%
-18% -30%
-29%
-30% -40%
2018 2019 2020 2021 2006 2007 2008 2009 2010
Source: Company reports. Source: Company reports.
13
a delayed basis.
Capgemini: Cyclicality the focus

Cyclical risk into a recession is the No. 1 question we get asked by investors
Investor feedback around Capgemini continues to focus on the trajectory of numbers in
a recessionary-type scenario. Capgemini continues to be well liked and well held and is
a core holding for most investors that have a European Software & IT Services mandate.
Our view is that Capgemini is less cyclical than it has been historically and we already
forecast a substantial slowdown in organic revenue growth into 2023, from >14%
organic in 2022 to ~3.5% in 2023, suggesting that the Street has already factored in a
more pessimistic view on the macro.
1. Digital tailwinds are strong as organisations transform: Capgemini offers clean

exposure to digital transformation and many of the key technologies (cloud, big
data, AI etc) that are underwriting the current technology adoption cycle. Capgemini
also benefits from the need to automate - many customers are battling cost pressures
and look to their IT partners to help identify automation opportunities.
2. Surplus levels of demand: Capgemini management have indicated surplus levels of
demand vs supply thus even if demand faded there would be a cushion. Capgemini
have also flagged that parts of their business are booked out (e.g. SAP).
3. More diversified set of buying towers within an organisation: Today, ~50% of
total business is linked to traditional IT services (the so-called enterprise
management business), down from ~95% five years ago indicating a much more
diversified set of buying towers within an organisation (adding defensibility).
Capgemini’s touch points across its customer base have broadened from the
traditional CIO role to include CxOs across different verticals (such as
R&D,manufacturing, sales, etc.) – which should help to drive higher growth
resiliency than in the past.
4. Strong revenue composition from existing customers: ~95% of Capgemini’s
revenues come from existing customers which offers a degree of visibility as many
of these customers are engaged on multi-year strategic transformations.
5. Improved portfolio today versus history: Capgemini is more value-driven, more
globalized, more focused on higher-end projects, and has a more diversified
portfolio than in the past.
6. JPMe (and consensus) already forecast organic growth slowing from ~14% in
2022 to ~3-4% in 2023: This is over ~10pts of growth slowdown that is already
factored into consensus and thus we believe should already account for a softer
economic environment.
14
a delayed basis.
Figure 12: JPMe already forecast organic growth slowdown of >10pts 2023 vs 2022
JPMe organic ex-FX revenue growth (y-o-y%)
16.0% 14.6%
14.0% We already model a
12.0% 10.2% substantial slowdown in
10.0% growth into 2023
8.0%
6.0%
6.0%
3.5%
4.0%
2.0%
0.0%
2021 2022E 2023E 2024E
15
a delayed basis.
Amadeus: All eyes on travel recovery

Most investor conversations have focused on the linearity of the travel recovery
Our conversations with investors on Amadeus have centred around the linearity of the
travel recovery and what happens to travel volumes when travel recovery from
depressed levels meets consumer-led slowdown. Moreover, given the bookings
development in 3Q and October (which fell vs September as reported, though increased
slightly ex working day differences & cancellations), this has added to investor focus.
Our view is that yes the linearity of the recovery back to pre-COVID levels in 2024 may
not be straight, but we believe the long-term story for Amadeus is compelling and there
are some shorter term sources of support; Amadeus is a rare market share gainer in a
European market where clear share gainers are more difficult to find. We also believe
there are some offsets to any volume weakness such as pricing (revenue per booking
helped by inflation, mix shifting back to international). Volume itself could also be
supported by airline capacity coming back (operators remain upbeat) and Asian markets
continuing to recover upon the removal of travel restrictions.
1. Revenue per booking can help support numbers: Volume aside, Amadeus does
have support from pricing on the revenue per booking side which can help protect
numbers into 2023 (FX support, normalisation of international mix which brings a
higher booking fee vs local, inflation indexation in contracts with airlines).
2. Volumes can be supported by Asian markets recovering: In the event of a
recovery in China, Amadeus could benefit from this as volumes pick-up in the
region.
3. Recovery financial profile is attractive: Amadeus offers attractive exposure to
large travel software markets (Airline IT, Airport IT and Hotel IT) and a recovering
air traffic volume profile (which contributes to our EBITDA CAGR forecast of
~20% 2022-25). This recovery financial profile is much more attractive than other
assets in our European coverage.
4. Competitive positioning is robust: Amadeus has also continued to to invest in key
technology areas (NDC, merchandizing, hotel IT, move to public cloud, etc.) in
order to sustain technology leadership for the longer term. As such, we believe
Amadeus is well positioned competitively, with >40% share in both GDS (global
distribution systems) and PSS (passenger services systems for airlines), and likely
continued market share gains in the future. We also like the company’s prospects
within Hotel IT, especially after signing a second large customer for its central
reservation system (Marriott, in addition to IHG).
5. Leaner cost base today provides downside protection: Amadeus’ right sizing of
its cost base (€550m fixed cost reduction plan vs 2019 cost base) in the pandemic
provides a healthy cushion in the event travel volumes did begin to slow (though we
note historically global air traffic volumes have been resilient with ~0.2% decline in
2009).
6. Software portfolio (~50% of group sales) tracking well as of 3Q: Amadeus’
Software portfolio (~50% of group sales) continues to track well across Airline IT
(with 3Q PBs in Airline IT ~83.5% vs 2019 / 2Q was 77.7%) and Hospitality (3Q
quarterly revenue 99.2% of 2019, 94.4% in 2Q and 84.8% in 1Q). We would note
that Amadeus’ Airline IT business should benefit from customer implementations
16
a delayed basis.
which should support Passenger Boarded volumes in 2023 (Amadeus indicated it

was working to migrate ITA Airways, Allegiant, Hawaiian Airlines, Etihad Airways,
Bamboo Airways and another undisclosed carrier - all of which together would carry
an estimated 110m PB annually in a fully recovered scenario; Amadeus reasonably
expect 70m PB to be implemented by end of 2023).
7. Shareholder remuneration returning aiding recovery story: During the
pandemic Amadeus had to halt its dividend in order to preserve cash given liquidity
pressures. As of 3Q’22 results the management team has announced it will be
resuming shareholder distribution in the form of a dividend. We believe this
reinstatement should help support investor confidence in Amadeus and adds another
leg to the ‘return to normal’.
8. Scope to re-rate on return to normal and as mix shifts towards higher-value
software: We believe Amadeus has scope to re-rate as the business returns to its
2019 levels (EBITDA margins recover to >40% from the ~3% in 2020). Further, as
Amadeus continues to shift its business model towards non-distribution related
revenue streams (such as Airline software and Travel Software), this should support
a higher multiple. In 2009, Amadeus’ distribution (GDS) revenues accounted for
~75% of group revenues, whereas today this part of the business accounts for ~50%
of revenues. We believe the lower mix (GDS is ~50% of group revenues today)
should warrant a higher group multiple as a larger portion of revenues come from
potentially higher margin software.
17
a delayed basis.
Hexagon: Questions around cyclicality

Like the long-term story but questions mostly around the cyclical risk NT
Investor feedback on Hexagon has touched on the longer-term story with the continued
shift towards a more software-orientated business model, which investors generally like
(Hexagon’s EBIT margins are now almost ~30% having been ~5% in 2000). Questions
nearer term have centred around cyclical risk given end-market exposure, particularly
given revenue mix (group wise Hexagon is ~50% Software & Services and ~50%
Hardware; recurring revenues are ~35% of sales; licenses are ~10% of sales). We are
also mindful of the cyclical risk with Hexagon, though believe there are some offsets
such as supply chain pressures easing (we should help in Geospatial Enterprise
Solutions) and general portfolio diversification (e.g. in 3Q Industrial Enterprise
Solutions ALI & MI both accelerated).
Sage: Investors like the story

Investor feedback on Sage continues to be positive in most discussions
Feedback from investors on Sage has been largely positive with most engaged on the
positive side of the debate given growth acceleration, margin expansion potential and £
reporter supporting the case for upgrades. Sage’s FY22 results have further illustrated
this development with continued ARR acceleration (+12% exit rate) and an above
consensus organic recurring revenue guidance for 2023. Sage’s high recurring revenues
(>95%) are also helpful in the current environment. We agree with all of these positive
aspects and believe Sage is executing well and so far not showing any signs of
weakening from the broader macroeconomic environment; that said, Sage shares have
performed well versus the market and thus we would await a better entry point.
18
a delayed basis.
Digital Twin & Industrial Software Feedback

We hosted a full range of companies across the Industrial Software ecosystem for our
Digital Twin & Industrial Software Week series, including Capgemini, Hexagon,
Siemens Software, Bentley, Dassault Systemes, Unity Software, Autodesk, Matterport,
Ansys, Altair, CIMdata and Michael Grieves (an expert). Please see below for links to
the relevant takeaway and feedback reports from the event:
• Capgemini: Feedback on Capgemini’s developments in the Intelligent Industry and

approach to digital twin.
• Hexagon: Discussing developments in Asset Lifecycle Intelligence (one of
Hexagon’s Software unit) and how Hexagon addresses the digital twin domain.
• Dassault Systemes: Discussing Home & Lifestyle, Retail and CPG with Philippe
Loeb -
• CIMdata: Expert PLM consultant discussing competitive dynamics within industrial
software, Dassault Systemes M&A strategy and subscription transitions.
• US company feedback note: Including Autodesk, Ansys, AspenTech, Altair,
Bentley, Unity Software & Matterport.
19
a delayed basis.
Investment Thesis, Valuation and Risks

SAP (Overweight; Price Target: €116.00)
Investment Thesis
We factor in a no growth economic environment into our forecasts, but still see significant
upside to the shares suggesting this is more than discounted. Our DCF, which treats share
based compensation (a key investor pushback) as a cash expense, yields ~20% upside. Fur-
ther, our reverse DCF analysis shows SAP currently discounts a ~27% terminal EBIT mar-
gin (cons ~27% for FY23e) which would indicate SAP’s cloud transition is priced to fail,
which is at odds with our view it will materialise; in doing so, SAP’s financial profile will
transform (after ~2yrs of transition, SAP is moving from declining EBIT to DD growth),
positioning the stock as an attractive ‘GARP’ story on the cusp of inflection. Moreover, our
bottom up cloud model (~10 cloud product forecasts, many of which aren’t disclosed)
shows that even in a more difficult macro, SAP’s mid-term targets are underpinned. SAP
is our top pick in European Software and offers the most attractive risk/reward in our cover-
age with ~25% upside (bull case ~€140) vs ~20% downside (bear case ~€80)
Valuation
Our price target is €116 for Dec’23. This is based on the assumption that SAP shares trade
on a ~14x EV/EBITDA for 2023E (implies SAP’s multiple moves back in-line with the
global software sector average, where it has traded on average historically). As valuation
support, we also use a 10-year DCF, using a WACC of ~10% and terminal growth rate of
2%.
Risks to Rating and Price Target
• Presence of new CFO Dominik Asam (arrival in March 2023) adds risk to the mid-term
targets in the event he believes they should be reset.
• Macroeconomic conditions could be tougher than we anticipate (including supply chain
issues, wage inflation, rising interest rates and economic growth), which could impact
corporate IT budgets and directly impact SAP’s sales opportunities. On the other hand,
macro conditions could improve, with digital transformation possibly accelerating
adoption of SAP's products, which could drive revenue growth faster than currently
expected.
• The mix shift to cloud revenues could be faster or slower than expected, which could
alter the timing of both revenue recognition as well as gross and operating margin
achievements.
• The competitive environment remains strong, with a number of SaaS competitors pro-
viding strong offerings to compete with SAP in the areas of CRM, marketplace, big data
analytics, etc. SAP must improve its net promoter scores with customers and hold its
competitive position through its suite of products across a variety of functions.
• Competitors could be more aggressive than we anticipate, especially on the SaaS front.
Likewise, the conversion to the S/4HANA could cause customers to delay or resist the
upgrade (and in the worst case scenario, seek another vendor's ERP products). On the
other hand, accelerated digital transformation could compel customers to shift faster to
SAP’s S/4HANA ERP product.
• SAP’s S/4HANA, Cloud, Network (Concur and Ariba), or Qualtrics products may not
grow as expected. Or licenses and support could decline faster than expected, which
might put pressure on margins if the cloud has also not reached full economies of scale
to offset that pressure.
20
a delayed basis.
• Any delays in product development or releases could disappoint investors – particularly

if they were around the S/4HANA, the Business Technology Platform, industry cloud,
or data analytics. On the other hand, acceleration of product offerings in these areas
could see better customer uptake of such SAP products.
21
a delayed basis.

Dassault Systèmes (Underweight; Price Target: €31.00)
Investment Thesis
We are Underweight rating with a TP of €31, given the faster slowdown in Dassault’s license
sales than we had expected (2% decline in the quarter versus guidance of 6%-10%). With
the license to subscription dynamic stepping up in 3Q (~4-5pts of headwind to licenses),
macro (China not improving) and SMB weakness weighing on growth, we believe risks are
skewed to the downside. And whilst we acknowledge the focus on recurring revenues makes
strategic sense longer term, we expect transition mechanics and macro pressures to present
risks to expectations over the next 12months (JPMe ~1-4% below consensus adj. EBIT
2023-25). Further, although the lowered 2022 license guidance (5-7% ex-FX) accounts for
continued softness in China/SMB during 4Q, we believe there could still be downside risk
given a) broader worsening in the macro (which could impact Dassault’s other products
CATIA, ENOVIA & SIMULIA) and b) potential for the license and subscription dynamic
to accelerate further. Lastly, the pipeline into the fourth quarter also appears to contain a
number of larger deals which adds a layer of risk in the event some of these deals don’t close
due to tightening corporate budgets as spending plans are reassessed.
Valuation
We value Dassault Systemes using a multiple based approach with EV/EBITDA. As such,
we assign an ~18x EV/EBITDA multiple to our EBITDA forecast for 2023; this yields a
value per share of ~€31 Dec’23 . This would put Dassault Systemes on a ~10% discount to
design software peers, which we believe is justified given lower growth and uncertainty
around license/subscription shift.
• Dassault could benefit from greater levels of R&D investment from within its industrial
customer base as they undergo digitalisation.
• Dassault could acquire a strategic asset which significantly enhances the equity story.
Equally, there is a risk that such acquisitions fail to prove good value for money. Further-
more, difficulties could arise in integration of acquired companies, or the acquired com-
panies could struggle to achieve group margins over the mid-term.
• Bond yields could peak and begin to fall if inflation falls faster than expected, driving
a re-rating in rate sensitive assets.
• Macro disruptions such as Ukraine/Russia, COVID-related impacts, supply chain
issues, inflation, interest rates and the rate of economic growth. Mobility, Life Science,
Aerospace and Industrials represent large sectors for Dassault, and any adverse market
conditions which impact those industries could hinder the growth prospects for Das-
sault’s software.
• As Dassault tries to extend its presence in new sectors, such as life sciences, natural
resources and architecture & construction, it may face competition from experienced
firms that specialize in these industries. Dassault may struggle to compete with long-
standing competitors.
• If Dassault’s service revenues begin to grow faster than its software revenue, this could
prove an unfavorable trend in mix, seeing as the margins from software are substantially
higher than those from services. In addition, a quicker than anticipated move to SaaS or
subscriptions could create issues with delayed revenue recognition and impacts on mar-
gins. A faster move to the cloud by customers could also require Dassault to invest more
22
a delayed basis.
heavily in their own cloud offering.

• The competitive environment remains full of both long-standing and experienced ven-
dors, as well as new vendors offering more niche solutions.
23
a delayed basis.

Hexagon (Neutral; Price Target: Skr107.00)
Investment Thesis
Hexagon has a strong vision, good growth prospects and offers attractive exposure to a range
of technology themes; as such, Hexagon is well placed to benefit from the broad trend of
automation in the industrial world (including autonomous vehicles, IoT, construction digi-
talisation, digital twins, industry 4.0, smart cities and more). The company is well diversi-
fied across industries and geographies, and is shifting its revenue mix over time towards
software and high-tech products that carry higher margins, supporting further margin
improvement (Hexagon’s EBIT margins are now almost ~30% having been ~5% in 2000).
Whilst we like the long-term structural drivers at play for Hexagon, we remain on the side-
lines for now due to cyclical risk (as more hardware centric vs other European Software).
Valuation
We derive our Dec 2023 price target of ~SEK107 using a multiples-based approach. Our
target price is based on the shares trading at ~14x 2023E EV/EBITDA, which implies a
~30% discount to the PLM sector which we believe is warranted given the lower recurring
revenues and more hardware product exposure versus pure software PLM vendors.
Upside risks:
• Hexagon could find further significant cost savings to outperform our profit margin pro-
jections, or some of the COVID cost savings could become more permanent than
expected.
• Sustainable revenue acceleration into the upper single-digits into FY23 would likely
drive consensus earnings and the share price higher. Hexagon has a number of new and
competitive products in the market (such as OnCall, Leica RTC360, Leica BLK3D,
Xalt, BLAZE 600A, Leica SafeLoad, MineOperate UG Pro, Ground Penetrating Radar,
Computer Aided Dispatch, HxGN SDx,TerraStarX precise point positioning, and oth-
ers) which could drive stronger revenue growth.
• Currencies have been volatile and could prove more or less favourable than expected to
Hexagon's reported figures. In addition, because the company reports financial results
in EUR but the shares trade in SEK, the SEK/EUR exchange rate can affect the valuation
metrics, making it appear better or worse depending on the currency movements (and
without any underlying difference).
• Acquisitions can be a source of technology enhancement, synergy opportunities and
revenue and margin upside.
Downside risks:
• There could be lapses or lagging impacts from COVID-19 beyond our expectations.
Industries such as automotive, aerospace and O&G had been somewhat slower to recov-
er.
• As a large provider of hardware and software solutions to industrial companies, Hexa-
gon is exposed to cyclical slowdowns in industrial investment and capex. Slower growth
in construction and infrastructure in US public sector or emerging markets could be
harmful. A slowdown in the automotive or aerospace capex could also slow metrology
24
a delayed basis.
growth for Hexagon.

• The Intergraph PP&M division has 30-40% exposure to the Oil & Gas market, and capex
in the sector is volatile, which could negatively impact PPM’s revenue potential. Any
further cyclical downturns continue to be a risk.
• The large influential stake held by the trust of former Chairman Melker Schörling could
at some point in the future potentially be used to materially change the current company
strategy upon which our rating and PT is based. His two daughters sit on the Board,
suggesting continued interest in Hexagon.
• Given the company’s global presence and operations in multiple currencies, exchange
rate fluctuations would alter reported figures.
25
a delayed basis.

Sage Group (Neutral; Price Target: 725p)
Investment Thesis
Sage has successfully navigated its shift to subscriptions and is now well placed for contin-
ued growth acceleration and margin expansion from trough levels (adj. EBIT margins ~20%
vs 28%+ historically). Further, Sage has undergone a significant amount of portfolio
restructuring (via disposals) over the past ~2-3years, resulting in a much leaner and focused
business. Sage is also highly recurring (>90% of revenues recurring), which helps with earn-
ings resiliency in the current macroeconomic climate. Despite this, we believe that Sage’s
multiple looks rich, with more limited scope for re-rating. Moreover, we are also mindful
of UK SMB risk/exposure given the macroeconomic developments in the UK, which may
limit earnings upside.
Valuation
We derive our Dec 2023 price target of ~725p using EV/EBITDA multiples as compared
to other software companies with similar growth prospects. Our price target of ~725p repre-
sents an EV/EBITDA of ~15x (CY23), which implies broadly in line with Global Software.
The key risks that could prevent our thesis on Sage from being achieved include:
• Macroeconomic conditions could be better or worse than anticipated, and the econo-
mies within Sage's core geographic exposure could see macro or geopolitical disruption
(UK SMB is of heightened risk). SMEs could increase their demand for digitization and
cloud accounting offerings, or negative macro impacts could cramp demand.
• Management could deliver better or worse cost efficiencies, or the reinvestments might
be different than we expected, which could alter the company’s margin potential.
• Recurring revenues could grow slower than expected; and balanced with software
licenses (SSRS) in decline, could still create weakness in revenues or margins.
• The investments into sales & marketing could be less successful than anticipated, which
could hinder growth prospects. On the other hand, new cloud products and the Sage
Intacct geographic rollout could achieve better than expected results.
• Sage could experience stronger or weaker competition from Intuit, Microsoft, SAP,
Workday, Netsuite, Xero or a number of other ERP software or SaaS providers in the
regions where Sage sells software and services. Other competitors could enter the mar-
ket, or we could see consolidation or pricing pressure in the market.
26
a delayed basis.

Capgemini (Overweight; Price Target: €200.00)
Investment Thesis
Capgemini is one of the top IT Services vendors in Europe and indeed a Top 10 systems
integrator globally. Capgemini’s customers are ever more focused on strategic digital trans-
formation following the Covid-19 pandemic. Mid-term, digital transformation trends play
into CAP’s strengths (Digital & Cloud are already >65% of revs) - underpinned by the com-
pany's solid execution, and potential boosters from bolt-on M&A. We believe Capgemini’s
growth is underpinned by both structural acceleration in client demand for technology and
the relevance of Capgemini's strategic direction (around key areas: intelligent industry, cus-
tomer first, enterprise management, digital & cloud, and sustainability).
Valuation
We value Capgemini using a multiple based approach with EV/EBITDA. As such, we
assign a ~10.5x EV/EBITDA multiple to our EBITDA forecast for 2023; this yields a value
per share of ~€200 Dec’23 offering 20% upside. This would put Capgemini on a ~20%
discount to Accenture (vs ~30% discount currently - historical average). We believe Capge-
min’s discount versus Accenture should be narrower than historical levels given Capgemi-
ni’s improved margin relatively vs Accenture. Further, this would put Capgemini at a ~25%
discount to globally diversified IT Services peers (Accenture, Cognizant, Infosys and TCS),
a fair level given relative EBIT growth profiles.
The key risks that could prevent our thesis on Capgemini from being achieved include:
• Macroeconomic volatility and potential lagging impacts from Covid could last longer
than expected. Economic growth (especially in Europe, which is still >60% of revenues)
could be slower than we anticipate, which would likely impact corporate IT budgets,
which directly impact Capgemini's consulting and services opportunities.
• Capgemini could experience weaker pricing or utilization rates, driven by either slower
demand or increased competitive pressure. Indian heritage companies could also
increase their penetration into the mainland European outsourcing and IT services mar-
ket, or they might slow their European strategies as they focus on core products for exist-
ing clients.
• A competitive IT labour market could potentially put pressure on costs for Capgemini.
There is a tight supply of highly-skilled digital & cloud talent, and matching resource
and location is a constant challenge of the industry. Salary inflation in certain regions
can also be an issue. That said, we do view Capgemini's workforce overall as more flexi-
ble than it was some years ago, giving the company more maneuverability when it comes
to protecting margins and profits.
• Digital & Cloud offerings are offsetting slower demand in managed services. It is impor-
tant that Capgemini remains innovative in these areas and a leading supplier to its cli-
ents. AI/ Data analytics, 5G connectivity, next gen ERP, digital manufacturing, cyberse-
curity and sustainability are also areas of strong demand. Underperformance in these
businesses could see the Capgemini shares trade lower vs. our price target.
27
a delayed basis.

Amadeus IT Group SA (Overweight; Price Target: €61.00)
Investment Thesis
Amadeus offers attractive exposure to large travel software markets (Airline IT & New
Business Areas = €22bn TAM) and a recovering air traffic volume profile (which contrib-
utes to our EBITDA CAGR forecast of ~20% 2022-25). We believe Amadeus is well posi-
tioned competitively, with >40% share in both GDS (global distribution systems) and PSS
(passenger services systems for airlines), and likely continued market share gains in the
future. Amadeus’ right sizing of its cost base (€550m fixed cost reduction plan vs 2019 cost
base) in the pandemic provides a cushion in the event travel volumes slowed (though histori-
cally global air traffic volumes have been resilient with ~0.2% decline in 2009). On valua-
tion, we see Amadeus’ multiples at attractive levels (not far off the COVID-19 trough multi-
ple), with scope to re-rate as the business returns to 2019 levels (EBITDA margins recover
to >40% from the ~3% in 2020).
Valuation
We value Amadeus using a multiple based approach, using EV/EBITDA. As such, we
assign a ~14x EV/EBITDA multiple to our EBITDA forecast for 2023; this yields a Dec-23
PT of ~€61. This would put Amadeus back in line with the global software sector, which
we believe is justified given Amadeus is now on a recovery path, returning back to the busi-
ness it was pre-pandemic.
• Longer-term impacts of COVID-19 could include permanently lower business travel
(due to comfort with video-conferencing, lower budgets, and pressure to reduce carbon
footprint), we could possibly see consolidation amongst European airlines, slower long-
term air traffic growth rates, and pricing renegotiations.
• A weaker-than-expected macro-environment or political events (like Russia/Ukraine)
could dampen growth recovery in airline traffic volumes, which would impact revenue
drivers for Amadeus such as the number of TA bookings and Passengers Boarded.
• Disintermediation and increased competition from other GDSs or airlines themselves
(such as Lufthansa), which try to push more volumes via the direct channel. A level of
disintermediation (or market share loss by the indirect channel) is figured into our model
forecasts for the Distribution Division. In addition to the usual competition from other
GDS vendors, companies such as Google (with its Google Flight offering) could alter
the playing field in travel distribution.
• Customer losses, bankruptcies or consolidation of airlines or large travel agents could
harm Amadeus's volumes or pricing power. With the ongoing consolidation in the air-
line sector, there may be a risk to Altéa contracts that have currently been accounted for
in estimates. Furthermore, there is execution risk related to the migration of airlines onto
Altéa, and stops, delays or non-renewals would impact revenue forecasts (examples
include United Airlines, Alitalia, Air Berlin, TAM).
• Given the company’s global presence and operations in multiple currencies, exchange
rate fluctuations would alter reported figures. The company does attempt to hedge cur-
rency related to operational risk, where possible.
28
a delayed basis.
SAP: Summary of Financials

Income Statement FY20A FY21A FY22E FY23E FY24E Cash Flow Statement FY20A FY21A FY22E FY23E FY24E
Revenue 27,343 27,842 30,958 33,059 35,326 Cash flow from operating activities 7,195 6,207 5,763 6,715 8,337
COGS (7,363) (7,328) (8,327) (8,761) (9,038) o/w Depreciation & amortization 1,831 1,775 1,888 1,827 1,884
Gross profit 16,008 3,696 4,134 4,054 5,118 o/w Changes in working capital 591 256 (124) (134) 228
SG&A (7,559) (7,660) (9,091) (9,549) (9,956)
Adj. EBITDA 10,118 8,233 9,166 10,186 11,547 Cash flow from investing activities (2,987) (3,054) (919) (992) (1,060)
D&A (1,831) (1,775) (1,888) (1,827) (1,884) o/w Capital expenditure (816) (825) (994) (992) (1,060)
Adj. EBIT 8,287 8,231 8,014 8,950 10,240 as % of sales 3.0% 3.0% 3.2% 3.0% 3.0%
Net Interest 776 2,174 (529) (110) (17)
Adj. PBT 8,883 10,421 7,358 8,840 10,222 Cash flow from financing activities (3,998) (55) (4,285) (2,876) (2,975)
Tax (2,349) (2,079) (2,188) (2,299) (2,658) o/w Dividends paid (1,866) (2,236) (2,878) (2,396) (2,495)
Minority Interest (138) (392) 89 (120) (132) o/w Shares issued/(repurchased) - - - - -
Adj. Net Income 6,396 7,950 5,258 6,422 7,432 o/w Net debt issued/(repaid) (298) (272) (978) 0 0
Reported (DIL) EPS 5.39 6.74 4.48 5.46 6.27 Net change in cash (4) 3,586 1,231 2,847 4,302
Adj. (DIL) EPS 5.39 6.74 4.48 5.46 6.27
Adj. Free cash flow to firm 6,000 5,009 5,211 5,804 7,290
DPS 1.85 2.45 2.05 2.13 2.21 y/y Growth 130.4% (16.5%) 4.0% 11.4% 25.6%
Payout ratio 34.3% 36.4% 45.7% 39.0% 35.3%
Shares outstanding (DIL) 1,187 1,180 1,174 1,176 1,185
Balance Sheet FY20A FY21A FY22E FY23E FY24E Ratio Analysis FY20A FY21A FY22E FY23E FY24E
Cash and cash equivalents 5,311 8,898 10,131 12,977 17,280 Gross margin 58.5% 13.3% 13.4% 12.3% 14.5%
Accounts receivable 6,593 6,357 10,593 10,575 10,975 EBITDA margin 37.0% 29.6% 29.6% 30.8% 32.7%
Inventories - - - - - EBIT margin 30.3% 29.6% 25.9% 27.1% 29.0%
Other current assets 1,545 2,028 2,818 3,484 4,108 Net profit margin 23.4% 28.6% 17.0% 19.4% 21.0%
Current assets 15,084 20,041 25,023 28,518 33,844
PP&E 5,042 4,975 5,011 4,927 4,839 ROE 21.2% 23.2% 12.6% 14.0% 14.9%
LT investments 3,512 6,279 6,921 6,921 6,921 ROA 10.8% 12.3% 6.9% 7.8% 8.5%
Other non current assets 7,006 11,088 11,679 12,352 12,555 ROCE 13.2% 13.5% 10.3% 11.2% 12.0%
Total assets 58,476 71,173 80,674 84,486 89,671 SG&A/Sales 27.6% 27.5% 29.4% 28.9% 28.2%
Net debt/Equity 0.4 0.1 0.1 0.0 NM
Short term borrowings 2,348 4,528 8,579 8,579 8,579 Net debt/EBITDA 1.1 0.5 0.3 0.0 NM
Payables 1,213 1,545 2,049 2,223 2,292
Other short term liabilities 9,306 9,977 10,634 10,981 11,743 Sales/Assets (x) 0.5 0.4 0.4 0.4 0.4
Current liabilities 12,867 16,050 21,263 21,783 22,614 Assets/Equity (x) 2.0 1.9 1.8 1.8 1.7
Long-term debt 13,606 11,042 9,565 9,565 9,565 Interest cover (x) NM NM 17.3 93.0 661.1
Other long term liabilities 15,315 13,145 11,549 11,549 11,549 Operating leverage (88.2%) (37.0%) (23.6%) 172.2% 210.2%
Total liabilities 28,550 29,550 33,218 33,738 34,569 Tax rate 26.4% 20.0% 29.7% 26.0% 26.0%
Shareholders' equity 29,713 38,960 44,360 47,653 52,006 Revenue y/y Growth (1.0%) 1.8% 11.2% 6.8% 6.9%
Minority interests 211 2,664 3,096 3,096 3,096 EBITDA y/y Growth 0.3% (18.6%) 11.3% 11.1% 13.4%
EPS y/y Growth 5.4% 25.0% (33.5%) 21.9% 14.9%
Total liabilities & equity 58,474 71,174 80,674 84,486 89,671
Valuation FY20A FY21A FY22E FY23E FY24E
BVPS 25.11 33.02 37.90 40.68 44.04
P/E (x) 19.6 15.6 23.5 19.3 16.8
y/y Growth (2.6%) 31.5% 14.8% 7.3% 8.3%
P/BV (x) 4.2 3.2 2.8 2.6 2.4
EV/EBITDA (x) 11.8 14.0 12.5 11.0 9.3
Net debt/(cash) 10,643 3,914 3,131 285 (4,018)
Dividend Yield 1.8% 2.3% 1.9% 2.0% 2.1%
Source: Company reports and J.P. Morgan estimates.

Note: € in millions (except per-share data).Fiscal year ends Dec. o/w - out of which
29
a delayed basis.
Dassault Systèmes: Summary of Financials

COGS (736) (772) (887) (955) (1,029) o/w Depreciation & amortization 179 179 195 219 229
Gross profit 3,729 4,090 4,743 5,071 5,491 o/w Changes in working capital 13 134 (128) 17 29
SG&A (1,521) (1,560) (1,840) (1,975) (2,123)
Adj. EBITDA 849 1,858 2,084 2,221 2,412 Cash flow from investing activities (208) (160) (188) (181) (196)
D&A (179) (179) (195) (219) (229) o/w Capital expenditure (127) (104) (145) (181) (196)
Net Interest (23) (15) 11 21 44
Adj. PBT 1,328 1,653 1,879 2,010 2,214 Cash flow from financing activities (742) (712) (1,566) (367) (405)
Tax (161) (231) (385) (323) (382) o/w Dividends paid (291) (147) (224) (269) (307)
Minority Interest 6 (0) 2 2 2 o/w Shares issued/(repurchased) (5) (0) 198 0 0
Adj. Net Income 995 1,265 1,481 1,527 1,660 o/w Net debt issued/(repaid) (382) (340) (885) 0 0
Reported (DIL) EPS 0.37 0.58 0.68 0.77 0.86 Net change in cash 204 831 125 1,372 1,485
Adj. (DIL) EPS 0.76 0.95 1.12 1.15 1.24
DPS 0.11 0.17 0.21 0.23 0.26 y/y Growth 1.0% 38.2% 0.4% 15.7% 9.2%
Payout ratio 29.4% 29.1% 30.3% 30.2% 30.2%
Other current assets 355 361 542 542 542 Net profit margin 22.3% 26.0% 26.3% 25.3% 25.5%
Current assets 3,733 4,707 4,988 6,416 8,013
PP&E 861 817 850 874 ROE
900 19.4% 22.5% 20.6% 17.6% 17.1%
LT investments - - - - ROA- 7.4% 9.3% 10.1% 9.8% 9.9%
Other non current assets 433 521 315 315 ROCE
315 10.6% 12.9% 13.2% 12.4% 12.3%
Total assets 12,964 14,219 15,086 16,160 SG&A/Sales
17,407 34.1% 32.1% 32.7% 32.8% 32.6%
Net debt/Equity 0.4 0.2 0.1 NM NM
Short term borrowings 16 903 254 254 254 Net debt/EBITDA 2.4 0.8 0.2 NM NM
Payables 172 192 213 225 242
Long-term debt 4,174 2,966 2,742 2,742 2,742 Interest cover (x) 36.4 122.2 NM NM NM
Other long term liabilities 5,771 4,537 4,264 4,264 4,264 Operating leverage 40.4% 263.6% 81.5% 91.4% 110.7%
Shareholders' equity 5,061 6,197 8,167 9,167 10,273 Revenue y/y Growth 10.1% 8.9% 15.8% 7.1% 8.2%
Minority interests 45 14 15 15 15 EBITDA y/y Growth (11.1%) 118.7% 12.2% 6.6% 8.6%
Total liabilities & equity 12,964 14,219 15,087 16,160 17,407 EPS y/y Growth 2.6% 26.2% 17.4% 2.9% 7.8%
BVPS 3.89 4.73 6.23 6.96 7.74 Valuation FY20A FY21A FY22E FY23E FY24E
P/E (x) 49.4 39.1 33.3 32.4 30.0
y/y Growth (3.2%) 21.7% 31.7% 11.8% 11.2%
P/BV (x) 9.6 7.9 6.0 5.4 4.8
EV/EBITDA (x) 57.5 26.0 22.7 20.7 18.4
Net debt/(cash) 2,041 1,491 492 (880) (2,366)
Dividend Yield 0.3% 0.5% 0.5% 0.6% 0.7%
30
a delayed basis.
Hexagon: Summary of Financials

COGS (1,390) (1,544) (1,818) (1,890) (1,979) o/w Depreciation & amortization 455 579 518 639 647
Gross profit 2,374 2,797 3,328 3,523 3,788 o/w Changes in working capital 221 (21) (199) (87) (139)
SG&A (1,587) (1,788) (2,026) (2,077) (2,218)
Adj. EBITDA 1,411 1,786 1,945 2,145 2,278 Cash flow from investing activities (1,249) (1,194) (1,763) (636) (671)
Net Interest (27) (26) (29) (6) (4)
Adj. PBT 760 984 1,272 1,440 1,567 Cash flow from financing activities (189) (87) 372 (597) (646)
Minority Interest (7) (8) (12) (13) (15) o/w Shares issued/(repurchased) 0 (35) (58) (61) (65)
Adj. Net Income 801 1,016 1,215 1,309 1,411 o/w Net debt issued/(repaid) - - - - -
Reported (DIL) EPS 0.24 0.31 0.38 0.43 0.47 Net change in cash (63) 71 39 499 475
Adj. (DIL) EPS 0.31 0.39 0.45 0.48 0.52
Adj. Free cash flow to firm 1,016 961 921 1,202 1,225
DPS 0.09 0.11 0.12 0.14 0.15 y/y Growth 39.6% (5.4%) (4.1%) 30.4% 1.9%
Payout ratio 38.7% 35.8% 32.2% 32.2% 32.2%
Cash and cash equivalents 397 472 527 1,026 1,501 Gross margin 63.0% 64.3% 64.5% 65.1% 65.7%
Accounts receivable 885 1,091 1,351 1,389 1,480 EBITDA margin 37.4% 41.1% 37.7% 39.6% 39.5%
Inventories 371 444 528 585 654 EBIT margin 26.8% 29.2% 29.7% 29.9% 30.2%
Current assets 1,894 2,272 2,669 3,264 3,899
PP&E 480 537 605 ROE
630 655 13.4% 13.8% 12.5% 12.1% 12.8%
LT investments - - - ROA
- - 7.5% 8.2% 7.8% 7.6% 8.1%
Other non current assets 388 377 414 ROCE
414 414 9.9% 10.5% 9.8% 9.3% 10.0%
Total assets 10,704 14,095 17,194 SG&A/Sales
17,281 17,431 42.1% 41.1% 39.3% 38.4% 38.4%
Net debt/Equity 0.3 0.3 0.3 0.2 0.1
Short term borrowings 437 582 647 647 647 Net debt/EBITDA 1.4 1.3 1.5 1.1 0.7
Payables 207 263 300 309 329
Long-term debt 1,995 2,143 2,872 2,672 2,472 Interest cover (x) 51.5 68.4 66.1 387.1 547.9
Other long term liabilities 2,695 2,887 3,797 3,597 3,397 Operating leverage (108.1%) 168.5% 110.7% 114.1% 117.7%
Minority interests 14 33 27 27 28 EBITDA y/y Growth 3.8% 26.6% 8.9% 10.3% 6.2%
Total liabilities & equity 10,704 14,095 17,194 17,281 17,431 EPS y/y Growth 3.6% 25.2% 15.2% 7.5% 7.6%
P/E (x) 35.6 28.5 24.7 23.0 21.4
y/y Growth (2.8%) 45.6% 17.8% 2.3% 2.3%
P/BV (x) 4.8 3.3 2.8 2.7 2.7
EV/EBITDA (x) 19.8 15.8 14.9 13.2 12.1
Net debt/(cash) 2,035 2,253 2,992 2,293 1,618
Dividend Yield 0.8% 1.0% 1.1% 1.2% 1.4%
31
a delayed basis.
Sage Group: Summary of Financials

Revenue 1,846 1,947 2,158 2,315 2,502 Cash flow from operating activities 376 285 477 514 567
COGS (131) (138) (151) (162) (175) o/w Depreciation & amortization 47 51 50 52 55
Gross profit 1,715 1,811 2,008 2,155 2,329 o/w Changes in working capital 55 22 66 71 77
SG&A (1,357) (1,434) (1,565) (1,664) (1,782)
Adj. EBITDA 405 428 494 543 602 Cash flow from investing activities 62 (284) (55) (56) (57)
Adj. EBIT 358 377 444 491 547 as % of sales 2.1% 0.6% 0.8% 0.8% 0.8%
Net Interest (25) (31) (26) (22) (17)
Adj. PBT 333 346 418 469 530 Cash flow from financing activities (694) (127) (208) (219) (227)
Minority Interest - o/w Shares issued/(repurchased) 0 0 0 0 0
Adj. Net Income 250 263 316 355 401 o/w Net debt issued/(repaid) (137) 350 0 0 0
Reported (DIL) EPS 22.94 25.48 30.57 34.16 38.34 Net change in cash (281) (78) 214 239 283
Adj. (DIL) EPS 22.94 25.48 30.57 34.16 38.34
Adj. Free cash flow to firm 356 307 480 512 560
DPS 17.68 18.40 19.14 19.90 20.50 y/y Growth (11.4%) (13.8%) 56.6% 6.7% 9.3%
Payout ratio 77.1% 72.2% 62.6% 58.3% 53.5%
Cash and cash equivalents 567 489 703 942 1,224 Gross margin 92.9% 93.0% 93.1% 93.1% 93.1%
Accounts receivable 295 355 368 390 408 EBITDA margin 21.9% 22.0% 22.9% 23.5% 24.0%
Inventories - EBIT margin 19.4% 19.4% 20.6% 21.2% 21.9%
Current assets 924 883 1,110 1,370 1,671
PP&E 164 152 139 126 111 ROE 18.1% 21.0% 21.7% 22.2% 22.6%
LT investments 0 0 0 0 0 ROA 7.1% 7.3% 7.9% 8.4% 8.9%
Other non current assets 174 151 151 151 151 ROCE 11.8% 12.6% 12.5% 13.2% 13.8%
Net debt/Equity 0.2 0.5 0.3 0.2 NM
Short term borrowings 65 178 178 178 178 Net debt/EBITDA 0.6 1.7 1.1 0.5 NM
Payables 592 368 393 422 453
Other short term liabilities 723 780 844 911 983 Sales/Assets (x) 0.5 0.5 0.5 0.5 0.6
Long-term debt 749 1,044 1,044 1,044 1,044 Interest cover (x) 16.2 13.8 18.9 24.8 35.4
Other long term liabilities 767 1,134 1,134 1,134 1,134 Operating leverage 430.5% 97.0% 163.7% 146.2% 141.1%
Minority interests - - - EBITDA y/y Growth (13.3%) 5.7% 15.3% 10.1% 10.7%
Total liabilities & equity 3,329 3,896 4,111 4,362 4,657 EPS y/y Growth (15.6%) 11.1% 19.9% 11.7% 12.2%
P/E (x) 33.0 29.7 24.7 22.1 19.7
y/y Growth (32.1%) 32.8% 8.8% 9.6% 10.8%
P/BV (x) 741.5 558.3 513.3 468.5 422.9
EV/EBITDA (x) 19.8 19.9 16.8 14.9 13.0
Net debt/(cash) 247 733 519 280 (2)
Dividend Yield 2.3% 2.4% 2.5% 2.6% 2.7%

Note: £ in millions (except per-share data).Fiscal year ends Sep. o/w - out of which
32
a delayed basis.
Capgemini: Summary of Financials

COGS (11,712) (13,368) (16,158) (17,051) (18,205) o/w Depreciation & amortization 649 672 783 812 847
Gross profit 4,136 4,792 5,838 6,167 6,650 o/w Changes in working capital (44) 529 (382) (429) (418)
SG&A (2,257) (2,452) (2,964) (3,128) (3,339)
Adj. EBITDA 2,415 2,890 3,522 3,718 4,026 Cash flow from investing activities (1,714) (678) (595) (497) (517)
Net Interest (82) (117) (99) (102) (102)
Adj. PBT 1,355 1,680 2,255 2,455 2,749 Cash flow from financing activities 562 (1,746) (1,962) (1,542) (1,428)
Minority Interest 2 (2) (3) (3) (3) o/w Shares issued/(repurchased) (237) 390 (1,030) (425) (250)
Adj. Net Income 1,220 1,512 1,874 2,027 2,215 o/w Net debt issued/(repaid) 3,035 (1,361) 0 0 0
Reported (DIL) EPS 5.55 6.65 8.83 9.90 11.04 Net change in cash 378 291 (68) 495 873
Adj. (DIL) EPS 7.07 8.69 10.74 11.69 12.73
DPS 1.95 2.40 3.19 3.58 3.99 y/y Growth (10.5%) 71.4% (6.6%) 2.9% 13.8%
Payout ratio 35.2% 36.1% 36.2% 36.2% 36.2%
Shares outstanding (DIL) 173 174 175 173 174
Other current assets 2,315 1,264 3,961 3,996 4,062 Net profit margin 7.7% 8.3% 8.5% 8.7% 8.9%
Current assets 7,839 8,999 11,295 12,246 13,644
PP&E 1,692 1,703 2,113 2,187 2,287 ROE 16.8% 20.8% 21.0% 20.6% 20.2%
LT investments 545 814 931 931 931 ROA 6.1% 6.6% 7.3% 7.3% 7.7%
Other non current assets 1,528 1,695 1,762 1,712 1,662 ROCE 9.8% 10.6% 12.3% 12.6% 13.0%
Net debt/Equity 0.8 0.4 0.3 0.3 0.1
Short term borrowings 951 87 200 200 200 Net debt/EBITDA 2.0 1.1 0.9 0.7 0.4
Payables 3,358 4,361 6,026 6,043 6,129
Other long term liabilities 8,455 8,041 8,038 7,928 7,818 Operating leverage 48.2% 175.4% 111.3% 109.8% 133.4%
Shareholders' equity 6,103 8,467 9,377 10,322 11,613 Revenue y/y Growth 12.2% 14.6% 21.1% 5.6% 7.0%
Minority interests 12 12 15 15 15 EBITDA y/y Growth 9.1% 19.7% 21.9% 5.6% 8.3%
21,954 24,033 27,225 28,202 29,649 EPS y/y Growth 13.8% 23.0% 23.5% 8.9% 8.9%
Total liabilities & equity
P/E (x) 25.7 20.9 16.9 15.5 14.3
y/y Growth (28.1%) 37.9% 10.6% 10.9% 12.1%
P/BV (x) 5.0 3.6 3.3 3.0 2.6
EV/EBITDA (x) 14.1 11.2 9.2 8.5 7.6
Net debt/(cash) 4,904 3,227 3,203 2,599 1,616
Dividend Yield 1.1% 1.3% 1.8% 2.0% 2.2%

33
a delayed basis.
Amadeus IT Group SA: Summary of Financials

Revenue 2,174 2,670 4,514 5,314 6,022 Cash flow from operating activities 33 636 1,300 1,838 2,087
COGS (277) (495) (1,193) (1,401) (1,589) o/w Depreciation & amortization 829 683 636 680 700
Gross profit 1,897 2,175 3,322 3,913 4,433 o/w Changes in working capital 11 83 (80) 56 50
SG&A (1,598) (1,340) (1,494) (1,339) (1,457)
Adj. EBITDA 62 599 1,584 2,149 2,494 Cash flow from investing activities (1,474) (206) (532) (590) (659)
Adj. EBIT (771) (84) 949 1,469 1,794 as % of sales 23.1% 17.2% 12.1% 12.0% 12.0%
Net Interest (68) (82) (60) (41) (25)
Adj. PBT (874) (195) 847 1,413 1,753 Cash flow from financing activities 2,456 (866) (671) (477) (677)
Tax 256 61 (203) (367) (456) o/w Dividends paid (241) 0 0 (320) (520)
Minority Interest - - - - - o/w Shares issued/(repurchased) 733 0 0 0 0
Adj. Net Income (303) (42) 692 1,104 1,356 o/w Net debt issued/(repaid) 2,140 (669) (514) 0 0
Reported (DIL) EPS (1.36) (0.29) 1.38 2.23 2.78 Net change in cash 993 (426) 98 771 752
Adj. (DIL) EPS (0.66) (0.09) 1.49 2.37 2.91
Adj. Free cash flow to firm (574) 109 687 1,132 1,297
DPS 0.00 0.00 0.71 1.16 1.44 y/y Growth (159.3%) (118.9%) 531.9% 64.9% 14.6%
Payout ratio 0.0% 0.0% 51.7% 51.7% 51.7%
Shares outstanding (DIL) 460 456 465 465 465
Accounts receivable 254 442 451 531 602 EBITDA margin 2.9% 22.4% 35.1% 40.4% 41.4%
Inventories - - - - - EBIT margin (35.5%) (3.1%) 21.0% 27.7% 29.8%
Other current assets 1,309 1,074 1,026 1,066 1,101 Net profit margin (13.9%) (1.6%) 15.3% 20.8% 22.5%
Current assets 3,118 2,644 2,703 3,594 4,452
PP&E 348 279 320 352 ROE
389 (8.0%) (1.1%) 16.9% 23.0% 24.4%
LT investments - - - - ROA- (2.7%) (0.4%) 6.2% 9.4% 10.7%
Other non current assets 748 690 690 690 ROCE
690 (12.9%) (1.4%) 8.9% 12.7% 14.2%
Total assets 11,700 11,182 11,233 12,150 SG&A/Sales
13,098 73.5% 50.2% 33.1% 25.2% 24.2%
Net debt/Equity 0.8 0.8 0.6 0.3 0.2
Short term borrowings 1,321 635 627 627 627 Net debt/EBITDA 49.6 5.1 1.6 0.8 0.4
Payables 407 735 677 797 903
Other short term liabilities 665 634 580 636 686 Sales/Assets (x) 0.2 0.2 0.4 0.5 0.5
Other long term liabilities 5,533 5,414 4,900 4,900 4,900 Operating leverage 246.5% (390.4%)(1777.5%) 310.1% 165.9%
Total liabilities 7,945 7,437 6,803 6,979 7,134 Tax rate (29.3%) (31.2%) 24.0% 26.0% 26.0%
Minority interests 11 (0) 3 8 14 EBITDA y/y Growth (97.2%) 866.3% 164.4% 35.6% 16.0%
Total liabilities & equity 11,700 11,182 11,233 12,150 13,098 EPS y/y Growth (122.5%) (86.2%)(1736.1%) 59.5% 22.8%
Valuation FY20A FY21A FY22E FY23E FY24E
BVPS 8.46 8.32 9.84 11.47 13.22
P/E (x) NM NM 34.5 21.6 17.6
y/y Growth (3.6%) (1.6%) 18.2% 16.6% 15.3%
P/BV (x) 6.1 6.2 5.2 4.5 3.9
EV/EBITDA (x) 424.4 43.9 16.3 11.6 9.7
Net debt/(cash) 3,074 3,049 2,545 1,774 1,022
Dividend Yield 0.0% 0.0% 1.4% 2.3% 2.8%

34
a delayed basis.
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with respect to each security or issuer that the Research Analyst covers in this research) that: (1) all of the views expressed in this report
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total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect
this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.]
Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s
(or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this
stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable,
the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia and ex-India)
and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country
market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying
analyst’s coverage universe can be found on J.P. Morgan’s research website.
Coverage Universe: Ogg, Toby: AVEVA Plc (AVV.L), Amadeus IT Group SA (AMA.MC), Atos (ATOS.PA), AutoStore (AUTO.OL),
Capgemini (CAPP.PA), Darktrace (DARK.L), Dassault Systèmes (DAST.PA), Exclusive Networks (EXN.PA), Hexagon (HEXAb.ST), Indra
(IDR.MC), OVHcloud (OVH.PA), SAP (SAPG.DE), SOFTWARE AG (SOWGn.DE), SUSE (SUSEG.DE), Sage Group (SGE.L),
SoftwareONE (SWON.S), TeamViewer (TMV.DE), Temenos (TEMN.S), Trustpilot (TRST.L)
J.P. Morgan Equity Research Ratings Distribution, as of October 01, 2022

Overweight Neutral Underweight
(buy) (hold) (sell)
J.P. Morgan Global Equity Research Coverage* 50% 37% 13%
IB clients** 50% 46% 33%
JPMS Equity Research Coverage* 50% 38% 12%
IB clients** 70% 68% 50%
*Please note that the percentages might not add to 100% because of rounding.
**Percentage of subject companies within each of the "buy," "hold" and "sell" categories for which J.P. Morgan has provided
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35
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J P M O R G A N Equity Research

European Software & IT Services

on license/subs risk, cyclical risk and valuation risk. 20%

Equity Ratings and Price Targets

Source: J.P. Morgan estimates.

Macroeconomic risk given spending pressure and mounting warnings in software

Source: J.P. Morgan estimates, Company data.

Cloud gross margin ramp implies ~800bps of expansion, which is high

EBIT margin ramp implies a step up despite lackluster margins historically

Source: J.P. Morgan estimates, Company data.

Competitive intensity is high with well resourced competition across segments

Share-based compensation stepped up meaningfully in 2021

SAP CFO Luka Mucic, GS Conference February 2022

2. SAP’s initial share-based compensation guidance for €3.0-3.3bn was based on

SAP CFO Luka Mucic, GS Conference February 2022

Figure 6: SAP versus US enterprise / back-office software group

Source: Bloomberg Finance L.P.

Source: J.P. Morgan estimates.

Dassault Systemes: Cautiousness building

1. License to subscriptions is a cause for concern on the licenses if trend

Source: Company reports. Source: Company reports.

Christian Klein, CEO SAP (Conference September 2022)

1. High licenses hard to get comfortable with in current environment: Dassault

Source: Company reports. Source: Company reports.

Capgemini: Cyclicality the focus

1. Digital tailwinds are strong as organisations transform: Capgemini offers clean

Amadeus: All eyes on travel recovery

which should support Passenger Boarded volumes in 2023 (Amadeus indicated it

Hexagon: Questions around cyclicality

Sage: Investors like the story

Digital Twin & Industrial Software Feedback

• Capgemini: Feedback on Capgemini’s developments in the Intelligent Industry and

Investment Thesis, Valuation and Risks

• Any delays in product development or releases could disappoint investors – particularly

Investment Thesis, Valuation and Risks

heavily in their own cloud offering.

Investment Thesis, Valuation and Risks

growth for Hexagon.

Investment Thesis, Valuation and Risks

Investment Thesis, Valuation and Risks

Investment Thesis, Valuation and Risks

SAP: Summary of Financials

Source: Company reports and J.P. Morgan estimates.

Dassault Systèmes: Summary of Financials

Hexagon: Summary of Financials

Sage Group: Summary of Financials

Source: Company reports and J.P. Morgan estimates.

Capgemini: Summary of Financials

Source: Company reports and J.P. Morgan estimates.

Amadeus IT Group SA: Summary of Financials

Source: Company reports and J.P. Morgan estimates.

J.P. Morgan Equity Research Ratings Distribution, as of October 01, 2022

"Other Disclosures" last revised November 12, 2022.

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