1/12 Sector Guide

Pocket Name/ /25-05-2018

Pocket Guide / dd.mm.yyyy

Schindler

Industry Becoming stronger in Asia: Schindler is catching up

with its peers in strategic growth markets. Order backlog
Industrial Engineering in Asia-Pacific increased to 42% of total in 2017, up
from 24% in 2005. In terms of revenues, Asia’s share
Rating Price Target increased to 31% from 15% over the same period.
Hold CHF 225 FY18 should see further margin improvement:
Following a 2014 with stabilized margins, Schindler
Ticker SCHP SE increased its (adjusted) margin in 2015, 2016 and 2017
and we expect further improvements in 2018. However,
Share price CHF 211
the improvement will probably be less pronounced than
Mkt cap. (mns) CHF 22,347 in 2017 due to sharply higher raw material costs.
Free float (%) 55.8 %
Trad. vol. (mns) CHF 29.1 Defensive construction stock: Schindler remains a
high quality defensive play: Stable service business and
underlying growth drivers. Strong FCF generation, very
Investment Case strong balance sheet. The only Swiss construction stock
An attractive market: Elevators & escalators are an which delivered a positive performance in each of the
attractive industry as growth is driven by the intact last ten years.
structural growth drivers urbanization, an increasingly aged
population, and growing construction spending in emerging
markets. The four global players Otis, Schindler, Kone,
and ThyssenKrupp control about 60% of the new
installation market and pricing behavior is consequently
reasonable. An increasing installed base is creating a
growing capital-light service business, which results in a
steady and predictable source of income.

Recent Newsflow Next Catalysts & Events

24-10-2017 - 3Q17 results (=) 17-08-2018 - 1H18 results

3Q17 EBIT 1% above expectations as better-than- We expect continued sound top-line growth. Key question
expected revenue growth more than offset a weak margin will be whether Schindler will be able to increase its
performance. margin.

16-02-2018 - FY17 results (=) 23-10-2018 - 3Q18 selected key figures

FY17 EBIT bang in line with expectations. Positive growth
outlook for FY18, while cautious on margins.
14-02-2019 - FY18 results
26-04-2018 - 1Q18 results (=) Management is targeting revenue growth of 3-5% in local
Strong order intake, but slight EBIT margin decline due to currencies and a slight EBIT margin improvement.
rising input costs.

Analyst
Bernd Pomrehn , PhD, CFA
+41 58 283 57 99 bernd.pomrehn@vontobel.com
2/12 Schindler / Pocket Guide Vontobel

Criteria analysis

Weak Strong Comment

Growth profile 1 2 3 4 5 6 – Growing above GDP
Pricing power 1 2 3 4 5 6 – Low in NI & moderate in service business
Margin resilience 1 2 3 4 5 6 – Product mix with impact
Corporate governance 1 2 3 4 5 6 – Dual-class share structure
Financial metrics 1 2 3 4 5 6 – High net cash position
Valuation 1 2 3 4 5 6 – Upper end of the historical range

Business description Performance

Global leader founded in 1874: The Schindler Group is global

number two in elevators, escalators, and moving walks. It is active in
the areas of production, installation, maintenance, and modernization.

2x3 markets - different profitability: The group is split into three

regional (Americas, Europe and APAC) and three functional markets
(new installation, modernization and service business). Profitability is
highest in the service and lowest in the NI business. Chinese
profitability has increased significantly in recent years and is now
above group average.

Risks to our investment case

Market risks: Changes in interest rates, foreign currency exchange rates

Asia-Pacific accounts for 63% of global NI (2017): Any economic uncertainties in China will immediately impact the
new installations business (~50% of total sales).

Technology risks: Right product for the market - e.g. mid-rise residential elevators at low cost is different from
emerging (China) to developed markets (fewer floors and leverage).

China became a major top line and EBIT driver for Schindler: On the back of above-average growth over several
years, the Chinese market has gained importance. This is now all the more true at EBIT level, as margins have, in the
meantime, risen to above group level. Hence, any shocks in this market would affect the P&L.

Sensitivity analysis

Low High Comment

Cyclicality 1 2 3 4 5 6 – Defensive: 60-70% of EBIT from service
Earnings visibility 1 2 3 4 5 6 – Lead time (orders) is at about one year
Operating leverage 1 2 3 4 5 6 – Low given the high share of service business
Dependence on FX movements 1 2 3 4 5 6 – Mainly translation
Dependence on raw material prices 1 2 3 4 5 6 – Material exp. ~29% - steel, copper & wires
Dependence on key customers 1 2 3 4 5 6 – Dependence on projects but not key customers
Dependence on key suppliers 1 2 3 4 5 6 – Broad global supplier base
3/12 Schindler / Pocket Guide Vontobel

Corporate governance Management

Investor communication Chairman

Quarterly results incl. calls, starting to improve communications (visiting conferences, Silvio Napoli
reviewing roadshow policy). since 2017

Track record during last downturn CEO

Large projects are usually cancelled/postponed in times of downturn resulting in a slight Thomas Oetterli
sales decline (09: -1.8% lfl) but share of service increases and profitability rises (09: +150 since 2016
bps YoY).
CFO
Remuneration & incentives Urs Scheidegger
Executive BoD additionally get performance-related (op. cash flow excl. chg in NWC) since 2018
components. The targeted split of fixed, short-term and long-term variable compensation is
34%/33%/33% (CEO) and 50%/25%/25% for other members. CEO received CHF 4.0 mn
(+16% yoy) or 16% (17%) of total group management in FY17. Chairman Silvio Napoli
received total compensation of CHF 3.9 mn (CHF 4.0mn in FY16).

SWOT analysis

– Strong market position: no.1 in Escalators, no.3 in – Limited information flow and an unattractive capital
Elevators structure (dual-class share structure, Schindler &
WEAKNESSES

– Service (after-sales) business is underpinned by its Bonnard families control 71.1% of the voting rights)
STRENGTHS

mandatory character (security issues). Makes the – Lagged behind main peers Otis (part of UTX) and Kone
business rather defensive. in terms of profitability for a long time, but is now
– High portion of recurring revenues from after-sales catching up
business (50%-55% of rev. and 60-70% EBIT)
– Cash cow: high FCF generation of more than CHF 500
mn p.a.

– Strong growth in Asia - catch-up potential in China as – Bulk risk in the NI market in Asia in both growth (63% of
market share (VontE 6-7%) is clearly below main peers total NI in 2017) and competition (pricing).
OPPORTUNITIES

Kone and Otis. – Even weaker market in China

– Accelerating momentum of scale effects – Increasing competition in the high-margin service and
THREATS

– Intensifying investor communication modernization businesses

– Increased profitability in China

Guidance vs Vontobel and consensus estimates

Guidance: Outlook 2018: Revenue is expected to increase 3-5% in local currencies, based on projected market growth
of 3% yoy. An earnings outlook will be given with the publication of 1H18 results.

Vs Vontobel estimates: Sales growth of 5.1% in l.c. to CHF 10,789 mn. Our EBIT estimate of CHF 1,287 mn implies a
margin of 11.9% (+16bps). Group profit of CHF 978 mn (net profit: CHF 920 mn).

Vs consensus: Consensus expects FY18 sales of CHF 10,740 mn and an EBIT of CHF 1,303 mn (EBIT margin of
12.1%).
4/12 Schindler / Pocket Guide Vontobel

Divisions (all figures as % share of total)

Elevator & Escalator Revenues FY18E CHF 10,789 EBIT FY18E CHF 1,287 (100%)
(100%)
Description About 12 mn elevators and about 1 mn escalators are in operation worldwide. Each year around
850k and 50tsd elevators and escalators are installed, respectively. Product portfolio consists of
elevators, escalators, moving walks, transit management (peak-time traffic flow), maintenance and
modernization.
Drivers Growth: NI: population growth, urbanization, demographics; Modernization: safety and legislation,
aging population & installed base; Service: conversion rate from NI, safety and optimization
(remote control)
Profitability: 1) Harmonizing product offer: lower production and installation costs; 2) reduce fix
costs: increase density of installed base, pre-engineering, reduce service intervention per elevator
with the aid of IT
Market shares Elevators & Escalators: Otis (17%), Schindler (14%), Kone (13%), Thyssen (12%), Hitachi (10%) -
Escalators alone: Schindler (>20%), Otis (<20%)
Competitors Otis, Kone, ThyssenKrupp, Mitsubishi, Hitachi, Fujitec, Toshiba, Shanghai Mechanical, other
(27%)
Customers From residential to commercial, public buildings and infrastructure (e.g. airports, stations)
Suppliers Various
5/12 Schindler / Pocket Guide Vontobel

DCF valuation
Criteria analysis Explicit forecast period Transition period Terminal
DCF/EVA valuation 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E
Invested capital (average) CHF mns 3,566 3,742 3,806 3,777 3,755 3,815 3,875 3,930 3,978 4,017
ROIC % 27.8 29.0 30.0 32.7 34.6 36.0 37.2 38.5 39.7 40.6
ROIC-WACC % 22.6 23.6 24.3 26.7 28.4 29.6 30.6 31.7 32.7 33.3
Economic profit (EVA) CHF mns 807 883 925 1,010 1,067 1,129 1,185 1,245 1,299 1,339
Discounted EVA CHF mns 780 808 798 816 806 794 773 749 720 680
NWC intensity % 13.7 13.7 13.7 12.2 12.1 12.0 11.9 11.8 11.7 11.6
Implied P&L and FCF 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E
Revenues CHF mns 10,789 11,282 11,590 12,170 12,766 13,379 13,981 14,540 15,049 15,466
Revenues growth % 6.0 4.6 2.7 5.0 4.9 4.8 4.5 4.0 3.5 2.8
EBIT CHF mns 1,287 1,410 1,484 1,604 1,687 1,784 1,872 1,965 2,051 2,118
EBIT margin % 11.9 12.5 12.8 13.2 13.2 13.3 13.4 13.5 13.6 13.7
Tax rate % 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0
NOPLAT (Invested capital * ROIC) CHF mns 991 1,086 1,142 1,235 1,299 1,373 1,441 1,513 1,579 1,631
Depreciation CHF mns 163 170 176 180 185 190 195 200 205 210
Other non-cash items CHF mns -13.1 -0.41 7.42 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Change in NWC CHF mns -209 -70.5 -42.2 104 -60.0 -60.8 -58.3 -52.0 -45.0 -33.3
Capex CHF mns -225 -180 -180 -180 -185 -190 -195 -200 -205 -210
FCF to the firm CHF mns 707 1,005 1,104 1,339 1,239 1,313 1,383 1,461 1,534 1,598
Discounted FCF CHF mns 463 920 951 1,082 936 923 902 880 850 811
Weighted cost of capital 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E
Cost of equity % 5.2 5.4 5.7 6.0 6.2 6.4 6.6 6.8 7.0 7.3
After-tax cost of debt % 2.3 2.4 2.6 2.7 2.8 2.8 2.9 3.0 3.0 3.1
Market cap/EV % 100 100 100 100 100 100 100 100 100 100
WACC % 5.2 5.4 5.7 6.0 6.2 6.4 6.6 6.8 7.0 7.3
Net present value (NPV) 2018E Sensitivity analysis for NPV per share (avg. WACC vs. term. EBIT margin)
WACC
Explicit and transition period FCF CHF mns 7,906 EBIT\ 5.8% 6.3% 6.8% 7.3% 7.8% 8.3% 8.8%
Discounted cont. value of FCF CHF mns 16,677 10.7% 293 255 226 204 186 171 159
Terminal value as % of EV % 67.8 11.7% 313 271 240 215 196 180 166
Terminal rev. growth assumption % 2.8 12.7% 332 287 253 227 206 188 174
Enterprise value (EV) CHF mns 24,583 13.7% 351 303 266 238 215 197 181
Net debt CHF mns -2,220 14.7% 370 319 280 249 225 205 189
Minorities CHF mns 1,160 15.7% 390 334 293 261 235 214 196
Associates CHF mns 0.00 16.7% 409 350 306 272 245 222 204
Other adjustments to EV CHF mns 0.00
Implied market cap CHF mns 25,643
Equivalent total # of listed shares mns 108
Reporting currency to CHF rate x 1.00
Net present value (NPV) per
CHF 238
share
NPV per share 12 months
CHF 250
forward
6/12 Schindler / Pocket Guide Vontobel

Financials
Criteria analysis
Segment information by divisions
Orders 2012 2013 2014 2015 2016 2017 2018E 2019E
Elevator & Escalator CHF mns 8,967 9,456 9,979 9,967 10,374 10,989 11,621 12,155
Growth (in CHF) 2012 2013 2014 2015 2016 2017 2018E 2019E
Elevator & Escalator % 8.7 5.5 5.5 -0.1 4.1 5.9 5.8 4.6
Growth (in local currencies) 2012 2013 2014 2015 2016 2017 2018E 2019E
Elevator & Escalator % 8.5 7.2 7.8 4.6 4.6 5.5 4.9 4.6
Revenues 2012 2013 2014 2015 2016 2017 2018E 2019E
Elevator & Escalator CHF mns 8,258 8,813 9,246 9,391 9,683 10,179 10,789 11,282
Growth (in CHF) 2012 2013 2014 2015 2016 2017 2018E 2019E
Elevator & Escalator % 5.1 6.7 4.9 1.6 3.1 5.1 6.0 4.6
Growth (in local currencies) 2012 2013 2014 2015 2016 2017 2018E 2019E
Elevator & Escalator % 5.0 8.4 7.3 6.7 3.6 4.6 5.1 4.6
EBIT 2012 2013 2014 2015 2016 2017 2018E 2019E
Elevator & Escalator CHF mns 990 896 932 1,002 1,133 1,187 1,287 1,410
Margin 2012 2013 2014 2015 2016 2017 2018E 2019E
Elevator & Escalator % 12.0 10.2 10.1 10.7 11.7 11.7 11.9 12.5

Segment information by regions

Revenues 2012 2013 2014 2015 2016 2017 2018E 2019E
Europe CHF mns 3,817 3,981 3,975 3,654 3,810 4,089 4,359 4,524
Americas CHF mns 2,400 2,496 2,578 2,636 2,726 2,927 3,075 3,249
APAC CHF mns 2,041 2,336 2,693 3,101 3,147 3,163 3,355 3,509
Growth (in CHF) 2012 2013 2014 2015 2016 2017 2018E 2019E
Europe % -2.2 4.3 -0.2 -8.1 4.3 7.3 6.6 3.8
Americas % 7.5 4.0 3.3 2.2 3.4 7.4 5.1 5.7
APAC % 18.7 14.5 15.3 15.2 1.5 0.5 6.1 4.6
% of total revenues 2012 2013 2014 2015 2016 2017 2018E 2019E
Europe % 46.2 45.2 43.0 38.9 39.3 40.2 40.4 40.1
Americas % 29.1 28.3 27.9 28.1 28.2 28.8 28.5 28.8
APAC % 24.7 26.5 29.1 33.0 32.5 31.1 31.1 31.1
7/12 Schindler / Pocket Guide Vontobel

Income Statement 2012 2013 2014 2015 2016 2017 2018E 2019E
Revenues CHF mns 8,258 8,813 9,246 9,391 9,683 10,179 10,789 11,282
Gross profit CHF mns 5,816 6,077 6,345 6,491 6,870 7,244 7,643 8,022
Total operating expenses CHF mns -4,707 -5,061 -5,291 -5,345 -5,646 -5,909 -6,193 -6,442
EBITDA CHF mns 1,109 1,016 1,260 1,146 1,274 1,335 1,450 1,580
Depreciation of tangible assets CHF mns -82.0 -85.0 -98.0 -103 -110 -116 -122 -128
EBITA CHF mns 1,027 931 1,162 1,043 1,164 1,219 1,328 1,452
Amortization of intangibles CHF mns -37.0 -35.0 -52.0 -41.0 -31.0 -37.0 -41.0 -42.0
Impairment and amortization of goodwill CHF mns 0.00 0.00 -7.00 0.00 0.00 0.00 0.00 0.00
EBIT CHF mns 990 896 1,103 1,002 1,133 1,182 1,287 1,410
Total operating one-off items CHF mns 0.00 0.00 -171 0.00 -50.0 0.00 0.00 0.00
Adjusted EBIT CHF mns 990 896 932 1,002 1,083 1,182 1,287 1,410
Net financial result CHF mns -22.0 -240 -35.0 -29.0 -67.0 -15.0 -17.0 -6.00
Extraordinary result CHF mns 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Pretax profit CHF mns 983 700 1,114 982 1,097 1,161 1,270 1,404
Taxes CHF mns -253 -237 -247 -235 -274 -282 -292 -319
Group net profit CHF mns 730 463 867 747 823 879 978 1,085
Minority interests CHF mns -28.0 -31.0 -40.0 -58.0 -59.0 -60.0 -58.0 -62.0
Shareholders' net profit CHF mns 702 432 827 689 764 819 920 1,023
Total one-off items CHF mns 0.00 219 -162 0.00 -38.0 0.00 0.00 0.00
Adjusted net profit CHF mns 702 651 665 689 726 819 920 1,023
Growth 2012 2013 2014 2015 2016 2017 2018E 2019E
Revenues % 5.1 6.7 4.9 1.6 3.1 5.1 6.0 4.6
Organic revenues % 5.0 8.4 5.9 4.8 3.6 4.6 5.1 4.6
Gross profit % 5.3 4.5 4.4 2.3 5.8 5.4 5.5 5.0
EBITDA % 21.6 -8.4 24.0 -9.0 11.2 4.8 8.6 9.0
EBIT % 24.8 -9.5 23.1 -9.2 13.1 4.3 8.9 9.6
Net profit % 21.9 -38.5 91.4 -16.7 10.9 7.2 12.3 11.2
Net profit adjusted % 21.9 -7.3 2.2 3.6 5.4 12.8 12.3 11.2
Margin analysis 2012 2013 2014 2015 2016 2017 2018E 2019E
Gross margin % 70.4 69.0 68.6 69.1 70.9 71.2 70.8 71.1
EBITDA margin % 13.4 11.5 13.6 12.2 13.2 13.1 13.4 14.0
EBITA margin % 12.4 10.6 12.6 11.1 12.0 12.0 12.3 12.9
EBIT margin % 12.0 10.2 11.9 10.7 11.7 11.6 11.9 12.5
Adjusted EBIT margin % 12.0 10.2 10.1 10.7 11.2 11.6 11.9 12.5
Tax rate % 25.7 33.9 22.2 23.9 25.0 24.3 23.0 22.7
Net profit margin % 8.5 4.9 8.9 7.3 7.9 8.0 8.5 9.1
Adjusted net profit margin % 8.5 7.4 7.2 7.3 7.5 8.0 8.5 9.1

Revenues by divisions 2018E Revenues by regions 2018E

8/12 Schindler / Pocket Guide Vontobel

Balance Sheet 2012 2013 2014 2015 2016 2017 2018E 2019E
Cash and cash equivalents CHF mns 2,178 2,228 2,722 1,975 1,988 1,709 1,935 2,408
Marketable securities CHF mns 448 516 321 557 338 191 191 191
Inventories CHF mns 395 444 508 435 438 517 563 592
Accounts receivable CHF mns 1,444 1,511 1,696 1,652 1,818 2,089 2,303 2,408
Prepayment and accrued income CHF mns 595 674 792 775 737 840 890 931
Other current assets CHF mns 110 115 84.0 81.0 101 134 134 134
Total current assets CHF mns 5,170 5,488 6,123 5,475 5,420 5,480 6,016 6,664
Tangible assets CHF mns 522 655 802 848 924 1,041 1,144 1,196
Other intangible assets CHF mns 243 222 212 192 239 304 263 221
Goodwill CHF mns 561 520 773 678 716 819 819 819
Financial assets CHF mns 805 378 504 529 641 638 638 638
Other non-current assets CHF mns 218 200 280 317 324 263 444 546
Total non-current assets CHF mns 2652 2309 2798 2784 2883 3146 3389 3501
Total assets CHF mns 7,822 7,797 8,921 8,259 8,303 8,626 9,405 10,164
Accounts payable CHF mns 1,745 1,915 2,157 2,007 2,003 2,179 2,280 2,384
Short-term interest-bearing debt CHF mns 133 594 409 813 254 160 160 160
Accrued expenses and deferred income CHF mns 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other current liabilities/provisions CHF mns 1,450 1,465 1,760 1,865 2,033 2,040 2,221 2,323
Total current liabilities CHF mns 3,328 3,974 4,326 4,685 4,290 4,379 4,661 4,867
Long-term interest-bearing debt CHF mns 621 413 540 100 55.0 20.0 20.0 20.0
Pension liabilities (long-term portion) CHF mns 577 411 622 676 653 499 499 499
Other non-current liabilities CHF mns 124 134 107 107 115 116 116 116
Provisions CHF mns 359 340 330 334 343 344 344 344
Total non-current liabilities CHF mns 1,681 1,298 1,599 1,217 1,166 979 979 979
Total liabilities CHF mns 5,009 5,272 5,925 5,902 5,456 5,358 5,640 5,846
Total interest-bearing debt CHF mns 621 413 949 913 309 180 180 180
Ordinary share capital CHF mns 11.8 11.7 11.3 11.2 10.8 10.8 10.8 10.8
Share premium & retained earnings CHF mns 2,768 2,463 2,879 2,265 2,744 3,150 3,647 4,201
Shareholders' equity CHF mns 2,780 2,475 2,890 2,276 2,755 3,161 3,658 4,211
Minority interests CHF mns 33.0 50.0 106 81.0 92.0 107 107 107
Group equity CHF mns 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total liabilities and equity CHF mns 7,822 7,797 8,921 8,259 8,303 8,626 9,405 10,164

Balance sheet analysis 2012 2013 2014 2015 2016 2017 2018E 2019E
Net working capital (NWC) CHF mns 689 714 839 855 990 1,267 1,476 1,546
NWC/revenues % 8.2 8.0 8.4 9.0 9.5 11.1 12.7 13.4
NWC/total assets % 8.8 9.2 9.4 10.4 11.9 14.7 15.7 15.2
Inventory days days 60 56 60 59 57 59 63 65
Receivables days days 62 61 63 65 65 70 74 76
Payables days days 257 244 256 262 260 260 259 261
Net debt (+) / net cash (-) CHF mns -2,005 -2,331 -2,094 -1,935 -2,455 -2,147 -2,373 -2,846
Equity/total assets % 36.0 32.4 33.6 28.5 34.3 37.9 40.0 42.5
Net debt/equity (gearing) % -71.3 -92.3 -69.9 -82.1 -86.2 -65.7 -63.0 -65.9
Net debt/EBITDA x -1.7 -1.7 -1.7 -1.4 -1.6 -1.3 -1.3 -1.5
9/12 Schindler / Pocket Guide Vontobel

Cash flow statement 2012 2013 2014 2015 2016 2017 2018E 2019E
Group profit CHF mns 730 463 902 747 823 884 978 1,085
Depreciation + Amortization CHF mns 119 120 150 144 141 153 163 170
Goodwill impairment CHF mns 0.00 0.00 7.00 0.00 0.00 0.00 0.00 0.00
Non-cash financial income (-)/expenses (+) CHF mns 76.0 263 -136 357 269 32.0 0.00 0.00
Inc. (+)/decr.(-) in deferred taxes CHF mns 0.00 0.00 0.00 -284 -292 0.00 0.00 0.00
Inc. (+)/decr.(-) in pension provisions CHF mns -51.0 -54.0 -51.0 0.00 0.00 0.00 0.00 0.00
Inc. (+)/decr.(-) in other provisions CHF mns -76.0 -53.0 -14.0 7.00 22.0 -5.00 0.00 0.00
Other non-cash changes/adjustments CHF mns 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Operation cash flow (before chng in NWC) CHF mns 798 739 858 971 963 1,064 1,141 1,255
Inc. (-)/decr. (+) in NWC CHF mns -16.0 69.0 44.0 105 -34.0 -254 -209 -70.5
CF from operating activities CHF mns 782 808 902 1,076 929 810 932 1,185
Capex CHF mns -164 -259 -191 -196 -222 -262 -225 -180
Operating free cash flow (FCF) CHF mns 618 549 711 880 707 548 707 1,005
Invest.(-)/disp.(+) of tang./intang. CHF mns -368 95.0 302 5.00 108 8.00 0.00 0.00
Invest.(-)/disp.(+) of associates CHF mns -17.0 -9.00 -3.00 -2.00 -10.0 0.00 0.00 0.00
Invest.(-)/disp.(+) of non-core assets CHF mns 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Acquisitions CHF mns 618 549 711 880 707 548 707 1,005
Other adjustments CHF mns -346 81.0 240 -290 182 0.00 0.00 0.00
CF from investing activities CHF mns -277 457 1,059 397 765 294 482 825
Proceeds from issue of share capitals CHF mns 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Disposal (+)/ purchase (-) of shares CHF mns -124 -531 -76.0 -762 -32.0 0.00 0.00 0.00
Inc. (+)/decr. (-) in equity CHF mns -124 -531 -76.0 -762 -32.0 0.00 0.00 0.00
Dividend paid CHF mns -255 -268 -259 -408 -344 -585 -481 -532
Inc. (+)/decr.(-) in interest bearing debt CHF mns -80.0 215 -216 -50.0 -487 -45.0 0.00 0.00
Other adjustments CHF mns 0.00 0.00 -3.00 -78.0 -40.0 -46.0 0.00 0.00
CF from financing activities CHF mns -459 -584 -554 -1,298 -903 -676 -481 -532
Translation impact CHF mns -16.0 -10.0 35.0 -23.0 -8.00 -23.0 0.00 0.00
Inc. (+)/decr. (-) in cash CHF mns 1,235 1,728 2,863 2,220 2,517 1,988 2,392 3,095

Cash flow analysis 2012 2013 2014 2015 2016 2017 2018E 2019E
Operating cash flow margin % 9.5 9.2 9.8 11.5 9.6 8.0 8.6 10.5
Capex/revenues % 2.0 2.9 2.1 2.1 2.3 2.6 2.1 1.6
Capex/depreciation % 137.8 215.8 127.3 136.1 157.4 171.2 138.0 105.9
10/12 Schindler / Pocket Guide Vontobel

Price 2012 2013 2014 2015 2016 2017 2018E 2019E

Price (year-end or current) CHF 132.00 131.30 144.00 168.00 179.60 224.30 210.80 210.80
High CHF 132.20 145.20 145.70 171.00 196.80 227.80 238.00 NA
Low CHF 103.50 122.10 120.50 127.30 148.50 178.50 198.60 NA
Average basic shares outstanding ('000) 46,895 44,779 44,026 42,081 40,373 40,461 40,505 40,505
Year-end basic shares outstanding ('000) 46,895 46,172 44,619 44,236 40,717 40,717 40,717 40,717
Average fully diluted shares ('000) 46,895 46,172 44,619 44,236 40,717 40,717 40,717 40,717
Market capitalization CHF mns 15,463 15,391 16,148 18,934 19,246 23,923 22,347 22,347
Enterprise value CHF mns 13,851 13,394 13,934 18,295 17,789 23,523 21,562 21,168
Per-share data 2012 2013 2014 2015 2016 2017 2018E 2019E
EPS (reported) CHF 6.06 3.76 7.42 6.28 7.14 7.65 8.59 9.56
EPS (adjusted) CHF 5.93 5.56 5.90 6.14 6.74 7.60 8.53 9.49
FCF CHF 5.22 4.83 6.37 8.06 6.61 5.12 6.60 9.38
Net cash (+) / net debt (-) CHF 15.8 14.8 18.6 14.4 18.7 16.0 18.1 22.4
BVPS (reported) CHF 23.5 21.1 25.6 20.3 25.6 29.3 33.9 39.1
Dividend CHF 2.20 2.20 3.20 2.70 5.00 4.00 4.50 5.00
Payout ratio % 37.1 57.9 43.2 42.8 70.0 52.3 52.4 52.3

Valuation 2012 2013 2014 2015 2016 2017 2018E 2019E

P/E (reported) x 21.8 34.9 19.4 26.7 25.1 29.3 24.5 22.1
P/E (adjusted) x 22.3 23.6 24.4 27.4 26.7 29.5 24.7 22.2
P/Op. free cash flow x 25.3 27.2 22.6 20.8 27.2 43.8 31.9 22.5
P/Book (reported) x 5.62 6.21 5.62 8.29 7.03 7.65 6.21 5.40
EV/Sales x 1.68 1.52 1.51 1.95 1.84 2.31 2.00 1.88
EV/EBITDA x 12.5 13.2 11.1 16.0 14.0 17.6 14.9 13.4
EV/EBIT x 14.0 14.9 12.6 18.3 15.7 19.9 16.8 15.0
EV/Op. free cash flow x 22.4 24.4 19.6 20.8 25.2 42.9 30.5 21.1
EV/Equity free cash flow x 27.4 10.6 7.11 12.4 10.5 21.3 15.2 10.5
EV/Invested Capital x 6.87 6.34 5.31 7.11 6.20 6.86 5.82 5.60
FCF yield % 4.00 3.57 4.40 4.65 3.67 2.29 3.16 4.50
Dividend yield % 1.67 1.68 2.22 1.61 2.78 1.78 2.13 2.37

Profitability ratios & ROIC 2012 2013 2014 2015 2016 2017 2018E 2019E
Average invested capital CHF mns 2,006 2,063 2,369 2,600 2,721 3,150 3,566 3,742
NOPLAT CHF mns 733 663 838 762 861 898 991 1,086
Economic profit (EVA) CHF mns 587 513 666 573 664 670 732 814
ROIC % 36.5 32.1 35.4 29.3 31.6 28.5 27.8 29.0
ROE % 26.0 16.4 30.8 26.7 30.4 27.7 27.0 26.0
ROA % 9.5 5.9 10.4 8.7 9.9 10.4 10.8 11.1

Enterprise value 2012 2013 2014 2015 2016 2017 2018E 2019E
Market capitalization CHF mns 15,463 15,391 16,148 18,934 19,246 23,923 22,347 22,347
Net Debt (+) / net cash (-) CHF mns -2,005 -2,331 -2,094 -1,935 -2,455 -2,147 -2,373 -2,846
Value of minorities CHF mns 560 620 800 1,160 1,180 1,200 1,160 1,240
Value of associates CHF mns -300 -880 -920 -180 -620 120 0.00 0.00
Other adjustments for EV calculation CHF mns 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Enterprise value CHF mns 13,851 13,394 13,934 18,295 17,789 23,523 21,562 21,168
11/12 Schindler / Pocket Guide Vontobel

Disclaimer & Disclosures – Equity Research

Criteria analysis
1. Analyst declaration
This Vontobel Report has been produced by the organizational unit responsible for investment research (Research unit, sell-side analysis) of Bank Vontobel AG. Bank Vontobel AG
is subject to supervision by the Swiss Financial Market Supervisory Authority (FINMA). The authors listed on page 1 confirm that this report gives a complete and precise reflection of
their opinion of the analysed company and that they have neither directly nor indirectly received compensation for their assessment or opinion. The compensation of the authors of
this report is not directly related to the investment banking volume generated between Vontobel Group and the analysed company.
The author(s) of this document owns securities in the analysed companies: None
The document was not submitted to the analysed companies before publication or distribution
2. Disclosure of conflicts of interest
As an internationally active company, Vontobel Group is subject to a number of provisions in drawing up and distributing its investment research documents. The maker and
distributors of this financial analysis point out the following potential conflicts of interests: The author and its associated companies
– will or are attempting to generate investment banking business with the analysed companies within the next three months,
– conduct transactions with securities of the analysed companies from time to time
– have participated in capital market transactions/the issue of securities of the following analysed companies in the last 12 months: None
– have been active as Market Maker in equities of the following analysed companies in the last 12 months: None
– have provided other publicly known Investment Banking services for the following companies mentioned in this report in the last 12 months: None
– have received compensation for products and services outside Investment Banking from the following analysed companies: None
– hold mandatory disclosable (%) of the voting rights of the following analysed companies: None
– have executives who are members of the board of the analysed companies: None and
– have executives who are members of the board of Bank Vontobel AG or affiliated companies: None
– have no significant financial interest in the analysed companies and
– have reached no agreement with the analysed companies regarding this financial analysis.

3. Research rating history

The Ratings and/or Rating Outlook of the analysed companies were last changed as follows:
Schindler[SCHP.S] was last changed from Buy to Hold on 22-04-10
4. Global rating breakdown
VT Research universe VT Research universe Share of VT IB clients in rating category
No. As % As %
Buy 34 31 21
Hold 73 67 26
Reduce 2 2 0

The table above is revised at the beginning of each quarter, i.e. it currently reflects the status as at 31 March 2018.

5. Rating plotter charts

The data used for the share price and/or price target chart may have to be adjusted to reflect corporate actions undertaken by the company.

Not Rated: Currently Restricted, Suspended Coverage, or no rating assigned to company due to e.g. advising of analysed company in a capital market transaction, temporary
suspension of analyst coverage or a similar reason.

For company specific disclosures, such as Research rating history or Rating plotter charts, please refer to the most recent company specific information provided by Bank Vontobel
under "https://research.vontobel.com/en/disclaimers/companies" and/or contact Bank Vontobel for further information.

6. Methodology/Rating system
Bank Vontobel’s financial analysts apply a variety of valuation methodologies (e.g. DCF and EVA modelling, 'sum-of-the-parts', break-up and event-related analysis, peer group and
market multiple comparisons) to their own financial projections for the companies they cover. Overall, our investment recommendations take into consideration an assessment of the
company in its entirety and of the sector to which it belongs ("bottom-up approach"). Price target calculation is based on a number of factors, observations and assumptions,
including but not limited to: key business performance indicators and ratios, public and private valuation multiples, comparison with one or more peer groups of comparable
companies, overall equity market valuations, and with the company's own history and track record.

The stock recommendations published by Vontobel’s research team are defined as follows:

Rating Definition

Large Cap SLI Index (incl. tolerance)/non-Swiss stocks of similar market capitalisation
Buy Price target (when set) implies 10% or more upside on a 12-month horizon
Hold Price target (when set) implies 0-10% upside on a 12-month horizon
Reduce Price target (when set) implies downside on a 12-month horizon

Mid & small cap Other Swiss stocks/non-Swiss stocks of similar market capitalisation
Buy Price target (when set) implies 15% or more upside on a 12-month horizon
Hold Price target (when set) implies 0-15% upside on a 12-month horizon
Reduce Price target (when set) downside on a 12-month horizon

Restricted Coverage is temporarily restricted (no price target)

Suspended Coverage Coverage is temporarily suspended (no price target)
12/12 Schindler / Pocket Guide Vontobel

Analysts are required to review their recommendations under the following conditions:
Buy: When upside to price target falls below 5% (all caps).
Hold: When upside to price target reaches or exceeds 15% for large caps or 20% for mid & small cap;
when downside to price target reaches or exceeds 5% (all caps).
Reduce: When upside to price target reaches or exceeds 5% (all caps).
We reserve the right to waive repeated changes of recommendation during periods of unusually high equity market or specific stock price volatility

The use of the valuation methods does not rule out the risk that the stock fails to achieve the "fair value" within the projected period. Numerous factors influence share price
performance. Unforeseen changes can arise from the emergence of competitive pressure, from a change in demand for the products of an issuer, technological development, from
macroeconomic activity, exchange rate fluctuation or from a shift in society’s moral concept. Changes in taxation law or supervisory regulations can often have a grave, unforeseen
impact. This discourse on valuation methods and risk factors does not claim completeness.

For more information on our methodology and rating system see www.vontobel.ch.

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or completeness of the information contained in this report
This research report is for information purposes only and does not constitute a solicitation to invest or investment advice. This report has been written without regard for the financial
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