CA CHEUVREUX German Smaller Companies Review Jan2011

SMALLER COMPANIES
GERMANY
Janaury 2011
SMALLER
COMPANIES
REVIEW
77 companies covered
Market cap below ~EUR4bn
Smaller Companies Team

+49 (0)69 47897 525
www.cheuvreux.com
Disclosures available on www.cheuvreux.com
January 2011
GERMANY
Smaller Companies Review
Cheuvreux's Smaller Companies Team

FRANCE
BENELUX
Coordinator - Carole Rozen

(+33 1) 41 89 73 18
crozen@cheuvreux.com
Robert Van Overbeek - (+31 20) 573 06 81

rvanoverbeek@cheuvreux.com
NORDIC
Hubert d'Aillires - (+33 1) 41 89 74 58

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

jeliason@cheuvreux.com
Emmanuel Fourret - (+33 1) 41 89 73 06

efourret@cheuvreux.com
Mourad Lahmidi - (+33 1) 41 89 75 29
mlahmidi@cheuvreux.com
GERMANY
Amandine Latour - (+33 1) 41 89 75 46

alatour@cheuvreux.com
Craig Abbott - (+49 69) 47 89 75 25

cabbott@cheuvreux.com
Hans-Joachim Heimbrger (+49 69) 47 89 75 40
hheimburger@cheuvreux.com
Oliver Reinberg - (+49 69) 47 89 75 26
oreinberg@cheuvreux.com
AUSTRIA
Markus Remis - (+43) 1 227 12 70 13
mremis@cheuvreux.com
TURKEY
Ilgin Erdogan - (+90) 212 37 11 907
ierdogan@cheuvreux.com
SWITZERLAND
GREECE
Beat Keiser - (+41 1) 218 17 06

bkeiser@cheuvreux.com
Levon Babalyan - (+41 1) 218 17 07
lbabalyan@cheuvreux.com
Olivier Girakhou - (+41 1) 218 17 23
ogirakhou@cheuvreux.com
Mary Psyllaki - (+30) 210 37 34 006

mpsyllaki@cheuvreux.com
SPAIN
ITALY
Adrian Zunzunegui - (34 91) 495 16 28

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

mbaccaglio@cheuvreux.com
Iigo Egusquiza - (34 91) 495 16 33

iegusquiza@cheuvreux.com
www.cheuvreux.com
January 2011
GERMANY
CONTENTS
I Our small cap universe & analysts
II German smaller companies universe key figures
III Sector top picks and focus list
IV Overview of the German smaller companies segment
13
V Valuation multiples
22
VI Company profiles
25
ADVA Optical Networking

Aixtron*
Aurubis AG
Axel Springer
BAUER
BayWa
Bilfinger Berger
BRENNTAG
Carl Zeiss Meditec
Centrotherm*
CropEnergies*
CTS Eventim
DEMAG Cranes
Dialog Semiconductor
Douglas
Draegerwerk
ElringKlinger*
Fielmann
Fraport
Fuchs Petrolub
GEA Group
Gerresheimer
Gerry Weber
GfK
H&R WASAG
Heidelberger Druck
HHLA
Hochtief
Hornbach Holding
Hugo Boss
Jenoptik
Jungheinrich
Kabel Deutschland
KLOECKNER
Kontron
KRONES
KSB
Kuka
Lanxess
26
28
32
36
38
42
46
50
54
58
62
66
70
74
78
82
86
90
94
98
102
106
110
114
118
122
126
130
134
138
142
146
150
152
156
160
164
168
172
Leoni
MANZ AUTOMATION*
MLP
MTU
MVV Energie
Nordex*
Pfeiffer Vacuum
Pfleiderer
Phoenix Solar*
PRAKTIKER
ProSiebenSat.1 Media
Puma
Q-CELLS*
Rational
Rheinmetall
Rhoen Klinikum
Roth&Rau*
SAF-HOLLAND
Sartorius
SGL Carbon
SKW Stahl
SMA*
Software AG
SolarWorld*
Stada
Stratec Biomedical Systems
Strer
Suedzucker
Symrise
TAKKT
Tipp24
Tognum
TOM TAILOR Holding
TUI
Vossloh*
VTG*
Wacker Neuson
Wincor Nixdorf
176
180
184
188
192
196
200
204
208
212
216
218
222
226
230
234
238
242
246
250
254
258
262
266
270
274
278
282
286
290
294
296
300
304
308
312
316
320
* Green tech companies

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

Market Cap
Company
Target
Upside/
(EURm)
Price
Price
downside
AIXTRON SE
3,102
31.2
41.5
33%
AURUBIS
Rating
1/Selected List
Analyst
Klaus RINGEL
Telephone No.
+49 69 47897 542
1,810
44.3
40.0
-10%
2/Outperform
Alexander HAISSL
+49 69 47897 534
BAUER
641
37.5
38.0
1%
2/Outperform
Hans-Joachim HEIMBUERGER
+49 69 47897 540
BAYWA
1,189
34.9
35.0
0%
2/Outperform
Philipp BUMM
+49 69 47897 527
BILFINGER BERGER
2,730
61.9
70.0
13%
1/Selected List
Craig ABBOTT
+49 69 47897 525
BRENNTAG AG
3,687
71.6
52.0
-27%
3/Underperform
Sebastian KAUFFMANN
+49 69 47897 524
CARL ZEISS MEDITEC
1,148
14.1
14.5
3%
3/Underperform
Oliver REINBERG
+49 69 47897 526
CENTROTHERM PV
540
25.5
27.0
6%
3/Underperform
Philipp BUMM
+49 69 47897 527
CONERGY AG
193
0.5
0.4
-17%
4/Sell
Philipp BUMM
+49 69 47897 527
CROPENERGIES
471
5.5
2.4
-57%
3/Underperform
Philipp BUMM
+49 69 47897 527
1,090
45.4
42.0
-8%
3/Underperform
Oliver REINBERG
+49 69 47897 526
CTS EVENTIM
DEMAG CRANES AG
808
38.2
44.0
15%
2/Outperform
+49 69 47897 540
DIALOG SEMICONDUCTOR
1,146
17.5
20.0
15%
2/Outperform
Bernd LAUX
+49 69 47897 512
DOUGLAS
1,624
41.4
47.2
14%
2/Outperform
Jurgen KOLB
+49 69 47897 426
DRAEGERWERK
1,121
63.2
70.0
11%
3/Underperform
Oliver REINBERG
+49 69 47897 526
ELRINGKLINGER
1,610
25.4
24.0
-5%
3/Underperform
EUROKAI KGAA
452
33.6
36.0
7%
2/Outperform
FIELMANN
2,835
67.5
57.0
-16%
3/Underperform
Craig ABBOTT
+49 69 47897 525
FRAPORT
4,436
48.3
56.0
16%
1/Selected List
Craig ABBOTT
+49 69 47897 525
FUCHS PETROLUB
2,412
106.2
115.0
8%
2/Outperform
Martin ROEDIGER
+49 69 47897 763
GEA
4,001
21.8
26.0
19%
2/Outperform
+49 69 47897 540
GERRESHEIMER
1,004
32.0
32.5
2%
2/Outperform
Oliver REINBERG
+49 69 47897 526

+49 69 47897 426
GERRY WEBER
GFK SE
H&R WASAG
HEIDELBERGER DRUCK
Alexander NEUBERGER
+49 69 47897 384
+49 69 47897 540
730
35.3
39.0
10%
2/Outperform
Jurgen KOLB
1,328
37.0
40.0
8%
2/Outperform
Craig ABBOTT
+49 69 47897 525
633
21.1
19.0
-10%
3/Underperform
Martin ROEDIGER
+49 69 47897 763
863
3.7
5.8
56%
2/Outperform
+49 69 47897 540
HHLA
2,514
34.6
44.0
27%
2/Outperform
+49 69 47897 540
HOCHTIEF
4,285
61.2
64.0
5%
2/Outperform
Craig ABBOTT
+49 69 47897 525
397
99.1
74.4
-25%
3/Underperform
Jurgen KOLB
+49 69 47897 426

+49 69 47897 426
HORNBACH HOLDING AG
HUGO BOSS
3,527
53.2
57.0
7%
2/Outperform
Jurgen KOLB
JENOPTIK
307
5.4
6.6
23%
2/Outperform
Alexander HAISSL
+49 69 47897 534
JUNGHEINRICH
997
29.3
30.0
2%
3/Underperform
+49 69 47897 540
1,458
21.9
17.5
-20%
3/Underperform
Alexander HAISSL
+49 69 47897 534
513
9.2
7.0
-24%
3/Underperform
Bernd LAUX
+49 69 47897 512

+49 69 47897 540
KLOECKNER & CO SE
KONTRON
KRONES
1,482
46.9
37.0
-21%
3/Underperform
KSB
1,086
620.0
700.0
13%
2/Outperform
+49 69 47897 540
KUKA AG
571
16.8
13.0
-23%
3/Underperform
+49 69 47897 540
LANXESS
4,630
55.7
63.0
13%
2/Outperform
LEONI
966
32.5
40.0
23%
1/Selected List
MANZ AUTOMATION AG
269
49.1
69.0
41%
2/Outperform
MLP
826
7.7
7.0
-9%
3/Underperform
MTU
2,524
51.1
50.0
-2%
2/Outperform
MVV ENERGIE
1,810
27.5
19.0
-31%
3/Underperform
Sebastian KAUFFMANN
+49 69 47897 524
372
5.6
9.0
62%
4/Sell
Philipp BUMM
+49 69 47897 527
Michael HAID
+49 69 47897 967
NORDEX
Martin ROEDIGER
+49 69 47897 763
Alexander NEUBERGER
+49 69 47897 384
Philipp BUMM
+49 69 47897 527
Michael HAID
+49 69 47897 967
Antoine BOIVIN-CHAMPEAUX
+33 1 41 89 73 25
OVB
385
27.0
13.0
-52%
4/Sell
PFEIFFER VACUUM
749
88.0
87.0
-1%
2/Outperform
Craig ABBOTT
+49 69 47897 525
PFLEIDERER
142
2.4
4.0
69%
4/Sell
Craig ABBOTT
+49 69 47897 525
PHOENIX SOLAR
176
23.9
45.0
88%
2/Outperform
Philipp BUMM
+49 69 47897 527
PRAKTIKER
433
7.5
6.1
-18%
3/Underperform
Jurgen KOLB
+49 69 47897 426
www.cheuvreux.com
January 2011
GERMANY
Market Cap
Company
PUMA
Target
Upside/
(EURm)
Price
Price
downside
3,579
236.4
250.0
6%
3/Underperform
Rating
Analyst
Jurgen KOLB
Telephone No.
+49 69 47897 426
Q-CELLS
274
2.3
7.0
200%
3/Underperform
Philipp BUMM
+49 69 47897 527
QIAGEN
3,528
14.7
13.5
-8%
3/Underperform
Oliver REINBERG
+49 69 47897 526
RATIONAL
1,786
157.1
155.0
-1%
3/Underperform
Craig ABBOTT
+49 69 47897 525
RHEINMETALL
2,398
60.6
75.0
24%
2/Outperform
+49 69 47897 540
RHOENKLINIKUM
2,235
16.2
19.0
18%
2/Outperform
Craig ABBOTT
+49 69 47897 525
ROTH&RAU
206
12.7
36.0
183%
2/Outperform
Philipp BUMM
+49 69 47897 527
SAF-HOLLAND
148
7.2
11.0
53%
2/Outperform
Alexander NEUBERGER
+49 69 47897 384
Oliver REINBERG
+49 69 47897 526
SARTORIUS AG
SGL CARBON
SKW STAHL METALLURGIE HOLDING
SMA
478
28.0
30.0
7%
2/Outperform
1,767
27.1
24.0
-11%
3/Underperform
130
19.9
23.0
16%
2/Outperform
+49 69 47897 540
Alexander HAISSL
+49 69 47897 534
2,367
68.2
130.0
91%
2/Outperform
Philipp BUMM
+49 69 47897 527
SMARTRAC N.V.
301
18.4
19.0
3%
3/Underperform
Bernd LAUX
+49 69 47897 512
SOFTWARE AG
3,085
108.2
120.0
11%
1/Selected List
Bernd LAUX
+49 69 47897 512
SOLARWORLD
814
7.3
12.0
65%
2/Outperform
1,565
26.0
25.0
-4%
STADA
STRATEC BIOMEDICAL SYSTEMS
Philipp BUMM
+49 69 47897 527
3/Underperform
Oliver REINBERG
+49 69 47897 526
361
31.4
31.0
-1%
3/Underperform
Oliver REINBERG
+49 69 47897 526
STRER
1,137
27.0
23.0
-15%
2/Outperform
Craig ABBOTT
+49 69 47897 525
SUEDZUCKER
3,758
19.8
21.5
8%
2/Outperform
Klaus RINGEL
+49 69 47897 542
SYMRISE
2,328
19.7
18.0
-9%
3/Underperform
+49 69 47897 540

+49 69 47897 525
TAKKT
722
11.0
11.5
5%
2/Outperform
Craig ABBOTT
TOGNUM AG
2,560
19.5
15.5
-20%
2/Outperform
Craig ABBOTT
+49 69 47897 525
TOM TAILOR
276
16.7
19.6
17%
1/Selected List
Jurgen KOLB
+49 69 47897 426
TUI
2,731
10.9
11.3
4%
2/Outperform
Jurgen KOLB
+49 69 47897 426
VOSSLOH AG
1,267
94.9
103.0
9%
2/Outperform
Craig ABBOTT
+49 69 47897 525
VTG AG
318
14.9
12.0
-19%
3/Underperform
Sebastian KAUFFMANN
+49 69 47897 524
WACKER NEUSON SE
886
12.6
12.0
-5%
3/Underperform
+49 69 47897 540
WINCOR NIXDORF AG
1,849
58.0
49.0
-16%
3/Underperform
+49 69 47897 540
www.cheuvreux.com
January 2011
GERMANY
II - GERMAN SMALLER COMPANIES UNIVERSE-KEY FIGURES

Rating
P/E
(X)
11E
EV/Sales
(x)
12E
12E
EV/EBITDA
(x)
11E
EBITDA
margin (%)
11E
12E
ROCE (%) Div Yld (%)

12E
12E
FCF (MC)
(%)
12E
P/BV
(x)
12E
ROE
(%)
11E
AIXTRON SE
15.9
13.6
2.8
7.5
5.8
37.2
NS
2.2
5.7
3.8
AURUBIS
13.3
11.2
0.3
6.6
5.7
3.9
14.2
2.8
6.2
1.4
11.8
BAUER
10.9
8.6
0.9
6.0
5.3
15.6
13.3
2.4
0.2
1.3
14.1
BAYWA
14.7
11.5
0.2
7.1
5.9
3.3
9.9
1.3
4.4
1.2
9.2
BILFINGER BERGER
10.1
9.4
0.6
9.9
8.9
6.1
23.8
5.5
10.0
1.5
16.2
BRENNTAG AG
13.5
12.3
0.6
8.4
7.7
7.6
16.5
3.1
4.6
2.1
17.8
CARL ZEISS MEDITEC
18.4
16.8
1.2
7.8
6.7
15.6
35.8
1.8
5.9
1.8
10.8
CENTROTHERM PV
11.8
11.3
0.8
4.9
4.9
15.3
15.1
2.7
0.3
1.2
11.0
CONERGY AG
4.3
3.6
0.3
4.4
3.7
7.4
16.2
0.0
7.4
0.8
28.8
CROPENERGIES
28.4
22.8
1.5
10.8
9.5
14.2
6.5
0.0
7.9
1.3
5.1
CTS EVENTIM
18.3
15.9
2.5
12.8
10.8
19.7
52.2
2.8
6.9
5.4
28.7
DEMAG CRANES AG
14.4
9.8
0.8
7.7
5.6
10.2
28.3
3.6
8.8
2.5
21.2
23.5
17.4
3.4
17.0
12.0
19.8
104.0
0.0
4.5
4.3
27.7
DOUGLAS
16.0
14.5
0.5
5.2
4.8
8.9
17.6
3.5
5.3
2.0
13.3
DRAEGERWERK
12.3
11.1
0.8
6.1
5.6
12.4
17.9
2.1
8.1
1.7
16.0
ELRINGKLINGER
16.2
12.6
1.9
7.3
5.9
26.2
29.3
3.5
7.4
2.8
20.0
EUROKAI KGAA
15.5
11.9
1.3
5.7
4.6
22.1
14.2
0.9
8.8
1.0
8.9
FIELMANN
20.6
18.7
2.5
11.6
10.4
21.8
51.3
4.2
4.4
5.6
26.9
FRAPORT
20.3
18.7
3.3
9.6
8.3
34.3
9.2
2.7
0.1
1.6
8.4
FUCHS PETROLUB
12.4
11.5
1.4
7.1
6.1
20.2
46.2
2.5
8.5
3.2
35.0
GEA
13.5
10.1
1.0
8.0
6.2
12.2
15.6
3.0
8.7
1.8
15.3
GERRESHEIMER
19.6
15.4
1.4
6.6
5.9
20.7
14.6
1.5
6.9
1.8
11.5
GERRY WEBER
12.7
10.9
1.1
6.7
5.5
15.9
43.0
2.4
7.5
2.8
28.1
GFK SE
14.4
12.1
1.3
8.1
6.9
16.6
17.2
1.8
7.1
1.8
14.8
H&R WASAG
14.3
12.1
0.8
8.7
7.3
9.3
17.4
3.3
5.5
2.5
19.9
HEIDELBERGER DRUCK
15.8
10.3
0.5
5.5
4.8
9.1
8.0
0.0
NS
0.8
5.9
HHLA
24.5
20.4
3.1
10.1
8.7
31.2
23.9
3.0
5.9
3.7
16.4
HOCHTIEF
18.1
15.0
0.5
8.7
7.3
5.7
36.9
3.5
4.9
1.7
9.8
HORNBACH HOLDING AG
10.9
10.2
0.3
3.7
3.6
7.5
10.2
1.4
NS
0.9
9.1
HUGO BOSS
18.5
16.6
2.1
10.7
9.5
19.3
38.6
2.4
5.1
8.0
60.8
JENOPTIK
13.2
11.3
0.7
5.8
5.2
12.3
11.0
0.0
8.8
1.0
8.3
JUNGHEINRICH
12.3
10.5
0.5
3.7
2.9
13.2
17.0
1.7
13.4
1.4
12.7
KLOECKNER & CO SE
16.4
10.0
0.3
6.5
4.9
5.0
14.6
3.0
10.1
1.1
7.4
KONTRON
19.0
14.5
1.0
8.4
6.6
11.6
16.3
2.7
6.3
1.5
8.5
KRONES
18.3
15.7
0.6
7.9
6.8
7.9
12.8
1.4
4.9
1.7
10.7
KSB
10.5
8.1
0.5
4.7
3.7
10.9
19.7
2.5
6.1
1.3
14.2
KUKA AG
24.0
16.4
0.6
8.9
7.5
7.3
14.9
4.2
2.6
3.1
14.6
LANXESS
10.5
9.4
0.8
6.3
5.6
13.2
14.9
1.4
6.2
1.8
22.8
LEONI
8.9
7.0
0.5
4.8
4.0
9.6
19.4
4.3
9.1
1.6
22.2
MANZ AUTOMATION AG
18.5
10.8
0.9
6.6
3.6
13.3
23.9
0.0
1.6
1.2
7.7
MLP
18.1
16.0
NS
NS
NS
0.0
NS
5.9
NS
2.1
0.0
MTU
15.1
12.3
1.0
7.2
6.0
13.7
20.4
2.9
6.3
2.5
19.5
MVV ENERGIE
17.5
17.7
0.9
7.9
7.8
11.2
8.5
3.6
6.5
1.6
9.6
NORDEX
4.3
2.6
0.3
4.1
2.7
7.5
20.3
0.0
NS
0.6
19.9
OVB
38.1
33.5
NS
NS
NS
0.0
NS
2.2
NS
4.5
0.0
PFEIFFER VACUUM
18.3
16.8
3.0
11.1
9.9
27.2
51.4
4.7
5.5
5.0
27.4
PFLEIDERER
NS
32.9
0.6
6.1
4.6
10.3
6.4
0.8
24.8
0.3
-5.6
PHOENIX SOLAR
8.1
6.1
0.2
3.7
3.0
5.2
38.8
1.6
6.0
0.9
14.1
PRAKTIKER
16.0
8.9
0.2
4.0
3.3
4.2
7.9
3.0
4.9
0.5
3.1
PUMA
13.7
12.5
1.0
6.6
5.6
15.5
35.7
1.2
8.2
1.9
17.1
8.0
31.2
Q-CELLS
4.6
3.1
0.2
1.2
1.0
16.1
10.4
0.0
NS
0.3
QIAGEN
28.7
24.0
3.7
11.3
9.6
32.6
14.8
0.0
5.4
1.6
7.2
RATIONAL
21.3
18.5
4.3
13.8
11.8
31.0
108.4
4.6
5.1
8.9
39.9
RHEINMETALL
10.8
8.5
0.6
5.4
4.3
11.5
18.0
3.6
11.7
1.6
17.5
RHOENKLINIKUM
13.1
11.0
1.0
7.2
6.2
13.3
12.7
2.3
6.7
1.3
11.1
ROTH&RAU
7.2
5.7
0.3
1.8
1.1
16.3
25.8
0.0
9.7
0.7
11.1
SAF-HOLLAND
6.4
4.3
0.6
5.3
4.1
10.2
20.3
4.7
17.2
1.9
54.1
www.cheuvreux.com
January 2011
GERMANY
Rating
P/E
(X)
11E
EV/Sales
(x)
12E
12E
EV/EBITDA
(x)
11E
EBITDA
margin (%)
11E
12E
ROCE (%) Div Yld (%)

12E
12E
FCF (MC)
(%)
12E
P/BV
(x)
12E
ROE
(%)
11E
SARTORIUS AG
15.4
13.1
1.3
7.7
6.8
17.1
16.1
2.5
8.2
1.5
SGL CARBON
22.0
14.5
1.6
9.8
8.1
16.6
12.8
0.0
2.4
1.7
9.4
SKW STAHL METALLURGIE HOL
11.3
9.2
0.6
6.7
5.9
8.7
13.3
4.3
3.7
1.1
10.6
SMA
8.3
8.0
1.0
4.2
3.7
25.0
60.1
3.1
8.4
2.2
37.0
SMARTRAC N.V.
22.3
16.7
1.4
9.2
6.9
15.3
14.1
0.0
7.9
1.6
8.3
SOFTWARE AG
15.0
12.9
2.6
8.6
7.2
30.6
31.8
1.7
8.3
2.9
25.5
SOLARWORLD
8.3
9.2
0.8
4.0
3.4
19.0
13.9
1.2
12.1
0.8
11.5
STADA
11.4
10.4
1.4
8.3
7.0
16.8
13.6
2.8
5.8
1.5
11.2
STRATEC BIOMEDICAL SYSTEM
18.8
15.5
2.7
11.7
9.7
23.0
52.4
2.9
5.4
4.2
26.7
STRER
28.4
19.1
2.4
9.7
8.0
25.1
19.8
0.0
5.9
3.5
16.2
SUEDZUCKER
13.9
13.9
0.8
6.1
5.9
13.3
9.9
2.3
9.6
1.1
8.6
SYMRISE
15.8
15.6
1.9
9.1
8.8
20.9
15.3
3.6
7.1
2.9
19.8
TAKKT
13.6
12.0
1.0
8.0
7.1
12.9
22.6
5.5
8.5
2.7
20.9
TOGNUM AG
13.3
9.3
1.2
7.0
5.6
16.5
20.5
4.1
7.9
2.5
24.7
TOM TAILOR
16.0
11.5
0.9
6.4
5.2
13.7
20.1
2.6
3.7
2.6
20.2
TUI
27.0
18.8
0.3
5.0
3.7
5.2
10.7
2.5
50.1
1.1
5.5
VOSSLOH AG
12.8
11.7
1.1
7.6
6.7
14.3
18.1
3.1
5.4
2.0
18.0
VTG AG
14.6
12.1
1.4
5.7
5.4
24.7
7.5
2.7
6.8
1.0
7.0
WACKER NEUSON SE
22.7
16.0
1.2
9.2
7.3
13.5
8.6
3.2
2.2
1.1
4.9
WINCOR NIXDORF AG
16.3
14.4
0.8
8.3
7.3
10.0
26.4
3.6
6.7
4.4
31.0
www.cheuvreux.com
11.3
January 2011
GERMANY
TOP PICKS
Aixtron
EUR30.42
To 31/12
2009
2010E
2011E
2012E
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
Attrib. FCF yield (%)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
302.9
44.8
0.45
0.4
52.4
0.7
37.1
32.5
55.2
11.5
5.9
(5.5)
0.15
0.6
760.0
186.1
1.86
1.9
14.8
1.8
7.3
8.3
NS
37.9
5.2
(1.7)
0.56
2.0
871.3
195.5
1.96
2.0
15.5
5.0
7.3
8.5
NS
31.2
4.5
(2.0)
0.59
1.9
1047.3
229.7
2.30
2.3
13.2
5.9
5.6
6.5
NS
29.4
3.7
(2.2)
0.69
2.3
Bilfinger Berger
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
EUR61.31
2009
2010E
2011E
2012E
7382.0
140.0
3.78
3.8
14.3
10.5
12.5
21.7
12.2
9.5
1.6
4.8
2.00
3.7
7953.8
271.2
5.90
5.9
10.7
NS
10.3
15.2
25.8
17.1
1.8
4.0
2.72
4.3
8151.8
281.4
6.12
6.1
10.0
7.9
9.8
14.1
23.5
16.2
1.6
3.8
2.87
4.7
8357.4
301.8
6.56
6.6
9.3
10.1
8.9
12.7
23.8
15.9
1.5
3.2
3.42
5.6
EUR17.98
To 31/12
2009
2010E
2011E
2012E
Sales ($ m)
NAP rest. ($ m)
Clean EPS ($)
Reported EPS ($)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend ($)
Yield (%)
217.6
25.2
0.46
0.6
22.9
4.7
13.9
17.3
100.4
23.3
3.7
(3.4)
0.00
0.0
296.0
43.3
0.66
0.7
34.3
1.5
24.3
28.1
93.7
24.2
7.4
(2.6)
0.00
0.0
390.0
64.3
0.98
1.0
23.7
3.0
17.2
19.3
98.4
27.7
5.8
(2.5)
0.00
0.0
480.0
87.0
1.33
1.3
17.6
4.5
12.2
13.4
104.0
28.2
4.3
(2.5)
0.00
0.0
Fraport
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
EUR47.90
2009
2010E
2011E
2012E
1972.6
149.8
1.64
1.6
22.2
NS
9.3
17.7
6.4
6.1
1.4
3.0
1.15
3.2
2126.7
165.2
1.80
1.8
26.2
NS
9.9
16.9
8.1
6.5
1.7
3.3
1.15
2.4
2268.4
218.6
2.38
2.4
20.1
NS
9.6
16.0
8.1
8.4
1.7
3.6
1.15
2.4
2475.7
237.2
2.58
2.6
18.6
0.1
8.3
13.7
9.2
8.7
1.6
3.2
1.29
2.7
www.cheuvreux.com
1/Selected List - Target: 41.5

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

Strategically shifting more towards Services: the focus is
on downsizing construction and reinvesting proceeds
from the recent disposal of Valemus (est. net proceeds of
c.EUR500m) in further expansion of its market-leading
Services businesses, which proved more resilient than
expected in the downturn. Incoming orders in Industrial
Services now reaccelerating strongly. Power Services
(26% of EBIT) should see significant growth in emerging
markets and from lifetime extension capex in Germany. At
9.5x PE, 6.3 adj EV/EBITDA, 4.5% yield, re-rating still not
complete.
2/Outperform - Target: 20
With Dialog in the sweet spot of market growth
(smartphones, portable media devices) and its products
gaining increasing share at customers, top-line growth in
excess of 30% y-o-y and bottom-line expansion of more
than 50% p.a., it is likely to maintain its momentum,
probably even beyond 2011E. The company has won new
business from major customers and has key products
under development that could generate sizeable
incremental sales from H2-11E. Dialog shares, Europe's
best way to play the 'Apple-mania', are a highly attractive,
inexpensive tech investment.

PAX traffic trends/operational leverage to continue to
surprise on the upside. Above average PAX traffic growth,
scheduled aviation fee increases (+25% through 2015),
the inauguration of R-4 from Oct 2011 and the 50%
increase in high-yielding retail space from summer 2012
to drive EBITDA CAGR of 13.8% (2010-12E) vs 6% for the
European peers on avg. At the mid-point of major capex
cycle running below budgeted costs, execution risks now
diminishing. Also combines low-cost financing with
inflation hedge. SOP (EUR55), DCF (EUR57) suggest
further upside.
January 2011
GERMANY
Fuchs Petrolub
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
EUR102.50
2009
2010E
2011E
2012E
1178.1
121.5
5.14
5.1
12.6
11.2
7.5
8.4
35.2
36.5
4.4
(0.2)
1.70
2.6
1437.3
173.2
7.32
7.3
15.2
3.1
9.1
9.9
40.0
39.4
5.5
(0.3)
2.10
1.9
1588.2
203.1
8.58
8.6
11.9
7.4
6.8
7.5
44.2
35.0
3.9
(0.6)
2.50
2.4
1659.7
219.4
9.27
9.3
11.1
8.8
5.9
6.5
46.2
29.9
3.1
(1.0)
2.70
2.6
GEA Group
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
EUR21.00
2009
2010E
2011E
2012E
4411.2
160.6
0.87
0.9
17.8
11.1
9.0
12.4
9.3
9.7
1.7
(0.0)
0.30
1.9
4450.0
140.1
0.76
0.8
28.4
NS
14.3
20.0
6.9
8.0
2.2
1.7
0.24
1.1
5022.0
295.6
1.61
1.6
13.1
5.7
7.8
9.9
12.6
15.3
1.9
0.7
0.48
2.3
5577.9
395.4
2.15
2.2
9.8
9.0
6.0
7.3
15.6
18.1
1.7
0.2
0.65
3.1
GfK
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
EUR36.89
2009
2010E
2011E
2012E
1164.5
51.0
1.42
1.4
17.0
15.2
9.6
16.5
9.1
10.2
1.7
2.8
0.30
1.2
1272.7
76.0
2.12
2.1
17.8
6.8
9.9
14.1
13.3
13.8
2.3
1.9
0.42
1.1
1366.1
92.1
2.57
2.6
14.4
7.2
8.1
11.1
15.5
14.8
2.0
1.3
0.53
1.4
1453.7
109.4
3.05
3.0
12.1
7.1
6.8
9.2
17.2
15.6
1.8
0.8
0.67
1.8
HHLA
EUR34.46
To 31/12
2009
2010E
2011E
2012E
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
990.7
53.0
0.73
0.7
37.0
2.0
13.1
22.7
15.2
10.4
3.9
0.7
0.40
1.5
1068.8
71.7
0.99
1.0
35.0
0.1
13.4
22.3
16.1
12.8
4.5
0.8
0.61
1.8
1164.8
102.7
1.41
1.4
24.4
5.1
10.0
15.9
20.7
16.4
4.1
0.3
0.85
2.5
1254.6
123.0
1.69
1.7
20.3
5.9
8.7
13.5
23.9
17.6
3.6
(0.1)
1.02
3.0
www.cheuvreux.com

Fuchs Petrolub benefits from its strong positioning in
niche markets. Its performance in each of the last five
quarters has been far better than assumed. Besides Air
Liquide, Fuchs is the only chemical company that was
able to increase its EBIT, EBIT margin and dividend in the
crisis year 2009. Due to its fixed-cost reductions it is now
even leaner. Its focus on innovations and cost discipline
will drive its margins further. The company benefits from
rising volumes in an upturn and from lower raw material
costs in a downturn.
We advise purchasing GEA shares now to capture the
benefits of the group reorganisation that are likely to
emerge over the next 1-2 years. While GEA will not remain
unaffected if macro conditions worsen, the company does
have considerable restructuring potential in our view. The
market is completely ignoring the company's margin
expansion potential and appears to discount sales of
EUR5.1bn and an EBIT margin of just 9.6% for 2013E vs.
our estimates with EUR5.2bn and 12.4%(!), respectively.
Offers a fundamentally strong franchise with solid growth
potential at attractive multiples. GfK's crown jewel, the
Retail & Technology division (60% of EBIT), still has
significant growth potential as it expands its global
footprint in emerging markets. Assuming cont'd macro
recovery, GfK is on track to approach the upper end of its
targeted adj. operating margin range of 13 - 15% by
2012E. Margin expansion is driven by operational
leverage in Custom Research, continued robust organic
growth in R&T, BISS cost saving measures and
discontinuation of investments in Media.
The trading environment remains positive: the likely
recovery of Hamburg's regional advantage among North
Range ports (close proximity to Germany, EE and Baltic
states) will be driven by 1) rising fuel prices, as the total
cost of transport to final destinations is important; and 2)
a likely positive Elbe dredging decision. CAPEX is
expected to drop to maintenance levels from 11E
onwards. Given its current low capacity utilisation, HHLA
will be able to accommodate a recovery in volumes
without needing much additional growth CAPEX.
January 2011
GERMANY
Jenoptik
EUR5.25
To 31/12
2009
2010E
2011E
2012E
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
473.6
(38.9)
(0.68)
(0.7)
NS
NS
34.7
NS
NS
(15.0)
0.9
16.4
0.00
0.0
503.6
15.0
0.26
0.3
20.6
26.8
7.3
13.6
7.8
5.8
1.2
1.7
0.00
0.0
531.0
23.3
0.41
0.4
12.9
6.8
5.7
9.8
10.0
8.3
1.0
1.2
0.00
0.0
556.0
27.1
0.47
0.5
11.1
8.9
5.1
8.4
10.9
8.9
0.9
0.8
0.00
0.0
Leoni
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
EUR32.64
2009
2010E
2011E
2012E
2160.1
(123.5)
(4.50)
(4.5)
NS
NS
94.8
NS
NS
(28.7)
1.2
48.2
0.00
0.0
2850.0
79.5
2.68
2.7
12.3
3.8
5.9
10.1
14.0
19.3
2.2
1.9
0.50
1.5
3130.0
109.2
3.68
3.7
8.9
4.6
4.8
7.9
16.6
22.2
1.9
1.5
1.10
3.4
3320.0
138.6
4.67
4.7
7.0
9.1
4.0
6.3
19.4
23.8
1.6
1.1
1.40
4.3
Rheinmetall
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
EUR59.41
2009
2010E
2011E
2012E
3420.0
(58.0)
(1.60)
(1.6)
NS
8.2
11.4
NS
0.6
(5.3)
1.7
(0.1)
0.30
0.7
3975.0
171.6
4.33
4.3
13.9
NS
6.4
10.4
11.6
15.2
2.1
(0.2)
1.30
2.2
4600.0
221.3
5.59
5.6
10.6
8.0
5.3
7.8
14.5
17.4
1.8
(0.4)
1.55
2.6
5200.0
283.2
7.15
7.2
8.3
11.9
4.2
5.8
18.0
19.3
1.5
(0.7)
2.15
3.6
10
www.cheuvreux.com
2/Outperform - Target: 6.6

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

We continue to rate Leoni a 1/Selected List and the stock
remains on our German Top Picks list for a second
consecutive year for the following reasons: 1) the
company's unprecedented growth track record (CAGR
04-10 14%) has established it among the top 4 in global
wiring systems production; 2) more than 90% of its staff
are employed in low-cost regions, which allows it to keep
a tight control on its costs; 3) the shares are still trading
below the peers despite Leoni's superior growth profile
and the huge earnings rebound that looks set to continue
in 2011E.
Although Rheinmetall's Defence division will be affected
by budget cuts, we expect it to remain relatively resilient
given its successful internationalisation strategy: While we
expect budgets within NATO to be under pressure, strong
growth outside NATO is expected. Rheinmetall adopted
to the internationalisation trend at an early stage.
Automotive is likely to reach its peak sales of the last
cycle, i.e. EUR2,2bn in 2007, in 12E with a new peak EBIT
margin of 7-8% compared to just 5.6% in 2007. Valuation
remains inexpensive!
January 2011
GERMANY
Software AG
EUR107.15
To 31/12
2009
2010E
2011E
2012E
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
847.4
141.0
4.92
4.9
15.5
8.2
9.7
11.4
19.7
25.3
3.7
1.1
1.15
1.5
1098.0
172.0
6.06
6.1
18.1
4.3
10.5
12.4
23.6
25.9
4.4
0.5
1.30
1.2
1173.0
206.4
7.24
7.2
14.8
7.9
8.5
9.8
27.8
25.5
3.5
(0.1)
1.50
1.4
1260.0
239.0
8.38
8.4
12.8
8.4
7.1
8.0
31.8
24.3
2.9
(0.6)
1.80
1.7
TOM TAILOR Holding AG
EUR16.59
To 31/12
2009
2010E
2011E
2012E
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
300.2
(5.6)
(1.12)
(1.1)
NS
NS
5.0
11.6
9.4
8.6
NS
5.0
0.00
0.0
329.9
2.1
0.18
0.2
87.5
NS
9.1
21.2
8.4
2.8
3.4
1.4
0.00
0.0
368.3
17.3
1.05
1.0
15.9
1.0
6.4
10.7
15.9
20.2
3.1
0.9
0.31
1.9
420.9
24.1
1.46
1.5
11.4
3.7
5.2
7.8
20.1
23.9
2.6
0.7
0.44
2.7
Vossloh
To 31/12
Sales (EUR m)
NAP rest. (EUR m)
Clean EPS (EUR)
Reported EPS (EUR)
P/E (x)
EV/EBITDA (x)
EV/EBITA (x)
ROCE (%)
ROE (%)
P/BV (x)
Net debt/EBITDA (x)
Net dividend (EUR)
Yield (%)
EUR93.60
2009
2010E
2011E
2012E
1173.7
87.9
6.57
6.6
10.6
NS
7.4
8.7
19.6
20.5
2.1
0.4
2.00
2.9
1335.6
93.2
7.00
7.0
13.6
NS
8.4
10.2
17.4
19.0
2.5
0.6
2.50
2.6
1415.6
99.4
7.45
7.4
12.6
3.6
7.5
9.3
17.4
17.9
2.2
0.5
2.71
2.9
1588.8
108.9
8.14
8.1
11.5
5.5
6.6
8.1
18.1
17.6
2.0
0.3
2.96
3.2
11
www.cheuvreux.com

An innovation leader in the business process excellence
(BPE) software arena, its main growth area, Software
should deliver sustainable, high-1-digit top-line growth
flanked by the acquisition of product vendors in adjacent
software areas. Thus, Software is poised to double its
group sales every 5-6y. Thanks to cost and revenue
synergies from IDS Scheer, an improved product mix
(product sales outgrowing services) and traditionally
strong execution, we expect co. to expand its EBIT
margin from 24% in 10E to 28% by 12E and deliver avg.
EPS growth of ~18%. Co. targets mid-term a 30% EBIT
ROS (IFRS), which the market is far discounting. At 14x
earnings and less than 10x EV/EBIT (both 11E), the shares
remain significantly undervalued, trading at discounts of
15-25% to the EU software peers.
1/Selected List - Target: 19.6

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

Offers a pure play on the global emerging market rail
growth theme with above-average earnings visibility and
still undemanding valuation. Strong JV partnerships
formed in major early stage growth markets Russia
(Fasteners) and China (Switches), augmenting its
successful Chinese Fasteners business. Initiatives to
increase share of insourcing of key components/new
models to structurally increase profitability in locomotives.
Earnings growth resumed in 2010 (est. 9% EBIT CAGR
2010-12E). Absolute valuation models (EV/CE & DCF)
suggest further upside.
12
www.cheuvreux.com
Environment for port operators remains positive, Elbe River dredging
Great management execution: smooth integration of IDS, extraction of maximum synergies.

Growth from leading BPM offering.
Modularized business model allows mgmt to concentrate on growth and brand building; sales Quarterly releases
leverage to drive margins
Comment
Transitioning to mostly Services focus reducing risk and increasing share of stable, cashgenerative businesses
Purchase now to capture the benefits of the group reogranisation likely to emerge over the
next 1 - 2 years
Benefiting from strong demand in semiconductor and in its Metrology businesses; high FCF
to further de-leverage balance sheet
Winner of sector consolidation which is regaining momentum post the crisis.
Outlook for defence better than market believes; automotive to reach new peak margins in
the next cycle
Play on global emerging market rail growth theme. Earnings growth regaining momentum.
Combines good visibility with modest valuation
HHLA
SOFTWARE AG
TOM TAILOR
Defensive or Value
BILFINGER BERGER
GEA
JENOPTIK
LEONI
RHEINMETALL
VOSSLOH AG
On track to approach upper end of 13 - 15% Adj Optg margin target by 2012E (Operationall
leverage, robust R&T growth)
GFK SE
Potential contract wins; FY 10

results 31 Mar
Potential acq./DPS
announcement/CMD 24. Mar
FY10 prelims early Feb
2010 prelims due 8 Feb.
Analyst conf 10/11 March
Catalyst/Next news
Potential Services
acquisitions/Prelims 14 Feb
Release of prelim. 2010 results

on 27 Jan 11
FY10 prelims due early Feb
17.4%
10.9%
27.8%
8.1%
12.0%
16.0%
14.5%
103.0
75.0
40.0
6.6
26.0
8.5%
26.4%
23.0%
23.1%
19.4%
TP (EUR) Upside %
70.0
13.1%
19.6
120.0
44.0
40.0
115.0
56.0
20.0
TP (EUR) Upside %
41.5
33.0%
GERMANY
Capital Markets Day 24th/25th

Jan
Upside earnings surprises likely. Product mix evolution to further drive margins (rising share
of high-margin specialities)
Prelims early Feb
Prelims due 11 Mar
FUCHS PETROLUB
Traffic + fee increases + modest wage agreements = significant operational leverage
Rapid, sustainable growth amid exposure to smartphones/tablet PCs/portables. Great

Release of PM-OLED early
customer base (Apple). Highly promising product pipeline (PM-OLED, 2D-3D conversion, etc.) adopter customer
DIALOG
SEMICONDUCTOR
FRAPORT
Comment
Catalyst/Next news
Leading LED equipment supplier (MOCVD tool) benefitting from strong grwoth trends, > than Potential major orders/2010
expected acceptance of LED lighting
prelims due 1 March
Growth
AIXTRON SE
Cheuvreux German small-/ mid-cap focus list
January 2011
January 2011
GERMANY
IV Overview of the German smaller

companies segment
Our Cheuvreux German small- and mid-cap universe, defined as those companies with a
market capitalisation of less than EUR4.0bn, currently consists of 77 companies. Since
the June 2010 edition of this review, we have added Gerry Weber, Strer and Tom Tailor
to our research coverage. In this edition of our German Smaller Companies Review we
have compiled updates on those stocks within our universe with a market capitalisation of
between ~EUR200m and ~EUR4bn.
ADDITIONS TO THE CHEUVREUX GERMAN SMALLER COMPANIES COVERAGE LIST SINCE JUNE 2010
Company
Sector
GERRY WEBER
STRER
TOM TAILOR
Rating*
Target price (EUR)
Mkt. Cap (EURm)
Retail - Textiles
39.9
730.0
Media - Advertising
23.0
1,137.7
Retail - Textiles
19.6
276.0
*Current rating; Source: CA Cheuvreux
Performance small cap vs. large cap

The year 2010 drew to a close on a very friendly note. For investors, 2010 consisted of
two distinct phases: in the period from January to August, returns on equity investments
were generally low in both the large and mid/small-cap segments. However, a sudden
trend reversal in early September proved to be the starting point for a sustained equity
rally, driving the German indices for a second consecutive year of significant gains. Once
again, for the eighth time in the past ten years, German mid-caps outperformed the large
caps with the MDAX having risen 34.9% in 2010 vs. 16.1% for the benchmark DAX index.
The smaller companies index SDAX reported even stronger gains, up 45.8%. The
TECDAX, weighed down by the strong under-performance on the solar sector, reported
only a modest 4.0% gain.
ANNUAL PERFORMANCE OF GERMAN INDICES
DAX
MDAX
SDAX
TECDAX
2001
-19.8%
-7.5%
-23.0%
-59.9%
2002
-43.9%
-30.1%
-27.7%
-68.8%
2003
37.1%
47.8%
51.3%
50.9%
2004
7.3%
20.3%
21.6%
-3.9%
2005
27.1%
36.0%
35.2%
14.7%
2006
22.0%
28.6%
31.0%
25.5%
2007
22.3%
4.9%
-6.8%
30.2%
2008
-40.4%
-43.2%
-46.1%
-47.8%
2009
23.8%
34.0%
26.7%
60.8%
2010
16.1%
34.9%
45.8%
4.0%
Source: Thomson Reuters, CA Cheuvreux
13
www.cheuvreux.com
January 2011
GERMANY
In retrospect, the robust performance of equities in 2010 is understandable, considering

the fact that 1) from a risk/reward perspective investors have had little alternative to
equities, with the notable exception of commodities; 2) global monetary policy has been
particularly expansionary and supportive, on the one hand to avert deflation (H1-10) and
on the other hand to prevent a further spreading of the sovereign debt crisis in parts of
Europe; 3) corporate earnings have developed very favourably, returning rapidly to precrisis levels and in some instances already exceeding previous peaks, consistently
beating market expectations amid greater than projected economies-of-scale; and 4)
investors have displayed increasing willingness to assume risks again (probably
encouraged by the highly depressed level of bond yields). For Germany in particular it
remains to be added that the government's 'short-time work' scheme has proven a
welcome element in terms of providing outstanding flexibility for corporates with regards
to staff utilisation (thus giving them a true competitive edge), whilst having stabilised
public confidence and private consumption.
BEST AND WORST PERFORMERS IN 2010 CHEUVREUX GERMANY SMALL/MID-CAP UNIVERSE
BEST
WORST
Company
YtD
Company
YtD
1
2
HUGO BOSS
SAF-HOLLAND
128.2%
126.6%
1
2
Q-CELLS
ROTH&RAU
-72.7%
-60.1%
3
4
LANXESS
123.2%
122.1%
3
4
PFLEIDERER
SOLARWORLD
-59.5%
-51.6%
JUNGHEINRICH
116.5%
NORDEX
-47.1%
6
7
DRAEGERWERK
LEONI
103.9%
101.1%
6
7
PHOENIX SOLAR
CENTROTHERM PV
-44.2%
-36.8%
TUI
78.1%
OVB
-30.3%
SARTORIUS AG
78.0%
CONERGY AG
-25.5%
10
FUCHS PETROLUB
69.5%
10
MANZ AUTOMATION AG
-25.3%
11
12
TOGNUM AG
GERRY WEBER
68.8%
67.4%
11
12
SMA
MVV ENERGIE
-24.8%
-9.7%
13
ELRINGKLINGER
60.8%
13
QIAGEN
-5.5%
14
15
GFK SE
TAKKT
57.2%
55.4%
14
15
MLP
RHOENKLINIKUM
-5.0%
-4.0%
16
17
WACKER NEUSON SE
DEMAG CRANES AG
54.6%
52.9%
16
17
KONTRON
PRAKTIKER
-1.1%
1.2%
18
PFEIFFER VACUUM
49.9%
18
STADA
4.1%
19
20
BRENNTAG AG
AURUBIS
48.7%
46.5%
19
20
PUMA
HEIDELBERGER DRUCK
5.8%
6.8%
21
CROPENERGIES
46.4%
21
CARL ZEISS MEDITEC
14.7%
22
23
KSB
HORNBACH HOLDING AG
45.6%
44.4%
22
23
BILFINGER BERGER
KLOECKNER & CO SE
15.9%
17.5%
24
SOFTWARE AG
KUKA AG
42.5%
42.4%
24
AIXTRON SE
BAUER
17.7%
18.9%
25
25
14
www.cheuvreux.com
January 2011
GERMANY
With the vast majority of global economic imbalances far from resolved and government
debt going through the roof, German equities were hit by the 'Greek disease' until the
summer. However, as soon as the EU rescue scheme was finalised and a collapse of the
euro avoided, equities started to climb the wall of worries, with very few breaks for
consolidation within the final four months of the year. The rise in the German stock market
in particular has been fuelled by a) recovering global economic activity and sustainably
surging demand for German exports; b) the accelerated domestic economy; and c)
abundant liquidity thanks to investors' reduced risk aversion (in the second half of 2010).
At the same time, German stock prices have also been boosted by corporate earnings
growth exceeding original expectations and the global credit market returning to a more
normal state of affairs, although a return to full normality may take some time.
We are convinced corporate Germany will continue to exploit its very healthy
competitiveness, thereby gaining increasing market shares and expanding earnings
rapidly. While further painful restructuring has shifted down management agendas,
corporate Germany will not rest on its laurels but will continue to optimise its
portfolios/market positions and to globalise value-added. On average, German enterprises
should continue to fare better than many of their counterparts in other countries. With
productivity outweighing the drawbacks of their location (high wages and payroll
expenses, bureaucracy, excessive taxation, lack of labour market flexibility, etc.), we are
convinced the rise in domestic wages/salaries and the limited availability of skilled labour
will not throw a spanner in the works.
15
www.cheuvreux.com
GERMANY
January 2011
MDAX INDEX 5-YEAR PERFORMANCE
TECDAX INDEX 5-YEAR PERFORMANCE
9000
1150
8000
1050
7000
950
6000
850
5000
4000
750
3000
650
2000
550
1000
450
0
2006
2007
2008
2009
2010
2011
350
2006
2007
2008
2009
MDAX
2010
2011
TECDAX
SDAX INDEX 5-YEAR PERFORMANCE
GERMAN SMALL CAP INDICES VS. DAX LAST 5 YEARS

210
7000
6500
6000
140
5500
5000
4500
4000
70
3500
3000
2500
2000
2006
2007
2008
2009
2010
2011
0
2006
2007
2008
SDAX
SDAX
2009
TECDAX
2010
MDAX
2011
DAX
MDAX VS. DAX (2010)
SDAX VS. DAX (2010)
140
160
150
130
140
120
130
120
110
110
100
100
90
80
Jan
90
Feb
Mar
Apr
May
Jun
Jul
Aug
MDAX
Sep
Oct
Nov
Dec
Jan
DAX
16
www.cheuvreux.com
80
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
SDAX
Sep
Oct
Nov
Dec
Jan
DAX
January 2011
GERMANY
Outlook for 2011

Looking ahead, the headwinds from continued deleveraging, the slowly abating credit
crunch, government spending cut-backs and the rise in both wages/salaries and
commodity prices should be compensated for by continued global economic growth (with
the US and western Europe on a moderate recovery track and the emerging world mostly
growing rapidly), declining unemployment, and hence improved confidence. While some
of that is certainly discounted by now, the extent to which expectations may be trumped
remains to be seen. In particular, the rebound of the USD after a long period of weakness,
rock-bottom risk premiums for corporate bonds, and further cost improvements
(economies-of-scale outweighing rising headcount and raw materials costs) could make
2011 another fruitful year. Assuming continued strong y-o-y global economic growth
(3.8% in 2011E following 4.2% in 2010), German exports are set to continue to blossom,
not least with Germany being well positioned to supply the world with capital goods and
infrastructure goods and systems.
Of course, restructuring will also continue to play an important role, we believe, but not as
important as in earlier years. For Germany this means we expect companies to continue
to 1) optimise their manufacturing networks, supply chains and, increasingly, R&D and
administrative functions; 2) optimise their product portfolios and competitive positioning;
and 3) strengthen their global presence (many private-equity-held assets are poised to be
put up for sale and many German corporates have well-filled war chests).
We believe 2011 will be another positive year from a corporate earnings perspective
(assuming further top-line growth and a modest average rise in EBIT margins), pushing
many companies beyond their pre-crisis highs. As long as there is no major credit market
incident and as long as FY rates remain not too far from current levels, earnings growth
will probably provide the fuel needed for the equity market to maintain its ascent.
Best Picks for H1 2011

Against this backdrop, as well as the belief that Germany will lead central Europe on its
way back to growth, we expect the German stock market to climb before taking a first,
more pronounced breather in 2011. With few attractive alternatives in other asset classes,
stocks will likely draw a sizeable share of the abundant liquid funds available for
investment. The German stock market is well positioned in the European context, as
Germany's relative competitiveness is unparalleled and restructuring in this country is still
being taken very seriously. We believe Germany AG will continue to play its cards well in
2011 by taking further market shares and optimising its global competitiveness via
restructuring, whilst at the same time making use of its balance sheet strength to fuel
growth, organically as well as through acquisitions. Hence, investors should expect more
growth/restructuring/corporate action in 2011.
In this context, the members of Cheuvreux Germany's analyst team have singled out a
number of mid/small caps that we believe represent an attractive portfolio of investment
ideas with the potential to outperform the market as a whole. Based on considerations
such as balance sheet strength, recurring free cash flow generation, consensus
underestimation of the positive impact of operational leverage on earnings and cash flow
and dividend payouts, our Best Picks for the first half of 2011 are as follows:
17
www.cheuvreux.com
January 2011
GERMANY
Aixtron (price target: EUR41.5, upside 33%): The global LED equipment (MOCVD)
market remains duopolistic for the time being, with AIXA being the undisputed market
leader. Following the CAPEX cycle for LCD backlighting, the CAPEX cycle for LED lighting
is expected to be the next major driver for AIXA's new bookings. During 2010 concerns
arose that there may be a noticeable pause between the two cycles, resulting in a decline
in AIXA's new bookings. This weighed on the company's shares. Now, however, there are
tangible signs that the LED lighting market is gearing up earlier than widely expected. We
had already assumed at least stable bookings, but some bears in the market will have to
adjust their overly negative views on the company's future business prospects. This
should drive AIXA's shares, especially as >40% of the stock are held as shorts.
Bilfinger Berger (price target: EUR70, upside 15%): Bilfinger continues to successfully
execute its strategic plan to downsize its construction activities, including the potential
IPO of its Australian business Valemus, to fundamentally reduce its risk profile and
earnings volatility and free up significant capital to invest in the further expansion of its
market-leading positions in each of its Services businesses. The recent disposal of
Valemus, which is estimated will generate net cash proceeds of ~EUR500m, should serve
as a catalyst. Operationally, Bilfinger has consistently exceeded expectations throughout
2010. After having proven its resilience during the recession, its incoming orders have
picked up sharply, especially in the key Industrial Services division (+23% in Q3 after
+19% in Q2) and it raised its guidance twice in 2010. Despite the shares' recent strong
outperformance, they still offer attractive value, trading at just 9.5x P/E, 1.3x P/BV with a
sustainable ROE of ~16%, a dividend yield of 4.7% and non-recourse debt-adjusted
EV/EBITDA of 6.3x (all multiples 2011E).
Dialog Semiconductor (price target: EUR20, upside 12%): With Dialog in the sweet
spot of market growth (smartphones, portable media devices) and its products gaining
increasing share at customers, top-line growth in excess of 30% y-o-y and bottom-line
expansion of more than 50% p.a., it is likely to maintain its momentum, probably even
beyond 2011E. The company has won new business from major customers and has key
products under development that could generate sizeable incremental sales from H2-11E.
Dialog shares, Europe's best way to play the 'Apple-mania', are a highly attractive,
inexpensive tech investment.
Fraport (price target: EUR56, upside 16%): Fraport offers investors an attractive bet on
the global air traffic growth theme: the operator of the Star Alliance's largest European
hub, especially bearing in mind the added capacity from 2011/12, is strategically well
positioned to outpace its major European competitors. The significantly higher than
expected pace of PAX growth, combined with the scheduled aviation fee increases by
24% in several steps through 2015 and the 50% rise in high-yielding retail space, will
drive earnings growth. We estimate an EBITDA CAGR 2010-12E of 13.8% vs. 6.5% on
average for the European peers. Furthermore, we now estimate that the Aviation division
will meet its target to cover its cost of capital by 2015. Half way through the company's
major investment programme, execution risks are declining (costs 10-15% <budget) and
its new capacity is coming on stream just as PAX growth trends are being fully restored.
Fuchs Petrolub (price target: EUR115, upside 12%): Fuchs Petrolub benefits from its
strong positioning in niche markets. Its performance in each of the last five quarters has
been far better than assumed. Besides Air Liquide, Fuchs is the only chemical company
that was able to increase its EBIT, EBIT margin and dividend in the crisis year 2009. Due
to its fixed-cost reductions it is now even leaner. Its focus on innovations and cost
discipline will drive its margins further. The company benefits from rising volumes in an
upturn and from lower raw material costs in a downturn.
18
www.cheuvreux.com
January 2011
GERMANY
GEA (price target: EUR26, upside 19%): We advise purchasing GEA shares now to
capture the benefits of the group reorganisation that are likely to emerge over the next 1-2
years. While GEA will not remain unaffected if macro conditions worsen, the company
does have considerable restructuring potential in our view. The market is completely
ignoring the company's margin expansion potential and appears to discount sales of
EUR5.1bn and an EBIT margin of just 9.6% for 2013E vs. our estimates with EUR5.2bn
and 12.4%(!), respectively.
GfK (price target: EUR40, upside 10%): GfK offers a fundamentally strong franchise with
solid growth potential at attractive multiples. Its crown jewel, the Retail & Technology
division (60% of EBIT), still has significant growth potential as it expands its global
footprint in emerging markets. Assuming cont'd macro recovery, GfK is on track to
approach the upper end of its targeted adj. operating margin range of 13-15% by 2012E.
Margin expansion is driven by operational leverage in Custom Research, continued robust
organic growth in R&T, BISS cost saving measures and discontinuation of investments in
Media.
HHLA (price target: EUR44, upside 28%). The trading environment remains positive: the
likely recovery of Hamburg's regional advantage among North Range ports (close
proximity to Germany, EE and Baltic states) will be driven by 1) rising fuel prices, as the
total cost of transport to final destinations is important; and 2) a likely positive Elbe
dredging decision. CAPEX is expected to drop to maintenance levels from 11E onwards.
Given its current low capacity utilisation, HHLA will be able to accommodate a recovery in
volumes without needing much additional growth capex.
Jenoptik (price target: EUR6.60, upside: 23%): We expect the business environment to
improve further due to continued strong demand from the semiconductor industry and
better prospects for the company's Metrology business, in particular in the automotive
industry. As a result of asset disposals and more efficient working capital management,
company was able to reduce net debt below EUR100m from c.EUR160m end of FY-09.
Our EVA model yields a fair value of EUR6.5/share for FY-12E based on a pre-tax RoCE
of 10.6%. In addition, Jenoptik has tax-loss carry-forwards of EUR1.5/share.
Leoni (price target: EUR40, upside: 23%): We continue to rate Leoni a 1/Selected List
and the stock remains on our German Top Picks list for a second consecutive year for the
following reasons: 1) the company's unprecedented growth track record (CAGR 04-10
14%) has established it among the top 4 in global wiring systems production; 2) more
than 90% of its staff are employed in low-cost regions, which allows it to keep a tight
control on its costs; 3) the shares are still trading below the peers despite Leoni's superior
growth profile and the huge earnings rebound that looks set to continue in 2011E.
Rheinmetall (price target: EUR75, upside: 26%): Although Rheinmetall's Defence
division will be affected by budget cuts, we expect it to remain relatively resilient given its
successful internationalisation strategy: While we expect budgets within NATO to be
under pressure, strong growth outside NATO is expected. Rheinmetall adopted to the
internationalisation trend at an early stage. Automotive is likely to reach its peak sales of
the last cycle, i.e. EUR2.2bn in 2007, in 12E with a new peak EBIT margin of 7-8%
compared to just 5.6% in 2007. Valuation remains inexpensive!
19
www.cheuvreux.com
January 2011
GERMANY
Software AG (price target: EUR120, upside: 11%): Software AG has successfully

positioned itself as an innovation leader in the business process excellence (BPE)
software arena, its main field of growth. The company can be expected to deliver
sustainable, high-single-digit top-line growth, to be complemented by the acquisition of
product vendors in adjacent software areas. Hence, it is poised to double its group sales
every 5-6 years. Due to the realisation of cost and revenue synergies from IDS Scheer, an
improvement in the product mix (sales of products growing faster than services) and
traditionally strong execution, we expect Software AG to expand its EBIT margin from
24% in 2010E to 28% by 2012E, delivering annual EPS growth of roughly 18% on
average. The company's mid-term target stands at 30% EBIT return on sales (IFRS), a
level that the market is far from having discounted. At 14x earnings and less than 10x
EV/EBIT (both for 2011E), the shares remain significantly undervalued, trading at
discounts of 15-25% to the EU software peers.
Tom Tailor (price target: EUR19.6, upside: 17%): We believe Tom Tailor offers
convincing growth potential, mainly via its own retail expansion, which we expect to result
in a 33% sales CAGR between CY09 and CY12E. As its infrastructure is well placed to
handle the additional sales volume, we anticipate a cost leverage that will lead to EBIT
margin expansion from 5.6% in CY09 to 9.7% in CY12E. As private equity group Alpha
Funds sold its entire remaining 17.1% stake in Tom Tailor as of 1 December, the risk of a
share overhang has been reduced considerably and now only applies to the 11.6%
Morgan Finance stake. As a consequence of this, we reduced our discount on our DCFbased fair value of EUR21.70 from 20% to 10%. This was the sole reason for the rise in
our target price to EUR19.60.
Vossloh (price target: EUR103, upside: 9%): Vossloh offers a pure play on the global
emerging market rail growth theme with above-average earnings visibility and stillundemanding valuation. Strong JV partnerships formed in major early-stage growth
markets Russia (Fasteners) and China (Switches), augmenting its successful Chinese
Fasteners business. Initiatives to increase its share of insourcing of key components/new
models to structurally increase profitability in locomotives. Earnings growth resumed in
2010 (est. 9% EBIT CAGR 2010-12E). Absolute valuation models (EV/CE & DCF) suggest
further upside!"
20
www.cheuvreux.com
January 2011
GERMANY
Rating distribution
The distribution of our ratings across the German small-/mid-cap universe is currently
fairly balanced with 44% of our mid-cap universe stocks carrying a 2/Outperform rating
and 43% rated 3/Underperform. We rate 8% 1/Selected List and have a 4/Sell rating on
just 5%.
BREAKDOWN BY RATING CATEGORY
40
35
30
25
20
15
10
5
0
1/Selected List
2/Outperform
3/Underperform
4/Sell
Source: CA Cheuvreux
21
www.cheuvreux.com
22
6.1
www.cheuvreux.com
PRAKTIKER
16.8
16.8
16.7
SMARTRAC N.V.
17.4
CARL ZEISS MEDITEC
17.7
MVV ENERGIE
PFEIFFER VACUUM
18.7
18.5
18.7
FIELMANN
RATIONAL
18.8
TUI
FRAPORT
20.4
19.1
STRER
CROPENERGIES
HHLA
24.0
22.8
QIAGEN
32.9
PFLEIDERER
WINCOR NIXDORF AG
SYMRISE
FUCHS PETROLUB
PUMA
SOFTWARE AG
AIXTRON SE
CTS EVENTIM
HUGO BOSS
CARL ZEISS MEDITEC
QIAGEN
FIELMANN
PFEIFFER VACUUM
RATIONAL
33.5
OVB
BAUER
HEIDELBERGER DRUCK
JUNGHEINRICH
HOCHTIEF
LEONI
Highest
9.3
TOGNUM AG
TUI
SOLARWORLD
Highest
9.2
9.2
SKW STAHL METALLURGIE HOLDING
8.9
PRAKTIKER
SOLARWORLD
8.5
8.6
BAUER
KSB
ROTH&RAU
VTG AG
SAF-HOLLAND
CONERGY AG
NORDEX
9.5
9.9
10.0
10.3
10.7
11.0
11.9
12.0
12.3
13.2
13.4
14.3
14.4
15.7
16.8
4.2
4.2
4.1
4.1
3.6
3.5
3.3
3.0
3.0
2.6
2.5
2.1
2.1
1.2
1.0
2012E
P/BV (x)
SOFTWARE AG
KUKA AG
FUCHS PETROLUB
STRER
HHLA
AIXTRON SE
WINCOR NIXDORF AG
OVB
PFEIFFER VACUUM
CTS EVENTIM
FIELMANN
HUGO BOSS
RATIONAL
Highest
WACKER NEUSON SE
TUI
EUROKAI KGAA
JENOPTIK
VTG AG
PHOENIX SOLAR
HORNBACH HOLDING AG
SOLARWORLD
HEIDELBERGER DRUCK
CONERGY AG
ROTH&RAU
NORDEX
PRAKTIKER
Q-CELLS
PFLEIDERER
Lowest
2.9
3.1
3.2
3.5
3.7
3.8
4.2
4.3
4.4
4.5
5.0
5.4
5.6
8.0
8.9
1.1
1.1
1.0
1.0
1.0
0.9
0.9
0.8
0.8
0.8
0.7
0.6
0.5
0.3
0.3
2012E
SYMRISE
DEMAG CRANES AG
WINCOR NIXDORF AG
MVV ENERGIE
TOGNUM AG
FIELMANN
KUKA AG
LEONI
3.60
3.62
3.62
3.64
4.11
4.16
4.16
4.30
4.33
4.58
4.66
4.74
5.45
5.53
5.87
2012E
SKW STAHL METALLURGIE HOLDI
RATIONAL
PFEIFFER VACUUM
SAF-HOLLAND
TAKKT
BILFINGER BERGER
MLP
Highest
Dividend yield (%)
GERMANY
RHEINMETALL
8.0
8.1
SMA
7.0
LEONI
PHOENIX SOLAR
4.3
SAF-HOLLAND
5.7
3.6
CONERGY AG
ROTH&RAU
3.1
Q-CELLS
Q-CELLS
PFLEIDERER
2.6
NORDEX
P/CF (x)
Lowest
2012E
Lowest
P/E before goodwill (x)
V - VALUATION MULTIPLES
January 2011
23
www.cheuvreux.com
2.8
2.6
PFEIFFER VACUUM
1.9
1.6
ELRINGKLINGER
AIXTRON SE
1.8
2.2
STRER
SYMRISE
2.2
HUGO BOSS
2.3
2.3
SOFTWARE AG
2.4
2.8
HHLA
2.3
3.1
FRAPORT
FIELMANN
3.2
QIAGEN
CTS EVENTIM
3.6
RATIONAL
STRER
SGL CARBON
FRAPORT
HHLA
SYMRISE
BILFINGER BERGER
HUGO BOSS
CROPENERGIES
QIAGEN
PFEIFFER VACUUM
FIELMANN
CTS EVENTIM
RATIONAL
Highest
SAF-HOLLAND
LEONI
CONERGY AG
TUI
KSB
SMA
HORNBACH HOLDING AG
MANZ AUTOMATION AG
Highest
0.4
0.4
JUNGHEINRICH
HOCHTIEF
0.3
KLOECKNER & CO SE
0.4
0.3
HORNBACH HOLDING AG
0.4
0.3
CONERGY AG
DOUGLAS
0.2
NORDEX
SOLARWORLD
PRAKTIKER
PHOENIX SOLAR
JUNGHEINRICH
NORDEX
ROTH&RAU
8.0
8.1
8.3
8.7
8.8
8.9
9.5
9.5
9.6
9.7
9.9
10.4
10.8
11.8
12.0
4.1
4.0
3.7
3.7
3.7
3.7
3.6
3.6
3.4
3.3
3.0
2.9
2.7
1.1
1.0
2012E
EV/EBITA (x)
SYMRISE
SMARTRAC N.V.
HUGO BOSS
VTG AG
STRER
HOCHTIEF
FIELMANN
MVV ENERGIE
RATIONAL
BILFINGER BERGER
CTS EVENTIM
HHLA
FRAPORT
CROPENERGIES
Highest
LEONI
GERRY WEBER
JUNGHEINRICH
RHEINMETALL
PRAKTIKER
SAF-HOLLAND
HORNBACH HOLDING AG
CONERGY AG
KSB
MANZ AUTOMATION AG
SMA
PHOENIX SOLAR
NORDEX
Q-CELLS
ROTH&RAU
Lowest
11.8
12.0
12.0
12.2
12.4
12.4
12.6
12.6
12.7
12.8
13.1
13.3
13.5
13.7
17.6
6.3
6.3
6.0
5.9
5.7
5.6
5.1
5.1
4.6
4.6
4.0
3.1
3.1
1.9
1.7
2012E
EV/CE (x)
FUCHS PETROLUB
GERRY WEBER
CARL ZEISS MEDITEC
BILFINGER BERGER
SMA
HHLA
PFEIFFER VACUUM
HUGO BOSS
HOCHTIEF
FIELMANN
2.7
2.7
2.8
2.9
3.2
3.3
4.3
4.5
4.8
5.4
5.5
6.8
9.3
15.2
31.6
0.9
0.9
0.9
0.8
0.8
0.8
0.8
0.8
0.7
0.6
0.6
0.6
0.5
0.4
0.3
2012E
CTS EVENTIM
RATIONAL
AIXTRON SE
Highest
VTG AG
SUEDZUCKER
PFLEIDERER
JENOPTIK
KLOECKNER & CO SE
ROTH&RAU
BAYWA
NORDEX
KSB
TUI
HEIDELBERGER DRUCK
HORNBACH HOLDING AG
PRAKTIKER
Q-CELLS
Lowest
GERMANY
LEONI
0.2
AURUBIS
0.2
ROTH&RAU
0.2
Q-CELLS
TUI
0.2
0.2
PRAKTIKER
BAYWA
0.2
0.2
PHOENIX SOLAR
Q-CELLS
EV/EBITDA (x)
Lowest
2012E
Lowest
EV/Sales (x)
VALUATION MULTIPLES, CONT'D
January 2011
24
www.cheuvreux.com
43.0
38.8
38.6
36.9
35.8
35.7
31.8
PHOENIX SOLAR
HUGO BOSS
HOCHTIEF
CARL ZEISS MEDITEC
PUMA
SOFTWARE AG
FUCHS PETROLUB
GERRY WEBER
51.3
46.2
FIELMANN
52.2
51.4
52.4
PFEIFFER VACUUM
60.1
SMA
CTS EVENTIM
104.0
GEA
JENOPTIK
EUROKAI KGAA
DEMAG CRANES AG
LEONI
SUEDZUCKER
ROTH&RAU
BILFINGER BERGER
KLOECKNER & CO SE
RHEINMETALL
SOLARWORLD
JUNGHEINRICH
SAF-HOLLAND
PFLEIDERER
TUI
PRAKTIKER
108.4
12.7
RHOENKLINIKUM
HOCHTIEF
RATIONAL
11.0
JENOPTIK
BRENNTAG AG
0.2
8.7
8.8
8.8
8.8
9.1
9.6
9.7
10.0
10.1
11.7
12.1
13.4
17.2
24.8
50.1
4.9
4.9
4.6
4.5
4.4
4.4
3.7
3.7
2.6
2.4
2.2
1.6
0.3
Highest
10.7
FIELMANN
BAYWA
TOM TAILOR
SGL CARBON
WACKER NEUSON SE
MANZ AUTOMATION AG
CENTROTHERM PV
Highest
10.4
9.9
FRAPORT
SUEDZUCKER
TUI
9.2
WACKER NEUSON SE
Q-CELLS
8.6
MVV ENERGIE
9.9
8.5
HEIDELBERGER DRUCK
10.2
8.0
PRAKTIKER
HORNBACH HOLDING AG
7.9
VTG AG
0.1
2012E
GERMANY
BAYWA
KUKA AG
7.5
CROPENERGIES
BAUER
6.4
6.5
PFLEIDERER
FRAPORT
FCF yield (market cap)

Lowest
2012E
Lowest
ROCE (Pre-tax) (%)
VALUATION MULTIPLES, CONT'D
January 2011
January 2011
GERMANY
VI - Company profiles
25
www.cheuvreux.com
January 2011
GERMANY
SECTOR
No rating
Rating
N/A
Target price (6 months)
ADVA Optical Networking

Riding the good waves
Q
Reuters: ADAG.DE Bloomberg: ADV GR
Stock data
Recent developments Back to growth
Nine-months (Jan-Sept) 2010 revenues grew 23% y-o-y to EUR212.3m.

In Q3 ADVA reported revenues of EUR80.5m, up 38% y-o-y and 17%
q-o-q, driven by stronger enterprise business in North America (high
frequency trading and financial applications) and continuing growth in
Ethernet access and carrier infrastructure. Its gross margin came in at
40% in Q3-10, down 100bp vs. Q2 and 300bp vs. Q1 as the company
has cut prices to gain access to strategic customers with major longterm business potential. Thanks to the operating leverage, ADVA's proforma operating income increased in Q3 to EUR4.4m or 5.5% of sales
(EUR2.7m in Q1 and EUR1.9m in Q2). At the end of Q3, the company
had a net cash position of EUR26.2m (gross cash of EUR66.2m and
gross debt of EUR40m).
Q
EUR6.42
Price (07/01/2011)
Outlook Sustainable growth
ADVA expects to report revenues between EUR76m and EUR81m for

Q4 with a pro-forma operating margin between 2% and 6%. Going
forward, it is confident it can deliver double-digit growth, driven by 1)
the tremendous growth of cloud computing in enterprise networks, 2)
the explosion of mobile data traffic in Ethernet access, and 3)
continuing growth of video content in carrier infrastructure.
Whilst ADVA will certainly benefit from powerful drivers, it will face a
highly competitive environment on the pricing front. It will also compete
with companies offering end-to-end solutions, with Alcatel-Lucent, for
instance, selling solutions combining IP routers and optical equipment.
In that respect, the partnership signed with Juniper is likely to provide
significant opportunities.
Market capitalisation
Free float
Enterprise value
No. of shares, adjusted
Daily volume
EUR308m
EUR264m
EUR309m
47.992m
EUR 1.39m
Performances
1 month 3 months 12 months
16.4%
12.2%
142.4%
8.7%
-0.1%
139.4%
Absolute perf.
Relative perf.
70.6
70.6
60.6
60.6
50.6
50.6
40.6
40.6
30.6
30.6
20.6
20.6
10.6
10.6
0.6
0.6
01/01
04/02
07/03
10/04
01/06
Price/TECDAX
04/07
07/08
10/09
01/11
Price
Sector focus
Sector Top Picks
Least favoured
Shareholders
Free Float 86.0%, Egora Hold. 14.0%
2009E
2010E
2011E
2012E
92.4
38.1
17.6
13.5
EV/EBITDA (x)
4.6
8.2
7.0
5.2
8.6
2.9
4.3
6.0
Net debt/EBITDA (x)
(1.1)
(0.9)
(1.0)
(1.1)
P/E (x)
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
EV/Capital empl. (x)
Source: Factset
Cheuvreux does not currently cover ADVA Optical
Odon de Laporte
Research Analyst
odelaporte@cheuvreux.com
(44) 207 621 51 79
Q
Q
26
www.cheuvreux.com
GERMANY
January 2011
Company profile
Q Global provider of communication infrastructure solutions

ADVA was founded in 1994 in Meiningen and Munich. Originally
focused on storage solutions for enterprise, ADVA now has a
balanced customer base and a product portfolio with three pillars:
Q Infrastructure solutions for carriers/operators (45% of revenues
in 2009)
Q
Q
Ethernet access for carriers (30%)

Transmission technologies for enterprises (25%).
Its solutions are deployed at more than 250 carriers and >10,000
enterprises worldwide, making it the global leader in Ethernet access
devices and the fourth player worldwide in metro WDM (no.2 in
Europe).
SWOT analysis
Strengths
Weaknesses
Focuses
Resellers
on growth segments
within the telecoms equipment
industry
High level of dependency on

key staff
with Juniper
Threats
Cloud computing
Growth
are squeezing
margins
Opportunities
Pricing pressure
in mobile data traffic
Continuing
Q Adoption of cloud computing solutions by

enterprises, which need to invest accordingly in
their telecoms infrastructure,
Q Tremendous growth in mobile data traffic,
which forces mobile operators to invest heavily
in their backhaul infrastructure to avoid the
congestion of their networks.
We also believe ADVA is a takeover candidate

as the telecoms equipment industry is still on the
consolidation path.
ADVA has 1,100 employees.
Partnership
Investment case
ADVA is a good vehicle to play trends such as:
From a regional perspective ADVA generates 72% of its sales in the

EMEA region, 23% in the Americas and 5% in Asia-Pacific.
growth in video
traffic
27
www.cheuvreux.com
January 2011
GERMANY
SEMICONDUCTORS
1/Selected List
Rating
+33.0% EUR41.50
Aixtron
Reuters: AIXGn.DE Bloomberg: AIXA GR
LED lighting is gearing up

Q
Recent developments Strong Q3 results & better outlook
AIXA's Q3-10 results were better than expected. Sales came in at

EUR212.7m, beating our estimate of EUR200.0m (cons: EUR200.0m);
EBIT came to EUR82.6m vs. our EUR72.9m forecast and consensus of
EUR71.6m. Net profit came in at EUR56.8m, also clearly ahead of our
EUR50.7m forecast and consensus of EUR50.2m.
The company also surprised the market with a high Q3-10 order intake
of EUR200.4m (+14% q-o-q), 11% ahead of our forecast of EUR180m
and consensus of EUR184m. It reported ongoing healthy demand for
new LED equipment and expects new bookings to remain strong
around the current level going forward. AIXA's order backlog at the end
of September 2010 stood at EUR279m.
Due to the strong business recorded in the first nine months of 2010
and the good visibility for the remainder of this year, AIXA raised its
EBIT margin outlook for 2010 from 33% to ~35% (we predict 35%),
whilst reiterating its sales target of ~EUR750m (we: EUR760m). In Q410 so far it has seen a continuation of the healthy demand for
equipment and has noted some improvement in momentum for LED
lighting-related tools.
Q
EUR31.20
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
Performances
According to a Digitimes article, LED orders for LCD TV backlighting

started to pick up again in November 2010 and are set to increase
significantly in March 2011 when TV vendors launch new models. TV
vendors have clearly now completed the inventory adjustments that led
to a deceleration of growth in LED demand for backlighting in
summer/autumn of this year and were a burden on all LED-related
stocks. Leading LED producer Epistar noted that orders from Koreabased packaging houses have begun to pick up, indicating that
vendors have started placing orders to meet demand in 2011.
The recent news flow offers further confirmation that the drop in LED
demand from the TV segment was just a temporary issue and LEDs
remain a growth market, currently driven largely by the products'
growing penetration in TV backlighting units. Looking ahead, LED
lighting is set to become the main driver for further market growth and
will probably displace TV backlighting as the biggest application from
2014-2015.

16.8%
49.0%
24.4%
9.1%
32.7%
22.8%
Absolute perf.
Relative perf.
101.9
101.9
81.9
81.9
61.9
61.9
41.9
41.9
21.9
21.9
1.9
1.9
01/01
Outlook Improving momentum for LED lighting
AIXA issued bullish statements regarding the improvements in

momentum in the emerging LED lighting market and now sees tangible
signs of an earlier than widely expected market development, e.g. an
increasing proportion of LED lighting-related equipment orders. The
company's management is now less concerned there will be a pause
between the LCD backlighting and the LED lighting CAPEX cycles than
it was a few months ago. As street consensus currently does NOT
anticipate a smooth transition between these two cycles, it should
come as a positive surprise.
EUR3102m
EUR2813m
EUR2439m
99.424m
EUR 44.71m
03/02
07/03
10/04
12/05
03/07
Price/TECDAX
06/08
Sector focus
Sector Top Picks
Dialog Semiconductor,
Micronas, STMicroelectronics
Least favoured
Shareholders
Free Float 90.7%, Camma 9.3%
2009
2010E
2011E
2012E
P/E (x)
52.4
14.8
15.9
13.6
EV/EBITDA (x)
37.1
7.3
7.5
5.8
0.7
1.8
4.8
5.7
Net debt/EBITDA (x)
(5.5)
(1.7)
(2.0)
(2.2)
Yield (%)
0.6
2.0
1.9
2.2
ROCE (%)
55.2
NS
NS
NS
17.9
27.3
24.9
31.6
Q
Q
28
www.cheuvreux.com
12/10
Price
Klaus RINGEL
Research Analyst
kringel@cheuvreux.com
(49) 69 47 89 75 42
09/09
January 2011
GERMANY
Company profile
World market leader for MOCVD equipment

Aixtron develops and produces equipment for the production of
compound semiconductors (HBTs, LEDs, etc. mainly using the
MOCVD process) and silicon semiconductors (based on CVD
technology). With a MOCVD market share of 68% in 2009, it is by far
the world market leader in this area. In 2005 the company entered
the silicon production equipment (SPE) industry by acquiring Genus
Inc., a specialist in atomic layer deposition (ALD).
Q
Q Very flexible management of production capacities

Aixtron outsources 80% of its production process, keeping only R&D
and assembly in house. Its customer base is broadly diversified
(LED, displays, telecom suppliers, consumer/optoelectronics; and
memory makers), with 93% of its revenues generated in Asia,
followed by Europe (3%) and the USA (4%).
Q LED equipment is Aixtron's main growth driver
The vast majority of Aixtron's EUR279m order book (30 September
10) relates to compound semiconductor systems, e.g. for the
production of LEDs and OLEDs (approximately 99%). The remainder
is for silicon semiconductor manufacturing systems.
SWOT analysis
Strengths
Weaknesses
Market and technology

leadership in a duopolistic
MOCVD market with high
barriers to entry (production
process expertise)
High FX sensitivity (AIXA

generates over 90% of its sales
in USD vs. just 20% of its costs)
AIXA is only a small player in

the silicon semiconductor
equipment area
No bank debt; strong balance

sheet
Dependent on the cyclical

semiconductor industry
Highly scalable business

model
Opportunities
Threats
Sound long-term growth

prospects for many end-markets
using MOCVD-made devices
(incl. LEDs, OLEDs, blue-ray
lasers) as well as ALD/AVD.
Early strategic positioning
in promising future markets
(OLEDs, Carbon Nanotubes)
Powerful new competition from

silicon chip tool makers entering
AIXA's territory (e.g. Applied
Materials).
Investments in probable future

markets may not pay off
Valuation
AIXA's shares are trading at 14x PE, 6.2x

EV/EBITDA and 2.5x EV/Sales (all for 2011E).
Current valuation levels are attractive vs. peers
and vs. the company's own valuation history.
We see further upside for the shares due to the
special situation in the LED equipment arena
(duopolistic MOCVD world market with AIXA as
the dominant player) and ongoing strong
demand for LEDs, especially from LCD TVs and
improving momentum from LED lighting.
Investment case
We expect AIXA's order intake to remain stable

around the current high level of EUR200m for at
least the next two quarters. We see a genuine
chance for further a acceleration in new
bookings from YE-11E with the emergence of
the LED lighting market. For 2011E and 2012E
we assume average orders per quarter of
EUR177m and EUR249m respectively.
We believe the market currently has an overly
pessimistic view of AIXA's shares. Lingering
concerns about new competitors entering the
duopolistic MOCVD market, market share losses
at AIXA vs. Veeco, push-outs and cancellations
of equipment deliveries and a significant pause
between the LCD backlighting and the solid
state lighting investment cycle are exaggerated
and we are convinced the market will have to
alter its negative view of AIXA.
LEDs are considered to be a strong growth
market. Market researcher Strategies Unlimited
expects the high brightness LED market to
expand to USD19bn in 2014 from USD5.3bn in
2009 (CAGR09-14 29%). The biggest application
is currently backlighting for LCD screens (51%
of LED market). However, general illumination
(solid-state lighting) is seen as the next mass
market for LEDs, and this application is
expected to become several times bigger than
LCD backlighting, thus triggering a significant
need for additional LED production equipment
to meet the growing demand.
The LED equipment (MOCVD) world market
remains duopolistic for the time being, with AIXA
as the undisputed market leader. Continuing
strong LED growth is triggering demand for
additional
equipment.
Despite
numerous
rumours, none of the mentioned newcomers has
yet succeeded in delivering a MOCVD tool to
match those of the incumbents'. Moreover, we
do NOT expect this to happen soon, if ever.
29
www.cheuvreux.com
January 2011
GERMANY
Aixtron
FY to 31/12 (Euro m)
Profit & Loss Account
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
Goodwill amortisation before OP
Goodwill amortisation [impairment test]
Non recurring operational items
EBIT
Net financial items
Non recurring financial items
Other exceptional items
Tax
Associates [contribution]
Discontinuing activities
Goodwill amortisation
Net profit [loss] before minorities
Dividend to preferred shares
Minorities
Net attributable profit [loss]
Restatement [impairment test]
Adj. for exceptional items
Net attrib. profit [loss], restated
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Financial investments
Net buyback of treasury shares
Disposals
Dividend paid
Capital increase
Other cash flow
Dec. [inc.] in net debt
Balance Sheet
Shareholders' equity [group share]
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
Working capital requirement
WCR as a % of sales
Capital employed
30
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
140.0
53.3%
(29.5)
(94.8)
15.7
183.1%
(6.0)
9.7
139.3%
0.0
0.0
0.0
9.7
0.8
0.0
0.0
(2.8)
0.0
0.0
0.0
7.6
0.0
0.1
7.7
0.0
0.0
7.7
124.3%
139.4
-0.4%
(41.1)
(140.6)
(42.3)
NS
(10.4)
(52.7)
NS
0.0
0.0
0.0
(52.7)
0.5
0.0
0.0
(1.3)
0.0
0.0
0.0
(53.5)
0.0
0.0
(53.5)
0.0
0.0
(53.5)
NS
171.7
23.2%
(42.0)
(114.1)
15.6
136.9%
(9.9)
5.7
110.8%
0.0
0.0
0.0
5.7
0.9
0.0
0.0
(0.8)
0.0
0.0
0.0
5.9
0.0
0.0
5.9
0.0
0.0
5.9
111.0%
214.8
25.1%
(45.0)
(136.3)
33.5
114.7%
(12.9)
20.6
NS
0.0
0.0
0.0
20.6
1.8
0.0
0.0
(5.2)
0.0
0.0
0.0
17.3
0.0
0.0
17.3
0.0
0.0
17.3
193.2%
274.4
27.7%
(57.5)
(173.6)
43.3
29.3%
(10.8)
32.5
57.8%
0.0
0.0
0.0
32.5
3.2
0.0
0.0
(12.7)
0.0
0.0
0.0
23.0
0.0
0.0
23.0
0.0
0.0
23.0
32.9%
302.9
10.4%
(60.4)
(187.6)
54.9
26.8%
7.8
62.7
92.9%
0.0
0.0
0.0
62.7
1.3
0.0
0.0
(19.2)
0.0
0.0
0.0
44.8
0.0
0.0
44.8
0.0
0.0
44.8
94.8%
760.0
150.9%
(63.4)
(390.3)
306.3
NS
(39.4)
266.9
NS
0.0
0.0
0.0
266.9
2.8
0.0
0.0
(83.6)
0.0
0.0
0.0
186.1
0.0
0.0
186.1
0.0
0.0
186.1
NS
871.3
14.6%
(66.6)
(480.3)
324.4
5.9%
(45.2)
279.2
4.6%
0.0
0.0
0.0
279.2
4.1
0.0
0.0
(87.8)
0.0
0.0
0.0
195.5
0.0
0.0
195.5
0.0
0.0
195.5
5.1%
1,047.3
20.2%
(69.9)
(590.5)
386.9
19.3%
(54.3)
332.6
19.1%
0.0
0.0
0.0
332.6
5.2
0.0
0.0
(108.1)
0.0
0.0
0.0
229.7
0.0
0.0
229.7
0.0
0.0
229.7
17.5%
13.6
152.1%
(6.6)
(3.8)
(3.8)
3.2
0.0
0.0
0.0
0.0
0.9
(6.5)
(2.4)
(43.1)
NS
(0.5)
(8.3)
(8.3)
(51.9)
0.0
0.0
0.0
0.0
100.1
(75.2)
(27.0)
15.8
136.7%
(11.1)
(2.2)
(0.5)
2.5
0.0
0.0
0.0
0.0
(5.5)
9.0
6.0
30.2
91.1%
(18.8)
(6.1)
(3.9)
5.3
0.0
0.0
0.0
0.0
(2.8)
3.7
6.2
33.7
11.6%
(27.4)
(18.4)
(15.7)
(12.1)
0.0
0.0
0.0
(6.3)
0.0
7.7
(10.7)
37.0
9.8%
(20.3)
0.0
3.0
16.7
0.0
0.0
0.0
(8.2)
159.4
6.5
174.4
225.5
NS
(150.3)
(25.3)
(17.7)
49.9
0.0
0.0
0.0
(14.9)
0.0
0.0
35.0
240.6
6.7%
(63.4)
(27.3)
(18.6)
149.9
0.0
0.0
0.0
(55.8)
0.0
0.0
94.1
284.0
18.0%
(75.1)
(30.8)
(20.3)
178.1
0.0
0.0
0.0
(58.6)
0.0
0.0
119.5
137.0
0.0
0.7
0.8
(46.5)
NS
92.0
13.6
20.8
37.1
0.0
0.0
20.7
14.8
92.2
183.6
0.0
1.0
4.3
(32.4)
NS
156.5
71.0
31.5
42.2
0.0
0.0
11.8
8.5
156.5
183.9
0.0
1.0
1.1
(50.5)
NS
135.5
65.1
21.6
36.4
4.9
0.0
7.5
4.4
135.5
198.4
0.0
0.9
1.0
(77.6)
NS
122.7
59.0
18.5
35.1
4.9
0.0
5.1
2.4
122.6
212.9
0.0
0.9
0.9
(71.4)
NS
143.3
58.7
14.5
39.3
4.9
0.0
25.9
9.4
143.3
413.5
0.0
1.1
1.1
(302.1)
NS
113.6
58.3
22.7
37.8
0.0
0.0
(5.2)
(1.7)
113.6
584.7
0.0
1.1
2.8
(524.0)
NS
64.6
58.3
22.7
23.7
0.0
0.0
(40.0)
(5.3)
64.7
724.4
0.0
1.1
3.3
(663.7)
NS
65.1
58.3
22.7
5.8
0.0
0.0
(21.7)
(2.5)
65.1
895.5
0.0
1.1
3.9
(855.0)
NS
45.5
58.3
22.7
(17.7)
0.0
0.0
(17.9)
(1.7)
45.4
www.cheuvreux.com
January 2011
GERMANY
Aixtron
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
Per Share Data (at 7/1/2011)

EPS before goodwill
% Change
EPS, reported
% Change
0.12
124.3%
0.12
124.3%
(0.67)
NS
(0.65)
NS
0.07
110.3%
0.07
110.3%
0.20
188.4%
0.20
192.5%
0.23
15.6%
0.23
17.3%
0.45
95.2%
0.45
95.2%
1.86
NS
1.86
NS
1.96
5.1%
1.96
5.1%
2.30
17.5%
2.30
17.5%
Goodwill per share

Dividend per share
Cash flow per share
% Change
Book value per share
0.00
0.00
0.21
152.1%
2.1
0.00
0.00
(0.54)
NS
2.1
0.00
0.00
0.18
134.2%
2.0
0.00
0.07
0.35
89.1%
2.1
0.00
0.09
0.34
-3.2%
2.3
0.00
0.15
0.37
9.8%
4.0
0.00
0.56
2.26
NS
5.3
0.00
0.59
2.41
6.7%
6.7
0.00
0.69
2.84
18.1%
8.3
64.832
64.832
0.000
87.797
82.111
2.000
89.799
87.824
1.960
90.444
88.164
1.310
90.444
99.870
0.000
99.424
99.870
0.000
99.424
99.870
0.000
99.424
99.870
0.000
99.424
99.870
0.000
3.05
7.35
3.04
4.77
2.78
3.98
2.36
2.95
3.34
4.13
2.44
3.05
9.51
9.98
3.31
6.25
4.76
10.70
2.76
6.81
23.50
25.71
3.01
11.45
27.61
29.10
18.71
23.24
31.20
31.32
27.42
29.19
31.20
-
198.7
152.9
249.6
218.2
293.3
243.8
851.1
774.4
430.5
360.0
2,336.5
2,035.5
2,744.6
2,221.7
3,102.0
2,439.4
3,102.0
2,248.1
25.7
25.7
14.5
1.6
1.4
1.7
0.0
NS
NS
NS
NS
1.3
1.4
0.0
48.6
48.6
18.2
0.9
1.6
1.9
0.0
47.7
47.7
27.4
0.6
4.5
6.6
0.7
20.7
20.7
14.1
NS
2.1
2.6
1.9
52.4
52.4
63.4
0.7
5.9
17.9
0.6
14.8
14.8
12.2
1.8
5.2
NS
2.0
15.9
15.9
13.0
4.8
4.7
NS
1.9
13.6
13.6
11.0
5.7
3.8
NS
2.2
9.7
15.8
1.09
11.7
NS
NS
1.57
(5.0)
15.6
42.8
1.42
16.2
23.1
37.6
3.61
26.9
8.3
11.1
1.31
11.4
37.1
32.5
6.7
56.4
7.3
8.3
2.9
9.9
7.5
8.7
2.8
10.3
5.8
6.8
2.1
8.0
NS
NS
11.2
6.9
5.4
1.5
NS
0.0
NS
0.8
NS
NS
NS
0.9
NS
0.0
NS
NS
9.1
3.3
3.4
1.3
NS
0.0
NS
NS
15.6
9.6
8.1
1.8
NS
35.7
NS
NS
15.8
11.8
8.4
2.0
NS
39.1
NS
NS
18.1
20.7
14.8
2.7
NS
33.4
NS
NS
40.3
35.1
24.5
11.7
NS
30.1
NS
NS
37.2
32.0
22.4
13.4
NS
30.1
NS
NS
36.9
31.8
21.9
23.1
NS
30.0
10.5
7.7
5.8
5.8
NS
NS
NS
NS
4.4
3.8
3.3
3.3
17.5
13.5
9.1
9.1
23.5
15.1
11.4
11.4
55.2
38.6
11.5
11.5
NS
NS
37.9
37.9
NS
NS
31.2
31.2
NS
NS
29.4
29.4

Av. number of shares, adjusted
Treasury stock, adjusted
Share Price [Adjusted]
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
Attrib. FCF yield [%]
P/BV
Enterprise value / Op CE
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
EV/Debt-adjusted cash flow
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Capital turn [Sales/ Op. CE]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
Return on equity, restated
31
www.cheuvreux.com
January 2011
GERMANY
STEEL
2/Outperform
Rating
-9.7% EUR40.00
Aurubis AG
Reuters: NAFG.DE Bloomberg: NDA GR
Market environment to continue to improve

Q
Recent developments Q4-09/10 in line with expectations
Operating EBT in Q4 in line: Aurubis reported Q4-09/10 figures

broadly in line with expectations. Operating EBT came to EUR37m vs.
our forecast of EUR39.8m. Primary copper reported EUR13.1m vs. our
EUR11.0m estimate. Recycling and Precious Metals operating EBT
came to EUR12.3m and EUR17.2m respectively vs. our EUR12.5m and
EUR20.0m forecasts.
Strong growth in copper product volumes: The company's
concentrate throughput totalled 2,063kt in FY-09/10 vs. 2,095kt in FY08/09. Its cathode production came to 1,144kt, up 5.3% y-o-y. Its wire
rod production totalled 766tk, up 23.2% y-o-y, and continuous-cast
shapes came to 210kt, up 37.3% y-o-y.
Strong earnings growth in FY-09/10: FY-09/10 EBT before LIFO came
to EUR258m, with EPS of EUR4.69/share. FY-09/10 operating EBT
totalled EUR159m. FY-09/10 sales climbed ~48% to EUR9.865bn due
to the significant rise in copper prices (average of USD7,036/t vs.
USD4,479/t).
As a result of the strong earnings improvement, Aurubis is set to pay a
dividend of EUR1/share vs. EUR0.65 for the previous year.
Q
EUR44.29
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
Performances
9.7%
29.9%
28.0%
8.0%
14.1%
-0.4%
Absolute perf.
Relative perf.
42.6
42.6
37.6
37.6
32.6
32.6
27.6
27.6
22.6
22.6
17.6
17.6
12.6
12.6
7.6
01/01
7.6
04/02
06/03
Outlook Earnings recovery to continue
Although Aurubis has refrained from providing a detailed outlook for FY10/11, management indicated a continuation of the volume and
earnings growth.
Higher TC/RCs to drive primary copper: Supplies of copper
concentrate in the market are expected to improve as a result of the
increase in concentrate production, which is the main source of profits
for the company's primary copper business unit. Thus, TC/RCs are set
to improve from the current multi-year lows treatment and refining
charges for spot deliveries have improved to USD80/t of concentrate
and 8 cents per pound of copper in recent weeks from 30/3 in FY09/10.
Good availability of copper scrap/continued positive volume trend
in wire rod and shape business: Due to continued economic growth
and higher copper prices, the availability of copper scrap/other
recycling materials should remain solid. With regards to copper
products, volumes are expected to grow further in FY-10/11, although
the growth rates are likely to be somewhat lower.
We forecast group operating EBT of EUR191.8m for the current FY, up
from EUR159m in FY-09/10.
EUR1810m
EUR1357m
EUR2224m
40.87m
EUR 8.06m
09/04
12/05
Price/M DAX
03/07
06/08
Sector focus
Sector Top Picks
RAUTARUUKKI, Thyssen
Krupp, Voestalpine
SSAB
Least favoured
Shareholders
Free Float 75.0%, Salzgitter Ag 25.0%
P/E (x)
EV/EBITDA (x)
2008/0
9
27.3
2009/1
0E
15.8
Q
32
www.cheuvreux.com
2010/1
1E
13.3
2011/1
2E
11.2
5.7
8.5
8.1
6.6
40.6
NS
13.6
6.2
Net debt/EBITDA (x)
1.7
2.0
1.2
0.9
Yield (%)
1.9
1.5
2.3
2.8
ROCE (%)
7.2
10.1
12.6
14.1
1.2
1.2
1.1
1.0
Q
12/10
Price
Alexander HAISSL
Research Analyst
ahaissl@cheuvreux.com
(49) 69 47 897 534
09/09
January 2011
GERMANY
Company profile
Largest copper producer in Europe

Following its acquisition of Cumerio, Aurubis AG (formerly
Norddeutsche Affinerie AG) is Europe's largest integrated copper
producer and the international leader in copper recycling. The
company generates some 1.1 million tonnes of copper cathodes and
has capacity for more than 1.3 million tonnes of copper products
annually with production sites in seven European countries and a
total workforce of about 4,700 employees.
Q
Norddeutsche Affinerie AG was founded in Hamburg in 1866 with its

largest production site and administrative headquarters also located
in Hamburg. The IPO was carried out in 1998.
Q Diversified product portfolio
Aurubis' core business is the production of marketable copper
cathodes from copper concentrates, copper scrap and recycled raw
materials. These are processed into continuous-cast wire rods,
shapes and rolled products as well as special wire made of copper
and copper alloys. The company's product portfolio also includes
precious metals and a number of other products, such as sulphuric
acid and iron silicate.
Q Three business units on the copper value chain; diversified
customer base
Aurubis has three business units: Primary Copper (29% of sales),
Recycling / Precious Metals (copper production, 17% of sales),
and Copper Products (copper processing, 54% of sales). Its
customers include companies in the copper semi-finished products
(copper semis) industry, electrical engineering, the electronics and
chemical industries as well as suppliers in the construction and car
industries.
SWOT analysis
Strengths
Weaknesses
European market leader with

production in Germany, Belgium,
Italy and Eastern Europe
Fluctuations in copper spot

prices impact revenues and
working capital (earnings are
dependent on TC/RC and
cathode premiums)
Long-term treatment/refining
contracts (TC/RC) with mining
companies provide earnings
stability
FX risk, as costs are mainly

EUR-denominated
Secured energy supply due to

long-term contract with Vattenfall
Opportunities
Threats
Financial strength could enable

company to drive industry
consolidation/ M&A outside
Europe (major shareholder
Salzgitter (25% stake) supportive
Increased competition from

Chinese players (smelting
capacities)
Improved profitability due to

synergies with Cumerio
33
www.cheuvreux.com
Valuation
Our normalized earnings model assumes

normalized EBITDA of EUR311m in 10-11E
(below peak to trough average of EUR345m)
with an EV/EBITDA multiple of 7.0x. This model
yields a fair value of EUR39 per share.
Q
Q As a second valuation approach we use a

peer group comparison. Compared to our steel
peer group, the stock is trading at an average
discount of 20%, which is not justified in our
view given Aurubis' ability to generate at least its
cost of capital over the cycle, in contrast to steel
producers.
Investment case
Q We expect Aurubis' market environment to

stay favourable, with copper prices remaining
high (above USD7,000/t) due to rising copper
demand.
Q Market conditions in relation to treatment/
refining charges (TC/RCs) are expected to
improve from the current multi-year lows due to
the increase in concentrate production.
Treatment and refining charges for spot
deliveries improved to USD80/t of concentrate
and 8 cents per pound of copper in recent
weeks from 30/3 in FY-09/10. TC/RCs are the
main profit driver for the company's primary
business unit.
Q For the Aurubis group we forecast an
operating pre-tax profit of EUR191.8m fro the
current FY, up ~20% y-o-y due mainly to higher
contributions from primary copper and copper
products.
Q As the market leader in Europe with a ~40%
share in cathodes, we expect the company to
drive consolidation outside Europe to increase
its global footprint. Its main shareholder,
Salzgitter AG, will likely support such deals.
Q We stick to our 2/OP rating and TP of EUR40
based on a normalised earnings model and a
peer group comparison.
January 2011
GERMANY
Aurubis AG
FY to 30/9 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
34
2005
2006
2007
2008
2009
2010E
2011E
2012E
3,022.4
0.0%
(189.5)
(2,670.1)
162.8
0.0%
(63.6)
99.2
0.0%
0.0
0.0
0.0
99.2
(9.5)
0.0
0.0
(29.1)
0.1
0.0
0.0
60.8
0.0
(1.4)
59.4
0.0
0.0
59.4
0.0%
5,753.0
90.3%
(194.0)
(5,396.6)
162.4
-0.2%
(51.6)
110.8
11.7%
0.0
0.0
0.0
110.8
(7.9)
0.0
0.0
(42.9)
0.2
0.0
0.0
60.1
0.0
(1.1)
59.0
0.0
0.0
59.0
-0.7%
6,468.8
12.4%
(215.4)
(5,935.9)
317.5
95.5%
(57.9)
259.6
134.3%
0.0
0.0
0.0
259.6
(9.2)
0.0
0.0
(92.2)
0.6
0.0
0.0
158.8
0.0
(1.2)
157.6
0.0
0.0
157.6
167.1%
8,384.6
29.6%
(266.1)
(7,644.5)
474.0
49.3%
(92.0)
382.0
47.1%
0.0
0.0
0.0
382.0
(42.0)
0.0
0.0
(103.4)
0.7
0.0
0.0
237.2
0.0
(1.8)
235.4
0.0
0.0
235.4
49.4%
6,686.9
-20.2%
(269.5)
(6,201.0)
216.4
-54.3%
(105.6)
110.8
-71.0%
0.0
0.0
0.0
110.8
(37.9)
0.0
0.0
(20.2)
0.6
0.0
0.0
53.3
0.0
(1.0)
52.3
0.0
0.0
52.3
-77.8%
9,457.1
41.4%
(267.0)
(8,888.2)
301.9
39.5%
(108.3)
193.6
74.7%
0.0
0.0
0.0
193.6
(31.9)
0.0
0.0
(45.3)
0.0
0.0
0.0
116.4
0.0
(2.0)
114.4
0.0
0.0
114.4
118.7%
8,723.0
-7.8%
(269.8)
(8,117.2)
336.0
11.3%
(109.4)
226.6
17.0%
0.0
0.0
0.0
226.6
(34.8)
0.0
0.0
(53.7)
0.0
0.0
0.0
138.1
0.0
(2.0)
136.1
0.0
0.0
136.1
19.0%
9,400.0
7.8%
(287.0)
(8,733.0)
380.0
13.1%
(117.5)
262.5
15.8%
0.0
0.0
0.0
262.5
(34.5)
0.0
0.0
(63.8)
0.0
0.0
0.0
164.2
0.0
(3.0)
161.2
0.0
0.0
161.2
18.4%
129.7
0.0%
(75.3)
(33.4)
0.0
21.0
0.2
0.0
0.0
(21.6)
1.0
11.9
12.5
108.6
-16.3%
(278.5)
(47.8)
0.0
(217.7)
0.1
0.0
0.0
(33.6)
8.6
202.0
(40.6)
218.1
100.8%
(75.7)
(94.0)
0.0
48.4
(215.5)
0.0
0.0
(39.0)
0.0
254.3
48.2
337.4
54.7%
(399.9)
(114.0)
0.0
(176.5)
214.5
0.0
0.0
(53.9)
97.6
84.3
166.0
156.7
-53.6%
545.7
(111.0)
0.0
591.4
(50.4)
0.0
0.0
(65.4)
0.0
(381.8)
93.8
232.5
48.4%
(275.8)
(186.5)
0.0
(229.8)
0.0
0.0
0.0
(26.6)
0.0
15.6
(240.8)
243.8
4.9%
123.8
(121.9)
0.0
245.7
0.0
0.0
0.0
(26.6)
0.0
(8.8)
210.3
285.0
16.9%
(32.2)
(140.0)
0.0
112.8
0.0
0.0
0.0
(40.9)
0.0
8.1
80.0
500.3
4.3
51.1
93.5
95.2
18.9
744.4
25.0
4.2
334.6
1.8
0.0
378.9
12.5
744.5
693.4
2.8
55.0
72.8
175.9
25.3
999.9
25.0
2.9
330.5
1.7
0.0
639.7
11.1
999.8
910.9
2.8
58.8
108.9
278.6
30.5
1,360.0
25.0
3.2
364.5
217.1
0.0
750.1
11.6
1,359.9
1,136.5
4.3
66.6
116.7
745.9
65.4
2,070.0
25.0
21.8
870.9
2.7
0.0
1,149.6
13.7
2,070.0
1,025.5
3.3
71.5
137.4
358.5
34.8
1,596.2
25.0
17.0
874.4
53.1
0.0
626.8
9.4
1,596.3
1,115.1
3.6
71.5
160.8
614.8
55.0
1,965.8
25.0
26.4
943.1
53.1
0.0
918.2
9.7
1,965.8
1,226.2
4.0
71.5
148.3
395.7
32.2
1,845.7
25.0
35.1
946.9
53.1
0.0
785.6
9.0
1,845.7
1,349.1
4.5
71.5
159.8
323.7
23.9
1,908.6
25.0
44.5
960.0
53.1
0.0
825.9
8.8
1,908.5
www.cheuvreux.com
January 2011
GERMANY
Aurubis AG
FY to 30/9 (Euro)
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
1.77
0.0%
1.77
0.0%
1.64
-7.4%
1.64
-7.4%
4.24
159.1%
4.24
159.1%
5.82
37.2%
5.82
37.2%
1.28
-78.0%
1.28
-78.0%
2.80
118.7%
2.80
118.7%
3.33
19.0%
3.33
19.0%
3.94
18.4%
3.94
18.4%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
1.00
3.86
0.0%
13.9
0.00
1.05
3.01
-21.9%
18.2
0.00
1.45
5.87
94.8%
23.1
0.00
1.60
8.34
42.0%
26.5
0.00
0.65
3.83
-54.0%
24.4
0.00
0.65
5.69
48.4%
26.6
0.00
1.00
5.97
4.9%
29.0
0.00
1.25
6.97
16.9%
31.8
33.601
33.601
0.000
36.041
36.041
0.000
37.154
37.154
0.000
40.463
40.463
0.000
40.870
40.870
0.000
40.870
40.870
0.000
40.870
40.870
0.000
40.870
40.870
0.000
21.59
22.77
13.99
17.37
21.48
27.12
16.67
21.46
26.85
35.30
20.05
27.29
28.48
38.33
19.80
28.80
34.96
31.24
18.11
24.77
44.29
44.87
28.63
36.35
44.29
45.00
42.70
44.39
44.29
-
625.0
769.5
705.0
947.6
1,146.0
1,275.0
1,232.0
2,051.4
1,428.6
1,833.5
1,810.1
2,446.7
1,810.1
2,224.2
1,810.1
2,155.9
12.2
12.2
5.6
3.4
1.6
1.0
4.6
13.1
13.1
7.1
NS
1.2
0.9
4.9
6.3
6.3
4.6
4.2
1.2
1.1
5.4
4.9
4.9
3.4
NS
1.1
1.0
5.6
27.3
27.3
9.1
40.6
1.4
1.2
1.9
15.8
15.8
7.8
NS
1.7
1.2
1.5
13.3
13.3
7.4
13.6
1.5
1.1
2.3
11.2
11.2
6.4
6.2
1.4
1.0
2.8
4.7
7.8
0.26
5.5
5.8
8.6
0.17
8.3
4.0
4.9
0.20
5.7
4.3
5.4
0.25
5.6
8.5
16.5
0.3
9.8
8.1
12.6
0.3
9.6
6.6
9.8
0.3
8.3
5.7
8.2
0.2
7.0
17.1
0.7
5.4
3.3
2.0
4.1
18.9
56.6
NS
1.6
2.8
1.9
1.0
5.8
25.3
64.1
NS
1.3
4.9
4.0
2.5
5.7
30.5
34.2
11.3
2.2
5.7
4.6
2.8
4.1
65.4
27.5
5.7
2.3
3.2
1.7
0.8
4.3
34.8
50.8
9.5
2.6
3.2
2.0
1.2
4.9
55.0
23.2
9.7
1.6
3.9
2.6
1.6
4.9
32.2
30.0
11.0
1.1
4.0
2.8
1.7
5.1
23.9
31.7
13.4
13.4
12.6
12.6
11.1
6.5
8.9
8.9
22.7
14.4
18.9
18.9
18.5
12.9
23.1
23.1
7.2
5.2
5.2
5.2
10.1
7.3
10.8
10.8
12.6
9.1
11.8
11.8
14.1
10.2
12.7
12.7

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
35
www.cheuvreux.com
January 2011
GERMANY
MEDIA
No Rating
Rating
N/A
Axel Springer
On the path to Digital and International
Expansion
Recent developments Modest organic growth plus major
consolidation effects drive strong earnings rebound
In line with the media sector in general, Axel Springer reported a pickup in sales and earnings in the first nine months of 2010 thanks to the
economic recovery and improvements in advertising spending. Sales in
Q1-Q3 climbed 10%, but adjusted for consolidation effects the increase
came to just 2.3% and adjusted further for positive FX effects, just
1.5%. The structural shift in demand from print to online continued
unabated in 2010. Advertising revenues for the group as a whole rose
21.4%, driven in particular by growth in Digital Media, whilst circulation
sales were down 2%. At the divisional level, Newspapers National
(-1.9%) and Magazines National (-5.7%) both reported declines, whilst
Print International reported a 19.4% increase. The latter was, however,
mostly attributable to the first-time consolidation of the eastern
European companies contributed by Ringier to the JV Axel Springer
Media in the third quarter. Digital Media sales rose sharply, by 62.6%,
also heavily impacted by consolidation effects (i.e. Step Stone and
Digital Window), although pro forma sales also climbed 20.4%. Due to
operational leverage, EBITDA growth reached 46% for an 18.6%
margin, with EBIT up 53% (15.8% margin). However, due to PPA
charges and higher net financial expenses, net income declined by
19%. Operating cash flow, on the other hand, rose 39% (11.7%
margin). Despite acquisitions, the company's liquidity improved from a
net debt position of EUR193m (Sept. 09) to a net cash position of
EUR39m.
Q
Outlook Still on the acquisition path
As the next step in its strategy to increase its digital offering and, in
particular, to strengthen its positioning in European online
marketplaces, in September Springer acquired a 12.4% stake in
SeLoger.com SA, the leading provider of real-estate portals in France. It
also announced a takeover offer at the same price, EUR34 per share,
valuing the company at EUR566m. The offer was approved on 30
November by the French Securities Regulator. Previously, during the
summer, Springer and Ringier AG bundled their E. European media
activities in a joint-venture Ringier Axel Springer Media AG. Despite the
50/50 ownership structure the activities of the joint-venture, as per
agreement, have been fully consolidated by Springer. Given the
strength of its balance sheet (net cash EUR39m) and its access to
unutilised credit facilities worth EUR1.145bn, we would expect Springer
to make further acquisitions as part of its strategy to become one of the
leading pan-European multi-media companies. With regards to its FY10
guidance, despite what Springer referred to in its Q3 report as 'recently
more subdued market conditions', it expects a significant rise in
revenues, to be driven entirely by the International Print and Digital
Media divisions. It also expects its EBITDA to return to the previous
high of ~EUR486m reported in 2008.
EUR119.95
Price (07/01/2011)
Reuters: SPRGn.DE Bloomberg: SPR GR
Stock data
Free float
Enterprise value
Daily volume
EUR3.9bn
EUR1.59bn
EUR4.07bn
32.98m
EUR 5.3m
Performances
1.2%
18.7%
55.7%
-1.1%
5.2%
22.2%
Absolute perf.
Relative perf.
139.0
139.0
119.0
119.0
99.0
99.0
79.0
79.0
59.0
59.0
39.0
39.0
19.0
04/03
19.0
09/05
03/07
10/07
06/08
Price/M DAX
02/09
09/09
Sector focus
Sector Top Picks
Least favoured
Shareholders
Axel Springer Ges. Fr Publizis. 51.5%, Free Float
40.8%, Friede Springer 7.0%, Axel Springer Ag 0.6%
2009
2010
2011
2012
23.7
13.1
12.2
11.2
EV/EBITDA (x)
8.0
7.6
6.6
5.8
9.3
8.2
11.4
11.9
Net debt/EBITDA (x)
0.6
(0.2)
(0.5)
(0.8)
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
P/E (x)
Source: Factset
Cheuvreux does not currently cover Axel Springer
Q
Q
36
www.cheuvreux.com
12/10
Price
Craig ABBOTT
Research Analyst
(49) 69 47 89 75 25
05/10
January 2011
GERMANY
Company profile
A leading European multimedia group

Axel Springer is one of Germany's largest media companies (sales
~EUR2.8bn), and is the German number 1 in magazines and
newspapers, with a focus on publications with broad popular
appeal. In addition the company has holdings in many TV, internet
and radio services. Springer considers itself to be one of Europe's
leading multimedia groups, with an integrated offering of a broad
range of internet, print and Web TV products.
Q
Q Advertising now exceeds Circulation

Due to the international acquisitions in Digital Media and the
expansion of its E. European print media business, the German
share of revenues, though still dominant, has declined further to
73%. In terms of revenues, Advertising has now surpassed
Circulation as the biggest source, now accounting for 47% vs. 42%
for Circulation and 12% for Other. Sales split by segment: National
Newspapers (42%), National Magazines (18%), International Print
(13%), Digital Media (24%) and Services (3%).
SWOT analysis
Strengths
Weaknesses
Germany's leading newspaper

and magazine publisher
Still rather low share of

international business
Strong brands
Strong market shares
Print, faces stagnant (at best)

demand due to the ongoing
migration to digital media
channels.
Well
diversified product
portfolio
Opportunities
Threats
Geographical expansion
Digitisation
Integration of acquired
companies
Cross-media
Overpaying for digitisation

strategy
37
www.cheuvreux.com
Valuation
Based on consensus data, Axel Springer is

currently trading at 11E and 12E PEs of 11.8x
and 10.7x and at EV/EBITDA multiples of 7.2x
and 6.6x respectively, with a forecast dividend
yield of 3.8% (2010).
Q
Investment case
Springer continues to pursue its strategy to

become Europe's leading integrated multi-media
company, while maintaining a high level of
profitability relative to its peers. Since 1998 it
has grown from being a predominately national
player with a presence in just 7 countries and
electronic revenues of just 2% of sales to a
major European multi-media group with a
presence in more than 35 countries and digital
revenues accounting for 24% of sales.
Springer's balance sheet strength (net cash),
strong free cash generation (FCF margin 12% of
sales) and access to EUR1.145bn should enable
it to continue to pursue its strategy of growing
internationally and, in particular, expanding its
digital activities.
The increase in the free float in September 2010
to nearly 41% through the placement, valued at
~EUR500m, of the 8.4% stake from Hellman &
Friedmann (previously held by Deutsche Bank)
and the reduction in Springer's treasury stake
from 9.6% to just 0.6%, substantially increased
the shares' long-term attractiveness for potential
investors.
January 2011
GERMANY
MACHINERY
2/Outperform
Rating
+13% EUR42.00
BAUER
Reuters: B5AG.DE Bloomberg: B5A GR
Reasonably low expectations for 2011 could

lead to a positive surprise
Q
Recent developments Very late-cyclical out of the crisis
Bauer released solid Q3-10 numbers in mid-October and now expects

to report flat y-o-y sales for FY10 and a net profit of EUR35-40m. Q3-10
group external sales reached EUR315m, +27% y-o-y and +1% q-o-q.
The EBIT margin reached 9.0% and net profit came in at EUR17.5m.
On the order intake side, Construction saw the highest disappointment
with orders worth EUR102m, -13% y-o-y and -58% q-o-q. However,
during the results conference call CEO Prof. Bauer indicated that this
was not to be seen as a trend and predicted that Q4-10 order intake in
Construction would rise q-o-q, also given the already gained order
intake from Hong Kong for railway systems, estimated at EUR50m, to
be booked in Q4-10. In addition, we believe the excellent 8.3% Q3-10
EBIT margin in Construction could explain the weak Q3-10
Construction order intake. Bauer appears to be pursuing a strong
margin-before-volume policy when accepting projects. Q3-10 order
intake in Equipment (+19% y-o-y to EUR158m) and Resources (+8% yo-y to EUR58m) came in as expected.
Also on the positive side, the excellent 8.2% Resources margin in Q310 (Q3 and Q4 are always seasonally the strongest quarters) showed
that margin potential of 8-10% in this division for the FY is feasible.
Q
EUR37.45
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
Performances
16.5%
22.2%
20.0%
11.0%
3.9%
-15.6%
Absolute perf.
Relative perf.
75.0
75.0
65.0
65.0
55.0
55.0
45.0
45.0
35.0
35.0
25.0
25.0
15.0
15.0
07/06
01/07
08/07
1) CEO Prof. Bauer recently stated that he does not expect the small
equipment market to recover before 2012. The current level of
utilisation of small equipment among clients is far too low for them to
switch back to growth mode. However, larger equipment, e.g. trench
cutters, which are needed for special projects, are already selling well.
2) The sale of the company's first deep-drilling rig to an already
specified customer has been hit by payment delays. Bauer is now
looking to sell the rig to another client but appears to be experiencing
problems due to the difficult markets clients are relying more on peers
with long track records and competitors are trying to prevent Bauer's
market entry via aggressive pricing. But discussions with clients are
ongoing. Prof. Bauer continues to see deep drilling rig potential in the
medium term and aims to sell at least two large TBA 300 (ASP:
EUR15m) and at least 1 small TBA 200 rig (ASP: EUR12m) in 2011. We
share his optimism.
3) Discussions with the Iraqi government regarding the Mosul river dam
are ongoing. However, we believe a joint venture between Bauer and
Revi is unlikely as each partner would have to guarantee for the other.
We believe Bauer deserves more than 50% of the project's profits as it
does the high-risk work due to its unique equipment technology.
03/08
09/08
Price/SDAX
Outlook 2011 market expectations are reasonably low
We see at least three topics that could be the source of a positive

surprise in 2011E:
EUR641m
EUR332m
EUR1132m
17.131m
EUR 1.04m
04/09
11/09
Sector focus
Sector Top Picks
Least favoured
ABB, EADS, SIEMENS AG

Alstom, Nexans, Rolls-Royce
Shareholders
Free Float 51.8%, Bauer Family 48.2%
P/E (x)
EV/EBITDA (x)
2009
2010E
2011E
12.8
15.6
10.9
8.6
6.6
7.4
6.0
5.3
Q
38
www.cheuvreux.com
2012E
NS
NS
5.7
0.2
Net debt/EBITDA (x)
3.0
3.0
2.3
2.1
Yield (%)
2.1
1.5
2.0
2.4
ROCE (%)
9.0
8.8
11.6
13.3
1.1
1.1
1.1
1.0
Q
01/11
Price
Research Analyst
(49) 69 47 897 540
06/10
January 2011
GERMANY
Company profile
A company with a 218-year history

Having begun its 218-year history as a small copper forge, Bauer AG
is now the holding company for the following five subsidiaries: a)
Bauer Spezialbau GmbH (Construction segment); b) Bauer
Maschinen (Equipment segment); c) Bauer Resources (Resources
segment); d) Schachtbau Nordhausen; and e) Spesa Spezialbau/
Sanierung. It is a global player.
Q
Q Premium position in niche with high barriers to entry

Bauer AG operates in a) the specialist foundation engineering sector;
b) the manufacture and supply of equipment for specialist
foundation engineering; and c) the resources segment, where it
operates three divisions (mining, environment and materials). In
2009, Construction generated revenues of EUR587m and EBIT of
EUR26m, Equipment EUR605m and EUR51m, and Resources
EUR164m and EUR6m.
Q A true global player with strong exposure to infrastructure
Bauer benefits globally from individual market trends via a) its
penetration of all major geographical markets, with 85% of its
equipment sold outside Germany; and b) an estimated 60% of
projects being government-based with the rest non-residential. The
company's 2009 geographical revenues split was as follows:
Germany 28%, EU ex Germany 17%, Europe ex EU 8%, Middle
East 16%, Far East 11%, Americas 11%, Others 9%. This makes it a
truly global player, with the typical costs of globalising distribution
and value-added already having been widely digested in earlier
years.
SWOT analysis
Strengths
Weaknesses
Outstanding track record in

project management
Potential vulnerability to
cyclicality of its main industries
Production, sales and services

network globally proven
Typical
costs of internationalisation already fully digested

One of the two world market
leaders in specialist foundation
equipment
Opportunities
Threats
Strong structural growth

drivers
New low-cost market entrants
Slowdown
in innovation could
hurt pricing power
Market launch of deep drilling

rigs in 2011
Expansion in the Resources

segment
39
www.cheuvreux.com
Valuation
Q DCF: we assume sales and EBITDA CAGRs

of 2.3% and 6.4% respectively for 2010-19E, a
WACC of 8.3% and a terminal growth rate of
2%. Based on these parameters, our DCF
model yields a fair value of EUR42 per share.
Q In our multiple comparison Bauer trades at a
discount of 22% to the overall peer-group
average based on 12E EV/EBITDA. Compared to
its closest peer, Trevi, Bauer trades at a
premium of 2% based on 12E EV/EBITDA.
We rate the stock a 2/Outperform with a target

price of EUR42.
Investment case
We believe Bauer has a good chance to surprise

on the upside in 2011E given that the stock has
underperformed throughout 2010 and market
expectations for 2011 are reasonably low.
We see four topics as a potential source of a
positive surprise in 2011E: 1) A quicker than
expected recovery in small standard equipment.
2) Better than expected development of large
deep drilling rig sales in 11E after the weak
market entry in 2010. 3.) Positive surprises in
winning new Construction projects: we consider
dam renewal projects one of the most important
future areas for Bauer given its state-of-the-art
technology (trench cutters able to reach 250
metres) and the fact that it has already landed a
prestigious win at the Hoover Dike in Florida at
the expense of Keller. Moreover, it is easier to
gain approval for a dam renewal project than for
many other infrastructure measures as
resistance from neighbours, environmental
groups and governments is normally very low as
they all have a vested interest in the dam's
safety.
January 2011
GERMANY
BAUER
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
40
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
602.4
0.0%
(149.9)
(377.7)
74.8
0.0%
(43.2)
31.6
0.0%
0.0
0.0
0.0
31.6
(17.6)
0.0
0.0
(6.0)
0.8
0.0
0.0
8.7
0.0
(0.8)
7.9
0.0
0.0
7.9
0.0%
717.5
19.1%
(155.3)
(467.3)
94.9
26.9%
(47.4)
47.5
50.3%
0.0
0.0
0.0
47.5
(18.4)
0.0
0.0
(10.7)
1.2
0.0
0.0
19.5
0.0
(0.6)
18.9
0.0
0.0
18.9
139.2%
835.4
16.4%
(175.1)
(537.1)
123.2
29.8%
(50.2)
73.0
53.7%
0.0
0.0
0.0
73.0
(16.2)
0.0
0.0
(24.2)
2.6
0.0
0.0
35.2
0.0
(1.1)
34.1
0.0
0.0
34.1
80.4%
1,033.0
23.7%
(214.9)
(632.7)
185.4
50.5%
(53.6)
131.8
80.5%
0.0
0.0
0.0
131.8
(18.0)
0.0
0.0
(41.7)
2.2
0.0
0.0
74.4
0.0
(1.9)
72.5
0.0
0.0
72.5
112.6%
1,290.8
25.0%
(250.8)
(811.6)
228.4
23.2%
(60.9)
167.5
27.1%
0.0
0.0
0.0
167.5
(23.9)
0.0
0.0
(39.2)
3.1
0.0
0.0
107.5
0.0
(3.1)
104.4
0.0
0.0
104.4
44.0%
1,096.5
-15.1%
(263.0)
(673.5)
160.0
-29.9%
(75.6)
84.4
-49.6%
0.0
0.0
0.0
84.4
(28.4)
0.0
0.0
(17.5)
3.5
0.0
0.0
42.0
0.0
(3.0)
39.0
0.0
0.0
39.0
-62.6%
1,106.9
0.9%
(257.9)
(697.3)
151.7
-5.2%
(68.6)
83.1
-1.5%
0.0
0.0
0.0
83.1
(28.9)
0.0
0.0
(17.5)
4.0
0.0
0.0
40.7
0.0
(2.0)
38.7
0.0
0.0
38.7
-0.8%
1,202.2
8.6%
(257.9)
(756.8)
187.5
23.6%
(74.5)
113.0
36.0%
0.0
0.0
0.0
113.0
(29.3)
0.0
0.0
(26.3)
4.0
0.0
0.0
61.4
0.0
(2.5)
58.9
0.0
0.0
58.9
52.2%
1,290.0
7.3%
(263.8)
(812.0)
214.2
14.2%
(74.8)
139.4
23.4%
0.0
0.0
0.0
139.4
(32.3)
0.0
0.0
(33.0)
3.0
0.0
0.0
77.0
0.0
(2.0)
75.0
0.0
0.0
75.0
27.3%
51.9
0.0%
(12.4)
0.0
(30.0)
39.5
0.1
0.0
0.0
(0.2)
0.0
0.0
39.4
66.9
28.9%
(16.4)
(26.2)
(30.0)
24.3
(0.4)
0.0
0.0
(0.3)
0.0
(12.6)
11.0
85.4
27.7%
(32.7)
(23.3)
(30.0)
29.4
(5.4)
0.0
0.0
(0.4)
10.0
(20.6)
13.0
128.0
49.9%
(71.0)
(57.3)
(30.0)
(0.3)
(2.8)
0.0
0.0
(7.9)
0.0
26.2
15.2
168.4
31.6%
(65.6)
(113.4)
(30.0)
(10.6)
0.0
0.0
0.0
(17.1)
0.0
35.2
7.5
117.6
-30.2%
(84.6)
(163.0)
(30.0)
(130.0)
(1.8)
0.0
0.0
(17.1)
0.0
147.0
(1.9)
109.3
-7.1%
(3.8)
(112.1)
(30.0)
(6.6)
0.0
0.0
0.0
(15.0)
0.0
28.2
6.6
135.9
24.3%
(15.5)
(82.2)
(30.0)
38.2
0.0
0.0
0.0
(8.9)
0.0
(7.5)
21.8
151.8
11.7%
(36.1)
(114.7)
(30.0)
1.0
0.0
0.0
0.0
(13.0)
0.0
(6.9)
(18.9)
121.4
7.0
33.3
8.4
212.6
165.6
382.7
0.0
7.2
158.7
0.7
3.6
212.5
35.3
382.7
142.0
6.5
34.5
15.4
222.1
149.6
420.5
0.0
10.5
169.3
0.5
4.2
235.9
32.9
420.4
214.2
8.4
36.5
25.9
200.3
90.0
485.3
0.0
11.2
184.9
4.1
6.0
279.1
33.4
485.3
268.5
10.7
41.2
25.3
276.7
99.1
622.4
0.0
14.2
245.8
5.4
7.5
349.5
33.8
622.4
357.9
14.7
43.9
29.0
338.6
90.9
784.1
0.0
17.8
334.6
3.7
9.1
418.8
32.4
784.0
374.7
27.2
46.3
26.8
480.4
119.5
955.4
0.0
21.8
417.7
3.6
11.0
501.3
45.7
955.4
398.3
29.3
46.4
24.9
461.7
108.0
960.6
0.0
22.5
420.4
3.6
11.0
503.1
45.5
960.6
446.4
33.6
46.4
27.4
432.5
90.1
986.3
0.0
23.4
427.2
3.6
11.0
521.2
43.4
986.4
505.2
38.9
47.5
29.4
443.3
81.5
1,064.3
0.0
31.3
459.2
3.6
11.0
559.2
43.3
1,064.3
www.cheuvreux.com
January 2011
GERMANY
BAUER
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
3.31
0.0%
3.31
0.0%
7.91
139.2%
7.91
139.2%
2.17
-72.6%
2.17
-72.6%
4.23
95.3%
4.23
95.3%
6.09
44.0%
6.09
44.0%
2.28
-62.6%
2.28
-62.6%
2.26
-0.8%
2.26
-0.8%
3.44
52.2%
3.44
52.2%
4.38
27.3%
4.38
27.3%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.13
21.73
0.0%
50.7
0.00
0.17
28.00
28.9%
59.3
0.00
0.50
5.43
-80.6%
13.1
0.00
1.00
7.47
37.7%
14.7
0.00
1.00
9.83
31.6%
19.9
0.00
0.60
6.87
-30.2%
21.3
0.00
0.52
6.38
-7.1%
22.7
0.00
0.76
7.93
24.3%
25.3
0.00
0.88
8.86
11.7%
28.6

Latest price
High
Low
Average price
2.389
2.389
0.000
2.389
2.389
0.000
15.733
15.733
0.000
17.131
17.131
0.000
17.131
17.131
0.000
17.131
17.131
0.000
17.131
17.131
0.000
17.131
17.131
0.000
17.131
17.131
0.000
32.82
33.00
16.53
22.10
48.74
67.91
31.15
49.79
29.45
71.81
17.00
45.00
29.25
34.60
19.60
26.83
35.30
37.00
27.17
31.85
37.45
37.75
35.20
37.05
37.45
-
553.3
780.0
830.9
1,136.0
504.5
889.2
501.1
1,051.7
604.7
1,129.3
641.5
1,132.9
641.5
1,134.7
NS
NS
NS
NS
NS
-
NS
NS
NS
NS
NS
0.0
15.1
15.1
6.0
5.3
2.5
1.6
1.5
11.5
11.5
6.5
NS
3.3
1.9
2.1
4.8
4.8
3.0
NS
1.5
1.2
3.4
12.8
12.8
4.3
NS
1.4
1.1
2.1
15.6
15.6
5.5
NS
1.6
1.1
1.5
10.9
10.9
4.7
5.7
1.5
1.1
2.0
8.6
8.6
4.2
0.2
1.3
1.0
2.4
NS
NS
NS
NS
NS
NS
NS
NS
6.3
10.7
0.93
8.2
6.1
8.6
1.10
8.1
3.9
5.3
0.69
4.7
6.6
12.5
1.0
7.4
7.4
13.6
1.0
8.5
6.0
10.0
0.9
7.1
5.3
8.1
0.9
6.4
4.3
4.1
12.4
5.2
1.4
1.6
165.6
3.9
5.2
3.3
13.2
6.6
2.7
1.7
149.6
2.1
7.6
2.3
14.7
8.7
4.2
1.8
90.0
23.1
10.3
2.2
17.9
12.8
7.2
1.7
99.1
23.6
9.6
2.0
17.7
13.0
8.3
1.7
90.9
16.4
5.6
4.1
14.6
7.7
3.8
1.2
119.5
26.4
5.2
4.2
13.7
7.5
3.7
1.2
108.0
23.0
6.4
3.2
15.6
9.4
5.1
1.2
90.1
22.1
6.6
2.9
16.6
10.8
6.0
1.2
81.5
20.1
8.4
4.9
6.7
6.7
11.4
7.4
14.3
14.3
15.4
9.1
17.3
17.3
21.6
13.9
31.2
31.2
21.7
15.9
34.2
34.2
9.0
6.3
11.0
11.0
8.8
6.1
10.2
10.2
11.6
8.1
14.1
14.1
13.3
9.3
16.0
16.0
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
41
www.cheuvreux.com
January 2011
GERMANY
DISTRIBUTORS
2/Outperform
Rating
+0.4% EUR35.00
BayWa
Reuters: BYWGnx.DE Bloomberg: BYW6 GR
Benefitting from firm soft commodity prices

Recent developments Solid Q3 and change in the
management board
BayWa reported very solid Q3-10 results, in line with expectations.

Revenues rose 4% y-o-y to EUR2.1bn, EBIT was up 20% to EUR30m,
and net income increased an even stronger 53% to EUR8m due to
book gains from the sale of the financial asset AniMedica.
In November, BayWa announced it is seeking a strategic solution for its
building materials division. In this context the board member
responsible for this division, Frank Hurtmans, left the company. No
details have been announced so far as to whether the division will be
sold or if it will be place in a JV.
Q
EUR34.87
Price (07/01/2011)
Outlook Good years ahead
In 2010E BayWa is set to achieve its strongest earnings growth since

2006, with a probable 43% y-o-y rise in adjusted EBT from EUR65m
(reported. EUR75m) to EUR107m. EUR15m of this improvement is likely
to come from new renewable energy activities, EUR10m from grain
price effects, EUR9m from logistics-related cost savings and EUR8m
from the sale of non-operating real estate.
BayWa is benefiting from the strong demand for photovoltaic systems
in Germany. We expect its renewable energy business to contribute
revenues of EUR400m (5% of group sales) already in 2010E and EBIT
of EUR25m (16% of group EBIT), which is above the company's
guidance of EUR300-350m and EUR20m respectively. As BayWa
targets renewable energy revenues of EUR1bn in the medium term, its
overall group margin will improve, as its core business generates EBIT
margins of 1-2%, while renewable energy margins will likely generate a
margin of 6-7% this year.
BayWa anticipates a positive impact from the recovery in the agriculture
sector. Overall sentiment has improved as a result of demand gradually
returning to normal levels in the operating resources business and
thanks to the rise in milk prices seen in recent months.
One of BayWa's main points of focus is renewable energy. The
company plans to make further acquisitions and say it has 10-15
acquisition targets on its radar screen. It does not rule out purchases of
listed companies, but made it clear that it does not intend to acquire
production companies (i.e. producers of photovoltaic modules or
biogas systems), but rather developers and service companies. Such
acquisitions would represent a good fit for BayWa, in our view, as its
customer base (farmers) are a major customer group in the renewable
energy industry.
Stock data
Free float
Enterprise value
Daily volume
EUR1189m
EUR514m
EUR1990m
34.105m
EUR 1.29m
Performances
0.6%
16.0%
35.1%
-0.9%
1.9%
5.1%
Absolute perf.
Relative perf.
49.5
49.5
44.5
44.5
39.5
39.5
34.5
34.5
29.5
29.5
24.5
24.5
19.5
19.5
14.5
14.5
9.5
9.5
4.5
01/01
4.5
03/02
06/03
09/04
12/05
Price/M DAX
03/07
06/08
Sector focus
Sector Top Picks
Least favoured
Ahold, Carrefour
Colruyt
Shareholders
Free Float 43.3%, Bay. Raiffeisen Bet. 32.2%, Lli
14.3%, Rwa Deutschland Gmbh 10.3%
2009
2010E
2011E
2012E
18.9
18.2
14.7
11.5
9.0
8.8
7.1
5.9
18.4
1.0
8.0
4.4
Net debt/EBITDA (x)
3.1
2.3
1.5
1.0
Yield (%)
1.6
1.2
1.3
1.3
ROCE (%)
5.8
7.4
8.9
9.9
1.0
1.0
0.9
0.8
P/E (x)
EV/EBITDA (x)
Q
Q
42
www.cheuvreux.com
12/10
Price
Philipp BUMM
Research Analyst
pbumm@cheuvreux.com
(49) 69 47.897.527
09/09
January 2011
GERMANY
Company profile
Europe's largest agricultural trading company

BayWa is the largest agricultural trading company in Europe. In 2009
it recorded revenues of EUR7.3bn. Of this total, it generated 45% in
its agriculture division, 25% in energy and 24% in building materials.
In terms of operating profit, agriculture accounted for 33%, building
materials 8%, energy 31% and others 28% of the total. It is
important to note that BayWa can also be considered a value play as
it carries real-estate properties at a book value of about EUR900m
(fair value of EUR1.2bn), which compares to its current market cap
of about EUR1bn. It has a strong focus on its agriculture division. It
basically aims to sell farmers everything they need (e.g. fertilizers,
seeds, machinery) and then to sell on the farmers' harvests to grain
mills or the food industry.
Q
Q Divisional sales split (2009)

Agriculture 45%, building materials 24%, energy 25%, others 6%.
SWOT analysis
Strengths
Weaknesses
BayWa
has consistently managed to grow its sales over the

last 20 years, despite declines in
the agricultural and construction
industries
Agricultural sales are strongly

dependent on the weather and
EU farming subsidies.
BayWa is not earning its cost
of capital
Strong
long-term relationships
with farmers
Opportunities
Threats
Divestment of financial assets

to finance growth
New
Sales
Investments in eastern Europe

could fail
CEO will focus on

profitability; previous CEO retired
after 18 years in July 2008
in the building materials

division are dependent on the
German construction industry
Renewable
energy activities
offer significantly higher margins
(4-7% EBIT)
Valuation
BayWa is now trading at an EV/Capital

employed multiple of only 0.73x for 11E, which
is 16% below its average for 2004-2009 (range:
0.6-1.5x). We see no justification for this
discount. The shares are currently trading at a
P/E 12E of 11.5x and a P/B 11E of only about
1.16x.
Q
Investment case
We rate the stock a 2/Outperform with a target

price of EUR35. Looking ahead, we expect
further improvements in BayWa's agriculture
division and we see additional potential for the
company to realise more of its underlying value
for example by selling non-core activities and
focusing more on ROCE.
BayWa clearly benefits from the current strong
demand for photovoltaic systems in Germany.
We expect its renewable energy business to
contribute revenues of EUR400m (5% of group
sales) already in 2010E with EBIT of EUR25m
(16% of group EBIT). As BayWa targets
renewable energy revenues of EUR1bn in the
medium term, its overall group margin should
improve as its core business generates EBIT
margins of 1-2% vs. probably 6-7% in 2010E in
renewable energy. The company's overall EBIT
margin is thus poised to increase from 1.6% in
09 to 1.9% in 10E and 2.1% in 11E.
BayWa will continue to benefit from firmer soft
commodity prices. Global harvest forecasts
have been reduced due to the drought in
western Europe and fires in Russia. Leading
agricultural institutes (e.g. USDA) have recently
reduced their global harvest assumptions. As a
result, the wheat price has jumped >30% in
2010. We expect farmers to invest more (i.e. to
increase their harvest areas and boost yields,
calling for new machinery), leading to further
sales potential for BayWa in the years ahead.
43
www.cheuvreux.com
January 2011
GERMANY
BayWa
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
44
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
6,109.3
3.7%
(535.3)
(5,416.5)
157.5
14.4%
(84.6)
72.9
35.8%
0.0
0.0
0.0
72.9
(27.4)
0.0
0.0
(4.5)
0.0
0.0
0.3
31.4
0.0
(7.8)
23.6
0.0
0.0
23.3
15.1%
6,537.1
7.0%
(555.6)
(5,809.8)
171.7
9.0%
(91.9)
79.8
9.5%
0.0
0.0
0.0
79.8
(26.2)
0.0
0.0
(3.3)
0.0
0.0
0.0
38.9
0.0
(12.7)
26.2
0.0
0.0
26.2
12.4%
7,299.8
11.7%
(577.6)
(6,521.3)
200.9
17.0%
(89.1)
111.8
40.1%
0.0
0.0
0.0
111.8
(12.9)
0.0
0.0
(12.9)
0.0
0.0
0.0
56.9
0.0
(17.8)
39.1
0.0
0.0
39.1
49.2%
7,227.2
-1.0%
(586.9)
(6,405.7)
234.6
16.8%
(91.0)
143.6
28.4%
0.0
0.0
0.0
143.6
(22.7)
0.0
0.0
(18.7)
0.0
0.0
0.0
71.8
0.0
(25.8)
46.0
0.0
0.0
46.0
17.6%
8,794.6
21.7%
(607.9)
(7,928.6)
258.1
10.0%
(96.2)
161.9
12.7%
0.0
0.0
0.0
161.9
(46.2)
0.0
0.0
(26.8)
0.0
0.0
0.0
77.3
0.0
(18.4)
58.9
0.0
0.0
58.9
28.0%
7,260.2
-17.4%
(619.6)
(6,430.8)
209.8
-18.7%
(94.4)
115.4
-28.7%
0.0
0.0
0.0
115.4
(26.5)
0.0
0.0
(15.7)
0.0
0.0
0.0
59.8
0.0
(14.4)
45.4
0.0
0.0
45.4
-22.9%
8,068.9
11.1%
(640.0)
(7,181.9)
247.0
17.7%
(94.1)
152.9
32.5%
0.0
0.0
0.0
152.9
(32.1)
0.0
0.0
(26.8)
0.0
0.0
0.0
80.5
0.0
(15.0)
65.5
0.0
0.0
65.5
44.3%
8,437.7
4.6%
(650.0)
(7,505.7)
282.0
14.2%
(100.8)
181.2
18.5%
0.0
0.0
0.0
181.2
(37.2)
0.0
0.0
(32.5)
0.0
0.0
0.0
97.5
0.0
(16.5)
81.0
0.0
0.0
81.0
23.7%
9,042.5
7.2%
(696.6)
(8,031.9)
314.0
11.3%
(106.0)
208.0
14.8%
0.0
0.0
0.0
208.0
(31.4)
0.0
0.0
(40.5)
0.0
0.0
0.0
121.4
0.0
(18.2)
103.2
0.0
0.0
103.2
27.4%
115.9
7.7%
151.7
(109.8)
(48.7)
157.8
0.0
0.0
0.0
(8.0)
0.0
0.0
149.8
130.7
12.8%
(48.5)
(130.0)
(64.7)
(47.8)
0.0
0.0
0.0
(8.7)
0.0
0.0
(56.5)
146.0
11.7%
(161.9)
(97.8)
(24.8)
(113.7)
0.0
0.0
0.0
(15.7)
0.0
0.0
(129.4)
162.8
11.5%
(281.3)
(76.1)
(25.5)
(194.6)
0.0
0.0
0.0
(13.1)
0.0
0.0
(207.7)
169.3
4.0%
43.1
(112.5)
(50.9)
99.9
0.0
0.0
0.0
(13.1)
0.0
0.0
86.8
154.1
-9.0%
205.7
(153.6)
(102.7)
206.2
0.0
0.0
0.0
(17.2)
0.0
0.0
189.0
174.6
13.3%
(60.5)
(100.0)
(43.5)
14.1
0.0
0.0
0.0
(13.6)
0.0
0.0
0.5
198.3
13.6%
16.3
(100.0)
(40.9)
114.6
0.0
0.0
0.0
(14.3)
0.0
0.0
100.3
227.4
14.7%
(65.4)
(100.0)
(36.7)
62.0
0.0
0.0
0.0
(15.0)
0.0
0.0
47.0
613.2
81.4
425.1
307.8
388.5
55.9
1,816.0
2.6
14.7
904.2
255.5
13.8
625.2
10.2
1,816.0
651.7
89.1
427.8
307.3
446.7
60.3
1,922.6
5.3
14.2
951.1
264.0
14.5
673.6
10.3
1,922.7
683.8
100.2
427.7
311.8
581.8
74.2
2,105.3
9.0
20.3
965.7
259.6
15.3
835.5
11.4
2,105.4
730.8
123.7
425.9
283.8
787.9
92.2
2,352.1
9.0
18.1
959.7
238.8
9.8
1,116.8
15.5
2,352.2
776.3
138.8
426.0
270.0
762.0
83.3
2,373.1
13.0
22.4
988.4
265.9
9.8
1,073.8
12.2
2,373.3
802.9
154.6
425.7
268.5
643.0
67.2
2,294.7
29.4
36.2
1,059.1
292.3
9.8
867.8
12.0
2,294.6
854.8
169.6
423.6
348.0
565.2
55.2
2,361.2
29.4
36.2
1,065.0
292.3
9.8
928.3
11.5
2,361.0
921.5
186.1
421.4
385.4
429.7
38.8
2,344.1
29.4
36.2
1,064.2
292.3
9.8
912.1
10.8
2,344.0
1,009.7
204.2
417.2
447.4
324.8
26.8
2,403.3
29.4
36.2
1,058.2
292.3
9.8
977.4
10.8
2,403.3
www.cheuvreux.com
January 2011
GERMANY
BayWa
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.69
15.1%
0.70
15.5%
0.78
12.1%
0.78
10.7%
1.16
48.6%
1.16
48.6%
1.36
17.7%
1.36
17.7%
1.73
27.6%
1.73
27.6%
1.33
-23.2%
1.33
-23.2%
1.92
44.3%
1.92
44.3%
2.38
23.6%
2.38
23.6%
3.03
27.4%
3.03
27.4%
(0.01)
0.24
3.45
7.7%
17.9
0.00
0.26
3.88
12.4%
19.0
0.00
0.30
4.31
11.3%
19.9
0.00
0.32
4.81
11.5%
21.3
0.00
0.32
4.98
3.6%
22.5
0.00
0.40
4.52
-9.3%
23.1
0.00
0.42
5.12
13.3%
24.6
0.00
0.44
5.82
13.6%
26.6
0.00
0.46
6.67
14.7%
29.1

Latest price
High
Low
Average price
33.713
33.620
0.000
33.790
33.730
0.000
33.853
33.850
0.000
33.853
33.850
0.000
33.969
33.970
0.000
34.105
34.100
0.000
34.105
34.100
0.000
34.105
34.100
0.000
34.105
34.100
0.000
14.30
17.00
11.50
13.16
17.01
24.70
13.65
16.49
24.28
26.60
16.80
21.80
34.00
47.85
22.39
36.46
25.80
44.68
15.20
32.97
25.16
27.35
13.87
21.33
35.04
35.05
24.90
29.22
34.87
35.06
34.65
34.95
34.87
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
480.8
1,197.8
573.8
1,461.6
820.4
1,943.5
1,150.9
2,770.8
874.4
2,069.6
852.7
1,898.4
1,195.0
2,165.0
1,189.2
1,990.1
1,189.2
1,847.9
20.4
20.6
4.1
24.7
0.8
0.8
1.7
21.9
21.9
4.4
NS
0.9
0.9
1.5
21.0
21.0
5.6
NS
1.2
1.1
1.2
25.0
25.0
7.1
NS
1.6
1.3
0.9
14.9
14.9
5.2
8.7
1.1
1.0
1.2
18.9
18.9
5.6
18.4
1.1
1.0
1.6
18.2
18.2
6.8
1.0
1.4
1.0
1.2
14.7
14.7
6.0
8.0
1.3
0.9
1.3
11.5
11.5
5.2
4.4
1.2
0.8
1.3
7.6
16.4
0.20
7.4
8.5
18.3
0.22
7.6
9.7
17.4
0.27
10.0
11.8
19.3
0.38
11.8
8.0
12.8
0.24
8.8
9.0
16.5
0.3
9.3
8.8
14.2
0.3
9.5
7.1
11.0
0.2
7.7
5.9
8.9
0.2
6.5
5.7
3.4
2.6
1.2
0.5
4.0
55.9
34.2
6.6
3.4
2.6
1.2
0.6
4.0
60.3
33.5
15.6
4.0
2.8
1.5
0.8
4.0
74.2
26.0
10.3
4.8
3.2
2.0
1.0
3.4
92.2
23.5
5.6
4.5
2.9
1.8
0.9
4.2
83.3
18.5
7.9
4.2
2.9
1.6
0.8
3.6
67.2
30.0
7.7
3.2
3.1
1.9
1.0
3.9
55.2
21.9
7.6
2.2
3.3
2.1
1.2
4.1
38.8
18.5
10.0
1.4
3.5
2.3
1.3
4.3
26.8
15.2
4.7
4.1
3.9
3.9
4.9
4.5
4.1
4.1
6.1
5.0
5.9
5.9
6.8
5.4
6.5
6.5
7.7
5.7
7.9
7.9
5.8
4.6
5.8
5.8
7.4
5.6
8.0
8.0
8.9
6.7
9.2
9.2
9.9
7.4
10.8
10.8

EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
45
www.cheuvreux.com
January 2011
GERMANY
CONSTRUCTION & INFRASTRUCTURE
1/Selected List
Rating
+13.1% EUR70.00
Bilfinger Berger
Strategic transition still evolving
Q
Recent developments strong Q3, successful transactions
Bilfinger's solid Q3 results again beat expectations with output volume

up +5.4%. The group already exceeded its 4% EBIT margin target in
Q3 (4.4%), and the EBIT margin progression beat our forecasts in all
divisions. Notably, the Building & Facility Services division reported a
4.4% margin due to higher utilisation and benefits from the integration
of M+W Zander. Most importantly, incoming order growth in the key
Industrial Services division (40% of group EBIT) continued to gain
momentum with orders in Q3 up 23% organically (vs. 19.2% in Q2).
Bilfinger increased its guidance again, on the back of which we raised
our forecasts 3% for 2010/11E.
Bilfinger recently completed a small bolt-on acquisition of Rotring
Engineering, further enhancing its power and oil engineering services
offering. Bilfinger paid just 6x EV/EBIT for this highly profitable (EBIT
margin 16-17%) niche services provider. Bilfinger also recently sold
50% stakes in four of its concession PPP projects at a 54% premium to
NPV, suggesting its NPV for the entire portfolio is probably very
conservative. The disposal also generated a capital gain of EUR18m.
Q
Outlook Valemus successfully sold/Lifetime extensions
Bilfinger continues to execute its strategy to downsize its construction

activities both organically and via the recent disposal of its Australian
operations (Valemus), rechanneling the freed-up capital into growing its
more stable, higher-margin Services businesses. In late December it
sold Valemus to Lend Lease for c. EUR700m. After the repayment of a
EUR125m inter-company loan and a potential cash-out of risk
provisions the net proceeds are likely to be c. EUR500m. Bilfinger
reiterated its strategy to reinvest the net proceeds in expanding its
Services activities. Including debt financing, it expects to be able to
finance c. EUR1bn acquisitions. If we assume it can realise acquisitions
with an average EV/EBIT multiple of 6.5x, this suggests it could
potentially acquire c. EUR155m additional EBIT or +45% from our
2010E estimate of EUR332m. In Power Bilfinger ideally aims to expand
geographically into high-growth markets such as Russia or India and
potentially into new areas such as turbine or distribution grid servicing,
where significant investments are expected. To date, Bilfinger has a
successful M&A track record, certainly in Industrial & Power Services.
We are increasingly confident Power Services' 2010 incoming orders
will exceed its 2009 level (EUR1.02bn) as orders in Q4 picked up
strongly and include a major EUR460m modernisation order in Poland.
From 2012 at the latest we expect it to begin to benefit from increasing
capital spending on power plant lifetime extension projects in Germany.
Bilfinger is the dominant independent provider of high-pressure piping
and boiler installation, maintenance and lifetime extension services and
is very well positioned. Despite the shares' recent strong
outperformance, they still offer attractive value, trading on ~10x (11E),
1.3x P/BV (ROE 11E 15.7%), a dividend yield (10E) of 4.4% and nonrecourse debt adjusted EV/EBITDA of 6.3x (11E).
Craig ABBOTT
Research Analyst
(49) 69 47 89 75 25
EUR61.90
Price (07/01/2011)
Reuters: GBFG.DE Bloomberg: GBF GR
Stock data
Free float
Enterprise value
Daily volume
EUR2730m
EUR2620m
EUR4918m
46m
EUR 14.16m
Performances
1.3%
16.7%
11.2%
-0.2%
2.5%
-13.5%
Absolute perf.
Relative perf.
72.0
72.0
62.0
62.0
52.0
52.0
42.0
42.0
32.0
32.0
22.0
22.0
12.0
12.0
01/01
04/02
07/03
10/04
01/06
Price/M DAX
04/07
07/08
Q
46
www.cheuvreux.com
01/11
Price
Sector focus
Sector Top Picks
Least favoured
ADP, Bilfinger Berger
Shareholders
Free Float 96.0%, Treasury Shares 4.0%
2009
2010E
2011E
P/E (x)
14.3
10.7
10.1
9.4
EV/EBITDA (x)
12.5
10.3
9.9
8.9
10.5
NS
7.8
10.0
Net debt/EBITDA (x)
4.8
4.0
3.8
3.2
Yield (%)
3.7
4.3
4.6
5.5
ROCE (%)
12.2
25.8
23.5
23.8
2.6
3.7
3.2
2.9
Q
10/09
2012E
January 2011
GERMANY
Company profile
Reorganised into five divisions

Bilfinger was reorganised into five divisions beginning with its Q1-10
report and now reports its Australian operations as discontinued
pending their planned IPO: Industrial Services (29% of output/45%
of EBIT), Power Services (13%/28%), Building and Facility
Services (33%/22%), Construction (25%/EBIT loss) and
Concessions (5% of EBIT). Under its 'new' structure we estimate an
output volume in 2010E of ~EUR8bn and EBIT of EUR332m, which
will include a EUR18m disposal gain (Concessions).
Q
Q Services, the main value driver

The Services divisions, built up via a series of acquisitions since
2002 as well as robust organic growth, have become the groups
main earnings contributor, accounting for ~60% of group output and
~80% of EBIT in 2009). Bilfinger is the European market leader in
Industrial Services, the largest Facility Services provider in the stillfragmented German market, and occupies leading positions in its
niche segments in Power Services.
Bilfinger's valuation remains attractive as the

shares are still trading on a single-digit P/E for
2011E of ~10x, adjusted EV/EBITDA (excluding
non-recourse debt) of ~6.3x, P/BV of 1.3x with a
ROE of 15.7% and offer a dividend yield of
~4.7% (multiples all 2011E).
Our target price of EUR70 is derived applying a
blended EV/EBIT multiple of 8.1x (11E) for the
Services divisions (Power 9x, Industrial 8x and
Facility Services 7x) and applying EV/EBIT
multiples of just 3.5x for both the Construction
division and the building activities. For the
Concessions portfolio we apply a 30% premium
to the company's published NPV (based on
recent partial disposals which generated >50%
premium to NAV). For Valemus we apply the
estimated net cash proceeds (EUR535m) and
we apply a P/E multiple to the central costs.
SWOT analysis
Strengths
Weaknesses
Significant proportion of
earnings (~85%) already
contributed by the relatively
stable Services divisions.
German construction market

remains highly fragmented.
Exposure (albeit limited) to the

commercial building sector,
which is in a severe downturn.
Amongst the market leaders (in

Europe) in each of its Services
units.
Recent track record of losses

on large civil projects.
Opportunities
Threats
Funds raised from potential

IPO of its Australian business
(targeted for spring 2011) can be
reinvested in expanding its
service offering and geographic
footprint in Services. Bilfinger
has to date a successful
acquisition and integration track
record.
Potential execution risks

during planned downsizing of
construction activities.
Risk of significant cost

overruns in construction
projects.
Price pressure in some facility

management and industrial
services segments
Scalable platform in Services,

especially in Industrial Services.
Loss from Cologne tube

project could potentially exceed
insured amounts.
Future flow of social

infrastructure PPP projects
Integration risk for acquired

companies.
47
www.cheuvreux.com
Valuation
Investment case
Bilfinger's new strategic focus, if successful, will

fundamentally reduce the group's risk profile
and earnings volatility and enable it to further
strengthen its already market-leading positions
in each of its Services businesses.
The company's plan is to reduce its construction
activities from ~EUR5.3bn in 2009 to <EUR2bn
by 2012 via a) disposal of its Australian
operations; b) organic downsizing of its
remaining construction activities; and potentially
c) small regional disposals. Capital freed up from
the downsizing will be reinvested in the further
expansion of its Services businesses, which
should lead to a further re-rating of the shares.
The first major step in this process was
completed in late December with the disposal of
its Australian subsidiary Valemus.
Even in its current form the resilient Services
activities already account for ~80% of group
EBIT, making Bilfinger an attractive defensive
alternative, and we keep it as one of our top
picks in the construction and infrastructure
sector. Services, reporting just a 2% decline in
output/EBIT in 2009, proved far more resilient
than the market had feared. We estimate
Services will return to at least 3-5% organic
growth and an EBIT margin of >5%.
Furthermore, with 96% free float Bilfinger could
potentially become a takeover target.
January 2011
GERMANY
Bilfinger Berger
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
48
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
5,437.9
19.2%
(1,513.5)
(3,758.1)
166.3
-12.8%
(85.3)
81.0
-20.0%
(0.3)
0.0
0.0
80.7
10.3
0.0
0.0
(34.3)
0.0
0.0
0.0
56.7
0.0
(5.5)
51.2
0.0
0.0
51.5
-62.8%
6,205.9
14.1%
(1,710.3)
(4,283.7)
211.9
27.4%
(97.1)
114.8
41.7%
(5.3)
0.0
0.0
109.5
5.9
0.0
0.0
(41.6)
0.0
0.0
0.0
73.8
0.0
(7.3)
66.5
0.0
0.0
71.8
39.4%
7,527.3
21.3%
(2,027.1)
(5,162.1)
338.1
59.6%
(168.3)
169.8
47.9%
0.0
0.0
0.0
169.8
3.4
0.0
0.0
(77.0)
0.0
0.0
0.0
96.2
0.0
(4.1)
92.1
0.0
0.0
92.1
28.3%
8,633.7
14.7%
(2,285.7)
(5,991.6)
356.4
5.4%
(127.2)
229.2
35.0%
0.0
0.0
0.0
229.2
(1.4)
0.0
0.0
(87.9)
0.0
0.0
0.0
139.9
0.0
(5.8)
134.1
0.0
0.0
134.1
45.6%
9,757.1
13.0%
(2,653.5)
(6,636.5)
467.1
31.1%
(169.0)
298.1
30.1%
0.0
0.0
0.0
298.1
(14.5)
0.0
0.0
(79.2)
0.0
0.0
0.0
204.4
0.0
(4.0)
200.4
0.0
0.0
200.4
49.4%
7,382.0
-24.3%
(2,744.6)
(4,336.4)
301.0
-35.6%
(128.0)
173.0
-42.0%
0.0
0.0
0.0
173.0
(38.0)
0.0
60.0
(52.0)
0.0
0.0
0.0
143.0
0.0
(3.0)
140.0
0.0
0.0
140.0
-30.1%
7,953.8
7.7%
(2,227.1)
(5,240.7)
486.0
61.5%
(154.0)
332.0
91.9%
0.0
0.0
0.0
332.0
(40.5)
0.0
80.8
(99.1)
0.0
0.0
0.0
273.2
0.0
(2.0)
271.2
0.0
0.0
271.2
93.7%
8,151.8
2.5%
(2,282.5)
(5,372.2)
497.1
2.3%
(151.0)
346.1
4.2%
0.0
0.0
0.0
346.1
(49.2)
0.0
87.8
(100.9)
0.0
0.0
0.0
283.8
0.0
(2.4)
281.4
0.0
0.0
281.4
3.8%
8,357.4
2.5%
(2,340.1)
(5,477.8)
539.5
8.5%
(163.5)
376.0
8.6%
0.0
0.0
0.0
376.0
(47.6)
0.0
87.5
(111.7)
0.0
0.0
0.0
304.3
0.0
(2.5)
301.8
0.0
0.0
301.8
7.2%
142.0
-35.3%
56.1
(75.9)
(75.9)
122.2
(42.3)
0.0
0.0
(47.7)
0.0
0.0
32.2
170.9
20.4%
17.3
(101.9)
(101.9)
86.3
(436.3)
0.0
0.0
(36.8)
0.0
0.0
(386.8)
264.5
54.8%
(57.5)
(129.4)
(39.1)
77.6
(391.1)
0.0
0.0
(37.2)
0.0
0.0
(350.7)
267.1
1.0%
57.8
(195.8)
(92.2)
129.1
(608.2)
0.0
0.0
(46.5)
0.0
0.0
(525.6)
373.4
39.8%
(15.9)
(230.5)
(113.4)
127.0
(448.2)
0.0
0.0
(45.5)
0.0
0.0
(366.7)
271.0
-27.4%
94.0
(153.6)
(65.0)
211.4
(924.5)
0.0
0.0
(44.5)
0.0
0.0
(757.6)
427.2
57.6%
(243.7)
(305.0)
(209.6)
(121.5)
(2.0)
0.0
0.0
(92.0)
0.0
0.0
(215.5)
434.8
1.8%
(40.4)
(180.0)
(82.2)
214.4
(31.0)
0.0
0.0
(124.9)
0.0
0.0
58.5
467.8
7.6%
(9.5)
(183.5)
(83.2)
274.8
(28.5)
0.0
0.0
(132.1)
0.0
0.0
114.2
1,110.0
20.5
97.2
55.3
(574.6)
NS
708.4
331.2
18.1
475.3
566.9
0.0
(683.1)
(12.6)
708.4
1,161.2
27.7
130.2
196.9
(209.2)
NS
1,306.8
546.7
45.7
512.0
847.5
0.0
(645.1)
(10.4)
1,306.8
1,189.4
16.8
159.7
260.8
183.2
15.2
1,809.9
659.9
78.5
607.3
1,105.8
0.0
(641.6)
(8.5)
1,809.9
1,310.6
21.3
135.4
523.8
676.5
50.8
2,667.6
700.1
86.8
581.2
1,666.8
0.0
(367.3)
(4.3)
2,667.6
1,120.0
21.0
218.8
516.3
1,125.7
98.7
3,001.8
1,082.8
152.5
599.3
2,129.7
0.0
(962.5)
(9.9)
3,001.8
1,538.4
23.0
286.7
697.1
1,457.4
93.3
4,002.6
1,367.9
170.6
795.9
2,580.0
0.0
(911.8)
(12.4)
4,002.6
1,717.6
25.0
300.0
310.2
1,923.0
110.4
4,275.8
1,367.9
161.6
800.9
2,987.0
0.0
(1,041.7)
(13.1)
4,275.7
1,874.0
27.4
302.0
345.7
1,864.5
98.1
4,413.6
1,367.9
160.6
905.9
2,943.0
0.0
(963.8)
(11.8)
4,413.6
2,043.7
29.9
304.0
346.3
1,750.4
84.4
4,474.3
1,367.9
163.1
1,003.0
2,891.9
0.0
(951.7)
(11.4)
4,474.2
www.cheuvreux.com
January 2011
GERMANY
Bilfinger Berger
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
1.40
-62.9%
1.40
-59.4%
1.94
38.3%
1.80
28.8%
2.48
27.6%
2.48
37.8%
3.61
45.6%
3.61
45.6%
5.60
55.3%
5.60
55.3%
3.78
-32.4%
3.78
-32.4%
5.90
55.8%
5.90
55.8%
6.12
3.7%
6.12
3.7%
6.56
7.3%
6.56
7.3%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.01
1.00
3.87
-35.5%
29.2
0.14
1.00
4.62
19.4%
30.4
0.00
1.25
7.11
53.9%
30.7
0.00
1.80
7.18
1.0%
33.4
0.00
2.00
10.43
45.3%
29.3
0.00
2.00
7.32
-29.8%
32.9
0.00
2.72
9.29
26.8%
34.6
0.00
2.87
9.45
1.8%
37.9
0.00
3.42
10.17
7.6%
41.0

Latest price
High
Low
Average price
36.700
36.700
0.000
37.000
37.000
0.000
37.200
37.200
0.000
37.200
37.200
0.000
35.800
35.800
0.000
44.100
37.000
0.000
46.000
46.000
0.000
46.000
46.000
0.000
46.000
46.000
0.000
30.25
31.95
25.50
28.45
40.30
46.44
30.18
38.43
55.52
55.75
37.71
46.21
52.78
74.73
47.35
62.12
37.32
61.34
35.21
50.76
53.92
54.56
23.39
38.72
63.20
64.35
40.75
50.77
61.90
64.00
59.90
62.69
61.90
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,110.8
752.7
1,479.8
1,563.4
2,038.7
2,473.2
1,932.7
2,827.2
1,342.8
2,714.7
1,969.7
3,756.0
2,787.1
5,029.8
2,729.8
4,918.3
2,729.8
4,806.2
21.7
21.6
7.8
9.9
1.0
5.3
3.3
22.4
20.8
8.7
5.3
1.3
3.4
2.5
22.4
22.4
7.8
3.6
1.8
3.5
2.3
14.6
14.6
7.4
6.4
1.6
2.8
3.4
6.7
6.7
3.6
9.3
1.3
3.1
5.4
14.3
14.3
7.4
10.5
1.6
2.6
3.7
10.7
10.7
6.8
NS
1.8
3.7
4.3
10.1
10.1
6.5
7.8
1.6
3.2
4.6
9.4
9.4
6.1
10.0
1.5
2.9
5.5
4.5
9.3
0.14
4.7
7.4
13.6
0.25
8.4
7.3
14.6
0.33
9.1
7.9
12.3
0.33
10.2
5.8
9.1
0.28
7.0
12.5
21.7
0.5
12.4
10.3
15.2
0.6
11.0
9.9
14.2
0.6
10.5
8.9
12.8
0.6
9.6
NS
NS
3.1
1.5
1.0
38.4
NS
71.7
NS
NS
3.4
1.9
1.2
13.5
NS
55.6
NS
0.7
4.5
2.3
1.3
10.7
15.2
50.5
NS
2.5
4.1
2.7
1.6
8.6
50.8
49.9
NS
3.0
4.8
3.1
2.1
11.2
98.7
35.7
7.9
5.4
4.1
2.3
1.9
5.2
93.3
52.9
12.0
4.5
6.1
4.2
3.4
6.2
110.4
46.1
10.1
4.3
6.1
4.2
3.5
5.5
98.1
46.9
11.3
3.7
6.5
4.5
3.6
5.3
84.4
52.1
57.2
35.7
4.7
4.7
25.0
16.0
5.9
5.9
24.1
13.4
8.1
8.1
22.9
14.1
10.8
10.8
34.2
24.6
19.7
19.7
12.2
8.9
9.5
9.5
25.8
17.0
17.1
17.1
23.5
15.5
16.2
16.2
23.8
15.7
15.9
15.9
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
49
www.cheuvreux.com
January 2011
GERMANY
TRANSPORT LOGISTICS
3/Underperform
Rating
-27.4% EUR52.00
BRENNTAG AG
Limited value from hazardous expansion
Q
Recent developments Q3-10: strong top, weak bottom
On 11 November 2010, Brenntag released its Q3-10 results. On a group

level, operating EBITDA came to EUR160m (+17% y-o-y), 2/3% ahead
of our estimate and consensus respectively. Operating profit, however,
was just in line with our estimate and 5% below consensus due to
higher amortisation charges, which were negatively affected by the
stronger USD. Net income came in at EUR43m, around 5-6% below
our estimate and consensus. Besides the higher amortisation, net
income was also burdened by a write-down on financial assets.
The company's free cash flow declined from EUR135m in Q3-09 to
EUR91m in Q3-10. The growth in EBITDA was not sufficient to offset
the higher capex, which rose by EUR7m, and the higher working capital
outflow (EUR-48m vs. EUR+12m).
By division, North America was stronger than expected, which the
company attributed to the strong, but volatile US economy. Business in
Latin America was hit by the difficult political situation in Venezuela.
While Asia/Pacific came in just a touch above estimates in absolute
terms, Europe was in line and Rest of the World was a little weaker.
Q
Outlook FY outlook confirmed
Reuters: BNRGn.DE Bloomberg: BNR GR
Stock data
Free float
Enterprise value
Daily volume
EUR3687m
EUR1847m
EUR5422m
51.5m
EUR 5.27m
Performances
-0.6%
10.2%
-2.1%
-3.2%
-
Absolute perf.
Relative perf.
80.0
80.0
75.0
75.0
70.0
70.0
65.0
65.0
60.0
60.0
55.0
55.0
50.0
50.0
45.0
45.0
03/10
04/10
06/10
For the full year 2010 management expects to report a rise in group
sales and gross profit based on positive macroeconomic trends,
although going forward the company expect a slight softening of the
macro-growth trend. Further, management regards the outsourcing
trend for chemicals distribution as fully intact.
Sector focus
The company continues to forecast operating EBITDA for the full-year

2010 of EUR570-600m, excluding IPO costs of EUR5.7m. The weaker
USD will have some negative translational impact. According to our
estimates, on a full-year basis, a change in the EUR-USD exchange rate
of 0.05 cents will impact the group's EBITDA by EUR10-15m.
Shareholders
We estimate operating EBITDA for 2010E of EUR589m, broadly in line

with consensus.
EUR71.60
Price (07/01/2011)
07/10
08/10
Price/M DAX
09/10
10/10
Sector Top Picks

Least favoured
Free Float 50.1%, Brachem Acquisition S.C.A. 49.9%
2009
2010E
2011E
2012E
P/E (x)
NS
27.6
13.5
12.3
EV/EBITDA (x)
5.7
10.0
8.4
7.7
NS
NS
3.6
4.6
Net debt/EBITDA (x)
5.3
2.5
2.2
2.0
Yield (%)
0.0
2.0
2.8
3.1
ROCE (%)
9.2
12.3
15.9
16.5
0.9
1.6
1.5
1.4
Q
Q
50
www.cheuvreux.com
01/11
Price
Sebastian KAUFFMANN, CFA

Research Analyst
skauffmann@cheuvreux.com
(49) 69 478 97 524
11/10
January 2011
GERMANY
Company profile
Global leader in chemical distribution

With a 6.9% market share Brenntag is the global leader in the
distribution of industrial and specialty chemicals. It operates around
400 distribution facilities in over 60 countries and delivers some
10,000 chemical products to more than 150,000 customers.
Q
Intermediary between chemical producers and consumers

Its main business activities include a) the purchase of chemicals
from producers such as BASF, BP and Exxon, b) storage of largescale quantities of chemicals in its own warehouses, c) repackaging
in smaller quantities, d) distribution of chemical products and e) the
provision of additional services such as just-in-time deliveries,
product mixing, inventory management etc.
Q
Q Core markets are Europe and North America

Except for in the Asia-Pacific region, which Brenntag only entered in
late 2008, the company is among the leading players in each of its
sub-markets. Its core markets are Europe and North America, in
terms of both sales and EBITDA. However, its future growth, both
organic and via acquisitions, will come largely from Latin America
and the Asia-Pacific region.
IPO at the end of March 2010

The stock began trading on 29 March 2010 at an IPO price of EUR50
per share. The proceeds from the capital increase of around
EUR500m have been used largely to repay a mezzanine facility
agreement. The indirect selling shareholders were funds managed
by BC Partners, Bain Capital, GSMP (a Goldman Sachs affiliate) and
two management vehicles.
Q
SWOT analysis
Strengths
Weaknesses
Global market leader and

usually among the largest players
in each of its regions
Potential share overhang from

selling shareholder
Enormous amount of goodwill

on the balance sheet, roughly
equating to shareholders' equity
Solid cash flow generation

enables the company to maintain
capex and financial investments
Recent entry into the AsiaPacific market, where profitability

has still to be proven
Opportunities
Threats
Operating profit growth

through organic investments or
acquisitions, particularly in Asia
Business model has proven

relatively resilient to the
economic downturn
Potential failure to integrate

acquired competitors
Write-down of inventories in
case of price drops or overestimation of customer demand
Generation of synergies and

economies of scale and scope
Further outsourcing of
chemical distribution by large
producers to reduce complexity
Accidents or environmental
damage or changes in laws and
regulations
51
www.cheuvreux.com
Valuation
We value Brenntag based on a broad mix of

approaches, which yield a fair value of EUR52
per share on average.
Only our SOP model, which derives its
parameters from a peer group, is able to justify
the current share price. We believe Brenntag
should in fact be trading at a discount to the
peers due, for example, to its shareholder
structure, its significant goodwill and its limited
track record.
The shares' high premium to the company's
book value and capital employed imply strong
capital market expectations, though the
company has failed to earn its cost of capital in
recent years.
Investment case
We believe the market is over-excited with

regards to Brenntag's long-term earnings
potential, given that the majority of the current
EPS growth stems from the non-recurrence of
private equity-related expenses as well as
abnormally high economic growth rates. In fact,
we estimate the company's organic EPS growth
potential to be in the mid-single-digit region
going forward rather than matching the doubledigit rates of the past five years. Given
Brenntag's low operational leverage, we favour
instead chemicals producers, which in many
cases also offer a lower valuation.
Furthermore, the two former private equity
owners, Bain Capital and BC Partners, have
already raised Brenntag's operating efficiency
significantly, which implies that any room for
improvements is likely to be much more limited
going forward.
Also, we are concerned about the company's
acquisition course, since its goodwill is likely to
almost equal equity in 2010E and this might
become a problem in case of a rise in cost of
capital or declining cash flows.
Even if we adjust for the amortisation of
customer relationships, the company's ROCE
has failed to exceed its reported cost of capital
in the past three years. Hence, from our
perspective it is questionable whether the
numerous acquisitions made in the past have
generated any meaningful value.
January 2011
GERMANY
BRENNTAG AG
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
52
2007
2008
2009
2010E
2011E
2012E
6,671.4
7,379.6
10.6%
(582.9)
(6,315.8)
480.9
17.9%
(202.7)
278.2
37.6%
0.0
0.0
0.0
278.2
(279.5)
0.0
0.0
(40.5)
0.0
0.0
0.0
(41.8)
0.0
(0.3)
(42.1)
0.0
0.0
(42.1)
34.2%
6,364.6
-13.8%
(590.3)
(5,297.7)
476.6
-0.9%
(205.9)
270.7
-2.7%
0.0
0.0
0.0
270.7
(223.6)
0.0
0.0
(46.6)
0.0
0.0
0.0
0.5
0.0
(0.6)
(0.1)
0.0
0.0
(0.1)
99.8%
7,598.8
19.4%
(681.2)
(6,335.0)
582.6
22.2%
(185.5)
397.1
46.7%
0.0
0.0
0.0
397.1
(172.0)
0.0
0.0
(83.3)
0.0
0.0
0.0
141.8
0.0
(6.6)
135.2
0.0
0.0
135.2
NS
8,453.5
11.2%
(777.2)
(7,031.1)
645.2
10.7%
(104.9)
540.3
36.1%
0.0
0.0
0.0
540.3
(96.0)
0.0
0.0
(164.4)
0.0
0.0
0.0
279.9
0.0
(7.3)
272.6
0.0
0.0
272.6
101.6%
9,064.5
7.2%
(848.2)
(7,519.6)
696.7
8.0%
(112.8)
583.9
8.1%
0.0
0.0
0.0
583.9
(94.4)
0.0
0.0
(181.1)
0.0
0.0
0.0
308.4
0.0
(7.8)
300.6
0.0
0.0
300.6
10.3%
(389.8)
(193.7)
(106.7)
(77.2)
0.0
0.0
8.7
(4.8)
0.0
(116.0)
(189.3)
282.4
-44.2%
(105.3)
(178.5)
(95.2)
(1.4)
0.0
0.0
5.3
(5.9)
0.0
(43.1)
(45.1)
250.6
-11.3%
239.7
(87.3)
(5.0)
403.0
0.0
0.0
11.2
(4.5)
40.0
(145.8)
303.9
356.1
42.1%
(203.8)
(288.7)
(204.7)
(136.4)
0.0
0.0
0.0
(7.4)
505.0
(686.1)
(324.9)
405.1
13.8%
(53.5)
(215.9)
(126.9)
135.7
0.0
0.0
0.0
(88.3)
0.0
(21.1)
26.3
433.4
7.0%
(37.5)
(221.9)
(127.0)
174.0
0.0
0.0
0.0
(117.9)
0.0
(29.9)
26.2
184.3
13.4
52.5
193.2
2,855.7
NS
3,299.1
1,415.2
526.4
910.5
0.0
57.2
389.8
5.8
3,299.1
118.9
9.4
53.9
197.6
2,955.2
NS
3,335.0
1,450.4
446.2
898.5
0.0
44.8
495.1
6.7
3,335.0
164.1
8.2
54.4
195.6
2,535.9
NS
2,958.2
1,453.4
332.5
887.7
0.0
29.2
255.4
4.0
2,958.2
1,492.5
14.8
62.8
222.7
1,472.5
97.7
3,265.3
1,512.1
234.0
1,030.7
0.0
29.2
459.2
6.0
3,265.2
1,669.5
22.1
71.6
241.4
1,425.1
84.2
3,429.7
1,548.2
221.3
1,118.3
0.0
29.2
512.7
6.1
3,429.7
1,844.5
29.9
78.2
254.8
1,369.1
73.0
3,576.5
1,584.3
206.8
1,205.8
0.0
29.2
550.2
6.1
3,576.3
(537.2)
(5,726.3)
407.9
(205.7)
202.2
0.0
0.0
0.0
202.2
(271.7)
0.0
0.0
6.3
0.0
0.0
0.0
(63.2)
0.0
(0.8)
(64.0)
0.0
0.0
(64.0)
506.3
www.cheuvreux.com
January 2011
GERMANY
BRENNTAG AG
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2007
2008
2009
2010E
2011E
2012E
(1.56)
(1.03)
34.2%
(1.03)
34.2%
(0.00)
99.8%
(0.00)
99.8%
2.77
NS
2.77
NS
5.29
91.4%
5.29
91.4%
5.84
10.3%
5.84
10.3%
4.5
0.00
0.00
6.89
-44.2%
2.9
0.00
0.00
6.11
-11.3%
4.0
0.00
1.50
7.29
19.2%
27.5
0.00
2.00
7.87
8.0%
30.4
0.00
2.25
8.42
7.0%
33.6
41.000
41.000
0.000
41.000
41.000
0.000
41.000
41.000
0.000
51.500
48.880
0.000
51.500
51.500
0.000
51.500
51.500
0.000
76.30
76.44
48.12
60.24
71.60
76.47
70.05
73.28
71.60
-
3,929.5
5,796.6
3,687.4
5,422.3
3,687.4
5,369.8
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
27.6
27.6
10.5
NS
2.8
1.6
2.0
13.5
13.5
9.1
3.6
2.4
1.5
2.8
12.3
12.3
8.5
4.6
2.1
1.4
3.1
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
10.0
14.6
0.8
12.1
8.4
10.0
0.6
11.4
7.7
9.2
0.6
10.7
1.5
5.6
6.1
3.0
NS
2.1
NS
0.0
1.7
10.5
6.5
3.8
NS
2.2
NS
0.0
2.1
10.1
7.5
4.3
0.0
2.2
NS
0.0
3.4
4.1
7.7
5.2
1.9
2.3
97.7
54.2
6.7
3.5
7.6
6.4
3.3
2.5
84.2
37.8
7.4
3.2
7.7
6.4
3.4
2.6
73.0
38.5
6.2
5.7
NS
NS
8.5
NS
NS
NS
9.2
0.1
NS
NS
12.3
7.7
9.5
9.5
15.9
10.0
17.8
17.8
16.5
10.4
17.7
17.7
(1.56)
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
12.35

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
53
www.cheuvreux.com
January 2011
GERMANY
HEALTHCARE EQUIPMENT
Carl Zeiss Meditec

Hidden value not to be unlocked in near term
Q
Recent developments Momentum improved
CZM announced its Q4 results in an ad hoc release as they exceeded

consensus expectations. Q4 sales rose 15% y-o-y to EUR186m.
Stripping out FX effects, we estimate 8.5% organic growth. This was
driven by strong year-end business in Asia and a trend towards highermargin products, which translated into a record 14.4% EBIT margin and
implied 19% EBIT growth in Q4. On a full-year basis, this implies
estimated organic growth of about 5% (5.7% reported) and a 12.8%
margin (vs. 11.9% in FY08/09). Net income growth in Q4 was even
stronger at 21%, but we believe this reflects a minor one-time gain from
the sale of the pharma business, as announced earlier, and hedging
gains also contributed.
In early December CZM announced its dividend proposal, which
foresees a regular EUR0.22 dividend plus a one-time special dividend
of EUR0.33. Given that the special dividend only accounts for 8% of the
company's current net cash position, we consider this a
disappointment in view of the lack of deal flow in recent years.
At its full-year analyst meeting in mid-December CZM also disclosed
some details of its new company excellent programme MEGA 2015,
which follows its RACE 2010 programme. With this CZM aims to
achieve a 15% EBIT margin by 2015. We were slightly disappointed by
this target as the company had already said a year earlier that it aimed
to realise a 15% margin target in the mid-term - mid-term was so far
defined as a 3-5-year horizon.
Q
Outlook Likely strong Q1 but limited M&A expected
We upgraded the stock in mid-September as we felt the magnitude of

its underperformance was exaggerated and its momentum, after two
challenging years, looked set to improve (see our note dated 13 Sept).
This seems to have materialised. We understand that CZM continues to
expect an acceleration of growth next year despite the now slightly
higher base (5% organic). However, it has yet to provide quantified
guidance. Furthermore, we understand that, despite the higher margin
of 12.8%, a moderate margin improvement is likely. We predict a 40bps
increase next year. Following the Q4 results announcement we
increased our 10/11E EPS forecast by 7.2%.
After our upgrade the stock performed impressively and we
downgraded it again on 8 December as our target priced left hardly any
room for upside. While we expect Q1 results to be strong, given the
unchallenging comparison base (sales fell 7.9% organically in Q109/10), we believe the key potential catalyst for the stock remains an
improvement in its highly inefficient capital structure. As we continue to
believe small deals in the range of EUR10-30m are more likely than a
meaningful transactiom, we reiterate our 3/Underperform rating.
Rating
3/Underperform
+2.7% EUR14.50
EUR14.12
Price (07/01/2011)
Reuters: AFXG.DE Bloomberg: AFX GR
Stock data
Free float
Enterprise value
Daily volume
EUR1148m
EUR401m
EUR893m
81.3m
EUR 0.89m
Performances
0.3%
19.6%
9.6%
-6.2%
6.5%
8.2%
Absolute perf.
Relative perf.
62.8
62.8
52.8
52.8
42.8
42.8
32.8
32.8
22.8
22.8
12.8
12.8
2.8
01/01
2.8
03/02
06/03
09/04
12/05
Price/TECDAX
03/07
06/08
Price
Sector focus
Sector Top Picks
DiaSorin, Getinge, Orpea,

William Demant
Least favoured
Shareholders
Carl Zeiss AG 65.0%, Free Float 35.0%
08/09
09/10E
10/11E
11/12E
20.1
20.6
18.4
16.8
EV/EBITDA (x)
7.9
6.9
7.8
6.7
6.9
6.4
5.3
5.9
Net debt/EBITDA (x)
(3.4)
P/E (x)
(2.9)
(3.1)
(3.2)
Yield (%)
1.4
1.4
1.6
1.8
ROCE (%)
26.3
30.3
33.2
35.8
2.5
2.5
3.0
2.8
Oliver REINBERG, CFA

Research Analyst
(49) 69 478 975 26
Q
Q
54
www.cheuvreux.com
10/09
January 2011
GERMANY
Company profile
Leading player in ophthalmology (and microsurgery)

Carl Zeiss Meditec is a leading player in the global ophthalmology
market. The company was founded via the spin-off of the
Ophthalmology division of Carl Zeiss in 2002, which was
subsequently merged with Asclepion-Meditec AG. Carl Zeiss
Meditec acquired Carl Zeiss Surgical in 2006, which also extended
its business focus from the ophthalmology market into microsurgery
(Neuro/ENT). A number of its products are gold standard in the
industry, including its OCT technology, IOL Master and Humphrey
Field Analyzer. The "Zeiss" brand underlines the company's
premium strategy.
Q
Q Strong drivers but limited consumable sales

Demand in the ophthalmology market is driven by the aging global
population and the increasing prevalence of diabetes. However,
technological innovations and increasing healthcare spending in
emerging markets also play a crucial role. From a medium-term
perspective, the ophthalmology market is expected to grow by 5-7%
per year. CZM's revenues constitute primarily equipment sales,
whilst its consumables business (recurring revenues) is more or less
limited to roughly 15-20% of group sales.
Q The American market is the largest
The Americas constitute the company's largest market (35% of
09/10 sales), followed by Europe (36%) and Asia/Pacific (29%). 49%
of the Japanese business belongs to minority shareholders.
Carl Zeiss AG holds a 65% stake

Carl Zeiss AG remains the company's largest shareholder (65%).
Carl Zeiss Meditec is a member of the TecDax.
Q
SWOT analysis
Strengths
Weaknesses
Several of the company's

products are industry gold
standard
Smaller and less profitable

than major competitors
Free float shareholders remain

in a minority
Strong Zeiss brand recognised

for superior quality
Inefficient capital structure

(heavily overcapitalised)
Carl Zeiss AG, a powerful

financing vehicle
Strong cash flow generation
Opportunities
Threats
Value-accretive acquisitions
financed by excess cash
More global launch of its IOL

offering
Recurring revenues limited to

15-20% of total; sales trend may
hence remain volatile
Missing out on new

technological developments
MEGA 2015 programme to

accelerate sales
Market growth rebound
55
www.cheuvreux.com
Valuation
We reiterate our 3/Underperform rating and

EUR14.5 price target. At this level CZM would
be trading at 17.2x 2011/12E earnings. Note that
this multiple is not adjusted for the company's
massive EUR330m net cash position, which
accounts for 30% of its market capitalisation.
Although we do not anticipate a material nearterm improvement, this has to be taken into
consideration. Based on our target price, the
stock would be trading at only 11.4x 2011/12E
excess-cash-adjusted earnings, but we note that
it is unlikely CZM will put its entire cash position
to work in the near term.
Investment case
Carl Zeiss Meditec has a strong franchise with

leading market positions and a strong brand.
After its lack of growth over the last three years,
we believe its momentum is set to improve (we
predict 7.5% organic growth in 10/11E) and Q1
results will benefit from an unchallenging
comparison base. Given the company's massive
excess cash pile, equating to 30% of its market
cap, CZM has hidden value reserves.
However, after the recently strong share price
performance, we believe M&A and alternative
uses of the excess cash are necessary to
catalyse further upside, as the unadjusted P/E
multiples are rich. Since we believe only small
deals are likely in 10/11E, the stock is likely to
tread water after its recent strong performance.
January 2011
GERMANY
Carl Zeiss Meditec

FY to 30/9 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
56
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
234.9
-0.3%
(60.4)
(142.8)
31.7
3.9%
(5.4)
26.3
6.5%
0.0
0.0
0.0
26.3
(1.2)
0.0
0.0
(9.8)
0.0
0.0
0.0
15.3
0.0
(2.7)
12.6
0.0
0.0
12.6
16.7%
323.7
37.8%
(74.9)
(204.0)
44.8
41.3%
(9.1)
35.7
35.7%
0.0
0.0
0.0
35.7
(2.1)
0.0
0.0
(13.5)
0.0
0.0
0.0
20.1
0.0
(3.8)
16.3
0.0
0.0
16.3
29.4%
390.6
20.7%
(92.8)
(238.9)
58.9
31.5%
(10.8)
48.1
34.7%
0.0
0.0
0.0
48.1
(2.5)
0.0
0.0
(15.9)
0.0
0.0
0.0
29.7
0.0
(3.0)
26.7
0.0
0.0
26.7
63.8%
569.7
45.9%
(141.4)
(346.1)
82.2
39.6%
(11.8)
70.4
46.4%
0.0
0.0
0.0
70.4
5.8
0.0
0.0
(26.5)
0.0
0.0
0.0
49.7
0.0
(1.9)
47.8
0.0
0.0
47.8
79.0%
600.2
5.4%
(149.8)
(369.5)
80.9
-1.6%
(12.7)
68.2
-3.1%
0.0
0.0
0.0
68.2
7.5
0.0
0.0
(19.5)
0.0
0.0
0.0
56.2
0.0
(2.2)
54.0
0.0
0.0
54.0
13.0%
640.1
6.6%
(159.8)
(387.8)
92.5
14.3%
(16.4)
76.1
11.6%
0.0
0.0
0.0
76.1
2.5
0.0
0.0
(23.5)
0.0
0.0
0.0
55.1
0.0
(4.6)
50.5
0.0
0.0
50.5
-6.5%
676.7
5.7%
(167.9)
(405.1)
103.7
12.1%
(17.0)
86.7
13.9%
0.0
0.0
0.0
86.7
(4.0)
0.0
0.0
(23.1)
0.0
0.0
0.0
59.5
0.0
(4.6)
54.9
0.0
0.0
54.9
8.7%
736.1
8.8%
(182.7)
(438.3)
115.1
11.0%
(17.9)
97.2
12.1%
0.0
0.0
0.0
97.2
(0.3)
0.0
0.0
(29.1)
0.0
0.0
0.0
67.9
0.0
(5.5)
62.4
0.0
0.0
62.4
13.7%
776.6
5.5%
(192.7)
(459.0)
124.9
8.5%
(18.8)
106.1
9.2%
0.0
0.0
0.0
106.1
0.0
0.0
0.0
(31.8)
0.0
0.0
0.0
74.3
0.0
(5.9)
68.4
0.0
0.0
68.4
9.6%
22.2
25.4%
9.4
(3.7)
1.0
27.9
(6.0)
0.0
3.0
0.0
0.0
(18.0)
6.9
35.4
59.5%
3.0
(3.0)
1.7
35.4
(106.0)
0.0
1.0
0.0
39.8
36.1
6.3
45.7
29.1%
(2.8)
(14.1)
(0.2)
28.8
(12.0)
0.0
0.0
(5.2)
(2.0)
(12.5)
(2.9)
71.4
56.2%
(15.3)
(9.9)
(0.7)
46.2
(8.3)
0.0
0.0
(11.4)
167.9
(1.1)
193.3
59.8
-16.2%
(5.0)
(9.5)
(8.3)
45.3
(15.3)
0.0
0.0
(35.0)
0.0
(2.8)
(7.8)
75.5
26.3%
11.9
(19.6)
(6.1)
67.8
(11.0)
0.0
0.0
(14.6)
0.0
(1.0)
41.2
76.5
1.3%
0.2
(11.5)
0.0
65.2
0.0
0.0
0.0
(14.6)
0.0
0.0
50.6
85.7
12.0%
(3.2)
(16.5)
(4.0)
66.0
0.0
0.0
0.0
(16.5)
0.0
0.0
49.5
93.1
8.6%
(1.8)
(17.3)
(4.1)
74.0
0.0
0.0
0.0
(18.7)
0.0
0.0
55.3
131.6
5.6
1.3
22.2
(72.3)
NS
88.4
16.1
5.4
24.1
13.0
0.0
29.8
12.7
88.4
205.4
13.8
2.0
23.5
(39.9)
NS
204.8
94.0
30.7
29.8
22.2
0.0
28.1
8.7
204.8
223.1
10.1
1.8
20.8
(48.3)
NS
207.5
101.4
25.7
29.9
18.2
0.0
32.4
8.3
207.6
471.6
9.6
11.3
38.6
(243.8)
NS
287.3
103.7
21.9
31.5
31.4
0.0
98.7
17.3
287.2
488.0
12.7
12.0
35.1
(227.9)
NS
319.9
111.7
32.9
38.4
34.3
0.0
102.7
17.1
320.0
520.8
18.9
11.3
41.4
(268.5)
NS
323.9
113.6
38.0
42.2
35.2
0.0
95.1
14.9
324.1
561.2
23.5
12.0
43.8
(319.1)
NS
321.4
113.6
33.7
41.0
35.2
0.0
97.8
14.5
321.3
607.1
29.0
13.0
47.7
(368.7)
NS
328.1
113.6
31.2
42.2
35.2
0.0
105.9
14.4
328.1
656.8
34.9
13.8
50.3
(423.9)
NS
331.9
113.6
28.5
43.4
35.2
0.0
111.1
14.3
331.8
www.cheuvreux.com
January 2011
GERMANY
Carl Zeiss Meditec

FY to 30/9 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
0.44
6.5%
0.44
74.1%
0.54
20.7%
0.54
20.7%
0.82
53.4%
0.82
53.4%
0.61
-25.4%
0.61
-25.4%
0.66
8.3%
0.66
8.3%
0.62
-6.5%
0.62
-6.5%
0.68
8.7%
0.68
8.7%
0.77
13.8%
0.77
13.8%
0.84
9.5%
0.84
9.5%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
0.78
14.5%
4.6
0.00
0.16
1.16
48.8%
6.6
0.00
0.14
1.41
20.8%
6.7
0.00
0.43
0.92
-34.9%
5.6
0.00
0.18
0.74
-19.6%
5.8
0.00
0.18
0.93
26.2%
6.2
0.00
0.20
0.94
1.3%
6.7
0.00
0.23
1.05
12.0%
7.2
0.00
0.25
1.15
8.6%
7.8

Latest price
High
Low
Average price
28.400
28.400
0.000
30.400
30.400
0.000
32.500
32.500
0.000
78.000
78.000
0.000
81.300
81.300
0.000
81.300
81.300
0.000
81.300
81.300
0.000
81.300
81.300
0.000
81.300
81.300
0.000
9.98
10.31
6.87
8.15
13.27
13.96
9.29
11.49
15.80
17.33
10.09
13.49
11.95
18.97
11.18
15.70
8.70
12.41
7.33
9.88
12.46
12.49
8.18
10.03
14.29
14.36
10.94
12.04
14.12
14.53
14.07
14.29
14.12
-
315.0
310.8
511.0
590.6
210.5
187.9
1,190.4
1,004.9
813.1
630.2
901.7
726.1
939.1
710.4
1,147.7
893.1
1,147.7
836.0
22.5
22.5
12.8
7.3
2.2
4.1
0.0
24.7
24.7
11.4
5.6
2.0
3.2
1.2
19.2
19.2
11.2
12.3
2.4
1.0
0.9
19.5
19.5
13.1
3.7
2.1
3.9
3.6
13.1
13.1
11.8
5.4
1.5
2.2
2.1
20.1
20.1
13.4
6.9
2.0
2.5
1.4
20.6
20.6
14.8
6.4
2.1
2.5
1.4
18.4
18.4
13.4
5.3
2.0
3.0
1.6
16.8
16.8
12.3
5.9
1.8
2.8
1.8
9.8
11.8
1.32
10.6
13.2
16.5
1.83
12.9
3.2
3.9
0.48
3.5
12.2
14.3
1.76
14.2
7.8
9.2
1.05
11.0
7.9
9.5
1.1
8.7
6.9
8.2
1.1
8.0
7.8
9.2
1.2
9.2
6.7
7.9
1.1
7.9
NS
NS
13.5
11.2
6.5
3.1
NS
0.0
NS
NS
13.8
11.0
6.2
1.8
NS
29.8
NS
NS
15.1
12.3
7.6
2.1
NS
17.0
NS
NS
14.4
12.4
8.7
2.2
NS
70.2
NS
NS
13.5
11.4
9.4
2.1
NS
27.1
NS
NS
14.5
11.9
8.6
2.2
NS
29.0
NS
NS
15.3
12.8
8.8
2.4
NS
29.6
NS
NS
15.6
13.2
9.2
2.5
NS
30.0
NS
NS
16.1
13.7
9.6
2.6
NS
29.7
34.9
21.2
10.1
10.1
19.6
11.7
8.3
8.3
25.4
16.6
12.7
12.7
27.5
17.9
10.7
10.7
23.9
17.7
11.7
11.7
26.3
18.5
10.2
10.2
30.3
21.8
10.3
10.3
33.2
23.2
10.8
10.8
35.8
25.0
11.0
11.0
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
57
www.cheuvreux.com
January 2011
GERMANY
RENEWABLE EQUIPMENT
Centrotherm
+5.8% EUR27.00
EUR25.52
Reuters: CTNG.DE Bloomberg: CTN GR
Recent developments Excellent Q3 but write-downs
Centrotherm reported solid Q3 figures: sales of EUR180m (+63% y-o-y)

exceeded our estimate of EUR170m and consensus of EUR161m. EBIT
of EUR20.4m (+110% y-o-y) beat our EUR18.7m estimate (cons.
EUR17m) and net income of EUR14.4m (+99% y-o-y) came in above
our EUR12.5m forecast (cons. EUR12.4m).
The company reiterated its FY10 sales guidance of EUR580-600m but
said its EBIT margin will be around 11%.
However, it also removed about EUR290m older polysilicon orders from
its order book. Its total order backlog after 9M-10 stood at EUR748m,
down from EUR922m after 9M-09 and from EUR864m after H1-10. On
the other hand, Centrotherm again received very strong order intake of
in Q3, largely for cell equipment.
Q
3/Underperform
Price (07/01/2011)
Polysilicon order intake to follow

Q
Rating
Outlook Polysilicon equipment orders will come
Given the massive order intake for cell equipment, we see the threat of
polysilicon overcapacity vanishing. Cell customers anticipate ongoing
strong demand for photovoltaic from end-customers. Hence, demand
for wafers and, in particular, polysilicon is set to rise. As selling prices
for polysilicon stabilised at around USD50/kg in June/July before rising
to >USD70-80 in October and USD90-100 in November, and bearing in
mind the fact that equipment producers are promising production costs
of USD20-30/kg, polysilicon producers are likely to make investments in
new equipment.
The continuous flow of cell equipment orders from China shows that
the cell producers are confident the markets will show further growth. If
this were not the case, they would not have ordered equipment that will
only be up and running from 2011. It is also important to mention in this
context that the orders received are for production capacity expansion
rather to replace existing equipment. Nonetheless, we expect major
polysilicon orders to come in 2012E rather than 2011E.
Stock data
Free float
Enterprise value
Daily volume
EUR540m
EUR183m
EUR449m
21.162m
EUR 0.85m
Performances
-2.0%
-19.0% -46.8%
-8.4%
-27.9% -47.4%
Absolute perf.
Relative perf.
83.0
83.0
73.0
73.0
63.0
63.0
53.0
53.0
43.0
43.0
33.0
33.0
23.0
23.0
13.0
10/07
13.0
03/08
08/08
01/09
05/09
Price/TECDAX
10/09
03/10
Price
Sector Top Picks

Least favoured
SMA, SolarWorld
Conergy
Shareholders
Hartung Beteiligungs Gmbh 52.8%, Free Float
33.9%, Autenrieth Beteiligungs Gmbh 9.3%
2009
2010E
2011E
2012E
P/E (x)
33.2
14.7
11.8
11.3
EV/EBITDA (x)
11.0
5.7
4.9
4.9
NS
3.0
4.4
0.3
Net debt/EBITDA (x)
(2.0)
(1.5)
(1.0)
(0.7)
Yield (%)
0.9
2.0
2.5
2.7
ROCE (%)
14.5
16.5
16.5
15.1
3.3
1.9
1.7
1.5
Philipp BUMM
Q
Q
58
www.cheuvreux.com
01/11
Sector focus
Research Analyst
pbumm@cheuvreux.com
(49) 69 47.897.527
08/10
January 2011
GERMANY
Company profile
Leading manufacturer with broad product range

Centrotherm PV is one of the world's leading technology and service
providers for the manufacture of solar cells and solar silicon. The
company's broad product spectrum comprises key equipment and
turnkey production lines for crystalline and thin-film solar cells. Its
product range is supplemented by reactors and converters for the
manufacture of polysilicon.
Q
Q Top tier player in almost all areas

With the exception of its newly established thin-film business, the
company is a top-two player in terms of global market share in all its
business areas (no.1 in c-Si turnkey and no. 2 in c-Si antireflective
coating equipment, trailing world market leader Roth & Rau).
Strengths
Weaknesses
Strongly
established solar cell

equipment supplier
Strongly dependent on
execution of high-volume
polysilicon orders
Huge
order backlog extending

into 2011
Well
diversified product
portfolio
Limited visibility on the

potential success of its CIGS
thin-film activities
Opportunities
Threats
Contributions from solar silicon

business faster than expected
Push-outs and cancellations in

the order backlog
Our DCF-based target price stands at EUR27.

The company is trading at a P/E-11E ratio of
12x.
Based on 2012E multiples we see Centrotherm
trading at a premium to Roth & Rau and Manz
Automation. In terms of EV/Sales 11E it is
trading at 0.72x, which represents a 56%
premium to Roth & Rau. On an EV/EBITDA 12E
basis Centrotherm also looks more expensive
than Roth & Rau, trading at 4.9x or at a 45%
premium.
SWOT analysis
Polysilicon order intake cycle
Reduction
Client's strong demand for the

company's new CIGS thin-film
turnkey line might result in
significant new orders
of political support
New
competitors from the

semiconductor equipment area
and low-cost competitors from
Asia may invade Centrotherm's
turf
59
www.cheuvreux.com
Valuation
Investment case
Centrotherm is well prepared to show revenue

growth in 2011E by working down its estimated
end-2010E order backlog of about EUR900m.
Although major order intake for the company's
polysilicon business will probably start earlier
than previously expected (as a result of strong
cell capacity expansion), we see a pick-up of
new orders in 2012E rather than in 2011E.
January 2011
GERMANY
Centrotherm
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
60
2006
2007
2008
2009
2010E
2011E
2012E
71.2
44.8%
(2.5)
(59.2)
9.4
-84.1%
(0.1)
9.4
-84.2%
0.0
0.0
0.0
9.4
0.1
0.0
0.0
(3.5)
0.0
0.0
0.0
6.0
0.0
(0.1)
5.9
0.0
0.0
5.9
166.2
133.5%
(8.7)
(136.0)
21.5
128.5%
(0.4)
21.1
126.0%
0.0
0.0
0.0
21.1
0.4
0.0
0.0
(7.4)
0.0
0.0
0.0
14.2
0.0
(0.6)
13.6
0.0
0.0
13.6
130.3%
374.7
125.4%
(27.8)
(289.4)
57.5
167.4%
(14.0)
43.5
105.8%
0.0
0.0
0.0
43.5
5.5
0.0
0.0
(14.6)
0.0
0.0
0.0
34.4
0.0
0.2
34.6
0.0
0.0
34.6
154.0%
509.1
35.9%
(61.1)
(379.3)
68.8
19.6%
(35.6)
33.1
-23.8%
0.0
0.0
0.0
33.1
3.5
0.0
0.0
(9.9)
0.0
0.0
0.0
26.7
0.0
0.2
26.9
0.0
0.0
26.9
-22.1%
567.1
11.4%
(62.4)
(425.6)
79.1
15.1%
(28.4)
50.8
53.2%
0.0
0.0
0.0
50.8
2.9
0.0
0.0
(15.0)
0.0
0.0
0.0
38.6
0.0
0.2
38.8
0.0
0.0
38.8
44.2%
595.9
5.1%
(65.5)
(439.3)
91.0
15.0%
(29.8)
61.2
20.6%
0.0
0.0
0.0
61.2
2.1
0.0
0.0
(17.7)
0.0
0.0
0.0
45.6
0.0
0.2
45.8
0.0
0.0
45.8
18.0%
641.8
7.7%
(70.6)
(474.4)
96.8
6.3%
(32.1)
64.7
5.7%
0.0
0.0
0.0
64.7
1.6
0.0
0.0
(18.6)
0.0
0.0
0.0
47.7
0.0
0.2
47.9
0.0
0.0
47.9
4.7%
6.0
-89.8%
0.0
(0.3)
1.2
5.7
0.0
0.0
0.0
0.0
0.0
(4.0)
1.7
14.6
143.3%
(23.4)
(3.3)
0.1
(12.1)
0.0
0.0
0.0
(3.0)
144.6
(3.7)
125.8
48.4
NS
(60.9)
(30.5)
(23.0)
(43.0)
0.0
0.0
0.0
0.0
141.0
(245.7)
(147.7)
62.4
28.9%
(37.0)
(45.0)
(34.8)
(19.6)
0.0
0.0
0.0
0.0
0.0
0.0
(19.6)
67.0
7.4%
9.9
(60.0)
(48.7)
16.9
0.0
0.0
0.0
(8.1)
0.0
0.0
8.8
75.4
12.5%
(6.6)
(45.0)
(33.1)
23.8
0.0
0.0
0.0
(11.6)
0.0
0.0
12.2
79.8
5.8%
(8.5)
(69.5)
(56.7)
1.8
0.0
0.0
0.0
(13.7)
0.0
0.0
(11.9)
7.0
0.0
0.0
5.3
0.0
NS
12.3
3.9
0.2
0.2
0.0
0.0
0.9
1.3
5.2
162.1
0.7
0.0
3.4
(163.9)
NS
2.3
3.9
2.7
4.3
0.0
0.0
(8.6)
(5.2)
2.3
318.4
(0.2)
0.5
13.8
(199.4)
NS
133.1
129.3
99.0
44.6
0.1
0.0
(121.5)
(32.4)
151.5
375.3
(0.4)
0.5
18.9
(135.8)
NS
258.5
129.3
99.0
54.0
0.1
0.0
(53.9)
(10.6)
228.5
406.1
(0.6)
0.5
21.1
(120.0)
NS
307.1
129.3
99.0
85.6
0.1
0.0
(7.0)
(1.2)
307.0
440.2
(0.8)
0.5
22.2
(90.7)
NS
371.4
129.3
99.0
100.8
0.1
0.0
42.2
7.1
371.4
474.4
(1.0)
0.5
23.9
(69.4)
NS
428.4
129.3
99.0
138.2
0.1
0.0
61.8
9.6
428.4
www.cheuvreux.com
January 2011
GERMANY
Centrotherm
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2006
2007
2008
2009
2010E
2011E
2012E
0.94
1.36
44.5%
1.36
44.5%
2.06
51.0%
2.06
51.0%
1.27
-38.1%
1.27
-38.1%
1.84
44.1%
1.84
44.1%
2.16
17.9%
2.16
17.9%
2.27
4.7%
2.27
4.7%
7.0
0.00
0.00
1.46
52.7%
10.1
0.00
0.00
2.88
97.1%
18.9
0.00
0.38
2.95
2.5%
17.4
0.00
0.55
3.17
7.4%
18.6
0.00
0.65
3.56
12.5%
20.2
0.00
0.68
3.77
5.8%
21.7
1.000
6.275
0.000
16.000
9.997
0.000
16.820
16.820
0.000
21.162
21.162
0.000
21.162
21.162
0.000
21.162
21.162
0.000
21.162
21.162
0.000
75.00
76.00
40.30
56.73
20.00
74.20
15.02
43.90
42.20
46.00
13.10
29.49
26.94
48.75
23.35
31.39
25.52
27.50
25.45
26.26
25.52
-
865.9
702.0
423.2
224.3
893.0
757.7
570.1
450.6
540.1
449.8
540.1
471.1
NS
NS
NS
NS
NS
0.0
55.1
55.1
51.4
NS
7.4
NS
0.0
9.7
9.7
7.0
NS
1.1
1.5
0.0
33.2
33.2
14.3
NS
2.4
3.3
0.9
14.7
14.7
8.5
3.0
1.4
1.9
2.0
11.8
11.8
7.2
4.4
1.3
1.7
2.5
11.3
11.3
6.8
0.3
1.2
1.5
2.7
NS
NS
NS
NS
32.7
33.2
4.22
49.0
3.9
5.2
0.60
5.0
11.0
22.9
1.5
12.7
5.7
8.9
0.8
6.9
4.9
7.3
0.8
6.1
4.9
7.3
0.7
6.0
NS
NS
13.2
13.1
8.4
13.7
NS
0.0
NS
NS
12.9
12.7
8.5
NS
NS
0.0
NS
NS
15.3
11.6
9.2
2.5
NS
0.0
NS
NS
13.5
6.5
5.2
2.2
NS
29.9
NS
NS
14.0
9.0
6.8
1.8
NS
30.0
NS
NS
15.3
10.3
7.7
1.6
NS
30.0
NS
NS
15.1
10.1
7.4
1.5
NS
30.0
179.8
113.6
NS
NS
NS
NS
8.8
8.8
28.7
20.1
11.5
11.5
14.5
10.6
7.4
7.4
16.5
11.9
10.0
10.0
16.5
11.9
11.0
11.0
15.1
10.9
10.6
10.6
0.94
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
0.96

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
61
www.cheuvreux.com
January 2011
GERMANY
RENEWABLE EQUIPMENT
CropEnergies
Wheat prices are very firm again
Q
Recent developments Solid H1 FY 09-10
CropEnergies reported final Q2 revenues of EUR121m (+27% y-o-y)

and EBIT of EUR15m, up from EUR2.4m in Q2-09. The final results
were fully in line with the previously published preliminary figures. Net
income fell short of our expectations due to the tax rate of 27% vs. our
estimate of only 10%. In recent quarters the tax rate was positively
affected by the Wanze/Belgium operations. For the full year, we
assume a tax rate of 25%. The company's reported tax rate for H1-10
stands at 22%.
Q
Rating
3/Underperform
-56.7% EUR2.40
EUR5.54
Price (07/01/2011)
Reuters: CE2G.DE Bloomberg: CE2 GR
Stock data
Free float
Enterprise value
Daily volume
EUR471m
EUR103m
EUR657m
85m
EUR 0.49m
Performances
24.2%
49.7%
35.1%
16.1%
33.3%
33.5%
Absolute perf.
Relative perf.
Outlook ongoing soft commodity concerns
With the release of the H1 results CropEnergies also confirmed its fullyear 2010 guidance for sales of >EUR420m and operating profit of
>EUR30m. This guidance had been revised on 20 September; its
original guidance was for sales of well above EUR400m and a more
than doubling of its 2009 operating profit of EUR12m. Since the
company has now given more specific forecasts for 2010, we assume
the company has secured most of its wheat needs (well above 80%) for
the full year. Crop Energies seems to be able to pass on the increased
wheat prices, which we regard as positive. This ability is largely
attributable to the reduction in Brazilian ethanol production as Brazilian
companies are currently focusing more on sugar production due to the
high prices for sugar in the global market.
However, we continue to see CropEnergies as a risky bet on
commodity prices as the company's profitability still depends on the
bioethanol price on the selling side and soft commodity prices such as
wheat and sugar thick juice on the input side.
For FY 2010-11E we expect a further slight profitability improvement
despite the fact that wheat prices have risen and currently stand at
more than 50% above 2009 levels of EUR120-130 per tonne, which
does not favour CropEnergies. Specifically, we expect the company to
grow sales by 34% y-o-y thanks to the expansion of its available
bioethanol capacity, and EBIT of EUR31m due to scale effects, the
non-recurrence of ramp-up costs, and higher ethanol prices. However,
since the bioethanol market is highly competitive given its exposure to
cheap imports from Brazilian bioethanol producers (made from
sugarcane), we regard the company's future profitability as rather
difficult to predict and reiterate our 3/Underperform rating.
8.9
8.9
7.9
7.9
6.9
6.9
5.9
5.9
4.9
4.9
3.9
3.9
2.9
2.9
1.9
09/06
1.9
04/07
10/07
05/08
11/08
Price/TECDAX
06/09
12/09
Sector focus
Sector Top Picks
Least favoured
SMA, SolarWorld
Conergy
Shareholders
Suedzucker 71.0%, Free Float 21.9%, Szvg 7.1%
2009/10
2010/11E
Q
62
www.cheuvreux.com
2011/12E
2012/13E
P/E (x)
74.6
27.0
28.4
EV/EBITDA (x)
14.2
9.7
10.8
9.5
16.3
4.4
7.1
7.9
Net debt/EBITDA (x)
7.0
3.9
3.1
2.3
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
1.7
4.5
5.6
6.5
0.8
1.0
0.9
0.9
Q
12/10
Price
Philipp BUMM
Research Analyst
pbumm@cheuvreux.com
(49) 69 47.897.527
06/10
22.7
January 2011
GERMANY
Company profile
Biofuel company with 760m of capacity

Taken public by Sdzucker AG in September 2006, CropEnergies is
one of Europe's leading producers of biofuel (bioethanol) with a
current annual production capacity of about 760k m since the end
of FY 08-09 (28 February 2009) in Germany and Belgium.
Q
Feedstock: mainly wheat but also sugar

The company processes feedstock such as wheat and sugar into its
main product bioethanol but also sells a by-product "ProtiGrain",
which is used in animal feeds. The company targets an EU
bioethanol market share of about 10%.
Q
At the end of June 2008 CropEnergies acquired French alcohol

producer Ryssen Alcools (capacity of 100k m), thereby expanding
its activities in the important French market, as planned.
SWOT analysis
Strengths
Weaknesses
As a subsidiary of Sdzucker
AG, CropEnergies most likely has
a secure supply of sugar juice as
a feedstock for its bioethanol
production
As an early mover in the

European bioethanol market,
CropEnergies,
as
a
major
bioethanol supplier, should be in
a position to forge strong
relationships with the oil industry
Opportunities
Threats
Lower feedstock prices would

increase margins
Bioethanol is so far only

competitive in Europe due to
subsidies in the form of
mandatory blending ratios and
tax exemptions
The
cost
of
producing
bioethanol in Europe is about
twice as high as in Brazil and
more than 50% higher than in
the US due to higher feedstock
(wheat) costs
Second-generation
biofuel
production technology may be
more economical, using the
whole plant not just the
fruit/grain and thus displacing
CropEnergies' technology.
Further
63
increasing wheat prices
www.cheuvreux.com
Valuation
Our DCF-based target price suggests a fair

value of EUR2.4.
CropEnergies is trading at a P/E of 28x and an
EV/EBITDA of 10.8x for (both for 2011-12E). Its
ROE for these two years stands at 8% and 7%,
and the P/B ratios at 0.85x and 0.80x
respectively.
Investment case
We continue to see CropEnergies as a risky bet

on commodity prices as the company's
profitability will depend on the bioethanol price
on the selling side and soft commodity prices
such as wheat and sugar thick juice on the input
side.
Bioethanol prices have risen in sympathy with
the crude oil price: we saw prices above
EUR600 per m in 2008 fall strongly to EUR460
(as of May 2010) due to overcapacity and
weaker demand. Currently we see prices of
EUR570. Hence, CropEnergies' revenues will be
affected by this market trend. We assume the
company will be able to run at a high utilisation
rate of 95% going forward given the successful
ramp-up of its plant in Wanze, Belgium.
Wheat prices have also increased strongly from
lows of about EUR120 per tonne in 2009 to
currently about EUR200-230. CropEnergies will
start to suffer from this situation starting next
year (when its secured supply at fixed prices for
2010 starts to end).
Although the near-term outlook for CropEnergies
has improved due to already secured input
costs, we remain cautious in view of volatile
commodity prices. CropEnergies has no control
over either bioethanol prices or wheat feedstock
prices, making investments in the stock rather
uncertain in our view considering the high
volatility of soft commodity prices. We maintain
our 3/Underperform rating.
January 2011
GERMANY
CropEnergies
FY to 28/2 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
64
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11E
2011/12E
2012/13E
60.5
146.8
142.6%
(5.6)
(114.6)
26.6
NS
(8.0)
18.6
NS
0.0
0.0
0.0
18.6
(0.8)
0.0
0.0
(6.6)
0.0
0.0
0.0
11.1
0.0
0.0
11.1
0.0
0.0
11.1
134.9%
186.8
27.2%
(8.5)
(152.4)
25.9
-2.6%
(8.9)
17.0
-8.6%
0.0
0.0
0.0
17.0
2.9
0.0
0.0
0.3
0.0
0.0
0.0
20.1
0.0
0.0
20.1
0.0
0.0
20.1
81.1%
328.4
75.8%
(17.2)
(293.5)
17.7
-31.7%
(10.6)
7.1
-58.2%
0.0
0.0
0.0
7.1
(3.5)
0.0
0.0
2.2
0.0
0.0
0.0
5.8
0.0
0.0
5.8
0.0
0.0
5.8
-71.1%
374.2
13.9%
(22.0)
(321.5)
30.7
73.4%
(21.3)
9.4
32.4%
0.0
0.0
0.0
9.4
(8.3)
0.0
0.0
3.3
0.0
0.0
0.0
4.4
0.0
0.0
4.4
0.0
0.0
4.4
-24.1%
416.1
11.2%
(23.0)
(337.7)
55.4
80.5%
(30.0)
25.4
170.2%
0.0
0.0
0.0
25.4
(8.8)
0.0
0.0
(4.1)
0.0
0.0
0.0
12.4
0.0
0.0
12.4
0.0
0.0
12.4
181.8%
427.4
2.7%
(24.0)
(342.7)
60.7
9.6%
(30.0)
30.7
20.9%
0.0
0.0
0.0
30.7
(8.5)
0.0
0.0
(5.5)
0.0
0.0
0.0
16.6
0.0
0.0
16.6
0.0
0.0
16.6
33.9%
439.0
2.7%
(25.1)
(348.5)
65.4
7.7%
(30.0)
35.4
15.3%
0.0
0.0
0.0
35.4
(7.9)
0.0
0.0
(6.9)
0.0
0.0
0.0
20.7
0.0
0.0
20.7
0.0
0.0
20.7
24.7%
7.0
(135.2)
(132.8)
(160.0)
32.8
0.0
0.1
0.0
0.0
10.7
(116.5)
19.1
160.1%
1.5
(51.2)
(36.6)
(30.6)
270.1
0.0
(8.8)
0.0
0.0
(0.5)
230.2
29.1
52.4%
(4.9)
(139.8)
(139.2)
(115.6)
1.4
0.0
6.8
0.0
0.0
10.4
(97.0)
16.5
-43.3%
15.7
(182.8)
(157.0)
(150.6)
(1.0)
0.0
(12.7)
0.0
0.0
(11.0)
(175.3)
25.7
55.8%
42.3
(31.9)
(18.9)
36.1
(1.3)
0.0
2.0
0.0
0.0
4.2
41.0
42.4
65.0%
6.6
(35.0)
(20.0)
14.0
0.0
0.0
0.0
(4.3)
0.0
3.0
12.7
46.6
9.9%
2.2
(15.4)
0.0
33.4
0.0
0.0
0.0
0.0
0.0
0.8
34.2
50.7
8.8%
2.2
(15.8)
0.0
37.1
0.0
0.0
0.0
0.0
0.0
0.8
37.9
1.0
0.0
0.0
10.6
130.4
NS
142.0
0.0
0.5
134.7
0.0
0.0
7.0
11.6
142.2
282.2
0.0
0.0
19.0
(114.3)
NS
186.9
0.0
0.6
177.8
0.0
0.0
8.5
5.8
186.9
303.8
0.0
0.0
22.6
(13.5)
NS
312.9
0.0
0.5
308.8
0.0
0.0
3.6
1.9
312.9
308.6
0.0
0.0
24.3
167.9
54.4
500.8
0.0
4.9
476.6
0.0
0.0
19.3
5.9
500.8
311.7
0.0
0.0
26.6
215.4
69.1
553.7
0.0
8.8
483.2
0.0
0.0
61.6
16.5
553.6
319.9
0.0
0.0
29.5
215.9
67.5
565.3
0.0
8.8
488.2
0.0
0.0
68.2
16.4
565.2
336.5
0.0
0.0
30.3
186.1
55.3
552.9
0.0
8.8
473.6
0.0
0.0
70.4
16.5
552.8
357.1
0.0
0.0
31.2
152.6
42.7
540.9
0.0
8.8
459.4
0.0
0.0
72.7
16.6
540.9
(3.1)
(69.5)
(12.1)
(6.0)
(18.1)
0.0
0.0
0.0
(18.1)
(4.1)
0.0
0.0
(9.5)
0.0
0.0
0.0
(31.8)
0.0
0.0
(31.8)
0.0
0.0
(31.8)
(31.8)
www.cheuvreux.com
January 2011
GERMANY
CropEnergies
FY to 28/2 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11E
2011/12E
2012/13E
(0.53)
0.18
134.3%
0.18
134.3%
0.32
78.0%
0.32
78.0%
0.07
-79.0%
0.07
-79.0%
0.05
-23.5%
0.05
-23.5%
0.15
180.8%
0.15
180.8%
0.20
33.6%
0.20
33.6%
0.24
25.1%
0.24
25.1%
0.0
0.00
0.00
0.31
159.1%
3.3
0.00
0.00
0.47
49.8%
3.6
0.00
0.00
0.19
-58.6%
3.6
0.00
0.00
0.30
55.7%
3.7
0.00
0.00
0.50
65.2%
3.8
0.00
0.00
0.55
9.8%
4.0
0.00
0.00
0.60
8.8%
4.2
60.000
60.000
0.000
85.000
61.000
0.000
85.000
62.000
0.000
85.000
85.000
0.000
85.000
85.000
0.000
85.000
85.000
0.000
85.000
85.000
0.000
85.000
85.000
0.000
6.60
8.14
6.24
7.29
3.76
8.53
3.76
6.56
2.90
4.45
1.76
3.05
3.86
4.24
2.41
3.02
5.68
5.75
3.06
3.89
5.54
5.74
5.27
5.49
5.54
-
570.4
456.1
654.5
641.0
314.5
482.4
221.0
436.4
320.9
536.8
470.9
657.0
470.9
623.5
NS
NS
NS
NS
NS
0.0
36.3
36.3
21.1
NS
2.0
2.4
0.0
11.6
11.6
8.0
NS
1.1
2.0
0.0
42.5
42.5
14.9
NS
0.8
1.0
0.0
74.6
74.6
12.8
16.3
1.1
0.8
0.0
27.0
27.0
7.9
4.4
1.0
1.0
0.0
28.4
28.4
10.1
7.1
1.4
0.9
0.0
22.7
22.7
9.3
7.9
1.3
0.9
0.0
NS
NS
NS
NS
17.1
24.5
3.11
23.3
24.7
37.7
3.43
24.5
27.3
67.9
1.47
21.7
14.2
46.4
1.2
7.4
9.7
21.1
1.3
11.0
10.8
21.4
1.5
12.4
9.5
17.6
1.4
11.0
NS
NS
NS
NS
NS
0.4
NS
0.0
NS
NS
18.1
12.7
7.6
0.8
NS
0.0
NS
NS
13.9
9.1
10.8
0.6
NS
0.0
5.1
10.2
5.4
2.2
1.8
0.7
54.4
0.0
3.7
8.4
8.2
2.5
1.2
0.7
69.1
0.0
6.3
5.1
13.3
6.1
3.0
0.7
67.5
0.0
7.1
4.0
14.2
7.2
3.9
0.8
55.3
0.0
8.3
3.0
14.9
8.1
4.7
0.8
42.7
0.0
NS
NS
NS
NS
10.0
6.2
4.0
4.0
5.4
5.5
6.8
6.8
1.4
2.3
1.9
1.9
1.7
6.8
1.4
1.4
4.5
3.4
4.0
4.0
5.6
4.2
5.1
5.1
6.5
4.9
6.0
6.0
(0.53)
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
(0.53)

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
65
www.cheuvreux.com
January 2011
GERMANY
MULTI-SERVICES
3/Underperform
Rating
-7.6% EUR42
CTS Eventim
Reuters: EVDG.DE Bloomberg: EVD GR
Option value only to materialise in H2-11

Q
Recent developments A weaker Q3 result
CTS published Q3 results in November. Note that, seasonally, Q3 is a

soft quarter. Q4 is the most important quarter, representing 40+% of
annual net income. Bearing this in mind, we would not read too much
into the results, which overall appeared light when we stripped out the
contribution from consolidation effects.
Ticketing remains key for CTS. The division's sales in Q3 climbed 48%,
in our view driven largely by consolidation effects: Swiss TicketCorner
(TC) since 1 March and TicketOnline (TO) since 1 July. We estimate that
these contributed about EUR10-11m sales in Q3 (but seasonality is
hard to estimate). CTS' adjusted Ticketing EBIT rose 17% in Q3 to an
estimated EUR9.6m (note that CTS adjusted its 9M EBIT for one-time
costs and non-cash amortisation charges; its H2-10 EBIT was only
adjusted for one-time costs). We allocate some EUR2.5m to
consolidation effects, which suggests Ticketing adj. EBIT was down
slightly from EUR8.2m in Q3-09. Note, however, that the termination of
the Live Nation contract in July had an adverse impact, which we
believe was almost offset by moderate organic growth.
Overall, 2010 was a more challenging year for Ticketing given the lack
of big headline events to support presales and other cross-selling
activities. EBIT was adjusted for EUR8.8m costs in 9M-10, of which we
estimate EUR4.5m were one-offs (for M&A; legal fees), though both are
likely to also impact Q4 with legal costs also running into 2011 (Live
Nation). This resulted in the 31% decline in reported EBIT.
LE is usually volatile and barely contributes in Q3 due to seasonal
effects. EBIT was slightly down, reflecting EUR1m one-time start-up
costs for Tutanchamun and a minor deconsolidation effect.
Q
EUR45.43
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
EUR1090m
EUR543m
EUR1317m
24m
EUR 0.56m
Performances
1.2%
22.0%
35.6%
-3.6%
3.7%
-4.6%
Absolute perf.
Relative perf.
45.6
45.6
40.6
40.6
35.6
35.6
30.6
30.6
25.6
25.6
20.6
20.6
15.6
15.6
10.6
10.6
5.6
5.6
0.6
01/01
0.6
03/02
06/03
09/04
12/05
Price/SDAX
03/07
06/08
09/09
01/11
Price
Sector focus
Sector Top Picks
Least favoured
Outlook M&A, Live Nation compensation, AEG
Looking ahead, Q4 results will be important. So far CTS says the

business has performed favourably, but we and the mkt already predict
adjusted EBIT of EUR86.5m, again supported by consolidation gains.
In terms of strategic issues, we believe the second half of 2011E will be
important. On an unspecified date in H2-11, an arbitration decision will
be reached between CTS and Live Nation, and a compensation
payment to CTS may be on the cards. Once the decision has been
taken, we believe CTS may also consider seeking alternative paths for
its UK market strategy. We note that See Tickets only sold its German
business (TicketOnline) so far, but the UK operations may be also up for
sale. Furthermore, bolt-on acquisitions in other countries, including
France and Spain, remain possible. Finally, AEG seeks an alternative to
Ticketmaster; and once the legal case with Live Nation has been
resolved in H2, discussions may continue. In H1-11 we expect the final
decision from the German antitrust authorities on the CTS' TicketOnline
deal. After the stock's recent impressive performance and as triggers
are only likely to emerge in H2, we remain on the sidelines.
Shareholders
Klaus-Peter Schulenberg 50.1%, Free Float 49.9%
2009
2010E
2011E
P/E (x)
20.5
21.4
18.3
15.8
EV/EBITDA (x)
10.6
15.3
12.3
10.0
4.1
NS
6.2
6.9
Net debt/EBITDA (x)
(1.8)
0.6
0.1
(0.3)
Yield (%)
2.4
1.9
2.2
2.8
ROCE (%)
NS
33.0
41.7
52.2
NS
6.1
6.4
6.3

Research Analyst
(49) 69 478 975 26
Q
Q
66
www.cheuvreux.com
2012E
January 2011
GERMANY
Company profile
Dominant German ticketing force

Online ticketing (www.eventim.de) is the company's cash cow,
generating highly profitable revenues of EUR6-7 per ticket versus
about a EUR1 system fee on tickets sold at a retail outlet via CTS'
network. The increasing penetration of online ticket sales is a key
growth driver. CTS effectively dominates the German market.
Q
Live Nation collaboration ended

CTS had a global collaboration agreement with Live Nation, the no.1
global tour promoter. Live Nation terminated the collaboration in
most countries with effect from mid-2010. An arbitration decision on
a potential compensation payment is due in H2-11. After this, CTS
may seek alternative ways to enter the new markets.
Q
Q Live Entertainment division provides crucial content

The Live Entertainment division comprises various majority stakes in
promoters of live concerts (incl. a 51% stake in Marek Lieberberg).
This is a low-margin business but is of strategic importance for the
Ticketing division as it provides crucial high-class content.
Q Attractive balance sheet and cash flow characteristics
In both divisions CTS receives revenues before costs apply,
translating into positive cash flow from working capital. Capex
requirements are very limited in this scalable business model. CTS
has little net debt on its balance sheet, although note that the gross
cash includes ticket revenues that have yet to be settled.
SWOT analysis
Strengths
Weaknesses
Dominant leader in Germany
Strong ties to top live entertainment firms secure access to

high-class content in Germany
German and other market

positions dependent on content
supply
Limited visibility in the volatile

Live Entertainment division
Limited asset base requirements; negative working capital;

strong cash flows
Increasing internet penetration

lowers barriers to entry
somewhat
Incremental ticket sales incur

very limited incremental costs
Artists need to go on tour as

record sales continue to decline
Opportunities
Threats
Increasing number of internet

tickets sold
Live Nation compensation

payment
Further international
expansion
Potential ticketing deal
with AEG
Successful resale (fansale)
roll-out; flexible pricing
Artists and promoters seeking

to participate in ticketing profits
High returns may attract new
capital / more competitors
TicketOnline deal not yet

cleared by antitrust authorities
67
www.cheuvreux.com
Valuation
We reiterate our 3/Underperform rating and

EUR42 target price, at which CTS would be
trading at 16.5x 2011E and 15.0x 2012E
earnings.
Investment case
We give CTS' business model high marks in

view of its dominant German market position,
the scalability of its business model and its
strong cash flow generation profile.
We see option value for the stock: a) Live Nation
compensation payment; b) bolt-on M&A; c)
potential AEG contract.
However, after the shares' strong performance,
given that the option values are only likely to
materialise in H2-11E and that the recent
operational development was softer in Q3 if one
strips out consolidation effects, we prefer to
remain on the sidelines.
A residual risk remains that antitrust may refrain
from approving the TicketOnline deal. While we
understand the likelihood of this happening is
low, it would have a major adverse impact on
earnings forecasts.
January 2011
GERMANY
CTS Eventim
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT (post one-timers+PPA)
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
68
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
222.7
-0.8%
(18.5)
(178.4)
25.8
29.0%
(4.4)
21.4
41.7%
0.0
0.0
0.0
21.4
0.5
0.0
0.0
(8.9)
0.0
0.0
0.0
13.1
0.0
(4.0)
9.1
0.0
0.0
9.1
93.6%
256.2
15.0%
(21.9)
(196.9)
37.4
45.0%
(4.7)
32.7
52.8%
0.0
0.0
0.0
32.7
1.2
0.0
0.0
(13.4)
0.0
0.0
0.0
20.5
0.0
(4.6)
15.9
0.0
0.0
15.9
74.7%
342.9
33.8%
(27.0)
(263.9)
52.0
39.0%
(6.3)
45.7
39.8%
0.0
0.0
0.0
45.7
2.3
0.0
0.0
(19.5)
0.0
0.0
0.0
28.5
0.0
(5.0)
23.5
0.0
0.0
23.5
47.8%
384.4
12.1%
(31.8)
(298.7)
53.9
3.7%
(7.1)
46.8
2.4%
0.0
0.0
0.0
46.8
3.2
0.0
0.0
(19.8)
0.0
0.0
0.0
30.2
0.0
(6.8)
23.4
0.0
0.0
23.4
-0.4%
404.3
5.2%
(39.5)
(307.0)
57.8
7.2%
(7.5)
50.3
7.5%
0.0
0.0
0.0
50.3
3.1
0.0
0.0
(17.8)
0.0
0.0
0.0
35.5
0.0
(6.3)
29.2
0.0
0.0
29.2
24.8%
466.7
15.4%
(45.0)
(341.7)
80.0
38.4%
(8.7)
71.3
41.7%
0.0
0.0
0.0
71.3
0.2
0.0
0.0
(23.3)
0.0
0.0
0.0
48.1
0.0
(8.2)
39.9
0.0
0.0
39.9
36.6%
508.7
9.0%
(47.2)
(372.2)
89.3
11.6%
(15.9)
73.4
2.9%
0.0
0.0
0.0
73.4
(0.9)
0.0
0.0
(21.7)
0.0
0.0
0.0
50.7
0.0
(7.9)
42.8
0.0
9.1
51.9
30.1%
542.8
6.7%
(49.6)
(386.2)
107.0
19.8%
(21.1)
85.9
17.0%
0.0
0.0
0.0
85.9
(3.0)
0.0
0.0
(24.0)
0.0
0.0
0.0
58.8
0.0
(9.8)
49.0
0.0
10.7
59.7
15.0%
564.7
4.0%
(52.1)
(389.4)
123.2
15.1%
(21.3)
101.9
18.6%
0.0
0.0
0.0
101.9
(2.5)
0.0
0.0
(28.8)
0.0
0.0
0.0
70.6
0.0
(10.0)
60.6
0.0
8.5
69.1
15.7%
19.6
27.3%
8.8
(5.7)
0.0
22.7
0.0
0.0
0.0
0.0
0.0
(4.3)
18.4
27.7
41.3%
34.8
(4.0)
0.0
58.5
(0.1)
0.0
0.0
0.0
0.0
(3.8)
54.7
35.4
27.8%
12.1
(12.9)
0.0
34.6
(2.4)
0.0
0.0
(8.2)
0.0
(7.1)
19.3
38.7
9.3%
(14.7)
(18.8)
0.0
5.2
(11.2)
0.0
0.0
(11.8)
0.0
(2.6)
(9.2)
44.4
14.7%
61.4
(19.4)
0.0
86.4
(7.3)
0.0
0.0
(11.8)
0.0
(7.4)
67.2
58.3
31.3%
(3.2)
(15.0)
0.0
40.1
0.0
0.0
0.0
(14.6)
0.0
(8.2)
17.3
66.6
14.2%
15.4
(194.8)
0.0
(112.8)
0.0
0.0
0.0
(19.9)
0.0
(57.9)
(190.6)
79.9
20.0%
12.8
(11.3)
0.0
81.4
0.0
0.0
0.0
(21.4)
0.0
(9.8)
50.2
91.9
15.0%
7.6
(11.9)
0.0
87.6
0.0
0.0
0.0
(24.5)
0.0
(10.0)
53.1
59.9
6.5
1.9
0.9
(57.9)
NS
11.3
39.1
7.8
3.1
8.5
0.0
(47.3)
(21.2)
11.2
75.7
6.3
1.8
1.0
(86.9)
NS
(2.1)
41.7
5.5
4.1
6.1
0.0
(59.4)
(23.2)
(2.0)
91.1
4.1
1.8
1.0
(110.3)
NS
(12.3)
44.7
8.4
5.5
6.3
0.0
(77.2)
(22.5)
(12.3)
102.7
7.2
2.5
3.5
(77.0)
NS
38.9
74.1
22.5
7.8
7.4
0.0
(72.9)
(19.0)
38.9
119.6
5.8
2.2
2.0
(136.8)
NS
(7.2)
89.9
21.2
9.2
5.2
0.0
(132.6)
(32.8)
(7.1)
144.9
4.9
2.7
2.1
(145.7)
NS
8.9
96.9
20.5
11.2
5.5
0.0
(125.2)
(26.8)
8.9
167.8
4.9
3.0
2.3
49.9
28.9
227.9
250.0
92.5
15.1
5.5
0.0
(135.1)
(26.6)
228.0
195.5
4.9
3.3
2.3
5.3
2.6
211.3
250.0
84.5
13.2
5.5
0.0
(141.9)
(26.1)
211.3
231.5
4.9
3.6
2.2
(41.6)
NS
200.6
250.0
77.1
11.3
5.5
0.0
(143.2)
(25.4)
200.7
www.cheuvreux.com
January 2011
GERMANY
CTS Eventim
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before one-timer+PPA
% Change
EPS, reported
% Change
0.38
93.4%
0.38
93.4%
0.66
74.9%
0.66
74.9%
0.98
47.7%
0.98
47.7%
0.98
-0.4%
0.98
-0.4%
1.22
24.8%
1.22
24.8%
1.66
36.6%
1.66
36.6%
2.16
30.1%
1.78
7.2%
2.49
15.0%
2.04
14.5%
2.88
15.7%
2.53
23.7%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
0.82
27.3%
2.5
0.00
0.34
1.15
41.2%
2.8
0.00
0.49
1.48
27.8%
3.3
0.00
0.49
1.61
9.4%
3.8
0.00
0.61
1.85
14.7%
4.4
0.00
0.83
2.43
31.3%
5.2
0.00
0.89
2.78
14.2%
6.1
0.00
1.02
3.33
20.0%
7.1
0.00
1.26
3.83
15.0%
8.4

Latest price
High
Low
Average price
24.000
24.000
0.000
24.000
24.000
0.000
24.000
24.000
0.000
24.000
24.000
0.000
24.000
24.000
0.000
24.000
24.000
0.000
24.000
24.000
0.000
24.000
24.000
0.000
24.000
24.000
0.000
8.90
9.10
4.83
6.97
20.61
24.76
9.00
16.78
29.26
31.41
19.09
25.31
26.50
38.33
23.40
30.24
23.94
31.00
17.00
24.33
34.14
35.99
17.03
27.69
46.22
46.95
32.54
38.47
45.43
46.31
44.80
45.23
45.43
-
213.6
250.9
494.6
552.3
702.2
741.7
636.0
746.1
574.6
564.4
819.4
845.4
1,109.2
1,367.1
1,090.3
1,317.5
1,090.3
1,232.8
23.5
23.5
10.9
7.4
3.6
NS
0.0
31.1
31.1
17.9
9.2
7.3
NS
1.7
29.9
29.9
19.8
4.1
8.9
NS
1.7
27.2
27.2
16.4
0.6
7.0
NS
1.8
19.7
19.7
12.9
12.4
5.5
NS
2.5
20.5
20.5
14.1
4.1
6.6
NS
2.4
21.4
21.4
16.7
NS
7.6
6.1
1.9
18.3
18.3
13.6
6.2
6.4
6.4
2.2
15.8
15.8
11.9
6.9
5.4
6.3
2.8
9.7
11.7
1.13
8.2
14.8
16.9
2.16
15.2
14.3
16.2
2.16
17.4
13.8
15.9
1.94
15.3
9.8
11.2
1.40
10.4
10.6
11.9
1.8
11.6
15.3
18.6
2.7
17.3
12.3
15.3
2.4
13.4
10.0
12.1
2.2
11.2
NS
NS
11.6
9.6
5.9
NS
NS
0.0
NS
NS
14.6
12.8
8.0
NS
NS
51.3
NS
NS
15.2
13.3
8.3
NS
NS
50.0
NS
NS
14.0
12.2
7.9
12.2
NS
50.3
NS
NS
14.3
12.4
8.8
NS
NS
50.1
NS
NS
17.1
15.3
10.3
NS
NS
49.9
NS
0.7
17.6
14.4
10.0
2.3
28.9
49.9
NS
0.1
19.7
15.8
10.8
2.6
2.6
50.0
NS
NS
21.8
18.0
12.5
2.9
NS
49.9
NS
NS
16.4
16.4
NS
NS
23.5
23.5
NS
NS
29.6
29.6
148.6
89.9
25.7
25.7
NS
NS
27.8
27.8
NS
NS
31.9
31.9
33.0
23.1
29.2
36.6
41.7
29.6
28.7
36.0
52.2
37.1
30.1
35.1
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
69
www.cheuvreux.com
January 2011
GERMANY
MACHINERY
2/Outperform
Rating
+15.3% EUR44
DEMAG Cranes
Services a harbour of stability
Q
Recent developments Late-cycle recovery finally arrives
Q4 sales, reported on 7 Dec, rose +13% y-o-y and +41% q-o-q to

EUR290m. EBIT came in at EUR24.5m. Group order intake rose +44%
y-o-y and +10% q-o-q to EUR267.5m. Given the improved order
situation (backlog: EUR307m, still down -2% y-o-y) short-time work has
been stopped almost completely. Demag beat its 09-10 sales and EBIT
guidance (~EUR900m, EUR45-50m) with EUR931m and EUR54m resp.
The restructuring is now finished and cut annual expenses by EUR60m.
Net cash (company def.) stands at EUR7.2m as of YE 09-10.
Demag's 10-11 guidance (sales EUR970-1000m, EBIT margin > 5.8%)
looks conservative. We now estimate 10-11E sales of EUR1045m and
EBIT of EUR73m. The company reiterated its break-even points for PT
(EUR200m) and IC (EUR470m, assuming 60% low-margin products).
We estimate R&D expense for the mid-price segment will burden EBIT
for the next 2 FYs by an estimated EUR20-25m combined, with
EUR10-15m likely in FY 10-11. Demag guides for first revenues from
the mid-segment by FY 11-12 and revenue potential in the low 3-digit
EURm range by FY 14-15 (we estimate EUR120-150m).
Demag's management has consistently stressed that it intends to
remain a stand-alone company and is not interested in deeper talks
with either Konecranes or Terex.
Q
EUR38.17
Price (07/01/2011)
Reuters: D9CGn.DE Bloomberg: D9C GR
Stock data
Free float
Enterprise value
Daily volume
EUR808m
EUR709m
EUR865m
21.173m
EUR3.65m
Performances
1.4%
21.2%
49.5%
-0.1%
6.5%
16.3%
Absolute perf.
Relative perf.
51.0
51.0
46.0
46.0
41.0
41.0
36.0
36.0
31.0
31.0
26.0
26.0
21.0
21.0
16.0
16.0
11.0
11.0
06.06
01.07
08.07
03.08
09.08
Price/M DAX
04.09
11.09
06.10
01.11
Price
Outlook Promising longer-term growth drivers
Port Technology (PT) and Industrial Cranes (IC) face different pricing
situations. In PT, pricing returned to healthy levels already in Q4 09-10
and continues to improve. IC's situation remains tough, however, and
Demag is trying to reduce discounts to list prices granted during the
crisis with limited scope to increase list prices.
Currently, about 1/3 of Demag's Services business is on peers'
products, 2/3 within its own installed fleet. Company now seems to
target a 40:60 ratio here.
Demag now sees peak margins at the latest in FY 14-15 due to planned
sales growth and a more competitive cost structure.
Apart from the actual amount of containers transported globally, we see
structural grow in transhipment as a key growth driver for PT as this
drives demand for handling equipment. The transhipment biz
(unloading containers from large ships (often more than 10,000 TEUs)
to smaller feeder vessels which then transport volumes to the final
destination) is growing structurally as the share of post-Panamax ships
(i.e. those too big to pass through the Panama Canal) deployed on
intercontinental routes is growing steadily due to cost considerations
for shipping lines. In fact, ships that can handle 10,000 TEUs or more
make up nearly half of all cargo ships currently being manufactured in
the world today and are mainly earmarked for deployment on the AsiaEurope-Asia route.
Sector focus
Sector Top Picks
Least favoured

Shareholders
Free Float 87.8%, Cevian Capital 10.1%,
Management 2.1%
2008/09
2009/10E
2010/11E
P/E (x)
12.2
27.2
14.4
EV/EBITDA (x)
15.6
9.9
7.7
5.6
7.6
4.9
6.4
8.8
(0.7)
0.1
0.1
(0.5)
Yield (%)
0.0
1.6
2.9
3.6
ROCE (%)
4.6
12.7
21.3
28.3
1.6
1.8
2.0
1.8
Q
Q
70
www.cheuvreux.com
9.8
Net debt/EBITDA (x)
Research Analyst
(49) 69 47 897 540
2011/12E
January 2011
GERMANY
Company profile
A world market leader in crane manufacturing

DEMAG Cranes is a leading crane manufacturer (no.1-2 worldwide in
industrial cranes with about 12% world market share; no.1 in mobile
harbour cranes with 45% world market share). With its cashgenerative, flexible business model (high degree of outsourcing) the
company supplies a blue chip customer base of more than 100k
industrial clients and roughly 100 port customers globally.
Q
Q Service division: the company's gem

With capacity utilisation rising amongst clients and a corresponding
increase in high-margin spare parts sales, the Services division is
likely to generate a healthy EBIT margin of 20% in FY10-11E. Market
entry barriers are very high here as Demag protects its own fleet
against new entrants with technological requirements and its dense
services network that is needed to meet client needs.
Q Industrial Cranes: extremely high customer retention rate
This division offers high-quality components (e.g. rope and chain
hoists) and complete cranes. Thanks to its strong reputation, Demag
consistently achieves price premiums vs. its competitors, which we
estimate at 5%. In addition, it has an extremely high customer
retention rate, which we estimate at 90+%.
Q Port Technology: pioneer in automated handling and storage
Also known by the brand name Gottwald Port Technology (GPT), this
division's products include mobile harbour cranes and
services/software to facilitate and improve container handling and
other logistics activities at terminals and ports.
SWOT analysis
Strengths
Weaknesses
Strong brand name based on

superior product quality and
innovation
Highly volatile profitability in

Industrial Cranes and Port
Technology.
Large installed base of 660k

cranes and hoists, a source of
recurring high-margin maintenance and spare parts revenues
Opportunities
Threats
Fast growth in emerging

markets
Rising penetration of the

installed base with in-house
services
Sharply weaker USD
Component supply shortage
Surging raw material costs

(steel)
Depressed investment in new

port capacity for years to come
due to the current crisis
Technology leadership
Pioneer position in automated

materials handling systems
Structural
growing
transhipment business
71
www.cheuvreux.com
Valuation
Q DEMAG Cranes shares are trading at 9.8x

2011-12E earnings. As FY09-10E EPS will likely
mark the cycle trough, we find a multiple of 13x
more appropriate, suggesting >30% upside.
At 0.67x EV/Sales, 5.6x EV/EBITDA, and 2.5x

price/book (all 2011-12E), we believe the shares
of financially very robust DEMAG Cranes are
priced significantly below their fair value.
Q Our
SOP
approach
confirms
the
undervaluation: our fair value of EUR506m
(applying EV/sales of 1.5 for FY11-12E) for the
resilient Services unit (FY11-12E EBIT margin:
20.2%) equates to a large proportion of the
company's current market capitalisation.
Q A
divisional ROCE model based on
normalised assumptions yields a FV of EUR44.
Q Our DCF model yields a FV of EUR45 with
the following inputs: CAGR FY 11-20E for sales
of 2.2% and 2.8% for EBITDA, WACC of 7.4%
and a 2% terminal growth rate.
Investment case
While the sentiment amongst Port Technology

(PT) clients has improved recently, Demag does
not expect business to increase materially until
the resurrection of large new port projects.
These decisions by port operators take time
despite the recent pick-up in volumes as their
decisions are based on trends lasting a decade
rather than quarters.
We regard Demag as very well positioned to
benefit from structurally growing end markets
due to its significant restructuring programme
implemented during the crisis, its investments in
promising products and services, its focus on
expanding emerging market products by starting
new mid-price product lines, and its growth
potential in Services both within its own installed
base (world's largest installed base (660k) in
Industrial Cranes) and in third-party business.
We stick to our positive view on Demag and
reiterate our 2/OP due to the very promising
strategic outlook, takeover speculation, and
attractive valuation. A divisional EVA model
based on normalised assumptions for the three
divisions yields a FVpS of EUR44.
January 2011
GERMANY
DEMAG Cranes
FY to 30/9 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
72
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
810.1
-4.0%
0.0
(765.6)
44.5
NS
(21.7)
20.8
179.3%
(16.4)
0.0
0.0
6.3
(37.2)
0.0
0.0
10.6
0.8
0.0
(16.4)
(19.5)
0.0
0.0
(19.5)
0.0
0.0
13.4
-24.4%
881.6
8.8%
(299.9)
(513.5)
68.2
53.3%
(21.0)
45.3
118.1%
(11.8)
0.0
0.0
35.4
(33.6)
0.0
0.0
(2.0)
0.7
0.0
(11.8)
0.5
0.0
0.0
0.5
0.0
0.0
24.2
80.9%
986.9
11.9%
(308.4)
(592.1)
86.4
26.7%
(21.1)
65.3
44.2%
(11.3)
0.0
0.0
53.9
(21.6)
0.0
0.0
(10.4)
0.2
0.0
(11.3)
22.1
0.0
(0.1)
22.0
0.0
18.6
63.3
162.0%
1 080.4
9.5%
(324.5)
(638.8)
117.1
35.5%
(23.9)
93.1
42.7%
(11.2)
0.0
0.0
82.0
(14.2)
0.0
0.0
(35.0)
0.0
0.0
0.0
32.8
0.0
(0.3)
32.4
0.0
18.8
62.4
-1.4%
1 225.8
13.5%
(351.9)
(710.1)
163.7
39.9%
(22.5)
141.2
51.6%
(5.4)
0.0
0.0
135.8
(12.0)
0.0
0.0
(42.9)
0.0
0.0
0.0
80.8
0.0
(0.5)
80.3
0.0
4.3
90.0
44.3%
1 047.6
-14.5%
(351.9)
(654.5)
41.2
-74.8%
(22.5)
18.6
-86.8%
(5.4)
0.0
0.0
13.2
(11.1)
0.0
0.0
(0.9)
0.0
0.0
0.0
1.2
0.0
(0.3)
0.9
0.0
34.2
40.5
-55.0%
931.3
-11.1%
(351.9)
(507.3)
72.1
74.9%
(20.1)
52.0
178.6%
(1.8)
0.0
0.0
50.2
(8.3)
0.0
0.0
(14.1)
0.0
0.0
0.0
27.8
0.0
(0.1)
27.7
0.0
0.0
29.5
-27.2%
1 107.0
18.9%
(367.6)
(627.1)
112.3
55.9%
(22.4)
89.9
73.1%
0.0
0.0
0.0
89.9
(8.4)
0.0
0.0
(25.0)
0.0
0.0
0.0
56.5
0.0
(0.3)
56.2
0.0
0.0
56.2
90.7%
1 225.0
10.7%
(385.9)
(692.8)
146.3
30.2%
(21.3)
125.0
39.0%
0.0
0.0
0.0
125.0
(5.7)
0.0
0.0
(36.6)
0.0
0.0
0.0
82.6
0.0
(0.5)
82.1
0.0
0.0
82.1
46.2%
15.7
(26.2)
7.9
(10.0)
0.0
0.5
0.0
(1.0)
0.0
80.3
0.0
(1.0)
33.6
113.8%
(58.0)
15.3
(10.0)
0.0
(21.2)
0.0
(1.0)
0.0
100.2
0.0
(1.0)
56.5
68.3%
65.0
(18.7)
(10.0)
102.8
16.6
0.0
0.0
0.0
(214.6)
147.2
52.0
67.5
19.5%
0.5
(19.7)
(29.0)
48.3
1.8
0.0
0.0
(21.2)
0.0
(19.8)
9.1
109.1
61.7%
43.6
(20.0)
(1.0)
132.8
(1.1)
0.0
0.0
(23.3)
0.0
(64.7)
43.7
28.8
-73.6%
19.8
(8.9)
(6.0)
39.7
(0.8)
0.0
0.0
(29.6)
0.0
12.5
21.8
49.6
72.0%
0.0
(20.3)
(3.0)
29.3
0.0
0.0
0.0
0.0
0.0
(29.3)
0.0
79.4
60.2%
(4.8)
(23.2)
(2.0)
51.4
0.0
0.0
0.0
(19.8)
0.0
(7.6)
24.0
104.9
32.1%
(9.1)
(24.5)
(3.0)
71.3
0.0
0.0
0.0
(23.6)
0.0
7.5
55.2
65.1
0.0
122.2
39.7
305.3
469.1
532.2
118.6
59.9
160.9
12.9
0.0
179.9
22.2
532.2
160.3
0.1
139.4
35.9
236.2
147.2
571.9
119.7
60.1
124.1
34.1
0.0
233.8
26.5
571.8
188.2
0.7
130.5
38.7
133.1
70.5
491.2
120.5
59.9
123.5
17.5
0.0
169.7
17.2
491.2
208.0
1.0
121.7
42.8
115.9
55.5
489.4
120.5
55.2
124.4
15.6
0.0
173.7
16.1
489.4
269.7
1.5
112.7
52.6
17.9
6.6
454.4
120.4
49.2
128.6
16.7
0.0
139.5
11.4
454.4
225.9
1.8
132.5
60.4
5.7
2.5
426.4
120.4
40.6
120.1
17.5
0.0
127.8
12.2
426.4
225.9
1.8
132.5
60.4
5.7
2.5
426.4
120.4
40.6
120.1
17.5
0.0
127.8
13.7
426.4
293.1
2.4
134.0
69.7
(59.4)
NS
439.8
118.6
40.6
116.7
17.5
0.0
146.4
13.2
439.9
351.6
3.0
135.0
77.2
(108.1)
NS
458.6
118.6
40.6
119.9
17.5
0.0
162.0
13.2
458.6
www.cheuvreux.com
January 2011
GERMANY
DEMAG Cranes
FY to 30/9 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.58
1.09
87.7%
0.02
102.6%
2.99
173.3%
1.04
NS
2.95
-1.4%
1.53
47.2%
4.25
44.2%
3.79
147.5%
1.91
-55.0%
0.04
-98.9%
1.39
-27.2%
1.31
NS
2.65
90.7%
2.65
102.7%
3.88
46.2%
3.88
46.2%
3.1
1.12
0.00
(0.05)
0.0%
7.6
1.07
1.00
2.67
NS
7.9
0.53
1.10
3.19
19.4%
8.7
0.26
1.40
5.16
61.7%
11.3
0.26
0.00
1.36
-73.6%
10.7
0.08
0.60
2.34
72.0%
10.1
0.00
1.11
3.75
60.2%
12.7
0.00
1.38
4.95
32.1%
15.2
21.173
21.173
0.000
21.173
21.173
0.000
21.173
21.173
0.000
21.173
21.173
0.000
21.173
21.173
0.000
21.173
21.173
0.000
21.173
21.173
0.000
21.173
21.173
0.000
21.173
21.173
0.000
40.00
40.42
21.95
28.36
29.34
53.00
25.81
40.62
18.80
39.05
11.60
27.86
23.32
26.20
11.85
19.07
36.28
39.38
22.19
28.31
38.17
38.41
36.55
37.74
38.17
-
571.7
817.8
699.6
921.6
551.3
665.2
523.2
643.9
595.7
716.4
808.2
865.2
808.2
817.5
NS
NS
NS
NS
NS
-
NS
NS
NS
NS
NS
0.0
20.8
13.4
15.0
18.0
5.1
1.7
2.5
12.1
10.0
9.2
6.9
3.4
1.9
3.7
4.7
4.4
3.6
24.1
1.7
1.5
7.4
14.1
12.2
17.1
7.6
2.2
1.6
0.0
29.0
27.2
16.2
4.9
3.8
1.8
1.6
14.4
14.4
10.2
6.4
3.0
2.0
2.9
9.8
9.8
7.7
8.8
2.5
1.8
3.6
NS
NS
NS
NS
NS
NS
NS
NS
9.5
12.5
0.83
11.5
7.9
9.9
0.85
12.4
4.1
4.7
0.54
5.7
15.6
34.5
0.6
18.4
9.9
13.8
0.8
13.0
7.7
9.6
0.8
10.2
5.6
6.5
0.7
7.5
1.2
NS
5.2
2.6
NS
1.6
469.1
0.0
2.0
NS
7.5
5.1
0.1
1.6
147.2
0.0
4.0
2.4
8.8
6.6
2.2
2.1
70.5
96.1
8.2
1.7
10.8
8.6
3.0
2.3
55.5
71.8
13.6
0.2
13.4
11.5
6.6
2.8
6.6
36.9
3.7
0.2
3.9
1.8
0.1
2.6
2.5
0.0
8.6
0.1
7.7
5.6
3.0
2.3
2.5
45.9
13.3
NS
10.1
8.1
5.1
2.6
NS
42.0
NS
NS
11.9
10.2
6.7
2.8
NS
35.6
4.0
2.6
NS
NS
8.4
1.7
0.3
0.3
13.8
9.4
12.4
24.2
19.7
9.5
16.9
28.1
32.3
21.1
35.0
37.2
4.6
2.6
0.4
16.8
12.7
8.4
13.1
13.1
21.3
14.8
21.2
21.2
28.3
19.6
26.4
26.4
(0.92)
Goodwill per share

Dividend per share
Cash flow per share
% Change
1.55
0.00
(0.05)

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
73
www.cheuvreux.com
January 2011
GERMANY
SEMICONDUCTORS
2/Outperform
Rating
+12.1% EUR20.00
Rapid growth to be sustained
Recent developments Q3-10 results very healthy
Dialog Semiconductor reported very robust results for Q3-10. Sales

were up 35% y-o-y and 16% q-o-q to USD79.5m, driven mainly by
market share gains, new customer wins, as well as expansion in the
market as a whole. EBIT of USD13.9m translates to a strong 17.4%
margin, driven by economies of scale (very solid gross margin of
46.3%). Net profit for Q3-10, boosted by a USD1.0m deferred tax gain,
hit USD13.3m (up 51% y-o-y). Due to tight working capital
management, the company generated a very strong USD14m in free
cash flow from operations.
For Q4-10 Dialog Semiconductor has predicted of USD81-86m,
implying a level below its normal seasonality. However, we are not
concerned about reduced growth for Q4-10 as this should be a onetime phenomenon caused by 1) the acceleration of sales of c.USD4m
into Q3 (early Xmas build); 2) cont'd production constraints within the
supply chain; and 3) the shrinking EMP business. Hence, the company
remains positioned in the sweet spot of the market (3G wireless,
Smartphones, etc.) with its highly scalable business model, consistently
adding strong design wins/new customers (audio ICs, Atom
companion chip, Auto, ).
Outlook - Tremendous growth prospects not fully priced in
We are convinced Dialog Semiconductor will continue to grow its topline by c.30% p.a. for years to come. The company is addressing the
fastest-growing consumer end-markets (mainly smartphones and tablet
PCs) and serves the most successful customers (Apple, RIM, Samsung,
Bosch, ), whilst steadily expanding market share.
However, the group's growth profile is about adding new
customers/sockets (e.g. Samsung, Sony, etc.) as well as processor
partners, launching new products (recently audio, PM-OLED display
drivers; 2D-3D video conversion; more to come in 2011E and beyond),
addressing new end-markets (e.g. medical home care, sports, LED
lighting ), and increasing ASPs from the current USD1.6, and its
growth profile will continue to be broadened materially in this manner.
We view Dialog as a highly attractive chip-cycle-independent growth
investment and, in the longer run, a takeover target. The company has
huge upside in the medium term, stemming from its unique PM-OLED
driver IC technology as well as promising 2D-3D video conversion chip,
that have barely been discounted so far. At 17x earnings and 12x
EV/EBITDA (2012E), the shares are not expensive considering Dialog's
growth prospects. We thus see further upside and recommend
investors to buy on dips. Our medium-term target price of
EUR25+/share lies materially higher than our near term target of
EUR20.
EUR17.84
Price (07/01/2011)
Reuters: DLGS.DE Bloomberg: DLG GR
Stock data
Free float
Enterprise value
Daily volume
$1512m
$1150m
$1313m
65.61m
$ 11.15m
Performances
19.9%
50.0%
93.9%
12.1%
33.6%
91.5%
Absolute perf.
Relative perf.
50.5
50.5
40.5
40.5
30.5
30.5
20.5
20.5
10.5
10.5
0.5
01/01
0.5
04/02
07/03
10/04
01/06
Price/TECDAX
04/07
07/08
Sector focus
Sector Top Picks
Least favoured
Shareholders
Free Float 76.1%, Jp Morgan Am 7.2%, Management
4.6%, Adtran 4.5%, Bank Ny Mellon 4.3%, X-Fab
3.3%
2009
2010E
2011E
P/E (x)
22.9
34.3
23.5
17.4
EV/EBITDA (x)
13.9
24.3
17.0
12.0
Q
74
www.cheuvreux.com
2012E
4.7
1.5
3.1
4.5
Net debt/EBITDA (x)
(3.4)
(2.6)
(2.5)
(2.5)
Yield (%)
ROCE (%)
0.0
0.0
0.0
0.0
100.4
93.7
98.4
104.0
17.3
18.9
13.0
9.3
Q
01/11
Price
Bernd LAUX
Research Analyst
blaux@cheuvreux.com
(49) 69 47 89 75 12
10/09
January 2011
GERMANY
Company profile
Fabless analogue/mixed-signal chipmaker

Dialog Semiconductor, founded in 1981 as a UK registered PLC and
listed in Germany since 1999, is a fabless semiconductor maker that
specialises in providing analogue/mixed-signal ASIC (70%) and
ASSP (30%) solutions to the wireless, portable consumer and
automotive & lighting industries.
Q
Q Narrow focus on power management and audio

The group's main products are highly integrated (up to 40 functions)
power management and audio codec ICs, and ultra-low-power
differentiated colour display driver ICs. In 2009 it generated one-third
of its sales with products developed within the previous 12 months.
The group operates sales offices in Germany, the UK, the US,
Taiwan, Japan and Korea.
One of the fastest growing chipmakers worldwide

Dialog Semiconductor (390 staff) has been one of the fastestgrowing semiconductor vendors in the world since 2008 and has
been profitable at the EBIT level for the past twelve consecutive
quarters. Its main customers (total: around 60) are Apple, RIM,
SonyEricsson, LG, Samsung, Bosch and Zumtobel.
Q
Reporting currency is USD, despite listing in EUR

Although its shares are listed in Germany and quoted in EUR, Dialog
reports in USD as the company generates almost all of its revenues
and has all its cost of materials in USD (thus being USD functional).
The company currently has forward hedges on its predictable EUR
and GBP expenses (labour, office rent) on a 12-month basis.
Q
SWOT analysis
Strengths
Weaknesses
Technological leader in
analogue/mixed-signal chips
for battery management and
audio codec applications
Highly scalable business

model given move to true
fabless structure
Strong dependence on a
limited number of end-customers
(Apple, Bosch, LG, RIM,
SonyEricsson and Zumtobel),
with SonyEricsson losing share
Strong customisation of
products requires considerable
R&D
Very experienced, well

connected top management
Profitability still below that of

best-in-class
Great base of high-volume

reference customers
Limited operating scale
Spotless balance sheet
Opportunities
Threats
Increasing penetration of
customers (Apple, RIM, LG,
Samsung, )
Trend towards more highly

integrated mobile phone platform
solutions could sideline Dialog
going forward
Growth due to rising

integration, higher ASPs,
promising R&D, especially for
ultra-low-power display drivers
Fast innovation cycle at

customers means limited
visibility and low barriers to entry
Company owns valuable IP,

making it a takeover target
Potential limitation of foundry

capacity (DLG: TSMC,
Chartered) may temporarily curb
short-term growth
Well exposed to the most

attractive end-market
segments
75
www.cheuvreux.com
Valuation
Based
on
typical
multiples,
Dialog
Semiconductor shares offer highly attractive
value provided investors buy into the sustainable
growth story.
With 11% of the company's current market
capitalisation covered by net cash, the shares
are trading at 2.6x EV/sales and at a
price/tangible book ratio of 4.3x (2012E). Based
on our 2012E earnings forecast, the company's
P/E stands at 17x in line with fabless
semiconductor industry peers which fails to
reflect its superior growth profile. Adjustments
for net cash bring the 2012E P/E down to 15.8x.
On our DCF model renders a fair value per share
of at least EUR20 (our price target) without
considering much of the anticipated very
significant contribution from PM-OLED and 2D3D conversion.
Assuming Dialog's display driver projects take
off (mainly PM-OLED) and/or the company is
acquired a few years down the road, given its
strong product IP and customer access,
substantially higher share prices in excess of
EUR25 are likely to come within reach.
Investment case
Dialog Semiconductor is a narrowly focussed

semiconductor developer that concentrates on
what are currently the most exciting, fastest
growing end-market segments. With its
differentiated
products
it
shows
great
momentum in terms of winning new customers,
adding sockets, lifting its share of the wallet at
existing clients, and hence gaining market share.
As a result, we remain confident the company
will continue to expand its top line organically by
a minimum of 30% p.a. in coming years. On top
of that comes the potential take-off of its unique
PM-OLED display driver technology, which,
though currently little more than an option, could
multiply Dialog's size in the long run.
In light of the company's scalable, low-capitalintensity business model, we are convinced its
gross margin can be expanded from the current
45% towards 47%, lifting the EBIT margin from
15% toward 20% within three years. Thus,
Dialog Semiconductor should be able to triple/
quadruple its 2009 EPS in three to four years
while generating constantly high free cash flows.
Independent of the chip cycle, we expect the
company's shares to continue climbing to at
least EUR20, and if PM-OLED succeeds they
may rise to more than EUR25.
January 2011
GERMANY
FY to 31/12 (Us Dollar m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
76
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
115.8
24.7%
(21.6)
(80.4)
13.8
NS
(11.5)
2.3
120.2%
0.0
0.0
0.0
2.3
1.1
0.0
(8.9)
(0.1)
(0.7)
0.0
0.0
(6.2)
0.0
0.0
(6.2)
0.0
0.0
(6.2)
69.6%
170.8
47.5%
(28.5)
(128.6)
13.7
-0.7%
(10.1)
3.6
56.5%
0.0
0.0
0.0
3.6
1.0
0.0
(16.5)
(20.2)
1.4
0.0
0.0
(30.8)
0.0
0.0
(30.8)
0.0
0.0
(30.8)
NS
93.9
-45.0%
0.0
(124.9)
(30.9)
NS
(10.0)
(41.0)
NS
0.0
0.0
0.0
(41.0)
1.2
0.0
(2.3)
0.2
(2.1)
0.0
0.0
(44.0)
0.0
0.0
(44.0)
0.0
0.0
(44.0)
-42.9%
86.8
-7.6%
0.0
(97.7)
(10.9)
64.8%
(6.4)
(17.3)
57.9%
0.0
0.0
0.0
(17.3)
1.0
0.0
(2.7)
(0.1)
0.1
0.0
0.0
(19.0)
0.0
0.0
(19.0)
0.0
0.0
(19.0)
56.9%
161.8
86.5%
0.0
(148.1)
13.7
NS
(7.7)
6.0
134.5%
0.0
0.0
0.0
6.0
(0.1)
0.0
0.0
0.7
0.1
0.0
0.0
6.8
0.0
0.0
6.8
0.0
0.0
6.8
135.6%
217.6
34.5%
0.0
(181.9)
35.7
161.1%
(7.1)
28.7
NS
0.0
0.0
0.0
28.7
(0.0)
0.0
0.0
3.9
0.2
0.0
0.0
32.7
0.0
0.0
32.7
0.0
(7.5)
25.2
NS
296.0
36.0%
0.0
(241.3)
54.7
53.0%
(7.4)
47.3
65.0%
0.0
0.0
0.0
47.3
1.2
0.0
0.0
(3.7)
(1.5)
0.0
0.0
43.3
0.0
0.0
43.3
0.0
0.0
43.3
71.7%
390.0
31.8%
0.0
(312.9)
77.1
41.0%
(8.4)
68.7
45.2%
0.0
0.0
0.0
68.7
2.0
0.0
0.0
(6.4)
0.0
0.0
0.0
64.3
0.0
0.0
64.3
0.0
0.0
64.3
48.5%
480.0
23.1%
0.0
(376.4)
103.6
34.4%
(9.6)
94.0
36.8%
0.0
0.0
0.0
94.0
3.0
0.0
0.0
(10.0)
0.0
0.0
0.0
87.0
0.0
0.0
87.0
0.0
0.0
87.0
35.3%
14.1
NS
(16.3)
(5.9)
(1.0)
(8.1)
0.0
0.0
0.0
0.0
0.3
(16.4)
(24.2)
0.0
(34.0)
0.0
(3.9)
(1.0)
(3.9)
0.0
0.0
0.0
0.0
0.0
0.0
(3.9)
37.5
(3.9)
(1.0)
(0.4)
(1.6)
0.0
0.0
0.0
0.1
12.5
10.6
(12.6)
62.9%
(1.3)
(5.9)
(1.0)
(19.8)
(2.4)
0.0
0.0
0.0
0.0
2.2
(20.0)
14.5
NS
(5.5)
(7.7)
(1.0)
1.3
3.5
0.0
0.0
0.0
(0.1)
0.7
5.4
40.1
176.2%
(1.7)
(8.7)
(1.0)
29.6
(8.0)
0.0
0.0
0.0
31.4
33.8
86.7
50.5
26.0%
(14.8)
(13.3)
(1.0)
22.3
(0.6)
0.0
0.0
0.0
0.0
1.2
22.9
72.7
44.1%
(12.0)
(14.4)
(1.0)
46.3
(0.8)
0.0
0.0
0.0
0.0
1.3
46.8
96.6
32.9%
(8.5)
(20.2)
(1.0)
68.0
(1.0)
0.0
0.0
0.0
0.0
1.5
68.5
108.2
0.0
0.0
2.2
(31.5)
NS
78.9
0.0
3.1
21.2
0.2
0.0
54.3
46.9
78.8
113.4
0.0
0.0
0.3
(42.0)
NS
71.7
0.0
9.5
20.7
0.3
0.0
41.2
24.1
71.7
70.7
0.0
0.0
1.4
(51.4)
NS
20.7
0.0
1.6
12.4
1.9
0.0
4.9
5.2
20.7
53.7
0.0
0.0
1.0
(31.8)
NS
22.8
0.0
2.4
10.5
4.2
0.0
5.7
6.6
22.8
60.2
0.0
0.0
1.3
(36.9)
NS
24.6
0.0
4.6
7.7
0.7
0.0
11.5
7.1
24.6
157.0
0.0
0.0
2.0
(121.8)
NS
37.3
0.0
5.0
9.8
8.7
0.0
13.8
6.3
37.3
200.3
0.0
0.0
3.0
(143.5)
NS
59.8
0.0
6.5
14.3
9.3
0.0
29.7
10.0
59.8
264.6
0.0
0.0
4.3
(189.0)
NS
79.9
0.0
12.1
14.7
10.1
0.0
43.1
11.0
79.9
351.6
0.0
0.0
5.8
(256.0)
NS
101.4
0.0
21.3
16.0
11.0
0.0
53.0
11.0
101.4
www.cheuvreux.com
January 2011
GERMANY
FY to 31/12 (Us Dollar)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
(0.14)
69.7%
(0.14)
69.7%
(0.68)
NS
(0.68)
NS
(1.00)
-46.2%
(1.00)
-46.2%
(0.43)
57.3%
(0.43)
57.3%
0.15
135.0%
0.15
135.0%
0.46
NS
0.60
NS
0.66
42.5%
0.66
9.8%
0.98
48.5%
0.98
48.5%
1.33
35.3%
1.33
35.3%
0.00
0.00
0.32
NS
2.5
0.00
0.00
0.00
0.00
0.00
(0.77)
2.5
1.6
0.00
0.00
(0.28)
63.2%
1.2
0.00
0.00
0.32
NS
1.3
0.00
0.00
0.74
130.4%
2.9
0.00
0.00
0.77
4.6%
3.1
0.00
0.00
1.11
44.1%
4.0
0.00
0.00
1.47
32.9%
5.4
44.030
44.030
0.000
45.180
45.180
0.000
44.170
44.170
0.000
44.550
44.550
0.000
45.410
45.410
0.000
54.460
54.460
0.000
65.610
65.610
0.000
65.610
65.610
0.000
65.610
65.610
0.000
2.13
5.88
1.94
3.88
3.35
3.75
1.79
2.78
1.28
3.58
1.23
2.14
2.46
3.05
1.41
2.26
1.02
2.63
0.60
1.58
10.60
11.73
0.79
4.32
22.56
22.70
10.02
15.00
23.05
24.48
22.57
23.58
23.05
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
75.3
43.6
124.4
82.1
45.3
(7.9)
80.8
44.8
46.5
8.9
625.5
495.0
1,480.0
1,327.2
1,512.2
1,313.2
1,512.2
1,245.2
NS
NS
6.6
NS
0.9
0.6
0.0
NS
NS
NS
NS
1.3
1.2
0.0
NS
NS
NS
NS
0.8
NS
0.0
NS
NS
NS
NS
2.0
2.4
0.0
6.9
6.9
3.2
2.9
0.8
0.4
0.0
22.9
22.9
14.4
4.7
3.7
17.3
0.0
34.3
34.3
29.4
1.5
7.4
18.9
0.0
23.5
23.5
20.8
3.1
5.7
13.0
0.0
17.4
17.4
15.7
4.5
4.3
9.3
0.0
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
3.2
19.0
0.38
3.4
6.0
22.8
0.48
(28.3)
0.3
0.2
NS
0.2
NS
NS
0.52
(3.3)
0.7
1.5
0.06
0.6
13.9
17.3
2.3
12.4
24.3
28.1
4.5
26.9
17.0
19.1
3.4
18.5
12.0
13.2
2.6
13.3
NS
NS
11.9
2.0
NS
1.5
NS
0.0
NS
NS
8.0
2.1
NS
2.4
NS
0.0
NS
1.5
NS
NS
NS
5.0
NS
0.0
11.2
2.5
NS
NS
NS
4.7
NS
0.0
NS
NS
8.5
3.7
4.2
6.8
NS
0.0
NS
NS
16.4
13.2
15.0
7.6
NS
0.0
NS
NS
18.5
16.0
14.6
5.9
NS
0.0
NS
NS
19.8
17.6
16.5
5.6
NS
0.0
NS
NS
21.6
19.6
18.1
5.3
NS
0.0
2.9
3.0
NS
NS
5.0
14.6
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
24.9
25.0
11.9
11.9
100.4
113.9
23.3
17.5
93.7
86.3
24.2
24.2
98.4
89.4
27.7
27.7
104.0
93.3
28.2
28.2

EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
77
www.cheuvreux.com
January 2011
GERMANY
SPECIALIST RETAILERS
2/Outperform
Rating
+14.1% EUR47.20
Douglas
Reuters: DOHG.DE Bloomberg: DOU GR
Fine execution of different retail formats

Q
Recent developments Pleased with Christmas business
In an interview with Euro am Sonntag in December, CEO Dr Henning

Kreke said he was pleased with the ongoing Christmas business,
though he refrained from going into any detail. Additional information
will be provided at the FY10 analyst meeting, scheduled for 13 January
2011, when the company will also give details of its Q1-FY11 sales
performance.
DOH is still in the process of reviewing its country portfolio with a view
to potentially exiting those countries in which it feels it is unlikely to
increase its profitability substantially or where it has no leading market
position. It has already left Denmark and confirmed in November that it
will exit the US. In late autumn DOH also indicated that Russia may be
on its non-continued countries list. According to the Russian press,
Rive Gauche, a perfume and cosmetics chain, has expressed interest in
DOH's 31 stores in Russia. Russia, Denmark and the US together
represented ~2% of DOH's group sales in FY09 and, in terms of
profitability, it is fair to assume they were break-even at best.
The reported FY10 trading statement released in early October revealed
group sales of EUR3.319bn, which was about 1% above our forecast.
The group's FY10 EBT guidance before one-offs - remained
unchanged at the high end of the range of EUR120m-EUR130m. Our
estimate stands at EUR132m.
Since Dr Oetker increased his stake in DOH to 25.8% in early 2009, he
stopped buying shares. However, he recently disclosed that between
15 and 23 November he again bought 15,000 shares at EUR36.61. This
is not a huge amount, but we will closely monitor whether or not he
continues. On the other hand, drugstore owner Mller, who in August
2010 officially disclosed his stake of 6.4%, has not reported any
additional purchases since then. However, he once mentioned that he
could see his stake rising to about 15%.
Q
EUR41.35
Price (07/01/2011)
Outlook Good Christmas business ensures growth
Historically, DOH has generated about 95% of its annual EBT in the
Christmas quarter. As we expect it to report a strong Christmas
business, with a 2.3% l-f-l sales increase and ~14% EBT growth
(compared with Q1-FY10 excluding the non-cash write-up on Buch.de),
we believe the company has earned the necessary cash flow to
accelerate its expansion and open about 50-70 new perfumery stores.
DOH is well placed to benefit from the expected positive macro trends
in Germany, as we estimate that about 70% of its EBIT stems from
Germany. Both increasing wages and a declining unemployment rate
will help DOH increase customer traffic and raise its average prices.
Furthermore, we at least expect its eastern European operations to stop
deteriorating further and we thus believe DOH is on track to deliver
sales and margin growth.
Stock data
Free float
Enterprise value
Daily volume
EUR1624m
EUR586m
EUR1615m
39.279m
EUR 5.11m
Performances
-4.3%
9.8%
22.0%
-5.7%
-3.5%
-5.1%
Absolute perf.
Relative perf.
52.0
52.0
47.0
47.0
42.0
42.0
37.0
37.0
32.0
32.0
27.0
27.0
22.0
22.0
17.0
17.0
12.0
12.0
01/01
04/02
07/03
10/04
01/06
Price/M DAX
04/07
07/08
Sector focus
Sector Top Picks
Least favoured
Ahold, Carrefour
Colruyt
Shareholders
Free Float 36.1%, Dr. Oetker 25.8%, Kreke Family
12.2%, Mller 6.4%, Bank Sarasin 6.2%, Sparinvest
Holding 5.4%
08/09
09/10E
10/11E
11/12E
23.0
19.2
16.0
14.5
EV/EBITDA (x)
6.0
6.0
5.2
4.8
7.5
4.8
5.3
5.3
Net debt/EBITDA (x)
0.7
0.4
0.2
0.1
Yield (%)
3.0
2.8
3.2
3.5
ROCE (%)
11.5
14.9
16.8
17.6
1.5
1.5
1.6
1.5
P/E (x)
Q
Q
78
www.cheuvreux.com
01/11
Price
Jurgen KOLB
Research Analyst
jkolb@cheuvreux.com
(49) 69 47 89 74 26
10/09
January 2011
GERMANY
Company profile
History
Confectioner Hussel, founded in 1949, was the corporate starting
point of DOH. It acquired the German perfumery chain Douglas in
1969 and expanded internationally from 1974. The group still
called Hussel AG acquired Uhren Weiss in 1979, marking its entry
into the jewellery business. In the same year it began its books
business with Montanus. In 1986 Hussel AG added fashion business
with Appelrath Cpper. In 1989 the group changed its name to
Douglas Holding, reflecting the fact that perfumery had become the
largest part of its business.
Q
Q Business lines
DOH is active in five retail segments: perfumery (banner: Douglas),
books (banner: Thalia), jewellery/watches (banner: Christ), fashion
(banner: Appelrath Cpper) and confectionaries (banner: Hussel).
Q Divisional details
DOH generates about 65% of its group sales in Germany. On a
divisional basis, its perfumery chain contributes ~58% to group
sales and ~72% to group EBIT. This division also has the highest
international exposure at 50%. Thalia contributes ~26% to group
sales and ~28% to group EBIT. Thalia is also present in Austria and
Switzerland. Christ contributes 9% to group sales and ~15% to
group EBIT. The fashion and confectionary businesses contributes
3% to group sales and 3% to group EBIT.
Q Strategic focus lifestyle retailer
With its range of divisions DOH strives to be a lifestyle-oriented
retailer, with its main focus being on service.
SWOT analysis
Strengths
Weaknesses
Successful execution in all its

retail formats except fashion
Well-known retail banners

offering high levels of service.
Hardly any synergies between

the individual retail formats.
High exposure to nonperforming international markets
such as Spain, Portugal and the
Baltic states.
Follows a clear a service

strategy which proved resilient
during the crisis.
Opportunities
Threats
Increase penetration in already

active foreign markets to gain
market share and thus boost
purchasing power vs. suppliers.
Competitive landscape in
European perfumery industry
remains difficult.
High fixed-cost base due to

high service approach.
Growth in German-speaking
countries for books division.
Further exploit the Internet as a

distribution channel not only for
its books division.
79
www.cheuvreux.com
Valuation
Our TP of EUR47.20 is based on a DCF

calculation with a WACC of 8% and a terminal
growth rate of 2%. Additionally, we estimate a
stable EBITDA margin of 8.5% from FY13E. For
FY10E we expect DOH to report an 8.4%
EBITDA margin.
Based on our FY11E estimates DOH shares are
trading at 16x P/E, which compares with an
average of 17.7x in the period FY07-FY09. We
believe the company has made two core
strategic decisions: to exit some non-profitable
markets and to increase the share of private
label offering. Both decisions will support its
profitability and thus its valuation multiples
going forward.
Investment case
Our investment case has a short-term and a

more long-term component.
The short-term component has included the
company's focus on 2010 Christmas business,
specifically in Germany where we believe DOH
generates about 70% of its group EBIT. With
positive macroeconomic indicators, such as
unemployment rates and an expectation of rising
net wages, the German retail association HDE
expects German 2010 Christmas sales to show
a 2.5% increase, which would mark the highest
growth rate since 2004. As DOH depends
heavily on Christmas business it should be a
significant beneficiary. However, unusually cold
and snowy weather conditions may have
negatively affected Q1-FY11 sales.
The long-term component sees a steady
improvement in the company's operating
margins towards its peak level of 5.6% in IFRS
terms. The improvement will be driven by its exit
from non-performing countries, an increase in its
exclusive/private label products business, both
at the perfumery and jewellery/watches
divisions, and leverage effects recorded by its
books division after the full integration of
Buch.de.
As we expect the positive trend in the German
retail sector to also continue in 2011E, we
believe DOH is well positioned to deliver positive
surprises.
January 2011
GERMANY
Douglas
FY to 30/9 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
80
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
2,288.4
58.6%
(499.4)
(1,575.7)
213.3
157.9%
(99.2)
114.1
NS
(1.1)
0.0
0.0
113.1
(4.1)
0.0
0.0
(43.6)
(0.8)
0.0
0.0
64.5
0.0
(7.4)
57.1
0.0
(6.1)
52.1
NS
2,417.6
5.6%
(529.3)
(1,660.7)
227.6
6.7%
(92.5)
135.1
18.4%
0.0
0.0
0.0
135.1
(6.9)
0.0
0.0
(62.1)
(8.8)
0.0
0.0
57.3
0.0
(0.4)
56.9
0.0
(6.1)
50.8
-2.4%
2,680.0
10.9%
(580.8)
(1,857.3)
241.9
6.3%
(100.8)
141.1
4.4%
0.0
0.0
0.0
141.1
(3.2)
0.0
0.0
(53.4)
(8.5)
0.0
0.0
76.0
0.0
(0.3)
75.7
0.0
0.0
75.7
49.0%
3,000.6
12.0%
(652.7)
(2,082.1)
265.8
9.9%
(108.7)
157.1
11.3%
(0.1)
0.0
0.0
157.0
(4.6)
0.0
0.0
(54.7)
(9.3)
0.0
0.0
88.4
0.0
(0.3)
88.1
0.0
0.0
88.2
16.5%
3,130.4
4.3%
(683.1)
(2,171.0)
276.3
4.0%
(117.0)
159.3
1.4%
0.0
0.0
0.0
159.3
(3.1)
0.0
0.0
(52.2)
(6.9)
0.0
0.0
97.1
0.0
(0.1)
97.0
0.0
0.0
97.0
10.0%
3,200.8
2.2%
(698.3)
(2,248.0)
254.5
-7.9%
(138.9)
115.6
-27.4%
0.0
0.0
0.0
115.6
(4.4)
0.0
0.0
(41.1)
(7.3)
0.0
0.0
62.8
0.0
(0.1)
62.7
0.0
0.0
62.7
-35.4%
3,319.3
3.7%
(708.8)
(2,330.8)
279.7
9.9%
(129.4)
150.3
30.0%
0.0
0.0
0.0
150.3
(18.2)
0.0
0.0
(47.5)
0.0
0.0
0.0
84.5
0.0
(0.1)
84.4
0.0
0.0
84.4
34.6%
3,478.0
4.8%
(734.9)
(2,434.1)
309.0
10.5%
(136.0)
173.0
15.1%
0.0
0.0
0.0
173.0
(17.4)
0.0
0.0
(54.5)
0.0
0.0
0.0
101.2
0.0
(0.1)
101.1
0.0
0.0
101.1
19.7%
3,648.3
4.9%
(773.2)
(2,547.2)
327.8
6.1%
(142.3)
185.5
7.2%
0.0
0.0
0.0
185.5
(16.4)
0.0
0.0
(57.5)
0.0
0.0
0.0
111.7
0.0
(0.1)
111.6
0.0
0.0
111.6
10.4%
169.1
163.5%
8.0
(120.8)
0.0
56.2
2.6
0.0
0.0
(29.3)
0.0
149.4
178.9
161.5
-4.5%
132.6
(161.2)
0.0
132.9
(86.6)
0.0
0.0
(29.3)
0.0
214.0
231.0
169.9
5.2%
(23.2)
(194.1)
0.0
(47.4)
(15.1)
0.0
0.0
(38.8)
0.0
96.5
(4.8)
196.1
15.4%
(9.3)
(210.6)
0.0
(23.8)
(24.2)
0.0
0.0
(39.2)
0.0
28.5
(58.7)
210.4
7.3%
(15.0)
(189.1)
0.0
6.3
18.9
0.0
0.0
(43.1)
0.0
(96.4)
(114.3)
199.0
-5.4%
(5.8)
(84.3)
0.0
108.9
7.0
0.0
0.0
(43.2)
0.0
(89.2)
(16.5)
214.4
7.7%
(13.3)
(122.8)
0.0
78.2
0.0
0.0
0.0
(43.2)
0.0
1.5
36.5
238.3
11.2%
(16.9)
(134.9)
0.0
86.5
0.0
0.0
0.0
(45.2)
0.0
(12.1)
29.2
255.1
7.1%
(12.8)
(156.9)
0.0
85.5
0.0
0.0
0.0
(52.2)
0.0
(35.0)
(1.6)
550.4
14.2
26.7
153.8
32.4
5.7
777.4
15.2
24.3
390.2
2.5
5.2
340.1
14.9
777.4
532.0
5.8
27.3
162.3
72.7
13.5
800.1
55.3
35.6
407.4
82.8
11.5
207.5
8.6
800.1
587.7
3.3
27.8
169.6
143.7
24.3
932.1
115.2
45.8
431.0
96.7
12.7
230.7
8.6
932.1
639.1
0.1
28.1
197.6
206.1
32.2
1,071.0
170.7
53.8
472.9
116.1
17.5
240.0
8.0
1,071.0
696.8
0.2
28.3
203.0
217.4
31.2
1,145.7
207.0
60.6
508.4
26.2
88.5
255.0
8.1
1,145.7
710.7
0.2
29.6
206.7
165.4
23.3
1,112.6
205.4
60.1
478.6
29.2
78.5
260.8
8.1
1,112.6
752.0
0.2
29.6
218.6
118.9
15.8
1,119.3
205.4
69.4
462.8
29.2
78.5
274.1
8.3
1,119.3
808.0
0.2
29.6
227.6
69.7
8.6
1,135.2
205.4
73.8
457.3
29.2
78.5
291.0
8.4
1,135.2
867.5
0.3
29.6
233.9
31.3
3.6
1,162.5
205.4
82.6
463.0
29.2
78.5
303.8
8.3
1,162.5
www.cheuvreux.com
January 2011
GERMANY
Douglas
FY to 30/9 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
1.42
NS
1.56
NS
1.39
-2.3%
1.55
-0.3%
2.02
45.2%
2.02
29.7%
2.29
13.4%
2.28
13.3%
2.49
8.9%
2.49
9.0%
1.60
-35.7%
1.60
-35.7%
2.15
34.6%
2.15
34.6%
2.58
19.7%
2.58
19.7%
2.85
10.4%
2.85
10.4%
0.03
1.00
4.62
163.5%
13.1
0.00
1.00
4.41
-4.5%
12.7
0.00
1.00
4.52
2.6%
14.0
0.00
1.10
5.08
12.3%
15.2
0.00
1.10
5.40
6.3%
16.7
0.00
1.10
5.08
-5.9%
17.0
0.00
1.15
5.47
7.7%
18.0
0.00
1.33
6.08
11.2%
19.2
0.00
1.43
6.51
7.1%
20.7

Latest price
High
Low
Average price
39.073
36.622
0.000
38.767
36.622
0.000
39.160
37.562
0.000
39.200
38.607
0.000
39.236
38.981
0.000
39.279
39.195
0.000
39.279
39.200
0.000
39.279
39.200
0.000
39.279
39.200
0.000
26.00
26.69
20.60
23.75
32.50
33.17
25.53
29.83
39.17
41.19
32.40
36.91
39.45
50.45
38.90
44.36
31.25
39.94
26.67
32.75
36.83
35.10
25.36
30.10
41.35
43.36
31.59
35.88
41.35
42.13
41.33
41.72
41.35
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,015.9
1,067.4
1,225.2
1,231.1
1,443.5
1,505.9
1,717.4
1,818.3
1,217.1
1,348.1
1,446.7
1,534.0
1,624.2
1,665.0
1,624.2
1,615.8
1,624.2
1,577.4
18.7
18.3
5.6
5.5
2.0
1.4
3.8
23.4
23.4
7.4
10.8
2.6
1.7
3.1
19.4
19.4
8.7
NS
2.8
1.8
2.6
17.3
17.3
7.8
NS
2.6
1.9
2.8
12.6
12.6
5.8
0.5
1.9
1.3
3.5
23.0
23.0
7.3
7.5
2.2
1.5
3.0
19.2
19.2
7.6
4.8
2.3
1.5
2.8
16.0
16.0
6.8
5.3
2.1
1.6
3.2
14.5
14.5
6.4
5.3
2.0
1.5
3.5
5.0
9.4
0.47
6.2
5.4
9.1
0.51
7.5
6.2
10.7
0.56
8.8
6.8
11.6
0.61
9.1
4.9
8.5
0.43
6.3
6.0
13.3
0.5
7.6
6.0
11.1
0.5
7.4
5.2
9.3
0.5
6.5
4.8
8.5
0.4
5.9
NS
0.2
9.3
5.0
2.8
3.0
5.7
64.2
NS
0.5
9.4
5.6
2.4
3.4
13.5
64.4
NS
0.8
9.0
5.3
2.8
3.3
24.3
49.6
NS
1.1
8.9
5.2
2.9
3.2
32.2
48.2
NS
1.0
8.8
5.1
3.1
3.0
31.2
44.2
NS
0.8
8.0
3.6
2.0
3.2
23.3
68.8
15.4
0.6
8.4
4.5
2.5
3.3
15.8
53.4
17.8
0.3
8.9
5.0
2.9
3.4
8.6
51.5
NS
0.1
9.0
5.1
3.1
3.5
3.6
50.4
14.8
8.8
10.9
9.7
19.1
9.2
11.3
10.0
17.2
10.1
13.8
13.8
16.8
10.4
14.8
14.8
15.5
10.0
15.0
15.0
11.5
6.9
9.2
9.2
14.9
9.5
11.9
11.9
16.8
10.9
13.3
13.3
17.6
11.6
13.7
13.7
Goodwill per share

Dividend per share
Cash flow per share
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
81
www.cheuvreux.com
January 2011
GERMANY
3/Underperform
Rating
+10.8% EUR70.00
Draegerwerk
Reuters: DRWG_p.DE Bloomberg: DRW3 GR
Key is 2011 outlook after an impressive year

Q
EUR63.18
Price (07/01/2011)
Recent developments Strong Q3 results, outlook unclear
Drgerwerk raised its 2010 guidance in October and now expects 10%
sales growth in reported terms and an EBIT margin of 8-9% incl. a
mark-to-market charge on the Siemens option (= 8.6-9.6% ex option
vs. 7-8% previously). This implies an EBIT range of EUR168-189m,
which still appears conservative to us given EUR137m in 9M-10 and
seasonal strength in Q4. DRW is experiencing a number of tailwinds:
ongoing strong demand, favourable FX and product mix, as well as
earlier realisation of costs savings under its Turnaround program.
In November DRW released strong Q3-10 results with sales up 15.6%
on a reported basis (a full 3.5% above consensus) and up an est'd
10.2% at cc/organic. Leveraged by the strong sales growth, EBIT was
4% above expectations. Net income after minorities/GS was 4% below
expectations, however, which we attribute primarily to lower-thanexpected financial result due to certain fees incurred for unused credit
lines, which should not reoccur to this extent going forward.
Stock data
Free float
Enterprise value
Daily volume
EUR1121m
EUR0m
EUR1640m
17.8m
EUR 2.13m
Performances
8.9%
-4.4%
95.0%
1.8%
-14.9%
92.6%
Absolute perf.
Relative perf.
307.0
307.0
257.0
257.0
207.0
207.0
157.0
157.0
Order momentum deteriorated, with orders increasing only an

estimated 2.4% at cc in Q3-10 (versus 9.0% in H1-10).
107.0
107.0
57.0
57.0
Medical posted another impressive quarter with 20% sales growth

(est'd 15% at cc) and another strong 10% margin, albeit short of H110's 13.8% level. Orders continued to increase but at a lower run rate,
rising an estimated +5.1% in Q3 cc (vs. 12.3% in H1-10). Safety sales
increased 6.5% reported, and an est'd 1.3% at cc. Order momentum
deteriorated, falling an estimated -4.1% in Q3 (vs. 3.4% in H1-10).
7.0
Outlook Outlook for 2011 will be key
01/01
7.0
03/02
12/05
03/07
07/08
Sector Top Picks
DRW predicts low-single-digit sales growth for 2011 and its EBIT
margin not above the 2010 level, which also implies it could be below
the 2010 level. We currently predict a 9.3% margin for 2010E (guidance
8-9%) and 9.1% for 2011E.
Shareholders

William Demant
Prefs: Free float 100.0%; Ords: Drger Family 71%,

free float 29%
2009
2010E
2011E
2012E
25.5
11.3
12.3
11.1
8.5
5.6
6.1
5.6
23.3
9.3
6.8
8.1
Net debt/EBITDA (x)
2.7
0.9
0.8
0.5
Yield (%)
1.3
1.8
1.9
2.1
ROCE (%)
7.7
17.7
17.2
17.9
1.2
1.4
1.5
1.4
P/E (x)
EV/EBITDA (x)
Q
Q
82
www.cheuvreux.com
01/11
Price

Research Analyst
(49) 69 478 975 26
10/09
Sector focus
Least favoured
We will remain on the sidelines until guidance for 2011 is clarified, likely
in Feb 2011. The stock is however not expensive and its new synergy
program to be announced in March may provide a positive catalyst.
09/04
Price/TECDAX
Without question, Q4 will be another strong quarter; we even expect

DRW to beat its guidance. The key point of the Q4 release, however,
will the outlook for 2011.
EBIT bridge: We assume net positive one-time effects (Siemens option;

deep diving system; disposal gains) of EUR4m in 2011E; Siemens
synergies add EUR5m, while higher R&D offsets both factors. Organic
growth in 2011E should be more than offset by a likely deterioration of
the product mix, translating to a net EBIT decline in 2011E. We leave
our numbers unchanged at this stage but see a slight downside risk to
our forecasts.
06/03
January 2011
GERMANY
Company profile
"Technology for life" the theme of two divisions

Draegerwerk is the holding company for its two business divisions
"Draeger Medical" (100% ownership after they acquired Siemens
25% minority stake) and "Draeger Safety" (100% ownership). While
both follow the theme "Technology for Life", synergies between the
two divisions are minor. Europe remains the group's biggest market
(63% of 2009 sales), followed by the Americas (18%) and AsiaPacific (13%).
Q
Q Draeger Medical leader in anaesthesia and ventilation

Draeger Medical is focused on the acute point of care market
(APOC), offering ventilation, anaesthesia, monitoring and other
products on a global basis. While the company is a small player in
the medical technology market as a whole, it has market-leading
positions in its specific product areas. The market exhibits certain
pricing pressure.
Q Draeger Safety
Draeger Safety offers detection and protection equipment as well as
safety solutions on a global basis. Its product portfolio is very broad
and tends to have low average ticket prices. While market growth is
limited, Draeger Safety has outperformed its market in recent years.
Q Shareholders remain in a minority position
After the capital increase mid-2010, ordinary shares represent 62%
of total capital, of which 29% are free float (listed for the first time);
the Draeger family continues to control the company, holding 71%
of votes. The preference shares are 100% free float.
SWOT analysis
Strengths
Weaknesses
Market-leading positions in
specific niche areas
(anaesthesia, ventilation)
Sound
Draeger remains a small player

compared with competitors such
as GE and Philips
performance of Draeger
Safety
Strong
Some pricing pressure
Shareholders remain in a
minority position. KGaA
corporate structure.
brand
Mixed track record
Opportunities
Threats
Expansion in the high-margin

US market beyond anaesthesia
Potential reduction of pricing

pressure
Pricing pressure remains a key

challenge, customers face
substantial cost pressure
Capex spending may be cut as

a result of high public deficits
Infinity ACS and platform

strategy to improve profitability
Significant investment backlog

in the German market
83
www.cheuvreux.com
Valuation
We reiterate our 3/UP rating and EUR70 target

price for Draegerwerk, which suggest some
upside potential from current levels. At this,
Draegerwerk would be trading at 12.2x 2012E
earnings.
Investment case
We downgraded the stock when Draegerwerk

reached our target price. In the interim the stock
fell back and offers catch-up potential.
We have so far not upgraded Drgerwerk back
to 2/UP as we fear that the clarification of its
margin guidance, which we expect in Feb 2011,
may imply slight downside risk to our and
market forecasts. However, the valuation leaves
limited downside scope for the stock in our view
and its new synergy program may be taken
positively. We expect details on this to be
announced at its analyst meeting in March 2011;
DRW intends to integrate marketing and sales
between its Medical and Safety division.
January 2011
GERMANY
Draegerwerk
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
84
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,520.5
6.9%
(565.9)
(814.1)
140.5
26.5%
(45.6)
94.9
64.5%
0.0
0.0
0.0
94.9
(23.6)
0.0
9.4
(33.3)
0.0
0.0
0.0
47.3
0.0
(22.0)
25.3
0.0
(9.4)
15.9
NS
1,630.8
7.3%
(570.1)
(886.3)
174.4
24.1%
(49.6)
124.8
31.5%
0.0
0.0
0.0
124.8
(27.8)
0.0
0.0
(37.4)
0.0
0.0
0.0
59.5
0.0
(22.7)
36.8
0.0
0.0
36.8
131.3%
1,801.3
10.5%
(594.7)
(1,006.0)
200.6
15.0%
(52.4)
148.2
18.8%
0.0
0.0
0.0
148.2
(34.6)
0.0
0.0
(39.7)
0.0
0.0
0.0
74.0
0.0
(30.3)
43.7
0.0
0.0
43.7
18.8%
1,819.5
1.0%
(622.5)
(1,016.6)
180.4
-10.1%
(56.1)
124.3
-16.1%
0.0
0.0
0.0
124.3
(32.9)
0.0
0.0
(30.6)
0.0
0.0
0.0
60.7
0.0
(14.6)
46.1
0.0
0.0
46.1
5.5%
1,924.5
5.8%
(637.7)
(1,123.6)
163.2
-9.5%
(57.4)
105.8
-14.9%
0.0
0.0
0.0
105.8
(31.1)
0.0
0.0
(28.1)
0.0
0.0
0.0
46.6
0.0
(14.1)
32.5
0.0
0.0
32.5
-29.5%
1,911.1
-0.7%
(663.8)
(1,101.3)
146.0
-10.5%
(65.9)
80.1
-24.3%
0.0
0.0
0.0
80.1
(30.8)
0.0
0.0
(16.8)
0.0
0.0
0.0
32.5
(4.1)
(13.5)
14.9
0.0
0.0
14.9
-54.2%
2,095.4
9.6%
(727.8)
(1,104.1)
263.5
80.5%
(68.5)
195.0
143.4%
0.0
0.0
0.0
195.0
(34.7)
0.0
0.0
(56.1)
1.0
0.0
0.0
104.2
(18.1)
(3.6)
82.5
0.0
0.0
82.5
NS
2,153.8
2.8%
(748.1)
(1,138.0)
267.7
1.6%
(71.3)
196.4
0.7%
0.0
0.0
0.0
196.4
(29.1)
0.0
0.0
(58.5)
2.0
0.0
0.0
108.6
(12.9)
(3.9)
91.8
0.0
0.0
91.8
11.3%
2,232.0
3.6%
(775.3)
(1,171.3)
285.4
6.6%
(74.1)
211.3
7.6%
0.0
0.0
0.0
211.3
(27.1)
0.0
0.0
(64.4)
3.0
0.0
0.0
119.7
(14.3)
(4.3)
101.1
0.0
0.0
101.1
10.1%
95.5
5.6%
(82.5)
(79.0)
(38.3)
(66.0)
0.0
0.0
0.0
(4.7)
0.3
(11.9)
(82.3)
90.1
-5.7%
(59.9)
(37.0)
(3.3)
(6.8)
0.0
0.0
0.0
(5.3)
(1.5)
(19.2)
(32.8)
136.2
51.2%
(46.9)
(59.8)
(30.2)
29.5
0.0
0.0
0.0
(6.0)
(1.6)
(25.6)
(3.7)
125.7
-7.7%
32.0
(125.5)
(75.7)
32.2
0.0
0.0
0.0
(6.6)
(63.3)
(34.1)
(71.8)
139.3
10.8%
(41.9)
(76.2)
(21.2)
21.2
0.0
0.0
0.0
(6.6)
0.1
(17.6)
(2.9)
93.0
-33.2%
100.4
(42.4)
4.5
151.0
0.0
0.0
0.0
(8.5)
0.8
(10.1)
133.2
172.7
85.7%
(17.6)
(65.0)
(2.1)
90.1
0.0
0.0
0.0
(8.8)
99.5
0.0
180.8
180.0
4.2%
(32.3)
(68.3)
(3.6)
79.4
0.0
0.0
0.0
(36.2)
0.0
0.0
43.2
193.8
7.7%
(27.8)
(71.7)
(4.7)
94.3
0.0
0.0
0.0
(31.9)
0.0
0.0
62.4
226.1
243.1
173.1
145.3
218.1
46.5
1,005.7
137.4
39.0
189.2
113.2
0.0
526.8
34.6
1,005.6
257.7
245.1
192.2
151.0
255.8
50.9
1,101.8
135.9
42.9
198.4
101.2
0.0
623.4
38.2
1,101.8
288.5
251.5
194.0
186.0
254.5
47.1
1,174.5
137.8
47.3
213.9
98.6
0.0
676.8
37.6
1,174.4
326.4
179.1
169.9
177.6
322.0
63.7
1,175.0
182.8
40.9
240.6
102.2
0.0
608.6
33.4
1,175.1
338.5
179.1
167.6
192.6
329.8
63.7
1,207.6
182.3
29.3
260.5
105.3
0.0
630.2
32.7
1,207.6
389.3
4.5
170.2
221.8
394.1
100.1
1,179.9
240.3
38.6
245.9
132.9
0.0
522.2
27.3
1,179.9
562.5
8.1
186.6
243.2
231.4
40.6
1,231.8
302.7
48.6
169.9
132.9
0.0
577.6
27.6
1,231.7
618.1
12.0
191.8
250.0
201.1
31.9
1,273.0
298.4
47.9
172.0
132.9
0.0
621.9
28.9
1,273.1
687.3
16.3
198.7
259.1
152.9
21.7
1,314.3
294.9
47.4
173.5
132.9
0.0
665.7
29.8
1,314.4
www.cheuvreux.com
January 2011
GERMANY
Draegerwerk
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1.25
NS
1.99
14.5%
2.90
131.3%
2.90
45.5%
3.44
18.7%
3.44
18.7%
3.63
5.5%
3.63
5.5%
2.56
-29.5%
2.56
-29.5%
1.17
-54.2%
1.17
-54.2%
5.43
NS
5.43
NS
5.16
-5.0%
5.16
-5.0%
5.68
10.1%
5.68
10.1%
0.00
0.45
7.52
5.6%
17.4
0.00
0.50
7.09
-5.7%
19.8
0.00
0.55
10.72
51.2%
22.2
0.00
0.55
9.90
-7.7%
25.2
0.00
0.35
10.97
10.8%
26.3
0.00
0.40
7.32
-33.2%
30.3
0.00
1.13
11.36
55.2%
35.9
0.00
1.18
10.11
-11.0%
33.5
0.00
1.30
10.89
7.7%
37.3

Latest price
High
Low
Average price
12.700
12.700
0.000
12.700
12.700
0.000
12.700
12.700
0.000
12.700
12.700
0.000
12.700
12.700
0.000
12.700
12.700
0.000
15.200
15.200
0.000
17.800
17.800
0.000
17.800
17.800
0.000
42.37
63.00
38.03
48.53
44.00
49.10
41.15
45.91
56.50
58.00
44.25
49.60
49.80
74.68
46.19
62.60
26.20
52.29
21.85
36.96
29.89
31.95
13.09
21.96
61.40
71.20
29.91
53.30
63.18
64.18
61.65
63.26
63.18
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
538.1
1,395.1
558.8
1,350.7
717.6
1,664.7
632.5
1,325.2
332.7
974.8
379.6
1,240.2
935.1
1,470.0
1,121.4
1,640.2
1,121.4
1,598.9
33.8
33.8
5.6
NS
2.4
1.6
1.1
15.2
15.2
6.2
NS
2.2
1.4
1.1
16.4
16.4
5.3
2.4
2.5
1.5
1.0
13.7
13.7
5.0
3.9
2.0
1.2
1.1
10.2
10.2
2.4
4.4
1.0
0.9
1.3
25.5
25.5
4.1
23.3
1.0
1.2
1.3
11.3
11.3
5.4
9.3
1.7
1.4
1.8
12.3
12.3
6.2
6.8
1.9
1.5
1.9
11.1
11.1
5.8
8.1
1.7
1.4
2.1
9.9
14.7
0.92
8.6
7.7
10.8
0.83
9.4
8.3
11.2
0.92
7.3
7.3
10.7
0.73
7.6
6.0
9.2
0.51
5.2
8.5
15.5
0.6
8.6
5.6
7.5
0.7
7.4
6.1
8.4
0.8
8.0
5.6
7.6
0.7
7.4
6.0
2.3
9.2
6.2
3.1
1.7
46.5
22.6
6.3
2.8
10.7
7.7
3.6
1.6
50.9
17.3
5.8
1.9
11.1
8.2
4.1
1.7
47.1
16.0
5.5
2.6
9.9
6.8
3.3
1.7
63.7
15.2
5.2
2.4
8.5
5.5
2.4
1.7
63.7
13.7
4.7
4.2
7.6
4.2
1.5
1.8
100.1
34.1
7.6
1.3
12.6
9.3
4.1
1.9
40.6
20.8
9.2
1.1
12.4
9.1
4.4
1.9
31.9
22.9
10.5
0.8
12.8
9.5
4.7
1.9
21.7
22.9
10.6
5.7
11.9
7.3
12.5
7.7
15.4
15.4
13.8
9.0
16.4
16.4
11.6
7.7
15.2
15.2
9.6
6.0
10.1
10.1
7.7
5.0
3.9
3.9
17.7
11.5
15.8
15.8
17.2
11.2
16.0
16.0
17.9
11.6
15.9
15.9

EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
85
www.cheuvreux.com
January 2011
GERMANY
AUTO COMPONENTS
ElringKlinger
-5.5% EUR24.00
EUR25.39
Reuters: ZILGn.DE Bloomberg: ZIL2 GR
Recent developments Strong business in every respect
ElringKlinger delivered a strong Q3-10 in every respect. Its 31.3% gross

margin almost twice as high as most peers was as good as in Q2,
while its 16.8% EBIT margin was on a par with its pre-crisis level (Q208). The group order book suggests a solid Q4. As most European
automakers won't do their usual production break in December, we
anticipate a strong seasonal pattern for Q4, i.e. sales and EBIT only
moderately below Q3, which would still be enough to hit the upper end
of the 2010 guidance range.
Q
3/Underperform
Price (07/01/2011)
New products will drive growth in '11 and

beyond
Q
Rating
Stock data
Free float
Enterprise value
Daily volume
EUR1610m
EUR713m
EUR1595m
63.36m
EUR 3.06m
Performances
-4.4%
14.0%
47.4%
-5.9%
0.1%
14.7%
Absolute perf.
Relative perf.
Outlook New products becoming an important driver
2011E should be the year when new product developments outside

Elring's traditional footprint contribute significantly to group top-line
growth. Elring's new diesel particulate filter arrived at two big German
carmakers' laboratories for final testing and the company is waiting for
a firm order. Elring needs ~ 6 months to fully ramp-up series
production. We expect EUR25m sales for H2-11.
Moldflon, battery components for electric cars, and parts for fuel cell
should add another EUR40m. Those components open new areas of
activities for ElringKlinger without massive investments going forward.
New machines and equipment for battery parts and Moldflon have
already been expensed.
Apart from the above new technologies, the recovery of global truck
production is certainly an important growth driver within ElringKlinger's
established business around the engine (gaskets, cam covers, oil pans),
while the further emerging-market-induced expansion of global light
vehicle production should help growth in engine-parts for passenger
cars. This business also benefits from the rising penetration of
turbochargers for gasoline engines; this product is required to maintain
the power of downsized engines. Gaskets used in the exhaust gas
aftertreatment section of the car but also heat shields around the
turbocharger command substantially higher prices than traditional
gaskets.
27.1
27.1
22.1
22.1
17.1
17.1
12.1
12.1
7.1
7.1
2.1
06/02
2.1
07/03
07/04
09/06
Price/M DAX
10/07
11/08
Sector Top Picks

Least favoured
Daimler, Volkswagen
FIAT
Shareholders
Lechler Families 55.7%, Free Float 44.3%
2009
2010E
2011E
2012E
28.1
22.2
16.2
12.6
EV/EBITDA (x)
8.6
9.0
7.3
5.9
5.1
3.2
6.4
7.4
(0.3)
P/E (x)
Net debt/EBITDA (x)
1.4
0.2
(0.1)
Yield (%)
1.2
1.9
2.8
3.5
ROCE (%)
11.4
19.8
24.5
29.3
2.1
2.6
2.5
2.3
Q
Q
86
www.cheuvreux.com
01/11
Price
Alexander NEUBERGER
Research Analyst
aneuberger@cheuvreux.com
(49) 69 47 89 73 84
12/09
Sector focus
All in all, Elring's growth profile remains superior to almost all

competitors. Sustainable fixed-cost cuts in the crisis of EUR9m (~4% of
cost of goods sold) help to grow profitably.
ElringKlinger's shares rose from EUR5 at the trough in early 09 to
EUR24 in one nearly unbroken upward sweep. The much quicker
rebound of global auto markets and a strengthened business model for
ElringKlinger justified this performance. Going forward, we still expect
solid growth for the ElringKlinger group with the top line expanding 9%
y/y in 11E and even 14% in 12E. However, even these outstanding
perspectives are in our view fully reflected in the current share price.
08/05
January 2011
GERMANY
Company profile
World leader in gaskets and heat shields

EK designs and manufactures special-purpose and cylinder-head
gaskets (its core product group), sealing systems and modules for
noise insulation and heat-shielding applications in diesel and petrol
engines. Its most recent portfolio additions are diesel particulate
filters and injection moulded parts for several industries.
Q
Highly innovative
EK continually develops new applications for existing products using
new materials that in most cases reduce production costs per unit. It
also enters new areas that are good fits for its core competence. A
very efficient group structure and a limited number of production
sites keep EK's cost structure lean.
Q
Q Huge market shares in oligopolistic markets

ElringKlinger commands market-leading positions in most of its
product areas, especially in gaskets for passenger car engines.
Production at very high quality standards, in huge quantities, and at
low prices per unit is a core competence of the group that will also
help the company return to and sustain its pre-crisis EBIT margin
level of >17% in 11E or 12E. This makes ElringKlinger a rarity in the
automotive industry.
SWOT analysis
Strengths
Weaknesses
Strong, profitable market

position appears sustainable
thanks to high entry barriers in
gasket business
Still little activity in eastern

European truck engine markets
Opportunities
Threats
Basically all EK products

lower CO2 emissions
High capital intensity and aboveaverage R&D expenses require

high levels of profitability to
maintain solid returns on
invested capital
Moldflon, diesel particulate

filters, and fuel cells could
double the company in size
within a decade
87
www.cheuvreux.com
Valuation
After a very strong Q3-10, we reduced our rating

to 3/UP without making any changes to our
estimates or target price. Based on our 11E EPS
estimate of EUR2.76 ElringKlinger shares trade
at a P/E of 15x vs. a sector P/E of 9.5x. Its
EV/EBITDA11E is 6.8x vs. 4.6x for the sector.
These multiples translate to a 50% premium to
the peer group, which we consider justified
given Elring's outstanding profitability and its
superior growth and market position.
Investment case
ElringKlinger is a rarity among European

suppliers: It commands high market shares in
almost all areas it is active in. The hurdle rate for
new businesses (EBIT Margin 18%) guarantees
that Elring's planned growth of 5-7% p.a. does
not dilute its huge profitability and hence
remains the most profitable listed supplier in
Europe. Huge hurdle rates in the cylinder head
gasket business and a highly concentrated
market limits the risk of new entrants into
Elring's home turf.
Almost all products that Elring develops and
produces serve to lower vehicle weight and
hence CO2 emissions. Its high capital intensity
and low labour intensity allows the group to
keep a high share of its production in Germany,
which allows tight quality control for all
products.
This unique mix is well known among investors
and in our view fully reflected in the share's
valuation.
January 2011
GERMANY
ElringKlinger
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
88
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
453.5
8.8%
(135.0)
(208.7)
109.8
16.7%
(39.1)
70.7
31.4%
0.0
0.0
0.0
70.7
(3.8)
0.0
0.0
(24.6)
0.3
0.0
0.0
42.7
0.0
(4.4)
38.3
0.0
2.9
41.2
53.7%
474.6
4.7%
(139.8)
(219.2)
115.6
5.3%
(40.6)
75.0
6.1%
0.0
0.0
0.0
75.0
(6.3)
0.0
0.0
(24.3)
2.2
0.0
0.0
46.6
0.0
(4.2)
42.4
0.0
0.0
42.4
2.9%
528.4
11.3%
(140.7)
(245.9)
141.8
22.7%
(45.7)
96.1
28.1%
0.0
0.0
0.0
96.1
(5.7)
0.0
0.0
(25.7)
(2.6)
0.0
0.0
62.0
0.0
(4.1)
57.9
0.0
0.0
57.9
36.6%
607.8
15.0%
(150.5)
(286.3)
171.0
20.6%
(48.0)
123.0
28.0%
0.0
0.0
0.0
123.0
(6.1)
0.0
0.0
(34.6)
(1.9)
0.0
0.0
80.3
0.0
(4.4)
75.9
0.0
0.0
75.9
31.1%
657.8
8.2%
(104.9)
(415.4)
137.5
-19.6%
(61.7)
75.8
-38.4%
0.0
0.0
0.0
75.8
(11.5)
0.0
0.0
(16.8)
(4.2)
0.0
0.0
43.2
0.0
(3.3)
39.9
0.0
0.0
39.9
-47.4%
579.3
-11.9%
(93.8)
(351.0)
134.5
-2.2%
(71.2)
63.3
-16.5%
0.0
0.0
0.0
63.3
(13.9)
0.0
0.0
(14.6)
0.0
0.0
0.0
34.8
0.0
(1.6)
33.2
0.0
0.0
33.2
-16.8%
760.0
31.2%
(94.3)
(473.0)
192.7
43.3%
(76.7)
116.0
83.3%
0.0
0.0
0.0
116.0
(14.9)
0.0
0.0
(25.4)
(3.4)
0.0
0.0
72.3
0.0
(2.5)
69.8
0.0
0.0
69.8
110.2%
830.0
9.2%
(95.5)
(516.7)
217.8
13.0%
(72.6)
145.2
25.2%
0.0
0.0
0.0
145.2
(3.7)
0.0
0.0
(39.6)
0.1
0.0
0.0
102.0
0.0
(2.5)
99.5
0.0
0.0
99.5
42.6%
943.0
13.6%
(97.8)
(587.2)
258.0
18.5%
(77.3)
180.7
24.4%
0.0
0.0
0.0
180.7
(0.1)
0.0
0.0
(50.5)
(0.2)
0.0
0.0
129.9
0.0
(2.5)
127.4
0.0
0.0
127.4
28.0%
84.1
20.5%
(10.8)
(40.8)
0.0
32.5
0.0
0.0
0.0
(7.2)
22.4
(46.6)
1.1
87.2
3.7%
(0.6)
(84.6)
0.0
2.0
(31.0)
0.0
0.0
(8.4)
0.0
10.5
(26.9)
107.6
23.4%
(12.8)
(41.2)
0.0
53.6
(4.7)
0.0
0.0
(19.2)
0.0
(26.4)
3.3
128.3
19.2%
(28.6)
(96.6)
0.0
3.1
0.0
0.0
0.0
(24.0)
0.0
18.1
(2.8)
104.9
-18.2%
(9.8)
(213.4)
0.0
(118.3)
4.5
0.0
0.0
(26.9)
(115.2)
282.0
26.1
106.1
1.1%
40.2
(98.4)
0.0
47.9
1.5
0.0
0.0
(25.9)
0.0
(29.3)
(5.8)
152.4
43.6%
(35.5)
(63.1)
0.0
53.8
(3.8)
0.0
0.0
(11.5)
123.8
(27.8)
134.5
174.7
14.6%
(6.6)
(64.7)
0.0
103.4
(4.2)
0.0
0.0
(31.4)
0.0
(42.2)
25.6
207.3
18.7%
(10.3)
(78.3)
0.0
118.7
(4.7)
0.0
0.0
(44.3)
0.0
10.2
79.9
125.4
12.5
38.8
36.0
78.4
56.9
291.1
19.4
6.3
170.7
1.7
4.3
88.8
19.6
291.2
180.1
16.0
52.4
15.5
83.2
42.4
347.2
22.5
8.4
210.5
1.5
35.5
68.9
14.5
347.3
215.2
16.0
53.5
17.8
61.2
26.5
363.7
22.0
6.2
211.9
1.4
40.1
81.9
15.5
363.5
265.6
15.5
54.4
14.6
90.7
32.3
440.8
27.1
9.9
256.3
1.5
38.7
107.3
17.7
440.8
273.3
14.9
58.5
28.4
238.4
82.7
613.5
73.0
13.5
360.4
1.6
34.1
130.9
19.9
613.5
304.3
13.2
59.4
16.7
194.9
61.4
588.5
74.6
14.5
386.2
1.6
32.5
79.0
13.6
588.4
480.4
21.7
56.6
26.6
35.4
7.1
620.7
74.6
15.9
371.3
1.6
32.9
124.4
16.4
620.7
547.4
25.3
47.7
33.2
(23.6)
NS
630.0
74.6
17.1
362.2
1.8
36.6
137.6
16.6
629.9
628.7
29.7
44.0
47.2
(89.7)
NS
659.9
74.6
18.5
361.8
2.0
41.0
161.9
17.2
659.8
www.cheuvreux.com
January 2011
GERMANY
ElringKlinger
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
0.72
53.8%
0.67
61.8%
0.74
2.9%
0.74
10.7%
1.01
36.5%
1.01
36.5%
1.32
31.1%
1.32
31.1%
0.69
-47.4%
0.69
-47.4%
0.58
-16.9%
0.58
-16.9%
1.19
106.9%
1.19
106.9%
1.57
31.7%
1.57
31.7%
2.01
28.1%
2.01
28.1%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.29
1.46
20.5%
1.9
0.00
0.33
1.51
3.7%
2.8
0.00
0.42
1.87
23.4%
3.3
0.00
0.47
2.23
19.2%
4.1
0.00
0.42
1.82
-18.2%
4.3
0.00
0.20
1.84
1.2%
5.1
0.00
0.50
2.60
41.3%
7.1
0.00
0.70
2.76
6.0%
7.9
0.00
0.90
3.27
18.7%
9.0

Latest price
High
Low
Average price
57.600
57.600
0.000
57.600
57.600
0.000
57.600
57.600
0.000
57.600
57.600
0.000
57.600
57.600
0.000
57.600
57.600
0.000
63.360
58.560
0.000
63.360
63.360
0.000
63.360
63.360
0.000
10.00
10.53
6.33
8.10
10.19
12.37
8.42
10.66
16.17
16.53
10.25
13.33
28.33
29.48
15.95
21.95
6.95
29.67
5.40
17.41
16.20
16.51
5.90
11.73
26.50
27.70
15.79
20.56
25.39
26.90
25.25
25.99
25.39
-
576.0
687.3
586.8
685.5
931.6
1,004.7
1,632.0
1,737.0
400.3
661.6
933.1
1,153.3
1,680.1
1,737.6
1,609.7
1,595.3
1,609.7
1,521.0
14.0
14.0
6.8
5.6
5.3
2.4
2.9
13.8
13.8
6.7
0.3
3.6
2.2
3.3
16.1
16.1
8.7
5.8
4.9
3.1
2.6
21.5
21.5
12.7
0.2
6.8
4.3
1.6
10.0
10.0
3.8
NS
1.6
1.1
6.0
28.1
28.1
8.8
5.1
3.2
2.1
1.2
22.2
22.2
10.2
3.2
3.7
2.6
1.9
16.2
16.2
9.2
6.4
3.2
2.5
2.8
12.6
12.6
7.8
7.4
2.8
2.3
3.5
6.3
9.7
1.52
7.9
5.9
9.1
1.44
7.5
7.1
10.5
1.90
9.0
10.2
14.1
2.86
13.1
4.8
8.7
1.01
5.8
8.6
18.2
2.0
10.0
9.0
15.0
2.3
10.6
7.3
11.0
1.9
9.0
5.9
8.4
1.6
7.3
NS
0.9
24.2
15.6
9.4
1.6
56.9
44.1
18.3
1.0
24.4
15.8
9.8
1.5
42.4
45.3
NS
0.6
26.8
18.2
11.7
1.6
26.5
41.5
NS
0.7
28.1
20.2
13.2
1.5
32.3
35.4
12.0
2.3
20.9
11.5
6.6
1.1
82.7
60.6
9.7
1.8
23.2
10.9
6.0
1.0
61.4
34.7
12.9
0.2
25.4
15.3
9.5
1.3
7.1
41.9
NS
NS
26.2
17.5
12.3
1.4
NS
44.6
NS
NS
27.4
19.2
13.8
1.5
NS
44.8
24.8
15.7
36.0
39.3
24.2
15.9
26.7
26.7
29.8
21.1
31.1
31.1
30.7
21.5
33.3
33.3
13.1
9.4
15.7
15.7
11.4
8.1
11.5
11.5
19.8
14.6
15.7
15.7
24.5
17.7
20.0
20.0
29.3
21.1
22.5
22.5
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
89
www.cheuvreux.com
January 2011
GERMANY
3/Underperform
Rating
-15.6% EUR57.00
Fielmann
Reuters: FIEG.DE Bloomberg: FIE GR
It's a gem, but fully valued

Q
Recent developments Consistent performance
Operationally Fielmann has continued to deliver consistent results.

Revenue growth through the first three quarters of 2010 came to 4.9%
and was fairly consistent across the quarters (4.8%, 5.1%, 4.9%). Due
to lower advertising spending and, finally, the containment of personnel
costs, the company's pre-tax earnings in 9M-10 rose 8.9% for a 17.2%
margin. In the same period it opened just 12 new shops (+2%).
Q
EUR67.50
Price (07/01/2011)
Outlook Price mix the key driver
Operationally we have one concern and that is the recent lack of

volume growth. Recent sales growth, at least in the first three quarters
of 2010, has been driven entirely by prices (mix), while volumes have
remained flat. In particular the price mix has improved as the proportion
of higher-priced vari-focal lenses has risen as a percentage of sales
we estimate currently ~19% - and this continues to increase as
Fielmann further penetrates the older segment of the population. Added
to this comes an average annual price increase of ~EUR5 per pair of
glasses (+3%). Bearing in mind that Fielmann is investing in expanding
its floor space by ~2% p.a., should the price mix effect begin to slow
and volume growth fail to reaccelerate, Fielmann's top-line growth
could decelerate further and fall short of the targeted 5-7% p.a. Over
time, due to wage inflation and a probable rise in marketing
expenditure, this trend would eventually begin to erode margins.
Although its balance sheet strength would clearly enable Fielmann to
enter new markets via acquisitions, our clear impression is that for the
foreseeable future it is likely to continue to focus on the organic growth
opportunities within its existing markets.
Given Fielmann's defendable dominant market position, high
profitability (estimated FY10E pre-tax margin: 17.9%) and cash flow
generation, this could admittedly be described as a high-class concern,
were it not for the valuation. The shares are trading at a forward PE of
~21x for a PEG ratio of ~2.2x. Historically they have typically traded at a
forward PE between 18x and 20x for a PEG ratio of 1.35-1.45x. Further
multiple expansion from the current already lofty level is therefore
unlikely, in our opinion. The shares have begun to stagnate and we
expect that to continue in the coming months unless Fielmann begins
to report a rapid increase in unit sales growth. Given the company's
spotless balance sheet (net cash 6% of market cap), dependable
dividend (estimated DPS for 2010E: EUR2.25 for a yield of 3.2%) and
defensive characteristics, the downside risk is, however, also limited.
Stock data
Free float
Enterprise value
Daily volume
EUR2835m
EUR822m
EUR2706m
42m
EUR 2.10m
Performances
-5.2%
-3.3%
28.5%
-6.6%
-15.1%
0.0%
Absolute perf.
Relative perf.
73.0
73.0
63.0
63.0
53.0
53.0
43.0
43.0
33.0
33.0
23.0
23.0
13.0
01/01
13.0
03/02
06/03
09/04
12/05
Price/M DAX
03/07
06/08
Price
Sector focus
Sector Top Picks
Least favoured
Ahold, Carrefour
Colruyt
Shareholders
Gnther Fielmann 36.8%, Free Float 29.0%, Fielmann
Family Foundation 15.1%, Inter Optik Gmbh 11.4%,
Marc Fielmann 7.7%
2009
2010E
2011E
P/E (x)
19.4
24.0
20.6
18.7
EV/EBITDA (x)
10.6
13.5
11.5
10.4
3.5
3.2
3.7
4.4
Net debt/EBITDA (x)
(0.9)
(0.9)
(0.8)
(0.8)
Yield (%)
3.9
3.2
3.7
4.2
ROCE (%)
49.4
49.1
50.2
51.3
6.3
6.3
5.8
5.4
Craig ABBOTT
Q
Q
90
www.cheuvreux.com
2012E
Research Analyst
(49) 69 47 89 75 25
10/09
January 2011
GERMANY
Company profile
Europe's largest optical retail chain, dominant in Germany

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

Fielmann has successfully replicated its business model in
Switzerland, where it is has become the market leader in just ten
years with a 35% market share (units), and in Austria where it
occupies 24% of the market (units).
Valuation
Our target price of EUR57 is based on a DCF

valuation model (WACC 8.1%, terminal growth
2.5%).
The shares are richly valued, trading at a PEG of
2.2x. This is above the historical average of 1.4x
despite the similar forecast revenue growth
profile going forward we estimate a 6.3% sales
CAGR 2010-13E vs. 6.6% over the past 10
years. Earnings growth, however, is likely to be
slightly slower than in the previous 10 years (we
estimate 9%-10% net earnings growth per year
in 2009-12E vs. 14-15% in the past 10 years).
Germany accounts for 80% of sales and 82% of pre-tax earnings.

Switzerland accounts for 10% of sales and 12% of pre-tax
earnings.
Austria accounts for 5% of sales and 5% of pre-tax earnings.
Fielmann also has small retailing operations in the Netherlands,
Poland and in the Baltic countries (via franchisees).
SWOT analysis
Strengths
Weaknesses
Clear
market leader in German

optical retailing with 48% market
share (measured by unit sales).
Lack of experience in
M&A/integration, which could be
key in a consolidating European
optical market and for establishing a leading position in the
German hearing aid retail market.
Enormous cost advantages by

excluding the wholesaler/ scale
effects (purchasing volumes,
economies of scale in
production/logistics).
Opportunities
Threats
Significant store expansion

potential in existing markets.
Store expansion potential in

Germany will gradually approach
saturation expansion abroad in
non-German-speaking markets
entails higher risk.
New market entrances;

balance sheet would facilitate
acquisitions.
Eventual CEO succession risk

(Mr Fielmann is 71).
Hearing aids. The German

retail hearing aid market, worth
an estimated EUR900m-1bn with
a fragmented retail structure,
offers significant growth
potential.
Demographic trends: as the

population ages, the number of
presbyopia cases & hearing
impairments rises.
91
www.cheuvreux.com
Investment case
In spring 2010 we downgraded Fielmann after a

significant re-rating starting in Q3 2009, on
valuation grounds. Further multiple expansion
potential and/or significant upward estimate
revisions are unlikely.
Fielmann's superior qualities remain firmly intact:
dominant market position with high barriers to
entry, pricing power, solid growth potential, high
margins/ROCE, attractive defensive growth
characteristics and a very strong balance sheet
(net cash ~6% of market cap).
Indeed, we expect Fielmann to be able to
maintain its historical sales growth rate of 6-7%
p.a. for the forecast period (2010-13E) due to the
combination of store expansion growth (~3%
p.a.) and organic growth of ~3.5% p.a., driven
by market share gains, a rising ASP resulting
from the rising proportion of multi-focal glasses,
and hearing aid sales. Assuming a further 50bps
gross margin rise and scale effects as the store
base expands, we estimate that FIE can
increase its PBT margin by ~200bps to ~19%,
resulting in a net earnings CAGR 2010-13E of
9.3%. The current share price, however, already
fully reflects the company's growth outlook.
January 2011
GERMANY
Fielmann
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
92
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
667.5
-18.0%
(240.3)
(317.0)
110.2
-30.5%
(30.3)
79.9
-30.9%
(5.2)
0.0
0.0
74.7
1.4
0.0
0.0
(27.8)
0.0
0.0
0.0
48.3
0.0
(2.0)
46.3
0.0
0.0
51.5
-29.2%
733.1
9.8%
(278.9)
(337.9)
116.3
5.5%
(31.1)
85.2
6.6%
0.0
0.0
0.0
85.2
1.8
0.0
0.0
(29.3)
0.0
0.0
0.0
57.8
0.0
(2.7)
55.1
0.0
0.0
55.1
7.0%
792.9
8.2%
(298.2)
(353.4)
141.3
21.5%
(36.6)
104.7
22.9%
0.0
0.0
0.0
104.7
2.2
0.0
2.5
(35.1)
0.0
0.0
0.0
71.7
0.0
(2.7)
69.0
0.0
0.0
69.0
25.2%
839.2
5.8%
(314.7)
(359.7)
164.8
16.6%
(32.0)
132.8
26.8%
0.0
0.0
0.0
132.8
3.6
0.0
0.0
(54.3)
0.0
0.0
0.0
82.1
0.0
(3.0)
79.1
0.0
0.0
79.1
14.6%
903.9
7.7%
(344.4)
(371.2)
188.3
14.3%
(31.1)
157.2
18.4%
0.0
0.0
0.0
157.2
4.7
0.0
0.0
(47.9)
0.0
0.0
0.0
113.9
0.0
(3.3)
110.6
0.0
0.0
110.6
39.8%
952.5
5.4%
(363.6)
(396.1)
192.8
2.4%
(33.2)
159.6
1.5%
0.0
0.0
0.0
159.6
2.9
0.0
0.0
(48.1)
0.0
0.0
0.0
114.4
0.0
(3.3)
111.1
0.0
0.0
111.1
0.5%
1,010.3
6.1%
(387.8)
(409.6)
212.9
10.4%
(37.0)
175.9
10.2%
0.0
0.0
0.0
175.9
4.7
0.0
0.0
(52.9)
0.0
0.0
0.0
127.7
0.0
(3.0)
124.7
0.0
0.0
124.7
12.2%
1,077.1
6.6%
(405.4)
(437.3)
234.4
10.1%
(40.0)
194.4
10.5%
0.0
0.0
0.0
194.4
5.7
0.0
0.0
(59.0)
0.0
0.0
0.0
141.0
0.0
(3.3)
137.7
0.0
0.0
137.7
10.4%
1,147.7
6.6%
(428.5)
(461.4)
257.8
10.0%
(44.0)
213.8
10.0%
0.0
0.0
0.0
213.8
6.1
0.0
0.0
(64.9)
0.0
0.0
0.0
155.0
0.0
(3.5)
151.5
0.0
0.0
151.5
10.0%
85.4
-24.6%
(50.8)
(44.8)
(24.8)
(10.2)
(4.8)
0.0
1.7
(33.6)
0.0
0.0
(46.9)
88.9
4.1%
(26.2)
(57.9)
(35.9)
4.8
(1.9)
0.0
(8.8)
(33.6)
0.0
0.0
(39.5)
108.3
21.8%
14.7
(46.6)
(22.8)
76.4
(12.6)
0.0
23.7
(33.6)
0.0
0.0
53.9
114.0
5.3%
(2.3)
(41.7)
(16.6)
70.0
(5.6)
0.0
1.4
(50.4)
0.0
0.0
15.4
145.0
27.2%
(30.4)
(35.1)
(8.0)
79.5
(11.5)
0.0
0.0
(58.8)
0.0
0.0
9.2
145.4
0.3%
(29.7)
(36.9)
1.2
78.8
(3.2)
0.0
(1.0)
(81.9)
0.0
0.0
(7.3)
164.7
13.3%
(21.7)
(46.0)
(5.6)
97.0
(4.6)
0.0
0.0
(84.0)
0.0
0.0
8.4
181.1
10.0%
(20.5)
(54.0)
(10.9)
106.6
(4.9)
0.0
0.0
(94.8)
0.0
0.0
6.9
199.0
9.9%
(14.4)
(56.0)
(10.1)
128.6
(5.1)
0.0
0.0
(106.1)
0.0
0.0
17.4
335.1
1.0
0.7
43.5
(96.0)
NS
284.3
34.0
3.9
165.9
0.0
0.0
80.5
12.1
284.3
356.5
2.0
2.0
25.3
(55.3)
NS
330.5
40.6
6.1
189.3
0.7
0.0
89.5
12.2
326.2
384.0
0.0
0.0
36.9
(97.2)
NS
323.7
40.9
7.5
195.4
1.6
0.0
78.4
9.9
323.8
412.3
0.0
0.0
28.4
(139.3)
NS
301.4
41.1
10.0
201.1
1.8
0.0
47.4
5.6
301.4
468.3
0.1
0.0
51.8
(186.9)
NS
333.3
44.4
11.3
202.3
1.6
0.0
40.1
4.4
333.3
498.0
(0.3)
0.0
47.4
(178.2)
NS
366.9
45.0
11.5
209.5
1.0
0.0
57.1
6.0
366.9
538.7
(0.1)
0.0
53.9
(186.6)
NS
405.9
45.0
17.5
212.5
41.9
1.0
83.0
8.2
405.9
581.7
0.1
0.0
48.4
(194.8)
NS
435.4
45.0
23.5
220.5
41.9
2.0
98.0
9.1
435.4
627.1
0.3
0.0
51.3
(213.6)
NS
465.1
45.0
29.5
226.5
41.9
3.0
115.4
10.1
465.1
www.cheuvreux.com
January 2011
GERMANY
Fielmann
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
1.23
-29.2%
1.10
-31.6%
1.31
7.0%
1.31
19.1%
1.64
25.2%
1.64
25.2%
1.88
14.6%
1.88
14.6%
2.63
39.8%
2.63
39.8%
2.65
0.5%
2.65
0.5%
2.97
12.2%
2.97
12.2%
3.28
10.4%
3.28
10.4%
3.61
10.0%
3.61
10.0%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.12
0.80
2.03
-24.6%
7.2
0.00
0.95
2.12
4.1%
7.5
0.00
1.20
2.58
21.8%
7.9
0.00
1.40
2.71
5.2%
8.4
0.00
1.95
3.45
27.2%
9.2
0.00
2.00
3.46
0.3%
9.9
0.00
2.26
3.92
13.3%
10.6
0.00
2.53
4.31
10.0%
11.3
0.00
2.81
4.74
9.9%
12.1

Latest price
High
Low
Average price
42.000
42.000
0.000
42.000
42.000
0.000
42.000
42.000
0.000
42.000
42.000
0.000
42.000
42.000
0.000
42.000
42.000
0.000
42.000
42.000
0.000
42.000
42.000
0.000
42.000
42.000
0.000
26.10
26.50
17.95
22.82
28.62
31.87
25.25
28.06
48.82
49.08
29.00
36.98
45.00
53.63
40.75
46.93
46.50
53.50
32.80
45.41
51.36
53.81
40.56
47.66
71.14
74.00
50.87
62.81
67.50
71.68
65.20
68.88
67.50
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,092.0
1,047.0
1,199.1
1,207.6
2,050.4
2,036.5
1,890.0
1,825.4
1,953.0
1,826.5
2,157.1
2,042.3
2,987.9
2,872.8
2,835.0
2,706.9
2,835.0
2,684.1
23.7
21.3
12.8
NS
3.6
3.7
3.1
21.8
21.8
13.5
0.4
3.8
3.7
3.3
29.7
29.7
18.9
3.6
6.1
6.3
2.5
23.9
23.9
16.6
3.6
5.3
6.1
3.1
17.7
17.7
13.5
3.9
5.1
6.1
4.2
19.4
19.4
14.8
3.5
5.2
6.3
3.9
24.0
24.0
18.1
3.2
6.7
6.3
3.2
20.6
20.6
15.7
3.7
6.0
5.8
3.7
18.7
18.7
14.2
4.4
5.6
5.4
4.2
9.5
13.1
1.57
11.8
10.4
14.2
1.65
13.1
14.4
19.5
2.57
18.3
11.1
13.7
2.18
15.7
9.7
11.6
2.02
12.5
10.6
12.8
2.1
13.8
13.5
16.3
2.8
17.3
11.5
13.9
2.5
14.9
10.4
12.6
2.3
13.4
NS
NS
16.5
12.0
7.2
2.3
NS
72.6
NS
NS
15.9
11.6
7.9
2.3
NS
72.4
NS
NS
17.8
13.2
9.0
2.5
NS
73.0
NS
NS
19.6
15.8
9.8
2.8
NS
74.3
NS
NS
20.8
17.4
12.6
3.0
NS
74.1
NS
NS
20.2
16.8
12.0
2.9
NS
75.6
NS
NS
21.1
17.4
12.6
2.8
NS
76.1
NS
NS
21.8
18.0
13.1
2.8
NS
77.2
NS
NS
22.5
18.6
13.5
2.8
NS
77.9
28.1
17.8
14.8
14.8
26.2
17.4
16.8
16.8
32.5
21.8
19.7
19.7
44.3
26.7
21.2
21.2
52.7
37.1
26.8
26.8
49.4
34.8
25.1
25.1
49.1
34.7
26.2
26.2
50.2
35.4
26.9
26.9
51.3
36.2
27.5
27.5
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
93
www.cheuvreux.com
January 2011
GERMANY
1/Selected List
Rating
+16.0% EUR56.00
Fraport
Reuters: FRAG.DE Bloomberg: FRA GR
Still in ascent stage
Stock data
Recent developments Traffic consistently surprising on

upside
The rapid restoration of PAX growth has consistently surprised on the

upside with Fraport having revised its PAX and EBITDA guidance
upwards 3x in 2010 despite the volcanic ash cloud disruption and a
high comparison base in H2 09. In the first three quarters of 2010 FRA
reported sales +8.5% and EBITDA growth of 24.5% due to operational
leverage.
Q
EUR48.28
Price (07/01/2011)
Outlook Traffic, fee hikes, retail sales driving earnings
FRA is guiding for FY10 PAX growth of >4% (at Frankfurt Airport) and
EBITDA of ~EUR700m, an implied increase of ~27%. The initial outlook
for 2011 PAX growth is ~4% with the low base effect from the volcanic
ash disruptions expected to broadly offset the probable negative
impact from the Eco tax. We estimate 4.3% PAX growth, which could
also prove conservative considering the seat capacity increase of 6.4%
for the winter flight season. Fraport is now in the early stages of its next
growth cycle driven by its capacity expansion. We estimate a CAGR in
PAX from 2010-15E of 4.9%, which, combined with the scheduled
aviation fee increases of 26% (cumulative) from July 2010 2015 and
the 50% increase in high-yielding, airside retail space to ~30 000 sqm
by mid-2012, will drive earnings growth. We estimate CAGR in EBITDA
2010-12E of ~14%, more than double the 6.5% on average for the
European peers. Currently at the mid-point of its ~EUR7bn
expansionary capex programme through 2015, FRA is fully on schedule
and running 10-15% below budget. As a result, capex for 2010/11 is
now expected to be ~EUR900m p.a. (~EUR100m p.a. lower than
previously assumed), declining to ~EUR600m p.a. for 2012-15E, then to
~EUR400m p.a. thereafter. Combined with our recently raised forecasts
we now estimate that FRA will succeed in achieving its target of
covering its cost of capital in the Aviation division by 2015 and
becoming FCF generative already from 2012 (FRA officially targets
2013). With financing also fully secured, the associated risks with the
expansion programme are now declining.
From October 2011, when the new runway R-4 goes into operation
which will increase Frankfurt Airport's theoretical capacity by 50% to
126 ATMs (air traffic movements) per hour we expect FRA to outpace
the growth of its major competitors, certainly in terms of ATMs.
However, we also expect PAX per PAX flight to increase as the share of
wide-body, long-haul flights, which currently account for ~25% of
flights at Frankfurt, is likely to increase as well, especially as the global
A380 fleet expands; to date only 38 of the 234 A380s on order are in
operation (4 of which with Lufthansa). Frankfurt, which will soon be
equipped with 15 A380-compatible slots, will be particularly well
positioned amongst European hubs.
Free float
Enterprise value
Daily volume
EUR4436m
EUR1237m
EUR7464m
91.9m
EUR 4.04m
Performances
-0.3%
8.3%
27.7%
-1.9%
-4.9%
-0.6%
Absolute perf.
Relative perf.
65.0
65.0
55.0
55.0
45.0
45.0
35.0
35.0
25.0
25.0
15.0
15.0
06/01
08/02
10/03
01/05
03/06
Price/M DAX
05/07
08/08
Sector focus
Sector Top Picks
Least favoured
Shareholders
State Of Hessen 31.7%, Free Float 27.9%, City Of
Frankfurt 20.2%, Artio 10.3%, Lufthansa 9.9%
2009
2010E
2011E
2012E
22.2
26.2
20.3
18.7
EV/EBITDA (x)
9.3
9.9
9.6
8.3
NS
NS
NS
0.1
Net debt/EBITDA (x)
3.0
3.3
3.6
3.2
Yield (%)
3.2
2.4
2.4
2.7
ROCE (%)
6.4
8.1
8.1
9.2
1.1
1.3
1.3
1.2
P/E (x)
Q
Q
94
www.cheuvreux.com
12/10
Price
Craig ABBOTT
Research Analyst
(49) 69 47 89 75 25
10/09
January 2011
GERMANY
Company profile
Frankfurt Airport, the dominant asset

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

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

Group operations are structured in four divisions (2008):
Q
- Aviation (34% of sales and 21% of EBITDA)

- Retail & Property (18% and 43%)
- Ground Handling (31% and 7%)
- External Activities (17% and 29%).
SWOT analysis
Strengths
Weaknesses
Owns/operates world's 9thlargest airport with high share of

international transit PAX (~53%).
The main European hub for

Star Alliance, largest alliance in
the airline industry, which
accounts for ~70% of PAX at
Frankfurt Airport.
Growth
Will be FCF negative at least

through 2011 due to
expansionary capex
in airport participations
abroad entail higher geopolitical/
FX risks.
PAX
traffic is closely linked to

changes in GDP growth
Large catchment area (~40m

inhabitants and ~60% of German
GDP) in centre of Europe
Opportunities
Threats
Expansion of capacity with

runway 4 (planned for winter
2011/12) increasing capacity
50% to 126 movements per hour
(84 currently).
Significant increases in interest

rates/construction costs could
lead to cost overruns in capacity
expansion capex programme.
Disruptions in air travel

(prolonged recession,
geopolitical shocks, pandemics,
volcanic eruptions)
Expansion of its high-margin

retail & property business (retail
space at Frankfurt to be
increased 50% from 2010-12)
Increasing competition (i.e.

from Dubai, Munich and Zrich
hubs).
Development of its land bank.
Acquisitions of airport
participations.
Impact
of Eco tax in 2011

could greater than anticipated
Risk
of potentially overpaying
for acquisitions.
95
www.cheuvreux.com
Valuation
We continue to apply a combination of our DCF

and SOP valuation models in deriving our new
target price of EUR56.
Our DCF model (terminal WACC 6.7%,
terminal growth of 1.5% and terminal EBIT
margin of 21.5%) renders a fair value of
EUR57.
Q
In deriving our SOP-based fair value of EUR55,

we value the Aviation RAB (12E) at 1x and apply
conservative gross yields of between 7.5-8.5%
for the retail & real estate activities, sector
EV/EBITDA multiples for Lima, Twin Star and
FM/IT Services, and use a DCF for Antalya.
Investment case
Our 1/Selected List rating is based on the

following:
1) PAX growth momentum continues to
surprise on the upside. Fraport has revised
upward its PAX guidance 3x in 2010 and now
forecasts >4% despite the volcanic ash cloud
effect; for 2011 it is indicating ~4% despite the
Eco tax. From Oct 11 Frankfurt will begin to
benefit from the added flight capacity (+50%) as
R-4 goes operational.
2) In early stages of next major growth phase.
We est. ~14% CAGR in EBITDA at Fraport from
10-12E vs. ~7% CAGR for its peers. Besides the
general PAX recovery and the first full-year
consolidation of T-2 at Antalya, this growth will
be driven by retail investments and from Q4-11
the inauguration of R-4 (capacity +50%).
3) Operational leverage. The combination of
stronger-than-expected PAX growth, which also
drives retail sales, combined with the scheduled
24% total increase in aviation fees through 2015
is having a greater operational leverage effect
than previously estimated.
4) Risks associated with major capex
programme are declining. At the mid-point of
its major expansionary capex programme
Fraport is fully on schedule and currently 1015% below budget. Its new capacity is now set
to come on stream just as it is needed to enable
Fraport to avoid capacity constraints and
outpace its major European competitors.
5) Fraport is strategically very well positioned
(large catchment area in heart of Europe, high
quality PAX mix, high-yielding long-haul flights)
and offers investors a play on the global air
travel growth theme with a superior growth
profile amongst the major European hubs.
January 2011
GERMANY
Fraport
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
96
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,998.1
8.9%
(974.5)
(507.4)
516.2
11.8%
(229.2)
287.0
28.1%
(5.9)
0.0
0.0
281.1
(15.2)
0.0
0.0
(127.5)
0.0
0.0
(5.9)
138.4
0.0
(2.0)
136.4
0.0
0.0
148.2
-4.9%
2,089.8
4.6%
(1,032.4)
(514.9)
542.5
5.1%
(235.8)
306.7
6.9%
0.0
0.0
0.0
306.7
(21.2)
0.0
0.0
(123.9)
0.0
0.0
0.0
161.6
0.0
0.0
161.6
0.0
0.0
161.6
9.0%
2,143.9
2.6%
(1,076.9)
(488.6)
578.4
6.6%
(248.0)
330.4
7.7%
0.0
0.0
0.0
330.4
9.8
0.0
0.0
(111.3)
0.0
0.0
13.6
228.9
0.0
0.4
229.3
0.0
0.0
215.7
33.5%
2,329.0
8.6%
(1,143.3)
(605.2)
580.5
0.4%
(245.1)
335.4
1.5%
0.0
0.0
0.0
335.4
(37.8)
0.0
0.0
(83.9)
0.0
0.0
0.0
213.7
0.0
(5.0)
208.7
0.0
0.0
208.7
-3.2%
2,101.6
-9.8%
(925.2)
(575.3)
601.1
3.5%
(240.0)
361.1
7.7%
0.0
0.0
0.0
361.1
(87.4)
0.0
0.0
(93.1)
0.0
0.0
0.0
180.6
0.0
(7.2)
173.4
0.0
0.0
173.4
-16.9%
1,972.6
-6.1%
(866.9)
(552.9)
552.8
-8.0%
(262.5)
290.3
-19.6%
0.0
0.0
0.0
290.3
(89.3)
0.0
0.0
(43.9)
0.0
0.0
0.0
157.1
0.0
(7.3)
149.8
0.0
0.0
149.8
-13.6%
2,126.7
7.8%
(891.7)
(534.3)
700.7
26.8%
(291.3)
409.4
41.0%
0.0
0.0
0.0
409.4
(159.0)
0.0
0.0
(75.1)
0.0
0.0
0.0
175.2
0.0
(10.0)
165.2
0.0
0.0
165.2
10.3%
2,268.4
6.7%
(935.3)
(556.0)
777.1
10.9%
(312.7)
464.4
13.4%
0.0
0.0
0.0
464.4
(137.2)
0.0
0.0
(98.2)
0.0
0.0
0.0
229.1
0.0
(10.5)
218.6
0.0
0.0
218.6
32.3%
2,475.7
9.1%
(982.8)
(584.8)
908.1
16.9%
(358.4)
549.7
18.4%
0.0
0.0
0.0
549.7
(195.2)
0.0
0.0
(106.4)
0.0
0.0
0.0
248.2
0.0
(11.0)
237.2
0.0
0.0
237.2
8.5%
353.0
6.1%
96.7
(189.7)
(122.2)
260.0
12.6
0.0
0.0
(39.7)
0.0
0.0
232.9
423.0
19.8%
70.7
(641.1)
(505.9)
(147.4)
21.3
0.0
0.0
(68.0)
0.0
0.0
(194.1)
503.2
19.0%
(18.3)
(467.3)
(457.9)
17.6
46.5
0.0
0.0
(87.2)
0.0
0.0
(23.1)
458.8
-8.8%
113.1
(701.5)
(1,434.4)
(129.6)
38.3
0.0
0.0
(104.8)
0.0
0.0
(196.1)
420.6
-8.3%
183.5
(979.1)
(787.4)
(375.0)
(59.1)
0.0
0.0
(104.8)
0.0
0.0
(538.9)
419.6
-0.2%
146.0
(1,038.9)
(943.3)
(473.3)
20.6
0.0
0.0
(104.8)
0.0
0.0
(557.5)
466.6
11.2%
70.9
(1,098.6)
(842.3)
(561.1)
0.0
0.0
0.0
(104.8)
0.0
0.0
(665.9)
541.8
16.1%
19.3
(933.1)
(819.7)
(372.0)
0.0
0.0
0.0
(104.8)
0.0
0.0
(476.8)
606.6
12.0%
9.2
(611.2)
(487.4)
4.6
0.0
0.0
0.0
(104.8)
0.0
0.0
(100.2)
2,030.8
12.2
25.5
491.2
(5.7)
NS
2,554.0
116.8
141.1
2,381.5
99.6
0.0
(185.0)
(9.3)
2,554.0
2,142.5
15.4
21.4
503.8
188.4
8.7
2,871.5
108.3
50.2
2,587.4
300.5
0.0
(174.9)
(8.4)
2,871.5
2,324.0
22.1
20.6
502.8
211.4
9.0
3,080.9
97.1
42.3
2,729.5
424.7
0.0
(212.6)
(9.9)
3,081.0
2,460.3
33.0
19.4
498.7
407.6
16.3
3,419.0
22.7
594.2
3,735.0
398.6
0.0
(1,192.0)
(51.2)
3,558.5
2,449.8
60.2
19.0
461.8
1,086.0
43.3
4,076.8
22.7
630.9
3,886.3
386.2
0.0
(849.3)
(40.4)
4,076.8
2,548.6
34.3
20.3
510.5
1,643.5
63.6
4,757.2
40.0
936.3
4,521.1
252.4
0.0
(992.6)
(50.3)
4,757.2
2,609.1
44.3
28.0
484.8
2,309.4
87.0
5,475.6
40.0
936.3
5,178.4
402.4
0.0
(1,081.6)
(50.9)
5,475.5
2,722.9
54.8
28.0
512.7
2,786.3
100.3
6,104.7
40.0
936.3
5,798.9
402.4
0.0
(1,073.0)
(47.3)
6,104.6
2,855.2
65.8
28.0
514.6
2,886.5
98.8
6,350.1
40.0
936.3
6,051.7
402.4
0.0
(1,080.2)
(43.6)
6,350.2
www.cheuvreux.com
January 2011
GERMANY
Fraport
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1.64
-5.0%
1.51
18.2%
1.77
8.1%
1.77
17.4%
2.35
32.5%
2.50
40.8%
2.27
-3.5%
2.27
-9.2%
1.90
-16.4%
1.90
-16.4%
1.64
-13.6%
1.64
-13.6%
1.80
10.1%
1.80
10.1%
2.38
32.0%
2.38
32.0%
2.58
8.5%
2.58
8.5%
0.13
0.75
3.91
6.0%
21.5
0.00
0.96
4.64
18.8%
22.6
(0.15)
1.15
5.48
18.0%
24.0
0.00
1.15
4.99
-9.0%
25.8
0.00
1.15
4.60
-7.8%
25.6
0.00
1.15
4.59
-0.2%
26.7
0.00
1.15
5.09
10.9%
27.2
0.00
1.15
5.90
15.9%
28.5
0.00
1.29
6.60
12.0%
29.8

Latest price
High
Low
Average price
91.100
90.300
0.000
91.100
91.100
0.000
92.500
91.800
0.000
91.400
92.000
0.000
91.500
91.500
0.000
91.500
91.500
0.000
91.900
91.700
0.000
91.900
91.900
0.000
91.900
91.900
0.000
31.39
31.60
21.86
25.64
44.90
45.29
29.17
36.14
54.02
67.09
44.60
56.52
53.87
64.96
43.90
53.70
30.91
54.80
22.56
41.14
36.28
39.21
21.55
31.36
47.16
49.29
33.96
40.45
48.28
48.74
47.01
48.32
48.28
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
2,837.0
2,897.1
4,091.3
4,301.1
4,921.2
5,143.4
4,912.9
5,455.6
2,828.3
4,051.1
3,319.6
5,143.5
4,334.0
6,933.4
4,436.5
7,464.7
4,436.5
7,555.2
20.8
19.1
8.0
9.0
1.5
1.2
2.4
25.3
25.3
9.7
NS
2.0
1.7
2.1
21.6
23.0
9.9
0.4
2.3
1.9
2.1
23.7
23.7
10.8
NS
2.1
1.7
2.1
16.3
16.3
6.7
NS
1.2
1.1
3.7
22.2
22.2
7.9
NS
1.4
1.1
3.2
26.2
26.2
9.3
NS
1.7
1.3
2.4
20.3
20.3
8.2
NS
1.7
1.3
2.4
18.7
18.7
7.3
0.1
1.6
1.2
2.7
5.6
10.1
1.45
7.9
7.9
14.0
2.06
9.9
8.9
15.6
2.40
10.4
9.4
16.3
2.34
11.0
6.7
11.2
1.93
8.1
9.3
17.7
2.6
10.2
9.9
16.9
3.3
11.5
9.6
16.1
3.3
11.4
8.3
13.7
3.1
9.9
NS
NS
25.8
14.4
6.9
0.8
NS
49.7
NS
0.4
26.0
14.7
7.7
0.8
8.7
54.1
NS
0.4
27.0
15.4
10.7
0.8
9.0
46.0
15.4
0.9
24.9
14.4
9.2
0.7
16.3
50.7
6.9
2.6
28.6
17.2
8.6
0.6
43.3
60.7
6.2
3.9
28.0
14.7
8.0
0.4
63.6
70.2
4.4
4.9
32.9
19.3
8.2
0.4
87.0
63.8
5.7
5.1
34.3
20.5
10.1
0.4
100.3
48.3
4.7
4.8
36.7
22.2
10.0
0.4
98.8
50.0
11.7
6.1
7.0
7.0
11.9
6.8
7.8
7.8
12.4
8.4
10.4
10.4
10.6
7.6
8.9
8.9
9.8
7.0
7.3
7.3
6.4
5.0
6.1
6.1
8.1
5.6
6.5
6.5
8.1
5.7
8.4
8.4
9.2
6.5
8.7
8.7

EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
97
www.cheuvreux.com
January 2011
GERMANY
DIVERSIFIED CHEMICALS
2/Outperform
Rating
+8.3% EUR115.00
Fuchs Petrolub
No end of favourable prospects in sight
Q
Recent developments excellent Q3-10 results
Due to its outstanding performance in Q3-10, Fuchs Petrolub was

forced to publish prelims for Q3-10 in an ad-hoc release. Sales rose
26.1% y-o-y to EUR382.8m; EBIT was up 19.5% to EUR66.9m, 17% %
above our former estimate, 14% above consensus and thus even
higher than in Q2-10. The Q3-10 EBIT margin was 17.5%, virtually
unchanged from Q2-10 (17.6%).
Fuchs reported a gross margin of 38.5% in Q3-10, beating its earlier
guidance for H2-10 (38%) and providing relieve to the market as it
showed the company was able to manage the adverse impact of rising
raw material costs. After the strong prelims we raised our gross margin
assumption for Q3-10 to 39% from 38%.
During its prelims Fuchs also raised its 2010 EBIT guidance from
>EUR200m to c.EUR240m. We predict EUR249m after our recent EPS
estimate increase, which is still conservative in our view.
Q
Outlook Earnings and margin expansion to continue
We learnt from Fuchs Petrolub that the second round of price

increases, scheduled for Q4-10, is progressing well. As the price
increases are still a work in progress, we conclude there may be a small
delay with a few customers (of 100,000). But that is no concern for us.
Quite the contrary. We see this statement as an important relief factor.
The higher price levels will be in place also in 2011, while we currently
see no further significant raw material price inflation. Thus, we expect
Fuchs Petrolub to restore its gross margin to close to the level before
Q3-10 (c. 40%).
Fuchs Petrolub expressed its confidence for the future. Barring an
(unexpected) external shock, the company expects modest growth (top
line) in 2011. We understand this to mean volume growth, as the price
increases implemented in summer 2010 as well as in Q4-10 will of
course have a positive spill-over effect on sales in 2011.
The imminent changes in the supervisory board should offer additional
chances for the company. Prof. Dr. Jrgen Strube (head of supervisory
board) and Prof. Dr. Bernd Gottschalk will resign as of 11 May 2011 (at
AGM) to allow for some invigoration of the supervisory board. Dr.
Jrgen Hambrecht, CEO of BASF and Ines Kolmsee, CEO of SKW
Stahl-Metallurgie, will be proposed for the supervisory board. If elected,
Mr. Hambrecht will be proposed as head of supervisory board. This is a
very astute move as Mr. Hambrecht is well connected in global industry
and should help Fuchs Petrolub to generate additional contacts and
(more/additional) orders from (new) customers.
We expect ongoing EBIT and EBIT margin growth at Fuchs Petrolub
thanks to its strong positioning, which enables it to grow and thus gain
market share. This in connection with price hikes will lead to earnings
growth and margin expansion thanks to economies of scale.
EUR106.20
Price (07/01/2011)
Reuters: FPEG_p.DE Bloomberg: FPE3 GR
Stock data
Free float
Enterprise value
Daily volume
EUR2412m
EUR1814m
EUR2274m
23.66m
EUR 4.18m
Performances
1.1%
21.2%
57.0%
-0.4%
6.4%
22.1%
Absolute perf.
Relative perf.
104.6
104.6
84.6
84.6
64.6
64.6
44.6
44.6
24.6
24.6
4.6
01/01
4.6
03/02
06/03
09/04
12/05
Price/M DAX
03/07
06/08
Sector focus
Sector Top Picks
Least favoured
BASF, Fuchs Petrolub, Lanxess
Shareholders
Free float: 100% of pref. shares and 48.3% of
common shares; Fuchs family: 51.7% of common
shares
2009
2010E
2011E
2012E
12.6
15.2
12.4
11.5
7.5
9.1
7.1
6.1
11.2
3.1
7.1
8.5
Net debt/EBITDA (x)
(0.2)
(0.3)
(0.6)
(1.0)
P/E (x)
EV/EBITDA (x)
Yield (%)
2.6
1.9
2.4
2.5
ROCE (%)
35.2
40.0
44.2
46.2
3.0
3.4
3.0
2.7
Q
Q
98
www.cheuvreux.com
01/11
Price
Martin ROEDIGER
Research Analyst
mroediger@cheuvreux.com
(49) 69 47 897 763
10/09
January 2011
GERMANY
Company profile
No. 9 in global lubricants, but no. 1 independent supplier

Founded in 1931, Fuchs Petrolub is the largest of the world's 590
lubricant suppliers not affiliated with an oil concern. Compared to all
lubricant producers (including oil majors), Fuchs ranks no. 9 globally.
Q
Q More than 100,000 clients globally

The company provides more than 100,000 customers in more than
100 countries worldwide with lubricants for hundreds of applications
including automotive, industrial and speciality applications. Fuchs
Petrolub's biggest customer accounts for about 3.5% of group
sales; its second most important customer generates 2% of sales.
Thus, Fuchs Petrolub is not vulnerable to individual clients.
Q Focus on specialties
Fuchs supplies mainly specialities and occupies world-marketleading positions in areas such as metalworking fluids, lubricating
greases, products for forging etc. According to an earlier analysis by
the company, 27.5% of its finished lubricants are metalworking
fluids, corrosion preventives or lubricating greases.
Q Many different customer groups
Fuchs's customer base is broadly diversified. The trade customer
group accounts for 26% of Fuchs's group sales, the producer goods
industry 14%, and vehicle manufacturing industry 11% among many
other customer industries.
SWOT analysis
Strengths
Weaknesses
Strongly positioned in highperformance lubricant niches
Well balanced portfolio with

more than 100,000 clients in over
100 countries
Slow overall volume growth in

lubricants (CAGR96-09:-1%)
Stagnation of lubricants
consumption in major endmarkets such as the Americas
and western Europe
Opportunities
Threats
Trend towards high-tech and

biodegradable lubricants, where
Fuchs has a strong market
position
Strong position in highperformance lubricant niches
Leading independent player in

lubricants and greases
Some time delay in passing on

raw material costs to customers
which could weigh on quarterly
margins
Upturn may not be
sustainable, resulting in another
top-line hit for the company
Margin
expansion via mix

improvement/increased focus on
high-margin specialties
Valuation
The stock is trading at 12.1x P/E 11E, 20%

below the average of the European chemicals
sector (15.4x). In terms of EV/EBITDA 11E it is
trading at 7.1x, 11% below the peer group
average (8.0x).
We see no justification for these discounts in
view of a) Fuchs Petrolub's visible earnings
stream; and b) its high ROCE 11E of 30.9%
versus the European peers' average of 13.2%.
Our DCF analysis, based on a WACC of 8.5%
and a 1% terminal growth rate, renders a fair
value of EUR115, which we adopt as our price
target. We rate the stock 2/Outperform.
Investment case
Fuchs Petrolub is the world's leading

independent player in lubricants and greases. Its
independence allows it to achieve greater
customer and market proximity, gives it greater
responsiveness, speed and flexibility, which
constitute an advantage over major oil
companies. It is a full-line supplier with a global
presence, which makes Fuchs superior to other
independent lubricant providers.
Due to its innovations, customized products and
highly appreciated level of service, customers
realize the added value of Fuchs's products,
which usually account for a fraction of their
production costs. Due to its innovations, Fuchs
should be able to pass on raw material costs to
customers, as it has done in the past.
We think Fuchs Petrolub is set to increase its
profitability even further going forward thanks to
top-line growth, an improving portfolio mix
(increased focus on high-margin specialties),
and cost discipline. We expect its EBIT margin
to reach new record levels, rising from 15.3% in
2009 to 19.1% in 2012E.
Fuchs Petrolub will generate shareholder value
by trying to acquire small competitors at
favourable prices and will continue to pay a
sustainable dividend.
Fuchs is one of just two chemical companies in
the European chemicals sector able to increase
its EBIT (the other was Air Liquide), EBIT margin
and dividend in 2009 vs. 2008. Such resiliency in
the crisis also make Fuchs Petrolub a defensive
stock.
99
www.cheuvreux.com
January 2011
GERMANY
Fuchs Petrolub
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
100
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,096.3
5.3%
(173.5)
(802.2)
120.6
-0.8%
(25.8)
94.8
0.4%
(8.6)
0.0
0.0
86.2
(18.8)
0.0
0.0
(27.3)
0.0
0.0
0.0
39.6
0.6
(1.1)
39.0
0.0
0.0
47.6
-2.9%
1,192.2
8.7%
(174.4)
(859.6)
158.2
31.2%
(29.4)
128.8
35.9%
0.0
0.0
0.0
128.8
(15.7)
0.0
0.0
(38.9)
0.0
0.0
0.0
73.5
0.7
(1.0)
73.2
0.0
0.7
73.9
55.3%
1,323.3
11.0%
(181.5)
(958.5)
183.3
15.9%
(22.1)
161.2
25.2%
0.0
0.0
0.0
161.2
(11.8)
0.0
0.0
(52.2)
0.0
0.0
0.0
96.2
1.0
(0.6)
96.6
0.0
1.0
97.6
32.1%
1,365.3
3.2%
(181.7)
(967.6)
216.0
17.8%
(20.8)
195.2
21.1%
0.0
0.0
0.0
195.2
(8.5)
0.0
0.0
(66.4)
0.0
0.0
0.0
118.8
1.5
(0.7)
119.6
0.0
1.0
120.6
23.6%
1,393.7
2.1%
(191.0)
(1,011.0)
191.7
-11.3%
(20.0)
171.7
-12.0%
0.0
0.0
0.0
171.7
(8.9)
0.0
0.0
(52.5)
0.0
0.0
0.0
108.7
1.6
(0.9)
109.4
0.0
0.8
110.2
-8.6%
1,178.1
-15.5%
(181.6)
(793.9)
202.6
5.7%
(22.7)
179.9
4.8%
0.0
0.0
0.0
179.9
(7.0)
0.0
0.0
(51.5)
0.0
0.0
0.0
119.7
1.7
(0.6)
120.8
0.0
0.7
121.5
10.3%
1,437.3
22.0%
(183.5)
(981.6)
272.2
34.4%
(23.1)
249.1
38.5%
0.0
0.0
0.0
249.1
(3.6)
0.0
0.0
(72.7)
0.8
0.0
0.0
171.5
2.1
(0.8)
172.8
0.0
0.4
173.2
42.6%
1,588.2
10.5%
(190.6)
(1,076.3)
321.3
18.0%
(27.1)
294.2
18.1%
0.0
0.0
0.0
294.2
(2.2)
0.0
0.0
(87.5)
(0.3)
0.0
0.0
201.7
2.5
(1.6)
202.6
0.0
0.5
203.1
17.3%
1,659.7
4.5%
(197.2)
(1,114.4)
348.1
8.3%
(30.6)
317.5
7.9%
0.0
0.0
0.0
317.5
0.2
0.0
0.0
(94.7)
(2.2)
0.0
0.0
218.2
2.7
(2.0)
218.9
0.0
0.5
219.4
8.0%
22.3
-69.2%
108.2
(24.3)
(8.1)
106.2
6.9
0.0
0.0
(10.7)
(3.7)
0.0
98.7
94.0
NS
(79.4)
(43.6)
(14.5)
(29.0)
(2.2)
0.0
0.0
(11.4)
(3.7)
0.0
(46.3)
120.0
27.7%
(11.3)
(5.2)
(1.7)
103.5
(5.8)
0.0
0.0
(14.4)
(3.7)
0.0
79.6
141.4
17.8%
17.3
(20.6)
(6.9)
138.1
0.1
0.0
0.0
(20.8)
(3.7)
(190.4)
113.7
128.3
-9.3%
(60.8)
(48.6)
(16.2)
18.9
0.6
0.0
0.0
(31.6)
38.9
(91.2)
(64.4)
144.2
12.4%
57.1
(36.3)
(12.1)
165.0
1.4
0.0
0.0
(37.5)
(14.8)
(32.9)
81.2
198.3
37.5%
(75.4)
(45.3)
(15.1)
77.6
0.0
0.0
0.0
(39.5)
0.0
16.1
54.2
232.2
17.1%
(21.6)
(39.7)
(13.2)
170.9
0.0
0.0
0.0
(49.1)
0.0
12.2
134.0
251.9
8.5%
(8.1)
(39.8)
(13.3)
204.0
0.0
0.0
0.0
(58.3)
0.0
(32.7)
113.0
155.9
3.9
55.5
49.5
108.1
67.6
372.9
78.7
3.5
154.9
1.0
4.2
130.6
11.9
372.9
231.4
1.2
54.9
47.7
131.3
56.4
466.5
83.7
6.3
161.3
5.9
1.5
207.8
17.4
466.5
302.1
1.1
57.0
67.9
58.3
19.2
486.4
78.0
5.7
150.9
6.0
7.2
238.6
18.0
486.4
335.3
1.2
56.5
86.9
7.7
2.3
487.6
77.4
7.9
149.2
5.9
7.2
240.0
17.6
487.6
313.9
1.4
70.6
65.2
104.6
33.2
555.7
81.5
12.0
168.6
12.5
0.0
281.1
20.2
555.7
391.5
1.4
83.8
76.2
(31.7)
NS
521.2
83.0
12.0
180.5
11.1
0.0
234.9
19.9
521.5
525.0
2.0
84.7
93.0
(70.7)
NS
634.0
83.0
15.4
199.3
11.1
0.0
325.6
22.7
634.4
679.5
2.7
88.0
102.7
(195.8)
NS
677.1
83.0
16.7
210.5
11.1
0.0
356.0
22.4
677.3
841.3
3.4
91.0
107.4
(344.5)
NS
698.6
83.0
14.6
221.8
11.1
0.0
368.3
22.2
698.8
www.cheuvreux.com
January 2011
GERMANY
Fuchs Petrolub
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
2.22
-2.9%
1.82
31.3%
3.44
55.2%
3.41
87.7%
4.54
32.1%
4.49
31.9%
5.42
19.3%
5.57
23.8%
4.62
-14.7%
4.59
-17.6%
5.14
11.2%
5.11
11.4%
7.32
42.6%
7.30
43.0%
8.58
17.3%
8.56
17.3%
9.27
8.0%
9.25
8.0%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.40
0.55
1.04
-69.2%
6.7
0.00
0.70
4.37
NS
10.1
0.00
1.00
5.58
27.6%
13.1
0.00
1.50
6.35
13.8%
14.1
0.00
1.60
5.38
-15.3%
11.6
0.00
1.70
6.10
13.4%
14.8
0.00
2.10
8.38
37.5%
20.1
0.00
2.50
9.81
17.1%
26.2
0.00
2.70
10.65
8.5%
32.9

Latest price
High
Low
Average price
21.493
21.493
0.000
21.493
21.493
0.000
21.493
21.493
0.000
21.493
21.493
-0.770
23.861
23.861
0.000
23.660
23.660
0.000
23.660
23.660
0.000
23.660
23.660
0.000
23.660
23.660
0.000
23.98
25.64
14.49
19.01
32.91
34.09
19.13
26.26
58.00
60.40
31.92
41.66
60.59
75.40
48.50
64.94
34.00
69.10
23.10
48.93
64.80
67.48
22.15
42.73
110.90
111.10
58.57
79.14
106.20
112.75
104.75
107.76
106.20
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,322.6
1,445.0
839.1
1,006.3
1,426.6
1,520.2
1,577.0
1,618.7
895.9
1,051.5
1,484.1
1,517.7
2,479.6
2,470.1
2,412.1
2,274.1
2,412.1
2,126.0
13.2
10.8
23.1
8.3
3.6
3.9
2.3
9.6
9.6
7.5
NS
3.3
2.2
2.1
12.8
12.8
10.4
7.3
4.4
3.2
1.7
11.2
11.2
9.5
8.8
4.3
3.4
2.5
7.4
7.4
6.3
2.1
2.9
1.9
4.7
12.6
12.6
10.6
11.2
4.4
3.0
2.6
15.2
15.2
13.2
3.1
5.5
3.4
1.9
12.4
12.4
10.8
7.1
4.1
3.0
2.4
11.5
11.5
10.0
8.5
3.2
2.7
2.5
12.0
15.2
1.32
44.2
6.4
7.8
0.84
9.8
8.3
9.4
1.15
12.0
7.5
8.3
1.19
11.1
5.5
6.1
0.75
7.9
7.5
8.4
1.3
10.2
9.1
9.9
1.7
12.4
7.1
7.7
1.4
9.8
6.1
6.7
1.3
8.5
6.4
4.8
11.0
8.6
3.7
3.0
67.6
30.3
10.1
1.4
13.3
10.8
6.2
2.6
56.4
20.6
15.5
0.5
13.9
12.2
7.3
2.8
19.2
22.2
NS
0.1
15.8
14.3
8.8
2.9
2.3
27.0
NS
0.8
13.8
12.3
7.9
2.6
33.2
34.9
NS
NS
17.2
15.3
10.3
2.3
NS
33.3
NS
NS
18.9
17.3
12.1
2.3
NS
28.8
NS
NS
20.2
18.5
12.9
2.4
NS
29.2
NS
NS
21.0
19.1
13.3
2.4
NS
29.2
25.8
15.3
28.6
28.6
28.1
18.4
37.6
38.0
34.1
22.2
38.1
38.5
41.1
26.5
43.4
43.9
31.6
21.4
42.2
42.6
35.2
24.7
36.5
36.7
40.0
28.2
39.4
39.5
44.2
30.9
35.0
35.1
46.2
32.3
29.9
30.0

EPS before goodwill
% Change
EPS, reported
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
101
www.cheuvreux.com
January 2011
GERMANY
gMACHINERY
2/Outperform
Rating
+19.4% EUR26
GEA Group
Reuters: G1AG.DE Bloomberg: G1A GR
GEA taking its fate into its own hands

Q
Recent developments Creating a sixth segment
Q3-10 order intake came in at EUR1.153bn (+20% y-o-y, -1% q-o-q).

Splitting this by order size, we see that the recovery visible in Q2-10 in
larger projects continued. The backlog after Q3 stood at EUR2.424bn,
of which EUR950m were billable in FY10. To meet our full-year
estimates GEA therefore needs to have recorded order intake of
EUR372m in Q4-10 that were converted to sales within the quarter. Its
underlying EBIT margin in Q3-10 reached 8.2%.
GEA reiterated its 2010 guidance of flat y-o-y sales, at least flat margins
and 7-10% y-o-y order intake growth, implying a 3-15% order intake
increase in Q4-10. We clearly expect it to have reached the high end of
this range. On the negative side, management reiterated that pricing
remains tough, but added that it is not currently getting any worse.
In Q3-10 China became GEA's largest national market, accounting for
14% or EUR159m of Q3-10 group sales, a 73% y-o-y increase.
With the recent acquisition of Convenience Food Systems (CFS), a
supplier of animal protein processing equipment, GEA has created a
sixth segment. CFS's customers are already-existing GEA clients,
which opens potential for cross-selling. We estimate the CFS purchase
price at EV/sales of 1.1x (estimated 10E sales of EUR400m, estimated
EBIT margin of 8% with mid-term potential for >12%). Similar to GEA
Process Engineering, CFS has low capital employed and a high ROCE.
We expect the deal to be closed in Q2-11E and include 7 months of
CFS's 11E sales in our estimates. Peers include Marel, JBT and Weber
group. Due to the fragmented competitive landscape, GEA sees scope
to double CFS's sales over the next 3-4 years via acquisitions.
Q
EUR21.765
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
EUR4001m
EUR3272m
EUR4908m
183.81m
EUR11.22m
Performances
7.4%
20.1%
34.7%
5.8%
5.5%
4.8%
Absolute perf.
Relative perf.
29.0
29.0
24.0
24.0
19.0
19.0
14.0
14.0
9.0
9.0
4.0
01.01
4.0
04.02
07.03
10.04
01.06
Price/M DAX
04.07
07.08
10.09
01.11
Price
Sector focus
Sector Top Picks
Least favoured

Outlook - time to start believing the 12% EBIT margin target
GEA's 9M-10 figures show that the restructuring of the Heat Exchanger
business is making progress, with average capacity up (positive for
economies of scale) and the number of sites in high-labour-cost
countries down. GEA continues to predict a 12% EBIT margin after the
crisis. To meet this target, it predicts restructuring costs of EUR120m,
of which EUR20m are non-cash.
Refrigeration Technology was the problem child in early 2010, but the
new divisional management has found ways to boost profitability (5.1%
Q3-10 EBIT margin vs. 2.0% Q3-09 EBIT margin despite a 6% y-o-y
sales decline) without eliminating an activity with annual sales of an
estimated EUR200m that formerly generated no margin. Now it seems
only EUR100m in annual sales will be eliminated.
The recent acquisitions make GEA's customer portfolio less cyclical by
shifting it away from Oil & Gas and Power (19% of 9M-10 order intake)
towards the Food & Beverage sector (46%). Management considers
F&B clients more healthy and the sector less dependent on legislation
and political influences.
Shareholders
Free Float 81.8%, Blackrock 9.9%, Kuwait
Investment Office 8.3%
2009
2010E
2011E
2012E
17.8
28.4
13.5
10.1
9.0
14.3
8.0
6.2
11.1
NS
5.5
8.7
Net debt/EBITDA (x)
(0.0)
1.7
0.7
0.2
Yield (%)
1.9
1.1
2.2
3.0
ROCE (%)
9.3
6.9
12.6
15.6
1.2
1.4
1.3
1.2
P/E (x)
EV/EBITDA (x)
Research Analyst
(49) 69 47 897 540
Q
Q
102
www.cheuvreux.com
January 2011
GERMANY
Company profile
GEA sprang from Metallgesellschaft

GEA Group was acquired by mg technologies (formerly
Metallgesellschaft) in 1999. Following mg technologies' portfolio
restructuring programme from 2004 to 2007, in which the entire
chemical and plant engineering activities were divested in 2005 and
2007 respectively, the company renamed itself GEA.
Q
Speciality mechanical engineering

Today, GEA is a speciality mechanical engineering company,
although still highly diversified. It is the global market leader in 90%
of its activities. No individual customer accounts for more than 2-3%
of group sales.
Q
Q Simplified group structure from January 2010 onwards

GEA simplified its group structure with effect from January 2010,
consolidating 9 sub-divisions into 5 (6 after recent CFS acquisition).
By YE-11 it will also reduce its legal entities by 50%. Additionally,
GEA intends to realise the full synergy potential of its heat
exchangers segment. From 12E, the group reorganisation is
expected to achieve gross annual cost savings of EUR65m in the
Heat Exchanger division and EUR25-30m in Mechanical Equipment
on overall restructuring costs of up to EUR120m (incl. EUR20m noncash costs). The biggest part of these costs are expected to be
booked in 2010.
Sales geographically well diversified

GEA offers geographically well diversified sales with 13% of its
group sales generated in Germany, 28% in western Europe, 13% in
North America, 9% in eastern Europe & CIS, 6% in Latin America,
9% in Asia ex China, 12% in China, 5% in Africa, and 4% in the
Middle East. (Figures based on 9M-10)
Q
SWOT analysis
Strengths
Weaknesses
No. 1-2 market positions in

core divisions with strong
acquisition track record
Margin gap to closest peer Alfa

Laval (given different sales mix)
Legacy
issues
Overall lower risk profile

following recent divestments
(e.g. plant engineering and
Ruhrzink)
Opportunities
Threats
Support for margins by

increasing low-cost base
Macroeconomic risk
Raw
Cross-segmental synergies
material price risk
Competitive
pressures
Reduced number of legal

entities
Valuation
Our PT is based solely on our DCF model as we

believe it best captures the company's growth
prospects. We also employ a normalised
earnings model, a peer group multiple
comparison, and an EVA model. All approaches
indicate undervaluation.
Q
DCF: We assume sales and EBITDA CAGRs
WACC of 8.4% (2011E) and a 2.0% terminal
growth rate. Based on these parameters our
DCF model yields a fair value of EUR26 per
share.
Q
Peer group multiple comparison: based
on 2011E EV/EBITDA GEA trades at an 11%
discount to its peer group.
Q
Our normalised earnings model renders a
fair value of EUR25 assuming a 12% EBIT
margin in 2012E.
Our EVA model yields a FV of EUR30 based

on 2012E multiples.
We reiterate our 2/OP rating with a TP of

EUR26.
Investment case
GEA's long-term transformation story, i.e. its

transformation into a market leader capable of
generating EBIT margins of 12%, continues to
progress. We advise buying GEA shares now to
capture the expected benefits of the group
reorganisation that will emerge over the next 2
years, which means that even if macro
conditions should deteriorate, GEA offers
considerable self-help potential, although of
course it would not remain unaffected.
Given GEA's track record of low returns and
frequent earnings disappointments in the years
2005-2008, investors' hesitance to believe the
new management's 12% post-crisis EBIT
margin target is understandable. But GEA has
made dramatic changes over the last 2 years,
most importantly in its management and its
mindset.
The two recent acquisitions are exactly in line
with what GEA's management had promised for
over a year regarding a larger acquisition. This
news thus further underlines management's
creditability, also with regard to the 12% across
the cycle EBIT margin target.
Further portfolio management
Price over volume strategy:

pricing power, shift to smaller
orders away from low-margin
turnkey projects
Estimated 35% emerging

markets exposure
103
www.cheuvreux.com
January 2011
GERMANY
GEA Group
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
104
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
4 058.6
-0.2%
971.2
(4 869.1)
160.7
178.0%
(74.6)
86.1
128.6%
0.0
0.0
0.0
86.1
(94.0)
0.0
(190.7)
(16.4)
0.0
0.0
0.0
166.4
0.0
(3.1)
163.3
0.0
0.0
163.3
182.2%
3 390.7
-16.5%
(868.0)
(2 237.7)
285.0
77.3%
(59.7)
225.3
161.7%
0.0
0.0
0.0
225.3
(44.6)
0.0
(204.7)
(40.4)
0.0
(85.5)
0.0
(64.3)
0.0
(2.2)
(66.5)
0.0
0.0
(66.5)
NS
4 346.2
28.2%
(956.2)
(3 017.7)
372.3
30.6%
(74.1)
298.2
32.4%
0.0
0.0
0.0
298.2
(44.5)
0.0
(475.7)
(66.3)
0.0
(85.5)
0.0
(288.2)
0.0
(0.2)
(288.4)
0.0
475.7
187.3
NS
4 856.0
11.7%
(1 068.5)
(3 306.7)
480.7
29.1%
(79.6)
401.1
34.5%
0.0
0.0
0.0
401.1
(49.5)
0.0
0.0
(114.4)
0.0
(85.5)
0.0
237.2
0.0
(1.1)
236.1
0.0
0.0
236.1
26.1%
5 179.0
6.7%
(1 174.2)
(3 418.9)
585.9
21.9%
(81.7)
504.2
25.7%
0.0
0.0
0.0
504.2
(45.4)
0.0
(248.0)
(109.8)
0.0
0.0
0.0
101.0
0.0
(1.4)
99.6
0.0
248.0
347.6
47.3%
4 411.2
-14.8%
(1 193.0)
(2 849.5)
368.7
-37.1%
(100.5)
268.2
-46.8%
0.0
0.0
0.0
268.2
(59.0)
0.0
0.0
(47.5)
0.0
0.0
0.0
161.7
0.0
(1.1)
160.6
0.0
0.0
160.6
-53.8%
4 450.0
0.9%
(1 059.3)
(3 035.6)
355.1
-3.7%
(100.6)
254.5
-5.1%
0.0
0.0
0.0
254.5
(55.8)
0.0
0.0
(56.6)
0.0
0.0
0.0
142.1
0.0
(2.0)
140.1
0.0
0.0
140.1
-12.8%
5 022.0
12.9%
(1 068.4)
(3 343.0)
610.7
72.0%
(128.6)
482.1
89.4%
0.0
0.0
0.0
482.1
(56.9)
0.0
0.0
(127.6)
0.0
0.0
0.0
297.6
0.0
(2.0)
295.6
0.0
0.0
295.6
111.0%
5 577.9
11.1%
(1 088.9)
(3 736.0)
753.0
23.3%
(133.9)
619.1
28.4%
0.0
0.0
0.0
619.1
(55.3)
0.0
0.0
(166.4)
0.0
0.0
0.0
397.4
0.0
(2.0)
395.4
0.0
0.0
395.4
33.7%
241.0
NS
1 245.4
(71.2)
(10.4)
1 415.2
(176.4)
0.0
0.0
0.0
0.0
(159.1)
1 079.7
6.3
-97.4%
(129.0)
(70.4)
0.0
(193.1)
(24.1)
0.0
0.0
0.0
0.0
0.0
(217.2)
6.3
0.0%
(129.0)
(70.4)
0.0
(193.1)
(24.1)
0.0
0.0
0.0
(6.7)
56.0
(167.9)
6.3
0.0%
(129.0)
(70.4)
0.0
(193.1)
(24.1)
0.0
0.0
0.0
7.4
98.3
(111.4)
132.2
NS
(54.2)
(116.8)
0.0
(38.8)
(4.5)
0.0
0.0
0.0
0.0
11.1
(32.2)
256.8
94.2%
121.9
(92.2)
0.0
286.4
32.2
0.0
0.0
(36.8)
0.0
(361.7)
(79.8)
289.5
12.7%
(242.3)
(596.3)
0.0
(549.1)
0.0
0.0
0.0
(55.1)
0.0
69.1
(535.1)
429.7
48.4%
(99.5)
(110.5)
0.0
219.7
0.0
0.0
0.0
(44.8)
0.0
80.1
255.0
556.3
29.5%
(56.2)
(150.6)
0.0
349.5
0.0
0.0
0.0
(88.7)
0.0
105.2
366.0
1 633.6
38.9
696.4
347.2
(304.9)
NS
2 411.2
1 186.4
763.5
410.5
70.5
0.0
(19.8)
(0.5)
2 411.1
1 584.1
0.0
835.5
611.0
(306.8)
NS
2 723.7
1 280.3
24.9
468.1
288.4
0.0
662.1
19.5
2 723.7
1 259.3
2.2
675.5
896.4
(152.8)
NS
2 680.5
1 250.8
41.3
461.8
209.7
0.0
717.0
16.5
2 680.6
1 410.2
3.5
681.4
1 069.9
(34.9)
NS
3 130.0
1 299.7
95.9
530.7
233.5
0.0
970.2
20.0
3 130.0
1 452.1
3.3
705.0
826.9
120.9
8.3
3 108.2
1 331.8
144.4
562.2
238.0
0.0
831.8
16.1
3 108.2
1 735.0
0.0
663.2
689.2
(5.9)
NS
3 081.5
1 530.9
159.2
607.9
205.8
0.0
577.8
13.1
3 081.5
1 822.0
0.0
667.4
801.0
594.2
32.6
3 884.5
1 530.9
134.3
1 128.6
205.8
0.0
885.1
19.9
3 884.6
2 074.8
0.0
673.1
878.9
413.6
19.9
4 040.2
1 530.9
106.2
1 138.6
205.8
0.0
1 058.9
21.1
4 040.3
2 383.5
0.0
686.0
976.1
139.8
5.9
4 185.4
1 530.9
72.7
1 188.8
205.8
0.0
1 187.3
21.3
4 185.4
www.cheuvreux.com
January 2011
GERMANY
GEA Group
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.85
182.8%
0.85
182.8%
(0.35)
NS
(0.35)
NS
1.00
NS
(1.53)
NS
1.26
26.5%
1.26
182.1%
1.89
50.1%
0.54
-57.0%
0.87
-53.8%
0.87
61.3%
0.76
-12.8%
0.76
-12.8%
1.61
111.0%
1.61
111.0%
2.15
33.8%
2.15
33.8%
0.00
0.00
1.25
NS
8.5
0.00
0.00
0.03
-97.3%
30.4
0.00
0.00
0.03
0.0%
24.1
0.00
0.00
0.03
0.0%
7.5
0.00
0.20
0.72
NS
7.7
0.00
0.30
1.40
94.3%
9.1
0.00
0.24
1.58
12.7%
9.7
0.00
0.48
2.34
48.4%
10.8
0.00
0.65
3.03
29.4%
12.3

Latest price
High
Low
Average price
192.300
192.300
0.000
52.150
188.000
0.000
52.150
188.000
0.000
187.300
187.300
0.000
183.810
183.810
0.000
183.810
183.810
0.000
183.810
183.810
0.000
183.810
183.810
0.000
183.810
183.810
0.000
8.69
13.20
8.33
10.70
10.50
11.29
8.26
9.74
17.07
17.08
10.51
13.63
23.80
28.34
15.70
22.31
12.15
26.95
9.27
19.10
15.56
15.78
7.20
11.52
21.63
21.99
13.48
17.24
21.77
22.73
21.25
21.93
21.77
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1 682.0
2 042.2
2 035.0
2 345.0
3 209.2
3 524.3
4 467.3
4 901.3
2 235.4
2 853.9
2 860.1
3 330.9
3 975.8
5 089.3
4 000.6
4 908.9
4 000.6
4 641.2
10.2
10.2
6.9
85.7
1.0
0.9
0.0
NS
NS
NS
NS
0.3
1.0
0.0
17.1
17.1
NS
NS
0.7
1.4
0.0
18.9
18.9
NS
NS
3.2
1.7
0.0
6.4
6.4
16.9
NS
1.6
1.0
1.6
17.8
17.8
11.1
11.1
1.7
1.2
1.9
28.4
28.4
13.7
NS
2.2
1.4
1.1
13.5
13.5
9.3
5.5
2.0
1.3
2.2
10.1
10.1
7.2
8.7
1.8
1.2
3.0
12.7
23.7
0.50
6.4
8.2
10.4
0.69
18.0
9.5
11.8
0.81
55.0
10.2
12.2
1.01
NS
4.9
5.7
0.55
18.3
9.0
12.4
0.8
11.0
14.3
20.0
1.1
15.3
8.0
10.2
1.0
10.4
6.2
7.5
0.8
7.8
1.7
NS
4.0
2.1
4.1
1.7
NS
0.0
6.4
NS
8.4
6.6
NS
1.4
NS
0.0
8.4
NS
8.6
6.9
NS
1.8
NS
0.0
9.7
NS
9.9
8.3
4.9
1.7
NS
0.0
12.9
0.9
11.3
9.7
2.0
1.8
8.3
36.9
6.2
NS
8.4
6.1
3.7
1.5
NS
34.3
6.4
2.1
8.0
5.7
3.2
1.2
32.6
31.5
10.7
1.0
12.2
9.6
5.9
1.3
19.9
29.8
13.6
0.3
13.5
11.1
7.1
1.4
5.9
30.2
3.7
3.3
10.5
10.5
9.3
24.9
NS
NS
12.1
15.7
NS
16.1
13.8
9.3
18.3
18.3
17.6
8.4
7.1
27.2
9.3
7.2
9.7
9.7
6.9
4.9
8.0
8.0
12.6
8.8
15.3
15.3
15.6
11.0
18.1
18.1

EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
105
www.cheuvreux.com
January 2011
GERMANY
2/Outperform
Rating
+1.7% EUR32.50
Gerresheimer
Packaged for a strong 2011
Q
Recent developments Sound Q3 results
GXI reported sound Q3 results in October 2010, with 5.8% organic

growth and a significant 28% EBITDA increase, beating market
expectations at that time by 3.5%. In particular the rebound in
Cosmetics/MG was positive.
During its Q3 conference call, GXI announced an adjustment to its RTF
production lines. This will have led to a 20% capacity decline in Q4-10
(est. EUR4.5m sales loss) and production will be ramped up again in
Q1-11, before probably returning to full capacity again in summer 2011.
We estimate this will depress TG sales growth by ~5% in Q4 (1.8% of
Q4 group basis). As in Q2 and Q3, the decline in bulk syringes business
is likely to have continued, leading to an estimated 6% decline at
constant FX in TG in Q4-10E.
Nevertheless, with the rest of the business delivering a strong
performance and with an improvement in cosmetics, we believe GXI will
still come out at the upper end of its constant FX sales guidance. We
predict 3.9% (guidance 3-4%) organic growth and a 20.1% EBITDA
margin (19.5-20.0%).
We clearly believe growth in RTFs remains on track and the company's
decision taken in Dec 2010 to build a fourth line illustrates its
confidence in this product area. The fourth line will be completed in
2012 and will generate sales in 2013 (est. EUR33m annual sales if fully
utilised).
Q
Outlook Refinancing and M&A likely in 2011E
We believe the outlook for 2011 is promising. Gerresheimer's corporate

bond can be bought back in mid-Feb at 102% (104% earlier) and the
company is likely to take action. Even if it can only refinance at 6.06.5% as indicated, this would boost our EPS forecasts by 2-3%, but we
consider this conservative.
In an ideal case, the company will combine the refinancing with an M&A
transaction to increase its funding volume. Areas of interest include
targets in emerging markets and the company also lacks a plastics
offering in the US market. Any deal will depend on the price tag and
strategic fit, but M&A should tend to be taken positively. M&A is part of
Gerresheimer's plan to increase its EM sales from an estimated
EUR100m in 2010 to EUR200m in 2013.
In terms of operational performance: while Tubular Glass will have a
softer H1-11E, due to the two factors discussed above, we believe
Moulded Glass and Plastics Systems should develop favourably.
We like the stock, also bearing in mind the company's attractive
valuation levels, structural growth and strong cash generation. Finally,
note that IMS expects accelerated global pharma growth of 5-7% in
2011 (after 4-6% this year).
EUR31.97
Price (07/01/2011)
Reuters: GXIG.DE Bloomberg: GXI GR
Stock data
Free float
Enterprise value
Daily volume
EUR1004m
EUR1004m
EUR1469m
31.4m
EUR 2.27m
Performances
12.9%
11.9%
29.9%
11.1%
-1.8%
1.1%
Absolute perf.
Relative perf.
62.0
62.0
52.0
52.0
42.0
42.0
32.0
32.0
22.0
22.0
12.0
06/07
12.0
11/07
04/08
10/08
03/09
Price/M DAX
08/09
02/10
Sector focus
Sector Top Picks

William Demant
Least favoured
Shareholders
Free Float 100.0%
08/09
09/10E
10/11E
11/12E
17.6
14.4
14.1
12.2
EV/EBITDA (x)
7.4
6.9
6.6
5.9
4.0
6.6
5.8
6.9
Net debt/EBITDA (x)
2.2
1.6
1.3
0.9
Yield (%)
0.0
1.4
1.4
1.5
ROCE (%)
9.6
11.7
13.3
14.6
1.3
1.4
1.3
1.3
P/E (x)
Q
Q
106
www.cheuvreux.com
12/10
Price

Research Analyst
(49) 69 478 975 26
07/10
January 2011
GERMANY
Company profile
Leading supplier of packaging products

Gerresheimer is a leading supplier of glass and plastic packaging
products for the pharmaceutical (74% of 2009 continuing sales),
cosmetics (11%) and life science research industries (9%). Its main
geographical markets are Europe (66% of total 2009 sales) and
North America (28%). In particular, it observes strong growth in
ready-to-fill (RTF) syringes, inhalers and pens. The company's client
base is fragmented (largest customer: <5% of sales).
Q
Pharma clients benefit from growth, but face challenges

The company generates 74% of its sales in the pharmaceutical
industry, which is showing structural unit sales growth in most areas.
In pharmaceutical packaging Gerresheimer is protected by high
barriers to entry due to validation and capex requirements.
Furthermore, it holds leading market shares in key product areas.
Quality is an important focus for its clients and pricing has been less
in the spotlight despite the significant challenges facing the pharma
industry (patent expiries, low R&D productivity, healthcare reforms).
Q
Q High operational and financial gearing

Looking ahead, Gerresheimer's significant operational and financial
leverage should work in its favour. Raw materials (20% of sales) and
energy costs (8%) are important input factors. While a large
proportion of its contracts include price-adjustment clauses,
changes in input costs may have an impact on the company's
profitability.
Q M&A to remain part of the business model
External growth remains on the company's mid-term agenda to
allow it to complement its product range from a geographical as well
as a product-specific perspective.
SWOT analysis
Strengths
Weaknesses
Broad product offering in an

oligopolistic market
High barriers to entry:

validation and capex
requirements
No IP protection; most
products offer limited scope for
differentiation
High exposure to energy costs
Significant goodwill and

intangible assets
Diversified client base
Pharma clients benefiting from

structural growth in various areas
Nearly entirely recurring sales
Opportunities
Threats
Company's high operational

and financial leverage should
work in its favour
Plastic Systems - a new area

being successfully built up
Client base faces structural

challenges; these will increase
cost-cutting pressure in the
supply chain
Some cyclicality in demand

from cosmetics and life science
research industries
Emerging demand from generic and biotech manufacturers

Bolt-on acquisitions
107
www.cheuvreux.com
Valuation
We reiterate our 2/OP rating and EUR32.5 target

price. At this level, the stock would be trading at
14.3x 2011E and 12.4x 2012E P/E. Note that our
earnings forecasts do not include potential
benefits from refinancing or (obviously) M&A. We
predict average sales and EPS growth (10E-12E)
of 5.4% and 15.4% respectively.
Investment case
We give Gerresheimer's business model high

marks (solid top-line growth; given stability and
nearly 100% of recurring revenues the
operational and financial leverage should work in
its favour, the supplier market is consolidated;
high barriers to entry; fragmented client base).
These characteristics and the implied growth
are, in our view, not adequately reflected in the
stock's valuation levels.
Furthermore, we see two issues that will likely
trigger further upside: 1) GXI is likely to refinance
its outstanding EUR126m bond, for which it
currently pays a 7.9% yield. 2) M&A transactions
are likely in 2011E, particularly after the
company's impressive deleveraging.
January 2011
GERMANY
Gerresheimer
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
108
www.cheuvreux.com
2007
2008
2009
2010E
2011E
2012E
957.7
(303.0)
(503.2)
151.5
47.8%
(65.0)
86.5
88.5%
(33.2)
0.0
0.0
53.3
(77.6)
0.0
0.0
25.1
0.0
0.0
0.0
0.9
0.0
(2.1)
(1.2)
0.0
10.3
42.3
NS
1,060.1
10.7%
(327.0)
(562.7)
170.4
12.5%
(70.9)
99.5
15.0%
(38.5)
0.0
0.0
61.0
(43.7)
0.0
0.0
(12.8)
0.0
0.0
0.0
4.5
0.0
(3.8)
0.7
0.0
18.5
57.7
36.4%
1,000.2
-5.7%
(319.0)
(506.3)
174.9
2.6%
(76.2)
98.7
-0.8%
(38.3)
0.0
0.0
60.4
(40.3)
0.0
0.0
(13.2)
0.0
0.0
0.0
7.0
0.0
(1.2)
5.8
0.0
(2.1)
42.0
-27.2%
1,022.2
2.2%
(326.0)
(495.2)
201.0
14.9%
(82.8)
118.2
19.8%
(26.0)
0.0
0.0
92.2
(34.7)
0.0
0.0
(15.1)
0.0
0.0
0.0
42.3
0.0
(2.0)
40.3
0.0
(4.6)
61.7
46.9%
1,071.6
4.8%
(342.0)
(508.2)
221.4
10.1%
(86.8)
134.6
13.9%
(20.0)
0.0
0.0
114.6
(28.5)
0.0
0.0
(25.8)
0.0
0.0
0.0
60.2
0.0
(3.0)
57.2
0.0
(6.0)
71.2
15.4%
1,135.2
5.9%
(362.0)
(532.5)
240.7
8.7%
(91.9)
148.8
10.5%
(17.0)
0.0
0.0
131.8
(26.7)
0.0
0.0
(31.6)
0.0
0.0
0.0
73.6
0.0
(3.3)
70.3
0.0
(5.1)
82.2
15.4%
92.0
124.4%
(38.0)
(87.0)
(49.0)
(33.0)
(217.0)
0.0
0.0
0.0
436.0
0.0
186.0
154.0
67.4%
12.0
(96.0)
(53.0)
70.0
(38.0)
0.0
0.0
(15.0)
2.0
1.0
20.0
105.0
-31.8%
12.0
(87.0)
(47.0)
30.0
0.0
0.0
0.0
(15.0)
0.0
(4.0)
11.0
151.0
43.8%
(12.0)
(79.0)
(38.0)
60.0
0.0
0.0
0.0
0.0
0.0
0.0
60.0
167.0
10.6%
(15.0)
(91.0)
(48.0)
61.0
0.0
0.0
0.0
(13.0)
0.0
0.0
48.0
183.0
9.6%
(15.0)
(96.0)
(51.0)
72.0
0.0
0.0
0.0
(14.0)
0.0
0.0
58.0
466.0
39.0
174.0
42.0
396.0
78.4
1,117.0
373.0
192.0
426.0
64.0
0.0
62.0
6.5
1,117.0
434.0
45.0
176.0
46.0
438.0
91.4
1,139.0
374.0
165.0
482.0
61.0
0.0
58.0
5.5
1,140.0
443.0
37.0
167.0
36.0
385.0
80.2
1,068.0
374.0
128.0
461.0
42.0
0.0
64.0
6.4
1,069.0
484.0
39.0
149.0
53.0
326.0
62.3
1,051.0
367.0
125.0
441.0
42.0
0.0
76.0
7.4
1,051.0
528.0
42.0
146.0
60.0
278.0
48.8
1,054.0
365.0
125.0
428.0
42.0
0.0
95.0
8.9
1,055.0
585.0
45.0
143.0
69.0
220.0
34.9
1,062.0
367.0
125.0
413.0
42.0
0.0
116.0
10.2
1,063.0
January 2011
GERMANY
Gerresheimer
FY to 30/11 (Euro)
2007
2008
2009
2010E
2011E
2012E
1.49
1.84
23.2%
0.02
152.4%
1.34
-27.2%
0.19
NS
1.97
46.9%
1.28
NS
2.27
15.4%
1.82
42.0%
2.62
15.4%
2.24
22.9%
16.0
1.23
0.40
4.90
51.1%
13.4
1.22
0.00
3.34
-31.8%
14.1
0.83
0.40
4.81
43.8%
15.0
0.64
0.44
5.32
10.6%
16.4
0.54
0.48
5.83
9.6%
18.2

Latest price
High
Low
Average price
28.350
28.350
0.000
31.400
31.400
0.000
31.400
31.400
0.000
31.400
31.400
0.000
31.400
31.400
0.000
31.400
31.400
0.000
38.20
40.00
31.94
36.75
19.50
38.25
16.92
31.80
23.50
25.37
13.02
18.41
32.99
32.99
21.49
26.61
31.97
33.25
31.51
32.19
31.97
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,199.5
1,832.6
802.6
1,467.8
725.7
1,300.1
885.5
1,387.9
1,003.7
1,469.5
1,003.7
1,408.5
NS
25.6
11.8
NS
2.4
1.7
1.0
31.9
10.6
4.0
8.2
1.5
1.4
2.1
NS
17.6
7.0
4.0
1.7
1.3
0.0
24.8
14.4
5.9
6.6
1.9
1.4
1.4
19.6
14.1
6.0
5.8
2.0
1.3
1.4
15.4
12.2
5.5
6.9
1.8
1.3
1.5
12.1
21.2
1.91
19.8
8.6
14.8
1.39
8.6
7.4
13.2
1.3
10.7
6.9
11.7
1.4
7.7
6.6
10.9
1.4
7.6
5.9
9.5
1.2
6.8
2.0
4.3
15.8
9.0
0.1
0.9
78.4
(945.0)
3.9
2.8
16.1
9.4
0.4
1.0
91.4
1794.3
4.3
3.7
17.5
9.9
0.7
1.0
80.2
0.0
5.8
2.2
19.7
11.6
4.1
1.0
62.3
31.2
7.8
1.7
20.7
12.6
5.6
1.1
48.8
24.2
9.0
1.2
21.2
13.1
6.5
1.1
34.9
21.4
8.2
NS
NS
2.0
9.2
2.4
0.2
4.5
9.6
3.3
1.3
0.8
11.7
8.6
8.7
7.7
13.3
9.3
11.5
10.2
14.6
10.2
12.8
11.8

EPS before goodwill
% Change
EPS, reported
% Change
(0.04)
Goodwill per share

Dividend per share
Cash flow per share
% Change
1.17
0.40
3.25
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
109
www.cheuvreux.com
January 2011
GERMANY
TEXTILE RETAILERS
2/Outperform
Rating
+10.5% EUR39.00
Gerry Weber
Reuters: GWIG.DE Bloomberg: GWI1 GR
The growth continues

Q
Stock data
Recent developments Retail in the fast lane
Gerry Weber reported a like-for-like sales increase for July to

September 2010 of 14.2%. In August it achieved the strongest like-forlikes sales growth in its history. Its retail sales rose 26% on a like- forlike basis, significantly outperforming the sector, which grew by only
8% in the same month. Furthermore, in November, the first month of its
FY11, the company also showed a strong performance in retail, both in
Germany and in its international markets, recording an 11% increase in
like-for-like sales. The main reasons behind this positive development
have been the company's improved lead times and the increase in its
number of proprietary retail stores, which allow it to present more
fashionable collections. This puts it closer to customer preferences and
therefore facilitates higher sell-through rates.
Q
Outlook Strong sales and EBIT margin increase
In late 2010 Gerry Weber also announced plans to accelerate its

expansion via company-owned retail and franchises stores. It now
targets 65 new own retail stores in FY11, up from ~50 in FY10E, and
60-70 new franchise stores, up from ~35 in FY10E.
This, together with the strong order intake development (23% y-o-y
increase) for its spring/summer 2011 collection underlines our
investment case. Looking ahead, we predict strong sales growth
(CAGR10-12E: 9%), not only due to the expansion but also due to
higher levels of acceptance for the new collections, which will drive l-f-l
sales in the company's own stores.
The company has also announced it will raise its retail prices in 2011 to
cover the rise in input costs, mainly owing to the increase in cotton
prices and the production bottleneck in Asia. Higher retail prices will
take the pressure off its gross margins. As a result we now expect its
gross margin to also increase slightly in FY11E to 50%. This compares
with our former forecast of a flat trend, with the margin remaining at
49.6%. Hence, we believe Gerry Weber will be able to provide not only
sustainable sales growth but also margin growth in the period FY10E to
FY12E.
Free float
Enterprise value
Daily volume
Jrgen KOLB
Jennifer GAUSSMANN
Research Analyst
jkolb@cheuvreux.com
(49) 69 47 89 74 26
Research Analyst
jgaussman@cheuvreux.com
(49) 69 47 89 75 35
Q
110
www.cheuvreux.com
EUR730m
EUR259m
EUR710m
20.69m
EUR 1.70m
Performances
-4.9%
14.1%
58.9%
-9.4%
-3.0%
11.8%
Absolute perf.
Relative perf.
35.7
35.7
30.7
30.7
25.7
25.7
20.7
20.7
15.7
15.7
10.7
10.7
5.7
03/04
5.7
01/05
11/05
09/06
07/07
Price/SDAX
06/08
04/09
02/10
01/11
Price
Sector focus
Sector Top Picks
Least favoured
Ahold, Carrefour
Colruyt
Shareholders
Free Float 35.5%, Gerhard Weber 26.8%, Udo
Hardieck 17.9%, Treasury Stock 10.0%, Ralf Weber
9.9%
2009
2010E
2011E
2012E
P/E (x)
NS
15.2
12.7
10.9
EV/EBITDA (x)
0.2
8.0
6.7
5.5
NS
4.4
5.5
7.5
Net debt/EBITDA (x)
0.2
(0.0)
(0.2)
(0.5)
Yield (%)
0.0
0.0
2.4
2.4
ROCE (%)
35.6
37.4
39.2
43.0
0.1
3.3
3.0
2.7
Q
EUR35.30
Price (07/01/2011)
January 2011
GERMANY
Company profile
Founded as a manufacturer of women's trousers

Gerry Weber was founded in Germany in 1973 by Gerhard Weber
and Udo Hardieck as a manufacturer of women's trousers. Its
portfolio was expanded item by item until it became a full women's
apparel manufacturer and wholesaler.
Q
Vertical integration
Today Gerry Weber is a vertically integrated women's apparel
retailer. It is active as a wholesaler and retailer in over 40 countries.
Its target group are women in the 30+ age range. The company's
strong innovative power leads to fast growth in sales and margins.
Q
Three core brands

Gerry Weber's portfolio comprises three core brands: Gerry Weber,
Taifun and Samoon, all of which operate in the upper mid-price
segment. The Gerry Weber brand has two sub-labels: Gerry Weber
Edition and G.W., its more price-aggressive label. While Taifun
concentrates on a younger fashion group than the Gerry Weber
brand, Samoon addresses plus-size women.
Q
Q Core markets
Gerry Weber is active in over 40 countries across the globe. Outside
Germany, its core markets include Benelux, England, Ireland,
Austria, Switzerland and Scandinavia, which together account for
28% of group sales. Markets in Asia, Eastern Europe, the Middle
East and the Far East are of growing importance for the company
and currently contribute about 12% to group sales. Around 60% of
group sales are still generated in Germany.
SWOT analysis
Strengths
Weaknesses
Innovations as margin drivers
Large share of German

business
Strong reputation with

wholesale customers
Dependence on CEO Gerhard

Weber
Strong cash flow generation
Opportunities
Threats
Company-owned retail stores

Maximum order limits to
increase flexibility and
improve lead times
Deterioration in German
consumer sentiment
Loss of innovative power after

CEO's retirement
111
www.cheuvreux.com
Valuation
GWI shares are currently trading at a 2011E P/E

of 12.5x, in line with where the peers stood in
August 2010. Nevertheless, the successful
performance of the peer group over the last
three months has led to a 15% valuation
increase, bring the peer group average to a
2011E P/E of ~15x. Our TP of EUR39 implies a
P/E of 14x. We believe the discount to be
sufficient, taking into account GWI's low free
float and liquidity.
Investment case
Q Innovative power has been Gerry Weber's

main margin driver in the past and will remain so
in the future. Although its strong EBIT margin
growth in recent years is likely to decelerate on
higher input costs, the most recent innovations
in its proprietary retail business, i.e. maximum
order limits and RFID and EDI technologies,
should lead to an estimated EBIT margin of
14.4% in FY12E.
Q Looking ahead, we anticipate strong EBIT
margin growth over the next three FYs from
13.1% in the current FY to 14.4% in FY12E, an
increase of 130bps. This is based on an
assumed 70bps rise in the gross profit margin
from 49.6% to 50.3% between FY10E and
F12E, thanks to the company-owned retail
business and to cost-saving potential resulting
from RFID and flexibility in procurement and
production.
Q The
company's innovative steps also
facilitate shorter lead times and therefore allow it
to present collections that are more up-to-date.
We estimate that this will help boost its sales by
5%, 7% and 11% in the years FY10E to FY12E.
We also assume a rise in its inventory turns to
11x in FY12E from 10x currently. Together with
its strict claims management, this should lead to
an improvement in the company's working
capital as a percentage of sales from 14.6%
now to 12.9% in FY12E.
January 2011
GERMANY
Gerry Weber
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
112
2005
2006
2007
2008
2009
2010E
2011E
2012E
386.7
442.9
14.5%
(58.7)
(336.0)
48.2
16.4%
(7.2)
41.0
15.2%
0.0
0.0
0.0
41.0
(3.4)
0.0
0.0
(15.5)
(1.0)
0.0
0.0
21.1
0.0
0.0
21.1
0.0
0.0
21.1
27.1%
507.1
14.5%
(67.3)
(377.7)
62.1
28.8%
(10.4)
51.7
26.1%
0.0
0.0
0.0
51.7
(4.2)
0.0
0.0
(19.7)
(1.0)
0.0
0.0
26.9
0.0
0.0
26.9
0.0
0.0
26.9
27.5%
570.0
12.4%
(77.4)
(418.6)
74.0
19.2%
(11.3)
62.7
21.3%
0.0
0.0
0.0
62.7
(3.9)
0.0
0.0
(18.0)
(1.4)
0.0
0.0
39.4
0.0
0.0
39.4
0.0
0.0
39.4
46.5%
594.1
4.2%
(87.0)
(423.5)
83.6
13.0%
(12.4)
71.2
13.6%
0.0
0.0
0.0
71.2
(4.1)
0.0
0.0
(23.4)
(0.7)
0.0
0.0
43.0
0.0
0.0
43.0
0.0
0.0
43.0
9.1%
623.7
5.0%
(94.9)
(434.3)
94.5
13.0%
(13.1)
81.4
14.3%
0.0
0.0
0.0
81.4
(3.7)
0.0
0.0
(27.0)
(0.6)
0.0
0.0
50.1
0.0
0.0
50.1
0.0
0.0
50.1
16.5%
668.3
7.2%
(104.0)
(458.0)
106.3
12.5%
(14.0)
92.3
13.4%
0.0
0.0
0.0
92.3
(3.0)
0.0
0.0
(31.0)
(0.7)
0.0
0.0
57.6
0.0
0.0
57.6
0.0
0.0
57.6
15.0%
741.2
10.9%
(113.3)
(505.6)
122.3
15.1%
(15.6)
106.7
15.6%
0.0
0.0
0.0
106.7
(2.6)
0.0
0.0
(36.2)
(0.7)
0.0
0.0
67.2
0.0
0.0
67.2
0.0
0.0
67.2
16.7%
(3.4)
(10.9)
0.0
8.1
0.1
0.0
0.0
(8.2)
0.0
10.2
10.2
27.7
23.7%
(10.6)
(19.3)
0.0
(2.2)
0.2
0.0
0.0
(9.4)
0.0
6.4
(5.0)
39.2
41.5%
(0.4)
(21.8)
0.0
17.0
(0.3)
0.0
0.0
(9.2)
0.0
5.3
12.8
51.8
32.1%
(28.3)
(19.0)
0.0
4.5
0.1
0.0
0.0
(11.5)
0.0
(1.9)
(8.8)
55.4
6.9%
47.6
(16.8)
0.0
86.2
0.3
0.0
0.0
(16.9)
0.0
(43.0)
26.6
64.0
15.5%
(5.7)
(25.0)
0.0
33.3
0.0
0.0
0.0
(15.5)
0.0
(16.2)
1.6
71.8
12.2%
(5.0)
(26.8)
0.0
40.0
0.0
0.0
0.0
(17.6)
0.0
(19.0)
3.4
83.2
15.9%
(7.6)
(20.8)
0.0
54.8
0.0
0.0
0.0
(17.6)
0.0
(6.0)
31.2
118.7
0.0
0.0
13.7
41.4
34.9
173.8
0.0
6.1
68.7
1.0
0.1
97.7
25.3
173.6
129.1
0.0
0.0
12.4
54.8
42.4
196.3
0.0
7.6
79.4
0.8
0.2
108.4
24.5
196.4
145.1
0.0
0.0
17.2
46.1
31.8
208.4
0.0
13.3
85.2
1.0
0.3
108.8
21.5
208.6
181.1
0.0
0.0
17.8
45.3
25.0
244.2
0.0
13.2
93.0
0.8
0.1
137.0
24.0
244.1
158.9
0.0
0.0
21.2
20.6
13.0
200.7
0.0
12.3
98.4
0.5
0.1
89.4
15.0
200.7
193.7
0.0
0.0
25.8
(1.1)
NS
218.4
0.0
12.6
109.9
0.5
0.1
95.1
15.2
218.2
233.7
0.0
0.0
22.1
(19.7)
NS
236.1
0.0
12.5
122.8
0.5
0.1
100.1
15.0
236.0
283.3
0.0
0.0
24.5
(58.9)
NS
248.9
0.0
13.5
126.9
0.5
0.1
107.6
14.5
248.6
(51.2)
(294.1)
41.4
(5.8)
35.6
0.0
0.0
0.0
35.6
(3.6)
0.0
(4.2)
(11.2)
0.0
0.0
0.0
16.6
0.0
0.0
16.6
0.0
0.0
16.6
22.4
www.cheuvreux.com
January 2011
GERMANY
Gerry Weber
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.71
0.92
29.8%
0.92
29.8%
1.17
27.5%
1.17
27.5%
1.75
49.3%
1.75
49.3%
2.08
18.9%
2.08
18.9%
2.42
16.3%
2.42
16.3%
2.78
15.0%
2.78
15.0%
3.25
16.7%
3.25
16.7%
4.7
0.00
0.40
1.21
26.3%
5.2
0.00
0.50
1.71
41.5%
5.8
0.00
0.75
2.30
34.7%
7.3
0.00
0.75
2.68
16.5%
6.9
0.00
0.00
3.09
15.4%
9.4
0.00
0.85
3.47
12.2%
10.4
0.00
0.85
4.02
15.9%
12.8
23.433
23.433
0.000
22.953
22.953
0.000
22.953
22.953
0.000
22.509
22.509
0.000
20.662
20.662
0.000
20.690
20.690
0.000
20.690
20.690
0.000
20.690
20.690
0.000
36.75
37.30
21.68
27.19
35.30
37.34
35.06
35.99
35.30
-
760.4
758.7
730.4
710.1
730.4
670.9
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
15.2
15.2
11.9
4.4
3.9
3.3
0.0
12.7
12.7
10.2
5.5
3.4
3.0
2.4
10.9
10.9
8.8
7.5
2.7
2.7
2.4
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
8.0
9.3
1.2
11.2
6.7
7.7
1.1
9.5
5.5
6.3
0.9
7.8
11.5
1.8
10.7
9.2
4.3
2.2
34.9
56.5
14.2
2.0
10.9
9.3
4.8
2.3
42.4
43.5
14.8
1.2
12.2
10.2
5.3
2.4
31.8
42.7
19.0
0.9
13.0
11.0
6.9
2.3
25.0
42.8
NS
0.4
14.1
12.0
7.2
3.0
13.0
36.0
NS
NS
15.2
13.1
8.0
2.9
NS
0.0
NS
NS
15.9
13.8
8.6
2.8
NS
30.5
NS
NS
16.5
14.4
9.1
3.0
NS
26.2
20.6
20.6
15.0
15.0
21.0
21.0
17.8
17.8
24.9
24.9
20.4
20.4
25.8
25.8
24.4
24.4
35.6
35.6
31.3
31.3
37.4
37.4
29.7
29.7
39.2
39.2
28.1
28.1
43.0
43.0
26.9
26.9
0.71
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.40
0.96

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
113
www.cheuvreux.com
January 2011
GERMANY
ADVERTISING
2/Outperform
Rating
+8.1% EUR40.00
GfK
Reuters: GFKG.DE Bloomberg: GFK GR
Organic growth, leverage, investments

paying off
Q
Recent developments accelerated recovery in MR demand
The pace of recovery in market research has consistently surprised on

the upside, and GfK's results in the first three quarters have also
consistently beaten expectations. As of 9M-10, GfK posted organic
sales growth of +7.6% with momentum picking up from quarter to
quarter (Q3 +9.2% after +8.3% in Q2, +5.2% Q1). Although Custom
Research has seen a rebound as expected (organic 9M-10 +6.5%), the
real positive surprise has been the further acceleration in top-line
growth at Retail & Technology (R&T) (+11.7%) whilst Media sales (+5%)
have yet to fully regain momentum. The group adjusted operating
margin in Q3-10 was 15% (vs. 13.5% in Q3-09) and 12.9% for 9M-10
driven by the continued strong performance in R&T (29.3% margin in
9M-10 vs. 27% in 2009) and operational leverage in Custom Research
(6% vs. 3.4%). Operating cash flow was also strong (+18%) and has
been primarily used to de-leverage the balance sheet. As of 9M-10 net
gearing had been reduced to 63%.
Q
EUR37.00
Price (07/01/2011)
Outlook Robust growth in R&T driving earnings
GfK confirmed with its Q3-10 results that it expects to reach the upper
end of its guidance for sales growth of up to 6% (est. 9.3%, 6.2%
organic) and an adjusted operating margin of up to 13.5% (est. 13.9%).
Given the seasonal strength of Q4 and the fact that the order backlog
as of end-October already covered 98% of budgeted sales growth in
2011 (+3%), we see its guidance as minimum of what will be
achievable. We estimate for 2011E sales growth of +7.3%, comprising
~4% market growth, assumed market share gains of ~2% plus
acquisitions made in 2010, and we estimate another 60bps increase in
the adjusted operating margin. GfK's main absolute earnings driver
remains the R&T division, its crown jewel, for which we estimate sales
growth of 10%, 8% and 7.5% in 2010/11/12E driven by continued
geographic expansion in emerging markets, new end-market verticals
(e.g. tourism and fashion), and new product innovations (e.g. Network
Intelligence Solution). GfK's emerging market growth potential is still
significant. While emerging markets already account for 20-24% of
sales GfK is for instance no. 1 in R&T in China (and many other
emerging markets) we expect this share to continue to grow both
organically on the back of its global OEM customers, and also via small
acquisitions. Assuming a continued modest recovery in global
economic growth, we see GfK on track to approach the upper end of
its targeted adj. operating margin range of 13-15% by 2012E. The
company's margin expansion is being driven by a) continued robust
organic revenue growth in the high-margin R&T area; b) operational
leverage, in particular in Custom Research; c) the discontinuation of
one-off investments in the Media division (roll-out of Ad Measure); and
d) data collection cost improvements in Custom Research, also as part
of the group's BISS cost improvement programme.
Stock data
Free float
Enterprise value
Daily volume
EUR1328m
EUR571m
EUR1834m
35.9m
EUR 0.83m
Performances
13.8%
16.5%
53.4%
8.4%
-0.9%
7.9%
Absolute perf.
Relative perf.
37.3
37.3
32.3
32.3
27.3
27.3
22.3
22.3
17.3
17.3
12.3
12.3
7.3
01/01
7.3
03/02
06/03
09/04
12/05
Price/SDAX
03/07
06/08
Sector focus
Sector Top Picks
Least favoured
Lagardere, Pages Jaunes, Reed

Elsevier NV
Seat Pagine Gialle
Shareholders
Gfk-Nrnberg E.V. 57.0%, Free Float 43.0%
2009
2010E
2011E
2012E
17.0
17.8
14.4
12.1
9.6
9.9
8.1
6.9
15.2
6.8
7.2
7.1
Net debt/EBITDA (x)
2.8
1.9
1.3
0.8
Yield (%)
1.2
1.1
1.4
1.8
ROCE (%)
9.1
13.3
15.5
17.2
1.5
1.6
1.5
1.4
P/E (x)
EV/EBITDA (x)
Q
Q
114
www.cheuvreux.com
01/11
Price
Craig ABBOTT
Research Analyst
(49) 69 47 89 75 25
10/09
January 2011
GERMANY
Company profile
The world's 4th-largest market research group

GfK is the world's 4th-largest market research company with sales
of ~EUR1.27bn (2010E) adj. operating income of ~EUR177m. Its
workforce numbers ~9700. Since 2008 GfK has operated three
sectors (previously split into five): Custom Research, Retail and
Technology, and Media.
Q
Custom Research
Custom Research (61% of group revenues, 30% of group adj.
operating income) includes the sub-segments "Custom Research",
"Consumer Tracking" and "Healthcare" (which were all still individual
segments in 2007). It offers tailor-made information services for
various areas, including consumer markets and healthcare.
Valuation
Our target price of EUR40 is DCF-based. Our

main assumptions include:
Q
WACC of 8.0%
Terminal growth of 3%
Terminal EBIT margin 11.8%
Investment case
Q Retail and Technology the growth driver

R&T (29% of group revenues, 60% of group adj. operating income)
gathers retail information through continuous data collection.
Q Media
Media (10% of group revenues, 10% of group adj. operating income)
offers tailor-made surveys as well as continuous data collection
regarding media consumption.
Q Revenues by region
GfK's geographic revenue split is as follows: Germany 26%, Western
Europe/Middle East/Africa 37%, North America 17%, Asia-Pacific
8%, Central & Eastern Europe 7%, and Latin America 4%.
Q High share of continuous research
One of GfK's main advantages vs. competitors is its high proportion
of continuous research, which accounts for ~63% of revenues and
makes the business model more stable and more profitable.
SWOT analysis
Strengths
Weaknesses
Strong market positions (no. 4

globally for Market Intelligence
and no. 1 globally for Retail
Tracking of technical consumer
goods).
Custom research more

economically sensitive than
previously perceived
Flexibility regarding acquisition

opportunities currently
constrained by still relatively high
debt level
Global market leader in retail

tracking of technical consumer
goods.
High percentage of highmargin, relatively stable panel

research (~53% of sales).
Opportunities
Threats
Entering into new

products/geographical regions,
especially in panel research.
Risk of overpaying for

acquisitions/integration risk
Migration of some data

collection online leading to price
pressure in some product
segments
Market growth that has

consistently exceeded
GDP/advertising growth
Structural demand growth for

quality market intelligence,
increasingly, due to tougher
competition/increasingly
complex consumer habits
A prolonged slump in demand

in Custom Research could result
in intensifying price pressure
115
New market entrants
www.cheuvreux.com
GfK offers small-cap investors a fundamentally

strong franchise with still-solid growth
opportunities at decent multiples. GfK was not
immune to the economic crisis, especially in
Custom Research. The company responded,
however, with several cost-cutting measures in
addition to the BISS efficiency programme, and
margins are quickly being restored.
Market intelligence remains crucial to enable
companies to make the right product and
marketing decisions and historically has proven
resilient. As the world's fourth-largest market
research firm, GfK is well positioned and has
several well-entrenched positions, especially in
Retail & Technology and Media, and ~53% of its
sales stem from stable, high-margin panel
research.
The group's crown jewel is the Retail &
Technology division, which accounts for ~60%
of group earnings and still has significant growth
potential as it expands its global footprint in
emerging markets.
The valuation gap to its closest European peer
Ipsos has narrowed in recent quarters, but the
current discounts on EV/EBITDA (11E/12E) of
~22% and ~26% are still unjustifiably high
considering the two companies now have similar
organic growth rates and especially given GfK's
structurally higher profitability due to its high
share of high-margin Retail & Technology EBIT
(~60%). We expect this discount to unwind
further.
January 2011
GERMANY
GfK
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
116
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
669.1
12.4%
(282.7)
(278.3)
108.1
14.6%
(23.5)
84.6
21.7%
0.0
0.0
0.0
84.6
(3.2)
0.0
0.0
(28.2)
4.5
0.0
0.0
53.1
0.0
(10.8)
42.3
0.0
0.0
42.3
27.0%
937.3
40.1%
(373.1)
(435.3)
128.9
19.2%
(45.0)
83.9
-0.8%
0.0
0.0
0.0
83.9
7.6
0.0
0.0
(24.7)
3.2
0.0
0.0
66.8
0.0
(8.2)
58.6
0.0
0.0
58.6
38.5%
1,112.2
18.7%
(442.3)
(497.8)
172.1
33.5%
(50.2)
121.9
45.3%
0.0
0.0
0.0
121.9
(28.5)
0.0
0.0
(22.2)
3.3
0.0
0.0
71.2
0.0
(6.0)
65.2
0.0
0.0
65.2
11.3%
1,162.1
4.5%
(465.2)
(497.7)
199.2
15.7%
(59.7)
139.5
14.4%
0.0
0.0
0.0
139.5
(22.4)
0.0
0.0
(25.7)
3.0
0.0
0.0
91.5
0.0
(8.2)
83.3
0.0
0.0
83.3
27.8%
1,220.4
5.0%
(494.3)
(534.1)
192.0
-3.6%
(59.2)
132.8
-4.8%
0.0
0.0
0.0
132.8
(19.8)
0.0
0.0
(31.0)
3.6
0.0
0.0
82.0
0.0
(8.9)
73.1
0.0
0.0
73.1
-12.2%
1,164.5
-4.6%
(477.5)
(527.0)
160.0
-16.7%
(67.2)
92.8
-30.1%
0.0
0.0
0.0
92.8
(17.3)
0.0
0.0
(14.9)
3.8
0.0
0.0
60.5
0.0
(9.5)
51.0
0.0
0.0
51.0
-30.2%
1,272.7
9.3%
(515.4)
(557.0)
200.3
25.2%
(59.5)
140.8
51.7%
0.0
0.0
0.0
140.8
(16.5)
0.0
0.0
(37.3)
4.0
0.0
0.0
87.0
0.0
(11.0)
76.0
0.0
0.0
76.0
49.0%
1,366.1
7.3%
(551.9)
(587.7)
226.5
13.1%
(61.5)
165.0
17.2%
0.0
0.0
0.0
165.0
(17.3)
0.0
0.0
(44.3)
4.0
0.0
0.0
103.4
0.0
(11.3)
92.1
0.0
0.0
92.1
21.2%
1,453.7
6.4%
(587.3)
(614.4)
252.0
11.3%
(64.6)
187.4
13.6%
0.0
0.0
0.0
187.4
(14.7)
0.0
0.0
(51.8)
3.4
0.0
0.0
120.9
0.0
(11.5)
109.4
0.0
0.0
109.4
18.8%
76.6
16.4%
15.4
(13.0)
(13.0)
79.0
(66.0)
0.0
0.0
(6.5)
0.0
(12.4)
(5.9)
111.8
46.0%
17.0
(21.4)
(21.4)
107.4
(780.3)
0.0
0.0
(9.4)
0.0
209.5
(472.8)
121.3
8.5%
(11.2)
(21.9)
0.3
88.2
(44.7)
0.0
0.0
(11.6)
0.0
(49.5)
(17.6)
151.1
24.6%
17.0
(24.8)
(1.6)
143.3
(2.3)
0.0
0.0
(12.8)
0.0
(64.4)
63.8
141.2
-6.6%
4.3
(29.7)
(5.3)
115.8
(26.2)
0.0
0.0
(16.1)
0.0
(75.1)
(1.6)
127.7
-9.6%
6.9
21.3
44.6
155.9
(50.0)
0.0
0.0
(16.5)
0.0
8.7
98.1
146.5
14.7%
20.0
(61.0)
(29.2)
105.5
(30.0)
0.0
0.0
(10.8)
0.0
0.0
64.7
164.9
12.6%
2.5
(60.0)
(25.9)
107.4
0.0
0.0
0.0
(15.2)
0.0
0.0
92.2
185.5
12.5%
(19.2)
(62.0)
(25.7)
104.3
0.0
0.0
0.0
(18.9)
0.0
0.0
85.4
237.8
18.9
27.6
20.9
11.7
4.6
316.9
190.2
68.7
65.0
23.7
0.0
(30.7)
(4.6)
316.9
404.4
22.2
38.4
101.2
484.6
113.6
1,050.8
735.8
272.0
80.7
15.8
0.0
(53.5)
(5.7)
1,050.8
448.9
17.5
40.4
146.3
502.1
107.7
1,155.2
764.7
260.6
79.9
15.7
0.0
34.4
3.1
1,155.3
489.4
20.2
34.7
105.5
438.3
86.0
1,088.1
745.7
242.7
82.2
17.7
0.0
(0.1)
(0.0)
1,088.2
477.0
23.3
41.5
93.8
440.0
87.9
1,075.6
736.5
232.5
93.5
22.6
0.0
(9.4)
(0.8)
1,075.7
524.6
28.4
46.0
30.6
453.8
82.1
1,083.4
791.1
201.8
104.8
60.3
0.0
(74.6)
(6.4)
1,083.4
589.9
39.4
46.5
58.1
389.1
61.8
1,123.0
791.1
216.3
121.8
60.3
0.0
(66.6)
(5.2)
1,122.9
666.8
50.7
47.0
65.3
296.9
41.4
1,126.7
791.1
212.8
123.8
60.3
0.0
(61.4)
(4.5)
1,126.6
757.3
62.2
47.5
72.0
211.4
25.8
1,150.4
791.1
209.1
124.8
60.3
0.0
(35.0)
(2.4)
1,150.3
www.cheuvreux.com
January 2011
GERMANY
GfK
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
1.35
5.6%
1.35
5.6%
1.75
29.8%
1.75
29.8%
1.85
5.9%
1.85
5.9%
2.33
26.0%
2.33
26.0%
2.04
-12.7%
2.04
-12.7%
1.42
-30.2%
1.42
-30.2%
2.12
49.0%
2.12
49.0%
2.57
21.2%
2.57
21.2%
3.05
18.8%
3.05
18.8%
0.00
0.30
2.44
-3.3%
7.3
0.00
0.33
3.34
36.8%
11.7
0.00
0.36
3.45
3.3%
12.4
0.00
0.45
4.23
22.8%
13.3
0.00
0.46
3.93
-7.1%
12.8
0.00
0.30
3.56
-9.6%
14.3
0.00
0.42
4.08
14.7%
16.0
0.00
0.53
4.59
12.5%
18.0
0.00
0.67
5.17
12.5%
20.4

Latest price
High
Low
Average price
31.400
31.400
0.000
33.500
33.500
0.000
35.200
35.200
0.000
35.700
35.700
0.000
35.900
35.900
0.000
35.900
35.900
0.000
35.900
35.900
0.000
35.900
35.900
0.000
35.900
35.900
0.000
28.65
28.80
18.75
23.24
28.30
34.25
25.90
30.29
32.82
38.50
26.80
33.09
27.50
39.58
25.29
32.63
22.02
31.27
13.00
23.58
24.13
24.29
13.67
18.93
37.60
38.30
23.80
29.08
37.00
37.84
36.84
37.29
37.00
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
898.5
1,166.6
932.1
1,584.6
1,149.0
1,796.9
982.2
1,551.1
791.4
1,368.8
866.3
1,528.6
1,349.8
1,980.0
1,328.3
1,834.7
1,328.3
1,726.6
21.3
21.3
11.7
7.0
3.9
4.0
1.0
16.2
16.2
8.5
10.1
2.4
1.5
1.2
17.7
17.7
9.5
7.0
2.6
1.6
1.1
11.8
11.8
6.5
13.3
2.1
1.4
1.6
10.8
10.8
5.6
13.1
1.7
1.3
2.1
17.0
17.0
6.8
15.2
1.7
1.5
1.2
17.8
17.8
9.2
6.8
2.3
1.6
1.1
14.4
14.4
8.1
7.2
2.1
1.5
1.4
12.1
12.1
7.2
7.1
1.8
1.4
1.8
10.8
13.8
1.74
11.9
12.3
18.9
1.69
13.7
10.4
14.7
1.62
11.8
7.8
11.1
1.34
8.6
7.1
10.3
1.12
8.2
9.6
16.5
1.3
9.6
9.9
14.1
1.6
11.3
8.1
11.1
1.3
9.4
6.9
9.2
1.2
8.1
NS
0.2
16.2
12.6
7.9
2.3
4.6
22.3
NS
4.3
13.8
9.0
7.1
0.9
113.6
18.9
6.0
4.1
15.5
11.0
6.4
1.0
107.7
19.4
8.9
2.9
17.1
12.0
7.9
1.1
86.0
19.3
9.7
3.1
15.7
10.9
6.7
1.2
87.9
22.6
9.2
3.6
13.7
8.0
5.2
1.1
82.1
21.1
12.1
2.7
15.7
11.1
6.8
1.2
61.8
19.8
13.1
1.8
16.6
12.1
7.6
1.3
41.4
20.7
17.1
1.1
17.3
12.9
8.3
1.3
25.8
22.0
28.9
18.8
19.5
19.5
8.1
5.9
15.6
15.6
10.7
8.2
15.7
15.7
13.0
10.2
18.6
18.6
12.6
9.2
16.6
16.6
9.1
7.3
10.2
10.2
13.3
9.3
13.8
13.8
15.5
10.8
14.8
14.8
17.2
12.0
15.6
15.6
Goodwill per share

Dividend per share
Cash flow per share
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
117
www.cheuvreux.com
January 2011
GERMANY
3/Underperform
Rating
-10.0% EUR19.00
H&R WASAG
No trigger in sight
Q
Reuters: WASG.DE Bloomberg: WAS GR
Stock data
Recent developments Q3-10 results were in line
H&R Wasag's Q3-10 results were in line with expectations. EBITDA

rose 59% y-o-y to EUR27.9m, in line with our estimate at the time of
EUR28.1m and consensus of EUR27.8m. Sales rose just 26.5% y-o-y
to EUR267.9m, falling a disappointing 8% short of our estimate
(EUR292.5) and 6% below consensus (EUR284m).
Sales in H&R Wasag's Chemical/Pharmaceutical Products International
segment suffered from increased competition in Asia. This is a concern
for us. Moreover, demand for label-free plasticizers, H&R Wasag's most
promising product, is rising strongly, but H&R Wasag is unable to fully
participate as its two refineries are already running at full capacity. It
posted just 5% segment volume growth in Q3-10, whilst its volumes at
Chemical/Pharmaceutical Products National rose just 3% y-o-y .
Nevertheless, H&R Wasag increased its EBITDA guidance range for
2010 from EUR85-95m to EUR90-100m after Q3-10 reporting. This is
now in line with market expectations.
Q
EUR21.11
Price (07/01/2011)
Outlook Earnings drop likely in 2011
H&R Wasag is not willing to invest in a fuel refinery and denied any
interest in acquiring Shell's refinery in Hamburg. It does not rule out an
acquisition per se, though, as it follows an opportunistic approach.
However, a stand-alone specialty refinery is difficult to find. Thus, the
company sees better chances to grow organically. As it revealed after
its huge capex programme of EUR55m for its propane de-asphalting
(PDA) plant in 2010/2011, it sees opportunities to further invest in
higher-quality products beyond that programme.
In base oils the supply/demand situation is currently balanced. Base oil
prices moved up substantially in H1-10, leading to very comfortable
base oil margins, which still prevail. H&R Wasag hopes this situation
can continue into next year, but has no way of foreseeing how long it
will last. The company is optimistic that the gradual improvement in its
market will continue with competitors shutting down production units in
"grade 1" base oils every 2-4 years as oil majors cut back their refinery
capacity. This will improve H&R Wasag's positioning and thus its
earnings in future.
H&R Wasag reiterated that it will stay with its currently loss-making
business Plastics. It hopes that due to the change in strategy (away
from automotive towards medical) it can return to former profitability
(EBITDA margins 2002-2005: 11-19%) but we doubt it. We see the
stock's valuation as stretched, while earnings should shrink in 2011E,
weighing on the share price. Thus, we prefer other chemical stocks,
which continue to benefit from positive earnings momentum, and
reiterate our 3/Underperform rating on the stock.
Free float
Enterprise value
Daily volume
EUR633m
EUR277m
EUR814m
29.973m
EUR 0.48m
Performances
4.8%
14.1%
39.3%
-0.1%
-2.9%
-2.0%
Absolute perf.
Relative perf.
43.1
43.1
38.1
38.1
33.1
33.1
28.1
28.1
23.1
23.1
18.1
18.1
13.1
13.1
8.1
8.1
3.1
01/01
3.1
03/02
06/03
09/04
12/05
Price/SDAX
03/07
06/08
Sector focus
Sector Top Picks
Least favoured
Shareholders
Nils Hansen 46.5%, Free Float 43.9%, Wilhelm
Scholten 6.1%, Prof. Wolfgang Thum 3.5%
2009
2010E
2011E
2012E
18.0
12.3
14.3
12.1
EV/EBITDA (x)
9.1
7.9
8.7
7.3
NS
NS
1.4
5.5
Net debt/EBITDA (x)
1.7
1.3
1.5
1.1
P/E (x)
Yield (%)
3.0
2.9
2.8
3.3
ROCE (%)
12.7
19.1
15.7
17.4
1.7
1.9
1.8
1.7
Q
Q
118
www.cheuvreux.com
01/11
Price
Martin ROEDIGER
Research Analyst
(49) 69 47 897 763
09/09
January 2011
GERMANY
Company profile
Niche supplier of raw materials for chemical companies

H&R Wasag is a niche supplier of raw materials for chemical
companies. Its products include among others white oils for the
cosmetics industry and plasticizers for tyre rubber. In 2009 the
company achieved EBIT of EUR45m on sales of EUR762m.
Geographically, 64% of its sales were generated in Germany, 18% in
rest of Europe and 18% in the rest of the world.
Q
Chemical-Pharmaceutical Pre-Products = 95% of sales

WAS's 2004 acquisition of BP's specialty refinery more than doubled
group sales and increased its sales exposure to the main chemicals
and pharmaceutical pre-products segment from 66% (2003) to 95%
(2009) of total group sales. This segment accounts for 100% of
group EBITDA as the remaining Plastics segment (5% of sales)
generated a loss in 2009.
Q
Golden Cut project finally to commence in 2010

H&R
Wasag
is
currently
strengthening
its
chemicals/
pharmaceuticals pre-products business with investments (capex for
"Project 40"). After postponements due to financial constraints, the
company kicked off its "Golden Cut" investment project in spring
2010. H&R Wasag's aim with this project is to switch production of
certain low-margin (commodity) products into high-margin (specialty)
products. H&R Wasag expects an EBITDA contribution of EUR1214m from this project by 2012.
Q
Q Additional business in silica possible

H&R WASAG AG finally obtained its licence to mine deposits of silica
sand on the property owned by the group at Haltern am See. The
company will investigate the various options for the extraction of the
deposits. This project is not expected to have any major impact on
earnings in the near term.
SWOT analysis
Strengths
Weaknesses
Leading position in crude-oilbased specialties for the

chemical and pharmaceutical
industries
Time lag in passing on raw

material costs to customers
Adverse cost structure due to

huge exposure to Germany
Cost leader in lubricants

blending in Europe
Not a price leader, just a price

taker dependent on pricing set
by oil majors
Niche player with leading

technological edge
Dependent on major
shareholder H&R for distribution
in Germany (64% of sales)
Opportunities
Threats
Taking over non-core activities

of major oil companies
Growth opportunities in
eastern Europe and Asia
Introduction of tyre
labelling in EU in 2012 could
boost sales
No 1 player in label-free
plasticizers in Europe with 25%
market share in that region
Increasing competition from

Asian companies
Regulatory risk (REACH

programme)
119
www.cheuvreux.com
Valuation
The stock is trading at a EV/EBITDA 11E of 8.7x,

9% above the average of the European
chemicals sector (8.0x).
In terms of P/CF 11E, the stock trades at 9.6x,
4% above the average of the European
chemicals sector (9.2x).
Our DCF model renders a fair value of EUR19
based on a WACC of 8.0% and a terminal
growth rate of 1%. Thus, our price target is
EUR19, suggesting 10% downside. Our rating is
3/Underperform.
Investment case
We believe H&R Wasag's earnings have peaked

for the time being, as in 2010 its earnings were
buoyed by very favourable circumstances that
are unlikely to reoccur soon: a) production
problems at competitors (refineries) enabled
H&R Wasag to increase its volumes and thus
gain market share. b) selling prices, e.g. base
oils, rose stronger than raw material costs (crude
oil derivatives) leading to significant windfall
profits in 2010. For 2011, however, we expect
the margin between base and crude oil prices to
normalize, leading to shrinking earnings and
most certainly margins in 2011E. For the time
being, we believe investors will focus on stocks
that can offer earnings and margin growth in
2011. Investors will have to wait until 2012 for
earnings and margin expansion at H&R Wasag,
when the "Golden Cut" investment programme
is expected to boost EBITDA by EUR12-14m.
However, this should already be largely
discounted in the share price. Thus, we see no
triggers for the share price in near term.
We see H&R Wasag's valuation as stretched.
Our peer group comparison shows no upside.
The company is unlikely to report any earnings
growth in 2011, while other chemical companies
will probably increase earnings in 2011.
Moreover, H&R Wasag's ROCE is inferior to the
chemicals sector. The company's negative
earnings momentum and inferior profitability
justify a valuation discount to the chemicals
sector.
January 2011
GERMANY
H&R WASAG
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
120
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
497.1
135.4%
(69.9)
(394.3)
32.9
37.1%
(13.7)
19.2
29.7%
(2.7)
0.0
0.0
16.5
(7.0)
0.0
0.0
(2.3)
0.3
0.0
(2.7)
7.5
0.0
(1.0)
6.5
0.0
0.0
11.9
30.8%
650.1
30.8%
(78.4)
(526.3)
45.4
38.0%
(16.5)
28.9
50.5%
(0.9)
0.0
0.0
28.0
(9.1)
0.0
0.0
(8.1)
0.0
0.0
(0.9)
10.9
0.0
(1.0)
9.9
0.0
0.0
11.7
-1.7%
816.8
25.6%
(92.7)
(623.2)
100.9
122.2%
(16.9)
84.0
190.7%
0.0
0.0
0.0
84.0
(9.0)
0.0
0.0
(29.4)
0.0
0.0
0.0
45.6
0.0
(2.3)
43.3
0.0
0.0
43.3
NS
797.9
-2.3%
(78.0)
(627.1)
92.8
-8.0%
(13.6)
79.2
-5.7%
0.0
0.0
0.0
79.2
(6.2)
0.0
(17.3)
(21.4)
0.0
0.0
0.0
34.3
0.0
0.4
34.7
0.0
0.0
34.7
-19.9%
1,035.2
29.7%
(62.7)
(919.1)
53.4
-42.5%
(16.3)
37.1
-53.2%
0.0
0.0
0.0
37.1
(11.1)
0.0
22.0
(14.3)
0.0
0.0
0.0
33.7
0.0
0.0
33.7
0.0
0.0
33.7
-2.9%
762.3
-26.4%
(67.9)
(628.9)
65.5
22.7%
(20.8)
44.7
20.5%
0.0
0.0
0.0
44.7
(8.6)
0.0
0.0
(11.1)
0.0
0.0
0.0
25.1
0.0
(0.1)
25.0
0.0
0.0
25.0
-25.8%
1,057.5
38.7%
(75.0)
(880.4)
102.1
55.9%
(21.1)
81.0
81.2%
0.0
0.0
0.0
81.0
(8.3)
0.0
0.0
(21.4)
0.0
0.0
0.0
51.2
0.0
0.0
51.2
0.0
0.0
51.2
104.8%
1,006.0
-4.9%
(77.4)
(835.0)
93.6
-8.3%
(21.7)
71.9
-11.2%
0.0
0.0
0.0
71.9
(9.0)
0.0
0.0
(18.6)
0.0
0.0
0.0
44.3
0.0
0.0
44.3
0.0
0.0
44.3
-13.5%
1,099.9
9.3%
(84.6)
(906.2)
109.1
16.6%
(26.1)
83.0
15.4%
0.0
0.0
0.0
83.0
(8.6)
0.0
0.0
(22.0)
0.0
0.0
0.0
52.4
0.0
0.0
52.4
0.0
0.0
52.4
18.3%
29.5
(74.6)
(64.9)
0.0
0.0
(0.4)
0.0
0.0
(5.7)
0.0
142.9
0.0
28.7
-2.7%
8.6
(39.8)
0.0
(2.5)
0.7
0.0
0.0
(5.7)
0.0
33.6
26.1
63.3
120.6%
(39.3)
14.4
0.0
38.4
1.6
0.0
0.0
(5.7)
6.3
(43.7)
(3.1)
46.2
-27.0%
40.6
(60.7)
0.0
26.1
0.0
0.0
0.0
(12.6)
0.0
(10.1)
3.4
49.6
7.4%
(18.4)
(60.2)
0.0
(29.0)
0.6
0.0
0.0
(24.0)
0.0
45.3
(7.1)
43.3
-12.7%
(18.6)
(47.1)
(4.0)
(22.4)
(8.1)
0.0
0.0
(12.0)
0.0
(0.1)
(42.6)
74.2
71.4%
(51.7)
(33.8)
(29.0)
(11.3)
0.0
0.0
0.0
(13.5)
0.0
31.7
6.9
65.7
-11.5%
5.7
(62.3)
(14.0)
9.1
0.0
0.0
0.0
(18.0)
0.0
0.5
(8.4)
79.1
20.4%
(19.6)
(24.5)
(7.0)
35.0
0.0
0.0
0.0
(18.0)
0.0
7.3
24.3
80.5
3.8
50.8
33.8
99.5
118.0
268.4
44.2
1.0
88.8
7.7
0.7
126.0
25.3
268.4
71.8
3.1
50.8
46.0
121.6
162.4
293.3
49.9
0.6
105.9
7.3
0.4
129.3
19.9
293.4
113.7
4.7
49.8
40.9
85.5
72.2
294.6
35.1
1.2
89.6
6.1
0.0
162.5
19.9
294.5
172.3
1.0
48.3
43.4
40.4
23.3
305.4
35.1
5.0
133.0
6.1
0.0
126.1
15.8
305.3
164.8
0.6
48.2
51.2
96.4
58.3
361.2
35.0
3.9
164.0
5.3
0.2
152.8
14.8
361.2
181.3
0.4
48.8
22.2
113.1
62.2
365.8
35.1
3.2
168.9
11.1
2.5
145.0
19.0
365.8
218.9
0.6
53.9
30.7
132.8
60.5
436.9
35.1
4.2
180.6
11.1
2.5
203.3
19.2
436.8
245.1
0.7
55.7
29.2
139.9
56.9
470.6
35.1
5.0
220.4
11.1
2.5
196.4
19.5
470.5
279.5
0.8
60.9
32.0
117.7
42.0
490.9
35.1
5.9
217.9
11.1
2.5
218.2
19.8
490.7
www.cheuvreux.com
January 2011
GERMANY
H&R WASAG
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
121
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.63
30.8%
0.34
32.8%
0.62
-1.6%
0.52
52.0%
2.06
NS
2.06
NS
1.16
-43.8%
1.16
-43.8%
1.12
-2.9%
1.12
-2.9%
0.83
-25.8%
0.83
-25.8%
1.71
104.8%
1.71
104.8%
1.48
-13.5%
1.48
-13.5%
1.75
18.3%
1.75
18.3%
0.29
0.30
0.00
0.10
0.30
1.52
4.0
3.5
0.00
0.60
3.01
98.5%
4.8
0.00
0.80
1.54
-48.8%
4.9
0.00
0.40
1.66
7.4%
5.1
0.00
0.45
1.45
-12.7%
5.6
0.00
0.60
2.48
71.3%
6.7
0.00
0.60
2.19
-11.5%
7.6
0.00
0.70
2.64
20.4%
8.6
18.916
18.916
0.000
18.916
18.916
0.000
21.021
21.021
0.000
29.973
29.973
0.000
29.973
29.973
0.000
29.973
29.973
0.000
29.973
29.973
0.000
29.973
29.973
0.000
29.973
29.973
0.000
8.54
10.75
6.07
8.32
10.75
10.82
7.65
9.43
38.27
40.81
10.71
22.02
20.24
42.35
17.21
30.73
10.90
21.11
9.20
14.67
14.98
16.85
7.55
11.88
21.05
22.89
13.20
17.55
21.11
21.44
20.71
21.11
21.11
-
161.5
303.3
203.4
368.3
723.9
853.8
553.0
635.6
326.7
465.8
449.0
597.3
630.9
804.0
632.7
814.7
632.7
797.7
24.9
13.6
NS
NS
2.2
1.2
3.5
20.5
17.4
7.1
NS
3.1
1.3
2.8
18.6
18.6
12.7
5.3
8.0
3.0
1.6
17.5
17.5
13.1
4.7
4.1
2.1
4.0
9.7
9.7
6.6
NS
2.1
1.3
3.7
18.0
18.0
10.4
NS
2.7
1.7
3.0
12.3
12.3
8.5
NS
3.1
1.9
2.9
14.3
14.3
9.6
1.4
2.8
1.8
2.8
12.1
12.1
8.0
5.5
2.4
1.7
3.3
9.2
15.8
0.61
56.8
8.1
12.7
0.57
10.8
8.5
10.2
1.05
12.4
6.8
8.0
0.80
12.7
8.7
12.6
0.45
8.1
9.1
13.4
0.8
12.1
7.9
9.9
0.8
10.0
8.7
11.3
0.8
11.3
7.3
9.6
0.7
9.4
4.7
NS
6.6
3.9
1.5
1.9
118.0
87.3
5.0
4.2
7.0
4.4
1.7
2.3
162.4
57.3
11.2
1.4
12.4
10.3
5.6
2.8
72.2
29.1
15.0
0.9
11.6
9.9
4.3
2.7
23.3
69.1
4.8
1.9
5.2
3.6
3.3
2.9
58.3
35.6
7.6
2.6
8.6
5.9
3.3
2.2
62.2
54.0
12.3
1.8
9.7
7.7
4.8
2.5
60.5
35.1
10.4
2.1
9.3
7.1
4.4
2.2
56.9
40.6
12.7
1.5
9.9
7.5
4.8
2.3
42.0
40.0
7.4
5.6
8.4
8.4
10.1
5.8
14.8
14.8
29.1
17.7
47.0
47.0
26.5
16.3
22.4
22.4
10.4
7.3
22.8
22.8
12.7
8.8
14.8
14.8
19.1
13.5
26.5
26.5
15.7
11.1
19.9
19.9
17.4
12.3
20.7
20.7
www.cheuvreux.com
January 2011
GERMANY
MACHINERY
2/Outperform
Rating
+56.3% EUR5.80
Heidelberger Druck
Resurrection of a world market leader
Q
Recent developments capital increase
HDD announced on 12 Sept a subscription price of EUR2.7 to raise

gross proceeds of EUR420m. The 155m new shares have been
included in the existing listing on the stock exchange since endSeptember. Due to the capital increase, we expect HDD's financial
result to be less negative at ~EUR-135m for FY 10-11E (March) and
EUR-95m for FY 11-12E.
Q2 10-11E order intake remained strong with the final figures matching
the preliminaries at EUR650m, +5% y-o-y and -17% q-o-q. The q-o-q
decline stemmed from the order boost in Q1 of ~EUR100m from the
IPEX trade fair. We expect order intake to remain robust for the balance
of FY 10-11E at EUR690m in Q3 and EUR710m in Q4.
EUR3.71
Price (07/01/2011)
Reuters: HDDG.DE Bloomberg: HDD GR
Stock data
Free float
Enterprise value
Daily volume
EUR863m
EUR712m
EUR1475m
232.929m
EUR 3.42m
Performances
-1.4%
15.4%
-39.5%
-2.9%
1.3%
-53.0%
Absolute perf.
Relative perf.
71.4
71.4
LatAm provided the strongest order intake growth in Q2 10-11, a +74%

y-o-y jump to EUR47m, driven by extremely strong business in Brazil.
Order intake in other regions was as follows: EMEA +17% to
EUR231m; Asia/Pacific +33% to EUR228m; E. Europe (+2% to
EUR63m) and N. America +7% to EUR81m (all y-o-y).
61.4
61.4
51.4
51.4
41.4
41.4
31.4
31.4
21.4
21.4
During its Q2 10-11 release, HDD reiterated its FY 10-11 guidance
11.4
11.4
for moderate y-o-y sales increase and break-even EBIT, but still a net
loss. We currently exp. sales growth of 12% y-o-y to EUR2.58bn and
EBIT of EUR21.3m. During the CC management guided for order intake
of EUR600-700m per quarter in H2 10-11, implying FY 10-11 orders of
EUR2.64-2.84bn (+11-20%), or a y-o-y order intake growth range of 7% to +9% for H2 10-11. We are at the upper end of guidance and
exp. Q3/Q4 10-11E orders of EUR690m/EUR710m.
1.4
Outlook Better prospects, but crisis not over
Renewed rumours of a potential merger between HDD and Manroland

are positive in our view. Serious antitrust issues surmountable through
plant closures or divestments. In the current economic recovery, public
criticism of job losses would probably be milder. Disagreement about
the joint leadership and cultural issues could be solved by pressure
from main shareholder Allianz. Although w doubt this combination will
actually happen, we do believe the stock market is willing to play the
speculation again and again.
Having faced the toughest period in its history the past 3 years, we
expect HDD to emerge strengthened from the crisis. We believe it has
taken the right steps (deep restructuring, capital increase) and will make
optimal use of the profitable growth opportunities that lie ahead
(emerging markets, services, consumables). After years of
underinvestment in printing equipment, demand is returning. This,
together with reduced capacity among all industry players, is likely to
improve pricing. However, the fact remains that Heidelberger Druck is
active in a structurally declining industry that will never return to its
former peak.
01/01
1.4
04/02
07/03
10/04
01/06
Price/M DAX
04/07
07/08
Sector focus
Sector Top Picks
Least favoured

Shareholders
Free Float 82.6%, Allianz Ag 13.2%, Rwe 4.2%
09/10
10/11E
11/12E
12/13E
P/E (x)
NS
NS
15.8
10.3
EV/EBITDA (x)
NS
12.4
5.5
4.8
NS
NS
0.8
NS
Net debt/EBITDA (x)
(13.1)
3.6
1.6
1.3
0.0
Yield (%)
0.0
0.0
0.0
ROCE (%)
NS
1.0
7.2
8.0
0.6
0.6
0.6
0.6
Q
Q
122
www.cheuvreux.com
01/11
Price
Research Analyst
(49) 69 47 897 540
10/09
GERMANY
January 2011
Company profile
World's largest manufacturer of sheet-fed offset printing

presses
Founded in 1850, Heidelberger Druckmaschinen (HDD) has been
listed since 1997. With a market share of ~41% (3x that of its closest
competitor), it is the world's largest manufacturer of sheet-fed offset
presses, covering the complete product range from pre-press to
finishing (including software solutions). Key end-markets include
commercial and packaging printing. Its workforce numbers 16,500.
HDD offers a proprietary sales organisation with a presence in over
170 countries; 60,000 printing machines were sold over the past 15
years offering huge potential for Services. Its manufacturing sites are
located in Germany, Switzerland, Slovakia, China and the USA.
Q
Q Still expected to be loss-making in FY 10-11E

Following the first losses in its history in 2004-05, Heidelberg
divested loss-making activities (digital and web systems) that had
accounted for 17% of FY 03-04 group sales and returned to the
black. The past two FYs have been loss-making again, however, and
we expect another loss in 10-11E of EUR79m due to a) the sharp
sales drop during 2009-10 which it has not fully recovered from, b)
structural problems within the printing industry; and c) a highly
negative financial result despite relief from the capital increase.
Q Mid-term targets are optimistic
Mid-term, HDD guides for sales of above EUR3bn, a post-crisis EBIT
margin of >5%, a pre-tax ROCE of 15%, a net debt/EBITDA ratio of
below 2.5x, an equity ratio of 33%, net working capital of less than
35% of trailing 12M sales, R&D below 5% of sales, and capex of
2%.
SWOT analysis
Strengths
Weaknesses
Global no. 1 manufacturer of

sheet-fed offset printing presses
with ~41% global market share,
~3x that of its nearest competitor
Opportunities
Threats
Growth
prospects in emerging
markets and in packaging
Intensified
Cost base still highly exposed

to high-cost countries
Huge
negative financial result

despite capital increase
Structural customer concentration and price erosion in

industrialised countries
production shift to
China
Exchange
Rising
remote services (internet)

could lock out third-party service
providers
123
rates (EUR/USD,
USD/JPY), material and energy
prices
Increasing
share of online
advertising in overall ad
spending
www.cheuvreux.com
Valuation
We use three different valuation approaches for

HDD shares: A normalised earnings model, a
historic price/book value analysis, and a historic
EV/Sales analysis.
Q Our normalised earnings model yields a FV of
EUR6.6/share.
Q Applying HDD's 10-year historical average
P/BV of 1.5x to its current equity position, we
arrive at a FV of EUR5.7.
Q HDD's current 2010-11E EV/Sales ratio of
0.57x is well below its historical 10-year average
of 0.7x.
All in all, we reiterate our 2/OP and with a TP of

EUR5.8.
Investment case
Having faced the toughest period in its history

the past 3 years, we expect HDD to emerge
strengthened from the crisis. We believe it has
taken the right steps (deep restructuring, capital
increase), and will make optimal use of the
profitable growth opportunities that lie ahead
(emerging markets, services, consumables).
After years of underinvestment in printing
equipment, demand is returning. This, together
with reduced capacity amongst all industry
players, is likely to improve pricing.
The company should achieve its ambitious midterm targets (see company profile) thanks to a)
an installed base of 240,000 machines
worldwide which provides huge services
potential that the company has neglected in the
past; b) significant opportunities in emerging
markets, especially for lower-end machines; c)
the fact that HDD offers by far the best and most
up-to date product portfolio in the industry as it
did not cut back R&D during the crisis as sharply
as some peers.
January 2011
GERMANY
Heidelberger Druck
FY to 31/3 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
124
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11E
2011/12E
2012/13E
3,360.3
-10.3%
(1,138.1)
(1,940.9)
281.3
12.7%
(114.2)
167.1
110.5%
0.0
0.0
0.0
167.1
(46.5)
0.0
0.0
(46.4)
0.0
0.0
0.0
61.2
0.0
(6.1)
55.1
0.0
0.0
55.1
107.9%
3,585.5
6.7%
(1,096.6)
(2,077.3)
411.6
46.3%
(134.5)
277.1
65.8%
0.0
0.0
0.0
277.1
(47.9)
0.0
0.0
(94.3)
0.0
0.0
(3.0)
134.9
0.0
(0.1)
134.8
0.0
0.0
137.8
150.1%
3,802.8
6.1%
(1,163.3)
(2,148.9)
490.6
19.2%
(128.8)
361.8
30.6%
0.0
0.0
0.0
361.8
(62.1)
0.0
0.0
(36.7)
0.0
0.0
(2.0)
262.9
0.0
0.1
263.0
0.0
0.0
265.0
92.3%
3,670.3
-3.5%
(1,179.7)
(2,099.2)
391.4
-20.2%
(123.6)
267.8
-26.0%
0.0
0.0
0.0
267.8
(68.9)
0.0
0.0
(57.4)
0.0
0.0
(1.0)
141.6
0.0
0.2
141.8
0.0
0.0
142.8
-46.1%
2,999.5
-18.3%
(1,065.8)
(2,062.0)
(128.3)
NS
(99.3)
(227.6)
NS
0.0
0.0
0.0
(227.6)
(119.1)
0.0
0.0
98.0
0.0
0.0
0.0
(248.7)
0.0
0.0
(248.7)
0.0
0.0
(248.7)
NS
2,306.4
-23.1%
(816.6)
(1,543.0)
(53.2)
58.5%
(105.4)
(158.6)
30.3%
0.0
0.0
0.0
(158.6)
(127.5)
0.0
0.0
57.6
0.0
0.0
0.0
(228.5)
0.0
0.0
(228.5)
0.0
0.0
(228.5)
8.1%
2,583.2
12.0%
(784.6)
(1,679.1)
119.5
NS
(98.2)
21.3
113.4%
0.0
0.0
0.0
21.3
(128.0)
0.0
0.0
27.7
0.0
0.0
0.0
(78.9)
0.0
0.0
(78.9)
0.0
0.0
(78.9)
65.5%
2,919.0
13.0%
(798.5)
(1,853.6)
266.9
123.3%
(96.3)
170.6
NS
0.0
0.0
0.0
170.6
(94.9)
0.0
0.0
(21.2)
0.0
0.0
0.0
54.5
0.0
0.0
54.5
0.0
0.0
54.5
169.1%
3,007.7
3.0%
(805.1)
(1,890.8)
311.8
16.8%
(113.7)
198.1
16.1%
0.0
0.0
0.0
198.1
(77.1)
0.0
0.0
(37.5)
0.0
0.0
0.0
83.5
0.0
0.0
83.5
0.0
0.0
83.5
53.2%
175.3
133.4%
(94.2)
(162.0)
(44.4)
(80.9)
(58.5)
0.0
0.0
(1.8)
0.0
317.1
175.9
594.4
NS
(1,301.1)
(52.9)
(33.0)
(759.6)
(55.7)
0.0
0.0
(25.8)
212.6
1,103.6
475.1
440.7
-25.9%
(14.2)
(13.7)
(32.0)
412.8
6.1
0.0
0.0
(55.5)
(9.5)
(338.4)
15.5
251.5
-42.9%
169.1
(1.4)
(31.0)
419.2
(20.5)
0.0
0.0
(77.3)
(4.3)
(142.8)
174.3
(160.7)
NS
165.4
(113.4)
(30.0)
(108.7)
40.4
0.0
0.0
(74.2)
0.0
64.0
(78.5)
(116.7)
27.4%
40.5
26.3
(30.0)
(49.9)
4.8
0.0
0.0
0.0
0.0
(50.9)
(96.0)
(52.1)
55.4%
26.1
(98.4)
(30.0)
(124.4)
0.0
0.0
0.0
0.0
400.0
137.9
413.5
187.8
NS
(56.4)
(124.1)
(30.0)
7.3
0.0
0.0
0.0
0.0
0.0
157.6
164.9
206.9
10.2%
(92.2)
(123.3)
(30.0)
(8.6)
0.0
0.0
0.0
0.0
0.0
116.1
107.5
1,195.1
35.3
594.5
652.5
102.2
8.3
2,579.6
82.1
157.8
490.2
666.7
0.0
1,182.9
35.2
2,579.7
1,137.7
0.0
211.6
720.8
490.7
43.1
2,560.8
101.2
157.3
549.7
55.7
0.0
1,696.9
47.3
2,560.8
1,201.7
0.0
132.9
788.4
467.0
38.9
2,590.0
103.2
157.8
549.8
49.6
0.0
1,729.7
45.5
2,590.1
1,192.8
0.0
116.0
883.4
402.3
33.7
2,594.5
103.2
169.9
582.0
70.1
0.0
1,669.3
45.5
2,594.5
796.1
0.0
154.2
856.3
680.8
85.5
2,487.4
103.2
219.0
647.4
29.7
0.0
1,488.0
49.6
2,487.3
579.0
0.0
225.4
725.2
694.9
120.0
2,224.5
125.6
167.0
596.9
24.9
0.0
1,310.0
56.8
2,224.4
900.0
0.0
219.7
697.5
424.9
47.2
2,242.1
125.6
164.5
599.7
24.9
0.0
1,327.5
51.4
2,242.2
954.6
0.0
223.6
788.1
413.7
43.3
2,380.0
125.6
171.8
620.1
24.9
0.0
1,437.6
49.3
2,380.0
1,038.0
0.0
225.4
812.1
420.4
40.5
2,495.9
125.6
190.4
611.1
24.9
0.0
1,544.0
51.3
2,496.0
www.cheuvreux.com
January 2011
GERMANY
Heidelberger Druck
FY to 31/3 (Euro)
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11E
2011/12E
2012/13E

EPS before goodwill
% Change
EPS, reported
% Change
0.64
107.9%
0.64
107.9%
1.61
151.8%
1.58
146.3%
3.26
101.7%
3.23
104.6%
1.83
-43.9%
1.82
-43.8%
(3.21)
NS
(3.21)
NS
(2.95)
8.1%
(2.95)
8.1%
(0.34)
88.5%
(0.34)
88.5%
0.23
169.0%
0.23
169.0%
0.36
53.0%
0.36
53.0%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.30
2.04
133.4%
13.6
0.04
0.65
6.96
NS
12.7
0.03
0.95
5.41
-22.3%
13.8
0.01
0.95
3.22
-40.5%
14.3
0.00
0.00
(2.07)
NS
10.3
0.00
0.00
(1.50)
27.4%
7.5
0.00
0.00
(0.22)
85.1%
3.9
0.00
0.00
0.81
NS
4.1
0.00
0.00
0.89
10.2%
4.5

Latest price
High
Low
Average price
85.908
85.908
0.000
85.357
85.357
0.000
81.400
81.400
0.000
78.126
78.126
0.000
77.600
77.600
0.000
77.600
77.600
0.000
232.929
232.929
0.000
232.929
232.929
0.000
232.929
232.929
0.000
25.00
34.60
21.35
26.59
32.32
33.30
21.35
26.64
35.88
41.90
30.30
34.74
23.00
40.98
19.36
32.41
3.64
56.96
3.84
13.02
5.33
7.64
2.80
4.99
3.71
8.74
2.87
5.52
3.71
3.90
3.71
3.77
3.71
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
2,117.7
3,047.1
3,113.5
3,760.1
2,840.9
3,391.2
1,299.7
1,747.9
268.5
1,073.8
412.3
1,307.7
863.0
1,482.7
863.0
1,475.4
863.0
1,483.9
39.0
39.0
12.3
NS
1.8
1.6
1.2
20.5
20.0
4.6
NS
2.5
1.5
2.0
11.1
11.0
6.6
14.5
2.6
1.3
2.6
12.7
12.6
7.1
32.2
1.6
0.7
4.1
NS
NS
NS
NS
0.4
0.4
0.0
NS
NS
NS
NS
0.7
0.6
0.0
NS
NS
NS
NS
1.0
0.6
0.0
15.8
15.8
4.6
0.8
0.9
0.6
0.0
10.3
10.3
4.2
NS
0.8
0.6
0.0
10.8
18.2
0.91
14.0
9.1
13.6
1.05
6.0
6.9
9.4
0.89
6.8
4.5
6.5
0.48
5.8
NS
NS
0.36
(14.3)
NS
NS
0.6
(88.2)
12.4
69.6
0.6
34.8
5.5
8.6
0.5
5.8
4.8
7.5
0.5
5.7
6.0
0.6
8.4
5.0
1.8
1.8
8.3
46.8
8.6
0.8
11.5
7.7
3.8
1.4
43.1
41.2
7.9
1.1
12.9
9.5
6.9
1.5
38.9
29.4
5.7
1.6
10.7
7.3
3.9
1.5
33.7
52.3
NS
NS
NS
NS
NS
1.2
85.5
0.0
NS
NS
NS
NS
NS
1.0
120.0
0.0
0.9
NS
4.6
0.8
NS
1.2
47.2
0.0
2.8
2.2
9.1
5.8
1.9
1.2
43.3
0.0
4.0
2.0
10.4
6.6
2.8
1.2
40.5
0.0
8.7
5.0
4.7
4.7
11.1
6.5
12.6
12.6
14.2
12.5
24.6
24.6
10.6
7.5
12.6
12.6
NS
NS
NS
NS
NS
NS
NS
NS
1.0
0.7
NS
NS
7.2
5.2
5.9
5.9
8.0
5.5
8.4
8.4
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
125
www.cheuvreux.com
January 2011
GERMANY
SHIPPING & LOGISTICS
2/Outperform
Rating
+27.1% EUR44.00
HHLA
Reuters: HHFGn.DE Bloomberg: HHFA GR
Delayed Elbe River dredging a burden

Recent developments Strong business momentum in H2
but delayed Elbe River dredging a burden
In Q3-10 HHLA's group sales climbed 17% y-o-y and 7% q-o-q to

EUR287m. Its Q3 container TEU volume was very strong, rising 28% yo-y and 17% q-o-q to 1.619m (our estimate: 1.49m). This sturdy growth
showed that HHLA is actually winning back market share at the
expense of both Rotterdam and Antwerp, where Q3 volumes were up
by less than 20% y-o-y.
The group EBIT margin was very strong at 21%, while the Container
division's EBIT margin reached 30% in Q3. Net profit came to EUR27m.
With revenue per TEU handled (Rev/TEU) having reached its lowest
level since Q4-07 in Q3-10, at EUR101, driven mainly by a rising
proportion of low-margin transhipment volumes and lower storage
charges, we now assume FY10E Rev/TEU of EUR103.6, implying Q410 Rev/TEU of EUR100.5. We see Rev/TEU rising again to EUR104.5 in
FY11E followed by EUR105.5 in FY12E. While HHLA expects to see a
recovery in storage charges once the global container shortage eases,
it does not anticipate a return to pre-crisis levels, which we estimate at
EUR16-18 per TEU, as shipping lines have learned to operate their
logistics operations more efficiently.
After the strong Q3-10, HHLA raised its guidance, predicting more than
15% y-o-y growth in Container TEU volumes in 2010, with Intermodal
volumes up by more than 11% y-o-y, sales in excess of EUR1bn and
EBIT of around EUR180m. The company had previously predicted 2010
volume growth of more than 10%, with a rising proportion of lowermargin feeder volumes, a y-o-y rise in group revenue to around
EUR1bn and an EBIT margin of at least 15%.
In a statement released on 8 November, Germany's federal government
and the City State of Hamburg stated that they still expect the dredging
work on the Elbe River to start by year-end 2011. Furthermore, the
financing for this infrastructure project is secured. This statement came
as a slight disappointment as we had hoped for a positive dredging
decision in Q4-10 with construction work to start in early 2011E. Having
said that, the statement was fully in line with the timeline we apply in our
model, i.e. we expect the Elbe to be dredged for 2012E.
Q
EUR34.62
Price (07/01/2011)
Outlook Elbe dredging of paramount importance
Clearly, the dredging of the Elbe River to deepen its bed by one metre
is of paramount importance for the Port of Hamburg since large ships,
defined as ships which can handle 10,000 TEUs or more, account for
nearly half of all cargo ships currently being manufactured in the world
today. Such ships can currently only use the Elbe River during high tide,
but could use a dredged Elbe at all times of day. They are earmarked
mainly for deployment on the Asia-Europe-Asia route, which is also of
paramount importance for Hamburg as TEUs on this route account for
59% of Hamburg's total container throughput.
Stock data
Free float
Enterprise value
Daily volume
EUR2514m
EUR804m
EUR3659m
72.63m
EUR 3.05m
Performances
4.8%
18.9%
19.3%
3.2%
4.4%
-7.2%
Absolute perf.
Relative perf.
65.0
65.0
55.0
55.0
45.0
45.0
35.0
35.0
25.0
25.0
15.0
11/07
15.0
04/08
08/08
01/09
06/09
Price/M DAX
10/09
03/10
Sector focus
Sector Top Picks
Least favoured
Shareholders
Freie Und Hansestadt Hamburg 68.0%, Free Float
32.0%
2009
2010E
2011E
2012E
P/E (x)
37.0
35.0
24.5
20.4
EV/EBITDA (x)
13.1
13.4
10.1
8.7
2.0
0.1
5.1
5.9
Net debt/EBITDA (x)
0.7
0.8
0.3
(0.1)
Yield (%)
1.5
1.8
2.5
2.9
ROCE (%)
15.2
16.1
20.7
23.9
3.4
3.1
3.3
3.3
Q
Q
126
www.cheuvreux.com
12/10
Price
Research Analyst
(49) 69 47 897 540
08/10
January 2011
GERMANY
Company profile
Germany's top port operator with deep vertical integration

Hamburg-based HHLA (Hamburger Hafen und Logistic AG) is a
leading, vertically-integrated port operator and logistics company
holding market shares of 71% in Hamburg and 16.6% in the
Hamburg-Antwerp range. Besides operating three container
terminals in the Port of Hamburg and one in Odessa, HHLA offers
intermodal and logistics services.
Q
Q Extensive service offering in addition to container handling

In Container Handling (2009: 57% of sales, 93% of EBIT), container
shipping lines pay HHLA to load their containers onto or off ships
and to store and repair the containers. In 2009 HHLA's top 5
customers accounted for 48% of its total sales, its top 10 customers
75%, and its top 15 87%. In its Intermodal business (29% of sales)
HHLA transports containers by rail, sea or road from the ports to the
hinterland in Germany and to Eastern/Central Europe. Its customers
appreciate HHLA's highly efficient hinterland connections. In
Logistics (14% of sales) the company offers a comprehensive range
of services for a variety of cargos.
Q Transport cost advantage due to attractive inland position
The Port of Hamburg is a crucial transport link between Asia and
Central/Eastern Europe, the two most important emerging markets.
It has a structural/geographical advantage due to its location 100km
inland. Normally, when transporting a container from Shanghai to
Prague via Hamburg, for example, the transport from Shanghai to
Hamburg (roughly 20,400km) accounts for 97% of the total distance
but just 70% of the total transport costs. The remaining 3% of the
distance and 30% of the transportation costs arise between
Hamburg and Prague. The distance from Hamburg to Prague
(700km) is shorter than Rotterdam-Prague (1,100km) or AntwerpPrague (1,000km). Hence, the final transport segment from port to
final destination is more expensive from these other two ports than
from Hamburg and raises overall transport costs appreciably.
SWOT analysis
Strengths
Weaknesses
Market leader in Hamburg
One port with one access

'bottleneck': the Elbe River
Customers appreciate high

level of vertical integration
Long term: visibility of growth
Highly capital-intensive
High share of minorities
Transport cost advantages

due to location
Opportunities
Threats
Strongly benefits from an

economic recovery
Delay of Elbe River dredging
Long-lasting global recession

hitting global trade flows
127
www.cheuvreux.com
Valuation
DCF: assuming sales and EBITDA CAGRs of

2.8% and 2.9% respectively for 2010-19E, a
WACC of 8.4% and 1.5% terminal growth, our
DCF model renders a FV per share of EUR41.
SOP: our SOP model, based on 12E

forecasts, yields a FV per share of EUR47 with
the following inputs: EV/sales of 4.8x for the
Container division, 1.1x for Intermodal and 1.3x
for Logistics. In a blue-sky scenario (completion
of Elbe River dredging by the start of 2012) the
FV rises to as much as EUR50.
Q
Q Normalised earnings model: indicates a FV

of EUR39 in a base case and EUR48 in a bluesky case.
Multiple comparison: our peer group

valuation shows HHLA to be trading in line with
other ports and at an 8% discount to its
transport/logistics peers based on 11E
EV/EBITDA. However, these multiples fail to
capture HHLA's strong recovery potential and
its positive upside potential from a swift Elbe
River dredging decision that may lead to
completion by YE-11.
Investment case
HHLA winning back market share: in 2009

HHLA's market share in the Hamburg-Antwerp
range fell from 19.9% to just 16.6% due to
weakness in key end-markets and a temporary
shift of transhipment volumes to its peers. This
trend continued in H1-10. However, in Q3-10
HHLA began to win back market share and
outperformed on TEU volumes, recording a 28%
y-o-y rise whilst Rotterdam and Antwerp both
showed less than 20% y-o-y growth. After 9M10 we estimate HHLA's market share to be back
at >17%. This indicates that handling quality,
time and regional location are gaining
importance again vs. handling prices. We expect
this trend to continue.
Huge upside if positive Elbe dredging
decision comes soon: We believe that if the
Elbe dredging is finished by start of 12, starting
in 12E HHLA can regain an estimated 0.4-0.6m
TEUs (mainly transhipment) lost to other North
Range ports in 2009. This scenario offers 28%
upside potential to our current 12E estimates
and the FV could rise to as much as EUR50.
January 2011
GERMANY
HHLA
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
128
2006
2007
2008
2009
2010E
2011E
2012E
1,017.4
22.2%
(236.8)
(484.2)
296.4
41.0%
(78.3)
218.1
48.8%
0.0
0.0
0.0
218.1
(31.3)
0.0
0.0
(69.8)
0.0
0.0
(2.0)
116.9
0.0
(19.8)
97.1
0.0
0.0
99.1
64.6%
1,180.0
16.0%
(261.5)
(539.9)
378.6
27.7%
(91.0)
287.6
31.9%
0.0
0.0
0.0
287.6
(30.9)
0.0
0.0
(104.9)
0.2
0.0
(1.0)
152.0
0.0
(40.7)
111.3
0.0
0.0
112.3
13.3%
1,326.8
12.4%
(280.7)
(589.2)
456.9
20.7%
(101.8)
355.1
23.5%
0.0
0.0
0.0
355.1
(31.2)
0.0
0.0
(106.6)
0.2
0.0
0.0
217.4
0.0
(57.2)
160.2
0.0
0.0
160.2
42.7%
990.7
-25.3%
(284.7)
(428.5)
277.5
-39.3%
(117.3)
160.2
-54.9%
0.0
0.0
0.0
160.2
(34.4)
0.0
0.0
(36.9)
0.2
0.0
0.0
89.1
0.0
(36.1)
53.0
0.0
0.0
53.0
-66.9%
1,068.8
7.9%
(247.1)
(515.7)
306.0
10.3%
(122.4)
183.6
14.6%
0.0
0.0
0.0
183.6
(34.7)
0.0
0.0
(43.4)
0.8
0.0
0.0
106.3
0.0
(34.6)
71.7
0.0
0.0
71.7
35.3%
1,164.8
9.0%
(266.2)
(535.8)
362.8
18.6%
(133.4)
229.4
24.9%
0.0
0.0
0.0
229.4
(30.7)
0.0
0.0
(59.9)
0.8
0.0
0.0
139.7
0.0
(37.0)
102.7
0.0
0.0
102.7
43.2%
1,254.6
7.7%
(288.2)
(564.5)
401.9
10.8%
(143.7)
258.2
12.6%
0.0
0.0
0.0
258.2
(21.8)
0.0
0.0
(71.1)
0.8
0.0
0.0
166.0
0.0
(43.0)
123.0
0.0
0.0
123.0
19.8%
204.5
91.2
(56.0)
(18.7)
239.7
(83.1)
0.0
0.0
0.0
0.0
(143.6)
13.0
250.2
22.3%
71.1
(102.2)
(34.1)
219.1
(18.5)
0.0
0.0
0.0
123.0
0.0
323.6
323.1
29.1%
34.8
(113.4)
(37.8)
244.5
(12.1)
0.0
0.0
(11.0)
0.1
(202.0)
19.5
212.4
-34.3%
(45.7)
(101.6)
(33.9)
65.1
7.2
0.0
0.0
(15.0)
0.0
(127.6)
(70.3)
213.2
0.4%
(27.7)
(183.3)
(100.0)
2.2
0.0
0.0
0.0
(29.1)
0.0
97.2
70.3
276.7
29.8%
(11.6)
(90.3)
(5.0)
174.8
0.0
0.0
0.0
(44.4)
0.0
101.4
231.8
313.1
13.2%
(12.1)
(100.4)
(5.0)
200.6
0.0
0.0
0.0
(61.6)
0.0
111.3
250.3
208.6
50.1
377.4
53.5
329.4
127.3
1,019.0
0.0
63.1
681.7
163.1
0.0
111.0
10.9
1,018.9
482.8
86.7
312.4
59.1
103.3
18.1
1,044.3
0.0
68.9
755.4
181.6
0.0
38.4
3.3
1,044.3
574.1
108.5
300.7
68.6
102.4
15.0
1,154.3
0.0
78.4
873.0
193.7
0.0
9.2
0.7
1,154.3
534.8
102.2
325.1
74.9
203.7
32.0
1,240.7
0.0
82.3
916.8
186.5
0.0
55.2
5.6
1,240.8
598.0
116.2
325.1
56.6
230.6
32.3
1,326.5
0.0
102.6
957.4
186.5
0.0
80.1
7.5
1,326.6
676.0
133.5
325.1
61.7
100.2
12.4
1,296.5
0.0
109.0
907.9
186.5
0.0
93.1
8.0
1,296.5
761.5
152.4
325.1
66.5
(38.8)
NS
1,266.7
0.0
115.9
857.7
186.5
0.0
106.5
8.5
1,266.6
www.cheuvreux.com
January 2011
GERMANY
HHLA
FY to 31/12 (Euro)
2006
2007
2008
2009
2010E
2011E
2012E
1.36
1.55
13.3%
1.53
14.6%
2.21
42.7%
2.21
44.0%
0.73
-66.9%
0.73
-66.9%
0.99
35.2%
0.99
35.2%
1.41
43.3%
1.41
43.3%
1.69
19.8%
1.69
19.8%
2.9
0.01
0.85
3.45
22.3%
5.8
0.00
1.00
4.45
29.1%
6.9
0.00
0.40
2.92
-34.3%
7.0
0.00
0.61
2.94
0.4%
7.6
0.00
0.85
3.81
29.8%
8.5
0.00
1.02
4.31
13.1%
9.5
72.630
72.630
0.000
72.630
72.630
0.000
72.630
72.630
0.000
72.630
72.630
0.000
72.630
72.630
0.000
72.630
72.630
0.000
72.630
72.630
0.000
61.00
67.50
57.50
61.48
23.50
61.88
20.26
43.02
26.99
32.78
16.15
25.97
34.55
35.70
23.44
28.63
34.62
35.81
34.42
35.13
34.62
-
4,430.4
4,664.5
1,706.8
2,525.0
1,960.3
3,636.3
2,509.4
4,089.5
2,514.5
3,659.4
2,514.5
3,493.1
NS
NS
NS
NS
NS
0.0
39.8
39.5
17.7
4.9
10.5
5.4
1.4
10.7
10.7
5.3
10.6
3.4
2.6
4.3
37.0
37.0
9.2
2.0
3.9
3.4
1.5
35.0
35.0
11.8
0.1
4.5
3.1
1.8
24.5
24.5
9.1
5.1
4.1
3.3
2.5
20.4
20.4
8.0
5.9
3.7
3.3
2.9
NS
NS
NS
NS
12.3
16.2
3.95
17.4
5.5
7.1
1.90
5.6
13.1
22.7
3.7
9.7
13.4
22.3
3.8
12.1
10.1
16.0
3.1
9.2
8.7
13.5
2.8
8.0
9.5
1.6
29.1
21.4
11.5
1.2
127.3
0.0
12.3
0.4
32.1
24.4
12.9
1.4
18.1
55.5
14.6
0.3
34.4
26.8
16.4
1.4
15.0
45.3
8.1
1.0
28.0
16.2
9.0
0.9
32.0
54.8
8.8
1.1
28.6
17.2
9.9
0.9
32.3
61.8
11.8
0.4
31.1
19.7
12.0
1.0
12.4
60.1
18.4
NS
32.0
20.6
13.2
1.2
NS
60.2
25.5
16.0
60.7
60.7
33.3
19.7
26.1
26.1
37.0
24.8
32.4
32.4
15.2
10.7
10.4
10.4
16.1
11.4
12.8
12.8
20.7
14.5
16.4
16.4
23.9
16.7
17.6
17.6

EPS before goodwill
% Change
EPS, reported
% Change
1.34
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.03
0.00
2.82

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
129
www.cheuvreux.com
January 2011
GERMANY
2/Outperform
Rating
+4.5% EUR64.00
Hochtief
Reuters: HOTG.DE Bloomberg: HOT GR
ACS exceeds the 30% threshold

Q
Recent developments ACS increases stake beyond 30%
In September ACS, Hochtief's largest shareholder, announced a

voluntary exchange offer for Hochtief shares. It offered 8 ACS shares
for 5 Hochtief shares, which initially valued Hochtief at just EUR55.7 per
share. Clearly a low-balled offer Hochtief's share price was already
above the offer price at the time ACS' strategy was to simply exceed
the 30% threshold by the end of the offer period and then to expand its
stake further over time, ideally eventually to over 50%, enabling it to
consolidate Hochtief. At least partially in response, Hochtief announced
ambitious measures to crystallise the value of its portfolio of assets to
include the consolidation of its three European divisions (expected
annual savings ~EUR40m), the disposal of its Concessions business in
2011, either via a trade sale or an IPO, and pulling forward the planned
disposal of its Aurelis real-estate portfolio to 2012 (1 year ahead of
plan). In early December Hochtief also announced a 10% capital
increase excluding subscription rights, with the shares to be acquired
by Qatar Holding LLC. In addition to gaining a new strategic
shareholder, the move initially diluted ACS' stake from 29.98% to
27.3%. ACS in the meantime increased its offer to 9:5 (equating to
EUR64 per share), and according to a press statement (4 Jan) it
succeeded in increasing its stake to above the 30% threshold (30.34%)
by the end of the initial tender period, which ended on 29 Dec; an
additional acceptance period was extended to 18 Jan (terms
unchanged).
Q
EUR61.22
Price (07/01/2011)
Outlook ACS likely to gradually increase to majority stake
Having increased its stake beyond the 30% threshold, ACS is likely to
be a natural buyer in the market over time until it is eventually able to
acquire a majority stake. Given its leveraged balance sheet, ACS may,
however, need to sell assets initially to raise the funding that would be
required to achieve the 50%, which at the current share price would
cost ~EUR850m.
Operationally Hochtief reported solid results through the third quarter,
with the biggest positive 2010 surprise so far being its strong margin
performance in the Americas division, despite the sharp declines in
orders in 2009 in its US building activities at Turner (pre-tax profit Q1Q3 +31%, 2% margin). Because of provisions made previously,
Hochtief was able to largely offset the AUD120m project-related writedowns that had been previously announced by Leighton. Hochtief
reconfirmed its FY10 guidance for sales in line with 2009 but with pretax and net income both slightly above 2009 levels.
Stock data
Free float
Enterprise value
Daily volume
EUR4285m
EUR2785m
EUR9293m
66.5m
EUR 18.32m
Performances
-5.6%
-3.9%
8.4%
-7.0%
-15.6% -15.6%
Absolute perf.
Relative perf.
100.0
100.0
90.0
90.0
80.0
80.0
70.0
70.0
60.0
60.0
50.0
50.0
40.0
40.0
30.0
30.0
20.0
20.0
10.0
01/01
10.0
04/02
07/03
10/04
01/06
Price/M DAX
04/07
07/08
Price
Sector Top Picks

Least favoured
Shareholders
ACS 30.3%, Qatar Holding LLC 9.09%, Treasury
Shares 4.46%, Free float 56.1%
2009
2010E
2011E
2012E
18.2
20.6
18.1
15.0
EV/EBITDA (x)
8.0
9.6
8.7
7.3
3.7
0.7
NS
4.9
Net debt/EBITDA (x)
0.3
0.2
0.3
(0.1)
P/E (x)
Yield (%)
2.8
2.5
2.9
3.5
ROCE (%)
29.6
28.7
32.1
36.9
4.6
5.1
5.0
4.8
Craig ABBOTT
Q
Q
130
www.cheuvreux.com
12/10
Sector focus
Research Analyst
(49) 69 47 89 75 25
10/09
January 2011
GERMANY
Company profile
A global, diversified construction services company

Hochtief is a globally leading, diversified construction services
company. Although it is still the largest construction company in
Germany (based on market cap), it generates less than 10% of its
group sales in Germany today. Hochtief operates a diversified but
inter-linked portfolio of businesses designed around covering the
entire lifecycle of infrastructure, real estate and industrial facilities.
Q
Q Operates six divisions

The group operates six divisions: Americas (334 of sales, 15% of
pre-tax earnings), Asia-Pacific (46% of sales, 64% of PBT),
Concessions (generates only marginal reported sales of 1% but
accounts for 12% of PBT), Europe (12% of sales but just 4% of
PBT), Real Estate (4% of sales, 4% of PBT), and Services (3% of
sales, 3% of PBT).
High correlation to Leighton

Hochtief's Asia-Pacific division, comprising predominately the
activities of its listed subsidiary Leighton Holdings (55% stake) in
Australia, is the group's main earnings contributor, accounting for
~42% of sales and ~65% of pre-tax profit. Therefore, Hochtief's
share performance has historically exhibited a high correlation to
that of Leighton's shares.
Q
SWOT analysis
Strengths
Weaknesses
Global footprint an
increasingly important factor in
winning/retaining large, multinational customers
German
construction market
remains highly fragmented with
poor pricing discipline resulting
in low profitability in European
construction
Increasingly diversified
portfolio of business activities,
reducing exposure to new
building demand
Share price highly correlated

with the share price of its listed
subsidiary, Leighton Holdings
Ltd. (55% stake)
Relatively stable, long-term

contract mining business of
Leighton and Services
Commercial building activities

may face prolonged downturn
Leighton's Australian mines

produce above-average yields
making them less susceptible to
shutdowns
Opportunities
Threats
Well positioned to benefit from

economic-stimulus-driven
infrastructure and public building
projects, especially in the US and
Australia
Tendering for PPP

concessions projects (Road &
Social Infrastructure)
Project risks (construction) and

asset revaluation risks (property
management)
Amid lower activity, risk of
rising price/margin pressure on
bids for new projects
Stimulus-based orders may

not be able to offset decline in
orders in commercial building
Acquisitions in Services
Traffic and tariff recovery at

airport and road concessions
FX risks (USD & AUD)

(translation)
131
www.cheuvreux.com
Valuation
Our target price of EUR64 is based on a SOP

valuation approach. Our key assumptions are
90% of the value of its 55% stake in Leighton
Holdings, EV/EBIT multiples (based on 10E
estimates) of 6.0x for Turner, 7.5x for Flatiron, 5x
for the Europe division, 5x for Real Estate and
7.5x for Services. We value the Concessions
division at EUR1.3bn.
Investment case
Hochtief's share price performance in the near

future is likely to continue to be dominated by
how ACS's tender offer develops. Regardless of
the outcome, however, Hochtief has been
prompt in stepping up measures to crystallise
the value of its portfolio, including now trying to
accelerate the disposal of its Aurelis property
portfolio, which it is confident will generate a
significant gain, and pursuing a dual-track
disposal process for its Concessions business in
2011.
Furthermore,
Hochtief
plans
to
consolidate its three European divisions, a move
which is expected to generate ~EUR40m in
savings p.a. Applying a P/E of 10x, this implies a
further EUR400m or ~EUR5 per share. Qatar's
recent investment in Hochtief was a strategic
move to 'acquire expertise as it builds out its
infrastructure ahead of the 2022 World Cup', but
the move also underlines that there is hidden
value in Hochtief.
January 2011
GERMANY
Hochtief
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
132
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
11,943.7
13.4%
(1,834.5)
(9,690.3)
418.9
18.7%
(262.7)
156.2
10.1%
0.0
0.0
0.0
156.2
31.0
0.0
0.0
(106.2)
0.0
0.0
0.0
81.1
0.0
(40.0)
41.1
0.0
0.0
41.1
-29.6%
13,653.2
14.3%
(2,161.4)
(10,924.7)
567.1
35.4%
(286.9)
280.2
79.4%
0.0
0.0
0.0
280.2
48.9
0.0
0.0
(177.7)
0.0
0.0
0.0
151.3
0.0
(88.5)
62.8
0.0
0.0
62.8
52.8%
15,465.7
13.3%
(2,583.9)
(12,377.8)
504.0
-11.1%
(324.5)
179.5
-35.9%
0.0
0.0
0.0
179.5
158.6
0.0
0.0
(136.7)
0.0
0.0
0.0
201.4
0.0
(112.3)
89.1
0.0
0.0
89.1
41.9%
16,451.8
6.4%
(2,806.0)
(13,210.3)
435.5
-13.6%
(312.5)
123.0
-31.5%
0.0
0.0
0.0
123.0
378.4
0.0
0.0
(160.3)
0.0
0.0
0.0
341.1
0.0
(200.3)
140.8
0.0
0.0
140.8
58.0%
18,703.1
13.7%
(3,265.8)
(14,757.7)
679.6
56.1%
(392.3)
287.3
133.6%
0.0
0.0
0.0
287.3
209.6
0.0
0.0
(173.0)
0.0
0.0
0.0
323.9
0.0
(167.2)
156.7
0.0
0.0
156.7
11.3%
18,166.1
-2.9%
(3,501.1)
(13,638.4)
1,026.6
51.1%
(501.4)
525.2
82.8%
0.0
0.0
0.0
525.2
75.2
0.0
0.0
(192.3)
0.0
0.0
0.0
408.1
0.0
(212.9)
195.2
0.0
0.0
195.2
24.6%
17,842.9
-1.8%
(3,358.7)
(13,497.4)
986.8
-3.9%
(460.0)
526.8
0.3%
0.0
0.0
0.0
526.8
94.5
0.0
0.0
(198.8)
0.0
0.0
0.0
422.5
0.0
(217.3)
205.2
0.0
0.0
205.2
5.1%
18,634.9
4.4%
(3,499.6)
(14,071.0)
1,064.3
7.9%
(460.0)
604.3
14.7%
0.0
0.0
0.0
604.3
86.7
0.0
0.0
(221.1)
0.0
0.0
0.0
469.8
0.0
(244.3)
225.5
0.0
0.0
225.5
9.9%
19,397.3
4.1%
(3,625.3)
(14,626.4)
1,145.6
7.6%
(470.0)
675.6
11.8%
0.0
0.0
0.0
675.6
105.4
0.0
0.0
(249.9)
0.0
0.0
0.0
530.1
1.0
(260.3)
270.8
0.0
0.0
270.8
20.1%
353.2
4.1%
(1,109.3)
(440.3)
(201.4)
(1,196.4)
0.0
0.0
383.1
(84.6)
0.0
0.0
(897.9)
440.3
24.7%
195.4
(496.8)
(223.7)
138.9
0.0
0.0
466.9
(111.4)
0.0
0.0
494.4
563.8
28.0%
343.1
(737.4)
(428.1)
169.5
0.0
0.0
235.5
(128.1)
0.0
0.0
276.9
654.2
16.0%
(44.9)
(703.2)
(374.1)
(93.9)
(1,301.8)
0.0
0.0
(195.6)
0.0
0.0
(1,591.3)
716.2
9.5%
(428.4)
(645.5)
(271.4)
(357.7)
0.0
0.0
324.3
(91.0)
0.0
0.0
(124.4)
930.5
29.9%
19.2
(661.2)
(297.9)
288.5
0.0
0.0
(302.5)
(98.0)
0.0
0.0
(112.0)
882.5
-5.2%
(68.8)
(750.0)
(393.1)
63.7
0.0
0.0
75.0
(105.0)
0.0
0.0
33.7
929.8
5.4%
(55.2)
(904.0)
(531.3)
(29.4)
0.0
0.0
80.0
(112.9)
0.0
0.0
(62.3)
1,001.1
7.7%
59.4
(650.0)
(262.1)
410.5
0.0
0.0
80.0
(124.0)
0.0
0.0
366.5
1,548.7
356.0
313.3
2,758.4
(184.6)
NS
4,791.8
211.2
85.7
900.6
1,002.6
0.0
2,591.6
21.7
4,791.7
1,664.8
537.2
172.6
288.5
(936.6)
NS
1,726.5
227.7
545.3
682.2
924.8
0.0
(653.5)
(4.8)
1,726.5
1,807.7
538.0
33.0
278.6
(1,283.9)
NS
1,373.4
299.8
615.4
751.8
745.9
0.0
(1,039.5)
(6.7)
1,373.4
2,297.7
703.1
29.0
477.9
(202.2)
NS
3,305.5
406.5
1,319.9
1,027.6
1,503.7
0.0
(952.1)
(5.8)
3,305.6
1,931.0
895.2
76.7
1,073.4
329.7
11.7
4,306.0
407.8
74.8
1,163.3
2,764.6
0.0
(104.6)
(0.6)
4,305.9
2,210.1
1,101.8
71.3
1,243.6
266.1
8.0
4,892.9
431.1
72.6
1,530.6
3,119.6
0.0
(261.0)
(1.4)
4,892.9
2,310.3
1,319.1
71.3
1,224.2
232.3
6.4
5,157.2
431.1
72.6
1,545.6
3,319.6
0.0
(211.6)
(1.2)
5,157.3
2,423.0
1,563.4
71.3
1,256.2
294.6
7.4
5,608.5
431.1
72.6
1,505.6
3,723.6
0.0
(124.4)
(0.7)
5,608.5
2,569.7
1,823.7
71.3
1,310.5
(71.8)
NS
5,703.4
431.1
72.6
1,455.6
3,873.6
0.0
(129.5)
(0.7)
5,703.4
www.cheuvreux.com
January 2011
GERMANY
Hochtief
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.65
-29.7%
0.65
153.3%
0.99
52.2%
0.99
52.2%
1.37
38.5%
1.37
38.5%
2.07
51.1%
2.07
51.1%
2.26
8.9%
2.26
8.9%
2.94
30.0%
2.94
30.0%
3.09
5.1%
3.09
5.1%
3.39
9.9%
3.39
9.9%
4.07
20.1%
4.07
20.1%
0.00
0.75
5.60
4.1%
23.8
0.00
0.90
6.95
24.1%
25.4
0.00
1.10
8.69
25.1%
26.8
0.00
1.30
9.64
10.9%
32.5
0.00
1.40
10.32
7.1%
26.4
0.00
1.50
13.99
35.6%
31.7
0.00
1.61
13.27
-5.2%
33.1
0.00
1.77
13.98
5.4%
34.7
0.00
2.13
15.05
7.7%
36.5

Latest price
High
Low
Average price
63.100
63.100
0.000
63.400
63.400
0.000
64.900
64.900
0.000
67.900
67.900
0.000
69.400
69.400
0.000
66.500
66.500
0.000
66.500
66.500
0.000
66.500
66.500
0.000
66.500
66.500
0.000
23.99
26.90
16.80
21.16
37.83
37.94
22.34
29.43
55.20
59.50
36.33
46.28
92.00
98.31
50.91
77.40
35.74
91.89
19.78
54.16
53.55
60.71
20.53
40.39
63.54
67.69
45.09
56.92
61.22
64.67
60.93
62.46
61.22
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,679.3
3,440.9
2,648.1
5,617.0
3,508.5
6,669.0
5,847.5
13,985.4
2,501.8
5,575.4
3,748.5
8,179.5
4,447.8
9,455.5
4,285.4
9,293.8
4,285.4
8,402.2
36.8
36.8
4.3
NS
1.0
0.9
3.1
38.2
38.2
5.4
2.2
1.5
7.0
2.4
40.2
40.2
6.4
2.1
2.1
10.6
2.0
44.4
44.4
9.5
NS
2.8
7.8
1.4
15.8
15.8
3.5
NS
1.4
3.6
3.9
18.2
18.2
3.8
3.7
1.7
4.6
2.8
20.6
20.6
4.8
0.7
1.9
5.1
2.5
18.1
18.1
4.4
NS
1.8
5.0
2.9
15.0
15.0
4.1
4.9
1.7
4.8
3.5
8.2
22.0
0.29
5.3
9.9
20.0
0.41
4.5
13.2
37.2
0.43
4.8
32.1
NS
0.85
14.3
8.2
19.4
0.30
5.0
8.0
15.6
0.5
4.6
9.6
17.9
0.5
5.8
8.7
15.4
0.5
5.3
7.3
12.4
0.4
4.6
NS
NS
3.5
1.3
0.7
3.2
NS
115.1
NS
NS
4.2
2.1
1.1
17.0
NS
90.9
NS
NS
3.3
1.2
1.3
24.6
NS
80.1
NS
NS
2.6
0.7
2.1
9.1
NS
62.7
NS
0.5
3.6
1.5
1.7
12.1
11.7
62.0
NS
0.3
5.7
2.9
2.2
10.2
8.0
51.1
NS
0.3
5.5
3.0
2.4
9.7
6.4
52.2
NS
0.3
5.7
3.2
2.5
9.9
7.4
52.2
NS
NS
5.9
3.5
2.7
10.6
NS
52.3
4.1
1.8
2.7
2.7
35.0
16.1
3.8
3.8
28.6
17.0
5.1
5.1
6.8
4.6
6.3
6.3
18.6
12.2
8.5
8.5
29.6
20.1
9.2
9.2
28.7
19.5
9.3
9.3
32.1
21.8
9.8
9.8
36.9
25.1
11.1
11.1

EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
133
www.cheuvreux.com
January 2011
GERMANY
3/Underperform
Rating
-25.0% EUR74.40
Hornbach Holding
Turbulent times ahead
Q
Reuters: HBHG_p.DE Bloomberg: HBH3 GR
Stock data
Recent developments Positive 9M-10 but .
In 9M-FY10 Hornbach was able to increase its sales, gross profit

margin and EBIT margin. Its success was attributable to lower input
costs and a positive sales trend in both nominal and like-for-like terms
in Germany and its international markets thanks to the economic
rebound.
After the negative trend in Hornbach's international markets in FY09
and Q1-FY10, international sales picked up speed again in Q2-10,
returning positive like-for-like growth of 2.1%. The only remaining weak
links are now Hornbach's Czech and Rumanian stores, which have yet
to feel the positive impact of the economic upswing. With its strong Q2
and Q3-10, Hornbach was able to offset the 1.5% Q1-10 like-for-like
sales decline and therefore reported slightly positive l-f-l sales growth of
0.6% in 9M-10 for its international markets.
The company's German business also reported positive l-f-l sales
growth of 4.9% in Q2-10 after an unsatisfying Q1-10 with a l-f-l sales
decrease of 2.3%. The positive trend was sustained in Q3, with a l-f-l
increase of 6.4%. The main reasons for the positive development in Q2
and Q3-10 were the overall economic stability in Germany, with less
unemployment and a positive outlook in terms of household income, as
well as the sunny weather. Q2 sales were also boosted by the company
catching up on gardening sales lost in Q1-10 as well as by the positive
trends in terms of economic and consumer sentiment. This resulted in it
reporting 2.7% l-f-l sales growth in 9M-10.
Q
Outlook weaker quarters expected
Looking ahead, we see a rising risk of declining gross profit margins as

1) the company has indicated that suppliers have begun to exert
pressure in terms of purchasing prices and 2) Hornbach already
reported lower retail prices in H1-FY10. Additionally, the increase in
store openings in the company's international markets beginning from
FY11E (from 2-3 stores p.a. in FY09 and FY10E to a planned 6-7 new
stores p.a. from FY11 in line with its annual level of new store
openings in the years prior to the global financial crisis) will also lead to
higher opex.
Hence, we see little potential for further positive developments in terms
of gross profit and EBIT margins after FY10E.
Free float
Enterprise value
Daily volume
Jrgen KOLB
Jennifer GAUSSMANN
Research Analyst
jkolb@cheuvreux.com
(49) 69 47 89 74 26
Research Analyst
(49) 69 47 89 75 35
Q
134
www.cheuvreux.com
EUR397m
EUR327m
EUR856m
8m
EUR 0.13m
Performances
0.4%
37.7%
48.0%
-4.4%
17.1%
4.1%
Absolute perf.
Relative perf.
110.0
110.0
100.0
100.0
90.0
90.0
80.0
80.0
70.0
70.0
60.0
60.0
50.0
50.0
40.0
40.0
30.0
30.0
01/01
04/02
07/03
09/04
11/05
Price/SDAX
01/07
06/08
10/09
01/11
Price
Sector focus
Sector Top Picks
Least favoured
Ahold, Carrefour
Colruyt
Shareholders
Free Float 82.6%, King Fisher Plc 17.4%
09/10
10/11E
11/12E
12/13E
P/E (x)
7.9
11.2
10.9
10.2
EV/EBITDA (x)
3.0
3.7
3.7
3.6
28.4
NS
NS
NS
Net debt/EBITDA (x)
1.9
1.9
2.0
2.0
Yield (%)
1.7
1.5
1.5
1.4
ROCE (%)
11.1
10.6
10.3
10.2
0.5
0.5
0.5
0.5
Q
EUR99.14
Price (07/01/2011)
GERMANY
January 2011
Company profile
History
Founded as a craftsman's enterprise in 1877, Hornbach expanded
to become a construction materials retailer in 1900. In 1968 Otmar
Hornbach, the great grandson of the founder, opened the first
combined DIY and gardening store in Europe. The company's
expansion with large-format DIY stores began in 1980 with the first
DIY store of 8,000m. In 2001 Kingfisher and Hornbach formed a
strategic alliance, with Kingfisher taking a shareholding in Hornbach,
but the company remains family-controlled. Hornbach is currently
Germany's fourth- and Europe's sixth-largest DIY retailer.
Q
Q Regional distribution
Besides Germany (92 stores), Hornbach operates stores in the
Czech Republic (6), Slovakia (2), Romania (3), Austria (11),
Switzerland (5), Luxembourg (1), the Netherlands (8) and Sweden (3).
Foreign sales contribute ~39% to group sales.
Group and shareholder structure

Hornbach Holding consists of three subgroups: 1) Baumarkt, which
is the DIY retail operating business, 2) Real Estate, which consists of
parts of the group's real estate and 3) Baustoffunion, the
construction materials retailer. 94% of Hornbach Holding's sales
stem from its DIY business, 4% from real estate and 2% from the
construction materials division. The following shares are listed on the
stock exchange: 1) Hornbach Baumarkt ordinary shares, which are
77.2% owned by the Holding and 5.3% by Kingfisher, 2) Hornbach
Holding preferred shares, of which 17.4% are held by Kingfisher. Of
the unlisted Hornbach ordinary shares Kingfisher owns 25% plus
one share; the rest is owned by the Hornbach family.
Q
Q Strategy
Hornbach relies on organic growth in its large-scale DIY stores, both
in Germany and abroad. To finance growth it uses either its free
cash flow or sale-and-lease-back transactions.
SWOT analysis
Strengths
Weaknesses
Strong
reputation and
expertise in service
Fragmented German DIY

market opens the door to
aggressive pricing and thus low
margins
Above-average
sales per
capita due to project focus
High
dependence on private
housing and renovation market
Opportunities
Threats
Energy-saving projects
supported by the 'energy
passport' in Germany
Consumers postponing
building and renovation projects
Consolidation
Slow
recovery of eastern
European markets
of the German
DIY market
135
www.cheuvreux.com
Valuation
We derive our target price of EUR74.4 from a

DCF calculation based on a WACC of 7.2%, a
1% terminal growth rate and a peak EBITDA
margin of 7.6% in 2010E.
The shares are currently trading at a 2011E P/E
of 11x, marking a discount to the peers, which
are trading at 12x for the same period. However,
we think this ~10% discount is justified by the
shares' low liquidity and low transparency.
Furthermore, we believe the group's belowaverage operating margin of 5%, compared to a
peer group average of 6% in 2011E, and its low
ROE of 9% vs. 14% for the peers, also justifies
the high discount.
Investment case
Hornbach is Germany's no. 4 and Europe's no. 6

DIY retailer. In terms of its business model, we
find very little to criticise.
Nevertheless, with the arising risk of lower gross
profit margins due to higher input costs and
lower retail prices, as well as higher opex, we
see little potential for a positive development in
terms of EBIT margins.
We believe the stock is close to its fair value at
current levels and we therefore reiterate our
3/UP rating.
January 2011
GERMANY
Hornbach Holding
FY to 28/2 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
136
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11E
2011/12E
2012/13E
2,220.2
8.0%
(368.1)
(1,676.2)
175.9
13.4%
(76.9)
99.0
25.6%
(5.1)
0.0
0.0
93.9
(37.6)
0.0
0.0
(24.8)
0.3
0.0
0.0
30.6
1.1
(9.1)
22.6
0.0
0.0
27.7
28.8%
2,367.1
6.6%
(393.8)
(1,794.3)
179.0
1.8%
(87.1)
91.9
-7.2%
(1.2)
0.0
0.0
90.7
(41.1)
0.0
0.0
(20.5)
1.8
0.0
0.0
29.8
1.1
(5.1)
25.8
0.0
0.0
27.0
-2.5%
2,544.2
7.5%
(410.8)
(1,936.4)
197.0
10.1%
(77.9)
119.1
29.6%
0.0
0.0
0.0
119.1
(37.7)
0.0
0.0
(7.3)
1.8
0.0
0.0
74.7
1.1
(12.7)
63.1
0.0
0.0
63.1
133.7%
2,617.3
2.9%
(421.1)
(2,018.8)
177.4
-9.9%
(75.5)
101.9
-14.4%
0.0
0.0
0.0
101.9
(33.4)
0.0
0.0
(9.3)
(0.8)
0.0
0.0
57.2
1.1
(10.3)
48.0
0.0
0.0
48.0
-23.9%
2,752.0
5.1%
(446.3)
(2,053.2)
252.5
42.3%
(73.4)
179.1
75.8%
0.0
0.0
0.0
179.1
(33.1)
0.0
0.0
(31.5)
(1.7)
0.0
0.0
111.8
1.1
(21.6)
91.3
0.0
0.0
91.3
90.2%
2,853.3
3.7%
(468.7)
(2,162.1)
222.5
-11.9%
(71.0)
151.5
-15.4%
0.0
0.0
0.0
151.5
(37.9)
0.0
0.0
(33.5)
2.0
0.0
0.0
81.0
1.1
(15.6)
66.5
0.0
0.0
66.5
-27.2%
2,972.1
4.2%
(480.5)
(2,265.7)
225.9
1.5%
(70.8)
155.1
2.4%
0.0
0.0
0.0
155.1
(34.4)
0.0
0.0
(36.8)
2.0
0.0
0.0
84.6
1.3
(14.9)
71.0
0.0
0.0
71.0
6.8%
3,100.7
4.3%
(494.0)
(2,373.7)
233.0
3.1%
(70.7)
162.3
4.6%
0.0
0.0
0.0
162.3
(36.3)
0.0
0.0
(37.8)
0.0
0.0
0.0
86.9
1.3
(15.5)
72.7
0.0
0.0
72.7
2.4%
3,256.8
5.0%
(509.5)
(2,503.9)
243.4
4.5%
(70.2)
173.2
6.7%
0.0
0.0
0.0
173.2
(38.8)
0.0
0.0
(40.3)
0.0
0.0
0.0
92.8
1.3
(16.3)
77.8
0.0
0.0
77.8
7.0%
117.7
(4.4)
(97.9)
0.0
0.0
0.9
0.0
0.0
(8.9)
0.0
0.0
0.0
119.0
1.1%
(100.7)
(1.8)
0.0
16.5
(0.1)
0.0
0.0
(8.9)
0.0
154.4
161.9
159.3
33.9%
86.6
(101.7)
0.0
144.2
(0.3)
0.0
0.0
(8.9)
0.0
(26.1)
108.9
132.0
-17.1%
(94.0)
(92.1)
0.0
(54.1)
(0.4)
0.0
0.0
(8.9)
0.0
5.3
(58.1)
190.3
44.2%
0.5
(81.3)
0.0
109.5
(2.4)
0.0
0.0
(8.9)
0.0
(11.2)
87.0
152.7
-19.8%
58.4
(135.9)
0.0
75.2
2.6
0.0
0.0
(8.9)
0.0
(18.2)
50.7
157.3
3.0%
(2.3)
(169.4)
0.0
(14.4)
(0.4)
0.0
0.0
(8.9)
0.0
(22.7)
(46.4)
159.7
1.5%
(2.2)
(173.6)
0.0
(16.1)
(0.4)
0.0
0.0
(10.4)
0.0
(11.7)
(38.6)
165.3
3.5%
(7.0)
(182.4)
0.0
(24.1)
(0.4)
0.0
0.0
(10.1)
0.0
(10.9)
(45.5)
453.0
82.9
0.0
64.0
673.6
125.7
1,273.5
3.3
21.8
1,018.2
2.0
0.0
232.9
10.5
1,278.2
473.0
85.6
3.5
65.2
660.5
118.2
1,287.8
3.3
22.6
931.0
2.0
0.0
334.2
14.1
1,293.1
527.7
102.0
0.0
77.5
517.3
82.2
1,224.5
3.3
23.1
954.4
2.3
0.0
253.3
10.0
1,236.4
570.9
116.7
0.0
88.3
581.9
84.6
1,357.8
3.3
19.1
975.0
2.7
0.0
357.8
13.7
1,357.9
645.3
135.1
0.0
100.9
494.0
63.3
1,375.3
3.3
17.0
985.0
5.1
0.0
365.0
13.3
1,375.4
706.7
154.8
0.0
92.2
413.8
48.0
1,367.5
3.3
16.2
1,048.0
2.5
0.0
297.6
10.4
1,367.6
769.5
169.0
0.0
95.1
437.6
46.6
1,471.2
3.3
15.1
1,147.7
2.9
0.0
302.2
10.2
1,471.2
832.9
183.4
0.0
99.2
462.1
45.5
1,577.6
3.3
13.8
1,251.9
3.3
0.0
305.2
9.8
1,577.5
901.3
198.9
0.0
104.2
492.4
44.8
1,696.8
3.3
12.5
1,365.4
3.7
0.0
312.0
9.6
1,696.9
www.cheuvreux.com
January 2011
GERMANY
Hornbach Holding
FY to 28/2 (Euro)
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11E
2011/12E
2012/13E
3.46
28.8%
2.83
8.7%
3.38
-2.5%
3.23
14.2%
7.89
133.7%
7.89
144.6%
6.00
-23.9%
6.00
-23.9%
11.41
90.2%
11.41
90.2%
8.31
-27.2%
8.31
-27.2%
8.88
6.8%
8.88
6.8%
9.09
2.4%
9.09
2.4%
9.73
7.0%
9.73
7.0%
0.64
1.14
0.00
0.15
1.14
14.88
55.5
58.0
0.00
1.14
19.91
33.9%
64.8
0.00
1.14
16.50
-17.1%
70.2
0.00
1.14
23.79
44.2%
79.5
0.00
1.14
19.09
-19.8%
87.2
0.00
1.52
19.66
3.0%
94.7
0.00
1.45
19.96
1.5%
102.7
0.00
1.43
20.66
3.5%
111.2

Latest price
High
Low
Average price
8.000
8.000
0.000
8.000
8.000
0.000
8.000
8.000
0.000
8.000
8.000
0.000
8.000
8.000
0.000
8.000
8.000
0.000
8.000
8.000
0.000
8.000
8.000
0.000
8.000
8.000
0.000
63.01
65.00
54.60
58.78
71.10
77.90
63.00
70.45
81.00
90.50
70.00
77.02
89.20
104.36
76.40
91.14
60.36
90.20
46.00
60.64
66.00
74.79
36.00
54.25
99.14
101.50
60.00
74.02
99.14
103.95
97.62
99.80
99.14
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
252.0
924.1
285.4
948.3
320.6
836.9
349.6
929.5
241.4
730.8
264.0
675.8
396.6
831.7
396.6
856.2
396.6
886.1
22.3
18.2
NS
NS
1.1
0.7
1.8
22.0
21.1
4.8
5.8
1.2
0.7
1.6
10.3
10.3
4.1
44.8
1.3
0.7
1.4
14.9
14.9
5.4
NS
1.3
0.7
1.3
5.3
5.3
2.5
45.3
0.8
0.5
1.9
7.9
7.9
3.5
28.4
0.8
0.5
1.7
11.2
11.2
5.0
NS
1.0
0.5
1.5
10.9
10.9
5.0
NS
1.0
0.5
1.5
10.2
10.2
4.8
NS
0.9
0.5
1.4
5.3
9.3
0.42
35.1
5.3
10.3
0.40
6.4
4.2
7.0
0.33
4.5
5.2
9.1
0.36
6.0
2.9
4.1
0.27
3.4
3.0
4.5
0.2
4.0
3.7
5.4
0.3
4.6
3.7
5.3
0.3
4.6
3.6
5.1
0.3
4.6
4.7
NS
7.9
4.5
1.4
1.7
125.7
40.4
4.4
5.6
7.6
3.9
1.3
1.8
118.2
35.3
5.2
3.2
7.7
4.7
3.0
2.1
82.2
14.5
5.3
4.4
6.8
3.9
2.2
1.9
84.6
19.0
7.6
2.6
9.2
6.5
4.1
2.0
63.3
10.0
5.9
2.7
7.8
5.3
2.9
2.1
48.0
13.7
6.6
2.8
7.6
5.2
2.9
2.0
46.6
17.1
6.4
2.9
7.5
5.2
2.8
2.0
45.5
16.0
6.3
3.0
7.5
5.3
2.9
1.9
44.8
14.7
7.8
5.4
5.1
5.1
7.1
5.0
5.6
5.6
9.7
6.7
12.7
12.7
7.5
5.3
8.8
8.8
13.1
8.9
15.2
15.2
11.1
5.1
9.9
9.9
10.6
7.4
9.7
9.7
10.3
7.2
9.1
9.1
10.2
7.2
9.0
9.0

EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
137
www.cheuvreux.com
January 2011
GERMANY
LUXURY GOODS
2/Outperform
Rating
+7.1% EUR57.00
Hugo Boss
Reuters: BOSG_p.DE Bloomberg: BOS3 GR
The growth story continues

Q
Recent developments Q3-above expectations
Q3-10 reported sales were up 19.4% and FX-adjusted sales showed a

14% increase. After 9M-10, BOS' sales had increased by 5.6% y-o-y
and by 2% in FX-adj. terms. This was driven by 27% growth in its retail
channel, whereas its wholesale business saw an 8% decline. The
company's own retail business reported a l-f-l sales increase of 15% in
Q3-10.
Due to better sourcing and greater manufacturing efficiency, fewer
rebates and the strong growth of its own retail business including
outlets and online business BOS' 9M-10 gross profit margin increased
by 540bps y-o-y to 58%.
Thanks to the strong sales and gross profit margin growth BOS' Q3-10
adjusted EBITDA margin showed a 446bps y-o-y increase, whilst its
9M-10 adjusted EBITDA margin was up 308bps y-o-y.
The company kept its CY10 sales growth guidance unchanged,
predicting 5% FX-adjusted growth and about 8% in EUR terms. It also
forecast about 20% growth in adj. CY10 EBITDA.
In Germany BOS' recorded 4.7% 9M-10 sales growth, thereby
outpacing fashion retail sales, which increased by 4%, and in particular
the men's segment, which grew by roughly 1%.
Q
EUR53.20
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
EUR3527m
EUR997m
EUR3769m
70.4m
EUR 2.94m
Performances
3.3%
21.6%
104.2%
1.7%
6.8%
58.9%
Absolute perf.
Relative perf.
57.5
57.5
47.5
47.5
37.5
37.5
27.5
27.5
17.5
17.5
7.5
7.5
01/01
04/02
07/03
10/04
01/06
Price/M DAX
04/07
07/08
10/09
01/11
Price
Outlook Detailed 2015 targets
BOS has provided clearly detailed CY15 targets: sales of EUR2.5bn and
EUR500m EBITDA, hence an EBITDA margin of 20%. Historically, the
company recorded its margin peak at 19.8% in CY00, though that was
under German GAAP and with a higher share of royalties.
For CY10E we expect it to report an EBITDA margin of about 19%,
hence 'just' short of its CY15 target of 20%. Even though we
understand that some infrastructure investments may be necessary to
deal with the higher sales volume and the product mix might change
going forward, we feel the company's 20% EBITDA margin target is
almost too conservative, given its already achieved performance.
A major operational change is still to come. The core element of the
company's 'Drive' concept aims to substantially reduce lead times from
currently 53 to 38 weeks. This will mean designers working on
collections for the next season will already have first information about
the sell-through rates of the current collection and hence more
indications about which styles, colours and fabrics are selling best. The
first collection to be designed, produced and delivered to retailers
under the 'Drive' concept will be for H2-11.
The company's growth potential stems from its own retail operations,
where it aims to open around 50 new stores per year, and from the
further roll-out of its BOSS woman, accessories, BOSS Green and
Orange collections.
Sector focus
Sector Top Picks
Least favoured
L'Oral, Richemont
Bulgari
Shareholders
Ord: Permira 88.0%, Pref: Permira 55.0%, Free Float
(Pref Shares) 45.0%, Free Float (Ord Shares) 12.0%
2009
2010E
2011E
2012E
16.3
23.0
18.5
16.6
8.8
13.0
10.7
9.5
18.4
4.3
4.7
5.1
Net debt/EBITDA (x)
1.8
1.0
0.6
0.3
Yield (%)
3.9
1.9
2.3
2.4
ROCE (%)
22.7
33.4
36.9
38.6
2.9
4.9
4.9
4.5
P/E (x)
EV/EBITDA (x)
Jurgen KOLB
Research Analyst
jkolb@cheuvreux.com
(49) 69 47 89 74 26
Q
Q
138
www.cheuvreux.com
January 2011
GERMANY
Company profile
Collections
Founded in 1923 as a manufacturer of work-wear and occupational
clothing, BOS has evolved into a manufacturer of high-end clothing
and accessories. It also licenses out its brand name for fragrances.
Under the brand BOSS umbrella the company offers five collection
lines accompanied by accessory lines: BOSS Black (men and
women, elegant modern classics for business and leisure), BOSS
Selection (premium men's label, incl. the Tailored line), BOSS
Orange (stylish leisure collection for men and women), BOSS Green
(sportswear line for men), HUGO (unconventional fashion for men
and women).
Q
Q Geographical sales split

Group sales split by region: Europe (incl. Germany): 65%; America:
21%; Asia/Pacific: 12%. The remaining 2% stem from global
royalties.
Q Shareholder structure
Since September 2007 Permira has owned 88.02% of the ordinaries
and 55.28% of the preferred shares. It acquired BOS with the
acquisition of the Valentino fashion holding and thereafter made a
takeover offer at EUR48.33 for the ordinaries and EUR43.45 for the
preferred shares.
Strategy and positioning

BOS aims to grow organically in its niche as a high-end fashion
manufacturer with a full line of accessories. Its main geographical
growth areas are Asia and the US.
Q
SWOT analysis
Strengths
Weaknesses
Excellent global brand

recognition with authenticity for
formal and leisure wear, and
shoes & accessories for men and
women
Unique brand positioning, just

below luxury brands
Financial situation of franchise

partners still critical in some
markets
Balance sheet ratios not yet
back to historical strength but
clearly improving
Successful
working capital
management leads to free cash
flow generation
Opportunities
Threats
Growth potential due to own

retail
Better inventory turns thanks

to 'Drive' concept secures cash
flow generation
Fewer pre-orders from retailers

shift inventory risk to
manufacturers
Higher own retail share makes

BOS more vulnerable to
economic trends
Cost consciousness and fixed

cost cuts will support margin
growth
Clearer brand segmentation

helps BOS approach target
customers better
139
www.cheuvreux.com
Valuation
Our TP of EUR57 for the pref. shares is based

on a DCF calculation with a WACC of 8.1%, a
2% terminal growth rate and a peak EBITDA
margin of 19.7% as of 2013E. We expect BOS
to record an adjusted CY10E EBITDA margin of
19%.
If we were to incorporate BOS' targeted sales
(EUR2.5bn) and EBITDA margin (20%) by 2015
into our DCF calculation, we would arrive at a TP
of EUR62. However, as we see potential for the
company to exceed its EBITDA margin target,
we see further upside potential from a blue-sky
scenario perspective.
In terms of peers, BOS' business model is
probably closest to that of Burberry. Based on
our CY11E estimates, BOS preferred shares are
trading at an EV/EBITDA multiple of 12.5x, which
compares with 13.5x at Burberry. We hence feel
BOS' valuation still offers upside potential.
Investment case
After focusing strongly on fixed cost reductions

and repositioning in 2009, BOS has now
reached a point from which sales growth and
efficiency improvements will become the
earnings drivers.
Following its clearer brand separation and an
SKU reduction at BOSS Black of ~50%, which
reduces complexity, BOS is now focusing on
efficiency improvements to drive its margins.
Thanks to its 'Drive' concept, which aims to
reduce lead times from 53 to 38 weeks, we
expect BOS' average inventory turns to increase
from 4.5x in CY09 to 5.3x in CY11E. This would
put it back close to its historical peak of 5.4x,
recorded in CY06. We expect 'Drive' to be a
core element in enabling BOS to increase the
speed of its inventory turnover, to reduce its
excess inventories, to get closer to the market
with fresh products and to thus increase sales
productivity in its own stores.
With the combination of a substantial lead time
reduction, sales growth driven by expansion in
Asia and the US, and the expansion of
collections such BOSS Green, we believe the
company's 2015 financial targets are within
reach and may even be exceeded.
January 2011
GERMANY
Hugo Boss
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
140
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,168.4
10.8%
(198.3)
(797.4)
172.7
13.5%
(36.0)
136.7
14.3%
(1.4)
0.0
0.0
135.3
(5.3)
0.0
0.0
(41.9)
0.1
0.0
(1.4)
87.4
0.8
(0.1)
88.1
0.0
0.0
90.9
9.3%
1,309.4
12.1%
(238.2)
(867.0)
204.2
18.2%
(41.3)
162.9
19.2%
0.0
0.0
0.0
162.9
(4.8)
0.0
0.0
(49.0)
(0.9)
0.0
0.0
107.4
0.8
0.0
108.2
0.0
0.0
108.2
19.0%
1,495.5
14.2%
(277.8)
(984.3)
233.4
14.3%
(49.0)
184.4
13.2%
0.0
0.0
0.0
184.4
(4.9)
0.0
0.0
(51.2)
0.4
0.0
0.0
127.4
1.2
0.0
128.6
0.0
0.0
128.6
18.9%
1,632.0
9.1%
(299.7)
(1,044.6)
287.7
23.3%
(67.4)
218.3
18.4%
0.0
0.0
0.0
220.3
(7.9)
0.0
0.0
(58.3)
0.0
0.0
0.0
147.6
6.5
(0.1)
154.0
0.0
0.0
154.0
19.8%
1,686.1
3.3%
(352.8)
(1,081.5)
251.8
-12.5%
(61.0)
190.8
-12.6%
0.0
0.0
0.0
190.8
(26.3)
0.0
0.0
(36.4)
(16.1)
0.0
0.0
110.7
1.4
(0.1)
112.0
0.0
0.0
112.0
-27.3%
1,561.9
-7.4%
(331.4)
(1,003.0)
227.5
-9.7%
(69.1)
158.4
-17.0%
0.0
0.0
0.0
158.4
(22.4)
0.0
0.0
(32.7)
0.6
0.0
0.0
103.0
1.0
0.0
104.0
0.0
0.0
104.0
-7.1%
1,686.8
8.0%
(353.6)
(1,022.7)
310.5
36.5%
(72.5)
238.0
50.3%
0.0
0.0
0.0
238.0
(15.2)
0.0
0.0
(53.5)
0.0
0.0
0.0
168.3
1.1
0.0
169.4
0.0
0.0
169.4
62.9%
1,830.2
8.5%
(382.0)
(1,095.9)
352.3
13.5%
(76.9)
275.4
15.7%
0.0
0.0
0.0
275.4
(14.3)
0.0
0.0
(62.7)
0.0
0.0
0.0
197.3
1.3
0.0
198.5
0.0
0.0
198.5
17.2%
1,985.8
8.5%
(416.0)
(1,182.6)
387.2
9.9%
(81.8)
305.4
10.9%
0.0
0.0
0.0
305.4
(13.5)
0.0
0.0
(70.1)
0.0
0.0
0.0
220.5
1.3
0.0
221.8
0.0
0.0
221.8
11.7%
136.4
18.3%
56.1
(83.5)
0.0
109.0
0.0
0.0
0.0
(53.1)
0.0
(4.7)
51.2
151.2
10.9%
10.3
(78.2)
0.0
83.3
0.0
0.0
0.0
(53.1)
0.0
(50.2)
(20.0)
193.0
27.6%
6.5
(89.8)
0.0
109.7
0.0
0.0
0.0
(55.3)
0.0
(45.5)
8.9
220.3
14.1%
(103.3)
(84.7)
0.0
32.3
0.0
0.0
0.0
(84.1)
0.0
32.2
(19.6)
161.7
-26.6%
(15.9)
(118.8)
0.0
27.0
0.0
0.0
0.0
(454.4)
0.0
439.7
12.3
178.0
10.1%
160.3
(48.3)
0.0
290.0
0.0
0.0
0.0
(96.8)
0.0
(114.4)
78.8
243.5
36.8%
(18.8)
(63.3)
0.0
161.4
0.0
0.0
0.0
(67.9)
0.0
(15.2)
78.3
277.2
13.8%
(41.1)
(68.6)
0.0
167.5
0.0
0.0
0.0
(76.2)
0.0
(48.7)
42.6
305.7
10.3%
(50.4)
(74.5)
0.0
180.8
0.0
0.0
0.0
(87.3)
0.0
(37.5)
56.0
415.6
0.0
14.0
34.8
154.8
37.2
619.2
25.6
36.2
207.1
0.0
0.0
361.1
30.9
630.0
467.8
0.0
18.6
48.2
107.1
22.9
641.7
25.6
48.8
229.0
0.0
0.0
350.8
26.8
654.2
494.4
0.0
16.4
32.4
117.0
23.7
660.2
25.6
59.0
259.0
0.0
0.0
344.3
23.0
687.9
546.4
0.0
13.5
69.7
174.8
32.0
804.4
25.6
71.5
249.0
0.0
0.0
458.3
28.1
804.4
199.0
0.0
12.7
74.5
604.1
303.6
890.3
25.6
79.4
294.8
0.0
0.0
490.4
29.1
890.2
201.8
0.0
12.4
75.9
408.4
202.4
698.5
25.6
75.8
270.4
0.0
0.0
326.7
20.9
698.5
303.2
0.0
12.8
82.0
314.5
103.7
712.5
25.6
77.5
259.5
0.0
0.0
349.9
20.7
712.5
425.5
0.0
13.2
84.7
222.8
52.4
746.2
25.6
80.0
248.7
0.0
0.0
392.0
21.4
746.3
560.0
0.0
13.7
88.8
128.9
23.0
791.4
25.6
75.9
245.5
0.0
0.0
444.5
22.4
791.5
www.cheuvreux.com
January 2011
GERMANY
Hugo Boss
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
1.29
9.2%
1.25
6.9%
1.54
19.1%
1.54
22.9%
1.83
18.9%
1.83
18.9%
2.23
22.1%
2.23
22.1%
1.62
-27.3%
1.62
-27.3%
1.51
-7.1%
1.51
-7.1%
2.46
62.9%
2.46
62.9%
2.88
17.1%
2.88
17.1%
3.21
11.8%
3.21
11.8%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.04
0.07
1.94
18.3%
5.8
0.00
0.07
2.15
10.8%
6.6
0.00
0.11
2.74
27.6%
6.9
0.00
6.45
3.19
16.4%
1.3
0.00
1.37
2.34
-26.6%
1.5
0.00
0.96
2.58
10.1%
1.9
0.00
1.07
3.53
36.8%
3.2
0.00
1.23
4.02
13.8%
4.8
0.00
1.27
4.43
10.3%
6.7

Latest price
High
Low
Average price
70.400
70.400
0.000
70.400
70.400
0.000
70.400
70.400
0.000
70.400
69.040
0.000
70.400
69.016
0.000
70.400
69.016
0.000
70.400
69.016
0.000
70.400
69.016
0.000
70.400
69.016
0.000
24.50
24.50
15.75
19.35
29.70
31.54
21.14
26.39
38.92
40.50
28.80
34.29
39.00
49.69
34.20
43.73
14.40
42.60
9.04
26.05
24.55
29.12
8.46
18.39
56.50
56.93
22.17
35.40
53.20
58.44
52.91
56.16
53.20
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,687.1
1,855.9
2,117.4
2,243.1
2,814.6
2,948.0
2,767.1
2,961.0
1,117.8
1,735.7
1,573.0
1,997.0
3,716.9
4,051.6
3,526.7
3,769.8
3,526.7
3,676.4
19.6
19.0
12.6
6.5
4.2
2.9
0.3
19.3
19.3
13.8
3.9
4.5
3.4
0.2
21.3
21.3
14.2
3.9
5.6
4.3
0.3
17.5
17.5
12.2
1.2
NS
3.7
16.5
8.9
8.9
6.1
2.4
9.9
2.0
9.5
16.3
16.3
9.5
18.4
12.9
2.9
3.9
23.0
23.0
16.0
4.3
17.5
4.9
1.9
18.5
18.5
13.2
4.7
11.1
4.9
2.3
16.6
16.6
12.0
5.1
8.0
4.5
2.4
10.7
13.6
1.59
13.3
11.0
13.8
1.71
14.5
12.6
16.0
1.97
15.0
10.4
13.6
1.81
13.1
6.9
9.1
1.03
9.6
8.8
12.6
1.3
10.2
13.0
17.0
2.4
15.9
10.7
13.7
2.1
13.1
9.5
12.0
1.9
11.6
NS
1.1
14.8
11.7
7.5
1.9
37.2
5.6
NS
0.7
15.6
12.4
8.3
2.0
22.9
4.6
NS
0.6
15.6
12.3
8.6
2.2
23.7
6.0
NS
0.8
17.5
13.4
9.4
2.0
32.0
289.2
9.6
3.7
14.9
11.3
6.6
1.9
303.6
84.4
10.2
2.3
14.6
10.1
6.7
2.2
202.4
63.7
NS
1.3
18.4
14.1
10.0
2.4
103.7
43.6
NS
0.8
19.2
15.0
10.8
2.5
52.4
42.8
NS
0.4
19.5
15.4
11.2
2.5
23.0
39.5
21.7
14.7
23.7
23.7
24.9
17.1
26.2
26.2
26.8
19.2
29.9
29.9
27.1
19.7
32.8
32.8
21.4
16.2
78.3
78.3
22.7
17.3
69.4
69.4
33.4
25.4
77.5
77.5
36.9
28.0
60.8
60.8
38.6
29.3
49.4
49.4
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
141
www.cheuvreux.com
January 2011
GERMANY
ELECTRICAL EQUIPMENT
2/Outperform
Rating
+23.1% EUR6.60
Jenoptik
Reuters: JENG.DE Bloomberg: JEN GR
Strong earnings momentum and healthy

balance sheet
Q
Recent developments Strong Q3-10 ahead of expectations
Positive order momentum continued: Q3-10 order intake came to

EUR158m, up ~41% y-o-y and ~2% q-o-q. The main driver was
Laser&Optical Systems with EUR67.3m order intake, up ~33% q-o-q
(~EUR8m stemmed from a large medical systems order, which will not
recur in the coming quarters). Metrology also showed a further
sequential improvement with EUR33.5m intake vs. EUR30.5m in Q2.
EBIT ahead of expectations, but including one-offs: EBIT in Q3-10
came to EUR12m, well ahead of our EUR7.9m forecast. This figure
includes a one-off stemming from the caverion disposal, which we
estimate at ~EUR1.5m, and a large order in traffic solutions, which we
estimate at ~EUR3m (was incorporated into our estimate). EPS in Q3
came to EUR0.15, which was much better than our EUR0.07 forecast.
Further deleveraging: Net debt at the end of Q3 stood at EUR126.8m,
down from EUR144m after Q2-10. The disposal of Optronik was
expected to be finalised in Q4, which should have brought net debt
below EUR100m.
Conservative guidance confirmed: The company confirmed its 2010
guidance for sales of ~EUR500m and EBIT of >EUR25m, which to us is
still overly conservative given the fact that it already booked EUR22.5m
in 9M-10.
Q
EUR5.36
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
EUR307m
EUR213m
EUR377m
57.24m
EUR 0.73m
Performances
-5.3%
23.2%
24.1%
-11.5%
9.7%
22.6%
Absolute perf.
Relative perf.
82.6
82.6
72.6
72.6
62.6
62.6
52.6
52.6
42.6
42.6
32.6
32.6
22.6
22.6
12.6
12.6
2.6
2.6
01/01
04/02
07/03
10/04
01/06
Price/TECDAX
04/07
07/08
10/09
01/11
Price
Outlook Business environment to remain strong in 2011
In 2011E we expect the business environment to remain strong for

Jenoptik due to ongoing high demand from the semiconductor industry
and better prospects for the company's Metrology business, especially
in the automotive industry. Defense & Civil Systems also looks set to
remain solid with its order backlog of ~1.4x sales.
For 2011E we forecast sales of EUR531m, up ~5% y-o-y, with EBIT of
EUR37.8m, implying a 7.1% margin. The main driver is likely to be
Laser&Optical Systems, which we estimate will grow by ~7% in terms
of sales, with further EBIT margin expansion to 8.9% vs. 8.0% in 10E.
We estimate EPS at EUR0.41/share.
Aside from the increase in sales/earnings we also expect Jenoptik to
deliver a healthy free cash flow, with net debt to be reduced by a further
~EUR17m to EUR75.9m.
Sector focus
Sector Top Picks
Least favoured

Shareholders
Free Float 69.7%, Ece Industriebeteiligungen 25.0%,
Varis Vermgensverwaltung 5.3%
2009
2010E
2011E
2012E
NS
20.6
13.2
11.3
34.7
7.3
5.8
5.2
NS
26.8
6.7
8.8
Net debt/EBITDA (x)
16.4
1.7
1.2
0.8
P/E (x)
EV/EBITDA (x)
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
NS
7.8
10.0
10.9
0.8
0.9
0.9
0.8
Alexander HAISSL
Research Analyst
(49) 69 47 897 534
Q
Q
142
www.cheuvreux.com
January 2011
GERMANY
Company profile
Comprehensive optoelectronic group

Created in 1991 from Jenoptik Carl Zeiss Jena GmbH, Jenoptik has
a total headcount of ~3,100. The company is headquartered in Jena,
in the German state of Thuringia, and has several major sites in
Germany. It is represented in nearly 70 countries and has major
production sites abroad in the US, France and Switzerland as well as
in India, China, Korea and Japan.
Q
Q Five divisions with semiconductor & automotive as its main

industries
As a comprehensive optoelectronics group, Jenoptik divides its
activities into five divisions: Laser & Material Processing, Optical
Systems, Industrial Metrology, Traffic Solutions and Defense & Civil
Systems. Its customers are mainly in the following industries:
semiconductor/semiconductor equipment, automotive/suppliers,
medical technology, security and defence technology and
aerospace.
Valuation
Due to its broad, diversified product portfolio,

the company has no relevant comparable peers.
In valuing the stock we therefore focus on an
absolute return model (EVA).
Our EVA model yields 'fair' values of EUR5.4
and EUR6.5 per share on an 11E and 12E basis,
assuming pre-tax RoCE of 9.7% and 10.6%
respectively. Based on our 11E estimates, the
stock is trading at 5.8x EV/EBITDA and at 10.0x
EV/EBIT, implying a ~20% discount to its own
historical figures.
Furthermore, Jenoptik still has tax loss carryforwards on its balance sheet amounting to
~EUR490m (meaning only 40% of its German
profits need to be taxed). We estimate the NPV
of the tax loss carry-forwards at ~EUR1.5/share.
We stick to our 2/OP rating with a TP of
EUR6.60.
SWOT analysis
Strengths
Weaknesses
Highly innovative development

team
Lack of critical mass
Lack of the financial means to

accelerate expansion
World-leading proprietary
optics technology
Opportunities
Threats
Rapid organic expansion of

high-margin Laser & Optics and
Sensors units
The integration of numerous

small independent entities is
difficult to execute successfully
Small complementary
acquisitions
Expansion of international
distribution to open up new
markets
Investment case
Strong earnings momentum to continue

Looking ahead, we expect the business
environment to improve further for Jenoptik due
to the ongoing high level of demand from the
semiconductor industry and better prospects for
the company's Metrology business, in particular
in the automotive industry (following a pick-up in
the auto industry with a ~6-month time lag).
Moreover, Defense & Civil Systems also looks
set to remain solid with its order backlog of 1.4x
sales.
Healthy balance sheet and solid free cash
flow
Asset disposals and more efficient working
capital management enabled the company to
reduce its net debt position substantially from
~EUR160m at the end of FY09 to an estimated
~EUR93m in 2010E. With higher operating cash
flow and CAPEX discipline Jenoptik should be
able to generate solid free cash flow (~EUR20m
annually) going forward, thereby reducing its net
debt further.
143
www.cheuvreux.com
January 2011
GERMANY
Jenoptik
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
144
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
2,523.0
31.3%
(536.7)
(1,854.6)
131.7
135.1%
(50.6)
81.1
NS
0.0
0.0
0.0
81.1
(33.3)
0.0
0.0
(18.4)
(10.4)
0.0
0.0
19.0
0.0
(6.2)
12.8
0.0
0.8
13.6
126.6%
1,914.4
-24.1%
(472.6)
(1,403.8)
38.0
-71.1%
(47.8)
(9.8)
NS
0.0
0.0
0.0
(9.8)
(22.6)
0.0
0.0
(16.9)
(20.1)
0.0
0.0
(69.4)
0.0
(5.5)
(74.9)
0.0
0.0
(74.9)
NS
485.1
-74.7%
(180.1)
(231.8)
73.3
92.9%
(35.1)
38.2
NS
0.0
0.0
0.0
38.2
(14.2)
0.0
0.0
(3.0)
(5.0)
0.0
0.0
16.1
0.0
(2.7)
13.5
0.0
0.0
13.5
118.0%
521.7
7.5%
(192.3)
(259.5)
69.9
-4.7%
(34.5)
35.3
-7.5%
0.0
0.0
0.0
35.3
(27.5)
0.0
0.0
(5.4)
(7.1)
0.0
0.0
(4.6)
0.0
(3.6)
(8.2)
0.0
0.0
(8.2)
NS
548.3
5.1%
(194.7)
(285.4)
68.1
-2.5%
(31.1)
37.1
4.9%
0.0
0.0
0.0
37.1
(11.3)
0.0
0.0
(3.7)
(5.5)
0.0
0.0
16.6
0.0
(4.8)
11.8
0.0
0.0
11.8
NS
473.6
-13.6%
(194.7)
(269.2)
9.8
-85.7%
(29.4)
(19.7)
NS
0.0
0.0
0.0
(19.7)
(10.4)
0.0
0.0
(0.5)
(4.3)
0.0
0.0
(34.8)
0.0
(4.1)
(38.9)
0.0
0.0
(38.9)
NS
503.6
6.3%
(184.7)
(264.6)
54.2
NS
(25.1)
29.1
NS
0.0
0.0
0.0
29.1
(11.4)
0.0
0.0
(2.6)
(0.1)
0.0
0.0
15.0
0.0
0.1
15.0
0.0
0.0
15.0
138.6%
531.0
5.4%
(187.9)
(277.7)
65.5
20.8%
(27.7)
37.8
29.9%
0.0
0.0
0.0
37.8
(10.7)
0.0
0.0
(4.1)
0.2
0.0
0.0
23.2
0.0
0.1
23.3
0.0
0.0
23.3
55.2%
556.0
4.7%
(191.1)
(296.4)
68.5
4.6%
(27.0)
41.5
9.8%
0.0
0.0
0.0
41.5
(9.9)
0.0
0.0
(4.8)
0.2
0.0
0.0
27.0
0.0
0.1
27.1
0.0
0.0
27.1
16.3%
84.5
NS
67.3
(138.1)
0.0
13.7
46.5
0.0
0.0
0.0
(0.4)
(30.1)
29.7
(26.9)
NS
(48.7)
(129.2)
0.0
(204.8)
(27.0)
0.0
0.0
0.0
(8.8)
75.0
(165.6)
58.3
NS
(0.1)
(150.9)
0.0
(92.7)
56.7
0.0
0.0
0.0
(8.8)
48.2
3.5
29.6
-49.2%
159.7
(24.0)
0.0
165.3
19.4
0.0
0.0
0.0
(12.9)
(170.1)
1.7
44.0
48.5%
(27.3)
(32.6)
0.0
(16.0)
16.6
0.0
0.0
0.0
0.0
(86.1)
(85.4)
(5.2)
NS
(105.0)
(19.5)
0.0
(129.7)
11.3
0.0
0.0
0.0
(0.0)
60.7
(57.7)
36.5
NS
63.9
(17.6)
0.0
82.8
(5.0)
0.0
0.0
0.0
20.8
(41.4)
57.2
52.3
43.1%
(10.5)
(21.3)
0.0
20.5
(5.3)
0.0
0.0
0.0
0.0
7.2
22.3
54.3
3.9%
(5.9)
(21.6)
0.0
26.9
(5.6)
0.0
0.0
0.0
0.0
9.0
30.3
336.0
33.0
56.3
103.7
238.9
64.7
768.0
67.1
32.1
230.9
113.3
7.4
317.2
12.6
768.0
271.4
42.9
6.9
58.2
375.5
119.5
754.9
47.6
29.1
164.7
131.0
16.7
365.8
19.1
754.9
276.8
22.6
6.4
64.6
346.2
115.7
716.6
53.0
36.5
170.2
89.6
1.4
365.9
75.4
716.6
259.3
21.6
6.4
63.0
191.7
68.2
542.0
59.2
29.1
175.9
70.7
0.9
206.3
39.5
542.0
270.9
21.9
6.4
57.1
191.6
65.4
548.0
60.2
28.8
170.5
53.6
1.4
233.6
42.6
548.0
239.3
0.5
6.4
61.7
159.4
66.5
467.4
59.1
18.9
152.1
43.4
0.3
193.6
40.9
467.4
267.8
0.5
6.4
55.3
93.2
34.7
423.2
53.0
38.0
153.8
48.4
0.3
129.7
25.8
423.2
290.9
0.6
6.4
58.9
75.9
26.0
432.6
53.0
39.6
145.9
53.7
0.3
140.3
26.4
432.6
317.8
0.7
6.4
61.2
52.5
16.5
438.7
53.0
41.2
138.7
59.2
0.4
146.1
26.3
438.7
www.cheuvreux.com
January 2011
GERMANY
Jenoptik
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
145
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.26
124.8%
0.25
123.0%
(1.44)
NS
(1.44)
NS
0.26
118.0%
0.26
118.0%
(0.15)
NS
(0.15)
NS
0.21
NS
0.21
NS
(0.68)
NS
(0.68)
NS
0.26
138.4%
0.26
138.4%
0.41
55.3%
0.41
55.3%
0.47
16.2%
0.47
16.2%
0.00
0.00
1.63
NS
6.5
0.00
0.00
(0.52)
NS
5.2
0.00
0.00
1.12
NS
5.3
0.00
0.00
0.52
-53.6%
4.6
0.00
0.00
0.77
48.4%
4.8
0.00
0.00
(0.09)
NS
4.2
0.00
0.00
0.64
NS
4.7
0.00
0.00
0.91
43.1%
5.1
0.00
0.00
0.95
3.9%
5.6
51.870
51.870
0.000
51.870
51.870
0.000
51.870
51.840
0.000
56.910
56.870
0.000
56.910
56.910
0.000
56.920
56.920
0.000
57.240
57.240
0.000
57.240
57.240
0.000
57.240
57.240
0.000
7.76
12.04
5.76
8.82
7.60
10.10
6.57
8.26
7.50
8.35
6.22
7.20
6.25
8.25
5.16
7.30
5.00
6.13
3.10
4.82
3.79
6.24
2.76
3.81
5.40
5.84
3.82
4.50
5.36
5.49
5.24
5.40
5.36
-
402.5
697.7
402.0
784.4
426.8
779.4
355.7
482.2
284.6
427.7
215.7
337.9
309.0
397.2
306.7
377.6
306.7
354.4
29.6
29.6
4.8
3.4
1.2
1.1
0.0
NS
NS
NS
NS
1.5
1.3
0.0
28.9
28.9
6.7
NS
1.4
1.2
0.0
NS
NS
12.0
46.5
1.4
1.0
0.0
24.2
24.2
6.5
NS
1.1
0.9
0.0
NS
NS
NS
NS
0.9
0.8
0.0
20.6
20.6
8.5
26.8
1.2
0.9
0.0
13.2
13.2
5.9
6.7
1.1
0.9
0.0
11.3
11.3
5.6
8.8
1.0
0.8
0.0
5.3
8.6
0.28
6.2
20.6
NS
0.41
(95.8)
10.6
20.4
1.61
11.1
6.9
13.6
0.92
(3.4)
6.3
11.5
0.78
8.0
34.7
NS
0.7
63.7
7.3
13.6
0.8
8.6
5.8
10.0
0.7
6.2
5.2
8.5
0.6
5.6
4.0
2.8
5.2
3.2
0.8
3.9
64.7
0.0
1.7
NS
2.0
NS
NS
3.2
119.5
0.0
5.2
5.9
15.1
7.9
3.3
0.8
115.7
0.0
2.5
6.5
13.4
6.8
NS
1.1
68.2
0.0
6.0
4.4
12.4
6.8
3.0
1.1
65.4
0.0
0.9
NS
2.1
NS
NS
1.1
66.5
0.0
4.8
2.6
10.8
5.8
3.0
1.3
34.7
0.0
6.1
1.5
12.3
7.1
4.4
1.4
26.0
0.0
6.9
1.0
12.3
7.5
4.9
1.5
16.5
0.0
12.5
10.4
3.9
4.1
NS
NS
NS
NS
6.1
5.1
5.0
5.0
7.5
NS
NS
NS
7.5
6.1
4.4
4.4
NS
NS
NS
NS
7.8
6.6
5.8
5.8
10.0
8.5
8.3
8.3
10.9
9.3
8.9
8.9
www.cheuvreux.com
January 2011
GERMANY
MACHINERY
Jungheinrich
3/Underperform
+2.3% EUR30.00
EUR29.32
Price (07/01/2011)
Reuters: JUNG_p.DE Bloomberg: JUN3 GR
Excellent company but limited share price

upside
Recent developments Strong Q3 and guidance raised as
expected
In mid November, Jungheinrich reported a strong Q3 with almost no

traditional summer lull. Q3 order intake reached EUR475m , +16% y-oy and -1% q-o-q. Sales came in at EUR458m, +14% y-o-y and +3% qo-q. The EBIT margin in Q3-10 reached 5.8%, unchanged q-o-q, which
is extremely strong bearing in mind that, seasonally, Q3 is normally
weaker. Net profit amounted to EUR23.6m (est. EUR15.2m), including
an extraordinary gain of EUR2.1m due to the revaluation of tax losses
carried forward.
After Q3 the company's order backlog stood at EUR293m, +30% y-o-y.
Jungheinrich continues to benefit from the ongoing positive mix shift,
i.e. high-margin large diesel and electric-counterbalanced truck sales
outgrowing lower margin warehouse technology.
With its Q3-10 results Jungheinrich raised its guidance, predicting FY10
order intake of roughly EUR1.85bn, sales of significantly more than
EUR1.75bn and EBIT in excess of EUR80m. We estimate EUR1.86bn
order intake, sales of EUR1.8bn and EBIT of EUR92m. For Q4-10E our
estimates imply sales of EUR509m, +14% y-o-y, EBIT of EUR28m,
+114% y-o-y, and EUR470m order intake, +10% y-o-y.
Q
Rating
Stock data
Free float
Enterprise value
Daily volume
Performances
2.9%
24.7%
113.3%
-2.0%
6.1%
50.0%
Absolute perf.
Relative perf.
36.2
36.2
31.2
31.2
26.2
26.2
21.2
21.2
16.2
16.2
11.2
11.2
6.2
01/01
6.2
04/02
07/03
After having upgraded Jungheinrich in August 2009, we downgraded

the stock after the Q3-10 results, whilst keeping our TP at EUR30. This
downgrade reflected solely a) the shares' strong outperformance since
mid-2009; b) the already demanding consensus, which foresees 33%
net profit growth in 2011 and 18% in 2012; c) the fact that the stock is a
consensus buy. Our downgrade was in no way related to company or
industry fundamentals, The shares currently appear fully valued relative
to their own history. Thus, we see better value elsewhere, at least in the
near term.
When speculation regarding a pending IPO of key peer KION flares up
again, it might be worth taking a closer look at investing in Jungheinrich.
Although Jungheinrich differs in some key aspects from KION
(indebtedness, customer structure, sales mix branding, profitability of
new vs. after-market business, and geographic production structure) it
is its closest peer.
10/04
01/06
Price/SDAX
Outlook Peak margins are close, time to take some profits
Given the expected strong 10E and already demanding consensus for
2011, further upside surprise potential in terms of the 2011 outlook
appears limited. With a Q3-10 EBIT margin of 5.8% (FY08: 5.7%), we
believe the company is already close to the peak level we expect it to
reach in the next cycle, taking into account the probable pressure from
higher raw material and personnel costs in 2011E and management's
expectation that the company will need some time before it can
increase its list prices. Currently, despite the healthy order intake
situation, no reductions in discounts to list prices are possible.
EUR997m
EUR468m
EUR947m
34m
EUR 1.25m
04/07
07/08
Sector focus
Sector Top Picks
Least favoured

Shareholders
Family Shareholders 53.0%, Free Float 47.0%
2009
2010E
2011E
2012E
P/E (x)
NS
16.7
12.3
10.5
EV/EBITDA (x)
5.3
4.4
3.6
2.9
40.3
6.1
7.7
13.4
Net debt/EBITDA (x)
(1.0)
(0.5)
(0.4)
(0.7)
Yield (%)
0.9
1.0
1.4
1.7
ROCE (%)
NS
11.2
14.0
17.0
0.7
1.2
1.1
1.0
Q
Q
146
www.cheuvreux.com
01/11
Price
Research Analyst
(49) 69 47 897 540
10/09
GERMANY
January 2011
Company profile
Amongst the top four global players in material handling

Jungheinrich, founded in 1953, is one of the world's leading
providers of equipment for material handling, warehousing and
material flow engineering. It was ranked no. 2 in Europe and no. 3
worldwide in 2009. Since 2007 it has been more or less a
management holding company, with major parts of its operations
run by four fully owned business units and transferred to legally
independent limited partnerships.
Q
Q Production > 95% based in Germany

Jungheinrich produces nearly all its engine-powered materialhandling trucks in Germany. Counterbalanced and narrow-aisle
trucks are manufactured in Moosburg, and small-series and
specialised trucks at the Lueneburg plant. Some trucks are
produced in Qingpu, China for the Asian market. Jungheinrich
manufactures warehousing equipment in Norderstedt, Germany.
Three divisions but the money is clearly earned with services

Jungheinrich provides a comprehensive range of forklift trucks,
shelving systems and related services covering the complete area of
intralogistics. The company generated 48% (including 22% from
financial services) of its 2009 sales with new business, 34% with
after-sales services and 18% with rentals & sales of used
equipment.
Q
Q Overwhelming majority of sales generated in Europe

In 2009 28% of group sales were generated in Germany, with
Europe ex Germany accounting for 67%. The Rest of the World
accounted for a still small 5% of group sales. The risk-averse
company prefers organic growth to acquisitions.
SWOT analysis
Strengths
Weaknesses
Three divisions offering a onestop solution
High (94%) sales exposure to

Europe makes the company
especially vulnerable to the
weakening European market
Highly centralised production

structure leading to strong
economies of scales
Inadequate
Opportunities
Threats
Long-term: Eastern Europe

and Asia
financial disclosure
Strong balance sheet
Increasing demand for services
Mail-order
Recession in Europe
Further
business
intensification of price
pressure sparked by new
Chinese competitors
Raw
147
material prices
www.cheuvreux.com
Valuation
We apply a DCF valuation and a peer group

comparison to calculate our price target.
Q
DCF: we apply sales and EBITDA CAGRs of
1% and 1.5% respectively for 2010-19E,
together with a WACC of 9.2% and a 1.5%
terminal growth rate. Based on these
parameters our DCF model renders a fair value
of EUR30.5 per share.
Peer group comparison: in our multiple

comparison Jungheinrich is shown to be trading
at a discount of 42% based on EV/EBITDA for
2011E. We regard this as unjustified, even taking
into account its slightly lower margins and
corporate governance issues.
Q
Q
KION's takeover multiples (EV/sales of 1.0
and EV/EBIT of 15.2x for 2006) are not
applicable, on the one hand because we think
Jungheinrich will always trade at a discount to
KION, and on the other also due to the control
premium.
Taking both valuation approaches into account,

we rate the stock a 3/Underperform with a target
price of EUR30.
Investment case
In 2009 Jungheinrich carried out a drastic costcutting programme which probably nobody
expected from a family-owned company,
lowering its break-even to sales of ~EUR1.6bn.
This explains why its EBIT margin bounced back
to a healthy 5.8% already in Q2-10 (FY08: 5.7%)
and was maintained at this level in Q3.
After having upgraded Jungheinrich in August
2009, we downgraded the stock after the Q3-10
results, whilst keeping our TP at EUR30. This
downgrade was solely related to a) the shares'
strong outperformance since mid-2009; b) the
already demanding consensus, which predicts
33% net profit growth in 2011 and 18% in 2012;
and c) the fact that stock is a consensus buy.
The downgrade was in no way related to
company or industry fundamentals, The shares
currently appear fully valued relative to their own
history. We therefore see better value elsewhere,
at least in the near term.
January 2011
GERMANY
Jungheinrich
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
148
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,525.0
3.7%
(488.2)
(836.4)
200.4
3.7%
(124.0)
76.4
-1.2%
0.0
0.0
0.0
76.4
(4.0)
0.0
0.0
(23.9)
0.1
0.0
0.0
48.5
0.0
0.0
48.5
0.0
0.0
48.5
13.3%
1,644.9
7.9%
(503.1)
(920.9)
220.9
10.2%
(114.0)
106.9
39.9%
0.0
0.0
0.0
106.9
(0.1)
0.0
0.0
(44.7)
0.0
(85.5)
0.0
62.1
0.0
0.1
62.2
0.0
0.0
62.2
28.2%
1,748.1
6.3%
(517.7)
(993.0)
237.4
7.5%
(119.0)
118.4
10.8%
0.0
0.0
0.0
118.4
(0.1)
0.0
0.0
(51.7)
0.0
(85.5)
0.0
66.6
0.0
0.0
66.6
0.0
0.0
66.6
7.1%
2,000.7
14.4%
(564.4)
(1,161.8)
274.5
15.6%
(135.0)
139.5
17.8%
0.0
0.0
0.0
139.5
(1.0)
0.0
0.0
(56.9)
0.0
(85.5)
0.0
81.6
0.0
0.0
81.6
0.0
0.0
81.6
22.4%
2,145.1
7.2%
(594.9)
(1,258.5)
291.7
6.3%
(170.0)
121.7
-12.7%
0.0
0.0
0.0
121.7
(0.3)
0.0
0.0
(44.7)
0.0
0.0
0.0
76.7
0.0
0.0
76.7
0.0
0.0
76.7
-5.9%
1,676.7
-21.8%
(604.2)
(972.3)
100.3
-65.6%
(172.0)
(71.7)
NS
0.0
0.0
0.0
(71.7)
(2.8)
0.0
0.0
19.3
0.0
0.0
0.0
(55.2)
0.0
0.0
(55.2)
0.0
0.0
(55.2)
NS
1,799.5
7.3%
(551.9)
(1,017.3)
230.3
129.7%
(138.6)
91.8
NS
0.0
0.0
0.0
91.8
(3.1)
0.0
0.0
(28.4)
0.0
0.0
0.0
60.3
0.0
0.0
60.3
0.0
0.0
60.3
NS
1,969.0
9.4%
(580.6)
(1,128.5)
259.9
12.8%
(141.8)
118.1
28.7%
0.0
0.0
0.0
118.1
2.8
0.0
0.0
(39.9)
0.0
0.0
0.0
81.0
0.0
0.0
81.0
0.0
0.0
81.0
34.3%
2,047.3
4.0%
(587.2)
(1,174.3)
285.8
10.0%
(147.4)
138.4
17.1%
0.0
0.0
0.0
138.4
3.0
0.0
0.0
(46.7)
0.0
0.0
0.0
94.7
0.0
0.0
94.7
0.0
0.0
94.7
16.9%
172.5
25.8%
7.5
(140.3)
0.0
39.7
(4.6)
0.0
0.0
(14.2)
0.0
(1.1)
19.8
181.4
5.2%
(50.7)
(70.4)
0.0
60.3
(2.7)
0.0
0.0
(15.2)
0.0
1.2
43.6
196.8
8.5%
(56.4)
(70.4)
0.0
70.1
(1.1)
0.0
0.0
(16.3)
0.0
(86.8)
(34.0)
217.0
10.2%
7.1
(70.4)
0.0
153.8
44.6
0.0
0.0
(17.3)
0.0
(102.7)
78.3
244.1
12.5%
(45.7)
(116.8)
0.0
81.5
1.5
0.0
0.0
(18.6)
0.0
(169.1)
(104.7)
132.2
-45.9%
144.4
(92.2)
0.0
184.3
(0.7)
0.0
0.0
(17.6)
0.0
56.3
222.3
195.2
47.7%
(58.3)
(75.6)
0.0
61.3
0.0
0.0
0.0
(1.9)
0.0
2.8
62.2
227.9
16.7%
(9.0)
(141.8)
0.0
77.1
0.0
0.0
0.0
(9.3)
0.0
20.5
88.3
244.5
7.3%
(4.1)
(106.5)
0.0
133.9
0.0
0.0
0.0
(14.5)
0.0
7.8
127.2
392.6
0.0
146.0
204.4
(94.7)
NS
648.3
4.4
5.0
494.7
0.9
16.8
126.4
8.3
648.2
436.7
0.0
164.7
192.9
36.0
8.2
830.3
0.0
38.5
489.7
45.9
10.4
245.7
14.9
830.3
484.9
0.0
160.6
210.2
72.1
14.9
927.8
4.9
36.4
520.9
45.5
11.9
308.2
17.6
927.8
553.7
0.0
163.8
230.5
39.4
7.1
987.3
4.9
37.7
611.0
0.6
12.2
321.0
16.0
987.3
625.1
0.0
140.2
176.0
86.6
13.9
1,027.8
4.9
35.0
661.8
0.6
10.7
314.8
14.7
1,027.7
546.6
0.0
143.2
188.1
(53.3)
NS
824.6
4.3
21.6
619.4
0.4
11.6
167.3
10.0
824.6
605.0
0.0
132.5
198.0
(102.0)
NS
833.4
4.3
18.0
560.0
0.4
11.6
239.1
13.3
833.4
676.7
0.0
139.4
216.6
(176.7)
NS
855.9
4.3
14.1
563.9
0.4
11.6
261.6
13.3
855.9
756.9
0.0
140.9
225.2
(297.6)
NS
825.4
4.3
10.0
527.1
0.4
11.6
272.0
13.3
825.4
www.cheuvreux.com
January 2011
GERMANY
Jungheinrich
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1.43
13.3%
1.43
129.6%
3.46
142.4%
3.46
142.4%
1.96
-43.3%
1.96
-43.3%
2.40
22.5%
2.40
22.5%
2.26
-6.0%
2.26
-6.0%
(1.62)
NS
(1.62)
NS
1.77
NS
1.77
NS
2.38
34.3%
2.38
34.3%
2.79
17.0%
2.79
17.0%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.36
5.07
25.8%
11.2
0.00
0.51
10.08
98.6%
26.8
0.00
0.54
5.79
-42.6%
29.8
0.00
0.58
6.38
10.2%
34.0
0.00
0.55
7.18
12.5%
17.8
0.00
0.12
3.89
-45.9%
16.0
0.00
0.30
5.74
47.7%
17.5
0.00
0.40
6.70
16.7%
19.5
0.00
0.50
7.19
7.3%
21.8

Latest price
High
Low
Average price
34.000
34.000
0.000
16.000
18.000
0.000
16.000
34.000
0.000
16.000
34.000
0.000
34.000
34.000
0.000
34.000
34.000
0.000
34.000
34.000
0.000
34.000
34.000
0.000
34.000
34.000
0.000
13.90
20.50
12.85
16.71
19.74
21.64
13.54
17.92
23.10
29.95
19.50
23.56
26.73
37.18
22.46
29.25
9.05
27.53
8.00
17.56
13.40
14.98
6.58
10.73
29.58
30.60
12.72
20.61
29.32
30.00
28.51
29.23
29.32
-
472.6
506.2
671.2
816.9
785.4
960.8
908.8
1,099.2
307.7
523.2
455.6
533.5
1,005.7
1,024.2
996.7
947.4
996.7
828.0
9.7
9.7
2.7
8.4
1.2
0.8
2.6
5.7
5.7
2.0
8.6
0.7
1.1
2.6
11.8
11.8
4.0
8.8
0.8
1.1
2.3
11.1
11.1
4.2
21.8
0.8
1.1
2.2
4.0
4.0
1.3
27.0
0.5
0.5
6.1
NS
NS
3.4
40.3
0.8
0.7
0.9
16.7
16.7
5.2
6.1
1.7
1.2
1.0
12.3
12.3
4.4
7.7
1.5
1.1
1.4
10.5
10.5
4.1
13.4
1.3
1.0
1.7
2.5
6.6
0.33
2.9
3.7
7.6
0.50
4.5
4.0
8.1
0.55
4.9
4.0
7.9
0.55
5.1
1.8
4.3
0.24
2.1
5.3
NS
0.3
4.0
4.4
11.2
0.6
5.2
3.6
8.0
0.5
4.2
2.9
6.0
0.4
3.4
NS
NS
13.1
5.0
3.2
2.4
NS
25.4
NS
0.2
13.4
6.5
3.8
2.1
8.2
14.8
NS
0.4
13.6
6.8
3.8
2.0
14.9
27.6
NS
0.2
13.7
7.0
4.1
2.1
7.1
24.2
NS
0.4
13.6
5.7
3.6
2.1
13.9
24.4
NS
NS
6.0
NS
NS
2.1
NS
(7.4)
NS
NS
12.8
5.1
3.4
2.2
NS
16.9
NS
NS
13.2
6.0
4.1
2.3
NS
16.8
NS
NS
14.0
6.8
4.6
2.5
NS
17.9
12.1
7.8
13.2
13.2
13.8
8.0
15.3
15.3
13.6
7.7
14.7
14.7
14.3
8.4
15.9
15.9
12.0
7.6
13.1
13.1
NS
NS
NS
NS
11.2
7.6
10.5
10.5
14.0
9.4
12.7
12.7
17.0
11.4
13.4
13.4

EPS before goodwill
% Change
EPS, reported
% Change
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
149
www.cheuvreux.com
January 2011
GERMANY
SECTOR
Kabel Deutschland
Rating
No Rating
N/A
EUR34.28
Price (07/01/2011)
Reuters: KD8Gn.DE Bloomberg: KD8 GR
Seizing the growth potential

Q
Recent developments Strong operational performance
The most recent quarterly results for the Q2 2010/11 fiscal year showed
strong momentum in KPI's, revenues and EBITDA. Revenues are up by
7.6% y-o-y to EUR396m, with EBITDA up by 9.5% to EUR179m. The
EBITDA margin reached an all-time high of 45.2%. Kabel Deutschland
added 55k new internet and phone subscribers equalling an estimated
markert share of net broadband additions in its footprint above 100%,
benefitting from new promotions and offers launched in August. The
subscriber base stands at 7.5m direct CATV subscribers and 1.2m
Internet/phone subscribers. Importantly, total RGUs per sub is 1.4, up
from 1.3 12 months ago. Blended ARPU per subscriber of EUR13.1 is a
10% increase y-o-y, driven by upselling of Internet/phone and Premium
TV services to existing cable television customers.
While Kabel Deutschland reported a net loss of EUR6m for the period
mainly due to high interest expenses - this is an improvement versus
previous quarters, and net profits are approaching break even point.
Though capex/sales remains high at 20% free cash flow is positive at
EUR16m. Net debt is EUR2,876m, implying a net debt/EBITDA ratio of
4.0x, down from 4.7x one year ago, illustrating the rapid ongoing
deleveraging. With the completion of the refinancing project this month,
the company has redeemed and/or refinanced EUR818m in bonds and
credit facilities, saving around EUR50m in interest costs per year.
At the Q2 results Kabel Deutschland management updated its guidance
for the 2010/11 fiscal year and expects revenue growth at the upper
end of the targeted range of 6.5-7.0%, with EBITDA similarly at the
upper end of the EUR715-725m range. Capex guidance has been
lowered by EUR10m to EUR340-350m, implying capex/sales of around
23%. Management still expects to achieve a total of around 250k net
broadband internet/Phone subscriber additions for the year 2010/11.
Q
Stock data
Free float
Enterprise value
No of shares, adjusted
Daily volume
EUR3,085.2m
EUR1,736.9m
EUR5,961.2m
90m
EUR0.239m
Performances
Performance (%)
Absolute
Relative perf.
1m
-6.2%
-8.0%
2m
17.9%
4.8%
3m
N/A
N/A
44
43
39
38
34
33
29
28
24
23
19
14
03/ 10
18
01/11
08/10
Price
Price/ M DAX
Sector focus
Sector Top Picks
Least favoured
Outlook Network upgrades driving growth
In February 2010 Kabel Deutschland launched its DOCSIS 3.0 network

upgrade enabling broadband internet access with transmisison speeds
of up to 100Mbs. By end-November Kabel Deutschland offered 60Mbs
and 100Mbs speeds in around 35% of its (two-way) upgraded footprint
(around 12m households). By mid-2012 the DOCSIS 3.0 upgrade will be
completed and the offering available in the entire upgraded network.
While we do not expect a continuation of the strong Q2 performance
with a market share of broadband net adds above 100%, subscriber
intake should remain solid, supported by improved network capabilities
and the recently reduced price offerings. Kabel Deutschland looks well
positioned to meet its guidance for 2010/11 revenue growth of close to
7.0% and EBITDA growth of close to 10% The recent refinancings and
ongoing deleveraging should result in higher underlying growth in EPS.
Peter Kurt Nielsen
Shareholders
Free Float 56.3%, Cable Holding 43.7%
2010
P/E (x)
EV/EBITDA (x)
2011E
2012E
2013E
36.6
16.5
8.1
7.1
6.2
9.9
5.7
8.1
Net debt/EBITDA (x)
4.3
3.8
3.2
2.6
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
Source: Factset
Cheuvreux does not currently cover Kabel Deutschland
Research Analyst
pnielsen@cheuvreux.com
(44) 207 621 5181
150
www.cheuvreux.com
January 2011
GERMANY
Company profile
The largest cable operator in Germany

Kabel Deutschland is the largest cable network operator in Germany
in terms of subscribers and revenues with 7.5m direct subscribers.
The network covers 13 out of the 16 German federal states with a
combined population of 47m and close to 24m homes. With more
than 15m residential home passed (65% of coverage) the company
is also the largest cable operator in a single European country.
Q
Q Docsis 3.0 upgrade launched in early 2010

The company originated from the Deutsche Telekom group, from
which it was sold in 2003. Since then extensive network upgrades
have enabled it to offer telephony and internet access in addition to
cable television. In 2010 the company embarked on a network
upgrade to the next generation cable technology standard DOCSIS
3.0, which will allow download speeds of up to 100Mbs.
Q Triple play: television, telephony, and internet access
Kabel Deutschland offers television and telecommunications
services to its customers, including basic cable television, premium
TV services, Broadband internet access, and fixed line telephony
services. In May 2009 the company also launched a mobile phone
voice and data offering as a service provider on O2's network.
Q Listed in March 2010
Kabel Deutschland was listed on the Frankfurt Stock Exchange in
March 2010. The selling shareholder Cable Holding S.A., which is
controlled by the Private Equity fund Providence, still holds 43.7% of
the shares and votes. The remainder is free float. Providence has
agreed a lock up on further share sales until March 31 2011.
SWOT analysis
Strengths
Weaknesses
Kabel Deutschland operates

Germany's second largest TV
and telecoms network
Little scope for expanding

coverage areas for basic cable
TV services
DOCSIS 3.0 network upgrade

provides superior transmission
speeds versus competitors
20% of network still does not

facilitate two-way
communications.
Stable and predictable cash

flows from basic CATV services
Inherent cable technology

disadvantages versus fibre/VDSL
Experienced management team

with strong track record
Highly leveraged balance sheet

limits scope for shareholder
distributions
Opportunities
Threats
Significant growth potential from

upselling of new, additional
services to existing customers
Increased competition in basic

television services from new
competitors and alternative
technologies, including Level 4
cable network operators
Revenue generating units (RGUs)

per subscriber and ARPU low
compared to other markets
Economies of scale provides
leverage on earnings margins
The incumbent telecom operator

is rolling out fibre and VDSL to
households
Intensified price competition in
bundled (double and triple-play)
services
Deleveraging of balance sheet to

improve earnings and cash flows
151
www.cheuvreux.com
Valuation
With the shares up by 55% since the IPO in

March 2010, Kabel Deutschland was the best
performing stock in the Telecoms sector in
2010.
Measured on consensus forecasts the shares
are valued at EV/EBITDA multiples of 8.1x
2010/11E and 7.1x 2011/12E, vs the European
sector averages of 5.1x and 4.9x respectively.
P/E is a high 36.6x 2011/12E and 16.5x
2012/13E due to comparatively low net earnings.
Q
Free cash flow yields are currently low and
to date Kabel Deutschland has not distributed
dividends. The leveraged balance sheet with net
debt/EBITDA of 4.0x and reported net losses will
also limit the scope for dividend payments in the
near term.
Investment case
The investment case for Kabel Deutschland is

based on the company's strong position as the
largest cable operator and the second largest
network access operator in Germany.
While revenues and cash flows from basic CATV
services are stable, the upselling of new services
such as Premium TV services, telephony and
Broadband internet access, hold material scope
for ARPU and revenue growth.
While basic CATV services provide stable and
predictable revenues and cash flows, revenues
from new services are growing by 26% y-o-y,
and now make up 34% of total revenues.
The Docsis 3.0 network upgrade will provide
Kabel Deutschland with superior transmission
speeds, and the bandwidth advantage
combined with competitive Triple play pricing
positions the company well versus competitors.
The scalable cost structure and economies of
scale imply that revenue growth from upselling
of new services, increasing RGUs and ARPU per
subscriber should translate into continued
earnings margin improvements.
While capex remains high at above 20% of
sales, around 70% of capex is success driven.
Improved cash flow from operations will
facilitate deleveraging and hence a reduction of
interest expenses, improving reported earnings
and free cash flow.
While we do not anticipate similar outstanding
share price performance as in 2010, Kabel
Deutschland's strong growth profile, improving
balance sheet and cash flows, and experienced
management team, provide the shares with an
appealing investment profile for 2011.
January 2011
GERMANY
STEEL
3/Underperform
Rating
-20.2% EUR17.50
KLOECKNER
Too early to adopt a positive stance
Recent developments Q3-10 in line with expectations; FY10 guidance unchanged
Shipments in Q3-10 totalled 1,368kt, down ~6% qoq and in line with
our 1,370kt forecast. Europe came in down ~7%, North America down
~1% sequentially. Group sales of EUR1.4bn beat expectations due to
higher average selling prices (ASPs) EUR1,024/t booked vs. our
EUR938/t estimate and EUR978/t achieved in Q2-10. Becker remained
strong at the Q2-10 level we estimate a volume of 251kt and EBITDA
of ~EUR18m. The rise in prices vs. Q2-10 stemmed from a time lag and
mix effect (less construction in the summer period).
Q3-10 EBITDA came to EUR61m, in line with our EUR60m estimate.
The margin came to 4.3%, slightly below our 4.7% estimate and down
from 7.1% in Q2-10. Europe was the main driver, as Becker remained
particularly strong the company's EBITDA margin in Europe came to
5.2%, with North America at 2.1%.
Klckner retained its guidance for 2010, predicting group EBITDA of
more than EUR200m (margin >4%), after having already booked
EUR190m in 9M-10. It predicted a q-o-q decline in Q4 volumes, with
EBITDA also down q-o-q. EBITDA consensus for 2010 stands at
EUR235m, indicating ~EUR45m for Q4.
Reuters: KCOGn.DE Bloomberg: KCO GR
Stock data
Free float
Enterprise value
Daily volume

3.5%
36.3%
14.9%
1.9%
19.7%
-10.6%
Absolute perf.
Relative perf.
65.1
65.1
55.1
55.1
45.1
45.1
35.1
35.1
25.1
25.1
15.1
15.1
5.1
06/06
5.1
01/07
08/07
03/08
10/08
Price/M DAX
Outlook Mini cycle to be short-lived; underlying margin to

remain depressed
Although we expect further volume growth in the quarters ahead, we do

not expect KCO to return to its underlying EBITDA margin target of
~6% before 2012E. For 2011E we estimate EBITDA of EUR278.5m,
implying a margin of ~5%, which puts us ~15% below consensus.
EUR1458m
EUR1458m
EUR1796m
66.5m
EUR 14.46m
Performances
For 2011 management confirmed its previous guidance of 10% organic

volume growth y-o-y. As the markets are set to grow by 7-8%, KCO
needs to gain further market shares in Europe and North America. We
forecast volumes of 5.7mt, up 8.8% y-o-y (5.6% l-f-l growth as Becker
has been consolidated since 1 March).
EUR21.92
Price (07/01/2011)
04/09
11/09
06/10
01/11
Price
Sector focus
Sector Top Picks
Krupp, Voestalpine
SSAB
Least favoured
Shareholders
Free Float 100.0%
Although the short-term momentum for KCO shares remain favourable,

given the rise in steel prices into Q1-11 (cost push), we expect this mini
cycle to end already in Q2-11E.
Following the recent share price rally, we find little attraction in the
company's valuation, trading at 6.5x EV/EBITDA, 16x P/E and 1.2x
P/BV (all 2011E estimates).
2009
2010E
2011E
2012E
P/E (x)
NS
22.9
16.4
10.0
EV/EBITDA (x)
NS
8.0
6.5
4.9
41.0
NS
5.6
10.0
Net debt/EBITDA (x)
2.3
1.0
0.5
0.1
Yield (%)
0.0
1.3
1.8
3.0
ROCE (%)
NS
8.3
11.0
14.6
0.9
0.9
0.9
0.8
Alexander HAISSL
Research Analyst
(49) 69 47 897 534
Q
Q
152
www.cheuvreux.com
January 2011
GERMANY
Company profile
Largest producer-independent distributor; business model

highly geared to steel cycle
Klckner & Co SE is the largest producer-independent multi-metal
distributor in the combined European and North American market
(geographical sales split: Germany 29%, France 20%, Switzerland
15%, Spain 6%, Netherlands 6%, UK 7%, US 15%). The company
has a global presence covering more than 15 countries, roughly 250
locations, and a total workforce of ~9,500. With its wide range of
products (more than 200,000) it serves around 185,000 customers in
various sectors (construction ~38%, machinery/manufacturing
~19%, automotive ~12%). Klckner's business model is highly
geared to the steel cycle and steel price movements. Hence, on the
basis of the average price method applied for inventories, its
inventory holding generates windfall profits/losses.
Q
Q Growth via acquisitions strategy

KCO's growth is generated mainly via acquisitions since its IPO in
2006 it has successfully acquired and integrated 18 service centres
around the globe. In Q4-09 it announced the acquisition of the
Becker Stahl-Service Group, headquartered in Bnen, North Rhine
Westphalia (Germany). Becker has roughly 460 employees and
annual sales of ~EUR600. The acquisition strengthened KCO's
position in flat product business.
SWOT analysis
Strengths
Weaknesses
Strong balance sheet
Underlying EBITDA margin of

~6% unlikely to be achieved
before 2012E
Strong M&A track record (18

successful acquisitions since IPO
in 2006)
Solid business model in

downturn with strong FCF
generation
Business highly geared to steel

cycle/prices with high earnings
volatility (windfall profits/losses)
Opportunities
Threats
Firepower for further M&A

activities
Further industry consolidation

in highly fragmented markets
Negative pricing expectations

adversely affecting customers'
buying behaviour
Expansion strategy in
Brazil/China
Strong volumes/earnings
recovery in case of pick up in
underlying demand/re-stocking
153
www.cheuvreux.com
Valuation
Since we expect the company's underlying

profitability to remain volatile in the quarters
ahead, we focus our valuation approach on a
normalised underlying margin of ~6% at the
EBITDA level. Based on normalised EBITDA of
EUR340m, a multiple of 5.5x (in line with the
long-term average) and a discount period of two
years, our model yields a 'fair' value of
EUR17.5/share.
With net working capital (adjusted for financial
liabilities) accounting for ~60% of the company's
current market capitalisation (~50% incl.
pensions), this should clearly put a floor under
the share price.
We rate the stock a 3/UP with a TP of EUR17.5.
Investment case
Highly geared to the steel cycle we do not

expect the upwards trend to be sustainable
into Q2-11E: Klckner's business model is
highly geared to the steel spot market (~85% of
revenues in Europe and ~15% in North America,
with construction accounting for 38%,
automotive 12% and Machinery/ Manufacturing
19%). As we expect the cost-driven steel spot
price rally to end in Q1-11E, conditions look set
to get tougher again in Q2-11E.
Market expectations already demanding for
2011; valuation unattractive: In our view the
market's expectations are already demanding,
predicting 2011 EBITDA of ~EUR320m (5.7%
margin; Reuters consensus) vs. our estimate of
EUR278.5m. Moreover, we find the company's
valuation unattractive at 6.5x EV/EBITDA for 11E
and 4.9x for 12E. We therefore stick to our 3/UP
rating with a TP of EUR17.5.
January 2011
GERMANY
KLOECKNER
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
154
2007
2008
2009
2010E
2011E
2012E
6,274.1
6,749.6
7.6%
(546.3)
(5,602.9)
600.4
62.6%
(67.4)
533.0
74.6%
0.0
0.0
0.0
533.0
(69.8)
0.0
0.0
(79.3)
0.0
0.0
0.0
383.9
0.0
14.2
398.1
0.0
0.0
398.1
198.4%
3,860.5
-42.8%
(441.2)
(3,487.8)
(68.5)
NS
(109.6)
(178.1)
NS
0.0
0.0
0.0
(178.1)
(61.7)
0.0
0.0
54.2
0.0
0.0
0.0
(185.7)
0.0
(2.8)
(188.5)
0.0
0.0
(188.5)
NS
5,166.0
33.8%
(476.9)
(4,460.9)
228.2
NS
(84.7)
143.5
180.6%
0.0
0.0
0.0
143.5
(65.0)
0.0
0.0
(15.8)
0.0
0.0
0.0
62.7
0.0
(1.7)
61.0
0.0
0.0
61.0
132.4%
5,620.0
8.8%
(498.3)
(4,843.2)
278.5
22.0%
(87.5)
191.0
33.1%
0.0
0.0
0.0
191.0
(61.7)
0.0
0.0
(38.8)
0.0
0.0
0.0
90.5
0.0
(1.5)
89.0
0.0
0.0
89.0
45.9%
5,900.0
5.0%
(514.3)
(5,045.7)
340.0
22.1%
(88.0)
252.0
31.9%
0.0
0.0
0.0
252.0
(41.5)
0.0
0.0
(63.1)
0.0
0.0
0.0
147.3
0.0
(2.0)
145.3
0.0
0.0
145.3
63.3%
(282.6)
(60.7)
0.0
(119.5)
1.9
0.0
0.0
(37.2)
0.0
136.3
(18.5)
429.1
91.7%
18.3
(48.1)
0.0
399.3
(12.9)
0.0
0.0
(37.2)
0.0
(65.7)
283.5
(81.7)
NS
586.6
(25.0)
0.0
479.9
1.5
0.0
0.0
0.0
193.0
(319.5)
354.9
154.2
NS
(363.4)
(165.0)
0.0
(374.2)
0.0
0.0
0.0
0.0
0.0
8.3
(365.9)
181.3
17.6%
(43.6)
(55.0)
0.0
82.7
0.0
0.0
0.0
(18.3)
0.0
4.7
69.1
237.4
30.9%
(24.0)
(64.9)
0.0
148.5
0.0
0.0
0.0
(26.7)
0.0
(7.4)
114.4
760.6
84.3
188.5
203.5
732.2
86.7
1,969.1
91.2
105.4
482.1
2.7
0.0
1,287.7
20.5
1,969.1
1,062.4
12.0
180.1
321.7
564.5
52.5
2,140.7
104.6
131.4
479.4
15.6
0.0
1,409.8
20.9
2,140.7
1,108.2
15.1
174.6
141.2
(155.6)
NS
1,283.5
93.1
101.9
426.2
14.1
0.0
648.2
16.8
1,283.5
1,169.9
16.1
176.3
154.6
217.0
18.3
1,733.9
93.1
101.9
506.5
14.1
0.0
1,018.3
19.7
1,733.9
1,240.9
17.2
179.4
159.5
149.4
11.9
1,746.4
93.1
101.9
474.0
14.1
0.0
1,063.4
18.9
1,746.4
1,359.6
19.1
180.0
153.6
27.0
2.0
1,739.3
93.1
101.9
450.9
14.1
0.0
1,079.4
18.3
1,739.3
(509.2)
(5,395.7)
369.2
(63.9)
305.3
0.0
0.0
0.0
305.3
(97.2)
0.0
0.0
(53.6)
1.5
0.0
0.0
156.1
0.0
(22.7)
133.4
0.0
0.0
133.4
223.8
www.cheuvreux.com
January 2011
GERMANY
KLOECKNER
FY to 31/12 (Euro)
2007
2008
2009
2010E
2011E
2012E
2.87
8.56
198.4%
8.56
198.4%
(3.61)
NS
(3.61)
NS
0.92
125.4%
0.92
125.4%
1.34
45.9%
1.34
45.9%
2.19
63.3%
2.19
63.3%
15.6
0.00
0.00
9.23
91.7%
22.8
0.00
0.00
(1.56)
NS
16.7
0.00
0.28
2.32
NS
17.3
0.00
0.40
2.73
17.6%
18.3
0.00
0.66
3.57
31.0%
19.8

Latest price
High
Low
Average price
46.500
46.500
0.000
46.500
46.500
0.000
66.500
52.269
0.000
66.500
66.500
0.000
66.500
66.500
0.000
66.500
66.500
0.000
27.30
-
12.49
-
17.85
20.37
5.63
13.92
21.01
23.46
13.65
17.79
21.92
21.93
21.40
21.68
21.92
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,269.5
2,403.3
580.8
1,289.1
1,187.0
1,174.2
1,396.8
1,814.9
1,457.7
1,797.0
1,457.7
1,670.7
9.5
9.5
5.7
NS
1.8
1.2
2.9
1.5
1.5
1.4
71.3
0.5
0.6
0.0
NS
NS
NS
41.0
1.1
0.9
0.0
22.9
22.9
9.1
NS
1.2
0.9
1.3
16.4
16.4
8.0
5.6
1.2
0.9
1.8
10.0
10.0
6.1
10.0
1.1
0.8
3.0
6.5
7.9
0.38
7.4
2.1
2.4
0.19
2.7
NS
NS
0.3
(35.1)
8.0
12.6
0.4
8.6
6.5
9.4
0.3
7.9
4.9
6.6
0.3
6.2
3.8
3.3
5.9
4.9
2.5
3.2
86.7
27.9
8.6
1.3
8.9
7.9
5.7
3.2
52.5
0.0
NS
1.9
NS
NS
NS
3.0
NS
0.0
3.5
1.4
4.4
2.8
1.2
3.0
18.3
30.5
4.5
0.8
5.0
3.4
1.6
3.2
11.9
29.9
8.2
0.1
5.8
4.3
2.5
3.4
2.0
30.2
15.5
11.6
19.2
19.2
25.1
20.8
46.1
46.1
NS
NS
NS
NS
8.3
6.7
5.4
5.4
11.0
7.7
7.4
7.4
14.6
10.2
11.3
11.3

EPS before goodwill
% Change
EPS, reported
% Change
2.87
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.80
4.81
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
155
www.cheuvreux.com
January 2011
GERMANY
ELECTRONICS
Kontron
3/Underperform
-24.1% EUR7.00
EUR9.22
Price (07/01/2011)
Reuters: KBCG.DE Bloomberg: KBC GR
Transformation not finished yet

Q
Rating
Recent developments mediocre earnings, mgmt change
Kontron reported Q3-10 sales up 15% y-o-y to EUR133m, fuelled by

the rebound in Automation. The low-margin ODM business was
deliberately terminated. At EUR8.1m, Q3-10 EBIT was flat
q-o-q and up 77% y-o-y, lifting Kontron's Q3-10 EBIT margin to 6.1%
from 4.0% a year earlier on improved cost control despite higher
component prices. Order intake reached a new high of EUR204m,
boosting the backlog to a record EUR468m. Cash flow from operations
came in at EUR-1.3m amid higher working capital.
At end-November, Kontron announced that Chief Production Officer Dr
Martin Zurek and Chief Financial Officer (CFO) Dieter Gauglitz will leave
the Board of Management with effect from 1 January 2011. While Dr
Zurek will remain with the company, assuming responsibility for supply
chain optimisation (outside the Board of Management), Mr Gauglitz has
resigned, but will remain available to Kontron as an external advisor.
The CFO position is to be filled again as soon as possible.
Outlook Transformation continues. Turnaround within

reach
The change in top management is linked to the company's ongoing

transformation and is likely to be followed by some redistribution of
responsibilities within the Board of Management. That should ultimately
lead to more balanced workloads among board members and a hence
reduced workload for CEO Ulrich Gehrmann. In our opinion, a
realignment of Kontron's management structure has been necessary
given its recent top-line expansion (with more targeted for the future),
the group's reorganisation (shifting to a more centralised geographic
organisation structure adequate for further globalisation), and its
execution issues (translating growth into profit).
Kontron will remain in transition for the coming months and continue to
streamline its group structure (merger of entities) and operations,
integrate recent acquisitions (Digital Logic, AP Labs, Ubitronics), and
take decisive steps to recover from the fraud suffered in Malaysia. The
benefits of the company's makeover will likely begin to be felt from
2011E onwards and in a gradual pattern. At the same time, success will
require improved management execution and a more favourable market
environment (improved availability of components; rising utilisation;
better mix). However, if successful, Kontron may see an impressive
turnaround in 2011E, with further upside for the years beyond.
It will take time for the company to recover investors' lost trust.
However, at 19x 2011E EPS, 0.9x EV/sales and 1.5x book, the shares
are not expensive, but it is too early to turn outright bullish.
Stock data
Free float
Enterprise value
Daily volume
EUR513m
EUR457m
EUR515m
55.683m
EUR 2.17m
Performances
24.6%
38.4%
11.5%
16.5%
23.3%
10.1%
Absolute perf.
Relative perf.
47.1
47.1
42.1
42.1
37.1
37.1
32.1
32.1
27.1
27.1
22.1
22.1
17.1
17.1
12.1
12.1
7.1
7.1
2.1
2.1
01/01
03/02
08/03
11/04
01/06
Price/TECDAX
04/07
07/08
Price
Sector Top Picks
Least favoured
Shareholders
Free Float 89.2%, Warburg Pincus 8.8%,
Management 2.0%
2009
2010E
2011E
2012E
20.5
NS
19.0
14.5
EV/EBITDA (x)
9.2
31.5
8.4
6.6
NS
NS
7.7
6.3
Net debt/EBITDA (x)
(1.3)
1.9
(0.2)
(0.4)
Yield (%)
2.5
0.0
2.2
2.7
ROCE (%)
10.4
NS
12.5
16.3
1.4
1.1
1.2
1.1
P/E (x)
Bernd LAUX
Q
Q
156
www.cheuvreux.com
12/10
Sector focus
Research Analyst
blaux@cheuvreux.com
(49) 69 47 89 75 12
10/09
January 2011
GERMANY
Company profile
Full-range embedded computer technology provider

Founded in 1962, Kontron develops and produces embedded
computer (EC) systems, i.e. special-purpose computer systems
containing a combination of hardware (40% average) and real-time
software (60%). The company provides a full range of ECT products.
Q
Global market leader

With a market share of 11% Kontron is the world's largest EC
technology manufacturer. Its client base numbers roughly 3,500,
with no individual client accounting for more than 4% of total sales.
The usual shipment size ranges from 100-300k units. Its biggest
customer industries are telecommunications equipment, energy
generation, medical systems, POS/gaming, transportation, defence,
and automation.
Q
Q Addressing a highly attractive growth market

Kontron addresses a USD6bn market that has the potential to grow
at a pace of 10% p.a. (in units) amid sustainably buoyant demand
driven by outsourcing and new applications. The company continues
to steadily expand its share of this market as it generates the fastest
organic growth.
Q Net cash position gone; strategic flexibility limited
Following the EUR34m fraud at its Malaysian entity, Kontron likely
finished 2010 with a moderate net debt position of EUR25m (12-09:
EUR54m net cash). This reduces the company strategic flexibility
going forward; acquisition activity is likely to be limited. If it should
need additional funds, shareholder Warburg Pincus (holding 8.8%) is
standing by to expand its stake in the company and may be
prepared to finance further external growth.
SWOT analysis
Strengths
Weaknesses
Cost-efficient
No
engineering with
roughly 38% of all engineers
located in eastern Europe
proprietary products
Production
efficiency still not

satisfactory, resulting in suboptimal margins
High
re-use quota of 54% of

technology/IP for different
vertical markets thanks to
module-based structure
Control
of a track record in
turning growth into higher returns
Technology
leadership in
vertical solutions
Opportunities
Threats
Ongoing
trend to outsource EC
development supports industry
growth
Strong
potential to expand in
Asia
Industry
of working capital
Lack
consolidation to
proceed
Low entry barriers for highly

fragmented EC industry
Rising
input costs (microprocessors, electronic

components) amid supply
shortages
Rising
price erosion due to

currency shifts
Turning
strong order book and

market share gains into earnings
157
www.cheuvreux.com
Valuation
Kontron shares are priced at very moderate

multiples, especially considering its turnaround
situation. Based on our 2011E projections, the
shares are trading at 19x earnings, 11x cash
flow, 8x EV/EBITDA, 0.9x EV/Sales, and 1.5x
book value. That may appear "fair", but does not
discount Kontron's opportunity to substantially
increase profitability going forward.
From our standpoint, Kontron's valuation
multiples reflect the financial market's lack of
confidence in sustainably higher returns
stemming from the company's sub-par
execution in the past. Most likely, it will take
Kontron and its renewed management time to
rebuild that lost trust.
Investment case
On numerous occasions over the past two years

Kontron has disappointed expectations for its
bottom-line, being hit by the collapse of
Automation (2009), shortages in electronic
components, inventory rising to excessive levels,
frequent restructuring charges, and the fraud at
its Malaysian entity. In addition, Kontron has not
been able to convert its market share gains,
strong design-wins, and healthy order backlog
into earnings.
In response, the company accelerated the
transformation process it started in 2009 (further
streamlining its group structure, merger of
entities and operations, integration of recent
acquisitions Digital Logic, AP Labs, Ubitronics),
in addition to the continued Profit Improvement
Programme.
We fear the benefits of these transformation and
cost reduction processes will be felt only
gradually despite the strong economic
improvement and rebound of the Automation
sector. For a more rapid recovery, Kontron
requires electronic components to become more
easily and cheaply available again. Nonetheless,
Kontron appears to have a huge opportunity to
strongly expand its profitability given its low
base, strong order book, and increasing
sales/healthy end-markets. But it all comes
down to quality of execution.
January 2011
GERMANY
Kontron
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
158
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
262.1
14.3%
(71.5)
(162.9)
27.7
-45.0%
(7.2)
19.5
-55.1%
(0.2)
0.0
0.0
20.3
(1.5)
0.0
0.0
(5.0)
0.0
0.0
(0.2)
13.8
0.0
(0.1)
13.7
0.0
0.0
14.1
-81.2%
300.4
14.6%
(75.3)
(196.0)
29.1
5.1%
(6.5)
21.6
10.8%
0.0
0.0
0.0
22.6
(1.0)
0.0
0.0
(5.1)
0.0
0.0
0.0
16.5
0.0
(1.5)
15.0
0.0
0.0
15.0
6.4%
405.0
34.8%
(90.2)
(273.9)
40.9
40.5%
(8.0)
31.9
47.7%
0.0
0.0
0.0
32.9
(0.7)
0.0
0.0
(6.5)
0.0
0.0
0.0
25.7
0.0
(2.6)
23.1
0.0
0.0
23.1
54.0%
446.5
10.2%
(89.3)
(300.7)
56.5
38.1%
(10.2)
45.3
42.0%
0.0
0.0
0.0
46.3
1.1
0.0
0.0
(14.8)
0.0
0.0
0.0
32.6
0.0
(2.5)
30.1
0.0
0.0
30.1
30.3%
496.9
11.3%
(104.4)
(332.8)
59.7
5.7%
(11.4)
48.3
6.6%
0.0
0.0
0.0
48.3
1.1
0.0
0.0
(13.1)
0.0
0.0
0.0
36.3
0.0
(1.6)
34.7
0.0
0.0
34.7
15.3%
468.9
-5.6%
(103.5)
(323.0)
42.4
-29.0%
(12.3)
30.1
-37.7%
0.0
0.0
0.0
30.1
(0.5)
0.0
0.0
(7.7)
0.0
0.0
0.0
21.9
0.0
(0.3)
21.6
0.0
0.0
21.6
-37.8%
485.0
3.4%
(112.5)
(358.5)
14.0
-67.0%
(17.0)
(3.0)
NS
0.0
0.0
0.0
(3.0)
(2.0)
0.0
0.0
(9.0)
0.0
0.0
0.0
(14.0)
0.0
(1.0)
(15.0)
0.0
0.0
(15.0)
NS
532.0
9.7%
(119.9)
(350.6)
61.5
NS
(19.0)
42.5
NS
0.0
0.0
0.0
42.5
(4.0)
0.0
0.0
(10.5)
0.0
0.0
0.0
28.0
0.0
(1.0)
27.0
0.0
0.0
27.0
NS
589.0
10.7%
(123.1)
(390.9)
75.0
22.0%
(19.0)
56.0
31.8%
0.0
0.0
0.0
56.0
(4.0)
0.0
0.0
(15.2)
0.0
0.0
0.0
36.8
0.0
(1.5)
35.3
0.0
0.0
35.3
30.7%
21.3
-53.5%
(13.8)
(50.5)
0.0
(43.0)
(5.5)
0.0
0.0
0.0
(9.0)
46.3
(11.2)
23.0
8.0%
(28.6)
(18.9)
0.0
(24.5)
120.5
0.0
0.0
0.0
3.0
(100.9)
(1.9)
33.9
47.4%
(1.5)
(117.9)
0.0
(85.5)
120.0
0.0
0.0
(4.6)
18.0
(39.1)
8.8
42.9
26.5%
5.5
(121.7)
0.0
(73.3)
120.0
0.0
0.0
(7.3)
17.1
(40.1)
16.4
47.9
11.7%
(16.1)
(32.9)
0.0
(1.1)
(71.2)
0.0
0.0
(10.1)
(5.5)
62.1
(25.8)
34.2
-28.6%
(7.8)
(56.1)
0.0
(29.7)
1.4
6.0
0.0
(10.1)
42.1
25.5
35.2
2.4
-93.0%
(8.4)
(66.0)
0.0
(72.0)
0.0
4.0
0.0
(11.1)
0.0
28.4
(50.7)
47.0
NS
11.5
(17.6)
0.0
40.9
(2.7)
22.0
0.0
0.0
0.0
(11.2)
49.0
55.8
18.7%
(1.8)
(20.0)
0.0
34.0
(2.9)
7.0
0.0
(11.1)
0.0
0.3
27.3
188.1
2.2
0.3
11.1
(12.5)
NS
189.2
80.7
2.8
23.6
0.0
0.8
81.3
31.0
189.2
229.0
5.3
0.2
12.4
(12.9)
NS
234.0
85.1
11.5
25.9
0.3
0.0
111.1
37.0
233.9
241.2
10.5
0.2
10.2
(28.6)
NS
233.5
84.8
16.9
21.2
0.4
0.0
110.2
27.2
233.5
277.6
10.5
0.1
11.5
(70.7)
NS
229.0
81.7
19.2
22.0
0.4
0.0
105.8
23.7
229.1
286.7
3.6
1.3
11.6
(42.5)
NS
260.7
82.8
28.1
21.6
6.5
0.0
121.7
24.5
260.7
330.2
2.8
2.1
14.9
(56.4)
NS
293.6
91.5
40.1
24.0
5.1
0.0
132.8
28.3
293.5
305.3
2.5
2.5
24.3
26.4
8.6
361.0
140.0
45.0
19.6
5.1
0.0
151.2
31.2
360.9
333.0
2.8
2.8
20.2
(12.2)
NS
346.6
140.0
49.2
13.9
7.8
0.0
135.7
25.5
346.6
358.4
3.0
2.8
22.4
(32.1)
NS
354.5
140.0
52.7
11.4
10.7
0.0
139.6
23.7
354.4
www.cheuvreux.com
January 2011
GERMANY
Kontron
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
0.31
-81.2%
0.30
111.3%
0.33
5.8%
0.33
9.0%
0.47
44.3%
0.47
44.3%
0.59
25.6%
0.59
25.6%
0.69
16.4%
0.69
16.4%
0.39
-43.8%
0.39
-43.8%
(0.27)
NS
(0.27)
NS
0.49
NS
0.49
NS
0.63
30.7%
0.63
30.7%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.01
0.00
0.47
-53.4%
4.1
0.00
0.10
0.50
7.3%
4.9
0.00
0.15
0.69
38.1%
4.8
0.00
0.20
0.85
22.3%
5.3
0.00
0.20
0.95
12.6%
5.5
0.00
0.20
0.61
-35.6%
5.7
0.00
0.00
0.04
-93.0%
5.5
0.00
0.20
0.84
NS
5.8
0.00
0.25
1.00
18.7%
6.2

Latest price
High
Low
Average price
45.654
45.654
0.000
45.905
45.905
0.000
48.954
48.954
0.000
50.733
50.733
0.000
50.284
50.284
0.000
55.683
55.683
0.000
55.683
55.683
0.000
55.683
55.683
0.000
55.683
55.683
0.000
6.75
8.69
5.59
6.88
7.47
7.99
5.67
6.71
11.00
11.72
6.82
9.47
13.72
17.95
10.22
13.95
7.27
14.20
5.01
9.03
7.97
9.33
5.11
7.84
7.99
8.94
5.28
7.06
9.22
9.25
7.95
8.60
9.22
-
309.9
299.4
366.9
396.0
540.2
579.6
686.0
677.1
370.0
340.2
443.8
389.8
444.9
440.8
513.4
515.9
513.4
496.5
22.5
21.9
14.5
NS
1.6
1.6
0.0
22.9
22.9
14.9
NS
1.5
1.7
1.3
23.3
23.3
15.9
NS
2.3
2.5
1.4
23.1
23.1
16.2
NS
2.6
3.0
1.5
10.5
10.5
7.6
NS
1.3
1.3
2.8
20.5
20.5
13.0
NS
1.4
1.4
2.5
NS
NS
NS
NS
1.5
1.1
0.0
19.0
19.0
10.9
7.7
1.6
1.2
2.2
14.5
14.5
9.2
6.3
1.5
1.1
2.7
11.2
15.4
1.14
13.3
14.1
18.3
1.32
14.9
14.5
18.2
1.43
14.8
12.2
14.9
1.52
14.6
5.7
7.0
0.69
6.8
9.2
13.0
0.8
11.1
31.5
NS
0.9
58.6
8.4
12.1
1.0
9.9
6.6
8.9
0.8
8.1
18.5
NS
10.2
7.4
5.3
1.4
NS
0.0
NS
NS
9.4
7.2
5.5
1.3
NS
30.6
NS
NS
9.9
7.9
6.3
1.7
NS
31.8
NS
NS
12.4
10.1
7.3
2.0
NS
33.7
NS
NS
12.0
9.7
7.3
2.0
NS
29.0
NS
NS
9.0
6.4
4.7
1.6
NS
51.6
7.0
11.0
2.9
NS
NS
1.4
8.6
0.0
15.4
NS
11.6
8.0
5.3
1.6
NS
41.2
18.8
NS
12.7
9.5
6.2
1.7
NS
39.4
10.4
7.6
7.6
7.6
9.2
7.1
6.8
6.8
13.7
10.9
10.1
10.1
19.8
13.6
11.5
11.5
19.0
14.0
12.9
12.9
10.4
7.7
6.8
6.8
NS
NS
NS
NS
12.5
9.1
8.5
8.5
16.3
11.5
10.4
10.4
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
159
www.cheuvreux.com
January 2011
GERMANY
MACHINERY
3/Underperform
Rating
-21.2% EUR37.00
KRONES
Reuters: KRNG.DE Bloomberg: KRN GR
Strong sales recovery? Yes. Closing margin

gap to sector? No.
Recent developments V-shaped sales recovery
Krones released its Q3-10 numbers on 27 Oct. Sales, EBT and net
profit were in line while order intake disappointed, falling 5% y-o-y and
8% q-o-q to EUR513m. Although the H1-10 order intake pattern was
excellent and last year's Q3 benefited from the Drintec trade fair, we
found Q3-10 order intake disappointing. We attribute this more to
customers' ordering reluctance rather than a general move by Krones
towards a "margin over volume" policy, which we would welcome. In an
interview after the Q3-10 release, CFO Thaus stressed that 2010 y-o-y
order intake growth will be in the low 2-digit percentage range. We
estimate 2010E order intake at EUR2150m, up +12% y-o-y, implying
Q4-10E order intake of EUR532m (+6% y-o-y and +4% q-o-q).
Krones continues to guide for sales growth of up to 15% y-o-y in 2010,
the key momentum drivers being China, Asia, the Middle East, Africa
and South America. Krones has issued an EBT-margin target of around
3% (our estimate: 3.2%). The current order backlog of EUR923m,
which is up +4% y-o-y, ensures roughly 5-6 months visibility.
Management believes it can achieve 2008 peak sales (EUR2.38bn) by
2012 or 2013, but concedes that EBT margins of ~3% are completely
unsatisfactory and targets 7% and a ROCE of 20% by 2012.
Outlook Profitability expected to stay below peers
EUR46.93
Price (07/01/2011)
Krones's structural growth drivers remain intact: 1) global population

growth (+80m people annually per year); 2) a health & wellness trend
underpinning the demand for packaged beverages; and 3) strong
growth in PET applications.
We also appreciate Krones's additional qualities such as its market
leadership and rock-solid balance sheet. However, the current valuation
(12E EV/Sales of 0.58x and EV/EBITDA of 6.8x) already seems to reflect
a V-shaped recovery. In addition, we believe the company's profitability
will lag that of other capital goods companies in the coming years due
to structural factors. Indeed, the company recently conceded that price
pressure is still very high, and this remains our key concern for the
stock: From 2003-05, a period of sales growth, Krones's EBIT margin
fell from 7.6% to 5.3%, despite its excellent market position, due to
price wars in the industry. Pricing discipline improved only modestly in
05-08; thus, we are concerned that Krones could remain well below the
average profitability of the capital goods sector also in the next profit
cycle.
Compared to peers (e.g. GEA), Krones regards itself as a total solutions
provider and intends to strengthen its turnkey business further (targeted
group sales exposure: 20-30% or 4-5 large projects p.a.) in order to
secure a certain minimum level of capacity utilisation.
Stock data
Free float
Enterprise value
Daily volume
EUR1482m
EUR693m
EUR1392m
31.59m
EUR 1.91m
Performances
1.3%
8.8%
26.9%
-0.3%
-4.5%
-1.3%
Absolute perf.
Relative perf.
59.0
59.0
49.0
49.0
39.0
39.0
29.0
29.0
19.0
19.0
9.0
01/01
9.0
04/02
06/03
09/04
12/05
Price/M DAX
03/07
06/08
Q
Sector focus
Sector Top Picks
Least favoured

Shareholders
Kronseder Family 53.2%, Free Float 46.8%
2009
2010E
2011E
2012E
NS
31.2
18.3
15.7
EV/EBITDA (x)
35.5
11.5
7.9
6.8
10.2
0.7
3.9
4.9
Net debt/EBITDA (x)
(4.2)
(1.0)
(1.0)
(1.2)
P/E (x)
Yield (%)
1.7
0.7
1.2
1.4
ROCE (%)
NS
7.1
11.3
12.8
1.2
1.4
1.3
1.2
Q
160
www.cheuvreux.com
01/11
Price
Research Analyst
(49) 69 47 897 540
09/09
January 2011
GERMANY
Company profile
IPO'd in 1984, 53% of voting rights with Kronseder family

Krones was founded in 1951 by Hermann Kronseder and taken
public in 1984. The Kronseder family remains the majority
shareholder with 53% of the outstanding capital. In addition, Volker
Kronseder is the company's CEO and Norman Kronseder is a
member of the supervisory board.
Q
Q Global market leader in bottling machinery

Krones is the global market leader in bottling machinery for the
beverage industry, offering single machines and complete
production lines including, for example, PET stretch blow moulding,
filling, labelling and packaging machinery. Management plans to
strengthen the company's competence in process technology (e.g.
IT, logistics, warehousing) via acquisitions.
Q 85% of group sales related to beverages
In 2009 some 85% of Krones's group sales were related to
beverages (46% soft drinks, water, 39% alcoholic) and roughly 15%
to food, chemicals, pharmaceuticals and cosmetics. About 80% of
group revenues are generated with PET applications, which are said
to offer higher growth rates than the beverage packaging market as
a whole.
Q International sales: 90%; local production: 80%
We believe the company's production and transport costs constitute
a competitive disadvantage to peers as 80% of its workforce is
based in Germany but it generates only 10% of its sales in Germany.
SWOT analysis
Strengths
Weaknesses
Global market leader in

packaging machinery for
beverages (leader in PET).
Strong mismatch between

geographic sales structure (90%
outside of Germany) and
workforce (80% in Germany)
Stable management; CEO and

CFO joined the board in 1989 and
1997 respectively. Good track
record.
Rock-solid balance sheet
Earnings dilution from Kosme

(low output range), a subsidiary
set up for the sole purpose of
preventing the market entry of
new competitors.
No operating leverage visible
(less scalable tailor-made project
business).
Opportunities
Threats
Rising share of after-sales

business, from ~15% to at least
25% of group revenues.
Rising competition from

manufacturers located in or
expanding into low-cost
countries.
Growth in non-beverage
packaging and process
technology.
Price wars: historically, price

discipline in the industry has
been low
161
www.cheuvreux.com
Valuation
We apply a DCF valuation to derive our price

target of EUR37 per share.
WACC of 8%, and a terminal growth rate of
2.0%. Based on these parameters, our DCF
model renders a fair value of EUR38 per share.
Q Historical multiples comparison: From a

historical multiples perspective, Krones appears
expensive. Its 2012E EV/Sales multiple of 0.58x
is 29% above its 10-year average, whilst its
2012E EV/EBITDA multiple of 6.8x is 43% above
its historical average.
We reiterate our 3/Underperform rating with a

Investment case
We appreciate Krones's qualities: a) intact longterm structural growth drivers (population

growth, rising variety of beverages); b) market
leadership; and c) rock-solid balance sheet.
However, the current valuation (12E EV/Sales of
0.58x and EV/EBITDA of 6.8x) already seems to
reflect a V-shaped recovery. In addition, we
believe the company's profitability will lag that of
other capital goods companies in the coming
years due to structural factors. Indeed, the
company recently conceded that price pressure
is still very high, and this remains our key
concern for the stock: From 2003-05, a period of
sales growth, Krones's EBIT margin fell from
7.6% to 5.3%, despite its excellent market
position, due to price wars in the industry.
Pricing discipline improved only modestly in 0508; thus, we are concerned that Krones could
remain well below the average profitability of the
capital goods sector again in the next profit
cycle. Indeed, management EBT margin target
of 7% by 2012 is expected to be well below the
estimated 2012E margins at e.g. GEA (11.2%).
However, given currently high capacity utilisation
at Krones and the industry at large and good
market momentum, we believe management will
be more selective with the orders and margins it
accepts in H1-11.
January 2011
GERMANY
KRONES
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
162
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,514.3
5.5%
(487.3)
(880.5)
146.5
-1.5%
(45.3)
101.2
-6.8%
0.0
0.0
0.0
101.2
(1.3)
0.0
0.0
(37.9)
0.0
0.0
0.0
62.1
0.0
(0.4)
61.7
0.0
0.0
61.7
5.3%
1,695.0
11.9%
(521.6)
(1,036.6)
136.8
-6.6%
(46.6)
90.2
-10.9%
0.0
0.0
0.0
90.2
1.0
0.0
0.0
(27.8)
0.0
0.0
0.0
63.5
0.0
(0.2)
63.3
0.0
0.0
63.3
2.6%
2,156.0
27.2%
(599.5)
(1,358.7)
197.8
44.6%
(47.6)
150.2
66.5%
0.0
0.0
0.0
150.2
2.1
0.0
0.0
(51.8)
1.3
0.0
0.0
101.7
0.0
1.0
102.7
0.0
0.0
102.7
62.2%
2,381.4
10.5%
(661.4)
(1,511.4)
208.6
5.5%
(51.0)
157.6
4.9%
0.0
0.0
0.0
157.6
(3.1)
0.0
0.0
(49.5)
1.6
0.0
0.0
106.6
0.0
0.4
107.0
0.0
0.0
107.0
4.2%
2,381.4
0.0%
(661.4)
(1,511.4)
208.6
0.0%
(51.0)
157.6
0.0%
0.0
0.0
0.0
157.6
(3.1)
0.0
0.0
(49.5)
1.6
0.0
0.0
106.6
0.0
0.4
107.0
0.0
0.0
107.0
0.0%
1,864.9
-21.7%
(615.3)
(1,219.6)
30.0
-85.6%
(59.6)
(29.6)
NS
0.0
0.0
0.0
(29.6)
(10.6)
0.0
0.0
4.8
1.0
0.0
0.0
(34.4)
0.0
(0.2)
(34.6)
0.0
0.0
(34.6)
NS
2,126.1
14.0%
(622.2)
(1,378.7)
125.2
NS
(57.4)
67.8
NS
0.0
0.0
0.0
67.8
(0.5)
0.0
0.0
(20.5)
1.0
0.0
0.0
47.8
0.0
(0.2)
47.6
0.0
0.0
47.6
NS
2,236.4
5.2%
(640.5)
(1,419.0)
176.9
41.3%
(64.2)
112.7
66.2%
0.0
0.0
0.0
112.7
2.1
0.0
0.0
(34.8)
1.0
0.0
0.0
81.1
0.0
(0.2)
80.9
0.0
0.0
80.9
70.0%
2,299.3
2.8%
(640.5)
(1,461.4)
197.4
11.6%
(66.7)
130.7
16.0%
0.0
0.0
0.0
130.7
3.2
0.0
0.0
(40.5)
1.0
0.0
0.0
94.5
0.0
(0.2)
94.3
0.0
0.0
94.3
16.6%
107.4
6.9%
(64.9)
(59.0)
(21.2)
(16.5)
40.5
0.0
0.0
(11.9)
0.0
(49.7)
(37.6)
110.0
2.4%
(22.3)
(78.3)
(35.9)
9.4
(3.5)
0.0
0.0
(13.7)
0.0
10.3
2.5
147.9
34.5%
(58.4)
(113.4)
(30.0)
(23.9)
0.5
0.0
0.0
(16.7)
13.1
38.1
11.1
154.6
4.5%
51.1
(113.4)
(30.0)
92.3
(1.0)
0.0
0.0
(16.7)
0.0
(13.3)
61.3
154.6
0.0%
51.1
(113.4)
(30.0)
92.3
(1.0)
0.0
0.0
(16.7)
0.0
(13.3)
61.3
22.1
-85.7%
172.2
(80.8)
(30.0)
113.5
13.2
0.0
0.0
(22.1)
0.0
(36.5)
68.1
113.3
NS
(26.8)
(76.6)
(30.0)
9.9
0.0
0.0
0.0
(15.0)
0.0
35.4
30.3
147.6
30.3%
(9.6)
(80.5)
(30.0)
57.5
0.0
0.0
0.0
(11.0)
0.0
14.1
60.6
162.5
10.1%
(6.3)
(82.8)
(30.0)
73.4
0.0
0.0
0.0
(17.8)
0.0
6.8
62.4
523.8
1.9
59.8
123.0
(12.4)
NS
696.1
0.0
43.7
267.4
24.2
0.0
360.9
23.8
696.2
568.6
3.3
64.6
113.4
(14.8)
NS
735.1
0.0
54.5
287.1
15.2
0.0
378.4
22.3
735.2
708.0
0.0
75.2
190.3
6.1
0.9
979.6
0.0
58.4
349.2
14.5
0.0
557.4
25.9
979.5
790.0
0.0
74.5
194.0
(63.5)
NS
995.0
0.0
79.8
386.7
15.5
0.0
513.0
21.5
995.0
790.0
0.0
74.5
194.0
(63.5)
NS
995.0
0.0
79.8
386.7
15.5
0.0
513.0
21.5
995.0
695.7
0.0
76.8
231.8
(126.7)
NS
877.6
0.0
86.1
407.4
2.3
0.0
381.6
20.5
877.4
728.5
0.0
77.8
274.3
(122.6)
NS
958.0
0.0
94.4
418.3
2.3
0.0
442.9
20.8
958.0
798.6
0.0
80.1
288.5
(171.4)
NS
995.8
0.0
103.0
426.0
2.3
0.0
464.4
20.8
995.8
875.3
0.0
80.1
296.6
(227.0)
NS
1,025.0
0.0
111.2
433.9
2.3
0.0
477.4
20.8
1,025.0
www.cheuvreux.com
January 2011
GERMANY
KRONES
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
1.95
5.3%
1.95
5.3%
2.00
2.6%
2.00
2.6%
3.25
62.2%
3.25
62.2%
3.39
4.2%
3.39
4.2%
3.39
0.0%
3.39
0.0%
(1.10)
NS
(1.10)
NS
1.51
NS
1.51
NS
2.56
69.9%
2.56
69.9%
2.99
16.6%
2.99
16.6%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.43
3.40
6.9%
16.2
0.00
0.47
3.48
2.4%
17.5
0.00
0.70
4.68
34.5%
21.7
0.00
0.70
4.89
4.5%
24.3
0.00
0.70
4.89
0.0%
24.3
0.00
0.60
0.70
-85.7%
21.4
0.00
0.35
3.59
NS
22.7
0.00
0.56
4.67
30.2%
24.7
0.00
0.66
5.14
10.1%
27.0

Latest price
High
Low
Average price
31.590
31.590
0.000
31.590
31.590
0.000
31.590
31.590
0.000
31.590
31.590
0.000
31.590
31.590
0.000
31.590
31.590
0.000
31.590
31.590
0.000
31.590
31.590
0.000
31.590
31.590
0.000
28.35
28.83
19.83
24.65
28.71
34.03
23.97
29.33
38.55
38.55
28.00
33.28
54.83
65.50
36.67
52.46
31.07
60.25
27.45
46.44
35.50
39.39
22.00
30.23
46.95
47.89
34.16
41.32
46.93
47.67
44.74
46.57
46.93
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,754.4
1,801.8
1,739.4
1,789.2
1,219.9
1,274.6
1,737.3
1,725.5
981.5
972.9
1,121.5
1,063.8
1,483.2
1,442.3
1,482.4
1,392.5
1,482.4
1,336.3
14.5
14.5
8.3
NS
1.8
2.7
1.5
14.3
14.3
8.2
0.5
1.6
2.5
1.6
11.9
11.9
8.2
NS
1.8
1.3
1.8
16.2
16.2
11.2
5.3
2.3
1.8
1.3
9.2
9.2
6.3
9.4
1.3
1.0
2.3
NS
NS
50.7
10.2
1.7
1.2
1.7
31.2
31.2
13.1
0.7
2.1
1.4
0.7
18.3
18.3
10.0
3.9
1.9
1.3
1.2
15.7
15.7
9.1
4.9
1.7
1.2
1.4
12.3
17.8
1.19
16.7
13.1
19.8
1.06
16.4
6.4
8.5
0.59
8.8
8.3
10.9
0.73
11.1
4.7
6.2
0.41
6.2
35.5
NS
0.6
34.0
11.5
21.3
0.7
12.6
7.9
12.4
0.6
9.5
6.8
10.2
0.6
8.3
NS
NS
9.7
6.7
4.1
2.3
NS
22.0
NS
NS
8.1
5.3
3.7
2.4
NS
23.5
NS
0.0
9.2
7.0
4.7
2.2
0.9
21.5
NS
NS
8.8
6.6
4.5
2.4
NS
20.7
NS
NS
8.8
6.6
4.5
2.4
NS
20.7
2.8
NS
1.6
NS
NS
2.1
NS
(54.8)
NS
NS
5.9
3.2
2.2
2.2
NS
23.2
NS
NS
7.9
5.0
3.6
2.3
NS
21.9
NS
NS
8.6
5.7
4.1
2.2
NS
22.1
15.1
9.3
12.5
12.5
12.5
8.8
11.8
11.8
15.6
10.3
15.6
15.6
16.1
11.0
14.5
14.5
16.1
11.0
14.5
14.5
NS
NS
NS
NS
7.1
5.0
6.8
6.8
11.3
7.9
10.7
10.7
12.8
8.9
11.4
11.4
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
163
www.cheuvreux.com
January 2011
GERMANY
MACHINERY
2/Outperform
Rating
+12.9% EUR700
KSB
Reuters: KSBG_p.DE Bloomberg: KSB3 GR
A hidden pearl
Q
Stock data
Recent developments Outlook lifted slightly
At the beginning of November KSB reported strong Q3-10 sales and

order intake. Q3-10 sales came in at EUR485m (+4% y-o-y and +2% qo-q); order intake came to EUR561m (+27% y-o-y and +4% q-o-q),
hence above our forecast of EUR530m. The company reports
profitability only on a half-year basis.
At the same time, KSB raised its outlook slightly for FY10: it had
previously predicted 2010 order intake and sales on par with 2009.
However, the company now expects to report slight y-o-y sales and
order intake growth. We currently expect 3% y-o-y sales growth for
2010E and a 7% rise in order intake. KSB anticipates a moderate
recovery in its standard business, while its project business looks set to
remain sluggish. It expects 2010 earnings to show a sharp drop
compared to 2009 due to rising price pressure resulting from
overcapacity and higher D&A as a consequence of higher CAPEX in
earlier years.
Q
EUR620
Price (07/01/2011)
Outlook Structural growth drivers + strong market position
The structural growth drivers for KSB in the oligopolistic market in

which it is active include rising demand for new power stations around
the world as well as the scarcity of water and other resources. China,
for example, plans to build 60 new nuclear power plants over the next
10 years, and this is likely to be a key growth driver for KSB. The
company already won a prestigious contract in 2009 worth EUR50m to
supply 16 pumps by 2012. In addition to this contract, it will also
generate fees thorough the provision of maintenance services every 11.5 years. In order to benefit to the fullest from this market situation,
KSB formed a German-Chinese joint venture already in 2008 called
SEC-KSB Nuclear Pumps & Valves.
Pumps require continual maintenance, especially pumps for power
plants. KSB has one of the largest service networks in the world and the
densest in Europe. It generates 15-18% of its group sales in the highmargin services business, mainly in the energy industry.
The services arena is protected by high entry barriers thanks to KSB's
high market shares (KSB pumps are used in almost all German, half of
all European and 1/3 of all global power plants), outstanding product
quality, and low total cost of ownership. Moreover, its strong market
share gives it a competitive advantage in spare parts business given the
legal requirement in many parts of the world that most replacement
parts for power station pumps come from the OEM.
Free float
Enterprise value
Daily volume
EUR1086m
EUR553m
EUR1060m
1.751m
EUR 0.39m
Performances
8.4%
23.7%
47.6%
3.3%
5.2%
3.8%
Absolute perf.
Relative perf.
660.0
660.0
560.0
560.0
460.0
460.0
360.0
360.0
260.0
260.0
160.0
160.0
60.0
60.0
01/01
01/02
04/03
07/05
01/07
Price/SDAX
02/08
02/09
Price
Sector Top Picks

Least favoured

Shareholders
Free Float 51.0%, Ksb Foundation 49.0%
2009
2010E
2011E
P/E (x)
6.4
12.0
10.5
8.1
EV/EBITDA (x)
3.4
5.4
4.7
3.7
10.4
3.9
6.4
6.1
Net debt/EBITDA (x)
(0.9)
(1.2)
(1.3)
(1.3)
Yield (%)
3.0
1.5
2.1
2.5
ROCE (%)
19.9
15.5
16.9
19.7
0.8
0.9
0.7
0.6
Q
164
www.cheuvreux.com
2012E
Q
01/11
Sector focus
Research Analyst
(49) 69 47 897 540
02/10
January 2011
GERMANY
Company profile
A world market leader for pumps and valves

As a global player with production in 19 countries, KSB is a leading
supplier of pumps (80% of group sales) and valves (20% of group
sales) that help to move fluids. It occupies the global no. 1 position
as a supplier of pumps to the energy/power (both nuclear and
conventional) and mining industries (32% of 09 group sales). In
addition, it also holds a top-5 position in applications for industry &
building (47% of 09 group sales) as well as water & waste water
(20% of 09 group sales). KSB thus transports almost every sort of
fluid, ranging from clean water to aggressive and explosive liquids.
Q
Q 15-18% of group sales related to high-margin services

With one of the largest service networks in the world, comprising
more than 100 service units globally, KSB generates 15-18% of its
group sales with its high-margin services business, mainly in the
energy industry. As pumps need continual maintenance, especially
at power plants, KSB's strong service network offers a competitive
edge relative to the company's peers.
Q Strong exposure to Europe (68% of group sales)
In 2009 the group generated 68% of its total sales in Europe, 4% in
the Middle East & Africa, 14% in Asia/Pacific and 14% in the
Americas. While developed countries still dominate KSB's
geographical sales split, the BRIC countries have been its growth
engine in recent years and we expect this trend to continue after the
economic crisis, when financing becomes more readily available
again.
Shareholders: majority of voting rights at foundation

With the stock having been listed for more than 100 years, roughly 80%
of KSB's ordinary shares are held by the KSB foundation (and have
been since 1964). Its intention is to keep the majority of voting rights
(>50% of ordinary shares) within the foundation. The remaining 20% of
the ordinary shares and 100% of the preferred shares are free float.
Q
SWOT analysis
Strengths
Weaknesses
Strong global service network
Strong
position in a highly
Shareholder structure
Majority
of value-added still
generated in high-cost countries
Superior product quality and

reliability
14%
of sales in Asia/Pacific vs.

28% of employees in this lowcost region
Opportunities
Threats
Construction of new nuclear

power plants in China, India,
Russia, the UK and the US, with
accompanying Services business
Scarcity
Drastic
of clean water around

the globe requiring more pumps
for water transport, purification,
treatment, etc.
'Buy local' requirements in

China
Low-cost
competition from
China
increase in raw material
prices
165
www.cheuvreux.com
Valuation
Q DCF: we incorporate sales and EBITDA

CAGRs of 1.9% and 3.2% respectively for 201019E, a WACC of 9.1% and a terminal growth
rate of 1.5%. Based on these parameters, our
DCF model yields a fair value of EUR700 per
share.
Q Multiple comparison: KSB trades at a 52%
discount to its peer group (ITT, Weir, Sulzer,
Pentair and Flowserve) based on 11E
EV/EBITDA. Although partly justified by its lower
margins and shareholder structure (80% of
KSB's ordinary shares are held by the KSB
foundation), we believe the current discount is
excessive.
Q Normalised earnings model: our normalised
earnings model yields a FV of EUR700 based on
the following assumptions: EV/EBIT normalised
8.2x,
normalised
EBIT
assumed
very
conservatively at EUR185m, discount period of
two years, 9% discount rate.
Taking everything into account, we rate KSB a

2/Outperform with a TP of EUR700.
Investment case
Given strong structural growth drivers, KSB's

excellent market position in a highly oligopolistic
market, high barriers to entry, a rock-solid
balance sheet and an inexpensive valuation, we
strongly advise investors to revisit KSB, despite
its limited liquidity/free float. We are convinced
that its conservative outlook for 11E offers
upside.
Strong structural growth drivers are working in
KSB'S favour: rising demand for new power
stations worldwide and the growing scarcity of
water and other resources. China for example
plans to build 60 new nuclear power plants over
the next 10 years. KSB already won one
prestigious contract in 2009 valued at EUR50m
excluding services.
Pumps
require
continual
maintenance,
especially pumps for power plants. KSB has one
of the largest service networks in the world and
the densest in Europe. It generates 15-18% of
its group sales in the high-margin services
arena, mainly in the energy industry.
January 2011
GERMANY
KSB
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
166
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,401.4
12.1%
(508.5)
(818.3)
74.6
-21.5%
(34.2)
40.4
-24.6%
0.0
0.0
0.0
40.4
(11.7)
0.0
0.0
(9.8)
1.0
0.0
0.0
18.8
1.0
(8.7)
11.1
0.0
0.0
11.1
1,401.4
0.0%
(508.5)
(818.3)
74.6
0.0%
(34.2)
40.4
0.0%
0.0
0.0
0.0
40.4
(11.7)
0.0
0.0
(9.8)
1.0
0.0
0.0
18.8
1.0
(8.7)
11.1
0.0
0.0
11.1
0.0%
1,607.4
14.7%
(521.7)
(954.0)
131.7
76.5%
(33.2)
98.5
143.8%
0.0
0.0
0.0
98.5
(10.5)
0.0
0.0
(27.9)
2.2
0.0
0.0
59.9
2.5
(12.9)
49.5
0.0
0.0
49.5
NS
1,770.9
10.2%
(581.6)
(1,020.3)
169.0
28.3%
(34.6)
134.4
36.4%
0.0
0.0
0.0
134.4
(8.7)
0.0
0.0
(38.8)
2.9
0.0
0.0
80.6
9.3
(13.1)
76.8
0.0
0.0
76.8
55.2%
1,991.7
12.5%
(614.6)
(1,134.8)
242.3
43.4%
(35.0)
207.3
54.2%
0.0
0.0
0.0
207.3
(11.5)
0.0
0.0
(60.6)
4.3
0.0
0.0
126.7
12.8
(16.4)
123.1
0.0
0.0
123.1
60.3%
1,892.8
-5.0%
(618.3)
(1,046.9)
227.6
-6.1%
(43.4)
184.2
-11.1%
0.0
0.0
0.0
184.2
(16.7)
0.0
0.0
(50.4)
5.3
0.0
0.0
110.0
12.3
(14.7)
107.6
0.0
0.0
107.6
-12.6%
1,945.5
2.8%
(616.1)
(1,130.1)
199.3
-12.4%
(49.6)
149.7
-18.7%
0.0
0.0
0.0
149.7
(17.7)
0.0
0.0
(40.8)
4.0
0.0
0.0
86.6
8.6
(10.0)
85.2
0.0
0.0
85.2
-20.8%
2,057.3
5.7%
(635.7)
(1,197.1)
224.5
12.6%
(52.5)
172.0
14.9%
0.0
0.0
0.0
172.0
(13.8)
0.0
0.0
(48.7)
4.0
0.0
0.0
100.6
13.0
(10.0)
103.6
0.0
0.0
103.6
21.6%
2,196.1
6.7%
(645.9)
(1,277.8)
272.4
21.3%
(53.8)
218.6
27.1%
0.0
0.0
0.0
218.6
(13.5)
0.0
0.0
(62.7)
4.0
0.0
0.0
131.0
15.3
(12.0)
134.3
0.0
0.0
134.3
29.6%
61.2
-22.9%
(16.8)
0.0
(30.0)
44.4
(15.4)
0.0
0.0
0.0
0.0
0.0
29.0
61.2
0.0%
(16.8)
(25.4)
(30.0)
19.0
(15.4)
0.0
0.0
(0.9)
0.0
(11.4)
(8.7)
92.7
51.5%
2.0
(25.4)
(30.0)
69.3
(10.9)
0.0
0.0
(0.9)
0.0
(11.4)
46.1
133.6
44.1%
(22.5)
(44.0)
(30.0)
67.1
(10.1)
0.0
0.0
(4.0)
0.0
(18.5)
34.5
174.8
30.8%
(33.9)
(113.4)
(30.0)
27.5
2.9
0.0
0.0
(16.0)
0.0
11.9
26.3
164.5
-5.9%
20.4
(100.9)
(30.0)
84.0
(4.5)
0.0
0.0
(22.1)
0.0
187.0
244.4
139.5
-15.2%
(26.8)
(68.8)
(30.0)
43.9
0.0
0.0
0.0
(15.0)
0.0
(29.5)
(0.6)
168.3
20.6%
(19.7)
(72.7)
(30.0)
75.9
0.0
0.0
0.0
(15.0)
0.0
8.3
69.2
202.9
20.6%
(24.5)
(106.5)
(30.0)
71.9
0.0
0.0
0.0
(22.8)
0.0
7.7
56.8
390.0
0.0
192.4
179.0
(35.6)
NS
725.8
30.3
9.0
224.8
39.0
0.0
422.7
30.2
725.8
390.0
0.0
192.4
179.0
(35.6)
NS
725.8
30.3
9.0
224.8
39.0
0.0
422.7
30.2
725.8
426.6
0.0
201.6
201.0
(62.8)
NS
766.4
31.0
8.4
231.5
49.9
0.0
445.6
27.7
766.4
435.9
70.0
213.4
225.9
(100.0)
NS
845.2
37.2
9.8
254.3
60.1
0.0
483.9
27.3
845.3
524.2
81.6
223.7
246.0
(120.1)
NS
955.4
36.7
10.8
313.2
57.2
0.0
537.6
27.0
955.5
627.1
93.5
235.8
246.7
(214.6)
NS
988.5
33.8
8.4
365.5
61.6
0.0
519.1
27.4
988.4
696.2
104.5
221.8
235.8
(229.5)
NS
1,028.8
33.8
18.2
374.9
61.6
0.0
540.4
27.8
1,028.9
781.1
118.2
228.9
249.3
(297.4)
NS
1,080.1
33.8
28.6
384.7
61.6
0.0
571.4
27.8
1,080.1
887.6
135.3
232.5
266.2
(350.2)
NS
1,171.4
33.8
46.3
419.6
61.6
0.0
610.0
27.8
1,171.3
www.cheuvreux.com
January 2011
GERMANY
KSB
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
6.34
-61.6%
6.34
-50.3%
6.34
0.0%
6.34
0.0%
28.27
NS
28.27
NS
43.86
55.2%
43.86
55.2%
70.30
60.3%
70.30
60.3%
61.45
-12.6%
61.45
-12.6%
48.66
-20.8%
48.66
-20.8%
59.17
21.6%
59.17
21.6%
76.70
29.6%
76.70
29.6%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
34.95
-23.8%
222.7
0.00
0.00
34.95
0.0%
222.7
0.00
2.00
52.94
51.5%
241.6
0.00
9.00
76.30
44.1%
239.9
0.00
12.50
99.83
30.8%
286.9
0.00
12.00
93.95
-5.9%
346.1
0.00
8.56
79.67
-15.2%
389.0
0.00
13.01
96.12
20.6%
433.1
0.00
15.34
115.88
20.6%
491.6
1.751
1.751
0.000
1.751
1.751
0.000
1.751
1.751
0.000
1.751
1.751
0.000
1.751
1.751
0.000
1.751
1.751
0.000
1.751
1.751
0.000
1.751
1.751
0.000
1.751
1.751
0.000
110.00
128.00
103.00
115.00
141.00
152.00
107.00
129.00
312.00
380.00
137.00
258.00
408.00
695.00
348.00
522.00
274.00
478.00
180.00
329.00
395.00
463.00
180.00
321.00
582.00
591.00
390.80
489.90
620.00
628.00
583.00
613.83
620.00
-
193.0
310.8
253.0
370.8
657.0
745.9
774.0
827.3
574.0
696.7
708.0
764.6
1,019.1
1,069.5
1,085.6
1,060.4
1,085.6
1,003.3
17.4
17.4
3.1
23.0
0.5
0.5
0.0
22.2
22.2
4.0
7.5
0.6
0.5
0.0
11.0
11.0
5.9
10.5
1.3
1.0
0.6
9.3
9.3
5.3
8.7
1.7
1.1
2.2
3.9
3.9
2.7
4.2
1.0
0.8
4.6
6.4
6.4
4.2
10.4
1.1
0.8
3.0
12.0
12.0
7.3
3.9
1.5
0.9
1.5
10.5
10.5
6.5
6.4
1.4
0.7
2.1
8.1
8.1
5.4
6.1
1.3
0.6
2.5
4.2
7.7
0.22
4.5
5.0
9.2
0.27
5.4
5.7
7.6
0.46
7.5
4.9
6.2
0.47
5.9
2.9
3.4
0.35
3.4
3.4
4.2
0.4
3.8
5.4
7.1
0.6
6.3
4.7
6.2
0.5
5.4
3.7
4.6
0.5
4.3
6.4
NS
5.3
2.9
1.4
2.0
NS
0.0
6.4
NS
5.3
2.9
1.4
2.0
NS
0.0
12.5
NS
8.2
6.1
3.9
2.2
NS
7.1
19.4
NS
9.5
7.6
5.1
2.3
NS
20.5
NS
NS
12.2
10.4
7.0
2.2
NS
17.8
13.6
NS
12.0
9.7
6.5
2.0
NS
19.5
11.3
NS
10.2
7.7
4.9
2.0
NS
17.6
16.3
NS
10.9
8.4
5.5
2.0
NS
22.0
NS
NS
12.4
10.0
6.7
2.0
NS
20.0
5.9
3.9
2.9
2.9
5.9
3.9
2.9
2.9
13.7
9.5
12.3
12.3
17.1
11.9
19.3
19.3
23.1
16.1
26.6
26.6
19.9
14.1
18.8
18.8
15.5
10.8
13.0
13.0
16.9
11.8
14.2
14.2
19.7
13.8
16.4
16.4

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
167
www.cheuvreux.com
January 2011
GERMANY
MACHINERY
3/Underperform
Rating
-22.8% EUR13
Kuka AG
Reuters: KU2G.DE Bloomberg: KU2 GR
Robots for the future

Q
EUR16.84
Price (07/01/2011)
Stock data
Recent developments Ongoing recovery in Q3
Kuka's Q3-10 sales rose +26% y-o-y and +1.1% q-o-q to EUR274m.
EBIT was EUR8.3m, net profit EUR-0.2m, while order intake rose+52%
y-o-y and +11% q-o-q to EUR314.5m. The better-than-expected order
intake was mainly driven by the low-margin Systems division.
By division, Robotics Q3-10 order intake rose +95% y-o-y and 4%
q-o-q to EUR138m, probably the highest order intake level for Robotics
for some time to come, driven by y-o-y growth of +206% in
Automotive, +54% in General Industry, and +49% in Services.
Robotics' Q3 sales (early cycle) rose +58% y-o-y to EUR119m, with
EBIT of EUR7.2m. Systems Q3 order intake rose +34% y-o-y and
+17% q-o-q to EUR196m. Systems (late cycle) generated sales of
EUR172m, +14% y-o-y, and EBIT of EUR4.9m.
KUKA reiterated its 2010 guidance for sales of >EUR1bn with EBIT of
EUR20-30m pre restructuring expenses of EUR10m. .
Outlook Recovery and strong market position, but

consensus expectations already high
KUKA intends to capitalise on its strong competitive position: In its

Robotics division, its Automotive business is no. 1 in Europe with a
market share of 45% and no. 1-2 globally (25% share). Key peers are
Fanuc, Yaskawa, Nachi and ABB. Its position in Robotics/General
Industry is weaker, though, with just a top-3 position and 20% market
share in Europe, and top 5/10% share globally. Its key competitors here
are: Yaskawa, Fanuc, ABB, Stubli. In Systems, KUKA holds a top-2
position in Europe with ThyssenKrupp, and in the US a top-2 position
with Comau.
KUKA recently maintained its mid-term EBIT margin targets of 5% for
the Systems division, 10% for Industry Robotics (Automotive, General
Industry), and even >10% for Advanced Robotics (Professional
Services, Medical Technology). To meet these ambitious mid-term
targets KUKA would need to generate sales of EUR1.1bn (2010E:
EUR1035m). The company has undertaken significant efforts to cut
capacity and lower its break-even point in 2010 to sales of EUR300350m in Robotics and EUR600m in Systems. The introduction of the
new Quantec robot family in 2011 to the Automotive industry and in
2012 to clients from the General Industry is also part of the company's
plan to meet its mid-term margin targets.
Given the automotive industry's strong bargaining leverage (high
average contract size, limited number of customers), we expect the
pricing environment in this area to remain tough. However, we are more
optimistic for the General Industry area. Nonetheless, the 11E EBIT
consensus of EUR60m seems ambitious.
Free float
Enterprise value
Daily volume
EUR571m
EUR348m
EUR709m
33.92m
EUR1.79m
Performances
9.4%
20.3%
31.6%
4.2%
2.3%
-7.5%
Absolute perf.
Relative perf.
32.3
32.3
27.3
27.3
22.3
22.3
17.3
17.3
12.3
12.3
7.3
01.01
7.3
04.02
07.03
10.04
01.06
Price/SDAX
04.07
07.08
Sector focus
Sector Top Picks
Least favoured

Shareholders
Free Float 61.0%, Grenzebach 25.2%, Oppenheim
Funds (Pref) 5.2%, Wyser-Pratte 4.7%, Kuka Ag 3.9%
2009
2010E
2011E
2012E
P/E (x)
NS
NS
24.0
16.4
EV/EBITDA (x)
NS
15.1
8.9
7.5
NS
NS
NS
2.6
Net debt/EBITDA (x)
(1.8)
1.2
0.8
0.5
Yield (%)
0.0
0.0
0.0
4.2
ROCE (%)
NS
5.4
13.1
14.9
1.1
1.5
1.4
1.2
Q
Q
168
www.cheuvreux.com
01.11
Price
Research Analyst
(49) 69 47 897 540
10.09
GERMANY
January 2011
Company profile
Solutions provider for automation of industrial processes

German-based KUKA sees itself as an advanced solutions provider
for the automation of industrial production processes to help its
customers increase their productivity, improve product quality,
reduce consumption of costly materials and energy, and make work
processes more flexible. The company serves customers in a wide
range of industries, including automotive, plastics, assembly
systems and foundries, aerospace, glass and wood. In 2007 it
changed its name from IWKA to KUKA and moved its headquarters
to Augsburg, Germany.
Q
Focus on two divisions: Robotics and Systems

After the sale of its packaging division in 2007, a move designed to
increase its equity ratio, KUKA focuses on two core businesses:
Robotics and Systems. In 2009 Robotics accounted for 37% group
sales, Systems for 63%. KUKA has reiterated its mid-term (EBIT)
margin targets of 5% for the Systems division, 10% for Industry
Robotics (Automotive, General Industry) and even >10% for
Advanced Robotics (Professional Services, Medical Technology).
Q
Geographic sales split: strong exposure to Europe

Geographically, the group generated 28% of its 2009 sales in
N. America, 26% in Europe ex Germany, 33% in Germany, and 13%
in Asia and RoW.
Q
Megatrends for robot-based automation

KUKA sees the future of robot-based automation resting on three
pillars: 1) expanding industrialisation, also in small and mediumsized companies; 2) sustainability, e.g. electric cars and joining and
processing technologies for new materials; and 3) the demographic
shift leading to higher demand from the healthcare sector.
Q
SWOT analysis
Strengths
Weaknesses
Market/technology
Strong
leader
Limited experience in new

markets
innovative power
Tailor-made
solutions
Opportunities
Threats
Shortening model lifecycles in

the automotive industry
Increasing
demand for robotics

from general industry
Trend
towards improving
efficiency of production
processes by automation
169
Volatile and unpredictable

capex in cyclical automotive
sector, KUKA's main sales driver
Dependence
on large
customers (especially in the
automotive industry) with related
risk of price pressure
www.cheuvreux.com
Valuation
We derive our price target from a DCF valuation,

a peer group multiple approach, and an EVA
model.
DCF: We incorporate sales and EBITDA
CAGRs of 3.3% and 11.1% respectively for
2010-19E, a WACC of 8.7% and a 1.5%
terminal growth rate. Based on these
parameters our DCF model yields a fair value
per share of EUR10.2.
Q
Q
Multiple comparison: KUKA trades at a
significant premium to its peer group based on
12E EV/EBITDA (18.6x vs. 7.7x despite lower
margins).
Q
EVA: Assuming a pre-tax ROCE of 13% by
12E and a pre-tax WACC of 10%, our EVA
model yields a FV of EUR16.
Taking all three valuation approaches into

account, we rate the stock a 3/Underperform
with a target price of EUR10.
Investment case
Given the Automotive industry's strong

bargaining leverage, we expect the pricing
environment in this area to remain tough. We
estimate the average size of contracts for
automotive companies at ~600 robots, with 20
active customers, vs. an estimated 6,000 active
customers and an average contract size of
about 3 robots in general industry.
However, we are more optimistic on the pricing
environment for General Industry. Nonetheless,
11E EBIT consensus of EUR60m seems
ambitious.
Given that consensus expectations are already
pricing in a very rapid turnaround and the stock
is a 75% consensus buy, we see limited upside
potential in the stock and reiterate our 3/UP
rating.
January 2011
GERMANY
Kuka AG
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
170
2006
2007
2008
2009
2010E
2011E
2012E
1 164.6
1 286.4
(318.2)
(791.3)
55.1
(332.0)
(857.0)
97.4
76.8%
(26.9)
70.5
NS
0.0
0.0
0.0
70.5
(7.9)
0.0
69.1
(13.6)
(0.1)
0.0
0.0
118.0
0.0
(0.1)
117.9
0.0
(69.1)
48.8
175.5%
1 266.1
-1.6%
(358.0)
(830.1)
78.0
-19.9%
(26.0)
52.0
-26.2%
0.0
0.0
0.0
52.0
(5.0)
0.0
0.0
(16.5)
0.0
0.0
0.0
30.6
0.0
(0.1)
30.5
0.0
0.0
30.5
-37.5%
902.1
-28.8%
(319.8)
(609.2)
(26.9)
NS
(26.0)
(52.9)
NS
0.0
0.0
0.0
(52.9)
(11.5)
0.0
0.0
(11.4)
0.0
0.0
0.0
(75.8)
0.0
0.1
(75.7)
0.0
0.0
(75.7)
NS
1 034.6
14.7%
(330.6)
(658.5)
45.5
NS
(24.8)
20.7
139.1%
0.0
0.0
0.0
20.7
(20.1)
0.0
0.0
(9.2)
0.0
0.0
0.0
(8.6)
0.0
0.0
(8.6)
0.0
0.0
(8.6)
88.6%
1 103.0
6.6%
(332.5)
(690.5)
80.0
75.7%
(24.3)
55.7
169.2%
0.0
0.0
0.0
55.7
(16.1)
0.0
0.0
(15.8)
0.0
0.0
0.0
23.8
0.0
0.0
23.8
0.0
0.0
23.8
NS
1 178.5
6.8%
(336.9)
(748.5)
93.1
16.4%
(25.9)
67.2
20.6%
0.0
0.0
0.0
67.2
(15.1)
0.0
0.0
(17.2)
0.0
0.0
0.0
34.9
0.0
0.0
34.9
0.0
0.0
34.9
46.8%
(49.8)
NS
59.2
(92.2)
0.0
(82.8)
(0.6)
0.0
0.0
0.0
4.3
104.8
25.6
16.2
132.6%
0.2
(24.8)
0.0
(8.4)
(85.0)
0.0
0.0
0.0
0.0
86.7
(6.7)
48.0
196.1%
(26.9)
(33.6)
0.0
(12.5)
0.0
0.0
0.0
0.0
0.0
17.3
4.8
60.8
26.6%
(9.3)
(36.5)
0.0
15.0
0.0
0.0
0.0
0.0
0.0
8.5
23.5
159.3
1.5
70.1
124.4
48.4
30.1
403.7
49.6
29.6
90.3
1.0
0.0
233.2
25.9
403.7
151.0
1.3
72.7
103.5
54.2
35.6
382.6
49.6
29.6
90.3
1.0
0.0
212.1
20.5
382.5
174.3
1.7
73.2
110.3
66.2
37.6
425.7
49.6
31.8
97.4
1.0
0.0
245.8
22.3
425.6
208.6
2.3
74.1
117.9
50.3
23.9
453.1
49.6
34.2
105.7
1.0
0.0
262.6
22.3
453.1
(38.4)
16.7
0.0
0.0
0.0
16.7
(13.8)
0.0
(62.7)
(5.1)
(0.0)
0.0
0.0
(64.8)
0.0
0.2
(64.6)
0.0
0.0
(64.6)
0.0
144.8
0.0
(116.8)
0.0
(116.8)
0.0
0.0
0.0
0.0
0.0
0.0
(116.8)
64.3
(116.8)
0.0
92.4
2.2
0.0
0.0
0.0
0.0
0.0
94.6
56.6
-60.9%
(187.4)
(116.8)
0.0
(247.6)
1.3
0.0
0.0
0.0
0.8
(5.0)
(245.6)
119.1
1.5
140.3
150.3
77.4
64.2
488.6
111.2
24.7
153.5
1.6
2.3
195.3
16.8
488.6
232.1
1.4
73.9
162.9
(163.6)
NS
306.6
49.6
19.9
91.9
1.6
0.0
143.5
11.2
306.6
212.0
1.5
68.5
118.8
53.6
25.1
454.4
49.6
24.6
93.1
0.4
0.0
286.8
22.6
454.4
www.cheuvreux.com
January 2011
GERMANY
Kuka AG
FY to 31/12 (Euro)
2006
2007
2008
2009
2010E
2011E
2012E
(2.43)
1.83
175.5%
4.43
NS
1.18
-35.6%
1.18
-73.4%
(2.82)
NS
(2.82)
NS
(0.29)
89.6%
(0.29)
89.6%
0.70
NS
0.70
NS
1.03
46.9%
1.03
46.9%
0.00
0.00
0.00
0.00
0.00
5.45
4.5
8.7
0.00
0.00
2.19
-59.8%
8.2
0.00
0.00
(1.85)
NS
5.6
0.00
0.00
0.55
129.8%
4.5
0.00
0.00
1.42
156.5%
5.1
0.00
0.70
1.79
26.6%
5.4
26.600
26.600
0.000
26.600
26.600
0.000
25.820
25.820
0.000
28.480
26.910
0.000
33.920
29.390
0.000
33.920
33.920
0.000
33.920
33.920
0.000
19.36
24.85
14.00
19.40
26.01
31.79
18.43
25.49
12.67
26.75
9.81
18.35
11.95
12.90
8.70
10.85
16.60
16.93
9.99
12.38
16.84
18.07
16.51
17.22
16.84
-
515.0
730.3
693.2
602.1
337.0
459.4
340.3
458.1
563.1
689.0
571.2
709.6
571.2
694.6
NS
NS
NS
NS
4.3
1.5
0.0
14.2
14.2
4.8
13.6
3.0
2.0
0.0
10.7
10.7
5.8
NS
1.5
1.0
0.0
NS
NS
NS
NS
2.1
1.1
0.0
NS
NS
30.1
NS
3.7
1.5
0.0
24.0
24.0
11.9
NS
3.3
1.4
0.0
16.4
16.4
9.4
2.6
3.1
1.2
4.2
13.3
43.7
0.63
48.7
6.2
8.5
0.47
4.0
5.9
8.8
0.36
7.7
NS
NS
0.5
(12.6)
15.1
33.3
0.7
(2.6)
8.9
12.7
0.6
12.3
7.5
10.3
0.6
9.8
4.0
NS
4.7
1.4
NS
2.4
64.2
0.0
12.3
NS
7.6
5.5
9.2
4.2
NS
0.0
15.5
0.9
6.2
4.1
2.4
2.8
25.1
0.0
NS
NS
NS
NS
NS
2.2
30.1
0.0
2.3
3.3
4.4
2.0
NS
2.7
35.6
0.0
5.0
1.4
7.3
5.1
2.2
2.6
37.6
0.0
6.2
0.8
7.9
5.7
3.0
2.6
23.9
68.1
3.4
3.7
NS
NS
23.1
20.7
68.1
23.5
11.5
7.5
15.5
15.5
NS
NS
NS
NS
5.4
NS
NS
NS
13.1
7.9
14.6
14.6
14.9
10.0
18.2
18.2

EPS before goodwill
% Change
EPS, reported
% Change
(2.43)
Goodwill per share

Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
171
www.cheuvreux.com
January 2011
GERMANY
COMMODITY CHEMICALS
2/Outperform
Rating
+13.2% EUR63.00
Lanxess
Reuters: LXSG.DE Bloomberg: LXS GR
Earnings growth continues

Q
Recent developments Strong Q3-10 earnings performance
In Q3-10, Lanxess's underlying EBITDA sky-rocketed 71% y-o-y to

EUR244m, while sales rose 34.5% to EUR1.847bn. Both figures beat
expectations driven by price and volume increases. Volumes grew
9.2% y-o-y while prices were up 17% y-o-y in Q3-10.
All segments contributed to earnings growth. At Performance Polymers
underlying EBITDA rose 89% y-o-y to EUR144m (CA Cheuvreux: +97%
to EUR150m); Advanced Intermediates rose 38% to EUR55m (CA
Cheuvreux: +30% to EUR52m); and Performance Chemicals rose 24%
to EUR83m (CA Cheuvreux: +21% to EUR81m). In the reconciliation,
underlying EBITDA was EUR-38m vs. our expectation of EUR-37m.
As we had expected, the company raised its guidance for 2010 with the
Q3 release to underlying EBITDA of EUR900m (EUR800m). We expect
underlying EBITDA of EUR900m in 2010E.
Q3-10 earnings were somewhat depressed by the fact that the
company could not supply all its customers, e.g. in butyl rubber. A
maintenance shutdown forced Lanxess to put some products on
allocation, and Lanxess sees no downturn in demand in sight in the
near term. Especially for emerging markets the company remains
optimistic, saying it expects improving momentum there.
Q
EUR55.65
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
EUR4630m
EUR4630m
EUR5932m
83.2m
EUR 21.57m
Performances
-3.8%
25.9%
92.3%
-5.3%
10.6%
49.6%
Absolute perf.
Relative perf.
60.0
60.0
50.0
50.0
40.0
40.0
30.0
30.0
20.0
20.0
10.0
01/05
10.0
10/05
07/06
04/07
01/08
Price/M DAX
10/08
07/09
04/10
12/10
Price
Outlook Mid-term target with increased confidence
Lanxess has substantially improved the cost structure of its business

units (e.g. Functional Chemicals). Additionally, it spoke of several capex
projects that had not previously appeared in its budget (e.g. investment
in Mesamoll production capacity). Based on a) higher EBITDA in 2010
than previously assumed (EUR900m vs. EUR800m); b) the very
favourable improvement of previous problem children like Functional
Chemicals; and c) more and more visibility thanks to capex projects
with high ROCE, Lanxess has a higher level of confidence that it will
reach its mid-term target of EUR1.4bn EBITDA by 2015.
Sector focus
Sector Top Picks
Least favoured
Shareholders
Free Float 100.0%
We are confident that Lanxess will continue to benefit from strong

growth in emerging markets and strong growth in customer industries
such as automotive/tires.
Our DCF-based price target stands at EUR63 and is supported by
other valuation approaches. The company's EV/CE 11E (1.31x) vs.
ROCE/WACC (1.51x) suggests 15% upside. Based on our peer-group
comparison, the stock trades at 10.5x P/E 11E, 32% below the
European chemicals sector (15.4x). Its P/CF 11E is 6.2x, 33% below the
peer average (9.2x). This discount is exaggerated given Lanxess's
ongoing strong earnings growth. Our rating is 2/Outperform.
P/E (x)
EV/EBITDA (x)
2009
2010E
2011E
26.9
12.0
10.5
9.4
8.4
7.2
6.2
5.6
5.8
NS
3.2
6.2
Net debt/EBITDA (x)
2.0
1.1
0.8
0.5
Yield (%)
1.9
1.0
1.3
1.4
ROCE (%)
4.2
14.2
14.5
14.9
1.0
1.4
1.2
1.1
Martin ROEDIGER
Research Analyst
(49) 69 47 897 763
Q
Q
172
www.cheuvreux.com
2012E
January 2011
GERMANY
Company profile
Mid-sized chemical company

Lanxess is a mid-sized chemical company based in Germany. In
2009 it generated sales of EUR5.1bn and EBITDA before special
items of EUR465m.
Q
Q Performance Polymers its biggest segment

Lanxess divides its activities into the segments Performance
Polymers (47%), Advanced Intermediates (22%), Performance
Chemicals (30%) and others (1%). Geographically, Germany
accounted for 21% of group sales, Europe ex Germany 31%, North
America 15%, Latin America 10% and Asia/Pacific 23% in 2009.
(figures as of YE-09)
Q Strong market positions in most of its activities
Lanxess holds strong market positions in 70% of its businesses. In
Performance Polymers, Advanced Intermediates, and Performance
Chemicals respectively, it holds top-3, top-2, and top-4 positions.
Profitability gap to peers already closed in 2008

In 2008, i.e. one year sooner than previously scheduled, the
company met its target to raise profitability (EBITDA margin before
special items) to the level of its peers (11%) via its "price before
volume" strategy, efficiency improvements, restructurings,
divestments and organic growth.
Q
Transformation underway
Lanxess is currently undergoing a structural transformation. Its first
milestones were reached after its disposal of underperforming
assets combined with the acquisition of high-margin activities.
Q
SWOT analysis
Strengths
Weaknesses
Strong
market positions in
70% of its portfolio
Weak margins at some

business units, e.g. Fine
Chemicals
Impeccable
track record in
terms of meeting targets
Successful
restructuring has
begun to pay off
Very
high exposure to Asia and

LatAm enables Lanxess to
benefit strongly from those
regions' huge growth prospects
Opportunities
Threats
Capacity expansion in
Performance Rubber in
promising Asian market
Regulatory
burdens (REACH
programme)
Double-dip
Structural
shift towards highperformance tyres requiring highperformance rubber (where

Lanxess is the market leader)
recession, resulting
in another downturn hitting
earnings
Lanxess is trading at 6.2x EV/EBITDA 11E, 23%

below the European chemicals sector average
(8.0x). On P/CF 10E, it is trading at 6.2x, 33%
below the sector average (9.2x). On a P/E 11E
basis Lanxess trades at 10.5x, 32% below the
European peer group (15.4x). These discounts
are not justified, however, given the company's
strong earnings progression and rapid catch-up
in profitability.
Our DCF model (WACC: 8.0%, terminal growth
rate: 1%) renders a fair value of EUR63, which is
also our price target. This implies 13% upside.
We thus maintain our 2/Outperform rating.
Investment case
Lanxess has consistently beaten street

forecasts, thereby reinforcing management's
credibility. Through cost cuts and capex
postponements, the company reacted quickly to
changes in the marketplace/economy and
demonstrated its high degree of flexibility.
We are impressed with the commitment of
company's workforce in agreeing to accept to a
~10% wage cut in the crisis previously agreed
to remain in force until the beginning of 2012
and now abandoned due to strong recovery. It is
only fair that employees receive an one-time
payment of EUR20m in 2010. For us,
management is best-in-class and the workforce
is highly committed to the company a big
advantage over other competitors.
Due to aggressive restructuring in the past,
including the disposal of poorly performing
assets and acquisitions of high-margin activities,
Lanxess's portfolio has improved substantially
and the company is now strongly benefiting from
the current economic upturn. Lanxess is also
benefiting from the structural shift among its
customers towards high-performance tyres.
Such tyres require high-performance rubber,
and area where Lanxess is market leader.
Moreover, Lanxess will benefit from megatrends
such as the substitution of plastics for steel in
cars as this reduces a) production costs for car
manufacturers; b) fuel consumption; and thus c)
CO2 emissions.
Looking ahead, Lanxess is therefore likely to
enjoy strong earnings and margin growth to a
far greater extent than in the past.
Structural
shift in automotive
industry towards lighter materials
could enable Lanxess to supply
more SCP plastics to the auto
industry
173
Valuation
www.cheuvreux.com
January 2011
GERMANY
Lanxess
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
174
2006
2007
2008
2009
2010E
2011E
2012E
6,944.0
-2.9%
(1,136.0)
(5,170.0)
638.0
87.1%
(262.0)
376.0
NS
0.0
0.0
0.0
376.0
(73.0)
0.0
0.0
(85.0)
(16.0)
0.0
0.0
202.0
0.0
(5.0)
197.0
0.0
0.0
197.0
6,608.0
-4.8%
(1,064.0)
(5,031.0)
513.0
-19.6%
(298.0)
215.0
-42.8%
0.0
0.0
0.0
215.0
(42.0)
0.0
0.0
(60.1)
(1.0)
0.0
0.0
111.9
0.0
0.0
111.9
0.0
166.8
278.7
41.5%
6,576.0
-0.5%
(1,062.0)
(4,912.0)
602.0
17.3%
(279.0)
323.0
50.2%
0.0
0.0
0.0
323.0
(98.0)
0.0
0.0
(58.0)
21.0
0.0
0.0
188.0
0.0
0.0
188.0
0.0
129.0
317.0
13.8%
5,057.0
-23.1%
(981.0)
(3,654.0)
422.0
-29.9%
(273.0)
149.0
-53.9%
0.0
0.0
0.0
149.0
(125.0)
0.0
0.0
7.0
8.0
0.0
0.0
39.0
0.0
1.0
40.0
0.0
41.5
81.5
-74.3%
6,985.0
38.1%
(1,002.2)
(5,103.2)
879.6
108.4%
(277.0)
602.6
NS
0.0
0.0
0.0
602.6
(78.4)
0.0
0.0
(111.0)
(19.6)
0.0
0.0
393.6
0.0
(1.0)
392.6
0.0
16.0
408.6
NS
7,185.0
2.9%
(1,087.3)
(5,148.2)
949.5
7.9%
(288.0)
661.5
9.8%
0.0
0.0
0.0
661.5
(74.8)
0.0
0.0
(124.6)
(20.2)
0.0
0.0
441.9
0.0
0.0
441.9
0.0
0.0
441.9
8.2%
7,490.0
4.2%
(1,113.2)
(5,358.8)
1,018.0
7.2%
(299.0)
719.0
8.7%
0.0
0.0
0.0
719.0
(68.8)
0.0
0.0
(138.4)
(21.2)
0.0
0.0
490.6
0.0
0.0
490.6
0.0
0.0
490.6
11.0%
445.0
(66.0)
(251.0)
(100.4)
128.0
(48.0)
0.0
0.0
0.0
0.0
0.0
80.0
378.9
-14.9%
198.0
(251.0)
(100.4)
325.9
(160.0)
0.0
0.0
(20.8)
0.0
270.3
145.1
541.0
42.8%
(248.0)
(267.0)
(106.8)
26.0
203.0
0.0
0.0
(83.2)
0.0
591.2
737.0
314.0
-42.0%
89.0
(284.0)
(113.6)
119.0
10.0
0.0
0.0
(41.6)
0.0
578.6
666.0
805.5
156.5%
(400.4)
(460.0)
(184.0)
(54.9)
0.0
0.0
0.0
(41.6)
0.0
66.3
(30.2)
743.9
-7.6%
(46.5)
(550.0)
(220.0)
147.4
0.0
0.0
0.0
(49.6)
0.0
(34.7)
63.2
811.0
9.0%
(65.6)
(460.0)
(184.0)
285.4
0.0
0.0
0.0
(58.2)
0.0
(10.6)
216.6
1,403.0
25.0
520.0
699.0
545.0
38.2
3,192.0
11.0
30.0
1,465.0
150.0
9.0
1,527.0
22.0
3,192.0
1,508.0
17.0
470.0
665.0
477.0
31.3
3,137.0
10.0
23.0
1,459.0
285.0
34.0
1,326.0
20.1
3,137.0
1,323.0
16.0
498.0
759.0
905.0
67.6
3,501.0
89.0
56.0
1,646.0
72.0
44.0
1,594.0
24.2
3,501.0
1,432.0
13.0
569.0
758.0
841.0
58.2
3,613.0
123.0
73.0
1,809.0
79.0
27.0
1,502.0
29.7
3,613.0
1,775.7
21.2
581.3
1,047.0
925.3
51.5
4,350.5
123.0
75.3
1,989.8
79.0
27.0
2,056.5
29.4
4,350.5
2,158.9
30.4
630.7
1,077.0
778.1
35.5
4,675.0
123.0
76.3
2,250.8
79.0
27.0
2,118.9
29.5
4,675.0
2,581.2
40.5
645.7
1,122.7
535.9
20.4
4,926.0
123.0
76.1
2,412.0
79.0
27.0
2,208.9
29.5
4,925.9
www.cheuvreux.com
January 2011
GERMANY
Lanxess
FY to 31/12 (Euro)
2006
2007
2008
2009
2010E
2011E
2012E
2.33
3.39
45.6%
1.35
-42.2%
3.81
12.4%
2.26
68.0%
0.98
-74.3%
0.48
-78.7%
4.91
NS
4.72
NS
5.31
8.1%
5.31
12.6%
5.90
11.0%
5.90
11.0%
16.3
0.00
1.00
4.61
-12.4%
17.1
0.00
0.50
6.50
41.1%
15.4
0.00
0.50
3.77
-42.0%
16.7
0.00
0.60
9.68
156.5%
20.7
0.00
0.70
8.94
-7.6%
25.2
0.00
0.80
9.75
9.0%
30.2

Latest price
High
Low
Average price
84.620
84.620
0.000
83.200
83.200
0.990
83.200
83.200
0.000
83.200
83.200
0.000
83.200
83.200
0.000
83.200
83.200
0.000
83.200
83.200
0.000
42.48
42.48
25.11
32.19
33.60
43.75
26.72
37.39
13.73
34.37
10.28
22.85
26.34
28.03
10.64
18.62
59.10
59.49
25.89
38.51
55.65
59.90
54.52
56.91
55.65
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
3,594.7
4,594.3
2,795.2
3,423.2
1,142.2
2,429.2
2,191.5
3,551.7
4,917.1
6,330.0
4,630.1
5,932.8
4,630.1
5,705.7
18.2
18.2
8.1
2.1
2.6
1.5
0.6
9.9
9.9
7.3
5.9
2.0
1.2
3.0
3.6
3.6
2.1
20.0
0.9
0.7
3.6
26.9
26.9
7.0
5.8
1.6
1.0
1.9
12.0
12.0
6.1
NS
2.8
1.4
1.0
10.5
10.5
6.2
3.2
2.2
1.2
1.3
9.4
9.4
5.7
6.2
1.8
1.1
1.4
7.2
12.2
0.66
9.1
6.7
15.9
0.52
8.4
4.0
7.5
0.37
3.9
8.4
23.8
0.7
7.5
7.2
10.5
0.9
7.3
6.2
9.0
0.8
7.4
5.6
7.9
0.8
6.6
8.7
1.2
9.2
5.4
2.9
2.3
38.2
10.7
12.2
1.3
7.8
3.3
1.7
2.3
31.3
74.4
6.1
1.7
9.2
4.9
2.9
1.9
67.6
22.1
3.4
2.7
8.3
2.9
0.8
1.4
58.2
104.0
11.2
1.1
12.6
8.6
5.6
1.6
51.5
12.7
12.7
1.0
13.2
9.2
6.2
1.6
35.5
13.2
14.8
0.7
13.6
9.6
6.6
1.6
20.4
13.6
12.4
8.7
15.1
15.1
7.6
5.0
7.7
20.4
9.5
7.3
15.3
27.2
4.2
5.2
2.8
5.9
14.2
11.1
24.9
26.0
14.5
11.3
22.8
22.8
14.9
11.6
21.0
21.0

EPS before goodwill
% Change
EPS, reported
% Change
2.33
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.25
5.26
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
175
www.cheuvreux.com
January 2011
GERMANY
AUTO COMPONENTS
1/Selected List
Rating
+23.0% EUR40.00
Leoni
EUR32.53
Price (07/01/2011)
Reuters: LEOGn.DE Bloomberg: LEO GR
Winner of sector concentration

Recent developments Exploding copper price hardly
affects group EBIT
The recent explosion of the copper price to levels above USD8,000/ton

from USD3,000 two years ago is a potential threat to Leoni's mid-term
target of a 7% ROS, comparable to the years 06 and 07 when a
similarly high copper price level prevented the achievement of the same
target. However, since Leoni passes copper price fluctuations on to its
customers, exploding commodity prices only inflate its top-line but
have no meaningful impact on earnings. Hence, we would not be
concerned if Leoni misses this target.
Outlook Concentration in the cables sector gaining

momentum
Stock data
Free float
Enterprise value
Daily volume
EUR966m
EUR966m
EUR1425m
29.7m
EUR 5.92m
Performances
-0.4%
30.5%
90.1%
-1.9%
14.6%
48.0%
Absolute perf.
Relative perf.
Leoni was the first global cable and wiring systems manufacturer to
consolidate the field of cable producers with the acquisition of Valeo's
automotive cable activities in 2008. The avoidance of goodwill
impairments despite the big crisis shows how smooth the integration
process went and illustrates that management is not overpaying even
in deals close to the peak.
A recent bid from two European competitors, Nexans and Prysmian,
(Q4-10) for Draka, a Dutch-based competitor for Leoni's Wires&Cables
division with average profitability clearly below Leoni, indicates the
concentration process is regaining momentum after the crisis. Leoni
itself has a long-standing track-record of acquiring competitors, mostly
family-owned businesses with sales around EUR20-100m.
Although the recent bid does not concern a competitor in automotive
cables, we assume more deals will follow simply because the
production process for many industrial and automotive cables is
basically the same and hence, economies of scale play an enormous
role in a commodity sector such as cables. Leoni is a cost leader in this
field not only because of its low-cost plant footprint, but also because
of its high value-added that includes the production of the core cables
in contrast to almost all peers.
45.8
45.8
40.8
40.8
35.8
35.8
30.8
30.8
25.8
25.8
20.8
20.8
15.8
15.8
10.8
10.8
5.8
5.8
01/01
03/02
06/03
09/04
12/05
Price/M DAX
03/07
06/08
Sector Top Picks

Least favoured
Price
Daimler, Volkswagen
FIAT
Shareholders
Free Float 100.0%
EV/EBITDA (x)
2009
2010E
2011E
NS
12.3
8.8
7.0
94.8
5.9
4.8
4.0
NS
3.8
4.7
9.1
Net debt/EBITDA (x)
48.2
1.9
1.5
1.1
Yield (%)
0.0
1.5
3.4
4.3
ROCE (%)
NS
14.0
16.6
19.4
1.0
1.4
1.3
1.3
Q
176
www.cheuvreux.com
2012E
Alexander NEUBERGER
Q
01/11
Sector focus
P/E (x)
Research Analyst
(49) 69 47 89 73 84
09/09
January 2011
GERMANY
Company profile
Global player in automotive and industrial cables

Leoni is a globally operating manufacturer of wiring systems/
harnesses, cables and wires. Most of its products are considered
commodities by its clients in the automobile industry. Such products
account for some 70% of Leoni's sales. The other 30% are target
many different industrial applications (energy, medical, telecoms,
capital/installation goods).
Q
Q Cost leadership is the name of the game

Management has reallocated the bulk of production from Germany
to countries with the lowest labour costs in Europe, including
Ukraine, Romania and North Africa. By so doing, Leoni has
achieved cost leadership in wiring systems as well as EBITA
margins of 6% prior to the crisis.
Gaining market share

The acquisition of Valeo's cable business in 2008 established Leoni
as the number 1 in Europe and number 4 globally. Its most relevant
competitors are Yazaki (Japan) and Delphi (US). In contrast to
basically all its competitors, Leoni produces the core cables itself
and also sells the cables to its peers. Its higher in-house valueadded is the second reason, in addition to its production footprint,
why Leoni numbers among the most profitable peers.
SWOT analysis
Strengths
Weaknesses
Impressive cost-cutting skills,

cost leadership in cable
manufacturing and wiring
systems
Saturated European auto

markets limit long-term growth of
Leoni's European activities
Balanced
Limited scope to diversify

outside cable business
Opportunities
Threats
portfolio with 70%

automotive and 30% industrial
customers
Rising presence in Asia

provides new growth
opportunities
Unmitigated price pressure

combines with limited additional
cost-cutting potential from plant
relocations to low-cost areas
177
www.cheuvreux.com
Valuation
Despite a decent run in 2010 and an almost

unmatched growth track record (sales CAGR0410: 14%) and a strong outlook for 11, Leoni
shares are trading below their European peer
group. Top-line growth, recovering profitability
and the deleveraging of its balance sheet are
key reasons why we maintain Leoni shares as a
top-pick for mid-cap investors in auto space.
A recent bid for Draka, one of Leoni's
competitors in Europe, valued the business at
16x our assumed net earnings for 11E, which is
almost twice the current valuation for Leoni. In
EV/Sales terms, Draka is valued at 0.34x, due to
its mediocre profitability level. (Leoni 0.49x).
Investment case
Leoni is a winner within the consolidation

process of the global wiring systems business. It
acquired Valeo's restructured Cable business for
a very decent price (EV/Sales 0.49x), avoiding
any goodwill write-down in the crisis. It has
expanded its customer portfolio with names it
was previously missing (PSA, Renault, SEAT)
and established itself as the European no.1
(Globally no 4).
Assiduous cost-cutting in the crisis, the
geographic mix of its plant network with almost
all of its plants in the lowest-cost areas on the
planet (North Africa, Ukraine), but also a decent
order book (new models, solar industry, Chinese
automakers) are the right prerequisites for
further profitable growth.
January 2011
GERMANY
Leoni
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
178
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,247.2
15.5%
(290.2)
(846.8)
110.2
2.0%
(49.6)
60.6
7.3%
0.0
0.0
0.0
60.6
(15.3)
0.0
0.4
(13.3)
1.0
0.0
0.0
33.3
0.0
(0.1)
33.2
0.0
0.0
33.2
50.2%
1,548.0
24.1%
(330.4)
(1,058.7)
158.9
44.2%
(56.7)
102.2
68.6%
0.0
0.0
0.0
102.2
(14.8)
0.0
0.7
(32.3)
0.7
0.0
0.0
56.5
0.0
(0.2)
56.3
0.0
0.0
56.3
69.6%
2,108.2
36.2%
(399.4)
(1,514.1)
194.7
22.5%
(64.3)
130.4
27.6%
0.0
0.0
0.0
130.4
(18.4)
0.0
0.0
(37.3)
4.8
0.0
0.0
79.5
0.0
(0.8)
78.7
0.0
0.0
78.7
39.8%
2,366.8
12.3%
(499.3)
(1,664.6)
202.9
4.2%
(72.7)
130.2
-0.2%
0.0
0.0
0.0
130.2
(21.0)
0.0
0.0
(30.3)
7.3
0.0
0.0
86.2
0.0
(1.0)
85.2
0.0
0.0
85.2
8.3%
2,912.0
23.0%
(596.2)
(2,137.9)
177.9
-12.3%
(110.2)
67.7
-48.0%
0.0
0.0
0.0
67.7
(36.0)
0.0
0.0
(10.6)
(1.8)
0.0
0.0
19.3
0.0
(0.1)
19.2
0.0
0.0
19.2
-77.5%
2,160.1
-25.8%
(530.7)
(1,618.7)
10.7
-94.0%
(111.5)
(100.8)
NS
0.0
0.0
0.0
(100.8)
(36.2)
0.0
0.0
19.2
(5.7)
0.0
0.0
(123.4)
0.0
(0.1)
(123.5)
0.0
0.0
(123.5)
NS
2,850.0
31.9%
(536.3)
(2,063.4)
250.3
NS
(104.3)
146.0
NS
0.0
0.0
0.0
146.0
(36.3)
0.0
0.0
(29.5)
(0.5)
0.0
0.0
79.7
0.0
(0.2)
79.5
0.0
0.0
79.5
164.4%
3,130.0
9.8%
(567.0)
(2,263.7)
299.3
19.6%
(117.8)
181.5
24.3%
0.0
0.0
0.0
181.5
(32.9)
0.0
0.0
(40.5)
1.2
0.0
0.0
109.4
0.0
(0.2)
109.2
0.0
0.0
109.2
37.4%
3,320.0
6.1%
(592.9)
(2,380.9)
346.2
15.7%
(128.2)
218.0
20.1%
0.0
0.0
0.0
218.0
(29.9)
0.0
0.0
(51.3)
2.0
0.0
0.0
138.8
0.0
(0.2)
138.6
0.0
0.0
138.6
26.9%
82.6
0.9%
(5.6)
(88.2)
0.0
(11.2)
(0.3)
0.0
0.0
(7.1)
123.4
(18.1)
86.7
124.0
50.1%
(44.9)
(96.8)
0.0
(17.7)
(8.6)
0.0
0.0
(12.5)
2.9
76.5
40.6
147.8
19.2%
(40.3)
(164.6)
0.0
(57.1)
2.5
0.0
0.0
(16.9)
(7.0)
104.3
25.8
153.8
4.1%
(236.0)
(144.6)
0.0
(226.8)
(2.4)
0.0
0.0
(23.8)
(7.0)
159.4
(100.6)
136.5
-11.2%
314.4
(401.4)
0.0
49.5
(22.8)
0.0
0.0
(26.7)
0.0
105.3
105.3
(9.3)
NS
69.7
(98.2)
0.0
(37.8)
(0.1)
0.0
0.0
(5.8)
0.0
97.8
54.1
185.5
NS
(31.3)
(116.9)
0.0
37.3
0.0
0.0
0.0
0.0
2.3
(4.3)
35.3
230.4
24.2%
(41.4)
(144.0)
0.0
45.0
0.0
0.0
0.0
(14.9)
0.0
(15.0)
15.1
269.3
16.9%
(42.1)
(139.4)
0.0
87.8
0.0
0.0
0.0
(32.7)
0.0
(23.9)
31.2
371.2
0.1
32.0
82.8
161.0
43.4
647.1
44.3
17.2
307.8
5.7
0.0
272.1
21.8
647.1
427.2
0.0
33.7
114.0
167.5
39.2
742.4
40.0
20.0
336.5
14.3
0.0
331.5
21.4
742.3
481.7
0.0
36.3
43.8
236.9
49.2
798.7
65.4
26.7
397.1
11.8
0.0
297.6
14.1
798.6
525.6
0.0
38.4
35.1
482.6
91.8
1,081.7
78.9
43.6
414.9
14.2
0.0
530.0
22.4
1,081.6
447.7
0.0
50.5
52.3
551.8
123.3
1,102.3
152.3
113.8
573.3
37.0
0.0
225.9
7.8
1,102.3
369.1
0.0
49.6
101.7
516.0
139.8
1,036.4
150.0
92.4
554.1
37.0
0.0
202.9
9.4
1,036.4
451.1
0.0
48.3
99.8
477.7
105.9
1,076.9
164.3
92.4
552.4
36.5
0.0
231.2
8.1
1,076.8
545.6
0.0
48.2
87.6
447.6
82.0
1,129.0
164.3
117.4
553.6
36.0
0.0
257.7
8.2
1,129.0
651.7
0.0
47.4
66.4
393.2
60.3
1,158.7
164.3
124.5
557.8
35.5
0.0
276.7
8.3
1,158.8
www.cheuvreux.com
January 2011
GERMANY
Leoni
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
179
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1.12
50.3%
1.12
31.8%
1.90
69.6%
1.90
69.6%
2.65
39.8%
2.65
39.8%
2.87
8.3%
2.87
8.3%
0.66
-77.1%
0.66
-77.1%
(4.50)
NS
(4.50)
NS
2.68
159.5%
2.68
159.5%
3.68
37.4%
3.68
37.4%
4.67
26.9%
4.67
26.9%
0.00
0.42
2.78
0.8%
12.1
0.00
0.57
4.18
50.1%
13.8
0.00
0.80
4.98
19.2%
15.4
0.00
0.90
5.18
4.1%
16.8
0.00
0.20
4.68
-9.7%
15.1
0.00
0.00
(0.34)
NS
13.5
0.00
0.50
6.25
NS
14.7
0.00
1.10
7.76
24.2%
17.3
0.00
1.40
9.07
16.9%
20.5
29.700
29.700
0.000
29.700
29.700
0.000
29.700
29.700
0.000
29.700
29.700
0.000
29.183
29.183
0.000
27.430
27.430
0.000
29.700
29.700
0.000
29.700
29.700
0.000
29.700
29.700
0.000
16.70
17.67
13.90
15.64
26.93
29.40
16.68
22.56
30.92
34.34
25.10
29.17
33.60
46.81
28.40
35.74
12.99
36.15
7.52
24.57
16.35
17.34
6.07
12.40
32.95
34.98
13.27
20.93
32.53
33.83
31.25
32.98
32.53
-
496.0
683.3
799.8
986.7
918.3
1,179.7
997.9
1,504.7
385.8
951.1
485.6
1,014.2
978.6
1,468.1
966.0
1,425.8
966.0
1,371.1
14.9
14.9
6.0
NS
1.4
1.1
2.5
14.2
14.2
6.5
NS
1.9
1.4
2.1
11.7
11.7
6.2
NS
2.0
1.5
2.6
11.7
11.7
6.5
NS
2.0
1.4
2.7
19.7
19.7
2.8
12.8
0.9
0.9
1.5
NS
NS
NS
NS
1.2
1.0
0.0
12.3
12.3
5.3
3.8
2.2
1.4
1.5
8.8
8.8
4.2
4.7
1.9
1.3
3.4
7.0
7.0
3.6
9.1
1.6
1.3
4.3
6.2
11.3
0.55
7.4
6.2
9.7
0.64
7.4
6.1
9.0
0.56
7.4
7.4
11.6
0.64
8.9
5.3
14.0
0.33
6.0
94.8
NS
0.5
46.1
5.9
10.1
0.5
6.9
4.8
7.9
0.5
5.6
4.0
6.3
0.4
4.7
7.2
1.9
8.8
4.9
2.7
1.9
43.4
37.6
10.7
1.4
10.3
6.6
3.7
2.1
39.2
30.1
10.6
1.6
9.2
6.2
3.8
2.7
49.2
30.2
9.7
3.1
8.6
5.5
3.6
2.2
91.8
31.4
4.9
4.0
6.1
2.3
0.7
2.7
123.3
30.4
0.3
NS
0.5
NS
NS
2.2
139.8
0.0
6.9
2.6
8.8
5.1
2.8
2.7
105.9
18.7
9.1
1.9
9.6
5.8
3.5
2.9
82.0
29.9
11.6
1.5
10.4
6.6
4.2
3.0
60.3
30.0
9.4
6.3
9.4
9.4
14.0
8.9
14.1
14.1
16.6
11.3
17.8
17.8
12.2
9.0
17.6
17.6
6.4
4.1
4.4
4.4
NS
NS
NS
NS
14.0
10.2
19.3
19.3
16.6
12.1
22.2
22.2
19.4
14.2
23.8
23.8
www.cheuvreux.com
January 2011
GERMANY
RENEWABLE EQUIPMENT
2/Outperform
Rating
+40.7% EUR69.00
MANZ AUTOMATION
Not just solar, but LCD and touch panels too
Q
Recent developments 9M-10 still loss making
Manz Automation reported 9M-10 revenues of EUR121m (9M-09:

EUR47m) with Q3-10 revenues alone totalling EUR54m (EUR18.5m).
The increase was primarily driven by the new products for the
production of crystalline solar cells. Despite the sales growth, Manz
recorded an EBIT loss in 9M-10 of EUR-3.3m (EUR-16.1m), resulting in
a net loss of EUR-1.6m (EUR-11.5m).
Management increased its 2010 guidance to total revenues of
EUR170175m (previously: "at least EUR140m") and may even exceed
this target depending on further developments in the market, especially
the market for thin-film technology. In addition, the company forecasts
EBIT break-even due to what has proven to be a strong final quarter. As
of Q3-10 Manz Automation had cash and cash equivalents of EUR42.1
million and an equity ratio of around 69%.
In October 2010 Manz Automation received orders of about EUR25m,
in particular from Asian customers. These orders primarily include
automation and system solutions for the production of crystalline solar
cells and will be reflected in revenues and earnings in the coming fiscal
year. Furthermore, it received new orders in the Li-ion segment for the
installation of pilot lines in Germany. The order backlog thus increased
to around EUR125m as of the end of Q3-10.
Q
EUR49.05
Price (07/01/2011)
Reuters: M5ZG.DE Bloomberg: M5Z GR
Stock data
Free float
Enterprise value
Daily volume
EUR269m
EUR127m
EUR170m
5.48m
EUR 1.15m
Performances
1.6%
0.1%
-29.6%
-5.0%
-10.9% -30.5%
Absolute perf.
Relative perf.
195.0
195.0
175.0
175.0
155.0
155.0
135.0
135.0
115.0
115.0
95.0
95.0
75.0
75.0
55.0
55.0
35.0
35.0
15.0
09/06
15.0
04/07
10/07
04/08
11/08
Price/TECDAX
05/09
12/09
06/10
01/11
Price
Outlook Working off the order backlog
For 2011E, Manz Automation targets further revenue growth from its
guided level for 2010 of EUR170-175m. This target can be easily
achieved if the company receives a thin film order. The company
expects at least one order of about EUR150m in 2011E. Regarding
LCD, we expect the positive trend to continue. Manz Automation is
strongly benefitting from the demand for touch screen panels (e.g.
iPad).
Sector focus
Sector Top Picks
Least favoured
SMA, SolarWorld
Conergy
Shareholders
Manz Family 49.2%, Free Float 50.8%
2009
2010E
2011E
2012E
P/E (x)
NS
41.9
18.5
10.8
EV/EBITDA (x)
NS
13.4
6.6
3.6
16.6
0.8
2.8
1.6
Net debt/EBITDA (x)
9.2
(6.2)
(3.9)
(2.7)
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
NS
6.9
15.8
23.9
1.7
1.7
1.5
1.1
Philipp BUMM
Research Analyst
pbumm@cheuvreux.com
(49) 69 47.897.527
Q
Q
180
www.cheuvreux.com
January 2011
GERMANY
Company profile
One of the world's leading technology providers

Manz Automation is one of the world's leading technology providers
in terms of its market shares in systems for automation, quality
assurance and laser process technology for the photovoltaic
industry and for automation and wet chemicals for the LCD industry.
Its core competencies are in robotics, image processing, laser
technology, wet chemicals and control and drive technology.
Q
Q Company structure
The company's key strategic divisions are photovoltaic
(systems.solar),
LCD
(systems.LCD)
and
OEM
systems
(systems.AICO: systems for automation in various industrial sectors
and the life sciences industry). Manz has production sites in China,
Germany, Hungary, Slovakia and Taiwan. Its production equipment
is distributed either via its own sales force and local representatives
in the countries of its major clients (China, Germany, India, Spain,
Taiwan and South Korea), or indirectly via cooperation partners
Applied Materials and Roth & Rau AG.
SWOT analysis
Weaknesses
Outstanding technological
know-how in automation, quality
assurance and laser process
technology for the photovoltaic
and LCD industries
Strong dependence on new

order intake levels
Strong client relationships with

world market leaders in solar and
LCD (e.g. AMAT, Roth&Rau)
Opportunities
Threats
Emerging solar markets, e.g.

India and the Middle East
Push-outs
and cancellations
from order backlog

The company is trading at a P/E-11E ratio of
18.5x.
Based on 2011E multiples we see Manz
Automation trading at a premium to Roth & Rau
and Centrotherm. In terms of EV/Sales 11E it is
trading at 0.9x, which represents a 50%
premium to Roth & Rau. On an EV/EBITDA 12E
basis, Manz Automation also looks more
expensive than Roth & Rau, trading at 3.6x or a
50+% premium.
However, the company is less dependent on the
solar market as it is a strong supplier to the LCD
industry.
Strengths
Lithium-ion battery orders
Reduced
political support
New

Asia may invade Manz's turf
181
www.cheuvreux.com
Valuation
Investment case
Manz automation will continue to benefit from its

LCD business in 2011E.
We expect the company to sign at least one
major contract for its thin-film (CIGS) equipment,
which should be about EUR150m per line. This
is not included in our estimates, and hence
suggests additional growth potential. The
company targets being profitable already with
the first line it delivers. We and the company are
confident that not only one, but at least two
CIGS production lines can be sold in 2011.
In general, Manz Automation will work off its
order backlog of EUR125(as of 9M-10).
January 2011
GERMANY
MANZ AUTOMATION
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
182
2005
2006
2007
2008
2009
2010E
2011E
2012E
29.3
43.8
49.4%
(11.3)
(23.5)
9.1
12.5%
(1.2)
7.9
8.4%
(3.0)
0.0
0.0
4.9
(0.7)
0.0
0.0
(1.3)
0.0
0.0
0.0
2.8
0.0
0.0
2.8
0.0
0.0
5.8
0.5%
71.3
62.6%
(16.6)
(41.1)
13.6
50.1%
(1.6)
12.0
52.7%
(2.0)
0.0
0.0
10.0
0.5
0.0
0.0
(2.3)
0.0
0.0
0.0
8.2
0.0
0.0
8.2
0.0
0.0
10.2
75.9%
236.5
NS
(41.7)
(159.7)
35.1
157.9%
(5.5)
29.6
146.6%
(1.0)
0.0
0.0
28.6
(0.1)
0.0
0.0
(7.3)
0.0
0.0
0.0
21.1
0.0
0.8
21.9
0.0
0.0
22.9
124.8%
85.9
-63.7%
(37.3)
(57.6)
(9.0)
NS
(6.9)
(15.9)
NS
0.0
0.0
0.0
(15.9)
2.9
0.0
0.0
3.3
0.0
0.0
0.0
(9.7)
0.0
0.1
(9.6)
0.0
0.0
(9.6)
NS
151.2
76.0%
(37.8)
(99.2)
14.3
NS
(6.4)
7.9
149.7%
0.0
0.0
0.0
7.9
1.4
0.0
0.0
(2.8)
0.0
0.0
0.0
6.5
0.0
0.1
6.6
0.0
0.0
6.6
168.4%
195.7
29.4%
(39.1)
(130.5)
26.0
82.5%
(6.9)
19.2
142.5%
0.0
0.0
0.0
19.2
1.5
0.0
0.0
(6.2)
0.0
0.0
0.0
14.5
0.0
0.1
14.6
0.0
0.0
14.6
120.8%
286.0
46.2%
(42.9)
(200.0)
43.0
65.5%
(9.2)
33.9
76.9%
0.0
0.0
0.0
33.9
1.7
0.0
0.0
(10.7)
0.0
0.0
0.0
24.9
0.0
0.1
25.0
0.0
0.0
25.0
71.6%
0.0
(9.1)
(9.1)
(6.5)
0.0
0.0
0.0
0.0
3.0
0.0
(3.5)
4.0
53.8%
(7.3)
(2.0)
(1.6)
(5.3)
0.0
0.0
0.0
0.0
14.1
(2.1)
6.7
9.8
145.0%
(18.9)
(5.2)
(4.5)
(14.3)
0.0
0.0
0.0
0.0
22.8
(5.7)
2.8
26.6
171.4%
(63.7)
(38.3)
(35.9)
(75.4)
0.0
0.0
0.0
0.0
0.0
(18.7)
(94.1)
(2.8)
NS
53.1
(5.7)
(4.8)
44.6
0.0
0.0
0.0
0.0
0.0
(7.3)
37.3
13.1
NS
(4.0)
(7.0)
(5.5)
2.1
0.0
0.0
0.0
0.0
0.0
(0.3)
1.8
21.5
64.1%
(6.4)
(7.5)
(5.5)
7.6
0.0
0.0
0.0
0.0
0.0
(0.2)
7.4
34.2
59.1%
(19.8)
(10.0)
(7.1)
4.4
0.0
0.0
0.0
0.0
0.0
(0.2)
4.2
4.7
0.0
0.0
1.4
0.0
NS
6.1
0.0
2.8
7.6
2.1
0.0
6.2
21.1
18.7
21.7
0.0
0.1
2.6
(0.7)
NS
23.6
0.0
3.9
7.4
0.0
0.0
13.4
30.6
24.7
52.6
0.0
0.1
4.6
(20.4)
NS
36.9
0.0
5.9
3.0
0.3
0.0
32.3
45.3
41.5
181.6
9.6
3.7
9.6
(47.9)
NS
156.6
21.9
22.2
16.1
0.3
0.0
96.1
40.6
156.6
175.2
1.8
3.8
7.3
(83.1)
NS
105.0
21.9
27.9
16.6
0.3
0.0
42.9
49.9
109.6
181.8
1.8
3.8
15.8
(88.8)
NS
114.4
21.9
27.9
17.3
0.3
0.0
46.9
31.0
114.3
196.3
1.7
3.8
21.5
(102.0)
NS
121.4
21.9
27.9
17.9
0.3
0.0
53.3
27.2
121.3
221.3
1.6
3.8
33.2
(117.9)
NS
142.0
21.9
27.9
18.8
0.3
0.0
73.1
25.6
142.0
(9.4)
(11.9)
8.1
(0.8)
7.3
(4.0)
0.0
0.0
3.3
(0.5)
0.0
0.0
(1.0)
0.0
0.0
0.0
1.8
0.0
0.0
1.8
0.0
0.0
5.8
2.6
www.cheuvreux.com
January 2011
GERMANY
MANZ AUTOMATION
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2005
2006
2007
2008
2009
2010E
2011E
2012E
12.82
3.69
-71.3%
1.78
-54.8%
2.97
-19.3%
2.39
34.4%
5.12
72.1%
4.90
104.7%
(1.76)
NS
(1.76)
NS
1.20
168.5%
1.20
168.5%
2.66
120.7%
2.66
120.7%
4.56
71.6%
4.56
71.6%
10.4
1.91
0.00
2.54
-56.0%
13.8
0.58
0.00
2.86
12.4%
15.3
0.22
0.00
5.94
107.8%
40.5
0.00
0.00
(0.51)
NS
32.0
0.00
0.00
2.39
NS
33.2
0.00
0.00
3.92
64.1%
35.8
0.00
0.00
6.24
59.1%
40.4
0.450
0.450
0.000
1.574
1.574
0.000
3.430
3.430
0.000
4.480
4.480
0.000
5.480
5.480
0.000
5.480
5.480
0.000
5.480
5.480
0.000
5.480
5.480
0.000
22.74
22.84
17.67
18.98
157.31
166.88
22.78
80.29
41.75
199.01
28.30
122.91
66.50
69.56
22.00
43.19
50.35
71.66
42.17
52.68
49.05
53.00
47.75
50.04
49.05
-
70.7
70.0
511.4
491.1
187.0
142.9
268.7
189.5
275.9
190.9
268.8
170.6
268.8
154.7
NS
NS
NS
NS
NS
0.0
12.8
6.2
8.9
NS
1.6
2.8
0.0
65.8
52.9
55.1
NS
10.3
11.9
0.0
8.5
8.2
7.0
NS
1.0
0.9
0.0
NS
NS
NS
16.6
2.1
1.7
0.0
41.9
41.9
21.1
0.8
1.5
1.7
0.0
18.5
18.5
12.5
2.8
1.4
1.5
0.0
10.8
10.8
7.9
1.6
1.2
1.1
0.0
NS
NS
NS
NS
7.7
8.9
1.60
15.6
36.1
40.9
6.89
52.2
4.1
4.8
0.60
5.4
NS
NS
2.2
(37.9)
13.4
24.2
1.3
15.8
6.6
8.9
0.9
8.4
3.6
4.6
0.5
4.7
16.8
NS
27.4
24.7
6.0
1.8
NS
0.0
12.2
NS
20.7
17.9
6.4
1.8
NS
0.0
NS
NS
19.1
16.8
11.5
1.7
NS
0.0
NS
NS
14.8
12.5
8.9
1.5
NS
0.0
3.1
NS
NS
NS
NS
0.8
NS
0.0
NS
NS
9.4
5.2
4.3
1.3
NS
0.0
NS
NS
13.3
9.8
7.4
1.6
NS
0.0
NS
NS
15.1
11.9
8.7
2.0
NS
0.0
43.7
27.8
46.4
46.4
31.8
21.6
13.8
13.8
29.1
22.7
16.9
16.9
18.9
14.1
12.9
12.9
NS
NS
NS
NS
6.9
4.9
3.7
3.7
15.8
11.1
7.7
7.7
23.9
16.7
12.0
12.0
3.93
Goodwill per share

Dividend per share
Cash flow per share
% Change
8.89
0.00
5.78

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
183
www.cheuvreux.com
January 2011
GERMANY
ASSET GATHERERS
3/Underperform
Rating
-8.6% EUR7.00
MLP
EUR7.66
Price (07/01/2011)
Reuters: MLPG.DE Bloomberg: MLP GR
Not a growth story at this time

Recent developments Sale of old-age provision products
sluggish
MLP reported Q3-10 figures in line with expectations, still driven by

clients' reluctance to commit funds to long-term pension products.
Total revenues in Q3-10 came to EUR116m, +4% y-o-y (expected:
EUR115m), EBIT was at EUR8.7m, +38% y-o-y (exp. EUR7.7m), and
net profit at EUR6.8m, +48% y-o-y (exp. EUR6.2m). Revenues from
old-age provision products amounted to EUR64.1m, -1.5% y-o-y (our
exp. EUR63.8m), indicating that clients are still reluctant to invest in
long-term savings products. Revenues from health insurance rose
23.1% to EUR12.8m (exp. EUR13.5m), reflecting clients switching from
public to private health insurance. Revenues from wealth management
climbed 7.0% y-o-y to EUR20.0m (exp. EUR19.5m), driven by the
recovery of the capital markets. Q3-10 assets under management
totalled EUR19.3bn, up 3% from EUR18.7bn in Q2-10. The strong
improvements in EBIT and net profit were a result of MLP's efficiency
programme, which should have led to cost savings of EUR10m in 2010,
of which EUR7m were achieved in 9M-10. The number of financial
advisors at the end of Q3-10 amounted to 2,317, down 43 q-o-q from
2,360 (our exp. 2,360). While advisor turnover in Q3-10 remained
normal, MLP is having difficulties finding new, qualified advisors. While
its growth in numbers of advisors is disappointing, MLP's management
is nevertheless right in retaining discipline in the hiring process and
focusing on advisor quality. Any dilution of the quality of its existing
advisor force must be avoided.
Outlook EBIT margin target of 15% by YE 2012 too

ambitious
MLP has become more a cost-cutting story than a growth story. Its
number of financial advisors has been under pressure for years now.
We expect it to report flat total revenues for 2010E followed by a 3%
rise y-o-y in 2011E. The bottom line in 2010E will be supported by
MLP's cost-cutting programme, which should have lowered its fixed
cost base by EUR10m, from EUR295m to EUR285m, based on our
estimates. Without significant growth, however, the company's EBIT
margin target of 15% by YE 2012 looks to be out of reach. Starting
from 7.9% in 2009, we expect an EBIT margin of 10.3% in 2010E and
12.5% in 2011E. With MLP trading at a P/E 2011E of 18x, we reiterate
our 3/UP rating on the stock.
Stock data
Free float
Enterprise value
Daily volume
EUR826m
EUR247m
EUR826m
107.861m
EUR 0.21m
Performances
-2.7%
-0.3%
-4.6%
-7.3%
-15.2% -32.9%
Absolute perf.
Relative perf.
144.1
144.1
124.1
124.1
104.1
104.1
84.1
84.1
64.1
64.1
44.1
44.1
24.1
24.1
4.1
01/01
4.1
04/02
07/03
10/04
01/06
Price/SDAX
04/07
07/08
Sector focus
Sector Top Picks
Least favoured
MLP
Shareholders
Free Float 30.0%, Manfred Lautenschlger 29.4%,
Swiss Life 9.9%, Talanx Group 9.9%
2009
2010E
2011E
35.9
21.2
18.1
16.0
133.8
97.8
94.7
93.8
Net yield [%]
3.7
4.6
5.2
5.9
Emb. value/share
3.6
3.9
2.8
2.8
P/Emb. value (x)

New business value
(m)
Non-life comb. ratio
(%)
2.2
2.0
2.8
2.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
P/E (x)
Payout ratio (%)
Q
Q
184
www.cheuvreux.com
01/11
Price
Michael HAID
Research Analyst
mhaid@cheuvreux.com
(49) 69 47 89 79 67
10/09
2012E
January 2011
GERMANY
Company profile
One of Europe's leading independent advisory companies

MLP is one of Europe's leading providers of financial services
products for private and corporate clients. It offers the full range of
tailor-made insurance, banking, old-age provision, wealth
management and financing products.
Q
About 2,317 consultants, about 771,000 clients

MLP currently has approximately 2,317 financial consultants, about
200 branch offices and about 771,000 clients. Following the sale of
its Austrian activities, its operations are now essentially 100% in
Germany.
Q
Q
Strategic reorientation: sale of insurances, acquisition of Feri
In Q2-05 MLP sold its life and P&C insurance activities in a move
that was the logical outcome of its strategy announced in Q4-04 to
focus solely on distribution/financial advice and to become a fully
independent financial advisory firm, serving both private households
and corporate clients. In 2006 it announced the acquisition of wealth
management company Feri Finance, thereby entering into the wealth
management market. Taking advantage of expected industry
consolidation, in January 2009 MLP took over ZSH (80 consultants).
Q
Balanced shareholder structure after failed takeover attempt
In Q3-08 Swiss Life acquired a 27% stake in MLP. To defend itself
against a hostile takeover and maintain its independence, MLP
placed 10% of its stock with friendly product providers. Following
this successful defence against a takeover, Swiss Life reduced its
stake in MLP to below 10%. The current shareholder structure is: 1)
29.5% the Lautenschlger family, 2) 9.9% Swiss Life, 3) 9.9%
Talanx, 4) 6.0% Barmenia, 5) 6.0% Allianz Leben, and 6) 4.2% AXA
4.2%. This means that about 35% of MLP is in free float, not
counting Berenberg's 4.8%, Harris's 5.0%, and HBOS/Lloyds' 0.7%.
SWOT analysis
Strengths
Weaknesses
Strong client base: 771,000

clients
No international diversification
Limited free float: only 30%
Well-educated financial
consultants
Opportunities
Threats
Increased need for financial

advice in Germany's complex
product world
Financial crisis: fear leads to

lack of demand for financial
products, clients reluctant to
invest in long-term products
Industry consolidation
Productivity gains: 7-9%

reduction in fixed costs targeted
185
www.cheuvreux.com
Valuation
Our DCF valuation suggests a FV of EUR7.00 for

MLP, giving the stock approximately 8%
downside. Based on our estimates, MLP trades
at a P/E (2011E) of 18.1x, which we consider
expensive in light of the limited growth potential
suggested by the low level of growth the
company has experienced in recent years. Our
FV of EUR7.00 implies a fair P/E (2011E) of 1617x. Compared to its peers MLP also looks
expensive, with Azimut trading at 8x 2011E
earnings, Banca Generali at 10x and
Mediolanum at 11x.
Investment case
Even though the German economy recovered

significantly in 2010, we expect MLP clients to
remain reluctant to invest in old-age pension
products, MLP's core business, on the basis of
increased uncertainty regarding the currency
system and potential inflation. The company's
9M-10 revenues from old-age pension products
showed a decline (-2.8% y-o-y). As competition
for financial advisors remains fierce and new
talent is difficult to find, we expect MLP's
number of financial advisors to stay essentially
flat in the range of 2,325-2,350 (9M-10: 2,317).
The company has meanwhile become more of a
cost-cutting story than a growth story. Its
number of financial advisors has been under
pressure for years now. In 2011E we expect its
total revenues to increase by 3% y-o-y to
EUR557m. The bottom line will be supported by
its cost-cutting programme 2009/2010, which
should have lowered its fixed-cost base in 2010
by EUR10m, from EUR295m to EUR285m,
based on our estimates. Without growth,
however, we believe the company's EBIT margin
target of 15% by YE-12 is out of reach. In light
of the limited growth MLP currently offers, we
cannot justify a P/E (2011E) of 18x - hence our
3/UP rating.
January 2011
GERMANY
MLP
Profit and loss account
Gross sales
% Change
Net revenues
Change in unearned premiums
Net investment income
Total ordinary income
% Change
Underwriting costs
Other income [expenses]
Acquisition costs
Administrative expenses
Pre-tax operating profit
Exceptionals
Taxes
Profit from associates
Goodwill amortisation [Ins]
Net profit before minorities
% Change
Pre-tax net profit
Net attr. profit [loss], restated
of which Life [%]
of which Non-life [%]
of which Life Reinsurance [%]
of which Non-life Reins. [%]
of which AM [%]
of which Banking [%]
of which Holding [%]
Balance sheet
Goodwill
Intangible assets
Total financial assets
of which Participations
of which Equities
of which Bonds
of which Property
of which Unit Linked
Deferred acquisition costs [Ins]
Banking assets [B]
Other assets
Total assets
Total shareholders' equity
Subordinated liabilities
Net debt
Funds for future appropriation [Ins]
Total technical reserves
Banking liabilities [B]
Other liabilities
Total liabilities
186
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
688.3
31.7%
688.3
688.3
31.7%
(35.8)
(27.6)
(537.2)
87.7
(36.3)
51.4
51.4
31.0%
87.7
51.4
17.5
4.7
112.3
(34.5)
690.9
0.4%
690.9
690.9
0.4%
(1.8)
(91.5)
(477.7)
119.9
141.7
(61.9)
199.7
199.7
261.6
199.7
16.2
1.9
28.1
53.8
553.8
-19.8%
553.8
553.8
-19.8%
4.7
18.1
(486.4)
90.2
3.3
(27.7)
65.8
65.8
-67.1%
93.5
65.8
2.5
102.9
(5.3)
597.4
7.9%
597.4
597.4
7.9%
0.0
20.3
(514.6)
103.2
(9.4)
(31.5)
(0.1)
62.1
62.1
-5.5%
93.7
62.1
12.3
96.5
(8.9)
597.8
0.1%
597.8
597.8
0.1%
(8.1)
0.1
(540.1)
49.7
(6.3)
(16.0)
(2.6)
24.8
24.8
-60.1%
40.8
24.8
15.8
185.8
(101.6)
532.1
-11.0%
532.1
532.1
-11.0%
(0.3)
0.3
(492.5)
39.7
(3.0)
(12.5)
24.2
24.2
-2.4%
36.7
24.2
(0.3)
161.7
(61.4)
539.5
1.4%
539.5
539.5
1.4%
0.3
0.1
(485.0)
54.9
0.1
(16.5)
38.6
38.6
59.6%
55.0
38.6
10.7
136.3
(47.0)
556.5
3.1%
556.5
556.5
3.1%
0.7
(488.2)
69.0
(23.5)
45.5
45.5
18.0%
69.0
45.5
9.2
139.1
(48.3)
578.6
4.0%
578.6
578.6
4.0%
0.1
(500.2)
78.4
(26.7)
51.8
51.8
13.6%
78.4
51.8
9.7
139.0
(48.7)
60.3
1,959.6
1,564.1
357.6
371.6
337.0
3,086.2
289.0
289.6
213.3
1,995.7
355.4
232.2
3,086.2
0.7
22.2
893.3
265.8
1,182.0
455.1
455.2
499.3
227.5
1,182.0
119.6
67.2
791.9
287.4
1,266.1
323.4
323.4
599.7
342.9
1,266.1
119.6
65.1
974.9
264.6
1,424.2
339.7
339.7
752.3
332.2
1,424.2
117.3
45.2
1,113.1
258.9
1,534.4
429.1
429.1
803.9
301.4
1,534.4
91.8
64.4
1,072.5
246.9
1,475.5
418.5
418.5
771.1
285.9
1,475.5
91.8
60.8
1,137.6
201.2
1,491.4
424.8
424.8
845.5
221.1
1,491.4
91.8
71.5
1,173.5
216.3
1,553.0
432.6
432.6
904.7
215.8
1,553.0
91.8
82.9
1,214.5
232.4
1,621.5
441.2
441.2
968.0
212.3
1,621.5
www.cheuvreux.com
January 2011
GERMANY
MLP
Net asset value
Ordinary dividends
Valuation reserves on balance sheet
Valuation reserves off BS after tax
In force Life
In force Other lines
Goodwill
Other NAV items
Embedded value
Future business value
Appraisal value
Financial ratios
Life gen. costs / Avg. techn. prov. [%]
Life operating margin [%]
Non-life retention ratio
NL combined ratio [%] excl. equ. prov.
Non-life reins. retention ratio [%]
Non-life reins. combined ratio [%]
Life reins. operating margin [%]
AM rest. net profit / Avg. AUM [%]
Bank operating margin [%]
Return [%]
Return on avg. invest. [%]
Restated ROE after goodwill
Return on allocated equity [%]
Per share data (Euro)
EPS [restated after goodwill]
% Change
EV per share
% Change
EPS before goodwill
Net equity per share as published
Total AUM per share
Dividend per share
Share price (adjusted) (Euro)
Latest price
High
Low
Average price
Valuation
P/E
P/E before goodwill
P/Non restated EPS
P/BV (incl. rev. res)
P/Embedded value
P/AUMPS (year end) [%]
Net yield [%]
187
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
289.0
23.9
265.1
265.1
455.1
64.8
13.3
0.7
191.1
594.0
594.0
323.4
39.9
14.3
119.6
226.7
404.8
404.8
339.7
48.8
15.2
119.6
252.1
438.6
438.6
429.1
30.2
11.1
117.3
136.3
429.1
429.1
418.5
32.4
(18.1)
91.8
110.3
386.5
386.5
424.8
37.8
(11.3)
91.8
131.6
415.6
415.6
432.6
43.1
(0.0)
91.8
297.7
297.7
441.2
48.5
0.0
91.8
300.9
300.9
0.92
8.8
100.0
76.0
16.4
31.0
100.0
73.7
13.7
0.04
16.5
0.16
17.3
0.03
10.0
(0.00)
9.6
0.03
10.9
0.02
13.0
0.02
14.2
0.0
0.0
0.0
18.9
53.7
16.9
(8,771.8) (316,973.0) (104,427.0)
0.0
18.7
(98,644.4)
0.0
6.4
0.0
0.0
5.7
0.0
0.0
9.2
0.0
0.0
10.6
0.0
0.0
11.8
0.0
0.47
31.0%
2.4
11.6%
0.47
2.44
14.4
0.22
1.84
5.5
125.4%
1.84
3.61
0.0
0.60
0.64
-65.5%
4.1
-26.2%
0.64
2.84
0.0
0.40
0.63
-0.8%
4.5
10.8%
0.63
2.98
0.0
0.50
0.24
-61.3%
4.0
-11.5%
0.27
3.70
0.0
0.28
0.22
-8.2%
3.6
-9.9%
0.22
3.58
0.0
0.30
0.36
59.8%
3.9
7.5%
0.36
3.59
0.0
0.35
0.42
17.9%
2.8
-28.4%
0.42
3.61
0.0
0.40
0.48
13.7%
2.8
1.1%
0.48
3.64
0.0
0.45
14.59
20.93
10.35
14.03
108.6
1,585.1
17.52
17.90
10.70
14.80
108.6
1,903.4
15.04
22.86
13.24
16.88
103.6
1,482.3
10.75
19.70
7.83
14.26
98.7
1,048.9
9.80
14.44
8.03
10.94
101.8
1,056.8
8.06
11.06
5.19
8.43
107.9
869.4
7.60
8.28
6.20
7.45
107.9
819.7
7.66
7.83
7.53
7.69
107.9
826.3
7.66
107.9
826.3
30.8
30.8
30.8
6.0
6.0
1.013
1.5
9.5
9.5
9.5
4.8
3.2
0.000
3.4
23.7
23.7
23.7
5.3
3.7
0.000
2.7
17.1
17.1
17.1
3.6
2.4
0.000
4.7
40.2
36.4
40.2
2.7
2.5
0.000
2.9
35.9
35.9
36.0
2.3
2.2
0.000
3.7
21.2
21.2
21.2
2.1
2.0
0.000
4.6
18.1
18.1
18.2
2.1
2.8
0.000
5.2
16.0
16.0
16.0
2.1
2.7
0.000
5.9
www.cheuvreux.com
January 2011
GERMANY
AEROSPACE & DEFENCE
2/Outperform
Rating
-2.2% EUR50.00
MTU
Reuters: MTXGn.DE Bloomberg: MTX GR
Towards higher multiples in 2011

Q
Recent developments 9M-10 sales in line, FY guidance too
9M-10 sales at EUR1,992m, EBIT at EUR226m: in line. No major

surprises for MTUs 9-month results. Sales totalled EUR1,992m, up 2%.
Commercial OEM (EUR822m), Military (EUR378m) and MRO
(EUR814m) were relatively in line. Adj. EBIT came to EUR226m, i.e. a
margin of 11.3%. Net profit was EUR100m, and FCF EUR143m.
The group confirmed all its FY guidance targets, i.e. sales at EUR2.75bn
(EUR2.768bn in our est.), adj. EBIT of EUR310m (EUR310.7m est.), net
profit of EUR140m (EUR143m) and FCF of EUR120m (EUR119m).
Q
Stock data
Free float
Enterprise value
Daily volume
EUR2524m
EUR2524m
EUR2948m
49.4m
EUR 11.43m
Performances
3.8%
23.7%
30.6%
2.2%
8.6%
1.6%
Absolute perf.
Relative perf.
2011 Outlook Some momentum acceleration expected
MTU indicated for 2011 it is looking for 15-20% sales growth in OEM,
5-10% in spares and MRO, and a decline of 10% in military, leading to
high single-digit sales growth overall. We now anticipate 7.7% versus
our previous 4.3% estimate, but the main difference comes from the
loss-making OEM series.
Spare parts and MRO activities still lagging a bit. Spares and MRO will
grow next year but only modestly at 5-10% (in line with our forecast), as
MTU spares did not decline significantly last year and as the MTU
installed base has been renewed considerably, limiting shop visits.
Military business down but in line with expectations. MTU said that the
10% drop expected in the military business in 2011 is a one-off issue
linked only to the aftermarket business (Tornado) and mainly due to the
German operations.
Concerning the GTF engine powering the A320 NEO, it will cost the
group EUR70-80m in R&D over four years according to our estimates,
but give it a clear advantage for the long term (spare parts flows). MTU
will have a 15% share of this new GTF engine, derived from the existing
GTF made for the Bombardier C-Series.
Q
EUR51.10
Price (07/01/2011)
Valuation - high sensitivity to the USD and spare parts
Whilst our current EUR50 target price is based on a EUR1=USD1.38

assumption, MTU's EBIT sensitivity to the USD is EUR50m for 10 cents,
i.e a 15-20% impact on EBIT or EUR8-10 per share. This means the
current USD level would add EUR4-5 to our current TP. Similarly, the
sensitivity to spare parts growth is rather high, with a EUR4 impact on
the TP for every 500bp growth difference while assuming 7.5% spare
parts growth for the time being. Last but not least, the GTF engine
should provide an additional TP contribution (still to be determined).
This clearly means that our current TP, which no longer shows any
upside (after having outperformed the German index by 31% in 2010),
could be raised by some EUR10+.
52.0
52.0
47.0
47.0
42.0
42.0
37.0
37.0
32.0
32.0
27.0
27.0
22.0
22.0
17.0
17.0
12.0
12.0
05/05
01/06
10/06
06/07
03/08
Price/M DAX
11/08
08/09
Sector focus
Sector Top Picks
Least favoured

Shareholders
Free Float 100.0%
2009
2010E
2011E
2012E
13.4
17.5
15.1
12.3
EV/EBITDA (x)
6.7
7.7
7.2
6.0
6.4
4.8
4.8
6.3
(0.2)
P/E (x)
Net debt/EBITDA (x)
0.4
0.2
0.1
Yield (%)
2.4
2.2
2.4
2.9
ROCE (%)
14.7
16.0
17.0
20.4
1.5
1.5
1.5
1.4
Q
Q
188
www.cheuvreux.com
01/11
Price
Antoine BOIVIN-CHAMPEAUX
Research Analyst
aboivinchampeaux@cheuvreux.com
(33) 1 41 89 73 25
04/10
January 2011
GERMANY
Company profile
One of the world's largest suppliers of engine modules

MTU Aero Engines is one of the world's largest manufacturers of
aircraft engine modules and components (LPC and HPC turbines
and compressors; control units; installed base: 15,000 aircraft, 29%
world market share) with well-established risk-and-revenue-sharing
partner positions in numerous major aircraft engine programmes.
Q
Q Leading OEM-independent supplier

At the same time, it is the leading OEM-independent supplier of
maintenance and repair overhaul (or MRO) services for commercial
aircraft engines (No. 4 global MRO service provider with a 7%
market share).
Q Strong position in military engines
The company generates 20% of its sales with military engines and
services, predominantly for European armed forces (the Tornado,
Eurofighter, Tiger and A400M).
SWOT analysis
Valuation
We value the stock using three methods (SOP,

peer comparison and DCF), although we focus
more on our SOP and DCF valuations.
Sensitivity to the dollar is quite high in the case
of MTU, a 10% variation has a 20% impact on
EBIT according to our calculation.
Relative to its European peers, MTU is trading at
a discount on P/E and EV/Sales multiples.
EV/EBITA is 10% higher than peers (2011E)
Our SOP valuation, in which we split the OEM
business further into military and commercial,
yields a fair value of EUR53 per share, which
implies a 2011 EV/adjusted EBITA multiple of
9.0x.
Based on what we consider to be appropriate
assumptions (WACC 8.9%, terminal growth of
2%), our DCF leads to a EUR50 TP (with a
EUR1=USD1.38 assumption).
Strengths
Weaknesses
Strongly cash-generative
business model
Little influence on pricing

(dictated by engine OEMs)
Aftermarket business
represents about 60% of total
sales and offers good visibility
Earnings generated mainly via

spare parts and MRO in
commercial business
Opportunities
Threats
MTU posted a very strong outperformance in

2009 and 2010E, better than most of its peers.
We attribute this achievement to its resilient
model linked to its favourable mix of engines
and its positioning in defence.
Emancipation from P&W

opening up new opportunities
Increase in military margin due

to exports outside the EU (Saudi
Arabia etc.)
Industry overcapacity for MRO

services
Potential cutbacks in
German/European military
budgets
Investment case
We think this should continue in 2011, albeit to a

lesser extent. The euro at USD1.30 clearly helps
a great deal and the aftermarket is expected to
be up in 2011 after two difficult years.
Last but not least, the cost-cutting plan will bring
in additional savings in 2011.
MTUs current multiples remain relatively low
and we are therefore confident the stock will
continue to outperform. The group has limited
exposure to delayed programmes.
189
www.cheuvreux.com
January 2011
GERMANY
MTU
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
190
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,918.0
0.0%
(506.0)
(1,199.0)
213.0
0.2%
(132.0)
81.0
0.0%
0.0
0.0
0.0
81.0
(73.0)
0.0
0.0
(6.0)
(2.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2,183.0
13.8%
(525.0)
(1,363.0)
295.0
38.5%
(164.0)
131.0
61.7%
0.0
0.0
0.0
131.0
(75.0)
0.0
0.0
(26.0)
2.0
0.0
0.0
33.0
0.0
0.0
33.0
0.0
0.0
33.0
2,416.0
10.7%
(471.0)
(1,609.0)
336.0
13.9%
(152.0)
184.0
40.5%
0.0
0.0
0.0
184.0
(33.0)
0.0
0.0
(61.0)
0.0
0.0
0.0
89.0
0.0
0.0
89.0
0.0
0.0
89.0
169.7%
2,576.0
6.6%
(503.0)
(1,680.0)
393.0
17.0%
(150.0)
243.0
32.1%
0.0
0.0
0.0
243.0
(64.0)
0.0
0.0
(25.0)
0.0
0.0
0.0
154.0
0.0
0.0
154.0
0.0
0.0
154.0
73.0%
2,724.0
5.7%
(492.0)
(1,824.0)
408.0
3.8%
(160.0)
248.0
2.1%
0.0
0.0
0.0
248.0
(51.0)
0.0
0.0
(18.0)
0.0
0.0
0.0
180.0
0.0
0.0
180.0
0.0
0.0
180.0
16.9%
2,611.0
-4.1%
(485.0)
(1,760.0)
366.0
-10.3%
(119.0)
247.0
-0.4%
0.0
0.0
0.0
247.0
(38.0)
0.0
0.0
(68.0)
0.0
0.0
0.0
141.0
0.0
0.0
141.0
0.0
0.0
141.0
-21.7%
2,768.0
6.0%
(506.0)
(1,874.0)
388.0
6.0%
(121.0)
267.0
8.1%
0.0
0.0
0.0
267.0
(46.0)
0.0
0.0
(78.0)
0.0
0.0
0.0
143.0
0.0
0.0
143.0
0.0
0.0
143.0
1.4%
2,990.0
8.0%
(506.0)
(2,075.0)
409.0
5.4%
(124.0)
285.0
6.7%
0.0
0.0
0.0
285.0
(28.0)
0.0
0.0
(90.0)
0.0
0.0
0.0
167.0
0.0
0.0
167.0
0.0
0.0
167.0
16.8%
3,250.0
8.7%
(506.0)
(2,268.0)
476.0
16.4%
(129.0)
347.0
21.8%
0.0
0.0
0.0
347.0
(28.0)
0.0
0.0
(112.0)
0.0
0.0
0.0
206.0
0.0
0.0
206.0
0.0
0.0
206.0
23.4%
188.0
-0.2%
121.0
(73.0)
0.0
236.0
4.6
0.0
5.0
0.0
2.0
(58.0)
185.0
419.0
122.9%
218.0
(220.0)
0.0
417.0
31.8
0.0
32.0
0.0
53.0
(456.0)
46.0
223.0
-46.8%
(55.0)
(94.0)
0.0
74.0
2.6
0.0
3.0
(40.0)
0.0
58.0
95.0
298.0
33.6%
(48.0)
(105.0)
0.0
145.0
(2.5)
0.0
(3.0)
(44.0)
0.0
(74.0)
24.0
307.0
3.0%
99.0
(282.0)
0.0
124.0
(1.5)
0.0
(2.0)
(51.0)
(3.0)
(77.0)
(9.0)
219.0
-28.7%
34.0
(133.0)
0.0
120.0
0.0
0.0
0.0
(48.0)
0.0
(6.0)
66.0
224.0
2.3%
10.0
(115.0)
0.0
119.0
0.0
0.0
0.0
(51.0)
0.0
(3.0)
65.0
261.0
16.5%
(16.0)
(124.0)
0.0
121.0
0.0
0.0
0.0
(59.0)
0.0
3.0
65.0
305.0
16.9%
(16.0)
(131.0)
0.0
158.0
0.0
0.0
0.0
(49.0)
0.0
14.0
123.0
217.0
0.0
359.0
213.0
838.0
386.2
1,627.0
383.0
586.0
577.0
47.0
0.0
35.0
1.8
1,628.0
528.0
0.0
378.0
488.0
272.0
51.5
1,666.0
394.0
818.0
569.0
15.0
0.0
(131.0)
(6.0)
1,665.0
562.0
0.0
395.0
484.0
237.0
42.2
1,678.0
393.0
797.0
538.0
12.0
0.0
(62.0)
(2.6)
1,678.0
562.0
0.0
377.0
537.0
259.0
46.1
1,735.0
392.0
744.0
540.0
15.0
0.0
46.0
1.8
1,737.0
617.0
0.0
390.0
479.0
267.0
43.3
1,753.0
408.0
867.0
525.0
16.0
0.0
(63.0)
(2.3)
1,753.0
730.0
0.0
412.0
421.0
159.0
21.8
1,722.0
403.0
845.0
557.0
40.0
0.0
(124.0)
(4.7)
1,721.0
827.0
0.0
412.0
376.0
90.0
10.9
1,705.0
403.0
845.0
551.0
40.0
0.0
(134.0)
(4.8)
1,705.0
938.0
0.0
412.0
343.0
28.0
3.0
1,721.0
403.0
845.0
551.0
40.0
0.0
(118.0)
(3.9)
1,721.0
1,083.0
0.0
412.0
325.0
(81.0)
NS
1,739.0
403.0
845.0
552.0
40.0
0.0
(102.0)
(3.1)
1,738.0
www.cheuvreux.com
January 2011
GERMANY
MTU
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
191
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.00
0.60
0.00
0.60
1.64
173.5%
1.64
173.5%
2.95
79.5%
2.95
79.5%
3.64
23.7%
3.64
23.7%
2.85
-21.7%
2.85
-21.7%
2.90
1.4%
2.90
1.4%
3.38
16.8%
3.38
16.8%
4.17
23.3%
4.17
23.3%
0.00
0.00
4.70
5.4
0.00
0.73
7.62
62.1%
8.9
0.00
0.82
4.11
-46.0%
9.5
0.00
0.93
5.70
38.5%
9.3
0.00
0.93
6.22
9.1%
10.9
0.00
0.93
4.43
-28.7%
13.8
0.00
1.13
4.53
2.3%
15.6
0.00
1.25
5.28
16.5%
17.7
0.00
1.50
6.17
16.9%
20.4
40.000
40.000
0.000
55.000
55.000
0.000
54.220
54.220
0.000
55.000
52.300
0.000
52.000
49.400
0.000
49.400
49.400
0.000
49.400
49.400
0.000
49.400
49.400
0.000
49.400
49.400
0.000
26.28
27.00
21.00
24.55
35.46
35.79
20.31
28.16
40.00
52.11
30.94
42.73
19.58
40.70
12.87
24.23
38.19
39.75
16.45
26.80
50.61
50.79
34.91
43.38
51.10
51.89
49.58
50.44
51.10
-
1,445.4
2,080.4
1,950.3
2,570.3
2,080.0
2,701.0
959.4
1,600.4
1,886.6
2,441.6
2,500.1
2,986.1
2,524.3
2,948.3
2,524.3
2,839.3
NS
NS
NS
NS
NS
-
43.8
43.8
3.5
28.9
3.0
1.3
2.8
21.6
21.6
8.6
3.8
3.7
1.5
2.3
13.6
13.6
7.0
7.0
4.3
1.6
2.3
5.4
5.4
3.2
12.9
1.8
0.9
4.8
13.4
13.4
8.6
6.4
2.8
1.5
2.4
17.5
17.5
11.2
4.8
3.2
1.5
2.2
15.1
15.1
9.7
4.8
2.9
1.5
2.4
12.3
12.3
8.3
6.3
2.5
1.4
2.9
NS
NS
NS
NS
7.1
15.9
0.95
4.5
7.7
14.0
1.06
10.6
6.9
11.1
1.05
7.7
3.9
6.5
0.59
4.5
6.7
9.9
0.9
10.0
7.7
11.2
1.1
11.8
7.2
10.3
1.0
10.6
6.0
8.2
0.9
8.8
2.9
4.5
11.1
4.2
NS
1.2
386.2
0.0
3.9
0.6
13.5
6.0
1.5
1.3
51.5
121.7
10.2
1.1
13.9
7.6
3.7
1.5
42.2
50.0
6.1
0.9
15.3
9.4
6.0
1.5
46.1
31.6
8.0
0.9
15.0
9.1
6.6
1.6
43.3
25.5
9.6
0.7
14.0
9.5
5.4
1.6
21.8
32.6
8.4
0.4
14.0
9.6
5.2
1.7
10.9
39.0
14.6
0.1
13.7
9.5
5.6
1.8
3.0
37.0
17.0
NS
14.6
10.7
6.3
1.9
NS
36.0
5.1
0.2
NS
NS
7.9
4.4
6.5
6.5
11.0
6.5
17.2
17.2
14.1
12.1
31.8
31.8
14.3
13.0
34.2
34.2
14.7
9.9
21.4
21.4
16.0
10.4
18.9
18.9
17.0
11.0
19.5
19.5
20.4
13.2
21.0
21.0
www.cheuvreux.com
January 2011
GERMANY
ELECTRICITY UTILITIES
3/Underperform
Rating
-30.8% EUR19.00
MVV Energie
EUR27.46
Price (07/01/2011)
Reuters: MVVGn.DE Bloomberg: MVV1 GR
Premium without a cause

Recent developments full year FY 2010 results a touch
lower than expected
On 17 December 2010, MVV MVV Energie pre-released full preliminary

results for FY 2009-10, which overall were a touch below our
expectations. The full final details were released on 30 December 2010.
Group revenues excluding energy taxes increased 6% y-o-y to
EUR3.359bn, beating our estimate of EUR3.219bn. However, adjusted
EBIT was just EUR239m (unchanged vs. the previous year) compared
with our estimate of EUR241m. Hence, the company achieved its fullyear guidance of flat EBIT y-o-y. Adjusted net income declined 3% to
EUR95m vs. our estimate of EUR102m, mainly due to higher-thanexpected tax payments.
Stock data
Free float
Enterprise value
Daily volume
EUR1810m
EUR334m
EUR3111m
65.9m
EUR 0.17m
Performances
11.8%
-6.2%
-11.1%
6.5%
-20.3% -37.5%
Absolute perf.
Relative perf.
46.0
46.0
Bearing in mind, in particular, that the company recorded a 23%

increase in its electricity sales volume, we find the results fairly
uninspiring.
41.0
41.0
36.0
36.0
31.0
31.0
MVV Energie will pay a constant dividend of EUR0.90 per share, which
is a touch below our forecast of EUR0.95.
26.0
26.0
21.0
21.0
16.0
16.0
Outlook Flat sales expected
For the full fiscal year 2010-11, management forecasts group revenues
excluding energy taxes in the region of the previous year's level of
EUR3.36bn.
During the release of the preliminary FY-10 results, management said it
aims to lower its annual costs by EUR20-30m by FY 2012-13, mainly
through the release of 450 employees. This will require restructuring
expenses of EUR31m, which will not be booked in adjusted EBIT.
11.0
01/01
11.0
04/02
06/03
09/04
12/05
Price/SDAX
03/07
06/08
09/09
01/11
Price
Sector focus
Sector Top Picks
Least favoured
EDF, GDF Suez, TERNA

ACEA
Shareholders
City Of Mannheim 50.1%, Free Float 18.5%,
Rheinenergie 16.3%, Enbw 15.1%
08/09
09/10E
10/11E
11/12E
NS
18.4
17.5
17.7
21.4
8.5
7.9
7.8
1.2
5.4
6.1
6.5
Net debt/EBITDA (x)
7.6
3.1
3.0
3.0
Yield (%)
2.9
3.3
3.5
3.6
ROCE (%)
NS
8.8
8.7
8.5
1.3
1.2
1.1
1.1
P/E (x)
EV/EBITDA (x)

Research Analyst
(49) 69 478 97 524
Q
Q
192
www.cheuvreux.com
January 2011
GERMANY
Company profile
Largest municipal network

MVV Energie, formerly the municipal utility of the City of Mannheim,
today holds stakes of between 10-100% in seven municipal utilities
across Germany and is Germany's largest listed municipal utility
network. 96% of its external sales are generated in Germany.
Q
Operating in all traditional utilities activities

The company is active in the fields of electricity, gas, heat and water.
These are considered core activities and accounted for 82% of its
FY08-09 group revenues and 63% of its EBIT. The core divisions are
accompanied by so-called growth divisions: value-added services
and the environmental energy business.
Q
Q Usually among the leading players

MVV is not the leader in any of its markets, but in most cases is one
of the largest players. This holds true particularly for the district
heating division, as well as for the environmental energy business
and value-added services, where the company occupies a number
three position.
Q Majority-owned by city of Mannheim
After having sold a 16.1% stake to RheinEnergie in 2007, the City of
Mannheim still holds a majority 50.1% stake in MVV. RheinEnergie,
which now officially holds 16.3%, is the second-largest shareholder.
EnBW is the third-largest shareholder and has held a stake of 15.1%
since 2004.
SWOT analysis
Strengths
Weaknesses
Close, long-term customer

relationships lead to belowaverage customer churn rates
Limited electricity and gas

sales from own sources
High dependency on weather

conditions and general
commodity price trends
Expertise in acquisition and

integration of other utilities
Limited refinancing needs in

the medium term and an overall
solid balance sheet structure
Low foreign revenues mean

high dependency on German
politics, regulators, and antitrust
authorities
Opportunities
Threats
Increase in supply margins
Demand for energy services

from municipals and energyintensive industries
Mild or highly volatile winter

temperatures put pressure on
sales and margins
Pressure from 2013 due to the

full auctioning of CO2 certificates
Acquisition of further stakes in

municipal utilities and generation
of synergies
Large utilities aiming to

increase/maintain market share
through (temporary) reduction in
supply margins
Market entry in UK waste

energy business
193
www.cheuvreux.com
Valuation
Applying a DCF model (WACC: 7.1%; long-term

growth rate: 1.0%), we derive a share price
target for MVV Energie of EUR19.
MVV Energie's current valuation premium (P/E:
77%, EV/EBITDA: 30% and EV/EBIT: 27% all on
2012E numbers) is unjustified in our view given
a) its low EBIT growth prospects, forecast at a
CAGR of just above 1% for the coming ten
years; and b) its lack of sustainable improvement
in the ROCE due to the company's ambitious
investment programme in the coming years,
which we estimate will be around 150% of
depreciation.
Investment case
None of our valuation approaches justifies the

current share price. The relative stability of the
share price at around EUR30 seems to be
attributable solely to M&A support. A third party
such as RheinEnergie may be interested in
building up a minority stake in the company, but
a full takeover is unlikely in our view. And as we
expect M&A support to fade, MVV Energie's
share price is bound to fade with it.
We forecast group EBIT growth of just 1.3% p.a.
though to 2018. But to achieve even this
relatively low growth rate, capex of more than
EUR2bn will be required. As a result, sustainable
improvement in the group ROCE is unlikely, and
the stock offers little or no prospect of
shareholder value creation.
In light of the above, it is surprising to see the
stock trading at a significant premium to the
sector (EV/EBITDA: 30%; P/E: 77%). We can
see no justification for the current share price
level. 3/Underperform.
January 2011
GERMANY
MVV Energie
FY to 30/9 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
194
2006
2007
2008
2009
2010E
2011E
2012E
2,276.1
2,405.2
5.7%
(303.3)
(1,742.7)
359.2
-3.0%
(144.1)
215.1
7.0%
0.0
0.0
0.0
215.1
(76.4)
0.0
0.0
(12.4)
0.0
0.0
0.0
126.2
0.0
(17.0)
109.2
0.0
0.0
109.2
118.4%
2,809.4
16.8%
(304.9)
(2,018.5)
486.0
35.3%
(149.4)
336.6
56.5%
0.0
0.0
0.0
336.6
(67.9)
0.0
0.0
(83.8)
0.0
0.0
0.0
185.1
0.0
(15.1)
170.0
0.0
0.0
170.0
55.7%
3,369.2
19.9%
(314.2)
(2,898.6)
156.4
-67.8%
(179.0)
(22.6)
NS
0.0
0.0
0.0
(22.6)
(73.8)
0.0
0.0
21.4
0.0
0.0
0.0
(75.0)
0.0
(16.2)
(91.2)
0.0
0.0
(91.2)
NS
3,430.5
1.8%
(339.0)
(2,707.5)
384.0
145.5%
(142.7)
241.3
NS
0.0
0.0
0.0
241.3
(75.2)
0.0
0.0
(49.8)
0.0
0.0
0.0
116.2
0.0
(14.3)
101.9
0.0
0.0
101.9
NS
3,507.8
2.3%
(352.5)
(2,762.5)
392.8
2.3%
(148.5)
244.3
1.2%
0.0
0.0
0.0
244.3
(76.1)
0.0
0.0
(50.5)
0.0
0.0
0.0
117.7
0.0
(14.5)
103.2
0.0
0.0
103.2
1.3%
3,618.3
3.2%
(346.7)
(2,871.9)
399.7
1.8%
(154.0)
245.7
0.6%
0.0
0.0
0.0
245.7
(78.6)
0.0
0.0
(50.1)
0.0
0.0
0.0
117.0
0.0
(14.6)
102.4
0.0
0.0
102.4
-0.8%
(97.0)
(190.0)
(20.7)
(52.3)
(28.6)
0.0
31.2
(57.3)
90.2
8.1
(8.7)
322.3
37.3%
30.6
(164.4)
(20.3)
188.5
(90.4)
0.0
44.0
(56.3)
0.0
(105.5)
(19.7)
377.6
17.2%
(115.7)
(208.3)
(58.9)
53.6
(41.2)
0.0
74.0
(63.1)
225.7
(251.3)
(2.3)
329.6
-12.7%
(71.9)
(237.8)
(58.8)
19.9
(17.6)
0.0
77.3
(71.4)
0.0
215.8
224.0
341.3
3.5%
1.7
(224.2)
(81.5)
118.8
0.0
0.0
0.0
(59.3)
0.0
(169.0)
(109.5)
348.3
2.1%
2.1
(225.2)
(76.8)
125.2
0.0
0.0
0.0
(59.3)
0.0
(117.8)
(51.9)
355.9
2.2%
3.0
(224.9)
(70.8)
134.0
0.0
0.0
0.0
(62.6)
0.0
(69.0)
2.4
732.1
104.9
29.1
546.4
1,312.1
156.8
2,724.6
207.1
101.6
1,876.4
184.8
15.4
339.2
14.9
2,724.5
798.3
115.4
34.3
568.8
1,313.5
143.8
2,830.3
221.1
104.0
1,942.8
271.0
0.0
291.5
12.1
2,830.4
1,153.7
116.1
35.9
755.4
1,139.5
89.7
3,200.6
219.5
95.4
1,962.1
535.3
0.0
388.3
13.8
3,200.6
1,010.1
103.0
36.6
811.3
1,191.6
107.1
3,152.6
224.2
105.6
2,002.0
429.7
75.1
316.0
9.4
3,152.6
1,068.1
117.3
39.5
813.8
1,197.0
101.0
3,235.7
224.2
93.1
2,096.0
429.7
75.1
317.6
9.3
3,235.7
1,127.9
131.8
41.0
819.0
1,194.8
94.8
3,314.5
224.2
80.7
2,185.2
429.7
75.1
319.6
9.1
3,314.5
1,183.9
146.4
40.3
829.3
1,188.2
89.3
3,388.1
224.2
68.2
2,268.5
429.7
75.1
322.5
8.9
3,388.2
(280.1)
(1,625.7)
370.3
(169.3)
201.0
0.0
0.0
0.0
201.0
(73.0)
0.0
0.0
(64.4)
0.0
0.0
0.0
63.6
0.0
(13.6)
50.0
0.0
0.0
50.0
234.7
www.cheuvreux.com
January 2011
GERMANY
MVV Energie
FY to 30/9 (Euro)
2006
2007
2008
2009
2010E
2011E
2012E
0.91
1.96
115.8%
1.96
115.8%
2.60
33.0%
2.60
33.0%
(1.38)
NS
(1.38)
NS
1.55
NS
1.55
NS
1.57
1.3%
1.57
1.3%
1.55
-0.8%
1.55
-0.8%
12.3
0.00
0.80
5.78
35.6%
13.5
0.00
0.90
5.78
0.1%
16.6
0.00
0.90
5.00
-13.5%
14.4
0.00
0.95
5.18
3.5%
15.3
0.00
0.95
5.29
2.0%
16.2
0.00
1.00
5.40
2.2%
17.0

Latest price
High
Low
Average price
55.800
55.100
0.000
55.800
55.800
0.000
65.900
65.300
0.000
65.900
65.900
0.000
65.900
65.900
0.000
65.900
65.900
0.000
65.900
65.900
0.000
25.07
25.55
17.16
21.34
31.29
33.20
21.21
28.63
32.21
35.74
23.15
31.78
30.94
34.00
29.80
31.09
28.01
33.00
24.19
30.20
27.46
28.30
27.09
27.74
27.46
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,398.1
2,831.2
1,745.0
3,184.6
2,122.9
3,388.5
2,040.3
3,349.3
1,944.1
3,265.8
1,809.6
3,111.8
1,809.6
3,105.2
27.6
27.6
5.9
NS
2.0
1.1
3.2
16.0
16.0
5.4
9.3
2.3
1.2
2.6
12.4
12.4
5.6
2.3
1.9
1.3
2.8
NS
NS
6.2
1.2
2.1
1.3
2.9
18.4
18.4
5.5
5.4
1.9
1.2
3.3
17.5
17.5
5.2
6.1
1.7
1.1
3.5
17.7
17.7
5.1
6.5
1.6
1.1
3.6
7.6
14.1
1.24
9.0
8.9
14.8
1.32
7.4
7.0
10.1
1.21
7.5
21.4
NS
1.0
9.6
8.5
13.5
1.0
7.6
7.9
12.7
0.9
7.1
7.8
12.6
0.9
6.9
5.1
5.6
16.3
8.8
2.8
0.9
156.8
88.2
4.7
4.1
14.9
8.9
5.2
0.9
143.8
40.9
7.2
3.0
17.3
12.0
6.6
1.1
89.7
34.6
2.1
3.6
4.6
NS
NS
1.3
107.1
(65.0)
5.1
3.5
11.2
7.0
3.4
1.3
101.0
61.4
5.2
3.4
11.2
7.0
3.4
1.2
94.8
60.7
5.1
3.3
11.0
6.8
3.2
1.3
89.3
64.4
8.0
4.0
7.1
7.1
8.4
7.6
14.7
14.7
12.6
8.7
15.9
15.9
NS
NS
NS
NS
8.8
6.2
10.0
10.0
8.7
6.1
9.6
9.6
8.5
6.0
9.0
9.0

EPS before goodwill
% Change
EPS, reported
% Change
0.91
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.80
4.26
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
195
www.cheuvreux.com
January 2011
GERMANY
RENEWABLE EQUIPMENT
4/Sell
Rating
+61.9% EUR9.00
Nordex
Reuters: NDXG.DE Bloomberg: NDX1 GR
Ongoing strong competition

Q
Recent developments Profit warning
Nordex issued a profit warning with the release of its Q3-10 results. Its
Q3-10 sales of EUR264m were clearly below our EUR290m forecast
and even further below consensus of EUR319m. Due to the
disappointing sales, EBIT came in at only EUR10m, ~EUR4m below our
estimate and ~EUR3m below consensus. Net income of EUR5.4m also
fell short of expectations.
The company cut its sales guidance and now expects to report
revenues of only ~EUR1bn for 2010. It had previously guided for singledigit revenue growth y-o-y, implying sales of >EUR1.2bn. Hence, this
represents a significant cut in revenues. In 2011 Nordex expects to
return to positive revenue growth. In terms of EBIT, it still expects to
report a y-o-y increase for 2010.
Q
EUR5.56
Price (07/01/2011)
Outlook Ongoing strong competition and price erosion
Looking ahead, we expect competition, especially from Vestas and

Siemens, to intensify further. Nordex faces a disadvantage in vendor
financing due to its relatively small balance sheet (vs. Siemens and
Vestas). Furthermore, Asian wind turbine producers are also entering
the market, thereby increasing pressure on turbine prices.
Overall, the US market probably fell 40-50% y-o-y in 2010 in terms of
new installed wind energy/turbines capacity due to a) low energy
consumption, b) the low natural gas price and c) the lack of renewable
energy subsidies at federal level. Order intake picked up in Q3, but
visibility in terms of the market's size in 2011 remains poor.
Also, Vestas issued a profit warning in 2010, mainly due to tough
competition in Europe from Siemens and GE combined with low
demand. We thus expect competition and price erosion to remain
strong in 2011E and beyond.
Stock data
Free float
Enterprise value
Daily volume
EUR372m
EUR177m
EUR709m
66.845m
EUR 3.07m
Performances
11.6%
-21.0% -50.6%
4.3%
-29.7% -51.2%
Absolute perf.
Relative perf.
161.4
161.4
141.4
141.4
121.4
121.4
101.4
101.4
81.4
81.4
61.4
61.4
41.4
41.4
21.4
21.4
1.4
1.4
03/01
06/02
08/03
11/04
01/06
Price/TECDAX
04/07
07/08
10/09
12/10
Price
Sector focus
Sector Top Picks
Least favoured
SMA, SolarWorld
Conergy
Shareholders
Free Float 47.6%, Skion 21.8%, Cmp Capital
Partners 14.4%, Goldman Sachs 10.6%, Hsh
Nordbank 2.1%
2009
2010E
2011E
2012E
P/E (x)
29.2
8.6
4.3
2.6
EV/EBITDA (x)
11.1
5.4
4.1
2.7
NS
NS
NS
NS
Net debt/EBITDA (x)
(1.0)
1.5
2.0
1.3
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
10.7
10.1
14.9
20.3
1.7
0.9
0.9
0.7
Philipp BUMM
Research Analyst
pbumm@cheuvreux.com
(49) 69 47.897.527
Q
Q
196
www.cheuvreux.com
January 2011
GERMANY
Company profile
One of the world's top 10 suppliers

Originally founded in 1985 in Give, Denmark, Nordex is now a
German-based management holding company with its main office in
Norderstedt, production facilities in Rostock and China (Dongying,
Yinchuan), and a production site in the US since mid-2010.
Q
The company is one of the world's ten leading suppliers and

manufacturers of wind turbines and no. 4 in Germany, supplying
wind turbines for inland, coastal and, to a limited extent, offshore
locations. Its principal focus is on turbines with a capacity of 1.5-2.5
MW, but it also offers smaller units for international markets.
Nordex's workforce currently numbers roughly 1850 and the
company is represented by offices and subsidiaries in 18 countries,
which have so far supplied over 3,300 wind turbines with a total
capacity of almost 4000 MW.
Q Geographical split
In Europe the company generated 82% of its total sales in 2009,
while the US and Asia accounted for 11% and 7% in 2009.
Company structure
Nordex generates sales from turbine construction and services.
Turbine construction is by far its largest revenue generator,
accounting for >96% of total sales. The company's product array
includes windmills with rated capacities ranging from 1.3MW to
2.5MW. Its service business and others account for the remaining
4% of total sales.
Q
SWOT analysis
Strengths
Weaknesses
Product
Lack
portfolio well
positioned in the attractive 1.52.5MW capacity wind turbine
class for on-shore locations
of vertical integration
Dependence
on component
suppliers
Not
active in off-shore
business in the near term
Lower
warranty provisions
compared to competitors
Opportunities
Threats
SKion (Susanne Klatten) may

increase its stake further from
currently ~25%
Competition from larger wind

turbine producers such as
Siemens, Vestas and GE
197
www.cheuvreux.com
Valuation
Nordex is currently trading at a P/E for 11E of 4x

and at EV/EBITDA of 4x.
Investment case
On a global scale, Nordex belongs to the smaller

wind turbine producers vs. larger players such
as Siemens, GE and Vestas. As the global
market is still in an oversupply situation this
year, the price pressure will be sustained,
thereby burdening Nordex's profitability.
Despite the recent improvement in order intake
in the US, competition is set to remain high.
Hence, the outlook for 2011 remains rather
uncertain and hurt from price erosion.
We reiterate our negative stance on Nordex,
which we do not consider to be as well
positioned in the US as Vestas or Siemens. We
believe Nordex is at a disadvantage due to the
fact that it so far has no local production
facilities in the US. It will probably only reach full
capacity utilisation in the US in 2012E, since its
decision to enter the market was postponed.
We continue to believe Nordex will find it hard to
sell its wind turbines in the Chinese market,
despite the fact that it produces locally, as the
'Buy Chinese' clauses and strong Chinese
competition, combined with significant price
pressure, will prevent it from realising a major
rebound in group profitability.
January 2011
GERMANY
Nordex
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
198
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
280.8
43.1%
(43.1)
(252.8)
(15.1)
71.2%
(13.6)
(28.7)
54.6%
0.0
0.0
0.0
(28.7)
(6.5)
0.0
4.8
(0.3)
0.0
0.0
0.0
(30.8)
0.0
0.0
(30.8)
0.0
0.0
(30.8)
NS
309.0
10.0%
(34.1)
(263.1)
11.8
178.1%
(11.7)
0.1
100.3%
0.0
0.0
0.0
0.1
(3.0)
0.0
5.4
0.0
0.0
0.0
0.0
2.6
0.0
0.0
2.6
0.0
0.0
2.6
108.4%
513.6
66.2%
(41.8)
(442.2)
29.6
150.8%
(13.0)
16.6
NS
0.0
0.0
0.0
16.6
(3.9)
0.0
0.0
(0.1)
0.0
0.0
0.0
12.6
0.0
0.2
12.8
0.0
0.0
12.8
NS
747.5
45.5%
(55.0)
(638.4)
54.1
82.8%
(14.0)
40.1
141.6%
0.0
0.0
0.0
40.1
(1.1)
0.0
0.0
8.9
0.0
0.0
0.0
48.0
0.0
0.9
48.9
0.0
0.0
48.9
NS
1,135.7
51.9%
(81.7)
(975.2)
78.8
45.7%
(15.9)
62.9
56.9%
0.0
0.0
0.0
62.9
1.0
0.0
0.0
(14.4)
0.0
0.0
0.0
49.5
0.0
(1.9)
47.6
0.0
0.0
47.6
-2.7%
1,182.8
4.1%
(105.8)
(1,019.0)
58.0
-26.4%
(18.0)
40.0
-36.4%
0.0
0.0
0.0
40.0
(5.2)
0.0
0.0
(10.6)
0.0
0.0
0.0
24.1
0.0
0.2
24.3
0.0
0.0
24.3
-48.9%
1,566.9
32.5%
(115.0)
(1,357.7)
94.2
62.4%
(25.1)
69.1
72.8%
0.0
0.0
0.0
69.1
(9.5)
0.0
0.0
(17.9)
0.0
0.0
0.0
41.7
0.0
1.0
42.7
0.0
0.0
42.7
75.7%
2,299.8
46.8%
(167.9)
(1,959.3)
172.6
83.2%
(29.9)
142.7
106.5%
0.0
0.0
0.0
142.7
(21.2)
0.0
0.0
(36.4)
0.0
0.0
0.0
85.0
0.0
1.0
86.0
0.0
0.0
86.0
101.4%
3,144.0
36.7%
(264.1)
(2,612.3)
267.6
55.0%
(34.6)
233.0
63.3%
0.0
0.0
0.0
233.0
(26.3)
0.0
0.0
(62.0)
0.0
0.0
0.0
144.7
0.0
0.0
144.7
0.0
0.0
144.7
68.3%
(28.2)
NS
51.0
(2.8)
(2.8)
20.0
0.0
0.0
0.0
0.0
(11.6)
3.6
12.0
14.3
150.7%
(16.5)
(8.8)
(8.8)
(11.0)
0.0
0.0
0.0
0.0
58.4
(6.8)
40.6
27.5
92.3%
43.3
(19.1)
(13.9)
51.7
0.0
0.0
0.0
0.0
72.5
(4.5)
119.7
63.0
129.1%
(10.1)
(28.5)
(21.0)
24.4
0.0
0.0
0.0
0.0
75.3
(20.7)
79.0
65.5
4.0%
(214.7)
(72.3)
(60.9)
(221.5)
0.0
0.0
0.0
0.0
3.0
(3.9)
(222.4)
42.1
-35.7%
(41.0)
(55.5)
(43.7)
(54.4)
0.0
0.0
0.0
0.0
1.1
33.3
(20.0)
66.8
58.7%
(140.4)
(150.6)
(135.0)
(224.2)
0.0
0.0
0.0
0.0
0.0
0.0
(224.2)
114.9
72.0%
(175.1)
(127.1)
(104.1)
(187.3)
0.0
0.0
0.0
0.0
0.0
0.0
(187.3)
179.3
56.0%
(180.6)
(44.6)
(3.7)
(45.9)
0.0
0.0
0.0
0.0
0.0
0.0
(45.9)
2.5
0.0
0.4
12.0
28.1
NS
43.0
10.0
38.9
23.3
5.5
0.0
(34.7)
(12.4)
43.0
63.5
0.0
0.4
12.6
(12.4)
NS
64.1
10.0
40.5
21.4
9.8
0.0
(17.6)
(5.7)
64.1
146.2
2.3
0.4
46.8
(132.0)
NS
63.7
10.0
45.4
27.8
7.2
0.0
(26.6)
(5.2)
63.8
270.4
1.4
0.5
57.5
(211.1)
NS
118.7
10.0
75.5
35.2
3.9
0.0
(5.7)
(0.8)
118.9
321.1
3.3
0.5
106.7
(95.9)
NS
335.7
10.0
89.3
78.8
6.7
0.0
151.0
13.3
335.8
345.3
4.3
0.6
89.9
(59.2)
NS
380.9
10.0
75.7
97.5
5.9
0.0
192.0
16.2
381.1
388.5
1.3
0.5
115.4
139.6
35.8
645.3
10.0
89.3
253.1
6.7
0.0
332.4
21.2
691.5
474.5
0.3
0.5
150.7
337.6
71.1
963.6
10.0
89.3
350.3
6.7
0.0
507.5
22.1
963.8
619.2
0.3
0.5
180.4
353.9
57.1
1,154.3
10.0
89.3
360.3
6.7
0.0
688.1
21.9
1,154.4
www.cheuvreux.com
January 2011
GERMANY
Nordex
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
(59.12)
NS
(59.12)
NS
0.05
100.1%
0.05
100.1%
0.21
NS
0.21
NS
0.75
NS
0.75
NS
0.72
-4.0%
0.72
-4.0%
0.36
-49.8%
0.36
-49.8%
0.64
78.0%
0.64
78.0%
1.29
101.4%
1.29
101.4%
2.17
68.2%
2.17
68.2%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
(54.13)
NS
4.8
0.00
0.00
0.26
100.5%
1.2
0.00
0.00
0.44
67.8%
2.4
0.00
0.00
0.96
116.7%
4.1
0.00
0.00
0.98
2.5%
4.8
0.00
0.00
0.62
-36.7%
5.1
0.00
0.00
1.00
60.4%
5.8
0.00
0.00
1.72
72.1%
7.1
0.00
0.00
2.68
56.0%
9.3
0.521
0.521
0.000
54.133
54.133
0.000
62.042
62.042
0.000
65.595
65.595
0.000
66.595
66.595
0.000
67.595
67.595
0.000
66.845
66.845
0.000
66.845
66.845
0.000
66.845
66.845
0.000
6.50
11.50
5.90
8.14
4.97
6.80
1.45
3.78
13.76
23.15
4.98
11.27
31.55
39.60
13.76
28.37
10.00
33.35
8.00
21.77
10.48
14.76
7.15
11.11
5.51
11.77
4.25
7.69
5.56
5.82
5.51
5.65
5.56
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
31.2
59.7
217.6
205.6
889.2
757.6
2,109.0
1,898.3
668.5
573.1
700.5
641.9
368.0
508.1
371.7
709.8
371.7
726.1
NS
NS
NS
64.0
1.4
1.6
0.0
NS
NS
18.8
NS
4.2
3.8
0.0
66.7
66.7
31.0
5.8
5.8
13.4
0.0
42.3
42.3
32.9
1.2
7.7
16.5
0.0
14.0
14.0
10.2
NS
2.1
1.7
0.0
29.2
29.2
16.8
NS
2.1
1.7
0.0
8.6
8.6
5.5
NS
0.9
0.9
0.0
4.3
4.3
3.2
NS
0.8
0.9
0.0
2.6
2.6
2.1
NS
0.6
0.7
0.0
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
NS
NS
0.21
(2.8)
17.4
NS
0.67
11.9
25.6
45.6
1.48
24.2
35.1
47.3
2.54
29.5
7.3
9.1
0.51
8.9
11.1
16.0
0.5
14.0
5.4
7.4
0.3
6.9
4.1
5.0
0.3
5.5
2.7
3.1
0.2
3.7
NS
NS
NS
NS
NS
7.5
NS
0.0
3.9
NS
3.8
0.0
0.8
5.7
NS
0.0
7.6
NS
5.8
3.2
2.5
9.1
NS
0.0
NS
NS
7.2
5.4
6.4
6.5
NS
0.0
NS
NS
6.9
5.5
4.4
3.5
NS
0.0
11.2
NS
4.9
3.4
2.0
3.2
NS
0.0
9.9
2.1
6.0
4.4
2.7
2.3
35.8
0.0
8.1
2.9
7.5
6.2
3.7
2.4
71.1
0.0
10.2
2.0
8.5
7.4
4.6
2.7
57.1
0.0
NS
NS
NS
NS
0.2
0.2
4.2
4.2
29.3
29.1
9.2
9.2
34.9
42.9
19.9
19.9
19.1
14.8
16.0
16.0
10.7
7.4
7.3
7.3
10.1
7.1
11.6
11.6
14.9
10.4
19.9
19.9
20.3
14.2
26.5
26.5

Latest price
High
Low
Average price
199
www.cheuvreux.com
January 2011
GERMANY
ELECTRONICS
2/Outperform
Rating
-1.1% EUR87.00
Pfeiffer Vacuum
Taking a giant leap
Q
Reuters: PV.DE Bloomberg: PFV GR
Stock data
Recent developments great results/transformational deal
In November Pfeiffer announced plans to acquire Alcatel's Adixen in

what will be a transformational transaction for the company.
Operationally, the existing business performed very strongly in the first
three quarters. Sales in Q3 jumped 52% - albeit against the trough
quarter in 2009 and were up 15.3% after 9 months. Growth was
strong in all segments except coating (-40%) due to the high base
effect (large Solibro order). Notably the semiconductor business
continued its strong recovery, with sales +125% (Q1-Q3), albeit from a
low base. EBIT (Q1-Q3) rose 34% for a 23.4% margin (vs. 20.2% in
9M-09) due to operational leverage and the non-recurrence of costs
incurred in 2009 to enhance its Asslar production site. Pfeiffer raised its
guidance: sales ~EUR210m (+6% despite non-recurrence of Solibro
order), EBIT margin >23%.
Q
EUR88.00
Price (07/01/2011)
Outlook Pros and Cons to planned acquisition of Adixen
Pfeiffer will pay EUR200m for Adixen, an attractive price implying an

EV/EBITDA multiple of ~5x on the expected 2010E results (sales
EUR280m, EBITDA EUR40m). The deal will be partially financed
through a 10% capital increase that was completed in November and
raised EUR74m. With the placement of its treasury shares, the
company has raised a further EUR37m. Hence the deal will be 55%
equity financed.
When pondering the potential merits of the deal we see both pros and
cons. Pfeiffer will more than double in size to sales of ~EUR485m and
will become the no. 2 globally in backing pumps. It will have an
integrated product portfolio (turbo & backing pumps plus chambers &
fittings) and Adixen, though far more cyclical, is across the cycle a
faster growing company, in particular due to its higher exposure to the
Asian solar market.
There are however also risks. The execution risks are potentially high
considering that Pfeiffer has limited experience in acquiring and
integrating companies and this deal will entail merging two large
companies with quite diverse corporate cultures. Secondly, the
combined entity will become significantly more cyclical due to Adixen's
high exposure to the semiconductor industry (roughly 30% of combined
sales will be to the semiconductor industry vs. <10% at Pfeiffer today).
The deal will initially also be margin-dilutive (combined EBIT margin 11E
estimated at 17.8% vs. 23.7%). The company has verbally
communicated that it targets an average EBIT margin for the combined
entity of >20% in the medium term (post integration). However, as yet
the company has not communicated a detailed integration/restructuring
plan.
Free float
Enterprise value
Daily volume
EUR749m
EUR599m
EUR694m
8.51m
EUR 2.49m
Performances
-1.2%
27.3%
46.7%
-7.6%
13.3%
44.9%
Absolute perf.
Relative perf.
265.0
265.0
215.0
215.0
165.0
165.0
115.0
115.0
65.0
65.0
15.0
01/01
15.0
04/02
07/03
10/04
01/06
Price/TECDAX
04/07
07/08
Price
Sector Top Picks
Least favoured
Shareholders
Free Float 80.0%, Arnhold & Bleichrder 14.9%, Legg
Mason 5.0%
2009
2010E
2011E
2012E
P/E (x)
18.0
20.0
18.3
16.8
EV/EBITDA (x)
10.6
12.6
11.1
9.9
4.4
1.6
4.8
5.5
Net debt/EBITDA (x)
(1.5)
(0.9)
(1.0)
(1.1)
Yield (%)
4.2
3.4
3.8
4.7
ROCE (%)
47.2
46.4
49.0
51.4
5.5
5.0
4.6
4.3
Craig ABBOTT
Q
Q
200
www.cheuvreux.com
01/11
Sector focus
Research Analyst
(49) 69 47 89 75 25
10/09
January 2011
GERMANY
Company profile
Market leader in turbo vacuum pump technology

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

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

pumps with an estimated market
share of 30-35% and now
technology leader in dry backing
pumps.
Short order book visibility,

typically only 2-3 months, due to
short delivery times for standard
products of just 5-7 days
Will become 2nd largest

integrated vacuum company
behind Edwards
Close correlation to capital

spending cycles in many endmarkets (especially
semiconductor)
Brand
name and product

reputation with its turbo pumps
offering lowest lifecycle costs
FX exposure (UDS/YEN)
Diversified
Acquisition increases
complexity of the firm (5
production sites from 2)
Opportunities
Threats
Cross-selling potential
customer base
(>8,000, none accounting for
more than 5% of sales)
Integration risks, potential

restructuring costs
New end-market applications
High margins/ROCE in turbo

pump segment may attract more
competition
Strengthened position in
coating (i.e. Asian solar segment)
Potential raw material and

energy cost inflation
201
www.cheuvreux.com
Valuation
We take the mid-range of Adixen's historical

peak/trough EBIT margin range of 10% to 15%,
then apply a premium to the Cheuvreux Capital
Goods Sector for the combined entity, given its
superior profitability. Applying then an
EV/EBITDA multiple of 8.5x and a P/E of 14x, we
arrive at a fair value of EUR87 per share.
Q
Investment case
Pfeiffer operates one of the highest quality

businesses in our universe. With a marketleading position in turbo pumps, a premium
product that commands premium prices,
streamlined production and a pure-play focus on
vacuum technology, PFV is highly profitable
(estimated trough EBIT margin 21%) and cashgenerative, and remained so even during the
trough of the recession. The company also has
solid medium-term growth potential through new
applications and the expansion of its product
range, particularly in backing pumps and
increasingly also in systems. This all suggests
the shares deserve to trade at a premium.
Furthermore, given Pfeiffer's ever-broadening
range of applications the company is becoming
more early-cyclical than in the past. Its current
multiples are undemanding considering its
premium qualities, its high cash conversion rate,
balance sheet strength (net cash ~11% of
market cap) and medium-term growth potential
through new applications.
The acquisition of Adixen will transform the
group significantly, making it the 2nd largest
vacuum pump technology company behind
Edwards. The combined group will have a broad
product portfolio across the entire spectrum,
two internationally acclaimed brands and a very
broad geographical spread. In particular it will
significantly increase Pfeiffer's presence in Asia.
January 2011
GERMANY
Pfeiffer Vacuum
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
202
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
151.5
9.3%
(45.9)
(66.1)
39.5
39.6%
(4.9)
34.6
42.4%
0.0
0.0
0.0
34.6
1.8
0.0
(10.2)
(14.6)
0.0
0.0
0.0
11.6
0.0
0.0
11.6
0.0
0.0
11.6
-9.4%
159.5
5.3%
(44.0)
(75.9)
39.6
0.3%
(3.2)
36.4
5.2%
0.0
0.0
0.0
36.4
2.5
0.0
(1.0)
(15.0)
0.0
0.0
0.0
23.0
0.0
(0.1)
22.9
0.0
0.0
22.9
97.4%
179.5
12.5%
(47.2)
(84.4)
47.9
21.0%
(3.1)
44.8
23.1%
0.0
0.0
0.0
44.8
1.4
0.0
0.0
(16.6)
0.0
0.0
0.0
29.8
0.0
(0.2)
29.6
0.0
0.0
29.6
29.3%
192.0
7.0%
(44.7)
(91.2)
56.1
17.1%
(3.3)
52.8
17.9%
0.0
0.0
0.0
52.8
6.6
0.0
0.0
(22.1)
0.0
0.0
0.0
37.3
0.0
(0.3)
37.0
0.0
0.0
37.0
25.0%
198.1
3.2%
(43.3)
(99.8)
55.0
-2.0%
(3.5)
51.5
-2.5%
0.0
0.0
0.0
51.5
2.7
0.0
0.0
(16.1)
0.0
0.0
0.0
38.1
0.0
(0.1)
38.0
0.0
0.0
38.0
2.7%
182.0
-8.1%
(46.2)
(94.3)
41.5
-24.5%
(3.7)
37.8
-26.6%
0.0
0.0
0.0
37.8
0.7
0.0
0.0
(10.7)
0.0
0.0
0.0
27.7
0.0
(0.1)
27.6
0.0
0.0
27.6
-27.4%
214.0
17.6%
(49.6)
(108.5)
55.9
34.7%
(5.2)
50.7
34.1%
0.0
0.0
0.0
50.7
2.7
0.0
0.0
(15.5)
0.0
0.0
0.0
37.9
0.0
(0.4)
37.5
0.0
0.0
37.5
35.9%
230.6
7.8%
(50.1)
(117.8)
62.7
12.2%
(6.2)
56.5
11.4%
0.0
0.0
0.0
56.5
1.7
0.0
0.0
(16.9)
0.0
0.0
0.0
41.3
0.0
(0.4)
40.9
0.0
0.0
40.9
9.1%
246.9
7.1%
(51.1)
(127.3)
68.5
9.3%
(6.9)
61.6
9.0%
0.0
0.0
0.0
61.6
1.8
0.0
0.0
(18.4)
0.0
0.0
0.0
45.0
0.0
(0.4)
44.6
0.0
0.0
44.6
9.0%
16.5
-1.2%
9.9
5.5
(0.4)
31.9
0.0
0.0
0.0
(6.1)
0.0
0.0
25.8
26.2
58.8%
(1.8)
(3.1)
(0.7)
21.3
0.0
0.0
0.0
(7.8)
0.0
0.0
13.5
32.8
25.2%
(1.1)
(5.6)
(2.0)
26.1
(11.6)
0.0
0.0
(11.7)
0.0
0.0
2.8
40.5
23.5%
(12.2)
1.4
(0.8)
29.7
0.0
0.0
0.0
(21.8)
0.0
0.0
7.9
45.7
12.8%
(2.7)
(4.4)
(6.7)
38.6
0.0
0.0
0.0
(27.8)
0.0
0.0
10.8
31.4
-31.3%
(8.0)
(1.5)
(2.4)
21.9
0.0
0.0
0.0
(29.6)
0.0
0.0
(7.7)
43.1
37.3%
(6.2)
(25.0)
(0.7)
11.9
0.0
0.0
0.0
(20.9)
0.0
0.0
(9.0)
47.6
10.4%
(5.6)
(5.8)
(1.2)
36.2
0.0
0.0
0.0
(25.5)
0.0
0.0
10.7
51.9
9.0%
(4.1)
(6.2)
(1.2)
41.6
0.0
2.0
0.0
(28.5)
0.0
0.0
15.1
99.4
0.0
1.5
0.0
(53.1)
NS
47.8
0.0
6.4
24.1
1.0
0.0
16.1
10.6
47.6
111.4
0.6
4.5
0.8
(64.2)
NS
53.1
0.0
7.7
21.3
7.1
0.0
17.0
10.7
53.1
138.3
0.6
3.9
13.9
(76.4)
NS
80.3
0.0
8.3
22.9
19.0
0.0
30.2
16.8
80.4
148.6
0.7
1.6
12.6
(83.5)
NS
80.0
0.0
6.3
26.3
13.0
0.0
34.5
18.0
80.1
137.3
0.5
1.7
10.8
(68.3)
NS
82.0
0.0
6.1
34.3
6.1
0.0
35.5
17.9
82.0
137.8
0.6
1.5
8.9
(62.0)
NS
86.8
0.0
0.8
36.8
6.7
0.0
42.5
23.4
86.8
154.4
1.0
2.0
11.5
(53.0)
NS
115.9
0.0
4.1
53.3
6.7
0.0
51.8
24.2
115.9
169.8
1.4
2.0
12.5
(63.6)
NS
122.1
0.0
3.4
53.5
6.7
0.0
58.5
25.4
122.1
185.9
1.8
2.0
13.6
(76.7)
NS
126.6
0.0
2.6
53.5
6.7
0.0
63.7
25.8
126.5
www.cheuvreux.com
January 2011
GERMANY
Pfeiffer Vacuum
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
1.34
-8.7%
1.34
-8.7%
2.64
97.4%
2.64
97.4%
3.39
28.7%
3.39
28.7%
4.19
23.4%
4.19
23.4%
4.37
4.3%
4.37
4.3%
3.24
-25.8%
3.24
-25.8%
4.41
35.9%
4.41
35.9%
4.81
9.1%
4.81
9.1%
5.24
9.1%
5.24
9.1%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.90
1.90
-0.5%
10.5
0.00
1.35
3.02
58.8%
11.5
0.00
2.50
3.76
24.6%
13.3
0.00
3.15
4.58
21.9%
13.7
0.00
3.35
5.25
14.7%
12.4
0.00
2.45
3.69
-29.8%
13.7
0.00
3.00
5.07
37.3%
15.1
0.00
3.35
5.59
10.4%
16.6
0.00
4.10
6.10
9.0%
17.7

Latest price
High
Low
Average price
8.690
8.690
0.000
8.690
8.690
0.000
8.730
8.730
0.000
8.840
8.840
0.000
8.700
8.700
0.000
8.510
8.510
0.000
8.510
8.510
0.000
8.510
8.510
0.000
8.510
8.510
0.000
33.00
35.15
25.40
31.84
46.17
47.25
31.60
39.77
64.40
66.60
44.45
51.66
55.00
78.00
51.30
66.46
46.93
68.78
38.14
56.42
58.50
60.59
36.11
49.49
88.00
90.97
52.52
64.85
88.00
89.85
86.00
88.70
88.00
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
290.1
238.5
405.9
348.2
566.1
496.5
483.5
405.0
414.9
349.1
497.8
438.8
748.9
706.2
748.9
694.8
748.9
681.0
24.7
24.7
17.4
11.0
3.1
5.1
2.7
17.5
17.5
15.3
5.2
4.0
7.6
2.9
19.0
19.0
17.1
4.6
4.8
8.1
3.9
13.1
13.1
12.0
6.1
4.0
6.0
5.7
10.7
10.7
8.9
9.3
3.8
4.6
7.1
18.0
18.0
15.9
4.4
4.3
5.5
4.2
20.0
20.0
17.4
1.6
5.8
5.0
3.4
18.3
18.3
15.7
4.8
5.3
4.6
3.8
16.8
16.8
14.4
5.5
5.0
4.3
4.7
6.0
6.9
1.57
15.2
8.8
9.6
2.18
14.0
10.4
11.1
2.77
15.5
7.2
7.7
2.11
11.0
6.3
6.8
1.76
8.0
10.6
11.6
2.4
14.2
12.6
13.9
3.3
16.9
11.1
12.3
3.0
14.8
9.9
11.1
2.8
13.3
NS
NS
26.1
22.8
7.7
3.3
NS
67.4
NS
NS
24.8
22.8
14.4
3.5
NS
51.2
NS
NS
26.7
25.0
16.6
2.9
NS
73.7
NS
NS
29.2
27.5
19.4
2.9
NS
75.3
NS
NS
27.8
26.0
19.2
2.6
NS
76.7
NS
NS
22.8
20.8
15.2
2.3
NS
75.5
NS
NS
26.1
23.7
17.7
2.0
NS
68.1
NS
NS
27.2
24.5
17.9
2.0
NS
69.7
NS
NS
27.7
24.9
18.2
2.1
NS
78.2
74.2
32.9
12.4
12.4
79.1
48.0
22.9
22.9
73.0
46.8
24.0
24.0
78.7
49.3
28.4
28.4
67.9
47.7
32.1
32.1
47.2
34.0
22.3
22.3
46.4
33.0
27.6
27.6
49.0
34.8
27.4
27.4
51.4
36.5
27.3
27.3
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
203
www.cheuvreux.com
January 2011
GERMANY
BUILDING MATERIALS
4/Sell
Rating
+68.8% EUR4.00
Pfleiderer
Reuters: PFDGn.DE Bloomberg: PFD4 GR
Still too risky

Q
Stock data
Recent developments market conditions remain tough
Pfleiderer's operational and financial difficulties continued in Q3-10.

Although sales were up 9.8%, EBITDA again declined 6% for a margin
of just 6.5%, EBIT returned, slightly, to negative territory (EUR-1m), and
the bottom line was negative at EUR-31.5m. Weak demand in many
end-markets coupled with structural overcapacity and high material
costs were again the main culprits. In particular market conditions
deteriorated more than expected in North America. Whilst volumes in
particle boards were up, volumes in laminate flooring declined and
pricing, in particular, was weak due to the product mix (demand shifting
to lower-priced products), the still-weak housing market and price
pressure from European imports.
Q
EUR2.37
Price (07/01/2011)
Outlook debt servicing is the issue/plant closures
Pfleiderer's debt situation remains precarious. Although the company

managed to reduce its net debt slightly in Q3-10 to EUR914m, its
reported net gearing was 141%, but more importantly net debt/EBITDA
stood at 7.2x. Including the hybrid bond, net debt was actually
EUR1.18bn, net gearing 314% and net debt/EBITDA 9.3x. With a
negative EBIT in 9M-10, interest cover was virtually non-existent.
Pfleiderer also cautioned in its Q3 report that no significant recovery of
the market for raw particleboard is to be expected in the short term and
that margins are likely to remain under pressure due to major price
increases in raw material costs. Against this backdrop, if there is no
sustained improvement in the market situation soon, Pfleiderer may not
be able to fulfil the (unspecified) financial covenants previously agreed
with the banks and may therefore have to resume negotiations with the
banks. The company further warned that its credit lines could become
more expensive or even fall due. In the worst case, the company's
continuing existence could even be jeopardised.
Pfleiderer is, however, responding by shutting down capacity. By the
end of December 2010 it will have closed its particle board plant in
Ebersdorf, Germany, and by June 2011 it will close its MDF plant in
Nidda, Germany. Furthermore, the Gschwend-based particle board
plant, which had been on short-time work, will also be permanently
shut down. The closures are expected to lead to one-off costs of
~EUR42m for the Nidda and Ebersdorf plants, of which ~EUR25m will
be cash costs. The company expects, however, to partially offset these
costs through the sale of property and plant, which it is optimistic will
generate ~EUR25m. A further EUR9m in restructuring costs are
expected for the Gschwend closure. On a positive note, the Gschwend
and Ebersdorf plants represent an estimated 10% of total particle
board manufacturing capacity in Germany, and their permanent closure
should begin to have a positive impact on prices already in 2011.
Free float
Enterprise value
Daily volume
EUR142m
EUR94m
EUR980m
59.76m
EUR 1.20m
Performances
22.2%
-36.7% -64.8%
16.4%
-46.1% -75.2%
Absolute perf.
Relative perf.
26.1
26.1
21.1
21.1
16.1
16.1
11.1
11.1
6.1
6.1
1.1
1.1
01/01
03/02
06/03
09/04
12/05
Price/SDAX
03/07
07/08
Sector focus
Sector Top Picks
Heidelbergcement, Saint
Gobain
Least favoured
Shareholders
Free Float 67.7%, One Equity 23.3%, Pfleiderer
Family 6%, H.H.F. Stienstra 3%
2009
2010E
2011E
2012E
NS
NS
NS
32.9
12.3
8.1
6.0
4.6
NS
NS
26.1
24.8
Net debt/EBITDA (x)
8.5
6.3
4.6
3.4
Yield (%)
0.0
0.0
0.0
0.8
ROCE (%)
NS
0.8
3.4
6.4
0.9
0.9
0.9
0.8
P/E (x)
EV/EBITDA (x)
204
www.cheuvreux.com
01/11
Price
Craig ABBOTT
Research Analyst
(49) 69 47 89 75 25
10/09
January 2011
GERMANY
Company profile
Leading engineered wood manufacturer

Pfleiderer is a pure-play engineered wood manufacturer. Following
the acquisition of Kunz in November 2005 it became the European
and global no.3 in the engineered wood industry (particle board/
MDF) and is no.2 and no.3 worldwide in its core markets, the
furniture and interior design industries. With the Pergo acquisition
(March 07) it became market leader in the US for laminate flooring
and a leading player in Europe in the upper priced segment.
Q
Valuation
Our target price of EUR4 is based on the

company's book value (EUR654m) less the
hybrid bond (EUR258m), less minorities
(EUR47m), with a discount of 30% of goodwill
(EUR118m) to account for potential impairment
charges.
Q End-markets: kitchens, furniture and laminate flooring

The group's main customers are furniture and kitchen manufacturers
as well as specialised wood retailers, and in laminate flooring, the
DIY chains and specialist flooring retailers.
Q Organised in three regions
Pfleiderer is structured on a regional basis with three divisions:
Western Europe (54% of sales and 53% of EBITDA), Eastern Europe
(20% of sales and 26% of EBITDA) and North America (26% of sales
and 21% of EBITDA).
SWOT analysis
Strengths
Weaknesses
Operates modern, highly

efficient production facilities for
engineered wood in structural
growth markets Poland and
Russia
Industry is highly vulnerable to

cyclical fluctuations in demand
and pricing
Very highly geared with net

debt/EBITDA (reported) of >7x or
>9x including the hybrid bond.
Opportunities
Threats
Structural growth in consumer

demand for furniture likely to
resume in eastern Europe after
the recession, where consumer
spending on furniture is at only
~20% of the EU level
Still-weak
Market-leading positions with

key products
demand and
declining capacity utilisation
rates likely to keep pressure on
margins
Competitive price pressure in

W. Europe could intensify further
Increasing share of the

laminate flooring market in North
America
Material prices (wood, glues &

resins) and energy costs could
increase, putting the gross
margin under pressure
205
www.cheuvreux.com
Investment case
We retain our 4/Sell recommendation on

Pfleiderer because the risks, even at this level,
outweigh the potential upside. Given Pfleiderer's
extremely high debt burden and still very difficult
operational conditions, the risk remains that a
major recapitalisation may yet be required.
Operationally, the capacity reduction measures
being taken both by Pfleiderer (permanent
closure of c.10% of the German market's total
particle board capacity) and reductions
indicated by competitors Kronospan and Glunz
suggest pricing, at least in the German particle
board market, should begin to improve in 2011.
Nevertheless, there are still many dark clouds on
the horizon for Pfleiderer. Material cost inflation
is likely to remain a structural issue due to tight
supply conditions and increasing demand for
wood (i.e. from the wood pellet industry) and the
consistently high oil price (glues & resins).
Furthermore, the trend amongst homeowners in
the US toward lower-priced flooring materials
could potentially erode Pergo's premium pricing
over time.
January 2011
GERMANY
Pfleiderer
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
206
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
766.9
-9.6%
(159.1)
(530.0)
77.8
9.3%
(38.8)
39.0
15.0%
0.0
0.0
0.0
39.0
(20.4)
0.0
39.6
(8.5)
0.0
0.0
0.0
49.7
0.0
(16.3)
33.4
0.0
0.0
33.4
172.9%
830.5
8.3%
(160.6)
(567.4)
102.5
31.7%
(48.7)
53.8
37.9%
0.0
0.0
0.0
53.8
(21.9)
0.0
7.1
4.6
0.0
0.0
0.0
43.5
0.0
(14.7)
28.8
0.0
0.0
28.8
-13.8%
1,415.3
70.4%
(238.6)
(968.9)
207.8
102.7%
(75.2)
132.6
146.5%
0.0
0.0
0.0
132.6
(40.3)
0.0
33.8
(25.2)
0.0
0.0
33.8
101.0
0.0
(17.1)
83.9
0.0
0.0
50.1
74.0%
1,801.1
27.3%
(266.8)
(1,285.8)
248.5
19.6%
(111.9)
136.6
3.0%
0.0
0.0
0.0
136.6
(46.0)
0.0
4.9
(10.9)
0.0
0.0
0.0
84.6
0.0
(27.1)
57.5
0.0
0.0
57.5
14.8%
1,735.9
-3.6%
(312.5)
(1,199.7)
223.7
-10.0%
(126.1)
97.6
-28.6%
0.0
0.0
0.0
97.6
(80.0)
0.0
(6.4)
11.2
0.0
0.0
0.0
22.3
0.0
(16.5)
5.8
0.0
0.0
5.8
-89.9%
1,381.5
-20.4%
(248.7)
(1,032.4)
100.4
-55.1%
(116.5)
(16.1)
NS
0.0
0.0
0.0
(16.1)
(48.8)
0.0
2.2
8.2
0.0
0.0
0.0
(54.5)
0.0
(15.3)
(69.8)
0.0
0.0
(69.8)
NS
1,497.1
8.4%
(269.5)
(1,100.7)
126.9
26.4%
(116.1)
10.8
167.1%
0.0
0.0
0.0
10.8
(53.5)
0.0
0.0
11.5
0.0
0.0
0.0
(31.2)
0.0
(19.0)
(50.2)
0.0
0.0
(50.2)
28.1%
1,582.8
5.7%
(284.9)
(1,135.7)
162.2
27.8%
(116.8)
45.4
NS
0.0
0.0
0.0
45.4
(63.7)
0.0
0.0
4.9
0.0
0.0
0.0
(13.3)
0.0
(19.8)
(33.1)
0.0
0.0
(33.1)
34.1%
1,652.5
4.4%
(297.4)
(1,151.3)
203.8
25.6%
(120.8)
83.0
82.8%
0.0
0.0
0.0
83.0
(58.6)
0.0
0.0
0.0
0.0
0.0
0.0
24.3
0.0
(20.0)
4.3
0.0
0.0
4.3
113.0%
88.5
92.8%
1.0
(54.6)
(27.8)
34.9
2.5
0.0
0.0
0.0
41.5
2.5
81.4
92.3
4.3%
11.4
(267.4)
(237.3)
(163.7)
(288.0)
0.0
0.0
0.0
1.2
(288.0)
(738.5)
176.2
90.9%
(64.8)
(146.4)
(106.8)
(35.0)
74.0
0.0
74.0
(6.4)
172.6
0.0
279.2
196.5
11.5%
1.4
(182.9)
(132.5)
15.0
(385.0)
0.0
0.0
(10.9)
185.0
(385.0)
(580.9)
148.4
-24.5%
106.8
(197.5)
(145.5)
57.7
(61.9)
0.0
0.0
(13.1)
0.0
(61.9)
(79.2)
62.0
-58.2%
(101.1)
(139.4)
(97.9)
(178.5)
(15.4)
0.0
0.0
0.0
(24.8)
(15.4)
(234.1)
84.9
36.9%
1.7
(91.0)
(46.1)
(4.4)
0.0
0.0
0.0
0.0
54.0
0.0
49.6
103.5
21.9%
27.8
(75.0)
(27.5)
56.3
0.0
0.0
0.0
0.0
0.0
0.0
56.3
145.2
40.3%
(8.8)
(82.0)
(32.4)
54.4
0.0
0.0
0.0
0.0
0.0
0.0
54.4
138.4
92.1
62.0
92.5
177.0
76.8
562.0
86.4
7.4
372.4
50.7
0.0
45.0
5.9
561.9
175.1
100.1
62.7
160.0
627.5
228.0
1,125.4
260.4
15.8
750.4
78.6
0.0
20.3
2.4
1,125.5
435.9
106.4
16.5
104.9
422.3
77.9
1,086.0
268.3
12.8
689.3
75.0
0.0
40.5
2.9
1,085.9
742.0
59.1
17.8
90.3
618.2
77.2
1,527.4
408.4
155.2
869.1
90.2
0.0
4.4
0.2
1,527.3
677.2
33.7
15.0
71.8
635.5
89.4
1,433.2
392.8
147.8
829.3
152.0
0.0
(88.7)
(5.1)
1,433.2
603.2
28.5
15.8
64.5
854.2
135.2
1,566.2
388.9
146.3
866.1
159.0
0.0
6.0
0.4
1,566.3
606.9
47.5
16.3
65.8
804.5
122.9
1,541.0
388.9
143.3
843.9
159.0
0.0
5.9
0.4
1,541.0
573.8
67.3
16.8
74.3
748.2
116.7
1,480.4
388.9
143.3
802.1
159.0
0.0
(12.8)
(0.8)
1,480.5
578.1
87.4
17.3
77.8
693.8
104.3
1,454.4
388.9
144.3
762.2
159.0
0.0
0.0
0.0
1,454.4
www.cheuvreux.com
January 2011
GERMANY
Pfleiderer
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.78
172.9%
0.78
172.9%
0.68
-13.6%
0.68
-13.6%
1.00
47.3%
1.67
146.7%
1.09
9.7%
1.09
-34.5%
0.11
-89.6%
0.11
-89.6%
(1.38)
NS
(1.38)
NS
(0.84)
39.0%
(0.84)
39.0%
(0.55)
34.0%
(0.55)
34.0%
0.07
113.0%
0.07
113.0%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
2.07
92.8%
3.2
0.00
0.15
2.17
4.5%
4.0
(0.67)
0.25
3.50
61.7%
8.4
0.00
0.30
3.74
6.7%
13.8
0.00
0.00
2.91
-22.0%
13.3
0.00
0.00
1.22
-58.0%
11.9
0.00
0.00
1.42
16.2%
10.2
0.00
0.00
1.73
21.9%
9.6
0.00
0.02
2.43
40.3%
9.7

Latest price
High
Low
Average price
42.685
42.685
0.000
42.600
42.600
0.000
50.300
50.300
0.000
52.591
52.591
0.000
50.938
50.938
0.000
50.682
50.682
0.000
59.760
59.760
0.000
59.760
59.760
0.000
59.760
59.760
0.000
8.49
8.52
3.93
6.24
16.18
18.00
8.30
14.20
20.49
27.25
16.10
20.14
14.24
25.91
12.35
20.44
6.60
17.11
5.17
10.86
6.14
8.56
2.40
5.58
2.44
7.45
1.70
4.43
2.37
2.55
2.35
2.42
2.37
-
362.4
778.3
690.5
1,733.3
1,038.2
1,688.1
751.9
1,743.3
336.2
1,943.5
312.8
1,235.8
146.0
1,028.5
141.6
980.9
141.6
930.3
10.9
10.9
4.1
6.5
2.6
1.5
0.0
23.9
23.9
7.5
NS
4.1
1.7
0.9
12.3
20.6
5.8
NS
2.4
1.7
1.2
13.0
13.0
3.8
1.4
1.0
1.2
2.1
58.0
58.0
2.3
4.5
0.5
1.5
0.0
NS
NS
5.0
NS
0.5
0.9
0.0
NS
NS
1.7
NS
0.2
0.9
0.0
NS
NS
1.4
26.1
0.2
0.9
0.0
32.9
32.9
1.0
24.8
0.2
0.8
0.8
10.0
20.0
1.02
5.7
16.9
32.2
2.09
11.8
8.1
12.7
1.19
7.1
7.0
12.8
0.97
5.9
8.7
19.9
1.12
3.2
12.3
NS
0.9
11.3
8.1
95.2
0.7
7.8
6.0
21.6
0.6
6.0
4.6
11.2
0.6
4.2
3.8
2.0
10.1
5.1
6.5
1.5
76.8
0.0
4.7
6.8
12.3
6.5
5.2
0.8
228.0
22.2
5.2
2.4
14.7
9.4
7.1
1.4
77.9
15.0
5.4
3.1
13.8
7.6
4.7
1.3
77.2
27.4
2.8
4.3
12.9
5.6
1.3
1.4
89.4
0.0
2.1
13.8
7.3
NS
NS
1.0
135.2
0.0
2.4
9.5
8.5
0.7
NS
1.1
122.9
0.0
2.5
7.2
10.2
2.9
NS
1.2
116.7
0.0
3.5
4.8
12.3
5.0
1.5
1.3
104.3
27.8
7.6
6.5
27.4
27.4
5.1
5.7
17.9
17.9
13.1
10.5
21.3
21.3
9.5
8.4
8.1
8.1
7.6
15.2
0.9
0.9
NS
NS
NS
NS
0.8
0.6
NS
NS
3.4
2.5
NS
NS
6.4
6.4
0.7
0.7

EPS before goodwill
% Change
EPS, reported
% Change
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
207
www.cheuvreux.com
January 2011
GERMANY
RENEWABLE EQUIPMENT
2/Outperform
Rating
+88.3% EUR45.00
Phoenix Solar
Successful steps abroad
Q
Recent developments Weaker Q3 after a record Q2
Phoenix Solar reported Q3-10 sales of EUR95m vs. our estimate of

EUR100m and consensus of EUR119m. EBIT came to EUR4.3m vs. our
EUR3.8m estimate (consensus: EUR4.7m), while net income of
EUR2.3m was almost bang in line with our forecast of EUR2.2m but
below consensus of EUR3.2m. Despite the slightly weaker than
expected Q3 revenues, the company kept its FY10 guidance
unchanged (sales: EUR660-700m, EBIT: EUR36m-40m). Due to
seasonality effects it expects to report a significantly stronger Q4 than
Q3, though it has said on more than one occasion that Q4 revenues will
come in below the record Q2-10 level of EUR284m. According to the
company's CEO, demand already picked up in September in the
German wholesale business.
Phoenix Solar generated 55% of its revenues abroad in Q3 (to some
extent clearly because Germany was rather weak). This is positive news
as it needs to expand abroad to compensate for its shrinking project
revenues in Germany. In 9M-10 it generated 21% of its total revenues
abroad, which was in line with the promised 20% for the full year 2010.
Q
Outlook Internationalisation is on track
Phoenix Solar needs to expand abroad, particularly as its project

business in Germany is poised to deteriorate as, from 2011, no further
subsidies will be paid for PV projects on arable land. Italy, France, the
US and maybe also the UK will all be key markets for Phoenix Solar
going forward. However, the company will also benefit from the German
residential market in 2011 as it is not only a project developer but also a
wholesaler for solar modules, inverters etc.
EUR23.90
Price (07/01/2011)
Reuters: PS4G.DE Bloomberg: PS4 GR
Stock data
Free float
Enterprise value
Daily volume
EUR176m
EUR176m
EUR140m
7.37m
EUR 1.01m
Performances
14.4%
-5.3%
-46.0%
6.9%
-15.7% -46.7%
Absolute perf.
Relative perf.
50.9
50.9
45.9
45.9
40.9
40.9
35.9
35.9
30.9
30.9
25.9
25.9
20.9
20.9
15.9
15.9
10.9
10.9
5.9
11/04
5.9
08/05
05/06
03/07
12/07
Price/TECDAX
09/08
06/09
03/10
01/11
Price
Sector focus
Sector Top Picks
Least favoured
SMA, SolarWorld
Conergy
Shareholders
Free Float 100.0%
2009
2010E
2011E
2012E
P/E (x)
33.1
5.3
8.1
6.1
EV/EBITDA (x)
20.0
2.8
3.7
3.0
17.3
NS
4.4
6.0
Net debt/EBITDA (x)
(1.9)
(0.7)
(1.0)
(0.8)
Yield (%)
0.5
1.9
1.3
1.6
ROCE (%)
24.7
58.3
37.9
38.8
5.2
1.9
1.7
1.4
Philipp BUMM
Research Analyst
pbumm@cheuvreux.com
(49) 69 47.897.527
Q
Q
208
www.cheuvreux.com
January 2011
GERMANY
Company profile
Strong photovoltaic downstream player

Phoenix Solar, founded in 1999, is a leading international
photovoltaic systems integrator. The company plans, builds and
operates large photovoltaic plants and is a specialist wholesaler for
complete power plants, solar modules and accessories. Its
headquarters are located in Sulzemoos, Germany (near Munich), and
it has sales offices throughout Germany and subsidiaries in southern
Europe, Asia and Australia. Phoenix Solar currently has more than
250 employees and entered the TecDAX in 2009. The company
generated EUR403m revenues (+18% y-o-y) in 2009 with EBIT of
EUR12m (-64% y-o-y). It has a market cap of EUR176m with 100%
free float (7.4% are held by management and the supervisory board).
Q
Strong exposure to Germany

The company is strongly exposed to Germany, where it generated
about 94% of its revenues in 2009. Most of its remaining business is
generated in Europe. In 9M-10 it already generated 21% abroad.
Q
Q Operating two divisions

Power Plants: Phoenix Solar offers turnkey construction, as well as
project development, planning services, operation and maintenance
service packages for constructed photovoltaic power plants. In 2009
the Power Plants division accounted for 37% of the company's total
sales and 50% of EBIT.
Components & Systems: This division is active in trading, mainly of

modules, inverters, mounting systems and complete systems. Its
typical customer is a local installer or electrician, but it also sells to
small local wholesalers. In 2009 the division accounted for 63% of
the company's sales and 50% of its EBIT.
SWOT analysis
Strengths
Weaknesses
Pure downstream player with

no technology risk
PS4 will benefit from declining

module prices as the balance of
power in the market has shifted
from producers to endcustomers and installers
PS4 will probably not benefit

from strong demand from China
No expertise in solar thermal
power plant project development
which, along with PV, is growing
strongly
Strong relationship to thin-film

module market leader First Solar
Low capital intensity
Opportunities
Threats
First results of tightened

working capital management
may have already emerged in
2009
Renegotiation of module
supply prices may not suffice to
offset market price declines
Reduction in feed-in tariffs,

which would put pressure on
selling prices per MW
PS4 is a takeover target due to

its 100% free float (management
and supervisory board hold
about 7.4% of outstanding
shares)
209
www.cheuvreux.com
Valuation
Our target price of EUR45 is based on a DCF

valuation. In terms of 2011E multiples, Phoenix
Solar is trading at a P/E of 8x (peers: 11x) and at
EV/EBIT of 5.2x (peers: 6.9x). Phoenix Solar is
one of the least expensive stocks in our
universe.
Investment case
The most important issue for us is the fact that

Phoenix Solar aims to report about 20% of sales
abroad for 2010, up from 6% in 2009. In view of
the strong project business potential, especially
in Italy and France, we are increasingly
convinced the company will prove able not only
to expand successfully in non-domestic
markets, but to generate 18%, 23%, 39% and
50% of its sales abroad in 2010E-2013E. This
clearly reduces its risk profile as its dependency
on the German market is diminishing.
Margin increase
business abroad
due
to
more
project
As the international business will comprise

largely high-margin project business (average
EBIT margin: 6%), we expect an immediate
positive impact on the group's overall EBIT
margin. We now forecast a 6.6% EBIT margin
for 2010E, followed by 5.0% in 2011E and 5.1%
in 2012E, up from previously 4.4%, 4.3% and
4.3% respectively.
January 2011
GERMANY
Phoenix Solar
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
210
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
67.2
186.3%
(2.6)
(61.4)
3.1
NS
(0.3)
2.8
NS
0.0
0.0
0.0
2.8
0.1
0.0
0.0
(0.3)
0.0
0.0
0.0
2.5
0.0
0.0
2.5
0.0
0.0
2.5
NS
111.1
65.5%
(3.7)
(100.5)
7.0
124.9%
(0.3)
6.7
136.7%
0.0
0.0
0.0
6.7
0.1
0.0
0.0
(2.9)
0.0
0.0
0.0
4.0
0.0
0.0
4.0
0.0
0.0
4.0
56.1%
119.0
7.1%
(4.8)
(109.2)
5.0
-27.9%
(0.2)
4.8
-28.8%
0.0
0.0
0.0
4.8
0.0
0.0
0.0
(1.8)
0.0
0.0
0.0
3.0
0.0
0.0
3.0
0.0
0.0
3.0
-23.5%
260.1
118.6%
(8.0)
(229.7)
22.5
NS
(0.3)
22.2
NS
0.0
0.0
0.0
22.2
(0.6)
0.0
0.0
(7.1)
0.0
0.0
0.0
14.5
0.0
0.0
14.5
0.0
0.0
14.5
NS
402.5
54.7%
(12.5)
(355.8)
34.2
52.1%
(0.4)
33.8
52.3%
0.0
0.0
0.0
33.8
(0.4)
0.0
0.0
(9.8)
0.0
0.0
0.0
23.7
0.0
0.0
23.7
0.0
0.0
23.7
63.7%
473.0
17.5%
(16.0)
(444.2)
12.8
-62.5%
(0.7)
12.2
-64.0%
0.0
0.0
0.0
12.2
(1.2)
0.0
0.0
(2.4)
0.0
0.0
0.0
8.5
0.0
0.0
8.6
0.0
0.0
8.6
-63.9%
715.4
51.2%
(28.6)
(638.8)
48.0
NS
(0.7)
47.3
NS
0.0
0.0
0.0
47.3
(2.2)
0.0
0.0
(13.5)
0.0
0.0
0.0
31.5
0.0
0.0
31.5
0.0
0.0
31.5
NS
721.6
0.9%
(36.1)
(648.0)
37.5
-21.8%
(1.4)
36.1
-23.6%
0.0
0.0
0.0
36.1
(4.9)
0.0
0.0
(9.4)
0.0
0.0
0.0
21.8
0.0
0.0
21.8
0.0
0.0
21.8
-30.8%
857.0
18.8%
(43.7)
(767.5)
45.7
21.8%
(1.7)
44.0
22.0%
0.0
0.0
0.0
44.0
(2.9)
0.0
0.0
(12.3)
0.0
0.0
0.0
28.8
0.0
0.0
28.8
0.0
0.0
28.8
32.0%
2.8
NS
(2.7)
(1.5)
(0.3)
(1.4)
0.0
0.0
0.0
0.0
0.8
(1.2)
(1.8)
4.2
50.5%
3.0
0.2
(0.1)
7.4
0.0
0.0
0.0
0.0
7.3
0.3
15.0
3.3
-22.4%
(19.2)
(1.2)
(0.5)
(17.2)
0.0
0.0
0.0
0.0
7.1
(0.6)
(10.7)
14.8
NS
(6.4)
(2.5)
(1.0)
5.9
0.0
0.0
0.0
(0.6)
0.2
(1.4)
4.1
23.7
60.2%
(56.2)
(2.3)
(1.1)
(34.9)
0.0
0.0
0.0
(1.3)
19.6
(1.1)
(17.7)
8.5
-63.9%
44.2
(4.2)
(2.9)
48.6
0.0
0.0
0.0
(1.3)
0.7
(1.1)
46.9
32.2
NS
(22.5)
(10.0)
(9.3)
(0.3)
0.0
0.0
0.0
(1.3)
20.0
0.0
18.3
23.3
-27.9%
(10.5)
(5.0)
(3.6)
7.8
0.0
0.0
0.0
(3.3)
0.0
0.0
4.5
30.5
31.2%
(14.1)
(5.9)
(4.2)
10.5
0.0
0.0
0.0
(2.2)
0.0
0.0
8.3
12.0
0.0
0.0
(0.9)
(1.2)
NS
9.9
0.3
1.3
0.5
0.6
0.0
7.3
10.9
9.9
23.2
0.0
0.0
2.4
(19.1)
NS
6.5
0.3
0.4
0.5
1.0
0.0
4.3
3.9
6.5
33.3
0.0
0.0
4.3
(11.0)
NS
26.7
0.3
0.6
0.8
1.4
0.0
23.5
19.8
26.7
47.3
0.1
0.0
1.8
(14.0)
NS
35.3
0.3
2.2
1.2
1.7
0.0
30.0
11.5
35.3
89.3
0.0
0.0
9.7
(5.1)
NS
93.9
0.5
2.6
1.7
0.6
0.0
86.2
21.4
91.5
97.3
0.0
0.0
(21.5)
(24.2)
NS
51.5
0.5
4.1
2.7
2.0
0.0
42.0
8.9
51.3
147.4
0.0
0.0
(32.6)
(31.7)
NS
83.1
0.5
4.1
12.0
2.0
0.0
64.5
9.0
83.1
165.9
0.0
0.0
(32.8)
(35.9)
NS
97.1
0.5
4.1
15.6
2.0
0.0
74.9
10.4
97.1
192.5
0.0
0.0
(39.0)
(38.1)
NS
115.4
0.5
4.1
19.8
2.0
0.0
89.0
10.4
115.4
www.cheuvreux.com
January 2011
GERMANY
Phoenix Solar
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
0.50
NS
0.50
NS
0.74
46.3%
0.74
46.3%
0.54
-26.1%
0.54
-26.1%
2.38
NS
2.38
NS
3.62
52.1%
3.62
52.1%
1.28
-64.7%
1.28
-64.7%
4.48
NS
4.48
NS
2.96
-33.9%
2.96
-33.9%
3.91
32.1%
3.91
32.1%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
0.56
NS
2.4
0.00
0.00
0.78
40.9%
4.3
0.00
0.00
0.59
-24.9%
6.0
0.00
0.20
2.43
NS
7.6
0.00
0.30
3.62
49.0%
13.4
0.00
0.20
1.28
-64.8%
14.3
0.00
0.45
4.58
NS
20.5
0.00
0.30
3.16
-31.1%
22.2
0.00
0.39
4.14
31.2%
25.7
5.030
5.030
0.000
5.370
5.370
0.000
5.550
5.550
0.000
6.080
6.080
0.000
6.540
6.540
0.000
6.700
6.700
0.000
7.040
7.040
0.000
7.370
7.370
0.000
7.370
7.370
0.000
7.24
10.80
6.50
7.87
16.19
20.20
8.20
13.59
16.00
29.70
12.30
19.72
41.00
41.00
15.00
22.26
25.13
53.20
18.55
36.75
42.23
43.74
22.63
35.24
23.70
45.00
20.20
29.28
23.90
24.04
23.40
23.90
23.90
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
35.9
34.7
89.5
70.3
84.6
73.7
237.6
223.5
168.0
162.8
282.1
257.2
166.8
135.1
176.1
140.2
176.1
138.0
14.4
14.4
13.1
NS
3.0
3.7
0.0
22.0
22.0
20.7
8.2
3.7
12.8
0.0
29.4
29.4
27.2
NS
2.7
2.9
0.0
17.2
17.2
16.9
2.5
5.4
6.6
0.5
6.9
6.9
6.9
NS
1.9
1.8
1.2
33.1
33.1
33.1
17.3
3.0
5.2
0.5
5.3
5.3
5.2
NS
1.2
1.9
1.9
8.1
8.1
7.6
4.4
1.1
1.7
1.3
6.1
6.1
5.8
6.0
0.9
1.4
1.6
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
11.2
12.3
0.52
13.0
10.1
10.5
0.63
17.1
14.7
15.5
0.62
22.7
9.9
10.1
0.86
14.7
4.8
4.8
0.40
6.8
20.0
21.2
0.5
27.1
2.8
2.9
0.2
4.0
3.7
3.9
0.2
5.3
3.0
3.1
0.2
4.2
NS
NS
4.6
4.2
3.8
7.2
NS
0.0
NS
NS
6.3
6.0
3.6
20.2
NS
0.0
NS
NS
4.2
4.0
2.5
4.7
NS
0.0
NS
NS
8.7
8.5
5.6
7.7
NS
8.4
NS
NS
8.5
8.4
5.9
4.4
NS
8.3
10.3
NS
2.7
2.6
1.8
9.6
NS
15.7
NS
NS
6.7
6.6
4.4
8.8
NS
10.1
7.6
NS
5.2
5.0
3.0
7.6
NS
10.1
16.0
NS
5.3
5.1
3.4
7.6
NS
10.0
30.3
27.5
23.5
23.5
121.6
70.5
18.6
18.6
18.9
11.9
9.5
9.5
66.0
44.2
36.1
36.1
37.2
26.4
30.6
30.6
24.7
19.2
9.2
9.2
58.3
40.8
23.9
23.9
37.9
26.6
14.1
14.1
38.8
27.2
16.2
16.2

Latest price
High
Low
Average price
211
www.cheuvreux.com
January 2011
GERMANY
PRAKTIKER AG
Transition phase in 2011
Q
Recent developments trading statement CY10
Q4-10 group sales fell 6.2% y-o-y and 7.5% in FX-adjusted l-f-l terms
to EUR749m. We had estimated sales of EUR782m and an FX-adjusted
l-f-l sales decline of 3.4%. Both Germany and its international markets
saw Q4-10 y-o-y sales decreases, of 6.5% and 5.7% respectively. L-f-l
sales declined in Q4-10 in Germany by 6.6% and 9.4% internationally.
Whereas Max Bahr delivered a Q4-10 7.3% l-f-l sales increase,
Praktiker in Germany saw a l-f-l sales setback of 12.1%. This
represented a further deterioration vs. 9M-10, when the fall-off
was -7.8% y-o-y. PRA attributed this mainly to its new pricing strategy
to cut back radically on its 20%-off campaign days. In its international
markets the 9M-10 trend continued with markets like Romania, Greece
and Bulgaria showing no improvement, whereas Turkey, Poland and
the Ukraine continued to deliver sales increases, also on a l-f-l basis.
For CY10, group sales declined 5.9% and 8% in FX-adj. l-f-l terms to
EUR3,447m. Domestic sales reached EUR2,451m, -6.3% y-o-y, -7%
l-f-l. International sales were EUR996m, -7.1% y-o-y FX-adjusted
and -10.6% in FX-adj. l-f-l terms.
The reported sales figures suggest that brand Praktiker is losing market
share in Germany. With the 5.9% CY10 sales decline, PRA came out
broadly in line with its reduced CY10 sales guidance of a mid-singledigit decline. The company did not comment on its CY10 adjusted
EBIT. We leave our EUR67.8m CY10 forecast unchanged.
Additional cost savings are possible in central functions and via
process optimisation. Potential cost-cutting areas will be defined in late
2010/early 2011 and presented at the analyst meeting in March 2011.
Additionally, PRA expects its Praktiker 2013 program to provide first
cost savings in the mid-single-digit EURm range as of CY11.
Q
Outlook Praktiker 2013 is the target
PRA defined its longer-term targets within its Praktiker 2013 program.
The aim is to achieve EBIT margins of 3.x% at Praktiker Germany (we
expect 0.7% in CY10E), 4.x% at Max Bahr (4.5% in CY10E), and 6.x%
in the international activities. (2.6% in CY10E).
The margin drivers at Praktiker Germany will be a) ~100bps from
increasing the share of private label products from 27% to 40%;
b)~150-200bps from better processes, especially from more efficient
logistics; and c) ~ 50 bps from cost savings at HQ.
In the international markets, all of the above factors are expected to
support margins, but it also requires core markets like Greece or
Romania to get back on their feet.
CY11 will most likely be a year of transition for PRA as it will be
implementing some adjustments in logistics, introduce more private
label lines, and further reduce its 20%-off campaign days at Praktiker
Germany.
Jurgen KOLB
Research Analyst
jkolb@cheuvreux.com
(49) 69 47 89 74 26
Rating
3/Underperform
-18.3% EUR6.10
EUR7.47
Price (07/01/2011)
Reuters: PRAG.DE Bloomberg: PRA GR
Stock data
Free float
Enterprise value
Daily volume
EUR433m
EUR349m
EUR594m
58m
EUR 3.64m
Performances
-4.8%
16.7%
5.6%
-6.3%
2.5%
-17.8%
Absolute perf.
Relative perf.
32.6
32.6
27.6
27.6
22.6
22.6
17.6
17.6
12.6
12.6
7.6
7.6
2.6
2.6
11/05
07/06
03/07
10/07
06/08
Price/M DAX
02/09
09/09
Price
Sector focus
Sector Top Picks
Least favoured
Ahold, Carrefour
Colruyt
Shareholders
Free Float 80.7%, Eton Park 8.4%, Odey Asset
Mgmt. 5.6%, Allianz Global Investors 3.0%,
Mackenzie Cundill 2.3%
2009
2010E
2011E
P/E (x)
NS
NS
16.0
8.9
EV/EBITDA (x)
4.9
6.1
4.0
3.3
Q
212
www.cheuvreux.com
2012E
NS
5.3
4.1
4.9
Net debt/EBITDA (x)
1.5
1.7
1.1
0.8
Yield (%)
1.3
0.0
1.5
2.9
ROCE (%)
4.9
3.1
6.2
7.9
0.5
0.4
0.4
0.4
Q
05/10
GERMANY
January 2011
Company profile
History
At the end of the 1970s PRA opened its first DIY stores in Germany
and Luxembourg. Its parent company at that time was ASKO
Deutsche Kaufhaus AG. In 1996 ASKO merged into the Metro group
and PRA became a subsidiary of Metro. In November 2005, Metro
IPOed PRA at an opening price of EUR14.90. PRA is Europe's
fourth-largest DIY operator.
Q
Q Market positioning
Under the Praktiker brand PRA operates a discount format in
Germany and a full-price format outside of Germany in currently nine
countries, mainly in eastern Europe. Since February 2007 PRA has
owned Max Bahr, a German full-assortment and service-oriented
DIY chain. In Germany, Praktiker and Max Bahr combined constitute
the second-largest DIY operator behind Obi. In its international
markets PRA either holds market leadership or number two positions
except for Poland, where it is number four.
Q Geographic split
In CY09, the German business accounted for 71% of group sales vs.
only 48% of group EBIT. With the exception of Luxembourg, all of
Praktiker's foreign operations are located in eastern Europe. Greece
and Romania make up the lion's share of its international business,
contributing about 49% of its international sales.
Q Product assortment
In Germany, Praktiker's main product category is gardening (23% of
sales). Max Bahr's gardening focus is an even stronger at 28%. In its
international markets, sanitary products (19%) have a higher share of
sales than gardening (14%).
SWOT analysis
Strengths
Long-established
Weaknesses
brand name
German market consolidation

has not happened and
Praktiker's E2S ("easy to shop)
conversions have been stopped
in DIY retailing
Hard discounter with a
reputation for low prices
Greece is PRAs largest foreign

market
Solid balance sheet
High fixed-cost base due to

lease contracts
Various formats at Praktiker

Germany make banner
clarification difficult for
consumers
Opportunities
Threats
Increase avg. prices via lower

number of 20%-off campaigns
Increase EBIT margin on

higher private label share
Greek crisis leads to market

consolidation
Eastern European markets

show no signs of recovery
Internet business gains market
share also in DIY business
Strategy adjustments may not
lead to an increase in customer
transactions
213
www.cheuvreux.com
Valuation
Out TP is based on a DCF calculation with a

WACC of 7.1%, a terminal growth rate of 2%
and an EBIT margin of 3.5% in 2013E where
PRA's Praktiker 2013 program targets a group
EBIT margin of at least 4%.
Based on our CY11E estimates and a share
price of ~EUR8, PRA trades at 16.9x P/E and a
8.2x EV/EBIT. If one compares this with
specialty retailer Douglas (EBIT margin of 5%,
FY11 P/E of 16.3x, EV/EBIT of 9.5x) we do not
consider PRA shares cheaply priced.
The shares trade at a CY11E P/tangible BV
multiple of 0.65x. While it is unusual for a retailer
to trade below a P/TBV multiple of 1x, we
believe this reflects scepticism in the capital
market regarding PRA's net profit delivery.
Investment case
Our 3/UP rating is based on two pillars:

1) At Praktiker in Germany, the company aims to
make smarter use of its marketing spend and
achieve less negative impact on its P&L than
with the 20%-off campaigns. However, this is
where we see the greatest risk for PRA: It will
happy to lose its 'price junkie' customers who
only focus on the 20%-off campaigns, but it will
be difficult to replace them with new customers.
To put it another way: a change in the customer
base requires PRA to communicate its adjusted
values from now on. This will be difficult to find a
differentiation factor in a market where service,
deep assortments and availability of locations
are already present. Additionally, differentiation
requires marketing and most likely higher
expenditure. For CY11E, with potential changes
in the customer structure, we see some risk for
our earnings forecast and the consensus.
2) Although we are entering the period where the
comparison base are beginning to get easier,
PRA's core markets Romania and Greece are
still far from delivering positive l-f-l sales growth.
For the time being we don't see the international
business at PRA serving as a sales and margin
booster.
January 2011
GERMANY
PRAKTIKER AG
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
214
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
2,934.0
5.3%
(417.7)
(2,395.8)
120.5
120.7%
(40.1)
78.4
125.3%
0.0
0.0
0.0
80.4
(8.6)
0.0
0.0
(8.2)
0.0
1.5
0.0
63.6
0.0
(0.9)
62.7
0.0
0.0
62.7
NS
3,033.9
3.4%
(425.5)
(2,472.8)
135.6
12.5%
(40.1)
93.5
19.3%
0.0
0.0
0.0
95.5
(10.1)
0.0
0.0
(20.9)
3.6
1.5
0.0
68.1
0.0
(1.0)
67.1
0.0
0.0
67.1
7.0%
3,162.1
4.2%
(434.8)
(2,579.0)
148.3
9.4%
(37.2)
109.1
16.7%
0.0
0.0
0.0
111.1
(4.7)
0.0
0.0
(28.3)
6.0
1.5
0.0
84.2
0.0
(1.0)
83.2
0.0
0.0
83.2
24.0%
3,945.0
24.8%
(553.8)
(3,212.3)
178.9
20.6%
(62.9)
114.0
4.5%
0.0
0.0
0.0
116.0
(20.7)
0.0
0.0
(69.8)
(1.8)
1.5
0.0
23.7
0.0
(1.1)
22.6
0.0
0.0
22.6
-72.8%
3,906.8
-1.0%
(561.1)
(3,144.9)
200.8
12.2%
(71.7)
129.1
13.2%
0.0
0.0
0.0
129.1
(26.1)
0.0
0.0
(75.0)
(23.2)
(13.2)
0.0
4.8
0.0
(1.1)
3.7
0.0
0.0
3.7
-83.6%
3,663.4
-6.2%
(535.8)
(2,995.8)
131.8
-34.4%
(69.0)
62.8
-51.4%
0.0
0.0
0.0
62.8
(33.6)
0.0
0.0
(27.8)
(10.7)
17.1
0.0
(9.4)
0.0
(1.2)
(10.6)
0.0
0.0
(10.6)
NS
3,474.5
-5.2%
(503.3)
(2,866.2)
105.0
-20.3%
(66.7)
38.3
-39.0%
0.0
0.0
0.0
38.3
(32.6)
0.0
0.0
(1.1)
(5.0)
0.0
0.0
(0.3)
0.0
(1.0)
(1.3)
0.0
0.0
(1.3)
87.7%
3,530.3
1.6%
(491.4)
(2,890.4)
148.5
41.4%
(70.8)
77.7
102.9%
0.0
0.0
0.0
77.7
(31.0)
0.0
0.0
(13.9)
(4.7)
0.0
0.0
28.1
0.0
(1.0)
27.1
0.0
0.0
27.1
NS
3,634.4
2.9%
(506.9)
(2,951.2)
176.3
18.7%
(74.5)
101.8
31.0%
0.0
0.0
0.0
101.8
(28.1)
0.0
0.0
(23.4)
(0.6)
0.0
0.0
49.7
0.0
(1.0)
48.7
0.0
0.0
48.7
79.7%
104.8
NS
(101.3)
(65.4)
0.0
(61.9)
0.2
0.0
(1.0)
0.0
0.0
36.6
(26.1)
117.9
12.5%
104.0
(83.6)
(50.0)
138.3
0.0
0.0
(1.0)
0.0
0.0
185.6
322.9
127.6
8.2%
(79.2)
(72.8)
(50.0)
(24.4)
0.1
0.0
(1.0)
0.0
0.0
140.3
115.0
83.5
-34.6%
33.5
(167.9)
(50.0)
(50.9)
0.2
0.0
(1.0)
0.0
0.0
172.0
120.3
85.4
2.3%
3.0
(117.6)
(35.0)
(29.2)
0.0
0.0
(0.1)
(26.1)
0.0
(21.5)
(76.9)
54.4
-36.3%
16.0
(73.0)
(133.0)
(2.6)
(0.2)
0.0
(0.2)
(26.1)
0.0
47.1
18.0
64.4
18.4%
31.1
(71.2)
(100.0)
24.3
0.0
0.0
0.0
(5.8)
0.0
(24.6)
(6.1)
98.6
53.1%
(5.2)
(75.5)
(60.0)
17.9
0.0
0.0
0.0
0.3
0.0
(20.0)
(1.8)
124.6
26.4%
(10.7)
(92.7)
(80.0)
21.2
0.0
0.0
0.0
(6.5)
0.0
(17.8)
(3.1)
630.3
1.4
9.7
107.8
95.5
15.1
844.7
116.6
14.5
192.5
0.0
0.0
520.7
17.7
844.3
869.5
1.5
0.5
125.2
(204.8)
NS
791.9
116.6
10.1
240.4
0.0
0.0
424.3
14.0
791.4
944.1
1.4
0.5
130.2
(172.5)
NS
903.7
116.6
10.8
273.8
0.0
0.0
502.2
15.9
903.4
939.9
1.5
0.7
202.1
147.1
15.6
1,291.3
214.6
68.9
463.9
0.0
0.0
543.7
13.8
1,291.1
897.6
1.5
0.7
205.7
189.3
21.1
1,294.8
192.7
71.0
495.8
0.0
0.0
535.3
13.7
1,294.8
877.0
1.6
0.7
195.5
196.7
22.4
1,271.5
192.7
70.6
493.9
0.0
0.0
514.3
14.0
1,271.5
870.9
1.6
0.6
188.9
178.4
20.4
1,240.4
192.7
72.5
496.6
0.0
0.0
478.7
13.8
1,240.5
899.2
1.7
0.6
188.6
160.3
17.8
1,250.4
192.7
67.7
506.1
0.0
0.0
483.8
13.7
1,250.3
942.3
1.8
0.6
191.2
145.6
15.4
1,281.5
192.7
67.5
524.4
0.0
0.0
496.8
13.7
1,281.4
www.cheuvreux.com
January 2011
GERMANY
PRAKTIKER AG
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
215
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.00
1.05
0.00
1.07
1.31
24.3%
1.32
24.0%
0.34
-73.7%
0.36
-72.8%
0.06
-81.4%
0.06
-82.2%
(0.18)
NS
(0.18)
NS
(0.02)
88.0%
(0.02)
88.0%
0.47
NS
0.47
NS
0.84
79.9%
0.84
79.9%
0.00
0.00
0.00
0.00
0.45
1.86
3.7
14.5
0.00
0.45
2.02
8.3%
15.8
0.00
0.45
1.31
-34.8%
15.8
0.00
0.45
1.47
12.1%
15.0
0.00
0.10
0.94
-36.3%
15.0
0.00
0.00
1.11
18.3%
15.0
0.00
0.11
1.70
53.2%
15.4
0.00
0.22
2.15
26.4%
16.0
168.726
0.000
0.000
58.000
62.844
0.000
58.000
62.844
0.000
58.000
62.844
0.000
58.000
58.000
0.000
58.000
58.000
0.000
58.000
58.000
0.000
58.000
58.000
0.000
58.000
58.000
0.000
15.33
16.10
15.30
15.66
27.07
27.48
15.60
23.19
20.40
34.50
17.60
27.50
7.80
20.47
4.32
11.67
7.75
10.59
2.68
6.76
7.96
8.54
5.19
6.67
7.47
8.03
7.04
7.62
7.47
-
1,183.2
1,330.9
452.4
642.4
449.5
646.9
461.7
640.7
433.3
594.2
433.3
579.5
NS
NS
NS
NS
NS
-
14.6
14.6
8.2
1.1
NS
2.9
20.7
20.7
13.4
1.7
NS
1.7
59.4
59.4
15.5
NS
1.3
1.0
2.2
NS
NS
5.3
NS
0.5
0.5
5.8
NS
NS
8.3
NS
0.5
0.5
1.3
NS
NS
7.2
5.3
0.5
0.4
0.0
16.0
16.0
4.4
4.1
0.5
0.4
1.5
8.9
8.9
3.5
4.9
0.5
0.4
2.9
NS
NS
NS
NS
NS
NS
NS
(1.6)
NS
NS
NS
(1.3)
7.5
11.7
0.34
12.8
3.2
5.0
0.16
6.1
4.9
10.3
0.2
8.1
6.1
16.7
0.2
13.1
4.0
7.6
0.2
5.0
3.3
5.7
0.2
4.0
14.0
0.9
4.0
2.7
2.2
3.5
15.1
0.0
13.4
NS
4.4
3.1
2.2
3.8
NS
42.1
NS
NS
4.6
3.5
2.7
3.5
NS
34.0
8.6
1.8
4.5
2.9
0.6
3.1
15.6
125.1
7.7
2.2
5.1
3.3
0.1
3.0
21.1
705.4
3.9
3.6
3.6
1.7
NS
2.9
22.4
(54.7)
3.2
2.8
3.0
1.1
NS
2.8
20.4
0.0
4.8
1.6
4.2
2.2
0.8
2.8
17.8
23.5
6.3
1.2
4.9
2.8
1.4
2.8
15.4
26.2
9.3
9.3
10.5
10.5
11.8
11.8
8.0
8.0
12.1
12.1
9.2
9.2
8.8
8.8
2.4
2.4
10.0
7.6
0.4
0.4
4.9
3.7
NS
NS
3.1
NS
NS
NS
6.2
4.2
3.1
3.1
7.9
5.4
5.3
5.3
www.cheuvreux.com
January 2011
GERMANY
SECTOR
No rating
Rating
N/A
ProSiebenSat.1 Media
Increase in advertising fuelling growth
Recent developments Impressive operating turnaround
In Q3-10, ProSiebenSat.1 (PSM) increased revenues by 12% y-o-y to

EUR627m, thus accelerating from the y-o-y growth rate in Q2-10. Free
TV advertising revenues in Germany/Austria/Switzerland grew an even
faster 15% y-o-y. Recurring EBITDA surged 64% y-o-y to EUR155m;
reported EBITDA reached EUR144m, more than twice the year-ago
level, with recurring costs as well as OPEX almost flat y-o-y amid tight
cost control and increasing benefits from the group's efficiency
enhancement programme (incl. relocation to Munich; disposal of
MAZ&More). Consolidated net profit came in at EUR32m (Q3-09:
EUR-13m). The predominant driver of the company's sharply improved
profitability has been higher advertising revenues in Germany. In light of
positive free cash flow, the group reduced its net debt position by
another EUR251m to EUR3.284bn.
Outlook Healthy growth to be continued
ProSiebenSat.1 is a beneficiary of the economic recovery of large parts

of western Europe, with television advertising showing particular
strength. That is unlikely to change going forward.
However, with year-ago comps getting increasingly difficult to beat, the
y-o-y growth rate is likely to slow. With a strong start into Q4-10, the
company's seasonally most important quarter, PSM is confident it will
continue to achiebve healthy revenue growth and recurring EBITDA in
excess of the previous year's result.
The most important strategic task for PSM's management will be to use
the power of its TV brands to drive growth initiatives in adjacent
business areas, such as the digital world, production, music and ecommerce.
EUR23.87
Price (07/01/2011)
Reuters: PSMG_p.DE Bloomberg: PSM GR
Stock data
Free float
Enterprise value
Daily volume
EUR2611.3m
EUR974.0m
EUR2611.3m
109.4m
EUR 10.19m
Performances
3.6%
34.9%
151.8%
1.2%
19.5%
97.5%
Absolute perf.
Relative perf.
40.9
40.9
35.9
35.9
30.9
30.9
25.9
25.9
20.9
20.9
15.9
15.9
10.9
10.9
5.9
5.9
0.9
0.9
01/01
04/02
07/03
10/04
01/06
Price/M DAX
04/07
07/08
10/09
01/11
Price
Sector focus
Sector Top Picks
Least favoured
Shareholders
KKR&Permira 62.7%, Free Float 37.3%
P/E (x)
EV/EBITDA (x)
2009E
2010E
2011E
2012E
26.0
13.2
11.2
11.0
7.1
9.1
8.6
8.1
14.8
7.0
8.3
8.3
Net debt/EBITDA (x)
4.7
3.5
3.1
2.7
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
Source: Factset
Cheuvreux does not currently cover Pro SiebenSat 1 Media
Bernd LAUX
Research Analyst
blaux@cheuvreux.com
(49) 69 47897 512
Q
216
www.cheuvreux.com
January 2011
GERMANY
Company profile
Information not available as the stock is

currently not covered.
Leading European FTA TV with core activity in Germany

ProSiebenSat.1 Group is the second-largest broadcasting group in
Europe and a leading European FTA TV player, serving over 78m
households in 14 different countries. Its core market is German
speaking Europe (Germany, Austria and Switzerland). In Germany
the company is the first FTA TV provider and no. 1 in TV advertising,
operating 4 stations that command a c. 30% share of audience.
Q
Q FTA TV achieved eached pan-European footprint with SBS

acquisition
In June 2007, the company acquired SBS Group, extending the
footprint of its FTA TV operations to the Nordic countries (Finland,
Norway, Sweden, Denmark), Benelux, Greece and CEE (Bulgaria,
Romania, Hungary). ProSiebenSat.1 operates a multichannel
approach and enjoys first or second rankings in terms of audience in
almost all markets of presence.
Valuation
Q Diversification in radio, magazines, internet, music

Beyond its core business, free TV, the company owns numerous
Internet brands, has stakes in radio stations, print and new media
companies, and works in related business areas such as music
business, and live event and artist management
Q Consensus forecast: 2010E EBIT at EUR717m
Consensus expects ProSiebenSat.1 to report 2010 revenues of
EUR2.97bn (62% from FTA TV German speaking; 25% from FTA TV
International; 13% from Diversification), EBITDA of EUR858m (67%
from FTA TV German speaking; 23% from FTA TV International; 9%
from Diversification), EBIT of EUR717m, and Net income of
EUR293m.
KKR and Permira still at 88% of voting shares

KKR and Permira (through Lavena holding) control 88% of PSM's
voting shares and 25% of its preferred stock. Telegraaf controls the
remaining 12% of the voting capital while 74.7% of the preferred
stock is free-float. According to the press, KKR and Permira are
consider a disposal of their shareholding.
Q
SWOT analysis
Strengths
Weaknesses
Audience leadership
Geographic diversification
Programming quality
Exposure to advertising
collection >90% of Group EBIT
Effective cost management
Opportunities
Recovery of German economy
Development of CEE
Diversified business growth
Excessive financial leverage
Leveraged control chain
Threats
Audience fragmentation
(multiplication of platforms,
content digitalisation)
Disposal
of non- strategic
assets (magazines; radio)
217
Sky Deutschland re-launch
www.cheuvreux.com
Investment case
Information not available as the stock is

currently not covered.
January 2011
GERMANY
TEXTILE & APPAREL
3/Underperform
Rating
+5.8% EUR250.00
Puma
Reuters: PUMG.DE Bloomberg: PUM GR
Two transition years ahead

Q
Recent developments Q3 and 'Phase IV revisited'
Q3-10 sales rose 16.5% and 6.5% FX-adjusted to EUR784.3m, thereby

exceeding the highest forecasts in the market and beating our estimate
by 1.3%. In 9M-10 the sales growth driver in regional terms was
America, where FX-adjusted sales climbed 17.5%. In the same period
sales in PUM's other two regions, Europe and Asia/Pacific, showed
declines of 5.6% and 7.9% respectively.
Following its somewhat better than expected sales performance, PUM
raised its CY10 sales growth guidance to 'mid-to-high single-digit sales
growth' from 'low-to-mid single-digit growth'.
Group EBIT increased by 7.6% in 9M-10, with the EBIT margin
expanding by 25% to 14.2%. PUM has issued no specific CY10
guidance on EBIT, other than to say that it expects an improvement.
In autumn 2010 PUM announced it had bought back the remaining
49% stake in its JV in China/HK as of 1 Jan. 2011. This will give it better
control and will enable it to manage the brand better in China.
During its investor day on 26 October PUM provided some information
about its longer term outlook: In CY15 it expects group sales to reach
EUR4bn with an EBIT margin on par with or above that of the industry
leader. Its targeted sales growth implies a 9% sales CAGR between
CY10 and CY15. In terms of distribution channels, PUM predicts a 6%
sales CAGR for its retail business and 8% for wholesale. In addition, ecommerce is expected to deliver ~EUR110m sales by CY15.
Q
EUR236.40
Price (07/01/2011)
Outlook Growth by category like all other peers
PUM has defined three growth contributors: 1) categories, 2) regions

and 3) non-PUM brands. In terms of categories, 80% of its sales growth
is expected to be generated by its core categories: team sports,
running, training, fitness, motorsport and lifestyle. The remaining 20%
will stem from regional categories such as outdoor, sailing and golf.
Stock data
Free float
Enterprise value
Daily volume
Performances
-2.9%
-7.1%
0.6%
-4.4%
-18.4% -21.7%
Absolute perf.
Relative perf.
362.0
362.0
312.0
312.0
262.0
262.0
212.0
212.0
162.0
162.0
112.0
112.0
62.0
62.0
12.0
01/01
12.0
03/02
06/03
PUM's CFO has defined CY11 and CY12 as transition years and CY13CY15 as an expansion period. However, he gave no indication as to
what this means for margins. Generally, PUM expects its gross profit
margins to remain at the current level whilst OPEX declines, even
though its marketing expenditure will rise as a % of sales.
09/04
12/05
Price/M DAX
03/07
06/08
Sector Top Picks

Least favoured
Shareholders
Ppr 71.0%, Free Float 29.0%
2009
2010E
2011E
2012E
P/E (x)
27.3
17.0
13.7
12.5
EV/EBITDA (x)
12.2
8.7
6.6
5.6
4.9
2.9
6.9
8.2
Net debt/EBITDA (x)
(1.9)
(1.8)
(1.3)
(1.6)
Yield (%)
0.8
0.8
1.0
1.2
ROCE (%)
20.1
29.0
33.1
35.7
3.2
2.9
2.6
2.4
Q
Q
218
www.cheuvreux.com
12/10
Price
Jurgen KOLB
Research Analyst
jkolb@cheuvreux.com
(49) 69 47 89 74 26
09/09
Sector focus
In terms of regions, 42% of the company's expected sales growth is set

to stem from: China, Brazil, Korea, India, Russia and Mexico. The
remaining 38% will come from the mature markets: the US, Japan,
France, Germany, Italy and the UK.
By CY15 PUM expects its sales breakdown to comprise 90% PUM
branded sales and 10% non-PUM brand sales, hence about EUR400m.
Of these EUR400m, about EUR300m are expected to stem from
Tretorn and Cobra Golf, leaving about EUR100m for a potential
acquisition.
EUR3579m
EUR1037m
EUR2854m
15.047m
EUR 4.41m
January 2011
GERMANY
Company profile
Roots in football
Puma was founded in 1948 as a shoe manufacturer with a strong
focus on football boots. From there it has expanded its brand into
the sports-lifestyle arena and its aim is to establish itself as the
number one sports-lifestyle brand.
Q
Product range from apparel to watches

About 55% of PUM's consolidated sales stem from footwear, ~35%
from apparel and ~11% from accessories. To round off its product
range it has sold licences for watches, cosmetics and glasses to
third parties.
Q
Q Production 100% outsourced

PUM has exchanged its entire own production facilities for a 100%
outsourcing business model. The vast majority of its sourced pieces
(about 90%) stem from Asia, followed by about 8% from EMEA and
roughly 3% from the Americas.
Q Shareholder structure
In 2007 PPR acquired a 25.1% stake in PUM from Mayfair. At the
end of a voluntary takeover offer in July 2007, PPR owned 62.1%.
PPR arrived at its current stake of 71% mainly via the cancellation of
PUM treasury shares but it also bought shares outright in the
market.
SWOT analysis
Strengths
Weaknesses
Industry-leading operating
margins
Lifestyle
Ultra conservative balance

sheet structure with 62% equity
ratio and no debt
PUM
Opportunities
Threats
PPR could take out minority

shareholders, but it already
indicated that it currently has no
plans to do so
Changed
category carries a
higher design risk
lacks the uniqueness it
used to have
Low
free float
order pattern from

retailers transfers operating risk
to the suppliers
Design
appeal and brand

image are the core operating
risks for PUM
Increase exposure to China

where PUM is still
underrepresented
PUM
failed to establish a
strong foothold in the emerging
markets and has now to catchup with its peers
Revival
of the share buy-back

programme will cushion the
share price
Management
and PPR have

little incentive to deliver positive
surprises that could benefit
minority shareholders
219
www.cheuvreux.com
Valuation
Our TP is based on a DCF calculation with a

WACC of 9.3%, a 2% terminal growth rate and a
peak EBIT margin of 13.9% by 2015E. The
calculation also assumes a sales volume of
EUR3.3bn by 2015E, compared with PUM's
target of EUR4bn.
PUM's 12-month forward EV/EBIT discount to
adidas between 1999 and 2009 came to 11%.
The stocks is currently trading at an ~8%
discount, which we believe leaves little room for
substantial upside. Especially as the free float is
low and the extent of PPR's influence at PUM is
unclear, this justifies a valuation discount to
adidas, from our perspective.
Investment case
As PUM's Phase IV revisited is very much based

on sales growth, we see some implementation
risk for PUM as it starts from a weak basis in
markets such as China and Russia. These
markets are seeing fierce competition from both
international and local brands and from nonathletic brands such as H&M.
Additionally, a market like Russia is very much
based on mono-branded stores, which would
require a build-up of PUM's own retail activities.
Here we see a substantial implementation risk as
we currently fail to see what PUM can bring to
the market in terms of uniqueness to gain
substantial market shares.
PUM has to correct its missed opportunities in
the emerging markets. We believe the late buildup of a brand franchise in these markets will be
more expensive and take longer than expected,
especially as PUM has lost its unique market
positioning as a combined sports and lifestyle
manufacturer.
January 2011
GERMANY
Puma
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
220
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,530.3
20.1%
(163.4)
(988.7)
378.2
33.5%
(17.6)
360.6
34.6%
(1.7)
0.0
0.0
358.9
5.7
0.0
0.0
(104.4)
0.0
0.0
(1.7)
260.2
0.0
(1.7)
258.5
0.0
0.0
261.9
38.6%
1,777.5
16.2%
(199.4)
(1,156.2)
421.9
11.6%
(24.3)
397.6
10.3%
0.0
0.0
0.0
397.6
6.4
0.0
0.0
(117.2)
0.0
0.0
0.0
286.8
0.0
(1.1)
285.7
0.0
0.0
285.7
9.1%
2,369.2
33.3%
(265.7)
(1,697.2)
406.3
-3.7%
(38.4)
367.9
-7.5%
0.0
0.0
0.0
367.9
6.0
0.0
0.0
(108.1)
0.0
0.0
0.0
265.8
0.0
(2.8)
263.0
0.0
0.0
263.0
-7.9%
2,373.5
0.2%
(278.0)
(1,677.4)
418.1
2.9%
(46.0)
372.1
1.1%
0.0
0.0
0.0
372.1
10.5
0.0
0.0
(110.9)
0.0
0.0
0.0
271.7
0.0
(2.6)
269.1
0.0
0.0
269.1
2.3%
2,524.2
6.3%
(306.4)
(1,836.6)
381.2
-8.8%
(55.9)
325.3
-12.6%
0.0
0.0
0.0
325.3
1.1
0.0
0.0
(94.8)
0.0
0.0
0.0
231.6
0.0
1.1
232.7
0.0
0.0
232.7
-13.5%
2,460.7
-2.5%
(320.2)
(1,887.9)
252.6
-33.7%
(60.2)
192.4
-40.9%
0.0
0.0
0.0
192.4
(8.3)
0.0
0.0
(58.2)
0.0
0.0
0.0
125.9
0.0
2.3
128.2
0.0
0.0
128.2
-44.9%
2,655.0
7.9%
(319.3)
(1,963.7)
372.0
47.3%
(56.8)
315.2
63.8%
0.0
0.0
0.0
315.2
(6.0)
0.0
0.0
(89.7)
0.0
0.0
0.0
219.6
0.0
1.5
221.1
0.0
0.0
221.1
72.5%
2,785.3
4.9%
(331.5)
(2,022.8)
431.0
15.9%
(59.6)
371.4
17.8%
0.0
0.0
0.0
371.4
(5.0)
0.0
0.0
(106.2)
0.0
0.0
0.0
260.1
0.0
1.5
261.6
0.0
0.0
261.6
18.3%
2,929.8
5.2%
(347.4)
(2,116.5)
465.9
8.1%
(63.3)
402.6
8.4%
0.0
0.0
0.0
402.6
(2.0)
0.0
0.0
(116.2)
0.0
0.0
0.0
284.4
0.0
1.5
285.9
0.0
0.0
285.9
9.3%
279.5
39.8%
32.1
(37.7)
0.0
273.9
0.0
0.0
0.0
(8.9)
0.0
122.2
387.2
311.1
11.3%
(169.4)
(107.5)
0.0
34.2
0.0
0.0
0.0
(11.7)
0.0
451.2
473.7
304.2
-2.2%
(61.8)
(186.2)
0.0
56.2
0.0
0.0
0.0
(16.9)
0.0
(40.3)
(1.0)
317.7
4.4%
7.1
(87.5)
0.0
237.3
0.0
0.0
0.0
(34.5)
0.0
(130.1)
72.7
287.5
-9.5%
(95.7)
(122.3)
0.0
69.5
0.0
0.0
0.0
(40.0)
0.0
(151.9)
(122.4)
186.1
-35.3%
188.1
(202.8)
0.0
171.4
0.0
0.0
0.0
(44.0)
0.0
(19.1)
108.3
276.4
48.5%
(118.4)
(49.6)
0.0
108.4
(43.5)
0.0
43.5
(27.1)
0.0
17.9
99.2
319.7
15.7%
(33.3)
(39.3)
0.0
247.1
(33.4)
0.0
33.4
(28.2)
0.0
21.0
239.9
347.7
8.8%
(8.3)
(45.7)
0.0
293.7
(27.8)
0.0
27.8
(34.3)
0.0
15.6
275.0
547.8
2.4
21.2
97.1
(356.4)
NS
312.1
20.0
13.1
84.7
0.0
0.0
194.3
12.7
312.1
870.9
4.5
22.6
95.3
(430.4)
NS
562.9
44.7
34.5
121.8
0.0
0.0
361.9
20.4
562.9
1,041.3
7.7
21.9
110.6
(393.7)
NS
787.8
161.5
32.2
155.1
0.0
0.0
439.0
18.5
787.8
1,146.8
8.0
17.9
120.0
(461.2)
NS
831.5
153.2
42.2
194.8
0.0
0.0
441.3
18.6
831.5
1,174.7
2.5
21.3
145.1
(325.3)
NS
1,018.3
154.8
56.3
245.1
0.0
0.0
562.1
22.3
1,018.3
1,239.7
0.1
25.2
142.8
(448.8)
NS
959.0
290.9
53.6
242.8
0.0
0.0
371.7
15.1
959.0
1,432.1
0.1
25.7
160.1
(487.0)
NS
1,131.0
291.2
55.6
233.4
43.5
0.0
507.4
19.1
1,131.1
1,664.0
0.1
26.0
180.8
(672.9)
NS
1,198.0
291.4
49.8
218.6
77.0
0.0
561.4
20.2
1,198.2
1,914.1
0.2
26.1
196.4
(904.5)
NS
1,232.3
291.7
41.7
208.7
104.8
0.0
585.3
20.0
1,232.2
www.cheuvreux.com
January 2011
GERMANY
Puma
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
16.26
38.6%
16.23
44.2%
17.49
7.6%
17.68
9.0%
15.71
-10.2%
16.30
-7.8%
15.90
1.3%
16.79
3.0%
14.12
-11.2%
15.15
-9.8%
8.50
-39.8%
8.50
-43.9%
14.61
71.9%
14.61
71.9%
17.28
18.3%
17.28
18.3%
18.89
9.3%
18.89
9.3%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.21
0.70
17.35
39.8%
32.1
0.00
1.00
19.05
9.8%
50.6
0.00
2.00
18.17
-4.6%
58.4
0.00
2.50
18.78
3.4%
69.1
0.00
2.75
17.45
-7.1%
70.6
0.00
1.80
12.33
-29.3%
80.4
0.00
1.86
18.26
48.1%
93.3
0.00
2.26
21.12
15.7%
108.3
0.00
2.86
22.97
8.8%
124.3

Latest price
High
Low
Average price
16.680
15.932
-0.175
16.875
16.160
-0.175
17.227
16.140
-0.605
16.016
16.030
-0.890
16.016
15.360
-1.120
15.078
15.092
0.000
15.047
15.138
0.000
15.047
15.138
0.000
15.047
15.138
0.000
202.30
222.93
136.67
191.31
246.50
250.90
171.50
207.78
295.67
338.20
240.12
285.81
273.00
351.70
256.44
299.31
140.30
277.45
108.11
205.34
231.84
241.77
101.47
176.04
248.00
267.10
199.00
232.85
236.40
255.50
234.55
240.00
236.40
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
3,241.9
2,906.7
3,950.2
3,542.4
4,750.2
4,378.4
4,381.7
3,938.4
2,167.6
1,863.6
3,496.6
3,073.0
3,754.2
3,249.4
3,578.6
2,854.7
3,578.6
2,595.4
12.6
12.4
11.7
8.4
6.3
9.3
0.3
14.1
14.1
12.9
0.9
4.9
6.3
0.4
18.8
18.8
16.3
1.2
5.1
5.6
0.7
17.2
17.2
14.5
5.4
4.0
4.7
0.9
9.9
9.9
8.0
3.2
2.0
1.8
2.0
27.3
27.3
18.8
4.9
2.9
3.2
0.8
17.0
17.0
13.6
2.9
2.7
2.9
0.8
13.7
13.7
11.2
6.9
2.2
2.6
1.0
12.5
12.5
10.3
8.2
1.9
2.4
1.2
7.7
8.1
1.90
10.6
8.4
8.9
1.99
11.6
10.8
11.9
1.85
14.6
9.4
10.6
1.66
12.7
4.9
5.7
0.74
6.5
12.2
16.0
1.2
16.0
8.7
10.3
1.2
11.6
6.6
7.7
1.0
8.8
5.6
6.4
0.9
7.4
NS
NS
24.7
23.6
17.0
4.9
NS
4.3
NS
NS
23.7
22.4
16.1
3.2
NS
5.7
NS
NS
17.1
15.5
11.2
3.0
NS
12.3
NS
NS
17.6
15.7
11.4
2.9
NS
14.9
NS
NS
15.1
12.9
9.2
2.5
NS
18.2
NS
NS
10.3
7.8
5.1
2.6
NS
21.2
NS
NS
14.0
11.9
8.3
2.4
NS
12.7
NS
NS
15.5
13.3
9.3
2.5
NS
13.1
NS
NS
15.9
13.7
9.7
2.6
NS
15.1
115.5
82.5
61.8
61.8
70.6
50.2
39.2
39.2
46.7
33.2
28.9
28.9
44.8
31.8
26.6
26.6
31.9
22.7
22.0
22.0
20.1
13.7
10.9
10.9
29.0
20.6
16.7
16.7
33.1
23.5
17.1
17.1
35.7
25.4
16.1
16.1
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
221
www.cheuvreux.com
January 2011
GERMANY
RENEWABLE EQUIPMENT
3/Underperform
Rating
+200.4% EUR7.00
Q-CELLS
Reuters: QCEG.DE Bloomberg: QCE GR
Price pressure expected

Q
Recent developments refinancing completed
On 22 October Q-Cells finished its long-expected refinancing. Via a

50% capital increase it generated gross proceeds of around EUR128m.
The company also issued a new convertible bond due in 2015, which
generated gross proceeds of EUR129m. The terms were set with a
coupon of 6.75% p.a. and an initial conversion price of EUR4.38. In
total, Q-Cells received net proceeds of EUR242m. At the same time, the
company bought back 57% of its outstanding convertible bonds
(duration 2012) at 94.5% for EUR282m (cash outflow: EUR266m).
With the release of its Q3-10 results Q-Cells raised its 2010 guidance,
predicting total sales of more than EUR1.3bn (previously EUR1.2-1.3bn)
and EBIT of around EUR75-80m.
Q
EUR2.33
Price (07/01/2011)
Outlook Price pressure on cells expected in Q1-11
Q-Cells has said it anticipates a more challenging market environment

in 2011. We expect cell prices to come under pressure again in 2011
once the 10-15GW of new equipment already ordered has been
installed and is up and running. Although we do not anticipate a major
oversupply situation in 2011E, we expect demand in Q1-11E to be
depressed due to the weather and to a seasonal weakness following
several feed-in tariff cuts across Europe especially in Germany. If cell
producers refrain from reducing their production output in Q1-11, we
are likely to see a temporary oversupply at the beginning of the year.
Stock data
Free float
Enterprise value
Daily volume
EUR274m
EUR110m
EUR285m
117.532m
EUR 7.76m
Performances
9.3%
-34.8% -81.1%
2.1%
-42.0% -81.4%
Absolute perf.
Relative perf.
101.4
101.4
81.4
81.4
61.4
61.4
41.4
41.4
21.4
21.4
1.4
1.4
10/05
06/06
01/07
09/07
05/08
Price/TECDAX
01/09
09/09
05/10
01/11
Price
Sector focus
Sector Top Picks
Least favoured
SMA, SolarWorld
Conergy
Shareholders
Good Energies Investments 49.5%, Free Float 40.5%,
Fidelity 10.0%
2009
2010E
2011E
P/E (x)
NS
NS
4.6
3.1
EV/EBITDA (x)
NS
2.9
1.2
1.0
NS
NS
NS
NS
Net debt/EBITDA (x)
(2.1)
2.2
0.9
0.7
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
NS
2.7
8.6
10.4
1.3
0.4
0.3
0.3
Philipp BUMM
Research Analyst
pbumm@cheuvreux.com
(49) 69 47.897.527
Q
Q
222
www.cheuvreux.com
2012E
January 2011
GERMANY
Company profile
3rd largest cell producer

Q-Cells is a major solar cell producer with 800MW of production
capacity as of the end of 2009. In 2008 it was the world's largest cell
producer, with an output of 574MW. In 2009 Q-Cells had a market
share of 4.8%, down from 7.4% in 2008.
Q
Valuation
Based on our DCF valuation we arrive at a target

price of EUR7.0 per share.
The company will likely report break-even again
for 2010E. It is currently trading at a P/E 11E of
5x and at an EV/EBIT multiple of 4x.
Increasingly focusing on System business

Q-Cells adjusted its objectives during 2009 and is currently focusing
strongly on its downstream System business, formerly known as QCells International. In this division the company develops solar
projects for financial investors, but is now also developing solar
projects on its own initiative with the aim of selling them to investors
at a later stage.
Q
Q Thin-film activities will be developed further

Beside its core Cells business, based on polysilicon, Q-Cells has
also invested in several thin-film subsidiaries. It is currently pinning
its hopes on Solibro, a thin-film module producer with a CIGS
(copper, indium, gallium, selenium) technology and a current
capacity of 80MW. According to Solibro's management, the
company is already able to produce with a module efficiency of
12.9%, which is very good for thin-film modules in general. However,
Solibro is still in the ramp-up phase.
SWOT analysis
Strengths
Weaknesses
One of the world's largest cell

producers, offering economies
of scale
Asian (i.e. Chinese)

competitors are able to produce
more cheaply due to lower
personnel expenses
Q-Cells
has been able to

renegotiate wafer contracts with
its suppliers
Currently
weak customer base

as customers have been hit by
global overcapacity and price
erosion in modules
Opportunities
Threats
Improving costs due to

restructuring programme
Thin-film activities will
increase Q-Cells' group
margins once it is
successful
Continued price erosion in

solar cells and modules
Further
write-downs on
subsidiaries
Financing of capex depends
on market conditions and could
be put on hold, leading to lower
competiveness
223
www.cheuvreux.com
Investment case
Q-Cells expects to realise COGS (excluding

wafer costs) of 18 cents (EURO) in Malaysia,
compared to 27-28 cents in Germany. However,
as Chinese competitors are able to produce at
even lower cost (estimated 15-16 cents) than QCells' Malaysian plant, we believe Q-Cells will be
prevented from returning to double-digit EBIT
margins. Hence, its profitability in its solar cell
business looks set to remain weak. In our view
the company will be unable to compete with its
Asian peers in terms of costs in the long run and
will need to focus on its Asian capacity
expansion.
We appreciate management's strategy to
produce not only solar cells but also modules,
which brings Q-Cells closer to its endcustomers. However, from our perspective QCells does not enjoy the same reputation and/or
branding as SolarWorld. Hence, it will not be
able to charge high prices in line with those of
SolarWorld. It will also take some time for QCells to establish a strong distribution network,
which is in our view one of the most important
issues.
We maintain our cautious view on the stock.
January 2011
GERMANY
Q-CELLS
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
224
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
128.7
299.4
132.6%
(28.1)
(196.8)
74.5
NS
(11.3)
63.2
NS
0.0
0.0
0.0
63.2
(3.2)
0.0
0.0
(20.0)
(1.7)
0.0
0.0
39.9
0.0
0.0
39.9
0.0
0.0
39.9
NS
539.5
80.2%
(43.5)
(348.8)
147.2
97.6%
(17.8)
129.4
104.7%
0.0
0.0
0.0
129.4
8.6
0.0
0.0
(42.2)
7.0
0.0
0.0
95.8
0.0
1.3
97.1
0.0
0.0
97.1
143.4%
858.9
59.2%
(66.4)
(570.5)
222.0
50.8%
(25.0)
197.0
52.2%
0.0
0.0
0.0
197.0
12.8
0.0
0.0
(64.0)
10.6
0.0
0.0
145.8
0.0
2.6
148.4
0.0
0.0
148.4
52.8%
1,251.3
45.7%
(93.1)
(907.4)
250.8
13.0%
(45.7)
205.1
4.1%
0.0
0.0
0.0
205.1
(30.5)
0.0
0.0
(37.9)
(17.7)
0.0
0.0
186.9
0.0
3.3
190.2
0.0
0.0
190.2
28.2%
801.6
-35.9%
(108.3)
(937.6)
(244.3)
NS
(241.6)
(485.9)
NS
0.0
0.0
0.0
(485.9)
(381.5)
0.0
0.0
82.8
(303.3)
0.0
0.0
(1,385.5)
0.0
29.3
(1,356.2)
0.0
0.0
(1,356.2)
NS
1,291.0
61.1%
(109.7)
(1,048.5)
132.8
154.4%
(99.4)
33.4
106.9%
0.0
0.0
0.0
33.4
(40.8)
0.0
0.0
1.5
(0.6)
0.0
0.0
(6.0)
0.0
0.1
(5.9)
0.0
0.0
(5.9)
99.6%
1,452.1
12.5%
(116.2)
(1,102.2)
233.7
76.0%
(124.6)
109.1
NS
0.0
0.0
0.0
109.1
(31.6)
0.0
0.0
(17.0)
0.0
0.0
0.0
60.5
0.0
(0.4)
60.1
0.0
0.0
60.1
NS
1,644.8
13.3%
(131.6)
(1,230.3)
282.9
21.1%
(138.7)
144.2
32.2%
0.0
0.0
0.0
144.2
(29.0)
0.0
0.0
(25.3)
0.0
0.0
0.0
89.8
0.0
(0.5)
89.3
0.0
0.0
89.3
48.6%
(12.2)
(34.6)
(34.7)
(31.7)
12.2
0.0
(8.6)
0.0
0.0
(8.6)
(36.7)
47.1
NS
(35.6)
(44.2)
(44.2)
(32.7)
246.6
0.0
(21.8)
0.0
0.0
(21.8)
170.3
106.9
127.0%
(58.9)
(76.0)
(76.0)
(28.0)
22.9
0.0
(85.3)
0.0
0.0
(85.3)
(175.7)
170.8
59.8%
(33.0)
(333.6)
(307.8)
(195.8)
1,248.0
0.0
(1,114.5)
0.0
0.0
(1,114.5)
(1,176.8)
232.6
36.2%
(167.4)
(421.1)
(383.6)
(355.9)
(144.0)
0.0
(14.1)
0.0
0.0
(14.1)
(528.1)
(1,143.9)
NS
(82.2)
(517.2)
(493.2)
(1,743.3)
245.8
0.0
1,148.6
0.0
0.0
1,148.6
799.7
93.4
108.2%
(52.5)
(150.0)
(111.3)
(109.1)
0.0
0.0
0.0
0.0
0.0
0.0
(109.1)
185.0
98.1%
(45.3)
(144.1)
(86.1)
(4.4)
0.0
0.0
0.0
0.0
0.0
0.0
(4.4)
228.5
23.5%
(62.9)
(242.0)
(159.8)
(76.4)
0.0
0.0
0.0
0.0
0.0
0.0
(76.4)
34.7
0.0
0.0
44.2
11.4
32.9
90.3
0.0
0.6
66.4
0.6
0.0
22.7
17.6
90.3
321.3
0.0
0.0
49.5
(176.2)
NS
194.6
0.0
14.4
99.6
12.5
0.0
68.1
22.7
194.6
426.3
13.7
0.0
56.2
(119.9)
NS
376.3
0.4
93.9
144.1
38.2
0.0
99.6
18.5
376.2
1,822.9
10.9
0.0
88.0
15.4
0.8
1,937.2
2.5
123.6
366.4
1,207.3
0.0
237.4
27.6
1,937.2
1,847.0
29.7
0.0
115.6
488.6
26.0
2,480.9
3.8
295.9
664.6
1,125.0
0.0
391.6
31.3
2,480.9
732.3
4.7
0.0
202.9
503.7
68.3
1,443.6
0.0
166.4
843.6
206.3
0.0
227.3
28.4
1,443.6
726.4
4.6
0.0
326.8
287.8
39.4
1,345.6
0.0
166.4
894.2
111.0
0.0
174.0
13.5
1,345.6
786.5
5.0
0.0
367.5
216.7
27.4
1,375.7
0.0
166.4
913.8
111.0
0.0
184.5
12.7
1,375.7
875.8
5.5
0.0
416.3
202.7
23.0
1,500.3
0.0
166.4
1,017.1
111.0
0.0
205.8
12.5
1,500.3
(12.3)
(91.6)
24.8
(5.2)
19.6
0.0
0.0
0.0
19.6
(1.5)
0.0
0.0
(5.9)
(0.4)
0.0
0.0
12.2
0.0
0.0
12.2
0.0
0.0
12.2
15.1
www.cheuvreux.com
January 2011
GERMANY
Q-CELLS
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.12
0.54
NS
0.54
NS
1.30
140.6%
1.30
140.6%
1.33
2.7%
1.33
2.7%
1.62
21.3%
1.62
21.3%
(11.54)
NS
(11.54)
NS
(0.05)
99.6%
(0.05)
99.6%
0.51
NS
0.51
NS
0.76
48.7%
0.76
48.7%
0.3
0.00
0.00
0.64
NS
4.4
0.00
0.00
1.43
124.1%
5.7
0.00
0.00
1.54
7.3%
16.4
0.00
0.00
1.98
28.9%
15.7
0.00
0.00
(9.73)
NS
6.2
0.00
0.00
0.80
108.2%
6.2
0.00
0.00
1.57
98.0%
6.7
0.00
0.00
1.94
23.5%
7.5
100.857
100.857
0.000
73.827
73.827
0.000
74.730
74.730
0.000
111.259
111.259
0.000
117.532
117.532
0.000
117.532
117.532
0.000
117.532
117.532
0.000
117.532
117.532
0.000
117.532
117.532
0.000
24.63
27.01
19.75
24.29
34.07
48.03
23.50
34.21
97.60
102.85
34.01
62.89
25.30
100.89
16.17
56.00
11.40
28.10
9.52
14.31
2.51
13.13
1.97
5.81
2.33
2.59
2.30
2.43
2.33
-
1,818.0
1,641.8
2,515.4
2,360.8
10,643.6
10,264.5
2,816.9
3,049.4
1,294.4
1,619.6
295.0
380.7
273.9
285.9
273.9
271.9
NS
NS
NS
NS
NS
-
45.6
45.6
38.6
NS
5.7
9.0
0.0
26.2
26.2
23.8
NS
6.0
7.0
0.0
73.2
73.2
63.6
NS
6.0
14.1
0.0
15.6
15.6
12.8
NS
1.6
2.2
0.0
NS
NS
NS
NS
1.8
1.3
0.0
NS
NS
3.2
NS
0.4
0.4
0.0
4.6
4.6
1.5
NS
0.3
0.3
0.0
3.1
3.1
1.2
NS
0.3
0.3
0.0
NS
NS
NS
NS
22.0
26.0
5.48
33.3
16.0
18.2
4.38
23.7
46.2
52.1
11.95
64.6
12.2
14.9
2.44
12.0
NS
NS
2.0
(2.0)
2.9
11.4
0.3
3.0
1.2
2.6
0.2
1.4
1.0
1.9
0.2
1.1
16.5
0.8
19.3
15.2
9.5
1.4
32.9
0.0
NS
NS
24.9
21.1
13.3
1.6
NS
0.0
NS
NS
27.3
24.0
17.8
1.6
NS
0.0
NS
0.1
25.8
22.9
17.0
1.2
0.8
0.0
8.2
2.1
20.0
16.4
14.9
0.9
26.0
0.0
NS
NS
NS
NS
NS
0.6
68.3
0.0
3.3
3.1
10.3
2.6
NS
1.0
39.4
0.0
7.4
1.2
16.1
7.5
4.2
1.1
27.4
0.0
9.8
0.9
17.2
8.8
5.5
1.2
23.0
0.0
21.9
14.7
42.7
42.7
34.7
23.1
13.2
13.2
38.3
26.6
25.7
25.7
27.0
18.8
8.5
8.5
15.1
12.6
10.9
10.9
NS
NS
NS
NS
2.7
2.2
NS
NS
8.6
6.7
7.9
7.9
10.4
8.1
10.7
10.7
0.12
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
0.15

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
225
www.cheuvreux.com
January 2011
GERMANY
MACHINERY
3/Underperform
Rating
-1.3% EUR155.00
Rational
Reuters: RAAG.DE Bloomberg: RAA GR
Great company but expensive

Q
EUR157.05
Price (07/01/2011)
Recent developments great margins but sales still soft
We downgraded Rational to 3/Underperform for valuation reasons

following the Q3-10 results which were broadly in line with our
expectations. Whilst Rational quickly restored its outstanding margins
already in 2009, its top-line growth has actually remained less dynamic
in 2010 than we had anticipated. Reported sales in Q3-10 were up
9.7%, but ~3ppt of the growth was attributable to positive FX effects.
This marked a clear slow-down from the rather robust FX-adj. growth of
~11% in Q2 after a sluggish start in Q1 (-1%). Sales growth by
geographic market was as follows: Germany slowed to 2.2%, Europe
ex Germany up 11.5%; Americas a 26.7% jump; Asia still
sluggish, growing just +3.4%; RoW down 4.1%. The EBIT margin, as
expected, was down from the exceptionally high level in Q3-09 but was
a still very high 29.9% (gross margin 63.2%).
Outlook structurally a 2-digit grower, but some potential

speed bumps again in 2011
We remain convinced that Rational can return to double-digit revenue

growth in 2011E (est. EPS CAGR 2010-12E 14%) driven by 1)
continued gradual macro recovery; 2) increasing market penetration of
the VarioCooking Center (VCC) and 3) Rational's investment in
increasing its sales and distribution capacity by ~15% focused mostly
in emerging market countries. Furthermore, we assume that the nextgeneration SelfCooking Center (SCC) will be launched in 2011
considering that historically the product introduction cycle has been
seven years (the first generation SCC was launched in Spring 2004).
There is risk to this assumption, however, since the company can
neither confirm nor deny for commercial reasons whether the next
generation launch will actually be in 2011. Another risk in 2011 could be
potential capital spending cutbacks amongst public institutions (such
as hospitals, schools, universities, prisons), which we estimate
comprise ~40% of group sales. This latter risk applies especially to
Europe, where austerity measures are beginning to take their toll.
Stock data
Free float
Enterprise value
Daily volume
EUR1786m
EUR517m
EUR1628m
11.37m
EUR 1.10m
Performances
-4.4%
1.2%
36.9%
-5.8%
-11.1%
6.5%
Absolute perf.
Relative perf.
164.0
164.0
144.0
144.0
124.0
124.0
104.0
104.0
84.0
84.0
64.0
64.0
44.0
44.0
24.0
01/01
24.0
03/02
06/03
09/04
12/05
Price/M DAX
03/07
07/08
Sector focus
Sector Top Picks
Least favoured

Shareholders
Founding Shareholders 71.6%, Free Float 28.4%
2009
2010E
2011E
P/E (x)
20.0
25.3
21.3
18.5
EV/EBITDA (x)
12.7
16.3
13.8
11.8
Q
226
www.cheuvreux.com
2012E
6.0
3.8
4.4
5.1
Net debt/EBITDA (x)
(1.0)
(1.3)
(1.3)
(1.4)
Yield (%)
3.0
3.0
3.7
4.6
ROCE (%)
87.3
94.8
99.4
108.4
12.0
17.3
16.1
15.2
Q
01/11
Price
Craig ABBOTT
Research Analyst
(49) 69 47 89 75 25
10/09
January 2011
GERMANY
Company profile
World market leader in thermal cooking applications

Rational is the world market leader in advanced thermal cooking
technology, with an estimated global market share of 53%. The
introduction of the combi-steamer oven technology 30 years ago
created a new investment cycle in the catering/gastronomy industry.
Q
With the VarioCooking Center (VCC) product line, which is based on

the same intelligent cooking technology as the SelfCooking Center
(SCC) but covers all non-oven-based cooking applications that
require direct contact with a heated surface, Rational now addresses
100% of the professional cooking equipment market.
Q Strategic focus on one technology yields high profitability
Due to its dominant market position and focused, one-technology
strategy, Rational's profitability is outstanding (EBITDA margin
~30%, NOPLAT ROCE ~40%). The company's 30-year track record
has been built purely organically, financed primarily through
internally generated cash. As a result, its balance sheet is very
strong with a year-end (09) net cash position of EUR102m and no
goodwill.
Growing global footprint

Rational generates 17% of its sales in Germany, 50% in the Rest of
Europe including Eastern Europe, 13% in the Americas, 13% in Asia
and 7% in the Rest of the World.
Q
SWOT analysis
Strengths
Weaknesses
Dominant market leadership

with an estimated 53% share of
the addressable world market
Revenues comprise mostly

new equipment sales
Relatively low share of

recurring revenues (<20% of
sales)
An estimated 5-year
technological lead over its
competitors
High share of public

customers (~40%), which may
reduce capex budgets
Very strong balance sheet
Exposed to contraction in
capital spending
Opportunities
Threats
An estimated 75% of its

potential market (for the SCC
ovens alone) is still untapped
The ultimate market potential

of the VarioCooking Center
(VCC) is similar to that of the
SCC
Exceptionally high
margins/ROCE may attract fresh
capital to the industry
FX exposure. Some 32% of
sales are non-euro based, of
which ~9% are in USD and ~8%
in GBP.
Increased penetration of fastfood chains
227
www.cheuvreux.com
Valuation
Our target price of EUR155 is DCF-based. Our

main assumptions are:
Q
WACC of 9% (99% equity weighted)
Terminal growth 2.5%
Terminal EBIT margin 26%
There are no directly comparable listed peer

companies for Rational. Its competitors are
private companies some of whom are
subsidiaries of large conglomerates such as
Convotherm (Manitowoc), Electrolux (Zanussi),
Lainox (ALI Group) and Eloma (ALI Group) which
we do not consider relevant for a peer multiple
comparison.
Investment case
Without a doubt, Rational operates one of

corporate Germany's premier business models;
and given its defendable market positioning,
high margins and cash conversion rate, the
shares clearly deserve a premium rating.
Following the shares' phenomenal performance
through mid-summer 2010, however, its
multiples (P/E and EV/EBITDA) are back to
historical highs seen during the high-growth
period of 2004-06. The forecast growth rates,
however, are markedly lower. The average
forward P/E multiple in 2005/06/07 was 23.2x,
28.1x and 23.5x compared with EPS growth of
24.5%, 22.1% and 18.1%.
We currently forecast EPS growth for
2010E/11E/12E of 10.2%/12.9%/15%, putting
us 3% to 6% above consensus. Therefore,
unless Rational starts to report a significant
acceleration in its top-line growth, further
multiple expansion from these levels is unlikely.
The FCF yield and DPS also do not suggest
further multiple expansion.
January 2011
GERMANY
Rational
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
228
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
221.8
18.9%
(44.6)
(117.6)
59.6
26.8%
(4.6)
55.0
28.5%
(1.4)
0.0
0.0
53.6
0.5
0.0
0.0
(20.0)
0.0
0.0
(1.4)
34.1
0.0
0.0
34.1
0.0
0.0
36.9
33.7%
246.4
11.1%
(53.4)
(121.3)
71.7
20.3%
(4.3)
67.4
22.5%
(0.5)
0.0
0.0
66.9
0.3
0.0
0.0
(24.8)
0.0
0.0
(0.5)
42.4
0.0
0.0
42.4
0.0
0.0
43.4
17.6%
283.7
15.1%
(57.0)
(141.8)
84.9
18.4%
(4.3)
80.6
19.6%
0.0
0.0
0.0
80.6
0.6
0.0
0.0
(29.3)
0.0
0.0
0.0
51.8
0.0
0.0
51.8
0.0
0.0
51.8
19.4%
336.6
18.6%
(63.7)
(175.1)
97.8
15.2%
(5.3)
92.5
14.8%
0.0
0.0
0.0
92.5
0.9
0.0
0.0
(32.3)
0.0
0.0
0.0
61.1
0.0
0.0
61.1
0.0
0.0
61.1
18.0%
342.9
1.9%
(72.3)
(180.2)
90.4
-7.6%
(7.3)
83.1
-10.2%
0.0
0.0
0.0
83.1
0.4
0.0
0.0
(21.9)
0.0
0.0
0.0
61.7
0.0
0.0
61.7
0.0
0.0
61.7
1.0%
314.4
-8.3%
(68.1)
(148.2)
98.1
8.5%
(7.6)
90.5
8.9%
0.0
0.0
0.0
90.5
(0.4)
0.0
0.0
(22.8)
0.0
0.0
0.0
67.3
0.0
0.0
67.3
0.0
0.0
67.3
9.1%
338.9
7.8%
(70.3)
(161.4)
107.2
9.3%
(7.6)
99.6
10.1%
0.0
0.0
0.0
99.6
0.0
0.0
0.0
(25.4)
0.0
0.0
0.0
74.2
0.0
0.0
74.2
0.0
0.0
74.2
10.3%
381.6
12.6%
(76.8)
(186.6)
118.2
10.3%
(7.6)
110.6
11.0%
0.0
0.0
0.0
110.6
1.8
0.0
0.0
(28.7)
0.0
0.0
0.0
83.7
0.0
0.0
83.7
0.0
0.0
83.7
12.8%
439.4
15.1%
(81.4)
(221.8)
136.2
15.2%
(10.1)
126.1
14.0%
0.0
0.0
0.0
126.1
3.2
0.0
0.0
(33.0)
0.0
0.0
0.0
96.3
0.0
0.0
96.3
0.0
0.0
96.3
15.1%
38.7
24.8%
4.8
(5.7)
(1.3)
37.8
(2.8)
0.0
0.0
(13.8)
0.0
2.1
23.3
46.7
20.7%
(27.6)
(4.4)
0.6
14.7
0.3
0.0
0.0
(56.9)
0.0
15.0
(26.9)
56.0
19.9%
(9.7)
(4.8)
0.8
41.5
(1.8)
0.0
0.0
(34.1)
0.0
2.9
8.5
66.4
18.6%
(5.3)
(14.3)
(7.6)
46.8
(8.1)
0.0
0.0
(33.1)
0.0
(0.2)
5.4
69.0
3.9%
4.7
(33.4)
(26.5)
40.3
(18.5)
0.0
0.0
(32.1)
0.0
(1.2)
(11.5)
74.9
8.6%
8.6
(2.4)
2.7
81.1
20.9
0.0
0.0
(31.1)
0.0
1.0
71.9
81.8
9.2%
(5.2)
(5.2)
(0.5)
71.4
1.3
0.0
0.0
(39.8)
0.0
(0.9)
32.0
91.4
11.7%
(7.8)
(5.2)
0.1
78.4
(0.8)
0.0
0.0
(56.9)
0.0
2.3
23.0
106.4
16.4%
(9.1)
(6.2)
0.4
91.1
(0.8)
0.0
0.0
(65.4)
0.0
3.2
28.1
104.1
0.0
0.6
0.0
(59.7)
NS
45.0
0.5
0.5
26.9
0.2
0.0
16.9
7.6
45.0
90.0
0.0
0.7
14.2
(32.2)
NS
72.7
0.4
0.4
27.3
0.2
0.0
44.4
18.0
72.7
105.7
0.0
0.7
17.8
(40.6)
NS
83.6
0.7
0.7
27.6
0.2
0.0
54.2
19.1
83.4
124.2
0.0
0.6
19.4
(44.3)
NS
99.9
0.9
0.9
36.1
0.2
0.0
59.5
17.7
97.6
134.5
0.0
0.6
18.2
(31.3)
NS
122.0
0.9
0.9
61.2
0.1
1.0
54.8
16.0
122.0
190.7
0.0
0.7
18.8
(102.3)
NS
107.9
0.6
0.6
56.3
0.1
2.0
46.2
14.7
107.9
225.0
0.0
0.5
18.1
(134.3)
NS
109.3
0.0
0.0
53.7
3.1
3.0
51.4
15.2
109.3
251.9
0.0
0.5
20.4
(157.4)
NS
115.4
0.5
0.5
51.1
3.1
4.0
59.2
15.5
115.4
282.8
0.0
0.5
23.6
(185.5)
NS
121.4
0.5
0.5
47.0
3.1
5.0
68.3
15.5
121.4
www.cheuvreux.com
January 2011
GERMANY
Rational
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
3.25
34.0%
3.00
27.6%
3.82
17.6%
3.73
24.3%
4.56
19.4%
4.56
22.2%
5.37
18.0%
5.37
18.0%
5.43
1.0%
5.43
1.0%
5.92
9.1%
5.92
9.1%
6.53
10.3%
6.53
10.3%
7.36
12.8%
7.36
12.8%
8.47
15.1%
8.47
15.1%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.25
4.99
3.40
25.2%
4.2
0.09
3.00
4.11
20.7%
4.9
0.00
3.75
4.93
19.9%
5.5
0.00
4.50
5.84
18.6%
6.4
0.00
1.00
6.07
3.9%
10.8
0.00
3.50
6.59
8.6%
13.3
0.00
5.00
7.19
9.2%
14.8
0.00
5.75
8.04
11.7%
16.4
0.00
7.20
9.36
16.4%
17.7

Latest price
High
Low
Average price
11.370
11.370
0.000
11.370
11.370
0.000
11.370
11.370
0.000
11.370
11.370
0.000
11.370
11.370
0.000
11.370
11.370
0.000
11.370
11.370
0.000
11.370
11.370
0.000
11.370
11.370
0.000
68.46
69.35
43.96
55.28
112.27
112.27
67.75
87.74
141.15
171.00
100.81
135.83
140.00
164.68
122.00
144.41
84.40
145.89
68.38
115.98
118.50
120.95
56.01
84.79
165.40
174.45
106.00
135.28
157.05
163.85
155.95
159.01
157.05
-
778.4
719.3
1,276.5
1,245.0
1,604.9
1,565.0
1,591.8
1,548.1
959.6
928.9
1,347.3
1,245.7
1,880.6
1,746.8
1,785.7
1,628.8
1,785.7
1,600.7
22.8
21.1
20.1
4.9
16.4
16.1
7.3
30.1
29.4
27.3
1.2
NS
17.2
2.7
31.0
31.0
28.7
2.6
NS
18.8
2.7
26.1
26.1
24.0
2.9
NS
15.9
3.2
15.6
15.6
13.9
4.2
7.8
7.9
1.2
20.0
20.0
18.0
6.0
8.9
12.0
3.0
25.3
25.3
23.0
3.8
11.2
17.3
3.0
21.3
21.3
19.5
4.4
9.6
16.1
3.7
18.5
18.5
16.8
5.1
8.9
15.2
4.6
12.1
13.1
3.24
18.7
17.4
18.5
5.05
26.8
18.4
19.4
5.52
28.1
15.8
16.7
4.60
23.5
10.3
11.2
2.71
13.5
12.7
13.8
4.0
16.6
16.3
17.5
5.2
21.4
13.8
14.7
4.3
18.1
11.8
12.7
3.6
15.4
NS
NS
26.9
24.8
15.4
5.0
NS
166.4
NS
NS
29.1
27.4
17.2
3.4
NS
80.4
NS
NS
29.9
28.4
18.3
3.4
NS
82.3
NS
NS
29.1
27.5
18.2
3.5
NS
83.7
NS
NS
26.4
24.2
18.0
2.9
NS
18.4
NS
NS
31.2
28.8
21.4
3.0
NS
59.1
NS
NS
31.6
29.4
21.9
3.2
NS
76.6
NS
NS
31.0
29.0
21.9
3.4
NS
78.1
NS
NS
31.0
28.7
21.9
3.8
NS
85.0
122.8
77.3
39.2
39.2
93.0
58.6
61.6
61.6
96.9
61.8
64.9
64.9
95.0
62.1
65.2
65.2
70.5
52.1
59.5
59.5
87.3
65.2
42.9
42.9
94.8
70.6
39.5
39.5
99.4
74.0
39.8
39.8
108.4
80.8
41.0
41.0
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
229
www.cheuvreux.com
January 2011
GERMANY
MACHINERY
2/Outperform
Rating
+23.9% EUR75.00
Rheinmetall
Reuters: RHMG.DE Bloomberg: RHM GR
Need to defend against budget cuts

Q
Recent developments 2010 guidance not that bad for Q4
RHM published Q3-10 numbers in mid-November: Defence Q3-10

sales were up +24% y-o-y and +21% q-o-q to EUR502m. Q3 Defence
order intake was EUR384m, -36% q-o-q, translating to a book-to-bill
ratio of 0.76.
Although this was disappointing at first sight, management confirmed in
the call that the weak Q3-10 order intake in Defence should not be seen
as a trend, that it was fully in line with internal planning, and that it is not
an indication of structural weakness going forward. RHM stuck to its
FY10 guidance for a book-to-bill ratio > 1.0, which implies Q4-10 order
intake of at least EUR600m, up +56% q-o-q. The Defence EBIT margin
was 10.4% (est. 10.2%). The order backlog now stands at EUR4.88bn.
Q3-10 Automotive sales were up +24% y-o-y (vs. Triad market light
vehicle production growth of +10% y-o-y) and down -4% q-o-q to
EUR490m, with an EBIT margin of 4.1%.
Following Q3-10, RHM expects full year group sales of EUR3.9bn and
group EBIT of EUR270-280m, with Defence sales of >EUR2.0bn and
EBIT >EUR215m and Automotive sales of EUR1.9bn and EBIT of
EUR70-80m. This guidance appeared a little disappointing at first sight,
as RHM had not disclosed before the conference call that it already
included an EUR10m restructuring provision for its Italian Auto
operations. Thus, Q4 for Automotive does not look as bad as the initial
guidance would have indicated, and the underlying EBIT margin in
Automotive should reach 4.5% for 2010E or 5.7% in Q4-10E,
influenced in part by positive mix effects in Q4.
Q
EUR60.55
Price (07/01/2011)
Outlook Defence growth driven by internationalisation
Although RHM's Defence division will be affected by budget cuts, we

expect it to remain relatively resilient given its successful
internationalisation strategy. While we expect budgets within NATO to
be under pressure, growth outside NATO is expected to be strong, and
RHM continues to predict healthy 2011-12 Defence budget CAGRs for
Australia (+8%), Brazil (+8%), India (+10%), Middle East (+6%), and
South Africa (+5%).
RHM has adjusted to the internationalisation trend at an early stage:
since 2007, eight of its 11 acquisitions were outside Germany, and
RHM predicts a mid-term international order intake ratio of 80% (9M10: 75%). Its recent EUR87m order intake from Canada offers an
example of how RHM is becoming less dependent on its German
domestic market. The contracts include: 1) EUR70m to supply grenade
launcher systems and ammunition. Under this contract RHM will supply
304 automatic grenade launchers by January 2012. In addition, it will
supply 250,000 rounds of 40mm practice and service ammunition. 2)
EUR17m to modernise and overhaul 42 Leopard battle tanks, which will
be taken over by the Canadian army from the Dutch army by the
beginning of 2012.
Stock data
Free float
Enterprise value
Daily volume
EUR2398m
EUR2398m
EUR2835m
39.6m
EUR 12.69m
Performances
11.3%
30.8%
38.2%
9.6%
14.9%
7.5%
Absolute perf.
Relative perf.
68.9
68.9
58.9
58.9
48.9
48.9
38.9
38.9
28.9
28.9
18.9
18.9
8.9
01/01
8.9
04/02
08/03
11/04
01/06
Price/M DAX
04/07
07/08
Sector focus
Sector Top Picks
Least favoured

Shareholders
Free Float 100.0%
P/E (x)
EV/EBITDA (x)
2009
2010E
2011E
NS
13.9
10.8
8.5
11.4
6.4
5.3
4.2
Q
230
www.cheuvreux.com
2012E
8.2
NS
7.8
11.7
Net debt/EBITDA (x)
(0.1)
(0.2)
(0.4)
(0.7)
Yield (%)
0.7
2.2
2.6
3.6
ROCE (%)
0.6
11.6
14.5
18.0
1.0
1.2
1.1
1.0
Q
01/11
Price
Research Analyst
(49) 69 47 897 540
10/09
GERMANY
January 2011
Company profile
Focus on Defence and Automotive

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

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

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

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

German Bundeswehr; improved
profitability in defence due to
internationalisation; highly
profitable and growing
ammunitions business
sales
Opportunities
Threats
Rheinmetall
is an active
consolidator in the European
defence industry
Automotive:
Defence:
partly project-driven
Automotive:
structurally low
margins
Automotive: concentration on
few customers with large
individual sales contribution
further cost
reductions
vulnerable to budget
cuts
Defence:
high market entry

barriers, further successful
internationalisation of the sales
base
231
www.cheuvreux.com
Valuation
Investment case
Defence outlook not that bad: Although

Rheinmetall's Defence division will be affected
by budget cuts, we expect it to remain relatively
resilient given its successful internationalisation
strategy: While we expect budgets within NATO
to be under pressure, strong growth outside
NATO is expected. Rheinmetall has adopted to
the internationalisation trend at an early stage:
Since 2007, 8 of its 11 acquisitions were outside
Germany, and Rheinmetall guides for a mid-term
international order intake ratio of 80% (9M-10:
75%).
Automotive is likely to reach its peak sales of
the last cycle, i.e. EUR2,2bn in 2007, in 12E with
a new peak EBIT margin of 7-8% compared to
just 5.6% in 2007. Higher profitability is driven
by a) strong restructuring efforts (B/E at
EUR1.55bn of sales); b) globalisation (market
entry in India and China, successful JVs); c)
innovation (e.g. broad range of EU-5,6 products
available); and d) portfolio effects (Pierburg,
Bearings and Aftermarket growing faster than
Pistons and ATAG; shift from commodity to
high-tech products).
January 2011
GERMANY
Rheinmetall
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
232
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
3,454.0
-18.7%
(992.0)
(2,078.0)
384.0
-11.7%
(157.0)
227.0
11.3%
0.0
0.0
0.0
227.0
(55.0)
0.0
0.0
(52.0)
(2.0)
0.0
0.0
118.0
0.0
(5.0)
113.0
0.0
0.0
113.0
79.4%
3,454.0
0.0%
(992.0)
(2,078.0)
384.0
0.0%
(157.0)
227.0
0.0%
0.0
0.0
0.0
227.0
(55.0)
0.0
0.0
(52.0)
(2.0)
0.0
0.0
118.0
0.0
(5.0)
113.0
0.0
0.0
113.0
0.0%
3,626.0
5.0%
(1,038.0)
(2,224.0)
364.0
-5.2%
(151.0)
213.0
-6.2%
0.0
0.0
0.0
213.0
(51.0)
0.0
0.0
(41.0)
2.0
0.0
0.0
123.0
0.0
(3.0)
120.0
0.0
0.0
120.0
6.2%
4,005.0
10.5%
(1,052.0)
(2,522.0)
431.0
18.4%
(168.0)
263.0
23.5%
0.0
0.0
0.0
263.0
(57.0)
0.0
0.0
(63.0)
7.0
0.0
0.0
150.0
0.0
(5.0)
145.0
0.0
0.0
145.0
20.8%
3,869.0
-3.4%
(1,079.0)
(2,380.0)
410.0
-4.9%
(166.0)
244.0
-7.2%
0.0
0.0
0.0
244.0
(62.0)
0.0
0.0
(49.0)
2.0
0.0
0.0
135.0
0.0
(1.0)
134.0
0.0
0.0
134.0
-7.6%
3,420.0
-11.6%
(1,068.0)
(2,174.0)
178.0
-56.6%
(165.0)
13.0
-94.7%
0.0
0.0
0.0
13.0
(61.0)
0.0
0.0
(6.0)
2.0
0.0
0.0
(52.0)
0.0
(6.0)
(58.0)
0.0
0.0
(58.0)
NS
3,975.0
16.2%
(1,128.0)
(2,400.1)
446.9
151.1%
(172.0)
274.9
NS
0.0
0.0
0.0
274.9
(55.0)
0.0
0.0
(57.2)
9.0
0.0
0.0
171.6
0.0
0.0
171.6
0.0
0.0
171.6
NS
4,600.0
15.7%
(1,174.8)
(2,895.2)
530.0
18.6%
(174.0)
356.0
29.5%
0.0
0.0
0.0
356.0
(46.5)
0.0
0.0
(85.2)
6.0
0.0
0.0
230.3
0.0
(9.0)
221.3
0.0
0.0
221.3
29.0%
5,200.0
13.0%
(1,233.6)
(3,329.1)
637.3
20.2%
(182.0)
455.3
27.9%
0.0
0.0
0.0
455.3
(39.1)
0.0
0.0
(114.0)
6.0
0.0
0.0
308.2
0.0
(25.0)
283.2
0.0
0.0
283.2
28.0%
248.0
-17.1%
(16.0)
(183.0)
0.0
49.0
(10.0)
0.0
0.0
(26.6)
0.0
402.6
415.0
248.0
0.0%
(16.0)
(183.0)
0.0
49.0
(10.0)
0.0
0.0
(26.6)
0.0
402.6
415.0
279.0
12.5%
(58.0)
(765.0)
0.0
(544.0)
(41.0)
0.0
0.0
(32.4)
0.0
438.4
(179.0)
312.0
11.8%
(119.0)
391.0
0.0
584.0
5.0
0.0
0.0
(36.0)
0.0
(593.0)
(40.0)
293.0
-6.1%
65.0
(298.0)
0.0
60.0
4.0
0.0
0.0
(46.8)
0.0
18.8
36.0
127.0
-56.7%
95.0
(91.0)
0.0
131.0
(6.0)
0.0
0.0
(46.8)
9.0
344.8
432.0
350.9
176.3%
(137.4)
(238.5)
0.0
(25.0)
0.0
0.0
0.0
(11.9)
(9.2)
210.5
164.4
423.1
20.6%
(61.8)
(165.6)
0.0
195.7
0.0
0.0
0.0
(51.5)
0.0
(11.4)
132.8
508.2
20.1%
(37.1)
(166.4)
0.0
304.7
0.0
0.0
0.0
(61.5)
0.0
76.1
319.3
828.0
47.0
514.0
397.0
151.0
17.3
1,937.0
357.0
60.0
1,052.0
110.0
0.0
358.0
10.4
1,937.0
828.0
47.0
514.0
397.0
151.0
17.3
1,937.0
357.0
60.0
1,052.0
110.0
0.0
358.0
10.4
1,937.0
894.0
43.0
519.0
434.0
205.0
21.9
2,095.0
365.0
74.0
1,057.0
151.0
0.0
448.0
12.4
2,095.0
1,014.0
43.0
522.0
422.0
236.0
22.3
2,237.0
391.0
93.0
1,046.0
146.0
0.0
561.0
14.0
2,237.0
1,059.0
59.0
523.0
410.0
205.0
18.3
2,256.0
419.0
111.0
1,092.0
142.0
0.0
492.0
12.7
2,256.0
1,070.0
64.0
610.0
502.0
(24.0)
NS
2,222.0
422.0
133.0
1,044.0
148.0
0.0
475.0
13.9
2,222.0
1,211.3
73.3
733.2
596.5
(101.2)
NS
2,513.1
422.0
122.9
1,120.6
148.0
0.0
699.6
17.6
2,513.1
1,379.0
84.4
693.1
644.0
(205.3)
NS
2,595.2
422.0
113.9
1,121.2
148.0
0.0
790.1
17.2
2,595.2
1,610.4
99.7
703.2
728.0
(458.6)
NS
2,682.7
422.0
99.9
1,119.6
148.0
0.0
893.2
17.2
2,682.7
www.cheuvreux.com
January 2011
GERMANY
Rheinmetall
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
3.20
82.7%
3.20
82.7%
3.20
0.0%
3.20
0.0%
3.42
7.0%
3.42
7.0%
4.14
21.1%
4.14
21.1%
3.88
-6.4%
3.88
-6.4%
(1.60)
NS
(1.60)
NS
4.33
NS
4.33
NS
5.59
29.0%
5.59
29.0%
7.15
28.0%
7.15
28.0%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.90
7.02
-15.5%
22.1
0.00
0.90
7.02
0.0%
22.1
0.00
1.00
7.95
13.4%
23.8
0.00
1.30
8.92
12.1%
26.9
0.00
1.30
8.48
-4.9%
28.1
0.00
0.30
3.50
-58.8%
26.7
0.00
1.30
8.86
153.2%
29.3
0.00
1.55
10.68
20.6%
33.3
0.00
2.15
12.83
20.1%
38.5

Latest price
High
Low
Average price
36.000
35.350
0.000
36.000
35.350
0.000
36.000
35.080
0.000
36.000
34.990
0.000
36.000
34.540
0.000
39.600
36.300
0.000
39.600
39.600
0.000
39.600
39.600
0.000
39.600
39.600
0.000
39.25
42.47
23.05
32.71
53.26
55.23
38.15
45.27
57.48
68.00
47.01
56.96
54.38
76.89
46.57
62.93
22.90
54.93
16.09
40.02
44.74
45.67
19.01
32.47
60.17
60.41
41.79
48.91
60.55
60.98
57.06
59.95
60.55
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,399.6
1,954.6
1,709.9
2,264.9
2,781.8
3,424.3
1,904.1
2,581.6
791.4
1,383.3
1,771.7
2,026.4
2,382.7
2,866.7
2,397.8
2,835.1
2,397.8
2,706.0
12.3
12.3
5.6
3.5
1.8
1.1
2.3
16.7
16.7
7.6
2.9
2.4
1.2
1.7
16.8
16.8
7.2
NS
2.4
1.8
1.7
13.1
13.1
6.1
29.7
2.0
1.2
2.4
5.9
5.9
2.7
7.5
0.8
0.7
5.7
NS
NS
12.8
8.2
1.7
1.0
0.7
13.9
13.9
6.8
NS
2.1
1.2
2.2
10.8
10.8
5.7
7.8
1.8
1.1
2.6
8.5
8.5
4.7
11.7
1.6
1.0
3.6
5.1
8.6
0.57
6.5
5.9
10.0
0.66
7.8
9.4
16.1
0.94
10.6
6.0
9.8
0.65
7.1
3.4
5.7
0.36
4.1
11.4
NS
0.6
11.3
6.4
10.4
0.7
7.3
5.3
8.0
0.6
6.0
4.2
5.9
0.5
4.6
7.0
0.6
11.1
6.6
3.4
1.9
17.3
28.2
7.0
0.6
11.1
6.6
3.4
1.9
17.3
28.2
7.1
0.7
10.0
5.9
3.4
1.9
21.9
29.2
7.6
0.8
10.8
6.6
3.7
1.9
22.3
31.4
6.6
0.7
10.6
6.3
3.5
1.8
18.3
33.5
2.9
NS
5.2
0.4
NS
1.6
NS
(18.8)
8.1
NS
11.2
6.9
4.3
1.7
NS
30.0
11.4
NS
11.5
7.7
5.0
1.9
NS
27.7
16.3
NS
12.3
8.8
5.9
2.1
NS
30.1
12.4
12.4
14.6
14.6
12.4
9.3
14.6
14.6
11.0
8.2
14.4
14.4
12.6
8.9
15.4
15.4
11.5
8.5
13.5
13.5
0.6
0.7
NS
NS
11.6
8.7
15.2
15.2
14.5
10.6
17.4
17.4
18.0
13.1
19.3
19.3

EPS before goodwill
% Change
EPS, reported
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
233
www.cheuvreux.com
January 2011
GERMANY
HEALTHCARE PROVIDERS & SERVICES
2/Outperform
Rating
+17.5% EUR19.00
Rhoen Klinikum
Defensive growth at reasonable price +
potential M&A catalyst
Q
Recent developments lack of M&A and healthcare reform
Rhn shares have underperformed significantly in the recent past,

especially since mid-summer 2010, due to a lack of M&A deal flow and
health care reform measures that have sparked downward estimate
revisions. Operationally, organic sales growth remained robust in 9M10, but due to higher material and personnel costs, the margin
progression has been slightly below our expectations. 9M-10 sales
were up 10.5% (organic +6%); EBIT increased nearly in line with sales
(+9.7%), resulting in an unchanged margin of 7.8%. EPS growth
(+11.6%) was broadly in line with expectations due to lower-thanexpected net financial expenses.
Q
Outlook Marburg-Giessen: day of reckoning in 2011
Rhn refined its 2010 net income guidance to ~EUR145m (we estimate
EUR146.5m), which appears achievable given the seasonal strength of
Q4. For 2011, the Healthcare Ministry has agreed a 1.15% change in
the rate of average revenues and most likely a discount of 30% for
surplus treatment volumes (for treatments beyond the negotiated
increases per hospital), which is expected to generate ~EUR500m in
savings for the health insurance funds. Against this backdrop, Rhn's
2011 guidance calls for revenues of EUR2.65bn (+4%) and EBITDA of
~EUR340m (+/- 5%), implying a ~60bps increase in the EBITDA margin
to ~12.8% and net income ~EUR160m (+/- 5%). The biggest earnings
growth contributor in 2011 will be the Marburg-Giessen (M-G)
University Hospital. The new hospital at Giessen will be completed in
Q1 with the move scheduled for April/May. The company has been
adamant that it definitely expects M-G to generate the targeted 10-12%
EBIT margin from YE-12, implying potentially a >20% increase in group
EBIT by 2013 (vs. 2010) from the pick-up in profitability at M-G alone.
For 2011 the company feels "very comfortable" with consensus
expectations of an EBIT margin of ~5%. The margin rise at M-G will be
driven by headcount reduction post the move into the new hospital,
volume growth (rising patient numbers but also further increases in the
Case Mix Index), and patient flow efficiency gains. In 2010 Rhn made
only one very small acquisition, Salze Klinik, a geriatric hospital. Rhn
also says it is in talks with three potential acquisition candidates, and
management remains convinced that the pace of privatisations, despite
improving financials for many municipalities, will pick up in 2011.
Though many investors have been disappointed that the pace of deals
completed has not accelerated quicker the only meaningful
transaction since the capital increase in summer 2009 was Medigreif,
price EUR110m we certainly welcome the fact that management has
not risked overpaying for an acquisition simply to get a deal done.
Following a sharp under-performance in H2-10, the shares offer good
value, combined with a defensive growth element. A potential major
catalyst could be the privatisation of the Kiel-Lbeck University Hospital
should it be given the green light to proceed in 2011.
EUR16.17
Price (07/01/2011)
Reuters: RHKG.DE Bloomberg: RHK GR
Stock data
Free float
Enterprise value
Daily volume
EUR2235m
EUR1776m
EUR2658m
138.2m
EUR 4.69m
Performances
1.4%
1.1%
-7.3%
-0.1%
-11.2% -27.9%
Absolute perf.
Relative perf.
23.9
23.9
21.9
21.9
19.9
19.9
17.9
17.9
15.9
15.9
13.9
13.9
11.9
11.9
9.9
9.9
7.9
7.9
5.9
01/01
5.9
03/02
06/03
09/04
12/05
Price/M DAX
03/07
06/08
Sector focus
Sector Top Picks

William Demant
Least favoured
Shareholders
Mnch.Family 12.5%, Free float 87.5%
2009
2010E
2011E
2012E
16.0
15.5
13.1
11.0
EV/EBITDA (x)
9.1
8.7
7.2
6.2
NS
0.0
6.3
6.7
Net debt/EBITDA (x)
1.5
1.4
0.9
0.6
Yield (%)
1.7
1.7
1.9
2.3
ROCE (%)
9.8
10.3
11.4
12.7
1.4
1.4
1.3
1.2
P/E (x)
Q
Q
234
www.cheuvreux.com
01/11
Price
Craig ABBOTT
Research Analyst
(49) 69 47 89 75 25
10/09
January 2011
GERMANY
Company profile
Leading private hospital operator and consolidator

Rhn Klinikum is one of three leading private hospital operators in
Germany, with sales in 2010E of EUR2.6bn and net earnings of
~EUR145m. The company owns and operates 53 hospitals with a
total capacity of ~16,000 beds.
Q
Its business model is based on acquiring ailing public hospitals,

implementing its patient flow model and turning around their
profitability. Compared to public hospital operators, Rhn generates
significant cost savings through procurement, four different stages
of care/accommodation, better coordination among staff and
departments and, over time, lower staffing requirements.
Q Acquisitive growth model focused on Germany
Rhn operates solely in Germany and currently has no plans to
expand abroad. The privatisation process in the German hospital
industry is set to continue as pressures on the public hospital sector,
which suffers the effects of structural underinvestment, will persist
and probably intensified after the recent recession. The pace of
acquisitions is difficult to forecast, somewhat limiting short-term
visibility on the M&A pipeline, but from a medium-term perspective
Rhn still has significant acquisitive growth potential. The company
aims to raise its market share from ~3% today to >8% in the
medium term.
SWOT analysis
Strengths
Weaknesses
Germany's largest listed and

one of the top three private
hospital operators.
Greater margin drag from

newly acquired clinics than in the
past due to deteriorating
profitability at public hospitals.
Rhn's financial strength

(especially after the recent
capital increase) and
management experience should
enable it to remain a leading
consolidator in the German
hospital industry.
Low visibility on timing of

acquisitions, which is a very
political process.
Management's solid track

record for acquisitions and
restructuring.
Opportunities
Threats
Significant acquisitive growth

opportunities due to the
privatisation process in the
German hospital industry.
Pricing regulation, future

healthcare reforms could put
margins under pressure.
Foreign operators could enter

the market, driving up acquisition
prices.
Medium-term potential to
enter foreign markets with similar
structures (e.g. Poland)
235
Tight supply conditions for

specialist doctors may keep
wage pressure high.
www.cheuvreux.com
Valuation
Our target price of EUR19 is DCF-based the

most appropriate approach, in our view, given
the long-term nature of Rhn Klinikum's
business model. Our DCF model is based on our
earnings model, which reflects both organic and
acquisitive sales growth (through 2015E). We
assume a WACC of 8.5% and 1.5% terminal
growth.
The company's multiples are not demanding,
considering that they are currently inflated by
margins suppressed by its recent acquisition
spree, which has however laid the groundwork
for earnings growth for the next 3-4 years. Rhn
is also Europe's only major listed pure-play
hospital operator a uniqueness factor that
should support its valuation.
Investment case
M&A catalyst to gradually emerge. Although

Rhn has only completed one very small
acquisition since buying the Medigreif chain at
the end of 2009, the pace of acquisitions in the
German hospital industry did in fact accelerate
in 2010 with some 14 transactions taking place.
Rhn currently is in negotiations with 3 hospitals
and claims that its M&A pipeline is beginning to
fill. Given the ongoing financial pressure on
states and municipalities and the huge
investment backlog in the public hospital sector
estimated to be ~EUR50bn the pace of
acquisitions is likely to continue to accelerate in
2011. Given its financial strength, Rhn still has
significant acquisitive growth potential. A
potential major catalyst could be the KielLbeck University Hospital privatisation if
approved.
Defensive growth qualities are still key. We
believe stocks that offer stable, non-cyclical
demand growth will begin to outperform again in
2011. Rhn's organic revenue growth should
remain robust (3-5%), driven by patient volume
growth (shorter average duration, market share
gains) and an increase in the proportion of
higher yielding treatments (Case-Mix-Index).
Furthermore, the turnaround in earnings at
Marburg-Giessen alone should boost EBIT by
11% by 2012E.
January 2011
GERMANY
Rhoen Klinikum
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
236
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,044.8
9.3%
(546.6)
(317.5)
180.7
3.4%
(57.1)
123.6
-3.4%
0.0
0.0
0.0
123.6
(11.9)
0.0
0.0
(31.7)
0.0
0.0
0.0
80.0
0.0
(3.8)
76.2
0.0
0.0
76.2
1.1%
1,415.8
35.5%
(793.6)
(414.8)
207.4
14.8%
(67.3)
140.1
13.3%
0.0
0.0
0.0
140.1
(16.5)
0.0
0.0
(35.2)
0.0
0.0
0.0
88.2
0.0
(4.6)
83.6
0.0
0.0
83.6
9.7%
1,933.0
36.5%
(1,127.8)
(584.1)
221.1
6.6%
(75.0)
146.1
4.3%
0.0
0.0
0.0
146.1
(20.4)
0.0
0.0
(16.6)
0.0
0.0
0.0
109.1
0.0
(3.9)
105.2
0.0
0.0
105.2
25.8%
2,024.7
4.7%
(1,204.0)
(571.4)
249.3
12.8%
(91.8)
157.5
7.8%
0.0
0.0
0.0
157.5
(20.4)
0.0
0.0
(25.9)
0.0
0.0
0.0
111.2
0.0
(4.9)
106.3
0.0
0.0
106.3
1.0%
2,130.3
5.2%
(1,270.6)
(596.9)
262.8
5.4%
(90.7)
172.1
9.3%
0.0
0.0
0.0
172.1
(29.2)
0.0
0.0
(20.3)
0.0
0.0
0.0
122.6
0.0
(5.3)
117.3
0.0
0.0
117.3
10.3%
2,320.1
8.9%
(1,379.2)
(656.9)
284.0
8.1%
(102.0)
182.0
5.8%
0.0
0.0
0.0
182.0
(23.3)
0.0
0.0
(27.1)
0.0
0.0
0.0
131.6
0.0
(5.9)
125.7
0.0
0.0
125.7
7.2%
2,613.3
12.6%
(1,539.8)
(749.1)
324.4
14.2%
(116.8)
207.6
14.1%
0.0
0.0
0.0
207.6
(25.9)
0.0
0.0
(30.0)
0.0
0.0
0.0
151.8
0.0
(5.0)
146.8
0.0
0.0
146.8
16.8%
2,791.6
6.8%
(1,639.6)
(781.0)
371.0
14.4%
(136.2)
234.8
13.1%
0.0
0.0
0.0
234.8
(24.2)
0.0
0.0
(34.7)
0.0
0.0
0.0
175.9
0.0
(5.2)
170.7
0.0
0.0
170.7
16.3%
3,011.4
7.9%
(1,754.2)
(842.9)
414.3
11.7%
(144.8)
269.5
14.8%
0.0
0.0
0.0
269.5
(19.3)
0.0
0.0
(41.3)
0.0
0.0
0.0
208.9
0.0
(6.5)
202.4
0.0
0.0
202.4
18.6%
137.6
6.7%
(33.5)
(120.4)
(30.9)
(16.3)
(1.7)
0.0
0.0
(17.8)
0.0
0.0
(35.8)
155.6
13.1%
(8.2)
(210.5)
(68.3)
(63.1)
5.0
0.0
0.0
(20.4)
0.0
0.0
(78.5)
184.0
18.3%
11.2
(310.9)
(265.2)
(115.7)
(2.4)
0.0
0.0
(19.4)
0.0
0.0
(137.5)
202.0
9.8%
(64.9)
(174.4)
(122.9)
(37.3)
(3.2)
0.0
0.0
(25.9)
0.0
0.0
(66.4)
213.3
5.6%
(26.3)
(265.9)
(204.4)
(78.9)
(6.6)
0.0
0.0
(29.0)
0.0
0.0
(114.5)
233.6
9.5%
(21.1)
(405.2)
(337.9)
(192.7)
422.9
0.0
0.0
(29.3)
0.0
0.0
200.9
269.1
15.2%
9.1
(277.6)
(202.8)
0.6
0.0
0.0
0.0
(30.0)
0.0
0.0
(29.4)
312.1
16.0%
(12.2)
(155.8)
(74.8)
144.1
0.0
0.0
0.0
(38.2)
0.0
0.0
105.9
353.7
13.3%
(6.2)
(193.7)
(106.3)
153.8
0.0
0.0
0.0
(42.7)
0.0
0.0
111.1
545.9
22.8
11.1
31.9
223.6
39.3
835.3
46.3
2.7
790.1
7.3
0.0
(11.1)
(1.1)
835.3
609.2
32.3
12.9
30.6
302.0
47.1
987.0
83.9
5.1
973.5
7.2
0.0
(82.4)
(5.8)
987.3
691.1
37.6
7.3
24.2
439.6
60.3
1,199.8
234.5
8.3
1,136.0
24.8
0.0
(203.7)
(10.5)
1,199.9
769.7
41.1
8.2
24.5
506.1
62.4
1,349.6
0.0
255.6
1,205.3
26.3
0.0
(137.7)
(6.8)
1,349.5
845.9
43.2
9.5
23.2
620.5
69.8
1,542.3
0.0
250.3
1,387.0
25.1
0.0
(120.0)
(5.6)
1,542.4
1,376.1
46.8
11.0
23.2
419.7
29.5
1,876.8
0.0
341.7
1,599.9
24.0
0.0
(88.8)
(3.8)
1,876.8
1,492.9
51.8
11.5
33.6
449.0
29.1
2,038.8
341.7
12.0
1,749.1
24.0
0.0
(87.0)
(3.3)
2,039.8
1,625.4
57.0
12.0
40.0
343.1
20.4
2,077.5
353.7
12.0
1,756.7
24.0
1.0
(67.9)
(2.4)
2,077.5
1,785.1
63.5
12.5
45.3
231.9
12.5
2,141.4
365.7
11.0
1,794.6
24.0
2.0
(55.9)
(1.9)
2,141.4
www.cheuvreux.com
January 2011
GERMANY
Rhoen Klinikum
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
0.74
1.0%
0.74
4.1%
0.81
9.7%
0.81
9.7%
1.01
25.8%
1.01
25.8%
1.03
1.1%
1.03
1.1%
1.13
10.3%
1.13
10.3%
1.07
-5.2%
1.07
-5.2%
1.06
-0.9%
1.06
-0.9%
1.24
16.3%
1.24
16.3%
1.47
18.6%
1.47
18.6%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.20
1.33
6.7%
5.1
0.00
0.23
1.50
13.0%
5.6
0.00
0.25
1.77
18.3%
6.4
0.00
0.28
1.95
9.8%
7.1
0.00
0.28
2.06
5.6%
7.9
0.00
0.29
1.99
-3.2%
11.4
0.00
0.28
1.95
-2.2%
10.5
0.00
0.31
2.26
16.0%
11.5
0.00
0.37
2.56
13.3%
12.5

Latest price
High
Low
Average price
103.700
103.700
0.000
103.700
103.700
0.000
103.700
103.700
0.000
103.700
103.700
0.000
103.700
103.700
0.000
117.300
117.300
0.000
138.200
138.200
0.000
138.200
138.200
0.000
138.200
138.200
0.000
11.30
11.63
9.25
10.31
16.15
16.86
11.41
14.12
18.37
20.16
14.00
17.23
21.58
24.13
17.78
21.52
17.07
54.05
14.15
19.31
17.12
17.95
13.70
15.89
16.47
19.85
15.25
17.64
16.17
16.55
15.96
16.23
16.17
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,172.3
1,464.8
1,644.0
2,049.1
1,903.1
2,419.1
2,237.8
2,855.1
1,770.2
2,481.6
2,054.4
2,581.9
2,276.2
2,814.3
2,234.7
2,658.9
2,234.7
2,550.6
15.4
15.4
8.5
NS
2.2
1.8
1.8
20.0
20.0
10.8
NS
2.9
2.1
1.4
18.1
18.1
10.4
NS
2.9
2.1
1.4
21.1
21.1
11.1
NS
3.0
2.2
1.3
15.1
15.1
8.3
NS
2.2
1.6
1.6
16.0
16.0
8.6
NS
1.5
1.4
1.7
15.5
15.5
8.5
0.0
1.6
1.4
1.7
13.1
13.1
7.2
6.3
1.4
1.3
1.9
11.0
11.0
6.3
6.7
1.3
1.2
2.3
8.1
11.9
1.40
9.6
9.9
14.6
1.45
11.7
10.9
16.6
1.25
11.7
11.5
18.1
1.41
12.6
9.4
14.4
1.17
10.1
9.1
14.2
1.1
9.8
8.7
13.6
1.1
9.4
7.2
11.3
1.0
7.8
6.2
9.5
0.8
6.7
15.2
1.6
17.3
11.8
7.7
1.3
39.3
27.2
12.6
1.9
14.6
9.9
6.2
1.4
47.1
28.5
10.8
2.4
11.4
7.6
5.6
1.6
60.3
24.6
12.2
2.5
12.3
7.8
5.5
1.5
62.4
27.3
9.0
2.9
12.3
8.1
5.8
1.4
69.8
24.8
12.2
1.8
12.2
7.8
5.7
1.3
29.5
27.1
12.5
1.7
12.4
7.9
5.8
1.3
29.1
26.4
15.3
1.1
13.3
8.4
6.3
1.4
20.4
25.1
NS
0.7
13.8
8.9
6.9
1.4
12.5
25.3
14.9
10.7
15.0
15.0
14.3
10.2
14.7
14.7
12.4
10.8
16.5
16.5
11.9
9.7
14.8
14.8
11.3
9.7
14.9
14.9
9.8
8.2
9.6
9.6
10.3
8.6
10.3
10.3
11.4
9.5
11.1
11.1
12.7
10.6
12.0
12.0
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
237
www.cheuvreux.com
January 2011
GERMANY
RENEWABLE EQUIPMENT
2/Outperform
Rating
Roth&Rau
Reuters: R8RG.DE Bloomberg: R8R GR
Recent developments Profit warning due to write-downs
On 9 November, Roth und Rau issued a profit warning with the release
of its preliminary Q3-10 results. 9M-10 sales were EUR189m (+19%
y-o-y), in line with our EUR194m estimate, but 9M-10 EBIT was only
EUR3m due to unscheduled write-downs and increased provisions. We
had expected EUR12m. The company said sales were line with its
expectations and that EBIT was hit, in particular, by depreciation
charges totalling EUR8.5m. Due to the probable cancellation of turnkey
projects in India, turnover that was already partially recognized in Q3-10
had to be booked to the company's own stocks and written down.
Further negative impacts came from delays in two turnkey projects in
Spain as well as the depreciation of working capital and allocations to
provisions. Additionally, the company booked additional development
expenses in the context of a key account project for which a new
production step was realised in mass production.
As a result, R8R lowered its EBIT outlook for 2010 to EUR9-9.5m,
implying an EBIT margin of just ~3%. Its former EBIT guidance was for
a margin of 8-9%. Its sales forecast remained unchanged at EUR285m.
Q
EUR12.70
Price (07/01/2011)
Working down the order backlog

Q
+183.5% EUR36.00
Outlook Working off the order book
We expect no significant order intake in 2011E, and so look for the

company to work off its huge order backlog of EUR365m (as of 9M-10).
We expect about 30GW of cell equipment to be installed in 2011E vs.
global new installed PV demand of about 16GW. Given that recent
order intake has been for higher-margin business, we expect R8R to
significantly increase its EBIT in 2011E. Given the relative shortage of
wafer equipment vs. cell equipment, we can expect further wafer
equipment orders in 2011E. Reminder: wafer equipment is a new field
for Roth &Rau and the company received only one major order in 2010
from a Indian company. If Roth&Rau manages to successfully ramp up
the lines, we expect further orders to follow. For 2011E, we also expect
the company to generate order intake from cell equipment upgrade
packages.
Stock data
Free float
Enterprise value
Daily volume
EUR206m
EUR178m
EUR117m
16.207m
EUR 2.30m
Performances
7.4%
-26.6% -61.4%
0.4%
-34.7% -61.9%
Absolute perf.
Relative perf.
56.0
56.0
46.0
46.0
36.0
36.0
26.0
26.0
16.0
16.0
6.0
05/06
6.0
12/06
07/07
01/08
08/08
Price/TECDAX
04/09
11/09
Price
Sector Top Picks

Least favoured
SMA, SolarWorld
Conergy
Shareholders
Free Float 82.3%; Roth & Rau families 11.4%; OTB
6.3%
EV/EBITDA (x)
2009
2010E
2011E
NS
12.3
7.2
5.7
13.9
2.2
1.8
1.1
0.9
NS
NS
9.7
Net debt/EBITDA (x)
(3.3)
(2.1)
(1.4)
(1.4)
Yield (%)
3.3
0.0
0.0
0.0
ROCE (%)
13.1
15.3
22.0
25.8
2.7
1.2
1.0
0.8
Philipp BUMM
Q
238
www.cheuvreux.com
2012E
Q
01/11
Sector focus
P/E (x)
Research Analyst
pbumm@cheuvreux.com
(49) 69 47.897.527
06/10
January 2011
GERMANY
Company profile
Leading supplier in the photovoltaic industry

Roth & Rau is a leading supplier of plasma process systems for the
photovoltaic industry. In its core market, anti-reflection coating
equipment for silicon solar cells, R8R is the world market leader with
a global share of approximately >50% (incl. OTB acquisition). Its
main competitor in this business is Centrotherm PV (share: roughly
25%).
Q
Q Supplier to automotive and semiconductor industries

Based on its plasma and ion-beam technology, the company also
supplies components and process equipment to the automotive and
semiconductor industries. Roth & Rau focuses on the development,
final assembly and distribution of its plasma process systems as well
as their control software.
Q Turnkey solutions
In addition to selling single items of production equipment, the
company also offers turnkey solutions for the production of silicon
solar cells in its photovoltaic division. Here Roth & Rau is the world
number two with a market share of 25% after by Centrotherm PV
with a dominant market share of approximately 50%. Through the
acquisition of CTF Solar GmbH, Roth&Rau became the only
independent supplier worldwide of a CdTe technology-based thinfilm turnkey line (the same technology First Solar is producing).
SWOT analysis
Strengths
Weaknesses
Firmly
Covers the key steps of the

solar cell production process
with in-house products
established solar cell

equipment supplier
Low visibility on order intake

due to the current economic
situation
Not focused so far on turnkey

solutions
Opportunities
Threats
Generating business in
emerging solar markets, e.g.
India and the Middle East
Push-outs and cancellations in

the current order backlog
Reduction
in political support
New

Asia could invade Roth&Rau's
turf
Further
order intake in the

wafer business
239
www.cheuvreux.com
Valuation

The company is trading at a P/E 11E ratio of
only 7.2x.
The three German solar equipment producers
Roth & Rau, Centrotherm and Manz Automation
are trading at similar EV/Sales multiples (0.50.7x) for 2011E. However, due to the cyclicality
of the cell equipment business, we see Roth &
Rau trading at a discount of 33-50% to
Centrotherm and Manz based on 2012E figures.
Investment case
Despite Roth & Rau's disappointing operating

performance in 2010 (profit warning), we expect
the company to benefit from very strong order
intake in the course of 2010. The company
suffered in 2010 from low-margin orders during
the financial crisis. According to the company,
its recently placed orders carry significantly
higher
margins.
Therefore,
we
expect
significantly higher profitability in 2011E than in
2010E and forecast an EBIT margin of 10%. We
also believe Roth & Rau has seen its trough.
We regard the current valuation as very
attractive as the company is trading at a
discount of 35+% compared to Centrotherm
and Manz Automation.
January 2011
GERMANY
Roth&Rau
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
240
2005
2006
2007
2008
2009
2010E
2011E
2012E
33.4
42.9
28.3%
(4.5)
(32.8)
5.5
-34.9%
(1.0)
4.5
-47.0%
0.0
0.0
0.0
4.5
0.3
0.0
0.0
(1.9)
0.0
0.0
0.0
2.9
0.0
0.0
2.9
0.0
0.0
2.9
-58.2%
146.2
NS
(7.6)
(123.1)
15.6
180.9%
(1.7)
13.9
NS
0.0
0.0
0.0
13.9
1.2
0.0
0.0
(3.4)
0.0
0.0
0.0
11.7
0.0
0.0
11.7
0.0
0.0
11.7
NS
272.1
86.1%
(20.2)
(217.4)
34.6
122.4%
(6.1)
28.6
106.0%
0.0
0.0
0.0
28.6
2.3
0.0
0.0
(8.4)
0.0
0.0
7.3
22.5
0.0
(0.1)
22.4
0.0
0.0
15.1
29.2%
197.9
-27.3%
(38.7)
(134.9)
24.3
-29.7%
(8.2)
16.1
-43.6%
0.0
0.0
0.0
16.1
(0.3)
0.0
0.0
(20.1)
0.0
0.0
0.0
(4.3)
0.0
(1.1)
(5.4)
0.0
0.0
(5.4)
NS
273.4
38.1%
(62.9)
(170.9)
39.6
63.0%
(16.4)
23.2
44.3%
0.0
0.0
0.0
23.2
0.6
0.0
0.0
(6.7)
0.0
0.0
0.0
17.2
0.0
(1.1)
16.0
0.0
0.0
16.0
NS
397.2
45.3%
(77.7)
(254.9)
64.6
63.0%
(23.8)
40.8
75.6%
0.0
0.0
0.0
40.8
0.6
0.0
0.0
(11.6)
0.0
0.0
0.0
29.8
0.0
(1.1)
28.7
0.0
0.0
28.7
79.0%
510.1
28.4%
(99.8)
(327.3)
83.0
28.4%
(30.6)
52.4
28.3%
0.0
0.0
0.0
52.4
0.9
0.0
0.0
(16.0)
0.0
0.0
0.0
37.3
0.0
(1.1)
36.2
0.0
0.0
36.2
26.2%
0.0
(2.8)
(2.8)
5.5
0.0
0.0
0.0
0.0
(2.6)
(1.1)
1.8
3.9
-53.0%
0.0
(2.0)
(1.6)
1.9
0.0
0.0
0.0
0.0
27.5
0.0
29.4
13.4
NS
(7.4)
(8.9)
(7.4)
(2.9)
0.0
0.0
0.0
0.0
36.0
0.2
33.3
28.6
113.4%
(60.1)
(22.7)
(20.0)
(54.2)
0.0
0.0
0.0
0.0
100.8
(28.5)
18.1
3.9
-86.4%
0.0
0.0
199.9
3.9
0.0
0.0
0.0
0.0
0.0
(10.2)
(6.3)
33.6
NS
20.2
(85.1)
191.0
(31.3)
0.0
0.0
0.0
(13.8)
35.9
0.0
(9.2)
53.7
59.8%
(27.0)
(30.0)
371.2
(3.3)
0.0
0.0
0.0
0.0
0.0
0.0
(3.3)
67.9
26.4%
(22.5)
(25.5)
489.6
19.9
0.0
0.0
0.0
0.0
0.0
0.0
19.9
4.7
0.0
0.0
0.0
0.0
NS
4.7
0.0
2.8
3.2
0.2
0.0
0.0
0.0
6.2
35.1
0.0
0.4
2.8
0.0
NS
38.3
0.0
3.7
3.3
0.2
0.0
6.3
14.7
13.5
82.8
0.0
0.5
6.1
(61.1)
NS
28.3
3.9
0.7
9.4
0.2
0.0
13.6
9.3
27.8
206.5
0.0
0.0
14.0
(86.8)
NS
133.7
11.2
16.2
21.1
11.0
0.0
73.8
27.1
133.3
206.5
0.0
1.0
13.0
(80.7)
NS
139.8
11.2
16.2
22.1
12.0
0.0
73.8
37.3
135.3
244.6
1.1
1.0
18.3
(84.1)
NS
180.9
11.2
16.2
71.2
31.6
0.0
53.6
19.6
183.8
273.3
2.3
1.0
27.0
(89.5)
NS
214.1
11.2
16.2
77.3
31.6
0.0
80.6
20.3
216.9
309.4
3.4
1.0
35.0
(117.4)
NS
231.4
11.2
16.2
72.2
31.6
0.0
103.1
20.2
234.3
(3.0)
(21.9)
8.5
0.0
8.5
0.0
0.0
0.0
8.5
0.0
0.0
0.0
(1.6)
0.0
0.0
0.0
6.9
0.0
0.0
6.9
0.0
0.0
6.9
8.3
www.cheuvreux.com
January 2011
GERMANY
Roth&Rau
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2005
2006
2007
2008
2009
2010E
2011E
2012E
1.35
0.34
-74.7%
0.34
-74.7%
1.22
NS
1.22
NS
1.19
-2.6%
1.76
44.5%
(0.40)
NS
(0.40)
NS
1.00
NS
1.00
NS
1.77
76.8%
1.77
76.8%
2.23
26.1%
2.23
26.1%
0.7
0.00
0.00
0.46
-71.5%
3.6
0.00
0.00
1.40
NS
7.8
(0.58)
0.00
2.26
61.0%
15.0
0.00
1.00
0.29
-87.4%
14.0
0.00
0.00
2.10
NS
15.1
0.00
0.00
3.31
57.8%
16.9
0.00
0.00
4.19
26.5%
19.1
6.308
5.140
0.000
9.672
8.474
0.000
10.639
9.565
0.000
13.800
12.684
0.000
13.800
13.684
0.000
16.207
15.997
0.000
16.207
16.207
0.000
16.207
16.207
0.000
9.52
10.72
6.34
8.25
60.64
64.83
8.77
31.20
14.90
60.64
10.56
30.99
30.22
32.85
10.43
20.81
12.29
33.95
10.65
21.98
12.70
13.40
12.25
12.71
12.70
-
86.7
87.1
574.3
513.7
205.6
118.8
417.0
337.3
169.6
86.5
205.8
117.3
205.8
89.4
NS
NS
NS
NS
NS
0.0
27.8
27.8
20.7
2.2
2.6
6.6
0.0
49.7
49.7
43.3
NS
7.8
18.6
0.0
8.5
12.5
6.6
NS
1.0
1.0
0.0
NS
NS
NS
0.9
2.2
2.7
3.3
12.3
12.3
5.9
NS
0.8
1.2
0.0
7.2
7.2
3.8
NS
0.8
1.0
0.0
5.7
5.7
3.0
9.7
0.7
0.8
0.0
NS
NS
NS
NS
15.7
19.3
2.03
23.3
33.0
37.1
3.51
41.2
3.4
4.2
0.44
4.4
13.9
21.0
1.7
88.4
2.2
3.7
0.3
2.6
1.8
2.9
0.3
2.2
1.1
1.7
0.2
1.3
NS
NS
25.5
25.5
20.8
5.6
NS
0.0
NS
NS
12.9
10.5
6.8
3.2
NS
0.0
NS
NS
10.6
9.5
8.0
5.3
NS
0.0
NS
NS
12.7
10.5
8.3
2.2
NS
0.0
NS
NS
12.3
8.1
NS
1.6
NS
(252.0)
NS
NS
14.5
8.5
6.3
1.8
NS
0.0
NS
NS
16.3
10.3
7.5
2.1
NS
0.0
NS
NS
16.3
10.3
7.3
2.5
NS
0.0
141.8
115.7
NS
NS
33.9
20.7
8.6
8.6
50.2
38.9
15.1
15.1
23.3
17.0
11.4
11.4
13.1
NS
NS
NS
15.3
11.0
6.8
6.8
22.0
15.9
11.1
11.1
25.8
18.1
12.4
12.4
1.35
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
1.62

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
241
www.cheuvreux.com
January 2011
GERMANY
AUTO COMPONENTS
2/Outperform
Rating
+53.4% EUR11.00
SAF-HOLLAND
Recovering from worst crisis in decades
Recent developments Full participation in nascent truck
recovery
Q3-10 was the first quarter post-recession that all global heavy-truck
markets recovered at double-digit y/y growth rates. Global truck sales
rose 26% y/y to 117k units. With excess inventories of trailers having
been sold into the market, SAF Holland benefited from an even more
pronounced rebound of its respective markets. Its 66% top-line
expansion in Q3-10 vs. Q3-09 was an outstanding performance. Sales
in its core Trailer division even rose 124% y/y in Q3-10.
This impressive top-line growth translated to a clean EBIT margin of
5.3% after 4.7% in Q2 and 2.5% in Q1. SAF's recovery is clearly
gaining traction. Moreover, unlike many automotive suppliers, SAF did
not benefit from cancelled summer production breaks, and so its
improvement in profitability in Q3-10 was even more cost-driven than
that of its auto peers.
Outlook A capital increase is essential to solidify the

balance sheet
SAF had reported very strong numbers in the aftermath of the crisis,
which caused us to raise expectations substantially already before the
Q3-10 release. We are strongly convinced that SAF will quickly meet or
even surpass profitability levels reported before the crisis. Even
management's mid-term targets for sales of EUR1bn and EBIT of
EUR100m although slightly above our expectations appear within
reach.
The big issue on the agenda is that SAF needs to massively cut its
group indebtedness, which resulted not only from losses in the crisis
but even more from its past before the company went public. Group
gearing stands at an abnormally high 1280%. Interest bearing debt of
EUR310m results in total interest expense of some EUR30m (~14m
cash-out, 16m deferred) or 3.9% of our group sales estimate of
EUR765m for 2011E.
This situation makes a capital increase essential. Management held an
extraordinary AGM on 14 December 2010 to obtain shareholder
approval for authorized capital to double its existing capital. Assuming
a rights issue for 15m new shares vs. 20m total outstanding shares
today, the measure would trigger a 75% gross dilution. However,
netting out reduced interest expense the dilution would be just 32% in
our scenario.
Even after a 2-for-1 capital increase, the shares would remain highly
attractively valued. Its P/E of 6.4x (pre-dilution) for 11E would grow to
8.9x post capital increase. A substantial rise in the liquidity of the
shares, a more solid balance sheet and substantial earnings growth
prospects make SAF Holland shares a unique investment opportunity.
EUR7.17
Price (07/01/2011)
Reuters: SFQN.DE Bloomberg: SFQ GR
Stock data
Free float
Enterprise value
Daily volume
EUR148m
EUR117m
EUR417m
20.702m
EUR 0.41m
Performances
20.4%
25.8%
189.1%
14.7%
7.0%
103.3%
Absolute perf.
Relative perf.
18.4
18.4
16.4
16.4
14.4
14.4
12.4
12.4
10.4
10.4
8.4
8.4
6.4
6.4
4.4
4.4
2.4
2.4
0.4
07/07
0.4
12/07
06/08
11/08
04/09
Price/SDAX
09/09
02/10
Sector focus
Sector Top Picks
Least favoured
Daimler, Volkswagen
FIAT
Shareholders
Free Float 79.1%, Management/Founder 20.9%
P/E (x)
EV/EBITDA (x)
2009
2010E
2011E
NS
16.9
6.4
4.3
29.9
8.2
5.3
4.1
Q
242
www.cheuvreux.com
2012E
NS
9.4
8.1
17.2
Net debt/EBITDA (x)
29.6
5.5
3.4
2.5
Yield (%)
0.0
0.0
3.1
4.7
ROCE (%)
NS
9.5
16.6
20.3
0.9
1.2
1.1
1.0
Q
01/11
Price
Alexander NEUBERGER
Research Analyst
(49) 69 47 89 73 84
07/10
January 2011
GERMANY
Company profile
Supplier of the global truck industry

SAF-Holland S.A. was founded in September 2005 as the umbrella
company for the merger of SAF and US-based truck supplier
Holland. SAF-Holland basically produces eight different modules for
trucks and trailers. Its customers include most of the leading truck
and trailer manufacturers in western Europe and the US, and these
two markets account for 95% of group sales. Hardly any other
industry is more cyclical than the global truck/trailer supplier
business. Some of SAF's peers or clients saw their sales drop by as
much as 90% in the recession; SAF's group sales fell 48% y-o-y in
2009. Its rapid response to the crisis, including a far-reaching
restructuring plan, averted bankruptcy. However, its EUR305m
interest-bearing debt load is a massive drag on the group's
recovery.
Q
Q Group strategy focuses on innovation and service

SAF-Holland mostly produces trailer axles but also equipment for
the interface between trucks and trailers, and suspension modules
for trucks/trailers as well as modules (landing legs & kingpins)
required for parking trailers after they are decoupled from the truck.
One of its core technologies is to make such products as light as
possible to reduce fuel consumption and maximise a truck's loading
capacity. SAF just launched trailers with disk brakes in the US to
replace old-style drum brakes since new US regulation requires a
substantial cut in trailer braking distances. SAF operates one of the
world's largest (non-captive) global service networks for its
products.
Business mix
The SAF-Holland group has three divisions: Roughly 50% of sales
come from Trailer Systems (trailer products), while Powered Vehicle
Systems (truck products) and Aftermarket contribute each about
25% of sales. Powered Vehicle Systems is currently by far the most
profitable business, accounting for 40-50% of adjusted group EBIT,
although this share is likely to decline with the rebound of
profitability in Trailer Systems.
Q
SWOT analysis
Strengths
Weaknesses
Global top 3 with its products

for trailers.
Strong presence in two of the

world's three largest truck and
trailer markets (US/EU)
Negligible presence in Russia,

the world's biggest truck market
in 07.
Highly cyclical business,

bearing risk of severe losses in
the next cyclical downturn
Opportunities
Threats
Huge growth potential from

substitution of drum brakes for
trailers in the US to shorten
braking distances
Any return to losses could

wipe out remaining equity (equity
ratio FY09: 5%).
Falling
equity markets could

jeopardize the company's large
capital increase (an estimated
EUR80m), which is essential to
reduce its EUR310m interest
bearing debt
Rising fuel prices spur market

share gains for SAF's lightweight truck components
Substitution of trailers for

semitrailers grows business in
fifth wheels and landing legs
243
www.cheuvreux.com
Valuation
SAF's most recent quarter (Q3-10) shows the

group's recovery is gaining traction with gross
margins already above pre-crisis levels. A harsh
restructuring plan implemented in the crisis,
reducing its domestic workforce by 50%, is the
basis for the group's return to profitability.
We consider the shares highly attractively
valued even after an expected 2-for-1 new
share issue. A massive cut in interest expense
would limit the dilutive impact from the
increased share count. SAF's fully diluted P/E
for 11E in our scenario is 8.9x and even 6.2x for
12E. We consider such a massive discount to
peers as exaggerated despite the stretched
balance sheet situation.
Investment case
Hardly any other industry is as cyclical as the

truck equipment and trailers industry. In some
cases, a 90% drop in order activity for some of
this equipment wiped out companies with
histories of more than 50 years.
Meanwhile, the reduction of unsold trailer
inventories, a clear upswing in global
transportation demand, and a streamlined
competitive landscape have clearly improved the
environment for SAF-Holland apart from its
severe cost cutting.
Three successive quarters have shown that the
company's
cost-cutting
measures
were
sufficient to lower costs to a sustainable level
without eradicating too much capacity that
would now otherwise be missing to benefit from
the industry recovery.
The crisis took its toll on SAF's balance sheet: A
capital ratio of 5%, 4-digit gearing, and annual
interest expense above EBIT undoubtedly make
a capital increase unavoidable. Management has
already communicated this and targets a
capital-raising for H1-11. But even after a 2-for-1
rights issue, we consider the shares as highly
attractively valued. SAF Holland is the only
European pure play to participate in the recovery
of the EU truck supplier industry.
We stick to our EUR11 fair value offering huge
upside of 53%.
January 2011
GERMANY
SAF-HOLLAND
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
244
2007
2008
2009
2010E
2011E
2012E
812.5
798.8
-1.7%
(82.3)
(673.9)
42.6
-25.8%
(23.0)
19.6
-49.4%
(16.0)
0.0
0.0
3.6
(26.2)
0.0
6.5
(2.8)
0.5
0.0
(16.0)
(25.0)
0.0
0.0
(25.0)
0.0
0.0
7.0
-37.5%
419.6
-47.5%
(57.5)
(352.3)
9.8
-77.0%
(28.4)
(18.6)
NS
(11.1)
0.0
0.0
(29.7)
(26.1)
0.0
7.5
7.0
(0.1)
0.0
(11.1)
(48.9)
0.0
0.0
(48.9)
0.0
0.0
(26.7)
NS
614.0
46.3%
(59.4)
(504.5)
50.1
NS
(18.8)
31.3
NS
0.0
0.0
0.0
31.3
(25.7)
0.0
7.5
(0.1)
(5.6)
0.0
0.0
7.5
0.0
0.0
7.5
0.0
0.0
7.5
128.1%
765.0
24.6%
(61.9)
(624.9)
78.2
56.1%
(21.2)
57.0
82.1%
0.0
0.0
0.0
57.0
(28.7)
0.0
7.5
(10.0)
(2.6)
0.0
0.0
23.2
0.0
0.0
23.2
0.0
0.0
23.2
NS
845.0
10.5%
(66.9)
(681.3)
96.8
23.8%
(25.8)
71.0
24.6%
0.0
0.0
0.0
71.0
(26.3)
0.0
7.5
(14.9)
(2.6)
0.0
0.0
34.7
0.0
0.0
34.7
0.0
0.0
34.7
49.6%
(82.2)
(9.3)
0.0
(61.6)
0.0
0.0
0.0
0.0
(1.0)
68.0
5.4
14.0
-53.2%
(13.3)
(63.1)
0.0
(62.4)
0.0
0.0
0.0
0.0
0.0
49.2
(13.2)
(9.4)
NS
30.8
(9.7)
0.0
11.7
0.0
0.0
0.0
0.0
0.0
(5.6)
6.1
26.3
NS
(0.9)
(13.5)
0.0
11.9
0.0
0.0
0.0
0.0
0.0
5.2
17.1
44.4
68.8%
(0.3)
(32.1)
0.0
12.0
0.0
0.0
0.0
0.0
0.0
(8.4)
3.6
60.5
36.3%
(3.7)
(31.3)
0.0
25.5
0.0
0.0
0.0
(4.6)
0.0
(21.7)
(0.8)
108.2
0.0
13.6
13.1
236.4
218.5
371.3
69.1
118.6
108.6
1.6
16.5
57.0
7.0
371.4
72.1
0.0
14.6
19.1
304.8
422.7
410.6
54.3
148.3
117.7
0.1
13.8
76.2
9.5
410.4
23.8
0.0
14.3
12.9
289.8
NS
340.8
44.3
137.7
108.6
0.0
10.9
39.3
9.4
340.8
31.2
0.0
14.6
17.8
277.6
NS
341.2
44.3
133.0
107.9
0.0
10.9
45.1
7.3
341.2
54.5
0.0
14.9
19.1
265.4
487.0
353.9
44.3
132.0
119.9
0.0
10.9
46.8
6.1
353.9
84.5
0.0
15.4
16.9
243.9
288.6
360.7
44.3
131.0
126.4
0.0
10.9
48.2
5.7
360.8
(129.5)
(625.6)
57.4
(18.7)
38.7
0.0
0.0
0.0
38.7
(32.6)
0.0
6.7
4.4
0.7
0.0
0.0
11.2
0.0
0.0
11.2
0.0
0.0
11.2
29.9
www.cheuvreux.com
January 2011
GERMANY
SAF-HOLLAND
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2007
2008
2009
2010E
2011E
2012E
0.15
0.36
143.2%
(1.29)
NS
(1.29)
NS
(2.36)
-83.7%
0.36
128.1%
0.36
115.3%
1.12
NS
1.12
NS
1.68
49.5%
1.68
49.5%
5.7
1.65
0.00
0.72
81.8%
3.5
1.07
0.00
(0.45)
NS
1.2
0.00
0.00
1.27
NS
1.5
0.00
0.22
2.15
68.9%
2.4
0.00
0.34
2.92
36.2%
3.7
18.837
75.523
0.000
20.700
19.438
0.000
20.702
20.702
0.000
20.702
20.702
0.000
20.702
20.702
0.000
20.702
20.702
0.000
13.75
19.35
11.08
14.74
1.20
14.60
0.99
8.08
2.67
4.00
0.30
1.94
6.14
6.49
1.97
4.58
7.17
7.64
6.16
6.98
7.17
-
127.1
408.4
148.4
417.8
148.4
396.8
92.7
92.7
34.7
2.4
0.7
0.0
NS
3.3
1.7
0.3
0.8
0.0
NS
NS
NS
2.3
0.9
0.0
16.9
16.9
4.8
9.4
4.1
1.2
0.0
6.4
6.4
3.3
8.1
3.0
1.1
3.1
4.3
4.3
2.5
17.2
1.9
1.0
4.7
4.0
6.0
0.29
3.7
7.2
15.6
0.38
7.6
29.9
NS
0.7
17.6
8.2
13.0
0.7
7.9
5.3
7.3
0.5
5.7
4.1
5.6
0.5
4.6
1.8
7.9
7.1
4.8
1.4
2.3
218.5
0.0
1.6
NS
5.3
2.5
NS
2.0
422.7
0.0
0.4
NS
2.3
NS
NS
1.3
NS
0.0
1.9
10.6
8.2
5.1
1.2
1.9
NS
0.0
2.7
6.0
10.2
7.5
3.0
2.2
487.0
19.6
3.7
4.0
11.5
8.4
4.1
2.4
288.6
20.3
11.0
11.0
10.9
10.9
4.9
4.9
NS
NS
NS
NS
NS
NS
9.5
9.5
27.3
27.3
16.6
16.6
54.1
54.1
20.3
20.3
51.7
51.7
0.15
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
0.40

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
245
www.cheuvreux.com
January 2011
GERMANY
HEALTHCARE PROVIDERS & SERVICES
2/Outperform
Rating
+7.1% EUR30.00
Sartorius
Reuters: SATG_p.DE Bloomberg: SRT3 GR
Impressive turnaround
Q
Stock data
Recent developments Remarkable Mechatronics recovery
Sartorius reported strong Q3 results at the end of October 2010, with

sales up 7.5% at cc and orders even up 10.2%. This performance was
driven primarily by the strong momentum in Mechatronics, which
realised an impressive turnaround after having experienced
considerable headwinds from the economic crisis in 2009. Q3 EBITA
rose 18%, driven by Mechatronics but also by a healthy Q3-10 Biotech
margin of 17.0%.
The muted growth at Biotech nonetheless remained a fly in the
ointment. Sales at the division rose by 4.6% at cc in Q3-10, similar to in
H1-10. While sales in North America and Asia-Pacific both increased at
a double-digit rate at cc, Europe (estimated 54% of 9M Biotech sales)
was down 2.2% in 9M-10 at cc. Adjusted for swine flu, sales in Europe
climbed about 2%, but still remained below the divisional run rate.
Management confirmed that its single-use business in Europe rose by
nearly 10%, but the equipment business was a drag. This should
improve in 2011E.
After the results Sartorius upped its FY EBITA margin guidance to
+250bps (100-200) and confirmed its group sales guidance. Biotech:
+5% sales growth (high single-digit); 16% margin (15%). Mechatronics:
+7% (low single-digit); 6% margin (5%).
Q
EUR28.01
Price (07/01/2011)
Free float
Enterprise value
Daily volume
EUR478m
EUR239m
EUR890m
17.05m
EUR 0.20m
Performances
19.4%
59.1%
76.8%
13.8%
35.4%
24.4%
Absolute perf.
Relative perf.
47.9
47.9
42.9
42.9
37.9
37.9
32.9
32.9
27.9
27.9
22.9
22.9
17.9
17.9
12.9
12.9
7.9
7.9
2.9
01/01
2.9
03/02
06/03
09/04
12/05
Price/SDAX
03/07
06/08
09/09
12/10
Price
Outlook Biotech momentum set to improve
We believe the outlook for Sartorius is promising. Growth in Biotech

should improve in 2011E due to a) the non-recurrence of H1N1 base
effects, b) equipment business, and c) the fact that some fermenter
orders received in 2010 should translate into sales in 2011E. We expect
normalised Biotech growth of 7% in 2011E. We also believe Sartorius
will at some stage provide guidance on the mid-term potential of the
division, maybe with its FY-10 results.
Mechatronics should also continue to develop favourably, driven by a
strong order intake and its refocusing on the pharma and food industry.
Since the restructuring measures, the division's fixed cost base has
improved significantly.
Also bearing in mind the company's very successful deleveraging,
thanks to its strong cash flow generation, smaller bolt-on acquisitions
may be possible, but we do not believe any deals are imminent.
Sector focus
Sector Top Picks

William Demant
Least favoured
Shareholders
Free Float 50.0%, Executor 25.0%, Bio-Rad 12.5%,
Sartorius Ag 9.0%, Family Sartorius 3.5%
2009
2010E
2011E
2012E
P/E (x)
13.4
13.4
12.6
11.0
EV/EBITDA (x)
11.3
8.9
7.7
6.8
0.4
5.9
7.0
8.2
Net debt/EBITDA (x)
3.9
2.0
1.5
1.0
Yield (%)
2.6
1.9
2.2
2.5
ROCE (%)
5.0
12.5
14.5
16.1
1.0
1.2
1.1
1.1

Research Analyst
(49) 69 478 975 26
Q
Q
246
www.cheuvreux.com
January 2011
GERMANY
Company profile
Biotech the gem of Sartorius AG

Sartorius has two divisions, Biotechnology and Mechatronics. In
Biotechnology (Sartorius Stedim Biotech) Sartorius acts as a thirdparty supplier to the biopharma industry, offering filtration equipment
(global no. 3), fermenters (global no.2) and single-use bags (global
no. 1). Its biotech activities are fully consolidated and in 2009
contributed 67% to sales and nearly 100% to group EBITA. 25% of
the Biotech business belongs to minority shareholders. Part of the
Biotech business stems from the Stedim acquisition in 2007.
Sartorius Stedim Biotech is listed separately at Euronext.
Q
Q Mechatronics the second division

In the Mechatronics division (33% of 2009 sales; breakeven EBITA)
Sartorius supplies high-end balances, scales and services to labs
(global no.2) and industrial clients. In particular, demand from
industrial clients is sensitive to the overall economic environment.
Q Europe is the largest market
On a group level, Europe remains Sartorius' largest market (57%),
followed by North America (21%) and Asia-Pacific (18%).
Q Sartorius family holds the majority of voting shares
The capital of Sartorius AG is divided into ordinary and preference
shares, with 50% of the ordinaries being controlled by the Sartorius
family. Bio-Rad holds a 25% financial stake in the ordinary shares.
The preference shares are the more liquid investment vehicle. A third
investment option is the French-listed Sartorius Stedim Biotech.
SWOT analysis
Strengths
Weaknesses
Leading market position
Still underrepresented in the

US and smaller than key
competitors
Pricing power in Biotech:

fragmented client base;
consolidated supplier base; high
barriers to switch bioprocess
suppliers due to revalidation
requirements; low ticket prices
Complex corporate structure;

only 10% free float of ordinary
shares
75% share of recurring

revenues in Biotech
Opportunities
Threats
Structural growth in
biotechnology combined with
substantial economies of scale /
high operating leverage should
support margin progression
Turnaround in
Mechatronics
More cautious FDA approval

procedures could reduce number
of biotech drug launches
Mechatronics dependent on
general economic trend
Significant financial leverage

with a large share of debt subject
to variable interest rates
247
FX risk
www.cheuvreux.com
Valuation
We reiterate our 2/Outperform rating and EUR30

target price for Sartorius. Based on our TP,
Sartorius would be trading at a moderate 11.8x
12E P/E. Our forecasts are 12% above
consensus for 2011 and 20% for 2012.
Investment case
We see Sartorius as a gem in the small cap

space thanks to its Biotech business model:
high single-digit top-line growth; scalability of
the business model; consolidated competitive
environment; fragmented client base; some 75%
of sales are recurring revenues. While
Mechatronics checks fewer boxes, the division
has realised a very successful turnaround and in
the lab market Sartorius is a leading player
beside Mettler Toledo.
We believe this quality is still not adequately
reflected in the company's valuation levels
despite an impressive recent performance. In
our view the stock is still largely ignored by the
market, as most sell-side analysts do not cover
its actively. With the return of business
momentum, investors' attention is likely to return
and we expect the stock to benefit. Note that
our forecasts are 12% and 20% above those of
the market for 2011 and 2012.
January 2011
GERMANY
Sartorius
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
248
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
467.6
5.7%
(182.0)
(230.8)
54.8
45.4%
(19.9)
34.9
101.7%
(2.4)
0.0
0.0
32.5
(4.7)
0.0
0.0
(12.6)
0.0
0.0
0.0
15.2
0.0
0.0
15.2
0.0
0.0
17.6
151.4%
484.3
3.6%
(187.3)
(234.8)
62.2
13.5%
(18.5)
43.7
25.2%
0.0
0.0
0.0
43.7
(8.5)
0.0
0.0
(13.2)
0.0
0.0
0.0
22.0
0.0
0.1
22.1
0.0
0.0
22.1
25.6%
521.1
7.6%
(191.2)
(258.6)
71.3
14.6%
(19.2)
52.1
19.2%
0.0
0.0
0.0
52.1
(6.2)
0.0
0.0
(16.8)
0.0
0.0
0.0
29.0
0.0
0.0
29.0
0.0
0.0
29.0
31.2%
589.0
13.0%
(220.4)
(286.3)
82.3
15.4%
(23.1)
59.2
13.6%
(4.3)
0.0
0.0
54.9
(13.7)
0.0
0.0
(10.9)
0.0
0.0
0.0
30.3
0.0
(0.2)
30.1
0.0
(4.1)
30.3
4.5%
611.6
3.8%
(231.7)
(299.8)
80.1
-2.7%
(23.3)
56.8
-4.1%
(6.3)
0.0
0.0
50.5
(23.7)
0.0
0.0
(10.6)
0.0
0.0
0.0
16.3
0.0
(3.9)
12.4
0.0
(3.3)
15.4
-49.2%
602.1
-1.6%
(227.5)
(317.3)
57.3
-28.5%
(26.4)
30.9
-45.6%
(7.0)
0.0
0.0
23.9
(13.6)
0.0
0.0
(9.3)
0.0
0.0
0.0
1.0
0.0
(8.3)
(7.3)
0.0
20.6
20.3
31.8%
644.5
7.0%
(240.2)
(302.7)
101.6
77.3%
(25.1)
76.5
147.6%
(7.0)
0.0
0.0
69.5
(8.9)
0.0
0.0
(23.3)
0.0
0.0
0.0
37.4
0.0
(9.5)
27.9
0.0
0.1
35.0
72.4%
673.4
4.5%
(247.7)
(310.4)
115.3
13.5%
(26.3)
89.0
16.3%
(7.0)
0.0
0.0
82.0
(11.9)
0.0
0.0
(25.4)
0.0
0.0
0.0
44.7
0.0
(11.4)
33.3
0.0
(2.3)
38.0
8.6%
712.7
5.8%
(258.6)
(327.1)
127.0
10.1%
(27.8)
99.2
11.5%
(7.0)
0.0
0.0
92.2
(10.6)
0.0
0.0
(29.3)
0.0
0.0
0.0
52.4
0.0
(13.7)
38.7
0.0
(2.3)
43.4
14.2%
37.9
21.5%
8.4
(14.7)
5.8
31.6
0.0
0.0
0.0
(4.3)
(0.2)
0.0
27.1
45.6
20.3%
(10.3)
(11.7)
7.5
23.6
0.0
0.0
0.0
(7.0)
0.0
0.0
16.6
50.8
11.4%
(5.2)
(31.3)
(8.3)
14.3
0.0
0.0
0.0
(8.7)
0.1
0.0
5.7
26.2
-48.4%
(6.8)
(114.1)
(118.3)
(94.7)
0.0
0.0
0.0
(10.7)
0.0
0.0
(105.4)
43.7
66.8%
(14.4)
(44.7)
(22.6)
(15.4)
0.0
0.0
0.0
(11.4)
(1.5)
1.6
(26.7)
39.8
-8.9%
90.0
(128.2)
(106.9)
1.6
0.0
0.0
0.0
(4.0)
(1.5)
(3.2)
(7.1)
69.5
74.6%
(4.7)
(25.8)
(1.3)
39.0
0.0
0.0
0.0
(7.5)
(6.0)
0.0
25.5
77.9
12.1%
(4.2)
(26.1)
(1.3)
47.6
0.0
0.0
0.0
(9.2)
(6.6)
0.0
31.8
87.1
11.8%
(4.5)
(27.0)
(1.4)
55.6
0.0
0.0
0.0
(11.0)
(7.4)
0.0
37.2
136.5
0.0
27.9
38.5
79.0
57.9
281.9
22.2
8.9
124.2
3.1
0.0
123.4
26.4
281.8
148.4
0.0
36.0
32.0
60.7
40.9
277.1
22.2
10.3
113.9
23.1
0.0
107.4
22.2
276.9
168.9
0.0
36.1
31.6
54.4
32.2
291.0
22.2
13.3
121.4
18.3
0.0
115.8
22.2
291.0
291.3
42.8
34.0
61.8
189.6
56.7
619.5
241.2
114.9
149.3
16.8
0.0
97.3
16.5
619.5
289.7
43.7
35.1
57.5
217.6
65.3
643.6
292.5
122.4
155.7
22.7
0.0
50.2
8.2
643.5
272.6
46.7
37.0
68.8
224.7
70.4
649.8
291.9
114.6
150.9
30.2
0.0
62.3
10.3
649.9
290.1
53.0
40.7
58.2
199.1
58.0
641.1
286.8
112.6
151.5
30.2
0.0
60.0
9.3
641.1
311.3
60.7
44.7
58.6
167.2
44.9
642.5
281.8
110.6
151.3
30.2
0.0
68.7
10.2
642.6
336.2
69.8
49.2
60.1
129.9
32.0
645.2
276.8
108.7
150.5
30.2
0.0
79.2
11.1
645.4
www.cheuvreux.com
January 2011
GERMANY
Sartorius
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1.03
151.1%
0.89
NS
1.30
25.6%
1.30
45.5%
1.70
31.3%
1.70
31.3%
1.78
4.5%
1.77
3.8%
0.90
-49.2%
0.73
-58.8%
1.19
31.9%
(0.43)
NS
2.05
72.4%
1.64
NS
2.23
8.6%
1.95
19.4%
2.55
14.2%
2.27
16.2%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.14
0.42
2.22
21.5%
7.6
0.00
0.52
2.67
20.3%
8.2
0.00
0.64
2.98
11.4%
9.3
0.25
0.68
1.54
-48.4%
16.4
0.37
0.42
2.56
66.8%
16.6
0.41
0.42
2.33
-8.9%
15.6
0.41
0.51
4.08
74.6%
16.5
0.41
0.61
4.57
12.1%
17.6
0.41
0.70
5.11
11.8%
19.0

Latest price
High
Low
Average price
17.050
17.050
0.000
17.050
17.050
0.000
17.050
17.050
0.000
17.050
17.050
0.000
17.050
17.050
0.000
17.050
17.050
0.000
17.050
17.050
0.000
17.050
17.050
0.000
17.050
17.050
0.000
15.06
15.35
6.55
11.25
20.25
23.72
14.05
18.82
32.95
33.55
20.00
28.83
26.92
47.38
26.05
38.89
8.16
27.11
6.11
17.93
15.90
18.20
6.01
10.32
27.45
28.00
14.95
19.67
28.01
28.28
27.00
27.76
28.01
-
205.0
311.9
323.0
418.4
514.0
604.5
460.4
686.3
139.1
521.8
271.1
649.0
468.0
904.6
477.6
890.3
477.6
857.5
16.9
14.6
6.8
15.4
2.0
1.1
2.8
15.6
15.6
7.6
7.3
2.5
1.6
2.6
19.4
19.4
11.1
2.8
3.6
2.2
1.9
17.7
15.1
17.5
NS
1.6
1.1
2.5
15.3
9.0
3.2
NS
0.5
0.8
5.1
20.4
13.4
6.8
0.4
1.0
1.0
2.6
16.7
13.4
6.7
5.9
1.7
1.2
1.9
15.4
12.6
6.1
7.0
1.6
1.1
2.2
13.1
11.0
5.5
8.2
1.5
1.1
2.5
5.7
8.9
0.67
7.7
6.7
9.6
0.86
8.2
8.5
11.6
1.16
11.0
8.3
11.6
1.17
18.9
6.5
9.2
0.85
6.7
11.3
21.0
1.1
13.0
8.9
11.8
1.4
9.4
7.7
10.0
1.3
8.1
6.8
8.6
1.2
7.0
11.7
2.1
11.7
7.5
3.3
1.7
57.9
47.1
7.3
1.3
12.8
9.0
4.5
1.9
40.9
40.1
11.5
1.1
13.7
10.0
5.6
1.9
32.2
37.6
6.0
7.2
14.0
10.1
5.1
1.0
56.7
38.5
3.4
5.0
13.1
9.3
2.7
1.0
65.3
57.8
4.2
5.6
9.5
5.1
0.2
1.0
70.4
(98.1)
11.4
2.9
15.8
11.9
5.8
1.1
58.0
31.2
9.7
2.1
17.1
13.2
6.6
1.1
44.9
31.2
12.0
1.5
17.8
13.9
7.4
1.2
32.0
30.8
12.5
6.9
11.8
11.8
17.2
10.8
16.1
16.1
19.1
12.1
18.8
18.8
9.8
7.2
10.9
9.3
9.1
5.5
4.4
3.2
5.0
0.5
NS
5.0
12.5
7.7
10.1
10.1
14.5
9.3
11.3
10.5
16.1
10.3
12.2
11.4

EPS before goodwill
% Change
EPS, reported
% Change
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
249
www.cheuvreux.com
January 2011
GERMANY
MACHINERY
3/Underperform
Rating
-11.3% EUR24.00
SGL Carbon
Reuters: SGCG.DE Bloomberg: SGL GR
Limited upside potential

Q
Recent developments Guidance upgraded twice in 2010
Group sales reached EUR357.6m in Q3-10 (16% y-o-y and 5% q-o-q)

compared to our estimate of EUR356m. The Q3 EBIT margin came to
10.2%. Q3-10 sales in Performance Products (PP) hit EUR198m, up
20% y-o-y and 11% q-o-q, driven by a strong volume recovery in
graphite electrodes for the steel industry but, at the same time, held
back by sluggish cathodes sales for the aluminium industry. In the GMS
division sales rose 20% y-o-y and 3% q-o-q to EUR103m, while CFC
sales totalled EUR55.4m, unchanged y-o-y and -10% q-o-q. Divisional
Q3-10 EBIT margins: PP: 19.4%; GMS: 11.4%; CFC in the red at
EUR-1.0m.
After having lifted its projections already after Q2, SGL again raised its
full-year guidance after Q3 and now expects group sales to show
roughly a 10% rise, with group EBIT up 20% y-o-y to EUR130m. Its
former guidance was for single-digit y-o-y sales growth and EBIT
growth of up to 10%. SGL has said the Q2-10 PP margin of 21.2% was
the 2010 peak. We believe high raw material costs (needle coke) and
price competition in graphite electrodes are putting pressure on
margins. CAPEX continues to be determined by the company's 50%
gearing target and SGL now expects to report a 10% y-o-y capex drop
for 2010 (old guidance: flat), implying EUR140m. For 2011 it forecasts
EBIT of EUR155-165m (our estimate: EUR161m).
Q
EUR27.05
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
EUR1767m
EUR1282m
EUR2410m
65.32m
EUR 6.86m
Performances
-3.0%
6.2%
22.4%
-4.4%
-6.8%
-4.8%
Absolute perf.
Relative perf.
64.6
64.6
54.6
54.6
44.6
44.6
34.6
34.6
24.6
24.6
14.6
14.6
4.6
01/01
4.6
04/02
07/03
10/04
01/06
Price/M DAX
04/07
07/08
10/09
Price
Outlook Recovery in cathodes expected in H2-11E
Based on our channel checks, we expect graphite electrode (GE)

volumes to continue their volume recovery in 2011E. We anticipate a
recovery in cathodes order intake in early 2011E, with cathode sales
likely to pick up in H2-11E. Given the lead time from order negotiations
to sales recognition, we believe SGL already has quite good visibility in
PP for Q1 and Q2, with visibility for H2-11 remaining cloudy. However,
given recent statements from peers on tough pricing, we believe the
volume recoveries will be partly offset by the ongoing tough pricing
situation in both GEs and cathodes in an industry that is characterised
by capacity utilisation 20-30% below peak levels. Moreover, margin
progression in 11E might be hindered by likely still relatively high needle
coke prices, accounting for roughly 50% of final GE production costs,
although the negotiations with needle coke producers are not yet
finished.
In GMS, business has begun to recover strongly in most end-markets.
For FY10E we now estimate 6% y-o-y sales growth to EUR386m with
an EBIT margin of 9.6% at GMS. The CFC division is likely to break
even in 2011E: in Q1-10 (EUR3.8m EBIT loss) and Q2-10 (EUR1.4m
EBIT loss) CFC was still burdened by start-up costs, project
postponements and price pressure related to low capacity utilisation
amongst the peers. This situation improved slightly in Q3-10, with the
division recording an EBIT loss of just EUR1m. For 2010E we expect
6% CFC sales growth y-o-y to EUR221m with a EUR7m EBIT loss.
Sector focus
Sector Top Picks
Least favoured

Shareholders
Free Float 72.6%, Skion 22.3%, Voith Group 5.1%
2009
2010E
2011E
2012E
NS
30.9
22.0
14.4
10.8
11.9
9.8
8.1
5.0
NS
0.2
2.4
Net debt/EBITDA (x)
1.8
2.1
1.7
1.3
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
2.8
8.6
9.9
12.8
1.4
1.6
1.5
1.4
P/E (x)
EV/EBITDA (x)
Research Analyst
(49) 69 47 897 540
Q
Q
250
www.cheuvreux.com
January 2011
GERMANY
Company profile
SGL created via the merger with a former Hoechst unit

In 1992 Hoechst's former subsidiary SIGRI merged with Great Lakes
Carbon (US) to become SIGRI Great Lakes GmbH. The company
was renamed SGL Carbon Group and IPOed on the Frankfurt Stock
Exchange in 1995. Post IPO, 50% of SGL's shares were free float
and 50% were held by Hoechst. In 1996 SGL was listed on the
NYSE with 100% free float.
Q
Q A leading manufacturer of carbon-based products

SGL sees itself as one of the world's leading manufacturers of
carbon-based products. It offers its customers a global distribution
network underpinned by more than 35 production locations in
Europe, North America and Asia, and provides a comprehensive
portfolio of materials and relevant technologies. The solutions it
delivers are used in a wide range of industries with a focus on steel,
aluminium, chemicals, automotive, energy and aerospace.
Q 3 units: PP, GMS and CFC all driven by fundamental trends
SGL is organised into two business areas: Performance Products
(PP, incl. graphite electrodes) and Advanced Materials, which in turn
consists of two business units: Graphite Materials & Systems (GMS)
and Carbon Fibers & Composites (CFC). 52% of 2009 group sales
were generated by PP, 30% by GMS and 18% by CFC. While PP is
driven by the demand for steel and aluminium resources, GMS and
CFC benefit from the replacement of traditional materials with more
innovative materials and alternative energy.
Q SGL: geographically well diversified
In 2009 SGL generated 20% of its total sales in Germany, 28% in
Europe ex Germany, 19% in North America, 26% in Asia, and 7% in
ROW. The group's workforce totalled 5.976 at the end of 2009.
SWOT analysis
Strengths
Weaknesses
Only
integrated producer of
carbon fibres & composites in
Europe
SGL may lack credibility with

some investors due to its antitrust
past
Costs advantages (Malaysia)
Strong
exposure to cyclical
movements, at least in PP
Opportunities
Threats
Rising
exposure to Asia via shift

of capacity to low-cost hub in
Malaysia
GMS/CFC:
Recovery
Commercial
in cathodes business
for aluminium industry
emergence of new
substitutes may lead to pricing
pressure
potential of SGL's
growth technologies may fail to
materialise
Price
negotiations with needle

coke suppliers and GE clients
251
www.cheuvreux.com
Valuation
To determine a fair value for SGL's shares we

apply a DCF valuation, an EVA model, a
historical valuation and a peer group multiple
approach.
Q
DCF: we assume sales and EBITDA CAGRs
WACC of 7.8% (2010E) and a 2.0% terminal
growth rate. Based on these parameters our
DCF model renders a fair value of EUR20 per
share.
Q
EVA: our EVA model yields a FV of EUR25.4
per share, applying 12E pre-tax ROCE of 12.8%
and a pre-tax WACC of 10%.
Q
on 2012E EV/EBITDA, SGL trades at a 9%
premium to the peer group.
All in all, we reiterate our 3/UP rating with a

Investment case
For years now SGL has been spending huge

amounts of its cash generated by Performance
Products, its cash cow division, for the ramp-up
of its CFC capacities (roughly EUR150m
between 2007-2009). The growth opportunities
for its CFC technology appear very healthy in the
mid-term, driven by the trend towards traditional
heavy materials being substituted with materials
that offer a lower weight combined with a high
level of stiffness. However, at least in the next 23 years, normalised EBIT margins and ROCEs in
CFC will be far below PP levels.
This negative mix effect might change to a
certain extent in the longer term, at least at the
ROCE level, bearing in mind the fact that
Performance Products has underinvested over
the last 5-8 years (even figuring in the new
Malaysian plant) and assuming the huge longterm growth potential of the CFC division will
indeed materialise (SGL's CEO Koehler
estimates that CFC sales can increase ten-fold
over the next 10 years).
We reiterate our 3/UP rating with a TP of EUR24
based on a 6-month horizon.
January 2011
GERMANY
SGL Carbon
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
252
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
926.2
-11.5%
(281.4)
(499.9)
144.9
38.8%
(59.7)
85.2
142.7%
0.0
0.0
0.0
85.2
(50.2)
0.0
(19.7)
(1.2)
(10.3)
(85.5)
0.0
3.8
0.0
0.0
3.8
0.0
0.0
3.8
108.7%
1,068.8
15.4%
(309.5)
(581.4)
177.9
22.8%
(65.1)
112.8
32.4%
0.0
0.0
0.0
112.8
(52.2)
0.0
0.0
(19.1)
(13.4)
(85.5)
0.0
28.1
0.0
0.1
28.2
0.0
0.0
28.2
NS
1,190.8
11.4%
(319.8)
(647.6)
223.4
25.6%
(53.4)
170.0
50.7%
0.0
0.0
0.0
170.0
(40.2)
0.0
(44.9)
(35.5)
(8.5)
(85.5)
0.0
40.9
0.0
(0.2)
40.7
0.0
0.0
40.7
44.3%
1,373.0
15.3%
(334.3)
(734.9)
303.8
36.0%
(49.3)
254.5
49.7%
0.0
0.0
0.0
254.5
(34.0)
0.0
(31.4)
(57.9)
0.0
(85.5)
0.0
131.2
0.0
(0.2)
131.0
0.0
0.0
131.0
NS
1,611.5
17.4%
(369.6)
(881.4)
360.5
18.7%
(54.7)
305.8
20.2%
0.0
0.0
0.0
305.8
(34.6)
0.0
(12.9)
(68.3)
0.4
0.0
0.0
190.4
0.0
(0.8)
189.6
0.0
0.0
189.6
44.7%
1,225.8
-23.9%
(333.8)
(721.3)
170.7
-52.6%
(134.3)
36.4
-88.1%
0.0
0.0
0.0
36.4
(41.9)
0.0
(2.2)
(42.7)
(9.9)
0.0
0.0
(60.3)
0.0
(0.1)
(60.4)
0.0
0.0
(60.4)
NS
1,346.8
9.9%
(314.5)
(830.9)
201.3
17.9%
(71.4)
130.0
NS
0.0
0.0
0.0
130.0
(46.6)
0.0
0.0
(25.9)
0.0
0.0
0.0
57.6
0.0
(0.4)
57.2
0.0
0.0
57.2
194.7%
1,475.8
9.6%
(317.2)
(913.1)
245.5
21.9%
(81.2)
164.3
26.4%
0.0
0.0
0.0
164.3
(47.6)
0.0
0.0
(35.0)
0.0
0.0
0.0
81.7
0.0
(1.5)
80.2
0.0
0.0
80.2
40.3%
1,574.2
6.7%
(315.9)
(965.5)
292.8
19.3%
(69.3)
223.5
36.1%
0.0
0.0
0.0
223.5
(46.4)
0.0
0.0
(53.1)
0.0
0.0
0.0
124.0
0.0
(1.7)
122.3
0.0
0.0
122.3
52.5%
42.3
70.6%
101.5
(70.4)
0.0
73.4
(65.0)
0.0
0.0
0.0
45.7
92.4
146.5
(39.0)
NS
(24.3)
(70.4)
0.0
(133.7)
82.0
0.0
0.0
0.0
(5.5)
108.8
51.6
94.1
NS
(93.0)
(70.4)
0.0
(69.3)
0.1
0.0
0.0
0.0
3.1
29.3
(36.8)
179.4
90.6%
(68.9)
(70.4)
0.0
40.2
5.1
0.0
0.0
0.0
(10.4)
(30.9)
4.0
242.9
35.4%
(121.6)
(116.8)
0.0
4.5
(12.8)
0.0
0.0
0.0
7.7
(6.8)
(7.4)
78.0
-67.9%
112.3
(92.2)
0.0
98.1
(30.5)
0.0
0.0
0.0
1.8
97.6
167.0
130.0
66.7%
(98.9)
(161.6)
0.0
(130.5)
0.0
0.0
0.0
0.0
1.4
(20.9)
(150.0)
164.3
26.3%
(28.1)
(132.8)
0.0
3.4
0.0
0.0
0.0
0.0
0.0
44.6
48.0
194.3
18.3%
(9.6)
(141.7)
0.0
43.1
0.0
0.0
0.0
0.0
0.0
(12.4)
30.7
281.7
0.2
155.7
145.4
223.7
79.4
806.7
61.6
23.2
345.5
71.0
22.7
282.7
30.5
806.7
322.1
1.3
166.0
164.2
248.7
76.9
902.3
66.8
19.8
346.0
4.0
7.7
458.0
42.9
902.3
445.0
2.2
167.6
117.6
216.5
48.4
948.9
63.9
19.9
348.9
3.6
8.0
504.6
42.4
948.9
629.9
3.5
170.1
93.5
228.8
36.1
1,125.8
96.1
23.2
449.5
6.5
0.0
550.5
40.1
1,125.8
763.3
4.5
223.3
90.8
385.8
50.2
1,467.7
95.6
48.5
632.7
19.3
0.0
671.6
41.7
1,467.7
750.5
4.7
235.2
82.6
299.4
39.6
1,372.4
112.1
28.6
634.8
49.8
0.0
547.1
44.6
1,372.4
809.0
5.2
235.9
82.2
427.8
52.5
1,560.0
112.1
24.6
729.1
49.8
0.0
644.5
47.9
1,560.0
890.0
5.8
237.9
146.1
422.4
47.1
1,702.2
112.1
17.2
788.1
49.8
0.0
735.1
49.8
1,702.2
1,013.0
6.8
236.9
155.9
380.3
37.3
1,792.9
112.1
12.5
865.2
49.8
0.0
753.3
47.9
1,792.9
www.cheuvreux.com
January 2011
GERMANY
SGL Carbon
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
0.24
112.0%
0.24
110.5%
0.50
107.9%
0.50
107.9%
0.66
31.7%
0.66
31.7%
2.12
NS
2.12
NS
2.97
40.2%
2.97
40.2%
(0.95)
NS
(0.95)
NS
0.88
192.6%
0.88
192.6%
1.23
40.3%
1.23
40.3%
1.87
52.4%
1.87
52.4%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
2.67
135.6%
5.4
0.00
0.00
(0.69)
NS
6.2
0.00
0.00
1.52
NS
8.5
0.00
0.00
2.90
90.7%
12.1
0.00
0.00
3.80
31.2%
11.9
0.00
0.00
1.22
-67.9%
11.7
0.00
0.00
1.99
63.1%
12.4
0.00
0.00
2.52
26.3%
13.6
0.00
0.00
2.98
18.3%
15.5
52.150
15.860
0.000
52.150
56.480
0.000
52.150
61.910
0.000
52.150
61.910
0.000
63.900
63.900
0.000
63.900
63.900
0.000
65.320
65.320
0.000
65.320
65.320
0.000
65.320
65.320
0.000
9.63
15.30
6.96
9.38
13.95
14.70
8.37
11.24
18.71
20.70
13.25
15.74
37.02
46.80
17.25
30.97
23.90
50.34
13.70
34.41
20.75
30.79
14.52
22.26
27.02
29.40
19.25
24.53
27.05
27.89
27.05
27.36
27.05
-
516.7
802.4
748.5
1,154.5
1,003.9
1,381.3
1,986.3
2,381.7
1,545.1
2,141.5
1,355.4
1,842.5
1,764.6
2,389.9
1,766.6
2,410.0
1,766.6
2,359.1
40.2
40.2
3.6
1.6
1.8
1.1
0.0
27.9
27.9
NS
NS
2.3
1.3
0.0
28.5
28.5
12.3
NS
2.2
1.5
0.0
17.5
17.5
12.8
2.3
3.1
2.1
0.0
8.1
8.1
6.3
NS
2.0
1.5
0.0
NS
NS
17.0
5.0
1.8
1.4
0.0
30.9
30.9
13.6
NS
2.2
1.6
0.0
22.0
22.0
10.8
0.2
2.0
1.5
0.0
14.4
14.4
9.1
2.4
1.7
1.4
0.0
5.5
9.4
0.87
10.0
6.5
10.2
1.08
(145.3)
6.2
8.1
1.16
11.9
7.8
9.4
1.74
11.7
5.9
7.0
1.33
8.0
10.8
50.6
1.5
8.3
11.9
18.4
1.8
14.7
9.8
14.7
1.6
12.0
8.1
10.6
1.5
10.3
2.9
5.3
15.6
9.2
0.4
1.3
79.4
0.0
3.4
NS
16.6
10.6
2.6
1.2
76.9
0.0
5.6
2.3
18.8
14.3
3.4
1.3
48.4
0.0
8.9
1.3
22.1
18.5
9.6
1.2
36.1
0.0
10.4
1.6
22.4
19.0
11.8
1.1
50.2
0.0
4.1
3.8
13.9
3.0
NS
0.9
39.6
0.0
4.3
3.3
15.0
9.7
4.3
0.9
52.5
0.0
5.2
2.6
16.6
11.1
5.5
0.9
47.1
0.0
6.3
2.0
18.6
14.2
7.9
0.9
37.3
0.0
12.0
9.1
1.4
1.4
12.7
7.5
9.2
9.2
18.1
9.7
9.6
9.6
22.7
15.8
23.2
23.2
21.1
15.5
28.4
28.4
2.8
9.4
NS
NS
8.6
5.9
7.3
7.3
9.9
7.0
9.4
9.4
12.8
9.0
12.8
12.8

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
253
www.cheuvreux.com
January 2011
GERMANY
STEEL
2/Outperform
Rating
+15.7% EUR23.00
SKW Stahl
Reuters: SK1G.DE Bloomberg: SK1 GR
Hidden gem with strong position in the value

chain
Recent developments Q3-10 in line with expectations;
outlook raised again
SKW reported Q3-10 sales of EUR96.4m, down ~8% q-o-q and in line
with our EUR95m forecast. Group EBITDA, at EUR6.2m, was slightly
below our estimate of EUR6.4m. Cored wire EBITDA came to EUR2.5m
and Powder and Granules came to EUR5m, both in line with
expectations. EBITDA in 9M-10 totalled EUR22.3m, implying a 7.8%
margin. Q3-10 EPS came in at EUR0.13, thereby falling short of
expectations due to a higher-than-expected tax rate.
SKW increased its full year 2010 guidance again and now projects
EBITDA of EUR27m vs. EUR24m previously (~13% increase). It expects
further growth in 2011, also driven by new plants in Russia and Bhutan.
Q
EUR19.88
Price (07/01/2011)
Outlook market fundamentals remain strong
We expect market fundamentals to remain favourable for SKW as

global crude steel output is likely to have grown ~6% y-o-y in 11E, with
the EU27 up ~9% and NAFTA up ~11%, driven mainly by continued
improvements in underlying demand. Global output in 11E will probably
reach a new record level, so the supply/demand balance is likely to be
favourable for SKW's products going forward.
In addition to its improving market environment, we see SKW's
expansion strategy as a key for it to accelerate growth and boost its
profitability. The company's acquisition of a 2/3 stake in Tecnosulfur
enables it to elevate its position in the attractive Brazilian market whilst
also boosting margins, as we estimate Tecnosulfur's EBITDA margin at
~15% vs. SKW's ~8%. Moreover, the company's project in Bhutan
(due to be finished by the end of 2010) will enable it to integrate
backwards to a low-cost base and will secure independent raw material
supplies.
Driven by a) increased global steel output; b) tight supply of/strong
demand for its products; and c) benefits from Tecnosulfur (starting in
10E) and Bhutan (11E), we expect SKW to show strong top-line growth
combined with substantial margin expansion. We predict 11E sales of
EUR316.2m, up ~8% y-o-y, and an 8.7% EBITDA margin.
Stock data
Free float
Enterprise value
Daily volume
EUR130m
EUR130m
EUR184m
6.545m
EUR 0.52m
Performances
0.9%
31.2%
20.4%
-3.9%
11.6%
-15.3%
Absolute perf.
Relative perf.
41.3
41.3
36.3
36.3
31.3
31.3
26.3
26.3
21.3
21.3
16.3
16.3
11.3
11.3
6.3
6.3
12/06
06/07
12/07
06/08
12/08
Price/SDAX
06/09
12/09
Price
Sector Top Picks
Krupp, Voestalpine
SSAB
Least favoured
Shareholders
Free Float 100.0%
2009
2010E
2011E
P/E (x)
NS
25.6
11.3
9.2
EV/EBITDA (x)
NS
10.7
6.7
5.9
3.7
1.2
NS
7.9
Net debt/EBITDA (x)
(82.0)
2.9
1.6
1.4
0.0
1.5
2.5
4.3
ROCE (%)
NS
7.0
12.1
13.3
0.9
0.9
0.9
0.8
Q
254
www.cheuvreux.com
2012E
Alexander HAISSL
Q
12/10
Sector focus
Yield (%)
Research Analyst
(49) 69 47 897 534
07/10
January 2011
GERMANY
Company profile
World-leading provider of desulphurization and secondary

metallurgy solutions for the steel industry
SKW Stahl-Metallurgie Holding AG is a world-leading provider of
desulphurization and secondary metallurgy solutions for the steel
industry and is also a key player in 'Quab' special chemicals. The
group is divided into three segments: Cored Wire, Powder and
Granules and Others (Quab).
Q
Q Cored Wire (~40% of sales) Affival, a global market leader

SKW's Affival group produces and sells wire filled with special
chemicals so-called 'cored wire', which imparts specific
metallurgical properties to steel. With a market share of ~30%
(global ex China) Affival is a global market leader with branches in
France, the US, Japan and South Korea.
Q Powder and Granules (~54% of sales) 3 brands with global
footprint
The Powder and Granules segment markets three product brands.
German-based SKW Stahl-Metallurgie GmbH (mainly active in
Europe) uses the product brand 'SKW Metallurgie' and Brazilian
Tecnosulfur uses the brand 'Tecnosulfur'.
Others (Quab) non-core business

SKW Quab Chemicals Inc. sells cationizing reagents in over 40
countries around the world. Basically Quab cationizing reagents
(annual sales of ~EUR27m) can be used in the production of almost
all forms of paper.
Q
SWOT analysis
Strengths
Weaknesses
Superior position within the

steel value chain
Supply/demand balance for

SKW's products remains tight
due to rising global steel output
Little pricing power, business

is mainly driven by steel volumes
link to steel output
High exposure in
Europe/NAFTA
Tecnosulfur acquisition lifts

margin/position in Brazil
Opportunities
Threats
Bhutan project enables

backward integration into low
cost base and will secure an
independent raw material supply
(finished end of 2010)
255
Decline in global steel output
www.cheuvreux.com
Valuation
Normalised earnings model: In our valuation

we apply a normalised EBITDA of EUR31m, an
EV/EBITDA multiple of 7.0x and WACC of 9%;
discounted back 2 years. Based on the abovementioned assumptions our model yields a 'fair'
value of EUR22.8/share.
Peer group comparison: The stock is trading at
a ~10% discount to peers, which is unjustified in
our view given a) SKW's ability to generate
excess returns on capital (16.6% between 20052009); and b) its better position within the value
chain, as it will benefit from higher volumes
without being impacted by low steel
prices/margins.
Taking both approaches into account, we stick
to our 2/OP rating with a TP of EUR23.
Investment case
Supply/demand balance remains tight

We expect market fundamentals to improve
further for SKW as global crude steel output in
11E will probably reach a new record level,
meaning that the supply/demand constellation is
likely to remain favourable for SKW's products
going forward. The company is geared solely
towards steel volumes, not steel prices.
M&A and vertical integration to lift margins
Aside from the improving market environment,
we see SKW's expansion strategy as another
key to accelerating growth while at the same
time increasing profitability. The company's
recent acquisition (2/3 stake) of Tecnosulfur will
enable it to elevate its position in the attractive
Brazilian market, whilst also boosting margins.
Moreover, its project in Bhutan (to be finished by
the end of 10) will enable it to back-integrate into
a low cost base and secure independent raw
material supplies.
Valuation indicates substantial upside
We stick to our 2/OP rating with a TP of EUR23,
as both our valuation approaches (normalised
earnings model and peer group comparison)
indicate further upside potential.
January 2011
GERMANY
SKW Stahl
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
256
www.cheuvreux.com
2007
2008
2009
2010E
2011E
2012E
239.0
28.6%
(17.6)
(200.3)
21.1
46.5%
(3.4)
17.7
41.6%
0.0
0.0
0.0
17.7
(0.8)
0.0
0.0
(4.5)
0.0
0.0
0.0
12.4
0.0
(0.1)
12.3
0.0
0.0
12.3
33.7%
377.8
58.1%
(30.2)
(321.5)
26.1
23.7%
(6.4)
19.7
11.3%
0.0
0.0
0.0
19.7
(2.7)
0.0
0.0
(7.0)
0.0
0.0
0.0
10.0
0.0
0.1
10.1
0.0
0.0
10.1
-17.9%
220.6
-41.6%
(23.1)
(197.9)
(0.4)
NS
(6.6)
(7.0)
NS
0.0
0.0
0.0
(7.0)
(2.5)
0.0
0.0
4.4
0.0
0.0
0.0
(5.1)
0.0
0.1
(5.0)
0.0
0.0
(5.0)
NS
292.4
32.5%
(29.4)
(244.8)
18.2
NS
(6.1)
12.1
NS
0.0
0.0
0.0
12.1
(2.7)
0.0
0.0
(2.8)
0.0
0.0
0.0
6.6
0.0
(1.4)
5.2
0.0
0.0
5.2
NS
316.2
8.1%
(30.7)
(258.1)
27.4
50.5%
(6.1)
21.3
76.0%
0.0
0.0
0.0
21.3
(2.8)
0.0
0.0
(5.6)
0.0
0.0
0.0
13.0
0.0
(1.5)
11.5
0.0
0.0
11.5
121.2%
336.0
6.3%
(31.6)
(273.4)
31.0
13.1%
(6.1)
24.9
16.9%
0.0
0.0
0.0
24.9
(2.6)
0.0
0.0
(6.7)
0.0
0.0
0.0
15.6
0.0
(1.5)
14.1
0.0
0.0
14.1
22.6%
15.8
42.3%
(24.0)
(3.9)
0.0
(12.1)
(0.3)
0.0
0.0
0.0
0.0
(16.2)
(28.6)
16.3
3.2%
(8.9)
(6.4)
0.0
1.0
0.0
0.0
0.0
(2.2)
0.0
10.9
9.7
1.4
-91.4%
29.6
(29.9)
0.0
1.1
(0.5)
0.0
0.0
(2.2)
24.5
(20.5)
2.4
12.7
NS
(12.3)
(20.8)
0.0
(20.4)
0.0
0.0
0.0
0.0
0.0
(0.5)
(20.9)
19.1
50.4%
2.3
(11.1)
0.0
10.3
0.0
0.0
0.0
(2.0)
0.0
0.0
8.3
21.7
13.6%
(10.5)
(6.4)
0.0
4.8
0.0
0.0
0.0
(3.2)
0.0
0.0
1.6
74.5
1.7
1.5
0.4
41.8
54.9
119.9
14.5
17.1
25.5
3.9
0.0
58.7
24.6
119.9
81.8
2.1
1.7
7.3
44.9
53.5
137.8
15.4
16.8
27.1
4.0
0.0
74.5
19.7
137.8
98.7
10.3
1.9
8.3
32.8
30.1
152.0
18.7
40.4
42.6
4.5
0.0
45.8
20.8
152.0
104.7
10.9
1.8
7.8
53.2
46.0
178.4
18.7
40.4
57.2
4.5
0.0
57.7
19.7
178.4
114.6
12.0
1.8
7.8
44.8
35.4
181.0
18.7
40.4
62.2
4.5
0.0
55.3
17.5
181.0
125.7
13.3
1.8
7.8
43.2
31.1
191.8
18.7
40.4
62.5
4.5
0.0
65.8
19.6
191.8
January 2011
GERMANY
SKW Stahl
FY to 31/12 (Euro)
2007
2008
2009
2010E
2011E
2012E
2.77
2.28
-17.5%
2.28
-17.5%
(1.10)
NS
(1.10)
NS
0.79
172.5%
0.79
172.5%
1.76
121.3%
1.76
121.3%
2.15
22.6%
2.15
22.6%
16.3
0.00
0.50
3.69
3.6%
18.0
0.00
0.00
0.31
-91.7%
22.3
0.00
0.30
1.94
NS
15.7
0.00
0.50
2.92
50.4%
17.0
0.00
0.86
3.32
13.6%
18.3

Latest price
High
Low
Average price
4.422
4.442
0.000
4.422
4.422
0.000
4.422
4.566
0.000
6.545
6.545
0.000
6.545
6.545
0.000
6.545
6.545
0.000
20.35
21.29
14.35
16.45
19.88
20.99
19.80
20.20
19.88
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
111.9
152.9
48.6
92.8
93.6
138.6
133.2
194.7
130.1
184.3
130.1
183.9
NS
NS
NS
NS
NS
NS
0.0
NS
NS
NS
2.1
NS
NS
0.0
NS
NS
NS
1.2
NS
NS
0.0
25.6
25.6
10.5
NS
1.3
0.9
1.5
11.3
11.3
6.8
7.9
1.2
0.9
2.5
9.2
9.2
6.0
3.7
1.1
0.8
4.3
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
10.7
16.1
0.7
13.3
6.7
8.7
0.6
8.8
5.9
7.4
0.5
7.8
NS
2.6
8.8
7.4
5.2
2.1
54.9
18.1
9.7
2.8
6.9
5.2
2.6
2.8
53.5
21.9
NS
NS
NS
NS
NS
1.5
30.1
0.0
6.7
4.2
6.2
4.1
2.3
1.7
46.0
37.8
9.8
2.3
8.7
6.7
4.1
1.8
35.4
28.5
11.9
2.0
9.2
7.4
4.6
1.8
31.1
39.9
15.3
11.2
18.0
18.0
14.7
8.6
13.2
13.2
NS
NS
NS
NS
7.0
4.9
5.1
5.1
12.1
8.4
10.6
10.6
13.3
9.3
11.9
11.9

EPS before goodwill
% Change
EPS, reported
% Change
2.77
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.50
3.56
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
257
www.cheuvreux.com
January 2011
GERMANY
RENEWABLE EQUIPMENT
2/Outperform
Rating
SMA
Reuters: S92G.DE Bloomberg: S92 GR
Recent developments Very strong Q3 but stock fell
Despite the very strong Q3 results, SMA's shares fell significantly on the
day the figures were released. The company spoke of an inventory
build-up in the value chain as installers anticipated further strong
demand in Q4 (especially in Germany). This explains why its Q3-10
revenues came in >20% stronger than the market had expected. As a
consequence, SMA is likely to have recorded a significant drop in
orders in Q4-10E and this trend will probably continue in Q1-11E.
Having said that, the likely weak Q1-11E, in particular, should come as
no surprise to investors, as Q1 also accounted for only an estimated
19% of FY revenues in 2010E and only 9% in 2009.
Q
EUR68.20
Price (07/01/2011)
Clear market leader not only in Germany

Q
+90.6% EUR130.00
Outlook We expect the global market to grow to 16GW
Stock data
Free float
Enterprise value
Daily volume
EUR2367m
EUR641m
EUR1807m
34.7m
EUR 5.72m
Performances
0.8%
-17.3% -31.1%
-5.8%
-26.3% -31.9%
Absolute perf.
Relative perf.
We expect SMA to release 900 temporary workers as a result of

seasonal weakness anticipated in Q1-11 (winter in Germany and
reduced feed-in tariffs). To cover the higher-than-expected demand in
9M-09, SMA hired >1000 employees last year to meet peak demand in
Q2-Q3.
102.0
102.0
92.0
92.0
82.0
82.0
72.0
72.0
62.0
62.0
52.0
52.0
We also expect Q4 demand to have been solid, but without a year-end

rally as was seen in 2009. Phoenix Solar's CEO Dr Hnel has confirmed
our view.
42.0
42.0
32.0
32.0
We reiterate our global demand assumptions of 13GW in 2010E and

16GW in 2011E. SMA expects the inventory build-up in early Q4-10 to
result in pricing pressure in 2011. We expect the average selling price
for inverters to drop 13% in 2011E to about 21cents per watt peak
(already included in our numbers). Hence, this is no surprise to us. As
the German market looks set to decline in 2011, SMA predicts that
about 70% of its revenues will stem from outside Germany. In 9M-10 its
foreign sales accounted for 37% of the total. We do not regard the
company's statements as news. This issue should already be reflected
in estimates for 2011. We predict a 5% sales decline for 11E despite
9% output growth. We also expect the EBIT margin to decline from
27.5% in 2010E (32% in Q3-10) to 23%. We assume EPS will drop by
20% y-o-y. Our estimates are broadly in line with consensus and
company guidance.
22.0
06/08
22.0
10/08
02/09
06/09
09/09
Price/TECDAX
01/10
05/10
Sector focus
Sector Top Picks
Least favoured
SMA, SolarWorld
Conergy
Shareholders
Free Float 27.1%, Peter Drews 19.1%, Gnther
Cramer 19.1%, Reiner Wettlaufer 19.1%, Werner
Kleinkauf 15.6%
2009
2010E
2011E
2012E
P/E (x)
18.5
6.9
8.3
8.0
EV/EBITDA (x)
11.8
3.4
4.1
3.7
2.1
7.8
4.5
8.3
Net debt/EBITDA (x)
(1.0)
(0.8)
(0.7)
(0.8)
Yield (%)
2.7
3.0
3.1
3.1
ROCE (%)
86.8
117.8
67.3
60.1
11.0
5.6
4.0
3.2
Q
Q
258
www.cheuvreux.com
01/11
Price
Philipp BUMM
Research Analyst
pbumm@cheuvreux.com
(49) 69 47.897.527
09/10
January 2011
GERMANY
Company profile
Companies activities
Founded in 1981, SMA Solar Technology AG develops, produces
and sells photovoltaic inverters, monitoring systems for photovoltaic
facilities, and electronic components for railway technology. The
photovoltaic inverter is a central component in any solar power
system that converts direct current (DC) into alternating current (AC),
thus converting the electricity produced by a solar panel into gridconvergent electricity.
Q
Q Well positioned in the solar sector

SMA achieved global market shares of 34%, 41% and ~44% in
2007E, 2008E, and 2009E respectively, based on CA Cheuvreux
market estimates. We regard the company as very solid and well
positioned in the solar sector, which has relatively high barriers to
entry (e.g. high development costs, service structure with direct
access to 400 relevant customers, highest available efficiency in the
market up to 99%).
Q Divisions
The two Photovoltaics Technology divisions, consisting mainly of
the photovoltaic inverter business, accounted for about 98% of
group sales in 2009. The photovoltaic inverter business is split
between Medium Power Solutions (MPS) and High Power Solutions
(HPS).
In the MPS division SMA produces and sells solar inverters with a
maximum capacity of 17kW, designed mainly for small and midsized solar systems for the residential market. These product series
carry brand names such 'Sunny Boy', 'Sunny Mini Central' and
'Sunny Tripower'.
The HPS division assembles inverters for larger projects under the
brand name 'Sunny Central'. Here the company offers inverters with
capacities of >1MW.
SWOT analysis
Strengths
Weaknesses
World market leader in solar

inverters with a market share of
44% in 2009
No order backlog/no binding

contracts with customers only
framework contracts valid for up
to 1 year
High barriers to entry
Excellent distribution structure

with wholesalers
No top-line visibility
Considerable seasonality
during the year
Broad range of products that

address every market segment in
the photovoltaic arena
Highly flexible and scalable

production
Opportunities
Threats
Cost of materials (electronic

components) may come down if
demand in the electronics
industry cools down
New potential market entrants

(e.g. ABB)
Like every solar company,

SMA heavily depends on
regulatory support
259
www.cheuvreux.com
Valuation
SMA is trading at a P/E-11E of 8x and at an

EV/EBIT of 6x. It will probably report a pre-tax
ROCE of 120% for 10E and 72% for 11E.
Despite its high profitability (EBIT margin >20%),
the company is trading at a 20+% discount to
the sector (P/E: 10x, EV/EBIT: 8x). We therefore
reiterate our 2/Outperform rating.
Investment case
SMA benefits more than any other solar

equipment manufacturer from strong global
demand due to its flexibility in production (11GW
capacity). Whenever global new installed
capacities increase, it is able to exploit its high
available capacity (a decline in global capacities
has the opposite effect). We believe SMA
recorded a 52% market share in 2010E, up from
44% in 2009E. The estimated rise in market
share is attributable to the fact that SMA, the
world's largest solar inverter manufacturer, is
seen as a strategic partner by more and more
suppliers. Hence, we expect it to have better
access to component supplies than its
competitors. As we believe global new installed
capacities will again be dominated by residential
demand in Germany in 2011E and 2012E, we
expect SMA to maintain a market share of >40%
going forward.
January 2011
GERMANY
SMA
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
260
2006
2007
2008
2009
2010E
2011E
2012E
192.9
327.3
(55.2)
(95.1)
42.6
(83.2)
(168.9)
75.3
76.7%
(16.0)
59.3
77.4%
0.0
0.0
0.0
59.3
(0.1)
0.0
0.0
(22.4)
0.0
0.0
0.0
36.8
0.0
0.0
36.8
0.0
0.0
36.8
79.6%
681.6
108.2%
(84.2)
(421.1)
176.3
134.1%
(8.9)
167.4
182.3%
0.0
0.0
0.0
167.4
3.7
0.0
0.0
(51.6)
0.0
0.0
0.0
119.5
0.0
0.0
119.5
0.0
0.0
119.5
NS
934.3
37.1%
(105.4)
(584.2)
244.7
38.8%
(16.3)
228.4
36.4%
0.0
0.0
0.0
228.4
3.8
0.0
0.0
(71.1)
0.0
0.0
0.0
161.1
0.0
0.0
161.1
0.0
0.0
161.1
34.8%
1,826.9
95.5%
(182.7)
(1,111.0)
533.3
118.0%
(31.3)
502.0
119.8%
0.0
0.0
0.0
502.0
3.0
0.0
0.0
(154.6)
0.0
0.0
0.0
350.4
0.0
0.0
350.4
0.0
0.0
350.4
117.5%
1,744.7
-4.5%
(191.9)
(1,117.0)
435.7
-18.3%
(30.3)
405.4
-19.2%
0.0
0.0
0.0
405.4
4.1
0.0
0.0
(125.4)
0.0
0.0
0.0
284.2
0.0
0.0
284.2
0.0
0.0
284.2
-18.9%
1,881.6
7.8%
(207.0)
(1,220.6)
454.0
4.2%
(32.7)
421.3
3.9%
0.0
0.0
0.0
421.3
5.0
0.0
0.0
(130.5)
0.0
0.0
0.0
295.8
0.0
0.0
295.8
0.0
0.0
295.8
4.1%
0.0
0.0
(10.6)
29.7
0.0
0.0
0.0
(13.0)
33.3
0.0
49.9
52.7
77.9%
(25.1)
(17.3)
(9.0)
10.3
0.0
0.0
0.0
(13.0)
(0.0)
(5.1)
(7.8)
128.3
143.3%
(18.6)
(77.8)
(67.1)
31.9
0.0
0.0
0.0
(25.2)
122.0
(3.9)
124.8
177.4
38.3%
(20.6)
(89.3)
(72.8)
67.6
0.0
0.0
0.0
(34.7)
0.4
(7.2)
26.1
381.7
115.1%
15.8
(210.0)
(191.7)
187.5
0.0
0.0
0.0
(45.1)
0.0
0.0
142.4
314.5
-17.6%
(57.1)
(150.0)
(132.6)
107.4
0.0
0.0
0.0
(87.6)
0.0
0.0
19.8
328.5
4.5%
(11.0)
(120.0)
(101.2)
197.5
0.0
0.0
0.0
(71.0)
0.0
0.0
126.5
40.7
0.0
0.0
45.8
0.0
NS
86.6
0.0
4.9
26.9
0.1
0.0
34.3
17.8
66.2
64.4
0.0
0.0
70.6
(42.4)
NS
92.6
0.0
1.9
31.3
0.1
0.0
59.4
18.1
92.6
280.8
0.0
0.0
117.7
(218.2)
NS
180.3
0.0
5.5
94.2
2.6
0.0
78.0
11.4
180.3
407.6
0.0
0.0
71.1
(205.8)
NS
272.8
0.0
15.4
149.1
10.7
0.0
98.6
10.6
273.8
712.9
0.0
0.0
75.1
(351.3)
NS
436.7
0.0
15.4
327.8
10.7
0.0
82.8
4.5
436.7
909.4
0.0
0.0
47.8
(343.7)
NS
613.5
0.0
15.4
447.5
10.7
0.0
139.9
8.0
613.5
1,134.2
0.0
0.0
49.0
(471.4)
NS
711.8
0.0
15.4
534.8
10.7
0.0
150.9
8.0
711.8
(9.2)
33.4
0.0
0.0
0.0
33.4
(0.2)
0.0
0.0
(12.8)
0.0
0.0
0.0
20.5
0.0
0.0
20.5
0.0
0.0
20.5
29.7
www.cheuvreux.com
January 2011
GERMANY
SMA
FY to 31/12 (Euro)
2006
2007
2008
2009
2010E
2011E
2012E
0.64
1.15
79.5%
1.15
79.5%
3.74
NS
3.74
NS
5.03
34.8%
5.03
34.8%
10.10
100.6%
10.10
100.6%
8.19
-18.9%
8.19
-18.9%
8.52
4.1%
8.52
4.1%
0.5
0.00
1.00
1.65
77.8%
1.0
0.00
1.30
4.01
143.3%
7.5
0.00
2.52
5.55
38.3%
9.2
0.00
2.05
11.00
98.4%
18.5
0.00
2.13
9.06
-17.6%
24.1
0.00
2.14
9.47
4.5%
30.5
32.000
32.000
0.000
32.000
32.000
0.000
32.000
32.000
0.000
34.700
32.000
0.000
34.700
34.700
0.000
34.700
34.700
0.000
34.700
34.700
0.000
37.50
67.50
23.00
46.04
93.25
97.59
28.43
53.90
69.50
103.70
66.99
84.83
68.20
70.15
68.20
69.30
68.20
-
1,103.8
857.3
3,235.8
2,882.2
2,411.7
1,835.2
2,366.5
1,807.7
2,366.5
1,663.2
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
10.0
10.0
9.4
2.9
5.0
4.8
3.5
18.5
18.5
16.8
2.1
10.1
11.0
2.7
6.9
6.9
6.3
7.8
3.8
5.6
3.0
8.3
8.3
7.5
4.5
2.8
4.0
3.1
8.0
8.0
7.2
8.3
2.2
3.2
3.1
NS
NS
NS
NS
NS
NS
NS
NS
4.9
5.1
1.26
6.8
11.8
12.6
3.1
16.5
3.4
3.7
1.0
4.8
4.1
4.5
1.0
5.8
3.7
3.9
0.9
5.1
NS
NS
22.1
17.3
10.6
2.9
NS
114.1
NS
NS
23.0
18.1
11.2
3.5
NS
87.1
NS
NS
25.9
24.6
17.5
3.8
NS
34.8
NS
NS
26.2
24.4
17.2
3.6
NS
50.1
NS
NS
29.2
27.5
19.2
4.3
NS
20.3
NS
NS
25.0
23.2
16.3
2.9
NS
26.0
NS
NS
24.1
22.4
15.7
2.7
NS
25.1
50.5
31.3
67.1
67.1
64.0
39.7
79.8
79.8
94.2
65.9
54.1
54.1
86.8
59.9
49.3
49.3
117.8
81.3
65.2
65.2
67.3
46.4
37.0
37.0
60.1
41.5
30.0
30.0

EPS before goodwill
% Change
EPS, reported
% Change
0.64
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.73
0.93

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
261
www.cheuvreux.com
January 2011
GERMANY
SOFTWARE
1/Selected List
Rating
+10.9% EUR120.00
Software AG
Reuters: SOWG.DE Bloomberg: SOW GR
Executing to perfection
Stock data
Recent developments Strong Q3 results, except for webM

licences
For Q3-10 Software AG reported a 29% rise in group sales to

EUR275m, driven by the consolidation of IDS, strong Services revenues
(up 56% y-o-y), improved maintenance revenues (up 19% to EUR97m),
the rebound of ETS (+6% y-o-y), and material FX effects (!). The only
weaker-than-expected number was webMethods new licences, which
rose only 6% y-o-y (-5% cc). Group EBIT was up 20% y-o-y to
EUR69m, equating to a 25.1% margin, with improved margins in all
three business lines. Net income rose 20% y-o-y to EUR46m due to a)
the company's strong execution; b) faster realisation of IDS Scheer
integration cost synergies, ultimately targeted at EUR35m (instead of
EUR30m); c) strongly growing Services revenues and hence improved
utilisation, and d) positive hedging effects. Free cash flow was excellent
at EUR43m (though down 9% y-o-y).
Q
EUR108.20
Price (07/01/2011)
Outlook Transformation not over yet
With the integration of IDS Scheer's back office, operations and

product (bundling of webM and ARIS in one BPM suite from 2011)
virtually completed by end-2010, Software AG's transformation focus
will shift to its Services/Consulting staff, which has been unaffected so
far. In 2011, the company's ARIS sales force will be merged with that of
webM. In addition, the low-margin, commoditised SAP integration
services will be scaled back in favour of more complex, higher-margin
BPM projects, which typically also come with much bigger deal sizes.
Initially, sales will continue to be dominated by the direct channel,
though successful reference projects are set to boost the indirect
channel from H2-11E (making further inroads into the SAP client base).
While Software AG is poised to continue to expand its profitability by
cutting expenses, the investment case is likely to change in the coming
years as top-line synergies are realized and hence growth becomes
increasingly important. First project-related successes in cross-selling
the group's broadened portfolio should be enhanced by the
introduction of the first fully harmonised Business Process Excellence
suite by the beginning of 2011. Amid increasing traction among
consultancies, we feel confident that Software AG will benefit from
reinforced indirect channel activity going forward.
Starting in H2-11, Software AG will eye further sizeable acquisitions
again. The company, we believe, can finance transactions up to a value
of EUR1bn solely from cash flow and additional debt. An equity capital
increase for this purpose is not being considered.
Free float
Enterprise value
Daily volume
EUR3085m
EUR2168m
EUR3088m
28.51m
EUR 8.81m
Performances
6.7%
19.2%
33.4%
-0.3%
6.2%
31.7%
Absolute perf.
Relative perf.
357.4
357.4
307.4
307.4
257.4
257.4
207.4
207.4
157.4
157.4
107.4
107.4
57.4
57.4
7.4
01/01
7.4
03/02
06/03
09/04
12/05
Price/TECDAX
03/07
07/08
Price
Sector Top Picks
Alten, Capgemini, Dassault

Systemes, Logica
Least favoured
Shareholders
Free Float 70.3%, Software Ag Foundation 29.7%
2009
2010E
2011E
2012E
15.5
18.1
14.9
12.9
EV/EBITDA (x)
9.7
10.5
8.6
7.2
8.2
4.3
7.8
8.3
(0.6)
P/E (x)
Net debt/EBITDA (x)
1.1
0.5
(0.1)
Yield (%)
1.5
1.2
1.4
1.7
ROCE (%)
19.7
23.6
27.8
31.8
2.2
2.7
2.5
2.4
Bernd LAUX
Q
Q
262
www.cheuvreux.com
01/11
Sector focus
Research Analyst
blaux@cheuvreux.com
(49) 69 47 89 75 12
10/09
January 2011
GERMANY
Company profile
Focus shifted to systems integration software

Established in 1969, Software AG is Germanys second-largest
software firm, focusing on database management systems and
systems integration software. While historically rooted in the
mainframe database management software segment, the company
with roughly 10,000 customers in more than 70 countries spread
across a broad range of industries has increasingly been shifting
its focus towards integration/business process management
software.
Q
Q Mainframe software - a highly profitable cash cow

Having said that, the mature and highly profitable mainframe
business (ETS business line; no. 2 globally behind IBM) still accounts
for some 46% of total licence revenues and about 36% of total
group revenues (2010E). Notwithstanding, the main source of future
growth will probably be integration software (webMethods business
line, complemented by ARIS), given Software AG's world-leading,
service-oriented middleware and BPM software portfolio.
Q Revenue split to be improved, Services to be streamlined
We estimate Software AG's 2010E revenues split at about 27% new
licences, 34% recurring maintenance and 39% services. While the
share of new licence revenues is likely to remain economy/IT
spending budget-driven (in particular at webMethods), the share of
high-margin maintenance is set to increase over time, reducing the
contribution from low-margin services.
Q Strong free cash flows to allow fast repayment of debt
Software AG's financial position remains very healthy. Its current net
debt of c. EUR190m (gearing: 24%) is likely to be paid back within
twelve months, bearing in mind the group's impressive free cash
flow generation capacity.
SWOT analysis
Strengths
Weaknesses
Fastest and most reliable

mainframe database; expertise in
mainframe integration
Unique, technologically leading

SOA /BPM integration suite
Profitable, highly cashgenerating business model

Excellent management track
record
Partner channel still fairly

weak; limited systems integrator
collaboration
Previously limited access to
enterprise applications software
customer base of SAP
Small share in customers' IT
wallets
Limited know-how of verticals

(ex IDS Scheer)
Opportunities
Threats
Margin expansion via product

mix improvement and synergies
(IDS)
Exploitation of group-internal
cross-selling opportunities, given
strongly enlarged customer base
Rising market awareness
and customer relevance for
Software AG, likely to attract
new partners
Strong global competition at

webMethods (e.g. IBM, Oracle)
USD and GBP weakness vs.

EUR weighing on top-line growth
and earnings (translation risk),
though to a reduced extent due
to IDS
Customers reducing their no.

of IT suppliers, cutting IT
budgets
263
www.cheuvreux.com
Valuation
Despite their 2010 run-up, Software AG shares

are trading at undemanding multiples: P/E 15x,
EV/EBITDA 9x, and EV/sales 2.7x (all based on
2011E), indicating an average discount of ~1525% to our peer group. We see no fundamental
justification for this, especially given the
company's faster growth, higher ROE and
strong balance sheet.
Our DCF model yields a fair value of EUR120,
indicating 11% upside from the current level,
although we incorporate what we consider to be
conservative assumptions (WACC 7.7%, sales
CAGR10-14E of 7%, average 25% EBIT margin,
2.0% terminal growth).
Assuming Software AG achieves management's
30+% EBIT margin goal by 2013E, the company
will generate EPS of about EUR10.0. At the
same time, a DCF model renders a fair value of
EUR140+ per share assuming that margin is
sustained.
Investment case
Software AG has successfully positioned itself

as an innovation leader in the business process
excellence (BPE) software arena. Going forward,
BPE, combining webMethods middleware and
ARIS process design, will be the company's
main driver of growth. Although process
optimisation, which is currently mainly
customised, is likely to be standardised over
time, that is not a concern for Software AG given
its leading position. The company's IT services
offer will remain focussed on a few end-markets
(public
sector,
financials,
production,
telecommunications).
The company can be expected to deliver
sustainable, high-single-digit top-line growth, to
be complemented by the acquisition of product
vendors in adjacent software. Hence, Software
AG is poised to double its group sales every 5-6
years. Due to the realisation of cost and revenue
synergies from IDS Scheer, an improvement in
the product mix (sales of products growing
faster than services) and traditionally strong
execution, we expect Software AG to expand its
EBIT margin from 24% in 2010E toward 28% by
2012E, delivering annual EPS growth of roughly
18% on average.
The company's mid-term target stands at 30%
EBIT return on sales (IFRS), a level that the
market is far from having discounted. At 15x
earnings and less than 10x EV/EBIT (both for
2011E)
the
shares
remain
materially
undervalued. Their 15-25% discount relative to
EU software peers does not appear justified.
January 2011
GERMANY
Software AG
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
264
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
411.4
-2.1%
0.0
(314.4)
97.0
NS
(11.2)
85.8
54.4%
(1.9)
0.0
0.0
83.9
3.3
0.0
24.5
(34.5)
0.0
0.0
0.0
77.2
0.0
(0.1)
77.1
0.0
0.0
79.0
NS
438.0
6.5%
(213.5)
(120.1)
104.4
7.6%
(7.9)
96.4
12.3%
0.0
0.0
0.0
96.4
4.7
0.0
0.0
(39.4)
0.0
0.0
0.0
61.8
0.0
(0.1)
61.6
0.0
0.0
61.6
-22.0%
483.0
10.3%
(229.9)
(133.7)
119.4
14.5%
(8.2)
111.2
15.4%
0.0
0.0
0.0
111.2
7.3
0.0
0.0
(45.4)
0.0
0.0
0.0
73.2
0.0
(0.3)
72.9
0.0
0.0
72.9
18.3%
621.3
28.6%
(286.0)
(183.3)
151.9
27.2%
(15.1)
136.8
23.0%
0.0
0.0
0.0
136.8
0.3
0.0
0.0
(48.7)
0.0
0.0
0.0
88.4
0.0
(0.0)
88.4
0.0
0.0
88.4
21.2%
720.6
16.0%
(305.6)
(208.9)
206.1
35.6%
(25.5)
180.6
32.0%
0.0
0.0
0.0
180.6
(5.1)
0.0
0.0
(59.6)
0.0
0.0
0.0
115.9
0.0
(0.0)
115.8
0.0
0.0
115.8
31.1%
847.4
17.6%
(391.0)
(199.3)
257.1
24.8%
(38.9)
218.2
20.8%
0.0
0.0
0.0
218.2
(8.9)
0.0
0.0
(68.5)
0.0
0.0
0.0
140.8
0.0
0.2
141.0
0.0
0.0
141.0
21.7%
1,098.0
29.6%
(527.8)
(257.3)
313.0
21.7%
(47.0)
266.0
21.9%
0.0
0.0
0.0
266.0
(14.0)
0.0
0.0
(79.5)
0.0
0.0
0.0
172.5
0.0
(0.5)
172.0
0.0
0.0
172.0
22.0%
1,173.0
6.8%
(532.3)
(281.7)
359.0
14.7%
(46.0)
313.0
17.7%
0.0
0.0
0.0
313.0
(8.0)
0.0
0.0
(98.0)
0.0
0.0
0.0
207.0
0.0
(0.6)
206.4
0.0
0.0
206.4
20.0%
1,260.0
7.4%
(565.0)
(294.0)
401.0
11.7%
(46.0)
355.0
13.4%
0.0
0.0
0.0
355.0
(2.0)
0.0
0.0
(113.0)
0.0
0.0
0.0
240.0
0.0
(1.0)
239.0
0.0
0.0
239.0
15.8%
85.8
NS
(28.7)
4.0
(1.0)
61.1
20.0
0.0
0.0
0.0
0.0
(65.6)
15.4
71.3
-16.9%
(8.2)
(9.6)
(1.0)
53.5
(0.6)
0.0
0.0
(20.5)
2.3
1.4
36.1
84.9
19.0%
(10.7)
(6.1)
(1.0)
68.1
0.5
0.0
0.0
(22.1)
0.2
(12.9)
33.9
107.2
26.2%
37.9
(33.7)
(1.0)
111.4
(356.5)
0.0
0.0
(24.9)
1.3
167.6
(101.1)
145.7
35.9%
(9.5)
(19.9)
(1.0)
116.3
1.8
0.0
0.0
(28.5)
0.3
(22.7)
67.0
193.3
32.7%
18.4
(32.2)
(5.0)
179.5
(299.2)
0.0
0.0
(31.4)
0.2
301.2
150.2
224.9
16.3%
(54.9)
(37.3)
(5.0)
132.6
0.0
0.0
0.0
(33.0)
(12.6)
(185.0)
(98.0)
255.3
13.5%
3.2
(16.4)
(6.0)
242.0
0.0
0.0
0.0
(37.0)
0.0
(131.3)
73.7
288.6
13.1%
(15.3)
(17.6)
(5.0)
255.7
0.0
0.0
0.0
(42.7)
0.0
(140.2)
72.8
323.4
0.2
22.2
48.5
(112.3)
NS
282.0
174.6
1.5
44.3
1.6
0.0
60.0
14.6
282.0
392.6
0.4
25.1
43.7
(157.2)
NS
304.6
188.1
6.1
46.3
2.2
0.0
61.8
14.1
304.6
421.6
0.6
24.6
58.0
(182.9)
NS
321.9
188.0
4.7
44.4
1.7
0.0
83.2
17.2
322.0
461.8
0.7
17.2
64.0
133.0
28.8
676.7
431.6
139.3
49.9
8.2
0.0
47.7
7.7
676.7
549.1
0.0
16.7
119.7
70.3
12.8
755.7
442.7
150.9
47.0
6.5
0.0
108.7
15.1
755.7
627.2
20.3
29.6
162.2
271.8
42.0
1,111.1
682.5
236.6
67.1
5.7
0.0
119.3
14.1
1,111.1
749.6
24.9
32.0
170.2
155.6
20.1
1,132.2
704.5
206.6
38.7
5.7
0.0
176.8
16.1
1,132.2
913.5
31.0
33.5
176.0
(24.3)
NS
1,129.7
704.5
181.0
61.5
5.7
0.0
177.1
15.1
1,129.7
1,103.6
38.1
35.0
182.7
(238.7)
NS
1,120.7
704.5
150.1
64.0
5.7
0.0
196.6
15.6
1,120.8
www.cheuvreux.com
January 2011
GERMANY
Software AG
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
2.90
NS
2.83
NS
2.23
-23.0%
2.23
-21.1%
2.56
14.5%
2.56
14.5%
3.10
21.2%
3.10
21.2%
4.05
30.9%
4.05
30.9%
4.92
21.3%
4.92
21.3%
6.06
23.2%
6.06
23.2%
7.24
19.6%
7.24
19.6%
8.38
15.8%
8.38
15.8%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.07
0.75
3.15
NS
11.1
0.00
0.80
2.58
-17.9%
13.4
0.00
0.90
2.98
15.1%
13.9
0.00
1.00
3.76
26.2%
15.2
0.00
1.10
5.10
35.8%
18.1
0.00
1.15
6.74
32.2%
20.7
0.00
1.30
7.92
17.5%
25.1
0.00
1.50
8.95
13.1%
30.5
0.00
1.80
10.12
13.1%
36.9
27.270
27.270
0.000
27.610
27.610
0.000
28.540
28.540
0.000
28.540
28.540
0.000
28.570
28.570
0.000
28.680
28.680
0.000
28.400
28.400
0.000
28.510
28.510
0.000
28.510
28.510
0.000
23.80
28.58
16.50
23.09
41.15
43.90
23.08
32.91
59.74
60.70
36.50
46.25
60.57
78.27
48.11
64.54
40.00
61.98
27.50
44.55
76.40
80.05
33.61
54.73
109.80
109.80
74.75
89.53
108.20
111.75
107.00
109.08
108.20
-
649.7
558.1
1,123.4
989.1
1,630.9
1,470.9
1,726.2
1,868.3
1,146.8
1,227.3
2,190.4
2,486.0
3,118.3
3,300.2
3,084.8
3,088.3
3,084.8
2,875.4
8.4
8.2
7.6
9.4
2.1
2.0
3.2
18.4
18.4
15.9
4.8
3.1
3.3
1.9
23.4
23.4
20.1
4.2
4.3
4.6
1.5
19.6
19.6
16.1
6.5
4.0
2.8
1.7
9.9
9.9
7.8
10.1
2.2
1.6
2.8
15.5
15.5
11.3
8.2
3.7
2.2
1.5
18.1
18.1
13.9
4.3
4.4
2.7
1.2
14.9
14.9
12.1
7.8
3.5
2.5
1.4
12.9
12.9
10.7
8.3
2.9
2.4
1.7
5.8
6.5
1.36
6.7
9.5
10.3
2.26
14.5
12.3
13.2
3.05
18.3
12.3
13.7
3.01
17.5
6.0
6.8
1.70
8.2
9.7
11.4
2.9
12.5
10.5
12.4
3.0
14.1
8.6
9.9
2.6
11.8
7.2
8.1
2.3
9.9
NS
NS
23.6
20.9
18.8
1.5
NS
26.5
NS
NS
23.8
22.0
14.1
1.4
NS
35.8
NS
NS
24.7
23.0
15.2
1.5
NS
35.2
NS
1.2
24.5
22.0
14.2
0.9
28.8
32.3
NS
0.5
28.6
25.1
16.1
1.0
12.8
27.1
NS
1.4
30.3
25.7
16.6
0.8
42.0
23.4
NS
0.7
28.5
24.2
15.7
1.0
20.1
21.5
NS
NS
30.6
26.7
17.6
1.0
NS
20.7
NS
NS
31.8
28.2
19.0
1.1
NS
21.5
30.6
21.2
27.1
27.1
31.9
19.5
17.0
17.0
34.7
21.4
18.9
18.9
20.5
13.2
21.2
21.2
24.1
15.9
23.6
23.6
19.7
13.3
25.3
25.3
23.6
16.2
25.9
25.9
27.8
18.9
25.5
25.5
31.8
21.6
24.3
24.3

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
265
www.cheuvreux.com
January 2011
GERMANY
RENEWABLE EQUIPMENT
2/Outperform
Rating
+64.6% EUR12.00
SolarWorld
Reuters: SWVG.DE Bloomberg: SWV GR
Brand and quality leader

Q
Recent developments Very good profitability
SolarWorld reported sales of EUR337m in Q3-10, in line with

expectations. EBIT of EUR51.4m came in much better (22%) than we
and consensus had expected (EUR42m), whilst net income of EUR18m
fell short of our forecast of EUR20.4m and consensus of EUR21m. The
clear surprise in the Q3-10 figures was the fact that SolarWorld was
able to report a 15% EBIT margin despite having lowered its prices in
the quarter. Its EUR-19m financial result was hit to the tune of EUR56m by non-cash items due to interest rate hedging. Its clean financial
result of EUR13-14m was in line with our expectations. The company
reported a high 42% tax rate because its US capacities are still lossmaking.
On 15 November SolarWorld offered Solarparc's shareholders
(EUR39m market cap as of 14 November) one SolarWorld share for one
Solarparc share. Solarparc was founded by SolarWorld's CEO Frank
Asbeck in 1993 and was IPOed in 2001. In 2009 it achieved revenues of
EUR11m, EBIT of EUR1.9m (17% EBIT margin) and net income of
EUR3.5m. Based on our latest information, Solarparc has 59MW of
wind parks in operation and ~88MW of solar parks, of which it actually
owns 57MW and 3MW respectively. SolarWorld will pay for the deal
with its treasury shares.
Q
EUR7.29
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
Performances
-1.3%
-22.9% -56.1%
-7.7%
-31.3% -56.6%
Absolute perf.
Relative perf.
140.3
140.3
120.3
120.3
100.3
100.3
80.3
80.3
60.3
60.3
40.3
40.3
20.3
20.3
0.3
01/01
0.3
03/02
06/03
09/04
12/05
Price/TECDAX
Outlook Strong brand also abroad
We regard the Solarparc acquisition as positive, since it will strengthen

SolarWorld's position as a fully integrated photovoltaic producer. The
company's CFO expects that about 200MW or about 40-50% of its US
production capacity will be sold in the US in 2011, implying that
demand in the US will be there. SolarWorld will benefit from increasing
demand in the US thanks to its local production site, which should have
a total capacity of 500MW by the end of 2011 at the latest. We expect
the US market to reach 1.2GW in 2011E, which puts SolarWorld's share
at an estimated 17%. Generally speaking, we expect SolarWorld to also
enjoy a high level of brand awareness outside of Germany, which for
the company is the key to success. We reiterate our 2/OP rating with a
EUR814m
EUR443m
EUR1254m
111.72m
EUR 5.85m
03/07
06/08
Price
Sector Top Picks

Least favoured
SMA, SolarWorld
Conergy
Shareholders
Free Float 54.4%
2009
2010E
2011E
2012E
29.0
10.7
8.3
9.2
EV/EBITDA (x)
9.2
5.6
4.0
3.4
NS
NS
19.3
12.1
Net debt/EBITDA (x)
1.3
2.3
1.4
1.0
Yield (%)
7.5
1.1
1.4
1.2
ROCE (%)
13.7
11.6
15.0
13.9
1.8
1.3
1.2
1.1
Philipp BUMM
Q
Q
266
www.cheuvreux.com
12/10
Sector focus
P/E (x)
Research Analyst
pbumm@cheuvreux.com
(49) 69 47.897.527
09/09
January 2011
GERMANY
Company profile
Fully integrated photovoltaic company

As one of the world's largest photovoltaic companies, SolarWorld
manufactures and sells mono- and polycrystalline silicon wafers,
cells and solar modules. Via a JV with Degussa and another with
Qatar it is also involved in pure silicon production.
Q
Polysilicon, wafers, cells and solar modules

Its vertically integrated business model makes SolarWorld a fully
integrated solar group based on four strategic business areas:
Polysilicon, Wafer, Cells and Modules.
Q
Q Largest player in the US

Following its Shell Solar acquisition in 2006, SolarWorld is now the
largest solar company in the US (in terms of crystalline-based
capacity). It aims to strongly expand its production capacity in the
US to 500MW in wafers, cells and modules by the end of 2011.
Focusing more on modules

The company's strategy has so far been to focus on its profitable
wafer business, with about 50% of its sales in terms of MW to be
generated with external cell customers and the remaining 50% of
wafer production being processed internally to generate solar cells
and modules. However, with its latest strategy shift SolarWorld aims
to also strengthen its cells and module business and to reduce its
dependency on external customers. The company currently employs
>2500 staff at its sites in Germany, Spain, South Africa, Asia and the
US.
Q
SWOT analysis
Strengths
Weaknesses
Full integration (polysilicon,

wafers, cells and modules). One
of the world's major players in
the photovoltaic industry.
As a pure solar player,

SolarWorld is strongly exposed
to polysilicon supply and prices
SolarWorld's
Long-term contracts with

several established polysilicon
producers including Wacker
Chemie, Tokuyama and Hemlock
Strong distribution network
production is not
based in low-cost countries
SolarWorld
faces margin
pressure from Chinese
competition
Thanks to its strong brand

name, SWV can sell at a
premium
contracts in
polysilicon may prove negative if
spot market prices fall below the
agreed long-term prices
Opportunities
Threats
Cost
Long-term
improvements due to
increasing US production
capacity
As the company focuses solely

on silicon-based solar modules,
a breakthrough in the form of
equally efficient thin-film
technology requiring no silicon
could make the considerable
investments planned for cell and
wafer assets unprofitable
Renegotiation
of long-term
prices due to price collapse in
wafers and cells
267
www.cheuvreux.com
Valuation
Based on our DCF valuation we arrive at a target

price of EUR12 per share.
The company is trading at a P/E 11E of 8x, at a
P/E 12E of 9x and at EV/EBIT multiples of 6.3x
and 6.4x respectively representing discounts
to Q-Cells and REC.
Investment case
SolarWorld will benefit from increasing demand

in the US as it has a local production site that
will have a total capacity of 500MW by the end
of 2011 at the latest. We expect the US market
to reach a size of 1.2GW in 2011E, which implies
SolarWorld will have a 17% market share.
Generally speaking, we expect the company to
enjoy a high level of brand awareness outside of
Germany, which is its key to success.
Despite a further price decline for modules,
triggered by subsidy cuts in Europe (e.g.
Germany), we expect SolarWorld to maintain a
double-digit EBIT margin going forward. We
predict 12% EBIT margins for 2011E and 2012E.
SolarWorld will be able to compensate falling
prices thanks to a) economies of scale, b) a
turnaround in its US operations and less
expensive sourcing.
We reiterate our 2/OP rating with a target price
of EUR12.
January 2011
GERMANY
SolarWorld
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
268
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
199.9
102.9%
(30.8)
(134.4)
34.7
-3.6%
(16.5)
18.2
-21.2%
0.0
0.0
0.0
18.2
(4.3)
0.0
0.0
(10.4)
(0.1)
0.0
0.0
3.5
0.0
0.0
3.5
0.0
0.0
3.5
-83.2%
356.0
78.1%
(37.8)
(209.9)
108.3
NS
(19.7)
88.6
NS
0.0
0.0
0.0
88.6
(4.9)
0.0
0.0
(31.8)
(0.8)
0.0
0.0
52.0
0.0
0.0
52.0
0.0
0.0
52.0
NS
515.2
44.7%
(55.0)
(240.6)
219.6
102.8%
(42.0)
177.6
100.5%
0.0
0.0
0.0
177.6
1.3
0.0
0.0
(49.8)
(1.3)
0.0
0.0
130.6
0.0
0.0
130.6
0.0
0.0
130.6
151.2%
698.8
35.6%
(75.0)
(382.8)
241.0
9.7%
(42.1)
198.9
12.0%
0.0
0.0
0.0
198.9
(23.0)
0.0
0.0
(65.0)
(1.8)
0.0
0.0
113.3
0.0
0.0
113.3
0.0
0.0
113.3
-13.2%
900.3
28.8%
(90.1)
(491.7)
318.5
32.2%
(55.2)
263.3
32.4%
0.0
0.0
0.0
263.3
(75.2)
0.0
0.0
(53.4)
(8.6)
0.0
0.0
148.1
0.0
0.0
148.1
0.0
0.0
148.1
30.7%
1,012.6
12.5%
(99.8)
(697.3)
215.5
-32.3%
(63.7)
151.8
-42.3%
0.0
0.0
0.0
151.8
(20.1)
0.0
0.0
(72.8)
(4.6)
0.0
0.0
59.0
0.0
0.0
59.0
0.0
0.0
59.0
-60.2%
1,330.7
31.4%
(146.4)
(931.5)
252.8
17.3%
(93.1)
159.7
5.2%
0.0
0.0
0.0
159.7
(48.3)
0.0
0.0
(33.4)
0.0
0.0
0.0
78.0
0.0
0.0
78.0
0.0
0.0
78.0
32.2%
1,651.5
24.1%
(181.7)
(1,156.0)
313.8
24.1%
(115.6)
198.2
24.1%
0.0
0.0
0.0
198.2
(57.9)
0.0
0.0
(42.1)
0.0
0.0
0.0
98.2
0.0
0.0
98.2
0.0
0.0
98.2
25.9%
1,585.2
-4.0%
(174.4)
(1,070.0)
340.8
8.6%
(158.5)
182.3
-8.0%
0.0
0.0
0.0
182.3
(55.5)
0.0
0.0
(38.0)
0.0
0.0
0.0
88.8
0.0
0.0
88.8
0.0
0.0
88.8
-9.6%
19.9
-44.1%
24.6
(32.3)
(24.3)
12.2
14.5
0.0
5.1
(1.0)
14.5
5.1
50.4
71.7
NS
(35.0)
(57.3)
(43.1)
(20.6)
42.9
0.0
2.8
(2.3)
42.9
2.8
68.5
173.2
141.6%
(201.7)
(105.9)
(85.3)
(134.4)
259.0
0.0
(79.4)
(7.0)
259.0
(79.4)
217.8
156.1
-9.9%
(148.6)
(117.8)
(89.8)
(110.3)
0.0
0.0
3.0
(11.2)
0.0
3.0
(115.5)
203.2
30.2%
73.9
(269.5)
(233.5)
7.6
2.4
0.0
(18.7)
(11.2)
2.4
(18.7)
(36.2)
122.6
-39.7%
(221.0)
(318.4)
(277.9)
(416.8)
(23.4)
0.0
39.6
(11.2)
(23.4)
39.6
(395.7)
171.1
39.6%
(51.5)
(300.0)
(246.8)
(180.4)
0.0
0.0
0.0
(128.5)
0.0
0.0
(308.9)
213.8
25.0%
161.4
(217.8)
(135.3)
157.4
0.0
0.0
0.0
(8.7)
0.0
0.0
148.7
247.3
15.7%
9.6
(158.5)
(79.3)
98.4
0.0
0.0
0.0
(11.0)
0.0
0.0
87.4
124.5
0.0
0.0
41.3
40.0
32.1
205.8
31.8
6.7
145.8
0.6
0.0
20.9
10.5
205.8
217.1
0.0
0.0
2.7
(47.6)
NS
172.2
31.8
2.7
178.4
6.9
0.0
(47.6)
(13.4)
172.2
599.6
0.0
0.0
17.0
(139.7)
NS
476.9
31.8
2.7
290.6
37.4
0.0
114.4
22.2
476.9
701.7
0.0
0.0
12.7
(151.7)
NS
562.7
29.6
3.1
349.6
52.2
0.0
128.3
18.4
562.8
841.1
0.0
0.0
23.2
(132.0)
NS
732.3
29.6
4.3
575.4
58.2
0.0
64.9
7.2
732.4
865.5
0.0
0.0
24.0
279.8
32.3
1,169.3
29.6
7.7
787.5
57.8
0.0
286.6
28.3
1,169.2
815.0
0.0
0.0
25.5
588.6
72.2
1,429.1
29.6
7.7
994.4
57.8
0.0
339.6
25.5
1,429.1
904.5
0.0
0.0
31.7
440.0
48.6
1,376.2
29.6
7.7
1,096.6
57.8
0.0
184.4
11.2
1,376.1
982.3
0.0
0.0
30.4
352.6
35.9
1,365.3
29.6
7.7
1,096.6
57.8
0.0
173.5
10.9
1,365.2
www.cheuvreux.com
January 2011
GERMANY
SolarWorld
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
0.04
-83.1%
0.04
-83.1%
0.51
NS
0.51
NS
1.17
128.3%
1.17
128.3%
1.01
-13.3%
1.01
-13.3%
1.33
30.8%
1.33
30.8%
0.53
-60.2%
0.53
-60.2%
0.70
32.2%
0.70
32.2%
0.88
25.9%
0.88
25.9%
0.80
-9.6%
0.80
-9.6%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.02
0.22
-44.2%
1.3
0.00
0.06
0.71
NS
2.1
0.00
0.10
1.55
119.5%
5.3
0.00
0.14
1.40
-9.9%
6.1
0.00
0.15
1.82
30.2%
7.4
0.00
1.15
1.10
-39.7%
6.6
0.00
0.08
1.53
39.7%
7.2
0.00
0.10
1.91
24.9%
8.0
0.00
0.09
2.21
15.7%
8.7

Latest price
High
Low
Average price
92.400
92.400
0.000
101.600
101.600
0.000
111.720
111.720
0.000
111.720
111.720
0.000
111.720
111.720
0.000
111.720
111.720
0.000
111.720
111.720
0.000
111.720
111.720
0.000
111.720
111.720
0.000
4.11
4.18
0.68
1.90
14.12
17.56
4.12
9.66
23.80
35.42
14.00
24.22
41.75
48.80
23.78
34.36
15.10
53.19
10.83
27.96
15.33
24.72
11.82
16.48
7.47
16.84
6.89
10.16
7.29
7.65
7.26
7.39
7.29
-
380.4
420.4
1,435.1
1,387.5
2,658.9
2,519.2
4,664.3
4,512.6
1,687.0
1,555.0
1,712.7
1,992.5
834.0
1,422.6
814.4
1,254.4
814.4
1,167.0
NS
NS
19.1
3.2
3.1
2.0
0.5
27.6
27.6
20.0
NS
6.8
8.4
0.4
20.4
20.4
15.4
NS
4.5
5.7
0.4
41.2
41.2
29.9
NS
6.8
8.8
0.3
11.4
11.4
8.3
0.5
2.0
2.3
1.0
29.0
29.0
14.0
NS
2.3
1.8
7.5
10.7
10.7
4.9
NS
1.0
1.3
1.1
8.3
8.3
3.8
19.3
0.9
1.2
1.4
9.2
9.2
3.3
12.1
0.8
1.1
1.2
12.1
23.1
2.10
20.0
12.8
15.7
3.90
18.6
11.5
14.2
4.89
14.6
18.7
22.7
6.46
26.4
4.9
5.9
1.73
6.0
9.2
13.1
2.0
15.1
5.6
8.9
1.1
6.9
4.0
6.3
0.8
4.9
3.4
6.4
0.7
4.1
8.1
2.0
17.4
9.1
1.8
1.0
32.1
52.8
NS
NS
30.4
24.9
14.6
2.2
NS
11.7
NS
NS
42.6
34.5
25.3
1.2
NS
8.6
10.5
NS
34.5
28.5
16.2
1.4
NS
13.8
4.2
NS
35.4
29.2
16.5
1.3
NS
11.3
10.7
2.3
21.3
15.0
5.8
0.9
32.3
217.8
5.2
3.4
19.0
12.0
5.9
1.0
72.2
11.5
5.4
2.1
19.0
12.0
5.9
1.3
48.6
11.4
6.1
1.4
21.5
11.5
5.6
1.2
35.9
11.3
8.9
2.2
2.9
2.9
53.6
33.3
27.2
27.2
40.4
29.3
24.4
24.4
39.0
24.7
17.6
17.6
39.1
28.7
19.3
19.3
13.7
6.1
7.1
7.1
11.6
8.2
10.1
10.1
15.0
10.5
11.5
11.5
13.9
9.8
9.5
9.5
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
269
www.cheuvreux.com
January 2011
GERMANY
PHARMACEUTICALS
Stada
-3.8% EUR25.00
EUR26.00
Reuters: STAGn.DE Bloomberg: SAZ GR
Stock data
Recent developments Adj. Q3 results better than expected
In September 2010 Stada announced a significant restructuring of its

Serbian operations. These led to significant EUR29.5m one-time
charges and a weaker operational performance. During its Q3 call,
however, management stressed its confidence that the situation will
improve going forward. Q4 should have benefited from the fact that the
supply channels have dried out and the company has installed a new
management team. Serbia accounted for 8% of Stada's 2009 sales.
In November Stada announced its Q3 results. Sales increased by 4.3%
in the quarter, which was 2.8% ahead of expectations, but still only
represented about 2% organic growth. This reflects the company's
strategy to focus on profitable growth, though such a strategy carries a
risk in an industry in which scale effects play a key role. Adjusted
EBITDA, the key figure, came to EUR75.6m in Q3, which was 10%
ahead of market expectations and will allow Stada to clearly match its
FY09 result, hence meeting its guidance. The Q3 adjusted operating
result came in at EUR56m, implying a material 14.0% margin. This is
noteworthy given the challenges it has faced in Germany and Serbia
and raises question marks concerning its sustainability. This result was
supported by massive one-time benefits, which came to EUR50m (!)
alone in Q3. The reported operating result came in close to break-even
in Q3 at EUR6.3m.
Q
3/Underperform
Price (07/01/2011)
The wild card

Q
Rating
Free float
Enterprise value
Daily volume
EUR1565m
EUR1252m
EUR2416m
60.2m
EUR 7.10m
Performances
9.7%
19.4%
-0.8%
8.1%
4.9%
-22.8%
Absolute perf.
Relative perf.
48.8
48.8
43.8
43.8
38.8
38.8
33.8
33.8
28.8
28.8
23.8
23.8
18.8
18.8
13.8
13.8
8.8
01/01
8.8
03/02
06/03
09/04
12/05
Price/M DAX
03/07
07/08
10/09
01/11
Price
Outlook Outlook for 2011 is key
Following the stronger than expected adjusted results, Stada will clearly
meet its guidance for 2010, in our view. It predicted growth in sales and
operating profit, adjusted for one-time special effects, with at least a
stable operating margin. In fact, we believe the Q4 results will be
positive, also bearing in mind the completely dried out supply channels
in Serbia as well as the company's improved German performance in
the quarter. Hence, the (probably vague) guidance for 2011 (margin) will
be of key importance.
Stada remains a high risk investment. It is small compared to the large
industry leaders it competes with in most of its markets. The company
has so far focused purely on profitable sales, but at some stage it will
refocus on volumes as generics is an economies-of-scale business.
This will prompt the question of what it implies for the current high
margin. Furthermore, the outcome of the renewal of the AOK tender
contract, in which Stada had a material 18% share (currently delayed),
and the regular and currently huge one-offs call the quality of adjusted
earnings into question.
On the positive side: a takeover bid remains possible (or merger with
e.g. Actavis), the BtF programme should improve the company's cost
base, but note that this is only expected to yield meaningful savings
from H2-11E onwards. M&A may be back on the agenda in 2011, but
with a 2.9x current ND/adj. EBITDA Stada's financial firepower ex rights
issues is limited.
Research Analyst
(49) 69 478 975 26
Sector focus
Sector Top Picks
Least favoured
Ipsen, Roche
Astra Zeneca, Glaxosmithkline,
Novartis
Shareholders
Free Float 80.0%, Doctors&Pharmacists 20.0%
2009
2010E
2011E
2012E
12.3
12.0
11.4
10.4
8.4
9.5
8.3
7.0
10.1
6.1
3.6
5.8
Net debt/EBITDA (x)
3.2
3.3
2.8
2.3
Yield (%)
2.3
2.3
2.7
2.8
ROCE (%)
11.3
9.7
11.4
13.6
1.4
1.4
1.3
1.2
P/E (x)
EV/EBITDA (x)
Q
Q
270
www.cheuvreux.com
January 2011
GERMANY
Company profile
Generic copycat
STADA is the no. 3 generic player in Germany (second-largest global
generic market) and no. 5 globally. It does not conduct its own R&D
activities for new active ingredients, but is increasingly in-housing
the development of new generic compounds. Market volume growth
is driven by the flow of patent expiries.
Q
Germany, Russia and Belgium are key markets

The company focuses on two core segments, Generics (71% of
2009 sales) and Branded Products (25%). Its products are currently
distributed in 30 countries via local sales subsidiaries and in
additional countries from centrally located countries. Germany
remains its largest market (34% of 2009 sales), followed by Russia
(12%). Belgium (8%) and Serbia (8%).
Q
Q Significant OTC offering; smaller exposure to biogenerics

Stada has significant exposure to OTC medication, Germany and
Russia being its most important markets. Its exposure to the
commercial success of biogenerics is more limited following the
partnering agreement with Hospira. However, Stada has maintained
semi-exclusive marketing rights for EPO in Germany and an option
to acquire the remaining shares of Bioceuticals, which manages its
biogeneric activities. Stada is also evaluating its options to develop
biogeneric monoclonal antibodies in the medium term.
Q A potential takeover target given its 100% free float
Due to its 100% free float and the rapid consolidation in the global
generic market, Stada is considered a potential acquisition target.
SWOT analysis
Strengths
Weaknesses
Strong local position in Russia,

which offers significant growth
Focus
on commodity products
Production
still makes intense

use of third-party suppliers with
limited short-term flexibility
Portfolio of strong, wellpositioned OTC brands and

strong relationships to German
pharmacists
Free
cash flow generation

remains limited in the past
Opportunities
Threats
Increased flow of patent

expiries in 2011
Eastern European countries,

which are less dependent on
reimbursement issues
Significant financial leverage

and major intangible assets on
the balance sheet
Pricing pressure; rebate

contracts using tender processes
becoming increasingly prevalent
Build the future programme
Falling behind in global

consolidation of the generic
industry
A takeover bid can never be

ruled out
Potential larger M&A would

likely be equity-financed
271
www.cheuvreux.com
Valuation
We reiterate our 3/UP rating and EUR25 target

price. At this level Stada would be trading at 11x
2011E and 10.0x 2012E P/E. Note that these P/E
multiples are based on fully adjusted earnings as
reported by Stada.
Investment case
In our view, Stada remains a high risk

investment. It has focused on profitable sales
that have clearly supported its underlying margin
development, but we believe this strategy may
only be of short-term nature as Stada is
operating in a commodity market in which
volumes play a key role. In addition, its financial
firepower ex rights issue remains restricted
given its current leverage of 2.9x ND/adjusted
EBITDA.
We acknowledge that Q4 results are likely to be
strong, bearing in mind the dried out supply
channels in Serbia and the still strong
development in Russia.
However, given the risk from incremental
austerity measures, we prefer to remain on the
sidelines until we are more convinced that its
Western European markets and Germany will
generate no further headwinds. The stock's
largest chance on the upside remains a takeover
bid.
January 2011
GERMANY
Stada
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
272
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
813.5
9.2%
(136.0)
(554.9)
122.6
5.0%
(33.9)
88.7
-3.3%
(0.5)
0.0
0.0
88.2
(10.7)
0.0
0.0
(29.0)
0.0
0.0
0.0
48.5
0.0
0.0
48.5
0.0
0.0
49.0
-1.8%
1,022.1
25.6%
(160.4)
(700.9)
160.8
31.2%
(53.7)
107.1
20.7%
0.0
0.0
0.0
107.1
(9.5)
0.0
(20.3)
(45.5)
0.0
0.0
0.0
52.0
0.0
(0.4)
51.6
0.0
28.9
80.5
64.3%
1,245.1
21.8%
(187.7)
(824.8)
232.6
44.7%
(63.9)
168.7
57.5%
0.0
0.0
0.0
168.7
(23.5)
0.0
(12.0)
(52.7)
0.0
0.0
0.0
92.5
0.0
(0.6)
91.9
0.0
10.2
102.1
26.8%
1,570.5
26.1%
(272.4)
(1,008.6)
289.5
24.5%
(101.7)
187.8
11.3%
0.0
0.0
0.0
187.8
(37.1)
0.0
(28.1)
(44.0)
0.0
0.0
0.0
106.6
0.0
(1.5)
105.1
0.0
41.7
146.8
43.8%
1,646.2
4.8%
(253.0)
(1,137.8)
255.4
-11.8%
(80.2)
175.2
-6.7%
0.0
0.0
0.0
175.2
(69.7)
0.0
0.0
(28.5)
0.0
0.0
0.0
77.0
0.0
(0.8)
76.2
0.0
39.8
116.0
-21.0%
1,568.8
-4.7%
(247.2)
(1,041.5)
280.1
9.7%
(87.6)
192.5
9.9%
0.0
0.0
0.0
192.5
(50.9)
0.0
0.0
(40.8)
0.0
0.0
0.0
100.7
0.0
(0.3)
100.4
0.0
15.3
115.7
-0.3%
1,632.6
4.1%
(257.3)
(1,121.6)
253.7
-9.4%
(90.6)
163.1
-15.3%
0.0
0.0
0.0
163.1
(52.1)
0.0
0.0
(38.8)
0.0
0.0
0.0
72.1
0.0
(0.3)
71.8
0.0
55.0
126.8
9.6%
1,730.1
6.0%
(272.6)
(1,167.7)
289.8
14.2%
(91.9)
197.9
21.3%
0.0
0.0
0.0
197.9
(49.9)
0.0
0.0
(44.4)
0.0
0.0
0.0
103.6
0.0
(0.4)
103.2
0.0
33.6
136.8
7.9%
1,825.9
5.5%
(287.7)
(1,199.6)
338.6
16.8%
(96.0)
242.6
22.6%
0.0
0.0
0.0
242.6
(47.9)
0.0
0.0
(52.6)
0.0
0.0
0.0
142.1
0.0
(0.4)
141.7
0.0
8.5
150.2
9.8%
81.3
3.2%
(43.3)
(67.0)
(41.5)
(29.0)
(13.0)
0.0
0.0
(18.8)
(5.0)
0.0
(65.8)
109.9
35.2%
53.4
(162.0)
(121.1)
1.3
(102.0)
0.0
0.0
(20.8)
1.8
0.0
(119.7)
153.3
39.5%
(166.2)
(47.9)
(61.0)
(60.8)
(485.0)
0.0
30.0
(20.8)
78.2
0.0
(458.4)
201.2
31.2%
(100.7)
(126.0)
(72.7)
(25.5)
(125.0)
0.0
10.0
(36.0)
7.6
0.0
(168.9)
168.7
-16.2%
(39.4)
(112.0)
(65.3)
17.3
(42.2)
0.0
10.9
(41.6)
0.6
0.0
(55.0)
191.2
13.3%
59.3
(106.5)
(63.2)
144.0
0.0
0.0
0.0
(30.5)
1.5
0.0
115.0
162.8
-14.9%
43.2
(111.9)
(38.4)
94.1
0.0
0.0
0.0
(32.4)
0.0
0.0
61.7
195.5
20.1%
(18.1)
(120.9)
(43.0)
56.5
0.0
0.0
0.0
(34.1)
0.0
1.0
23.4
238.2
21.8%
(16.4)
(130.5)
(48.4)
91.3
0.0
0.0
0.0
(41.2)
0.0
2.0
52.1
638.9
0.1
13.4
3.2
103.6
16.2
759.2
105.6
342.0
60.7
43.6
0.0
207.3
25.5
759.2
682.5
2.3
17.2
4.1
234.2
34.2
940.3
140.5
471.7
94.5
77.1
0.0
156.5
15.3
940.3
843.4
19.7
28.3
6.7
773.0
89.6
1,671.1
289.3
655.4
260.4
89.6
0.0
376.5
30.2
1,671.2
912.8
21.1
49.0
11.7
958.5
102.6
1,953.1
376.5
720.1
298.8
116.5
0.0
441.2
28.1
1,953.1
827.4
12.4
34.9
8.3
1,015.7
120.9
1,898.7
343.6
657.2
306.6
105.4
0.0
485.7
29.5
1,898.5
861.1
8.6
27.4
6.5
899.0
103.4
1,802.6
343.4
656.7
309.0
97.5
0.0
396.1
25.2
1,802.7
900.6
8.9
28.6
6.8
837.3
92.1
1,782.2
349.9
669.3
311.1
97.5
0.0
354.2
21.7
1,782.0
969.7
9.3
30.3
7.2
814.8
83.2
1,831.3
357.9
684.5
317.0
97.5
0.0
374.4
21.6
1,831.3
1,070.2
9.7
31.9
7.6
764.7
70.8
1,884.1
367.3
702.4
324.2
97.5
0.0
392.9
21.5
1,884.3
www.cheuvreux.com
January 2011
GERMANY
Stada
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
0.89
-17.2%
0.88
-6.9%
1.42
58.5%
0.91
2.7%
1.80
27.5%
1.62
79.1%
2.43
34.5%
1.74
7.0%
1.96
-19.4%
1.29
-26.0%
1.96
0.4%
1.71
32.7%
2.11
7.2%
1.19
-30.0%
2.27
7.9%
1.71
43.7%
2.50
9.8%
2.35
37.3%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.01
0.39
1.48
-13.0%
11.2
0.00
0.39
1.93
30.4%
11.6
0.00
0.62
2.71
40.2%
14.3
0.00
0.71
3.33
22.8%
14.4
0.00
0.52
2.85
-14.5%
13.4
0.00
0.55
3.25
14.1%
14.1
0.00
0.58
2.70
-16.7%
14.4
0.00
0.70
3.25
20.1%
15.4
0.00
0.72
3.96
21.8%
17.1

Latest price
High
Low
Average price
54.900
54.900
0.000
56.900
56.900
0.000
56.600
56.600
0.000
60.500
60.500
0.000
59.300
59.300
0.000
58.900
58.900
0.000
60.200
60.200
0.000
60.200
60.200
0.000
60.200
60.200
0.000
19.89
26.75
13.38
19.84
27.65
31.63
19.77
26.35
43.45
43.64
27.74
35.39
42.05
51.43
36.05
45.46
20.50
48.78
17.85
36.61
24.20
26.80
10.00
17.75
25.38
32.49
20.60
26.17
26.00
26.15
25.33
25.72
26.00
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
1,062.0
1,180.0
1,476.3
1,739.6
2,319.8
3,137.5
2,451.5
3,493.8
1,250.5
2,315.0
1,420.5
2,351.2
1,527.9
2,401.5
1,565.2
2,416.6
1,565.2
2,366.5
22.5
22.3
13.4
NS
1.8
1.6
2.0
19.5
19.5
14.3
0.1
2.4
2.0
1.4
24.1
24.1
16.0
NS
3.0
2.0
1.4
17.3
17.3
12.6
NS
2.9
1.9
1.7
10.5
10.5
7.2
1.4
1.5
1.3
2.5
12.3
12.3
7.5
10.1
1.7
1.4
2.3
12.0
12.0
9.4
6.1
1.8
1.4
2.3
11.4
11.4
8.0
3.6
1.7
1.3
2.7
10.4
10.4
6.6
5.8
1.5
1.2
2.8
9.6
13.3
1.45
13.4
10.8
16.2
1.70
15.0
13.5
18.6
2.52
18.5
12.1
18.6
2.23
15.2
9.1
13.2
1.41
10.5
8.4
12.2
1.5
10.3
9.5
14.7
1.5
12.2
8.3
12.2
1.4
10.5
7.0
9.8
1.3
8.6
11.5
1.3
15.1
10.9
6.0
1.1
16.2
44.1
16.9
2.1
15.7
10.5
5.1
1.2
34.2
43.0
9.9
5.0
18.7
13.5
7.4
0.8
89.6
38.2
7.8
4.8
18.4
12.0
6.8
0.9
102.6
40.9
3.7
6.0
15.5
10.6
4.7
0.9
120.9
40.5
5.5
4.7
17.9
12.3
6.4
0.9
103.4
32.3
4.9
5.1
15.5
10.0
4.4
1.0
92.1
48.6
5.8
4.2
16.8
11.4
6.0
1.0
83.2
40.8
7.1
3.2
18.5
13.3
7.8
1.0
70.8
30.6
12.4
7.8
7.9
7.9
12.4
6.6
7.9
12.5
10.7
6.8
11.5
12.9
10.2
7.2
12.2
17.5
9.8
7.1
9.7
15.1
11.3
8.0
12.4
14.4
9.7
6.3
8.3
15.1
11.4
8.0
11.2
15.2
13.6
9.9
14.2
15.1
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
273
www.cheuvreux.com
January 2011
GERMANY
3/Underperform
Rating
-1.1% EUR31
Stratec Biomedical
Systems
Strong outlook but some market challenges
Q
Recent developments New Abbott deal; strong Q3 results
Stratec announced in mid-December the signing of a new development

deal with Abbott. Management had been guiding for this deal basically
since the end of 2009. The amount of disclosed details remains very
limited, however. We suspect that first sales from prototypes may be
expected in 2011 already, but the launch is more likely to come in 2014.
We believe this will be the follow-up system for an existing instrument
rather than a new MDx instrument, but no details were provided.
In late October 2010, Stratec reported its Q3 results with sales up a
strong 34% y-o-y (+24% in 9M-10). (The consolidation of Ballista
contributed an estimated 2.5%.) Thus, Stratec delivered on its promise
of accelerated growth in H2-10. Note that an acceleration was also
necessary to reach the market's and our full-year sales estimate of
EUR100m (guidance range: EUR96-102m). The Q3 EBIT margin of
18.5% was flat with the H1-10 level due to Ballista consolidation and a
lower share of consumables. To achieve our 19.5% full-year forecast
(guidance >19.0%) we expect a strong Q4, which is however the usual
seasonal pattern at Stratec. Q3-10 EBIT and net income increased by
37% and 31% respectively.
Q
Outlook Update of mid-term guidance
We downgraded Stratec in mid-October after the stock reached our

target price. We felt that the market was aware of the upcoming
positive news flow (Q3, new deal, guidance update), but that there was
a risk that the recent adverse industry news flow could also provide a
slight headwind for Stratec in 2011.
Various industry players have recently been more cautious in their
outlooks (e.g. Immucor; Biomerieux; Qiagen). This was one reason for
our downgrade. The industry weakness has still not impacted the stock,
however, and so far Stratec has not seen an impact on their operations
and confirmed its FY forecasts. They did commented, however, that
their clients' timetables had shifted slightly. The company reiterated that
they will provide an updated mid-term guidance once Genprobe,
Qiagen and DiaSorin approve serial production of their new
instruments.
This new guidance is likely to provide a sales bandwidth for 2011 and a
CAGR sales growth rate assumption for 2012+13, which will in our view
suggest that Stratec will also deliver about 10-15% growth in 2013. The
bandwidth for 2011 may however be wider given the recent industry
developments.
For longer-term investors we continue to like Stratec, but we feel the
current valuation already reflects a significant part of its positives while
there are some clouds over the market in 2011.
EUR31.35
Price (07/01/2011)
Reuters: SBSG.DE Bloomberg: SBS GR
Stock data
Free float
Enterprise value
Daily volume
EUR361m
EUR203m
EUR331m
11.52m
EUR 0.74m
Performances
5.1%
1.1%
15.7%
0.2%
-14.0% -18.6%
Absolute perf.
Relative perf.
30.7
30.7
25.7
25.7
20.7
20.7
15.7
15.7
10.7
10.7
5.7
5.7
0.7
01/01
0.7
03/02
06/03
09/04
12/05
Price/SDAX
03/07
06/08
Sector focus
Sector Top Picks

William Demant
Least favoured
Shareholders
Free Float 56.3%, Leistner Family 43.7%
2009
2010E
2011E
2012E
P/E (x)
26.0
24.8
18.8
15.5
EV/EBITDA (x)
16.7
15.3
11.7
9.7
2.1
2.5
5.0
5.4
Net debt/EBITDA (x)
(0.9)
(0.8)
(1.0)
(1.2)
Yield (%)
1.7
1.8
2.4
2.9
ROCE (%)
32.9
38.7
47.9
52.4
6.4
6.5
6.1
5.5
Q
Q
274
www.cheuvreux.com
12/10
Price

Research Analyst
(49) 69 478 975 26
09/09
January 2011
GERMANY
Company profile
OEM of fully automated IVD analyser machines

Stratec Biomedical designs, develops and produces fully automated
analyser systems for its clients mainly global players in the in-vitro
diagnostic (IVD) industry. It allows its partners to accelerate their
time-to-market and benefits from the outsourcing trend in the
industry. Stratec develops the systems and its clients sell them
under their own brand names to end-customers, such as clinical
laboratories at hospitals and blood banks. At the start of a
development contract Stratec's clients commit themselves to certain
milestone payments and minimum system purchases.
Q
Q Bayer and DiaSorin are two key accounts

Aside from systems sales (68% of 2009 group sales), Stratec
generated 23% of its 2009 revenues via highly profitable
disposables sales and 9% via its services/advisory business.
Siemens and DiaSorin accounted for roughly 50% of its 2009
analyser system sales; Qiagen and Genprobe will start to contribute
meaningfully to sales going forward.
Q Broad industry competence secures new deals
In the IVD field, Stratec focuses on luminescence immunoassays,
blood grouping and typing, molecular diagnostics, other
immunoassay and point-of-care systems. It does not develop any
reagents. Stratec's competence has allowed it to sign new deals
with Abbott, Qiagen, Genprobe and Bio-Rad, amongst others.
Q Some exposure to capex spending trends
Stratec is exposed to laboratories' propensity to invest. We think its
risk profile is limited, however, given that a large proportion of these
instruments are sold by Stratec's clients within the framework of
reagent-rental deals. We also think the micro-cycles of its individual
instruments are still more important than overall market trends.
SWOT analysis
Strengths
Weaknesses
Global market leader in a

specific niche
Limited disclosure on
individual systems due to
confidentiality of OEM contracts
Strong industry reputation
Top two clients account for

about 50% of sales, but further
progress in diversification to
come from new systems
Platform strategy allows for

cost- and time-efficient development of customer-specific
solutions
Asset-light business model as

production is focused on
assembly
Opportunities
Threats
New development project wins

from existing or new clients
Delays in projects possible
Restricted global capex, but

reagent-rental deals provide
some buffer
Major replacement potential for

old systems
Potential expansion of
business model into OEM
commodity assays
Consolidation in medical
diagnostics industry brings some
uncertainty and may shift pricing
power
Losing out on new key

technologies
275
www.cheuvreux.com
Valuation
We reiterate our 3/Underperform rating on

Stratec and our EUR31 target price. At our
target price Stratec would trade at 18.6x 2011E
and 15.3x 2012E P/E.
Investment case
Stratec has established itself as a leading

outsourcing supplier in a growing niche market.
It growth potential over the coming years is
unmatched in the industry, due in part to the fact
that new deals have a material impact on the
group's accounts due to the low base.
We feel, however, that most of the positive
catalysts have now materialised (Q3 results,
Abbott deal). While we also expect a strong
guidance update around Feb 2011, we fear that
the recent challenges in the industry may also
translate into slight headwinds for Stratec in
2011. We are therefore more cautious on the the
stock's short-term potential despite its overall
strong fundamentals.
January 2011
GERMANY

Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
276
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
40.4
27.4%
(10.0)
(24.7)
5.7
46.2%
(1.0)
4.7
56.7%
0.0
0.0
0.0
4.7
(0.2)
0.0
0.0
(1.7)
0.0
0.0
0.0
2.8
0.0
0.0
2.8
0.0
0.0
2.8
64.7%
47.3
17.1%
(11.3)
(27.8)
8.2
43.9%
(1.0)
7.2
53.2%
0.0
0.0
0.0
7.2
(0.3)
0.0
0.0
(2.5)
0.0
0.0
0.0
4.4
0.0
0.0
4.4
0.0
0.0
4.4
57.1%
68.4
44.6%
(13.9)
(41.7)
12.8
56.1%
(1.8)
11.0
52.8%
0.0
0.0
0.0
11.0
(0.2)
0.0
0.0
(3.1)
0.0
0.0
0.0
7.7
0.0
0.0
7.7
0.0
0.0
7.7
75.0%
67.5
-1.3%
(15.8)
(35.1)
16.6
29.7%
(2.3)
14.3
30.0%
0.0
0.0
0.0
14.3
0.2
0.0
0.0
(4.5)
0.0
0.0
0.0
10.0
0.0
0.0
10.0
0.0
0.0
10.0
29.9%
61.0
-9.6%
(16.7)
(30.8)
13.5
-18.7%
(2.3)
11.2
-21.7%
0.0
0.0
0.0
11.2
(1.8)
0.0
0.0
(3.3)
0.0
0.0
0.0
6.1
0.0
0.0
6.1
0.0
2.1
8.2
-18.0%
79.6
30.5%
(20.7)
(41.6)
17.3
28.1%
(2.6)
14.7
31.3%
0.0
0.0
0.0
14.7
0.4
0.0
0.0
(3.4)
0.0
0.0
0.0
11.7
0.0
0.0
11.7
0.0
0.0
11.7
42.7%
100.5
26.3%
(26.6)
(51.1)
22.8
31.8%
(3.2)
19.6
33.3%
0.0
0.0
0.0
19.6
0.0
0.0
0.0
(4.4)
0.0
0.0
0.0
14.8
0.0
0.0
14.8
0.0
0.0
14.8
26.5%
123.3
22.7%
(32.4)
(62.5)
28.4
24.6%
(3.4)
25.0
27.6%
0.0
0.0
0.0
25.0
0.1
0.0
0.0
(5.7)
0.0
0.0
0.0
19.2
0.0
0.0
19.2
0.0
0.0
19.2
29.7%
142.2
15.3%
(37.1)
(71.9)
33.2
16.9%
(3.6)
29.6
18.4%
0.0
0.0
0.0
29.6
0.2
0.0
0.0
(7.0)
0.0
0.0
0.0
23.3
0.0
0.0
23.3
0.0
0.0
23.3
21.4%
3.8
52.0%
(1.4)
(1.1)
(0.3)
1.3
0.0
0.0
0.0
(0.3)
0.0
0.0
1.0
5.8
52.6%
(4.5)
(3.0)
(2.1)
(1.7)
0.0
0.0
0.0
(0.7)
12.1
0.0
9.7
9.7
67.2%
(0.9)
(6.6)
(5.2)
2.2
0.0
0.0
0.0
(1.1)
0.6
0.0
1.7
12.3
26.8%
(2.7)
(2.1)
(0.8)
7.5
0.0
0.0
0.0
(1.7)
0.7
0.0
6.5
8.6
-30.1%
(4.4)
(1.4)
(0.3)
2.8
0.0
0.0
0.0
(2.5)
(2.0)
0.0
(1.7)
13.0
51.2%
(2.1)
(4.5)
(3.9)
6.4
0.0
0.0
0.0
(4.0)
0.2
0.0
2.6
18.0
38.5%
(3.6)
(5.1)
(3.5)
9.3
0.0
0.0
0.0
(5.2)
0.0
0.0
4.1
22.6
25.6%
(2.2)
(2.2)
(0.5)
18.2
0.0
0.0
0.0
(6.7)
0.0
0.0
11.5
26.9
19.0%
(5.1)
(2.3)
(0.5)
19.5
0.0
0.0
0.0
(8.7)
0.0
0.0
10.8
15.5
0.0
0.1
2.4
3.2
20.6
21.2
0.0
0.2
4.4
0.1
0.0
16.4
40.6
21.1
31.5
0.0
0.0
4.1
(6.4)
NS
29.2
0.0
0.2
5.7
0.8
0.0
22.5
47.6
29.2
40.1
0.0
0.1
2.8
(8.7)
NS
34.3
0.9
5.4
5.6
3.0
0.0
19.4
28.4
34.3
48.6
0.0
0.0
3.4
(14.9)
NS
37.1
0.8
4.1
6.0
3.1
0.0
23.1
34.2
37.1
49.9
0.0
0.0
1.9
(13.4)
NS
38.4
0.6
2.7
6.3
0.9
0.0
27.9
45.7
38.4
59.3
0.0
0.1
1.6
(15.8)
NS
45.2
2.1
4.4
8.9
0.4
0.0
29.3
36.8
45.1
68.9
0.0
0.1
2.0
(18.9)
NS
52.1
2.1
4.4
10.8
0.4
0.0
33.4
33.2
51.1
81.4
0.0
0.1
2.4
(29.6)
NS
54.3
2.1
4.4
9.6
0.4
0.0
36.1
29.3
52.6
96.0
0.0
0.1
2.8
(39.1)
NS
59.8
2.1
4.4
8.4
0.4
0.0
41.6
29.3
56.9
www.cheuvreux.com
January 2011
GERMANY

FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
0.28
63.2%
0.28
63.2%
0.42
50.2%
0.42
50.2%
0.68
61.1%
0.68
61.1%
0.87
29.5%
0.87
29.5%
0.72
-17.6%
0.54
-38.7%
1.02
42.2%
1.02
91.0%
1.29
25.5%
1.29
25.5%
1.67
29.7%
1.67
29.7%
2.02
21.4%
2.02
21.4%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.07
0.38
50.0%
1.5
0.00
0.10
0.55
46.0%
2.9
0.00
0.15
0.85
54.2%
3.4
0.00
0.22
1.08
26.3%
4.0
0.00
0.35
0.76
-29.8%
4.0
0.00
0.45
1.14
50.6%
4.7
0.00
0.58
1.56
37.5%
5.4
0.00
0.76
1.96
25.5%
6.3
0.00
0.92
2.34
19.0%
7.4

Latest price
High
Low
Average price
10.050
10.050
0.000
10.510
10.510
0.000
11.400
11.400
0.000
11.440
11.440
0.000
11.390
11.390
0.000
11.430
11.430
0.000
11.520
11.520
0.000
11.520
11.520
0.000
11.520
11.520
0.000
5.53
6.31
2.77
4.31
14.90
15.50
5.44
10.03
22.00
22.50
11.69
17.28
20.75
29.53
17.16
23.23
13.55
22.00
10.56
15.70
26.58
28.14
8.00
17.49
31.91
34.14
22.11
28.01
31.35
32.59
30.83
31.73
31.35
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
54.6
57.9
151.5
145.1
246.4
237.8
233.9
219.0
154.6
141.2
303.8
288.1
367.6
348.8
361.2
331.7
361.2
322.2
19.8
19.8
14.6
2.4
3.8
2.8
1.3
35.6
35.6
27.0
NS
5.1
5.1
0.7
32.6
32.6
25.9
0.9
6.5
7.6
0.7
23.7
23.7
19.3
3.2
5.2
6.4
1.1
18.8
18.8
17.9
1.8
3.4
3.8
2.6
26.0
26.0
23.4
2.1
5.6
6.4
1.7
24.8
24.8
20.4
2.5
5.9
6.5
1.8
18.8
18.8
16.0
5.0
5.0
6.1
2.4
15.5
15.5
13.4
5.4
4.2
5.5
2.9
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
10.2
12.3
1.43
14.8
17.7
20.2
3.07
24.2
18.6
21.6
3.48
24.2
13.2
15.3
3.24
18.0
10.5
12.6
2.32
14.4
16.7
19.6
3.6
22.7
15.3
17.8
3.5
19.4
11.7
13.3
2.7
14.7
9.7
10.9
2.3
12.0
NS
0.8
14.1
11.6
6.9
1.9
20.6
25.1
NS
NS
17.3
15.2
9.3
1.7
NS
23.9
NS
NS
18.7
16.1
11.3
2.2
NS
22.2
NS
NS
24.6
21.2
14.8
2.0
NS
25.2
7.5
NS
22.1
18.4
10.0
1.6
NS
65.4
NS
NS
21.7
18.5
14.7
1.8
NS
44.0
NS
NS
22.7
19.5
14.7
2.0
NS
45.1
NS
NS
23.0
20.3
15.6
2.4
NS
45.6
NS
NS
23.3
20.8
16.4
2.5
NS
45.5
22.4
14.0
19.9
19.9
25.4
16.2
15.0
15.0
35.1
25.2
21.2
21.2
42.1
28.9
22.9
22.9
29.9
19.5
13.0
17.9
32.9
25.4
21.9
21.9
38.7
29.8
24.1
24.1
47.9
36.9
26.7
26.7
52.4
40.3
27.6
27.6
277
www.cheuvreux.com
January 2011
GERMANY
ADVERTISING
2/Outperform
Rating
-14.8% EUR23.00
Strer
Reuters: SAXG.DE Bloomberg: SAX GR
Switch on the Outdoor Channel

Q
Recent developments off to a good start!
Strer has begun its history as a listed company with two solid
quarterly results, successful completion of the acquisition of a) the
additional 40% stake in its Turkish subsidiary and b) News Outdoor
Poland. Furthermore, the roll-out of its two major product initiatives,
Outdoor Channel and Scroller 5000, is on track. Q3-10 sales were up
14.6%, with organic sales on a pro-forma basis (i.e. as if Turkey has
been 100% consolidated for the entire period) up 11.5%.
Geographically, German sales rose 5.9% with Street Furniture (+7%)
the main driver, while Billboard sales were up just 3% and Transport
+4%. Sales in Turkey more than doubled, partly due to consolidation
effects (100% consolidated since 1 Sep), while in Other (Poland and
blowUP media) sales rose 23%. Group operational EBITDA was up
17% (17.7% margin); net debt, primarily due to the inflow of IPO funds,
was reduced to EUR310m or 110% net gearing. With the closure of the
News Outdoor Poland deal in Q4-10 we est. year-end net gearing of
139%.
Q
EUR27.00
Price (07/01/2011)
Outlook major product initiatives on track
Strer narrowed its full-year 2010 guidance for organic sales on a proforma basis to at least 9% or ~5% organic growth for Q4-10 (high
comparative base already in Q4-09). Though it has no official guidance
for 2011, in the Q3 conf call Strer suggested that ~6% organic growth
in Germany should be achievable comprised of 2% GDP growth, 2%
pricing and 2% new products with Turkey and Other expected to
report stronger growth. Whilst rising filling ratios (i.e. volume growth)
was the key revenue driver in 2010 as the economic recovery gained
traction, higher prices are expected to be the more decisive factor in
2011. In many cases, prices are typically fixed once a year; hence,
there is usually a lag effect of about a year before prices begin to
adjust. Strer appears to be fully on track with both of its major new
product initiatives. It officially launched its Outdoor Channel (multiple
digital screens with moving-picture ads in high-profile locations at
major train stations) in Q4-10, the first of its kind in Germany. The first
200 installations are scheduled by year-end 2010; this total is expected
to be increased to 700 units by late spring 2011, and then finally to
~1000 units by year-end 2011. The Scroller 5000 program, which
consists of the conversion of up to 5000 traditional billboards and
upgrading them to Mega-Light standard including backlighting and
glass panels, is also on schedule with the first 500 conversions planned
by mid-2011 and 1000 by year-end 2011 and an additional ~1000 units
per year planned through 2015. With total planned investments of
~EUR50-70m, these two initiatives are expected to generate sales of
~EUR100m, ~20% growth to our 2010 estimated group sales, by 2015.
Stock data
Free float
Enterprise value
Daily volume
EUR1137m
EUR495m
EUR1470m
42.1m
EUR1.2m
Performances
5.8%
25.6%
0.8%
6.8%
-
Absolute perf.
Relative perf.
29.0
29.0
27.0
27.0
25.0
25.0
23.0
23.0
21.0
21.0
19.0
19.0
17.0
07/10
17.0
08/10
08/10
09/10
10/10
Price/SDAX
10/10
11/10
Price
Sector Top Picks

Least favoured
Lagardere, Pages Jaunes, Reed

Elsevier NV
Seat Pagine Gialle
Shareholders
Udo Mller 28.1%, Dirk Strer 28.3%, Free Float
43.5%
2009
2010E
2011E
2012E
P/E (x)
NS
NS
28.4
19.1
EV/EBITDA (x)
5.8
15.9
9.7
8.0
NS
NS
3.7
5.9
Net debt/EBITDA (x)
5.6
3.4
1.8
1.1
Yield (%)
0.0
0.0
0.0
0.0
ROCE (%)
10.0
6.5
15.5
19.8
1.1
2.3
2.2
2.2
Craig ABBOTT
Q
Q
278
www.cheuvreux.com
12/10
Sector focus
Research Analyst
(49) 69 47 89 75 25
12/10
January 2011
GERMANY
Company profile
Major Outdoor Advertising group

Founded in 1990, Strer Out-of-Home Media AG (Strer) is the fifthlargest out-of-home (OoH) advertising group globally and number
two in Europe with 2009 sales of EUR503m (incl. 100% of Strer
Turkey) and 1450 employees. Strer is the clear market leader in
Germany (53% market share, 2.2x its closest competitor), Turkey
(58% market share, 4.5x its closest competitor); and with completion
of the acquisition of News Outdoor Poland in Q4-10, it became the
no. 1 in Poland with an estimated market share of ~31%.
Q
Q Organisationally structured along geographic lines

Strer is organised into three divisions: Strer Germany (78% of
sales and 83% of EBITDA), Strer Turkey (13% of sales and 15% of
EBITDA) and Other which consists of Poland and blowUP media
(9% of sales and 3% of EBITDA).
Q Sales along product lines
Strer also reports sales by product group: Billboards (52% of
sales), Street Furniture (25%), Transport (14%) and Other (9%).
SWOT analysis
Strengths
Weaknesses
Market leader in German OoH

advertising market (53% market
share) & in early-stage, highgrowth Turkish market (58%)
The advertising industry is

highly cyclical and closely linked
to changes in GDP growth.
Polish market still fragmented,

resulting in higher price/margin
pressure
Better
balance than main peers

btw. public and private contracts
High barriers to entry (entrenched contract holders rarely

lose a following tender)
FX exposure: ~16% of sales in

Turkish lira & ~5% of sales in
Polish zloty.
Revenue-weighted average
maturity of top 25 city contracts
across Germany, Turkey and
Poland is >9 years.
Leveraged balance sheet (also

post IPO) with pro-forma net
debt/EBITDA ratio (10E) of ~2.4x,
which could limit external growth
opportunities and might restrict
flexibility if a double-dip
recession occurs.
High cash conversion rate due

to product mix.
Exclusive
contracts for
advertising at German railway
stations until 2020.
Opportunities
Threats
Outdoor advertising gaining

market share due to its greater
reach and high effectiveness,
benefiting from rising
digitalisation and mobilisation.
Could lose future tenders on

existing city contracts.
Restrictions on outdoor
advertising could become
tighter.
Market penetration growth

potential in Germany (OoH share
just 4.2% of advertising market
vs. European avg. of 9.3%)
Main competitor JCDecaux

seeking to increase market share
in Germany in street furniture
segment.
New product initiatives Scroller

5000 and Outdoor Channel
should result in higher filling
ratios/sales per site in Germany.
Consolidation opportunity
in Poland.
279
Site leases are long-term (fixed

& variable); should filling rates
decline significantly, profitability
could come under pressure.
www.cheuvreux.com
Valuation
We derive our target price of EUR23 as the

average of two approaches: a) a peer multiple
comparison, using the EV/EBITDA multiple
comparison with its major European competitor
JCDecaux, which implies a fair value of EUR21.5
per share; and b) our DCF valuation model using
a WACC of 8.6% and a terminal growth rate of
2%, which renders a fair value of EUR24 per
share.
Q
Investment case
Strer provides a structural, albeit cyclical,

growth opportunity. After having managed
surprisingly robust revenues and earnings during
the downturn in the advertising industry, Strer
is now poised to generate significant earnings
and cash-flow growth in the coming years. Due
to the combination of a) the general industry
recovery; b) low but growing penetration rates
for OoH advertising in Germany (we estimate
that just a 1ppt increase in the OoH share could
add ~EUR90m or ~19% to group sales); c) two
new major product initiatives: Scroller 5000 and
Outdoor Channel; d) its market-leading position
in the early-stage but high-growth Turkish
market; and e) a rebound in the highly cyclical
Polish and mega posters markets we estimate
Strer will be able to generate a CAGR in sales
from 2009-12E of ~11.4% and in operational
EBITDA of ~21%.
Strer's key competitive strengths include: 1)
market-leading position in Germany, Europes
largest advertising market, with a large network
of contractually secured prime locations in a
market that is currently under-penetrated vs.
other European markets, representing a major
growth opportunity; 2) a more favourable
balance than its main peers between public
(4 000) and private (15000) contracts; 3)
exclusive advertising rights at Germany's more
than 5 000 railway stations until 2020; 4) market
leadership in the early-stage, structural-growth
Turkish market; 5) acquisition of News Outdoor
Poland made Strer no. 1 in the consolidating
Polish market; and 6) high cash conversion rate
due to its product mix with cash generative,
relatively low-capital-intensity billboards (52% of
group sales).
January 2011
GERMANY
Strer
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
280
2007
2008
2009
2010E
2011E
2012E
509.0
493.4
-3.1%
(82.1)
(315.6)
95.7
-18.1%
(37.7)
58.0
-25.4%
0.0
0.0
0.0
58.0
(59.0)
0.0
0.0
(13.7)
0.0
0.0
0.0
(14.5)
0.0
(1.4)
(15.9)
0.0
0.0
(15.9)
NS
469.8
-4.8%
(82.3)
(294.2)
93.3
-2.5%
(44.3)
49.0
-15.5%
0.0
(10.0)
0.0
39.0
(47.3)
0.0
(0.1)
9.6
0.0
0.0
0.0
1.1
0.0
(1.5)
(0.4)
0.0
0.0
(0.4)
97.5%
518.4
10.3%
(83.9)
(342.9)
91.6
-1.8%
(53.6)
38.0
-22.4%
0.0
0.0
0.0
38.0
(38.9)
0.0
0.0
0.3
0.0
0.0
0.0
(0.7)
0.0
(1.9)
(2.6)
0.0
0.0
(2.6)
NS
603.3
16.4%
(85.6)
(366.4)
151.3
65.2%
(60.5)
90.8
138.9%
0.0
0.0
0.0
90.8
(28.8)
0.0
0.0
(18.6)
0.0
0.0
0.0
43.5
0.0
(3.5)
40.0
0.0
0.0
40.0
NS
648.7
7.5%
(86.5)
(384.6)
177.6
17.4%
(62.5)
115.1
26.8%
0.0
0.0
0.0
115.1
(24.8)
0.0
0.0
(27.1)
0.0
0.0
0.0
63.3
0.0
(3.8)
59.5
0.0
0.0
59.5
48.8%
(8.1)
(34.7)
(24.5)
31.2
0.0
0.0
0.0
0.0
0.0
0.0
31.2
23.1
-68.8%
(1.9)
(58.5)
(48.6)
(37.3)
0.0
0.0
0.0
0.0
0.0
0.0
(37.3)
55.5
140.3%
(19.5)
(22.4)
(13.0)
13.6
0.0
0.0
0.0
0.0
0.0
0.0
13.6
53.0
-4.5%
(10.4)
(50.3)
(32.1)
(7.7)
(81.0)
0.0
0.0
0.0
289.0
0.0
200.3
104.4
97.0%
2.9
(64.0)
(42.9)
43.3
0.0
0.0
0.0
0.0
0.0
0.0
43.3
129.9
24.4%
(5.6)
(53.0)
(30.3)
71.3
0.0
0.0
0.0
0.0
0.0
0.0
71.3
(17.0)
17.1
20.8
26.5
469.0
NS
516.4
0.0
417.2
166.8
32.8
0.0
(100.4)
(19.7)
516.4
(52.9)
17.1
19.7
25.6
528.5
NS
538.0
184.8
222.8
184.7
21.2
0.0
(74.8)
(15.2)
538.0
(59.8)
16.4
20.1
35.4
519.7
NS
531.8
180.2
213.1
180.9
40.6
0.0
(82.2)
(17.5)
531.8
226.7
18.3
20.1
68.5
309.3
126.2
642.9
180.2
268.6
203.0
61.5
0.0
(70.5)
(13.6)
642.9
266.6
21.8
20.1
72.9
266.0
92.2
647.4
180.2
267.7
207.4
61.5
0.0
(69.0)
(11.4)
647.4
326.1
25.6
20.1
72.2
199.2
56.6
643.2
180.2
257.7
208.0
61.5
0.0
(64.1)
(9.9)
643.2
0.0
(392.1)
116.9
(39.1)
77.8
0.0
0.0
0.0
77.8
(49.4)
0.0
0.0
6.6
0.0
0.0
0.0
35.0
0.0
(2.8)
32.2
0.0
0.0
32.2
74.0
www.cheuvreux.com
January 2011
GERMANY
Strer
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
281
www.cheuvreux.com
2007
2008
2009
2010E
2011E
2012E
0.00
0.00
0.00
(0.06)
0.00
0.00
0.00
(0.06)
0.95
NS
0.95
NS
1.41
48.7%
1.41
48.7%
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1.26
0.0
0.0
0.0
5.4
0.00
0.00
2.48
97.0%
6.3
0.00
0.00
3.09
24.4%
7.7
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
42.100
42.100
0.000
42.100
42.100
0.000
42.100
42.100
0.000
26.74
26.74
18.75
22.04
27.00
27.35
26.95
27.10
27.00
-
1,125.8
1,455.2
1,136.7
1,470.2
1,136.7
1,428.6
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
NS
NS
21.2
NS
5.0
2.3
0.0
28.4
28.4
10.9
3.7
4.3
2.2
0.0
19.1
19.1
8.8
5.9
3.5
2.2
0.0
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
15.9
38.3
2.8
18.1
9.7
16.2
2.4
11.4
8.0
12.4
2.2
9.2
2.4
6.3
23.0
15.3
6.9
1.1
NS
0.0
1.6
NS
19.4
11.8
NS
1.0
NS
0.0
2.0
9.4
19.9
10.4
0.2
1.0
NS
0.0
2.4
5.8
17.7
7.3
NS
0.9
126.2
0.0
5.3
2.5
25.1
15.1
7.2
1.0
92.2
0.0
7.2
1.5
27.4
17.7
9.8
1.1
56.6
0.0
16.1
19.8
NS
NS
11.2
178.3
35.4
35.4
10.0
NS
0.7
0.7
6.5
4.6
NS
NS
15.5
10.8
16.2
16.2
19.8
13.8
20.1
20.1
January 2011
GERMANY
FOOD INDUSTRY SUPPLIERS
2/Outperform
Rating
+9.6% EUR21.5
Suedzucker
Reuters: SZUG.DE Bloomberg: SZU GR
More than just sugar, and still very sweet!

Q
Recent developments strong 9M 10-11 figures
SZU has pre-released strong key figures for 9M 10-11: revenues

climbed 5% y-o-y to EUR4.67bn and group operating profit (OP)
increased by 35% to EUR416m. The strong OP growth was driven by
positive earnings performances in all divisions, especially in the Sugar
division, which benefited from a one-off due to higher non-EU sugar
exports, and CropEnergies, which clearly improved its profitability after
the full ramp-up of its new plant in Wanze, Belgium. Full 9M 10-11
results are due on 13 January 2011.
Due to the better-than-expected performance in the first 9 months of
the current business year, SZU a) again increased its sales guidance for
FY 10-11 from "a slight y-o-y increase to ~EUR5.8" to ~EUR6.0bn (our
estimate: EUR6.0bn); and b) raised its group OP guidance from
">450m" to "~EUR500m" (we: EUR507m). We see SZU well on track to
meet these targets and expect the Sugar segment and Crop Energies
to be the main drivers of the significant y-o-y improvement of group
profitability.
Q
EUR19.62
Price (10/01/2011)
Outlook favourable sugar environment continues
Due to the current ongoing discussion about the tightness of the sugar
world market, which is expected to persist at least for the sugar
marketing year (SMY) 2010-11, world sugar market prices remain near
record levels of c.USD760/t (c. EUR567/t), well above the EU sugar
reference price of EUR404/t. This situation could also be supportive for
SZU's quota sugar business, which accounts for c.70% of its sugar
division's volume sales. Quota sugar contract prices, which are
currently being negotiated, could go up in the current tight supply
situation; SZU is currently guiding for flat y-o-y prices in its quota sugar
business. Higher ASPs in the quota sugar area could have a material
positive impact on SZU's group operating profit. The company's rule of
thumb is that for every ASP increase of EUR10/t, group operating profit
rises by EUR30m). However, the bulk of the positive impact on SZU
group earnings from potentially higher quota sugar prices would come
in FY 11-12. We expect an update on this issue with SZU's Q3 10-11
results on 13 January 2011.
Stock data
Free float
Enterprise value
Daily volume
EUR3716m
EUR1263m
EUR4835m
189.4m
EUR6.07m
Performances
7.0%
18.9%
29.1%
6.3%
7.2%
3.0%
Absolute perf.
Relative perf.
25.4
25.4
20.4
20.4
15.4
15.4
10.4
10.4
5.4
01/01
5.4
04/02
07/03
09/04
12/05
Price/M DAX
04/07
07/08
Price
Sector focus
Sector Top Picks
Least favoured
Danone, SABMiller Plc, Unilever

N.V.
Carlsberg, Diageo, Pernod
Ricard
Shareholders
Szvg 55.0%, Free Float 34.0%, Zucker Invest Gmbh
11.0%
2009/10
2010/11E
2011/12E
2012/13E
16.1
16.0
13.8
13.8
7.2
6.7
6.0
5.8
18.6
7.8
9.7
9.7
Net debt/EBITDA (x)
1.6
1.3
0.9
0.6
Yield (%)
2.6
2.3
2.3
2.3
ROCE (%)
7.5
9.4
10.3
9.9
0.9
1.0
0.9
0.9
P/E (x)
EV/EBITDA (x)
Klaus RINGEL
Research Analyst
kringel@cheuvreux.com
(49) 69 47 89 75 42
Q
Q
282
www.cheuvreux.com
09/09
January 2011
GERMANY
Company profile
Europe's largest sugar producer

Sdzucker is Europe's leading supplier of sugar products: it sells
c.4.5m tonnes of sugar per year and captures a 24% share of the
European quota sugar market. In mid-2009-10 the company became
the EU's exclusive importer and distributor of ~400k tonnes per year
of sugar, mostly white sugar, from Mauritius. In fiscal year 2009-10
(February), a total of 200k tonnes of sugar was imported from
Mauritius, and this is expected to rise to the targeted 400k tonnes in
the current fiscal year.
Q
Q Close cooperation with the agricultural sector

The Sdzucker Group relies on close cooperation with farmers and
farmers' associations. Its core competencies are its extensive
manufacturing knowledge combined with the processing of
renewable agricultural raw materials, its in-house research expertise,
and its marketing experience, especially in the B2B area.
Q Business model successfully extended in recent years
Sdzucker Group is well positioned in its segments Special
Products, Crop Energies and Fruit. It pursues a sustainable strategy
of profitable growth and long-term improvements in shareholder
value via the penetration of new business fields along the value
chain, organic growth, as well as alliances and acquisitions
(bioethanol, food ingredients etc.) within its core areas of
competence, i.e. the procurement, processing and refinement of
high volumes of agricultural raw materials, and the sale of these
products to the food processing industry.
SWOT analysis
Strengths
Weaknesses
Strong market position in all

business areas
Defensive, non-cyclical
business model
Strongly dependent on volatile

agricultural raw material prices in
its non-sugar activities
Strong, cost-effective
distribution network in Europe
Vulnerable to politically
sensitive regulatory regimes in
several business areas (Sugar,
CropEnergies)
Opportunities
Threats
Development of new growth

markets (i.e. Russia, China,
Brazil)
Increase in FCF levels through

clear improvements in EBITDA
Further potential changes in

the EU's regulatory regime for
the sugar market
Emergence of a strong
substitute for sugar in the food
industry
283
www.cheuvreux.com
Valuation
SZU's shares are currently trading at 14x

earnings, 6.1x EV/EBITDA and 0.8x EV/sales (all
for 11-12E). We confirm our 2/Outperform rating.
Our target price stands at EUR21.5, suggesting
8% upside potential.
Investment case
We continue to like Sdzucker's defensive

growth business model and see our investment
case fully intact:
SZU is well on track to improve its operating
profit margin from 7.0% in 2009-10, to 8.3% in
2010-11E, and 9.0% in 2013-14E, putting it
close to levels prior to the sugar market reform.
Free cash flows will also continue to improve
significantly and give the company adequate
scope for debt reduction and/or bolt-on
acquisitions.
The stable and reliable sugar division remains
the main pillar of SZU's group earnings as ~70%
of its sugar business is linked to the EU sugar
market regime (guaranteed volumes and
guaranteed minimum prices) and will remain so
at least until 2015. The non-sugar activities,
especially the special products division, add
growth momentum to the group's defensive
business model.
We see good chances in the short term for some
extra business for SZU's sugar activities due to
the current special situation in the world sugar
market: sugar prices remain near record levels
around USD760/t (c. EUR576/t) and thus well
above the EU reference price level of EUR404/t.
ASPs for quota sugar contracts, currently being
negotiated, could rise in the current tight supply
situation; higher ASPs in the quota sugar area
could have a material positive impact on SZU's
group operating profit (the bulk thereof probably
in FY 11-12).
January 2011
GERMANY
Suedzucker
FY to 28/2 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
284
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11E
2011/12E
2012/13E
4 826.6
5.5%
(585.1)
(3 545.7)
695.8
2.8%
(204.6)
491.2
2.5%
0.0
0.0
0.0
491.2
11.1
0.0
0.0
(99.9)
11.1
0.0
258.8
402.4
0.0
(60.1)
342.3
0.0
0.0
83.5
-76.6%
5 346.5
10.8%
(656.5)
(4 055.5)
634.5
-8.8%
(237.1)
397.4
-19.1%
0.0
0.0
0.0
397.4
(69.0)
0.0
0.0
(23.7)
11.4
0.0
75.6
304.7
0.0
(62.3)
242.4
0.0
0.0
166.8
99.8%
5 764.9
7.8%
(708.2)
(4 837.1)
219.6
-65.4%
(348.5)
(128.9)
NS
0.0
0.0
0.0
(128.9)
(98.3)
0.0
0.0
(18.8)
0.7
0.0
(636.9)
(246.0)
0.0
(80.6)
(326.6)
0.0
0.0
310.3
86.0%
5 779.6
0.3%
(708.1)
(4 586.7)
484.8
120.8%
(295.5)
189.3
NS
0.0
0.0
0.0
189.3
(69.3)
0.0
0.0
(20.3)
23.4
0.0
0.0
99.7
0.0
(80.2)
19.5
0.0
0.0
19.5
-93.7%
5 871.3
1.6%
(721.3)
(4 555.0)
595.0
22.7%
(249.7)
345.3
82.4%
0.0
0.0
0.0
345.3
(113.4)
0.0
0.0
(48.7)
21.6
0.0
14.3
183.2
0.0
(21.0)
162.2
0.0
0.0
147.9
NS
5 718.2
-2.6%
(702.5)
(4 366.6)
649.1
9.1%
(256.7)
392.4
13.6%
0.0
0.0
0.0
392.4
(44.0)
0.0
0.0
(72.0)
2.0
0.0
0.0
276.4
0.0
(76.3)
200.1
0.0
0.0
200.1
35.3%
6 006.5
5.0%
(737.9)
(4 502.2)
766.5
18.1%
(270.3)
496.2
26.5%
0.0
0.0
0.0
496.2
(81.4)
0.0
0.0
(99.6)
2.0
0.0
0.0
315.2
0.0
(82.4)
232.8
0.0
0.0
232.8
16.4%
6 047.2
0.7%
(742.9)
(4 502.6)
801.7
4.6%
(260.0)
541.7
9.2%
0.0
0.0
0.0
541.7
(60.9)
0.0
0.0
(120.2)
2.0
0.0
0.0
360.6
0.0
(91.0)
269.6
0.0
0.0
269.6
15.8%
6 090.8
0.7%
(748.2)
(4 559.2)
783.4
-2.3%
(261.9)
521.5
-3.7%
0.0
0.0
0.0
521.5
(37.4)
0.0
0.0
(121.0)
2.0
0.0
0.0
363.1
0.0
(93.5)
269.6
0.0
0.0
269.6
0.0%
607.0
-0.2%
(200.4)
(499.8)
(499.8)
(93.2)
0.0
0.0
0.0
(102.3)
51.6
(457.6)
(601.5)
541.8
-10.7%
(30.4)
(425.6)
(318.7)
85.8
0.0
0.0
0.0
(117.9)
124.5
(177.6)
(85.2)
102.5
-81.1%
(261.6)
(536.4)
(421.1)
(695.5)
0.0
0.0
0.0
(162.8)
37.9
714.8
(105.6)
395.2
NS
285.9
(216.0)
(100.4)
465.1
0.0
0.0
0.0
(161.5)
0.0
(391.6)
(88.0)
432.9
9.5%
(253.5)
(250.0)
(132.6)
(70.6)
0.0
0.0
0.0
(75.7)
0.0
192.7
46.4
553.1
27.8%
279.7
(233.4)
(119.0)
599.4
0.0
0.0
0.0
(75.7)
115.6
(63.7)
575.6
585.5
5.9%
(46.2)
(250.0)
(129.9)
289.3
0.0
0.0
0.0
(85.2)
0.0
(20.3)
183.8
620.6
6.0%
(11.1)
(250.0)
(129.1)
359.5
0.0
0.0
0.0
(85.2)
0.0
(10.0)
264.3
625.0
0.7%
(15.7)
(250.0)
(128.2)
359.3
0.0
0.0
0.0
(85.2)
0.0
(11.9)
262.2
2 191.4
546.2
393.0
554.0
1 672.3
61.1
5 356.9
1 670.8
34.6
2 076.7
329.6
0.0
1 245.2
25.8
5 356.9
2 576.7
472.2
395.6
518.2
1 887.5
61.9
5 850.2
1 746.4
128.9
2 319.4
283.1
0.0
1 372.4
25.7
5 850.2
2 106.6
571.4
398.9
447.0
1 522.8
56.9
5 046.7
1 109.5
268.9
2 343.5
229.0
0.0
1 095.8
19.0
5 046.7
2 724.7
574.8
401.7
392.8
1 527.2
46.3
5 621.2
1 109.5
416.9
2 537.9
198.7
0.0
1 358.2
23.5
5 621.2
2 730.5
498.9
404.5
318.2
1 737.6
53.8
5 689.7
1 123.8
173.8
2 569.2
203.8
0.0
1 619.1
27.6
5 689.7
2 954.4
545.8
409.2
292.5
1 065.0
30.4
5 266.9
1 123.8
242.0
2 551.5
47.3
0.0
1 302.3
22.8
5 266.9
3 102.0
628.2
409.2
327.9
981.2
26.3
5 448.5
1 123.8
242.0
2 551.5
193.7
0.0
1 337.5
22.3
5 448.5
3 286.4
719.3
409.2
332.9
710.4
17.7
5 458.2
1 123.8
242.0
2 551.5
193.7
0.0
1 347.1
22.3
5 458.1
3 470.8
812.7
409.2
338.2
441.2
10.3
5 472.1
1 123.8
242.0
2 551.5
193.7
0.0
1 361.1
22.3
5 472.1
www.cheuvreux.com
January 2011
GERMANY
Suedzucker
FY to 28/2 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
285
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11E
2011/12E
2012/13E
0.49
-78.1%
1.98
-10.1%
0.96
94.5%
1.39
-29.8%
1.78
86.1%
(1.88)
NS
0.11
-93.9%
0.11
105.8%
0.78
NS
0.86
NS
1.06
35.2%
1.06
23.4%
1.23
16.4%
1.23
16.4%
1.42
15.8%
1.42
15.8%
1.42
0.1%
1.42
0.1%
(1.53)
0.55
3.58
-6.4%
12.1
(0.43)
0.55
3.11
-13.0%
14.2
3.66
0.55
0.59
-81.1%
11.5
0.00
0.40
2.21
NS
14.9
(0.08)
0.40
2.29
3.3%
14.0
0.00
0.45
2.92
27.7%
15.1
0.00
0.45
3.09
5.9%
15.9
0.00
0.45
3.28
6.0%
16.9
0.00
0.45
3.30
0.7%
17.9
172.683
172.683
2.960
174.231
174.231
0.000
174.231
174.231
0.000
178.500
178.500
0.000
189.400
189.400
0.000
189.400
189.400
0.000
189.400
189.400
0.000
189.400
189.400
0.000
189.400
189.400
0.000
15.12
17.04
13.93
15.30
19.80
19.80
13.82
16.63
18.19
22.38
16.34
19.73
16.17
18.82
13.11
15.49
11.00
16.46
7.15
12.27
17.06
15.87
10.35
14.30
19.62
20.39
13.90
16.03
19.62
20.25
19.42
19.94
19.62
-
3 231.2
4 705.4
3 716.0
5 106.4
3 716.0
4 835.6
3 716.0
4 566.4
7.5
30.7
4.2
1.2
0.4
3.6
14.2
20.7
6.4
1.4
0.4
2.8
NS
10.2
30.9
1.6
0.4
3.0
NS
NS
7.3
1.1
0.4
2.5
12.8
14.1
4.8
0.8
0.4
3.6
16.1
16.1
5.8
18.6
1.1
0.9
2.6
16.0
16.0
6.3
7.8
1.2
1.0
2.3
13.8
13.8
6.0
9.7
1.2
0.9
2.3
13.8
13.8
5.9
9.7
1.1
0.9
2.3
3.0
4.2
0.43
3.5
3.6
5.7
0.43
3.8
8.8
NS
0.33
9.2
4.0
10.2
0.33
4.3
3.6
6.2
0.37
4.1
7.2
12.0
0.8
8.0
6.7
10.3
0.9
7.9
6.0
8.9
0.8
7.3
5.8
8.8
0.8
7.0
NS
2.8
14.4
10.2
8.3
1.0
61.1
27.7
9.2
3.5
11.9
7.4
5.7
1.0
61.9
39.5
2.2
14.9
3.8
NS
NS
1.2
56.9
(29.3)
7.0
3.9
8.4
3.3
1.7
1.1
46.3
366.2
5.2
4.0
10.1
5.9
3.1
1.1
53.8
46.7
14.8
1.9
11.4
6.9
4.8
1.1
30.4
42.6
9.4
1.7
12.8
8.3
5.2
1.1
26.3
36.6
13.2
1.1
13.3
9.0
6.0
1.1
17.7
31.6
NS
0.7
12.9
8.6
6.0
1.2
10.3
31.6
9.8
7.8
16.9
16.9
7.1
6.6
9.9
9.9
NS
NS
NS
NS
3.5
2.9
0.7
0.7
6.3
5.0
6.1
6.1
7.5
6.0
7.0
7.0
9.4
7.2
7.8
7.8
10.3
7.7
8.6
8.6
9.9
7.4
8.1
8.1
www.cheuvreux.com
January 2011
GERMANY
Symrise
-8.6% EUR18.00
EUR19.70
Reuters: SY1G.DE Bloomberg: SY1 GR
Recent developments Strong recovery ongoing
Symrise reported Q3-10 numbers that were on the whole in line with
our expectation of a strong quarter. Group sales rose 16% y-o-y and
1% q-o-q to EUR410m, while EBITDA was up 25% y-o-y and down 5%
q-o-q at EUR90m. The EBITDA margin came in at a strong 21.9%. Net
cash flow from operating activities rose 47% y-o-y to EUR81m. The
company's net debt incl. pensions came to EUR755m after 9M-10, for a
net debt/EBITDA ratio of 2.3x.
In Q3-10 Flavour & Nutrition recorded sales of EUR200.4m, up 13% yo-y and flat q-o-q, while the division's EBITDA came to EUR44.3m
(+17% y-o-y) for a margin of 22.1%. In the Scent & Care division sales
amounted to EUR210m, up 19.9% y-o-y and 1% q-o-q, with EBITDA at
EUR45.7m (+33% y-o-y) for a margin of 21.8%.
In 9M-10 46% of group sales were generated in emerging markets. In
Q3-10 sales in the EAME region rose 10% y-o-y to EUR192.4m, with
especially strong growth in Western Europe. Asia/Pacific sales grew
27% y-o-y to EUR91m, led primarily by a positive sales performance in
Life Essentials, Beverages and Savory, while sales in North America (ex
Mexico) grew 23% y-o-y to EUR76m, with above-average sales growth
in Aroma Molecules and Life Essentials. Latin American sales (incl.
Mexico) climbed 16% y-o-y to EUR51m, with especially strong sales
growth in Fragrances, Life Essentials and Aroma Molecules.
Symrise now expects to report local currency sales growth of at least
8% y-o-y for FY10. It also continues to guide for an EBITDA margin of
more than 20%. After positive trading statements from main peer
Givaudan, we also expect Q4-10E to have been a strong quarter for
Symrise.
Q
3/Underperform
Price (07/01/2011)
No. 4 in attractive Flavours & Fragrances

Q
Rating
Stock data
Free float
Enterprise value
Daily volume
EUR2328m
EUR2191m
EUR3001m
118.17m
EUR 11.09m
Performances
-5.3%
-5.1%
23.8%
-6.7%
-16.6%
-3.7%
Absolute perf.
Relative perf.
22.4
22.4
20.4
20.4
18.4
18.4
16.4
16.4
14.4
14.4
12.4
12.4
10.4
10.4
8.4
8.4
6.4
12/06
6.4
06/07
12/07
06/08
12/08
Price/M DAX
06/09
12/09
07/10
12/10
Price
Sector focus
Sector Top Picks
Least favoured
Outlook Recommend taking profits after strong run
During 2010 Symrise was often cited as a takeover target for two kinds
a predators: peers from the F&F industry and clients targeting backward
integration. In our view, the top three F&F players would lack the
financial power to launch a takeover bid for Symrise. Moreover, any
such bid would probably trigger serious antitrust concerns, especially in
the EMEA region. We believe such backward integration on the part of
a Symrise customer is also unlikely as it would reduce the creative
innovation potential F&F clients enjoy thanks to having access to 3-4
core list suppliers. Against this background, the most likely option we
see is still for Symrise to become the prey of a company outside the
F&F arena or in private equity.
For a number of reasons the upside potential for Symrise shares
appears limited: the stock's rich valuation; consensus estimates offering
limited upside potential since 11E will face a much tougher y-o-y
comparison base; an end to restocking; pressure from raw materials
and insufficient scope to pass this on to clients.
Shareholders
Free Float 94.1%, Gerberding Vermgensverwaltung
5.9%
2009
2010E
2011E
2012E
P/E (x)
21.0
17.3
15.8
15.6
EV/EBITDA (x)
10.3
9.9
9.1
8.8
10.4
3.1
7.2
7.1
Net debt/EBITDA (x)
2.3
1.9
1.6
1.4
Yield (%)
3.3
3.4
3.7
3.6
ROCE (%)
10.4
14.5
15.0
15.3
1.6
1.9
1.8
1.8
Research Analyst
(49) 69 47 897 540
Q
Q
286
www.cheuvreux.com
January 2011
GERMANY
Company profile
Symrise: No. 4 in the global flavours & fragrances industry

Symrise was formed in 2002 through the merger of two German F&F
firms Dragoco and Haarmann & Reimer and was IPOed in December
2006. With a market share of 10% (2009), Symrise occupies the
no. 4 spot in the global F&F industry after Givaudan (19%),
Firmenich (12%) and IFF (12%). Flavours and fragrances (F&F)
constitute one of the most important product features for
consumers, but only a small proportion of the total end-product
production costs.
Q
Well diversified geographically

In 2009 Symrise posted total sales of EUR1.36bn and a normalised
EBITDA margin of 19.5%. Of the total sales (total EBITDA), 50%
(44%) were generated in the Scent & Care division and 50% (56%) in
Flavour & Nutrition. The 2009 geographical sales split shows a high
exposure to Western Europe (33% of group sales), followed by North
America (22%), Asian emerging markets (16%), Eastern Europe
(10%), South America (8%), Africa/ME (7%) and Asian mature
markets (4%).
Q
Q Almost complete replacement of top management since

July 2009
After Dr Bertram took over as CEO from Mr Linzbach in July 2009,
Symrise announced with its Q3-09 results in early November 2009
that the CFO position would also see a change: Dominique Yates's
responsibilities were taken over by Bernd Hirsch, former CFO of Carl
Zeiss Meditec.
Q Fourth business unit
In November 2009 Symrise established a fourth business unit within
its Flavours & Nutrition division: in addition to Beverages, Savory,
and Sweet, Symrise now also operates a Consumer Health unit,
which supplies supplements, healthcare products and specialties.
SWOT analysis
Strengths
Weaknesses
Focus on profitable 'AND'

products
Market
Besides 'traditional' F&F

business, Symrise has a strong
focus on Health and Beauty
Opportunities
Threats
Potential
'AND'
share gains could dilute

margins in the near term
Symrise has a weaker standing
than Givaudan with multinationals such as L'Oreal, P&G,
Unilever
for increased
business at multinationals
Bolt-on acquisitions to enhance or build competitive
edge in certain areas
products fail to achieve

targeted sales growth and
margin increases
Consolidation
amongst
customers
Customers
cancel or postpone
new product launches
287
www.cheuvreux.com
Valuation
We use a DCF valuation and a peer group

comparison to derive a fair value for Symrise's
shares.
WACC of 8.6% (2011E) and a terminal growth
rate of 2.0%. With these inputs our DCF model
renders a FV of EUR18 per share.
Q Peer group comparison. Based on 2011E

EV/EBITDA, Symrise is trading at a discount of
4% to its peers, which we regard as justified due
to its smaller size and lower margins.
Taking both approaches into account, we rate

the stock a 3/Underperform with a target price
of EUR18.
Investment case
In the past Symrise has often been cited as a

takeover target for both peers from the F&F
industry and clients targeting backward
integration. We believe none of the top three
F&F players would have the financial means to
launch a takeover bid for Symrise. Furthermore,
such a bid would raise serious antitrust
concerns, especially in the EMEA region.
Backward integration on the part of a Symrise
customer is unlikely, in our view, as it would
stem the creative innovation potential F&F
clients enjoy thanks to having access to 3-4 core
list suppliers. However, we believe Symrise
could become the prey of a company outside
the F&F arena or in private equity.
The upside potential for Symrise shares is
limited. Aside from the stock's rich valuation, we
attribute this to the fact that consensus
estimates offer limited upside potential since
2011E will face much tougher y-o-y
comparables, an end to restocking, pressure
from the raw materials side and insufficient
scope for this to be passed on to clients.
January 2011
GERMANY
Symrise
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
288
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,135.8
1,148.9
1.2%
302.0
(1,316.4)
134.5
-10.5%
(94.1)
40.4
90.6%
0.0
0.0
0.0
40.4
(94.5)
0.0
0.0
1.7
0.0
0.0
0.0
(52.4)
0.0
0.0
(52.4)
0.0
0.0
(52.4)
8.2%
1,229.4
7.0%
(279.0)
(736.9)
213.5
58.7%
(131.0)
82.5
104.2%
0.0
0.0
0.0
82.5
(200.1)
0.0
0.0
27.9
0.0
0.0
0.0
(89.7)
0.0
0.0
(89.7)
0.0
0.0
(89.7)
-71.2%
1,274.5
3.7%
(284.1)
(718.3)
272.1
27.5%
(76.4)
195.7
137.2%
0.0
0.0
0.0
195.7
(55.5)
0.0
0.0
(42.8)
0.0
0.0
0.0
97.4
0.0
0.0
97.4
0.0
0.0
97.4
NS
1,319.9
3.6%
(283.6)
(773.8)
262.5
-3.5%
(75.5)
187.0
-4.5%
0.0
0.0
0.0
187.0
(52.2)
0.0
0.0
(44.4)
0.0
0.0
0.0
90.4
0.0
0.0
90.4
0.0
0.0
90.4
-7.2%
1,362.0
3.2%
(298.8)
(817.1)
246.0
-6.3%
(83.0)
163.0
-12.8%
0.0
0.0
0.0
163.0
(46.3)
0.0
0.0
(32.4)
0.0
0.0
0.0
84.4
0.0
0.0
84.4
0.0
0.0
84.4
-6.7%
1,525.4
12.0%
(310.7)
(892.7)
322.0
30.9%
(84.0)
238.0
46.0%
0.0
0.0
0.0
238.0
(66.1)
0.0
0.0
(46.4)
0.0
0.0
0.0
125.5
0.0
0.0
125.5
0.0
14.6
140.1
66.1%
1,578.8
3.5%
(318.2)
(931.5)
329.1
2.2%
(86.0)
243.1
2.2%
0.0
0.0
0.0
243.1
(40.8)
0.0
0.0
(54.6)
0.0
0.0
0.0
147.7
0.0
0.0
147.7
0.0
0.0
147.7
5.4%
1,634.9
3.6%
(326.0)
(976.1)
332.9
1.1%
(86.0)
246.9
1.5%
0.0
0.0
0.0
246.9
(42.0)
0.0
0.0
(55.3)
0.0
0.0
0.0
149.5
0.0
0.0
149.5
0.0
0.0
149.5
1.2%
(24.6)
(3.9)
(1.0)
42.5
(3.3)
0.0
0.0
0.0
0.0
(107.3)
(68.1)
41.0
-42.3%
(17.2)
(3.9)
(1.0)
19.9
(0.6)
0.0
0.0
0.0
0.0
(53.3)
(34.0)
40.4
-1.5%
(7.9)
(3.9)
(1.0)
28.6
(47.0)
0.0
0.0
0.0
116.3
(107.5)
(9.6)
172.6
NS
(34.9)
(3.9)
(1.0)
133.8
0.0
0.0
0.0
0.0
0.0
(139.1)
(5.3)
167.6
-2.9%
(136.9)
(5.9)
(1.0)
24.9
78.6
0.0
0.0
0.0
0.0
(114.2)
(10.7)
171.4
2.3%
25.4
(12.3)
(1.0)
184.6
0.0
0.0
0.0
(59.1)
(0.0)
(122.6)
2.8
205.1
19.7%
(75.2)
(54.9)
(1.0)
75.0
0.0
0.0
0.0
(59.1)
0.0
(27.7)
(11.8)
233.8
14.0%
(10.1)
(56.8)
(1.0)
166.8
0.0
0.0
0.0
(82.8)
0.0
(0.7)
83.3
235.6
0.8%
(10.6)
(58.9)
(1.0)
166.1
0.0
0.0
0.0
(85.7)
0.0
(0.5)
79.9
71.0
0.0
165.5
176.1
1,097.7
NS
1,510.3
396.8
446.1
421.0
31.0
0.0
215.4
19.0
1,510.3
25.7
0.0
174.2
154.2
1,143.5
NS
1,497.6
423.0
426.5
405.1
31.6
0.0
211.4
18.4
1,497.6
550.6
0.0
180.5
132.7
605.2
109.9
1,469.0
412.4
382.5
396.8
78.6
0.0
198.7
16.2
1,469.0
642.7
0.0
186.3
126.2
543.4
84.5
1,498.5
412.4
382.5
396.8
78.6
0.0
228.2
17.9
1,498.5
648.4
0.0
191.9
113.6
641.6
98.9
1,595.5
452.3
404.0
388.4
0.0
0.0
350.8
26.6
1,595.5
689.0
0.0
199.5
108.9
574.0
83.3
1,571.3
461.6
376.1
417.1
0.0
0.0
316.6
23.2
1,571.3
755.4
0.0
150.0
126.2
607.5
80.4
1,639.1
461.6
372.0
392.0
0.0
0.0
413.5
27.1
1,639.2
820.3
0.0
145.0
130.6
528.6
64.4
1,624.5
461.6
372.8
362.0
0.0
0.0
428.0
27.1
1,624.5
884.1
0.0
140.0
135.3
453.2
51.3
1,612.6
461.6
352.6
355.1
0.0
0.0
443.2
27.1
1,612.5
295.0
(1,280.5)
150.3
(129.1)
21.2
0.0
0.0
0.0
21.2
(138.9)
0.0
0.0
60.6
0.0
0.0
0.0
(57.1)
0.0
0.0
(57.1)
0.0
0.0
(57.1)
71.0
www.cheuvreux.com
January 2011
GERMANY
Symrise
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
(0.71)
(0.63)
11.1%
(0.63)
11.1%
(0.76)
-20.3%
(0.76)
-20.3%
0.82
NS
0.82
NS
0.77
-7.2%
0.77
-7.2%
0.71
-6.7%
0.71
-6.7%
1.19
66.1%
1.06
48.7%
1.25
5.4%
1.25
17.7%
1.27
1.2%
1.27
1.2%
0.9
0.00
0.00
0.49
-44.1%
0.3
0.00
0.00
0.34
-30.8%
4.7
0.00
0.00
1.46
NS
5.4
0.00
0.50
1.42
-2.9%
5.0
0.00
0.50
1.45
2.3%
5.3
0.00
0.70
1.74
19.6%
5.7
0.00
0.73
1.98
13.9%
6.2
0.00
0.71
1.99
0.8%
6.8
80.370
80.370
0.000
83.070
83.070
0.000
118.170
118.170
0.000
118.170
118.170
0.000
118.170
118.170
0.000
118.170
118.170
0.000
118.170
118.170
0.000
118.170
118.170
0.000
118.170
118.170
0.000
19.56
19.95
17.25
18.97
19.28
23.12
17.51
20.01
9.98
19.44
7.20
13.49
14.98
15.93
7.01
11.05
20.53
22.64
14.97
18.59
19.70
20.70
19.34
19.86
19.70
-
2,278.3
2,929.4
1,179.3
2,012.8
1,770.2
2,543.6
2,425.4
3,183.0
2,327.9
3,001.6
2,327.9
2,921.1
NS
NS
NS
NS
NS
-
NS
NS
NS
NS
NS
0.0
NS
NS
57.2
4.2
0.5
0.0
23.4
23.4
13.2
5.9
3.5
2.1
0.0
13.0
13.0
7.0
2.1
2.0
1.3
5.0
21.0
21.0
10.3
10.4
2.8
1.6
3.3
17.3
17.3
11.8
3.1
3.6
1.9
3.4
15.8
15.8
10.0
7.2
3.2
1.8
3.7
15.6
15.6
9.9
7.1
2.9
1.8
3.6
NS
NS
NS
NS
NS
NS
NS
NS
3.3
8.6
0.58
3.7
10.8
15.0
2.30
13.9
7.7
10.8
1.53
9.9
10.3
15.6
1.9
12.4
9.9
13.4
2.1
12.6
9.1
12.3
1.9
11.4
8.8
11.8
1.8
11.0
1.1
15.5
13.2
1.9
NS
0.8
NS
0.0
1.4
NS
11.7
3.5
NS
0.8
NS
0.0
1.1
15.0
17.4
6.7
NS
0.9
109.9
0.0
4.9
3.1
21.4
15.4
7.6
0.9
84.5
0.0
5.0
3.8
19.9
14.2
6.8
0.8
98.9
65.4
5.3
3.3
18.1
12.0
6.2
0.9
83.3
70.0
4.9
3.0
21.1
15.6
8.2
0.9
80.4
65.9
8.1
2.3
20.8
15.4
9.4
1.0
64.4
58.4
7.9
1.9
20.4
15.1
9.1
1.0
51.3
56.1
1.4
0.7
NS
NS
2.8
2.7
NS
NS
5.9
4.5
NS
NS
13.8
9.6
16.4
16.4
11.7
7.9
15.0
15.0
10.4
7.5
13.0
13.0
14.5
10.6
18.1
20.4
15.0
10.9
19.8
19.8
15.3
11.2
18.5
18.5
(0.71)
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
0.88

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
289
www.cheuvreux.com
January 2011
GERMANY
DISTRIBUTORS
2/Outperform
Rating
+4.5% EUR11.50
TAKKT
Reuters: TTKG.DE Bloomberg: TTK GR
Cash-flow machine returning to (cyclical)

growth
Recent developments return to organic growth/positive
operational leverage in Q2 and Q3
Following TAKKT's strong Q3-10 results we raised our forecasts for

2011/12E by 16%/17% and upgraded TAKKT to 2/OP as the shares
were offering compelling value after a period of under-performance. We
then raised our estimates a further 4% after TAKKT's revised up again
its guidance to 4% organic sales growth/EBITDA margin >12% in midDecember. TAKKT's organic/FX adj sales growth, after lagging in
negative territory this cycle, turned positive in Q2-10 (+6.6%) and
continued this momentum in Q3 (+6.5%). The operational leverage
effect was particularly strong in TAKKT Europe, which reported a 46%
jump in EBITDA and the EBITDA margin back to 17% after 9M-10 (vs.
12.2% in 9M-09), and the group margin back to 13% (10.1%). The
margin progression in the Americas was much more subdued (+20bps
to 9.9%), in part because the comparative base was higher since the
recovery in the Americas began already in H2 2009, and also due to
start-up costs related to the roll-out of Hubert in Europe, which is
managed from the Hubert business in the US. In Dec. TAKKT decided
to fully write-off the remaining goodwill at its office furniture mail-order
business Topdeq (EUR12.9m), a move we view positively since it
creates a clean slate and only marginally impacts the balance sheet (eq
ratio yr-end ~48%)
Q
EUR11.00
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
EUR722m
EUR213m
EUR848m
65.6m
EUR 0.23m
Performances
10.9%
19.6%
49.7%
5.6%
1.7%
5.3%
Absolute perf.
Relative perf.
15.2
15.2
13.2
13.2
11.2
11.2
9.2
9.2
7.2
7.2
5.2
5.2
3.2
01/01
3.2
03/02
08/03
11/04
01/06
Price/SDAX
04/07
07/08
10/09
12/10
Price
Outlook leading indicators still pointing up
TAKKT nudged up its 2010 guidance with its Q3 results and now
projects organic/FX-adjusted sales growth of 3-4% and the EBITDA
margin approaching the lower end of its 12-15% target corridor (we
estimate 11.7%). We note that due to significantly higher catalogue
costs in Q4 (the main catalogues are shipped in early January),
TAKKT's EBITDA margin is typically at its lowest in Q4 (we est 7.9% vs.
7.2% in Q4-09). Operationally, the US ISM and Eurozone PMI indices,
typically very reliable 3- to 6-month leading indicators for TAKKT's topline growth, turned up again in October 2010 and are clearly in positive
growth territory. We estimate 4-5% sales growth p.a. through to 2012E
and an EBITDA margin improvement of 140bps vs. 2010 to 13.1%
(CAGR EPS 2010-12E 18%). Given TAKKT's low capex needs (<1.5%
of sales the next 2/3 years) we estimate its FCF margin at 6-8% of
sales. Barring a major acquisition and our impression is that there are
some attractive candidates on the radar screen a significant increase
in the DPS for 2011E is likely. Regarding TAKKT's strategy of increasing
the number of online-only platforms it operates, we remain sceptical
about the near-term potential, particulary for its European online-only
platform certeo. Cannabilisation risk appears to be limited, however,
due to the superior services it offers within framework agreements to its
large and medium-sized clients in its traditional combined
catalogue/online businesses.
Sector focus
Sector Top Picks
Least favoured
Ahold, Carrefour
Colruyt
Shareholders
Franz Haniel & Cie. Gmbh 70.4%, Free Float 29.6%
2009
2010E
2011E
2012E
17.3
16.3
13.6
11.9
EV/EBITDA (x)
9.9
9.4
8.0
7.1
3.9
7.9
8.5
8.5
Net debt/EBITDA (x)
2.6
1.6
1.1
0.8
Yield (%)
4.5
3.0
4.5
5.5
ROCE (%)
11.0
17.7
20.7
22.6
1.5
2.0
1.9
1.8
P/E (x)
Craig ABBOTT
Research Analyst
(49) 69 47 89 75 25
Q
Q
290
www.cheuvreux.com
January 2011
GERMANY
Company profile
Global market leader in B2B mail order for durable goods

TAKKT is the global market leader in B2B mail-order business for
durable office, plant and warehouse equipment, with 2010E sales of
~EUR790m. The company serves more than 3m customers in over
25 countries.
Q
Organised into TAKKT Europe & TAKKT America from 2010

Beginning in January 2010 the group was reorganised into two
divisions: TAKKT Europe and TAKKT America. TAKKT Europe
comprises two business areas: Business Equipment Group (BEG)
and Office Equipment Group (OEG) and will account for an
estimated 57% of group sales and 70% of EBITDA. TAKKT
America comprises the Plant Equipment Group (PEG) and the OEG
and BEG activities and will account for an estimated 43% of sales
and 30% of EBITDA.
Q
SWOT analysis
Strengths
Weaknesses
As
Sales
a market-leading B2B mail

order company, TAKKT has
pricing power due to the
fragmented supplier/customer
base combined with low price
sensitivity due to modest
average order size
highly sensitive to
changes in GDP growth. Order
volumes in business/office
market decline in recessions as
customers cut spending
FX
Long
Translation risk (~42% of

sales but ~20% of EBITDA is in
USD)
Opportunities
Threats
Still relatively low (but growing)

market penetration rates for the
B2B mail order industry vs.
traditional distribution channels
period to break-even, a
high barrier for potential new
entrants
Rising competition from online

providers could increase price
pressure
Acquisitions
to fill in
geographical/product gaps
New
start-ups
291
www.cheuvreux.com
Valuation
Our target price of EUR11.5 is DCF-based. Our

main DCF model assumptions are a WACC of
8.6%, terminal growth rate of 1.5% and terminal
EBITDA margin of 13%.
TAKKT's main attraction remains its consistently
high free cash generation, even in trough years.
(current FCF yield of ~9%).
Investment case
TAKKT clearly felt the full brunt of 2008-09

recession, with organic/FX-adjusted sales down
25.4% in 2009 and EBITDA down 49% (EBITDA
margin in 2009: 9.4% vs. 14.7% in 2008). The
company, however, responded quickly by
reducing costs. Together with the stable gross
margin of ~41-42%, and a return to positive
organic/FX-adjusted sales growth of 6.5% in Q2
and Q3, the EBITDA margin is recovering
strongly. After 9M-10 the EBITDA margin
returned to 13% and for the full year we expect
it to approach the group's target EBITDA margin
corridor of 12-15% (est. 11.7%).
With its key leading indicators, the ISM and PMI
indices still positive, we estimate 4.3% organic
sales growth in 2011E a further 80bps EBITDA
margin rise then within the 12-15% corridor.
The company's most compelling feature, its high
cash flow generation capability, proved reliable
even during the downturn. Given its still-low
capex needs for the next few years, we estimate
a FCF margin of 6% to 8% of sales during the
forecast period.
January 2011
GERMANY
TAKKT
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
292
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
727.6
1.9%
(95.7)
(544.8)
87.1
8.9%
(9.0)
78.1
11.1%
(15.7)
0.0
0.0
62.4
(10.9)
0.0
0.0
(18.5)
0.0
0.0
0.0
32.9
0.0
(0.6)
32.3
0.0
0.0
48.0
19.7%
773.2
6.3%
(98.5)
(576.3)
98.4
13.0%
(9.5)
88.9
13.8%
0.0
0.0
0.0
88.9
(10.3)
0.0
0.0
(28.3)
0.0
0.0
0.0
50.2
0.0
(0.7)
49.5
0.0
0.0
49.5
3.1%
958.2
23.9%
(115.4)
(723.6)
119.2
21.1%
(14.3)
104.9
18.0%
0.0
0.0
0.0
104.9
(12.3)
0.0
0.0
(30.4)
0.0
0.0
0.0
62.2
0.0
(0.9)
61.3
0.0
0.0
61.3
23.8%
986.2
2.9%
(112.3)
(731.5)
142.4
19.5%
(17.4)
125.0
19.2%
0.0
0.0
0.0
125.0
(8.8)
0.0
0.0
(36.8)
0.0
0.0
0.0
79.3
0.0
(1.2)
78.1
0.0
0.0
78.1
27.4%
932.1
-5.5%
(103.2)
(692.9)
136.0
-4.5%
(15.8)
120.2
-3.8%
0.0
0.0
0.0
120.2
(6.2)
0.0
0.0
(36.9)
0.0
0.0
0.0
77.0
0.0
(1.2)
75.8
0.0
0.0
75.8
-2.9%
731.5
-21.5%
(101.1)
(561.8)
68.6
-49.6%
(19.2)
49.4
-58.9%
0.0
0.0
0.0
49.4
(7.0)
0.0
0.0
(14.5)
0.0
0.0
0.0
27.8
0.0
(0.7)
27.1
0.0
0.0
27.1
-64.2%
787.5
7.7%
(103.6)
(588.9)
95.0
38.5%
(19.3)
75.7
53.2%
0.0
0.0
0.0
75.7
(8.9)
0.0
(12.9)
(22.4)
0.0
0.0
0.0
44.4
0.0
(0.9)
43.5
0.0
0.0
43.5
60.5%
822.6
4.5%
(105.5)
(611.0)
106.1
11.7%
(18.2)
87.9
16.1%
0.0
0.0
0.0
87.9
(7.8)
0.0
0.0
(26.8)
0.0
0.0
0.0
53.2
0.0
0.0
53.2
0.0
0.0
53.2
22.3%
860.4
4.6%
(107.9)
(636.1)
116.4
9.7%
(19.3)
97.1
10.5%
0.0
0.0
0.0
97.1
(6.3)
0.0
0.0
(30.4)
0.0
0.0
0.0
60.4
0.0
0.0
60.4
0.0
0.0
60.4
13.5%
57.6
13.8%
2.2
(8.8)
(1.5)
51.0
(0.4)
0.0
0.0
(8.4)
0.0
0.0
42.2
65.4
13.5%
(2.7)
(27.8)
(20.1)
34.9
2.8
0.0
0.0
(7.4)
0.0
(5.8)
24.5
81.4
24.5%
(7.2)
(56.6)
(47.0)
17.6
(13.4)
0.0
0.0
(6.4)
0.0
(4.9)
(7.1)
101.3
24.4%
(6.4)
1.8
11.7
96.7
(7.6)
0.0
0.0
(5.4)
0.0
(4.6)
79.1
97.8
-3.5%
17.4
(36.4)
(25.2)
78.8
(63.8)
0.0
0.0
(4.4)
0.0
(4.9)
5.7
56.1
-42.6%
14.7
(52.1)
(46.2)
18.7
(107.2)
0.0
0.0
(3.4)
0.0
(9.1)
(101.0)
55.7
-0.7%
2.6
(1.0)
5.3
57.3
0.0
0.0
0.0
(21.0)
0.0
(4.9)
31.4
76.3
37.0%
(6.2)
(9.0)
0.5
61.1
0.0
0.0
0.0
(21.0)
0.0
(4.9)
35.2
84.6
10.9%
(12.5)
(11.0)
0.2
61.1
0.0
0.0
0.0
(32.6)
0.0
(4.9)
23.6
181.1
3.0
10.5
6.9
182.3
99.0
383.8
211.5
6.4
68.0
5.5
0.0
91.3
12.5
382.7
230.6
2.4
12.8
12.4
157.9
67.8
416.1
212.1
24.7
68.0
4.8
0.0
104.1
13.5
413.7
273.2
2.4
14.3
17.4
164.8
59.8
472.1
255.1
26.2
64.4
7.0
0.0
118.1
12.3
470.8
321.9
3.0
15.5
17.9
85.7
26.4
444.0
207.3
26.2
93.4
6.4
0.0
109.4
11.1
442.7
324.3
3.4
17.0
14.9
79.9
24.4
439.5
210.5
27.2
108.7
7.5
0.0
84.1
9.0
439.5
238.8
3.3
17.0
15.7
180.7
74.6
455.5
253.1
28.2
99.8
5.6
0.0
68.8
9.4
455.5
248.5
4.2
17.0
15.3
149.4
59.1
434.4
240.2
29.2
93.5
5.6
0.0
65.9
8.4
434.4
280.7
4.2
17.0
14.5
114.2
40.1
430.6
235.0
30.2
88.5
5.6
1.0
71.3
8.7
430.6
308.5
4.2
17.0
16.0
90.6
29.0
436.3
229.8
31.2
84.4
5.6
2.0
85.2
9.9
436.3
www.cheuvreux.com
January 2011
GERMANY
TAKKT
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
0.66
19.6%
0.44
36.3%
0.68
3.2%
0.68
53.3%
0.84
23.9%
0.84
23.9%
1.07
27.3%
1.07
27.3%
1.04
-2.9%
1.04
-2.9%
0.41
-60.3%
0.41
-60.3%
0.66
60.5%
0.66
60.5%
0.81
22.3%
0.81
22.3%
0.92
13.6%
0.92
13.6%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.22
0.15
0.79
13.8%
2.3
0.00
0.15
0.90
13.5%
3.0
0.00
0.25
1.12
24.5%
3.5
0.00
0.80
1.39
24.4%
3.6
0.00
0.80
1.34
-3.5%
3.6
0.00
0.32
0.86
-36.3%
3.3
0.00
0.32
0.85
-0.7%
3.5
0.00
0.50
1.16
37.0%
3.8
0.00
0.60
1.29
10.9%
4.1

Latest price
High
Low
Average price
72.900
72.900
0.000
72.900
72.900
0.000
72.900
72.900
0.000
72.900
72.900
0.000
72.900
72.900
0.000
65.600
65.600
0.000
65.600
65.600
0.000
65.600
65.600
0.000
65.600
65.600
0.000
7.75
8.20
5.78
6.80
9.50
9.70
7.21
8.44
13.15
14.50
9.15
11.70
11.90
15.55
11.21
13.24
8.00
12.95
6.40
10.49
7.15
9.15
5.00
7.64
10.80
11.11
7.20
8.78
11.00
11.16
10.73
10.98
11.00
-
565.0
768.7
677.2
858.3
958.6
1,151.3
867.5
981.9
583.2
688.6
469.0
677.8
708.5
893.0
721.6
848.8
721.6
824.2
17.5
11.8
9.8
8.9
3.3
2.0
1.9
14.0
14.0
10.6
5.1
3.2
2.1
1.6
15.6
15.6
11.8
1.8
3.8
2.5
1.9
11.1
11.1
8.6
11.0
3.3
2.3
6.7
7.7
7.7
6.0
13.3
2.2
1.6
10.0
17.3
17.3
8.4
3.9
2.2
1.5
4.5
16.3
16.3
12.7
7.9
3.1
2.0
3.0
13.6
13.6
9.5
8.5
2.9
1.9
4.5
11.9
11.9
8.5
8.5
2.7
1.8
5.5
8.8
9.8
1.06
11.7
8.7
9.7
1.11
11.8
9.7
11.0
1.20
12.7
6.9
7.9
1.00
9.0
5.1
5.7
0.74
6.7
9.9
13.7
0.9
11.0
9.4
11.8
1.1
14.2
8.0
9.7
1.0
10.4
7.1
8.5
1.0
9.3
8.0
3.2
12.0
10.7
4.5
1.9
99.0
33.9
9.6
2.4
12.7
11.5
6.5
1.9
67.8
22.1
9.7
2.0
12.4
10.9
6.5
2.1
59.8
29.7
16.2
0.8
14.4
12.7
8.0
2.3
26.4
74.7
NS
0.8
14.6
12.9
8.3
2.2
24.4
76.9
9.8
3.2
9.4
6.8
3.8
1.6
74.6
77.5
10.7
2.7
12.1
9.6
5.6
1.8
59.1
48.3
13.6
1.5
12.9
10.7
6.5
1.9
40.1
61.7
18.5
1.1
13.5
11.3
7.0
2.0
29.0
65.2
20.7
13.3
19.6
19.6
21.7
13.9
24.0
24.0
22.6
15.2
25.3
25.3
28.7
19.6
27.6
27.6
27.9
18.9
26.5
26.5
11.0
7.2
12.0
12.0
17.7
11.7
19.2
19.2
20.7
13.8
20.9
20.9
22.6
15.0
21.7
21.7
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
293
www.cheuvreux.com
January 2011
GERMANY
SECTOR
No rating
Rating
N/A
Tipp24
Reuters: TIMGn.DE Bloomberg: TIM GR
Upside from market liberalisation

Q
Recent developments Favourable court decision
In the first nine months of 2010, Tipp24 grew its revenues 8.9 %
y-o-y to EUR66.5m (9M-09: 61.1m) with the Abroad segment once
again providing the dominant share. Consolidated EBIT fell 58.9% y-o-y
to EUR13.6m (33.1m); net profit fell 66.7% y-o-y to EUR8.4m (25.1m)
(all 9M-10).
In the Germany segment, 9M-10 revenues were flat at EUR 2.3m
(2.3m), while the EBIT loss dimished to EUR-6.4m (-9.3m). Revenues in
the Abroad segment rose to EUR66.0m (60.2m) while EBIT fell sharply
to EUR20.0m (42.7m). The company's 9M-10 figures were marked by a
special item: Total winnings paid out for secondary lotteries organized
by MyLotto24 Ltd., a fully consolidated minority shareholding of Tipp24
SE, exceeded the statistical average by EUR18.9m. This had a negative
effect of EUR18.3m on EBIT.
Political and legal situation: On 8 September 2010, the European Court
of Justice (ECJ) declared that Germany's state gambling monopoly was
not applicable as it infringes against basic European freedoms. The ECJ
thus confirmed Tipp24s view of the current legal situation. Tipp24
intends to resume its brokerage business for state-run lotteries in
Germany as quickly as possible. A working committee commissioned
by the premiers of Germanys Federal States is currently examining two
alternatives for the future of the State Treaty on Games of Chance. In
both models, the states are considering opening the internet and
advertising for lotteries. The working committees proposal will form the
basis of a new State Treaty on Games of Chance to be adopted by the
state premiers and expected to come into force in early 2012.
Q
EUR28.8
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
EUR223m
EUR134m
EUR116m
7.731m
EUR 0.28m
Performances
9.7%
6.0%
5.5%
4.5%
-9.8%
-25.8%
Absolute perf.
Relative perf.
40.2
40.2
35.2
35.2
30.2
30.2
25.2
25.2
20.2
20.2
15.2
15.2
10.2
10.2
5.2
10/05
5.2
06/06
01/07
09/07
05/08
Price/SDAX
01/09
09/09
05/10
Price
Sector focus
Sector Top Picks
Least favoured
Outlook Resumption of business in Germany
Tipp24 confirmed its 2010 forecast of at least EUR90m in consolidated

revenues and at least EUR20m in consolidated EBIT.
The Halle administrative court has declared central restrictions of the
German State Treaty on Games of Chance (Glcksspiel-Staatsvertrag
GlStV) to be inapplicable and determined that no permission for
brokerage of lotteries in particular 'Lotto 6 aus 49' on the Internet is
required, thus reinforcing Tipp24's intention to resume business in
Germany as soon as possible.
Shareholders
Free Float 60.3%, Gnther Holding 28.3%, Jens
Schumann 11.4%
P/E (x)
2009
2010E
2011E
2012E
8.7
12.7
14.6
8.9
EV/EBITDA (x)
5.8
5.1
2.8
2.3
9.9
5.6
13.7
12.9
Net debt/EBITDA (x)
(3.1)
(3.4)
(2.9)
(3.6)
0.0
0.0
0.0
0.0
ROCE (%)
Yield (%)
Source: Factset
Cheuvreux does not currently cover Tipp24
Bernd LAUX
Research Analyst
blaux@cheuvreux.com
(49) 69 47 897 512
Q
Q
294
www.cheuvreux.com
January 2011
GERMANY
Company profile
Online German lotto from the UK

Tipp24, founded in 1999, went public in 2005 (Prime Standard) as
the leading online broker for state-owned lottery products. Due to
Germany's Interstate Gambling Treaty, which prohibits all online
gambling activities, Tipp24 operates on-line the German lottery 6 out
of 49 as a secondary lottery from its UK minority holding,
MyLotto24, which accounts for 85% of revenues.
Q
Valuation
A peer group of European online gambling

companies is currently valued at c. 12x 2011E
earnings.
A moderate discount may be applicable to
Tipp24 shares in order to reflect the shares'
limited liquidity.
Q Bundled lottery activities in the UK

Since January 2009, Tipp24 has bundled its lottery activities in
MyLotto24, which includes a) the secondary lottery for the German 6
out of 49; b) Ventura24, the Spanish lottery broker, and c) Giochi24,
which includes the Italian lottery brokerage activities. Since
September 2008, Tipp24 has offered online games in Germany (skillbased games) through an Internet portal via its wholly owned
subsidiary Tipp24 Entertainment GmbH.
Q Bundled lottery activities in the UK
Since its foundation to the end of 2008, Tipp24 SE has brokered
tickets worth over EUR1.5bn to the state lottery companies in
recent years over EUR330m annually. The company's shares joined
the SDAX index in June 2009. In December 2009, Tipp24 switched
its legal format from a German AG to a European SE.
SWOT analysis
Strengths
Weaknesses
Long track record in managing

regulatory changes
Experience in operating in a
liberalized gambling market
Critical
Business model exposed to

regulatory and political risk
mass may not been
achieved in all business activities
Scalable business platform
Rather
Large client base
history
Opportunities
Threats
Deregulation of the
German/European gambling
market
short stock market
Low barriers to entry could

result in tougher competition
post liberalization of the
European gambling market
Expansion
opportunities in
various European countries
Increasing willingness of
consumers to gamble online
Continuous
regulatory
uncertainty beyond 2011
295
Costly M&A transactions
www.cheuvreux.com
Investment case
Tipp24 is a play on the liberalization of the

German gaming market, which we expect to be
implemented at year-end 2011E. German
liberalization would lead to a) strong top-line
growth rates of 30+% y-o-y; b) an overall
reduced risk profile with lower revenue volatility;
c) cost savings of EUR3-4m as high jackpot
insurance would become unnecessary d) payout
of cash reserves in the form of a special
dividend of possibly EUR6.50 per share
(assuming a 50% payout ratio).
January 2011
GERMANY
MACHINERY
2/Outperform
Rating
-20.4% EUR15.50
Tognum
Reuters: TGMG.DE Bloomberg: TGM GR
Investing in the next growth phase

Q
Recent developments guidance raised with Q3-10 results
Tognum reported solid Q3-10 results and raised its guidance again.
Sales were up 16.4% (9M-10 -3.8%) driven primarily by strong engine
sales (+27.7%) although coming from a weak comparative base (Q3-09
engine sales were down 38%). Onsite Energy sales remained robust,
however, rising +20.6%, as did Distribution sales (+27%). Higher
capacity utilisation led to a significant jump in adjusted EBIT (+71%) for
a 9.2% margin, despite still-above-average R&D expenses (7.1% vs.
6.3% Q3-09). Order intake rose 33% to EUR650m for a positive bookto-bill of 1.06x, with decentralised power, agriculture and industrial
showing the strongest increases. On 29 December 2010 Tognum
announced it would discontinue its fuel-cell activities, which will result
in a non-operational, one-off impact of ~EUR60m on the 2010 results,
but has no impact on its 2010 guidance or outlook for 2011.
Q
EUR19.48
Price (07/01/2011)
Outlook cyclical upswing plus structural growth
With good visibility for Q4-10, Tognum raised its 2010 guidance to
sales of EUR2.55bn (previously EUR2.4 2.5bn) and the adjusted
operating margin at the upper end of its forecast range of 7.5-9% (we
estimate 8.1%). For 2011 Tognum expects revenue growth of ~10%
and an adjusted EBIT margin in the high single-digit percentages.
Although Tognum still faces some operational headwinds sluggish
demand in some end markets such as marine, partial delays in major
defence projects demand in general has improved in most of its endmarkets. End-demand is particularly robust with OEM customers in
Onsite Energy, especially for the S4000 models, Gas Turbines and in
Construction and Agriculture. During the downturn Tognum took
advantage of its strong balance sheet and cash generation to begin
investing counter-cyclically in laying the groundwork for the next growth
phase with the key element being new product developments, in
particular the S1600 series, and the next generation S2000 and S4000
engines which will both be compliant with TIER IV regulations and
significantly more fuel efficient than their predecessors. Tognum
appears to be on track to bring the new engines to the market one year
ahead of TIER IV deadlines. Tognum is also targeting more than 10%
growth p.a. in its lucrative After-Sales business, which historically has
been primarily focused on providing spare parts. Increasingly, however,
it is active in remanufacturing engines and power packs. Further
measures include increasing the share of engines sold with long-term
maintenance contracts and by expanding its After-Service capacity
globally. The R&D spend is expected to again remain at above-average
levels in 2011E (6-7% of sales). Hence in 2011 Tognum may not quite
return to its targeted across-the-cycle adj. EBIT margin of 10.0%, but in
all likelihood by 2012E.
Stock data
Free float
Enterprise value
Daily volume
EUR2560m
EUR1605m
EUR3157m
131.375m
EUR 7.27m
Performances
-1.8%
20.8%
63.0%
-3.3%
6.1%
26.8%
Absolute perf.
Relative perf.
25.9
25.9
20.9
20.9
15.9
15.9
10.9
10.9
5.9
07/07
5.9
12/07
05/08
10/08
04/09
Price/M DAX
09/09
02/10
Price
Sector focus
Sector Top Picks
Least favoured

Shareholders
Free Float 69.8%, Daimler >25%, Management 5.2%,
P/E (x)
EV/EBITDA (x)
2009
2010E
2011E
19.0
22.7
13.3
9.3
7.5
9.4
7.0
5.6
10.9
1.2
2.4
7.9
Net debt/EBITDA (x)
1.1
0.9
0.7
0.3
Yield (%)
2.2
1.8
2.8
4.1
ROCE (%)
9.9
11.7
16.6
20.5
1.2
1.1
1.2
1.1
Q
Q
296
www.cheuvreux.com
2012E
Craig ABBOTT
Research Analyst
(49) 69 47 89 75 25
08/10
January 2011
GERMANY
Company profile
Leading manufacturer of high-performance diesel engines

Tognum is a leading manufacturer of premium high-speed offhighway diesel engines with very strong positions in marine (yachts,
ferries and naval), defence, rail (Europe) and heavy mining trucks. It
also supplies injection systems and decentralised onsite energy
systems based on diesel, gas and fuel cells.
Q
Q A fairly young company with a 100-year tradition

Tognum emerged from the DaimlerChrysler group, having been
acquired by EQT in 2006 and IPOed in 2007. In 2008, Daimler again
became a major shareholder in Tognum, acquiring EQT's remaining
22% stake, which has since been increased to more than 25%.
Tognum, however, has roughly 100 years of manufacturing
experience and generated EUR2.53bn in revenues in 2009.
Q Focus on propulsion/decentralised energy systems
Following last year's disposal of its propeller shaft business and new
segmentation, Engines sales in 2009 came to EUR1.68bn or 58% of
the group's gross revenues. The new Distribution division accounted
for EUR524m or 18%, while Onsite Energy generated EUR719m or
25% of the group's gross revenues (before eliminations). Tognum is
geographically well diversified with 19% of sales in Germany, 29% in
Rest of Europe, 24% in NAFTA, 20% in Asia-Pacific and 8% in Rest
of the World.
SWOT analysis
Strengths
Weaknesses
Market leader in many of its

relevant niche engine segments.
High degree of cyclicality
High FX exposure
High barriers to entry with

established clients
Multiple adjustments to
earnings lowers transparency.
Tognum's engines are more

fuel efficient (on avg.) than
competitors' (fuel costs account
for >90% of engine life cycle
costs).
High quarterly earnings

volatility
Relatively high working capital

(28% of sales)
Short history as a listed

company (IPO'd in 2007)
Significantly cash generative

across the cycle/strong balance
sheet
Technological competence with

100 years experience in R&D and
engine manufacturing
Opportunities
Threats
Increasing After-Market sales

by increasing spare
parts/remanufacturing activities
(targeting +10% p.a.)
Ever-stricter emissions
standards
Costs of additional
components required to meet
TIER IV regulations may not be
fully passed on
Targeting the introduction of its

new Tier IV-compliant
S2000/S4000 engines one year
ahead of emission deadlines.
Potential double-dip recession
Expansion in emerging
markets
297
www.cheuvreux.com
Valuation
Our target price of EUR15.5 is based on

15% discount to the peer group consisting of 20
European machinery companies.
Q
Investment case
Tognum's business model has proven

remarkably resilient, even during the sharp
economic downturn. Its adjusted EBIT margin
troughed in 2009 at 7.9%, and the companydefined return on net assets dipped to 14.9%.
Certainly flex-time agreements put in place after
the previous downturn played a major role as did
the relatively high share of government contracts
and the rising share of After-Sales business.
Because of its balance sheet strength, Tognum
was in the competitively advantageous position
to increase significantly its investments in new
product developments. which we expect to
begin the reap huge rewards for Tognum in the
coming years in the form of market share gains.
It will bring the next generation S2000 and
S4000 engines to the market ahead of TIER-IV
deadlines and ahead of its competition, which
should lead to a significant increase in sales and
a return over the next three to four years to an
adjusted EBIT margin range of 12% to 13% (and
RONA in the mid 20's).
January 2011
GERMANY
Tognum
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
298
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,263.2
1,436.1
13.7%
(363.6)
(917.6)
154.9
16.6%
(55.0)
99.9
22.0%
0.0
0.0
0.0
99.9
(11.1)
0.0
0.0
(30.0)
0.0
0.0
0.0
58.8
0.0
0.0
58.8
0.0
0.0
58.8
22.0%
2,534.6
76.5%
(386.0)
(1,842.9)
305.7
97.4%
(145.1)
160.6
60.8%
0.0
0.0
0.0
160.6
(110.8)
0.0
0.0
(23.2)
0.0
0.0
0.0
26.6
0.0
0.0
26.6
0.0
0.0
26.6
-54.8%
2,835.3
11.9%
(482.5)
(1,897.3)
455.5
49.0%
(112.1)
343.4
113.8%
0.0
0.0
(46.2)
343.4
(58.0)
0.0
0.0
(95.3)
22.2
0.0
0.0
212.2
0.0
0.0
212.2
0.0
(4.6)
207.6
NS
3,133.1
10.5%
(543.6)
(2,062.8)
526.7
15.6%
(120.0)
406.7
18.4%
0.0
0.0
(44.0)
362.7
(47.2)
0.0
0.0
(74.7)
(33.2)
0.0
0.0
207.6
0.0
0.0
207.6
0.0
57.0
264.6
27.5%
2,550.0
-18.6%
(501.0)
(1,763.0)
286.0
-45.7%
(117.5)
168.5
-58.6%
0.0
0.0
(14.5)
154.0
(32.0)
0.0
64.0
(37.7)
(49.5)
0.0
0.0
98.9
0.0
0.0
98.9
0.0
(18.6)
80.3
-69.7%
2,460.0
-3.5%
(507.2)
(1,611.5)
341.3
19.3%
(133.3)
208.0
23.4%
0.0
0.0
(10.0)
198.0
(28.0)
0.0
39.0
(54.0)
(29.0)
0.0
0.0
126.0
0.0
0.0
126.0
0.0
(11.7)
114.3
42.3%
2,740.0
11.4%
(519.7)
(1,769.1)
451.2
32.2%
(130.2)
321.0
54.3%
0.0
0.0
(10.0)
311.0
(28.7)
0.0
39.0
(87.7)
(29.0)
0.0
0.0
204.6
0.0
0.0
204.6
0.0
(11.7)
192.9
68.8%
2,980.0
8.8%
(551.1)
(1,886.2)
542.7
20.3%
(137.7)
405.0
26.2%
0.0
0.0
(21.0)
384.0
(31.6)
0.0
50.0
(112.0)
(29.0)
0.0
0.0
261.4
0.0
0.0
261.4
0.0
15.0
276.4
43.3%
(101.8)
(40.7)
(15.5)
(43.4)
363.8
0.0
0.0
0.0
0.0
(355.9)
(35.5)
113.8
14.8%
75.7
(40.8)
(12.1)
148.7
(56.8)
0.0
0.0
0.0
0.0
(42.9)
49.0
171.7
50.9%
264.2
(99.2)
(48.5)
336.7
(376.8)
0.0
0.0
0.0
0.0
(601.8)
(641.9)
358.0
108.5%
(101.9)
(160.1)
(83.7)
96.0
(49.7)
0.0
0.0
0.0
0.0
(42.8)
3.5
327.6
-8.5%
(117.3)
(201.3)
(56.1)
9.0
(36.4)
0.0
0.0
(72.0)
0.0
168.3
68.9
171.3
-47.7%
137.0
(141.5)
(62.9)
166.8
(5.1)
0.0
0.0
(92.0)
0.0
(13.6)
56.1
266.6
55.6%
(82.0)
(152.5)
(60.4)
32.1
(12.3)
0.0
0.0
(33.6)
0.0
(30.9)
(44.7)
351.7
31.9%
(94.2)
(197.3)
(67.8)
60.2
(5.5)
0.0
0.0
(45.3)
0.0
5.7
15.1
383.6
9.1%
(11.5)
(169.9)
(70.1)
202.2
(14.9)
0.0
0.0
(71.6)
0.0
(86.4)
29.3
406.0
6.0
270.6
192.5
35.5
8.6
910.6
0.0
43.0
182.2
120.5
0.0
564.9
44.7
910.6
410.0
4.0
283.4
213.9
(13.5)
NS
897.8
0.0
56.4
198.1
119.9
0.0
523.4
36.4
897.8
63.8
0.0
379.5
300.0
628.3
NS
1,371.6
178.5
286.4
371.8
93.6
0.0
441.4
17.4
1,371.7
534.5
0.0
389.5
377.9
312.5
58.5
1,614.4
186.7
291.4
406.5
0.0
143.3
586.5
20.7
1,614.4
671.6
0.0
398.2
451.9
342.4
51.0
1,864.1
192.1
289.6
484.1
0.0
54.8
843.5
26.9
1,864.1
678.5
0.0
370.7
420.8
300.2
44.2
1,770.2
192.1
270.0
527.7
0.0
59.9
720.4
28.3
1,770.1
770.8
0.0
374.3
393.6
310.4
40.3
1,849.1
192.1
249.7
567.3
0.0
72.2
767.9
31.2
1,849.2
930.1
0.0
379.4
411.0
295.9
31.8
2,016.4
192.1
229.3
654.7
0.0
77.7
862.6
31.5
2,016.4
1,119.9
0.0
401.2
387.4
158.4
14.1
2,066.9
192.1
208.8
707.5
0.0
92.6
865.9
29.1
2,066.9
(347.8)
(782.6)
132.8
(50.9)
81.9
0.0
0.0
0.0
81.9
(11.1)
0.0
0.0
(22.6)
0.0
0.0
0.0
48.2
0.0
0.0
48.2
0.0
0.0
48.2
99.1
www.cheuvreux.com
January 2011
GERMANY
Tognum
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
0.40
0.49
21.9%
0.49
21.9%
0.22
-54.7%
0.22
-54.7%
1.58
NS
1.62
NS
2.01
27.5%
1.58
-2.2%
0.61
-69.7%
0.75
-52.3%
0.87
42.4%
0.96
27.4%
1.47
68.7%
1.56
62.4%
2.10
43.3%
1.99
27.8%
3.4
0.00
0.00
0.95
14.8%
3.4
0.00
0.00
1.43
50.9%
0.5
0.00
0.60
2.73
90.4%
3.5
0.00
0.70
2.49
-8.5%
4.4
0.00
0.26
1.30
-47.7%
4.9
0.00
0.35
2.03
55.6%
5.5
0.00
0.55
2.68
31.9%
6.5
0.00
0.80
2.92
9.1%
7.7
120.025
120.025
0.000
120.025
120.025
0.000
120.025
120.025
0.000
131.375
131.375
0.000
131.375
131.375
0.000
131.375
131.375
0.000
131.375
131.375
0.000
131.375
131.375
0.000
131.375
131.375
0.000
20.61
26.59
4.20
22.05
9.00
20.75
6.94
14.46
11.60
12.40
6.35
9.89
19.73
20.76
11.62
15.43
19.48
20.04
18.91
19.45
19.48
-
2,590.7
3,149.4
1,182.6
1,868.4
1,524.2
2,135.2
2,591.9
3,204.4
2,559.7
3,157.3
2,559.7
3,026.7
NS
NS
NS
NS
NS
-
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
13.0
13.0
7.6
3.7
5.9
2.1
2.9
4.5
4.5
3.6
0.8
2.0
1.0
7.8
19.0
19.0
8.9
10.9
2.4
1.2
2.2
22.7
22.7
9.7
1.2
3.6
1.1
1.8
13.3
13.3
7.3
2.4
3.0
1.2
2.8
9.3
9.3
6.7
7.9
2.5
1.1
4.1
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
6.9
9.2
1.11
7.9
3.5
4.6
0.60
5.2
7.5
12.7
0.8
11.0
9.4
15.4
1.3
11.2
7.0
9.8
1.2
8.5
5.6
7.5
1.0
7.5
12.0
0.4
10.5
6.5
3.8
1.6
8.6
0.0
14.0
NS
10.8
7.0
4.1
1.8
NS
0.0
2.8
3.7
12.1
6.3
1.0
2.0
NS
0.0
7.9
0.9
16.1
12.1
7.5
1.9
58.5
37.1
11.2
1.0
16.8
13.0
6.6
1.7
51.0
44.3
8.9
1.8
11.2
6.6
3.9
1.5
44.2
34.5
12.2
1.2
13.9
8.5
5.1
1.4
40.3
36.5
15.7
0.8
16.5
11.7
7.5
1.4
31.8
35.3
17.2
0.4
18.2
13.6
8.8
1.5
14.1
40.2
10.4
7.1
12.6
12.6
12.8
8.5
15.4
15.4
12.6
6.7
52.7
52.7
23.3
16.1
49.5
48.2
22.5
15.7
36.6
49.1
9.9
6.9
15.7
12.6
11.7
8.2
17.8
16.0
16.6
11.6
24.7
23.1
20.5
14.4
26.4
28.2
0.40
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
0.83

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
299
www.cheuvreux.com
January 2011
GERMANY
TEXTILE RETAILERS
1/Selected List
Rating
+17.4% EUR19.60

Right on track
Q
Reuters: TTIGn.DE Bloomberg: TTI GR
Stock data
Recent developments Navigating through turbulence
On 1 December, private equity group Alpha Funds placed its remaining

stake of 17.1% (~2.83m) in the marketplace at EUR13.50 via a bookbuilding process. Its restricted period had expired as of September.
TOM TAILOR's 9M-10 figures reported on Tuesday 9 Nov. were in line
with our expectations: group sales rose 12% y-o-y on a very strong
performance by the retail business (+34% y-o-y) but also thanks to a
positive performance in wholesale (+8.5% y-o-y). The increase in retail
sales was achieved not only via expansion, as the company also
reported a l-f-l increase of 9% in 9M-10 (8% including e-shop).
In Q3-10 the company reported a decline in its adjusted EBITDA margin
from 18% in Q3-09 to 15.5% due to increased transportation costs
resulting from the production bottleneck in Asia which forced TOM
TAILOR to ship the available products quickly via air freight to its
European warehouses. The additional air freight costs were ~EUR0.5m
per month; however, the company expects these cost increases to be
resolved in Q1-11, leading to a normalised cost base again in CY11.
Q
EUR16.70
Price (07/01/2011)
Outlook Setting the course on growth
TOM TAILOR increased its sales guidance from previously 8-12% y-o-y
growth to now above 12%. Main reason: the new JV with its southeast
European franchise partner Sportina. Sportina will be fully consolidated
as of Q4-10. TOM TAILOR's investment in this former franchise partner
shows its confidence in its expansion strategy for both its non-core and
core European markets. Consequently, we remain confident on sales
growth for the coming years driven by expansion, the positive business
environment, and Tom Tailor's strong brands and e-business.
We forecast a 12% sales CAGR between CY09 and CY12 driven by a
33% sales CAGR in its own retail activities and a 5% sales CAGR for its
wholesale business. Due to the expected strong growth in own retail,
TOM TAILOR's group gross profit margin is expected to increase from
45.9% in CY09 to 48.5% in CY12E. The gross profit margin extension
and better cost leverage due to sales growth should lead to an EBIT
margin of 9.7% in CY12E vs. the adjusted level of 5.6% in CY09.
Due to the production bottleneck in Asia and related higher costs in
CY10, TOM TAILOR kept its EBITDA guidance unchanged at a
moderate y-o-y growth in absolute and adjusted terms. Hence, no
EBITDA margin growth is expected in CY10E. Nevertheless, as the
increase in opex due to the bottleneck in Asia was already expected
(and therefore included in our estimates), and this won't be an ongoing
problem, we are confident that TOM TAILOR will return to margin
growth as of CY11.
Jrgen KOLB
Jennifer GAUSSMANN
Research Analyst
jkolb@cheuvreux.com
(49) 69 47 89 74 26
Research Analyst
(49) 69 47 89 75 35
Q
Q
300
www.cheuvreux.com
Free float
Enterprise value
Daily volume
EUR276m
EUR238m
EUR324m
16.528m
EUR 0.56m
Performances
18.4%
27.4%
16.6%
11.9%
-
Absolute perf.
Relative perf.
18.0
18.0
17.0
17.0
16.0
16.0
15.0
15.0
14.0
14.0
13.0
13.0
12.0
12.0
11.0
11.0
10.0
03/10
10.0
04/10
06/10
07/10
08/10
Price/M DAX
09/10
10/10
11/10
01/11
Price
Sector focus
Sector Top Picks
Least favoured
Ahold, Carrefour
Colruyt
Shareholders
Free Float 86.4%, Morgan Finance S.A. 11.6%,
Management 1.7%
2009
2010E
2011E
2012E
P/E (x)
NS
87.5
16.0
11.5
EV/EBITDA (x)
5.0
9.1
6.4
5.2
NS
NS
1.0
3.7
Net debt/EBITDA (x)
5.0
1.4
0.9
0.7
Yield (%)
0.0
0.0
1.9
2.6
ROCE (%)
9.4
8.4
15.9
20.1
1.1
1.4
1.5
1.4
January 2011
GERMANY
Company profile
From a manufacturer to a vertically integrated company

TOM TAILOR is a German-based but internationally operating
apparel company. It started out in 1962 in the city of Hamburg as an
apparel manufacturer and wholesaler. Today, it is a vertically
integrated lifestyle clothing company. TOM TAILOR's product range
comprises of casual wear and accessories for men, women and
children. Its target group ranges in age from 0 to 45.
Q
Q Focus on western Europe and six distribution channels

Next to Germany TOM TAILOR's most important market,
accounting for ~70% of group sales the company's international
core markets comprise Austria, Benelux, Switzerland and France.
These account for 63% of its international sales. Both at home and
abroad TOM TAILOR uses six distribution channels to sell its
merchandise: company-owned retail, franchise stores, shop-inshops, multi-brand customers, e-shops and e-commerce cooperations. Its wholesale business still accounts for ~80% of group
sales, but its retail business is delivering a higher growth rate and
should reach a group sales share of ~43% by CY12, we believe. It
sources and produces over 90% of its merchandise in Asia.
Q Focus on expansion and increase in productivity
The company's focus is clearly on expansion in Germany and in its
international markets, enhancing its retail area productivity and
realising cost benefits. Its expansion plans focus on its core markets:
Germany, Austria, Switzerland, Benelux and France. TOM TAILOR
plans to open 60 to 70 new stores per year and 250 to 300 new
shop-in-shops for each division. It plans to realise its projected rise
in productivity by expanding its controlled retail area and reducing
its business with multi-brand customers.
SWOT analysis
Strengths
Weaknesses
Updated business model
Experienced management
team
Over 90% of production in

Asia
No further working capital

improvement
Lean and modularized

business model
Opportunities
Threats
Own retail expansion
Continuation of production
bottleneck in Asia
Upside potential in terms of

brand awareness
High start-up losses from

company-owned retai outletsl
301
www.cheuvreux.com
Valuation
We have increased our TP from EUR17.40 to

EUR19.60 as we reduced the discount on our
DCF-based fair value from 20% to 10%.
Our DCF model WACC: 8.2%, terminal growth
rate: 1% renders a fair value for TOM TAILOR
of EUR21.70. However, due to a potential share
overhang from Morgan Finance's 11.6% stake
(~1.9m shares) we apply a 10% discount to the
DCF value to arrive at our TP of EUR19.60. We
have reduced this overhang discount from 20%
to 10% as Alpha Funds sold its remaining
17.1% stake (~2.83m shares) as of 1 Dec. for
EUR13.50 per share.
Investment case
Q Thanks to its completed restructuring and

the additional cash stemming from its IPO in
March, TOM TAILOR is ready to face the future.
Having finished the maintenance work on its
business model, the company is now positioned
to focus predominantly on branding and the
expansion of its wholesale and retail operations.
Q TOM TAILOR still has considerable growth
potential in terms of brand awareness and
hence sales growth compared to its main
competitors Esprit and s.Oliver. Furthermore, we
expect its expansion via proprietary retail,
franchise stores and shop-in-shops to drive
sales at a CAGR09-12E of ~12%. TOM
TAILOR's broad target group, comprising men,
women and children between the ages of 0 and
45, offers relatively strong cross-selling potential
that will also help to promote sales.
Q Along with its sales growth, the company is
also set to improve its margins going forward.
Due to an increase in its number of proprietary
retail outlets and economies of scale, we expect
the gross profit margin to rise 260bps, from
~46% in FY09 to 48.5% in FY12E. Furthermore,
assuming stable OPEX relative to sales at 33.8%
going forward, which we consider realistic as its
infrastructure is well equipped to handle
additional sales volumes, TOM TAILOR should
be able to lift its adjusted EBITDA margin by
210bps from 12.6% in CY09 to 14.7% in FY12E.
January 2011
GERMANY

Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
302
2007
2008
2009
2010E
2011E
2012E
261.3
283.5
8.5%
(39.6)
(233.0)
10.9
-59.5%
(18.2)
(7.3)
NS
0.0
0.0
0.0
(7.3)
(21.7)
0.0
0.0
3.7
0.0
0.0
0.0
(25.3)
0.0
0.0
(25.3)
0.0
0.0
(25.3)
NS
300.2
5.9%
(41.3)
(221.9)
37.0
NS
(21.1)
15.9
NS
0.0
0.0
0.0
15.9
(17.7)
0.0
0.0
(3.8)
0.0
0.0
0.0
(5.6)
0.0
0.0
(5.6)
0.0
0.0
(5.6)
77.9%
329.9
9.9%
(49.5)
(245.8)
34.6
-6.5%
(19.8)
14.8
-6.9%
0.0
0.0
0.0
14.8
(13.2)
0.0
0.0
0.5
0.0
0.0
0.0
2.1
0.0
0.0
2.1
0.0
0.0
2.1
137.5%
368.3
11.6%
(51.6)
(266.2)
50.5
46.0%
(20.3)
30.2
104.1%
0.0
0.0
0.0
30.2
(5.5)
0.0
0.0
(7.4)
0.0
0.0
0.0
17.3
0.0
0.0
17.3
0.0
0.0
17.3
NS
420.9
14.3%
(59.0)
(300.1)
61.8
22.4%
(21.0)
40.8
35.1%
0.0
0.0
0.0
40.8
(6.3)
0.0
0.0
(10.3)
0.0
0.0
0.0
24.1
0.0
0.0
24.1
0.0
0.0
24.1
39.3%
0.0
(7.2)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
6.0
(29.4)
0.0
(30.6)
0.0
0.0
0.0
0.0
0.0
28.9
(1.7)
15.3
NS
5.3
(14.2)
0.0
6.4
0.0
0.0
0.0
0.0
0.0
(2.1)
4.3
21.7
41.8%
(6.9)
(23.1)
0.0
(8.3)
0.0
0.0
0.0
0.0
143.0
(130.4)
4.3
37.6
73.3%
(9.0)
(25.8)
0.0
2.8
0.0
0.0
0.0
0.0
0.0
(1.6)
1.2
45.1
19.9%
(5.3)
(29.5)
0.0
10.3
0.0
0.0
0.0
(5.2)
0.0
(1.6)
3.5
(52.0)
0.0
0.2
57.3
174.5
NS
180.0
5.4
140.5
9.6
0.0
0.0
24.5
9.4
180.0
(62.5)
0.0
0.2
51.9
190.4
NS
180.0
5.4
141.6
19.6
0.0
0.0
13.2
4.7
179.8
(68.2)
0.0
0.2
53.5
183.9
NS
169.4
5.6
134.3
19.9
0.0
0.0
9.6
3.2
169.4
76.9
0.0
0.2
49.5
49.1
63.8
175.7
5.6
131.7
25.8
0.0
0.0
12.6
3.8
175.7
94.2
0.0
0.2
47.9
47.4
50.3
189.7
5.6
131.0
32.0
0.0
0.0
21.1
5.7
189.7
113.1
0.0
0.2
46.3
43.6
38.6
203.2
5.6
136.9
34.6
0.0
0.0
26.2
6.2
203.3
(31.0)
(203.4)
26.9
(13.7)
13.2
0.0
0.0
0.0
13.2
(14.9)
0.0
0.0
14.4
0.0
0.0
0.0
12.8
0.0
0.0
12.8
0.0
0.0
12.8
www.cheuvreux.com
January 2011
GERMANY

FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2007
2008
2009
2010E
2011E
2012E
2.56
(5.06)
NS
(5.06)
NS
(1.12)
77.9%
(1.12)
77.9%
0.18
116.3%
0.18
116.3%
1.05
NS
1.05
NS
1.46
39.3%
1.46
39.3%
0.00
0.00
0.00
0.00
0.00
(1.44)
(10.4)
(12.5)
0.00
0.00
3.06
NS
(13.6)
0.00
0.00
1.89
-38.3%
4.7
0.00
0.31
2.28
20.5%
5.4
0.00
0.44
2.73
20.0%
6.4
5.000
5.000
0.000
5.000
5.000
0.000
5.000
5.000
0.000
16.528
11.492
0.000
16.528
16.528
0.000
16.528
16.528
0.000
16.00
16.48
10.33
13.07
16.70
17.14
16.00
16.73
16.70
-
264.4
313.9
276.0
324.2
276.0
320.4
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
0.0
87.5
87.5
8.5
NS
3.4
1.4
0.0
16.0
16.0
7.3
1.0
3.1
1.5
1.9
11.5
11.5
6.1
3.7
2.6
1.4
2.6
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
9.1
21.2
1.0
8.1
6.4
10.7
0.9
7.8
5.2
7.9
0.8
6.5
1.8
NS
10.3
5.1
4.9
1.5
NS
0.0
0.5
NS
3.8
NS
NS
1.6
NS
0.0
2.1
12.0
12.3
5.3
NS
1.8
NS
0.0
2.6
2.3
10.5
4.5
0.6
1.9
63.8
0.0
9.2
1.3
13.7
8.2
4.7
1.9
50.3
29.6
9.8
1.0
14.7
9.7
5.7
2.1
38.6
30.2
7.3
5.1
NS
NS
NS
NS
50.8
50.8
9.4
4.3
8.6
8.6
8.4
11.0
2.8
2.8
15.9
11.1
20.2
20.2
20.1
14.0
23.9
23.9
2.56
Goodwill per share

Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
303
www.cheuvreux.com
January 2011
GERMANY
HOTELS & HOLIDAY PACKAGES
2/Outperform
Rating
+4.1% EUR11.30
TUI
Reuters: TUIGn.DE Bloomberg: TUI1 GR
Hapag Lloyd goes into the last round

Q
Recent developments Operational and Hapag Lloyd
Overall, TUI AG's FY10 ended better than expected. Operationally, its
FY10 tourism sales were hit by planned internal capacity cuts, but also
by adverse external factors such as the Icelandic volcanic ash cloud.
Overall, its FY10 tourism sales declined by 1.4% but its adjusted EBIT
increased by 13.5% leading to an adjusted EBIT margin of 3.9%,
+52bps y-o-y. However, high one-off costs totalling EUR394.6m,
stemming mainly from negative one-time effects of the volcanic ash
cloud and new restructuring costs, substantially reduced the reported
EBIT of the tourism division to EUR245.6m.
Early bookings for summer holidays, which are currently only being sold
in the Nordics and the UK, show an 11% increase in booked sales with
a 4% rise in ASP's and 7% more customers.
Including 'other', TUI AG's adjusted EBIT reached EUR589.2m, +25.2%
y-o-y at a 3.6% EBIT margin. Group one-offs of EUR373m, however,
led to reported EBIT of only EUR215.5m.
Hapag Lloyd (HL) continues to benefit from the substantial rebound in
the container shipping industry. Its volumes increased by 1.3% y-o-y in
FY10 and its freight rates climbed 13.2% y-o-y. These increases,
together with a successful cost cutting programme, led to an adjusted
EBIT increase from EUR-663.2m in FY09 to EUR477.9m in FY10.
After HL issued new bonds to restructure its debt, it handed back the
state guarantee of EUR1.2bn and repaid the first debt tranches to TUI
AG. TUI AG mandated three investment banks to begin the disposal
process, which assumes both a trade sale and an IPO.
Q
EUR10.86
Price (07/01/2011)
Stock data
Free float
Enterprise value
Daily volume
EUR2731m
EUR1228m
EUR4380m
251.444m
EUR 12.00m
Performances
23.1%
20.8%
63.9%
21.2%
6.1%
27.5%
Absolute perf.
Relative perf.
42.9
42.9
37.9
37.9
32.9
32.9
27.9
27.9
22.9
22.9
17.9
17.9
12.9
12.9
7.9
7.9
2.9
01/01
2.9
04/02
07/03
10/04
01/06
Price/M DAX
04/07
07/08
10/09
01/11
Price
Sector focus
Sector Top Picks
Least favoured
Outlook The focus is on HL
TUI's operating tourism business seems to be back on the growth path

and management has expressed optimism that this trend will remain
intact. However, the company has provided no additional guidance.
By the end of CY10 and with the conversion of a EUR350m hybrid in
equity, TUI AG's equity exposure to HL should have reached
EUR1,537m. Loans that are yet to be repaid by HL to TUI amount to
EUR530m. Hence TUI's entire EV exposure to HL at the end of CY10
likely totalled EUR2,067m - a decline of EUR441m from its initial
exposure as HL has already paid back its first debt tranches.
With a successful disposal trade sale or IPO TUI has, for the first
time in recent history, the potential to have a cash position that is higher
than its maturing debt by 2014. Even though a complete exit from the
HL investment is on the cards for TUI, we doubt this will be possible via
a potential IPO, but certainly via a trade sale. In a second step TUI has
to find creative ways to increase its stake in TUI Travel without paying a
high cash premium to the minority shareholders. Once everything has
been completed TUI will be a pure tourism company.
Shareholders
Free Float 45.0%, Monteray Enterprises 15.0%, SGroup Travel Holding 15.0%, Riu Hotels S.A. 5.1%,
Cam, Spain 5.0%, Cdg Du Maroc 5.0%
08/09
09/10E
10/11E
11/12E
P/E (x)
4.5
NS
27.0
18.8
EV/EBITDA (x)
5.2
6.4
5.0
3.7
13.5
40.8
37.4
50.1
Net debt/EBITDA (x)
3.5
3.6
2.1
1.6
Yield (%)
0.0
0.0
1.0
2.5
ROCE (%)
3.5
3.6
7.6
10.7
0.6
0.7
0.7
0.6
Jurgen KOLB
Research Analyst
jkolb@cheuvreux.com
(49) 69 47 89 74 26
Q
Q
304
www.cheuvreux.com
January 2011
GERMANY
Company profile
History
Founded in 1924 as the mining and steel company Preussag, the
company redefined itself as a services company with a focus on
tourism in 1997. After various M&A transactions in the tourism
business, it changed its name to TUI AG in 2002. In 2007 TUI
merged with UK tourism group First Choice Travel PLC. First Choice
has maintained its UK listing and was renamed TUI Travel. It
manages the TUI group's tour operator business. TUI AG currently
owns a 54.8% stake in TUI Travel. TUI group is the European market
leader in the travel industry. In 2009 it sold a 56.7% HL stake to the
Albert Ballin consortium. TUI now owns a 49.8% stake in HL.
Q
Q Divisions
TUI Travel plc manages the tour operator business, which is divided
into mainstream, specialist travelling, activity holidays and
accommodation and destinations. TUI Travel also includes the airline
business. It contributes about 97% to the combined TUI group
tourism sales. TUI AG kept the hotels & resorts and cruise ship
business, which combined contribute about 3% to total tourism
sales. The cruise ship business includes TUI's proprietary cruise ship
business under the Hapag Lloyd Kreuzfahrten banner and a 50:50
joint venture with Royal Caribbean Cruises Ltd. with currently one
ship.
Q Shareholder
Officially, John Fredriksen owns ~15% of TUI via Monteray
Enterprises. Mr Fredriksen was not successful in having one of his
allies appointed to the supervisory board. Russian oligarch Alexey
Mordashow also owns a 15% stake in TUI.
Q Strategy
TUI's growth strategy focuses on selective acquisitions in the
specialised tourism sector and organic expansion into new markets
such as Russia, where it operates together with Alexey Mordashow.
SWOT analysis
Strengths
Weaknesses
Leading European tour

operator with a market share of
about 25%
Moderate operating margins

but a relatively high asset base
Still-complex group structure

but the risk profile concerning HL
is declining substantially
TUI has the potential and the

business set-up in place to tap
new source markets like Russia
The structure of the equity

participations in HL gives TUI a
strong position
Opportunities
Threats
Exploitation of market
opportunities in tourism in
eastern Europe and Asia
External
political or
environmental factors have an
immediate impact on the tourism
business
European duopolistic market

structure facilitates margin
increases
Growth
initiatives, e.g.
expansion into new markets
such as Russia or the cruise ship
business may fail to deliver
HL disposal would enable full

concentration on tourism
305
www.cheuvreux.com
Valuation
Our TP of EUR11.30 is based exclusively on a

sum-of-the-parts valuation.
We value TUI's 54.8% exposure in TUI Travel at
the current share price level of TUI Travel. Our
TP assumes that: 1) HL will pay back 100% of
the outstanding loans to TUI of EUR530m and 2)
TUI will recover its entire equity exposure, hence
EUR1,537m. This assumes that TUI's equity
exposure in HL will not change until the
disposal/IPO and the disposal price will be at a
1x equity multiple. We see a high likelihood that
a disposal or IPO of HL will be completed in Q2CY11E.
Investment case
Our investment case for TUI for the coming six

to nine months is based mainly on its potential
to successfully dispose of HL.
Our scenario assumes all HL debt will be repaid
to TUI and a trade sale or IPO (which we believe
is the more likely scenario) will generate
proceeds for TUI equating at least to its equity
exposure in HL.
However, based on a blue sky scenario that
assumes a 1.3x equity multiple and the
conversion of both hybrid 1 & 2 (combined
EUR700m) into equity at HL, we would arrive at
a TP of EUR12, indicating about 20% upside
potential. But again, it is rather unusual for
previous owners to sell all their shares in an IPO,
so we expect TUI to keep hold of a certain
tranche with a blocking period.
There are still several questions to be answered
when it comes to HL's shareholder structure, as
with an IPO or a trade sale the Albert Ballin
consortium will be broken up and thus
potentially a new anchor shareholder may have
to be found. Nonetheless, the process has been
started and we believe it will be completed in
Q2-CY11E.
After the IPO/trade sale we expect TUI to have
more cash than maturing debt. Based on our
calculations TUI's cash needs from maturing
debt amount to EUR520m by 2014E. This
calculation does not include any HL disposal
proceeds but includes the repaid vendor loan in
2014.
As a pure tourism company, TUI would 'lose' its
conglomerate discount (we assume 10%) but
would have to find a smart way to increase its
stake in TUI Travel without paying a high cash
premium. Such transactions are not yet included
in our TP.
January 2011
GERMANY
TUI
FY to 30/9 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
306
2006
2007
2008
2009
2010E
2011E
2012E
20,514.6
15,932.1
-22.3%
(1,972.9)
(13,190.2)
769.0
-11.8%
(456.4)
310.6
110.3%
(53.7)
53.7
0.0
312.6
(244.3)
0.0
0.0
30.3
37.0
96.2
0.0
135.6
0.0
(59.1)
76.5
0.0
96.2
226.4
NS
18,671.6
17.2%
(2,291.6)
(15,949.2)
430.8
-44.0%
(472.9)
(42.1)
NS
(107.2)
107.2
0.0
(42.1)
(287.7)
0.0
0.0
(42.8)
8.3
25.8
0.0
(364.3)
0.0
20.5
(343.8)
0.0
222.4
(14.2)
NS
13,103.6
-29.8%
(1,549.8)
(10,914.0)
639.8
48.5%
(444.2)
195.6
NS
(8.9)
8.9
0.0
195.6
(148.2)
0.0
0.0
46.2
(537.1)
917.0
0.0
(443.5)
0.0
(67.4)
(510.9)
0.0
844.2
342.2
NS
16,241.8
23.9%
(1,869.4)
(13,734.8)
637.6
-0.3%
(437.0)
200.6
2.6%
0.0
0.0
0.0
200.6
(269.6)
0.0
0.0
(24.8)
151.6
0.0
0.0
57.8
0.0
(25.0)
32.8
0.0
0.0
32.8
-90.4%
16,787.2
3.4%
(1,919.0)
(13,988.1)
880.1
38.0%
(447.0)
433.1
115.9%
0.0
0.0
0.0
433.1
(226.1)
0.0
0.0
(85.3)
134.2
0.0
0.0
255.9
0.0
(132.9)
123.0
0.0
0.0
123.0
NS
17,443.9
3.9%
(2,007.4)
(14,373.4)
1,063.1
20.8%
(460.0)
603.1
39.3%
0.0
0.0
0.0
603.1
(126.5)
0.0
0.0
(153.8)
138.6
0.0
0.0
461.4
0.0
(294.6)
166.8
0.0
0.0
166.8
35.6%
0.0
972.7
0.0
0.0
0.0
0.0
0.0
0.0
(1.0)
0.0
0.0
0.0
(1.0)
1,157.5
(2,013.4)
0.0
116.8
(133.0)
0.0
(1.0)
(193.0)
0.0
1,716.5
1,506.3
168.2
-82.7%
(2,182.4)
3,532.1
0.0
1,517.9
134.3
0.0
0.0
(193.2)
0.0
(1,086.5)
372.5
7.2
-95.7%
1,156.0
(972.0)
0.0
191.2
(794.3)
0.0
0.0
0.0
0.0
(567.3)
(1,170.4)
487.3
NS
34.5
400.0
0.0
921.8
(178.7)
0.0
0.0
0.0
0.0
220.5
963.6
696.6
43.0%
(70.0)
400.0
0.0
1,026.6
263.6
0.0
0.0
0.0
0.0
(1,325.7)
(35.5)
920.7
32.2%
34.3
420.0
0.0
1,375.0
(226.8)
0.0
0.0
(27.1)
0.0
(705.4)
415.7
2,728.3
279.1
1,085.1
1,355.6
3,210.9
106.8
8,659.0
3,134.8
604.9
5,257.8
0.0
0.0
(746.2)
(3.6)
8,251.3
2,795.0
297.4
856.9
1,589.8
3,917.3
126.7
9,456.4
3,063.0
1,385.4
5,789.0
0.0
540.7
(1,321.7)
(8.3)
8,915.7
1,937.0
305.5
717.6
1,432.9
2,929.2
130.6
7,322.2
2,520.3
815.8
2,778.0
0.0
406.4
801.7
4.3
7,322.2
2,055.6
324.4
868.4
1,351.9
2,262.8
95.1
6,863.1
2,715.8
887.9
2,450.3
0.0
1,200.7
(391.6)
(3.0)
6,863.1
2,102.8
335.0
870.0
1,345.4
2,324.1
95.3
6,977.3
2,715.8
892.0
2,415.3
0.0
1,379.4
(425.2)
(2.6)
6,977.3
2,310.9
382.8
870.0
1,338.4
1,878.8
69.7
6,780.9
2,715.8
820.7
2,484.5
0.0
1,115.8
(355.9)
(2.1)
6,780.9
2,664.2
463.9
870.0
1,327.2
1,648.5
52.7
6,973.8
2,715.8
766.3
2,549.9
0.0
1,342.6
(400.7)
(2.3)
6,973.9
(2,435.4)
(17,207.4)
871.8
(722.1)
147.7
NS
(709.5)
0.0
0.0
(559.8)
(219.5)
0.0
0.0
(129.4)
48.2
0.0
0.0
(860.5)
0.0
(46.9)
(907.4)
0.0
0.0
(197.9)
www.cheuvreux.com
January 2011
GERMANY
TUI
FY to 30/9 (Euro)
2006
2007
2008
2009
2010E
2011E
2012E
(0.79)
0.81
NS
0.31
108.4%
(0.14)
NS
(1.37)
NS
1.29
NS
(2.03)
-48.5%
0.04
-96.6%
0.13
106.4%
0.40
NS
0.49
NS
0.58
43.2%
0.66
35.6%
10.1
0.21
0.77
3.78
NS
10.4
0.43
0.00
0.58
-84.6%
7.7
0.04
0.00
(0.05)
NS
8.2
0.00
0.00
1.85
NS
8.4
0.00
0.11
2.68
44.9%
9.1
0.00
0.27
3.58
33.2%
10.3

Latest price
High
Low
Average price
250.664
250.664
0.000
250.898
250.898
0.000
251.094
251.258
0.000
251.094
251.444
0.000
251.444
251.444
0.000
251.444
251.444
0.000
251.444
251.444
0.000
15.14
18.58
14.01
16.28
19.13
22.10
15.11
19.04
8.05
19.28
7.12
13.93
5.84
8.81
3.25
5.72
10.50
10.62
5.91
8.04
10.86
11.05
10.23
10.78
10.86
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
3,795.6
7,683.9
4,795.9
9,029.4
2,019.5
5,261.9
1,408.3
3,344.5
2,256.7
4,073.7
2,730.7
4,380.2
2,730.7
3,923.1
NS
NS
NS
NS
1.5
0.9
5.1
32.1
23.6
5.1
2.4
1.8
1.0
4.0
NS
NS
13.8
75.1
1.0
0.8
0.0
4.7
4.5
NS
13.5
0.7
0.6
0.0
NS
NS
4.6
40.8
1.0
0.7
0.0
27.0
27.0
4.0
37.4
1.2
0.7
1.0
18.8
18.8
3.0
50.1
1.1
0.6
2.5
8.8
52.0
0.38
50.1
11.8
29.1
0.57
7.9
12.2
NS
0.28
14.4
5.2
17.1
0.3
44.7
6.4
20.3
0.3
6.0
5.0
10.1
0.3
5.0
3.7
6.5
0.2
3.8
4.0
NS
4.2
0.7
NS
2.5
106.8
(21.3)
3.1
4.0
4.8
2.0
0.9
1.8
126.7
252.5
1.5
17.4
2.3
NS
NS
2.7
130.6
0.0
4.3
NS
4.9
1.5
NS
2.3
95.1
0.0
2.4
4.8
3.9
1.2
0.4
2.9
95.3
0.0
3.9
2.7
5.2
2.6
1.5
3.0
69.7
22.5
8.4
1.8
6.1
3.5
2.6
3.1
52.7
40.7
1.8
1.3
NS
NS
3.5
2.4
2.8
6.4
NS
NS
NS
NS
3.5
1.6
NS
17.6
3.6
2.5
1.6
1.6
7.6
5.7
5.5
5.5
10.7
8.0
6.5
6.5

EPS before goodwill
% Change
EPS, reported
% Change
(3.62)
Goodwill per share

Dividend per share
Cash flow per share
% Change
2.83
0.77
(0.00)
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
307
www.cheuvreux.com
January 2011
GERMANY
ELECTRICAL EQUIPMENT
2/Outperform
Rating
+8.5% EUR103.00
Vossloh
Reuters: VOSG.DE Bloomberg: VOS GR
Increasing its emerging market presence

Q
Recent developments good results, cash-flow, orders
Operationally, VOS consistently performed above expectations in Qs

1-3 of 2010. 9M-10 sales were up 19% (+11% organic) driven in
particular by strong growth in the highest-margin fasteners business
(+57%) albeit heavily impacted by deliveries for the major BeijingShanghai project. The positive sales mix (higher fasteners share) was
also the key driver behind the EBIT margin of 12.0% (10.8%). Operating
cash improved significantly throughout Q1-3 to EUR71m (~11% of
sales) as in addition to the earnings growth, working capital levels were
reduced (-EUR75m). In August VOS was awarded another major highspeed fasteners contract in China to supply part of the LanzhouUrumqi line worth EUR140m, which should ensure full capacity
utilisation at its China plant again in 2011. Also aided by the ~EUR115m
combined switches/fasteners order in Libya, orders in 9M-10 rose 14%
(+7% organic) for a book-to-bill of 1.03x.
Q
EUR94.93
Price (07/01/2011)
Outlook entering the next growth phase
A major positive for VOS is that it is now significantly increasing its

presence in high-growth emerging markets in addition to its existing
Chinese high-speed fasteners business. In Oct, VOS signed a JV
agreement with China Railway Materials Group and family-owned
Huaxing to manufacture switches locally for the Chinese market. VOS
will own 50% and have operational control; total investments will be
~EUR30m for annual sales capacity of EUR70-80m. It also managed a
break-through in Russia by entering a JV with state operator RZD (VOS
stake 51%) to manufacture fastening systems, and was awarded its
first contract worth EUR10m. The plant (VOS investment EUR15m) will
have annual sales capacity of EUR60-65m and will be operational from
2012. Vossloh will also invest in rolling out its high-speed rail grinding
technology, acquired with the Rail Services acquisition in January.
Though an early-stage growth business, its preventive rail grinding
technique, done at 80 km/h which on average doubles the life of the
rails, is unique and offers significant growth potential. Additionally, the
North African high-speed project is progressing; the next major tender
(for both switches/fasteners and potentially for locomotives as well) is in
the foreseeable future with Morocco to follow. Whilst M&A can not be
ruled out, VOS currently sees greater opportunities in organically
developing new markets with strong local partners. VOS is also
strategically addressing the current low profitability of its two
locomotives businesses developing in-house power-train technology
which is already in use in its newest shunting model and is moving
increasingly to a common production platform as well as increasingly
shifting to diesel-electric technology for the locomotives produced in
Kiel. This should gradually increase its share of value-added (currently
~20%) and raise profitability. At its December CMD, VOS raised slightly
its guidance for EBIT for 2011E to >EUR160m and to >EUR170m for
2012E driven by the strength of its order intake, and announced it plans
to increase the DPS for 2010 by 25% to EUR2.50.
Stock data
Free float
Enterprise value
Daily volume
EUR1267m
EUR747m
EUR1541m
13.35m
EUR 5.95m
Performances
7.6%
17.6%
34.5%
6.0%
3.3%
4.7%
Absolute perf.
Relative perf.
104.0
104.0
94.0
94.0
84.0
84.0
74.0
74.0
64.0
64.0
54.0
54.0
44.0
44.0
34.0
34.0
24.0
24.0
14.0
01/01
14.0
04/02
08/03
11/04
01/06
Price/M DAX
04/07
07/08
Sector focus
Sector Top Picks
Least favoured

Shareholders
Vossloh Family 31%, Treasury shares 10%, Free
Float 59.0%
2009
2010E
2011E
2012E
10.6
13.6
12.8
11.7
EV/EBITDA (x)
7.4
8.4
7.6
6.7
NS
NS
3.6
5.4
Net debt/EBITDA (x)
0.4
0.6
0.5
0.3
P/E (x)
Yield (%)
2.9
2.6
2.9
3.1
ROCE (%)
19.6
17.4
17.4
18.1
1.7
1.9
1.7
1.5
Q
Q
308
www.cheuvreux.com
01/11
Price
Craig ABBOTT
Research Analyst
(49) 69 47 89 75 25
10/09
January 2011
GERMANY
Company profile
Rail tech supplier with strong market positions

Vossloh is a rail tech company with sales of ~EUR1.3bn and market
leading positions in its core businesses. It is structured into two
divisions: Rail Infrastructure (65% of sales, 82% of EBIT), which
consists of Fastening Systems (no. 1 globally), Switch Systems
(global no. 2) and Rail Services; and Transportation Systems (35%
of sales, 18% of EBIT), comprising Electrical Systems (no. 1 supplier
of on-board electronics for trolley buses/trams), Locomotives and
Rail Vehicles. Vossloh generates an estimated 86% of its sales with
public (i.e. state/municipal) rail operators and ~14% with private
operators. An estimated 60% of its sales are achieved in the
passenger sector and 40% in the freight sector.
Q
Q Geographically, strongest growth outside Europe

Vossloh currently still generates ~70% of sales in Europe, but down
from 80% just a few years ago and this share is likely to decline
further as Vossloh further positions itself to benefit from the higher
growth emerging markets which we est. currently account for ~23%
of group sales The regional split is as follows: Germany (19%),
France (9%), Western, Northern & Southern Europe (42%), North &
Central America (7%), Asia (19%), Africa (2%) and Australia (2%).
SWOT analysis
Strengths
Weaknesses
No. 1 globally with ~35%

market share in high-margin rail
fasteners; no.2 globally in
switching technology; no.1
globally in electrical systems for
trolley buses/trams.
Project risk
Management board consists of

just 2 members, with CEO also
sharing CFO duties.
An estimated 40% of sales are

related to the freight sector,
which is significantly more
cyclical than the passenger
sector.
Opportunities
Threats
Acquisitions in related niche

product segments (switches,
components).
Its increasingly global footprint

should enable Vossloh to benefit
from growth in rail infrastructure
investments especially in
emerging markets.
Balance sheet effectively degeared (gearing ~20%), raising

scope for acquisitions/dividend
increases.
Price pressure from budget

constraints at national rail
operators.
Material cost volatility, in
particular steel.
Increasing competition in highmargin fasteners, especially in

China.
Margin
enhancement via
vertical integration
Potential delay in recovery of

locomotive orders
309
www.cheuvreux.com
Valuation
We apply two absolute valuation models, our

DCF and EV/CE models, in deriving our target
price of EUR103.
Our DCF model (WACC 8.2%, terminal growth
2% and terminal EBIT margin of 11%) renders a
fair value of EUR107 per share.
Our absolute return, or EV/CE model implies fair
values of EUR100 (11E) and EUR103 (12E).
Investment case
Vossloh proved the resilience of its business

model in 2009 when earnings were broadly flat,
despite having ~40% freight exposure. In 2010
however the group returned to earnings growth
(est EBIT growth in 2010E ~11%) with its highmargin
Fasteners
business
consistently
outperforming expectations.
Following the successful acquisition of its Rail
Services business in Jan 2010, Vossloh is now
pursuing an organic expansion strategy,
establishing strong local partnerships in
investing in local production in its core
competencies, Fasteners (Russia) and Switches
(China) in markets with significant growth
potential.
Vossloh is implementing several measures to
structurally improve the profitability of its
locomotives businesses and increase its growth
potential. Most significantly it has developed inhouse development/production capability of
drive systems technology (~15% of total value
chain), introduced diesel-electric locomotives to
its shunting line-up, giving it access to new
markets, and will increasingly be using a higher
share of common components.
Vossloh offers investors a pure-play rail tech
investment opportunity to invest in the global
emerging market rail growth theme, with above
average earnings visibility and a stillundemanding valuation.
January 2011
GERMANY
Vossloh
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
310
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
917.8
0.6%
(215.0)
(573.7)
129.1
15.5%
(26.6)
102.5
16.3%
0.0
0.0
0.0
102.5
(12.9)
0.0
0.0
(31.8)
0.0
0.0
0.0
57.8
0.0
(0.6)
57.2
0.0
0.0
57.2
2.9%
942.6
2.7%
(216.0)
(607.7)
118.9
-7.9%
(28.3)
90.6
-11.6%
0.0
0.0
0.0
90.6
(21.5)
0.0
(0.2)
(23.0)
0.0
0.0
0.0
45.9
0.0
(0.8)
45.1
0.0
0.0
45.1
-21.2%
1,015.2
7.7%
(194.1)
(704.0)
117.1
-1.5%
(36.2)
80.9
-10.7%
0.0
0.0
0.0
80.9
(12.3)
0.0
(23.6)
(22.9)
0.0
0.0
(23.6)
22.6
0.0
(2.3)
20.3
0.0
0.0
43.9
-2.7%
1,023.3
0.8%
(223.2)
(661.4)
138.7
18.4%
(28.9)
109.8
35.7%
0.0
0.0
0.0
109.8
(10.1)
0.0
8.5
(34.6)
0.0
0.0
8.5
74.1
0.0
(2.7)
71.4
0.0
0.0
62.9
43.3%
1,212.7
18.5%
(195.7)
(847.4)
169.6
22.3%
(29.7)
139.9
27.4%
0.0
0.0
0.0
139.9
(11.5)
0.0
46.8
(29.5)
0.0
0.0
0.0
146.2
0.0
(6.8)
139.4
0.0
0.0
139.4
121.6%
1,173.7
-3.2%
(193.7)
(817.4)
162.6
-4.1%
(24.6)
138.0
-1.4%
0.0
0.0
0.0
138.0
(9.5)
0.0
0.0
(32.3)
0.0
0.0
0.0
96.7
0.0
(8.8)
87.9
0.0
0.0
87.9
-36.9%
1,335.6
13.8%
(198.5)
(950.4)
186.7
14.8%
(32.5)
154.2
11.7%
0.0
0.0
0.0
154.2
(13.2)
0.0
0.0
(35.3)
0.0
0.0
0.0
106.2
0.0
(13.0)
93.2
0.0
0.0
93.2
6.0%
1,415.6
6.0%
(203.8)
(1,009.0)
202.8
8.6%
(38.5)
164.3
6.5%
0.0
0.0
0.0
164.3
(12.3)
0.0
0.0
(40.0)
0.0
0.0
0.0
112.4
0.0
(13.0)
99.4
0.0
0.0
99.4
6.7%
1,588.8
12.2%
(209.4)
(1,159.5)
219.9
8.4%
(40.5)
179.4
9.2%
0.0
0.0
0.0
179.4
(10.3)
0.0
0.0
(49.5)
0.0
0.0
0.0
120.1
0.0
(11.2)
108.9
0.0
0.0
108.9
9.6%
84.4
4.1%
(51.5)
(35.0)
(18.6)
(2.1)
32.1
0.0
0.0
(16.2)
0.0
0.0
13.8
74.2
-12.1%
(23.9)
(95.5)
(38.0)
(45.2)
11.0
0.0
0.0
(15.2)
0.0
0.0
(49.4)
58.8
-20.8%
113.3
(40.2)
1.5
131.9
40.4
0.0
0.0
(14.2)
0.0
0.0
158.1
103.0
75.2%
(22.8)
(104.5)
(27.0)
(24.3)
(25.0)
0.0
0.0
(13.2)
0.0
0.0
(62.5)
129.1
25.3%
28.9
0.0
27.9
158.0
(61.2)
0.0
0.0
(26.3)
0.0
0.0
70.5
121.3
-6.0%
(76.4)
(50.5)
(11.3)
(5.6)
(55.6)
0.0
0.0
(44.1)
0.0
0.0
(105.3)
138.6
14.3%
1.5
(160.0)
(126.6)
(19.9)
0.0
0.0
0.0
(29.4)
0.0
0.0
(49.3)
150.9
8.9%
(9.8)
(90.0)
(54.6)
51.1
5.0
0.0
0.0
(36.8)
0.0
0.0
19.3
160.6
6.4%
(25.1)
(60.0)
(20.3)
75.5
0.0
0.0
0.0
(39.8)
0.0
0.0
35.7
325.3
5.8
15.6
171.7
171.1
51.7
689.5
262.7
13.3
97.4
13.6
0.0
302.5
33.0
689.5
354.9
6.1
14.9
161.3
220.5
61.1
757.7
313.6
20.4
102.7
17.5
0.0
303.5
32.2
757.7
361.8
9.3
9.9
231.5
62.4
16.8
674.9
314.6
0.8
100.1
42.7
0.0
216.7
21.3
674.9
421.9
12.1
11.5
255.0
124.9
28.8
825.4
334.4
17.8
139.4
42.2
0.0
303.1
29.6
836.9
475.8
16.9
8.9
273.9
(35.1)
NS
740.4
334.4
(20.8)
108.4
41.7
0.0
310.5
25.6
774.2
472.2
20.4
9.7
278.5
70.2
14.3
851.0
334.4
(12.3)
121.6
45.9
0.0
259.8
22.1
851.0
536.0
33.4
12.0
247.1
119.5
21.0
948.0
334.4
35.2
201.6
45.9
0.0
314.0
23.5
948.0
603.6
46.4
12.0
240.5
100.2
15.4
1,002.7
334.4
28.7
259.6
45.9
1.0
321.6
22.7
1002.7
672.7
57.6
12.0
253.7
64.4
8.8
1,060.4
334.4
22.2
285.6
45.9
2.0
350.2
22.0
1,060.4
www.cheuvreux.com
January 2011
GERMANY
Vossloh
FY to 31/12 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E

EPS before goodwill
% Change
EPS, reported
% Change
3.92
0.1%
3.92
0.1%
3.07
-21.6%
3.07
-21.6%
2.98
-3.0%
1.38
-55.1%
4.26
42.9%
4.83
NS
9.48
122.8%
9.48
96.3%
6.57
-30.7%
6.57
-30.7%
7.00
6.6%
7.00
6.6%
7.45
6.3%
7.45
6.3%
8.14
9.3%
8.14
9.3%
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
1.30
5.78
1.2%
21.0
0.00
1.30
5.05
-12.6%
22.9
1.60
1.30
3.99
-21.0%
23.2
(0.58)
1.70
6.97
74.7%
26.8
0.00
3.00
8.78
26.0%
29.4
0.00
2.00
9.07
3.2%
33.3
0.00
2.50
10.41
14.9%
37.8
0.00
2.71
11.30
8.5%
42.5
0.00
2.96
12.00
6.2%
47.3
14.600
14.600
0.000
14.690
14.690
0.000
14.740
14.740
0.000
14.780
14.780
0.000
14.700
14.700
0.000
13.380
13.380
0.000
13.310
13.310
0.000
13.350
13.350
0.000
13.380
13.380
0.000
36.35
47.68
27.45
38.66
41.10
48.58
36.11
41.01
57.14
59.20
34.90
43.70
80.10
94.47
56.21
75.65
79.49
99.49
45.41
81.71
69.52
89.80
62.36
77.09
95.50
96.46
65.75
77.98
94.93
98.97
93.23
96.04
94.93
-
523.4
715.4
604.8
850.6
841.7
1,009.6
1,179.9
1,360.3
1,174.9
1,206.6
1,021.9
1,203.2
1,271.1
1,577.2
1,267.3
1,541.2
1,270.2
1,472.8
9.3
9.3
6.3
NS
1.7
1.1
3.6
13.4
13.4
8.1
NS
1.8
1.1
3.2
41.5
19.2
14.3
14.1
2.5
1.6
2.3
16.6
18.8
11.5
NS
3.0
1.7
2.1
8.4
8.4
9.1
12.8
2.7
1.6
3.8
10.6
10.6
7.7
NS
2.1
1.7
2.9
13.6
13.6
9.2
NS
2.5
1.9
2.6
12.8
12.8
8.4
3.6
2.2
1.7
2.9
11.7
11.7
7.9
5.4
2.0
1.5
3.1
5.5
7.0
0.78
7.7
7.2
9.4
0.90
9.5
8.6
12.5
0.99
14.1
9.8
12.4
1.33
12.0
7.1
8.6
1.00
8.3
7.4
8.7
1.0
8.6
8.4
10.2
1.2
9.4
7.6
9.4
1.1
8.6
6.7
8.2
0.9
8.0
10.0
2.0
14.1
11.2
6.3
1.4
51.7
33.2
5.5
3.0
12.6
9.6
4.9
1.3
61.1
42.3
9.5
1.1
11.5
8.0
2.2
1.6
16.8
94.4
13.7
1.2
13.6
10.7
7.2
1.3
28.8
35.2
14.7
NS
14.0
11.5
12.1
1.7
NS
31.6
17.1
0.6
13.9
11.8
8.2
1.7
14.3
30.4
14.1
0.9
14.0
11.5
8.0
1.5
21.0
35.7
16.5
0.7
14.3
11.6
7.9
1.5
15.4
36.4
NS
0.4
13.8
11.3
7.6
1.6
8.8
36.4
15.2
9.8
19.3
19.3
12.2
8.2
13.6
13.6
12.8
6.4
5.8
5.8
13.8
9.5
18.5
18.5
19.1
15.9
34.3
34.3
19.6
14.3
20.5
20.5
17.4
13.1
19.0
19.0
17.4
12.9
17.9
17.9
18.1
12.8
17.6
17.6

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
311
www.cheuvreux.com
January 2011
GERMANY
TRANSPORT LOGISTICS
3/Underperform
Rating
-19.2% EUR12.00
VTG AG
Reuters: VT9G.DE Bloomberg: VT9 GR
Replacement needs set to pressurise ROCE

Q
Recent developments Unexciting 9M-10 results
On 16 November 2010, VTG reported 9M-10 results. The group's

EBITDA increased by 1.1% y-o-y to EUR114m, in line with consensus
and our estimate. The breakdown by division was also broadly in line
with our expectations. While Wagon Hire was hit by a decline in average
utilisation rates, Rail Logistics and the Tank Container division profited
from the pick-up in the economy.
Due to rising depreciation charges as a result of capex, the group's
EBIT declined by 9% y-o-y and was in line with both our estimate and
consensus. The same applies to net income, which, however, dropped
13% y-o-y due to VTG's financial leverage.
Following the company's 9M-10 results release, we adjusted our
estimates and raised our price target to EUR12 (EUR11) per share.
Given the stronger-than-expected development of the group's EBITDA,
we also raised our 10E-12E EBITDA forecasts by around 4%. However,
in particular due to higher depreciation charges resulting from higher
capex, we left our 10E EBIT forecast unchanged and lowered our 11E12E EBIT expectations slightly.
Q
EUR14.85
Price (07/01/2011)
Outlook Unexciting full-year 2010E outlook
For the full year we are completely in line with the company's guidance,
which foresees sales of EUR600-630m and EBITDA of EUR150-155m.
At the end of Q3-10, the utilisation rate in the Wagon Hire segment
amounted to 88.2% vs. 87.4% at the end of Q2-10. At the end of 2008,
the utilisation rate stood at around 91.1%, which implies that there is
still some room for recovery to reach previous peak levels.
Stock data
Free float
Enterprise value
Daily volume
EUR318m
EUR144m
EUR908m
21.39m
EUR 0.19m
Performances
0.3%
17.3%
25.8%
-4.4%
-0.2%
-11.5%
Absolute perf.
Relative perf.
24.8
24.8
19.8
19.8
14.8
14.8
9.8
9.8
4.8
07/07
4.8
12/07
05/08
10/08
04/09
Price/SDAX
09/09
02/10
08/10
Price
Sector focus
Sector Top Picks
Least favoured
Shareholders
Comagnie Europenne 54.6%, Free Float 45.4%
2009
2010E
2011E
2012E
11.4
15.1
14.6
12.1
EV/EBITDA (x)
5.3
6.0
5.7
5.4
6.8
NS
6.3
6.8
Net debt/EBITDA (x)
3.4
3.7
3.4
3.2
Yield (%)
2.6
2.0
2.4
2.7
ROCE (%)
7.4
6.7
6.9
7.5
0.9
0.9
0.9
0.9
P/E (x)

Research Analyst
(49) 69 478 97 524
Q
Q
312
www.cheuvreux.com
January 2011
GERMANY
Company profile
Rail Logistics company

VTG is a rail logistics company that offers wagons for hire and rail
freight transport, in particular for mineral oil and chemical products.
It is also active in tank and rail container logistics. The company's
core market is Germany, but it also has activities the rest of in
Europe, as well as in Asia and America.
Q
Q Main division: rail freight cars for hire

VTG is split into three operating divisions. Its main division, Wagon
Hire, provides rail freight cars for hire as well as fleet management
services for external wagon fleets and technical customer services.
Wagon Hire is responsible for roughly 51% of group revenues but
accounted for 91% of 2009 EBITDA.
Q Also active in rail logistics
The Rail Logistics division offers rail freight transport for mineral oil
and chemical products, liquid gases and other cargo. The Tank
Container Logistics division offers multimodal transportation
services for liquid and temperature-controlled products in tank
containers.
Q IPOed in 2007 at EUR18 per share
VTG GmbH was founded in 1951 as a state-owned company and
was privatised in 1961. In 2005, private equity firm WL Ross & Co
LLC acquired VTG from TUI and merged it with Alstertor Group. The
company has been publicly listed since 28 June 2007. The IPO price
was EUR18.
We value VTG based on the average of several

valuation methods, including DCF, EVA, FCFE,
residual income, DDM and SOP.
For our DCF model we apply a WACC of 6.5%
and a long-term growth rate of 1.0% to derive a
fair value of EUR11 per share. Given the
company's comparably high risk from its large
amount of goodwill as well as its high leverage,
we believe the low WACC is anything but
conservative.
As there are no truly comparable listed
competitors for VTG's wagon hire division, we
have conducted a divisional DCF and come to a
fair value for the wagon hire division of around
EUR700m (0.9x EV/capital employed 2009R or
4.7x EV/EBITDA 2011E). With respect to the rail
logistics and tank container business, we apply
an EV/EBITDA 2011E multiple of 10.0x,
reflecting the average of the freight forwarders
Khne + Nagel, Panalpina and DSV. Our SOP
yields a fair value of EUR12 per share.
Investment case
We rate VTG a 3/Underperform as we doubt

management will be able to raise the company's
capital returns to at least the cost of capital in
the foreseeable future.
SWOT analysis
Strengths
Weaknesses
Over 60 years of experience,

long-term customer contracts
with extension options
Largest (private) European

player in the wagon hire market
with about 20% market share
Limited visibility regarding

what the major stakeholder, a PE
investor, will do with its stake
Valuation
Free float of less than 50%
Partially outdated own rail car

fleet/ massive need for capex
over the next ten years
Fairly stable business model
Opportunities
Threats
Rising hire rates leading to

significant earnings growth due
to high operating leverage
M&A activity to expand fleet

and strengthen market position
Expansion in high-growth
markets such as Russia
Rising expenses for road
transportation increase
demand for rail
General drop in demand for rail

fleet cars due to economic
downswing or decline in oil price
Major fleet expansion, leading
to declining utilisation rates
Rising prices for wagons on
the back of steel prices and
eastern European labour costs
Market
entry of governmentowned railway corporations
313
www.cheuvreux.com
Our assumption is based on VTG's very limited

room for price increases, its already high
utilisation of its assets as well as massive capex
requirements to replace its ageing wagon fleet
and, as a result, a free cash flow of almost zero.
According to our estimates, the company's
NOPLAT ROCE of currently below 6% will stay
below the cost of capital in the coming ten
years. Similarly, the return on equity of around
7% looks set to stay below the company's cost
of equity.
Although these issues are to some extent
already reflected in today's valuation, with the
company trading at 0.9x EV/CE or 0.9x P/B
(both 2010E), we find VTG an unattractive
investment considering its virtually non-cyclical
profile as well as the high risk resulting from
goodwill and leverage.
January 2011
GERMANY
VTG AG
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
314
2007
2008
2009
2010E
2011E
2012E
541.4
608.7
12.4%
(55.6)
(396.7)
156.4
14.2%
(80.8)
75.6
10.5%
0.0
0.0
0.0
75.6
(32.5)
0.0
0.0
(15.2)
0.0
0.0
0.0
27.9
0.0
(0.9)
27.0
0.0
0.0
27.0
-44.7%
581.5
-4.5%
(60.4)
(371.7)
149.4
-4.5%
(82.5)
66.9
-11.5%
0.0
0.0
0.0
66.9
(31.5)
0.0
0.0
(12.8)
0.0
0.0
0.0
22.6
0.0
(1.0)
21.6
0.0
0.0
21.6
-20.0%
624.3
7.4%
(63.2)
(407.0)
154.1
3.1%
(89.2)
64.9
-3.0%
0.0
0.0
0.0
64.9
(29.9)
0.0
0.0
(12.8)
0.0
0.0
0.0
22.2
0.0
(1.0)
21.2
0.0
0.0
21.2
-1.9%
650.0
4.1%
(64.7)
(424.5)
160.8
4.3%
(93.8)
67.0
3.2%
0.0
0.0
0.0
67.0
(31.1)
0.0
0.0
(13.1)
0.0
0.0
0.0
22.7
0.0
(1.0)
21.7
0.0
0.0
21.7
2.4%
673.2
3.6%
(66.0)
(440.4)
166.8
3.7%
(93.6)
73.2
9.3%
0.0
0.0
0.0
73.2
(30.2)
0.0
0.0
(15.7)
0.0
0.0
0.0
27.3
0.0
(1.1)
26.2
0.0
0.0
26.2
20.7%
(19.9)
(185.8)
0.0
(97.8)
(4.4)
0.0
0.0
0.0
384.1
(272.6)
9.3
141.4
31.0%
8.2
(168.3)
(60.1)
(18.7)
(16.8)
0.0
9.8
0.0
0.0
(10.9)
(36.6)
140.5
-0.6%
4.2
(127.3)
(45.7)
17.4
(5.9)
0.0
5.8
(6.4)
0.0
(2.5)
8.4
114.0
-18.9%
1.4
(159.7)
(60.4)
(44.3)
(10.0)
0.0
0.0
(6.4)
0.0
59.1
(1.6)
117.5
3.1%
(4.8)
(91.8)
2.0
20.9
0.0
0.0
0.0
(6.4)
0.0
(15.0)
(0.5)
121.7
3.6%
(5.3)
(93.9)
(0.2)
22.5
0.0
0.0
0.0
(7.5)
0.0
(15.0)
0.0
276.4
2.3
46.3
208.8
471.2
169.1
1,005.0
156.2
66.7
729.7
24.7
0.0
27.6
5.1
1,004.9
285.7
2.7
44.1
68.3
499.7
173.3
900.5
158.1
63.7
838.1
7.6
16.9
(183.9)
(30.2)
900.5
294.1
2.7
47.8
66.9
512.7
172.7
924.2
158.1
61.2
883.3
7.2
17.1
(202.7)
(34.9)
924.2
307.9
3.7
50.0
68.3
563.4
180.8
993.3
158.1
64.0
950.9
7.2
17.1
(204.1)
(32.7)
993.2
322.2
4.7
51.2
69.1
548.8
167.9
996.0
158.1
65.7
947.2
7.2
17.1
(199.3)
(30.7)
996.0
339.8
5.8
52.3
69.9
533.7
154.4
1,001.5
158.1
67.5
945.7
7.2
17.1
(194.1)
(28.8)
1,001.5
(50.2)
(354.2)
137.0
(68.6)
68.4
0.0
0.0
0.0
68.4
(35.7)
0.0
0.0
17.0
0.0
0.0
0.0
49.6
0.0
(0.8)
48.8
0.0
0.0
48.8
107.9
www.cheuvreux.com
January 2011
GERMANY
VTG AG
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
2007
2008
2009
2010E
2011E
2012E
2.28
1.26
-44.7%
1.26
-44.7%
1.01
-20.0%
1.01
-20.0%
0.99
-1.9%
0.99
-1.9%
1.01
2.3%
1.01
2.3%
1.23
20.8%
1.23
20.8%
12.9
0.00
0.30
6.61
31.0%
13.1
0.00
0.30
6.57
-0.7%
13.4
0.00
0.30
5.33
-18.8%
14.1
0.00
0.35
5.49
3.1%
14.7
0.00
0.40
5.69
3.6%
15.5
21.389
21.389
0.000
21.390
21.390
0.000
21.390
21.390
0.000
21.390
21.390
0.000
21.390
21.390
0.000
21.390
21.390
0.000
17.15
19.00
14.00
17.69
7.50
17.25
6.50
12.87
11.50
11.65
5.16
8.26
15.00
15.25
10.35
12.48
14.85
15.51
14.80
15.12
14.85
-
366.8
866.0
160.4
685.4
246.0
793.3
320.7
925.0
317.6
908.7
317.6
892.5
7.5
7.5
3.4
NS
1.3
0.9
0.0
5.9
5.9
1.1
NS
0.6
0.8
4.0
11.4
11.4
1.8
6.8
0.9
0.9
2.6
15.1
15.1
2.8
NS
1.1
0.9
2.0
14.6
14.6
2.7
6.3
1.0
0.9
2.4
12.1
12.1
2.6
6.8
1.0
0.9
2.7
6.3
12.7
1.60
5.3
4.4
9.1
1.13
4.2
5.3
11.9
1.4
4.9
6.0
14.3
1.5
6.8
5.7
13.6
1.4
6.5
5.4
12.2
1.3
6.2
3.8
4.4
25.3
12.6
9.2
0.6
169.1
0.0
4.8
3.5
25.7
12.4
4.6
0.7
173.3
23.8
4.7
3.6
25.7
11.5
3.9
0.6
172.7
29.7
5.2
4.9
24.7
10.4
3.6
0.6
180.8
30.3
5.2
4.7
24.7
10.3
3.5
0.7
167.9
34.5
5.5
4.4
24.8
10.9
4.1
0.7
154.4
32.7
7.0
10.6
19.4
19.4
8.6
5.6
9.9
9.9
7.4
4.7
7.6
7.6
6.7
4.3
7.1
7.1
6.9
4.4
7.0
7.0
7.5
4.8
8.0
8.0
2.28
Goodwill per share

Dividend per share
Cash flow per share
% Change
0.00
0.00
5.05

Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
315
www.cheuvreux.com
January 2011
GERMANY
MACHINERY
3/Underperform
Rating
-5.0% EUR12
Wacker Neuson
Strong recovery well reflected in valuation
Recent developments Strong recovery, especially in
Construction
Wacker Neuson's Q3-10 results published on 12 November confirmed

the company's earlier indications of a strong Q3. Sales were EUR195m,
+31% y-o-y and -5% q-o-q. Q3-10 EBIT came in at EUR14.1m,
EBITDA at EUR25m. Net profit was EUR10.1m. The bottlenecks
amongst suppliers that had burdened the company in previous quarters
have eased further.
In 9M-10, the strongest growth came from Americas with sales up
+64% y-o-y to EUR128m; European sales rose +17% y-o-y to
EUR402m, and Asia +8% to EUR23m. Viewing the individual segments,
Light Equipment posted the highest sales growth in 9M-10, +39% y-o-y
to EUR224m, followed by Compact Equipment (+27% y-o-y to
EUR191m) and Services (+5% y-o-y to EUR141m), which did not suffer
too much in the crisis. Construction-related sales recovered more
strongly in 9M-10 than agricultural sales (+39% y-o-y vs. +8% y-o-y).
Given stronger-than-anticipated operating momentum in Q3-10,
Wacker Neuson had already raised its 2010 guidance on 27 October
from 'at least 10% y-o-y sales growth and an EBITDA margin of at least
9%' to 'at least 20% sales growth with an EBITDA margin of at least
10%'. We now predict 22.6% y-o-y sales growth for 10E and an
EBITDA margin of 11.6%.
Q
Outlook Three strategic growth pillars
Reuters: WACGn.DE Bloomberg: WAC GR
Stock data
Free float
Enterprise value
Daily volume
EUR886m
EUR274m
EUR960m
70.14m
EUR0.61m
Performances
0.4%
22.0%
44.8%
-4.4%
3.8%
1.8%
Absolute perf.
Relative perf.
28.8
28.8
23.8
23.8
18.8
18.8
13.8
13.8
8.8
8.8
3.8
3.8
05.07
10.07
04.08
09.08
03.09
Price/SDAX
We expect high-margin Services (30% of '09 group sales) to account

for only 20% of mid-term group sales (9M-10: 25%) as growth in this
business is lagging the group due to a) tougher y-o-y comparables and
b) spare parts business normally trails equipment sales by 6-12 months
(the latter was hit hard by the crisis).
Sector focus
By 2013/14, Wacker Neuson targets revenues of EUR1bn, an EBITDA

margin of 15%, and an EBIT margin of 10% provided the market
continues to recover. In order to meet these targets, Wacker is focusing
on three strategic pillars: 1) The global launch of compact equipment,
leading to market share gains. 2) The alliance with Caterpillar: This is a
strategic alliance for 20 years in mini excavators of up to 3 tons.
Wacker Neuson targets to increase its own capacity utilisation, reduce
R&D costs due to the platform concept, and gain market share in
Europe and the US. 3) A broader portfolio for agriculture: Growth is
driven by rising demand for food and fodder, biofuels and other
renewable resources, and fewer but larger farming operations, making
more machinery necessary. Wacker's target is to increase agricultural
sales to 15% of group sales (currently: 12%).
Shareholders
However, we are concerned that Wacker's mid-term growth potential

could fall short of its peers given its relatively low exposure to Asia. Asia
currently accounts for no more than 5% of group sales.
EUR12.625
Price (07/01/2011)
Sector Top Picks

Least favoured
08.09
02.10

Wacker Family 38.5%, Free Float 31.0%, Neuson

Family 29.0%, Management 1.5%
2009
2010E
2011E
2012E
NS
32.8
22.7
16.0
EV/EBITDA (x)
15.4
11.6
9.2
7.3
40.9
NS
0.4
2.2
Net debt/EBITDA (x)
(0.7)
0.7
0.6
0.4
3.2
P/E (x)
Yield (%)
0.0
0.0
2.1
ROCE (%)
NS
5.1
6.4
8.6
0.7
1.1
1.0
1.0
Q
Q
316
www.cheuvreux.com
01.11
Price
Research Analyst
(49) 69 47 897 540
07.10
January 2011
GERMANY
Company profile
One-stop solution for light and compact equipment

With roots going back to 1848, Wacker Neuson is today one of the
leading manufacturers of high-quality light and compact equipment
worldwide. It offers a comprehensive one-stop solution ranging from
development and production to rentals and repairs/services. Its key
focus is on helping clients enhance their operational efficiency.
Q
Q Portfolio expanded by merger with Neuson Kramer in 2007

The merger with Neuson Kramer in 2007 gave Wacker Construction
Equipment, subsequently renamed Wacker Neuson, the opportunity
to considerably expand its compact equipment product portfolio.
Wacker Neuson now offers over 300 product groups in the compact
and light equipment segments.
Q Geographic expansion of compact equipment class
In 9M-10 Wacker Neuson generated 73% of its group sales in
Europe, 23% in the US and 4% in Asia. Going forward, it aims to
further promote its high-quality equipment globally via its existing
sales and services network. Wacker operates production and
development sites in Germany, Austria, the US and the Philippines. It
has over 30 affiliates worldwide and over 180 sales and service
stations.
Well-balanced split between compact/light equipment and

services
In 9M-10 the company generated 34% of its sales with compact
equipment, 40% with light equipment and 25% with services
(according to our assumptions the services split is 1/3 rental and 2/3
aftermarket business).
Q
SWOT analysis
Strengths
Weaknesses
A market leader
Brand visibility
Mainly
Own global sales network
in the US: dependence

on large customers
Opportunities
Threats
Product portfolio expansion
Asian players, in particular, are

pursuing aggressive pricing
strategies.
Compact equipment sales via

existing channels
Underrepresentation in Asia
Slowdown of innovation at
Wacker Neuson could hurt its
pricing power.
Expansion of rental business
Geographic expansion in
eastern Europe, Russia, India
and China
Raw
317
material prices
www.cheuvreux.com
Valuation
We apply a DCF valuation, a peer group multiple

approach, a normalised earnings model and a
EVA/absolute return model in deriving a fair
value for Wacker Neuson shares.
of 5% and 10% respectively for 10-19E, a posttax WACC of 8.5% (2011E) and a 2% terminal
growth rate. Based on these parameters, our
DCF model yields a fair value of EUR12.
Q Peer group comparison: Based on 10E

EV/EBITDA Wacker is trading at a 25% premium
to peers. In our view this is not justified as
Wacker has lower (3%) exposure to Asian
growth markets than its competitors and
generates lower margins.
Q Our TP of EUR12 is based on a normalised
earnings model with the following inputs:
EV/EBIT of 9x, normalised EBIT of EUR118m
discounted back 2 years at a 9% discount rate.
Q The
company's
EUR11.4 for 2011E.
book
value
stands
at
Q EVA Model. On our current 12E estimates for

ROCE (8.6%) including goodwill and pre-tax
WACC of 10%, our model yields a FV of EUR11.
To justify its current share price of EUR12.5,
Wacker Neuson would need to generate a
2012E EBIT of EUR94m.
We reiterate our 3/Underperfom rating with a

Investment case
Given current valuation and consensus

expecting 196% y-o-y net profit growth in 2011
and 31% in 2012 the strong recovery seems to
be already priced in.
We are concerned that Wacker's mid-term
growth potential could fall short of its peers
given its relatively low exposure to Asia. Asia
currently accounts for no more than 5% of
group sales.
January 2011
GERMANY
Wacker Neuson
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
318
2006
2007
2008
2009
2010E
2011E
2012E
883.2
979.5
0.0
(883.2)
0.0
(167.8)
(811.8)
0.0
870.3
-11.1%
(191.5)
(578.0)
100.9
0.0
0.0
(44.8)
0.0
(42.9)
58.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
112.6
(2.2)
0.0
0.0
(34.9)
0.0
0.0
0.0
0.0
0.0
(0.5)
75.0
0.0
0.0
0.0
0.0
0.0
0.0
58.0
(2.3)
0.0
0.0
(17.6)
0.0
0.0
0.0
38.1
0.0
(0.7)
37.4
0.0
0.0
37.4
597.0
-31.4%
(170.5)
(389.3)
37.2
-63.2%
(40.3)
(3.1)
NS
(110.0)
0.0
0.0
(113.1)
(2.3)
0.0
0.0
5.5
0.0
0.0
0.0
(109.9)
0.0
(0.2)
(110.1)
0.0
0.0
(0.1)
NS
732.2
22.6%
(153.5)
(493.4)
85.3
129.4%
(40.8)
44.5
NS
0.0
0.0
0.0
44.5
(4.0)
0.0
0.0
(12.1)
0.0
0.0
0.0
28.3
0.0
(0.5)
27.8
0.0
0.0
27.8
NS
775.4
5.9%
(176.8)
(494.2)
104.4
22.5%
(45.7)
58.7
32.1%
0.0
0.0
0.0
58.7
(2.9)
0.0
0.0
(16.1)
0.0
0.0
0.0
39.7
0.0
(0.7)
39.0
0.0
0.0
39.0
40.2%
816.4
5.3%
(181.8)
(503.4)
131.1
25.6%
(48.9)
82.2
40.1%
0.0
0.0
0.0
82.2
(2.0)
0.0
0.0
(24.1)
0.0
0.0
0.0
56.2
0.0
(0.7)
55.5
0.0
0.0
55.5
42.2%
0.0
122.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(70.8)
0.0
0.0
0.0
(88.6)
0.0
0.0
0.0
7.5
0.0
0.0
81.0
-33.9%
(55.2)
(60.5)
(20.2)
25.8
86.8
0.0
0.0
0.0
0.0
(186.5)
112.5
41.2
-49.2%
99.2
94.5
31.5
234.9
0.9
0.0
0.0
(11.9)
0.0
(205.9)
18.0
62.8
52.5%
(5.2)
(81.3)
(27.1)
(23.7)
0.0
0.0
0.0
0.0
0.0
(68.8)
(92.5)
85.4
36.1%
(12.3)
(69.8)
(23.3)
3.3
0.0
0.0
0.0
0.0
0.0
(12.8)
(9.5)
105.1
23.0%
(11.7)
(73.5)
(24.5)
19.9
0.0
0.0
0.0
(18.3)
0.0
(13.0)
(11.4)
0.0
0.0
0.0
0.0
0.0
NS
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
912.7
0.0
23.7
48.6
43.9
NS
0.0
325.7
100.2
224.0
88.7
0.0
290.4
0.0
0.0
909.1
2.7
23.7
48.6
60.9
6.7
1 044.9
326.1
98.4
272.9
1.9
0.0
345.6
39.7
1 044.9
786.6
2.5
23.8
47.9
(24.9)
NS
836.0
236.0
87.6
266.4
1.0
0.0
244.9
41.0
836.0
774.9
2.4
0.0
36.6
62.7
8.1
876.7
236.0
70.2
324.3
1.0
0.0
245.2
33.5
876.7
814.5
2.6
0.0
38.8
59.4
7.3
915.2
236.0
52.0
366.6
1.0
0.0
259.6
33.5
915.2
852.2
2.7
0.0
40.8
57.8
6.8
953.5
236.0
32.9
410.3
1.0
0.0
273.3
33.5
953.5
www.cheuvreux.com
January 2011
GERMANY
Wacker Neuson
FY to 31/12 (Euro)
EPS before goodwill
% Change
EPS, reported
% Change
Goodwill per share
Dividend per share
Cash flow per share
% Change
Latest price
High
Low
Average price
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
319
www.cheuvreux.com
2006
2007
2008
2009
2010E
2011E
2012E
0.00
0.00
0.53
0.00
0.00
0.53
(0.00)
NS
(1.57)
NS
0.40
NS
0.40
125.2%
0.56
40.4%
0.56
40.4%
0.79
42.3%
0.79
42.3%
0.00
0.00
0.00
0.00
0.50
0.00
0.00
0.19
1.16
0.0
0.0
12.8
1.57
0.00
0.59
-49.2%
11.2
0.00
0.00
0.90
52.5%
11.0
0.00
0.26
1.22
36.1%
11.4
0.00
0.40
1.50
23.0%
11.8
0.000
0.000
0.000
51.000
70.140
0.000
70.140
70.140
0.000
70.140
70.140
0.000
70.140
70.140
0.000
70.140
70.140
0.000
70.140
70.140
0.000
14.62
29.76
12.57
21.53
6.19
15.30
4.01
9.37
8.20
9.51
4.31
6.95
13.00
13.77
7.53
10.28
12.63
13.60
12.57
13.21
12.63
-
1 025.5
1 025.5
434.2
525.3
575.2
573.9
911.8
990.2
885.5
960.0
885.5
953.6
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
NS
3.4
11.6
11.6
5.4
25.8
0.5
0.5
3.1
NS
NS
14.0
40.9
0.7
0.7
0.0
32.8
32.8
14.5
NS
1.2
1.1
0.0
22.7
22.7
10.4
0.4
1.1
1.0
2.1
16.0
16.0
8.4
2.2
1.1
1.0
3.2
NS
NS
NS
NS
NS
NS
1.05
0.0
5.2
9.1
0.60
6.3
15.4
NS
1.0
13.2
11.6
22.3
1.4
14.8
9.2
16.4
1.2
10.8
7.3
11.6
1.2
8.9
NS
NS
NS
NS
NS
NS
NS
0.0
NS
NS
NS
NS
NS
NS
NS
0.0
NS
0.8
11.6
6.7
4.4
0.8
6.7
35.6
15.9
NS
6.2
NS
NS
0.7
NS
0.0
NS
1.0
11.6
6.1
3.9
0.8
8.1
0.0
NS
0.7
13.5
7.6
5.1
0.8
7.3
46.8
NS
0.6
16.1
10.1
6.9
0.9
6.8
50.6
NS
NS
NS
NS
NS
NS
NS
NS
5.6
3.8
4.2
4.2
NS
NS
NS
NS
5.1
3.6
3.7
3.7
6.4
4.6
4.9
4.9
8.6
6.0
6.7
6.7
January 2011
GERMANY
ELECTRONICS
3/Underperform
Rating
-15.6% EUR49.00
Wincor Nixdorf
Trends now changing for the better
Q
Recent developments FY10-11 outlook surprisingly good
Wincor reported strong FY Q4 09-10 results (FY ends September) with

group sales of EUR557m (+7% y-o-y and +7% q-o-q) vs. our estimate
of EUR508m and consensus of EUR535m. EBIT was EUR41m (margin:
7.4%) vs. our estimate of EUR37m (margin 7.3%) and consensus of
EUR40m. Net profit came in at EUR26.6m (our estimate: EUR23.5m).
Wincor will propose a dividend of EUR1.70 for FY 09-10, in line with our
expectation.
Q4-10R Banking sales totalled EUR365m, +9% y-o-y and +7% q-o-q,
while Retail sales were EUR192m, +4% y-o-y and +7% q-o-q.
Banking's EBIT margin was 8.2% vs. 9.2% in Q4 08-09, while the Retail
margin stood at 4.9% vs. 5.4% a year earlier. Hardware sales were
EUR284m in Q4 (+6% y-o-y), while Software/Services sales were up
+8% y-o-y to EUR273m.
Q4-10 sales by geographic market we as follows: Germany EUR135m
(-6% y-o-y and -18% q-o-q); Europe ex Germany EUR260m
unchanged y-o-y and +13% q-o-q); Asia/Africa EUR86m (+32% y-o-y,
+40% q-o-q); and Americas EUR76m (+41% y-o-y, +18% q-o-q).
51% of Wincor's FY 09-10 group sales were generated with hardware,
and 49% with (less cyclical) software/services. Thus, the company has
nearly reached its long-term target of a 50:50 mix with
Software/Services sales having steadily risen from 33% in 1999-2000.
For FY 10-11, Wincor targets net sales growth of +6% y-o-y and EBITA
growth of +8% y-o-y, but says its chances of achieving this target will
depend on the speed of market recovery. In the conference call, CFO
Dr. Wunram added that the achievement of these targets will largely
depend on H2 10-11 as business momentum in H1 10-11 so far has
not been that strong with visibility of only 5-6 months.
Q
Outlook Trends improving
Geographically, management sees Germany (29% of group sales)

stable in FY 10-11 and expects Asia/Africa (15%) to show good
momentum. In addition, management stated that it expects group sales
volatility to remain high q-o-q in FY10-11. In the Americas, it will
probably be tough to avoid a drop-off in sales in FY 10-11 after +52%
y-o-y growth in FY 09-10. In Europe ex Germany (43% of group sales),
some countries (e.g. France and Russia) are seeing good momentum
while southern Europe remains sluggish.
As of the end of FY 09-11, Wincor's net debt stood at EUR134m.
Assuming positive cash generation and despite some likely bolt-on
acquisitions in FY 10-11, the potential for share buybacks and extra
dividends remains.
EUR58.04
Price (07/01/2011)
Reuters: WING.DE Bloomberg: WIN GR
Stock data
Free float
Enterprise value
Daily volume
EUR1849m
EUR1849m
EUR1945m
31.86m
EUR 6.40m
Performances
1.4%
18.9%
20.5%
-0.2%
4.4%
-6.2%
Absolute perf.
Relative perf.
78.0
78.0
68.0
68.0
58.0
58.0
48.0
48.0
38.0
38.0
28.0
28.0
18.0
05/04
18.0
03/05
01/06
11/06
09/07
Price/M DAX
07/08
05/09
Sector focus
Sector Top Picks
Least favoured
Shareholders
Free Float 100.0%
08/09
09/10E
10/11E
11/12E
12.8
15.8
16.3
14.4
EV/EBITDA (x)
6.0
7.4
8.3
7.3
6.5
6.1
5.7
6.7
(0.1)
P/E (x)
Net debt/EBITDA (x)
0.6
0.5
0.2
Yield (%)
3.9
3.3
3.2
3.6
ROCE (%)
31.3
23.4
24.0
26.4
2.3
2.4
2.5
2.3
Q
Q
320
www.cheuvreux.com
12/10
Price
Research Analyst
(49) 69 47 897 540
03/10
January 2011
GERMANY
Company profile
68% of sales and 80% of EBITA from the banking sector

Based in Paderborn, Germany, Wincor Nixdorf is one of the worlds
leading providers of IT solutions, products and services to retailers
and retail banking. Accordingly, the company is structured into two
divisions: banking and retail. In FY 08-09 banking accounted for
68% of total sales, retail 32%. Banking's EBITA margin of 8.4% was
sharply higher than that of retail (4.9%), so that banking contributed
80% to group EBITA and retail only 20%.
Q
Q Market leader in an oligopolistic market

In its banking division Wincor is ranked no.1 in Germany (08-09
market share: 77%) and no.2 in both Europe (35%) and worldwide
(20%). In retail, it is no.1 in Germany (40%) and Europe (32%), and
no.3 worldwide (14%). Its main production sites are located in
Paderborn, Germany, China, and Singapore.
Q Strong geographic exposure to Europe, especially Germany
Wincor Nixdorf generated 29% of its FY 08-09 sales in Germany,
43% in rest of Europe, 15% in Asia/Africa and 13% in the Americas.
Q Key to success: transformation into a full service provider
51% of Wincor's FY 09-10 group sales were generated with
hardware sales, 49% with (less cyclical) software and services. Thus,
the company has nearly reached its long-term target of a 50:50 mix
with Software/Services sales having steadily risen from 33% in
1999-2000. Software/services includes sales of software licences,
advisory services for customers regarding new solutions, and on-site
implementation and integration. The company's hardware business
includes ATMs and automated checkout systems among others.
SWOT analysis
To determine a fair value for Wincor shares we

apply a DCF valuation, a historical valuation and
a peer group multiple approach.
Q
We assume sales and EBITDA CAGRs of
2.2% and 2.1% respectively for 2010-19E, a
WACC of 8.8% (2011E), and a terminal growth
rate of 1.5%. Based on these parameters, our
DCF model renders a fair value of EUR50 per
share.
Q
On a historical multiple basis we see
Wincor trading 5% below its 5-year average
forward EV/Sales multiple, 11% above on P/E,
14% above in EV/EBIT terms and 5% above on
EV/EBITDA. Wincor enjoyed an exceptional
growth environment in 2004-2008, but that is
unlikely to be repeated anytime soon. We thus
regard its current valuation multiples as rather
expensive.
Q
on 2011E EV/EBITDA, Wincor is trading at a
15% premium to the peer group, NCR and
Diebold.
Q
Taking all issues into account, we reiterate
our 3/UP rating with a target price of EUR49.
Strengths
Weaknesses
A market leader in an
In the past, constant price

erosion of 6-8% p.a. in banking
and 8-10% in retail. Currently
more towards 10%
Long-standing customer
relationships
Production structure geared

towards Germany
Services business highly

diversified
Opportunities
Threats
Technological innovations
(cash cycle management for
instance)
Increase in recurring service

items
Consolidation process in
banking sector could reduce the
revenue base
Capex cooperation among
banks (sharing ATMs)
Growth
via geographic
expansion
Shortening of the ATM
replacement cycle
321
www.cheuvreux.com
Valuation
Investment case
We reiterate our 3/UP rating with a TP of EUR49.

In retrospect, Wincor's management navigated
the crisis remarkably well. Trends in the latecyclical business model are now clearly
changing for the better, and the stock's clear
underperformance vs. the MDAX since Q2-09
should cease. However, the valuation is already
quite demanding and the stock is a consensus
buy, so we see limited short-term upside
potential and prefer to wait for a setback in the
share price before revisiting our rating.
January 2011
GERMANY
Wincor Nixdorf
FY to 30/9 (Euro m)
Sales
% Change
Staff costs
Other costs
EBITDA
% Change
Depreciation
EBITA
% Change
EBIT
Net financial items
Tax
Minorities
% Change
Cash Flow Statement
Cash flow
% Change
Change in WCR
Capex
o/w Growth capex
Net cash flow
Disposals
Dividend paid
Capital increase
Other cash flow
Balance Sheet
Minority interests
Pension provisions
Other provisions
Net debt [cash]
Gearing [%]
Capital invested
Goodwill
Intangible assets
Tangible assets
Financial assets
Associates
WCR as a % of sales
Capital employed
322
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
1,575.9
9.4%
(352.2)
(1,084.3)
139.4
-18.5%
(26.3)
113.1
9.8%
(28.1)
0.0
0.0
85.0
(19.2)
0.0
0.0
(21.5)
0.0
0.0
0.0
44.4
0.0
(0.6)
43.8
0.0
0.0
71.9
20.8%
1,743.7
10.6%
(417.4)
(1,158.4)
167.9
20.5%
(31.3)
136.6
20.8%
(26.2)
0.0
0.0
110.4
(19.4)
0.0
0.0
(35.4)
0.0
0.0
0.0
55.6
0.0
(0.7)
54.9
0.0
0.0
81.1
12.8%
1,947.6
11.7%
(472.7)
(1,271.9)
203.0
20.9%
(42.2)
160.8
17.7%
(20.0)
0.0
0.0
140.8
(12.8)
0.0
0.0
(46.2)
0.0
0.0
0.0
81.9
0.0
(0.9)
81.0
0.0
0.0
101.0
24.6%
2,144.6
10.1%
(506.1)
(1,405.2)
233.3
14.9%
(42.2)
191.1
18.8%
(20.0)
0.0
0.0
171.1
(9.8)
0.0
0.0
(51.9)
0.0
0.0
0.0
109.3
0.0
(1.3)
108.0
0.0
0.0
128.1
26.8%
2,318.6
8.1%
(532.0)
(1,526.6)
260.0
11.5%
(54.0)
206.0
7.8%
(12.0)
0.0
0.0
194.0
(12.8)
0.0
0.0
(54.3)
0.0
0.0
0.0
126.9
0.0
(0.1)
126.8
0.0
0.0
138.8
8.4%
2,250.0
-3.0%
(532.0)
(1,456.0)
262.0
0.8%
(51.0)
211.0
2.4%
(5.0)
0.0
0.0
206.0
(16.0)
0.0
0.0
(49.0)
0.0
0.0
0.0
114.0
0.0
0.0
114.0
0.0
0.0
119.0
-14.2%
2,239.2
-0.5%
(538.3)
(1,477.7)
223.3
-14.8%
(61.0)
162.2
-23.1%
0.0
0.0
0.0
162.2
(6.0)
0.0
0.0
(50.0)
0.0
0.0
0.0
106.3
0.0
0.0
106.3
0.0
0.0
106.3
-10.7%
2,344.8
4.7%
(499.2)
(1,610.3)
235.3
5.4%
(63.0)
172.2
6.2%
0.0
0.0
0.0
172.2
(8.7)
0.0
0.0
(49.7)
0.0
0.0
0.0
113.8
0.0
0.0
113.8
0.0
0.0
113.8
7.1%
2,431.1
3.7%
(499.2)
(1,672.4)
259.6
10.3%
(65.2)
194.4
12.9%
0.0
0.0
0.0
194.4
(9.2)
0.0
0.0
(56.3)
0.0
0.0
0.0
128.9
0.0
0.0
128.9
0.0
0.0
128.9
13.2%
24.3
-88.8%
88.3
(184.5)
(61.5)
(71.9)
(4.3)
0.0
0.0
0.0
0.0
162.2
86.0
117.2
NS
14.8
(184.9)
(61.6)
(52.9)
29.6
0.0
0.0
(11.1)
2.4
143.1
111.2
145.8
24.4%
(5.6)
(51.8)
(17.3)
88.5
0.1
0.0
0.0
(17.4)
0.0
(115.2)
(44.0)
185.2
27.0%
53.7
(36.6)
(12.2)
202.3
(0.9)
0.0
0.0
(38.9)
0.3
(129.5)
33.3
194.0
4.8%
(23.2)
(32.7)
(10.9)
138.1
1.1
0.0
0.0
(83.1)
0.9
(69.8)
(12.9)
177.0
-8.8%
(17.5)
(67.1)
(22.4)
92.5
(1.0)
0.0
0.0
(70.5)
(1.2)
(51.5)
(31.7)
170.1
-3.9%
(12.2)
(64.9)
(21.7)
93.0
0.0
0.0
0.0
(61.2)
0.0
42.6
74.3
178.9
5.2%
(4.5)
(68.9)
(23.0)
105.5
0.0
0.0
0.0
(55.3)
0.0
32.3
82.6
195.8
9.4%
(1.8)
(70.5)
(23.5)
123.5
0.0
0.0
0.0
(59.2)
0.0
31.2
95.5
216.3
4.2
98.0
113.3
262.1
118.9
693.9
302.6
112.2
95.8
29.9
0.0
153.5
9.7
694.0
194.0
4.5
108.5
137.1
233.6
117.7
677.8
330.2
88.5
100.4
0.2
0.0
158.5
9.1
677.8
227.6
6.1
122.9
135.4
175.7
75.2
667.8
331.6
69.2
106.3
0.2
0.0
160.6
8.2
667.9
275.6
2.7
16.0
208.9
182.1
65.4
685.2
330.8
36.5
150.2
1.1
0.0
166.7
7.8
685.2
268.3
7.3
15.8
205.6
194.0
70.4
691.0
333.5
29.2
142.9
0.0
0.0
185.5
8.0
691.1
322.7
7.3
14.0
181.0
151.0
45.7
676.0
333.5
24.2
146.0
1.0
0.0
171.3
7.6
676.0
366.6
8.5
31.2
179.1
109.0
29.1
694.4
333.5
11.9
169.2
1.0
0.0
178.8
8.0
694.5
423.7
9.9
47.2
187.6
49.8
11.5
718.1
333.5
(2.4)
196.4
1.0
0.0
189.7
8.1
718.2
491.6
11.6
63.2
194.5
(23.5)
NS
737.4
333.5
(18.2)
224.5
1.0
0.0
196.6
8.1
737.5
www.cheuvreux.com
January 2011
GERMANY
Wincor Nixdorf
FY to 30/9 (Euro)
2004
2005
2006
2007
2008
2009
2010E
2011E
2012E
2.59
20.8%
1.58
NS
2.71
4.9%
1.84
16.5%
3.05
12.6%
2.45
33.4%
3.91
28.1%
3.30
34.7%
4.36
11.4%
3.98
20.6%
3.74
-14.3%
3.58
-10.1%
3.34
-10.7%
3.34
-6.8%
3.57
7.1%
3.57
7.1%
4.04
13.2%
4.04
13.2%
Goodwill per share

Dividend per share
Cash flow per share
% Change
1.01
0.67
0.87
-88.8%
12.4
0.88
1.05
3.92
NS
10.7
0.61
1.40
4.41
12.5%
12.4
0.61
2.78
5.66
28.3%
5.6
0.38
2.13
6.09
7.7%
6.3
0.16
1.85
5.56
-8.8%
7.9
0.00
1.73
5.34
-4.0%
9.8
0.00
1.86
5.62
5.2%
11.4
0.00
2.10
6.15
9.4%
13.3

Latest price
High
Low
Average price
16.500
27.800
0.000
16.540
29.910
0.000
16.540
33.080
0.000
32.750
32.750
0.000
31.860
31.860
0.000
33.090
31.860
0.000
31.860
31.860
0.000
31.860
31.860
0.000
31.860
31.860
0.000
29.55
29.78
20.45
24.62
44.50
45.43
28.13
35.32
58.93
61.01
42.75
52.81
65.00
74.99
53.80
64.76
33.71
65.19
26.90
45.62
47.65
48.44
31.50
39.70
61.01
61.49
42.83
50.24
58.04
61.23
57.18
58.90
58.04
-
Enterprise value
Valuation
P/E
P/E before goodwill
P/CF
P/BV
Yield [%]
884.1
1,226.0
1,404.3
1,763.5
1,896.3
2,214.7
1,918.6
2,138.6
1,358.8
1,569.4
1,408.2
1,572.2
1,523.7
1,662.9
1,849.2
1,945.1
1,849.2
1,887.8
18.8
11.4
33.8
NS
2.4
1.8
2.3
24.2
16.4
11.4
NS
4.2
2.6
2.4
24.1
19.3
13.4
4.6
4.8
3.3
2.4
19.7
16.6
11.5
10.4
11.5
3.1
4.3
8.5
7.7
5.5
10.2
5.4
2.3
6.3
13.3
12.8
8.6
6.5
6.0
2.3
3.9
15.8
15.8
9.9
6.1
5.4
2.4
3.3
16.3
16.3
10.3
5.7
5.1
2.5
3.2
14.4
14.4
9.4
6.7
4.4
2.3
3.6
8.8
10.8
0.78
32.6
10.5
12.9
1.01
13.5
10.9
13.8
1.14
14.3
9.2
11.2
1.00
11.0
6.0
7.6
0.68
7.7
6.0
7.5
0.7
8.4
7.4
10.3
0.7
9.6
8.3
11.3
0.8
10.5
7.3
9.7
0.8
9.3
7.3
10.8
8.8
7.2
2.8
2.4
118.9
42.5
8.6
2.0
9.6
7.8
3.2
2.6
117.7
57.2
15.9
1.2
10.4
8.3
4.2
2.9
75.2
57.2
NS
1.0
10.9
8.9
5.1
3.1
65.4
84.3
NS
1.0
11.2
8.9
5.5
3.4
70.4
53.5
16.4
0.9
11.6
9.4
5.1
3.3
45.7
51.7
NS
0.6
10.0
7.2
4.7
3.2
29.1
51.9
NS
0.3
10.0
7.3
4.9
3.3
11.5
52.1
NS
NS
10.7
8.0
5.3
3.3
NS
51.9
17.0
11.5
22.5
22.5
20.2
12.3
33.0
33.0
24.1
15.4
43.3
43.3
27.9
18.9
48.8
48.8
29.8
20.9
61.9
61.9
31.3
21.9
42.9
42.9
23.4
15.9
33.9
33.9
24.0
16.7
31.0
31.0
26.4
18.4
30.2
30.2

EPS before goodwill
% Change
EPS, reported
% Change
EV/EBITDA, restated
EV/EBITA, restated
EV/Sales
Financial Ratios
Interest cover
Net debt/Cash flow
EBITDA margin [%]
EBITA margin [%]
Net margin [%]
Gearing [%]
Payout ratio [%]
Return [%]
Pre-tax RoCE
RoCE after tax
ROE [%]
323
www.cheuvreux.com
January 2011
GERMANY
Notes
324
www.cheuvreux.com
January 2011
GERMANY
Notes
325
www.cheuvreux.com
January 2011
GERMANY
Notes
326
www.cheuvreux.com
January 2011
GERMANY
ECONOMIC & FINANCIAL OUTLOOK

Christopher Potts, Head of Economics & Strategy .................................................................................... + 33 1 41 89 73 44
EUROPEAN COORDINATION
Bruno Renard, Head of European Research .............................................................................................. + 33 1 41 89 73 17
RESEARCH DEPARTMENT
Bernd Laux, Head of Research ............................................................................................................... +49 69 47 89 75 15
Jrgen Kolb, Deputy Head of Research ................................................................................................... +49 69 47 89 74 26
Craig Abbott ............................... 75 25
Sebastian Kauffmann .................. 75 24
Oliver Reinberg ........................... 75 26
Small & Mid Caps
Utilities, Transport & Logistics
Healthcare, Small & Mid Caps,
Dr Michael Haid .......................... 79 67
Jrgen Kolb................................. 74 26
Klaus Ringel................................ 75 30
Insurance, Financial Services
General Retailers, Luxury Goods
Chemicals, Technology
Alexander Haissl ......................... 75 34
Bernd Laux.................................. 75 12
Martin Rdiger ............................ 77 63
Metals & Mining
Technology, Capital Goods
Chemicals
Dr Hans-Joachim Heimbrger ... 75 40
Alexander Neuberger .................. 73 84
Capital Goods, Small & Mid Caps
Automotive
EDITING
RESEARCH SUPPORT - STATISTICS
Bernadette Mullane ........................................75 19

Stanley Wiskoski ............................................75 18
Sonja Albert ................................................... 75 28

Marion Bacher................................................ 72 79
Markus Tombers ............................................ 72 90
DISTRIBUTION
Angelika Flegler ..............................................72 17
Dagmar Moldan..............................................72 16
327
www.cheuvreux.com

CA CHEUVREUX German Smaller Companies Review Jan2011

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SMALLER COMPANIES

Smaller Companies Team

Disclosures available on www.cheuvreux.com

Smaller Companies Review

Cheuvreux's Smaller Companies Team

Coordinator - Carole Rozen

Robert Van Overbeek - (+31 20) 573 06 81

Hubert d'Aillires - (+33 1) 41 89 74 58

Johan Eliason (+468) 723 51 77

Emmanuel Fourret - (+33 1) 41 89 73 06

Amandine Latour - (+33 1) 41 89 75 46

Craig Abbott - (+49 69) 47 89 75 25

Beat Keiser - (+41 1) 218 17 06

Mary Psyllaki - (+30) 210 37 34 006

Adrian Zunzunegui - (34 91) 495 16 28

Marco Baccaglio - (+39 2) 80 62 83 20

Iigo Egusquiza - (34 91) 495 16 33

Smaller Companies Review

II German smaller companies universe key figures

III Sector top picks and focus list

IV Overview of the German smaller companies segment

ADVA Optical Networking

* Green tech companies

Smaller Companies Review

I - OUR SMALL CAP UNIVERSE & ANALYSTS

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