ISRA Vision · ISRA Vision 3 COMMENT Published 04.09.2017 Sales development in EUR m Source:...

ISRA Vision

(CDAX, Technology)

A n a l y s t

Andreas Wolf

[email protected]

+49 40 309537-140

CO M M E N T Published 04.09.2017 08:15 1

Hold

EUR 150.00 (EUR 130.00)

Price EUR 142.80

Upside 5.0 %

Value Indicators: EUR Share data: Description:

DCF: 155.42

FCF-Value Potential 19e: 92.12

Bloomberg: ISR GR

Reuters: ISRG

ISIN: DE0005488100

Machine vision systems, optical robot guidance systems.

Market Snapshot: EUR m Shareholders: Risk Profile (WRe): 2016/17e

Market cap: 625.4

No. of shares (m): 4.4

EV: 633.1

Freefloat MC: 437.8

Ø Trad. Vol. (30d): 1.08 m

Freefloat 70.0 %

CEO 25.2 %

ISRA VISION Management 4.8 %

Fidelity 9.0 %

Beta: 1.2

Price / Book: 3.6 x

Equity Ratio: 63 %

Net Fin. Debt / EBITDA: 0.1 x

Net Debt / EBITDA: 0.2 x

Strong growth in Industrial Automation; Model reworked post Q3; PT up

ISRA Vision’s Q3 revenue figures (see next page) were in line with our estimates. While the EBIT margin reached last year’s high level of

nearly 20%, our estimates were somewhat higher.

Revenue growth of 11% was mainly driven by the Industrial Automation segment (+21%) where ISRA Vision predominantly serves premium

car manufacturers. The strong growth also reflects demand for 3D robot guidance products. Growth in the Surface Inspection segment (+8%)

was solid across all verticals. At the same time, earnings quality was high as the EBIT impact from capitalisation of R&D and corresponding

amortisation was close to zero.

Capital efficiency continues to improve: Despite strong revenue growth, the working capital remained approximately at the level of the

beginning of the financial year. This reflects further improvements in capital efficiency. FCF reached EUR 14m in the nine-month period. During

the call, management highlighted that there was room for further working capital optimisation. Hence, we lowered our working capital estimate

to 76% for 2016/17e (vs. 84% last year and > 90% the year before). We have also reflected higher working capital efficiency in the medium to

long term and anticipated a working capital ratio of approx. 35% by 2022.

New medium-term guidance could be a catalyst: The aim to increase the 2016/17 top line by 10% at last year’s stable margins was

confirmed. Next year, ISRA Vision looks set to surpass its medium-term target of EUR 150m. A new guidance could be published with next

year’s Q1. Management might target revenues of EUR 200m in the medium term. With a bigger acquisition, EUR 250m might even be within

reach. This statement shows that M&A remains on the agenda. However, management has also stated that prices of 13x EBITDA, which

potential sellers have recently asked for, are considered to be too expensive. Organic growth will remain the main pillar of top-line expansion.

In Industrial Automation, for example, new revenue potential is being created with new products in the area of 3D measurement technology

and fully automated car paint inspection. ISRA is also expanding its offering of products to address markets outside the high end. This should

create new business opportunities and support above market-average growth.

Valuation: Against the backdrop of the 9M figures, our model is being reworked (see below). The working capital ratio estimates (35% by

2022) and beta (1.2 vs. 1.15) have been lowered. As a result, the DCF-based PT is increased to EUR 150.

Changes in Estimates: Comment on Changes:

FY End: 30.9. in EUR m

2016/17e (old)

+ / - 2017/18e (old)

+ / - 2018/19e (old)

+ / -

Sales 143.3 0.0 % 158.6 0.5 % 175.7 0.9 %

EBITDA 43.4 -4.3 % 48.2 -2.3 % 54.5 -2.0 %

EBIT 30.6 -6.1 % 35.3 -3.2 % 41.0 -2.7 %

Net income 20.5 -6.2 % 23.8 -3.2 % 27.8 -2.7 %

� Against the backdrop of somewhat lower than estimated Q3 results, the bottom-line estimates are lowered.

� With continued strong momentum in Industrial Automation, revenue estimates for 2017/18e and 2018/19e are raised.

� Next year, ISRA Vision should surpass its medium term target of EUR 150m.

FY End: 30.9. in EUR m

CAGR (15/16-18/19e) 2012/13 2013/14 2014/15 2015/16 2016/17e 2017/18e 2018/19e

Sales 11.3 % 89.5 102.5 112.2 128.8 143.3 159.3 177.4

Change Sales yoy 6.7 % 14.4 % 9.5 % 14.8 % 11.2 % 11.2 % 11.3 %

Gross profit margin 54.5 % 55.2 % 55.8 % 56.4 % 56.4 % 57.5 % 57.8 %

EBITDA 12.3 % 26.1 28.8 32.4 37.7 41.6 47.1 53.4

Margin 29.2 % 28.1 % 28.9 % 29.3 % 29.0 % 29.6 % 30.1 %

EBIT 16.0 % 17.3 20.1 22.6 25.6 28.8 34.2 39.9

Margin 19.3 % 19.6 % 20.1 % 19.9 % 20.1 % 21.5 % 22.5 %

Net income 15.5 % 11.6 13.0 14.8 17.6 19.3 23.1 27.0

EPS 15.4 % 2.64 2.98 3.39 4.01 4.40 5.27 6.17

EPS adj. 15.4 % 2.64 2.98 3.39 4.01 4.40 5.27 6.17

DPS 13.4 % 0.35 0.39 0.41 0.48 0.55 0.65 0.70

Dividend Yield 1.2 % 0.9 % 0.8 % 0.7 % 0.4 % 0.5 % 0.5 %

FCFPS 0.97 1.27 -0.52 4.26 3.97 4.14 4.57

FCF / Market cap 3.6 % 2.8 % -1.0 % 6.4 % 2.8 % 2.9 % 3.2 %

EV / Sales 1.8 x 2.2 x 2.4 x 2.5 x 4.4 x 3.9 x 3.4 x

EV / EBITDA 6.3 x 8.0 x 8.5 x 8.4 x 15.2 x 13.1 x 11.2 x

EV / EBIT 9.5 x 11.5 x 12.2 x 12.4 x 22.0 x 18.1 x 15.0 x

P / E 11.3 x 15.2 x 15.9 x 16.7 x 32.5 x 27.1 x 23.1 x

P / E adj. 11.3 x 15.2 x 15.9 x 16.7 x 32.5 x 27.1 x 23.1 x

FCF Potential Yield 8.1 % 5.6 % 5.6 % 6.1 % 3.3 % 3.9 % 4.7 %

Net Debt 32.9 31.6 38.1 23.2 7.7 -7.9 -24.9

ROCE (NOPAT) 8.2 % 8.8 % 8.9 % 9.9 % 10.7 % 12.5 % 14.0 % Guidance: 2016/17: Revenue growth of approx. 10%, at least stable margins

Rel. Performance vs CDAX:

1 month: -6.6 %

6 months: 14.6 %

Year to date: 36.0 %

Trailing 12 months: 45.7 %

Company events:

27.11.17 EKF

ISRA Vision

CO M M E N T Publ ished 04 .09 .2017 2

Q3 figures

in EUR m Q3/ 17 Q3/ 17e ∆ WRe Q3/ 16 yoy 9M / 17 9M / 16 yoy

Sales 34.4 34.6 -0.7% 31.0 11.0% 93.3 84.3 10.7%

EB IT D A 10.1 11.8 -14.4% 8.9 13.2% 28.5 25.2 12.9%

margin 29.4% 34.3% 28.8% 30.5% 30.0%

EB IT 6.7 8.0 -16.2% 6.0 11.0% 18.4 16.6 10.4%

margin 19.5% 24.2% 19.5% 19.7% 19.7%

EB T 6.6 8.3 -20.2% 5.9 12.6% 18.1 16.2 11.6%

margin 19.3% 39.8% 19.0% 19.4% 19.2%

Industria l A uto mat io n 9.0 8.5 5.4% 7.4 20.5% 22.8 19.2 18.5%

Surface Vis io n 25.4 26.0 -2.3% 23.5 8.0% 70.5 65.0 8.4%

Source: Warburg Research

ISRA Vision


Sales development in EUR m


Sales by regions 2015/16


EBIT development in EUR m


Company Background

� Global leader in concentrated niche markets for optical surface inspection systems such as flat glass inspection, metals inspection or

paper inspection. European leader in 3D machine vision.

� These systems have very short amortisation periods of typically less than six months due to significant cost savings and yield

improvements.

� ISRA Vision's impressive track record of generating double-digit sales growth and double-digit EBIT margins is driven by a largely

untapped market (penetration only c. 15-20%) and a strong trend towards automation.

� Management’s interests are aligned with shareholder interest as the CEO owns 25% of the company.

Competitive Quality

� Strong competitive position based on ISRA Vision's relatively large size and more than 6,000 reference installations.

� Key customers are large, globally active blue chip industrial companies who value the one-stop-shop approach which few apart from

the larger suppliers can deliver.

� Strong global sales and service network, which is constantly being expanded.

� Competitive defence through high R&D expenditure of 20% of revenues.

� Diversification via technology, industry and region limits its dependencies in weak economic periods, as proved by the company’s

double-digit EBIT margin even in crisis year 2008/09.

Order book in EUR m


Sales by segments 2015/16


Net income development in EUR m


ISRA Vision


DCF model

Detailed forecast period Transitional period Term. Value

Figures in EUR m 16/17e 17/18e 18/19e 19/20e 20/21e 21/22e 22/23e 23/24e 24/25e 25/26e 26/27e 27/28e 28/29e

Sales 143.3 159.3 177.4 196.9 216.6 234.8 251.3 266.2 279.5 291.2 301.4 310.3 318.0

Sales change 11.2 % 11.2 % 11.3 % 11.0 % 10.0 % 8.4 % 7.1 % 5.9 % 5.0 % 4.2 % 3.5 % 3.0 % 2.5 % 2.0 %

EBIT 28.8 34.2 39.9 45.3 52.0 56.3 60.3 63.9 67.1 69.9 72.3 74.5 76.3

EBIT-margin 20.1 % 21.5 % 22.5 % 23.0 % 24.0 % 24.0 % 24.0 % 24.0 % 24.0 % 24.0 % 24.0 % 24.0 % 24.0 %

Tax rate (EBT) 31.4 % 31.4 % 31.4 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 %

NOPAT 19.7 23.4 27.4 31.2 35.9 38.9 41.6 44.1 46.3 48.2 49.9 51.4 52.7

Depreciation 12.8 12.9 13.5 15.8 17.3 18.8 20.1 21.3 22.4 23.3 24.1 24.8 25.4

in % of Sales 8.9 % 8.1 % 7.6 % 8.0 % 8.0 % 8.0 % 8.0 % 8.0 % 8.0 % 8.0 % 8.0 % 8.0 % 8.0 %

Changes in provisions 0.1 0.1 0.1 0.5 0.5 0.5 0.4 0.4 0.3 0.3 0.3 0.2 0.2

Change in Liquidity from

- Working Capital 1.2 4.3 4.8 -0.2 -20.7 -15.3 5.8 5.2 4.6 4.1 3.6 3.1 2.7

- Capex 16.6 17.3 17.9 18.7 19.5 21.1 22.6 24.0 25.2 26.2 27.1 27.9 28.6

Capex in % of Sales 11.6 % 10.9 % 10.1 % 9.5 % 9.0 % 9.0 % 9.0 % 9.0 % 9.0 % 9.0 % 9.0 % 9.0 % 9.0 %

Other 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

Free Cash Flow (WACC Model)

14.8 14.8 18.3 29.0 54.9 52.3 33.7 36.6 39.2 41.5 43.6 45.4 47.0 53

PV of FCF 14.8 13.8 15.8 23.4 41.2 36.5 21.9 22.1 22.1 21.8 21.3 20.6 19.9 410 share of PVs 6.30 % 35.55 % 58.15 %

Model parameter Valuation (m)

Derivation of WACC: Derivation of Beta: Present values 2028/29e 295

Terminal Value 410

Debt ratio 6.00 % Financial Strength 1.15 Financial liabilities 36

Cost of debt (after tax) 1.4 % Liquidity (share) 1.15 Pension liabilities 4

Market return 7.00 % Cyclicality 1.15 Hybrid capital 0

- - Transparency 1.15 Minority interest 1

Others 1.15 Market val. of investments 0

Liquidity 17 No. of shares (m) 4.4

WACC 7.44 % Beta 1.15 Equity Value 681 Value per share (EUR) 155.42

Sensitivity Value per Share (EUR)

Terminal Growth Delta EBIT-margin

Beta WACC 1.25 % 1.50 % 1.75 % 2.00 % 2.25 % 2.50 % 2.75 % Beta WACC -1.5 pp -1.0 pp -0.5 pp +0.0 pp +0.5 pp +1.0 pp +1.5 pp

1.34 8.4 % 121.50 123.78 126.24 128.88 131.74 134.84 138.22 1.34 8.4 % 119.94 122.92 125.90 128.88 131.86 134.85 137.83

1.25 7.9 % 131.92 134.72 137.74 141.02 144.58 148.47 152.74 1.25 7.9 % 131.29 134.53 137.77 141.02 144.26 147.50 150.74

1.20 7.7 % 137.75 140.86 144.23 147.90 151.90 156.29 161.12 1.20 7.7 % 137.73 141.12 144.51 147.90 151.29 154.68 158.06

1.15 7.4 % 144.07 147.54 151.31 155.42 159.94 164.91 170.41 1.15 7.4 % 144.77 148.32 151.87 155.42 158.97 162.52 166.07

1.10 7.2 % 150.94 154.81 159.04 163.69 168.80 174.45 180.75 1.10 7.2 % 152.51 156.23 159.96 163.69 167.41 171.14 174.87

1.05 6.9 % 158.42 162.77 167.54 172.80 178.61 185.09 192.33 1.05 6.9 % 161.03 164.95 168.88 172.80 176.72 180.64 184.56

0.96 6.4 % 175.58 181.14 187.30 194.14 201.81 210.44 220.25 0.96 6.4 % 181.01 185.39 189.77 194.14 198.52 202.90 207.27

� Sales growth looks set to remain clearly above GDP growth driven by automation trend and need to increase efficiency.

� EBIT margins are assumed to remain at high levels driven by sales growth and operating leverage.

� Margins look set to erode slightly thereafter assuming increased competitiveness, partly defended by the company’s R&D.

� Working capital requirements are expected to remain at high levels owing to the customer structure.

ISRA Vision


Free Cash Flow Value Potential Warburg Research's valuation tool "FCF Value Potential" reflects the ability of the company to generate sustainable free cash flows. It is based on the "FCF potential" - a FCF "ex growth" figure - which assumes unchanged working capital and pure maintenance capex. A value indication is derived via the perpetuity of a given year’s “FCF potential” with consideration of the weighted costs of capital. The fluctuating value indications over time add a timing element to the DCF model (our preferred valuation tool). in EUR m 2012/13 2013/14 2014/15 2015/16 2016/17e 2017/18e 2018/19e

Net Income before minorities 11.5 13.1 14.8 17.8 19.3 23.1 27.0

+ Depreciation + Amortisation 8.9 8.8 9.8 12.1 12.8 12.9 13.5

- Net Interest Income -0.7 -0.9 -0.7 -0.4 -0.4 -0.2 -0.1

- Maintenance Capex 7.9 10.0 10.1 11.0 11.6 12.1 12.5

+ Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0

= Free Cash Flow Potential 13.2 12.8 15.2 19.3 20.8 24.1 28.1

FCF Potential Yield (on market EV) 8.1 % 5.6 % 5.6 % 6.1 % 3.3 % 3.9 % 4.7 %

WACC 7.44 % 7.44 % 7.44 % 7.44 % 7.44 % 7.44 % 7.44 %

= Enterprise Value (EV) 163.5 229.8 274.2 316.5 633.1 617.5 600.4 = Fair Enterprise Value 177.2 172.5 204.8 259.9 280.1 323.6 377.7

- Net Debt (Cash) 19.0 19.0 19.0 19.0 3.5 -12.2 -29.3

- Pension Liabilities 4.1 4.1 4.1 4.1 4.2 4.3 4.4

- Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0

- Market value of minorities 0.0 0.0 0.0 0.0 0.0 0.0 0.0

+ Market value of investments 0.0 0.0 0.0 0.0 0.0 0.0 0.0

= Fair Market Capitalisation 154.0 149.3 181.7 236.7 272.3 331.5 402.7

Aktienanzahl (Mio.) 4.4 4.4 4.4 4.4 4.4 4.4 4.4

= Fair value per share (EUR) 35.15 34.09 41.56 54.06 62.18 75.69 91.95

premium (-) / discount (+) in % -56.5 % -47.0 % -35.6 %

Sensitivity Fair value per Share (EUR)

8.94 % 29.18 28.01 33.90 44.14 51.43 63.27 77.62

8.44 % 31.23 29.99 36.23 47.07 54.58 66.91 81.88

7.94 % 33.54 32.22 38.84 50.37 58.13 71.01 86.68

WACC 7.44 % 36.16 34.75 41.81 54.11 62.16 75.67 92.12

6.94 % 39.16 37.64 45.21 58.39 66.76 80.99 98.35

6.44 % 42.63 40.99 49.14 63.34 72.09 87.14 105.55

5.94 % 46.67 44.89 53.72 69.12 78.30 94.33 113.95

� A high market share in its targeted niche markets has created barriers to market entry.

� The beta takes the low liquidity into account.

ISRA Vision


Valuation

2012/13 2013/14 2014/15 2015/16 2016/17e 2017/18e 2018/19e

Price / Book 1.1 x 1.5 x 1.6 x 1.9 x 3.6 x 3.2 x 2.8 x

Book value per share ex intangibles 5.38 6.88 8.60 11.02 13.78 17.47 22.05

EV / Sales 1.8 x 2.2 x 2.4 x 2.5 x 4.4 x 3.9 x 3.4 x

EV / EBITDA 6.3 x 8.0 x 8.5 x 8.4 x 15.2 x 13.1 x 11.2 x

EV / EBIT 9.5 x 11.5 x 12.2 x 12.4 x 22.0 x 18.1 x 15.0 x

EV / EBIT adj.* 9.5 x 11.5 x 12.2 x 12.4 x 22.0 x 18.1 x 15.0 x

P / FCF 27.4 x 35.6 x n.a. 15.7 x 36.0 x 34.5 x 31.3 x

P / E 11.3 x 15.2 x 15.9 x 16.7 x 32.5 x 27.1 x 23.1 x

P / E adj.* 11.3 x 15.2 x 15.9 x 16.7 x 32.5 x 27.1 x 23.1 x

Dividend Yield 1.2 % 0.9 % 0.8 % 0.7 % 0.4 % 0.5 % 0.5 %

FCF Potential Yield (on market EV) 8.1 % 5.6 % 5.6 % 6.1 % 3.3 % 3.9 % 4.7 %

*Adjustments made for: -

Company Specific Items

2012/13 2013/14 2014/15 2015/16 2016/17e 2017/18e 2018/19e

Order book 55.5 69.0 80.0 85.0 n.a. n.a. n.a.

ISRA Vision


Consolidated profit and loss In EUR m 2012/13 2013/14 2014/15 2015/16 2016/17e 2017/18e 2018/19e

Sales 89.5 102.5 112.2 128.8 143.3 159.3 177.4

Change Sales yoy 6.7 % 14.4 % 9.5 % 14.8 % 11.2 % 11.2 % 11.3 % COGS 40.7 45.9 49.7 56.1 62.5 67.7 74.9

Gross profit 48.8 56.6 62.6 72.7 80.8 91.6 102.5

Gross margin 54.5 % 55.2 % 55.8 % 56.4 % 56.4 % 57.5 % 57.8 %

Research and development 11.9 13.5 15.2 18.2 20.4 23.1 25.1

Sales and marketing 16.9 19.6 21.2 25.3 28.0 30.2 33.0

Administration expenses 4.7 4.9 4.6 4.9 5.3 5.9 6.4

Other operating expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other operating income 1.9 1.4 0.9 1.2 1.7 1.8 1.9

Unfrequent items 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBITDA 26.1 28.8 32.4 37.7 41.6 47.1 53.4

Margin 29.2 % 28.1 % 28.9 % 29.3 % 29.0 % 29.6 % 30.1 %

Depreciation of fixed assets 1.0 1.1 1.4 2.2 2.3 2.4 2.5

EBITA 25.2 27.7 31.0 35.5 39.3 44.7 50.9

Amortisation of intangible assets 7.9 7.7 8.5 9.9 10.5 10.5 11.0

Goodwill amortisation 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBIT 17.3 20.1 22.6 25.6 28.8 34.2 39.9

Margin 19.3 % 19.6 % 20.1 % 19.9 % 20.1 % 21.5 % 22.5 %

EBIT adj. 17.3 20.1 22.6 25.6 28.8 34.2 39.9

Interest income 0.1 0.1 0.0 0.0 0.0 0.1 0.1

Interest expenses 0.9 0.9 0.8 0.5 0.4 0.3 0.2

Other financial income (loss) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBT 16.5 19.2 21.8 25.2 28.4 34.0 39.8

Margin 18.5 % 18.7 % 19.5 % 19.5 % 19.8 % 21.3 % 22.4 %

Total taxes 5.1 6.0 7.1 7.4 9.1 10.9 12.8

Net income from continuing operations 11.5 13.2 14.8 17.8 19.3 23.1 27.0

Income from discontinued operations (net of tax) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net income before minorities 11.5 13.2 14.8 17.8 19.3 23.1 27.0

Minority interest -0.1 0.1 0.0 0.2 0.0 0.0 0.0

Net income 11.6 13.0 14.8 17.6 19.3 23.1 27.0

Margin 12.9 % 12.7 % 13.2 % 13.6 % 13.4 % 14.5 % 15.2 % Number of shares, average 4.4 4.4 4.4 4.4 4.4 4.4 4.4

EPS 2.64 2.98 3.39 4.01 4.40 5.27 6.17

EPS adj. 2.64 2.98 3.39 4.01 4.40 5.27 6.17

*Adjustments made for:

Guidance: 2016/17: Revenue growth of approx. 10%, at least stable margins

Financial Ratios 2012/13 2013/14 2014/15 2015/16 2016/17e 2017/18e 2018/19e

Total Operating Costs / Sales 35.2 % 35.6 % 35.7 % 36.6 % 36.3 % 36.0 % 35.3 %

Operating Leverage 1.7 x 1.1 x 1.3 x 0.9 x 1.1 x 1.7 x 1.5 x

EBITDA / Interest expenses 28.4 x 31.1 x 42.8 x 79.0 x 103.9 x 157.0 x 267.0 x

Tax rate (EBT) 30.7 % 31.4 % 32.3 % 29.4 % 32.1 % 32.1 % 32.1 %

Dividend Payout Ratio 13.4 % 13.0 % 12.1 % 11.8 % 12.5 % 12.3 % 11.3 %

Sales per Employee n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Sales, EBITDA in EUR m


Operating Performance in %


Performance per Share


ISRA Vision


Consolidated balance sheet In EUR m 2012/13 2013/14 2014/15 2015/16 2016/17e 2017/18e 2018/19e

Assets

Goodwill and other intangible assets 92.8 98.0 105.6 109.6 114.1 119.1 124.1

thereof other intangible assets 0.0 0.0 0.0 0.0 4.5 9.5 14.5

thereof Goodwill 38.3 38.3 38.9 38.9 38.9 38.9 38.9

Property, plant and equipment 5.5 5.9 6.2 5.7 5.0 4.4 3.8

Financial assets 1.3 5.0 4.8 3.9 3.9 3.9 3.9

Other long-term assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Fixed assets 99.7 108.9 116.6 119.2 123.0 127.4 131.8

Inventories 25.8 28.0 30.7 33.7 34.1 35.4 35.5

Accounts receivable 63.2 70.2 86.8 88.5 88.3 91.7 97.2

Liquid assets 9.7 11.2 15.1 16.9 26.5 32.2 44.3

Other short-term assets 8.8 4.2 7.1 5.5 5.5 5.6 5.6

Current assets 107.5 113.6 139.7 144.7 154.4 164.9 182.7

Total Assets 207.2 222.5 256.3 263.8 277.3 292.2 314.4

Liabilities and shareholders' equity

Subscribed capital 4.4 4.4 4.4 4.4 4.4 4.4 4.4

Capital reserve 63.9 38.6 38.6 38.8 38.8 38.8 38.8

Retained earnings 38.6 71.1 82.4 97.1 114.3 134.9 159.1

Other equity components 9.4 14.1 17.8 17.6 17.0 17.5 18.4

Shareholders' equity 116.4 128.2 143.2 157.8 174.4 195.6 220.6

Minority interest 1.5 1.3 1.3 1.5 1.5 1.5 1.5

Total equity 117.9 129.5 144.5 159.3 175.9 197.1 222.1

Provisions 4.9 6.3 5.7 9.2 9.2 9.6 10.0

thereof provisions for pensions and similar obligations 2.0 2.9 3.1 4.1 4.2 4.3 4.4

Financial liabilities (total) 40.5 40.0 50.1 36.0 30.0 20.0 15.0

thereof short-term financial liabilities 28.9 32.0 50.1 36.0 30.0 20.0 15.0

Accounts payable 6.7 8.7 11.8 12.4 11.4 11.8 12.6

Other liabilities 37.2 37.9 44.2 46.9 50.7 53.7 54.7

Liabilities 89.3 92.9 111.8 104.5 101.4 95.1 92.3

Total liabilities and shareholders' equity 207.2 222.5 256.3 263.8 277.3 292.2 314.4


Efficiency of Capital Employment

Operating Assets Turnover 1.0 x 1.1 x 1.0 x 1.1 x 1.3 x 1.4 x 1.5 x

Capital Employed Turnover 0.6 x 0.6 x 0.6 x 0.7 x 0.8 x 0.8 x 0.9 x

ROA 11.6 % 12.0 % 12.7 % 14.7 % 15.7 % 18.1 % 20.5 %

Return on Capital

ROCE (NOPAT) 8.2 % 8.8 % 8.9 % 9.9 % 10.7 % 12.5 % 14.0 %

ROE 10.4 % 10.7 % 10.9 % 11.7 % 11.6 % 12.5 % 13.0 %

Adj. ROE 10.4 % 10.7 % 10.9 % 11.7 % 11.6 % 12.5 % 13.0 %

Balance sheet quality

Net Debt 32.9 31.6 38.1 23.2 7.7 -7.9 -24.9

Net Financial Debt 30.9 28.8 35.0 19.0 3.5 -12.2 -29.3

Net Gearing 27.9 % 24.4 % 26.4 % 14.5 % 4.4 % -4.0 % -11.2 %

Net Fin. Debt / EBITDA 118.0 % 99.7 % 108.1 % 50.5 % 8.5 % n.a. n.a.

Book Value / Share 26.6 29.3 32.8 36.0 39.8 44.7 50.4

Book value per share ex intangibles 5.4 6.9 8.6 11.0 13.8 17.5 22.1

ROCE Development


Net debt in EUR m


Book Value per Share in EUR


ISRA Vision


Consolidated cash flow statement In EUR m 2012/13 2013/14 2014/15 2015/16 2016/17e 2017/18e 2018/19e

Net income 11.5 13.1 14.8 17.8 19.3 23.1 27.0

Depreciation of fixed assets 1.0 1.1 1.4 2.2 2.3 2.4 2.5

Amortisation of goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Amortisation of intangible assets 7.9 7.7 8.5 9.9 10.5 10.5 11.0

Increase/decrease in long-term provisions 0.0 0.0 0.0 0.0 0.1 0.1 0.1

Other non-cash income and expenses 8.0 5.7 11.4 0.3 0.0 0.0 0.0

Cash Flow before NWC change 28.3 27.6 36.0 30.2 32.1 36.1 40.6

Increase / decrease in inventory 0.0 -2.1 -2.5 -3.0 -0.4 -1.3 -0.1

Increase / decrease in accounts receivable 0.7 -7.1 -18.5 -0.3 0.2 -3.4 -5.5

Increase / decrease in accounts payable -13.4 1.4 -3.6 6.5 -1.0 0.4 0.8

Increase / decrease in other working capital positions 0.0 0.0 0.6 1.0 3.0 3.7 2.1

Increase / decrease in working capital (total) -12.8 -7.8 -23.9 4.1 1.9 -0.6 -2.7

Net cash provided by operating activities [1] 15.5 19.8 12.2 34.3 34.0 35.4 37.9

Investments in intangible assets -9.4 -12.8 -13.3 -14.8 -15.0 -15.5 -16.0

Investments in property, plant and equipment -1.4 -1.4 -1.1 -0.9 -1.6 -1.8 -1.9

Payments for acquisitions -1.4 -0.8 -2.2 0.0 0.0 0.0 0.0

Financial investments 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Income from asset disposals 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net cash provided by investing activities [2] -12.7 -15.0 -16.6 -15.6 -16.6 -17.3 -17.9

Change in financial liabilities 1.4 -0.5 10.1 -14.1 -6.0 -10.0 -5.0

Dividends paid -1.3 -1.5 -1.7 -1.8 -2.1 -2.4 -2.8

Purchase of own shares 0.0 -0.2 0.2 -0.1 0.0 0.0 0.0

Capital measures 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other -0.7 -1.1 -0.7 -0.4 0.0 0.0 0.0

Net cash provided by financing activities [3] -0.7 -3.3 7.9 -16.4 -8.1 -12.4 -7.8

Change in liquid funds [1]+[2]+[3] 2.1 1.5 3.5 2.2 9.3 5.7 12.2

Effects of exchange-rate changes on cash 0.0 0.0 0.5 -0.5 0.0 0.0 0.0

Cash and cash equivalent at end of period 9.9 11.5 15.4 17.1 26.5 32.2 44.3


Cash Flow

FCF 4.3 5.6 -2.3 18.7 17.4 18.1 20.0

Free Cash Flow / Sales 5.3 % 5.4 % -2.0 % 14.5 % 12.1 % 11.4 % 11.3 %

Free Cash Flow Potential 13.2 12.8 15.2 19.3 20.8 24.1 28.1

Free Cash Flow / Net Profit 41.2 % 42.7 % -15.4 % 106.3 % 90.3 % 78.6 % 74.0 %

Interest Received / Avg. Cash 1.5 % 0.6 % 0.3 % 0.3 % 0.0 % 0.3 % 0.3 %

Interest Paid / Avg. Debt 2.3 % 2.3 % 1.7 % 1.1 % 1.2 % 1.2 % 1.1 %

Management of Funds

Investment ratio 12.0 % 13.9 % 12.9 % 12.1 % 11.6 % 10.9 % 10.1 %

Maint. Capex / Sales 8.8 % 9.7 % 9.0 % 8.5 % 8.1 % 7.6 % 7.1 %

Capex / Dep 121.5 % 161.8 % 146.7 % 129.4 % 129.7 % 134.1 % 132.6 %

Avg. Working Capital / Sales 88.0 % 82.7 % 86.1 % 82.5 % 75.9 % 69.9 % 65.4 %

Trade Debtors / Trade Creditors 946.4 % 808.6 % 736.0 % 712.6 % 774.6 % 777.1 % 771.4 %

Inventory Turnover 1.6 x 1.6 x 1.6 x 1.7 x 1.8 x 1.9 x 2.1 x

Receivables collection period (days) 258 250 282 251 225 210 200

Payables payment period (days) 60 69 87 81 67 64 61

Cash conversion cycle (Days) 320 301 304 278 245 228 198

CAPEX and Cash Flow in EUR m


Free Cash Flow Generation


Working Capital


ISRA Vision


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DISCLOSURE ACCORDING TO §34B OF THE GERMAN SECURITIES TRADING ACT (WHPG), THE ORDINANCE ON THE ANALYSIS OF FINANCIAL INSTRUMENTS (FINANV) AND MAR INCL. COMMISSION DELEGATED REGULATION (EU) 2016/958

The valuation underlying the investment recommendation for the company analysed here is based on generally accepted and widely used methods of

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http://www.mmwarburg.de/disclaimer/disclaimer.htm#Valuation). The result of this fundamental valuation is modified to take into consideration the

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Independent of the applied valuation methods, there is the risk that the price target will not be met, for instance because of unforeseen changes in

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SOURCES

All data and consensus estimates have been obtained from FactSet except where stated otherwise.

http://www.mmwarburg.de/disclaimer/disclaimer.htm#Valuation

ISRA Vision


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-1- Warburg Research, or an affiliated company, or an employee of one of these companies responsible for the compilation of the research, hold

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-2-

Warburg Research, or an affiliated company, within the last twelve months participated in the management of a consortium for an issue in

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Company Disclosure Link to the historical price targets and rating changes (last 12 months)

ISRA Vision 5 http://www.mmwarburg.com/disclaimer/disclaimer_en/DE0005488100.htm

http://www.mmwarburg.com/disclaimer/disclaimer_en/DE0005488100.htm

ISRA Vision


INVESTMENT RECOMMENDATION

Investment recommendation: expected direction of the share price development of the financial instrument up to the given price target in the opinion of

the analyst who covers this financial instrument.

-B- Buy: The price of the analysed financial instrument is expected to rise over the next 12 months.

-H- Hold: The price of the analysed financial instrument is expected to remain mostly flat over the next 12

months.

-S- Sell: The price of the analysed financial instrument is expected to fall over the next 12 months.

“-“ Rating suspended: The available information currently does not permit an evaluation of the company.

WARBURG RESEARCH GMBH – ANALYSED RESEARCH UNIVERSE BY RATING

Rating Number of stocks % of Universe

Buy 109 53

Hold 88 43

Sell 7 3

Rating suspended 1 0

Total 205 100

WARBURG RESEARCH GMBH – ANALYSED RESEARCH UNIVERSE BY RATING L

L taking into account only those companies which were provided with major investment services in the last twelve months.

Rating Number of stocks % of Universe

Buy 29 71

Hold 10 24

Sell 1 2

Rating suspended 1 2

Total 41 100

PRICE AND RATING HISTORY ISRA VISION AS OF 04.09.2017

Markings in the chart show rating changes by Warburg Research

GmbH in the last 12 months. Every marking details the date and

closing price on the day of the rating change.

ISRA Vision


EQUITIES Roland Rapelius +49 40 3282-2673 Head of Equities [email protected] RESEARCH Michael Heider +49 40 309537-280 Jochen Reichert +49 40 309537-130 Head of Research [email protected] Telco, Internet, Media [email protected]

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Tim Beckmann +49 40 3282-2665 Sanjay Oberoi +49 69 5050-7410 United Kingdom [email protected] United Kingdom [email protected]

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Matthias Fritsch +49 40 3282-2696 Juliane Willenbruch +49 40 3282-2694 United Kingdom [email protected] Roadshow/Marketing [email protected]

SALES TRADING Oliver Merckel +49 40 3282-2634 Bastian Quast +49 40 3282-2701 Head of Sales Trading [email protected] Sales Trading [email protected] Elyaz Dust +49 40 3282-2702 Jörg Treptow +49 40 3282-2658 Sales Trading [email protected] Sales Trading [email protected] Michael Ilgenstein +49 40 3282-2700 Jan Walter +49 40 3282-2662 Sales Trading [email protected] Sales Trading [email protected] MACRO RESEARCH Carsten Klude +49 40 3282-2572 Dr. Christian Jasperneite +49 40 3282-2439 Macro Research [email protected] Investment Strategy [email protected] Our research can be found under: Warburg Research http://research.mmwarburg.com/en/index.html Thomson Reuters www.thomsonreuters.com Bloomberg MMWA GO Capital IQ www.capitaliq.com FactSet www.factset.com For access please contact:

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