h&a top picks 2020...h&a alpha portfolio review the h&a alpha portfolio continued to meaningfully...

Please refer to important disclosures at the end of the report

H&A TOP Picks 2020

48% Alpha Performance YTD

Frederik Bitter

Analyst +49 40 450 6342 3091 [email protected]

Aliaksandr Halitsa


Alina Köhler


Christian Salis Analyst +49 40 414 3885 96 [email protected]

Christian Sandherr Analyst +49 (40) 4143885 79 [email protected]

Tim Wunderlich, CFA Analyst +49 40 4143885 81 [email protected]

13. October 2020


2 Hauck & Aufhäuser Privatbankiers AG

Hauck & Aufhäuser 48% Alpha Performance YTD

13. October 2020

H&A Alpha portfolio review

The H&A Alpha portfolio continued to meaningfully outperform its benchmarks. It returned 47% year to date, translating into c. 48% alpha vs. the MDAX and 42% vs. the SDAX. Since inception, the portfolio retuned 84%, beating its benchmarks by approximately 61% and 56%.

Notably, the top five picks this year (WEW, FTK, WAC, LPK and DEZ) outperformed their benchmarks by an average of 118%.

Source: Hauck & Aufhäuser, Bloomberg

The following table incudes our current holdings and their respective alpha generation vs. the MDAX since their inclusion in the H&A alpha list:

Source: Hauck & Aufhäuser, Bloomberg; relative performance vs. MDAX as of 12.10.2020

Below, we are reviewing our portfolio highlights:

Westwing (in on April 16th; 414% alpha) looks set to release another very strong

set of Q3 results, hardly showing any slowdown of growth despite the reopening

of brick-and-mortar stores. In fact, Q3 sales are seen to grow by at least 55% yoy

which should drive continued profitability improvement thanks to substantial

operating leverage. Therefore, the company looks set to achieve at least the top-

end of its upgraded FY’20 guidance of 40-50% yoy sales growth (eH&A: 50% yoy,

eCons: 45% yoy) and an adj. EBITDA margin of 6-8% (eH&A: 8.2%, eCons: 7.5%).

With that, Westwing continues to outgrow most e-commerce peers while at the

same time delivering excellent profitability and cash flow. Hence, news flow is seen

to remain very positive while the stock’s valuation discount to peers looks

unjustified (0.7x vs 2x EV/sales 2021E).

AMS AG

Buy; PT EUR 32.00

Upside / Downside: 39.9%

DEUTZ AG Buy; PT EUR 7.50


Dialog Semiconductor PLC Buy; PT EUR 49.50


Eckert & Ziegler AG Buy; PT EUR 52.50


LPKF Laser & Electronics AG Buy; PT EUR 40.00


S&T AG Buy; PT EUR 33.00


SAF-HOLLAND SE Buy; PT EUR 15.00


Wacker Neuson SE Buy; PT EUR 23.50


Westwing Group AG Buy; PT EUR 35.00


Zalando SE Buy; PT EUR 110.00


70

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01/19 03/19 05/19 07/19 09/19 11/19 01/20 03/20 05/20 07/20 09/20

MDAX SDAX H&A ALPHA PORTFOLIO

Company Ticker L/S Inclusion Absolut perf. Relative perf.

WESTWING GROUP A WEW GY L 16.04. 443.3% 414.1%

WACKER NEUSON SE WAC GY L 12.05. 60.0% 41.9%

LPKF LASER & ELE LPK GY L 13.01. 33.0% 33.9%

DEUTZ AG DEZ GY L 26.05. 40.2% 29.5%

AMS AG AMS SW L 17.09. 30.8% 28.9%

ECKERT & ZIEGLER EUZ GY L 12.05. 36.2% 18.0%

DIALOG SEMICOND DLG GY L 05.05. 36.4% 14.6%

SAF-HOLLAND SE SFQ GY L 24.08. 12.3% 10.4%

ZALANDO SE ZAL GR L 01.10. 6.7% 3.8%

S&T AG SANT GY L 12.03. 29.9% -9.7%



Wacker Neuson (in on May 13th; 42% alpha) is a cyclical recovery play and an

attractive value opportunity trading at roughly goodwill adjusted book value. Over

the recent years the company has significantly optimized its production footprint and

internal processes allowing for structurally higher margins and FCF generation. With

that, the company looks set to generate c. € 100m EBIT during the COVID crisis

(2020E), while being strongly FCF positive (> € 160m). More importantly, as

business gradually normalizes, Wacker looks well positioned to surprise positively

in 2021 benefiting from a range of structural savings and reversals of negative one-

time effects.

LPKF (in on January 13th; 34% alpha) has announced a > € 18m solar framework

agreement (eH&A; with Chinese CNBM, undisclosed by LPKF), with further growth

potential on the table. This provides confidence in the midterm guidance, which aims

for a 10-15% CAGR through 2019-24E in the core business. On top of that, positive

LIDE news flow in the form of further license agreements and a small order

announcement is expected during the remainder of the year, in our view. Across all

applications, LPKF targets € 150-200m sales with high-margin technology LIDE in

2024. Hence, valuation (13x PE FY’22) looks undemanding considering excellent

ROCE of 30%+ by FY’21E, a remarkable growth profile (70% EPS CAGR 20-22E),

and a business model transformation towards recurring foundry / license revenues.

Deutz (in on May 27th; 30% alpha) The latest ifo data for September once again

underlines the building economic recovery from the trough in April, with now five

months of subsequent improvement in business expectations among German

companies. As for DEUTZ’ earnings: they should recover materially from Q3-20

thanks to (a) improving op. leverage, (b) an increasing profit contribution from the

China business and (c) restructuring related cost savings (DEUTZ has announced

with Q2 results to cut 1,000 employees or 20% of its workforce). All said, our new

estimates post Q2-20 reporting imply adj. EBIT of almost €150m by 2022E vs.

c.€80m in FY-19, a material CAGR of c.24%.

AMS (in on September 17th; 29% alpha) reported Q3 prelims at the upper end of its

guidance. One should expect a strong Q4 on the back of (1) the normal seasonality

in the consumer electronics business, (2) strong end market demand related to

Apple’s iPhone 12 launch in October and (3) a gradual recovery of its automotive

and industrial business(eH&A 20% yoy sales growth), Thanks to Osram’s recovery

being well on track, coupled with its internal efficiency program, acquisition-related

synergies and AMS’ strong underlying business, FCF should strongly increase

enabeling a quick deleveraging to



valuation is underpinned by the recent Maxim takeover at premium multiples; 27x

EV/EBITDA and 36x PE 2021E compared to 8x EV/EBITDA and 16x PE 2021E for

Dialog.

SAF Holland (in on August 24th; 10% alpha) The latest strong improvements in N-

American truck and trailer net orders in August and September, certainly confirm our

positive view on the stock. First, there is a sequential business improvement

underway thanks to a cyclical economic recovery driving transportation activity and

hence demand for truck and trailer component suppliers, such as SAF-HOLLAND.

The company sees a continued improvement in both the OE (Original Equipment;

75% of sales) and the AM (Aftermarket; 25%) business from the trough in April.

Second, the adj. EBIT margin guidance for 2020 of 3-5% is deliberately

conservative, in our view, given that SAF reported a margin of 5.0% in H1-20 already

and sales volumes are expected to recover in H2-20 thereby driving positive

economies of scale. Third, the company guides for sustainably lower capex which

should drive FCF: SAF wants to spend € 20-25m (2.0-2.5%) annually on capex (ratio

in line with key peer JOST) vs. the previous guidance for 2020-22 of around 3-4%.

The lower capex levels should support FCF development, helping to further reduce

financial leverage (adj. net debt to adj. EBITDA stands at 2.5x as per end of Q2-20).

Zalando (in on October 1st; 4% alpha) is seen to be one of the key beneficiaries of

the COVID-19 crisis which should be reflected in excellent Q3 results. We expect

27% GMV growth yoy despite a tough comparable base, outperforming the general

run-rate of 20-25% yoy. This should enable strong profitability improvement thanks

to operating leverage and lower than expected marketing costs. Hence, adj. EBIT is

seen to arrive at € 61m in Q3, putting us c. 50% ahead of eCons (€ 39m). As a result,

the FY’20 guidance looks conservative and our new estimates put us 20% above

the top-end of the current adj. EBIT guidance (€ 250-300m, eH&A: € 350, eCons:

€ 286m). To this end, the guidance upgrade by Boozt last week should serve as an

excellent x-read for Zalando.

AMS AG Austria - High-tech Engineering

09-October-20

Buy (old: Buy)

Price target: CHF 32.00 (old: CHF 32.00) Christian Sandherr Analyst

Price: CHF 22.88 Next result: Q3 '20: 30.12.99

Bloomberg: AMS SW Market cap: CHF 6,275.7 m [email protected]

Reuters: AMS.S Enterprise Value: CHF 9,166.0 m Tel.: +49 (40) 4143885 79

Strong Q3 in the books, more to come AMS reported Q3 sales at the upper end of the guidance range ($ 530-570m) at

$ 564m, eH&A 570m. While this does imply a 13% yoy sales decline one needs to keep in mind (1) the high comps from last year (Q3 2019: +35% yoy), (2) an ongoing weakness in AMS’ automotive and industrial business (c.18% of sales) and (3) delayed product launches at the company’s largest customer Apple (eH&A 35-40% of sales).

While the company has not provided a first indication on the business development during the fourth quarter, we do expect a strong quarter on the back of (1) the normal

seasonality in the consumer electronics business, (2) strong end market demand related to Apple’s iPhone 12 launch in October and (3) a gradual recovery of its automotive and industrial business; eH&A 20% yoy sales growth, which is inline with H1 growth.

Beyond 2020, growth of AMS excl. Osram (13% 2019-22E CAGR) should by fuelled by:

A recovery of the smartphone market. While 2020 looks set to be a difficult year

with an estimated 12% yoy volume decline, 2021/22E should show notable improvements on the back of an economic recovery and higher sales of 5G phones. Industry expert IDC expects a 10% recovery next year and 5% growth in 2022.

This is seen to clearly benefit the company’s 3D sensing and BOLED solutions.

Structural trend towards a continuously rising level of autonomous driving.

ADAS, which broadly function on LiDAR, should be THE growth driver for automotive semis in the mid to long-term (Gartner: 24% CAGR 2019-23E). We expect AMS’ VCSEL sales to sharply increase from $ 25m in 2019 to $ 200m by 2022E, partially supported by the recently signed supply agreement between Ibeo

Automotive Systems and Great Wall Motor.

What’s more, Osram’s operational recovery seems well on track as indicated by the

company’s FY’21 guidance of 6-10% yoy sales growth with both core segments (Opto and Automotive, c. 78% of group sales) benefiting from an improving end market recovery, particularly in China and the US. The resulting positive operating leverage coupled with its internal efficiency program, acquisition-related synergies and AMS’ strong underlying business are seen to support FCF generation, allowing to de-lever the combined entity to

AMS AG


Source: Hauck & Aufhäuser, Bloomberg

AMS AG Price Currency Market CapEV/Sales

21E (x)

EV/Sales

22E (x)

EV/EBITDA

21E (x)

EV/EBITDA

22E (x)

EV/EBIT

21E (x)

EV/EBIT

22E (x)PER 21E (x) PER 22E (x)

CIRRUS LOGIC INC 70.4 USD 4,109 3.1 2.8 13.7 11.2 16.1 11.6 21.7 18.0

DIALOG SEMICOND 40.2 EUR 2,894 2.1 2.1 9.5 8.8 13.0 12.1 13.5 12.0

INFINEON TECH 26.8 EUR 34,946 3.4 3.1 12.6 11.1 24.1 19.1 28.5 23.2

MAXIM INTEGRATED 71.4 USD 19,103 8.4 8.0 21.7 19.4 24.5 20.4 29.4 26.5

NXP SEMICONDUCTO 134.8 USD 37,648 4.1 3.8 11.9 10.2 17.0 11.6 18.8 15.4

SEMTECH CORP 56.6 USD 3,688 6.4 5.8 23.2 19.1 n.a. n.a. 33.6 26.8

STMICROELECTRONI 28.5 EUR 25,969 2.4 2.2 10.1 8.5 16.1 12.8 19.2 15.3

SKYWORKS SOLUTIO 151.6 USD 25,314 7.0 6.3 15.8 13.9 20.4 18.5 22.0 18.6

AMS AG 22.9 CHF 6,276 1.2 1.0 6.2 4.5 15.3 8.9 14.4 8.7

Average (peer group) 4.6 4.3 14.8 12.8 18.8 15.1 23.4 19.5

Premium+/discount- in (%) -74% -76% -58% -65% -18% -41% -38% -55%

Implied fair value 104.6 104.1 65.1 70.2 30.8 39.7 37.1 51.2

Median (peer group) 3.7 3.4 13.1 11.2 17.0 12.8 21.9 18.3

Premium+/discount- in (%) -68% -71% -53% -60% -10% -30% -34% -53%

Implied fair value 83.6 82.9 57.2 60.7 27.5 32.7 34.7 48.2

AMS AG


Financials

Profit and loss (USD m) 2016 2017 2018 2019 2020E 2021E 2022E

Sales 610.4 1,213.8 1,627.4 2,085.9 4,051.4 6,516.4 7,039.2

Sales growth -11.7 % 98.8 % 34.1 % 28.2 % 94.2 % 60.8 % 8.0 %

Cost of sales 290.7 746.2 1,184.8 1,286.0 2,729.1 4,118.1 4,366.7

Gross profit 319.8 467.6 442.6 799.9 1,322.4 2,398.3 2,672.5

Sales and marketing 0.0 0.0 0.0 0.0 150.7 303.4 339.7

General and administration 107.0 158.9 162.1 193.6 394.5 554.6 577.6

Research and development 153.8 244.2 272.8 289.0 488.1 768.5 825.6

Other operating income 46.2 24.5 11.9 69.2 74.5 78.0 86.0

Other operating expenses 1.6 2.4 4.9 20.8 261.4 279.4 160.4

Unusual or infrequent items 0.0 0.0 0.0 -2.0 0.0 0.0 0.0

EBITDA 172.7 256.1 257.3 673.7 583.1 1,297.8 1,615.9

Depreciation 37.7 79.4 142.6 204.0 377.7 610.9 627.0

EBITA 135.0 176.6 114.7 469.7 205.4 686.8 989.0

Amortisation of goodwill 0.0 0.0 0.0 0.0 57.5 47.2 47.2

Amortisation of intangible assets 31.4 90.0 100.0 106.0 103.2 116.4 133.7

Impairment charges 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBIT (inc revaluation net) 103.5 86.6 14.7 363.7 44.7 523.3 808.1

Interest income 9.9 3.0 86.0 6.6 8.6 13.7 18.0

Interest expenses 5.4 5.5 -3.5 21.0 74.9 89.4 89.4

Other financial result 0.0 0.0 0.0 0.0 6.6 5.9 8.3

Financial result 4.4 -2.5 89.5 -14.3 -59.8 -69.8 -63.1

Recurring pretax income from continuing operations 107.9 84.1 104.2 349.4 -15.0 453.5 744.9

Extraordinary income/loss 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Earnings before taxes 107.9 84.1 104.2 349.4 -15.0 453.5 744.9

Taxes -6.3 -17.1 -2.4 17.7 -6.7 45.3 74.5

Net income from continuing operations 114.2 101.3 106.6 331.7 -8.3 408.1 670.4

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

Net income 114.2 101.3 106.6 331.7 -8.3 408.1 670.4

Minority interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net profit (reported) 114.2 101.3 106.6 331.7 -8.3 408.1 670.4

Average number of shares 67.2 81.9 81.8 81.9 274.3 274.3 274.3

EPS reported 1.70 1.24 1.30 4.05 -0.03 1.49 2.44

Profit and loss (common size) 2016 2017 2018 2019 2020E 2021E 2022E

Sales 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Cost of sales 47.6 % 61.5 % 72.8 % 61.7 % 67.4 % 63.2 % 62.0 %

Gross profit 52.4 % 38.5 % 27.2 % 38.3 % 32.6 % 36.8 % 38.0 %

Sales and marketing 0.0 % 0.0 % 0.0 % 0.0 % 3.7 % 4.7 % 4.8 %

General and administration 17.5 % 13.1 % 10.0 % 9.3 % 9.7 % 8.5 % 8.2 %

Research and development 25.2 % 20.1 % 16.8 % 13.9 % 12.0 % 11.8 % 11.7 %

Other operating income 7.6 % 2.0 % 0.7 % 3.3 % 1.8 % 1.2 % 1.2 %

Other operating expenses 0.3 % 0.2 % 0.3 % 1.0 % 6.5 % 4.3 % 2.3 %

Unusual or infrequent items 0.0 % 0.0 % 0.0 % neg. 0.0 % 0.0 % 0.0 %

EBITDA 28.3 % 21.1 % 15.8 % 32.3 % 14.4 % 19.9 % 23.0 %

Depreciation 6.2 % 6.5 % 8.8 % 9.8 % 9.3 % 9.4 % 8.9 %

EBITA 22.1 % 14.6 % 7.0 % 22.5 % 5.1 % 10.5 % 14.0 %

Amortisation of goodwill 0.0 % 0.0 % 0.0 % 0.0 % 1.4 % 0.7 % 0.7 %

Amortisation of intangible assets 5.1 % 7.4 % 6.1 % 5.1 % 2.5 % 1.8 % 1.9 %

Impairment charges 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

EBIT (inc revaluation net) 17.0 % 7.1 % 0.9 % 17.4 % 1.1 % 8.0 % 11.5 %

Interest income 1.6 % 0.2 % 5.3 % 0.3 % 0.2 % 0.2 % 0.3 %

Interest expenses 0.9 % 0.5 % neg. 1.0 % 1.8 % 1.4 % 1.3 %

Other financial result 0.0 % 0.0 % 0.0 % 0.0 % 0.2 % 0.1 % 0.1 %

Financial result 0.7 % neg. 5.5 % neg. neg. neg. neg.

Recurring pretax income from continuing operations 17.7 % 6.9 % 6.4 % 16.7 % neg. 7.0 % 10.6 %

Extraordinary income/loss 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Earnings before taxes 17.7 % 6.9 % 6.4 % 16.7 % neg. 7.0 % 10.6 %

Tax rate -5.8 % -20.4 % -2.3 % 5.1 % 7.5 % 10.0 % 10.0 %

Net income from continuing operations 18.7 % 8.3 % 6.5 % 15.9 % neg. 6.3 % 9.5 %

Result from discontinued operations (net of tax) 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Net income 18.7 % 8.3 % 6.5 % 15.9 % neg. 6.3 % 9.5 %

Minority interest 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Net profit (reported) 18.7 % 8.3 % 6.5 % 15.9 % neg. 6.3 % 9.5 %

Source: Company data, Hauck & Aufhäuser

AMS AG


Balance sheet (USD m) 2016 2017 2018 2019 2020E 2021E 2022E

Intangible assets 669.8 1,348.8 1,393.9 1,248.0 1,642.5 1,593.1 1,537.0

Property, plant and equipment 354.4 1,137.4 1,376.6 1,250.3 2,683.2 2,528.5 2,385.9

Financial assets 40.2 120.8 40.7 1,147.0 -158.8 -241.8 -241.8

FIXED ASSETS 1,064.4 2,607.1 2,811.2 3,645.3 4,166.8 3,879.9 3,681.1

Inventories 103.1 289.7 353.6 232.5 958.3 1,001.9 1,069.8

Accounts receivable 107.8 325.0 138.1 223.4 747.4 844.2 906.9

Other current assets 65.6 140.7 55.1 240.7 663.3 686.7 700.0

Liquid assets 192.5 329.0 713.3 553.7 802.5 1,474.8 2,370.0

Deferred taxes 39.3 29.7 18.6 9.5 481.0 493.3 493.3

Deferred charges and prepaid expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0

CURRENT ASSETS 508.3 1,114.1 1,278.8 1,259.8 3,652.5 4,500.9 5,539.9

TOTAL ASSETS 1,572.7 3,721.2 4,090.0 4,905.1 7,819.3 8,380.8 9,221.0

SHAREHOLDERS EQUITY 741.0 945.5 1,476.2 1,869.4 1,643.0 2,085.5 2,823.1

MINORITY INTEREST 0.0 0.0 0.0 0.0 565.2 558.0 565.1

Long-term debt 404.1 1,390.5 1,824.5 1,579.9 1,878.9 1,886.7 1,886.7

Provisions for pensions and similar obligations 22.3 50.7 92.0 124.7 329.2 367.7 404.4

Other provisions 81.8 78.0 18.8 75.9 276.6 290.9 300.5

Non-current liabilities 508.2 1,519.1 1,935.3 1,780.6 2,484.7 2,545.3 2,591.7

short-term liabilities to banks 119.9 669.1 251.0 864.8 1,484.6 1,500.8 1,500.8

Accounts payable 75.7 351.9 200.7 149.9 736.1 759.4 799.1

Advance payments received on orders 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other liabilities (incl. from lease and rental contracts) 74.8 159.1 151.8 171.2 816.9 842.5 851.9

Deferred taxes 59.9 76.5 74.9 69.3 88.8 89.3 89.3

Deferred income 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Current liabilities 330.3 1,256.6 678.5 1,255.1 3,126.4 3,192.0 3,241.2

TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 1,579.5 3,721.2 4,090.0 4,905.1 7,819.3 8,380.8 9,221.0

Balance sheet (common size) 2016 2017 2018 2019 2020E 2021E 2022E

Intangible assets 42.4 % 36.2 % 34.1 % 25.4 % 21.0 % 19.0 % 16.7 %

Property, plant and equipment 22.4 % 30.6 % 33.7 % 25.5 % 34.3 % 30.2 % 25.9 %

Financial assets 2.5 % 3.2 % 1.0 % 23.4 % neg. neg. neg.

FIXED ASSETS 67.4 % 70.1 % 68.7 % 74.3 % 53.3 % 46.3 % 39.9 %

Inventories 6.5 % 7.8 % 8.6 % 4.7 % 12.3 % 12.0 % 11.6 %

Accounts receivable 6.8 % 8.7 % 3.4 % 4.6 % 9.6 % 10.1 % 9.8 %

Other current assets 4.2 % 3.8 % 1.3 % 4.9 % 8.5 % 8.2 % 7.6 %

Liquid assets 12.2 % 8.8 % 17.4 % 11.3 % 10.3 % 17.6 % 25.7 %

Deferred taxes 2.5 % 0.8 % 0.5 % 0.2 % 6.2 % 5.9 % 5.3 %

Deferred charges and prepaid expenses 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

CURRENT ASSETS 32.2 % 29.9 % 31.3 % 25.7 % 46.7 % 53.7 % 60.1 %

TOTAL ASSETS 99.6 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

SHAREHOLDERS EQUITY 46.9 % 25.4 % 36.1 % 38.1 % 21.0 % 24.9 % 30.6 %

MINORITY INTEREST 0.0 % 0.0 % 0.0 % 0.0 % 7.2 % 6.7 % 6.1 %

Long-term debt 25.6 % 37.4 % 44.6 % 32.2 % 24.0 % 22.5 % 20.5 %

Provisions for pensions and similar obligations 1.4 % 1.4 % 2.3 % 2.5 % 4.2 % 4.4 % 4.4 %

Other provisions 5.2 % 2.1 % 0.5 % 1.5 % 3.5 % 3.5 % 3.3 %

Non-current liabilities 32.2 % 40.8 % 47.3 % 36.3 % 31.8 % 30.4 % 28.1 %

short-term liabilities to banks 7.6 % 18.0 % 6.1 % 17.6 % 19.0 % 17.9 % 16.3 %

Accounts payable 4.8 % 9.5 % 4.9 % 3.1 % 9.4 % 9.1 % 8.7 %

Advance payments received on orders 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Other liabilities (incl. from lease and rental contracts) 4.7 % 4.3 % 3.7 % 3.5 % 10.4 % 10.1 % 9.2 %

Deferred taxes 3.8 % 2.1 % 1.8 % 1.4 % 1.1 % 1.1 % 1.0 %

Deferred income 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Current liabilities 20.9 % 33.8 % 16.6 % 25.6 % 40.0 % 38.1 % 35.1 %

TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %


AMS AG


Cash flow statement (USD m) 2016 2017 2018 2019 2020E 2021E 2022E

Net profit/loss 114.2 101.3 106.6 331.7 -8.3 408.1 670.4

Depreciation of fixed assets (incl. leases) 37.7 79.4 142.6 204.0 549.0 610.9 627.0



Others -41.0 20.0 84.4 49.4 9.0 27.5 33.1

Cash flow from operations before changes in w/c 142.4 290.6 433.6 691.1 698.9 1,210.1 1,511.4

Increase/decrease in inventory -11.4 -179.8 -63.9 96.2 70.0 -43.6 -67.8

Increase/decrease in accounts receivable -5.3 -220.8 186.9 -88.6 117.6 -96.8 -62.7

Increase/decrease in accounts payable -8.8 132.5 -151.2 -3.7 -44.0 23.3 39.7

Increase/decrease in other working capital positions -16.4 -48.6 -59.4 19.4 -221.4 25.6 9.4

Increase/decrease in working capital -41.9 -316.8 -87.6 23.2 -77.7 -91.5 -81.4

Cash flow from operating activities 100.5 -26.1 346.0 714.4 621.1 1,118.7 1,430.1

CAPEX 101.8 615.1 471.2 200.9 349.7 520.5 609.2

Payments for acquisitions 48.3 -44.0 32.0 9.0 0.0 0.0 0.0

Financial investments 5.6 -23.9 -3.7 896.0 1,872.3 0.0 0.0

Income from asset disposals 73.9 14.5 26.3 94.2 0.0 0.0 0.0

Cash flow from investing activities -81.7 -532.7 -473.2 -1,011.7 -2,222.0 -520.5 -609.2

Cash flow before financing 18.8 -558.8 -127.2 -297.4 -1,600.9 598.1 820.9

Increase/decrease in debt position 192.2 1,027.2 712.6 267.3 0.0 0.0 0.0

Purchase of own shares 95.1 139.9 198.4 34.5 -11.7 0.0 0.0

Capital measures 0.0 0.0 0.0 0.0 1,838.0 0.0 0.0

Dividends paid 38.5 27.8 31.5 0.0 0.0 0.0 0.0

Others -3.8 -10.6 -19.0 -74.6 0.0 74.2 74.2

Effects of exchange rate changes on cash 0.0 -28.7 33.7 1.1 0.0 0.0 0.0

Cash flow from financing activities 54.7 848.9 463.8 158.3 1,849.7 74.2 74.2

Increase/decrease in liquid assets 73.6 261.3 370.3 -138.0 248.8 672.4 895.2

Liquid assets at end of period 188.5 436.5 699.4 553.7 802.5 1,474.8 2,370.0


AMS AG


Key ratios (USD m) 2016 2017 2018 2019 2020E 2021E 2022E

P&L growth analysis

Sales growth -11.7 % 98.8 % 34.1 % 28.2 % 94.2 % 60.8 % 8.0 %

EBITDA growth -20.3 % 48.3 % 49.0 % 163.1 % 126.6 % 92.6 % 177.1 %

EBIT growth -36.7 % -16.3 % -85.8 % 319.7 % 204.3 % 43.9 % 1706.1 %

EPS growth -29.9 % -27.2 % -23.3 % 227.4 % -102.3 % -63.2 % -8146.1 % Efficiency

Total operating costs / sales 35.4 % 31.4 % 26.3 % 20.8 % 30.1 % 28.1 % 25.8 %

Sales per employee 370.3 692.4 1,884.7 2,345.2 n/a n/a n/a

EBITDA per employee 104.7 146.1 297.9 757.5 n/a n/a n/a

Balance sheet analysis

Avg. working capital / sales 21.3 % 16.5 % 13.3 % 13.6 % 15.6 % 10.7 % 15.3 %

Inventory turnover (sales/inventory) 5.9 4.2 4.6 9.0 4.2 6.5 6.6

Trade debtors in days of sales 64.5 97.7 31.0 39.1 67.3 47.3 47.0

A/P turnover [(A/P*365)/sales] 95.1 172.1 61.8 42.5 98.4 67.3 66.8

Cash conversion cycle (days) 98.8 67.3 78.1 62.6 97.1 68.8 69.6

Cash flow analysis

Free cash flow -1.3 -641.2 -125.2 513.4 271.4 598.1 820.9

Free cash flow/sales -0.2 % -52.8 % -7.7 % 24.6 % 6.7 % 9.2 % 11.7 %

FCF / net profit neg. neg. neg. 154.8 % neg. 146.6 % 122.4 %

Capex / depn 155.2 % 348.9 % 192.7 % 353.9 % 318.2 % 67.2 % 75.4 %

Capex / maintenance capex 187.4 % 473.4 % 205.8 % 66.6 % 101.0 % 119.6 % 118.7 %

Capex / sales 17.6 % 48.7 % 28.7 % 52.6 % 54.8 % 8.0 % 8.7 %

Security

Net debt 331.5 1,730.6 1,362.2 1,891.0 2,561.1 1,912.7 1,017.5

Net Debt/EBITDA 1.9 6.8 5.3 2.8 4.4 1.5 0.6

Net debt / equity 0.4 1.8 0.9 1.0 1.6 0.9 0.4

Interest cover 19.0 15.7 -4.2 17.3 0.6 5.9 9.0

Dividend payout ratio 24.3 % 30.9 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Asset utilisation

Capital employed turnover 0.4 0.4 0.4 0.5 0.7 1.0 0.9

Operating assets turnover 1.2 0.9 1.0 1.3 1.1 1.8 2.0

Plant turnover 1.7 1.1 1.2 1.7 1.5 2.6 3.0


Returns

ROCE 8.1 % 3.8 % 0.6 % 9.5 % 0.9 % 9.3 % 11.8 %

ROE 15.4 % 10.7 % 7.2 % 17.7 % -0.5 % 19.6 % 23.7 %

Other

Interest paid / avg. debt 1.3 % 0.4 % -0.3 % 0.9 % 2.8 % 3.1 % 2.6 %

No. employees (average) 1649 1753 864 889 0 0 0

Number of shares 67.2 81.9 81.8 81.9 274.3 274.3 274.3

DPS 0.3 0.4 0.0 0.0 0.0 0.0 0.0

EPS reported 1.70 1.24 1.30 4.05 -0.03 1.49 2.44

Valuation ratios

P/BV 2.0 1.9 1.3 1.0 3.6 2.8 2.1

EV/sales 3.0 2.9 2.0 1.8 2.1 1.2 1.0

EV/EBITDA 10.4 13.6 12.6 5.5 14.7 6.2 4.5

EV/EBITA 13.4 19.7 28.4 7.8 41.7 11.6 7.3

EV/EBIT 17.4 40.1 221.3 10.1 191.5 15.3 8.9

EV/FCF -1394.5 -5.4 -26.0 7.2 31.6 13.4 8.8

Adjusted FCF yield 7.2 % 5.1 % 2.6 % 17.6 % 3.7 % 10.8 % 15.1 %

Dividend yield 1.5 % 1.6 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %


DEUTZ AG Germany - Engineering

02-October-20

Buy (old: Buy)

Price target: EUR 7.50 (old: EUR 7.50) Frederik Bitter Analyst

Price: EUR 5.02 Next result: Q3-20 10.11.20

Bloomberg: DEZ GR Market cap: EUR 606.1 m [email protected]

Reuters: DEZG.DE Enterprise Value: EUR 806.0 m Tel.: +49 40 450 6342 3091

Further AM expansion strategically sensible. Buy confirmed.

Faster-than-expected execution on the AM growth initiative: By 2022 DEUTZ wants

to achieve at least € 2bn in group sales (FY-19: € 1.8bn) and a 7-8% adj. EBIT margin (FY-19: 4.3%). The aftermarket (AM) business is a key pillar to achieve these targets. Among others, the company aims to open new sales channels (e.g. direct business with fleet operators), expand its existing service network (e.g. new service centers) and digitalise its AM offering (e.g. remote monitoring and servicing). In 2018 DEUTZ announced to target >€ 400m AM sales by 2022. At the beginning of this year, this target has been brought forward to 2021, suggesting strong project execution by management.

Highly profitable and growing healthily: In FY-19 the AM business accounted for some

€ 350m in sales, i.e. a share of 19%. This compares to just 13-14% (€ 200m) in 2007/08. Since new CEO Frank Hiller joined in 2017, making AM a key growth priority, AM growth accelerated from 3-4% p.a. (2012-16) to 7% p.a. (2017-19). Crucially, the 2021 >€ 400m AM sales target implies annual growth rates of about 7% to be sustained until 2021E.

Critically-important business, in good and bad times: The expansion of the AM

business not only matters in absolute sales terms, but more importantly in terms of profitability, given the above-average EBIT margin achieved in AM (eH&A: >10% vs. OE 0-5%). What’s more, the AM is rather more resilient i.e. less cyclical compared to the new engine (OE) business. In 2008/09 OE dropped by 48% (vs. 2007 levels), but AM only declined by 14%. A solid AM business is thus essential to counter the cyclical fluctuations in the OE business, thereby protecting group profitability and margins.

Step-by-step, organically and inorganically: Management employs a combination of

organic (e.g. expansion of the service network in the Middle-East in 2019) and inorganic initiatives. Consodering that just 10% of all >800 dealers globally are owned by DEUTZ, the latest acquisitions are easily put into context. For instance, end of 2019 it acquired Dutch DPS Power Group and yesterday DEUTZ announced to acquire three entities in Austria / Czech Republic, in order to expand its AM offering in Eastern Europe.

Sensible strategy and execution underlining our Buy case: We welcome the

continued expansion of the profitable AM business. It underlines management’s commitment to increase the sales and earnings resilience of DEUTZ, while, at the same time, structurally improving its margin profile. It thus underlines our Buy recommendation with unchanged PT of € 7.50 (FCFY ‘21E). DEUTZ is constituent of the H&A Alpha List.


High/low 52 weeks: 6.03 / 2.74

Price/Book Ratio: 1.1

Relative performance (SDAX):

3 months 12.9 %

6 months 15.2 %

12 months -17.7 %

Changes in estimates

Sales EBIT EPS

2020 old: 1,301.9 -90.4 -0.58

∆ - - -

2021 old: 1,598.0 68.9 0.43

∆ - - -

2022 old: 1,937.4 149.8 0.97

∆ - - -

Key share data:

Number of shares: (in m pcs) 120.9

Authorised capital: (in € m) -

Book value per share: (in €) 4.6

Ø trading volume: (12 months) 300,000

Major shareholders:

Free Float 100.0 %

Company description:

Non-captive engine manufacturer with specialisation in off-highway segments.

Y/E 31.12 (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E Sales 1,260.2 1,479.1 1,778.8 1,840.8 1,301.9 1,598.0 1,937.4

Sales growth 1 % 17 % 20 % 3 % -29 % 23 % 21 %

EBITDA 114.2 237.3 161.4 175.5 1.1 158.2 242.3

EBIT 23.4 143.8 82.0 88.1 -90.4 68.9 149.8

Net income 16.6 118.5 69.9 52.3 -98.2 52.1 117.5

Net debt -31.6 -98.2 -93.7 15.2 92.3 28.1 -36.2

Net gearing -6.4 % -16.8 % -15.1 % 2.3 % 16.7 % 4.6 % -5.1 %

Net Debt/EBITDA 0.0 0.0 0.0 0.1 81.3 0.2 0.0

EPS pro forma 0.14 0.39 0.58 0.38 -0.58 0.43 0.97

CPS -0.03 0.41 0.33 0.43 -0.40 0.32 0.95

DPS 0.07 0.15 0.15 0.00 0.00 0.07 0.15

Dividend yield 1.4 % 3.0 % 3.0 % 0.0 % 0.0 % 1.4 % 3.0 %

Gross profit margin 17.3 % 17.3 % 17.5 % 17.9 % 15.9 % 21.4 % 23.1 %

EBITDA margin 9.1 % 16.0 % 9.1 % 9.5 % 0.1 % 9.9 % 12.5 %

EBIT margin 1.9 % 9.7 % 4.6 % 4.8 % -6.9 % 4.3 % 7.7 %

ROCE 2.7 % 16.4 % 8.8 % 9.1 % -9.6 % 7.5 % 15.0 %

EV/sales 0.6 0.4 0.4 0.4 0.6 0.5 0.3

EV/EBITDA 6.2 2.7 4.0 4.0 709.6 4.7 2.8

EV/EBIT 30.2 4.5 7.8 8.1 -8.9 10.8 4.5

PER 36.5 5.1 8.7 11.6 -6.2 11.6 5.2

Adjusted FCF yield 6.2 % 23.5 % 14.6 % 12.6 % -5.8 % 10.5 % 21.5 %

Source: Company data, Hauck & Aufhäuser Close price as of: 01.10.2020

DEUTZ AG


Quarterly Estimates

Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020

reported reported reported reported reported reported reported eH&A eH&A eH&A

Orders 514.5 438.8 361.9 339.1 1,654.3 356.7 266.9 303.1 325.3 1,252.0

yoy - - - - - -30.7% -39.2% -16.2% -4.1% -24.3%

b-t-b 1.14x 0.92x 0.80x 0.74x 0.90x 1.05x 0.95x 0.99x 0.86x 0.96x

Sales 452.8 477.0 450.1 460.9 1,840.8 339.8 280.2 305.0 376.9 1,301.9

yoy - - - - - -25.0% -41.3% -32.2% -18.2% -29.3%

Adj. EBIT 25.1 22.1 22.0 9.6 78.8 -11.8 -38.1 -7.6 7.1 -50.4

yoy - - - - - n/m n/m -134.7% -25.7% -164.0%

margin 5.5% 4.6% 4.9% 2.1% 4.3% -3.5% -13.6% n/m 1.9% -3.9%

EPS 0.17 0.20 0.08 -0.02 0.43 -0.08 -0.35 -0.42 0.04 -0.81

yoy - - - - - n/m n/m n/m n/m -287.7%


EUR

DEUTZ AG


Financials

Profit and loss (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E

Sales 1,260.2 1,479.1 1,778.8 1,840.8 1,301.9 1,598.0 1,937.4

Sales growth 1.0 % 17.4 % 20.3 % 3.5 % -29.3 % 22.7 % 21.2 %

Cost of sales 1,041.6 1,222.9 1,468.3 1,510.5 1,095.2 1,255.6 1,490.5

Gross profit 218.6 256.2 310.5 330.3 206.7 342.4 446.9






Unusual or infrequent items 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBITDA 114.2 237.3 161.4 175.5 1.1 158.2 242.3

Depreciation 48.8 45.5 43.4 57.9 59.6 62.1 64.8

EBITA 65.4 191.8 118.0 117.6 -58.5 96.1 177.5




EBIT (inc revaluation net) 23.4 143.8 82.0 88.1 -90.4 68.9 149.8

Interest income 0.3 0.7 0.5 1.0 0.4 -0.3 0.6

Interest expenses 3.8 3.1 2.4 2.9 3.5 3.5 3.5

Other financial result 0.0 0.0 0.0 -11.1 0.0 0.0 0.0

Financial result -3.5 -2.4 -1.9 -13.0 -3.1 -3.9 -2.9

Recurring pretax income from continuing operations 19.9 141.4 80.1 75.1 -93.5 65.1 146.9


Earnings before taxes 19.9 141.4 80.1 75.1 -93.5 65.1 146.9

Taxes 3.9 22.9 10.2 22.8 4.7 13.0 29.4

Net income from continuing operations 16.0 118.5 69.9 52.3 -98.2 52.1 117.5


Net income 16.0 118.5 69.9 52.3 -98.2 52.1 117.5

Minority interest -0.6 0.0 0.0 0.0 0.0 0.0 0.0

Net profit (reported) 16.6 118.5 69.9 52.3 -98.2 52.1 117.5


EPS reported 0.14 0.98 0.58 0.43 -0.81 0.43 0.97


Sales 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Cost of sales 82.7 % 82.7 % 82.5 % 82.1 % 84.1 % 78.6 % 76.9 %

Gross profit 17.3 % 17.3 % 17.5 % 17.9 % 15.9 % 21.4 % 23.1 %






Unusual or infrequent items 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

EBITDA 9.1 % 16.0 % 9.1 % 9.5 % 0.1 % 9.9 % 12.5 %

Depreciation 3.9 % 3.1 % 2.4 % 3.1 % 4.6 % 3.9 % 3.3 %

EBITA 5.2 % 13.0 % 6.6 % 6.4 % neg. 6.0 % 9.2 %




EBIT (inc revaluation net) 1.9 % 9.7 % 4.6 % 4.8 % neg. 4.3 % 7.7 %

Interest income 0.0 % 0.0 % 0.0 % 0.1 % 0.0 % neg. 0.0 %

Interest expenses 0.3 % 0.2 % 0.1 % 0.2 % 0.3 % 0.2 % 0.2 %

Other financial result 0.0 % 0.0 % 0.0 % -0.6 % 0.0 % 0.0 % 0.0 %

Financial result neg. neg. neg. neg. neg. neg. neg.

Recurring pretax income from continuing operations 1.6 % 9.6 % 4.5 % 4.1 % neg. 4.1 % 7.6 %


Earnings before taxes 1.6 % 9.6 % 4.5 % 4.1 % neg. 4.1 % 7.6 %

Tax rate 19.6 % 16.2 % 12.7 % 30.4 % -5.0 % 20.0 % 20.0 %

Net income from continuing operations 1.3 % 8.0 % 3.9 % 2.8 % neg. 3.3 % 6.1 %


Net income 1.3 % 8.0 % 3.9 % 2.8 % neg. 3.3 % 6.1 %

Minority interest neg. 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Net profit (reported) 1.3 % 8.0 % 3.9 % 2.8 % neg. 3.3 % 6.1 %


DEUTZ AG


Balance sheet (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E

Intangible assets 148.5 213.2 203.6 216.2 209.2 209.9 212.7

Property, plant and equipment 286.0 273.4 283.8 347.2 339.7 291.6 308.0

Financial assets 49.2 32.7 18.8 56.1 56.1 56.1 56.1

FIXED ASSETS 483.7 519.3 506.2 619.5 605.1 557.6 576.8

Inventories 253.1 287.0 333.5 321.7 310.0 340.0 365.5



Liquid assets 91.8 143.8 132.8 55.3 -21.8 42.4 106.7

Deferred taxes 79.9 69.2 75.9 68.6 68.6 68.6 68.6


CURRENT ASSETS 576.0 678.9 743.1 681.7 548.3 667.0 784.9

TOTAL ASSETS 1,059.7 1,198.2 1,249.3 1,301.2 1,153.4 1,224.6 1,361.7

SHAREHOLDERS EQUITY 491.1 584.1 618.9 652.2 554.0 606.1 715.1


Long-term debt 44.0 28.1 19.3 34.1 34.1 34.1 34.1



Non-current liabilities 332.4 317.4 304.6 299.0 299.0 299.0 299.0

short-term liabilities to banks 16.2 17.5 19.8 36.4 36.4 36.4 36.4




Deferred taxes 0.4 0.2 0.5 0.8 0.8 0.8 0.8

Deferred income 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Current liabilities 236.2 296.5 325.6 349.8 300.2 319.3 347.4





Financial assets 4.6 % 2.7 % 1.5 % 4.3 % 4.9 % 4.6 % 4.1 %

FIXED ASSETS 45.6 % 43.3 % 40.5 % 47.6 % 52.5 % 45.5 % 42.4 %

Inventories 23.9 % 24.0 % 26.7 % 24.7 % 26.9 % 27.8 % 26.8 %



Liquid assets 8.7 % 12.0 % 10.6 % 4.2 % neg. 3.5 % 7.8 %

Deferred taxes 7.5 % 5.8 % 6.1 % 5.3 % 5.9 % 5.6 % 5.0 %


CURRENT ASSETS 54.4 % 56.7 % 59.5 % 52.4 % 47.5 % 54.5 % 57.6 %

TOTAL ASSETS 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %



Long-term debt 4.2 % 2.3 % 1.5 % 2.6 % 3.0 % 2.8 % 2.5 %








Deferred taxes 0.0 % 0.0 % 0.0 % 0.1 % 0.1 % 0.1 % 0.1 %

Deferred income 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %




DEUTZ AG


Cash flow statement (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E

Net profit/loss 16.0 118.5 69.9 52.3 -98.2 52.1 117.5




Others -22.8 -82.8 1.6 -9.3 0.0 0.0 0.0

Cash flow from operations before changes in w/c 82.5 120.4 147.9 127.1 -11.9 141.3 210.1

Increase/decrease in inventory 1.6 -27.6 -43.8 14.1 11.7 -30.0 -25.6

Increase/decrease in accounts receivable -11.1 -24.0 -13.4 9.2 44.5 -24.5 -28.0

Increase/decrease in accounts payable -9.2 43.9 6.8 -34.8 -49.6 19.2 28.1

Increase/decrease in other working capital positions 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Increase/decrease in working capital -18.7 -7.7 -50.4 -11.5 6.6 -35.3 -25.5

Cash flow from operating activities 63.8 112.7 97.5 115.6 -5.3 106.0 184.6

CAPEX 57.8 68.3 78.9 96.5 71.8 101.8 111.8

Payments for acquisitions 0.2 84.0 11.2 57.1 0.0 0.0 0.0

Financial investments 0.0 0.0 0.0 0.0 0.0 0.0 0.0


Cash flow from investing activities -55.4 -27.3 -80.3 -149.4 -71.8 -41.8 -111.8

Cash flow before financing 8.4 85.4 17.2 -33.8 -77.1 64.2 72.8

Increase/decrease in debt position -14.6 -19.9 -18.6 -21.1 0.0 0.0 0.0

Purchase of own shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Capital measures 0.0 -1.3 0.0 0.0 0.0 0.0 0.0

Dividends paid 8.5 8.5 18.1 18.1 0.0 0.0 8.5

Others -3.7 -2.9 8.5 -4.7 0.0 0.0 0.0

Effects of exchange rate changes on cash -2.3 -0.8 0.0 0.2 0.0 0.0 0.0

Cash flow from financing activities -26.8 -32.6 -28.2 -43.9 0.0 0.0 -8.5

Increase/decrease in liquid assets -20.7 52.0 -11.0 -77.5 -77.1 64.2 64.3

Liquid assets at end of period 91.8 143.8 132.8 55.3 -21.8 42.4 106.7

Source: Company data, Hauck & Aufhäuser Regional split (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E

Domestic 221.8 284.3 340.5 310.7 219.7 269.7 327.0

yoy change 35.7 % 28.2 % 19.8 % -8.8 % -29.3 % 22.7 % 21.2 %

Rest of Europe 650.9 725.5 799.2 831.2 587.9 721.6 874.8

yoy change -4.4 % 11.5 % 10.2 % 4.0 % -29.3 % 22.7 % 21.2 %

NAFTA 239.6 268.1 365.3 404.3 285.9 351.0 425.5

yoy change -13.0 % 11.9 % 36.3 % 10.7 % -29.3 % 22.7 % 21.2 %

Asia Pacific 147.9 201.2 273.8 294.6 208.4 255.7 310.1

yoy change 15.9 % 36.0 % 36.1 % 7.6 % -29.3 % 22.7 % 21.2 %

Rest of world 0.0 0.0 0.0 0.0 0.0 0.0 0.0

yoy change n/a n/a n/a n/a n/a n/a n/a

TTL 1,260.2 1,479.1 1,778.8 1,840.8 1,301.9 1,598.0 1,937.4

yoy change 1.0 % 17.4 % 20.3 % 3.5 % -29.3 % 22.7 % 21.2 %


DEUTZ AG


Key ratios (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E

P&L growth analysis

Sales growth 1.0 % 17.4 % 20.3 % 3.5 % -29.3 % 22.7 % 21.2 %

EBITDA growth 1.8 % 107.8 % -32.0 % 8.7 % -99.4 % 13827.2 %

53.2 %

EBIT growth 377.6 % 514.5 % -43.0 % 7.4 % -202.6 % -176.3 % 117.3 %

EPS growth 207.4 % 613.9 % -41.0 % -25.2 % -287.7 % -153.0 % 125.7 %

Efficiency


Sales per employee 340.8 378.3 405.0 386.0 286.3 361.0 394.4

EBITDA per employee 30.9 60.7 36.7 36.8 0.2 35.7 49.3






Cash conversion cycle (days) 64.7 58.9 61.8 64.3 89.8 85.4 76.0

Cash flow analysis

Free cash flow 6.0 44.4 18.6 19.1 -77.1 4.2 72.8

Free cash flow/sales 0.5 % 3.0 % 1.0 % 1.0 % -5.9 % 0.3 % 3.8 %

FCF / net profit 36.1 % 37.5 % 26.6 % 36.5 % neg. 8.1 % 61.9 %

Capex / depn 64.7 % 80.6 % 103.3 % 114.7 % 83.3 % 114.1 % 120.8 %


Capex / sales 4.6 % 4.6 % 4.4 % 5.2 % 5.5 % 6.4 % 5.8 %

Security

Net debt -31.6 -98.2 -93.7 15.2 92.3 28.1 -36.2

Net Debt/EBITDA 0.0 0.0 0.0 0.1 81.3 0.2 0.0

Net debt / equity neg. neg. neg. 0.0 0.2 0.0 neg.

Interest cover 6.2 46.4 34.2 30.4 0.0 19.6 42.5


Asset utilisation



Plant turnover 4.4 5.4 6.3 5.3 3.8 5.5 6.3


Returns

ROCE 2.7 % 16.4 % 8.8 % 9.1 % -9.6 % 7.5 % 15.0 %

ROE 3.4 % 20.3 % 11.3 % 8.0 % -17.7 % 8.6 % 16.4 %

Other

Interest paid / avg. debt 5.7 % 5.9 % 5.7 % 5.3 % 5.0 % 5.0 % 5.0 %


Number of shares 120.9 120.9 120.9 120.9 120.9 120.9 120.9

DPS 0.1 0.2 0.2 0.0 0.0 0.1 0.2

EPS reported 0.14 0.98 0.58 0.43 -0.81 0.43 0.97

Valuation ratios

P/BV 1.2 1.0 1.0 0.9 1.1 1.0 0.8

EV/sales 0.6 0.4 0.4 0.4 0.6 0.5 0.3

EV/EBITDA 6.2 2.7 4.0 4.0 709.6 4.7 2.8

EV/EBITA 10.8 3.4 5.4 6.0 -13.8 7.7 3.8

EV/EBIT 30.2 4.5 7.8 8.1 -8.9 10.8 4.5

EV/FCF 117.8 14.5 34.5 37.2 -10.4 175.9 9.2

Adjusted FCF yield 6.2 % 23.5 % 14.6 % 12.6 % -5.8 % 10.5 % 21.5 %

Dividend yield 1.4 % 3.0 % 3.0 % 0.0 % 0.0 % 1.4 % 3.0 %


Dialog Semiconductor PLC Germany - High-tech Engineering

09-October-20

Buy (old: Buy)

Price target: EUR 49.50 (old: EUR 48.50) Christian Sandherr Analyst

Price: EUR 40.25 Next result: Final Q3 11.05.20

Bloomberg: DLG GR Market cap: EUR 2,900.8 m [email protected]

Reuters: DLGS.DE Enterprise Value: EUR 2,623.9 m Tel.: +49 (40) 4143885 79

Not only home office powered growth; chg. est. & PT Q3 revenues came in at $386m, ahead of the guidance of $340 to $380m and street expectations (eH&A $360m, eCons $ 363m). While it implies a 5.5% yoy sales decline,

one should focus on the underlying performance of Dialog, i.e. excluding the main PMIC business with Apple, which is being phased out. Assuming a main PMIC sales decline similar to Q2, the underlying business should have grown by 20% yoy. The main driver should be the unbroken demand for products related to the home office effect such

as wearables, hearables, notebooks and tablets, particularly from its key customer Apple.

Most importantly, the company highlighted to expect this trend to carry on into Q4. Hence, one should expect an upbeat guidance for Q4 with the final Q3 numbers on November 5th. We now expect sales of $ 355m, which is a 7% yoy decline but a roughly 13% yoy increase of the company’s underlying business; eCons $ 361m.

While the home office tailwinds are likely to fade at some point, Dialog can rely on plenty other pockets of growth in the mid-term:

Battery Management ICs enable faster and safer charging for various consumer

electronics and could for instance also be used to enable wireless charging of accessories such as a smartwatch from a phone. As Dialog is already engaged in product developments with all top 5 smartphone OEMs, management sees the potential to increase sales to > $ 250m by ‘23E from $ 20-30m this year.

Automotive: Dialog is continuously gaining traction, supported by its recent design

wins of power management ICs for infotainment and ADAS platforms; i.e. sub and main PMICs for Renesas Electronics and Telechips. Coupled with its BLE and lighting ICs sales should reach at least $ 50m in 2022E, eH&A.

Consumer and industrial IoT sales are seen to be propelled by the acquisitions of

Adesto, Creative Chips and FCI. Besides their consolidation effects, they also bear significant cross selling opportunities for products such as BLE solutions for connected health and Industry 4.0 applications; c. $110m sales by ‘22E, eH&A.

Action: We increase our estimates to reflect a longer lasting home office effect.

Dialog offers (1) secular growth prospects with plenty pockets of growth (2) a solid balance sheet with > $ 300m net cash at the end of FY20 despite the c. $ 500m Adesto acquisition and (3) strong FCF generation of $ 214m in 2021E.

Dialog remains a BUY and a new € 49.5 PT (old: € 48.5), based on DCF.


High/low 52 weeks: 48.10 / 18.16


Relative performance (TecDAX):

3 months -4.4 %

6 months 42.2 %

12 months -18.8 %


Sales EBIT EPS

2020 old: 1,221.5 175.6 1.84

∆ 5.8% 7.7% 7.6%

2021 old: 1,257.8 252.5 2.80

∆ 1.6% 1.6% 1.6%

2022 old: 1,327.6 271.8 3.11

∆ 1.0% 1.0% 1.0%

Key share data:


Authorised capital: (in € m) 39.2



Major shareholders:

Free Float 87.7 %

Dialog Semiconductor 5.2 %

Norges 4.1 %

JP Morgan 3.5 %

Tsinghua University 2.8 %


Dialog Semiconductor designs integrated chips mainly used in handheld devices to manage and optimise power consumption.

Y/E 31.12 (USD m) 2016 2017 2018 2019 2020E 2021E 2022E Sales 1,197.6 1,352.8 1,442.1 1,566.2 1,292.0 1,277.6 1,340.6

Sales growth -12 % 13 % 7 % 9 % -18 % -1 % 5 %

EBITDA 374.8 259.8 280.3 471.7 266.1 330.4 348.4

EBIT 309.8 187.0 199.7 379.9 189.1 256.4 274.4

Net income 260.9 169.4 139.8 301.5 146.9 205.1 220.4

Net debt -619.2 -445.9 -433.2 -706.4 -325.7 -499.7 -677.8

Net gearing -52.0 % -33.2 % -33.3 % -44.9 % -19.5 % -27.3 % -33.8 %

Net Debt/EBITDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EPS pro forma 1.54 2.21 1.80 2.43 1.98 2.84 3.14

CPS 2.71 3.02 2.98 5.93 2.11 2.98 3.18

DPS 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Dividend yield 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %


EBITDA margin 31.3 % 19.2 % 19.4 % 30.1 % 20.6 % 25.9 % 26.0 %

EBIT margin 25.9 % 13.8 % 13.8 % 24.3 % 14.6 % 20.1 % 20.5 %

ROCE 26.0 % 14.0 % 13.4 % 21.7 % 9.6 % 12.2 % 12.1 %

EV/sales 2.4 2.2 2.1 1.7 2.3 2.2 1.8

EV/EBITDA 7.8 11.6 10.7 5.6 11.3 8.3 7.1

EV/EBIT 9.4 16.1 15.0 6.9 16.0 10.7 9.0

PER 30.1 21.0 25.8 19.1 23.4 16.3 14.8



Dialog Semiconductor PLC


Financials

Profit and loss (USD m) 2016 2017 2018 2019 2020E 2021E 2022E

Sales 1,197.6 1,352.8 1,442.1 1,566.2 1,292.0 1,277.6 1,340.6

Sales growth -11.6 % 13.0 % 6.6 % 8.6 % -17.5 % -1.1 % 4.9 %

Cost of sales 650.9 732.2 751.1 717.7 646.0 619.6 640.8

Gross profit 546.7 620.7 691.1 848.5 646.0 658.0 699.8






Unusual or infrequent items 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBITDA 374.8 259.8 280.3 471.7 266.1 330.4 348.4

Depreciation 26.0 30.8 31.5 39.6 32.0 30.0 30.0

EBITA 348.8 229.0 248.8 432.1 234.1 300.4 318.4





Interest income 3.7 6.0 9.9 22.0 5.0 4.4 5.4


Other financial result -4.8 3.1 -10.3 -5.5 0.0 0.0 0.0

Financial result -4.6 7.8 -3.5 5.2 3.0 2.4 4.8

Recurring pretax income from continuing operations 305.2 194.8 196.2 385.0 192.1 258.8 279.3


Earnings before taxes 305.2 194.8 196.2 385.0 192.1 258.8 279.3

Taxes 47.1 25.4 55.3 83.6 45.2 53.8 58.9

Net income from continuing operations 258.1 169.4 140.9 301.5 146.9 205.1 220.4


Net income 258.1 169.4 140.9 301.5 146.9 205.1 220.4

Minority interest -2.8 0.0 1.1 0.0 0.0 0.0 0.0

Net profit (reported) 260.9 169.4 139.8 301.5 146.9 205.1 220.4


EPS reported 3.43 2.34 1.89 4.13 2.04 2.93 3.25


Sales 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Cost of sales 54.3 % 54.1 % 52.1 % 45.8 % 50.0 % 48.5 % 47.8 %

Gross profit 45.7 % 45.9 % 47.9 % 54.2 % 50.0 % 51.5 % 52.2 %






Unusual or infrequent items 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

EBITDA 31.3 % 19.2 % 19.4 % 30.1 % 20.6 % 25.9 % 26.0 %

Depreciation 2.2 % 2.3 % 2.2 % 2.5 % 2.5 % 2.3 % 2.2 %

EBITA 29.1 % 16.9 % 17.3 % 27.6 % 18.1 % 23.5 % 23.8 %





Interest income 0.3 % 0.4 % 0.7 % 1.4 % 0.4 % 0.3 % 0.4 %


Other financial result -0.4 % 0.2 % -0.7 % -0.3 % 0.0 % 0.0 % 0.0 %

Financial result neg. 0.6 % neg. 0.3 % 0.2 % 0.2 % 0.4 %

Recurring pretax income from continuing operations 25.5 % 14.4 % 13.6 % 24.6 % 14.9 % 20.3 % 20.8 %


Earnings before taxes 25.5 % 14.4 % 13.6 % 24.6 % 14.9 % 20.3 % 20.8 %

Tax rate 15.4 % 13.0 % 28.2 % 21.7 % 23.0 % 20.0 % 20.0 %

Net income from continuing operations 21.6 % 12.5 % 9.8 % 19.2 % 11.4 % 16.1 % 16.4 %


Net income 21.6 % 12.5 % 9.8 % 19.2 % 11.4 % 16.1 % 16.4 %

Minority interest neg. 0.0 % 0.1 % 0.0 % 0.0 % 0.0 % 0.0 %

Net profit (reported) 21.8 % 12.5 % 9.7 % 19.2 % 11.4 % 16.1 % 16.4 %




Balance sheet (USD m) 2016 2017 2018 2019 2020E 2021E 2022E

Intangible assets 376.8 675.1 657.0 754.2 1,137.6 1,124.3 1,113.8



FIXED ASSETS 468.8 813.9 736.9 863.1 1,340.6 1,324.2 1,313.4

Inventories 105.3 168.9 149.7 122.6 143.6 142.0 149.0



Liquid assets 697.2 479.3 689.1 1,024.5 643.9 817.8 995.9

Deferred taxes 27.4 20.2 6.0 8.2 8.2 8.2 8.2


CURRENT ASSETS 961.7 762.9 980.3 1,313.9 936.9 1,107.9 1,298.7

TOTAL ASSETS 1,430.5 1,576.8 1,717.1 2,177.0 2,277.4 2,432.1 2,612.1

SHAREHOLDERS EQUITY 1,189.8 1,342.4 1,302.5 1,572.6 1,671.5 1,830.5 2,006.9


Long-term debt 78.0 33.4 59.1 193.8 193.8 193.8 193.8








Deferred taxes 2.0 4.0 8.2 18.5 18.5 18.5 18.5

Deferred income 0.0 0.0 0.0 0.0 0.0 0.0 0.0







FIXED ASSETS 32.8 % 51.6 % 42.9 % 39.6 % 58.9 % 54.4 % 50.3 %

Inventories 7.4 % 10.7 % 8.7 % 5.6 % 6.3 % 5.8 % 5.7 %



Liquid assets 48.7 % 30.4 % 40.1 % 47.1 % 28.3 % 33.6 % 38.1 %

Deferred taxes 1.9 % 1.3 % 0.4 % 0.4 % 0.4 % 0.3 % 0.3 %


CURRENT ASSETS 67.2 % 48.4 % 57.1 % 60.4 % 41.1 % 45.6 % 49.7 %

TOTAL ASSETS 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %



Long-term debt 5.5 % 2.1 % 3.4 % 8.9 % 8.5 % 8.0 % 7.4 %








Deferred taxes 0.1 % 0.3 % 0.5 % 0.8 % 0.8 % 0.8 % 0.7 %

Deferred income 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %






Cash flow statement (USD m) 2016 2017 2018 2019 2020E 2021E 2022E

Net profit/loss 258.1 169.4 140.9 301.5 146.9 205.1 220.4




Others -52.1 2.1 69.3 198.3 0.0 0.0 0.0

Cash flow from operations before changes in w/c 269.1 244.3 290.8 591.6 223.9 279.1 294.4

Increase/decrease in inventory 29.6 -54.4 19.2 23.2 -20.9 1.6 -7.0

Increase/decrease in accounts receivable -8.1 11.1 -36.3 -95.2 17.3 1.3 -5.7

Increase/decrease in accounts payable -41.9 7.8 14.9 -23.1 1.6 -4.3 3.5

Increase/decrease in other working capital positions 0.0 75.8 0.0 0.0 1.0 2.0 3.0

Increase/decrease in working capital -20.4 40.4 -2.2 -95.1 -1.1 0.6 -6.2

Cash flow from operating activities 248.8 284.7 288.6 496.5 222.8 279.6 288.2

CAPEX 53.4 75.1 57.1 36.0 54.4 57.7 63.2




Cash flow from investing activities -63.8 -357.7 -70.0 -147.9 -554.4 -57.7 -63.2

Cash flow before financing 185.0 -73.0 218.7 348.5 -331.6 222.0 225.0

Increase/decrease in debt position 0.0 0.0 -1.7 -0.2 0.0 0.0 0.0


Capital measures 0.0 0.0 3.6 0.0 0.0 0.0 0.0

Dividends paid 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Others -1.2 -20.0 0.0 248.9 0.0 0.0 0.0

Effects of exchange rate changes on cash 0.0 0.2 -0.3 1.2 1.0 2.0 3.0

Cash flow from financing activities -54.7 -145.1 -19.8 -3.1 -50.0 -50.0 -50.0

Increase/decrease in liquid assets 130.3 -217.9 198.6 346.7 -380.6 174.0 178.0

Liquid assets at end of period 697.2 479.3 677.8 1,024.5 643.9 817.8 995.9




Key ratios (USD m) 2016 2017 2018 2019 2020E 2021E 2022E

P&L growth analysis

Sales growth -11.6 % 13.0 % 6.6 % 8.6 % -17.5 % -1.1 % 4.9 %

EBITDA growth 18.4 % -30.7 % 7.9 % 68.3 % -43.6 % 24.2 % 5.4 %

EBIT growth 19.3 % -39.6 % 6.8 % 90.2 % -50.2 % 35.6 % 7.0 %

EPS growth 49.5 % -31.8 % -19.2 % 118.7 % -50.6 % 43.6 % 10.7 %

Efficiency


Sales per employee 1,096.6 1,153.5 1,108.8 1,080.2 833.6 774.3 1,574.4

EBITDA per employee 343.2 221.5 215.5 325.3 171.7 200.3 409.2






Cash conversion cycle (days) n/a n/a n/a n/a n/a n/a n/a

Cash flow analysis

Free cash flow 195.4 209.6 231.5 460.5 168.4 222.0 225.0

Free cash flow/sales 16.3 % 15.5 % 16.1 % 29.4 % 13.0 % 17.4 % 16.8 %

FCF / net profit 74.9 % 123.7 % 165.6 % 152.8 % 114.6 % 108.2 % 102.1 %

Capex / depn 100.3 % 123.3 % 70.9 % 39.1 % 70.7 % 77.9 % 85.4 %


Capex / sales 5.3 % 6.6 % 4.0 % 2.3 % 4.2 % 4.5 % 4.7 %

Security

Net debt -619.2 -445.9 -433.2 -706.4 -325.7 -499.7 -677.8

Net Debt/EBITDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net debt / equity neg. neg. neg. neg. neg. neg. neg.

Interest cover 89.9 143.6 63.7 33.6 94.5 128.2 457.4


Asset utilisation



Plant turnover 17.2 16.1 21.7 15.3 6.6 6.6 6.9


Returns

ROCE 26.0 % 14.0 % 13.4 % 21.7 % 9.6 % 12.2 % 12.1 %

ROE 21.9 % 12.6 % 10.7 % 19.2 % 8.8 % 11.2 % 11.0 %

Other



Number of shares 76.0 74.5 74.0 72.9 71.9 69.9 67.9

DPS 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EPS reported 3.43 2.34 1.89 4.13 2.04 2.93 3.25

Valuation ratios

P/BV 3.1 2.7 2.8 2.2 2.1 1.8 1.6

EV/sales 2.4 2.2 2.1 1.7 2.3 2.2 1.8

EV/EBITDA 7.8 11.6 10.7 5.6 11.3 8.3 7.1

EV/EBITA 8.3 13.2 12.1 6.1 12.9 9.2 7.8

EV/EBIT 9.4 16.1 15.0 6.9 16.0 10.7 9.0

EV/FCF 14.9 14.4 13.0 5.7 17.9 12.4 11.0


Dividend yield 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %


Eckert & Ziegler AG Germany - High-tech Engineering

12-October-20

Buy (old: Buy)

Price target: EUR 52.50 (old: EUR 52.50) Aliaksandr Halitsa Analyst

Price: EUR 44.40 Next result: Q3: 10.11.2020

Bloomberg: EUZ GR Market cap: EUR 929.3 m [email protected]

Reuters: EUZG.DE Enterprise Value: EUR 853.3 m Tel.: +49 40 414 3885 83

Canada makes use of radiotherapeutics and EUZ is there to help

Since October, two of the largest Canadian provinces Quebec and Ontario have announced that patients with advanced neuroendocrine tumors (NETs) can now benefit from highly effective radiopharmaceutical therapy Lutathera from Novartis.

To recap: Lutathera is an injectable radiotherapeutic that uses radioactive isotope

Lutetium-177 (lu-177) to kill tumor cells without damaging healthy tissue. Prior to its administration, a Gallium-68 (ga-68)-based imaging needs to be performed and this is where ga-68 generators come in handy.

Earlier in April, Health Canada approved a kit (called NETSPOT) for the preparation of the ga-68-based injection for localization and evaluation of NETs. Being one of a handful of suppliers of ga-68 generators, EUZ is an integral part of the value chain.

In this context, the recent approval of EUZ’ ga-68 generators in Canada and subsequent exclusive distribution partnership signed with Jubilant Radiopharma is excellent news.

In 2019, Lutathera generated revenues of $ 400m. While the growth stalled temporarily

due to the COVID pandemic with flat revenues in H1 2020, there’s little doubt that Lutathera is far from saturation. In fact, peak revenues are forecast at $ 2bn. This is

why Novartis announced to build a new 50,000-square foot manufacturing plant for radiopharmaceuticals, which compares to 16,000-square facility owned the developer of Lutathera that was later acquired by Novartis.

EUZ, on the other hand, currently makes € 30m sales with generators (eH&A) used in clinical and scientific settings. Based on its current approved capacity, EUZ could double the current volumes to c. 700 generators (eH&A). The next radiotherapeutic awaiting an approval in 2021-2022 targets prostate cancer, which addresses significantly larger patient population than Lutathera and likewise requires ga68-based imaging.

Hence, going from € 30m sales to € 60m with generators should be a matter of time.

This could yield c. € 20m EBIT given contribution margin of >60% (eH&A). Positively, competitive landscape looks thin with only two commercial generators (incl. EUZ)

available and another one looking to receive an approval. Better yet, in light of rapidly increasing demand for gallium-68, competition between the existing suppliers should be strongly subdued.

BUY with € 52.5 PT based on DCF.


High/low 52 weeks: 50.38 / 24.60


Relative performance (SDAX):

3 months 8.2 %

6 months 9.2 %

12 months -6.7 %


Sales EBIT EPS

2020 old: 178.4 32.1 1.07

∆ - - -

2021 old: 197.1 37.0 1.25

∆ - - -

2022 old: 215.3 42.9 1.45

∆ - - -

Key share data:


Authorised capital: (in € m) 0.6



Major shareholders:

Free float 67.8 %

Founders 32.2 %

Eckert & Ziegler AG 0.1 %


Produces and markets a wide range of industrial and medical applications featuring radioactive isotopes, including prostate seed implants, calibration standards and radiation afterloaders.

Y/E 31.12 (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E Sales 119.9 138.6 168.7 178.5 178.4 197.1 215.3

Sales growth -14 % 16 % 22 % 6 % 0 % 10 % 9 %

EBITDA 24.9 26.6 32.0 43.1 43.2 48.1 53.9

EBIT 16.1 18.0 23.4 32.1 32.1 37.0 42.9

Net income 9.5 14.7 16.1 22.0 22.1 25.6 29.8

Net debt -24.9 -56.0 -54.1 -78.9 -89.4 -97.6 -119.2

Net gearing -23.7 % -49.8 % -44.1 % -57.1 % -59.7 % -58.4 % -63.1 %

Net Debt/EBITDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EPS pro forma 1.93 2.19 3.12 1.06 1.07 1.25 1.45

CPS 2.42 3.54 2.53 1.46 0.87 0.98 1.34

DPS 0.66 0.80 1.20 0.35 0.36 0.42 0.48

Dividend yield 1.5 % 1.8 % 2.7 % 0.8 % 0.8 % 0.9 % 1.1 %


EBITDA margin 20.8 % 19.2 % 18.9 % 24.2 % 24.2 % 24.4 % 25.0 %

EBIT margin 13.5 % 13.0 % 13.9 % 18.0 % 18.0 % 18.8 % 19.9 %

ROCE 12.0 % 13.8 % 17.6 % 22.5 % 22.4 % 25.2 % 20.4 %

EV/sales 1.8 1.4 1.1 4.8 4.8 4.3 3.8

EV/EBITDA 8.8 7.1 6.0 20.0 19.8 17.6 15.3

EV/EBIT 13.6 10.5 8.2 26.9 26.6 22.8 19.2

PER 23.4 15.6 11.3 39.7 38.8 33.0 27.6



Eckert & Ziegler AG


Financials

Profit and loss (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E

Sales 119.9 138.6 168.7 178.5 178.4 197.1 215.3

Sales growth -14.2 % 15.7 % 21.7 % 5.8 % -0.1 % 10.5 % 9.2 %

Cost of sales 60.3 74.8 94.4 91.5 90.6 98.6 105.5

Gross profit 59.6 63.9 74.3 87.0 87.8 98.6 109.8






Unusual or infrequent items 0.9 -1.2 0.2 -0.2 0.0 0.0 0.0

EBITDA 24.9 26.6 32.0 43.1 43.2 48.1 53.9

Depreciation 8.7 8.6 8.6 11.1 11.1 11.1 11.1

EBITA 16.1 18.0 23.4 32.1 32.1 37.0 42.9





Interest income 0.4 0.3 0.2 0.3 0.3 0.3 0.3


Other financial result 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Financial result -0.7 -0.6 -0.5 -0.8 -0.8 -0.8 -0.8

Recurring pretax income from continuing operations 15.4 17.3 22.9 31.2 31.3 36.2 42.0


Earnings before taxes 15.4 17.3 22.9 31.2 31.3 36.2 42.0

Taxes 5.0 5.3 6.0 8.8 8.8 10.2 11.8

Net income from continuing operations 10.4 12.0 16.9 22.5 22.5 26.0 30.2

Result from discontinued operations (net of tax) -0.7 3.1 0.0 0.0 0.0 0.0 0.0

Net income 9.8 15.1 16.9 22.5 22.5 26.0 30.2

Minority interest 0.2 0.4 0.8 0.5 0.5 0.5 0.5

Net profit (reported) 9.5 14.7 16.1 22.0 22.1 25.6 29.8


EPS reported 1.81 2.78 3.12 1.07 1.07 1.25 1.45


Sales 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Cost of sales 50.3 % 53.9 % 55.9 % 51.2 % 50.8 % 50.0 % 49.0 %

Gross profit 49.7 % 46.1 % 44.1 % 48.8 % 49.2 % 50.0 % 51.0 %






Unusual or infrequent items 0.7 % neg. 0.1 % neg. 0.0 % 0.0 % 0.0 %

EBITDA 20.8 % 19.2 % 18.9 % 24.2 % 24.2 % 24.4 % 25.0 %

Depreciation 7.3 % 6.2 % 5.1 % 6.2 % 6.2 % 5.6 % 5.1 %

EBITA 13.5 % 13.0 % 13.9 % 18.0 % 18.0 % 18.8 % 19.9 %





Interest income 0.4 % 0.2 % 0.1 % 0.2 % 0.2 % 0.1 % 0.1 %


Other financial result 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Financial result neg. neg. neg. neg. neg. neg. neg.

Recurring pretax income from continuing operations 12.9 % 12.5 % 13.6 % 17.5 % 17.5 % 18.4 % 19.5 %


Earnings before taxes 12.9 % 12.5 % 13.6 % 17.5 % 17.5 % 18.4 % 19.5 %

Tax rate 32.2 % 30.7 % 26.2 % 28.1 % 28.1 % 28.1 % 28.1 %

Net income from continuing operations 8.7 % 8.7 % 10.0 % 12.6 % 12.6 % 13.2 % 14.0 %

Result from discontinued operations (net of tax) -0.6 % 2.2 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Net income 8.2 % 10.9 % 10.0 % 12.6 % 12.6 % 13.2 % 14.0 %

Minority interest 0.2 % 0.3 % 0.4 % 0.3 % 0.3 % 0.2 % 0.2 %

Net profit (reported) 8.0 % 10.6 % 9.6 % 12.3 % 12.4 % 13.0 % 13.8 %


Eckert & Ziegler AG


Balance sheet (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E

Intangible assets 53.0 51.4 52.5 51.9 51.9 51.9 51.9



FIXED ASSETS 93.7 88.5 93.0 97.1 96.5 100.4 96.6

Inventories 25.1 26.8 28.8 31.2 36.4 40.2 41.4



Liquid assets 36.6 57.7 54.2 78.9 89.5 97.7 119.3

Deferred taxes 9.0 8.8 9.9 10.9 0.0 0.0 0.0


CURRENT ASSETS 105.8 128.5 136.1 177.1 183.7 199.1 225.0

TOTAL ASSETS 199.5 217.0 229.1 274.2 280.2 299.5 321.6

SHAREHOLDERS EQUITY 105.2 112.3 122.6 138.2 149.7 167.2 188.9


Long-term debt 4.1 0.0 0.0 0.0 0.0 0.0 0.0








Deferred taxes 5.6 6.4 7.1 2.8 0.0 0.0 0.0

Deferred income 1.7 3.3 3.6 0.0 0.0 0.0 0.0


TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 199.5 217.0 229.1 274.2 280.2 299.5 321.6





FIXED ASSETS 47.0 % 40.8 % 40.6 % 35.4 % 34.4 % 33.5 % 30.0 %

Inventories 12.6 % 12.3 % 12.6 % 11.4 % 13.0 % 13.4 % 12.9 %



Liquid assets 18.3 % 26.6 % 23.7 % 28.8 % 31.9 % 32.6 % 37.1 %

Deferred taxes 4.5 % 4.1 % 4.3 % 4.0 % 0.0 % 0.0 % 0.0 %


CURRENT ASSETS 53.0 % 59.2 % 59.4 % 64.6 % 65.6 % 66.5 % 70.0 %

TOTAL ASSETS 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %



Long-term debt 2.1 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %








Deferred taxes 2.8 % 3.0 % 3.1 % 1.0 % 0.0 % 0.0 % 0.0 %

Deferred income 0.8 % 1.5 % 1.6 % 0.0 % 0.0 % 0.0 % 0.0 %




Eckert & Ziegler AG


Cash flow statement (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E

Net profit/loss 9.8 15.1 16.9 22.5 22.5 26.0 30.2




Others -0.8 5.5 2.8 10.6 0.0 0.0 0.0

Cash flow from operations before changes in w/c 17.7 29.3 28.2 44.1 33.6 37.1 41.3

Increase/decrease in inventory 0.3 -1.7 0.7 -2.2 -5.2 -3.8 -1.2

Increase/decrease in accounts receivable 2.0 -1.1 -4.0 -1.2 -1.8 -3.3 -3.2

Increase/decrease in accounts payable 0.1 -1.9 2.0 -0.4 1.7 0.5 0.5

Increase/decrease in other working capital positions 0.2 2.2 -5.7 0.0 0.0 0.0 0.0

Increase/decrease in working capital 2.6 -2.5 -7.0 -3.7 -5.3 -6.6 -3.9

Cash flow from operating activities 20.3 26.8 21.2 40.4 28.3 30.6 37.4

CAPEX 5.3 4.2 6.1 7.3 7.3 15.0 7.3



Income from asset disposals 0.0 15.2 -2.5 2.5 0.0 0.0 0.0

Cash flow from investing activities -5.5 5.1 -10.7 -5.7 -10.5 -15.0 -7.3

Cash flow before financing 14.8 31.9 10.5 34.7 17.9 15.6 30.1

Increase/decrease in debt position -3.9 -5.3 -1.7 -2.7 0.0 0.0 0.0


Capital measures 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Dividends paid 3.2 3.5 4.1 6.2 7.3 7.4 8.5

Others -2.5 -1.2 -0.2 -1.7 0.0 0.0 0.0

Effects of exchange rate changes on cash 0.3 -0.8 0.6 0.5 0.0 0.0 0.0

Cash flow from financing activities -9.5 -10.0 -14.6 -10.5 -7.3 -7.4 -8.5

Increase/decrease in liquid assets 5.6 21.1 -3.5 24.7 10.6 8.2 21.6

Liquid assets at end of period 37.0 57.7 54.2 78.9 89.5 97.7 119.3

Source: Company data, Hauck & Aufhäuser Regional split (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E

Domestic 0.0 0.0 0.0 0.0 0.0 0.0 0.0

yoy change n/a n/a n/a n/a n/a n/a n/a

Rest of Europe 74.5 84.9 96.8 110.4 125.9 143.5 163.6

yoy change 3.5 % 14.0 % 14.0 % 14.0 % 14.0 % 14.0 % 14.0 %

NAFTA 46.1 53.0 60.9 70.1 80.6 92.7 106.6

yoy change 3.5 % 15.0 % 15.0 % 15.0 % 15.0 % 15.0 % 15.0 %

Asia Pacific 14.0 15.8 17.9 20.2 22.9 25.8 29.2

yoy change 8.0 % 13.0 % 13.0 % 13.0 % 13.0 % 13.0 % 13.0 %

Rest of world -14.7 -15.1 -7.0 -22.2 -50.9 -64.9 -84.0

yoy change neg. neg. neg. neg. neg. neg. neg.

TTL 119.9 138.6 168.7 178.5 178.4 197.1 215.3

yoy change -14.2 % 15.7 % 21.7 % 5.8 % -0.1 % 10.5 % 9.2 %


Eckert & Ziegler AG


Key ratios (EUR m) 2016 2017 2018 2019 2020E 2021E 2022E

P&L growth analysis

Sales growth -14.2 % 15.7 % 21.7 % 5.8 % -0.1 % 10.5 % 9.2 %

EBITDA growth -7.6 % 7.0 % 20.1 % 35.0 % 0.1 % 11.4 % 12.1 %

EBIT growth -11.2 % 11.4 % 30.1 % 37.1 % 0.1 % 15.3 % 15.8 %

EPS growth -10.5 % 53.9 % 12.3 % -65.6 % 0.1 % 16.0 % 16.4 %

Efficiency


Sales per employee n/a n/a n/a n/a n/a n/a n/a

EBITDA per employee n/a n/a n/a n/a n/a n/a n/a






Cash conversion cycle (days) n/a n/a n/a n/a n/a n/a n/a

Cash flow analysis

Free cash flow 15.0 22.7 15.1 33.2 21.1 15.6 30.1

Free cash flow/sales 12.5 % 16.4 % 8.9 % 18.6 % 11.8 % 7.9 % 14.0 %

FCF / net profit 156.6 % 154.2 % 93.5 % 150.7 % 95.6 % 60.9 % 101.2 %

Capex / depn 61.0 % 53.9 % 71.4 % 65.5 % 94.4 % 135.4 % 65.9 %


Capex / sales 4.4 % 3.4 % 3.6 % 4.1 % 5.9 % 7.6 % 3.4 %

Security

Net debt -24.9 -56.0 -54.1 -78.9 -89.4 -97.6 -119.2

Net Debt/EBITDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net debt / equity neg. neg. neg. neg. neg. neg. neg.

Interest cover 13.9 20.4 34.8 29.3 29.3 33.8 39.1


Asset utilisation



Plant turnover 3.2 4.1 4.6 4.5 4.9 4.9 5.9


Returns

ROCE 12.0 % 13.8 % 17.6 % 22.5 % 22.4 % 25.2 % 20.4 %

ROE 9.1 % 13.1 % 13.2 % 15.9 % 14.7 % 15.3 % 15.8 %

Other



Number of shares 5.3 5.3 5.2 20.5 20.5 20.5 20.5

DPS 0.7 0.8 1.2 0.4 0.4 0.4 0.5

EPS reported 1.81 2.78 3.12 1.07 1.07 1.25 1.45

Valuation ratios

P/BV 2.3 2.1 1.9 6.7 6.2 5.6 4.9

EV/sales 1.8 1.4 1.1 4.8 4.8 4.3 3.8

EV/EBITDA 8.8 7.1 6.0 20.0 19.8 17.6 15.3

EV/EBITA 13.6 10.5 8.2 26.9 26.6 22.8 19.2

EV/EBIT 13.6 10.5 8.2 26.9 26.6 22.8 19.2

EV/FCF 14.7 8.3 12.7 26.0 40.5 54.3 27.3


Dividend yield 1.5 % 1.8 % 2.7 % 0.8 % 0.8 % 0.9 % 1.1 %


LPKF Laser & Electronics AG Germany - High-tech Engineering

28-September-20

Buy (old: Buy)

Price target: EUR 40.00 (old: EUR 40.00) Alina Köhler Analyst

Price: EUR 20.40 Next result: Q3 2020 29.10.20

Bloomberg: LPK GR Market cap: EUR 499.7 m [email protected]

Reuters: LPKG.DE Enterprise Value: EUR 468.2 m Tel.: +49 40 4506 342 3095

Solar contract underpins customer diversification

Topic: LPKF signed a framework agreement with a solar OEM good for > € 18m revenues in Q2 FY’21-22, a first order has been placed

Our view:

The client should be Chinese state-owned CNBM (eH&A, undisclosed by LPKF), which has announced its ambitious intentions to build 1.5GW fabs in four Chinese cities. Following Covid-19 related project delays, the first LPKF laser scriber worth a small- to mid-single-digit € m amount should be shipped in Q2’2

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