isra vision...surface vision sales increased by 10.5% to eur 25.9m and generated an ebit margin of...

ISRA VISION

(SDAX, Technology)

A n a l y s t

Robert-Jan van der Horst

[email protected]

+49 40 309537-290

A n a l y s t

Andreas Wolf

[email protected]

+49 40 309537-140

CO M M E N T Published 06.03.2019 08:15 1

RESEARCH

Buy

EUR 45.00

Price EUR 36.15

Upside 24.5 %

Value Indicators: EUR Share data: Description:

DCF: 45.24

Bloomberg: ISR GR

Reuters: ISRG

ISIN: DE0005488100

Machine vision systems, optical robot guidance systems.

Market Snapshot: EUR m Shareholders: Risk Profile (WRe): 2018/19e

Market cap: 791.6

No. of shares (m): 21.9

EV: 766.2

Freefloat MC: 554.1

Ø Trad. Vol. (30d): 3.40 m

Freefloat 70.0 %

CEO 25.2 %

ISRA VISION Management 4.8 %

BlackRock 3.3 %

Beta: 1.1

Price / Book: 3.6 x

Equity Ratio: 65 %

Strong start to the year

Stated Figures Q1/2018/19: Comment on Figures:

FY End: 30.9. in EUR m

Q1 18/19

Q1 18/19e

Q1 17/18 yoy 18/19e 17/18 yoy

Sales 34.2 34.0 31.2 10 % 168.2 152.5 10 %

EBIT 6.9 6.7 6.3 11 % 37.2 33.2 12 %

Margin 20.3 % 19.6 % 20.0 % 22.1 % 21.8 %

Net income 5.1 4.7 4.3 19 % 25.6 23.1 11 %

� Strong growth driven by Surface Vision business � Profitability increases slightly as a result of efficiency gains in both

business units. � Surface Vision sales up 10.5% to EUR 25.9m; EBIT margin 21.3% � Industrial Automation sales up 6.8% to EUR 8.3m; EBIT margin 19.9%

Revenues increased by 9.5% to EUR 34.2m, slightly exceeding our expectation of EUR 34.0m. As a result of further efficiency gains, the EBIT

margin improved by 30bps to 20.3% (EBIT EUR 6.9m) and came in ahead of our estimate of 19.6%. There was an even more dynamic

increase in net income which rose by 18.6% to EUR 5.1m.

The good performance was driven by increasing demand for ISRA’s surface inspection systems. Surface Vision sales increased by 10.5% to

EUR 25.9m and generated an EBIT margin of 21.3% (+9bps yoy). Business with the metal, advanced materials and print industry was

especially strong. Industrial Automation, which provides mainly premium automotive manufacturers and OEMs with smart factory, robot vision

and 3D inspection solutions, grew by a mere 6.8% to EUR 8.3m, generating an EBIT margin of 19.9% (+27bps yoy). In Europe, revenues grew

at a double-digit rate while there was only a slight increase in Asia compared to last year, as ISRA is phasing out some less profitable

businesses.

For 2018/19, ISRA is aiming for double-digit sales and earnings growth. Considering the high order backlog of EUR 96m (+16% yoy), we

believe this to be within reach. Furthermore, the strong project pipeline indicates that growth will pick up in Industrial Automation in the coming

quarters. There has also been positive feedback from an increase in marketing activities in America, which should lead to increasing order

momentum in that region.

Organic growth should be accompanied by a larger acquisition (with sales of a mid double-digit million). Management expects to close the deal

within the coming weeks. With EUR 34.2m in cash and no long-term debt, ISRA intends to finance the transaction without a capital increase.

Overall, ISRA had a strong start to the year. Not only is the company back on the 10%-growth path, but after some friction in Q4, the strong

order momentum, the well-filled pipeline and the progress in the acquisition process are also indications of dynamic operational development

and positive news flow for the coming quarters. Our unchanged DCF-based target price of EUR 45 implies an upside of 42%. We confirm our

Buy recommendation.

FY End: 30.9. in EUR m

CAGR (17/18-20/21e) 2014/15 2015/16 2016/17 2017/18 2018/19e 2019/20e 2020/21e

Sales 11.0 % 112.2 128.8 143.0 152.5 168.2 187.6 208.8

Change Sales yoy 9.5 % 14.8 % 11.0 % 6.7 % 10.3 % 11.5 % 11.3 %

Gross profit margin 55.8 % 56.4 % 56.6 % 56.5 % 56.8 % 56.9 % 57.0 %

EBITDA 10.8 % 32.4 37.7 42.8 49.0 54.1 60.2 66.6

Margin 28.9 % 29.3 % 30.0 % 32.1 % 32.2 % 32.1 % 31.9 %

EBIT 12.2 % 22.6 25.6 28.3 33.2 37.2 41.8 46.9

Margin 20.1 % 19.9 % 19.8 % 21.8 % 22.1 % 22.3 % 22.5 %

Net income 11.9 % 14.8 17.6 20.5 23.1 25.6 28.9 32.4

EPS 11.8 % 0.68 0.80 0.94 1.06 1.17 1.32 1.48

EPS adj. 11.8 % 0.68 0.80 0.94 1.06 1.17 1.32 1.48

DPS 6.3 % 0.08 0.10 0.12 0.15 0.16 0.17 0.18

Dividend Yield 0.7 % 0.7 % 0.5 % 0.4 % 0.4 % 0.5 % 0.5 %

FCFPS -0.10 0.85 0.93 0.27 1.39 0.90 1.14

FCF / Market cap -1.0 % 6.3 % 3.7 % 0.7 % 3.8 % 2.5 % 3.1 %

EV / Sales 2.4 x 2.5 x 3.9 x 6.0 x 4.6 x 4.0 x 3.5 x

EV / EBITDA 8.5 x 8.4 x 13.0 x 18.7 x 14.2 x 12.5 x 10.9 x

EV / EBIT 12.2 x 12.4 x 19.7 x 27.6 x 20.6 x 17.9 x 15.6 x

P / E 15.9 x 16.7 x 26.9 x 39.4 x 30.9 x 27.4 x 24.4 x

P / E adj. 15.9 x 16.7 x 26.9 x 39.4 x 30.9 x 27.4 x 24.4 x

FCF Potential Yield 5.6 % 6.1 % 4.3 % 4.3 % 5.6 % 6.4 % 7.2 %

Net Debt 38.1 23.2 4.6 1.7 -25.3 -41.3 -62.4

ROCE (NOPAT) 8.9 % 9.9 % 11.5 % 12.3 % 13.2 % 14.7 % 15.7 % Guidance: Approx. 10% in sales and earnings

Rel. Performance vs SDAX:

1 month: 19.9 %

6 months: -19.5 %

Year to date: 33.4 %

Trailing 12 months: 8.2 %

Company events:

19.03.19 AGM

31.05.19 Q2

30.08.19 Q3

13.12.19 Prel. FY 2018/19

ISRA VISION

CO M M E N T Publ ished 06 .03 .2019 2

RESEARCH

Sales development in EUR m

Source: Warburg Research

Sales by regions 2017/18


EBITDA 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 Robot Vision and 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 controlls around 25% of the company.

Competitive Quality

� Strong competitive position based on ISRA Vision's relatively large size and more than 10,000 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.

EBIT development in EUR m


Sales by segments 2017/18


Net income development in EUR m


ISRA VISION


RESEARCH

DCF model

Detailed forecast period Transitional period Term. Value

Figures in EUR m 18/19e 19/20e 20/21e 21/22e 22/23e 23/24e 24/25e 25/26e 26/27e 27/28e 28/29e 29/30e 30/31e

Sales 168.2 187.6 208.8 231.5 255.9 282.2 310.7 341.8 376.0 413.6 446.6 480.1 492.1

Sales change 10.3 % 11.5 % 11.3 % 10.9 % 10.5 % 10.3 % 10.1 % 10.0 % 10.0 % 10.0 % 8.0 % 7.5 % 2.5 % 2.5 %

EBIT 37.2 41.8 46.9 52.8 58.8 64.6 70.5 76.9 84.6 93.0 100.5 108.0 110.7

EBIT-margin 22.1 % 22.3 % 22.5 % 22.8 % 23.0 % 22.9 % 22.7 % 22.5 % 22.5 % 22.5 % 22.5 % 22.5 % 22.5 %

Tax rate (EBT) 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 %

NOPAT 26.0 29.3 32.8 37.0 41.2 45.2 49.4 53.8 59.2 65.1 70.3 75.6 77.5

Depreciation 16.9 18.4 19.8 22.0 24.1 26.0 28.0 30.1 32.0 35.2 38.0 40.8 41.8

in % of Sales 10.1 % 9.8 % 9.5 % 9.5 % 9.4 % 9.2 % 9.0 % 8.8 % 8.5 % 8.5 % 8.5 % 8.5 % 8.5 %

Changes in provisions 0.1 0.1 0.1 0.5 0.5 0.5 0.5 0.6 0.6 0.7 0.6 0.6 0.2

Change in Liquidity from

- Working Capital -6.5 8.0 7.6 3.3 1.8 0.4 14.3 15.5 17.1 18.8 16.5 16.7 6.0

- Capex 18.9 19.9 19.9 22.0 23.0 24.0 26.4 29.1 32.0 35.2 38.0 40.8 41.8

Capex in % of Sales 11.2 % 10.6 % 9.5 % 9.5 % 9.0 % 8.5 % 8.5 % 8.5 % 8.5 % 8.5 % 8.5 % 8.5 % 8.5 %

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)

30.7 19.8 25.2 34.1 40.9 47.3 37.2 39.9 42.8 47.1 54.4 59.5 71.7 74

PV of FCF 29.1 17.6 20.8 26.4 29.5 31.9 23.4 23.4 23.4 24.1 26.0 26.5 29.8 662 share of PVs 6.79 % 26.59 % 66.61 %

Model parameter Valuation (m)

Derivation of WACC: Derivation of Beta: Present values 2030/31e 332

Terminal Value 662

Debt ratio 7.00 % Financial Strength 1.00 Financial liabilities 33

Cost of debt (after tax) 1.4 % Liquidity (share) 1.00 Pension liabilities 4

Market return 7.00 % Cyclicality 1.20 Hybrid capital 0

Risk free rate 1.50 % Transparency 1.10 Minority interest 2

Others 1.20 Market val. of investments 0

Liquidity 35 No. of shares (m) 21.9

WACC 7.12 % Beta 1.10 Equity Value 991 Value per share (EUR) 45.24

Sensitivity Value per Share (EUR)

Terminal Growth Delta EBIT-margin

Beta WACC 1.75 % 2.00 % 2.25 % 2.50 % 2.75 % 3.00 % 3.25 % Beta WACC -1.5 pp -1.0 pp -0.5 pp +0.0 pp +0.5 pp +1.0 pp +1.5 pp

1.30 8.1 % 33.55 34.35 35.21 36.15 37.18 38.31 39.55 1.30 8.1 % 33.44 34.34 35.25 36.15 37.06 37.96 38.87

1.20 7.6 % 36.95 37.95 39.04 40.24 41.56 43.02 44.65 1.20 7.6 % 37.23 38.23 39.24 40.24 41.24 42.25 43.25

1.15 7.4 % 38.89 40.02 41.25 42.61 44.12 45.80 47.68 1.15 7.4 % 39.42 40.49 41.55 42.61 43.67 44.73 45.79

1.10 7.1 % 41.02 42.29 43.69 45.24 46.97 48.91 51.11 1.10 7.1 % 41.87 42.99 44.12 45.24 46.37 47.49 48.62

1.05 6.9 % 43.36 44.80 46.40 48.19 50.19 52.44 55.01 1.05 6.9 % 44.60 45.79 46.99 48.19 49.38 50.58 51.78

1.00 6.6 % 45.95 47.60 49.44 51.50 53.82 56.47 59.51 1.00 6.6 % 47.67 48.94 50.22 51.50 52.77 54.05 55.33

0.90 6.1 % 52.06 54.24 56.71 59.52 62.75 66.50 70.89 0.90 6.1 % 55.11 56.58 58.05 59.52 60.99 62.47 63.94

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

� EBIT margins are assumed increase further driven by sales growth and operating leverage.

� Working capital requirements are expected to decrease and to converge to the industry average.

� The beta of 1.1 reflects the strong growth track record and the increasing level of customer's market diversification.

ISRA VISION


RESEARCH

Valuation

2014/15 2015/16 2016/17 2017/18 2018/19e 2019/20e 2020/21e Price / Book 1.6 x 1.9 x 3.2 x 4.7 x 3.6 x 3.2 x 2.9 x

Book value per share ex intangibles 1.72 2.20 2.91 3.69 4.61 5.69 6.99

EV / Sales 2.4 x 2.5 x 3.9 x 6.0 x 4.6 x 4.0 x 3.5 x

EV / EBITDA 8.5 x 8.4 x 13.0 x 18.7 x 14.2 x 12.5 x 10.9 x

EV / EBIT 12.2 x 12.4 x 19.7 x 27.6 x 20.6 x 17.9 x 15.6 x

EV / EBIT adj.* 12.2 x 12.4 x 19.7 x 27.6 x 20.6 x 17.9 x 15.6 x

P / FCF n.a. 15.8 x 27.1 x 152.8 x 26.0 x 40.4 x 31.7 x

P / E 15.9 x 16.7 x 26.9 x 39.4 x 30.9 x 27.4 x 24.4 x

P / E adj.* 15.9 x 16.7 x 26.9 x 39.4 x 30.9 x 27.4 x 24.4 x

Dividend Yield 0.7 % 0.7 % 0.5 % 0.4 % 0.4 % 0.5 % 0.5 %

FCF Potential Yield (on market EV) 5.6 % 6.1 % 4.3 % 4.3 % 5.6 % 6.4 % 7.2 %

*Adjustments made for: -

ISRA VISION


RESEARCH

Consolidated profit and loss In EUR m 2014/15 2015/16 2016/17 2017/18 2018/19e 2019/20e 2020/21e

Sales 112.2 128.8 143.0 152.5 168.2 187.6 208.8

Change Sales yoy 9.5 % 14.8 % 11.0 % 6.7 % 10.3 % 11.5 % 11.3 % COGS 49.7 56.1 62.1 66.3 72.7 80.8 89.8

Gross profit 62.6 72.7 80.9 86.2 95.6 106.7 119.0

Gross margin 55.8 % 56.4 % 56.6 % 56.5 % 56.8 % 56.9 % 57.0 %

Research and development 15.2 18.2 20.3 20.1 22.0 24.4 27.1

Sales and marketing 21.2 25.3 28.3 29.4 32.3 35.8 39.7

Administration expenses 4.6 4.9 5.0 5.1 5.6 6.0 6.5

Other operating expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other operating income 0.9 1.2 1.1 1.7 1.5 1.3 1.1

Unfrequent items 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBITDA 32.4 37.7 42.8 49.0 54.1 60.2 66.6

Margin 28.9 % 29.3 % 30.0 % 32.1 % 32.2 % 32.1 % 31.9 %

Depreciation of fixed assets 1.4 1.4 2.3 1.5 1.5 1.3 1.5

EBITA 31.0 36.3 40.5 47.5 52.6 58.9 65.1

Amortisation of intangible assets 8.5 10.7 12.2 14.3 15.5 17.0 18.3

Goodwill amortisation 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBIT 22.6 25.6 28.3 33.2 37.2 41.8 46.9

Margin 20.1 % 19.9 % 19.8 % 21.8 % 22.1 % 22.3 % 22.5 %

EBIT adj. 22.6 25.6 28.3 33.2 37.2 41.8 46.9

Interest income 0.0 0.0 0.0 0.2 0.0 0.0 0.0

Interest expenses 0.8 0.5 0.3 0.3 0.3 0.3 0.3

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

EBT 21.8 25.2 28.0 33.0 36.9 41.5 46.5

Margin 19.5 % 19.5 % 19.6 % 21.7 % 21.9 % 22.1 % 22.3 %

Total taxes 7.1 7.4 7.3 9.8 11.1 12.5 14.0

Net income from continuing operations 14.8 17.8 20.7 23.3 25.8 29.1 32.6

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 14.8 17.8 20.7 23.3 25.8 29.1 32.6

Minority interest 0.0 0.2 0.2 0.2 0.2 0.2 0.2

Net income 14.8 17.6 20.5 23.1 25.6 28.9 32.4

Margin 13.2 % 13.6 % 14.3 % 15.2 % 15.2 % 15.4 % 15.5 % Number of shares, average 21.9 21.9 21.9 21.9 21.9 21.9 21.9

EPS 0.68 0.80 0.94 1.06 1.17 1.32 1.48

EPS adj. 0.68 0.80 0.94 1.06 1.17 1.32 1.48

*Adjustments made for:

Guidance: Approx. 10% in sales and earnings

Financial Ratios 2014/15 2015/16 2016/17 2017/18 2018/19e 2019/20e 2020/21e

Total Operating Costs / Sales 35.7 % 36.6 % 36.8 % 34.8 % 34.7 % 34.6 % 34.6 %

Operating Leverage 1.3 x 0.9 x 1.0 x 2.6 x 1.2 x 1.1 x 1.1 x

EBITDA / Interest expenses 42.8 x 79.0 x 123.8 x 142.1 x 164.6 x 183.1 x 202.7 x

Tax rate (EBT) 32.3 % 29.4 % 26.1 % 29.6 % 30.0 % 30.0 % 30.0 %

Dividend Payout Ratio 11.8 % 12.3 % 12.7 % 14.1 % 13.6 % 12.8 % 12.1 %

Sales per Employee n.a. n.a. 221,698 218,209 210,298 n.a. n.a.

Sales, EBITDA in EUR m


Operating Performance in %


Performance per Share


ISRA VISION


RESEARCH

Consolidated balance sheet In EUR m 2014/15 2015/16 2016/17 2017/18 2018/19e 2019/20e 2020/21e

Assets

Goodwill and other intangible assets 105.6 109.6 111.7 115.2 117.4 119.0 119.3

thereof other intangible assets 13.8 12.7 10.9 10.0 8.4 7.0 5.4

thereof Goodwill 38.9 38.9 38.8 38.9 38.9 38.9 38.9

Property, plant and equipment 6.2 5.7 5.2 4.8 4.6 4.5 4.3

Financial assets 4.8 3.9 4.2 4.5 4.5 4.5 4.5

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

Fixed assets 116.6 119.2 121.1 124.5 126.5 128.0 128.2

Inventories 30.7 33.7 32.7 36.9 33.0 35.4 38.0

Accounts receivable 86.8 88.5 98.0 111.8 112.9 122.3 131.6

Liquid assets 15.1 16.9 29.7 34.7 61.9 78.0 99.2

Other short-term assets 7.1 5.5 3.4 4.9 4.9 4.9 4.9

Current assets 139.7 144.7 163.9 188.4 212.7 240.6 273.7

Total Assets 256.3 263.8 285.0 312.9 339.2 368.6 401.9

Liabilities and shareholders' equity

Subscribed capital 4.4 4.4 4.4 21.9 21.9 21.9 21.9

Capital reserve 38.6 38.8 38.8 21.7 21.7 21.7 21.7

Retained earnings 82.4 97.1 111.6 151.9 174.3 199.6 228.3

Other equity components 17.8 17.6 20.5 0.4 0.4 0.4 0.4

Shareholders' equity 143.2 157.8 175.3 195.9 218.3 243.6 272.3

Minority interest 1.3 1.5 1.7 1.9 2.0 2.2 2.4

Total equity 144.5 159.3 177.0 197.8 220.3 245.8 274.7

Provisions 5.7 9.2 9.2 7.1 7.2 7.3 7.4

thereof provisions for pensions and similar obligations 3.1 4.1 3.4 3.6 3.7 3.8 3.9

Financial liabilities (total) 50.1 36.0 31.0 32.9 32.9 32.9 32.9

thereof short-term financial liabilities 50.1 36.0 31.0 32.9 32.9 32.9 32.9

Accounts payable 11.8 12.4 18.1 20.6 23.5 27.2 31.5

Other liabilities 44.2 46.9 49.8 54.6 55.4 55.5 55.5

Liabilities 111.8 104.5 108.0 115.1 118.9 122.8 127.2

Total liabilities and shareholders' equity 256.3 263.8 285.0 312.9 339.2 368.6 401.9


Efficiency of Capital Employment

Operating Assets Turnover 1.0 x 1.1 x 1.2 x 1.2 x 1.4 x 1.4 x 1.5 x

Capital Employed Turnover 0.6 x 0.7 x 0.8 x 0.8 x 0.9 x 0.9 x 1.0 x

ROA 12.7 % 14.7 % 16.9 % 18.6 % 20.3 % 22.5 % 25.3 %

Return on Capital

ROCE (NOPAT) 8.9 % 9.9 % 11.5 % 12.3 % 13.2 % 14.7 % 15.7 %

ROE 10.9 % 11.7 % 12.3 % 12.4 % 12.4 % 12.5 % 12.6 %

Adj. ROE 10.9 % 11.7 % 12.3 % 12.4 % 12.4 % 12.5 % 12.6 %

Balance sheet quality

Net Debt 38.1 23.2 4.6 1.7 -25.3 -41.3 -62.4

Net Financial Debt 35.0 19.0 1.3 -1.8 -29.0 -45.1 -66.3

Net Gearing 26.4 % 14.5 % 2.6 % 0.9 % -11.5 % -16.8 % -22.7 %

Net Fin. Debt / EBITDA 108.1 % 50.5 % 2.9 % n.a. n.a. n.a. n.a.

Book Value / Share 6.6 7.2 8.0 8.9 10.0 11.1 12.4

Book value per share ex intangibles 1.7 2.2 2.9 3.7 4.6 5.7 7.0

ROCE Development


Net debt in EUR m


Book Value per Share in EUR


ISRA VISION


RESEARCH

Consolidated cash flow statement In EUR m 2014/15 2015/16 2016/17 2017/18 2018/19e 2019/20e 2020/21e

Net income 14.8 17.8 20.7 23.3 25.8 29.1 32.6

Depreciation of fixed assets 1.4 1.4 2.3 1.3 1.5 1.3 1.5

Amortisation of goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Amortisation of intangible assets 8.5 10.7 12.2 14.3 15.5 17.0 18.3

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 11.4 0.3 -3.4 -0.7 0.0 0.0 0.0

Cash Flow before NWC change 36.0 30.2 31.9 38.2 42.8 47.5 52.4

Increase / decrease in inventory -2.5 -3.0 1.1 -4.1 3.9 -2.4 -2.6

Increase / decrease in accounts receivable -18.5 -0.3 -9.1 -15.8 -1.1 -9.4 -9.3

Increase / decrease in accounts payable -3.6 6.5 14.6 7.0 3.7 3.8 4.3

Increase / decrease in other working capital positions 0.6 1.0 -1.4 0.3 0.0 0.0 0.0

Increase / decrease in working capital (total) -23.9 4.1 5.2 -12.6 6.5 -8.0 -7.6

Net cash provided by operating activities [1] 12.2 34.3 37.1 25.6 49.3 39.5 44.8

Investments in intangible assets -13.3 -14.9 -15.7 -18.3 -17.7 -18.6 -18.6

Investments in property, plant and equipment -1.1 -0.9 -1.0 -1.3 -1.2 -1.3 -1.3

Payments for acquisitions -2.2 0.0 0.0 -0.3 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] -16.6 -15.6 -16.7 -19.9 -18.9 -19.9 -19.9

Change in financial liabilities 10.1 -14.1 -5.0 0.0 0.0 0.0 0.0

Dividends paid 1.1 0.9 1.0 1.3 1.2 1.3 1.3

Purchase of own shares 0.2 -0.1 0.0 1.9 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 -0.4 -0.3 0.4 0.0 0.0 0.0

Net cash provided by financing activities [3] 7.9 -16.4 -7.4 -0.3 -3.3 -3.5 -3.7

Change in liquid funds [1]+[2]+[3] 3.5 2.2 13.0 5.4 27.2 16.1 21.2

Effects of exchange-rate changes on cash 0.5 -0.5 -0.2 -0.5 0.0 0.0 0.0

Cash and cash equivalent at end of period 15.2 16.8 29.7 34.7 61.9 78.0 99.2


Cash Flow

FCF -2.3 18.7 20.4 6.0 30.4 19.6 24.9

Free Cash Flow / Sales -2.0 % 14.4 % 14.3 % 3.9 % 18.1 % 10.5 % 11.9 %

Free Cash Flow Potential 15.2 19.3 23.9 39.3 43.0 47.7 52.7

Free Cash Flow / Net Profit -15.4 % 105.5 % 99.5 % 25.9 % 118.8 % 68.0 % 77.0 %

Interest Received / Avg. Cash 0.3 % 0.3 % 0.2 % 0.5 % 0.0 % 0.0 % 0.0 %

Interest Paid / Avg. Debt 1.7 % 1.1 % 1.0 % 1.1 % 1.0 % 1.0 % 1.0 %

Management of Funds

Investment ratio 12.9 % 12.2 % 11.7 % 12.8 % 11.2 % 10.6 % 9.5 %

Maint. Capex / Sales 9.0 % 8.5 % 8.2 % 0.0 % 0.0 % 0.0 % 0.0 %

Capex / Dep 146.7 % 130.5 % 114.9 % 123.9 % 111.7 % 108.4 % 100.8 %

Avg. Working Capital / Sales 86.1 % 82.5 % 76.5 % 77.8 % 73.3 % 66.1 % 63.1 %

Trade Debtors / Trade Creditors 736.0 % 712.6 % 542.8 % 542.3 % 480.4 % 449.6 % 417.8 %

Inventory Turnover 1.6 x 1.7 x 1.9 x 1.8 x 2.2 x 2.3 x 2.4 x

Receivables collection period (days) 282 251 250 268 245 238 230

Payables payment period (days) 87 81 106 114 118 123 128

Cash conversion cycle (Days) 412 378 325 348 281 264 246

CAPEX and Cash Flow in EUR m


Free Cash Flow Generation


Working Capital


ISRA VISION


RESEARCH

LEGAL DISCLAIMER

This research report (“investment recommendation”) was prepared by the Warburg Research GmbH, a fully owned subsidiary of the M.M.Warburg &

CO (AG & Co.) KGaA and is passed on by the M.M.Warburg & CO (AG & Co.) KGaA. It is intended solely for the recipient and may not be passed on

to another company without their prior consent, regardless of whether the company is part of the same corporation or not. It contains selected

information and does not purport to be complete. The investment recommendation is based on publicly available information and data ("information")

believed to be accurate and complete. Warburg Research GmbH neither examines the information for accuracy and completeness, nor guarantees its

accuracy and completeness. Possible errors or incompleteness of the information do not constitute grounds for liability of M.M.Warburg & CO (AG &

Co.) KGaA or Warburg Research GmbH for damages of any kind whatsoever, and M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research

GmbH are not liable for indirect and/or direct and/or consequential damages. In particular, neither M.M.Warburg & CO (AG & Co.) KGaA nor Warburg

Research GmbH are liable for the statements, plans or other details contained in these investment recommendations concerning the examined

companies, their affiliated companies, strategies, economic situations, market and competitive situations, regulatory environment, etc. Although due

care has been taken in compiling this investment recommendation, it cannot be excluded that it is incomplete or contains errors. M.M.Warburg & CO

(AG & Co.) KGaA and Warburg Research GmbH, their shareholders and employees are not liable for the accuracy and completeness of the

statements, estimations and the conclusions derived from the information contained in this investment recommendation. Provided a investment

recommendation is being transmitted in connection with an existing contractual relationship, i.e. financial advisory or similar services, the liability of

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DISCLOSURE ACCORDING TO §85 OF THE GERMAN SECURITIES TRADING ACT (WPHG), MAR AND MIFID II INCL. COMMISSION DELEGATED REGULATION (EU) 2016/958 AND (EU) 2017/565

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

fundamental analysis, such as e.g. DCF Model, Free Cash Flow Potential, Peer Group Comparison or Sum of the Parts Model (see also

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

analyst’s assessment as regards the expected development of investor sentiment and its impact on the share price.

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

demand for the company’s products, changes in management, technology, economic development, interest rate development, operating and/or

material costs, competitive pressure, supervisory law, exchange rate, tax rate etc. For investments in foreign markets and instruments there are further

risks, generally based on exchange rate changes or changes in political and social conditions.

This commentary reflects the opinion of the relevant author at the point in time of its compilation. A change in the fundamental factors underlying the

valuation can mean that the valuation is subsequently no longer accurate. Whether, or in what time frame, an update of this commentary follows is not

determined in advance.

Additional internal and organisational arrangements to prevent or to deal with conflicts of interest have been implemented. Among these are the spatial

separation of Warburg Research GmbH from M.M.Warburg & CO (AG & Co.) KGaA and the creation of areas of confidentiality. This prevents the

exchange of information, which could form the basis of conflicts of interest for Warburg Research in terms of the analysed issuers or their financial

instruments.

The analysts of Warburg Research GmbH do not receive a gratuity – directly or indirectly – from the investment banking activities of M.M.Warburg &

CO (AG & Co.) KGaA or of any company within the Warburg-Group.

All prices of financial instruments given in this investment recommendation are the closing prices on the last stock-market trading day before the

publication date stated, unless another point in time is explicitly stated.

M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research GmbH are subject to the supervision of the Federal Financial Supervisory Authority,

BaFin. M.M.Warburg & CO (AG & Co.) KGaA is additionally subject to the supervision of the European Central Bank (ECB).

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


RESEARCH

Additional information for clients in the United States

1. This research report (the “Report”) is a product of Warburg Research GmbH, Germany, a fully owned subsidiary of M.M.Warburg & CO (AG & Co.)

KGaA, Germany (in the following collectively “Warburg”). Warburg is the employer of the research analyst(s), who have prepared the Report. The

research analyst(s) reside outside the United States and are not associated persons of any U.S. regulated broker-dealer and therefore are not subject

to the supervision of any U.S. regulated broker-dealer.

2. The Report is provided in the United States for distribution solely to "major U.S. institutional investors" under Rule 15a-6 of the U.S. Securities

Exchange Act of 1934.

3. Any recipient of the Report should effect transactions in the securities discussed in the Report only through J.P.P. Euro-Securities, Inc., Delaware.

4. J.P.P. Euro-Securities, Inc. does not accept or receive any compensation of any kind for the dissemination of the research reports from Warburg.

Reference in accordance with section 85 of the German Securities Trading Act (WpHG) and Art. 20 MAR regarding possible conflicts of interest with companies analysed:

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

a share of more than 5% of the equity capital of the analysed company.

-2-

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

the course of a public offering of such financial instruments, which are, or the issuer of which is, the subject of the investment

recommendation.

-3- Companies affiliated with Warburg Research manage financial instruments, which are, or the issuers of which are, subject of the

investment recommendation, in a market based on the provision of buy or sell contracts.

-4-

MMWB, Warburg Research, or an affiliated company, reached an agreement with the issuer to provide investment banking and/or

investment services and the relevant agreement was in force in the last 12 months or there arose for this period, based on the relevant

agreement, the obligation to provide or to receive a service or compensation - provided that this disclosure does not result in the disclosure of

confidential business information.

-5- The company compiling the analysis or an affiliated company had reached an agreement on the compilation of the investment

recommendation with the analysed company.

-6- Companies affiliated with Warburg Research regularly trade financial instruments of the analysed company or derivatives of these.

-6a- Warburg Research, or an affiliated company, holds a net long position of more than 0.5% of the total issued share capital of the analysed

company.

-6b- Warburg Research, or an affiliated company, holds a net short position of more than 0.5% of the total issued share capital of the analysed

company.

-6c- The issuer holds shares of more than 5% of the total issued capital of Warburg Research or an affiliated company.

-7- The company preparing the analysis as well as its affiliated companies and employees have other important interests in relation to the

analysed company, such as, for example, the exercising of mandates at analysed companies.

This report has been made accessible to the company analysed and was modified thereafter.

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


RESEARCH

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 130 65

Hold 56 28

Sell 6 3

Rating suspended 8 4

Total 200 100

WARBURG RESEARCH GMBH – ANALYSED RESEARCH UNIVERSE BY RATING J

J 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 28 72

Hold 9 23

Sell 0 0

Rating suspended 2 5

Total 39 100

PRICE AND RATING HISTORY ISRA VISION AS OF 06.03.2019

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


RESEARCH

EQUITIES Roland Rapelius +49 40 3282-2673 Head of Equities [email protected] RESEARCH Michael Heider +49 40 309537-280 Malte Schaumann +49 40 309537-170 Head of Research [email protected] Technology [email protected]

Henner Rüschmeier +49 40 309537-270 Patrick Schmidt +49 40 309537-125 Head of Research [email protected] Leisure, Internet [email protected]

Jonas Blum +40 40 309537-240 Oliver Schwarz +49 40 309537-250 Small/Mid Cap Research [email protected] Chemicals, Agriculture [email protected]

Christian Cohrs +49 40 309537-175 Cansu Tatar +49 40 309537-248 Industrials & Transportation [email protected] Cap. Goods [email protected]

Felix Ellmann +49 40 309537-120 Marc-René Tonn +49 40 309537-259 Software, IT [email protected] Automobiles, Car Suppliers [email protected]

Jörg Philipp Frey +49 40 309537-258 Robert-Jan van der Horst +49 40 309537-290 Retail, Consumer Goods [email protected] Technology [email protected]

Marius Fuhrberg +49 40 309537-185 Andreas Wolf +49 40 309537-140 Financial Services [email protected] Software, IT [email protected]

Ulrich Huwald +49 40 309537-255 Health Care, Pharma [email protected]

Thilo Kleibauer +49 40 309537-257 Retail, Consumer Goods [email protected]

Eggert Kuls +49 40 309537-256 Engineering [email protected]

Andreas Pläsier +49 40 309537-246 Banks, Financial Services [email protected]

Franz Schall +40 40 309537-230 Automobiles, Car Suppliers [email protected]

INSTITUTIONAL EQUITY SALES Klaus Schilling +49 40 3282-2664 Sanjay Oberoi +49 69 5050-7410 Head of Equity Sales, Germany [email protected] United Kingdom, USA [email protected]

Tim Beckmann +49 40 3282-2665 Simon Pallhuber +49 69 5050-7414 United Kingdom [email protected] Switzerland, France [email protected]

Lyubka Bogdanova +49 69 5050-7411 Ireland, Poland, Australia [email protected] Jens Buchmüller +49 69 5050-7415 Scandinavia, Austria [email protected]

Alexander Eschweiler +49 40 3282-2669 Germany [email protected]

Matthias Fritsch +49 40 3282-2696 Julia Fesenberg +49 69 5050-7417 United Kingdom [email protected] Roadshow/Marketing [email protected]

Michael Kriszun +49 40 3282-2695 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:

Andrea Schaper +49 40 3282-2632 Kerstin Muthig +49 40 3282-2703 Sales Assistance [email protected] Sales Assistance [email protected]

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