ca cheuvreux german smaller companies review jan2011

SMALLER COMPANIES

GERMANYJanaury 2011

SMALLER COMPANIES REVIEW77 companies coveredMarket cap below ~EUR4bn

Smaller Companies Team+49 (0)69 47897 525

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Disclosures available on www.cheuvreux.com

January 2011

GERMANY

Smaller Companies Review

Cheuvreux's Smaller Companies TeamFRANCECoordinator - Carole Rozen (+33 1) 41 89 73 18 [email protected] Hubert d'Aillires - (+33 1) 41 89 74 58 [email protected] Emmanuel Fourret - (+33 1) 41 89 73 06 [email protected] Mourad Lahmidi - (+33 1) 41 89 75 29 [email protected] Amandine Latour - (+33 1) 41 89 75 46 [email protected]

BENELUXRobert Van Overbeek - (+31 20) 573 06 81 [email protected]

NORDICJohan Eliason (+468) 723 51 77 [email protected]

GERMANYCraig Abbott - (+49 69) 47 89 75 25 [email protected] Hans-Joachim Heimbrger (+49 69) 47 89 75 40 [email protected] Oliver Reinberg - (+49 69) 47 89 75 26 [email protected]

AUSTRIAMarkus Remis - (+43) 1 227 12 70 13 [email protected]

TURKEYIlgin Erdogan - (+90) 212 37 11 907 [email protected]

SWITZERLANDBeat Keiser - (+41 1) 218 17 06 [email protected] Levon Babalyan - (+41 1) 218 17 07 [email protected] Olivier Girakhou - (+41 1) 218 17 23 [email protected]

GREECE SPAINAdrian Zunzunegui - (34 91) 495 16 28 [email protected] Iigo Egusquiza - (34 91) 495 16 33 [email protected]

ITALY

Mary Psyllaki - (+30) 210 37 34 006 [email protected]

Marco Baccaglio - (+39 2) 80 62 83 20 [email protected]

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

4 6 8 13 22 25

* Green tech companiesPlease note: this publication includes profiles of five companies, ADVA Optical Networking, Axel Springer, Kabel Deutschland, ProSiebenSat.1 Media and Tipp24, which were not covered by CA Cheuvreux Germany at the time this publication went to print but will attend our German Corporate Conference that takes place in Frankfurt from 17-19 January 2011.

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I - OUR SMALL CAP UNIVERSE & ANALYSTSMarket Cap Company (EURm) Price Target Price Upside/ downside Rating Analyst Telephone No.

AIXTRON SE AURUBIS BAUER BAYWA BILFINGER BERGER BRENNTAG AG CARL ZEISS MEDITEC CENTROTHERM PV CONERGY AG CROPENERGIES CTS EVENTIM DEMAG CRANES AG DIALOG SEMICONDUCTOR DOUGLAS DRAEGERWERK ELRINGKLINGER EUROKAI KGAA FIELMANN FRAPORT FUCHS PETROLUB GEA GERRESHEIMER GERRY WEBER GFK SE H&R WASAG HEIDELBERGER DRUCK HHLA HOCHTIEF HORNBACH HOLDING AG HUGO BOSS JENOPTIK JUNGHEINRICH KLOECKNER & CO SE KONTRON KRONES KSB KUKA AG LANXESS LEONI MANZ AUTOMATION AG MLP MTU MVV ENERGIE NORDEX OVB PFEIFFER VACUUM PFLEIDERER PHOENIX SOLAR PRAKTIKER

3,102 1,810 641 1,189 2,730 3,687 1,148 540 193 471 1,090 808 1,146 1,624 1,121 1,610 452 2,835 4,436 2,412 4,001 1,004 730 1,328 633 863 2,514 4,285 397 3,527 307 997 1,458 513 1,482 1,086 571 4,630 966 269 826 2,524 1,810 372 385 749 142 176 433

31.2 44.3 37.5 34.9 61.9 71.6 14.1 25.5 0.5 5.5 45.4 38.2 17.5 41.4 63.2 25.4 33.6 67.5 48.3 106.2 21.8 32.0 35.3 37.0 21.1 3.7 34.6 61.2 99.1 53.2 5.4 29.3 21.9 9.2 46.9 620.0 16.8 55.7 32.5 49.1 7.7 51.1 27.5 5.6 27.0 88.0 2.4 23.9 7.5

41.5 40.0 38.0 35.0 70.0 52.0 14.5 27.0 0.4 2.4 42.0 44.0 20.0 47.2 70.0 24.0 36.0 57.0 56.0 115.0 26.0 32.5 39.0 40.0 19.0 5.8 44.0 64.0 74.4 57.0 6.6 30.0 17.5 7.0 37.0 700.0 13.0 63.0 40.0 69.0 7.0 50.0 19.0 9.0 13.0 87.0 4.0 45.0 6.1

33% -10% 1% 0% 13% -27% 3% 6% -17% -57% -8% 15% 15% 14% 11% -5% 7% -16% 16% 8% 19% 2% 10% 8% -10% 56% 27% 5% -25% 7% 23% 2% -20% -24% -21% 13% -23% 13% 23% 41% -9% -2% -31% 62% -52% -1% 69% 88% -18%

1/Selected List 2/Outperform 2/Outperform 2/Outperform 1/Selected List 3/Underperform 3/Underperform 3/Underperform 4/Sell 3/Underperform 3/Underperform 2/Outperform 2/Outperform 2/Outperform 3/Underperform 3/Underperform 2/Outperform 3/Underperform 1/Selected List 2/Outperform 2/Outperform 2/Outperform 2/Outperform 2/Outperform 3/Underperform 2/Outperform 2/Outperform 2/Outperform 3/Underperform 2/Outperform 2/Outperform 3/Underperform 3/Underperform 3/Underperform 3/Underperform 2/Outperform 3/Underperform 2/Outperform 1/Selected List 2/Outperform 3/Underperform 2/Outperform 3/Underperform 4/Sell 4/Sell 2/Outperform 4/Sell 2/Outperform 3/Underperform

Klaus RINGEL Alexander HAISSL Hans-Joachim HEIMBUERGER Philipp BUMM Craig ABBOTT Sebastian KAUFFMANN Oliver REINBERG Philipp BUMM Philipp BUMM Philipp BUMM Oliver REINBERG Hans-Joachim HEIMBUERGER Bernd LAUX Jurgen KOLB Oliver REINBERG Alexander NEUBERGER Hans-Joachim HEIMBUERGER Craig ABBOTT Craig ABBOTT Martin ROEDIGER Hans-Joachim HEIMBUERGER Oliver REINBERG Jurgen KOLB Craig ABBOTT Martin ROEDIGER Hans-Joachim HEIMBUERGER Hans-Joachim HEIMBUERGER Craig ABBOTT Jurgen KOLB Jurgen KOLB Alexander HAISSL Hans-Joachim HEIMBUERGER Alexander HAISSL Bernd LAUX Hans-Joachim HEIMBUERGER Hans-Joachim HEIMBUERGER Hans-Joachim HEIMBUERGER Martin ROEDIGER Alexander NEUBERGER Philipp BUMM Michael HAID Antoine BOIVIN-CHAMPEAUX Sebastian KAUFFMANN Philipp BUMM Michael HAID Craig ABBOTT Craig ABBOTT Philipp BUMM Jurgen KOLB

+49 69 47897 542 +49 69 47897 534 +49 69 47897 540 +49 69 47897 527 +49 69 47897 525 +49 69 47897 524 +49 69 47897 526 +49 69 47897 527 +49 69 47897 527 +49 69 47897 527 +49 69 47897 526 +49 69 47897 540 +49 69 47897 512 +49 69 47897 426 +49 69 47897 526 +49 69 47897 384 +49 69 47897 540 +49 69 47897 525 +49 69 47897 525 +49 69 47897 763 +49 69 47897 540 +49 69 47897 526 +49 69 47897 426 +49 69 47897 525 +49 69 47897 763 +49 69 47897 540 +49 69 47897 540 +49 69 47897 525 +49 69 47897 426 +49 69 47897 426 +49 69 47897 534 +49 69 47897 540 +49 69 47897 534 +49 69 47897 512 +49 69 47897 540 +49 69 47897 540 +49 69 47897 540 +49 69 47897 763 +49 69 47897 384 +49 69 47897 527 +49 69 47897 967 +33 1 41 89 73 25 +49 69 47897 524 +49 69 47897 527 +49 69 47897 967 +49 69 47897 525 +49 69 47897 525 +49 69 47897 527 +49 69 47897 426

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Market Cap Company (EURm) Price

Target Price

Upside/ downside Rating Analyst Telephone No.

PUMA Q-CELLS QIAGEN RATIONAL RHEINMETALL RHOENKLINIKUM ROTH&RAU SAF-HOLLAND SARTORIUS AG SGL CARBON SKW STAHL METALLURGIE HOLDING SMA SMARTRAC N.V. SOFTWARE AG SOLARWORLD STADA STRATEC BIOMEDICAL SYSTEMS STRER SUEDZUCKER SYMRISE TAKKT TOGNUM AG TOM TAILOR TUI VOSSLOH AG VTG AG WACKER NEUSON SE WINCOR NIXDORF AG

3,579 274 3,528 1,786 2,398 2,235 206 148 478 1,767 130 2,367 301 3,085 814 1,565 361 1,137 3,758 2,328 722 2,560 276 2,731 1,267 318 886 1,849

236.4 2.3 14.7 157.1 60.6 16.2 12.7 7.2 28.0 27.1 19.9 68.2 18.4 108.2 7.3 26.0 31.4 27.0 19.8 19.7 11.0 19.5 16.7 10.9 94.9 14.9 12.6 58.0

250.0 7.0 13.5 155.0 75.0 19.0 36.0 11.0 30.0 24.0 23.0 130.0 19.0 120.0 12.0 25.0 31.0 23.0 21.5 18.0 11.5 15.5 19.6 11.3 103.0 12.0 12.0 49.0

6% 200% -8% -1% 24% 18% 183% 53% 7% -11% 16% 91% 3% 11% 65% -4% -1% -15% 8% -9% 5% -20% 17% 4% 9% -19% -5% -16%

3/Underperform 3/Underperform 3/Underperform 3/Underperform 2/Outperform 2/Outperform 2/Outperform 2/Outperform 2/Outperform 3/Underperform 2/Outperform 2/Outperform 3/Underperform 1/Selected List 2/Outperform 3/Underperform 3/Underperform 2/Outperform 2/Outperform 3/Underperform 2/Outperform 2/Outperform 1/Selected List 2/Outperform 2/Outperform 3/Underperform 3/Underperform 3/Underperform

Jurgen KOLB Philipp BUMM Oliver REINBERG Craig ABBOTT Hans-Joachim HEIMBUERGER Craig ABBOTT Philipp BUMM Alexander NEUBERGER Oliver REINBERG Hans-Joachim HEIMBUERGER Alexander HAISSL Philipp BUMM Bernd LAUX Bernd LAUX Philipp BUMM Oliver REINBERG Oliver REINBERG Craig ABBOTT Klaus RINGEL Hans-Joachim HEIMBUERGER Craig ABBOTT Craig ABBOTT Jurgen KOLB Jurgen KOLB Craig ABBOTT Sebastian KAUFFMANN Hans-Joachim HEIMBUERGER Hans-Joachim HEIMBUERGER

+49 69 47897 426 +49 69 47897 527 +49 69 47897 526 +49 69 47897 525 +49 69 47897 540 +49 69 47897 525 +49 69 47897 527 +49 69 47897 384 +49 69 47897 526 +49 69 47897 540 +49 69 47897 534 +49 69 47897 527 +49 69 47897 512 +49 69 47897 512 +49 69 47897 527 +49 69 47897 526 +49 69 47897 526 +49 69 47897 525 +49 69 47897 542 +49 69 47897 540 +49 69 47897 525 +49 69 47897 525 +49 69 47897 426 +49 69 47897 426 +49 69 47897 525 +49 69 47897 524 +49 69 47897 540 +49 69 47897 540

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II - GERMAN SMALLER COMPANIES UNIVERSE-KEY FIGURESRating 11E P/E (X) 12E EV/Sales (x) 12E EV/EBITDA (x) 11E 12E EBITDA margin (%) 11E ROCE (%) Div Yld (%) 12E 12E FCF (MC) (%) 12E P/BV (x) 12E ROE (%) 11E

AIXTRON SE AURUBIS BAUER BAYWA BILFINGER BERGER BRENNTAG AG CARL ZEISS MEDITEC CENTROTHERM PV CONERGY AG CROPENERGIES CTS EVENTIM DEMAG CRANES AG DIALOG SEMICONDUCTOR DOUGLAS DRAEGERWERK ELRINGKLINGER EUROKAI KGAA FIELMANN FRAPORT FUCHS PETROLUB GEA GERRESHEIMER GERRY WEBER GFK SE H&R WASAG HEIDELBERGER DRUCK HHLA HOCHTIEF HORNBACH HOLDING AG HUGO BOSS JENOPTIK JUNGHEINRICH KLOECKNER & CO SE KONTRON KRONES KSB KUKA AG LANXESS LEONI MANZ AUTOMATION AG MLP MTU MVV ENERGIE NORDEX OVB PFEIFFER VACUUM PFLEIDERER PHOENIX SOLAR PRAKTIKER PUMA Q-CELLS QIAGEN RATIONAL RHEINMETALL RHOENKLINIKUM ROTH&RAU SAF-HOLLAND

1 2 2 2 1 3 3 3 4 3 3 2 2 2 3 3 2 3 1 2 2 2 2 2 3 2 2 2 3 2 2 3 3 3 3 2 3 2 1 2 3 2 3 4 4 2 4 2 3 3 3 3 3 2 2 2 2

15.9 13.3 10.9 14.7 10.1 13.5 18.4 11.8 4.3 28.4 18.3 14.4 23.5 16.0 12.3 16.2 15.5 20.6 20.3 12.4 13.5 19.6 12.7 14.4 14.3 15.8 24.5 18.1 10.9 18.5 13.2 12.3 16.4 19.0 18.3 10.5 24.0 10.5 8.9 18.5 18.1 15.1 17.5 4.3 38.1 18.3 NS 8.1 16.0 13.7 4.6 28.7 21.3 10.8 13.1 7.2 6.4

13.6 11.2 8.6 11.5 9.4 12.3 16.8 11.3 3.6 22.8 15.9 9.8 17.4 14.5 11.1 12.6 11.9 18.7 18.7 11.5 10.1 15.4 10.9 12.1 12.1 10.3 20.4 15.0 10.2 16.6 11.3 10.5 10.0 14.5 15.7 8.1 16.4 9.4 7.0 10.8 16.0 12.3 17.7 2.6 33.5 16.8 32.9 6.1 8.9 12.5 3.1 24.0 18.5 8.5 11.0 5.7 4.3

2.8 0.3 0.9 0.2 0.6 0.6 1.2 0.8 0.3 1.5 2.5 0.8 3.4 0.5 0.8 1.9 1.3 2.5 3.3 1.4 1.0 1.4 1.1 1.3 0.8 0.5 3.1 0.5 0.3 2.1 0.7 0.5 0.3 1.0 0.6 0.5 0.6 0.8 0.5 0.9 NS 1.0 0.9 0.3 NS 3.0 0.6 0.2 0.2 1.0 0.2 3.7 4.3 0.6 1.0 0.3 0.6

7.5 6.6 6.0 7.1 9.9 8.4 7.8 4.9 4.4 10.8 12.8 7.7 17.0 5.2 6.1 7.3 5.7 11.6 9.6 7.1 8.0 6.6 6.7 8.1 8.7 5.5 10.1 8.7 3.7 10.7 5.8 3.7 6.5 8.4 7.9 4.7 8.9 6.3 4.8 6.6 NS 7.2 7.9 4.1 NS 11.1 6.1 3.7 4.0 6.6 1.2 11.3 13.8 5.4 7.2 1.8 5.3

5.8 5.7 5.3 5.9 8.9 7.7 6.7 4.9 3.7 9.5 10.8 5.6 12.0 4.8 5.6 5.9 4.6 10.4 8.3 6.1 6.2 5.9 5.5 6.9 7.3 4.8 8.7 7.3 3.6 9.5 5.2 2.9 4.9 6.6 6.8 3.7 7.5 5.6 4.0 3.6 NS 6.0 7.8 2.7 NS 9.9 4.6 3.0 3.3 5.6 1.0 9.6 11.8 4.3 6.2 1.1 4.1

37.2 3.9 15.6 3.3 6.1 7.6 15.6 15.3 7.4 14.2 19.7 10.2 19.8 8.9 12.4 26.2 22.1 21.8 34.3 20.2 12.2 20.7 15.9 16.6 9.3 9.1 31.2 5.7 7.5 19.3 12.3 13.2 5.0 11.6 7.9 10.9 7.3 13.2 9.6 13.3 0.0 13.7 11.2 7.5 0.0 27.2 10.3 5.2 4.2 15.5 16.1 32.6 31.0 11.5 13.3 16.3 10.2

NS 14.2 13.3 9.9 23.8 16.5 35.8 15.1 16.2 6.5 52.2 28.3 104.0 17.6 17.9 29.3 14.2 51.3 9.2 46.2 15.6 14.6 43.0 17.2 17.4 8.0 23.9 36.9 10.2 38.6 11.0 17.0 14.6 16.3 12.8 19.7 14.9 14.9 19.4 23.9 NS 20.4 8.5 20.3 NS 51.4 6.4 38.8 7.9 35.7 10.4 14.8 108.4 18.0 12.7 25.8 20.3

2.2 2.8 2.4 1.3 5.5 3.1 1.8 2.7 0.0 0.0 2.8 3.6 0.0 3.5 2.1 3.5 0.9 4.2 2.7 2.5 3.0 1.5 2.4 1.8 3.3 0.0 3.0 3.5 1.4 2.4 0.0 1.7 3.0 2.7 1.4 2.5 4.2 1.4 4.3 0.0 5.9 2.9 3.6 0.0 2.2 4.7 0.8 1.6 3.0 1.2 0.0 0.0 4.6 3.6 2.3 0.0 4.7

5.7 6.2 0.2 4.4 10.0 4.6 5.9 0.3 7.4 7.9 6.9 8.8 4.5 5.3 8.1 7.4 8.8 4.4 0.1 8.5 8.7 6.9 7.5 7.1 5.5 NS 5.9 4.9 NS 5.1 8.8 13.4 10.1 6.3 4.9 6.1 2.6 6.2 9.1 1.6 NS 6.3 6.5 NS NS 5.5 24.8 6.0 4.9 8.2 NS 5.4 5.1 11.7 6.7 9.7 17.2

3.8 1.4 1.3 1.2 1.5 2.1 1.8 1.2 0.8 1.3 5.4 2.5 4.3 2.0 1.7 2.8 1.0 5.6 1.6 3.2 1.8 1.8 2.8 1.8 2.5 0.8 3.7 1.7 0.9 8.0 1.0 1.4 1.1 1.5 1.7 1.3 3.1 1.8 1.6 1.2 2.1 2.5 1.6 0.6 4.5 5.0 0.3 0.9 0.5 1.9 0.3 1.6 8.9 1.6 1.3 0.7 1.9

31.2 11.8 14.1 9.2 16.2 17.8 10.8 11.0 28.8 5.1 28.7 21.2 27.7 13.3 16.0 20.0 8.9 26.9 8.4 35.0 15.3 11.5 28.1 14.8 19.9 5.9 16.4 9.8 9.1 60.8 8.3 12.7 7.4 8.5 10.7 14.2 14.6 22.8 22.2 7.7 0.0 19.5 9.6 19.9 0.0 27.4 -5.6 14.1 3.1 17.1 8.0 7.2 39.9 17.5 11.1 11.1 54.1

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Rating 11E

P/E (X) 12E

EV/Sales (x) 12E

EV/EBITDA (x) 11E 12E

EBITDA margin (%) 11E

ROCE (%) Div Yld (%) 12E 12E

FCF (MC) (%) 12E

P/BV (x) 12E

ROE (%) 11E

SARTORIUS AG SGL CARBON SKW STAHL METALLURGIE HOL SMA SMARTRAC N.V. SOFTWARE AG SOLARWORLD STADA STRATEC BIOMEDICAL SYSTEM STRER SUEDZUCKER SYMRISE TAKKT TOGNUM AG TOM TAILOR TUI VOSSLOH AG VTG AG WACKER NEUSON SE WINCOR NIXDORF AG

2 3 2 2 3 1 2 3 3 2 2 3 2 2 1 2 2 3 3 3

15.4 22.0 11.3 8.3 22.3 15.0 8.3 11.4 18.8 28.4 13.9 15.8 13.6 13.3 16.0 27.0 12.8 14.6 22.7 16.3

13.1 14.5 9.2 8.0 16.7 12.9 9.2 10.4 15.5 19.1 13.9 15.6 12.0 9.3 11.5 18.8 11.7 12.1 16.0 14.4

1.3 1.6 0.6 1.0 1.4 2.6 0.8 1.4 2.7 2.4 0.8 1.9 1.0 1.2 0.9 0.3 1.1 1.4 1.2 0.8

7.7 9.8 6.7 4.2 9.2 8.6 4.0 8.3 11.7 9.7 6.1 9.1 8.0 7.0 6.4 5.0 7.6 5.7 9.2 8.3

6.8 8.1 5.9 3.7 6.9 7.2 3.4 7.0 9.7 8.0 5.9 8.8 7.1 5.6 5.2 3.7 6.7 5.4 7.3 7.3

17.1 16.6 8.7 25.0 15.3 30.6 19.0 16.8 23.0 25.1 13.3 20.9 12.9 16.5 13.7 5.2 14.3 24.7 13.5 10.0

16.1 12.8 13.3 60.1 14.1 31.8 13.9 13.6 52.4 19.8 9.9 15.3 22.6 20.5 20.1 10.7 18.1 7.5 8.6 26.4

2.5 0.0 4.3 3.1 0.0 1.7 1.2 2.8 2.9 0.0 2.3 3.6 5.5 4.1 2.6 2.5 3.1 2.7 3.2 3.6

8.2 2.4 3.7 8.4 7.9 8.3 12.1 5.8 5.4 5.9 9.6 7.1 8.5 7.9 3.7 50.1 5.4 6.8 2.2 6.7

1.5 1.7 1.1 2.2 1.6 2.9 0.8 1.5 4.2 3.5 1.1 2.9 2.7 2.5 2.6 1.1 2.0 1.0 1.1 4.4

11.3 9.4 10.6 37.0 8.3 25.5 11.5 11.2 26.7 16.2 8.6 19.8 20.9 24.7 20.2 5.5 18.0 7.0 4.9 31.0

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TOP PICKSAixtronTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 302.9 44.8 0.45 0.4 52.4 0.7 37.1 32.5 55.2 11.5 5.9 (5.5) 0.15 0.6 2010E 760.0 186.1 1.86 1.9 14.8 1.8 7.3 8.3 NS 37.9 5.2 (1.7) 0.56 2.0 2011E 871.3 195.5 1.96 2.0 15.5 5.0 7.3 8.5 NS 31.2 4.5 (2.0) 0.59 1.9

EUR30.422012E 1047.3 229.7 2.30 2.3 13.2 5.9 5.6 6.5 NS 29.4 3.7 (2.2) 0.69 2.3

1/Selected List - Target: 41.5AIXA is a natural M&A target given its excellent market position and high free float of roughly 90%. Potential predators: major semiconductor equipment players like Applied Materials. We think AIXA will continue to benefit strongly from the emergence of LEDs in LCD screen backlighting units and lighting. Client orders are set to remain strong as it seems LED capacities are still short of demand. The competitive environment is favourable for the company: a duopolistic world market for MOCVD tools with AIXA as the dominant player with some 70% market share.

Bilfinger BergerTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 7382.0 140.0 3.78 3.8 14.3 10.5 12.5 21.7 12.2 9.5 1.6 4.8 2.00 3.7 2010E 7953.8 271.2 5.90 5.9 10.7 NS 10.3 15.2 25.8 17.1 1.8 4.0 2.72 4.3 2011E 8151.8 281.4 6.12 6.1 10.0 7.9 9.8 14.1 23.5 16.2 1.6 3.8 2.87 4.7

EUR61.312012E 8357.4 301.8 6.56 6.6 9.3 10.1 8.9 12.7 23.8 15.9 1.5 3.2 3.42 5.6

1/Selected List - Target: 70Strategically shifting more towards Services: the focus is on downsizing construction and reinvesting proceeds from the recent disposal of Valemus (est. net proceeds of c.EUR500m) in further expansion of its market-leading Services businesses, which proved more resilient than expected in the downturn. Incoming orders in Industrial Services now reaccelerating strongly. Power Services (26% of EBIT) should see significant growth in emerging markets and from lifetime extension capex in Germany. At 9.5x PE, 6.3 adj EV/EBITDA, 4.5% yield, re-rating still not complete.

Dialog SemiconductorTo 31/12 Sales ($ m) NAP rest. ($ m) Clean EPS ($) Reported EPS ($) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend ($) Yield (%) 2009 217.6 25.2 0.46 0.6 22.9 4.7 13.9 17.3 100.4 23.3 3.7 (3.4) 0.00 0.0 2010E 296.0 43.3 0.66 0.7 34.3 1.5 24.3 28.1 93.7 24.2 7.4 (2.6) 0.00 0.0 2011E 390.0 64.3 0.98 1.0 23.7 3.0 17.2 19.3 98.4 27.7 5.8 (2.5) 0.00 0.0

EUR17.982012E 480.0 87.0 1.33 1.3 17.6 4.5 12.2 13.4 104.0 28.2 4.3 (2.5) 0.00 0.0

2/Outperform - Target: 20With Dialog in the sweet spot of market growth (smartphones, portable media devices) and its products gaining increasing share at customers, top-line growth in excess of 30% y-o-y and bottom-line expansion of more than 50% p.a., it is likely to maintain its momentum, probably even beyond 2011E. The company has won new business from major customers and has key products under development that could generate sizeable incremental sales from H2-11E. Dialog shares, Europe's best way to play the 'Apple-mania', are a highly attractive, inexpensive tech investment.

FraportTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 1972.6 149.8 1.64 1.6 22.2 NS 9.3 17.7 6.4 6.1 1.4 3.0 1.15 3.2 2010E 2126.7 165.2 1.80 1.8 26.2 NS 9.9 16.9 8.1 6.5 1.7 3.3 1.15 2.4 2011E 2268.4 218.6 2.38 2.4 20.1 NS 9.6 16.0 8.1 8.4 1.7 3.6 1.15 2.4

EUR47.902012E 2475.7 237.2 2.58 2.6 18.6 0.1 8.3 13.7 9.2 8.7 1.6 3.2 1.29 2.7

1/Selected List - Target: 56PAX traffic trends/operational leverage to continue to surprise on the upside. Above average PAX traffic growth, scheduled aviation fee increases (+25% through 2015), the inauguration of R-4 from Oct 2011 and the 50% increase in high-yielding retail space from summer 2012 to drive EBITDA CAGR of 13.8% (2010-12E) vs 6% for the European peers on avg. At the mid-point of major capex cycle running below budgeted costs, execution risks now diminishing. Also combines low-cost financing with inflation hedge. SOP (EUR55), DCF (EUR57) suggest further upside.

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Fuchs PetrolubTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 1178.1 121.5 5.14 5.1 12.6 11.2 7.5 8.4 35.2 36.5 4.4 (0.2) 1.70 2.6 2010E 1437.3 173.2 7.32 7.3 15.2 3.1 9.1 9.9 40.0 39.4 5.5 (0.3) 2.10 1.9 2011E 1588.2 203.1 8.58 8.6 11.9 7.4 6.8 7.5 44.2 35.0 3.9 (0.6) 2.50 2.4

EUR102.502012E 1659.7 219.4 9.27 9.3 11.1 8.8 5.9 6.5 46.2 29.9 3.1 (1.0) 2.70 2.6

2/Outperform - Target: 115Fuchs Petrolub benefits from its strong positioning in niche markets. Its performance in each of the last five quarters has been far better than assumed. Besides Air Liquide, Fuchs is the only chemical company that was able to increase its EBIT, EBIT margin and dividend in the crisis year 2009. Due to its fixed-cost reductions it is now even leaner. Its focus on innovations and cost discipline will drive its margins further. The company benefits from rising volumes in an upturn and from lower raw material costs in a downturn.

GEA GroupTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 4411.2 160.6 0.87 0.9 17.8 11.1 9.0 12.4 9.3 9.7 1.7 (0.0) 0.30 1.9 2010E 4450.0 140.1 0.76 0.8 28.4 NS 14.3 20.0 6.9 8.0 2.2 1.7 0.24 1.1 2011E 5022.0 295.6 1.61 1.6 13.1 5.7 7.8 9.9 12.6 15.3 1.9 0.7 0.48 2.3

EUR21.002012E 5577.9 395.4 2.15 2.2 9.8 9.0 6.0 7.3 15.6 18.1 1.7 0.2 0.65 3.1

2/Outperform - Target: 26We advise purchasing GEA shares now to capture the benefits of the group reorganisation that are likely to emerge over the next 1-2 years. While GEA will not remain unaffected if macro conditions worsen, the company does have considerable restructuring potential in our view. The market is completely ignoring the company's margin expansion potential and appears to discount sales of EUR5.1bn and an EBIT margin of just 9.6% for 2013E vs. our estimates with EUR5.2bn and 12.4%(!), respectively.

GfKTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 1164.5 51.0 1.42 1.4 17.0 15.2 9.6 16.5 9.1 10.2 1.7 2.8 0.30 1.2 2010E 1272.7 76.0 2.12 2.1 17.8 6.8 9.9 14.1 13.3 13.8 2.3 1.9 0.42 1.1 2011E 1366.1 92.1 2.57 2.6 14.4 7.2 8.1 11.1 15.5 14.8 2.0 1.3 0.53 1.4

EUR36.892012E 1453.7 109.4 3.05 3.0 12.1 7.1 6.8 9.2 17.2 15.6 1.8 0.8 0.67 1.8

2/Outperform - Target: 40Offers a fundamentally strong franchise with solid growth potential at attractive multiples. GfK's crown jewel, the Retail & Technology division (60% of EBIT), still has significant growth potential as it expands its global footprint in emerging markets. Assuming cont'd macro recovery, GfK is on track to approach the upper end of its targeted adj. operating margin range of 13 - 15% by 2012E. Margin expansion is driven by operational leverage in Custom Research, continued robust organic growth in R&T, BISS cost saving measures and discontinuation of investments in Media.

HHLATo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 990.7 53.0 0.73 0.7 37.0 2.0 13.1 22.7 15.2 10.4 3.9 0.7 0.40 1.5 2010E 1068.8 71.7 0.99 1.0 35.0 0.1 13.4 22.3 16.1 12.8 4.5 0.8 0.61 1.8 2011E 1164.8 102.7 1.41 1.4 24.4 5.1 10.0 15.9 20.7 16.4 4.1 0.3 0.85 2.5

EUR34.462012E 1254.6 123.0 1.69 1.7 20.3 5.9 8.7 13.5 23.9 17.6 3.6 (0.1) 1.02 3.0

2/Outperform - Target: 44The trading environment remains positive: the likely recovery of Hamburg's regional advantage among North Range ports (close proximity to Germany, EE and Baltic states) will be driven by 1) rising fuel prices, as the total cost of transport to final destinations is important; and 2) a likely positive Elbe dredging decision. CAPEX is expected to drop to maintenance levels from 11E onwards. Given its current low capacity utilisation, HHLA will be able to accommodate a recovery in volumes without needing much additional growth CAPEX.

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JenoptikTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 473.6 (38.9) (0.68) (0.7) NS NS 34.7 NS NS (15.0) 0.9 16.4 0.00 0.0 2010E 503.6 15.0 0.26 0.3 20.6 26.8 7.3 13.6 7.8 5.8 1.2 1.7 0.00 0.0 2011E 531.0 23.3 0.41 0.4 12.9 6.8 5.7 9.8 10.0 8.3 1.0 1.2 0.00 0.0

EUR5.252012E 556.0 27.1 0.47 0.5 11.1 8.9 5.1 8.4 10.9 8.9 0.9 0.8 0.00 0.0

2/Outperform - Target: 6.6We expect the business environment to improve further due to continued strong demand from the semiconductor industry and better prospects for the company's Metrology business, in particular in the automotive industry. As a result of asset disposals and more efficient working capital management, company was able to reduce net debt below EUR100m from c.EUR160m end of FY-09. Our EVA model yields a fair value of EUR6.5/share for FY-12E, based on a pre-tax RoCE of 10.6%. In addition, Jenoptik has tax-loss carry-forwards of EUR1.5/share.

LeoniTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 2160.1 (123.5) (4.50) (4.5) NS NS 94.8 NS NS (28.7) 1.2 48.2 0.00 0.0 2010E 2850.0 79.5 2.68 2.7 12.3 3.8 5.9 10.1 14.0 19.3 2.2 1.9 0.50 1.5 2011E 3130.0 109.2 3.68 3.7 8.9 4.6 4.8 7.9 16.6 22.2 1.9 1.5 1.10 3.4

EUR32.642012E 3320.0 138.6 4.67 4.7 7.0 9.1 4.0 6.3 19.4 23.8 1.6 1.1 1.40 4.3

1/Selected List - Target: 40We continue to rate Leoni a 1/Selected List and the stock remains on our German Top Picks list for a second consecutive year for the following reasons: 1) the company's unprecedented growth track record (CAGR 04-10 14%) has established it among the top 4 in global wiring systems production; 2) more than 90% of its staff are employed in low-cost regions, which allows it to keep a tight control on its costs; 3) the shares are still trading below the peers despite Leoni's superior growth profile and the huge earnings rebound that looks set to continue in 2011E.

RheinmetallTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 3420.0 (58.0) (1.60) (1.6) NS 8.2 11.4 NS 0.6 (5.3) 1.7 (0.1) 0.30 0.7 2010E 3975.0 171.6 4.33 4.3 13.9 NS 6.4 10.4 11.6 15.2 2.1 (0.2) 1.30 2.2 2011E 4600.0 221.3 5.59 5.6 10.6 8.0 5.3 7.8 14.5 17.4 1.8 (0.4) 1.55 2.6

EUR59.412012E 5200.0 283.2 7.15 7.2 8.3 11.9 4.2 5.8 18.0 19.3 1.5 (0.7) 2.15 3.6

2/Outperform - Target: 75Although Rheinmetall's Defence division will be affected by budget cuts, we expect it to remain relatively resilient given its successful internationalisation strategy: While we expect budgets within NATO to be under pressure, strong growth outside NATO is expected. Rheinmetall adopted to the internationalisation trend at an early stage. Automotive is likely to reach its peak sales of the last cycle, i.e. EUR2,2bn in 2007, in 12E with a new peak EBIT margin of 7-8% compared to just 5.6% in 2007. Valuation remains inexpensive!

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Software AGTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 847.4 141.0 4.92 4.9 15.5 8.2 9.7 11.4 19.7 25.3 3.7 1.1 1.15 1.5 2010E 1098.0 172.0 6.06 6.1 18.1 4.3 10.5 12.4 23.6 25.9 4.4 0.5 1.30 1.2 2011E 1173.0 206.4 7.24 7.2 14.8 7.9 8.5 9.8 27.8 25.5 3.5 (0.1) 1.50 1.4

EUR107.152012E 1260.0 239.0 8.38 8.4 12.8 8.4 7.1 8.0 31.8 24.3 2.9 (0.6) 1.80 1.7

1/Selected List - Target: 120An innovation leader in the business process excellence (BPE) software arena, its main growth area, Software should deliver sustainable, high-1-digit top-line growth flanked by the acquisition of product vendors in adjacent software areas. Thus, Software is poised to double its group sales every 5-6y. Thanks to cost and revenue synergies from IDS Scheer, an improved product mix (product sales outgrowing services) and traditionally strong execution, we expect co. to expand its EBIT margin from 24% in 10E to 28% by 12E and deliver avg. EPS growth of ~18%. Co. targets mid-term a 30% EBIT ROS (IFRS), which the market is far discounting. At 14x earnings and less than 10x EV/EBIT (both 11E), the shares remain significantly undervalued, trading at discounts of 15-25% to the EU software peers.

TOM TAILOR Holding AGTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 300.2 (5.6) (1.12) (1.1) NS NS 5.0 11.6 9.4 8.6 NS 5.0 0.00 0.0 2010E 329.9 2.1 0.18 0.2 87.5 NS 9.1 21.2 8.4 2.8 3.4 1.4 0.00 0.0 2011E 368.3 17.3 1.05 1.0 15.9 1.0 6.4 10.7 15.9 20.2 3.1 0.9 0.31 1.9

EUR16.592012E 420.9 24.1 1.46 1.5 11.4 3.7 5.2 7.8 20.1 23.9 2.6 0.7 0.44 2.7

1/Selected List - Target: 19.6We believe Tom Tailor offers convincing growth potential, mainly via its own retail expansion, which we expect to result in a 33% sales CAGR between CY09 and CY12E. As its infrastructure is well placed to handle the additional sales volume, we anticipate a cost leverage that will lead to EBIT margin expansion from 5.6% in CY09 to 9.7% in CY12E. As private equity group Alpha Funds sold its entire remaining 17.1% stake in Tom Tailor as of 1 December, the risk of a share overhang has been reduced considerably and now only applies to the 11.6% Morgan Finance stake. As a consequence of this, we reduced our discount on our DCF-based fair value of EUR21.70 from 20% to 10%. This was the sole reason for the rise in our target price to EUR19.60.

VosslohTo 31/12 Sales (EUR m) NAP rest. (EUR m) Clean EPS (EUR) Reported EPS (EUR) P/E (x) Attrib. FCF yield (%) EV/EBITDA (x) EV/EBITA (x) ROCE (%) ROE (%) P/BV (x) Net debt/EBITDA (x) Net dividend (EUR) Yield (%) 2009 1173.7 87.9 6.57 6.6 10.6 NS 7.4 8.7 19.6 20.5 2.1 0.4 2.00 2.9 2010E 1335.6 93.2 7.00 7.0 13.6 NS 8.4 10.2 17.4 19.0 2.5 0.6 2.50 2.6 2011E 1415.6 99.4 7.45 7.4 12.6 3.6 7.5 9.3 17.4 17.9 2.2 0.5 2.71 2.9

EUR93.602012E 1588.8 108.9 8.14 8.1 11.5 5.5 6.6 8.1 18.1 17.6 2.0 0.3 2.96 3.2

2/Outperform - Target: 103Offers a pure play on the global emerging market rail growth theme with above-average earnings visibility and still undemanding valuation. Strong JV partnerships formed in major early stage growth markets Russia (Fasteners) and China (Switches), augmenting its successful Chinese Fasteners business. Initiatives to increase share of insourcing of key components/new models to structurally increase profitability in locomotives. Earnings growth resumed in 2010 (est. 9% EBIT CAGR 2010-12E). Absolute valuation models (EV/CE & DCF) suggest further upside.

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Cheuvreux German small-/ mid-cap focus listTP (EUR) Upside % 41.5 33.0%

Growth AIXTRON SE

Comment Catalyst/Next news Leading LED equipment supplier (MOCVD tool) benefitting from strong grwoth trends, > than Potential major orders/2010 expected acceptance of LED lighting prelims due 1 March

GERMANY

DIALOG SEMICONDUCTOR Prelims due 11 Mar Prelims early Feb Capital Markets Day 24th/25th Jan FY10 prelims due early Feb Release of prelim. 2010 results on 27 Jan 11

Rapid, sustainable growth amid exposure to smartphones/tablet PCs/portables. Great Release of PM-OLED early customer base (Apple). Highly promising product pipeline (PM-OLED, 2D-3D conversion, etc.) adopter customer

20.0

14.5%

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FRAPORT

Traffic + fee increases + modest wage agreements = significant operational leverage

56.0 115.0 40.0 44.0 120.0 19.6

16.0% 12.0% 8.1% 27.8% 10.9% 17.4%

FUCHS PETROLUB

Upside earnings surprises likely. Product mix evolution to further drive margins (rising share of high-margin specialities)

GFK SE

On track to approach upper end of 13 - 15% Adj Optg margin target by 2012E (Operationall leverage, robust R&T growth)

HHLA

Environment for port operators remains positive, Elbe River dredging

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SOFTWARE AG

Great management execution: smooth integration of IDS, extraction of maximum synergies. Growth from leading BPM offering.


TOM TAILOR

Modularized business model allows mgmt to concentrate on growth and brand building; sales Quarterly releases leverage to drive margins Catalyst/Next news Potential Services acquisitions/Prelims 14 Feb Analyst conf 10/11 March 2010 prelims due 8 Feb. Potential acq./DPS announcement/CMD 24. Mar FY10 prelims early Feb Potential contract wins; FY 10 results 31 Mar

Defensive or Value BILFINGER BERGER

Comment Transitioning to mostly Services focus reducing risk and increasing share of stable, cashgenerative businesses

TP (EUR) Upside % 70.0 13.1% 26.0 6.6 40.0 75.0 103.0 19.4% 23.1% 23.0% 26.4% 8.5%

GEA

Purchase now to capture the benefits of the group reogranisation likely to emerge over the next 1 - 2 years

JENOPTIK

Benefiting from strong demand in semiconductor and in its Metrology businesses; high FCF to further de-leverage balance sheet

LEONI

Winner of sector consolidation which is regaining momentum post the crisis.

RHEINMETALL

VOSSLOH AG

Outlook for defence better than market believes; automotive to reach new peak margins in the next cycle Play on global emerging market rail growth theme. Earnings growth regaining momentum. Combines good visibility with modest valuation

January 2011

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IV Overview of the German smaller companies segmentOur Cheuvreux German small- and mid-cap universe, defined as those companies with a market capitalisation of less than EUR4.0bn, currently consists of 77 companies. Since the June 2010 edition of this review, we have added Gerry Weber, Strer and Tom Tailor to our research coverage. In this edition of our German Smaller Companies Review we have compiled updates on those stocks within our universe with a market capitalisation of between ~EUR200m and ~EUR4bn.ADDITIONS TO THE CHEUVREUX GERMAN SMALLER COMPANIES COVERAGE LIST SINCE JUNE 2010Company GERRY WEBER STRER TOM TAILOR Sector Retail - Textiles Media - Advertising Retail - Textiles Rating* 2 2 1 Target price (EUR) 39.9 23.0 19.6 Mkt. Cap (EURm) 730.0 1,137.7 276.0

*Current rating; Source: CA Cheuvreux

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

Source: Thomson Reuters, CA Cheuvreux

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In retrospect, the robust performance of equities in 2010 is understandable, considering the fact that 1) from a risk/reward perspective investors have had little alternative to equities, with the notable exception of commodities; 2) global monetary policy has been particularly expansionary and supportive, on the one hand to avert deflation (H1-10) and on the other hand to prevent a further spreading of the sovereign debt crisis in parts of Europe; 3) corporate earnings have developed very favourably, returning rapidly to precrisis levels and in some instances already exceeding previous peaks, consistently beating market expectations amid greater than projected economies-of-scale; and 4) investors have displayed increasing willingness to assume risks again (probably encouraged by the highly depressed level of bond yields). For Germany in particular it remains to be added that the government's 'short-time work' scheme has proven a welcome element in terms of providing outstanding flexibility for corporates with regards to staff utilisation (thus giving them a true competitive edge), whilst having stabilised public confidence and private consumption.BEST AND WORST PERFORMERS IN 2010 CHEUVREUX GERMANY SMALL/MID-CAP UNIVERSEBEST Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 HUGO BOSS SAF-HOLLAND DIALOG SEMICONDUCTOR LANXESS JUNGHEINRICH DRAEGERWERK LEONI TUI SARTORIUS AG FUCHS PETROLUB TOGNUM AG GERRY WEBER ELRINGKLINGER GFK SE TAKKT WACKER NEUSON SE DEMAG CRANES AG PFEIFFER VACUUM BRENNTAG AG AURUBIS CROPENERGIES KSB HORNBACH HOLDING AG SOFTWARE AG KUKA AG YtD 128.2% 126.6% 123.2% 122.1% 116.5% 103.9% 101.1% 78.1% 78.0% 69.5% 68.8% 67.4% 60.8% 57.2% 55.4% 54.6% 52.9% 49.9% 48.7% 46.5% 46.4% 45.6% 44.4% 42.5% 42.4% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WORST Company Q-CELLS ROTH&RAU PFLEIDERER SOLARWORLD NORDEX PHOENIX SOLAR CENTROTHERM PV OVB CONERGY AG MANZ AUTOMATION AG SMA MVV ENERGIE QIAGEN MLP RHOENKLINIKUM KONTRON PRAKTIKER STADA PUMA HEIDELBERGER DRUCK CARL ZEISS MEDITEC BILFINGER BERGER KLOECKNER & CO SE AIXTRON SE BAUER YtD -72.7% -60.1% -59.5% -51.6% -47.1% -44.2% -36.8% -30.3% -25.5% -25.3% -24.8% -9.7% -5.5% -5.0% -4.0% -1.1% 1.2% 4.1% 5.8% 6.8% 14.7% 15.9% 17.5% 17.7% 18.9%Source: Thomson Reuters, CA Cheuvreux

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With the vast majority of global economic imbalances far from resolved and government debt going through the roof, German equities were hit by the 'Greek disease' until the summer. However, as soon as the EU rescue scheme was finalised and a collapse of the euro avoided, equities started to climb the wall of worries, with very few breaks for consolidation within the final four months of the year. The rise in the German stock market in particular has been fuelled by a) recovering global economic activity and sustainably surging demand for German exports; b) the accelerated domestic economy; and c) abundant liquidity thanks to investors' reduced risk aversion (in the second half of 2010). At the same time, German stock prices have also been boosted by corporate earnings growth exceeding original expectations and the global credit market returning to a more normal state of affairs, although a return to full normality may take some time. We are convinced corporate Germany will continue to exploit its very healthy competitiveness, thereby gaining increasing market shares and expanding earnings rapidly. While further painful restructuring has shifted down management agendas, corporate Germany will not rest on its laurels but will continue to optimise its portfolios/market positions and to globalise value-added. On average, German enterprises should continue to fare better than many of their counterparts in other countries. With productivity outweighing the drawbacks of their location (high wages and payroll expenses, bureaucracy, excessive taxation, lack of labour market flexibility, etc.), we are convinced the rise in domestic wages/salaries and the limited availability of skilled labour will not throw a spanner in the works.

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MDAX INDEX 5-YEAR PERFORMANCE

TECDAX INDEX 5-YEAR PERFORMANCE

9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2006 2007 2008 2009 MDAX 2010 2011

1150 1050 950 850 750 650 550 450 350 2006 2007 2008 2009 TECDAX 2010 2011



SDAX INDEX 5-YEAR PERFORMANCE210

GERMAN SMALL CAP INDICES VS. DAX LAST 5 YEARS

7000 6500 6000 5500 5000 4500 4000 3500 3000 2500 2000 2006 2007 2008 2009 SDAX 2010 20110 2006 2007 2008 SDAX TECDAX 2009 MDAX 2010 DAX 2011 70 140



MDAX VS. DAX (2010)140 130 120160 150 140 130 120 110 100

SDAX VS. DAX (2010)

110 100 90 80 Jan

90 80 Jan

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Sep DAX

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

Best Picks for H1 2011Against this backdrop, as well as the belief that Germany will lead central Europe on its way back to growth, we expect the German stock market to climb before taking a first, more pronounced breather in 2011. With few attractive alternatives in other asset classes, stocks will likely draw a sizeable share of the abundant liquid funds available for investment. The German stock market is well positioned in the European context, as Germany's relative competitiveness is unparalleled and restructuring in this country is still being taken very seriously. We believe Germany AG will continue to play its cards well in 2011 by taking further market shares and optimising its global competitiveness via restructuring, whilst at the same time making use of its balance sheet strength to fuel growth, organically as well as through acquisitions. Hence, investors should expect more growth/restructuring/corporate action in 2011. In this context, the members of Cheuvreux Germany's analyst team have singled out a number of mid/small caps that we believe represent an attractive portfolio of investment ideas with the potential to outperform the market as a whole. Based on considerations such as balance sheet strength, recurring free cash flow generation, consensus underestimation of the positive impact of operational leverage on earnings and cash flow and dividend payouts, our Best Picks for the first half of 2011 are as follows:

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Aixtron (price target: EUR41.5, upside 33%): The global LED equipment (MOCVD) market remains duopolistic for the time being, with AIXA being the undisputed market leader. Following the CAPEX cycle for LCD backlighting, the CAPEX cycle for LED lighting is expected to be the next major driver for AIXA's new bookings. During 2010 concerns arose that there may be a noticeable pause between the two cycles, resulting in a decline in AIXA's new bookings. This weighed on the company's shares. Now, however, there are tangible signs that the LED lighting market is gearing up earlier than widely expected. We had already assumed at least stable bookings, but some bears in the market will have to adjust their overly negative views on the company's future business prospects. This should drive AIXA's shares, especially as >40% of the stock are held as shorts. Bilfinger Berger (price target: EUR70, upside 15%): Bilfinger continues to successfully execute its strategic plan to downsize its construction activities, including the potential IPO of its Australian business Valemus, to fundamentally reduce its risk profile and earnings volatility and free up significant capital to invest in the further expansion of its market-leading positions in each of its Services businesses. The recent disposal of Valemus, which is estimated will generate net cash proceeds of ~EUR500m, should serve as a catalyst. Operationally, Bilfinger has consistently exceeded expectations throughout 2010. After having proven its resilience during the recession, its incoming orders have picked up sharply, especially in the key Industrial Services division (+23% in Q3 after +19% in Q2) and it raised its guidance twice in 2010. Despite the shares' recent strong outperformance, they still offer attractive value, trading at just 9.5x P/E, 1.3x P/BV with a sustainable ROE of ~16%, a dividend yield of 4.7% and non-recourse debt-adjusted EV/EBITDA of 6.3x (all multiples 2011E). Dialog Semiconductor (price target: EUR20, upside 12%): With Dialog in the sweet spot of market growth (smartphones, portable media devices) and its products gaining increasing share at customers, top-line growth in excess of 30% y-o-y and bottom-line expansion of more than 50% p.a., it is likely to maintain its momentum, probably even beyond 2011E. The company has won new business from major customers and has key products under development that could generate sizeable incremental sales from H2-11E. Dialog shares, Europe's best way to play the 'Apple-mania', are a highly attractive, inexpensive tech investment. Fraport (price target: EUR56, upside 16%): Fraport offers investors an attractive bet on the global air traffic growth theme: the operator of the Star Alliance's largest European hub, especially bearing in mind the added capacity from 2011/12, is strategically well positioned to outpace its major European competitors. The significantly higher than expected pace of PAX growth, combined with the scheduled aviation fee increases by 24% in several steps through 2015 and the 50% rise in high-yielding retail space, will drive earnings growth. We estimate an EBITDA CAGR 2010-12E of 13.8% vs. 6.5% on average for the European peers. Furthermore, we now estimate that the Aviation division will meet its target to cover its cost of capital by 2015. Half way through the company's major investment programme, execution risks are declining (costs 10-15% 1.0, which implies Q4-10 order intake of at least EUR600m, up +56% q-o-q. The Defence EBIT margin was 10.4% (est. 10.2%). The order backlog now stands at EUR4.88bn. Q3-10 Automotive sales were up +24% y-o-y (vs. Triad market light vehicle production growth of +10% y-o-y) and down -4% q-o-q to EUR490m, with an EBIT margin of 4.1%. Following Q3-10, RHM expects full year group sales of EUR3.9bn and group EBIT of EUR270-280m, with Defence sales of >EUR2.0bn and EBIT >EUR215m and Automotive sales of EUR1.9bn and EBIT of EUR70-80m. This guidance appeared a little disappointing at first sight, as RHM had not disclosed before the conference call that it already included an EUR10m restructuring provision for its Italian Auto operations. Thus, Q4 for Automotive does not look as bad as the initial guidance would have indicated, and the underlying EBIT margin in Automotive should reach 4.5% for 2010E or 5.7% in Q4-10E, influenced in part by positive mix effects in Q4.

Price (07/01/2011)Reuters: RHMG.DE Bloomberg: RHM GR

Stock dataMarket capitalisation Free float Enterprise value No. of shares, adjusted Daily volume EUR2398m EUR2398m EUR2835m 39.6m EUR 12.69m

PerformancesAbsolute perf. Relative perf. 1 month 3 months 12 months 11.3% 30.8% 38.2% 9.6% 14.9% 7.5%

68.9 58.9 48.9 38.9 28.9 18.9 8.9 01/01 04/02 08/03 11/04 01/06 04/07 07/08 10/09

68.9 58.9 48.9 38.9 28.9 18.9 8.9 01/11

Price/M DAX

Price

Sector focusSector Top Picks Least favoured ABB, EADS, SIEMENS AG Alstom, Nexans, Rolls-Royce

Outlook Defence growth driven by internationalisationAlthough RHM's Defence division will be affected by budget cuts, we expect it to remain relatively resilient given its successful internationalisation strategy. While we expect budgets within NATO to be under pressure, growth outside NATO is expected to be strong, and RHM continues to predict healthy 2011-12 Defence budget CAGRs for Australia (+8%), Brazil (+8%), India (+10%), Middle East (+6%), and South Africa (+5%). RHM has adjusted to the internationalisation trend at an early stage: since 2007, eight of its 11 acquisitions were outside Germany, and RHM predicts a mid-term international order intake ratio of 80% (9M10: 75%). Its recent EUR87m order intake from Canada offers an example of how RHM is becoming less dependent on its German domestic market. The contracts include: 1) EUR70m to supply grenade launcher systems and ammunition. Under this contract RHM will supply 304 automatic grenade launchers by January 2012. In addition, it will supply 250,000 rounds of 40mm practice and service ammunition. 2) EUR17m to modernise and overhaul 42 Leopard battle tanks, which will be taken over by the Canadian army from the Dutch army by the beginning of 2012. Hans-Joachim HEIMBUERGERResearch Analyst [email protected] (49) 69 47 897 540

ShareholdersFree Float 100.0%

2009 P/E (x) EV/EBITDA (x) Attrib. FCF yield (%) Net debt/EBITDA (x) Yield (%) ROCE (%) EV/Capital empl. (x) NS 11.4 8.2 (0.1) 0.7 0.6 1.0

2010E 13.9 6.4 NS (0.2) 2.2 11.6 1.2

2011E 10.8 5.3 7.8 (0.4) 2.6 14.5 1.1

2012E 8.5 4.2 11.7 (0.7) 3.6 18.0 1.0


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Company profileFocus on Defence and Automotive Rheinmetall was founded in 1889 as Rheinische Metallwaren- und Maschinenfabrik AG. In recent years, the company's strategy has focused on two key industries: Defence and Automotive, with all non-core businesses being divested. Automotive mainly exposed to Europe The Automotive business, parented by Kolbenschmidt Pierburg AG with its Pistons, Air Supply, Pumps, Aluminium Technology, Plain Bearings and Motor Services divisions, specializes in modules and systems relating to the engine. Geographically, Germany is this division's largest individual national market accounting for ~32% of divisional sales, followed by the rest of Europe (~44%) and North America (~10%). Its largest customer is VW/Audi, with ~17% of divisional sales, followed by Ford with ~11%. Leading supplier in the market for land forces equipment Rheinmetall's Defence business (56% of 2009 group sales) encompasses land systems, air defence systems, weapon & munitions and defence electronics. The company is one of Europe's leading suppliers and foremost specialists in the market for land forces equipment. Its top customer is Germany with ~36%, followed by the rest of Europe with ~30%, North America with ~10% and Asia with ~16%.

ValuationDCF: We incorporate sales and EBITDA CAGRs of 2.4% and 2.9% respectively for 2010-19E, a WACC of 8% and a terminal growth rate of 1.5%. Based on these parameters, our DCF model yields a fair value of EUR74 per share. Multiple comparison: Rheinmetall trades at a 21% discount to its Defence peers and at a 4% discount to its Automotive peers based on 2012E EV/EBITDA. However, a peer group valuation has limited applicability for Rheinmetall in its current situation, as it fails to capture the company's superior growth opportunities in Defence and the fact that Automotive completed a major restructuring programme in 2009 that could provided market conditions remain positive lead to new peak margins for the division in 12E. SOP: Given that Rheinmetall consists of two very different business areas, we also run a SOP valuation. Based on 11E estimates this approach indicates a FV of EUR73 per share applying an EV/Sales multiple of 0.95x for Defence and 0.4x for Automotive.

SWOT analysisStrengthsAutomotive: top three player Defence: leading supplier to German Bundeswehr; improved profitability in defence due to internationalisation; highly profitable and growing ammunitions business

Investment caseWeaknessesDefence: partly project-driven sales Automotive: structurally low margins

OpportunitiesRheinmetall is an active consolidator in the European defence industry Automotive: further cost reductions Defence: high market entry barriers, further successful internationalisation of the sales base

ThreatsAutomotive: concentration on few customers with large individual sales contribution Defence: vulnerable to budget cuts

Defence outlook not that bad: Although Rheinmetall's Defence division will be affected by budget cuts, we expect it to remain relatively resilient given its successful internationalisation strategy: While we expect budgets within NATO to be under pressure, strong growth outside NATO is expected. Rheinmetall has adopted to the internationalisation trend at an early stage: Since 2007, 8 of its 11 acquisitions were outside Germany, and Rheinmetall guides for a mid-term international order intake ratio of 80% (9M-10: 75%). Automotive is likely to reach its peak sales of the last cycle, i.e. EUR2,2bn in 2007, in 12E with a new peak EBIT margin of 7-8% compared to just 5.6% in 2007. Higher profitability is driven by a) strong restructuring efforts (B/E at EUR1.55bn of sales); b) globalisation (market entry in India and China, successful JVs); c) innovation (e.g. broad range of EU-5,6 products available); and d) portfolio effects (Pierburg, Bearings and Aftermarket growing faster than Pistons and ATAG; shift from commodity to high-tech products).

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RheinmetallFY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj. for exceptional items Net attrib. profit [loss], restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec. [inc.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 2004 3,454.0 -18.7% (992.0) (2,078.0) 384.0 -11.7% (157.0) 227.0 11.3% 0.0 0.0 0.0 227.0 (55.0) 0.0 0.0 (52.0) (2.0) 0.0 0.0 118.0 0.0 (5.0) 113.0 0.0 0.0 113.0 79.4% 248.0 -17.1% (16.0) (183.0) 0.0 49.0 (10.0) 0.0 0.0 (26.6) 0.0 402.6 415.0 828.0 47.0 514.0 397.0 151.0 17.3 1,937.0 357.0 60.0 1,052.0 110.0 0.0 358.0 10.4 1,937.0 2005 3,454.0 0.0% (992.0) (2,078.0) 384.0 0.0% (157.0) 227.0 0.0% 0.0 0.0 0.0 227.0 (55.0) 0.0 0.0 (52.0) (2.0) 0.0 0.0 118.0 0.0 (5.0) 113.0 0.0 0.0 113.0 0.0% 248.0 0.0% (16.0) (183.0) 0.0 49.0 (10.0) 0.0 0.0 (26.6) 0.0 402.6 415.0 828.0 47.0 514.0 397.0 151.0 17.3 1,937.0 357.0 60.0 1,052.0 110.0 0.0 358.0 10.4 1,937.0 2006 3,626.0 5.0% (1,038.0) (2,224.0) 364.0 -5.2% (151.0) 213.0 -6.2% 0.0 0.0 0.0 213.0 (51.0) 0.0 0.0 (41.0) 2.0 0.0 0.0 123.0 0.0 (3.0) 120.0 0.0 0.0 120.0 6.2% 279.0 12.5% (58.0) (765.0) 0.0 (544.0) (41.0) 0.0 0.0 (32.4) 0.0 438.4 (179.0) 894.0 43.0 519.0 434.0 205.0 21.9 2,095.0 365.0 74.0 1,057.0 151.0 0.0 448.0 12.4 2,095.0 2007 4,005.0 10.5% (1,052.0) (2,522.0) 431.0 18.4% (168.0) 263.0 23.5% 0.0 0.0 0.0 263.0 (57.0) 0.0 0.0 (63.0) 7.0 0.0 0.0 150.0 0.0 (5.0) 145.0 0.0 0.0 145.0 20.8% 312.0 11.8% (119.0) 391.0 0.0 584.0 5.0 0.0 0.0 (36.0) 0.0 (593.0) (40.0) 1,014.0 43.0 522.0 422.0 236.0 22.3 2,237.0 391.0 93.0 1,046.0 146.0 0.0 561.0 14.0 2,237.0 2008 3,869.0 -3.4% (1,079.0) (2,380.0) 410.0 -4.9% (166.0) 244.0 -7.2% 0.0 0.0 0.0 244.0 (62.0) 0.0 0.0 (49.0) 2.0 0.0 0.0 135.0 0.0 (1.0) 134.0 0.0 0.0 134.0 -7.6% 293.0 -6.1% 65.0 (298.0) 0.0 60.0 4.0 0.0 0.0 (46.8) 0.0 18.8 36.0 1,059.0 59.0 523.0 410.0 205.0 18.3 2,256.0 419.0 111.0 1,092.0 142.0 0.0 492.0 12.7 2,256.0 2009 3,420.0 -11.6% (1,068.0) (2,174.0) 178.0 -56.6% (165.0) 13.0 -94.7% 0.0 0.0 0.0 13.0 (61.0) 0.0 0.0 (6.0) 2.0 0.0 0.0 (52.0) 0.0 (6.0) (58.0) 0.0 0.0 (58.0) NS 127.0 -56.7% 95.0 (91.0) 0.0 131.0 (6.0) 0.0 0.0 (46.8) 9.0 344.8 432.0 1,070.0 64.0 610.0 502.0 (24.0) NS 2,222.0 422.0 133.0 1,044.0 148.0 0.0 475.0 13.9 2,222.0 2010E 3,975.0 16.2% (1,128.0) (2,400.1) 446.9 151.1% (172.0) 274.9 NS 0.0 0.0 0.0 274.9 (55.0) 0.0 0.0 (57.2) 9.0 0.0 0.0 171.6 0.0 0.0 171.6 0.0 0.0 171.6 NS 350.9 176.3% (137.4) (238.5) 0.0 (25.0) 0.0 0.0 0.0 (11.9) (9.2) 210.5 164.4 1,211.3 73.3 733.2 596.5 (101.2) NS 2,513.1 422.0 122.9 1,120.6 148.0 0.0 699.6 17.6 2,513.1 2011E 4,600.0 15.7% (1,174.8) (2,895.2) 530.0 18.6% (174.0) 356.0 29.5% 0.0 0.0 0.0 356.0 (46.5) 0.0 0.0 (85.2) 6.0 0.0 0.0 230.3 0.0 (9.0) 221.3 0.0 0.0 221.3 29.0% 423.1 20.6% (61.8) (165.6) 0.0 195.7 0.0 0.0 0.0 (51.5) 0.0 (11.4) 132.8 1,379.0 84.4 693.1 644.0 (205.3) NS 2,595.2 422.0 113.9 1,121.2 148.0 0.0 790.1 17.2 2,595.2 2012E 5,200.0 13.0% (1,233.6) (3,329.1) 637.3 20.2% (182.0) 455.3 27.9% 0.0 0.0 0.0 455.3 (39.1) 0.0 0.0 (114.0) 6.0 0.0 0.0 308.2 0.0 (25.0) 283.2 0.0 0.0 283.2 28.0% 508.2 20.1% (37.1) (166.4) 0.0 304.7 0.0 0.0 0.0 (61.5) 0.0 76.1 319.3 1,610.4 99.7 703.2 728.0 (458.6) NS 2,682.7 422.0 99.9 1,119.6 148.0 0.0 893.2 17.2 2,682.7

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RheinmetallFY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS, reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share No. of shares, adjusted Av. number of shares, adjusted Treasury stock, adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA, restated EV/EBITA, restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity, restated 2004 3.20 82.7% 3.20 82.7% 0.00 0.90 7.02 -15.5% 22.1 36.000 35.350 0.000 39.25 42.47 23.05 32.71 1,399.6 1,954.6 12.3 12.3 5.6 3.5 1.8 1.1 2.3 5.1 8.6 0.57 6.5 7.0 0.6 11.1 6.6 3.4 1.9 17.3 28.2 12.4 12.4 14.6 14.6 2005 3.20 0.0% 3.20 0.0% 0.00 0.90 7.02 0.0% 22.1 36.000 35.350 0.000 53.26 55.23 38.15 45.27 1,709.9 2,264.9 16.7 16.7 7.6 2.9 2.4 1.2 1.7 5.9 10.0 0.66 7.8 7.0 0.6 11.1 6.6 3.4 1.9 17.3 28.2 12.4 9.3 14.6 14.6 2006 3.42 7.0% 3.42 7.0% 0.00 1.00 7.95 13.4% 23.8 36.000 35.080 0.000 57.48 68.00 47.01 56.96 2,781.8 3,424.3 16.8 16.8 7.2 NS 2.4 1.8 1.7 9.4 16.1 0.94 10.6 7.1 0.7 10.0 5.9 3.4 1.9 21.9 29.2 11.0 8.2 14.4 14.4 2007 4.14 21.1% 4.14 21.1% 0.00 1.30 8.92 12.1% 26.9 36.000 34.990 0.000 54.38 76.89 46.57 62.93 1,904.1 2,581.6 13.1 13.1 6.1 29.7 2.0 1.2 2.4 6.0 9.8 0.65 7.1 7.6 0.8 10.8 6.6 3.7 1.9 22.3 31.4 12.6 8.9 15.4 15.4 2008 3.88 -6.4% 3.88 -6.4% 0.00 1.30 8.48 -4.9% 28.1 36.000 34.540 0.000 22.90 54.93 16.09 40.02 791.4 1,383.3 5.9 5.9 2.7 7.5 0.8 0.7 5.7 3.4 5.7 0.36 4.1 6.6 0.7 10.6 6.3 3.5 1.8 18.3 33.5 11.5 8.5 13.5 13.5 2009 (1.60) NS (1.60) NS 0.00 0.30 3.50 -58.8% 26.7 39.600 36.300 0.000 44.74 45.67 19.01 32.47 1,771.7 2,026.4 NS NS 12.8 8.2 1.7 1.0 0.7 11.4 NS 0.6 11.3 2.9 NS 5.2 0.4 NS 1.6 NS (18.8) 0.6 0.7 NS NS 2010E 4.33 NS 4.33 NS 0.00 1.30 8.86 153.2% 29.3 39.600 39.600 0.000 60.17 60.41 41.79 48.91 2,382.7 2,866.7 13.9 13.9 6.8 NS 2.1 1.2 2.2 6.4 10.4 0.7 7.3 8.1 NS 11.2 6.9 4.3 1.7 NS 30.0 11.6 8.7 15.2 15.2 2011E 5.59 29.0% 5.59 29.0% 0.00 1.55 10.68 20.6% 33.3 39.600 39.600 0.000 60.55 60.98 57.06 59.95 2,397.8 2,835.1 10.8 10.8 5.7 7.8 1.8 1.1 2.6 5.3 8.0 0.6 6.0 11.4 NS 11.5 7.7 5.0 1.9 NS 27.7 14.5 10.6 17.4 17.4 2012E 7.15 28.0% 7.15 28.0% 0.00 2.15 12.83 20.1% 38.5 39.600 39.600 0.000 60.55 2,397.8 2,706.0 8.5 8.5 4.7 11.7 1.6 1.0 3.6 4.2 5.9 0.5 4.6 16.3 NS 12.3 8.8 5.9 2.1 NS 30.1 18.0 13.1 19.3 19.3

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HEALTHCARE PROVIDERS & SERVICES

Rating Target price (6 months)

2/Outperform +17.5% EUR19.00 EUR16.17

Rhoen KlinikumDefensive growth at reasonable price + potential M&A catalystRecent developments lack of M&A and healthcare reformRhn shares have underperformed significantly in the recent past, especially since mid-summer 2010, due to a lack of M&A deal flow and health care reform measures that have sparked downward estimate revisions. Operationally, organic sales growth remained robust in 9M10, but due to higher material and personnel costs, the margin progression has been slightly below our expectations. 9M-10 sales were up 10.5% (organic +6%); EBIT increased nearly in line with sales (+9.7%), resulting in an unchanged margin of 7.8%. EPS growth (+11.6%) was broadly in line with expectations due to lower-thanexpected net financial expenses.

Price (07/01/2011)Reuters: RHKG.DE Bloomberg: RHK GR


PerformancesAbsolute perf. Relative perf. 1 month 3 months 12 months 1.4% 1.1% -7.3% -0.1% -11.2% -27.9%

Outlook Marburg-Giessen: day of reckoning in 2011Rhn refined its 2010 net income guidance to ~EUR145m (we estimate EUR146.5m), which appears achievable given the seasonal strength of Q4. For 2011, the Healthcare Ministry has agreed a 1.15% change in the rate of average revenues and most likely a discount of 30% for surplus treatment volumes (for treatments beyond the negotiated increases per hospital), which is expected to generate ~EUR500m in savings for the health insurance funds. Against this backdrop, Rhn's 2011 guidance calls for revenues of EUR2.65bn (+4%) and EBITDA of ~EUR340m (+/- 5%), implying a ~60bps increase in the EBITDA margin to ~12.8% and net income ~EUR160m (+/- 5%). The biggest earnings growth contributor in 2011 will be the Marburg-Giessen (M-G) University Hospital. The new hospital at Giessen will be completed in Q1 with the move scheduled for April/May. The company has been adamant that it definitely expects M-G to generate the targeted 10-12% EBIT margin from YE-12, implying potentially a >20% increase in group EBIT by 2013 (vs. 2010) from the pick-up in profitability at M-G alone. For 2011 the company feels "very comfortable" with consensus expectations of an EBIT margin of ~5%. The margin rise at M-G will be driven by headcount reduction post the move into the new hospital, volume growth (rising patient numbers but also further increases in the Case Mix Index), and patient flow efficiency gains. In 2010 Rhn made only one very small acquisition, Salze Klinik, a geriatric hospital. Rhn also says it is in talks with three potential acquisition candidates, and management remains convinced that the pace of privatisations, despite improving financials for many municipalities, will pick up in 2011. Though many investors have been disappointed that the pace of deals completed has not accelerated quicker the only meaningful transaction since the capital increase in summer 2009 was Medigreif, price EUR110m we certainly welcome the fact that management has not risked overpaying for an acquisition simply to get a deal done. Following a sharp under-performance in H2-10, the shares offer good value, combined with a defensive growth element. A potential major catalyst could be the privatisation of the Kiel-Lbeck University Hospital should it be given the green light to proceed in 2011. Craig ABBOTTResearch Analyst [email protected] (49) 69 47 89 75 25

23.9 21.9 19.9 17.9 15.9 13.9 11.9 9.9 7.9 5.9 01/01 03/02 06/03 09/04 12/05 03/07 06/08 10/09

23.9 21.9 19.9 17.9 15.9 13.9 11.9 9.9 7.9 5.9 01/11

Price/M DAX

Price

Sector focusSector Top Picks Least favoured DiaSorin, Getinge, Orpea, William Demant

ShareholdersMnch.Family 12.5%, Free float 87.5%

2009 P/E (x) EV/EBITDA (x) Attrib. FCF yield (%) Net debt/EBITDA (x) Yield (%) ROCE (%) EV/Capital empl. (x) 16.0 9.1 NS 1.5 1.7 9.8 1.4

2010E 15.5 8.7 0.0 1.4 1.7 10.3 1.4

2011E 13.1 7.2 6.3 0.9 1.9 11.4 1.3

2012E 11.0 6.2 6.7 0.6 2.3 12.7 1.2


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Company profileLeading private hospital operator and consolidator Rhn Klinikum is one of three leading private hospital operators in Germany, with sales in 2010E of EUR2.6bn and net earnings of ~EUR145m. The company owns and operates 53 hospitals with a total capacity of ~16,000 beds. Its business model is based on acquiring ailing public hospitals, implementing its patient flow model and turning around their profitability. Compared to public hospital operators, Rhn generates significant cost savings through procurement, four different stages of care/accommodation, better coordination among staff and departments and, over time, lower staffing requirements. Acquisitive growth model focused on Germany Rhn operates solely in Germany and currently has no plans to expand abroad. The privatisation process in the German hospital industry is set to continue as pressures on the public hospital sector, which suffers the effects of structural underinvestment, will persist and probably intensified after the recent recession. The pace of acquisitions is difficult to forecast, somewhat limiting short-term visibility on the M&A pipeline, but from a medium-term perspective Rhn still has significant acquisitive growth potential. The company aims to raise its market share from ~3% today to >8% in the medium term.

ValuationOur target price of EUR19 is DCF-based the most appropriate approach, in our view, given the long-term nature of Rhn Klinikum's business model. Our DCF model is based on our earnings model, which reflects both organic and acquisitive sales growth (through 2015E). We assume a WACC of 8.5% and 1.5% terminal growth. The company's multiples are not demanding, considering that they are currently inflated by margins suppressed by its recent acquisition spree, which has however laid the groundwork for earnings growth for the next 3-4 years. Rhn is also Europe's only major listed pure-play hospital operator a uniqueness factor that should support its valuation.

Investment caseM&A catalyst to gradually emerge. Although Rhn has only completed one very small acquisition since buying the Medigreif chain at the end of 2009, the pace of acquisitions in the German hospital industry did in fact accelerate in 2010 with some 14 transactions taking place. Rhn currently is in negotiations with 3 hospitals and claims that its M&A pipeline is beginning to fill. Given the ongoing financial pressure on states and municipalities and the huge investment backlog in the public hospital sector estimated to be ~EUR50bn the pace of acquisitions is likely to continue to accelerate in 2011. Given its financial strength, Rhn still has significant acquisitive growth potential. A potential major catalyst could be the KielLbeck University Hospital privatisation if approved. Defensive growth qualities are still key. We believe stocks that offer stable, non-cyclical demand growth will begin to outperform again in 2011. Rhn's organic revenue growth should remain robust (3-5%), driven by patient volume growth (shorter average duration, market share gains) and an increase in the proportion of higher yielding treatments (Case-Mix-Index). Furthermore, the turnaround in earnings at Marburg-Giessen alone should boost EBIT by 11% by 2012E.

SWOT analysisStrengthsGermany's largest listed and one of the top three private hospital operators. Rhn's financial strength (especially after the recent capital increase) and management experience should enable it to remain a leading consolidator in the German hospital industry. Management's solid track record for acquisitions and restructuring.

WeaknessesGreater margin drag from newly acquired clinics than in the past due to deteriorating profitability at public hospitals. Low visibility on timing of acquisitions, which is a very political process.

OpportunitiesSignificant acquisitive growth opportunities due to the privatisation process in the German hospital industry. Medium-term potential to enter foreign markets with similar structures (e.g. Poland)

ThreatsPricing regulation, future healthcare reforms could put margins under pressure. Foreign operators could enter the market, driving up acquisition prices. Tight supply conditions for specialist doctors may keep wage pressure high.

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Rhoen KlinikumFY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj. for exceptional items Net attrib. profit [loss], restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec. [inc.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 2004 1,044.8 9.3% (546.6) (317.5) 180.7 3.4% (57.1) 123.6 -3.4% 0.0 0.0 0.0 123.6 (11.9) 0.0 0.0 (31.7) 0.0 0.0 0.0 80.0 0.0 (3.8) 76.2 0.0 0.0 76.2 1.1% 137.6 6.7% (33.5) (120.4) (30.9) (16.3) (1.7) 0.0 0.0 (17.8) 0.0 0.0 (35.8) 545.9 22.8 11.1 31.9 223.6 39.3 835.3 46.3 2.7 790.1 7.3 0.0 (11.1) (1.1) 835.3 2005 1,415.8 35.5% (793.6) (414.8) 207.4 14.8% (67.3) 140.1 13.3% 0.0 0.0 0.0 140.1 (16.5) 0.0 0.0 (35.2) 0.0 0.0 0.0 88.2 0.0 (4.6) 83.6 0.0 0.0 83.6 9.7% 155.6 13.1% (8.2) (210.5) (68.3) (63.1) 5.0 0.0 0.0 (20.4) 0.0 0.0 (78.5) 609.2 32.3 12.9 30.6 302.0 47.1 987.0 83.9 5.1 973.5 7.2 0.0 (82.4) (5.8) 987.3 2006 1,933.0 36.5% (1,127.8) (584.1) 221.1 6.6% (75.0) 146.1 4.3% 0.0 0.0 0.0 146.1 (20.4) 0.0 0.0 (16.6) 0.0 0.0 0.0 109.1 0.0 (3.9) 105.2 0.0 0.0 105.2 25.8% 184.0 18.3% 11.2 (310.9) (265.2) (115.7) (2.4) 0.0 0.0 (19.4) 0.0 0.0 (137.5) 691.1 37.6 7.3 24.2 439.6 60.3 1,199.8 234.5 8.3 1,136.0 24.8 0.0 (203.7) (10.5) 1,199.9 2007 2,024.7 4.7% (1,204.0) (571.4) 249.3 12.8% (91.8) 157.5 7.8% 0.0 0.0 0.0 157.5 (20.4) 0.0 0.0 (25.9) 0.0 0.0 0.0 111.2 0.0 (4.9) 106.3 0.0 0.0 106.3 1.0% 202.0 9.8% (64.9) (174.4) (122.9) (37.3) (3.2) 0.0 0.0 (25.9) 0.0 0.0 (66.4) 769.7 41.1 8.2 24.5 506.1 62.4 1,349.6 0.0 255.6 1,205.3 26.3 0.0 (137.7) (6.8) 1,349.5 2008 2,130.3 5.2% (1,270.6) (596.9) 262.8 5.4% (90.7) 172.1 9.3% 0.0 0.0 0.0 172.1 (29.2) 0.0 0.0 (20.3) 0.0 0.0 0.0 122.6 0.0 (5.3) 117.3 0.0 0.0 117.3 10.3% 213.3 5.6% (26.3) (265.9) (204.4) (78.9) (6.6) 0.0 0.0 (29.0) 0.0 0.0 (114.5) 845.9 43.2 9.5 23.2 620.5 69.8 1,542.3 0.0 250.3 1,387.0 25.1 0.0 (120.0) (5.6) 1,542.4 2009 2,320.1 8.9% (1,379.2) (656.9) 284.0 8.1% (102.0) 182.0 5.8% 0.0 0.0 0.0 182.0 (23.3) 0.0 0.0 (27.1) 0.0 0.0 0.0 131.6 0.0 (5.9) 125.7 0.0 0.0 125.7 7.2% 233.6 9.5% (21.1) (405.2) (337.9) (192.7) 422.9 0.0 0.0 (29.3) 0.0 0.0 200.9 1,376.1 46.8 11.0 23.2 419.7 29.5 1,876.8 0.0 341.7 1,599.9 24.0 0.0 (88.8) (3.8) 1,876.8 2010E 2,613.3 12.6% (1,539.8) (749.1) 324.4 14.2% (116.8) 207.6 14.1% 0.0 0.0 0.0 207.6 (25.9) 0.0 0.0 (30.0) 0.0 0.0 0.0 151.8 0.0 (5.0) 146.8 0.0 0.0 146.8 16.8% 269.1 15.2% 9.1 (277.6) (202.8) 0.6 0.0 0.0 0.0 (30.0) 0.0 0.0 (29.4) 1,492.9 51.8 11.5 33.6 449.0 29.1 2,038.8 341.7 12.0 1,749.1 24.0 0.0 (87.0) (3.3) 2,039.8 2011E 2,791.6 6.8% (1,639.6) (781.0) 371.0 14.4% (136.2) 234.8 13.1% 0.0 0.0 0.0 234.8 (24.2) 0.0 0.0 (34.7) 0.0 0.0 0.0 175.9 0.0 (5.2) 170.7 0.0 0.0 170.7 16.3% 312.1 16.0% (12.2) (155.8) (74.8) 144.1 0.0 0.0 0.0 (38.2) 0.0 0.0 105.9 1,625.4 57.0 12.0 40.0 343.1 20.4 2,077.5 353.7 12.0 1,756.7 24.0 1.0 (67.9) (2.4) 2,077.5 2012E 3,011.4 7.9% (1,754.2) (842.9) 414.3 11.7% (144.8) 269.5 14.8% 0.0 0.0 0.0 269.5 (19.3) 0.0 0.0 (41.3) 0.0 0.0 0.0 208.9 0.0 (6.5) 202.4 0.0 0.0 202.4 18.6% 353.7 13.3% (6.2) (193.7) (106.3) 153.8 0.0 0.0 0.0 (42.7) 0.0 0.0 111.1 1,785.1 63.5 12.5 45.3 231.9 12.5 2,141.4 365.7 11.0 1,794.6 24.0 2.0 (55.9) (1.9) 2,141.4

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Rhoen KlinikumFY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS, reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share No. of shares, adjusted Av. number of shares, adjusted Treasury stock, adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib. FCF yield [%] P/BV Enterprise value / Op CE Yield [%] EV/EBITDA, restated EV/EBITA, restated EV/Sales EV/Debt-adjusted cash flow Financial Ratios Interest cover Net debt/Cash flow EBITDA margin [%] EBITA margin [%] Net margin [%] Capital turn [Sales/ Op. CE] Gearing [%] Payout ratio [%] Return [%] Pre-tax RoCE RoCE after tax ROE [%] Return on equity, restated 2004 0.74 1.0% 0.74 4.1% 0.00 0.20 1.33 6.7% 5.1 103.700 103.700 0.000 11.30 11.63 9.25 10.31 1,172.3 1,464.8 15.4 15.4 8.5 NS 2.2 1.8 1.8 8.1 11.9 1.40 9.6 15.2 1.6 17.3 11.8 7.7 1.3 39.3 27.2 14.9 10.7 15.0 15.0 2005 0.81 9.7% 0.81 9.7% 0.00 0.23 1.50 13.0% 5.6 103.700 103.700 0.000 16.15 16.86 11.41 14.12 1,644.0 2,049.1 20.0 20.0 10.8 NS 2.9 2.1 1.4 9.9 14.6 1.45 11.7 12.6 1.9 14.6 9.9 6.2 1.4 47.1 28.5 14.3 10.2 14.7 14.7 2006 1.01 25.8% 1.01 25.8% 0.00 0.25 1.77 18.3% 6.4 103.700 103.700 0.000 18.37 20.16 14.00 17.23 1,903.1 2,419.1 18.1 18.1 10.4 NS 2.9 2.1 1.4 10.9 16.6 1.25 11.7 10.8 2.4 11.4 7.6 5.6 1.6 60.3 24.6 12.4 10.8 16.5 16.5 2007 1.03 1.1% 1.03 1.1% 0.00 0.28 1.95 9.8% 7.1 103.700 103.700 0.000 21.58 24.13 17.78 21.52 2,237.8 2,855.1 21.1 21.1 11.1 NS 3.0 2.2 1.3 11.5 18.1 1.41 12.6 12.2 2.5 12.3 7.8 5.5 1.5 62.4 27.3 11.9 9.7 14.8 14.8 2008 1.13 10.3% 1.13 10.3% 0.00 0.28 2.06 5.6% 7.9 103.700 103.700 0.000 17.07 54.05 14.15 19.31 1,770.2 2,481.6 15.1 15.1 8.3 NS 2.2 1.6 1.6 9.4 14.4 1.17 10.1 9.0 2.9 12.3 8.1 5.8 1.4 69.8 24.8 11.3 9.7 14.9 14.9 2009 1.07 -5.2% 1.07 -5.2% 0.00 0.29 1.99 -3.2% 11.4 117.300 117.300 0.000 17.12 17.95 13.70 15.89 2,054.4 2,581.9 16.0 16.0 8.6 NS 1.5 1.4 1.7 9.1 14.2 1.1 9.8 12.2 1.8 12.2 7.8 5.7 1.3 29.5 27.1 9.8 8.2 9.6 9.6 2010E 1.06 -0.9% 1.06 -0.9% 0.00 0.28 1.95 -2.2% 10.5 138.200 138.200 0.000 16.47 19.85 15.25 17.64 2,276.2 2,814.3 15.5 15.5 8.5 0.0 1.6 1.4 1.7 8.7 13.6 1.1 9.4 12.5 1.7 12.4 7.9 5.8 1.3 29.1 26.4 10.3 8.6 10.3 10.3 2011E 1.24 16.3% 1.24 16.3% 0.00 0.31 2.26 16.0% 11.5 138.200 138.200 0.000 16.17 16.55 15.96 16.23 2,234.7 2,658.9 13.1 13.1 7.2 6.3 1.4 1.3 1.9 7.2 11.3 1.0 7.8 15.3 1.1 13.3 8.4 6.3 1.4 20.4 25.1 11.4 9.5 11.1 11.1 2012E 1.47 18.6% 1.47 18.6% 0.00 0.37 2.56 13.3% 12.5 138.200 138.200 0.000 16.17 2,234.7 2,550.6 11.0 11.0 6.3 6.7 1.3 1.2 2.3 6.2 9.5 0.8 6.7 NS 0.7 13.8 8.9 6.9 1.4 12.5 25.3 12.7 10.6 12.0 12.0

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RENEWABLE EQUIPMENT

Rating Target price (6 months)

2/Outperform +183.5% EUR36.00 EUR12.70

Roth&RauWorking down the order backlogRecent developments Profit warning due to write-downsOn 9 November, Roth und Rau issued a profit warning with the release of its preliminary Q3-10 results. 9M-10 sales were EUR189m (+19% y-o-y), in line with our EUR194m estimate, but 9M-10 EBIT was only EUR3m due to unscheduled write-downs and increased provisions. We had expected EUR12m. The company said sales were line with its expectations and that EBIT was hit, in particular, by depreciation charges totalling EUR8.5m. Due to the probable cancellation of turnkey projects in India, turnover that was already partially recognized in Q3-10 had to be booked to the company's own stocks and written down. Further negative impacts came from delays in two turnkey projects in Spain as well as the depreciation of working capital and allocations to provisions. Additionally, the company booked additional development expenses in the context of a key account project for which a new production step was realised in mass production. As a result, R8R lowered its EBIT outlook for 2010 to EUR9-9.5m, implying an EBIT margin of just ~3%. Its former EBIT guidance was for a margin of 8-9%. Its sales forecast remained unchanged at EUR285m.

Price (07/01/2011)Reuters: R8RG.DE Bloomberg: R8R GR


PerformancesAbsolute perf. Relative perf. 1 month 3 months 12 months 7.4% -26.6% -61.4% 0.4% -34.7% -61.9%

56.0 46.0 36.0 26.0 16.0 6.0 05/06 12/06 07/07 01/08 08/08 04/09 11/09 06/10

56.0 46.0 36.0 26.0 16.0 6.0 01/11

Outlook Working off the order bookWe expect no significant order intake in 2011E, and so look for the company to work off its huge order backlog of EUR365m (as of 9M-10). We expect about 30GW of cell equipment to be installed in 2011E vs. global new installed PV demand of about 16GW. Given that recent order intake has been for higher-margin business, we expect R8R to significantly increase its EBIT in 2011E. Given the relative shortage of wafer equipment vs. cell equipment, we can expect further wafer equipment orders in 2011E. Reminder: wafer equipment is a new field for Roth &Rau and the company received only one major order in 2010 from a Indian company. If Roth&Rau manages to successfully ramp up the lines, we expect further orders to follow. For 2011E, we also expect the company to generate order intake from cell equipment upgrade packages.

Price/TECDAX

Price

Sector focusSector Top Picks Least favoured SMA, SolarWorld Conergy

ShareholdersFree Float 82.3%; Roth & Rau families 11.4%; OTB 6.3%

2009 P/E (x) EV/EBITDA (x) Attrib. FCF yield (%) Net debt/EBITDA (x) Yield (%) ROCE (%) EV/Capital empl. (x) NS 13.9 0.9 (3.3) 3.3 13.1 2.7

2010E 12.3 2.2 NS (2.1) 0.0 15.3 1.2

2011E 7.2 1.8 NS (1.4) 0.0 22.0 1.0

2012E 5.7 1.1 9.7 (1.4) 0.0 25.8 0.8

Philipp BUMMResearch Analyst [email protected] (49) 69 47.897.527 Disclosures available on www.cheuvreux.com

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Company profileLeading supplier in the photovoltaic industry Roth & Rau is a leading supplier of plasma process systems for the photovoltaic industry. In its core market, anti-reflection coating equipment for silicon solar cells, R8R is the world market leader with a global share of approximately >50% (incl. OTB acquisition). Its main competitor in this business is Centrotherm PV (share: roughly 25%). Supplier to automotive and semiconductor industries Based on its plasma and ion-beam technology, the company also supplies components and process equipment to the automotive and semiconductor industries. Roth & Rau focuses on the development, final assembly and distribution of its plasma process systems as well as their control software. Turnkey solutions In addition to selling single items of production equipment, the company also offers turnkey solutions for the production of silicon solar cells in its photovoltaic division. Here Roth & Rau is the world number two with a market share of 25% after by Centrotherm PV with a dominant market share of approximately 50%. Through the acquisition of CTF Solar GmbH, Roth&Rau became the only independent supplier worldwide of a CdTe technology-based thinfilm turnkey line (the same technology First Solar is producing).

ValuationOur DCF-based target price stands at EUR36. The company is trading at a P/E 11E ratio of only 7.2x. The three German solar equipment producers Roth & Rau, Centrotherm and Manz Automation are trading at similar EV/Sales multiples (0.50.7x) for 2011E. However, due to the cyclicality of the cell equipment business, we see Roth & Rau trading at a discount of 33-50% to Centrotherm and Manz based on 2012E figures.

Investment caseDespite Roth & Rau's disappointing operating performance in 2010 (profit warning), we expect the company to benefit from very strong order intake in the course of 2010. The company suffered in 2010 from low-margin orders during the financial crisis. According to the company, its recently placed orders carry significantly higher margins. Therefore, we expect significantly higher profitability in 2011E than in 2010E and forecast an EBIT margin of 10%. We also believe Roth & Rau has seen its trough. We regard the current valuation as very attractive as the company is trading at a discount of 35+% compared to Centrotherm and Manz Automation.

SWOT analysisStrengthsFirmly established solar cell equipment supplier Covers the key steps of the solar cell production process with in-house products

WeaknessesLow visibility on order intake due to the current economic situation Not focused so far on turnkey solutions

OpportunitiesGenerating business in emerging solar markets, e.g. India and the Middle East Further order intake in the wafer business

ThreatsPush-outs and cancellations in the current order backlog Reduction in political support New competitors from the semiconductor equipment area and low-cost competitors from Asia could invade Roth&Rau's turf

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Roth&RauFY to 31/12 (Euro m) Profit & Loss Account Sales % Change Staff costs Other costs EBITDA % Change Depreciation EBITA % Change Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT Net financial items Non recurring financial items Other exceptional items Tax Associates [contribution] Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities Net attributable profit [loss] Restatement [impairment test] Adj. for exceptional items Net attrib. profit [loss], restated % Change Cash Flow Statement Cash flow % Change Change in WCR Capex o/w Growth capex Net cash flow Financial investments Net buyback of treasury shares Disposals Dividend paid Capital increase Other cash flow Dec. [inc.] in net debt Balance Sheet Shareholders' equity [group share] Minority interests Pension provisions Other provisions Net debt [cash] Gearing [%] Capital invested Goodwill Intangible assets Tangible assets Financial assets Associates Working capital requirement WCR as a % of sales Capital employed 2005 33.4 (3.0) (21.9) 8.5 0.0 8.5 0.0 0.0 0.0 8.5 0.0 0.0 0.0 (1.6) 0.0 0.0 0.0 6.9 0.0 0.0 6.9 0.0 0.0 6.9 2006 42.9 28.3% (4.5) (32.8) 5.5 -34.9% (1.0) 4.5 -47.0% 0.0 0.0 0.0 4.5 0.3 0.0 0.0 (1.9) 0.0 0.0 0.0 2.9 0.0 0.0 2.9 0.0 0.0 2.9 -58.2% 3.9 -53.0% 0.0 (2.0) (1.6) 1.9 0.0 0.0 0.0 0.0 27.5 0.0 29.4 35.1 0.0 0.4 2.8 0.0 NS 38.3 0.0 3.7 3.3 0.2 0.0 6.3 14.7 13.5 2007 146.2 NS (7.6) (123.1) 15.6 180.9% (1.7) 13.9 NS 0.0 0.0 0.0 13.9 1.2 0.0 0.0 (3.4) 0.0 0.0 0.0 11.7 0.0 0.0 11.7 0.0 0.0 11.7 NS 13.4 NS (7.4) (8.9) (7.4) (2.9) 0.0 0.0 0.0 0.0 36.0 0.2 33.3 82.8 0.0 0.5 6.1 (61.1) NS 28.3 3.9 0.7 9.4 0.2 0.0 13.6 9.3 27.8 2008 272.1 86.1% (20.2) (217.4) 34.6 122.4% (6.1) 28.6 106.0% 0.0 0.0 0.0 28.6 2.3 0.0 0.0 (8.4) 0.0 0.0 7.3 22.5 0.0 (0.1) 22.4 0.0 0.0 15.1 29.2% 28.6 113.4% (60.1) (22.7) (20.0) (54.2) 0.0 0.0 0.0 0.0 100.8 (28.5) 18.1 206.5 0.0 0.0 14.0 (86.8) NS 133.7 11.2 16.2 21.1 11.0 0.0 73.8 27.1 133.3 2009 197.9 -27.3% (38.7) (134.9) 24.3 -29.7% (8.2) 16.1 -43.6% 0.0 0.0 0.0 16.1 (0.3) 0.0 0.0 (20.1) 0.0 0.0 0.0 (4.3) 0.0 (1.1) (5.4) 0.0 0.0 (5.4) NS 3.9 -86.4% 0.0 0.0 199.9 3.9 0.0 0.0 0.0 0.0 0.0 (10.2) (6.3) 206.5 0.0 1.0 13.0 (80.7) NS 139.8 11.2 16.2 22.1 12.0 0.0 73.8 37.3 135.3 2010E 273.4 38.1% (62.9) (170.9) 39.6 63.0% (16.4) 23.2 44.3% 0.0 0.0 0.0 23.2 0.6 0.0 0.0 (6.7) 0.0 0.0 0.0 17.2 0.0 (1.1) 16.0 0.0 0.0 16.0 NS 33.6 NS 20.2 (85.1) 191.0 (31.3) 0.0 0.0 0.0 (13.8) 35.9 0.0 (9.2) 244.6 1.1 1.0 18.3 (84.1) NS 180.9 11.2 16.2 71.2 31.6 0.0 53.6 19.6 183.8 2011E 397.2 45.3% (77.7) (254.9) 64.6 63.0% (23.8) 40.8 75.6% 0.0 0.0 0.0 40.8 0.6 0.0 0.0 (11.6) 0.0 0.0 0.0 29.8 0.0 (1.1) 28.7 0.0 0.0 28.7 79.0% 53.7 59.8% (27.0) (30.0) 371.2 (3.3) 0.0 0.0 0.0 0.0 0.0 0.0 (3.3) 273.3 2.3 1.0 27.0 (89.5) NS 214.1 11.2 16.2 77.3 31.6 0.0 80.6 20.3 216.9 2012E 510.1 28.4% (99.8) (327.3) 83.0 28.4% (30.6) 52.4 28.3% 0.0 0.0 0.0 52.4 0.9 0.0 0.0 (16.0) 0.0 0.0 0.0 37.3 0.0 (1.1) 36.2 0.0 0.0 36.2 26.2% 67.9 26.4% (22.5) (25.5) 489.6 19.9 0.0 0.0 0.0 0.0 0.0 0.0 19.9 309.4 3.4 1.0 35.0 (117.4) NS 231.4 11.2 16.2 72.2 31.6 0.0 103.1 20.2 234.3

8.3 0.0 (2.8) (2.8) 5.5 0.0 0.0 0.0 0.0 (2.6) (1.1) 1.8 4.7 0.0 0.0 0.0 0.0 NS 4.7 0.0 2.8 3.2 0.2 0.0 0.0 0.0 6.2

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Roth&RauFY to 31/12 (Euro) Per Share Data (at 7/1/2011) EPS before goodwill % Change EPS, reported % Change Goodwill per share Dividend per share Cash flow per share % Change Book value per share No. of shares, adjusted Av. number of shares, adjusted Treasury stock, adjusted Share Price [Adjusted] Latest price High Low Average price Market capitalisation Enterprise value Valuation P/E P/E before goodwill P/CF Attrib. FCF yield [%] P/BV Enterprise value / Op

ca cheuvreux german smaller companies review jan2011

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