Datalogic · 2014. 3. 20. · IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 1 Datalogic ITALY \ Industrials New Coverage BUY (Prev. n.a ) Target: € 11.5 (Prev. n.a) Risk:

IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 1

Datalogic ITALY \ Industrials

New Coverage

BUY (Prev. n.a ) Target: € 11.5 (Prev. n.a) Risk: High STOCK DATA Ord

Price € 9.1

Bloomberg code DAL IM

Market Cap. (€ mn) 532

Free Float 33%

Shares Out. (mn) 58.4

52-w eek range 5.5-9.6

Daily Volumes ('000) 168.4

PERFORMANCE 1M 3M 12M

Absolute 17.3% 10.5% 44.3%

Rel. to FTSE all shares 14.2% -3.5% 10.2%

MAIN METRICS 2014E 2015E 2016E

Rev enues 480 522 548

Adjusted EBITDA 65 75 81

Net income 32 39 44

Adj. EPS - € cents 61 74 82

DPS ord - € cents 19 24 26

MULTIPLES 2014E 2015E 2016E

P/E 16.8 x 13.5 x 12.0 x

P/E adj 14.9 x 12.3 x 11.1 x

Adj. EV/EBIT 11.2 x 9.2 x 8.0 x

REMUNERATION 2014E 2015E 2016E

Div . Yield ord 2.1% 2.6% 2.9%

FCF y ield 4.8% 6.8% 8.2%

INDEBTEDNESS 2014 2015E 2016E

NFP -70 -46 -17

Debt/EBITDA 1.1 x 0.6 x 0.2 x

Interests cov 11.6 x 18.1 x 20.7 x

PRICE ORD LAST 365 DAYS

ANALYSTS Alessandro Cecchini- +39 026204.859 – [email protected] March 19, 2014 # 107

DATALOGIC HAS A VISION We initiate the coverage of Datalogic with a BUY rat ing and a target price of € 11.5 in light of: 1) Appealing prospects (2013-2015 EBITDA Cagr > 10%) supported by multiple growth drivers, 2 ) Interesting valuation: 2015 Adj.PE =12x at discount vs Italian mi d-cap stocks and 3) Potential extra growth arising from M&A. � Datalogic: a worldwide leader in Automatic identifi cation Datalogic (DAL) is a global leader in Automatic Identification with a specific focus on Automatic Data Capture (ADC ~63% of sales) and Industrial Automation (IA- ~31% of sales) markets. • ADC includes fixed retail & hand-held scanners and mobile computers; • IA stands for a wide range of solutions (i.e Industrial scanners, sensors)

whose objective is to automatize production processes. DAL enjoys a strong positioning in the industry (WW mkt. share in ADC = ~10% in IA =~6%) and a real global and diversified footprint (i.e Italy = ~9% of total sales). Through an intense history of both external and internal growth (2001-13 Sales CAGR +12%) the Group reached €450.7 mn of sales with high profitability and low leverage: Adj.EBITDA =€60 mn (margins = 13.3%) and NFP/Adj.EBITDA =-1.6x. � Playing the Automation trend The ADC and IA markets offer interesting expansion opportunities in the medium term (blended 12-15 CAGR =+4%) mainly for the following factors: • Increasing need for supply chain automation and management

infrastructure both in emerging and mature markets; • Increasing need to draw on automation as a competitive differentiator; • Increasing demand for traceability of processes and goods. � First signs of recovery support promising medium-te rm scenarios DAL enjoyed an encouraging 2H (org. growth ~6%) and the early months of the year show a sizeable order intake (>10%). We believe this trend will continue and DAL will report an appealing 13-15 Adj. EBITDA CAGR >10% mainly due to the following drivers: • Capitalizing on recent “break-through ” innovations (i.e. Jade) in the

Fixed-Retail scanners product category (~20% of group sales); • Growing focus and R&D investments in the developmen t of

imaging-vision technologies, which offer appealing prospects; • More exposure to Fast-Growing EM, geographies where the

company has been focusing the least so far (

Data logic – March 20, 2014


MAIN FIGURES € mn 2011 2012 2013 2014E 2015E 2016E

Revenues 426 462 451 480 522 548

Growth 8% 9% -2% 7% 9% 5%

EBITDA 51 59 61 65 75 81

Growth 0% 16% 4% 6% 15% 9%

Adjusted EBITDA 59 63 60 65 75 81

Growth 19% 7% -5% 8% 15% 9%

EBIT 36 16 45 49 58 64

Growth 5% -55% 179% 7% 19% 11%

Profit before tax 33 10 36 43 54 60

Growth 18% -71% 273% 22% 25% 12%

Net income 26 10 27 32 39 44

Growth 44% -60% 163% 18% 25% 12%

Adj. net income 34 35 30 36 43 48

Growth 69% 2% -13% 17% 21% 11%

MARGIN 2011 2012 2013 2014E 2015E 2016E

Ebitda Margin 11.9% 12.7% 13.6% 13.5% 14.3% 14.9%

Ebitda adj Margin 13.9% 13.7% 13.3% 13.5% 14.3% 14.9%

Ebit margin 8.6% 3.5% 10.1% 10.1% 11.1% 11.7%

Pbt margin 7.8% 2.1% 7.9% 9.0% 10.4% 11.0%

Ni rep margin 6.1% 2.2% 6.0% 6.6% 7.6% 8.1%

Ni adj margin 8.0% 7.6% 6.7% 7.4% 8.3% 8.8%

SHARE DATA 2011 2012 2013 2014E 2015E 2016E

EPS - € cents 46.1 18.0 47.2 54.1 67.5 75.5

Growth 39.3% -61% 162% 15% 43% 12%

Adj. EPS - € cents 60.8 61.5 53.3 61.1 74.2 82.1

Growth 63.5% 1% -13% 15% 39% 11%

DPS ord - € cents 15.6 15.0 16.0 18.9 23.6 26.4

DPS sav - € cents n.a. n.a. n.a. n.a. n.a. n.a.

VARIOUS - € mn 2011 2012 2013 2014E 2015E 2016E

Capital employed 236 302 289 296 301 302

FCF 22 44 40 26 36 43

Capex -14 -14 -17 -13 -14 -15

Working capital 67 61 39 49 54 57

INDEBTNESS - €mn 2011 2012 2013 2014E 2015E 2016E

NFP -59 -121 -97 -70 -46 -17

D/E 0.35 x 0.70 x 0.52 x 0.32 x 0.18 x 0.06 x

Debt/EBITDA 1.2 x 2.1 x 1.6 x 1.1 x 0.6 x 0.2 x

Interests cov 7.3 x 16.0 x 9.4 x 11.6 x 18.1 x 20.7 x

MARKET RATIOS 2011 2012 2013 2014E 2015E 2016E

P/E 12.6 x 35.2 x 17.6 x 16.8 x 13.5 x 12.0 x

P/E adj 9.6 x 10.3 x 15.5 x 14.9 x 12.3 x 11.1 x

PBV 1.9 x 2.1 x 2.5 x 2.4 x 2.1 x 1.9 x

P/CF 7.3 x 8.1 x 11.7 x 11.5 x 9.7 x 8.9 x

EV FIGURES 2011 2012 2013 2014E 2015E 2016E

EV/Sales 0.92 x 1.06 x 1.28 x 1.27 x 1.12 x 1.01 x

Adj. EV/EBITDA 7.7 x 8.3 x 9.4 x 9.4 x 7.8 x 6.8 x

Adj. EV/EBIT 8.1 x 9.2 x 11.5 x 11.2 x 9.2 x 8.0 x

EV/CE 1.7 x 1.6 x 2.0 x 2.1 x 1.9 x 1.8 x

REMUNERATION 2011 2012 2013 2014E 2015E 2016E

Div. Yield ord 2.7% 2.4% 1.9% 2.1% 2.6% 2.9%

Div. Yield sav n.a. n.a. n.a. n.a. n.a. n.a.

FCF yield 6.9% 12.1% 8.5% 4.8% 6.8% 8.2%

ROCE 13.6% 14.9% 12.8% 13.5% 15.5% 16.8%

Source: Equita SIM estimates and company data



INVESTMENT CASE We start the coverage on Datalogic (DAL) stock with a BUY rating and Euro 11.5 PS target price. Our valuation is based on a forward 12 months target multiple of 15x 2015 PE Adj., and it offers a 27% upside vs current prices. In our opinion, DAL’s strong positioning in appealing reference markets and its interesting valuation, combined with an encouraging company outlook, can offer an appealing investment opportunity. 1. Strong Positioning in appealing reference markets Datalogic (DAL) is a global leader in Automatic Identification with a specific focus on Automatic Data Capture (ADC - ~63% of total sales) and Industrial Automation (IA- ~31% of total sales) markets. • ADC includes fixed retail scanners, hand-held scanners and mobile computers;

ADC PRODUCTS (2012)

Source: Company presentation

• IA stands for a wide range of solutions/products (i.e. Industrial stationary

scanners, sensors, machine visions etc.) whose objective is to automatize production processes.

IA PRODUCTS (2012)




In spite of the challenging 2012-2013 two-year period (negative organic growth of sales at -5% YoY in 2012 and around -0.8% in 2013) DAL was able to achieve the following: • It has confirmed its excellent competitive and technological positioning by

keeping its market shares (10% in ADC and 6% in IA); • It has increased its investments in R&D to 7.9% of 2013 revenues vs. 6.2% in

2011 with the number of patents of ~1100 vs. 1003 in 2011; • It has accelerated the number of Breakthrough innovations launched (#4 in

2012 vs.



….DAL enjoyed an encouraging 2H and during the FY13 conference call the company announced that the first months of the year are showing good organic growth and a buoyant order intake (>10%). We are confident that this improving trend can continue and the company might report an appealing 2013-2015 Adj. EBITDA Cagr >10% (margins at 14.3% from 13.3% in 2013) by leveraging on multiple growth drivers: • Capitalizing on retailers’ return to investing thro ugh recent “break-

through ” innovations in the Fixed-Retail scanners product category (~20% of group sales) which show a great market appreciation; As a matter of fact, the main retailers are going back to investing after 2 years of limited investments; we believe that DAL is in the position to capitalize massively on this trend through its offer that includes the most technologically sophisticated and advanced products (i.e. Magellan 9800i and Jade): The new Magellan 9800i scanner is the world’s first bar code scanner driven completely by high performance digital imagi ng (1D and 2D), resulting in the ability to: 1) Increase checkout performance (i.e improving cashier throughput and operational efficiency) and 2) Interact with shoppers: a customer-facing imager allows shoppers to quickly and easily self-scan digital coupons from mobile devices, paper-based coupons and loyalty cards.

• Growing focus and R&D investments in the developmen t of imaging-

vision technologies, which offer the most appealing prospects, since multiple product categories (i.e. stationary scanners and hand-held scanners) are facing a technology shift (from laser technology);

• Demand recovery in the US T&L sector, where the company enjoys a strong

leadership positioning thanks to Accu-Sort; furthermore, it is currently expanding into other markets very successfully (i.e. Europe and Latam);

• More exposure to Fast-Growing emerging markets, geographies on which

the company has been focusing the least so far (



3. Appealing Valuation: Adj.PE 15 =12 with ~7% FCF yie ld The stock is trading at 2015 Adj.PE = 12x and 2015. Adj.EV/EBIT = 9x. We believe this valuation is appealing and a good entry point in light of the following: • Interesting growth opportunities (2013-2015 Adj.EBITDA Cagr = >10%); • Its low leverage (2013 NFP/Adj.EBITDA =1.6x) able to support some extra-

growth from bolt-on acquisitions; • A strong FCF generation (we expect circa € 35 mn 2015); • Potential extra growth arising from M&A.

DATALOGIC - MULTIPLE VALUATION

2014E 2015E 2016E

Adj. P/E 14.9 12.3 11.1

-expected Adj. EPS Growth 14.6% 21.4% 10.7%

FCF Yield 4.8% 6.8% 8.2%

Adj. EV/EBIT 11.2 9.2 8.0 *Adj.EBIT is before the amortization of intangible assets from acquisitions Source: EQUITA SIM

Moreover the stock is trading below: • Its historical average:

DATALOGIC - MULTIPLES

Pre-Crisis Normalized Trend Depressed Multiples Today

ADJ-PE 2006 2007 2008 2009 2010 2011 2012 2013 2014E

CURRENT YEAR (T) 27.9 x 20.8 x 14.6 x 22.4 x 26.6 x 15.9 x 8.7 x 10.8 x 14.9x

YEAR (T+1) 20.9 x 18.9 x 13.6 x 14.4 x 14.7 x 11.0 x 7.5 x 8.7 x 12.3 x

Adj.EBIT Growth (YoY) 45% -7% -82% 515% 28% 9% -6% 8%

EPS Adj Growth (YoY) 71% -8% -103% nm 69% 1% -13% 15%

NFP/Adj. EBITDA -1.5 -1.2 -2.2 -5.1 -1.5 -1.0 -1.9 -1.6 -1.1

T-Note 10y (US) 4.8% 4.6% 3.6% 3.2% 3.2% 2.8% 1.8% 2.3% 2.7%

BTP 10y (Italy) 4.1% 4.5% 4.6% 4.3% 4.0% 5.3% 5.6% 4.3% 3.4% Source: Equita SIM and Bloomberg

• Some peers driven by similar drivers and the reference index:

IA/ADC END-MARKET EXPOSURE PANEL

EV / EBITDA P/E Adj EBITDA Margin Sales CAGR EPS ADJ

2014 2015 2014 2015 2014 2015 2013-2015 2013-2015

Scansource 8.6 7.9 15.6 14.4 4.0% 4.2% 3.0% 6.1%

Zebra Tech 12.3 11.3 20.0 18.0 22.1% 22.5% 9.6% 18.6%

Cognex Corp. 24.9 20.0 36.1 28.2 29.7% 31.0% 16.1% 25.8%

Avg. 15.3 13.1 23.9 20.2 18.6% 19.2% 9.6% 16.8% Source: Bloomberg Estimates

• The Equita’s Industrial “Small-Mid” Cap coverage

EQUITA'S ITALIAN SMALL CAP INDUSTRIAL PANEL

Company Mkt Cap EV/EBIT EV/EBITDA P/E Adj EBITDA margin Sales CAGR EPS ADJ

(mn) 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2014-2016 2014-2016

Zignago SpA 486 11.9 10.3 9.6 7.6 6.8 6.3 14.8 13.5 12.6 24.7% 4.0% 8.4%

Brembo 1,719 15.1 13.5 12.1 8.9 8.1 7.4 18.6 16.6 15.1 14.0% 5.8% 11.0%

Sabaf SpA 164 11.3 8.7 7.7 6.1 5.2 4.7 17.4 13.4 12.1 21.0% 5.2% 19.8%

Ima Spa 1,361 14.1 12.8 11.8 11.6 10.7 9.9 21.8 19.7 18.3 15.3% 4.5% 9.3%

Interpump Spa 1,162 12.6 10.1 8.7 9.6 8.0 7.0 20.5 16.7 14.7 19.0% 7.7% 18.2%

Sogefi 554 10.7 7.9 7.0 6.2 5.0 4.5 12.8 10.2 9.0 11.3% 5.8% 18.8%

Avg. 12.6 10.6 9.5 8.3 7.3 6.6 17.7 15.0 13.6 17.5% 5.5% 14.3% Source: Equita SIM estimates



4. Bolt-on acquisitions can add extra growth Over the years, DAL economics have been supported b y organic performance and lively M&A activity (roughly half and half).

DATALOGIC - AN HISTORY OF GROWTH AND M&A

Source: Company presentation We believe that small-medium sized M&A opportunities in the IA and in mobile computers markets might emerge in the next few months on the back of the following: • The management’s reiterated strong focus on external growth opportunities; • The company’s low leverage (NFP/EBITDA ~-1x in 2014E vs. -1.5x historical

range ex 2009); • The marked segmentation of the IA industry (please see pag. 16 for a more

thorough analysis); We argue that the market might appreciate M&A execution for the following reasons: • Historically the company has shown a good track-record in managing and

subsequently incorporating medium-sized but also large companies, as it was the case for PSC in 2005 (deal value = $195 mn)

• It would enable DAL to cover its “weak-spots”: 1) Low exposure to emerging markets and 2) Low market share in the mobile computers segment, especially with reference to vertical markets ex-retail.

.....and/or it would enable the company to expand in highly promising markets, such as the “vision” one might be.

� Possible criticisms and mitigants

1. Ability to keep on innovating and competing in t he ADC market

Following Intermec’s integration with Honeywell, the increased size gap (especially in the mobile segment, ~20% of group sales) in the ADC market (around 2/3 of total sales) between Datalogic and its two main competitors (Motorola and Honeywell itself) could: • Threaten DAL’s competitive capacity; • Bring about a further widening (in absolute values) of the gap in R&D

investments between DAL and its competitors.



However, we believe that DAL could continue to be a benchmark player and a leader from the technological point of view in light of the following: • Strong technological and market positioning: DAL boasts a valuable patent

portfolio (over 1000 patents) and an excellent market positioning: customers consider DAL a well-established brand that has never disappointed them in terms of technological quality and innovation;

• Focus: DAL is a leader in some well-defined sectors (i.e. Fixed Retail scanners and Linear Imaging Hand-Held scanners), whereas its main competitors can be considered less specialized;

• The ADC market can be considered a “niche” market that however offers enough room for three reference players and where there is some kind of “price-discipline” among them.

Moreover, the following lessons can be drawn from past experiences: • There are some advantages associated with being “a smaller player”, such as

more flexibility to market changes (i.e. shorter decision-making process, the ability to be faster in getting new products to the market);

• It is also possible to compete in a smaller scale: 10 years ago Symbol (now belonging to Motorola) was a giant with €1-2 bn sales whereas Datalogic was a €150 mn worth player. Nowadays DAL is one of the world leaders in the ADC sector.

2. Governance From 1995 to 2013 external managers ran the company. Since 2013 the Volta family has increased its presence in the company governance: • After some strategic clashes with the previous CEO Mr Mauro Sacchetto, the

company founder, Mr Romano Volta, has decided to go back and take on the position of CEO besides being the company’s Chairman;

• His daughter Valentina Volta has taken on the position of CEO of the Business Development division (i.e. M&A, R&D and strategic development).

Despite the Volta family being now more present in the company management, we still believe that DAL remains a “management” company and a business that is strongly driven to growth for the following reasons: • DAL is a company with a strong managerial structure resting on many

managers with long-standing experience (i.e. the CFO Marco Rondelli and the two managers in charge of the ADC and IA divisions, Mr. Bill Parnell and Mr Gian Paolo Fedrigo);

• Mr Volta’s reassurances 1) on the continuity of corporate strategies in terms of both organic growth opportunities and growth strategies through acquisitions, 2) on the fact that DAL is and will always be a management company: his role is “temporary” and he is committed to assessing where the company stands today in order to identify the right profile for a new CEO.

Moreover, in a very challenging time like the current one, we believe that Mr Volta is perhaps the most suitable person to accompany DAL into the new decade, given his thorough knowledge of the industry and his strong orientation to excellence (“When I resumed my position as CEO I felt that DAL needed to go back to its origins and to focus more on engineering, where product excellence and human capital are the main priorities”).



3. Expansion in Emerging markets and potential margi ns diluition We argue that DAL’s growth in the medium term cannot overlook the Emerging markets (in EM



GLOBAL LEADER IN AUTOMATIC DATA CAPTURE AND INDUSTRIAL AUTOMATION MARKETS Datalogic (DAL) is a global leader in Automatic Identification with a specific focus on Automatic Data Capture (ADC - ~63% of total sales) and Industrial Automation (IA- ~31% of total sales) markets. At the moment Datalogic possesses a very strong expertise in many different technologies such as laser, imaging, sortation, wireless mobile computing, vision systems etc. The company was founded in 1972 by the current President and CEO Mr. Romano Volta; it can be considered a forerunner in the production of photoelectric sensors and laser scanners (in particular for manufacturing). Datalogic can undoubtedly be called “the bar code company”. The stock has been listed on the Italian Stock Exchange since 2001 (STAR segment). Through an eventful external and internal growth the Group now has sizeable metrics: in 2013 the company generated revenues for some € 450 mn with an Adj. EBITDA = € 60 mn. In particular, two major acquisitions have been key to strengthen and expand DAL’s business: • PSC (2005): it enabled DAL to enter the US bar-code readers market; • Accu-Sort (2011): it enabled DAL to double its presence in the Industrial

Automation industry and to increase its presence in the US.

DATALOGIC - AN HISTORY OF GROWTH AND M&A




� Two main reference markets for advance technologica l solutions The Group enjoys sizeable market shares and leadership positions in both its reference markets (ADC and IA). DAL is the only player in the world operating in both reference markets and exploiting the ensuing technological synergies. Automatic Data Capture (ADC): DAL is market expert in providing customized scanning and mobile solutions for specific needs. We estimate that most sales (~40%) arise from Hand-Held scanners, but mobile computers and POS retail scanners also have quite a relevant weight (~30%). DAL is: • Worldwide leader in POS (Point-of-sales) retail scanners - 32.8% global market

share; • European leader in Handheld readers - 33.8% market share; • 3rd top player in Mobile Computers for inventory management and data

collection at the points of sale - 4% of global market share.

ADC PRODUCTS (2012)


Main End Markets: • Retail is the main end market by far; • Manufacturing, Healthcare, Hospitality/Entertainment, service transportation

and logistics. Datalogic enjoys a strong and sound reputation amid retailers: everyone considers DAL as the pioneer in the market with a technological-edge. Market Drivers: • Growing list of emerging applications in the Government, Healthcare and T&L

sectors; • At this stage, the retail end market is mature but players (in particular

Datalogic) are working hard to launch technologically advanced products (i.e. fixed scanners with imager technology);

• Increased adoption of core retail automation technologies in emerging markets; • Enterprises require more data to effectively manage their supply chain; • The need to improve efficiency and overcome scanning errors.



Industrial Automation (IA): DAL offers a wide range of cutting edge solutions for traceability, inspection, detection and recognition in factory automation and logistics processes. Besides reading the bar code, IA also means identifying the shape, the color, etc. In particular, Datalogic: • Is the worldwide leader in Industry Stationary Scanners - 27.5% global market

share (~50% of IA sales); Industrial Stationary scanners can be basically subdivided into three clusters: bar code readers , image-based ID imagers and dimensioners . These identification devices automate the identification process of products based upon the reading of barcodes, analysis of images, and profiling of items. They are used in a wide range of applications and machines, ranging from reading barcodes on medication to guarantee patient safety to scanning parcel size and ensure accurate billing.

• Supplies: - Photoelectric sensors : DAL provides a range of photoelectric sensors for

universal and application-specific purposes, such as colour, contrast and luminescence sensors, fork sensors for label detection, as well as devices for dimensional and distance measurement;

- Safety: DAL offers a complete line of type 2 and type 4 safety light curtains for machine safeguarding and access control in dangerous areas;

- Machine visions : machine vision devices typically combine cameras with intelligent software in order to collect images and then answer questions about them such as: Where is it? What is it? How good is it? And what size is it?;

- Laser marking : Laser Marking is focused on providing top value solutions for automotive, metal tools, medical, electronics and packaging;

- Integrated Systems solutions : Integrated Systems combine various products - including Identification, Sensors, Material Handling, various third-party products - with control software to create automated solutions designed to address various operational challenges in a distribution centre or postal/parcel facility (i.e. Label Print & Apply solutions, Dimension Weigh Scan solutions).

Main End Markets: Industrial and logistics applications. Retail is not a sizeable end-market.

IA PRODUCTS (2012)




Market Drivers: • Growing technology convergence (laser and vision based technology)

expected to set the tone for future investments; • Increasing demand for traceability of processes and goods as well as new

regulations; • Development of the Inductive Proximity sensors and of the machine vision

products (potential addressable markets worth $3bn in 2014 – in the machine vision segment DAL generates only ~€15 mn of sales);

• Increasing importance of “Big Data”, the fusion of barcode, dimensions and image.

� Balanced presence across vertical and geographical markets DAL sells its products and technological solutions to the most important retailers (i.e. Walmart, Tesco and Metro), couriers (DHL, TNT and UPS) and automotive manufacturers (i.e. BMW) leveraging on long-standing business relations as well as on a well-established and constantly increasing patent portfolio (currently >1000 patents). Compared to the industry average, DAL features more in-house technology. Although the group is mainly exposed to the retail market (~40% of revenues and its historical end market), it is fairly diversified in terms of vertical markets: Retail (~40%), Manufacturing (~35%), Transportation & Logistics (~17%) and Healthcare (~5%).

DATALOGIC - GEOGRAPHICAL FOOTPRINT


From a geographical standpoint, DAL enjoys a wide geographical footprint even if it still mainly exposed to its historical markets: Europe including Italy (8.4% of total 2013 sales) accounts for ~50% of total sales and North America accounts for ~32% of sales. The exposure to Emerging markets is growing but it is still limited (



� Indirect distribution model DAL mainly sells its products and solutions through an indirect distribution model (some 80% of its sales). DAL relies upon a wide-ranging network of resellers, distributors (i.e. Scansource) and system integrators. The remaining sales are made directly by the company, mainly with very sizeable players (i.e. Fed-Ex) that rely upon in-house development structures. � Production in low-cost countries Datalogic currently manufactures in 8 production sites: 3 in Italy, 1 in Slovakia, 1 in Hungary, 2 in US and 1 in Vietnam. However, following the supply-chain reorganization in the ADC division in 2011, Datalogic currently manufactures nearly all its ADC products (some 2/3 of total turnover) in low-cost countries and above all in the Vietnam production facility (around 600 workers – 14 production lines).

ADC – MANUFACTURING FOOTPRINT

Source: Company presentation As far as the IA division is concerned, production is more scattered in different production sites. The management has not ruled out a possible reorganization of this division’s Supply-chain. � Competitive Scenario: big sharks in ADC, niche playe rs in IA The ADC market is a “niche” market worth ~$4 bn on a global basis with: • Mobile computers accounting for most sales (~67% of the market); • A strong exposure to Americas and Emea (>80% of total sales). Over the last few years the market has been subject to a powerful consolidation process and it can now be considered an oligopolistic market : from 10/12 competitors 6/7 years ago down to the current 3 main players: Motorola (mkt share >35%), Honeywell (~20% following the Intermec acquisition) and Datalogic (~10%).



ADC – COMPETITIVE SCENARIO

Source: Company presentation and VDC Following Intermec’s takeover by Honeywell the ADC market now seems stable and concentrated, with the three main players controlling >65% of the market;

There is some kind of price discipline among the three players, beyond the structural price erosion of the market on the back of technological development.

More in detail: • DAL is the third largest player (10% market share) since it leverages its

leadership position in POS Retail Scanners (#1 WW – 32.8% market share).

• Motorola, with its share in the “Mobile Enterprise Solutions” division ($ 2.7 bn

sales in 2012) enjoys a strong presence in the American market and is leader in Mobile Computers (some 50% of division revenues) as well as in laser Handheld scanners (also thanks to the acquisition of Symbol Technologies in 2007).

• Honeywell entered the sector in 2007 and thanks to an aggressive M&A

strategy (Hand Held, Metrologic, LXE, EMS and recently Intermec) it now generates some $800 mn sales in ADC markets with a strong focus on BRIC markets. Honeywell is very strong in the 2D technology for Handheld scanners.

The IA market is worth ~$3.7 bn on a global scale but it offers interesting growth opportunities (please see pag. 4). Sensors make up most sales, but DAL is less present in this product category. The IA market is strongly fragmented and features many small or medium-sized, highly specialised enterprises (e.g. in Germany there are over 500 companies specialising in vision) that enjoy good profitability, because products are generally tailor-made to meet customers’ needs. The market offers interesting M&A opportunities but it is not expected to consolidate in the short or medium term. DAL is a medium-sized player (~6% of market share), whereas the market leaders are the German Sick and the Japanese companies Keyence e Omron: all these companies mainly focus on the production of sensors and sensor solutions.



IA – COMPETITIVE SCENARIO

Source: Company presentation and VDC



SWOT ANALYSIS Strengths • Strong and consistent development of patent portfolio (at the end of 2013

>1000) and clients (>1000 partners globally); • High entry barriers, especially as far as higher value-added products are

concerned; • Global presence with a good diversification in terms of geographical markets

and vertical markets; • Strong management team with a consistent track-record; • Competitive cost base thanks to strong manufacturing presence in low-cost

countries and development of a global supply chain for the ADC division; • Market and technological leadership in multiple market segments; • Excellent cash generation to support external and internal development; • Strong ties with leading retailers and POS solution providers (like Wincor

Nixdorf). Opportunities • Interesting growth and development opportunities for both reference markets

with a specific focus on trends for Vision and Imaging technologies and the possibility to develop hybrid solutions (i.e. Bar Code + Imaging). For instance the new PowerScan PBT9500 Imager is a very innovative device able to read codes on difficult surfaces (i.e wood and plastic) improving data capture and efficiency: as a matter of fact, it enjoys well above the average margins;

• More efficient exploitation of Pharma and Healthcare end-markets, offering high value and growth;

• Sales development in emerging markets (at the end of 2013



TOP LINE GROWTH COUPLED WITH PROFITABILITY AND FCF G ENERATION Since its IPO, DAL has enjoyed consistent growth (both organic and through M&A) maximizing the underlying supportive trends of its reference markets (i.e. automation, search for efficiencies and new applications): • Sales CAGR 2001-2013 = +12%; • Adj. EBITDA CAGR 2001-2013 = +12%; • Net Income CAGR 2001-2013 = +34%. Organic + External growth = Double-digit Growth Over the years DAL has been reporting a double digit growth on average and it has over-performed its reference markets thanks to the following drivers: • Appealing organic growth, we estimate some +5/6% a year supported by

ongoing product innovation: evidence thereof is the fact that new products have been contributing to 25% of sales over the last two years;

• Strong acquisition strategy in both divisions (see table below) and on an international basis.

The most relevant size leaps occurred: • In 2005 through the acquisition of the American competitor PSC (deal Value =

$195 mn), a leader in fixed-position scanners for the retail market; • In 2012, through the acquisition of Accu-Sort (deal value = $135 mn), a leader

engaged in the design, manufacture and serving of Automatic Identification (Auto-ID) and material handling solutions.

SALES TREND (2001-2013)

Source: Company Data

The 2012-2013 two-year period has been a challenging time because of the following: • Negative organic growth (~-5% in 2012 and ~-1% in 2013) due to the tough

macroeconomic context; • A smaller than expected contribution from the acquisition of Accu-Sort (a

company that is highly exposed to the Transportation & Logistics sector and was penalized by delayed investments by customers): this led DAL to partially write-down its investment in 2012 (by €27 mn – roughly half of total goodwill).

DATALOGIC MAIN M&A DEALS (2004-2013)

Year Company Country Products Stake Deal Value

2004 Laservall Italy Laser marking of components and ID document 90% €8.5mn+€6mn earn out

2005 Informatics US Barcode readers and RFID 100% $23mn

2005 PSC US Retail scanners, handheld and mobile computers 100% $195mn

2008 Datesensor Italy Photoelectric sensors and devices 100% €42mn

2010 Evolution Robotics US Visual pattern recognition 100% $26mn

2011 Accu-Sort US Design, production, integration and maintenance of IA systems 100% $135mn

2011 PPT Vision US Machine Vision 100% $ 5mn

2013 Multiwave Photonics Portugal Laser marking technology 100% €0.6mn Source: Equita SIM and Company data



Efficiencies and Innovation > Price Erosion DAL has always enjoyed a fairly good average profitability (around 12-13% of sales in the last few years) mostly for the following reasons: • High technological content and competitive position ing: most products

can be considered high-end; • Highly competitive cost base thanks to a strong production base located

in low-cost countries . Out of the 8 global production sites, we believe that the Slovakian and the Vietnamese ones manufacture some 60% of goods exploiting particularly low labour costs and taxation (tax-rate in Vietnam = 5% until 2016 and in Slovakia = ~20%).

The operating leverage is relatively high and around 30%, given the high fixed costs. Over the last few years DAL has been able to offset the high structural technology obsolescence and subsequent price erosion mainly through efficiency-enhancing measures (i.e. reduction of COGS) and product innovation. 2012 is an outstanding example: profitability was robust (margins flat YoY also considering negative organic growth) thanks to the positive contribution of the ADC division new Supply-Chain and the ramp-up of the new production site in Vietnam.

DATALOGIC - ADJ. EBITDA TREND (2001-2013)

Source: Company Data

DATALOGIC - ADJ. EBIT BRIDGE (2005-2013)

Source: Company Data and Equita SIM estimates



Highly FCF generative DAL is a cash generative company thanks to: • Good profitability (Adj. EBITDA margin 10-17% ex 2009); • Limited investment profile in CAPEX (~2.5% of sales) given the no capital

Intensive nature of the business: in the last few years Commercial NWC has amounted to some 12/13% of sales whereas fixed assets and Intangibles are not particularly high on average;

• Limited tax rate, since production facilities are mainly located in low-cost countries and the average debt is fairly low (2006-2013 ex-2009 NFP/EBITDA around 1.5x).

The high FCF generation has enabled DAL to accomplish the following: • Quick deleveraging also after important acquisitions; • Maintaining a good dividend policy (pay-out = 35% in 2013).

DATALOGIC - FCF (2001-2013)




2013-2015 BUSINESS PLAN In September 2013 DAL refreshed its “Three Year Rolling Plan” (previous one 2012-2014) in order to expand targets to 2015 and take into consideration: • A more cautious market development; • A new paradigm based on 1) A higher focus on customers, 2) Market

expansion and 3) Greater emphasis on growth and optimization of human resources.

� Two speeds for ADC and IA Following a more challenging than expected 2012/2013 two-year period, VDC revised its growth projections and it now forecasts the following trends: • ADC rising by ~1% CAGR 2012-2015 vs. a previous expectation of +5.7%

CAGR 2011-2014. The cut is mainly ascribable to a slowdown in the mobile computers market (flattish trend). On the other hand, POS retail scanners (~30% of sales for DAL) and Hand Held Scanners (~40% of sales) are expected to grow mid-single digit (+4.3%);

• IA on the rise by 6.9% CAGR 2012-2015 vs. a previous expectation of +5.4% CAGR 2011-2014.

WORLDWIDE MARKET TREND: ADC E IA

Source: Company presentation and VDC � A new paradigma A higher focus on costumers What does it mean? DAL will try to focus more on its clients’ needs thus attempting to offer the most complete and technologically advanced product portfolio for each reference end-market by leveraging on: 1) its strong Brand Awareness and IP portfolio 2) its Consolidated Resellers network and 3) its Unique presence in both reference markets. In order to maintain its technological advantages and develop new breakthrough innovations, DAL decided 1) to set up a new business development division to meet and anticipate current and future costumer needs and search for new M&A opportunities 2) to increase investments in R&D from the current 7% of sales to some 8%.



As far as the different end-markets are concerned: Retail (~40% of sales) As far as the Retail market is concerned, the main development drivers will be: • To upgrade the customer through the launch of highly innovative products such

as Jade (the self-checkout designed to optimise supermarkets’ front-end functions) and the scanner equipped with imager technology (Magellan 9800i);

• To Increase depth in specialized mobile computers for retail where the company is sensibly less present than Motorola;

• To Increase the value of products and services for Tier 1; • Scouting new clients in non-food operators (i.e Sephora).

RETAIL MARKET

Source: Company presentation Manufacturing (~35% of sales) As far as this market is concerned, DAL’s main targets are: • To develop imaging solutions, machine vision technology and more in general

the sensors business in order to acquire market shares within the Factory Automation;

• To increase the sale of mobile products within warehouse development;

MANUFACTURING MARKET




T&L (~17% of sales) Thanks to the Accu-Sort acquisition in 2011, DAL has become a leader in sorting (i.e. 1/3 of world airports uses Datalogic products to sort out baggage). Now the company wants to expand in data collection and delivery, where its presence is currently poorer.

T&L MARKET

Source: Company presentation Healthcare (~5% of sales) Healthcare is a new end-market and DAL was one of the first players to approach it. The market offers multiple opportunities also thanks to an increased use of bar codes (e.g. to identify patients).

HEALTHCARE MARKET

Source: Company presentation International Expansion is key Geographic expansion will be one of the company’s main targets in the coming years. Emerging markets offer interesting growth opportunities: • Large potential in all key industries for automation investments; • Many countries are currently underserved (e.g. China and Brazil); • Big growth opportunities following demographic expansion (e.g. in Retail); • Chance to replicate the successful EMEA channel model.



Greater emphasis on the people management The Group will place a greater emphasis on growth and optimization of human resources, its fundamental strategic resource (DAL currently employs more than 350 engineers), through a targeted strategy of development and motivation coupled with competitive incentive plans. In this regard, in January 2014 DAL appointed a new experienced Head HR with the aim of improving staff satisfaction and HR management within the Group. � Financial Targets Based on the previous lines of development, DAL is confident to be able to over-perform the underlying market trends and to achieve the following targets: • Revenues Cagr over 5% above market average driven by:

- ADC Cagr over 4% vs +1% of market; - IA Cagr over 10% vs ~7% of the market - Recovery expected from 2014.

• EBITDA Cagr of around 8% expected in the range of €78-80 mn (EBITDA margin to ~15% in 2015).

• Cash generation able to lead Net Debt / EBITDA to 0.5x in 2015 • 2015 ROE target around 17-18%. Following the FY13 results release, the company confirmed its plan targets.

DATALOGIC - 3Y BUSINESS PLAN (MID-POINT)

2012A Margins 2013A Margins 2014E Margins 2015E Margins Cagr 2012-2015 Cagr 2013-2015

Sales 462.2 450,7 na 540.0 5.3% 9.5%

YoY Growth (%) 8.6% -2,5% - ADC 297.9 282,4 na 335.1 4.0% 9.0%

- IA 130.6 137,8 na 173.8 10.0% 12.3%

Adj.EBITDA 63.2 13.6% 60,0 na 79.0 14.6% 7.7% 14.8%

YoY Growth (%) 6.7% -5,0%

Net Debt* -121.1 -97,0 -38.5

∆ -61.7 24,1

ROE 6.0% 14,5% 17.5% * Net Debt guidance is whitout considering divident payments Source: Company data



ADC IS THE “CASH COW” WHILE IA IS THE “STAR” We estimate for 2013-2015: • Sales CAGR = +7.6% • Adj. EBITDA CAGR =+11.6% • Net Income CAGR =+21.1% We believe that now more than ever DAL is a “top line” story or, better said, a volumes story. Here are the reasons: • High Operating leverage: fixed costs are around 35% of total costs; • Expected Price erosion at some mid low single digit, to be confirmed; Lower room for reducing costs: we don’t expect the big efficiencies executed over the last years but at most some efficiency on operating costs � Top line: Volumes will be the driver In the coming years we expect volumes growth to largely compensate price erosion (2/3% a year on average) and to enable DAL to generate high-single digit growth on the back of: • Interesting developments of underlying markets: VDC Research expects

ADC and IA markets to improve by 4.3% (ex-mobile) and 6.9% on average in the coming years (2012-2015 Cagr);

• Capitalization of recent “break-through ” innovations (i.e. Jade, Magellan 9800i) in the Fixed-Retail scanners product category (~20% of group sales) that are likely to benefit from retailers going back to investing (according to company data, investments have been postponed for some 2 years);

• Demand recovery in the T&L sector, where the company enjoys a strong leadership position through Accu-Sort;

• Increasing focus and investments on developing imag ing-vision technologies that offer the most attractive prospects, since multiple product categories (e.g. stationary scanners and handheld scanners) are facing a technology shift (from laser technology);

We expect the IA sector to enjoy more growth in the medium term on the back of the following: • More growth opportunities thanks to more applications, more technological

contents and lower competitive pressure; • Fully exploitation of the 3 product segments acquired with Accu-Sort in 2012:

postal material handling, dimensioners and Integrated Solutions; • More investments in R&D.

Our organic growth estimates are a touch more cautious than the ones contained in the BP for 2013-2015 (please see table “Equita vs. Business Plan”) mainly due to more conservative projections on volume development in both divisions.

DATALOGIC - SALES DEVELOPMENT (2012-2016E)

2012A 2013A 2014E 2015E 2016E

Automatic Data Capture (ADC) 297.9 282.4 305.4 326.1 340.5

YoY Growth (%) 0.0% -5.2% 8.1% 6.8% 4.4%

Industrial Automation (IA) 130.6 137.8 144.2 164.1 174.8

YoY Growth (%) 35.7% 5.5% 4.6% 13.8% 6.5%

Other 33.7 30.5 30.7 31.6 32.6

YoY Growth (%) 6.0% -9.4% 0.5% 3.0% 3.0%

Total Sales 462.3 450.7 480.2 521.8 547.8

YoY Growth (%) 8.6% -2.5% 6.5% 8.7% 5.0%

Organic Growth (%) -5.0% -0.8% 8.3% 8.7% 5.0% Source: EQUITA SIM



� Margins expansion is possible in the medium term We believe that DAL might achieve an Adj. EBITDA margin above 14% in 2015 mainly thanks to the following: • Operating leverage able to largely offset emerging markets development and

the expected rise of R&D costs. As a matter of fact, we think that DAL will invest >8% of sales in R&D in 2014-2015 from 7.9% in 2013 in order to safeguard its technological leadership and guarantee new products flowing to compensate for price erosion;

• Margin recovery in the IA segment thanks to: 1) Better integration and synergies ensuing from acquired businesses and improved commercial distribution, 2) efficiency-enhancing measures in the supply-chain and 3) exploitation of operating leverage.

Our margin estimate is mildly lower than plan targets (~15%), mainly for higher investments in R&D and lower sales.

DATALOGIC - PROFITABILITY DEVELOPMENT (2012-2016E)

2012A 2013A 2014E 2015E 2016E

Total Sales 462.3 100.0% 450.7 100.0% 480.2 100.0% 521.8 100.0% 547.8 100.0%

YoY Growth (%) 8.6% -2.5% 6.5% 8.7% 5.0%

Gross Profit 212.9 46.1% 212.3 47.1% 227.7 47.4% 248.8 47.7% 262.3 47.9%

YoY Growth (%) 8.3% -0.3% 7.3% 9.3% 5.4%

Other revenues 6.9 1.5% 2.0 0.4% 2.0 0.4% 2.0 0.4% 2.0 0.4%

R&D -32.0 -6.9% -35.6 -7.9% -40.1 -8.3% -43.6 -8.4% -45.8 -8.4%

Distribution costs -86.0 -18.6% -83.5 -18.5% -88.6 -18.4% -95.0 -18.2% -98.8 -18.0%

Administrative exp. -45.9 -9.9% -42.2 -9.4% -44.2 -9.2% -46.4 -8.9% -47.8 -8.7%

Other operating exp. -2.5 -0.5% -2.9 -0.6% -2.5 -0.5% -2.5 -0.5% -2.5 -0.5%

Adj.EBIT 53.4 11.6% 50.1 11.1% 54.3 11.3% 63.3 12.1% 69.5 12.7%

YoY Growth (%) 9.5% -6.2% 8.4% 16.6% 9.7%

Adj.EBITDA 63.2 13.7% 60.0 13.3% 64.8 13.5% 74.7 14.3% 81.5 14.9%

YoY Growth (%) 6.7% -5.0% 8.1% 15.3% 9.0% Source: Company data and EQUITA SIM estimates

ADJ. EBITDA TREND (2001-2016)


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

0

10

20

30

40

50

60

70

80

90

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Adj. EBITDA Adj. EBITDA margin



� No big surprises below the EBIT level = Net Income C AGR 2013-2015 =

~20% We do not expect any big surprise below the EBIT level, provided that no extraordinary events occur. The low financial expenses and tax-rate (around 27%) are expected to be confirmed in the next years.

DATALOGIC - PROFITABILITY DEVELOPMENT (2012-2016E)

2012A 2013A 2014E 2015E 2016E

Adj.EBIT 53.4 11.6% 50.1 11.1% 54.3 11.3% 63.3 12.1% 69.5 12.7%

D&A (M&A) + other extraordinaries -37.1 -4.6 -5.6 -5.3 -5.3

EBIT 16.3 45.5 48.7 58.0 64.2

Net financial exp. -3.7 -6.5 -5.6 -4.1 -3.9

Other -3.1 -3.4 0.2 0.2 0.2

PBT 9.5 2.1% 35.5 7.9% 43.3 9.0% 54.1 10.4% 60.4 11.0%

taxes 0.7 -8.6 -11.7 -14.6 -16.3

Net Income 10.2 26.9 31.6 39.5 44.1

YoY Growth (%) 162.6% 17.5% 24.9% 11.8% Source: EQUITA SIM estimates and company data

� FCF as usual: High! Historically DAL has been a cash generation machine even during the worst years. We expect this trend to continue going forward, thus allowing DAL to generate more than €30 mn of FCF also thanks to good Capex and NWC control. We expect the company to report 2015 NFP lower than plan targets (~€-38.5 mn excluding 2013-2015 dividends) for two reasons: • Cash-in from the sale of own shares (€12 mn); • Use of factoring in 2013-2015 (€17 mn in 2013, expected to rise in 2014-2015).

DATALOGIC - FCF GENERATION (2012-2016E)

2012A % 2013A % 2014E % 2015E % 2016E %

Pre-tax 9.5 35,5 43.3 54.1 60.4

-D&A 15.5 15,6 16.1 16.7 17.3

-Cash Taxes -12.5 -14,7 -11.7 -14.6 -16.3

-∆ NWC 18.6 22,4 -9.1 -6.2 -3.2

-Capex -14.4 -3,1% -17,1 -3,8% -13.0 -2.7% -14.1 -2.7% -14.8 -2.7%

-Other 26.5 -1,4 0.0 0.0 0.0

FCF 43.3 40,3 25.7 35.9 43.4

- Severance and M&A -108.6 -9,4 0.0 0.0 0.0

- Dividends -8.5 -8,5 -9.4 -11.1 -13.8

- Equity issued net buy-back 11.8 1,7 12.0 0.0 0.0

- Other 0.3 0,0 -1.0 -1.0 -1.0

Net Debt -121.1 -97.0 -69.7 -45.8 -17.2

Net Debt (ex-dividend) -88.5 -51.8 -16.9 25.6 Source: EQUITA SIM estimates and company data



DATALOGIC - EQUITA VS 3-Y BUSINESS PLAN (MID-POINT)

2012A 2013A 2014E 2015E Cagr

2012-2015 Cagr

2013-2015 organic

Sales

Business Plan 462.25 450.7 458.7 na 540.0 5.3% 9.5%

YoY Growth (%) 8.6% -2.5%

- ADC 297.9 282.4 na 335.1 4.0% 8.9%

- IA 130.6 137.8 na 173.8 10.0% 12.3%

Equita SIM 462.3 450.7 458.7 480.2 521.8 4.1% 7.6% 8.4%

YoY Growth (%) 8.6% -2.5% 6.5% 8.7%

- ADC 297.9 282.4 305.4 326.1 3.1% 7.5% 8.2%

- IA 130.6 137.8 144.2 164.1 7.9% 9.1% 9.9%

Adj.EBITDA

Business Plan 63.2 13.7% 60.0 13.3% na 79.0 14.6% 7.7% 14.8%

YoY Growth (%) 6.7% -5.0%

Equita SIM 63.2 13.7% 60.0 13.3% 64.8 13.5% 74.7 14.3% 5.8% 11.6%

YoY Growth (%) 6.7% -5.0% 8.1% 15.3%

Net Debt*

Business Plan -121.1 -97.0 n.a -38.5

Equita SIM -121.1 -97.0 -69.7 -45.8

-cash out for dividends -8.5 -9.4 -11.1

ROE

Business Plan 6.0% 17.5%

Equita SIM 5.9% 14.5% 15.9% * Net Debt guidance is whitout considering divident payments Source: EQUITA SIM estimates and company data

DATALOGIC - MAIN METRICS (2013-2016)

2013A % 2014E % 2015E % 2016E %

Sales 450.7 100% 480.2 100% 521.8 100% 547.8 100%

YoY growth -2.5% 6.5% 8.7% 5.0%

Adj.EBITDA 60.0 13.3% 64.8 13.5% 74.7 14.3% 81.5 14.9%

YoY growth -5.0% 8.1% 15.3% 9.0%

Adj.EBIT 50.1 11.1% 54.3 11.3% 63.3 12.1% 69.5 12.7%

YoY growth -6.2% 8.4% 16.6% 9.7%

Adj. Net Income 30.4 35.7 43.3 48.0

YoY growth -13% 17% 21% 11%

NFP -97.0 -69.7 -45.8 -17.2

Adj.PE 14.9 12.3 11.1

FCF Yield 4.8% 6.8% 8.2% Source: Company data and EQUITA SIM estimates



VALUATION Our valuation of Euro 11.5 PS is based on a forward 12-months target multiple of 15x 2015 P/E Adj.

ADJ PE MULTIPLE VALUATION

SENSITIVITY

(A) 2015E Adj PE multiple 15.0 x 14.0 x 16.0 x

(B) 2015 Adj Net Income 43.3 43.3 43.3

(C) (A) x (B) Total Equity Value (EUR mn) 650 607 693

(D) Dividends to be cashed-in (EUR mn) 20.4 20 20

(E) (C) + (D) Total Stock Value (EUR mn) 671 627 714

(F) N.shares 58.4 58.4 58.4

(G) Target (EUR PS) 11.5 10.7 12.2 Source: EQUITA SIM estimates

We think that the company might trade at multiples consistent with the ones applied during the 2008-2010 period (forward 12 months Adj.PE = ~14.5x) bearing in mind the following: • Appealing growth opportunities: 2013-2015 Cagr Adj. EPS = ~20%; • Decreasing interest rates recently experienced on the market; • Possible extra growth arising from M&A.

DATALOGIC DCF (€ mn)

Assumptions

2014 2015 2016 2017 Beyond

g 2.0% Sales 480 522 548 575 587

WACC 8.6% Change % 6.5% 8.7% 5.0% 5.0% 2.0%

EBITDA 65 75 81 89 88

-Free-risk 3.2% Change % 8.1% 15.3% 9.0% 9.4% -1.3%

-Risk-Premium 4.5% Margin 13.5 14.3 14.9 15.5 15.0

-Beta Levered 1.6 D&A 16.1 16.7 17.3 17.7 14.7

EBIT 49 58 64 71 73

Valuation Change % 10% 19.1% 10.6% 11.4% 2.6%

Margin 10.1 11.1 11.7 12.4 12.5

NPV of Free Cash Flows (15-17) 117 Taxes -13 -16 -17 -19 -22

NPV of Terminal Value 623 EBIT after Tax 36 42 47 52 51

Estimated Enterprise Value 741 Change % 7% 19.1% 10.6% 11.4% -1.6%

2014E NFP (ex. dividend) -60 Adjustment to NFP -7 Capex -13.0 -14.1 -14.8 -14.4 -14.7

DAL Equity 673 (increase) decrease in NWC -9 -6 -3 -4 0

Peripherals & other 0 Free Cash Flow before minorities 29.6 38.8 46.2 51.5 51.3

Total Equity 673 FCF Minorities 0 0 0 0 0

Free Cash Flow after minorities 30 39 46 51 51

Adj. # of shares 58.4

Discount Factor 1.1 1.2 1.3 1.3

Target Price 11.5 PV of FCF 36 40 41 41

2015 Implied Adj.PE ~15 x

2016 Implied Adj.PE ~14 x

Upside vs Current Price 27% Source: EQUITA SIM estimates



PEERS COMPARISON Following Honeywell’s takeover on Intermec, Cognex is basically the only comparable player to Datalogic, although: • it is only exposed to the IA market; • it has a much higher positioning (high-end – gross margin of roughly 75%)

given its powerful exposure to vision technology. Given their widely diversified size and operations, Honeywell, Motorola, Omron and Keyence cannot be considered comparable companies. We believe it is interesting to highlight Zebra’s and Scansource’s multiples because, though they are not comparable players to Datalogic (Zebra manufactures and distributes barcode printers, Scansource is a wholesale distributor of automatic identification barcodes and point-of-sale products and it is one of DAL’s main clients), they are implicitly exposed to the same market drivers.

IA/ADC END MARKET EXPOSURE US – PANEL

Company Mkt Cap EV/EBITDA P/E Adj EBITDA margin Sales CAGR EPS ADJ

(mn)* 2014 2015 2014 2015 2014 2015 2013-2015 2013-2015

Scansource 808 8.6 7.9 15.6 14.4 4.0% 4.2% 3.0% 6.1%

Zebra Tech 2,536 12.3 11.3 20.0 18.0 22.1% 22.5% 9.6% 18.6%

Cognex Corp. 2,289 24.9 20.0 36.1 28.2 29.7% 31.0% 16.1% 25.8%

Avg. 15.3 13.1 23.9 20.2 18.6% 19.2% 9.6% 16.8%

Datalogic 9.4 7.8 14.9 12.3 13.5% 14.3% 7.6% 19.4% Source: Bloomberg Estimates *Market cap are in Euro

We do not think that Datalogic could trade at the same multiples of Cognex (i.e due to the different positioning and growth rates). However, we believe that it could be reasonable to see DAL trading broadly in line with Scansource/Zebra considering the strong DAL’s competitive positioning and its growth opportunities. Cognex Cognex Corporation (ticker: CGNX US Equity) is the world’s leading provider of value-added vision systems, vision software, vision sensors and surface inspection systems used in manufacturing automation. Cognex is also a leader in industrial ID readers. Cognex generates large part of sales in the US (~30%) and in Europe (~30%). In 2013, Cognex generated Sales of $354 mn, EBIT of $86.4 mn (EBIT margin at ~25%) and Net Income of $73.6 mn. Zebra Tech Corporation Zebra Technologies (ticker: ZBRA US Equity) designs, manufactures and sells specialty printing devices that print variable information on demand at the point of issuance. Zebra’s product range consists of direct thermal and thermal transfer label and receipt printers, passive radio frequency identification (RFID) printer/encoders and dye sublimation card printers. Zebra generates large part of sales in the US (~44%) and in Europe (~32%). In 2013, Zebra generated Sales of $1038 mn, EBIT of $170.8 mn (EBIT margin at ~16.5%) and Net Income of $134.4 mn.



Scansource ScanSource (ticker: SCSC US Equity) is the leading international distributor of specialty technology products, focusing on point-of-sale (POS) and barcode, communications, and physical security solutions. ScanSource’s teams provide value-added services and operate from two technology segments: • Barcode and Security (64% of total sales) • Communications and Services (36% of sales). ScanSource generates large part of sales in the US and Canada (74%). In 2013, it reported net sales of $2.9 bn with an EBIT of $ 51 mn (margin = 1.8%).



ANNEX 1: SHAREHOLDER BASE Datalogic’s majority shareholder is Hydra SpA (67.2% of capital), a company belonging to the founder Romano Volta. Following the recent ABB, the free float moved up from ~22% to ~33%.

DATALOGIC SHAREHOLDERS STRUCTURE

Source: Company data ANNEX 2: MANAGEMENT TEAM

DATALOGIC MANAGEMENT STRUCTURE


67.2%

32.8%

Hydra SpA Free Float



P&L 2011 2012 2013 2014E 2015E 2016E

Revenues 426 462 451 480 522 548

Growth 8% 9% -2% 7% 9% 5%

Total opex -377 -408 -401 -426 -459 -478

Growth 6% 8% -2% 6% 8% 4%

Margin -89% -88% -89% -89% -88% -87%

EBITDA 51 59 61 65 75 81

Growth 0% 16% 4% 6% 15% 9%

Margin 12% 13% 14% 13% 14% 15%

D&A (incl. M&A) -14 -43 -16 -16 -17 -17

Extraordinaries -8 -4 1 0 0 0

EBIT 36 16 45 49 58 64

Growth 5% -55% 179% 7% 19% 11%

Margin 9% 4% 10% 10% 11% 12%

Net financial profit/Expenses -7 -4 -7 -6 -4 -4

Profits/exp from equity inv na na na na na na

Other financial profit/Exp 4 -3 -3 0 0 0

Total financial expenses -3 -7 -10 -5 -4 -4

Non recurring pre tax na na na na na na

Profit before tax 33 10 36 43 54 60

Growth 18% -71% 273% 22% 25% 12%

Taxes -7 1 -9 -12 -15 -16

Tax rate -22% 8% -24% -27% -27% -27%

Minoritiy interests 0 0 0 0 0 0

Non recurring post tax na na na na na na

Net income 26 10 27 32 39 44

Growth 44% -60% 163% 18% 25% 12%

Margin 6% 2% 6% 7% 8% 8%

Adj. net income 34 35 30 36 43 48

Growth 69% 2% -13% 17% 21% 11%

Margin 8% 8% 7% 7% 8% 9%

CF Statement 2011 2012 2013 2014E 2015E 2016E

Pre-tax 33 10 36 43 54 60

D&A 14 16 16 16 17 17

(Taxes) -14 -12 -15 -12 -15 -16

(Increase) decrease in OWC -8 19 22 -9 -6 -3

(Purchase of fixed assets) -14 -14 -17 -13 -14 -15

(Other net investments) -6 -109 -9 0 0 0

(Distribution of dividends) -8 -9 -9 -9 -11 -14

Rights issue 9 12 2 12 0 0

Other 11 27 -1 -1 -1 -1

(Increase) Decrease in Net Debt 17 -62 24 27 24 29

Source: EQUITA SIM estimates and company data



INFORMATION PURSUANT TO ARTICLE 69 ET SEQ. OF CONSOB (Italian securities & exchange commission) REGULATION no. 11971/1999 This publication has been prepared by Alessandro Cecchini on behalf of EQUITA SIM SpA (licensed to practice by CONSOB resolution no. 11761 of December 22nd 1998 and registered as no. 67 in the Italian central register of investment service companies and financial intermediaries)

In the past EQUITA SIM has not published studies on Datalogic

EQUITA SIM is distributing this publication via e-mail to more than 700 qualified operators from March 20, 2014

The prices of the financial instruments shown in the report are the reference prices posted on the day prior to the date indicated on cover page.

EQUITA SIM intends to provide continuous coverage of the financial instrument forming the subject of the present publication, with a semi-annual frequency and, in any case, with a frequency consistent with the timing of the issuer’s periodical financial reporting and of any exceptional event occurring in the issuer’s sphere of activity. The information contained in this publication is based on sources believed to be reliable. Although EQUITA SIM makes every reasonable endeavour to obtain information from sources that it deems to be reliable, it accepts no responsibility or liability as to the completeness, accuracy or exactitude of such information. If there are doubts in this respect, EQUITA SIM clearly highlights this circumstance. The most important sources of information used are the issuer’s public corporate documentation (such as, for example, annual and interim reports, press releases, and presentations) besides information made available by financial service companies (such as, for example, Bloomberg and Reuters) and domestic and international business publications. It is EQUITA SIM’s practice to submit a pre-publication draft of its reports for review to the Investor Relations Department of the issuer forming the subject of the report, solely for the purpose of correcting any inadvertent material inaccuracies. This note has been submitted to the issuer. EQUITA SIM has adopted internal procedures able to assure the independence of its financial analysts and that establish appropriate rules of conduct for them.

Furthermore, it is pointed out that EQUITA SIM SpA is an intermediary licensed to provide all investment services as per Italian Legislative Decree no. 58/1998. Given this, EQUITA SIM might hold positions in and execute transactions concerning the financial instruments covered by the present publication, or could provide, or wish to provide, investment and/or related services to the issuers of the financial instruments covered by this publication. Consequently, it might have a potential conflict of interest concerning the issuers, financial issuers and transactions forming the subject of the present publication.

Equita SIM S.p.A. in the last 12 months has placed financial instruments issued by Datalogic S.p.A. In addition, it is also pointed out that, within the constraints of current internal procedures, EQUITA SIM’s directors, employees and/or outside professionals might hold long or short positions in the financial instruments covered by this publication and buy or sell them at any time, both on their own account and that of third parties.

The remuneration of the financial analysts who have produced the publication is not directly linked to corporate finance transactions undertaken by EQUITA SIM.

The recommendations to BUY, HOLD and REDUCE are based on Expected Total Return (ETR – expected absolute performance in the next 12 months inclusive of the dividend paid out by the stock’s issuer) and on the degree of risk associated with the stock, as per the matrix shown in the table. The level of risk is based on the stock’s liquidity and volatility and on the analyst’s opinion of the business model of the company being analysed. Due to fluctuations of the stock, the ETR might temporarily fall outside the ranges shown in the table.

EXPECTED TOTAL RETURN FOR THE VARIOUS CATEGORIES OF RECOMMENDATION AND RISK PROFILE

RECOMMENDATION/RATING Low Risk Medium Risk High Risk BUY ETR >= 10% ETR >= 15% ETR >= 20%

HOLD -5%

Documents

Datalogic · 2014. 3. 20. · IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 1 Datalogic ITALY \ Industrials New Coverage BUY (Prev. n.a ) Target: € 11.5 (Prev. n.a) Risk: