December 2012 Italy Top Picks - ... fileITALY December 2012 Disclosures available on THEMATIC REPORT Italy Top Picks 2013 performance gap accumulated by low quality/locally exposed

ITALY December 2012

Disclosures available on www.cheuvreux.com

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Italy Top Picks 2013

With Italy still burdened by a very weak macroeconomic environment and uncertainty ahead of the upcoming political elections, we feel stock picking must remain focused on high quality assets with low exposure to Italy or special cases in which restructuring, high visibility or changes in the business model provide strong catalysts. In our view, this could remain the right approach at the beginning of 2013, despite the huge performance gap accumulated by low quality/locally exposed assets. In the last few weeks, we have replaced Saipem and Prysmian (both rated 2/OP now) on our Selected list with Terna and ERG. Our 8 favourite stocks are listed below.

Banca Generali (EUR15.8 TP, 27% upside) Asset manager with no capital requirements, the opportunity to improve the asset mix and weak competitors (Italian banks) in a still-decent market (positive savings rate), trading at 10x P/E with a 7% DY.

Campari (EUR6.8 TP, 20% upside) Strong brands with improving geographical exposure and a value-enhancing M&A strategy are setting the pace for a positive 2013 outlook. Recent share price weakness provides appealing entry point.

De' Longhi (EUR13 TP, 23% upside) De Longhi couples the healthy fundamentals of small household appliances, with an enviable management track record, premium product positioning and the opportunity to develop the Braun brand.

ERG (EUR9.0 TP, 40% upside) ERG is beefing up its business model. The recent deal with Suez-GdF in renewables sharply shifts the focus towards new business and has reduced the reinvestment risk. At 4x EV/EBITDA, we see huge upside.

Finmeccanica (EUR5.0 TP, 21% upside) The key restructuring play in the Italian market. With heavy debt and a list of disposals to carry out, we believe the de-risking of the balance sheet and cost cutting might reduce risks and trigger a rerating.

Gemina (EUR1.0 TP, 14% upside) Although risky, Gemina can rely on a resilient asset (Rome airports) and huge upside if the new tariff scheme is approved in the coming weeks. Our fair value only factors in a 50% chance of approval.

Lottomatica (EUR21 TP, 20% upside) After a strong performance in Italy in 2011/12, the re-rating of Lottomatica could continue, thanks to the improving outlook for Gtech and Spielo, coupled with stricter capex discipline and rich cash flow generation.

Terna (EUR3.4 TP, 15% upside) A safe dividend play (>6% DY) in the Italian market, supported by good visibility on regulation (just approved), a shield against weak volumes, good management and a cheap valuation.

Marco Baccaglio, CFA (Head of Research) Italy (39)-02-80 62 83 20 ( Direct ) [email protected]

Antoine Boivin-Champeaux, Aerospace & Defense (33)-1-41 89 73 25 [email protected]

Matteo Bonizzoni, CFA Building Materials, Oil & Gas (39)-02-80 62 83 43 ( Direct ) [email protected]

Aldo Comi, Banks (39)-02-80 62 82 03 ( Direct ) [email protected]

Giorgio Iannella, Industrials, Consumer Goods (39)-02-80 62 83 30 ( Direct ) [email protected]

Atanasio Pantarrotas, CFA Insurance, Asset Gatherers (39)-02-80 62 83 10 ( Direct ) [email protected]

Francesca Pezzoli, Utilities (39)-02-80 62 83 10 ( Direct ) [email protected]

ECONOMIC & FINANCIAL OUTLOOK

Christopher Potts, Head of Economics & Strategy (Paris).......................................................................... +33 01 41 89 73 44

RESEARCH DEPARTMENT

Jolyon Montague, Global Head of European Research (Paris).................................................................... +33 01 41 89 75 99

Marco Baccaglio... +39 02 80 62 83 20 Italian Head of Research, Leisure, Telecoms

Matteo Bonizzoni.. +39 02 80 62 83 43 Building Materials, Oil & Gas

Giorgio Iannella..... +39 02 80 62 83 30 Industrials, Consumer Goods

Atanasio Pantarrotas..+39 02 80 62 83 10 Insurance, Asset Gatherers

Francesca Pezzoli..+39 02 80 62 83 80 Utilities

Aldo Comi .............+39 02 80 62 82 03 Banks

Geoffroy Stern………...+33 1 41897379 Oil Services

Thomas Mesmin………+33 1 41897598 Luxury Goods

Antoine Boivin-Champeaux. ……+33 1 41897325 - Aerospace & Defense

SALES

Giancarlo Castelli, Head of Italian Equities (London) ................................................................................... +44 207 621 5165

Alessandra Mazzolari +39 02 80 6280 18

Piergiorgio Canessa +39 02 80 6282 11

Stefano Mussati ..... +39 02 80 6280 26

Marco Tinessa ....... +39 02 80 6280 15

ETF SALES

Vincenzo Sagone.......................................................................................................................................... +39 02 80 62 80 20

SALES TRADING

Maurice Kanza, Head of Sales Trading ............................................................................................................ +39 02 80 62 80 62 Marco Ferrario .............................................................................................................................................. +39 02 80 62 81 20 Ilaria Pisani ................................................................................................................................................... +39 02 80 62 80 16 ETF trading ................................................................................................................................................... +39 02 80 62 85 00

DEALING PUBLISHING

Marco De Battisti......................+39 02 80 62 81 60 Giancarlo Offredi ......................+39 02 80 62 81 50

Anne Fisher .............................. +39 02 80 62 83 45 Sandra Montana ...................... +39 02 80 62 84 30

CONTENTS

I— 2013: the "value" dichotomy 3 II— Selected list 5 III— Target prices and ratings 6 IV— Company profiles 7

17 December 2012 ITALY Top Picks

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2

I— 2013: the "value" dichotomy With Italy still mired in recession and facing further political uncertainty (ahead of the February elections), stock picking is still being heavily influenced by macro considerations as we head into the new year. Almost without exception, betting on global companies that are relatively immune to the domestic crisis, while avoiding domestically exposed stocks proved to be the winning strategy in 2012. More of the same is likely, at least at the beginning of 2013.

QUALITY/COMPETITIVE POSITIONING RANKING (H AXIS) VS. DISTANCE FROM 3-YEARS PEAK PRICE (V AXIS)

DE LONGHI

ERG

SARASGEOX

TOD'S

ANSALDO STSPARMALAT

YOOX

DIASORIN

TENARIS

FIAT INDUSTRIAL

L ESPRESSO

INDESIT

PIRELLI

SAFILO

MEDIASET

CAMPARI

FINMECCANICA

SAIPEM

LUXOTTICA

IMPREGILO

PIAGGIO

ITALCEMENTI

BUZZI UNICEM

ENEL GP

AMPLIFON

ENEL

PRYSMIAN

TELECOM ITALIA

AUTOGRILLHERA

A2A

LOTTOMATICA

SIAS

GEMINA

ACEA

IREN

ATLANTIASNAM

TERNA

ASTALDI

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

Dis

tanc

e fr

om

the

pea

k o

f the

last

3 y

ears

Black is in our selected listGreen is 2/Outperform

Red is 3/Underperform or 4/Sell

Quality and competitive positioning ranking

Source: CA Cheuvreux

However, this exercise is becoming increasingly challenging, due to the "value polarisation" taking place between these two categories within the market. As the graph above illustrates (vertical axis is the current stock price distance vs. the last 3-years peak, horizontal axis is our assessment of the company's quality and competitive positioning), the strategy to pick high quality vs. value/low quality has been extremely rewarding to date. On the one hand, quality stocks that are geographically well-diversified and led by proven management teams are trading on historically high multiples. On the other, domestic stocks now look very cheap, especially in view of the solid franchises and earnings generation potential in a "normalised" economic environment.

The key question is "when" might the economic (and political) environment normalise, making domestically-driven stocks appealing investments once again. We believe the inflection point has not been reached yet, for several reasons:

Weak economic conditions,

aggravated by political uncertainty

Quality at cheap prices, value/domestic plays over 50% below

peak levels


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Structural reforms have only been partially completed. The action of the technical government led by Mr. Monti has been significantly slowed down by the poor implementation rate for several reforms, deemed necessary to boost the country's economic growth potential.

Austerity measures offset by exceptionally weak macroeconomic reaction. The expected improvement in the budget deficit does not seem to be taking place as rapidly as hoped, due to the lower-than-expected GDP and despite the burden of higher financial charges (tied to higher spreads), which has turned out to be less punitive than initially feared.

TAX INCOME EXPECTATIONS FOR 2012E PROVIDED BY THE ITALIAN GOVERNMENT

2012E PRIMARY BALANCE FORECAST (EUR BN) PROVIDED BY THE ITALIAN GOVERNMENT

488

505

495

481

465

470475

480

485490

495

500505

510

2011-Tremonti

2011-MontiDec-2011

2012-MontiApr-2012

2012-MontiSept-2012

55

75

57

45

0

10

20

30

40

50

60

70

80

2011-Tremonti

2011-MontiDec-2011

2012-MontiApr-2012

2012-MontiSept-2012

Source: CA Cheuvreux, Italian Government Source: CA Cheuvreux, Italian Government

Leading indicators suggest that the decline will continue. All leading indicators suggest that the economic decline will go on, despite the increasingly favourable comparison base. The unemployment rate is quickly rising (and is set to peak in 2013), despite the widespread implementation of temporary lay-off schemes (now accounting for around 4% of the labour force employed by large Italian companies).

CONSUMER CONFIDENCE INDEX – Y-O-Y CHANGE INDUSTRIAL PRODUCTION INDEX – Y-O-Y CHANGE

-4.1%

-8.4%

-9.5%

-6.7%

-11.7%

-9.9%

-7.3%

-4.5%

-11.6%

-15.6%

-16.7%

-13.6%

-10.9%

-8.5%

-7.1%

-11.9%

-18.0%

-16.0%

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

08-11

09-11

10-11

11-11

12-11

01-12

02-12

03-12

04-12

05-12

06-12

07-12

08-12

09-12

10-12

11-12

-3.8-4.1

-1.8

-4.6

-7.0

-5.5

-9.3

-6.7

-7.9

-7.1

-5.2 -5.0

-6.2

-10.0

-7.5

-5.0

-2.5

0.0

10-11 11-11 12-11 01-12 02-12 03-12 04-12 05-12 06-12 07-12 08-12 09-12 10-12

Source: ISTAT Source: ISTAT

New taxes in H2-13 should further depress the domestic environment. In mid-2013, to maintain the promised budget discipline, a new hike in the VAT rate is destined to take place, putting further pressure on private consumption, while several actions implemented to boost Italian tax revenues in 2012 (+4% YTD in October) will not provide any further benefits.

Stocks exposed to the Italian cycle are still too early to call,

despite appealing valuations


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This leads us to believe that it is too early to select locally-driven stocks with high cyclicality, despite their increasingly appealing valuations. There is no sign of any "normalisation" around the corner, so earnings will remain under pressure, at least for the first half of the year. We cannot exclude further downward earnings revisions, as the recovery will likely be delayed until 2014. However, we believe a re-rating might start to occur, as investors turn their attention to the low valuation of the Italian equity market.

SELECTED LIST – KEY RATIOS

Mkt. cap.

Price Range % Chg.

Target Price

Upside P/E EV/

EBITDA EV/

EBITA

Net Yield (%) (EUR)

EUR bn EUR - 52 W YTD EUR % 12E 13E 12E 12E 12E

Large caps Campari 3.3 5.7 5.0 - 6.5 9.9 6.8 20% 19.2 16.0 12.6 13.9 1.4 Lottomatica 3.0 17.5 10.9 - 18.4 50.3 21.0 20% 12.0 10.9 5.8 10.1 4.5 Terna 5.9 3.0 2.5 - 3.1 13.9 3.4 15% 13.4 13.2 8.7 12.6 6.4

Small-Mid caps (below EUR3bn) Banca Generali 1.4 12.4 6.5 - 12.8 72.6 15.8 27% 10.6 10.4 6.4 De' Longhi 1.6 10.5 6.0 - 11.3 53.7 13.0 24% 13.6 11.3 6.7 8.0 3.7 ERG 1.0 6.5 4.3 - 9.0 -26.5 9.0 40% 403.1 17.0 4.8 11.4 6.2 Finmeccanica 2.4 4.1 2.6 - 4.5 44.9 5.0 21% 8.9 5.9 4.4 6.5 2.4 Gemina 1.3 0.9 0.5 - 0.9 46.6 1.0 9% 175.0 21.9 8.5 23.3 0.0


Rather than picking the best ideas, Italian stocks are being selected more and more by the process of elimination, basically by sifting through "what's left" on the table. Our current selected list consists of 8 stocks, which mainly fall into the category of global leaders with a strong 2013 outlook (Campari, De' Longhi, Lottomatica), one restructuring story (Finmeccanica), a deep value stock with a changing business model (ERG), a special situation (Gemina) and finally, Terna, which might be boosted by investors' appetite for safe yields.

In the present environment, we feel that cyclical stocks will continue to suffer: (1) we maintain a negative stance on all media stocks, despite the rock-bottom prices at which they are currently trading. As the advertising market is unlikely to recover before H2-13, we feel it is still too early to reconsider these stocks; (2) we are still avoiding banks in light of the expected asset quality deterioration, apart from Intesa Sanpaolo, which we rate 2/Outperform. (3) We are still not keen on Telecom Italia, as the weak fundamentals are coupled with an unclear governance.

ITALIAN SELECTED LIST PERFORMANCE VS. ITALIAN FTSE/MIB INDEX

Selected List Italian FTSEMIB Selected list vs. Year

Absolute performance Absolute performance Italian FTSEMIB

2006 44.0% 15.2% 29%

2007 1.0% -8.2% 9%

2008 -43.0% -50.0% 7%

2009 68.6% 19.5% 49%

2010 -0.3% -13.2% 13%

2011 -22.4% -25.2% 3%

2012 YTD (13/12) 35.8% 4.5% 31%


Key bets focus on global leadership,

restructuring or special situations

Downward pressureto continue in H1-13


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5


TARGET PRICES AND RATINGS

CompaniesMarket Cap

Price (EUR)

Target (EUR)

Upside/ downside

Rat ing Analysts

A2A 2.3 0.7 0.8 7.3% 3 Francesc a PEZZOLI

ACEA 1.0 4.9 6.5 33 .0% 3 Francesc a PEZZOLI

AMPLIFON 0.7 3.3 4.0 22 .2% 2 G iorgio IANNELLA

ANSALDO STS 1.0 7.4 7.3 - 0.7% 3 G iorgio IANNELLA

ASTALDI 0.5 5.0 6.5 31 .3% 1 Ma tteo BONI ZZONI

ATLANTIA 7.8 12.4 16 .5 33 .4% 2 Borja CA STRO/Frances ca P EZZOLI

AUTOGRILL 1.9 7.5 11 .0 45 .9% 1 Ma rc o BACCAGLIO

AZIMUT 0.9 6.2 8.0 29 .1% 2 A ta nasio PA NTARROTAS

BA NCA GENERALI 0.8 7.2 11 .3 56 .9% 2 A ta nasio PA NTARROTAS

BA NCA MPS 2.9 0.3 0.3 23 .0% 3 A ldo COMI

BA NCA POP DI M ILANO 0.9 0.3 0.3 - 2.3% 3 A ldo COMI

BENETTON 0.5 3.0 3.0 1.6% 3 Ma rc o BACCAGLIO

BUZZI UNICEM 1.3 6.8 7.0 3.6% 3 Ma tteo BONI ZZONI

CAMPARI 3.0 5.1 6.0 16 .6% 2 Ma rc o BACCAGLIO

CIR 1.0 1.2 2.0 61 .8% 2 Francesc a PEZZOLI

DIASORIN 1.1 19.5 23 .0 18 .0% 3 A mandine LA TOUR

EDIS ON 4.3 0.8 0.8 2.4% 3 Francesc a PEZZOLI

ENEL 29.6 3.1 4.2 33 .6% 1 Francesc a PEZZOLI

ENEL GREEN P OWER 8.1 1.6 1.9 14 .6% 3 Francesc a PEZZOLI

ENI 58.0 16.0 18 .0 12 .4% 2 J ean-Cha rles LACOSTE

EXOR 3.6 15.6 20 .0 28 .6% 2 Ma rc o BACCAGLIO

FIAT 4.5 3.6 6.7 88 .7% 2 Bruno LAPIERRE

FIAT INDUSTRIAL 8.1 6.6 8.0 20 .8% 2 Ma rc o BACCAGLIO

FINMECCANICA 1.7 2.9 3.5 22 .5% 3 A ntoine BOIVIN- CHAMP EA UX

FONDIAR IA-SA I 0.3 0.6 0.3 -51.6% 3 A ta nasio PA NTARROTAS

GEMINA 0.9 0.6 0.9 50 .8% 2 Ma rc o BACCAGLIO

GENERALI 18.1 11.6 9.5 -18.3% 3 A ta nasio PA NTARROTAS

GEOX 0.6 2.2 2.4 8.4% 3 Ma rc o BACCAGLIO

HERA 1.2 1.1 1.6 45 .1% 2 Francesc a PEZZOLI

IMPREGILO 1.0 2.4 2.9 21 .3% 2 Ma tteo BONI ZZONI

INDESIT 0.4 3.7 4.0 7.7% 3 G iorgio IANNELLA

INTESA -SANPAO LO 21.0 1.3 1.3 0.5% 3 A ldo COMI

IREN 0.9 0.7 1.0 37 .4% 2 Francesc a PEZZOLI

ITALCEMENTI G ROUP 1.0 4.6 4.0 -12.2% 3 Ma tteo BONI ZZONI

L ESPRES SO 0.4 1.1 1.5 37 .7% 2 Ma rc o BACCAGLIO

LO TTOMATICA 2.0 11.6 16 .0 37 .8% 1 Ma rc o BACCAGLIO

LUXOTTICA 9.9 21.7 26 .0 19 .8% 1 Ma rc o BACCAGLIO

MEDIA SET 2.5 2.1 2.3 7.6% 3 Ma rc o BACCAGLIO

MEDIO BANCA 3.9 4.4 4.7 5.7% 3 A ta nasio PA NTARROTAS

MEDIO LANUM 2.2 3.0 3.4 13 .0% 2 A ta nasio PA NTARROTAS

MILA NO ASS ICURAZIONI 0.4 0.2 0.3 37 .8% 2 A ta nasio PA NTARROTAS

PARMALAT 2.3 1.3 1.6 20 .3% 3 Ma rc o BACCAGLIO

PIRELLI 3.1 6.5 8.8 35 .3% 1 G iorgio IANNELLA

PRYSMIAN 2.1 9.6 14 .8 54 .2% 2 G iorgio IANNELLA

SAFILO 0.3 4.9 4.8 - 1.7% 3 Ma rc o BACCAGLIO

SALVATORE FERRAGAMO 1.7 10.2 14 .0 37 .5% 2 Thomas MESMIN

SAIP EM 14.5 32.9 40 .0 21 .8% 1 Domin ique P ATRY

SARAS 0.9 1.0 1.0 3.4% 3 Ma tteo BONI ZZONI

SIAS 1.3 5.8 8.0 37 .5% 2 Francesc a PEZZOLI

SNAM RETE GAS 12.2 3.4 3.5 2.8% 3 Francesc a PEZZOLI

TELECO M ITALIA 15.3 0.8 0.9 2.3% 3 Ma rc o BACCAGLIO

TENARIS 15.7 13.3 13 .0 - 2.1% 3 G eoffroy STERN

TERNA 5.2 2.6 2.8 7.5% 3 Francesc a PEZZOLI

TOD'S 1.9 63.1 78 .0 23 .7% 3 Thomas MESMIN

UNICREDIT 12.4 6.4 7.1 10 .6% 3 A ldo COMI

UNIP OL 0.8 0.3 0.3 12 .0% 3 A ta nasio PA NTARROTAS

YOOX 0.4 8.3 10 .0 19 .9% 3 Ma rc o BACCAGLIO


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6

Company profiles


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7

INSURANCE

Banca Generali

Rating 1/Selected List

Target price (6 months) +27.1% EUR15.8

Price (13/12/2012) EUR12.43

Reuters: BGN.MI Bloomberg: BGN IM

Solid growth & improving mix

Business activity – 5th largest FA network & strong inflows Banca Generali is the asset gatherer unit of the Generali group in the Italian market. It has EUR25.5bn of client assets (9M-12) with twodistribution networks: 1) one for affluent retail clients, with EUR15.0bn assets and 1,138 financial advisors (FAs); and 2) the private banking network, with EUR10.5bn assets under the control of 261 FAs and 57 relationship managers. Thus, Banca Generali holds 0.9% of the Italian household savings market (total EUR3.0trn, excluding own equity holdings) and 10.2% of the FA networks. After collecting EUR1.26bn in FY-11, Banca Generali increased its net new money to EUR1,514m in11M-12 (up +40% y-o-y), corresponding to 15.4% of the whole FA market. The products sold by Banca Generali are predominantly the life insurance of its parent company (32% of total), mutual funds (25%), individual portfolio managed accounts (12%) and banking products (31%, including both current accounts and securities under administration).

Outlook – FY-12/13E net profits to exceed EUR130m After reporting quite poor FY-11 net profit (EUR73m), hit by the equity market pull-back, we expect a significant jump in FY-12E, to EUR130.5m (+78% y-o-y), thanks to the effect of LTRO on NII (up to EUR110m from EUR49m in FY-10) and solid performance fees (EUR47m vs. just EUR10m in the previous year), boosted by an 8% weighted average performance of the Luxembourg funds, the company's core product. Assuming a normalised net performance of +2% going forward, net profit should be stable (EUR133m) in FY-13E given the slowdown in performance fees (we look for -32%), but climb to EUR146m in FY-14E. It is worth noting that we have cautiously assumed a slowdown in inflows (EUR1.1bn p.a.), although we believe Banca Generali is well positioned to attract new FAs, especially by hiring people from traditional banks.

Investment recommendation – Best pick in healthy sector Banca Generali is our best pick in the Italian asset gatherer sector. The Italian FA sector has seen strong inflows (+EUR166bn since 2000) and,thanks to the weakening position of traditional banks, this trend could accelerate even in the event of a drop in the Italian savings rate (which is still at ~10%). The stock trades at a FY-13E P/E of 10.4x (at a slight premium to Italian peers), but owing to its limited capital requirements (Tier 1 ratio at 12.1%), it could sustain a payout policy of 75%/80%, translating into a FY-13E yield of 7.2%, best in class. Its recognisedbrand name should allow the company to continue to attract clients and FAs from traditional banks, sustaining strong inflows also in the future, at lower costs compared to past years. Banca Generali still has substantial scope to improve its mix, given that only 39% of assets are in higher margin products (funds of funds, unit-linked and managed accounts), well below its peers: a EUR1bn shift out of life into Lux funds would boost net earnings by EUR14m, approximately >10% of the total.

Stock data Market capitalisation EUR1388mFree float EUR473mEnterprise value EUR1388mNo. of shares, adjusted 111.7mDaily volume EUR2.55m

Performances 1 month 3 months 12 months

Absolute perf. 6.4% 22.5% 61.5% Relative perf. 3.0% 25.0% 50.7%

1.8

6.8

11.8

16.8

21.8

26.8

31.8

11/06 08/07 05/08 03/09 12/09 09/10 06/11 03/12 12/121.8

6.8

11.8

16.8

21.8

26.8

31.8

Price/FTSE ITALIA ALL-SHARE INDEX Price

Shareholders Generali 65.5%, Free Float 34.1%, Own Shares 0.4%

2011 2012E 2013E 2014E

Clean EPS 0.66 1.18 1.19 1.31

P/E (x) 11.0 10.6 10.4 9.5

Tangible BVPS 1.76 2.40 2.69 3.01

P/TBVPS (x) 4.1 5.2 4.6 4.1

Core ROE (%) 33.0 44.7 39.8 39.0

Core tier 1 ratio (%) 0.0 0.0 0.0 0.0

Yield (%) 7.6 6.4 7.2 8.0

Atanasio PANTARROTAS, CFA Research Analyst [email protected] (39) 02 80 62 83 10



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8

Banca Generali FY to 31/12 (Euro m) 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E

P&L and cash flow statement Total income 158 169 152 235 240 240 328 335 354% Change 61.2 6.9 -9.9 54.4 2.1 0.0 36.9 2.1 5.5Operating costs (131) (127) (138) (153) (145) (148) (156) (160) (164)% Change 37.9 -2.9 8.1 10.9 -5.3 2.3 5.4 2.2 2.9Pre provision operating profit 26 41 14 82 95 91 172 176 190% Change - 56 (65) - 16 (4) 88 2 8Bad debt charge 0 0 0 0 0 0 0 0 0Profit bef tax, exceptionals and GW [B] 26 41 14 82 95 91 172 176 190% Change - 55.8 -65.3 - 15.8 -3.7 88.1 2.1 7.9Associates [contribution] 0 0 0 0 0 0 0 0 0Other exceptional items 0 0 (4) (2) 0 0 0 0 0Pre-Tax Profit 26 41 10 80 95 91 172 176 190% Change - 55.8 -74.8 - 18.5 -3.7 88.4 1.9 7.9Tax (12) (21) (2) (15) (9) (14) (38) (38) (39)Goodwill amortisation 0 0 0 0 0 0 0 0 0Minorities 0 0 0 (2) (4) (4) (4) (5) (5)Net attributable profit [loss] [B] 14 20 8 63 82 73 131 133 146NAP [Loss], restated after goodwill 14 15 8 63 82 73 131 133 146% Change - 9.3 -48.4 - 30.2 -11.1 78.3 2.0 9.5 Financial Ratios ROE [%] 7.1 7.6 4.3 27.2 35.3 33.0 44.7 39.8 39.0Return on Tangible Equity [%] 7.1 7.6 4.3 27.2 35.3 33.0 44.7 39.8 39.0Cost income ratio [%] 83.2 75.6 90.6 65.1 60.4 61.8 47.6 47.6 46.4Bad debt charge [% av. RWA] 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Per Share Data EPS before goodwill 0.13 0.14 0.07 0.57 0.74 0.66 1.18 1.19 1.31% Change - 3.7 -48.2 - 29.3 -11.5 79.0 1.4 9.5Dividend per share 0.10 0.18 0.06 0.45 0.55 0.55 0.80 0.90 0.99Book value per share 1.7 1.7 1.6 1.9 1.9 1.8 2.4 2.7 3.0Tangible book value per share 1.7 1.7 1.6 1.9 1.9 1.8 2.4 2.7 3.0Latest price 9.60 6.88 2.77 8.50 9.07 7.20 12.43 12.43 12.43High 9.80 12.30 6.86 9.12 9.69 11.60 12.75 0.00 0.00Low 8.70 6.81 2.76 1.93 6.50 6.20 6.52 0.00 0.00Average price 9.14 9.56 4.66 5.60 8.36 8.80 9.55 0.00 0.00 Market capitalisation ( m) 1 068 765 308 946 1 011 804 1 388 1 388 1 388Detailed N° of shares (m) 111.300 111.300 111.300 111.300 111.500 111.700 111.700 111.700 111.700Av. number of shares, adjusted (m) 105.500 111.300 111.300 111.300 111.400 111.600 111.500 111.700 111.700Valuation multiples and ratios P/E before goodwill 71.5 49.5 38.6 14.8 12.2 11.0 10.6 10.4 9.5Yield [%] 1.0 2.6 2.2 5.3 6.1 7.6 6.4 7.2 8.0Payout ratio [%] 75.4 130.9 84.5 79.2 74.4 83.9 68.4 75.5 75.9P/BV 5.51 4.07 1.69 4.42 4.74 4.09 5.18 4.62 4.13 Balance sheet Customer credits & leases 350 346 768 783 852 972 1 281 1 600 1 623Total assets 3 580 4 211 4 068 3 988 3 808 4 549 6 644 6 643 6 742Customer deposits [excl repos] 3 054 3 766 3 671 3 368 2 911 3 042 3 392 3 540 3 588Minority interests 0 0 0 0 0 0 0 0 0Pref shares and hybrid capital 0 0 0 0 0 0 0 0 0Shareholders' equity [group share] 205 208 189 264 275 258 357 401 447Customer deposits/Customer loans 873.2 1 089.3 478.3 430.1 341.7 312.9 264.7 221.3 221.1Risk weighted assets [end of period] 0 0 0 0 0 0 0 0 0% Change - - - - - - - - -Total Tier 1 capital 193 187 126 174 174 148 268 301 336Tier 1 ratio [%] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Core eco capital, group share 193 187 126 174 174 148 268 301 336


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9

BEVERAGES

Campari



Price (13/12/2012) EUR5.655

Reuters: CPRI.MI Bloomberg: CPR IM

Strong brands to make a comeback in 2013

Business activity – Strong franchise built via M&A Campari is the leading spirits company in Italy and the 6th largest global spirits producer, with 2011 revenues of EUR1.3bn and EUR159m net profit. Campari now operates 13 plants (4 in Italy) and 4 wineries (3 in Italy), ahead of the acquisition of LdM to be completed shortly. It gradually opened up its own distribution subsidiaries, which now handle roughly 90% of consolidated sales. Over the last 10 years, Campari spent EUR1.6bn on acquisitions at an average multiple of around 12x EV/EBITDA. Its boldest acquisitions were: SKYY Vodka (for a combined EUR230-240m), Wild Turkey (EUR433m) and more recently, Lascelles de Mercado in the Rum market (EUR330m). Over the last 5 years, external growth was about 2% yearly (7% on a 10-year basis), compared to organic growth of ~5%. After the acquisition of LdM, Italian sales should be less than 25%. At end-2012, we expect net debt of EUR900-950m (2.3-2.4x pro-forma debt/EBITDA ratio).

Outlook – Returning to growth after a disappointing 2012 After a 2012 shaped by a difficult comparison base and some one-off items (distribution change in Russia, commercial issues with the leading retailer in Germany), 2013 should be a year of recovery for Campari, combining the strong fundamentals of its brands (Aperol and Wild Turkey are quickly gaining ground among the global spirit brands) and the consolidation/integration of the acquired business in Jamaica, which allowed the group to add the Rum category to the portfolio. We currently expect 6% organic growth for 2013 (with core brands up >7%) and a 16-17% contribution from M&A, which should push sales up to EUR1.67bn. Margins should be diluted by the acquisition (we expect ~100bps at the EBIT level), paving the way for around 15% potential EBIT growth. Our current forecast points to EUR350-355m EBIT vs. ~EUR300m expected in 2012 and a jump in net profit in the region of EUR200m (EUR164m 2012E). By the end of 2013, we expect Campari's net debt to decline to about EUR850m, implying 2.2x debt/EBITDA.

Investment recommendation – Corrections are opportunitiesCampari's huge, solid outperformance recently came to an abrupt halt(around 10% underperformance vs. the Italian market over the last month), due to some temporary issues with Aperol in Germany and the abnormally weak trend for the increasingly less important Italian market. That said, we note that: (1) Campari carried out a smart deal in the Rum market, with huge potential for integration. The success of Wild Turkey, just 3 years after the acquisition, bodes well for the return on this new investment. (2) Aperol's fundamentals are untouched and excluding the German issue, the brand is still posting nearly double-digit growth. (3) From H2-13, we feel Campari could continue its M&A strategy by further diversifying its spirits portfolio. (3) The stock trades on roughly 12x EV/EBIT for 2013, which is at the low end of the 12-14x range, it traded at over the last 3 years and at a discount to its large European peers of >10%. For these reasons, we consider Campari to be an appealing buying opportunity.



Absolute perf. -3.7% -5.9% 10.8% Relative perf. -7.5% -3.9% 5.0%

1.8

3.8

5.8

7.8

9.8

11.8

12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/121.8

3.8

5.8

7.8

9.8

11.8

Price/BCI Price

Shareholders Garavoglia Family 51.0%, Free Float 49.0%

2011 2012E 2013E 2014E

P/E (x) 17.6 19.2 16.0 13.9

EV/EBITDA (x) 11.1 12.6 10.5 9.2

Attrib. FCF yield (%) 4.6 3.0 4.2 6.1

Net debt/EBITDA (x) 2.0 2.8 2.2 1.6

Yield (%) 1.4 1.4 1.6 1.8

ROCE after tax (%) 9.4 8.0 9.6 10.6

EV/Capital empl. (x) 1.8 1.7 1.6 1.6

Marco BACCAGLIO Research Analyst [email protected] (39) 02 80 62 83 20



www.cheuvreux.com

10

Campari FY to 31/12 (Euro m) 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E

Profit & Loss Account Sales 932.4 957.5 942.3 1 008.4 1 163.0 1 274.2 1 350.6 1 661.2 1 785.9% Change 15.1% 2.7% -1.6% 7.0% 15.3% 9.6% 6.0% 23.0% 7.5%Staff costs (89.7) 167.8 (97.4) (107.4) (135.5) (149.4) (155.4) 0.0 0.0Other costs (632.8) (905.2) (630.1) (640.0) (732.2) (798.9) (860.5) (1 269.7) (1 351.5)EBITDA 209.9 220.1 214.8 261.0 295.3 325.9 334.7 391.5 434.4% Change 4.3% 4.9% -2.4% 21.5% 13.1% 10.4% 2.7% 17.0% 11.0%Depreciation (19.2) (19.5) (19.3) (25.4) (25.8) (30.3) (32.3) (37.8) (38.3)EBITA 190.7 200.6 195.5 236.6 270.5 296.6 303.4 354.7 397.1% Change 3.8% 5.2% -2.5% 21.0% 14.3% 9.6% 2.3% 16.9% 12.0%Goodwill amortisation before OP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Non recurring operational items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0EBIT 190.7 200.6 195.5 235.6 269.5 295.6 302.4 353.7 396.1Net financial items (15.0) (17.3) (23.0) (37.4) (36.5) (45.2) (48.0) (57.9) (54.4)Non recurring financial items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other exceptional items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Tax (55.2) (58.1) (45.7) (60.8) (76.2) (90.9) (90.7) (94.0) (107.8)Associates [contribution] 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0Discontinuing activities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0Net profit [loss] before minorities 120.5 125.2 126.8 137.4 156.8 159.5 163.7 201.9 233.8Dividend to preferred shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Minorities (3.2) (0.2) (0.2) (0.4) (0.5) (0.6) (0.2) (0.2) (0.2)Net attributable profit [loss] 117.3 125.0 126.6 137.0 156.3 158.9 163.5 201.7 233.6Restatement [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Adj. for exceptional items 0.4 2.1 3.2 3.4 0.2 8.6 5.4 2.0 0.0Net attrib. profit [loss], restated 117.7 127.1 129.8 139.4 156.5 167.5 168.9 203.7 233.6% Change -0.3% 8.0% 2.1% 7.4% 12.3% 7.0% 0.8% 20.6% 14.7%Cash flow 137.7 183.5 156.5 192.6 221.3 226.5 216.2 259.9 287.4Balance Sheet Shareholders' equity [group share] 795.9 876.7 952.9 1 043.5 1 249.9 1 363.8 1 486.8 1 642.2 1 823.7Minority interests 1.9 1.9 2.1 2.5 3.0 3.7 3.7 3.8 3.8Net debt [cash] 379.4 288.1 326.2 630.8 677.0 636.6 931.4 849.7 702.7Gearing [%] 47.6 32.8 34.2 60.3 54.0 46.6 62.5 51.6 38.5Per Share Data (at 13/12/2012) EPS before goodwill 0.21 0.22 0.22 0.24 0.27 0.29 0.29 0.35 0.41EPS, reported 0.20 0.22 0.22 0.24 0.27 0.28 0.28 0.35 0.40Goodwill per share 0.00 0.00 0.00 (0.00) 0.00 0.00 0.00 0.00 0.00Dividend per share 0.05 0.06 0.06 0.06 0.06 0.07 0.08 0.09 0.10Cash flow per share 0.25 0.32 0.27 0.34 0.39 0.39 0.38 0.45 0.50Book value per share 1.3 1.5 1.6 1.8 2.1 2.3 2.5 2.7 3.1No. of shares, adjusted 580.800 580.800 577.000 576.400 578.500 578.500 578.500 578.500 578.500Latest price 3.76 3.28 2.40 3.65 4.87 5.15 5.66 5.66 5.66Market capitalisation 2 182.9 1 903.6 1 393.9 2 103.9 2 812.4 2 976.4 3 271.4 3 271.4 3 271.4Enterprise value 2 635.0 2 206.6 1 732.5 2 750.1 3 507.7 3 633.7 4 220.0 4 138.4 3 991.6Valuation P/E 18.0 14.9 10.7 14.9 17.8 17.6 19.2 16.0 13.9P/E before goodwill 18.0 14.9 10.7 15.0 17.8 17.6 19.2 16.0 13.9P/CF 15.3 10.3 8.9 10.9 12.6 13.1 15.0 12.5 11.3Attrib. FCF yield [%] 4.2 6.6 8.8 8.7 4.7 4.6 3.0 4.2 6.1P/BV 2.8 2.3 1.5 2.1 2.3 2.2 2.3 2.1 1.9Enterprise value / Op CE 2.1 1.8 1.3 1.5 1.8 1.8 1.7 1.6 1.6Yield [%] 1.3 1.7 2.3 1.6 1.2 1.4 1.4 1.6 1.8EV/EBITDA, restated 12.6 10.0 8.1 10.5 11.8 11.1 12.6 10.5 9.2EV/EBITA, restated 13.8 11.0 8.9 11.6 13.0 12.3 13.9 11.7 10.1EV/Sales 2.83 2.31 1.84 2.73 3.02 2.85 3.13 2.49 2.24EV/Debt-adjusted cash flow 17.4 11.3 10.0 12.6 14.2 14.2 17.1 13.8 12.3Return [%] Pre-tax RoCE 15.2 16.1 14.3 13.3 13.8 14.7 12.4 14.1 15.5ROE [%] 15.9 15.4 14.2 14.1 13.3 12.4 11.6 13.1 13.7Return on equity, restated 16.0 15.6 14.6 14.4 13.4 13.1 12.0 13.2 13.7


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11

H & PC

De Longhi


Target price (6 months) +23.8% EUR13

Price (13/12/2012) EUR10.5

Reuters: DLG.MI Bloomberg: DLG IM

Buy the new growth phase, Braun driven

Business activity – The premium gourmet machine maker The new De' Longhi resulting from the spinoff of the Professional business (on 1 January 2012) is fully focused on premium small household appliances, mostly coffee makers (De' Longhi brand) and food preparation machines (Kenwood brand), which together account for 3/4 of group sales. In both niches, the company is number one in West Europe, with 29% and 20% market share, as well as in the world ex-US/China. Italy accounts for only 12% of total sales, while Europe is still predominant, with 60%. Emerging markets represent 1/3 of sales, of which East Europe (mostly Russia) together with Australia/New Zealandmake up 2/3. This year, the company added the German Braun brand, perpetually licensed by P&G – for a total transaction value of EUR290m at the max. earn-out payment. 70% of total production, internal and outsourced, comes from China. The new plant in Romania will allow the group to reduce its exposure to Chinese wage inflation (currently c.20% annually) and currency risk arising from c.25% of sales and c.40% of costs denominated in USD or USD-related currencies (10% weaker USD is followed by 10-12% higher EBITDA and 5-7% higher EPS).

Outlook – Sound growth ahead: 18% EPS CAGR 2011-14E There is more growth in small than large appliances (+3% vs. -1% CAGR 2007-11 in West Europe), basically thanks to lower product penetration. Specifically, demand for espresso makers and food preparation machines has been growing nicely, driven by strong underlying trends favouring worldwide espresso coffee consumption and home cooking. At the current perimeter, De' Longhi recorded 2006-11 CAGR of 6% for sales and 19% for EBITDA – operating leverage is still high today, with EBITDA growing twice as fast as the top line. Sales deriving from the Nespresso agreement rose at c.30% CAGR in 2007-11, while the Kenwood brand acquired in 2001 posted 11% sales CAGR in 2001-11. Assuming that De' Longhi stand-alone sales would grow at a 4% pace and Braun at 10%, for De' Longhi Group, we project 18% EPS CAGR in 2011-14E. Braun is expected to be EPS accretive from 2013 (to be consolidated from 1 January), overall 12% in the next three years.

Investment recommendation – Strong case, right timing De' Longhi offers the full menu: high competitive quality, leading ranking and premium positioning, combined with quite a strong track record for delivery (also on acquisitions, as witnessed by its success with the Kenwood brand, which will help with Braun as well), sound growth prospects and fairly high visibility on earnings, against the backdrop of growing reference markets. All this comes at the current undemanding 5.6x EBITDA and 6.1% FCFY. We believe Braun is a big deal for De' Longhi, given the perfect industrial fit with the rest of the group's portfolio, and trust management's ability to extract its full potential. Now is the time to buy, at the beginning of this fresh phase of growth driven by Braun, in addition to the still growing coffee and kitchen businesses. We initiated coverage of De' Longhi on 19 November, with a 1/SL rating and EUR13 TP (8x EBITDA 2013E).



Absolute perf. 0.0% 5.5% 38.2% Relative perf. -3.9% 7.8% 31.0%

1.0

6.0

11.0

16.0

21.0

07/01 12/02 05/04 10/05 03/07 09/08 02/10 07/11 12/121.0

6.0

11.0

16.0

21.0

Price/BCI Price

Shareholders De Longhi Soparfi 67.0%, Free Float 33.0%

2011 2012E 2013E 2014E

P/E (x) 10.8 13.6 11.3 10.1

EV/EBITDA (x) 4.4 6.7 5.6 5.0

Attrib. FCF yield (%) 1.0 1.5 6.1 7.6

Net debt/EBITDA (x) (0.6) 0.5 0.3 0.1

Yield (%) 4.8 3.7 4.7 5.1

ROCE after tax (%) 21.8 22.1 24.3 25.5

EV/Capital empl. (x) 1.7 2.4 2.1 2.0

Giorgio IANNELLA Research Analyst [email protected] (39) 02 8062 8330



www.cheuvreux.com

12

De Longhi FY to 31/12 (Euro m) 2006 2007 2008 2009E 2010 2011 2012E 2013E 2014E

Profit & Loss Account Sales 1 363.0 1 490.9 1 535.9 1 547.4 1 574.7 1 429.4 1 520.0 1 795.0 1 890.0% Change 8.4% 9.4% 3.0% 0.7% 1.8% -9.2% 6.3% 18.1% 5.3%Staff costs (12.5) (14.3) (7.7) (7.7) (7.9) (160.2) (176.4) (213.1) (219.5)Other costs (1 227.8) (1 320.3) (1 368.5) (1 394.8) (1 415.4) (1 059.6) (1 120.2) (1 321.6) (1 386.1)EBITDA 122.7 156.3 159.7 144.9 151.5 209.6 223.4 260.4 284.5% Change 4.5% 27.4% 2.2% -9.3% 4.6% 38.4% 6.6% 16.5% 9.3%Depreciation (40.6) (41.7) (41.3) (37.3) (37.2) (30.9) (35.6) (37.8) (40.1)EBITA 82.2 114.6 118.4 107.5 114.3 178.7 187.8 222.5 244.4% Change 2.8% 39.5% 3.3% -9.2% 6.3% 56.3% 5.1% 18.5% 9.8%Goodwill amortisation before OP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Non recurring operational items 2.8 (10.9) 8.2 (2.0) (2.0) (6.2) (10.0) (8.0) (8.0)EBIT 85.0 103.7 126.6 105.5 112.3 172.5 177.8 214.5 236.4Net financial items (48.6) (51.3) (50.0) (43.2) (38.9) (33.7) (33.7) (36.3) (37.2)Non recurring financial items 25.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other exceptional items (25.0) 9.4 (12.3) 0.0 0.0 0.0 0.0 0.0 0.0Tax (20.9) (21.1) (23.0) (24.9) (29.4) (44.4) (36.0) (44.6) (49.8)Associates [contribution] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Discontinuing activities 0.0 0.0 0.0 0.0 0.0 (3.9) 0.0 0.0 0.0Goodwill amortisation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Net profit [loss] before minorities 40.5 31.3 53.6 37.4 44.1 90.5 108.1 133.6 149.4Dividend to preferred shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Minorities (0.7) (0.7) (1.2) (0.8) (1.0) (0.3) (0.4) (0.4) (0.4)Net attributable profit [loss] 39.8 30.6 52.4 36.6 43.1 90.3 107.7 133.2 149.0Restatement [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Adj. for exceptional items (16.5) 5.6 (8.6) 0.0 0.0 4.2 7.5 6.0 6.0Net attrib. profit [loss], restated 23.3 36.2 43.8 36.6 43.1 94.5 115.2 139.2 155.0% Change -6.2% 55.6% 20.9% -16.5% 17.8% 119.3% 22.0% 20.9% 11.3%Cash flow 80.3 72.3 93.7 73.9 80.3 121.5 143.7 171.5 189.5Balance Sheet Shareholders' equity [group share] 615.5 625.3 668.7 696.3 730.4 597.8 648.8 723.1 799.3Minority interests 5.0 5.5 5.4 5.7 5.9 2.0 2.4 2.8 3.2Net debt [cash] 314.6 355.9 274.6 226.2 200.9 (117.4) 120.0 83.0 36.1Gearing [%] 50.7 56.4 40.7 32.2 27.3 NS 18.4 11.4 4.5Per Share Data (at 13/12/2012) EPS before goodwill 0.16 0.24 0.29 0.25 0.29 0.63 0.77 0.93 1.04EPS, reported 0.27 0.21 0.35 0.25 0.29 0.60 0.72 0.89 1.00Goodwill per share 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Dividend per share 0.06 0.06 0.06 0.06 0.06 0.33 0.39 0.49 0.54Cash flow per share 0.54 0.48 0.63 0.49 0.54 0.81 0.96 1.15 1.27Book value per share 4.1 4.1 4.4 4.6 4.8 3.7 4.0 4.3 4.8No. of shares, adjusted 149.500 149.500 149.500 149.500 149.500 149.500 149.500 149.500 149.500Latest price 4.40 3.79 1.44 3.16 5.88 6.83 10.50 10.50 10.50Market capitalisation 657.8 566.6 215.3 472.8 879.1 1 021.1 1 569.8 1 569.8 1 569.8Enterprise value 1 026.0 971.2 531.8 748.1 1 139.7 921.9 1 502.8 1 465.7 1 419.0Valuation P/E 28.3 15.6 4.9 12.9 20.4 10.8 13.6 11.3 10.1P/E before goodwill 28.3 15.6 4.9 12.9 20.4 10.8 13.6 11.3 10.1P/CF 8.2 7.8 2.3 6.4 11.0 8.4 10.9 9.2 8.3Attrib. FCF yield [%] 8.6 4.2 3.4 11.9 3.8 1.0 1.5 6.1 7.6P/BV 1.1 0.9 0.3 0.7 1.2 1.9 2.7 2.4 2.2Enterprise value / Op CE 1.1 0.9 0.5 0.5 0.5 1.7 2.4 2.1 2.0Yield [%] 1.4 1.6 4.2 1.9 1.0 4.8 3.7 4.7 5.1EV/EBITDA, restated 8.4 6.2 3.3 5.2 7.5 4.4 6.7 5.6 5.0EV/EBITA, restated 12.5 8.5 4.5 7.0 10.0 5.2 8.0 6.6 5.8EV/Sales 0.75 0.65 0.35 0.48 0.72 0.65 0.99 0.82 0.75EV/Debt-adjusted cash flow 9.0 9.3 4.1 7.4 10.8 6.4 8.9 7.3 6.5Return [%] Pre-tax RoCE 8.4 11.2 11.7 10.9 11.5 32.0 29.4 32.4 33.9ROE [%] 6.7 5.0 8.2 5.4 6.1 16.3 18.1 20.3 20.6Return on equity, restated 3.9 6.0 6.8 5.4 6.1 17.2 19.5 21.3 21.5


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13

OIL & GAS

ERG



Price (10/12/2012) EUR6.505

Reuters: ERG.MI Bloomberg: ERG IM

Business model transformation not priced in

Business activity – From refining to renewables Formerly focussed on refining, ERG's business model is undergoing a transformation. Following the exercise of the put option with Lukoil on 80% of Isab srl (Priolo refinery site) in 2012-13, the conversion of the Rome inland refinery into a logistics terminal (Q3-12) and the exercise of the residual put on 20% of Isab (Q4-13), ERG will exit the refining business to concentrate on businesses with greater stability/visibility: renewables (wind), powergen and oil product marketing. The recently announced acquisition of IP Maestrale from GDF, to be finalised in Q1-13, is in our view a wise move: 1) ERG will acquire 636MW of high quality wind assets already in operation (550MW in Italy, 86MW in Germany), generating EUR120m EBITDA (c.a. 30% of ERG's 2012 EBITDA), for a EUR859m EV, implying an attractive 7.2x EV/EBITDA pre-synergies, EUR1.35m EV/MW. We estimate that IP Maestrale's assets will generate EUR90/95m post tax FCF/EV, pointing to a solid 11% FCF/EV paid; and 2) it dissipates the cash reinvestment risk: ERG could have deployed the proceeds from the put option on refining unwisely, which was not the case.

Outlook – After solid 2012, we see room for further growth Following sound Q3-12 results, driven by the renewables and powergen divisions, we have upgraded our 2012E EBITDA estimate from EUR400m (guidance) to EUR419m. A new business plan will be presented on 19 December. We expect it to focus on: 1) new targets in the renewables division, including IP Maestrale's assets. We expect management to provide visibility on potential synergies (maintenance/service contracts, procurement, G&A) with existing wind assets, which in our view could top EUR10/15m; 2) oil product marketing: we believe the former EUR40m synergies target for Total/ERG could be upgraded, which could offset unfavourable volume dynamics in this business; 3) G&A: following the exit from refining, we believe there is room to streamline corporate structures; and 4) dividend: we expect a EUR0.4 DPS (6.1% yield) to be confirmed.

Investment recommendation – Undervalued in our SOP In our view, the transformation of the business model, implying in particular an increased focus on the renewables business, is not pricedin. The consolidation of IP Maestrale's assets will increase the weight of renewables in EBITDA from 33% (2012E) to 45% (2013E). Powergen will still account for 40% of 2013E EBITDA, and oil product marketing for the residual 15%. Trading at 4x EV/EBITDA 2013E, the stock is still priced in line with the refining sector. We derive a EUR9ps TP, implying 39.5%upside. Our SOP includes renewables at 7x EV/EBITDA, powergen at 5.5x (which incorporates mid-term threats to power prices in Sicily) and oil product marketing at 6x EV/EBITDA. We believe a sustainable 6.1% dividend yield on a low-geared financial structure (2x NFP/EBITDA 2013E post IP deal and exercise of residual put option on refining) addfurther appeal to the investment case.



Absolute perf. 23.9% 14.7% -29.3% Relative perf. 25.2% 19.3% -20.6%

2.8

7.8

12.8

17.8

22.8

01/03 04/04 06/05 09/06 12/07 03/09 06/10 09/11 12/122.8

7.8

12.8

17.8

22.8

Price/FTSE IT MID CAP INDEX Price

Shareholders San Quirico (Garrone Family) 62.8%, Free Float 37.2%

2011 2012E 2013E 2014E

P/E (x) NS NS 17.2 11.9

EV/EBITDA (x) 9.2 4.8 4.0 3.7

Attrib. FCF yield (%) NS NS 9.2 8.6


Yield (%) 4.6 6.1 6.1 6.1

ROCE after tax (%) 2.6 8.7 7.9 9.4

EV/Capital empl. (x) 1.2 1.2 1.2 1.2

Matteo BONIZZONI, CFA Research Analyst [email protected] (39) 02 80 62 83 43



www.cheuvreux.com

14

ERG FY to 31/12 (Euro m) 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E

Profit & Loss Account Sales 9 303.4 10 205.9 11 562.8 6 237.2 7 899.5 6 798.3 7 226.3 5 428.3 5 591.1% Change 3.0% 9.7% 13.3% -46.1% 26.7% -13.9% 6.3% -24.9% 3.0%Staff costs (176.8) (185.5) (195.7) 0.0 0.0 0.0 0.0 0.0 0.0Other costs (8 664.0) (9 659.1) (10 827.1) (6 145.7) (7 594.0) (6 514.2) (6 807.7) (4 965.3) (5 100.4)EBITDA 462.6 361.3 540.0 91.5 305.5 284.2 418.6 462.9 490.7% Change -46.8% -21.9% 49.4% -83.1% NS -7.0% 47.3% 10.6% 6.0%Depreciation (157.2) (185.4) (204.0) (183.5) (219.5) (247.1) (242.3) (235.9) (236.1)EBITA 305.5 175.9 336.0 (92.0) 86.0 37.1 176.4 227.0 254.6% Change -57.3% -42.4% 91.0% NS 193.5% -56.9% NS 28.7% 12.1%Goodwill amortisation before OP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Non recurring operational items (20.6) 190.3 (580.7) 160.3 (39.0) (87.0) (25.0) (36.0) (41.2)EBIT 284.8 366.2 (244.7) 68.3 47.0 (49.9) 151.4 191.0 213.3Net financial items (44.5) (66.7) (3.2) 17.8 (27.4) (5.7) (58.0) (2.9) 13.2Non recurring financial items 0.0 0.0 0.0 0.0 63.4 120.5 214.5 0.0 0.0Other exceptional items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Tax (46.5) (107.4) 4.5 (41.3) (39.6) 30.9 (49.5) (88.4) (101.9)Associates [contribution] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Discontinuing activities 0.0 0.0 892.4 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Net profit [loss] before minorities 193.8 192.1 649.0 44.8 43.4 95.8 258.9 99.2 124.1Dividend to preferred shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Minorities (41.0) (21.2) (3.0) (37.8) (33.0) (30.8) (42.0) (43.0) (43.0)Net attributable profit [loss] 152.8 170.9 646.0 7.0 10.4 65.0 216.9 56.2 81.1Restatement [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Adj. for exceptional items (49.4) (131.6) (562.8) (86.5) (30.5) (113.6) (214.5) 0.0 0.0Net attrib. profit [loss], restated 103.4 39.3 83.2 (79.5) (20.1) (48.6) 2.4 56.2 81.1% Change -78.4% -62.0% 111.7% NS 74.7% NS 104.8% NS 44.3%Cash flow 257.2 462.7 807.2 182.2 195.2 352.6 288.1 338.6 367.2Balance Sheet Shareholders' equity [group share] 1 218.9 1 333.8 1 916.3 1 782.5 1 740.4 1 727.8 1 670.0 1 666.1 1 687.0Minority interests 179.5 125.3 108.0 146.1 151.1 150.5 192.1 235.6 279.1Net debt [cash] 1 356.0 1 377.6 274.2 662.2 722.9 963.5 622.4 431.4 393.0Gearing [%] 97.0 94.4 13.5 34.3 38.2 51.3 33.4 22.7 20.0Per Share Data (at 10/12/2012) EPS before goodwill 0.69 0.26 0.55 (0.54) (0.14) (0.33) 0.02 0.38 0.55EPS, reported 1.02 1.14 4.30 0.05 0.07 0.43 1.44 0.37 0.54Goodwill per share 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Dividend per share 0.40 0.40 0.90 0.40 0.40 0.40 0.40 0.40 0.40Cash flow per share 1.71 3.08 5.37 1.23 1.32 2.38 1.94 2.28 2.48Book value per share 7.7 8.5 11.9 11.5 11.2 11.1 10.7 10.7 10.8No. of shares, adjusted 150.300 150.300 150.300 150.300 150.300 150.300 150.300 150.300 150.300Latest price 17.40 12.88 8.51 9.68 10.45 8.78 6.51 6.51 6.51Market capitalisation 2 614.5 1 935.6 1 279.1 1 454.9 1 570.6 1 319.6 977.7 977.7 977.7Enterprise value 4 388.4 3 524.7 1 574.8 2 172.3 2 793.6 2 617.3 2 012.2 1 842.0 1 807.1Valuation P/E 25.3 49.3 15.4 NS NS NS NS 17.2 11.9P/E before goodwill 25.3 49.3 15.4 NS NS NS NS 17.2 11.9P/CF 10.2 4.2 1.6 7.9 7.9 3.7 3.3 2.8 2.6Attrib. FCF yield [%] NS 5.9 NS NS 1.2 NS NS 9.2 8.6P/BV 2.3 1.5 0.7 0.8 0.9 0.8 0.6 0.6 0.6Enterprise value / Op CE 1.5 1.0 0.7 0.9 1.5 1.2 1.2 1.2 1.2Yield [%] 2.3 3.1 10.6 4.1 3.8 4.6 6.1 6.1 6.1EV/EBITDA, restated 9.5 9.8 2.9 23.7 9.1 9.2 4.8 4.0 3.7EV/EBITA, restated 14.4 20.0 4.7 NS 32.5 70.5 11.4 8.1 7.1EV/Sales 0.47 0.35 0.14 0.35 0.35 0.39 0.28 0.34 0.32EV/Debt-adjusted cash flow 13.7 6.6 1.9 11.9 12.7 6.9 5.6 5.0 4.6Return [%] Pre-tax RoCE 10.1 5.2 15.6 NS 4.5 1.7 10.3 15.0 17.0ROE [%] 13.4 13.7 40.5 0.4 0.6 3.8 13.9 3.4 4.9Return on equity, restated 8.9 3.0 4.4 NS NS NS 0.1 3.4 4.9


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15

AEROSPACE & DEFENCE

Finmeccanica



Price (13/12/2012) EUR4.142

Reuters: SIFI.MI Bloomberg: FNC IM

Restructuring and disposals drive the stock

Cost cutting: turnaround is impressive Aeronautics was the worst division in 2011, but the turnaround there is clearly the best of all the divisions over the 9M-12 period, even excluding exceptional items. Helicopters remains the jewel of the group and is even showing improvement vs. the already-high levels. This more than offset some disappointment in Defence Electronics (on the top line,but not on margin) and Transport (due to legacy programmes losses at Breda). As far as FCF is concerned, we believe Finmeccanica was on the right path in Q3, with a much less negative result than a year ago (EUR200m vs. EUR400m), giving some hope for the achievement of FY break-even.

Outlook: disposals above all, then restructuring Even if the company said they could not comment on any specific deal, the communiqué clearly stated that the Board of Directors had agreed tothe ongoing disposal process with binding contractual proposals to be signed by year-end. We understood during the 9M-12 conference call that this was a question of weeks and that it concerned more than one asset. Since then, it seems that the sale of Energia is more complex and political than anticipated, with the interference of the Italian Government, jeopardizing the possibility for Siemens to bid in normal conditions. The sale of the Transport division is also more complicated due to the fact that most bidders are interested in STS, not Breda. However, some announcements are still likely by the end of the year even if the deals will not be concluded by that time.

Concerning restructuring, the company remains well on track to achieve EUR440m cost savings by the end of 2013, with a significant portion (55%) targeted for 2012. This should secure the EBITA margin targeted for this fiscal year (around 6.5%). We expect the 2013 guidance to be set on the occasion of the FY-12 results presentation and show improvement compared to 2012, with an EBITA margin of around 7%.

We are positive on the name, 1/ Selected List with EUR5 TP Finmeccanica is far more dependent on its own decisions (disposals and restructuring) than on the general environment as the group is very indebted and the cost structure is too heavy. That is why Moody's has changed its negative outlook from negative to neutral, in anticipation ofshort term disposals. Based on a pure SOP and applying a high level of caution at all levels (prepayments, factoring, Law 808,…), we end up with a EUR5.4 TP, above our current TP (EUR5) based on our proprietary DCF model. This target does not include the benefits of any disposal, which may add an additional 15% valuation.




2.4

7.4

12.4

17.4

22.4

12/02 03/04 06/05 09/06 12/07 03/09 06/10 09/11 12/122.4

7.4

12.4

17.4

22.4


Shareholders Free Float 63.7%, Treasury Minister 30.2%, Capital Research & Management 2.1%, Barclays Plc 2.0%, The Income Fund 2.0%

2010 2011 2012E 2013E

P/E (x) 8.5 NS 9.0 6.0

EV/EBITDA (x) 4.5 4.2 4.4 3.2

Attrib. FCF yield (%) 7.9 NS 0.8 18.2


Yield (%) 4.8 0.0 2.4 3.6

ROCE after tax (%) 8.9 NS 6.6 7.9

EV/Capital empl. (x) 0.8 0.6 0.7 0.6

Antoine BOIVIN-CHAMPEAUX Research Analyst [email protected] (33) 1 41 89 73 25



www.cheuvreux.com

16

FY to 31/12 (Euro m) 2006 2007 2008 2009 2010 2011 2012E 2013E

Profit & Loss Account Sales 12 472.0 13 429.0 15 037.0 18 176.0 18 698.0 17 322.0 16 975.0 17 394.0% Change 13.9% 7.7% 12.0% 20.9% 2.9% -7.4% -2.0% 2.5%Staff costs (3 361.0) (3 599.0) (3 928.0) (4 607.0) (4 698.0) (4 501.0) (4 270.0) (4 400.0)Other costs (7 652.0) (8 360.0) (9 264.0) (11 326.0) (11 830.0) (11 415.0) (11 170.0) (11 237.0)EBITDA 1 459.0 1 470.0 1 845.0 2 243.0 2 170.0 1 406.0 1 535.0 1 757.0% Change 23.4% 0.8% 25.5% 21.6% -3.3% -35.2% 9.2% 14.5%Depreciation (548.0) (425.0) (540.0) (656.0) (581.0) (1 622.0) (500.0) (500.0)EBITA 911.0 1 045.0 1 305.0 1 587.0 1 589.0 (216.0) 1 035.0 1 257.0% Change 16.1% 14.7% 24.9% 21.6% 0.1% NS NS 21.4%Goodwill amortisation before OP 0.0 0.0 (40.0) (120.0) (85.0) 0.0 0.0 0.0Goodwill amortisation [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Non recurring operational items (33.0) 39.0 (55.0) (75.0) (272.0) (2 170.0) (85.0) (85.0)EBIT 878.0 1 084.0 1 210.0 1 392.0 1 232.0 (2 386.0) 950.0 1 172.0Net financial items (194.0) (7.0) (222.0) (297.0) (366.0) (440.0) (450.0) (450.0)Non recurring financial items 588.0 (230.0) (53.0) 0.0 0.0 0.0 0.0 0.0Other exceptional items 0.0 0.0 0.0 0.0 0.0 374.0 0.0 0.0Tax (243.0) (326.0) (367.0) (377.0) (309.0) 146.0 (180.0) (270.0)Associates [contribution] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Discontinuing activities (9.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation 0.0 0.0 0.0 1.0 2.0 3.0 4.0 5.0Net profit [loss] before minorities 1 020.0 521.0 621.0 718.0 557.0 (2 306.0) 320.0 452.0Dividend to preferred shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Minorities (32.0) (37.0) (50.0) (64.0) (64.0) (39.0) (50.0) (50.0)Net attributable profit [loss] 988.0 484.0 571.0 654.0 493.0 (2 345.0) 270.0 402.0Restatement [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Adj. for exceptional items (521.0) 143.0 0.0 0.0 0.0 0.0 0.0 0.0Net attrib. profit [loss], restated 467.0 627.0 611.0 773.0 576.0 (2 348.0) 266.0 397.0% Change 16.5% 34.3% -2.6% 26.5% -25.5% NS 111.3% 49.2%Cash flow 1 502.0 1 024.0 1 211.0 1 516.0 1 413.0 908.0 920.0 1 392.0Balance Sheet Shareholders' equity [group share] 5 276.0 5 329.0 5 974.0 6 351.0 6 814.0 4 301.0 4 571.0 4 914.0Minority interests 81.0 103.0 156.0 198.0 284.0 303.0 353.0 403.0Net debt [cash] 858.0 1 158.0 3 383.0 3 070.0 3 133.0 3 443.0 2 923.0 1 991.0Gearing [%] 16.0 21.3 55.2 46.9 44.1 74.8 59.4 37.4Per Share Data (at 13/12/2012) EPS before goodwill 1.11 1.48 1.39 1.34 1.00 (4.07) 0.46 0.69EPS, reported 2.34 1.14 1.29 1.13 0.85 (4.06) 0.47 0.70Goodwill per share 0.00 0.00 0.09 0.21 0.14 (0.01) (0.01) (0.01)Dividend per share 0.35 0.41 0.41 0.41 0.41 0.00 0.10 0.15Cash flow per share 3.55 2.42 2.75 2.63 2.45 1.57 1.60 2.41Book value per share 12.1 12.1 9.9 10.6 11.4 7.4 7.8 8.4No. of shares, adjusted 422.845 425.102 578.150 578.150 577.700 577.500 577.500 577.500Latest price 18.53 19.82 10.89 11.19 8.51 2.86 4.14 4.14Market capitalisation 7 836.7 8 404.7 4 810.2 6 469.5 4 915.3 1 650.8 2 392.0 2 392.0Enterprise value 9 167.8 10 739.0 9 539.4 11 127.4 9 689.9 5 958.7 6 749.0 5 612.6Valuation P/E 16.8 13.4 8.4 9.9 10.0 NS 8.8 5.9P/E before goodwill 16.8 13.4 7.9 8.4 8.5 NS 9.0 6.0P/CF 5.2 8.2 4.0 4.3 3.5 1.8 2.6 1.7Attrib. FCF yield [%] 10.3 2.8 8.9 7.9 7.9 NS 0.8 18.2P/BV 1.5 1.6 1.1 1.1 0.7 0.4 0.5 0.5Enterprise value / Op CE 1.2 1.4 0.9 1.1 0.8 0.6 0.7 0.6Yield [%] 1.9 2.1 3.8 3.7 4.8 0.0 2.4 3.6EV/EBITDA, restated 6.3 7.3 5.2 5.0 4.5 4.2 4.4 3.2EV/EBITA, restated 10.1 10.3 7.3 7.0 6.1 NS 6.5 4.5EV/Sales 0.74 0.80 0.63 0.61 0.52 0.34 0.40 0.32EV/Debt-adjusted cash flow 5.4 9.8 6.7 6.1 5.4 4.5 5.1 3.2Return [%] Pre-tax RoCE 12.1 14.1 12.6 15.5 13.9 NS 10.3 12.7ROE [%] 20.7 9.5 10.0 10.9 7.5 NS 6.1 8.5Return on equity, restated 9.3 12.5 10.0 10.9 7.5 NS 6.1 8.5


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17

BUILDING & CONSTRUCTION

Gemina


Target price (6 months) +14.3% EUR1 (0.95)

Price (13/12/2012) EUR0.875

Reuters: GEMI.MI Bloomberg: GEM IM

Now or never

Business activity – Long term concession in Roman airports Gemina is active in airport management via its 95% stake in Aeroporti di Roma (ADR). ADR operates two airports in Rome (Fiumicino hub and the smaller Ciampino) with 40.9m passengers in 2011 (down 1% in the first nine months of 2013) and a catchment area of 12m people. In 2011, it reported sales of EUR625m (52% from regulated activities), EUR271m EBITDA and a EUR15m net loss. Net debt stood at EUR1.25bn in 2011 (4.6x debt/EBITDA) and declined to EUR968m at end-September (3.7x), following the disposal of the retail business for EUR229m. Gemina is rated below investment grade by S&P due to the delayed implementation of the new tariffs. Gemina is controlled by a syndicate of shareholders controlling 43% of the capital and the main shareholder is the Benetton family, through the investment vehicle Sintonia. Thecumulative stakes of the shareholders in the syndicate (including the interests owned but not governed by the agreement) amount to 69%. Thus, the free float is around 30-31%.

Outlook –New tariffs would change the P&L radically Gemina has made significant progress over the last couple of years as it has reduced capital expenditure (waiting for the new tariffs) and undertaken a review of the business that culminated in the disposal of the retail division and should be finalised with the sale of the car park business, which we expect to occur in 2013 (we estimate EUR100-120m further cash inflow). The implementation of the new tariffs is the main catalyst: if implemented, we estimate that Gemina could increase its EBITDA from EUR260-270m to EUR420-425m, of which EUR280m from regulated activities. This would in turn lead to a jump in capex, which isexpected to reach EUR2.4-2.5bn over 10 years, more than twice the amount the airport would spend otherwise. Of this, around EUR0.9bn is expected to be employed in 2013-17 (although the amount could increase by 20-30% as negotiations are still underway).

Investment recommendation – A dual investment case We consider Gemina to be a very appealing asset thanks to the resilient traffic pattern (and despite the weak home carrier and domestic economy), the long-term concession and the potential upgrade of the infrastructure. The approval of the new tariffs would also provide an appealing return on capital at the current prices: we estimate that the IRR for an equity investor could jump from the current 8% (well below the cost of capital, in our view) to a much more appealing 20%, suggesting significant potential for rerating once the new tariffs are implemented. Gemina trades at ~8.5x 2012E EV/EBITDA after disposals, compared to a multiple of 8.2x. With the new tariffs fully implemented (2014E in our figures), the stock would trade at around 5x EV/EBITDA.Assigning a target price is very difficult: we set it at EUR1 (rounding up our previous EUR0.95), with 60% probability of new tariffs being rolled out. Shifting the probability to 80% would take our fair value to EUR1.2, while in a non-renewal scenario, we estimate the downside risk vs. the current stock price would be 35-40%.

Stock data Market capitalisation EUR1288mFree float EUR177mEnterprise value EUR2229mNo. of shares, adjusted 1473mDaily volume EUR1.43m



0.2

0.7

1.2

1.7

2.2

12/02 03/04 06/05 09/06 12/07 03/09 06/10 09/11 12/120.2

0.7

1.2

1.7

2.2


Shareholders Sintonia 26%, Toti 13%, Mediobanca 13%, Changi Airport 8%, FondiariaSAI 4%, Unicredit 3%, Generali 3%, Free float 30%.

2011 2012E 2013E 2014E

P/E (x) NS NS 22.1 10.5

EV/EBITDA (x) 7.9 8.5 6.4 4.9

Attrib. FCF yield (%) 10.4 NS NS 1.9


Yield (%) 0.0 0.0 0.0 0.0

ROCE after tax (%) NS NS 3.1 5.4

EV/Capital empl. (x) 0.7 0.8 0.8 0.7

Marco BACCAGLIO, CFA Research Analyst [email protected] (39) 02 80 62 83 20



www.cheuvreux.com

18

Gemina FY to 31/12 (Euro m) 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E

Profit & Loss Account Sales 360.1 436.2 581.7 571.0 597.5 625.3 539.2 633.5 756.2% Change -3.3% 21.1% 33.4% -1.8% 4.6% 4.7% -13.8% 17.5% 19.4%Staff costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other costs (218.4) (258.9) (388.7) (365.7) (351.5) (353.9) (277.3) (282.1) (306.7)EBITDA 141.7 177.3 193.0 205.3 246.0 271.4 261.9 351.4 449.5% Change 96.0% 25.1% 8.9% 6.4% 19.8% 10.3% -3.5% 34.2% 27.9%Depreciation (64.0) (95.6) (138.6) (142.2) (178.2) (170.8) (166.1) (177.1) (187.1)EBITA 77.7 81.7 54.4 63.1 67.8 100.6 95.8 174.3 262.4% Change 125.9% 5.1% -33.4% 16.0% 7.4% 48.4% -4.8% 81.9% 50.5%Goodwill amortisation before OP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Non recurring operational items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0EBIT 77.7 81.7 54.4 63.1 67.8 100.6 95.8 174.3 262.4Net financial items (60.7) (107.8) (101.0) (81.3) (87.5) (88.1) (78.6) (78.3) (79.5)Non recurring financial items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other exceptional items (3.9) 15.6 (0.6) (1.8) (1.8) 0.0 0.0 0.0 0.0Tax (22.8) (9.7) (6.0) (19.9) (16.4) (25.8) (18.5) (46.0) (68.6)Associates [contribution] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Discontinuing activities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Net profit [loss] before minorities (9.7) (20.1) (53.1) (39.9) (38.0) (13.4) (1.3) 50.1 114.3Dividend to preferred shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Minorities 127.1 3.8 19.2 0.8 0.7 (1.4) 8.0 8.2 8.5Net attributable profit [loss] 117.4 (16.3) (33.9) (39.1) (37.3) (14.8) 6.7 58.3 122.8Restatement [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Adj. for exceptional items (127.2) 0.0 (19.0) 14.0 0.0 0.0 0.0 0.0 0.0Net attrib. profit [loss], restated (9.8) (16.3) (52.9) (25.1) (37.3) (14.8) 6.7 58.3 122.8% Change 75.5% -66.3% NS 52.6% -48.6% 60.3% 145.3% NS 110.6%Cash flow 55.3 56.7 62.6 103.1 140.9 156.1 112.8 165.4 229.9Balance Sheet Shareholders' equity [group share] 562.9 1 773.6 1 730.8 1 685.9 1 572.1 1 557.3 1 564.0 1 622.3 1 745.1Minority interests 9.0 40.7 39.6 36.6 32.8 32.5 32.6 33.8 36.4Net debt [cash] 890.4 1 451.9 1 400.2 1 425.1 1 338.9 1 248.4 920.6 935.2 910.3Gearing [%] 155.7 80.0 79.1 82.7 83.4 78.5 57.7 56.5 51.1Per Share Data (at 13/12/2012) EPS before goodwill (0.02) (0.04) (0.04) (0.02) (0.03) (0.01) 0.01 0.04 0.08EPS, reported 0.18 (0.04) (0.02) (0.03) (0.03) (0.01) 0.01 0.04 0.08Goodwill per share 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Dividend per share 0.06 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Cash flow per share 0.09 0.14 0.04 0.07 0.10 0.11 0.08 0.11 0.16Book value per share 0.8 1.2 1.2 1.1 1.1 1.1 1.1 1.1 1.2No. of shares, adjusted 645.173 1473.000 1473.000 1473.000 1473.000 1473.000 1473.000 1473.000 1473.000Latest price 1.87 1.20 0.37 0.57 0.53 0.60 0.88 0.88 0.88Market capitalisation 1 226.1 1 767.6 540.6 839.6 782.9 878.6 1 288.1 1 288.1 1 288.1Enterprise value 2 028.1 3 290.6 1 985.3 2 306.5 2 162.3 2 147.6 2 229.3 2 243.9 2 219.0Valuation P/E NS NS NS NS NS NS NS 22.1 10.5P/E before goodwill NS NS NS NS NS NS NS 22.1 10.5P/CF 21.4 8.7 8.6 8.1 5.6 5.6 11.4 7.8 5.6Attrib. FCF yield [%] NS 0.2 NS NS 11.1 10.4 NS NS 1.9P/BV 2.3 1.0 0.3 0.5 0.5 0.6 0.8 0.8 0.7Enterprise value / Op CE 1.4 0.9 0.6 0.7 0.6 0.7 0.8 0.8 0.7Yield [%] 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0EV/EBITDA, restated 14.3 18.6 10.3 11.2 8.8 7.9 8.5 6.4 4.9EV/EBITA, restated 26.1 40.3 36.5 36.6 31.9 21.3 23.3 12.9 8.5EV/Sales 5.63 7.54 3.41 4.04 3.62 3.44 4.14 3.54 2.93EV/Debt-adjusted cash flow NS 12.3 11.2 8.6 7.3 34.7 20.9 10.9 7.9Return [%] Pre-tax RoCE 5.4 2.3 1.6 1.9 2.0 3.1 3.3 5.9 8.6ROE [%] 23.3 NS NS NS NS NS 0.4 3.7 7.3Return on equity, restated NS NS NS NS NS NS 0.4 3.7 7.3


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19

LEISURE

Lottomatica



Price (13/12/2012) EUR17.45

Reuters: LTO.MI Bloomberg: LTO IM

Gtech and Spielo engines are warming up

Business activity – A leader in the gaming space Thanks to the acquisition of Gtech in 2006, Lottomatica is the leading provider of lottery services in the world. It operates via three key divisions: (1) the Italian unit generates about EUR1.8bn sales and EUR0.7bn EBITDA, ~70% of the consolidated figures. The key contributors are the VLTs, "Lotto" and "Gratta & Vinci" (scratch and win) lottery games, each contributing around 30% of domestic profits (our forecast); (2) Gtech lotteries, with revenues of around EUR1bn (60% in US) and EUR260m yearly EBITDA (25% weight), engaged in the servicing and managing of lotteries outside Italy; and (3) the newly formed Spielo (EUR0.3bn sales and about 5% of consolidated EBITDA), which focuses on gaming machine manufacturing and maintenance, in addition to providing B2B solutions for internet gaming. Lottomatica works on a concession basis and the average term stands at ~8 years, with the two core lotteries in Italy ("Lotto" and "G&V") expiring in 2016 and 2019. Lottomatica is owned by the Italian holding company De Agostini, with a 59.8% stake.

Outlook – 2013 set to be Spielo's year After an exceptionally good 2011 shaped by the implementation of VLTs in the Italian market and by the re-launch of Lotto, 2012 continues to benefit from the progress of the Italian business (and from cost cutting). In addition, the first signs of the improved trading conditions of USlotteries (up high single digits) are clearly visible: Lottomatica has extended several contracts and secured two out of three management contracts. We believe that 2013 will be characterised by (1) a slight reduction of Italian EBITDA (-3% to EUR710-715m) vs. the record high of 2012; (2) a continuation of the recovery of Gtech's lottery unit, which we expect to grow by ~10% to EUR300-305m, supported by new management contracts and better market conditions; and (3) a significant increase in Spielo's contribution (+35-40% to EUR70-75m), boosted by the replacement cycle of the Canadian VLTs. Consolidated EBITDA could grow by 3-4%, while cash generation should increase further thanks to low capex: we estimate Lottomatica could reduce net debt by EUR0.2bn to EUR2.4bn (2.3x debt/EBITDA), after distributingEUR136m in dividends (5% yield).

Investment recommendation – More to come Despite LTO's excellent performance, we continue to rate the stock 1/Selected List as we believe that the improved outlook for Gtech andSpielo is not fully factored into stock multiples. Moreover, we believe that fears about the potential fall of Italian business margins are overdone, given the potential cost cutting and consolidation in the industry. The reinforcement of the financial structure (also compared to peers) represents a strength for Lottomatica as more lotteries plan to outsource or privatise their business. Trading at <6x EV/EBITDA (vs. 6.5-7x historically) and offering >10% equity FCF (of which around half to be distributed in dividends), we still consider the stock a compelling buying opportunity.



Absolute perf. 3.1% 3.1% 60.2% Relative perf. -0.2% 5.2% 49.5%

7.9

12.9

17.9

22.9

27.9

32.9

12/02 03/04 06/05 09/06 12/07 03/09 06/10 09/117.9

12.9

17.9

22.9

27.9

32.9


Shareholders De Agostini 59.7%, Free Float 27.6%, Mediobanca 12.7%

2011 2012E 2013E 2014E

P/E (x) 9.6 12.0 10.9 9.9

EV/EBITDA (x) 5.7 5.8 5.4 5.0

Attrib. FCF yield (%) 14.1 10.3 12.0 12.8


Yield (%) 6.1 4.5 5.4 6.6

ROCE after tax (%) 5.5 6.2 6.7 7.3

EV/Capital empl. (x) 1.0 1.1 1.0 1.0

Marco BACCAGLIO, CFA Research Analyst [email protected] (39) 02 80 62 83 20



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20

Lottomatica FY to 31/12 (Euro m) 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E

Profit & Loss Account Sales 938.8 1 661.4 2 058.9 2 176.9 2 314.0 2 973.7 3 064.1 3 163.8 3 263.8% Change 61.1% 77.0% 23.9% 5.7% 6.3% 28.5% 3.0% 3.3% 3.2%Staff costs (194.9) (369.3) (410.5) (428.3) (450.4) (491.2) (501.0) (511.0) (521.3)Other costs (335.3) (590.6) (892.4) (964.9) (1 051.3) (1 512.1) (1 542.8) (1 599.9) (1 656.8)EBITDA 408.6 701.5 756.0 783.7 812.3 970.4 1 020.3 1 052.8 1 085.8% Change 53.6% 71.7% 7.8% 3.7% 3.7% 19.5% 5.1% 3.2% 3.1%Depreciation (104.1) (306.6) (311.6) (331.0) (364.1) (428.6) (436.6) (431.6) (431.6)EBITA 304.5 394.9 444.4 452.7 448.2 541.8 583.7 621.2 654.2% Change 43.4% 29.7% 12.5% 1.9% -1.0% 20.9% 7.7% 6.4% 5.3%Goodwill amortisation before OP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation [impairment test] 0.0 0.0 (100.8) (76.0) (48.4) 4.0 0.0 0.0 0.0Non recurring operational items (85.2) 0.0 (3.7) (10.3) (13.8) (6.5) 0.0 0.0 0.0EBIT 219.3 394.9 340.0 366.4 386.0 539.3 583.7 621.2 654.2Net financial items (64.0) (180.9) (166.6) (178.2) (272.5) (173.5) (168.5) (164.5) (155.6)Non recurring financial items (121.5) (17.6) 12.0 0.0 0.0 0.0 0.0 0.0 0.0Other exceptional items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Tax (32.9) (90.5) (47.5) (75.8) (68.2) (160.1) (174.2) (190.9) (202.6)Associates [contribution] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Discontinuing activities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Net profit [loss] before minorities 0.9 106.0 137.9 112.4 45.4 205.7 240.9 265.9 296.0Dividend to preferred shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Minorities (7.4) (31.9) (44.1) (44.2) (44.9) (32.6) (29.0) (29.0) (32.0)Net attributable profit [loss] (6.6) 74.1 93.8 68.2 0.5 173.1 211.9 236.9 264.0Restatement [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Adj. for exceptional items 138.6 0.0 0.0 0.0 158.5 35.9 39.0 39.0 39.0Net attrib. profit [loss], restated 132.0 74.1 93.8 68.2 159.0 209.0 250.9 275.9 303.0% Change 15.6% -43.9% 26.7% -27.3% 133.3% 31.4% 20.1% 9.9% 9.8%Cash flow 233.9 412.6 449.5 471.1 451.9 721.6 668.5 688.5 695.6Balance Sheet Shareholders' equity [group share] 1 856.1 1 688.1 1 609.0 1 837.7 1 914.4 2 187.0 2 276.8 2 378.5 2 481.0Minority interests 17.5 45.1 58.4 59.1 444.5 422.0 402.0 382.0 398.5Net debt [cash] 2 742.2 2 229.0 2 713.5 2 423.0 2 975.0 2 741.0 2 592.8 2 405.0 2 172.0Gearing [%] 146.4 128.6 162.7 127.7 126.1 105.1 96.8 87.1 75.4Per Share Data (at 13/12/2012) EPS before goodwill 1.03 0.48 0.63 0.40 0.94 1.22 1.46 1.60 1.76EPS, reported (0.05) 0.48 0.62 0.40 0.00 1.01 1.23 1.38 1.54Goodwill per share 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Dividend per share 0.79 0.83 0.68 0.74 0.00 0.71 0.79 0.94 1.15Cash flow per share 1.82 2.67 3.03 2.79 2.68 4.20 3.89 4.00 4.04Book value per share 11.6 10.1 9.9 9.9 11.1 12.0 12.4 12.9 13.3No. of shares, adjusted 149.640 154.590 152.290 172.020 172.020 172.020 172.020 172.020 172.020Latest price 30.90 24.55 17.26 13.75 9.09 11.61 17.45 17.45 17.45Market capitalisation 4 623.9 3 795.2 2 627.0 2 365.3 1 563.7 1 997.2 3 001.7 3 001.7 3 001.7Enterprise value 8 399.7 6 853.4 6 226.4 5 561.1 5 225.6 5 516.9 5 874.1 5 671.0 5 447.6Valuation P/E 30.1 51.3 27.3 34.0 9.6 9.6 12.0 10.9 9.9P/E before goodwill 30.1 51.3 27.3 34.0 9.6 9.6 12.0 10.9 9.9P/CF 17.0 9.2 5.7 4.9 3.4 2.8 4.5 4.4 4.3Attrib. FCF yield [%] 0.7 0.6 7.2 4.1 NS 14.1 10.3 12.0 12.8P/BV 2.7 2.4 1.7 1.4 0.8 1.0 1.4 1.4 1.3Enterprise value / Op CE 2.2 1.6 1.3 1.2 1.0 1.0 1.1 1.0 1.0Yield [%] 2.6 3.4 3.9 5.4 0.0 6.1 4.5 5.4 6.6EV/EBITDA, restated 20.6 9.8 8.2 7.1 6.4 5.7 5.8 5.4 5.0EV/EBITA, restated 27.6 17.4 14.0 12.3 11.7 10.2 10.1 9.1 8.3EV/Sales 8.95 4.13 3.02 2.56 2.26 1.86 1.92 1.79 1.67EV/Debt-adjusted cash flow 31.4 11.9 9.4 8.3 8.1 6.5 7.4 6.9 6.6Return [%] Pre-tax RoCE 8.1 9.3 9.6 10.1 8.2 9.8 10.6 11.5 12.3ROE [%] NS 4.5 6.0 3.8 0.0 8.2 9.8 10.5 11.2Return on equity, restated 7.4 4.5 6.0 3.8 8.7 10.0 11.7 12.3 13.0


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21

UTILITIES

TERNA



Price (10/12/2012) EUR2.85

Reuters: TRN.MI Bloomberg: TRN IM

A safe dividend play

Business activity – Good regulation albeit higher taxation Terna is the domestic high voltage grid owner and operator with >90% of its cash flow deriving from regulated businesses and almost fully decoupled from volumes (<4% of revenues linked to volumes). The Italian energy networks have been fully regulated by the energy authority since 2001. The regulatory framework is similar to that of the UK, i.e. based on the regulatory asset base (RAB) increased in accordance with inflation every year. Revenues are set assuming allowed opex and depreciation and a 'fair' return on capital based on a capital asset pricing model that takes into account the Italian 10Y risk free rate. Regulation has been pretty stable with the exception of the introduction of an extra tax (the so-called Robin Hood tax) in mid 2011 as part of the national austerity measures. According to our estimates, net debt/RAB is set to stay in the region of 55%, i.e. at a level coherent with the company's A- credit rating (Terna enjoys a one notch uplift vs. the sovereign).

Outlook – Regulatory review done and no refinancing risk Terna has tariffs set until 2015, while the allowed return (currently at 7.4%) will be updated in accordance with the Italian risk free rate at the end of next year. Moreover, the company has locked in a low cost of debt (<3% this year and at 3.5% in the next 4Y) with no refinancing needs until 2015. Last year, management announced a EUR4.1bn capex plan and is looking for 7% annual RAB growth. The company has also identified some EUR1.8bn additional investments in storage, engineering and in the Balkans that could further boost growth. Storage is set to be regulated (with incentives yet to be defined) and the Ministry of Development has identified some 75MW to be built (out of Terna's target of 240MW), which hopefully will be included in the new business plan to be presented at the beginning of 2013. As for 2013, we foresee 5% EBIT growth y-o-y and net profit broadly flat y-o-y (prudently assuming a step-up in the cost of debt).

Investment recommendation – Appealing return We recently added Terna to the Italian Selected List as we see it as one of the safest plays in both Italy and the sector. In the current climate of political uncertainty, having already passed the regulatory review is a clear plus. The stock offers 7% organic growth coupled with a >6.5% DY, which is quite attractive. Terna trades broadly in line with 2013E RAB, while in our view, a 10% premium would be justified by asset growth and the fact that the return on new investments (>7% IRR) exceeds the cost of capital (we estimate a 6.5% WACC). The introduction of the Robin Hood Tax somewhat undermined investors' confidence, but it is worth mentioning that at the end of last year, Terna underwent the regulatory review, which was positive overall and partly offset the negative impact of the extra tax.

Stock data Market capitalisation EUR5700mFree float EUR3705mEnterprise value EUR11587mNo. of shares, adjusted 2000mDaily volume EUR25.78m


Absolute perf. 0.6% -0.9% 7.2% Relative perf. -0.4% 3.4% 7.2%

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

06/04 07/05 08/06 08/07 09/08 10/09 11/10 11/111.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5


Shareholders Free Float 65.0%, Cassa Depositi E Prestiti 30.0%, Enel 5.0%

2011 2012E 2013E 2014E

P/E (x) 15.0 12.9 12.7 11.3

EV/EBITDA (x) 8.2 8.5 8.6 8.2

Attrib. FCF yield (%) 1.1 NS NS 1.0


Yield (%) 8.1 6.7 6.7 6.8

ROCE after tax (%) 4.5 5.7 5.6 5.8

EV/Capital empl. (x) 1.2 1.2 1.2 1.2

Francesca PEZZOLI Research Analyst [email protected] (39) 02 80 62 83 80



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22

TERNA FY to 31/12 (Euro m) 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E

Profit & Loss Account Sales 1 307.8 1 348.0 1 396.0 1 360.7 1 589.0 1 635.0 1 775.4 1 834.2 1 934.4% Change 20.3% 3.1% 3.6% -2.5% 16.8% 2.9% 8.6% 3.3% 5.5%Staff costs (214.0) (194.0) (211.0) (181.6) (200.0) (201.8) (203.7) (205.5) (190.0)Other costs (193.9) (176.0) (190.0) (175.9) (214.0) (203.2) (211.3) (211.6) (228.0)EBITDA 899.9 978.0 995.0 1 003.2 1 175.0 1 230.0 1 360.4 1 417.1 1 516.4% Change 24.6% 8.7% 1.7% 0.8% 17.1% 4.7% 10.6% 4.2% 7.0%Depreciation (212.4) (255.0) (280.6) (308.8) (361.0) (394.0) (422.0) (434.2) (449.2)EBITA 687.5 723.0 714.4 694.4 814.0 861.0 938.4 982.9 1 067.2% Change 25.7% 5.2% -1.2% -2.8% 17.2% 5.8% 9.0% 4.7% 8.6%Goodwill amortisation before OP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Non recurring operational items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0EBIT 687.5 723.0 714.4 694.4 814.0 836.0 938.4 982.9 1 067.2Net financial items (100.0) (117.0) (180.0) (148.2) (103.0) (121.0) (120.0) (159.0) (195.0)Non recurring financial items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other exceptional items 31.0 0.0 0.0 417.0 0.0 0.0 0.0 0.0 0.0Tax (249.0) (173.0) (192.6) (192.1) (245.3) (388.0) (376.5) (374.9) (366.3)Associates [contribution] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Discontinuing activities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Goodwill amortisation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Net profit [loss] before minorities 369.5 433.0 341.8 771.1 612.7 440.0 441.9 449.0 505.9Dividend to preferred shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Minorities (3.5) (19.0) (14.0) 0.0 0.0 0.0 0.0 0.0 0.0Net attributable profit [loss] 366.0 414.1 327.8 771.1 612.7 440.0 441.9 449.0 505.9Restatement [impairment test] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Adj. for exceptional items (72.0) (67.0) 0.0 (417.0) (147.0) (93.0) 0.0 0.0 0.0Net attrib. profit [loss], restated 294.0 347.1 327.8 354.1 465.7 347.0 441.9 449.0 505.9% Change -0.9% 18.0% -5.5% 8.0% 31.5% -25.5% 27.4% 1.6% 12.7%Cash flow 578.4 669.1 608.4 662.9 826.7 859.0 863.9 883.2 955.1Balance Sheet Shareholders' equity [group share] 2 009.0 2 162.0 2 076.0 2 501.0 2 707.5 2 727.7 2 749.8 2 818.8 2 944.7Minority interests (110.0) (112.0) (87.0) 0.0 0.0 0.0 0.0 0.0 0.0Net debt [cash] 2 285.0 2 650.0 3 366.0 3 757.7 4 722.2 5 123.0 5 908.8 6 475.6 6 800.5Gearing [%] 120.3 129.3 169.2 150.2 174.4 187.8 214.9 229.7 230.9Per Share Data (at 10/12/2012) EPS before goodwill 0.15 0.17 0.16 0.18 0.23 0.17 0.22 0.23 0.25EPS, reported 0.18 0.21 0.16 0.39 0.31 0.22 0.22 0.23 0.25Goodwill per share 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Dividend per share 0.14 0.15 0.16 0.19 0.21 0.21 0.19 0.19 0.20Cash flow per share 0.29 0.34 0.30 0.33 0.41 0.43 0.43 0.44 0.48Book value per share 0.9 0.9 0.9 1.1 1.1 1.2 1.2 1.2 1.3No. of shares, adjusted 2000.000 2000.000 2000.000 2000.000 2000.000 2000.000 2000.000 2000.000 2000.000Latest price 2.57 2.76 2.34 3.00 3.16 2.60 2.85 2.85 2.85Market capitalisation 5 140.0 5 516.0 4 670.0 6 000.0 6 320.0 5 208.0 5 700.0 5 700.0 5 700.0Enterprise value 7 647.4 8 364.8 7 999.0 9 736.7 11 021.2 10 310.0 11 587.8 12 154.6 12 479.5Valuation P/E 17.5 15.9 14.2 16.9 13.6 15.0 12.9 12.7 11.3P/E before goodwill 17.5 15.9 14.2 16.9 13.6 15.0 12.9 12.7 11.3P/CF 8.9 8.2 7.7 9.1 7.6 6.1 6.6 6.5 6.0Attrib. FCF yield [%] 9.0 NS NS 0.0 NS 1.1 NS NS 1.0P/BV 3.0 3.0 2.7 2.8 2.8 2.3 2.4 2.3 2.2Enterprise value / Op CE 1.6 1.6 1.3 1.4 1.3 1.2 1.2 1.2 1.2Yield [%] 5.4 5.5 6.8 6.3 6.6 8.1 6.7 6.7 6.8EV/EBITDA, restated 8.5 8.6 8.0 9.7 9.4 8.2 8.5 8.6 8.2EV/EBITA, restated 11.1 11.6 11.2 14.0 13.5 12.0 12.3 12.4 11.7EV/Sales 5.85 6.21 5.73 7.16 6.94 6.31 6.53 6.63 6.45EV/Debt-adjusted cash flow 11.6 10.8 11.1 12.5 12.3 11.3 12.4 12.5 11.7Return [%] Pre-tax RoCE 14.0 13.7 12.0 9.8 9.9 9.9 9.9 9.7 10.1ROE [%] 20.0 21.2 17.1 36.5 25.5 17.5 17.5 17.3 18.8Return on equity, restated 15.8 17.5 17.1 15.2 18.8 13.6 17.5 17.3 18.8


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