Disruptive tech, strong positioning, autonomous roadmap; Neutraldoc.xueqiu.com/1481284bee9343fd2759b09b.pdf · 2014-08-26 · Investment Profile Low High Percentile 20th 40th 60th

August 26, 2014

INITIATION Mobileye N.V. (MBLY)

Neutral Equity Research

Disruptive tech, strong positioning, autonomous roadmap; Neutral

Investment view

We initiate coverage of Mobileye with a Neutral rating and 12-month price

target of $45 (18% upside). Mobileye offers exposure to a highly attractive,

rapidly expanding market (Advanced Driver Assistance Systems - ADAS),

alongside an ability to capitalise as a low-cost disruptor with compelling

technology. Mobileye has one of the strongest industry positioning profiles

in EU Tech. We forecast top-line growth of 38% in 2013-20, while

Mobileye’s asset-light model should allow EBITDA margin expansion over

2013-20 from 37% to 60%, and a net income CAGR of 44%. We are Neutral

given only 18% upside following share price strength post IPO.

Core drivers of growth

We expect strong end-market growth of front-facing, camera-based ADAS

driven by new car ratings regimes. We believe Mobileye’s technological

superiority will allow it to maintain its dominant share. We expect mix to

shift towards higher-end functionality, leading to higher ASPs. Semi-

autonomous driving will account for c.25% of extra revenues out to 2020.

Risks to the investment case

Risks to our view and price target include: (1) market share erosion; (2)

faster/slower ASP erosion; (3) investment needs; and (4) slower/faster

than expected ADAS market penetration.

Valuation

Our 12-month price target is $45, based on 1.3x 2016E PEG (70%

weighting), equating to 68x P/E, discounted one year, plus a 30% weighting

for M&A (13x 2020E EV/Sales), given MBLY’s strategic importance as a

potentially game-changing provider of autonomous driving. Given limited

upside vs. EU Tech, we adopt a Neutral stance.

Industry context

We see ADAS as one of the highest growth areas in automotive tech.

INVESTMENT LIST MEMBERSHIP

Neutral

Coverage View: Neutral

Alexander Duval +44(20)7552-2995 [email protected] Goldman Sachs International Goldman Sachs does and seeks to do business with companies

covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

The Goldman Sachs Group, Inc. Global Investment Research

Growth

Returns *

Multiple

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Investment Profile

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Percentile 20th 40th 60th 80th 100th

* Returns = Return on Capital For a complete description of the

investment profile measures please refer to

the disclosure section of this document.

Mobileye N.V. (MBLY)

Europe Technology Peer Group Average

Key data Current

Price ($) 38.19

12 month price target ($) 45.00

Upside/(downside) (%) 18

Market cap ($ mn) 9,165.6

Enterprise value ($ mn) 8,829.9

12/13 12/14E 12/15E 12/16E

Revenue ($ mn) 81.2 131.0 221.0 334.1

EBIT ($ mn) 28.3 46.8 104.2 180.2

EPS ($) -- 0.18 0.40 0.68

EV/EBITDA (X) -- NM 81.9 47.1

P/E (X) -- 216.0 96.5 55.8

Dividend yield (%) NM 0.0 0.0 0.0

FCF yield (%) -- 0.2 0.8 1.5

CROCI (%) 352.0 196.7 220.4 251.1

CROCI/WACC (X) -- -- -- --

EV/GCI (X) -- 253.8 157.1 109.7

Price performance chart

32

33

34

35

36

37

38

39

May-14 Jun-14 Jul-14

1,900

1,920

1,940

1,960

1,980

2,000

2,020

2,040

Mobileye N.V. (L) S&P 500 (R)

Share price performance (%) 3 month 6 month 12 monthAbsolute -- -- --

Rel. to S&P 500 -- -- --

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 8/25/2014 close.

August 26, 2014 Mobileye N.V. (MBLY)

Goldman Sachs Global Investment Research 2

Mobileye N.V.: Summary Financials

Analyst Contributors

Alexander Duval

[email protected]

Profit model ($ mn) 12/13 12/14E 12/15E 12/16E Balance sheet ($ mn) 12/13 12/14E 12/15E 12/16E

Total revenue 81.2 131.0 221.0 334.1 Cash & equivalents 124.4 335.7 407.0 545.3

Operating costs (32.9) (51.0) (79.1) (107.3) Accounts receivable 12.5 18.7 31.5 46.0

R&D (20.0) (33.2) (37.7) (46.6) Inventory 11.4 23.2 36.7 50.6

Lease payments 0.0 0.0 0.0 0.0 Other current assets 7.0 7.0 7.0 7.0

Other operating profit/(expense) 0.0 0.0 0.0 0.0 Total current assets 155.2 384.7 482.2 648.9

EBITDA 30.0 49.0 106.9 182.9 Net PP&E 5.7 7.4 9.0 11.1

Depreciation & amortisation (1.7) (2.2) (2.7) (2.7) Net intangibles 0.0 0.0 0.0 0.0

EBIT 28.3 46.8 104.2 180.2 Total investments 0.0 0.0 0.0 0.0

Net interest income/(expense) 2.4 1.3 1.3 2.4 Other long-term assets 7.3 9.6 12.4 15.6

Associates 0.0 0.0 0.0 0.0 Total assets 168.2 401.7 503.7 675.7

Profit/(loss) on disposals 0.0 0.0 0.0 0.0

Others (recurring) 0.0 0.0 0.0 0.0 Accounts payable 11.1 5.5 9.3 13.1

Pretax profits 30.8 48.1 105.5 182.6 Short-term debt 0.0 0.0 0.0 0.0

Income tax 2.3 (5.6) (10.6) (18.3) Other current liabilities 13.1 16.0 19.3 23.1

Tax rate (%) (7.4) 11.7 10.0 10.0 Total current liabilities 24.2 21.5 28.5 36.2

Minorities 0.0 0.0 0.0 0.0 Long-term debt 0.0 0.0 0.0 0.0

Preferred dividends 0.0 0.0 0.0 0.0 Other long-term liabilities 1.4 1.4 1.4 1.4

Net income (pre-exceptionals) 33.0 42.4 95.0 164.4 Total long-term liabilities 1.4 1.4 1.4 1.4

Other non-recurring items post tax 0.0 0.0 0.0 0.0 Total liabilities 25.6 22.9 29.9 37.6

Net income 33.0 42.4 95.0 164.4

EPS (underlying) ($) -- 0.18 0.40 0.68 Preferred shares 0.0 0.0 0.0 0.0

EPS (basic, reported) ($) NM 0.18 0.40 0.68 Total common equity 142.6 378.8 473.7 638.1

Weighted shares outstanding (mn) 0.0 240.0 240.0 240.0 Minority interest 0.0 0.0 0.0 0.0

Common dividends declared -- 0.0 0.0 0.0 Total liabilities & equity 168.2 401.7 503.7 675.7

DPS ($) 0.00 0.00 0.00 0.00 Capitalised leases 0.0 0.0 0.0 0.0

Dividend payout ratio (%) NM 0.0 0.0 0.0 Capital employed 142.6 378.8 473.7 638.1

Dividend cover (X) NM NM NM NM

Growth & margins (%) 12/13 12/14E 12/15E 12/16E Adj for unfunded pensions & GW 0.0 0.0 0.0 0.0

Revenue growth 101.7 61.2 68.8 51.2 Adj capital employed 142.6 378.8 473.7 638.1

EBITDA growth 1,973.9 63.1 118.2 71.1 Gross cash invested 12.4 34.8 55.7 78.6

EBIT growth NM 65.0 123.0 72.9

Net income growth NM 28.4 123.9 73.0 Ratios 12/13 12/14E 12/15E 12/16E

EPS growth -- -- 123.9 73.0 CROCI (%) 352.0 196.7 220.4 251.1

DPS growth -- -- -- -- CROCI/WACC (X) -- -- -- --

EBITDA margin 37.0 37.4 48.4 54.7 ROIC (%) 26.4 15.8 22.0 29.2

EBIT margin 34.9 35.7 47.2 53.9 ROIC/WACC (X) -- -- -- --

ROA (%) 23.7 14.5 20.7 27.5

Cash flow statement ($ mn) 12/13 12/14E 12/15E 12/16E WACC (%) -- -- -- --

Net income 33.0 42.4 95.0 164.4 Inventory days 46.3 48.2 49.5 47.7

D&A add-back (incl. ESO) 1.7 2.2 2.7 2.7 Asset turnover (X) 15.9 20.0 26.9 33.1

Minority interest add-back 0.0 0.0 0.0 0.0 Net debt/equity (%) (87.2) (88.6) (85.9) (85.5)

Net (inc)/dec working capital (7.2) (23.6) (22.6) (24.6) EBITDA interest cover (X) (12.3) (37.7) (82.2) (76.2)

Other operating cash flow 0.7 2.9 3.3 3.8

Cash flow from operations 28.2 23.9 78.4 146.3 Valuation 12/13 12/14E 12/15E 12/16E

EV/sales (X) -- 67.4 39.6 25.8

Capital expenditures (2.6) (3.9) (4.3) (4.8) EV/EBITDAR (X) -- 180.3 81.9 47.1

Acquisitions 0.0 0.0 0.0 0.0 EV/EBITDA (X) -- 180.3 81.9 47.1

Divestitures 0.0 0.0 0.0 0.0 EV/EBIT (X) -- 188.9 84.0 47.8

Others (6.3) (2.3) (2.8) (3.2) P/E (X) -- 216.0 96.5 55.8

Cash flow from investing (8.9) (6.2) (7.1) (8.0) Dividend yield (%) NM 0.0 0.0 0.0

FCF yield (%) -- 0.2 0.8 1.5

Dividends paid (common & pref) 0.0 0.0 0.0 0.0 EV/GCI (X) -- 253.8 157.1 109.7

Inc/(dec) in debt 0.0 0.0 0.0 0.0 EV/adj. capital employed (X) -- 205.2 131.2 92.9

Other financing cash flows 38.0 193.7 0.0 0.0 Price/book (X) -- NM 19.3 14.4

Cash flow from financing 38.0 193.7 0.0 0.0

Total cash flow 57.6 211.4 71.2 138.3 Note: Ratios are adjusted for leases where appropriate. Only separately disclosed where significant and ongoing.

Capex/D&A (%) 153.0 175.2 163.1 178.6

Reinvestment rate (%) 7.3 8.2 4.3 2.8

Cash flow cover of dividends (X) NM NM NM NM Note: Last actual year may include reported and estimated data.

Free cash flow cover of dividends (X) -- -- -- -- Source: Company data, Goldman Sachs Research estimates.



Contents

Overview: Disruptive technology and top-quartile positioning

support rapid profit growth and strategic asset status 4

Mobileye is in the top quartile on our industry positioning analysis 6

Technological approach and business model allows for a high degree of scaleability,

alongside strong OEM reach and visibility 8

We see robust growth in the front-facing ADAS camera market,

driven by penetration gains as a result of car ratings regimes 13

Set to maintain strong share in front-facing, camera-based ADAS given technology edge,

compelling price and barriers to entry 15

We expect OEM segment ASPs to expand on positive mix evolution to higher-value products 20

We forecast 38% revenue growth to 2020 22

Efficient operating model allows for strong expansion in EBITDA/FCF margins;

we see a 44% net income CAGR to 2020 26

Semi-autonomous can drive 25% of revenues out to 2020E,

and we see fully autonomous suggesting potential strategic asset status 30

Valuation: Our 12-month price target is $45; Neutral on limited upside following strong performance since listing 34

Selected management biographies 43

Key risks 44

Financials 45

Appendix 47

Disclosure Appendix 48

Prices in the body of this report are based on the market close of August 22, 2014



Overview: Disruptive technology and top-quartile positioning

support rapid profit growth and strategic asset status

We initiate coverage of Mobileye with a Neutral rating and 12-month price target of

$45, implying 18% upside, following the 50% rise in the share price post IPO. We

believe Mobileye offers exposure to a highly attractive and rapidly expanding market

(Advanced Driver Assistance Systems – ADAS), with compelling drivers (automotive

star ratings regimes, consumer pull), alongside a strong ability to capitalise as a low-

cost disruptor based on a robust technological edge. Mobileye ranks as having one of

the strongest industry positioning profiles in our EU Tech coverage. As a result, we

forecast top-line growth of 38% in 2013-20, while Mobileye’s asset-light and software-

centric business model allows for EBITDA margin expansion from 37% to 60%

between 2013 and 2020E; this drives a net income CAGR of 56%/49%/44% out to

2018/19/20E, in the top decile of our coverage. Our 12-month price target implies 18%

upside, based on our valuation method of 1.3x 2016E PEG (70% weighting; based on

54% net income CAGR in 2014-19E), equating to 68x P/E (discounted one year),

alongside a 30% M&A weighting (13x 2020E EV/Sales), reflecting the company’s

strategic importance as a potentially game-changing provider of autonomous driving

solutions that could offer scope to harvest a very sizeable revenue pool.

Key elements of the investment thesis:

Strong end-market growth of front-facing camera-based ADAS solutions, driven by

star ratings regimes and consumer pull factors

We believe that the market for front-facing camera based Advanced Driver Assistance

Systems (ADAS), which perform detailed interpretations of the visual field to anticipate

possible collisions and warn the driver (or prompt the car to manoeuvre), will see market

units grow at a 42% CAGR out to 2020. On our forecasts, front-facing camera-based ADAS

penetration of yearly vehicle production will reach c.50% in Europe by 2020 (with other

regions following later). We see the European regime for star ratings for vehicles, the

European New Car Approval Program (Euro NCAP), which over time will directly link

vehicle star ratings to certain ADAS functionalities, as a key catalyst. While there are clearly

other technological approaches to ADAS, such as radar, we note the inclusion in Euro

NCAP of functions such as Pedestrian Automatic Emergency Braking (Pedestrian AEB),

which we think are harder to deliver with certain non-camera-based technologies.

Moreover, we see consumer pull-factors as having a meaningful impact on adoption,

alongside competition between automakers (OEMs).

Technological superiority and disruptive cost proposition allow for dominant and

sustainable market share in the directly addressable market

We estimate Mobileye has a c.65% share of the directly relevant front-facing camera-based

ADAS market and we est. a similar share in 2020. In our view, Mobileye’s monocular

approach (system based on one camera) has advantages in terms of accuracy, which

position it well versus other vision-based approaches, as far as satisfying Euro NCAP

requirements are concerned, especially as the scheme evolves to incorporate ever more

sophisticated functionality. Further, we see significant cost benefits to the solution versus

competing approaches, which serve to strengthen its competitive position. Finally, we see

large barriers to entry including lengthy validation/testing required for each solution.



Evolution of mix towards more sophisticated offering (e.g. semi-autonomous driving)

allows for rising blended ASPs

Mobileye’s core OEM business (84% of group revenues in 2014E; 89% by 2020E) involves it

selling chips to tier one auto suppliers, which contain its software for interpreting images

coming from a camera in the vehicle. As a result, the average selling price (ASP) of such

chips is a key determinant of both top-line growth and gross margins.

We forecast the blended ASPs of chips that Mobileye ships to tier one auto suppliers rising

at a 1% CAGR out to 2020. While we expect underlying ASP declines to accelerate, we think

blended ASPs will rise. The company sells bundles of different functions at various prices

and we expect a progressive mix shift towards higher-end bundles.

Efficient operating model allows for strong expansion in EBITDA/FCF margins

We see the business model as highly scalable, allowing for sales to grow faster than opex

as volumes ramp (38%/23% CAGR respectively out to 2020E). While we believe the large

magnitude of the addressable opportunity will lead to R&D growing at a double-digit rate,

we nevertheless expect R&D/sales to fall from 25% in 2013 to 13% in 2020. Moreover, given

that Mobileye is able to address a broad range of OEMs in multiple geographies by selling

to a handful of tier one auto suppliers (in its core OEM segment), we expect Sales &

Marketing expenses to fall from 8% of sales in 2013 to 3% in 2020

As a result, we estimate EBITDA margins expand from 37% in 2013 to 60% by 2020E. We

see no need for significant capital investment as Mobileye’s OEM segment is fabless, and

hence see FCF margins expanding from 32% to 52% over the same period.

We expect semi-autonomous driving to contribute c.25% of group sales growth out

to 2020E, with Mobileye’s autonomous driving roadmap potentially according it

strategic status expect We expect semi-autonomous driving to contribute c.25% of

incremental OEM revenue growth between 2013 and 2020, given that Mobileye has design

wins from two OEMs to launch hands-free capable driving at highway speeds (and in

congested traffic in 2016), and is in development programs with six further OEMs for

potential launch in 2017/18. We expect demand for semi-autonomous driving to be driven

by consumer pull factors and intensifying competitive dynamics among OEMs (once the

first OEMs launch).

In our view, Mobileye has significant strategic importance as a potentially game-

changing technology provider of advanced and fully autonomous driving technology

in the longer term. We see Mobileye’s disruptive potential in advanced and fully

autonomous driving stemming from its low-cost approach, allowing for potential mass

market applicability. Given the potential higher value-add of fully autonomous functionality

versus current ADAS bundles, chips could sell for a multiple of those currently provided for

ADAS, suggesting potential to meaningfully expand the addressable market, and

supporting our view that Mobileye could be viewed as a potential M&A target.

Key risks

Competition (and/or technological substitution) could lead to market share erosion.

Underlying ASPs could erode at a faster/slower pace than expected, causing blended

ASP declines/faster ASP increases.

The ADAS penetration ramp could play out more slowly/faster than we expect.

Incremental investment requirements in the face of new entrants, or intensification of

efforts by existing large competitors, could affect EBITDA/FCF margins.

Automotive sector growth could slow/accelerate, impacting unit volumes.

Faster/slower than expected ramp of semi-autonomous cars.



Mobileye is in the top quartile on our industry positioning analysis

We see Mobileye as firmly in the top quartile on our industry positioning framework for

European Technology assets. Our industry positioning framework helps us to identify

companies well positioned to sustain high returns on capital relative to peers. It combines

financial analysis of companies’ returns with the structural drivers of those returns

(‘industry positioning’).

We capture the industry drivers for the sector through industry positioning metrics, as laid

out in Exhibit 2:

Segment growth: We weight each company’s segment exposures and blended

expected revenue growth based on industry forecasts that determine the

attractiveness of the categories. Based on our estimates of the broader camera-based

ADAS space, we estimate a c.45% blended market growth rate over 2013-18.

Relative market share: We analyze companies’ market shares in each of the

categories/segments in which they participate to determine potential scale and pricing

power, and whether these segments are concentrated or fragmented. We calculate a

relative market share score, which is defined as the company’s market share relative

to that of the top three players in the segment.

Expected company organic revenue growth: We use our forecasts of revenue

growth for each company over 2013-18, as these capture factors such as any expected

market share gains/losses or company-specific fundamental strengths/weaknesses.

Risk adjustment: We measure risk associated with each company’s ability to

maintain its market position and returns, as well as deliver on growth. The two

metrics we use for tech hardware companies are:

o R&D to Sales, to determine the % of sales invested by a company in its future

growth.

o Productivity Risk Factor, to determine the potential efficiency of R&D

investments, to assess risks to the delivery of growth.

Mobileye ranks in the 88th percentile of our European technology coverage industry

positioning framework, placing it in the top quartile. The company scores especially well

on the segment growth metrics, ranking in the 96th percentile vs. our coverage, given the

rapid penetration increases we expect in the market over the coming years. The company

scores in the 70th percentile within the “Positioning percentile” category, which

incorporates market share in its broader addressable market, while its overall total benefits

from its organic revenue growth score – the highest in our coverage.



Exhibit 1: Mobileye has one of the highest scores on our industry positioning framework European Technology industry positioning framework

Source: IDC, Gartner, Company data, Goldman Sachs Global Investment Research

Exhibit 2: Market positioning, growth rates and risk assessment factors

European Technology industry positioning framework

Source: IDC, Gartner, Company data, Goldman Sachs Global Investment Research

Ticker Company IP Quartile PercentileASML.AS ASML Holding NV Q1 IP 100%ARM.L ARM Holdings plc Q1 IP 96%DAST.PA Dassault Systemes Q1 IP 92%MBLY Mobileye N.V. Q1 IP 88%WDIG.DE Wirecard Q1 IP 85%SAPG.DE SAP (Ordinary Share) Q1 IP 81%GTO.AS Gemalto Q1 IP 77%

AVV.L Aveva Q2 IP 74%OPERA.OL Opera Software Q2 IP 70%MONI.L Monitise Q2 IP 66%HEXAb.ST Hexagon AB Q2 IP 62%WLN.PA Worldline Q2 IP 59%TCY.L Telecity Q2 IP 55%IFXGn.DE Infineon Q2 IP 51%

BLNX.L Blinkx Q3 IP 48%SPT.L Spirent Communications Plc Q3 IP 44%INXN Interxion Q3 IP 40%ERICb.ST Ericsson Q3 IP 37%STM.PA STMicroelectronics Q3 IP 33%SGE.L Sage Group Q3 IP 29%TEMN.S Temenos Q3 IP 25%

CAPP.PA Capgemini Q4 IP 22%PIC.L Pace Q4 IP 18%SOWG.DE Software AG Q4 IP 14%ATOS.PA Atos Q4 IP 11%IDR.MC Indra Q4 IP 7%ALUA.PA Alcatel-Lucent Q4 IP 3%TCH.PA Technicolor Q4 IP 0%

40% 40% 20%

A B A * BCAGR Relative Positioning 2013-18E Sales Growth R&D / Sales Productivity R&D Risk Assessment

RIC Market Growth Percentile Market Share Percentile Percentile Sales CAGR Percentile 2005-12 Factor Productivity Percentile Semis, commtech and Hardware Percentile Quartile

ASML.AS 12% 81% 0.85 100% 100% 13% 74% 15% 1.2 18% 88% ASML Holding NV 100% Q1 IP

IFXGn.DE 8% 37% 0.29 44% 44% 4% 29% 16% 1.2 19% 100% Infineon 51% Q2 IP

STM.PA 8% 37% 0.39 62% 48% 4% 18% 22% 0.8 18% 62% STMicroelectronics 33% Q3 IP

SPT.L 9% 59% 0.40 66% 74% 4% 22% 17% 1.0 17% 50% Spirent Communications Plc 44% Q3 IP

ERICb.ST 5% 29% 0.51 92% 62% 1% 11% 15% 1.2 18% 75% Ericsson 37% Q3 IP

PIC.L 2% 3% 0.37 59% 14% 5% 37% 7% 1.0 7% 25% Pace 18% Q4 IP

ALUA.PA 4% 7% 0.08 3% 7% -1% 0% 15% 0.8 12% 37% Alcatel-Lucent 3% Q4 IP

TCH.PA 1% 0% 0.42 77% 0% -1% 3% 4% 0.8 3% 0% Technicolor 0% Q4 IP

MBLY 45% 96% 0.20 37% 70% 48% 100% 21% 0.8 17% 48% Mobileye N.V. 88% Q1 IP

A B A * BCAGR Relative Positioning 2013-18E Sales Growth Recurring Product Risk Assessment

RIC Market Growth Percentile Market Share Percentile Percentile Sales CAGR Percentile Revenues Diversification Percentile Percentile Software, IT Services & IP Percentile Quartile

IP ARM.L 15% 85% 0.50 88% 96% 14% 81% 65% 4.0 82% 68% ARM Holdings plc 96% Q1 IP

WDIG.DE 11% 74% 0.32 55% 77% 20% 88% 70% 1.0 0% 49% Wirecard 85% Q1 IP

GTO.AS 11% 77% 0.59 96% 92% 12% 70% 6% 1.2 7% 12% Gemalto 77% Q1 IP

MONI.L 53% 100% 0.08 11% 33% 43% 96% 62% 3.0 58% 62% Monitise 66% Q2 IP

WLN.PA 9% 59% 0.30 51% 66% 6% 44% 75% 3.0 58% 76% Worldline 59% Q2 IP

INGC.PA 0% 0% 0.00 0% 0% 0% 0% 0% 0.0 0% 0% Ingenico SA 0% 0

DAST.PA 9% 66% 0.44 85% 88% 15% 85% 66% 4.0 82% 71% Dassault Systemes 92% Q1 IP

SAPG.DE 9% 70% 0.42 74% 85% 10% 59% 56% 4.0 82% 61% SAP (Ordinary Share) 81% Q1 IP

OPERA.OL 23% 88% 0.17 29% 55% 31% 92% 28% 3.0 58% 26% Opera Software 70% Q2 IP

AVV.L 8% 37% 0.41 70% 59% 13% 77% 70% 2.0 29% 57% Aveva 74% Q2 IP

HEXAb.ST 8% 55% 0.44 81% 81% 8% 51% 39% 4.0 82% 43% Hexagon AB 62% Q2 IP

BLNX.L 30% 92% 0.14 25% 51% 11% 66% 0% 2.0 29% 12% Blinkx 48% Q3 IP

SGE.L 5% 22% 0.13 22% 25% 6% 40% 66% 1.0 0% 42% Sage Group 29% Q3 IP

TEMN.S 5% 22% 0.30 48% 29% 8% 48% 44% 1.0 0% 17% Temenos 25% Q4 IP

SOWG.DE 7% 33% 0.08 7% 22% 1% 7% 40% 2.0 29% 25% Software AG 14% Q4 IP

TCY.L 8% 37% 0.20 40% 40% 11% 62% 90% 1.0 0% 60% Telecity 55% Q2 IP

INXN 8% 37% 0.19 33% 37% 9% 55% 90% 1.0 0% 56% Interxion 40% Q3 IP

CAPP.PA 4% 11% 0.11 18% 18% 5% 33% 55% 3.0 58% 48% Capgemini 22% Q4 IP

ATOS.PA 4% 11% 0.10 14% 11% 1% 14% 50% 2.0 29% 33% Atos (IT services) 11% Q4 IP

IDR.MC 4% 11% 0.03 0% 0% 4% 25% 32% 2.0 29% 18% Indra 7% Q4 IP

----- Risk Assessment ----- ----- Blended Industry Positioning -----

----- MARKET POSITION ----- --- Company Growth Profile --- ----- Risk Assessment ----- ----- Blended Industy Positioning -----

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Technological approach and business model allows for a high

degree of scaleability, alongside strong OEM reach and visibility

We believe that Mobileye’s business model and technological approach engender a

high degree of scaleability, strong OEM reach and a high level of revenue visibility

when compared with other EU Technology assets in our coverage.

Mobileye is a technological leader in the area of software algorithms, system-on-

chips and customer applications that are based on processing visual information for

Advanced Driver Assistance Systems (ADAS). Mobileye’s software algorithms perform

detailed interpretations of the visual field to anticipate possible collisions with vehicles,

pedestrians, and other obstacles, warning the driver accordingly (or prompting the vehicle

to respond in certain ways). Mobileye has conducted over 15 years of R&D and in addition

has a roadmap towards semi-autonomous and fully autonomous driving.

The company’s technology is on the road today in vehicles, and comprises a chip co-

designed with STMicroelectronics, onto which Mobileye’s software is loaded.

Mobileye’s chip at March 2014 had been integrated into 3.3mn vehicles and we expect the

company to ship 2.4mn chips in 2014 (vs. 1.3mn in 2013). The company states that by the

end of 2014 its technology will be available in 160 car models from 18 OEMs globally. Its

products have been selected for implementation in serial production of 237 car models

from 20 OEMs by 2016. In contrast to some of its peers (e.g. Continental and Bosch),

Mobileye has all its object detection algorithms conducted by a monocular or “mono” (i.e.

single) camera, with all of its ADAS functions (e.g. Pedestrian Automatic Emergency

Braking, Lane Departure Warning, Forward Collision Warning) based on this one sensor.

Exhibit 3: OEM is currently the dominant segment in the

revenue mix … Split of OEM revenues vs Aftermarket revenues, 2014E

Exhibit 4: … and we expect its share of revenues to rise

over time vs. the Aftermarket segment Split of OEM revenues vs Aftermarket revenues, 2020E

Source: Company data

Source: Goldman Sachs Global Investment Research

Mobileye’s “OEM” segment accounted for c.80% of revenues in 2013: the company

sells its chips to tier one auto suppliers, which then package/integrate them

(including incorporating a camera, which is not provided by Mobileye), and sell them to

auto manufacturers (OEMs). As a result, Mobileye’s core revenues are determined by its

chip volumes and the ASPs of the chips it sells. We note that Mobileye does not make any

of the chips, i.e. is “fabless”, but rather outsources this process to STMicro, and merely

contributes the software, which is the chief value-additive component in our view. This

asset-light approach allows for a high degree of scaleability, we believe, which is further

enhanced by Mobileye’s route to market approach for this segment.

OEM

segment,

$106

Aftermarket

Segment,

$21

84%

16%

OEM

segment,

$685

Aftermarket

Segment,

$81

89%

11%



Exhibit 5: OEM segment has seen increasing volumes shipped, alongside rising segment

revenues No of units, ASPs and revenues for the OEM segment from 2011-13

Source: Company data, Goldman Sachs Global Investment Research Note; OEM revenues include small hardware testing sales

Mobileye also has a smaller “Aftermarket” segment (c.20% of revenues in 2013),

whereby the company provides its technology as an aftermarket product in vehicles that do

not come pre-equipped with its technology. Rather than the system integration being

provided by a tier one auto supplier, as in the case of the OEM segment, Mobileye here

provides a complete system, which is manufactured by its contract manufacturer in China

that provides assembly, testing, packaging, etc. Aftermarket units are sold at significantly

higher ASPs than those in the OEM segment. Customers in this segment include telematics

providers, insurance companies and commercial fleets, as well as governmental fleets.

Such types of customers can use the technology to monitor driver behavior and reduce

costs, and in the case of insurers, use it to assign premiums. Given more rapid growth in

the OEM segment (43% revenue CAGR in 2013-20E vs. Aftermarket revenue CAGR of 24%

in the same period), we expect Aftermarket segment revenues to represent 11% of group

revenues by 2020E. That said, potential upside for this segment could stem from regulatory

incentives and/or rising market awareness.

In our view, Mobileye’s route to market approach for its core OEM segment allows

for broad OEM reach. Mobileye sells its EyeQ chips to automotive system integrators (tier

ones), and thus can work with all car producers (OEMs) through their various tier one

suppliers. While Mobileye’s customers are the tier ones (except for limited sales of test

equipment to the OEM, the direct customer is the tier one), it also works directly with the

OEMs to improve existing technologies and develop new applications/configurations. In

our view, this approach maximises the company’s ability to capture the greatest market

share as OEMs may often source components from different tier one companies for

different car models.

×

=

290

668

1,303

2011 2012 2013

35.0 37.5

44.1

2011 2012.0 2013

12.5

27.8

63.3

2011 2012 2013

Number of

Chips/Units

Sold (k)

ASPs ($)

Segment

Revenue

($mn)



Given that Mobileye provides the core underlying technology for ADAS (i.e. the software

encapsulated within its chip), an OEM has the option to work with its preferred tier one

partner while having core Mobileye technology on board. We also believe that if Mobileye

had decided to only work directly with OEMs, it might have found itself limited to certain

geographies. Mobileye states that it has won over 80% of the serial productions for which it

has been requested to provide a quotation.

Exhibit 6: Presence at multiple OEMs/tier ones in different phases of development and production


We believe Mobileye has a high degree of revenue visibility relative to other

technology assets in our European coverage based on the sequence of stages in its

OEM business model. First, there will be a multi-year period during which the OEM is

educated on Mobileye’s technology and the OEM tests/validates Mobileye’s technology.

Second, after this evaluation stage, if the OEM wants to put Mobileye’s system into one or

more of its new or redesigned car models, it will issue a request for quotations (RFQ) for

one or more applications. Tier ones will then compete to win the business, and there may

be multiple tier ones on any one bid process that apply to use Mobileye’s underlying

technology. An RFQ is usually issued for models that will be in production (i.e. have

“launched”) two to three years after the design win has been awarded. At this point, an

OEM model may remain in production for three or more years before an OEM decides

either to discontinue the model or to engage in partial or substantial redesign. We believe

that there would be limited incentive to switch to another provider at this point, unless

there were a meaningful technological differential.

OEMs Tier ones

GM Volvo Magna

BMW PSA TRW

Ford Opel Kansei

Chrysler Mitsubishi Delphi

Nissan Yulon Autoliv Mobileye

Honda Jaguar Gentex

Hyundai Scania KostalNot working with

Fiat Audi Mando . Continental

. BoschMAN SE Renault Mobis

IVECO Tesla Bendix

Serial production Tier one customer

Production agreements

STMicro

ME chipSystem



Thus, revenue that Mobileye may receive in any given year (based on OEM model

launches in that year where its chips are on board) is attributable to design wins from

previous years, meaning Mobileye typically knows the number of models that will

include its products for at least two or three years in advance (although this is subject

to the possibility of postponement, cancelation or termination, which has occurred only

once since 2007).

We note also that the contract will state the anticipated volume and pricing for the entire

multi-year period of production (although there is no guarantee as to volumes, as this will

depend on the number of units sold of the car model in which Mobileye technology is

present). While Mobileye’s OEM revenues are ultimately a function of car launches (e.g.

growth in 2013 was driven by multiple new launches by OEMs) and the volumes shipped of

car models into which its technology is designed, the company’s broad presence across a

range of OEM models to some degree mitigates the risk that one or other car model does

not sell well, in our view.

We note that by early 2010, Mobileye had been sourced by seven OEMs for inclusion in 36

car models, and by the end of 2014 it will be adopted by 18 OEMs for inclusion in 160 car

models. Mobileye’s products have at this point been selected for implementation in serial

production of 237 models from 20 OEMs by 2016.

Exhibit 7: New launches of cars where Mobileye technology is on board drive growth and higher ASPs

Source: Company data, Goldman Sachs Global Investment Research

24 5567

182

290

668

1303

35

37

44

33

35

37

39

41

43

45

47

49

0

200

400

600

800

1000

1200

1400

2007 2008 2009 2010 2011 2012 2013

Number of EyeQ

Average SellingPrice

BMW,

Volvo,

GM

BMW Yulon Volvo BMW,

Hyundai, GM

Honda,

Ford,

Volvo,GM,

Chrysler

BMW, GM,

Yuolon,

Land

Rover,

Honda,

Jaguar,

Ford, Opel,

Nissan



Exhibit 8: Contracted models and chips sold (OEM segment) Launching contracted car models in any given year drive the volume of chips sold


5 10 1319

34

54

109

160

213

237

24 5567

182

290

668

1303

0

200

400

600

800

1000

1200

1400

0

50

100

150

200

250

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mobileye Contracted Car Models Contracted Car Chips Sold (in 000's)



We see robust growth in the front-facing ADAS camera market,

driven by penetration gains as a result of car ratings regimes

ADAS represents one of the most dynamic segments in automotive electronics, and

we believe that the market for front-facing, camera-based Advanced Driver

Assistance Systems (ADAS) will see market units grow at a 42% CAGR out to 2020.

We think penetration of ADAS will increase rapidly within the large automotive end

market. We expect rising demand for ADAS systems (which can deliver functions such as

automatic emergency braking, lane departure warnings or pedestrian emergency braking)

to be catalyzed by growing public awareness of driver safety technologies, alongside the

increasing influence of organizations that issue safety ratings to incentivize OEMs to

include safety features in new or facelifted car models. We note that in 2011 the American

Automobile Association stated auto accidents cost the US US$300 bn annually, so reducing

traffic accidents has been a key topic for governments. The US IIHS (Insurance Institute for

Highway Safety) has said that over 90% of vehicle accidents are due to human factors, and

that one in three crashes resulting in a fatality could be prevented if every vehicle had

forward collision warning and lane departure, side view assist and adaptive headlights

technology. Over time we believe NCAPs will attach higher weight to certain ADAS

functions for the highest safety ratings, driving OEMs to incorporate ADAS as standard fit.

We think front-facing, camera-based ADAS penetration of yearly vehicle production

will reach c.50% in Europe by 2020, with other regions following later. We see the

European regime for star ratings for vehicles, Euro NCAP (European New Car Assessment

Programme, which over time will directly link star ratings to certain ADAS functionalities,

as a meaningful catalyst for market growth. Euro NCAP is composed of seven European

governments as well as motoring and consumer organisations in every European country.

We note that in Europe from 2014 a 5-star safety rating for a newly launched/facelifted

vehicle will be linked to having one or more active safety systems (including Adaptive

Cruise Control, Electronic Stability Control, Lane Departure Warning, Lane Keeping Assist

and Automatic Emergency Braking).

Exhibit 9: We expect the increasing relevance of ADAS features to star ratings to spread to

other geographies outside Europe Overview of star ratings regimes in various geographies and relevance of ADAS functions

Source: EU NCAP, Company data, Goldman Sachs Global Investment Research

•2014: Vehicle Automatic Emergency Braking (linked to 4*/5*)

•2016: Pedestrain Automatic Emergency braking (linked to 4*/5*)

Europe (EU NCAP)

• Reviewing adding Automatic Emergency Braking equivalent

US (NHTSA)

•2016: Automatic Emergency BrakingJapan (MLIT)

•2012: Lane Departure Warning and Automatic Emergency Braking (count towards 5*)

Australia (ANCAP)



We also note that while technological approaches to ADAS exist other than camera-

based ones (e.g. radar), the inclusion in Euro NCAP of functions such as Pedestrian

Automatic Emergency Braking are harder to deliver with certain non-vision-based

technologies. Euro NCAP will progressively introduce a linkage with star ratings for

Pedestrian Automatic Emergency braking from 2016 for car models launched/face-lifted

(with the fitment rate component of the ratings scheme for this ratcheting up over time).

We also expect a regulatory and/or star ratings regime impetus towards adoption of

camera-based ADAS technologies in other countries.

In March 2014 in the US, the NHTSA (National Highway Traffic Safety Administration)

issued a final ruling requiring rear visibility technology on all new vehicles under

10,000 pounds by 2018, and is currently reviewing adding dynamic brake support or

crash imminent braking (CIB and equivalent to AEB) to the new car approval program

rating system; further, the IIHS added collision avoidance technology (e.g. forward

collision warning) to its criteria for the “top safety pick” rating. Since NHTSA began

promoting these technologies, OEMs responded by integrating FCW and LDW into

models, e.g. LDW was in 61/69/124 models in 2011/12/13.

The Japanese Ministry of Land Infrastructure Transport and Tourism announced AEB

mandates for 2016 and the Australian ANCAP announced similar measure since 2012.

We also see consumer pull-factors as likely to have a meaningful positive impact on

adoption, while we believe the trend will continue of OEMs incorporating ADAS into

vehicles for competitive differentiation. As a result, we expect ADAS to become standard

on an increasing number of models, thus helping Mobileye’s volumes expand significantly.

We believe the penetration curve for front-facing camera-based ADAS systems in

Europe will follow a similar trajectory to that seen for Electronic Stability Control

(ESC) systems. These electronic braking systems were launched in Europe in 1995 and

had reached 40% penetration within ten years. We believe penetration of front-facing

camera-based ADAS in Europe will reach 50% penetration within ten years of launch, with

the higher ramp trajectory accounted for by consumer -pull factors, car star rating schemes

and usage of the technology as a differentiating factor among OEMs.

Exhibit 10: Penetration curve of relevant ADAS could be similar to electronic braking Penetration of ESC technology and ADAS at different points in time after launch in market


0%

10%

20%

30%

40%

50%

60%

70%

Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

ESC penetration, Europe (%) ADAS penetration, Europe (%)

Year one of ESC (1995); Year one of front-facing camera ADAS (2011)



Set to maintain strong share in front-facing, camera-based ADAS

given technology edge, compelling price and barriers to entry

We estimate that Mobileye has roughly a two-thirds share of the directly relevant

front-facing camera-based ADAS market and we forecast a similar market share in

2020, based on strong technological positioning, a disruptive price-point and high

barriers to entry. We see Mobileye’s main competition as Continental and Bosch,

sizeable tier one auto suppliers, whose offerings in ADAS are mainly stereo based.

We believe Mobileye’s monocular approach (system based on one camera) has

technological advantages in terms of accuracy, which positions it well versus other

vision-based approaches, e.g. stereo, as far as satisfying Euro NCAP requirements is

concerned. We think this will especially be the case as the requirements evolve to

incorporate ever more sophisticated functionality, e.g. the need to detect pedestrians (we

note that non-vision-based approaches such as radar are not good at detecting stationary

objects, and also fall down on detecting non-metallic objects such as people).

We see stereo systems as inherently less accurate versus monocular camera systems.

A monocular camera system mimics human vision in that it measures the rate of increase

in the size of image, allowing for “noise” to be filtered out with fewer errors, unaffected by

whether an object is stationary or moving, and independent of whether it is metallic. By

contrast, stereo uses two cameras and a depth map throughout the processing chain.

While it appears counterintuitive that one camera would be better than two, we believe that

the stereo approach will tend to be less accurate for detection at distances of over 50

meters (monocular solutions have a range of 150 meters), as small errors in triangulation

are magnified exponentially. Our tier one checks lead us to believe that monocular systems

are superior to stereo systems, and our OEM checks lead us to believe that Mobileye’s

solution offers stronger performance than the competing stereo systems of both

Continental and Bosch. Our OEM checks also suggest that while Bosch offers a monocular

camera-based solution, the performance is not on a par with that of Mobileye.

Exhibit 11: Mobileye’s monocular camera technology has cost and functionality benefits vs. competing approaches


Technology Performance Packaging / ease of installation

Price/value Prevalence today Suitability for Europe 4*/5* rating

in 2016

Summary of technology vs Mobileye

Monocular camera (Mobileye)

Radar - Lower performance: Lane Departure Warning, Pedestrian Detection, General Object Detection, Traffic Sign Detection, Beam control; Stationary Automatic Emergency Braking

Lidar ? - Expensive: suitability for mass production unclear

Stereo camera ? - Accuracy issues: Vehicle Detection (long range), Pedestrian Detection (long range)

Mono camera & Radar (Non-Mobileye) ? - Accuracy issues: Pedestrian Detection

Camera & Lidar ? - Accuracy issues: Pedestrian Detection

Stereo & radar ? - Accuracy issues: miss detection levels sub-optimal



We are unaware of any vendor other than Mobileye that is able to offer a monocular

camera-based ADAS system with the same range of features all in one system. We

believe this puts Mobileye at an advantage, as OEMs prefer to avoid sourcing ADAS

features for a given car from more than one supplier, given that it is easier to integrate a

single system and the more compact packaging.

Moreover, we see significant cost benefits to Mobileye’s solution versus competing

approaches, which serve to strengthen Mobileye’s competitive edge and disruptive

price proposition. In particular, we estimate that stereo-based systems (in our view the

closest competing technology) are roughly 50% more expensive than monocular systems,

given the requirement for two cameras, the fact that they occupy more space on the

windshield, and greater power consumption. We estimate that a fusion system incorporating

both radar and stereo would cost 150% more than Mobileye’s monocular solution. We also

note that LIDAR systems (which measure distance by illuminating a target with a laser and

analyzing the reflected light) appear to be at a cost disadvantage. (They also offer a lower

resolution vs. a camera, and hence do not offer the full range of ADAS functions in one

sensor, in the way that Mobileye’s monocular approach can).

Exhibit 12: Price deltas of different product offerings vs. Mobileye solution


While we are cognizant that competition to Mobileye could come in the form not only

of tier one companies, but also large technology companies that have significant

financial and technical resources, we note a number of key barriers to entry.

First, we note Mobileye has invested for 15 years in R&D development, and so

has already established a meaningful technological lead (evidenced by 237 car

model wins, outperforming the competition). It has stated a competitor would

require at least four to five years to develop a competing monocular solution.

We also believe it would not be possible for an existing competitor merely to

evolve their stereo processing software to be applicable to mono; a binary

break would be required and a new multi-year R&D cycle in our view.

Mobileye

Monocular

solution

Standalone

radar

Stereo

camera

Mono & Lidar Mono &

Radar

Stereo &

Radar

-(10%) - 100%

delta

100%

delta

50%-100%

delta

200%

delta

50%

delta



ADAS technologies typically involve a very long penetration cycle. Quite apart

from the time investment needed to develop suitable software functionality, one

typically observes a multi-year evaluation and testing period, even prior to the

awarding of the RFQ, with a three-year production development period thereafter

before the “launch” into serial production.

Exhibit 13: The long penetration cycle in ADAS technologies represents a significant barrier to entry in our view Stages of penetration cycle in Mobileye’s directly addressable ADAS market


We also note a barrier related to the fact that Mobileye’s offering is based on

hardware as well as software, making it less likely (and more inconvenient) for

them to be designed out of a car model.

We expect Mobileye’s EyeQ chip (which it designs with STMicro) to continue

to evolve in terms of performance over time allowing continuous improvement

in pattern recognition processing and a compelling launch cadence of new ADAS

functionalities, which should help Mobileye continue to extend its lead versus its

closest competitors.

Exhibit 14: We expect Mobileye’s EyeQ chip (which it designs with STMicro) to continue to

improve in terms of performance over time, allowing the functionality roadmap to evolve Speed of Mobileye EyeQ chips over time (multiple of initial EyeQ chip speed, x)


Marketing EvaluationPre-

DevelopmentProduction

Intent

Production Development

SerialProduction

Lead time:

2 years 2 years 2 years 1 year

Marketing and Evaluation Period Production Phase

3-years 5-7years

0x

50x

100x

150x

200x

250x

300x

350x

400x

2007 2010 2015 2018

Multiples of speed

EyeQ1: EyeQ1EyeQ2

EyeQ3

EyeQ4

Production Year



The company has large validation datasets that are used to train and improve

its software algorithms. While it is arguable that this is a less significant barrier

to entry as compared with some of the other factors listed above, we note that

given Mobileye has been conducting ADAS research for 15 years and has the

largest number of serial production models in the industry, it has millions of miles

of road experience data which it can use to optimise the functions it offers. We

also note that given its tier two position, and hence the fact it works with multiple

tier ones and multiple OEMs, its datasets are unbiased towards any particular OEM,

driving scenario (e.g. highway, country, city) or region.

The company has 18 US patents, six European patents, 29 US patent

applications, 24 European and other non-US patent applications and eight

provisional patent filings.

We note Mobileye’s strong track record of evolving functionality, as

illustrated in Exhibit 15.

Exhibit 15: Evolution of Mobileye features over time ADAS features released by Mobileye at various times


2007: Combination, or "fusion", of camera and radar by Volvo

2008: Bundling of functions (Lane Departure Warning (LDW), Intelligent High Beam Control (IHC), Traffic Sign Recognition (TSR)) by BMW

2010: Camera/ radar fusion of pedestrian Automatic Emergency Braking (AEB) by Volvo

2011: Camera-cnly Forward Collision Warning (FCW) by BMW, General Motors and OPEL

2013: Camera-only vehicle and pedestrian Automatic Emergency Braking (AEB) by BMW and Nissan

Camera-only Adaptive Cruise Control (ACC)

2015: Camera-only full Auto Emergency Braking (AEB) by multiple OEMs



Exhibit 16: Evolution of Mobileye technology and track record of innovation


2007

EyeQ1 chip

• Launched in 2007

• Supports:

• Lane Departure Warning (LDW), Traffic Sign Recognition (TSR), Adaptive Highbeam Control (AHC)

• Lane Departure Warning (LDW) and Vehicle Automatic Emergency Braking (AEB) fusion with radar

• Launched in 2010

• Chip is approx. 6x faster than the EyeQ1chip

• Supports:

• Various bundles of functionality, including Lane Departure Warning (LDW), Traffic Sign Recognition (TSR), Intelligent Highbeam Control (IHC), Forward Collision Warning (FCW), and Automatic Emergency Braking (AEB) for vehicles and pedestrians (partial braking i.e. starts to brake but not full brake)

• Chip to be launched in 2015

• Approx. 6x faster than EyeQ1

• Designed to support:

• Significant upgrades to all the above

• Full-braking Automatic Emergency Braking (AEB) (car fully brakes on its own), debris detection, general object detection, traffic light detection

• Launch anticipated in 2018

• Designed to support:

• Processing from multiple cameras, with configuration consisting of a a multifocal sensor (forward facing) and possibly side-and rear-view cameras, in order to support autonomous driving functions

2010

2015

2018

EyeQ2 chip

EyeQ3 chip

EyeQ4 chip



We expect OEM segment ASPs to expand on positive mix

evolution to higher-value products

The average selling price (ASP) of Mobileye’s OEM chips is a key determinant of both

top-line growth and gross margins. We forecast the blended ASPs of chips Mobileye

ships to tier one auto suppliers in its OEM segment to rise at a 1% CAGR out to 2020,

while we estimate gross margins will expand from 74% in 2013 to 77% in 2020.

Although we expect underlying ASP declines to accelerate towards 5% pa over the

period, we think blended ASPs will continue rising (as they have historically).

The company sells bundles of different functionalities at various prices and we

expect mix shift towards higher-value bundles.

We estimate that low-end bundles centered on, for example lane departure

warning (LDW) functionality, command an ASP of c$36 (2013), whereas mid-end

bundles centred on, e.g. automatic emergency braking (AEB) functionality,

command an ASP of c$45 (2013) and high-end bundles incorporating, e.g.

pedestrian automatic emergency braking, have ASPs of c$55 (2013).

We expect low-end/mid-end/high-end to constitute 13%/55%/24% of units

respectively in 2020 (vs. our estimates of 34%/51%/15% in 2013).

Exhibit 17: We see mix shifting towards higher-value bundles over time

% of OEM units accounted for by various bundles


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020

Low end bundle (LDW) Mid end bundle (vehicle AEB)

High end bundle (pedestrian AEB) Semi-autonomous driving bundle



Moreover, we note that the ADAS functions that Mobileye offers continue to evolve,

based on a clearly defined roadmap, allowing the company to deliver incremental

value over time. We believe this helps to dampen underlying price erosion. For

example, in coming years, available features will include traffic light detection, which we

believe will add significant value to end users.

Exhibit 18: Mobileye’s safety features evolve over time,

allowing it to deliver incremental value Selection of Mobileye features

Exhibit 19: We expect ASPs to continue to benefit from

an expanding list of safety features

ASP per OEM chip (US$)



A) Safety Features

1) Lane detection- Lane Departure Warning- Lane Keeping and Support

2) Vehicle detection- Forward Collision Warning- Headway Monitoring and Warning- Adaptive Cruise Control- Traffic Jam Assistant- Emergency Braking

3) Pedestrian Detection- Pedestrian Collision Warning- Pedestrian Emergency Braking

B) Driver Enhancement Features

4) Traffic Sign Recognition5) Intelligent High Beam Control6) Speed Limit Indicator

C) Features Under Development

2014-16:- No-Entry Sign Detection- New Traffic Signs

- Animal Detection- General Object Detection- Traffic Light Detection- Hazard Detection

- Emergency Steering- Autonomous Driving features

$35

$38

$44 $44 $44

$47 $47

$25

$30

$35

$40

$45

$50

2011 2012 2013 2014E 2015E 2016E 2017E



We forecast 38% revenue growth to 2020

We forecast a 38% group revenue CAGR over 2013-20, with the OEM segment

growing at a 43% CAGR and the Aftermarket at a 24% CAGR. Thus, OEM would

account for 91% of incremental growth and the Aftermarket 9%. We also forecast

Mobileye ADAS units of 14.9mn by 2020 versus 1.3mn in 2013 and 2.4mn in 2014,

implying a 42% CAGR over 2013-2020. We assume blended ASPs of $46 by 2020

versus $44 in 2013, implying a 1% CAGR.

Exhibit 20: Evolution of Mobileye group revenues (Group revenues in $mn)


The key assumptions underpinning our estimates of OEM units are as follows:

Global auto production units of 107.0mn in 2020, of which 25.3mn in Europe

and 81.7 mn in North America/other (vs. 84.0mn (global), 19.3mn (Europe) and

64.8mn (NA/other) in 2013).

Penetration of front-facing, camera-based ADAS units in Europe in 2020 of

c.50% and penetration in North America/other at 13%, with global penetration at

21% (vs. we estimate 2% global penetration in 2013).

Europe front-facing camera-based ADAS market units of 12.5mn, North

America/other units of 10.3mn, and global units of 22.8mn by 2020 (vs. 0.5mn

(Europe), 1.5mn (NA/other), 2.0mn (global) in 2013).

Market share 65% in 2020 (similar to our estimate of its share in 2013).

Mobileye OEM units shipped of 14.9mn in 2020 vs. 1.3mn/2.4mn units in

2013/2014 (implying a 42% CAGR over 2013-20).

81131

221

334

468

572

669

770

0

100

200

300

400

500

600

700

800

900

2013A 2014E 2015E 2016E 2017E 2018E 2019E 2020E



Exhibit 21: Revenue buildup: units Market and Mobileye units in mn


Our ASP estimate of $46.0 by 2020 vs. $44.1/$43.6 in 2013/2014 assumes:

Low-end OEM bundle ASPs of $30 in 2020 (vs. we est. $36 in 2013, a -3% CAGR)

Mid-range OEM bundle ASPs of $37 in 2020 (vs. we est. $45 in 2013, a -3% CAGR

High-end OEM bundle ASPs of $46 in 2020 (vs. we est. $55 in 2013, a -3% CAGR.

For all segments, we expect underlying ASP deflation of 5% pa by 2019/2020.

We assume low-end /mid-range/high-end/semi-autonomous bundles

represent 13%/55%/24%/8% of units in 2020 respectively (vs. we estimate

34%/51%/15%/0% in 2013).

We see semi-autonomous driving bundle accounting for 2% of units in 2016

rising to 8% in 2020. However, we note that these units come at significantly

higher ASPs vs. other packages (we estimate c.$150 in 2016), and as such we

expect them to account for c.25% of incremental segment revenue growth out to

2020.

(All figures in mn., unless otherwise stated) CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020Global auto production units (GSe) 84.0 87.6 92.7 97.3 101.1 102.8 104.9 107.0

of which Europe (GSe) 19.3 20.0 21.5 22.4 23.0 23.9 24.6 25.3of which N. America / other (GSe) 64.8 67.6 71.2 74.9 78.1 79.0 80.3 81.7

Global front-facing camera based ADAS units 2.0 3.6 5.7 7.8 11.9 15.1 19.1 22.8YoY (%) 81% 61% 37% 53% 27% 26% 19%

of which Europe 0.5 1.2 2.5 4.4 6.8 9.5 10.9 12.5YoY (%) 140% 108% 76% 55% 40% 15% 15%

of which N. America / other 1.5 2.4 3.2 3.4 5.1 5.6 8.2 10.3

% Penetration global front-facing camera based ADAS 2% 4% 6% 8% 12% 15% 18% 21%penetration Europe (%) 3% 6% 12% 20% 30% 40% 44% 49%penetration N. America / other (%) 2% 3% 4% 5% 7% 7% 10% 13%

% Mobileye market share, global front-facing camera based ADAS 66% 69% 71% 76% 72% 70% 68% 65%

Mobileye ADAS units shipped (OEM) 1.3 2.4 4.1 5.9 8.6 10.5 13.0 14.9YoY (%) 88% 66% 46% 45% 23% 24% 15%



Exhibit 22: Revenue buildup: ASPs Mobileye units (mn), ASP ($) and Segmental revenues ($ mn)


(All figures in mn., unless otherwise stated) CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020

% of Mobileye units - low end bundle (LDW) 34% 30% 24% 21% 22% 18% 17% 13%% of Mobileye units - mid end bundle (vehicle AEB) 51% 52% 53% 54% 55% 55% 55% 55%% of Mobileye units - high end bundle (pedestrian AEB) 15% 18% 22% 23% 20% 22% 23% 24%% of Mobileye units - semi-autonomous driving bundle 0% 0% 0% 2% 4% 5% 6% 8%

Units - low end bundle (LDW) 0.4 0.7 1.0 1.2 1.8 1.9 2.2 1.9Units - mid end bundle (vehicle AEB) 0.7 1.3 2.2 3.2 4.7 5.8 7.2 8.2Units - high end bundle (pedestrian AEB) 0.2 0.4 0.9 1.4 1.7 2.3 2.9 3.6Units - semi-autonomous driving bundle 0.0 0.0 0.0 0.1 0.3 0.5 0.7 1.3

ASP - low end bundle (LDW), $ 36 36 35 35 35 33 32 30yoy (%) -1% -1% -1% -2% -3% -5% -5%

ASP - mid end bundle (vehicle AEB), $ 45 45 44 44 43 41 39 37yoy (%) -1% -1% -1% -2% -3% -5% -5%

ASP - high end bundle (pedestrian AEB), $ 55 55 54 54 53 51 48 46yoy (%) -1% -1% -1% -2% -3% -5% -5%

ASP - semi-autonomous driving bundle, $ 180 179 178 150 147 142 135 128yoy (%) -1% -1% -16% -2% -3% -5% -5%

ASP-Blended. OEM, $ 44.1 43.6 44.3 46.8 46.6 47.1 45.2 46.0

OEM Revenues, $mn 56 106 179 276 399 495 588 685yoy (%) 89% 69% 54% 44% 24% 19% 17%

Aftermarket Revenues, $mn 18 21 38 54 66 73 78 81yoy (%) 17% 81% 42% 22% 10% 7% 4%

Hardware Revenues, $mn 6 4 4 4 4 4 4 4yoy (%) -38% 2% 2% 2% 2% 2% 2%

GROUP Revenues, $mn 81 131 221 334 468 572 669 770yoy (%) 61% 69% 51% 40% 22% 17% 15%



Exhibit 23: We expect OEM Segment revenue to grow at a CAGR of 43% over 2013-20E Revenues in $ mn (OEM revenue ex. hardware)


Exhibit 24: We expect the Aftermarket segment to grow at a CAGR of 24% over 2013-20E Revenues in $ mn


57

106

179

277

398

495

588

685

0

100

200

300

400

500

600

700

800

2013A 2014E 2015E 2016E 2017E 2018E 2019E 2020E

1.3 2.4 4.0 5.9 8.5

$44 $44 $44 $47 $47

# Units (m)

Avg ASP ($)

10.5

$47

13.0

$45

14.9

$46

1821

38

54

66

73

7881

0

20

40

60

80

100

2013A 2014E 2015E 2016E 2017E 2018E 2019E 2020E



Efficient operating model allows for strong expansion in

EBITDA/FCF margins; we see a 44% net income CAGR to 2020

We believe that Mobileye’s efficient operating model will allow for strong expansion

in EBITDA margins and FCF margins.

We forecast that gross margins will continue to increase from 74% in 2013 to 77% in

2020, having risen from 64% in 2011, as the company introduced more sophisticated

features (allowing for higher ASPs in the OEM segment), as we estimate the company

keeps the cost of each chip it buys from STMicroelectronics relatively constant.

We see Mobileye’s business model as highly scalable, allowing revenues to grow

faster than opex as volumes ramp (at CAGR of 38% for revenue and 23% for opex

over 2013-20). While we believe the large magnitude of the addressable opportunity will

lead to R&D growing at a double-digit rate over our forecast period, we nevertheless

expect R&D/sales to fall from 25% in 2013 to 13% in 2020. Moreover, given that Mobileye is

able to address a broad range of OEMs in multiple geographical markets by selling to a

handful of tier one auto suppliers (in its core OEM segment), we forecast Sales & Marketing

expenses falling from 8% of sales in 2013 to 3% in 2020 (with growth in these to a

significant degree driven by the Aftermarket segment).

As a result, we expect the EBITDA margin to expand from 37% in 2013 to 60% by 2020.

We see no significant capital requirement given that Mobileye is a fabless company, and

hence expect FCF margins to expand from 32% to 52% over the same period.

Exhibit 25: We expect Mobileye’s favourable position in the value chain to enable it to maintain high margins with low

capex Overview of ADAS value chain


Chip and Software Design ManufacturingPackaging & Integration

Implementation

Mobileye

• Low capexintensity

• High profitability

• Highly scalable

STMicroelectronics

• Chip maker carries out manufacturing (higher capex intensity)

Tier 1

• High level of competition/fragmentation

• Lower profitability

• Lower scope for technological differentiation

OEMs

• Highest level of price sensitivity

Vertical:

Responsible Party

Optimal position in ADAS value chain



Exhibit 26: We expect Mobileye to generate a revenue/net income CAGR of 38%/44% over 2013-20 Income statement

Note: excludes share-based compensation


Income Statement

($ mn) CY 2013 CY 2014E CY 2015E CY 2016E CY 2017E CY 2018E CY 2019E CY 2020ETotal Revenue 81.2 131.0 221.0 334.1 468.0 571.5 669.4 770.1

YoY Growth 101.7% 61.2% 68.8% 51.2% 40.1% 22.1% 17.1% 15.1%

Total COGS -21.1 -33.6 -56.3 -79.6 -110.6 -134.1 -156.7 -178.5

Gross profit 60.1 97.4 164.7 254.5 357.4 437.4 512.7 591.6% Gross Margin 74.0% 74.3% 74.5% 76.2% 76.4% 76.5% 76.6% 76.8%

OpexNet R&D -20.0 -33.2 -37.7 -46.6 -58.0 -71.6 -83.8 -98.5

% of revenues 24.6% 25.4% 17.1% 13.9% 12.4% 12.5% 12.5% 12.8%General & Administrative -5.3 -7.1 -9.7 -10.6 -14.0 -14.2 -14.1 -16.0

% of revenues 6.6% 5.4% 4.4% 3.2% 3.0% 2.5% 2.1% 2.1%Sales & Marketing -6.5 -10.3 -13.1 -17.1 -19.7 -22.4 -20.0 -23.5

% of revenues 8.0% 7.9% 5.9% 5.1% 4.2% 3.9% 3.0% 3.1%Total Opex -31.8 -50.6 -60.5 -74.3 -91.7 -108.2 -117.9 -138.0

YoY Growth 14.0% 59.1% 19.6% 22.8% 23.4% 18.0% 9.0% 17.0%EBIT 28.3 46.8 104.2 180.2 265.7 329.2 394.8 453.6

EBIT margin (%) 34.9% 35.7% 47.2% 53.9% 56.8% 57.6% 59.0% 58.9%Interest Income/(Expense) 2.4 1.3 1.3 2.4 4.3 6.0 8.0 12.0Profit Before Tax 30.8 48.1 105.5 182.6 270.0 335.2 402.8 465.6Tax Provision 2.3 -5.6 -10.6 -18.3 -27.0 -33.5 -38.3 -44.2

% Tax Rate NM 11.7% 10.0% 10.0% 10.0% 10.0% 9.5% 9.5%Net Income 33.0 42.4 95.0 164.4 243.0 301.7 364.5 421.4

% Net Income Margin 40.7% 32.4% 43.0% 49.2% 51.9% 52.8% 54.5% 54.7%

EPS (diluted, $/share) N/M 0.18 0.40 0.68 1.01 1.26 1.52 1.76

EBITDA summaryD&A in Opex 1.7 2.2 2.7 2.7 3.3 4.0 4.7 5.4

% of Revenue 2.1% 1.7% 1.2% 0.8% 0.7% 0.7% 0.7% 0.7%EBITDA 30.0 49.0 106.9 182.9 269.0 333.2 399.5 459.0

% EBITDA Margin 37.0% 37.4% 48.4% 54.7% 57.5% 58.3% 59.7% 59.6%



Exhibit 27: Gross margin expansion, 2013-20E

Exhibit 28: EBITDA margin expansion, 2013-20E



We see scope for FCF growth of 48% pa in 2013-20, alongside expansion in FCF

margins from 32% in 2013 to 52% in 2020.

We expect capex to grow at a 17% CAGR over the same period, significantly

slower than revenue growth of 38%.

As such we estimate capex/sales will fall from 3% in 2013 to 1% in 2020.

We note Mobileye’s asset-light business model, whereby it is not engaged in

manufacturing chips, but rather outsources this process to STMicro.

We see the main area of incremental capex as related to data center capacity.

We note that Mobileye has already demonstrated strong profitability metrics

historically.

The company achieved gross margins of 70%/74% in 2012/13.

Mobileye achieved EBITDA margins of 4%/37% in 2012/13.

The firm saw net income margins of 4%/41% and FCF margins of (8)%/32%

respectively in 2012/13.

74%74% 75%

76% 76% 77% 77% 77%

65%

67%

69%

71%

73%

75%

77%

79%

CY 2013 CY 2014E CY 2015E CY 2016E CY 2017E CY 2018E CY 2019E CY 2020E

37% 37%

48%

55%57% 58% 60% 60%

0%

10%

20%

30%

40%

50%

60%

70%

CY 2013 CY 2014E CY 2015E CY 2016E CY 2017E CY 2018E CY 2019E CY 2020E



Exhibit 29: Revenue (US GAAP), 2011-13

Exhibit 30: Gross profit and gross margins, 2011-13



Exhibit 31: Adj. net income and NI margin, 2011-13 Net income in US$ mn

Exhibit 32: Free cash flow, 2011-13 US$ mn



19.2

40.3

81.2

2011 2012 2013

GAAP Revenues

Revenues ($ mn)

64% 70% 74%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2011 2012 2013

Gross profit and gross margins

Gross profit ($ mn)

-64% 4% 41%

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2011 2012 2013

(11.0)

(3.2)

25.6

2011 2012 2013

Free cash flow ($ mn)



Semi-autonomous can drive 25% of revenues out to 2020E, and we

see fully autonomous suggesting potential strategic asset status

We see semi-autonomous driving technology driving c.25% of Mobileye’s OEM

revenue growth between 2013 and 2020E, and see meaningful optionality around its

longer-term autonomous driving roadmap, which we believe could suggest potential

strategic asset status. We note the concept of “autonomous” or “self-driving” vehicles

has gained greater prominence during recent periods. Self-driving vehicles are those

where operation of the vehicle occurs without direct driver input to control steering,

acceleration and breaking, and are designed in such a way that the driver is not expected to

monitor the road constantly while the vehicle operates in self-drive mode. Such vehicles

range from single applications where the driver needs to monitor traffic continuously, to

semi-autonomous or fully autonomous driving, where the driver increasingly gives up

control over certain aspects of driving. Semi-autonomous driving, under certain conditions,

means the driver does not have to monitor traffic continuously, whereas fully autonomous

driving means that under all situations means no “driver” input is required.

We think the eventual move towards fully autonomous vehicles could yield important

societal benefits (e.g. reduction of accidents), alongside meaningful economic savings

and value, which explains its status as a coveted market for technology enablers and

other potential market participants. For example, one analysis by the ENO Center for

Transportation suggested that assuming half of US vehicles were autonomous, this could

save 9,600 lives per year and reduce car crashes by 1.9mn per year, while generating crash

cost savings of $158bn and $37bn in fuel cost savings (more efficient route selections). In

our view, there could also be economic benefits related to productivity and scope for

certain players to monetise more in-car entertainment etc., given the “driver” would be

free to focus on tasks/interests other than driving.

Exhibit 33: We see various stages in the evolution of autonomous driving technology


2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Today: ADAS

1st stage (2015 to 2017):

Semi-autonomous

2nd & 3rd stage (2018 to 2022):

Advanced Autonomous

Final stage: Fully autonomous

- Advanced ADAS functions

are a second line of defense

for the driver, who remains

active

- Vehicle performs certain

key tasks itself (e.g. braking

acceleration, steering) on

highway and heavy traffic;

but not lane changes

- Country roads

- Lane changes on highway

- City traffic

- Cars capable of driving

themselves without any

human intervention

Key

Ele

men

ts



In our view, the market is likely to see several phases of evolution and technological

complexity on the way potentially towards fully autonomous driving. We believe semi-

autonomous driving will be one of the first intermediate stages, which involves hands-free

capable driving at highway speeds and in urban traffic. This may then be followed by

advanced autonomous driving, whereby the car is capable of, for example, managing lane

changes on the highway, as well as driving on country roads. This stage would likely

involve additional sensing hardware but processing software for analysing information

coming from the sensors would likely need to be more advanced. The final phase would be

fully autonomous driving, where zero human intervention would be required, and where

the “driver” would be free to focus on his or her lifestyle/entertainment during the journey.

Exhibit 34: We see semi-autonomous driving solutions accounting for c.25% of OEM segment revenues out to 2020E Overview of key metrics for Mobileye related to semi-autonomous driving solutions


We expect semi-autonomous driving to drive c.25% of Mobileye’s incremental OEM

revenue growth between 2013 and 2020E. On our forecasts, this contributes

meaningfully to OEM revenues by 2016 (8% of segment revenues) and already

accounts for almost 25% of segment revenues by 2020.

Semi-autonomous driving involves the driver remaining the main operator of the

vehicle under all conditions although they can give up some duties to the vehicle, with

features including automated braking, automated throttle and automated steering.

Mobileye has design wins from two OEMs to launch hands-free capable driving at

highway speeds (and in congested traffic) in 2016, and is in development programs

with six further OEMs for potential launch in 2017/18.

We note that bundles for semi-autonomous driving represent significantly higher

dollar value (ASP of US$150+), and that Mobileye’s semi-autonomous driving

technology is set to offer a trifocal camera setup.

We expect demand for semi-autonomous driving solutions to be driven by consumer-

pull factors and intensifying competitive dynamics among OEMs once the initial

commercial solutions launch.

2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E CAGR growth (2016E-20E)

% of Incremental OEM Growth

Units (Semi-autonomous, mn) n/a n/a n/a 0.1 0.3 0.5 0.7 1.3 72%

ASPs (Semi-autonomous, $) 180 179 178 150 147 142 135 128 -4%

Revenues (Semi-autonomous, $mn)

n/a n/a n/a 21 44 75 97 160 66% 26%

OEM revenues (incl hardware), ($mn)

63 110 183 280 402 499 592 689 25%

Semi-autonomous revenues as a % of OEM revenues

n/a n/a n/a 8% 11% 15% 16% 23% n/a

Group revenues ($mn) 81 131 221 334 468 572 669 770 23%

Semi-autonomous revenues as a % of Total revenues

n/a n/a n/a 6% 9% 13% 14% 21% n/a



Exhibit 35: Potential camera configurations of current mono camera approach for ADAS

and future trifocal camera system for autonomous implementations Potential camera setup for regular monocular ADAS and future semi-autonomous ADAS


We also see meaningful optionality around Mobileye’s longer-term autonomous

driving roadmap and believe this could suggest strategic asset status for Mobileye.

While likely beyond our forecast period, we believe Mobileye could be well positioned to to

progress towards fully autonomous driving which we believe could crystallise as a market

in the 2023 timeframe (i.e. cars capable of driving themselves with zero human

intervention). While we believe that multiple complex technological steps will be required

to achieve fully autonomous driving, and think it is impossible to predict exactly how the

market will evolve, we believe Mobileye’s ambitions to provide fully autonomous driving

are leant credibility by it having already won multiple contracts for production related to

semi-autonomous driving in coming years, having a roadmap for gradual evolution of

required functionality, as well as its approach of targeting mass market applicability of their

technology (i.e. harnessing relatively inexpensive sensors).

We see Mobileye’s disruptive potential in fully autonomous driving as stemming from

its three camera-centric approach, which can avoid using more expensive sensors. We

believe the potential success of Mobileye’s autonomous driving technology, and the speed

of evolution of the industry will rest upon the cost of enabling technology, including

hardware, software and packaging, being within acceptable automotive industry levels.

Given the potential higher value-add of fully autonomous functionality versus current

ADAS bundles, chips could sell for a multiple of those currently provided for more basic

ADAS bundles (e.g. US$150+ vs. 2013 blended ASP of c.US$44), suggesting potential to

meaningfully expand the addressable market vs. regular ADAS, even assuming

cannibalization of more basic ADAS. We recognize that the competitive landscape will

likely be intense in fully autonomous driving given the value at stake, and note that

Mobileye will need to continue to progress its technology roadmap for a multi-year period,

but believe the company has strategic importance as a potentially game-changing

technology provider of fully autonomous driving solutions, which could unlock potential to

harvest a very sizeable revenue pool.

CAR

CAR

Current:

Mono

Camera

Future:

Trifocal

Camera

System



Exhibit 36: We see various stages in the evolution of autonomous driving technology Overview of various phases in technological evolution towards fully autonomous driving


- Advanced ADAS not intended to

control the car but rather acts as a

second line of defense for the

driver

- Driver still the primary operator

of the car under all conditions

although he can give up some

driving duties to the vehicle

- The car is able to accelerate,

brake and steer by itself in both

mixed and transitional driving

conditions; however, driver should

remain in driver’s seat ready to

take over control in the event of an

emergency or system failure

- Cars capable of driving

themselves without any human

intervention; this is sometimes

referred to as "utopian" scenario

of fully autonomous driving

- Adaptive cruise control (ACC)

- Vehicle & pedestrian detection

e.g. vehicle/pedestrian automatic

emergency breaking (AEB)

- Lane departure warning (LDW)

- Lane keeping and support (LKS)

Not only Advanced ADAS

features but also:

- Automated braking

- Automated throttle

- Automated steering

All features from 1st stage, as well

as ability for car to:

- Manage transitions

- Manage lane changes

- Navigate intersections

- Work on country roads

- Work in city traffic

All features from 1st/2nd stage

plus:

- Focus on lifestyle or

entertainment; control as a

backup/supporting function (can

also travel with no occupants)

- Remote control/disable

- Already secure 237 car models

from 20 OEMs with Mobileye

technology in serial production by

2016

- Mobileye has secured design

wins from 2 OEMs to launch these

features in serial production in

2016 and are in development

programs with 6 more OEMS for

potential launch in 2018

- We think Mobileye is well

positioned to deliver advanced

autonomous capabilities

- We think Mobileye is well

positioned given current market

leadership, already announced

wins in semi-autonomous driving

and credible technology roadmap

Mob

iley

e P

osi

tionin

g

Today 1st stage (2015 to 2017) 2nd/3rd stage (2018 to 2022) Final stage

Fun

ctio

ns

Cap

abilit

y



Valuation: Our 12-month price target is $45; Neutral on limited

upside following strong performance since listing

Our 12-month price target of US$45 is based 70% on a 1.3x PEG applied to a 54% net

income CAGR for 2014-19E, equating to a 68x 2016E P/E (discounted back one year at

9%), and a 30% weighting for M&A potential to reflect Mobileye’s strategic importance as a potential provider of fully autonomous driving solutions, a

potentially game-changing technology.

While we see Mobileye as having strong financials (revenue growth, net income

growth, EBITDA margins, FCF margins) vs. our European Technology coverage, and

top-quartile industry positioning, we rate the stock Neutral as, following the strong price performance since the IPO, our price target implies less upside potential than

for other stocks in our coverage.

2016 is the base year for our core valuation multiple given our expectation of

strong revenue visibility over the next two years. Also, proceeds from the IPO

may be applied to working capital requirements (such as to acquire chips),

reducing the risk profile of the business. The company stated prior to the IPO

that the stockpiling of chips so as to avoid the consequences of unforeseen supply

chain shocks was one of the purposes of raising money in this way.

Our 12-month price target is consistent with our “growth to value”

framework for the European Technology sector. In particular, at our price target,

Mobileye would trade at a PEG of 2.0x on 2015, which we do not believe is

unreasonable in light of the 56% net income CAGR we forecast for 2013-18; In

comparison, our 12-month price target for ARM Holdings (which also has high

EBITDA/FCF margins on our estimates) implies a 2.1x PEG versus a 2013-18 EPS

CAGR of 23% (although we note that ARM is more diversified in terms of end

markets and will have higher average FCF margins in 2014-18E than Mobileye).

While we see no perfect comparable due to Mobileye’s status as a

software/hardware hybrid, several global disruptive technology companies

trade at similar P/E multiples on 2016E. We see a scarcity value in Mobileye;

although there are several disruptive tech companies covered by GS globally

that we expect to achieve strong net income growth, we expect Mobileye to

achieve higher EBITDA margins or FCF margins in several cases.

o Our 12-month price target core value PEG of 1.3x implies a 68x 2016E P/E,

with our estimate of a 56% 2013-18 net income CAGR, while we estimate a

median EBITDA margin of 52% over 2014-18 and median FCF margins of

42% in 2014-18;

o We note that on our US colleague’s estimates, Tesla, in the automotive

technology space, trades on GS ests at a 59x 2016 P/E, with a higher 68%

2013-18 net income CAGR, but with a lower median EBITDA margin of

17% in 2014-18, and lower FCF margins of -3%;

o On GS estimates LinkedIn trades on a 81x 2016 P/E, with a higher 101%

2013-18 net income CAGR (higher than Mobileye) but with only a 35%

median EBITDA margins in 2014-18, and average FCF margins of only 19%

in 2014-18.

o On GS estimates Yelp trades on a 60x 2016 P/E, with a 2014-18 net income

CAGR of 179%, but lower average EBITDA/FCF margins in 2014-18 of only

33%/23%.

o On GS estimates Red Hat trades on a 54x 2016 P/E, with a 2013-16 net

income CAGR of only 12%, and average EBITDA/FCF margins in 2014-18

of only 28%/30%.



Exhibit 37: We note there are several disruptive tech assets trading at 2016E P/E of 53x-81x; while some offer

comparable or higher net income growth, we estimate higher EBITDA/FCF margins for Mobileye in several cases Overview of trading multiples/metrics of disruptive technology assets vs. Mobileye multiples at price target

Data based on share prices as of last close on August 22, 2014


The 30% M&A weighting we apply reflects the following:

o Bloomberg reported on July 17 that ZF Fridrichshafen made an approach

for TRW, in our view highlighting the strategic importance of safety

technology in the automotive market, specifically that which helps drivers

to avoid crashes, given that TRW produces components including collision

sensors and air bags.

o Along with Mobileye’s already established role as a leading provider of

ADAS technology, a key enabling technology for delivering the

automotive active safety megatrend, we see Mobileye as strategically

important as a potentially game-changing provider of advanced and fully

autonomous driving solutions. Its technology could offer a potential

acquirer scope to harvest a very sizeable revenue pool in this sphere, in

light of the large yearly unit volume of cars produced (for context GS

estimates 87.6mn globally in 2014, rising to 107.0mn in 2020) as well as

the even larger installed base (estimated at approx. 1bn units) of autos

globally into which such technology could be retrofitted.

o In our valuation framework for our European Tech coverage (see Exhibit 40),

we assign a 30% M&A weighting for companies that screen as potential

acquisition targets given strong technology, strong customer bases, and

potential savings from cost synergies for a potential acquirer. We believe

Mobileye meets all of these criteria: We think Mobileye has not only a

strong technological edge in the evolving ADAS market, but also a credible

roadmap for achieving mass-market (i.e. disruptively priced) semi-

autonomous, advanced autonomous and fully autonomous vehicle

technology. Moreover, it already has secured a broad and high profile

customer base of automotive suppliers and OEMs in the ADAS space

(alongside already announced wins with car makers in semi-autonomous

driving technology), further reinforcing its credibility in this space. While we

see Mobileye as relatively lean from a cost perspective, we think a larger

acquirer could extract cost synergies by reducing certain opex items within

S&M and G&A expenses.

Company name EV/EBITDA P/E Sales CAGR Net income CAGR EBITDA margin Median FCF Margin Median

2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016 2013-2016 2013-2018 2013-2016 2013-2018 2014-18 2013-2018 2014-2018 2013-2018 2014-2018

Royalty IPARM Holdings plc 16.2x 14.6x 12.0x 43.1x 37.4x 31.6x 22.4x 45.5x 40.7x 34.6x 25.1x 14% 14% 28% 26% 26% 50% 54% 50% 48%

Disruptive InternetFacebook, Inc. 14.9x 12.1x 9.3x 17.0x 22.3x 19.1x 15.6x 59.7x 58.8x 50.2x 42.4x 40% n/a 53% n/a n/a 62% 63% 27% 27%LinkedIn Corporation 10.9x 7.8x 5.8x 55.3x 42.3x 24.5x 16.5x n/a n/a n/a 80.9x 40% 34% 142% 101% n/a 34% 35% 18% 19%Pandora Media, Inc. 6.0x 4.5x 3.3x n/a n/a 56.1x 27.6x n/a n/a 73.7x 36.6x 39% 34% n/a n/a n/a 10% 12% 11% 13%Twitter Inc. 19.6x 12.7x 8.2x 97.0x 119.6x 52.3x 28.9x n/a n/a n/a n/a 82% 62% n/a n/a n/a 26% 28% 3% 12%Yelp Inc. 14.9x 10.7x 8.1x 100.1x 82.6x 50.9x 24.7x n/a n/a n/a 59.9x 45% 36% n/a n/a 179% 27% 33% 19% 23%RetailMeNot, Inc. 2.8x 2.1x 1.5x 17.0x 8.2x 5.4x 3.7x 50.0x 40.3x 21.0x 14.9x 26% 23% 31% 30% 47% 40% 40% 26% 27%Zulily Inc 3.3x 2.2x 1.6x 54.9x 77.5x 31.6x 17.7x n/a n/a 82.3x 42.4x 56% 41% 109% 83% 92% 8% 9% 7% 6%

Automotive technologyBorgWarner Inc. 1.7x 1.4x 1.2x 8.9x 10.1x 8.3x 6.9x 16.6x 18.0x 15.2x 12.8x 16% 12% 22% 15% 12% 17% 17% 8% 8%Sensata Technologies Holding N.V. 4.4x 4.0x 3.7x 13.7x 16.2x 14.0x 12.9x 16.7x 20.5x 17.1x 15.7x 8% n/a 11% n/a n/a 29% 29% 17% 18%Tesla Motors, Inc. 8.1x 5.3x 3.8x 59.2x 75.7x 37.9x 22.9x 134.6x n/a 94.5x 58.6x 52% 43% 85% 68% 69% 15% 17% -2% -3%

High growth semiconductorsInvenSense, Inc. 6.7x 6.7x 5.1x 16.5x 36.0x 35.8x 19.2x 22.2x 40.9x 51.6x 25.5x 31% n/a 25% n/a n/a 27% 23% 26% 26%

3D PrintingStratasys Ltd. 6.8x 5.0x 3.8x 18.4x 21.7x 17.0x 13.4x 47.5x 48.1x 36.1x 27.5x 39% n/a 38% n/a n/a 30% 29% 7% 8%3D Systems Corporation 6.5x 4.9x 3.8x 30.2x 24.8x 18.0x 13.7x 58.6x 62.6x 42.8x 31.9x 31% n/a 25% n/a n/a 27% 27% 6% 8%

High growth softwareSplunk, Inc. 15.4x 10.9x 8.2x n/a n/a n/a 139.8x n/a n/a n/a n/a 40% n/a 47% n/a n/a 3% 4% 19% 20%Tableau Software 9.6x 7.1x 5.5x 116.7x 145.9x 46.7x 26.8x n/a n/a n/a n/a 43% n/a 55% n/a n/a 13% 15% 13% 17%Workday, Inc. 24.8x 22.1x 16.8x n/a n/a n/a n/a n/a n/a n/a n/a 59% n/a 33% n/a n/a -6% -3% -2% 1%Adobe Systems Inc. 8.4x 6.7x 5.3x 18.5x 31.4x 20.9x 14.2x 54.0x 103.9x 48.0x 28.5x 14% n/a 32% n/a n/a 32% 32% 26% 28%Red Hat, Inc. 5.3x 5.7x 4.8x 23.7x 18.0x 20.5x 17.1x 70.7x 54.0x 63.7x 54.3x 15% n/a 12% n/a n/a 29% 28% 29% 30%Sabre Corporation 2.5x 2.4x 2.1x n/a 8.8x 7.8x 6.6x n/a 70.1x 19.7x 13.2x 4% n/a 25% n/a n/a 30% 31% 12% 13%VMware, Inc. 7.0x 5.7x 4.8x 15.3x 18.8x 15.4x 13.2x 34.0x 45.9x 38.2x 32.4x 15% n/a 14% n/a n/a 37% 37% 37% 37%



o Our M&A valuation is $12.0bn ($50/share), based on 13x 2020E EV/Sales.

While we are not aware of any recent M&A related to autonomous driving

technology of the kind envisaged by Mobileye, Exhibit 39 shows the range

of transaction multiples in recently acquired Software as a Service (SaaS)

assets, which we see as a reasonable proxy for this kind of disruptive

technology, especially in light of Mobileye’s software-based nature. These

transactions have ranged from 0.5x-15.7x LTM EV/Sales, with a median of

6.8x. A 13x EV/Sales multiple would screen towards the upper end of this

range, which we view as justified by Mobileye’s strategic importance as a

potentially game-changing provider of autonomous driving solutions,

with a credible technological roadmap, deep OEM relationships, and

already announced semi-autonomous customer wins that could offer

scope to harvest a very sizeable revenue pool. On our estimates, Mobileye

also has a rapid multi-year growth trajectory, high level of revenue

visibility for several years and EBITDA/FCF margins in 2014-18 that screen

in the top quartile of our coverage.

o In order to further contextualise our M&A valuation approach, we include

a scenario analysis below, which examines the valuation multiple implied

based on a range of assumptions as to potential share an acquirer could

garner in the autonomous driving market. We believe large technology

companies may typically engage in this kind of analysis in assessing

acquisition targets, in cases where there could potentially be scope for an

acquirer to drive a faster revenue trajectory than may be possible for the

target on a standalone basis e.g. by leveraging resources including SG&A

dollars and human capital.

o Our sensitivity analysis suggests that if an acquirer were to gain access to

Mobileye’s advanced and fully autonomous technology, and by

harnessing this technology is successful at acquiring even a niche position

in the autonomous driving market, this would imply an EV/Sales range of

7x-14x. We believe the advanced autonomous driving market would be

reasonably established beyond 2020, and the fully autonomous driving

market could potentially evolve several years thereafter, although we

acknowledge uncertainties related to exact timing that could potentially

accelerate or slow this (including technical and/or regulatory factors). For

our sensitivity analysis, we note the following:

An assumption of 100mn car units sold per year, alongside a unit

ASP of $150, would imply a potential market size of advanced

autonomous and/or fully autonomous driving systems of $15bn.

A range of market share assumptions between 5% and 10% of the

autonomous driving addressable market, would suggest a

revenue base of $750-1,500mn, as compared with our standalone

Mobileye 2016/17/18 estimates of $334mn/468mn/$572mn. We

believe such a market share range could be viewed as

conservative as, in our view, Mobileye has a credible

technological roadmap towards fully autonomous driving, and

has already shown progress towards this goal in announced wins

in semi-autonomous driving which will launch as soon as 2016.

This would suggest a range of EV/sales (including revenue

synergies) of 7x-14x, which is within the range of historically

observed acquisition multiples in the SaaS space.



Exhibit 38: Our M&A scenario analysis suggests that were an acquirer to capture 5%-10% share of the autonomous

driving market this would imply a multiple of 7x-14x EV/sales, in line with historically observed SaaS transaction mults. Overview of a range of implied multiples based on various market share scenarios for advanced and fully autonomous driving


Exhibit 39: Disruptive tech asset deals in the SaaS space have seen multiples of up to 16x EV/sales (average 7x)

Overview of SaaS deal multiples

Note: Enterprise Values are for the target at time of deal completion; EV/Revenue figures are for the target using last 12 months revenue estimates provided

either by the company or as stated in press reports.

Source: Company data, press reports

Acquisition scenarios

Car production yearly (mn) 100

Market share (%) 5% 6% 7% 8% 9% 10%

ASP Mobileye autonomous ($) 150 Autonomous sales ($ mn) 750 900 1,050 1,200 1,350 1,500

Market revenues ($ mn) 15,000 5% 6% 7% 8% 9% 10%

Market share acquiror (%) 5% Implied EV/Sales (x) 14x 11x 10x 9x 8x 7x

Revenues implied ($ mn) 750

Implied EV/Sales (x) 14x

Announcement

Date

Completion Date Target Company Acquirer Enterprise Value

($m)

EV / Revenue

12/20/12 02/08/13 Eloqua, Inc. Oracle Corp. $724 8.0x

08/27/12 12/03/12 Kenexa Corp. International Business Machines Corp. $1,212 3.8x

05/22/12 10/01/12 Ariba, Inc. SAP America, Inc. $4,334 8.6x

02/09/12 04/05/12 Taleo Corp. Oracle Corp. $1,793 5.7x

12/03/11 02/22/12 SuccessFactors, Inc. SAP America, Inc. $3,273 11.2x

10/24/11 01/25/12 RightNow Technologies, Inc. Oracle Corp. $1,308 6.3x

05/10/11 10/13/11 Skype Technologies SA Microsoft Corp. $8,500 10.6x

08/18/11 08/30/11 Autonomy Corp. Plc Hewlett-Packard Co. $10,330 15.7x

08/19/10 02/28/11 McAfee, Inc. Intel Corp. $6,885 3.4x

11/15/10 12/21/10 Isilon Systems, Inc. EMC Corp. $2,228 12.7x

09/20/10 11/11/10 Netezza Corp. International Business Machines Corp. $1,678 7.5x

09/13/10 10/22/10 ArcSight, Inc. Hewlett-Packard Co. $1,375 7.1x

05/12/10 07/29/10 Sybase, Inc. SAP America, Inc. $5,646 4.5x

04/20/09 01/27/10 Sun Microsystems, Inc. Oracle Corp. $7,075 0.5x

09/15/09 10/23/09 Omniture, Inc. Adobe Systems, Inc. $1,605 6.3x

01/16/08 04/29/08 BEA Systems, Inc. Oracle Corp. $6,804 4.6x

01/08/08 04/25/08 Fast Search & Transfer ASA Microsoft Corp. $1,193 6.3x

10/07/07 02/18/08 Business Objects SA SAP AG $5,705 4.2x

11/12/07 01/31/08 Cognos ULC International Business Machines Corp. $4,452 4.4x

07/23/07 09/21/07 Opsware, Inc. Hewlett-Packard Co. $1,450 13.4x

05/18/07 08/13/07 aQuantive, Inc. Microsoft Corp. $5,374 10.8x

03/15/07 05/25/07 WebEx Communications, Inc. Cisco Systems, Inc. $2,814 7.4x

03/01/07 04/19/07 Hyperion Solutions Corp. Oracle Corp. $3,077 3.5x

11/30/06 02/06/07 Digital Insight Corp. Intuit, Inc. $1,265 5.2x

07/25/06 11/07/06 Mercury Interactive Corp. Hewlett-Packard Co. $4,562 5.4x

08/23/06 10/20/06 Internet Security Systems, Inc. International Business Machines Corp. $1,050 3.1x

08/10/06 10/12/06 FileNet Corp. International Business Machines Corp. $1,172 2.6x

Average 6.8xMax 15.7x



Exhibit 40: We apply a 30% M&A weighting for Mobileye given its strong technology, broad customer base spanning

multiple tier ones and the potential for synergies we believe it could offer a potential acquirer M&A valuation weighting framework for our European Technology coverage


Ticker Company name No blocking share holder M&A Weighting

Technology Customer Base Cost Synergies

10% 10% 10%

Semis&Hardware

ARM.L ARM Holdings plc ASML.AS ASML Holding NV

IFXGn.DE Infineon MBLY Mobileye N.V. 30%

PIC.L Pace 10%

STM.PA STMicroelectronics

TCH.PA Technicolor

CommTech

ERICb.ST Ericsson

GTO.AS Gemalto 20%

SPT.L Spirent Communications Plc ALUA.PA Alcatel‐Lucent

Software

AVV.L Aveva 20%

BLNX.L Blinkx 10%

DAST.PA Dassault Systemes

HEXAb.ST Hexagon AB MONI.L Monitise 30%

OPERA.OL Opera Software 20%

SGE.L Sage Group 10%

SAPG.DE SAP (Ordinary Share)

SOWG.DE Software AG

TEMN.S Temenos 20%

IT Services

WDIG.DE Wirecard 20%

TCY.L Telecity 10%

CAPP.PA Capgemini

ATOS.PA Atos

IDR.MC Indra

INXN Interxion 30%

M&A Criteria



Exhibit 41: Mobileye has one of the highest 5-year profit growth CAGRs in our European Technology coverage 2018E P/E vs. adj. EPS CAGR (2013-18E)

Note: while we do not have a published 2013 adj. EPS estimate (given the IPO took place in 2014), we include here for comparability purposes an illustrative

adjusted 2013-18 CAGR, based on the latest fully diluted share count.


5x

7x

9x

11x

13x

15x

17x

19x

5% 15% 25% 35% 45% 55%

2018E P/E (curren

t)

5‐yr EPS CAGR (2013‐18E)

MONI.LMONI.LMONI.LMONI.L

ARM.L

ASML.ASGTO.ASINGC.PA

TCY.L

WDIG.DE

INXN

WLN.PA

AVV.L

BLNX.L

DAST.PA

HEXAb.STOPERA.OL

ATOS.PA

CAPP.PA

SAPG.DE

MBLYCurrent 2018 P/E: 30.0x2013-18 adj. EPS CAGR: 56%



Exhibit 42: While Mobileye trades at a premium on 2015E PEG vs. other our European Technology coverage, it exhibits one

of the highest profit growth trajectories over 2013-18E and one of the highest EBITDA/FCF margin profiles in 2014-18 Current PEG (2015E) vs. average trading PEG 2011-13

Note: While we do not have a published 2013 adj. EPS estimate (given the IPO took place in 2014), we include here for comparability an illustrative adjusted

2013-18 CAGR, based on the latest fully diluted share count.


0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

0.25x 0.50x 0.75x 1.00x 1.25x 1.50x 1.75x 2.00x 2.25x 2.50x 2.75x

Curren

t PEG

(20

15E)

Average trading PEG 11‐13

ARM.L, Q1 IP, Q1 CROCI CROCI, 24% EPS CAGR (13‐18E)

ASML.AS, Q1 IP, Q1 CROCI CROCI, 26% EPS CAGR (13‐18E)

GTO.AS, Q1 IP, Q2 CROCI CROCI, 23% EPS CAGR (13‐18E)

TCY.L, Q2 IP, Q4 CROCI CROCI, 15% EPS CAGR (13‐18E)

WDIG.DE, Q1 IP, Q2 CROCI CROCI, 31% EPS CAGR (13‐18E)

INXN, Q3 IP, Q3 CROCI CROCI, 24% EPS CAGR (13‐18E)

AVV.L, Q2 IP, Q1 CROCI CROCI, 21% EPS CAGR (13‐18E)

BLNX.L, Q2 IP, Q2 CROCI CROCI, 8% EPS CAGR (13‐18E)

DAST.PA, Q1 IP, Q1 CROCI CROCI, 23% EPS CAGR (13‐18E)

HEXAb.ST, Q2 IP, Q3 CROCI CROCI, 23% EPS CAGR (13‐18E)

OPERA.OL, Q1 IP, Q1 CROCI CROCI, 29% EPS CAGR (13‐18E)

SAPG.DE, Q1 IP, Q1 CROCI CROCI, 16% EPS CAGR (13‐18E)

CAPP.PA, Q4 IP, Q2 CROCI CROCI, 22% EPS CAGR (13‐18E)

MBLYCurrent PEG (2015E): 1.7x2013-18 adj. EPS CAGR: 56%



Exhibit 43: Our 12-month price target for Mobileye is comparable to that for ARM Holdings; while ARM has greater end-

market diversification, we expect Mobileye to achieve higher profit growth over 2013-18E PEG at 12-month price target (using 2013-18E EPS CAGR) vs. average trading PEG 2011-13

Note: while we do not have a published 2013 adj. EPS estimate (given the IPO took place in 2014), we include here for comparability an illustrative adjusted

2013-18 CAGR, based on the latest fully diluted share count.


0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

0.25x 0.50x 0.75x 1.00x 1.25x 1.50x 1.75x 2.00x 2.25x 2.50x

PEG

at 12m PT (using 13‐18E EPS CAGR)

Average trading PEG 11‐13

MBLYPEG at 12m PT

(using 13-18 EPS CAGR): 2.0x2013-18 adj. EPS CAGR: 56%

ARM.L, Q1 IP, Q1 CROCI, 24% EPS CAGR (13‐18E)

ASML.AS, Q1 IP, Q1 CROCI, 26% EPS CAGR (13‐18E)

GTO.AS, Q1 IP, Q2 CROCI, 23% EPS CAGR (13‐18E)

TCY.L, Q2 IP, Q4 CROCI, 15% EPS CAGR (13‐18E)

WDIG.DE, Q1 IP, Q2 CROCI, 31% EPS CAGR (13‐18E)INXN, Q3 IP, Q3 CROCI, 24% EPS CAGR (13‐18E)

AVV.L, Q2 IP, Q1 CROCI, 21% EPS CAGR (13‐18E)

BLNX.L, Q2 IP, Q2 CROCI, 8% EPS CAGR (13‐18E)

DAST.PA, Q1 IP, Q1 CROCI, 23% EPS CAGR (13‐18E)

HEXAb.ST, Q2 IP, Q3 CROCI, 23% EPS CAGR (13‐18E)

OPERA.OL, Q1 IP, Q1 CROCI, 29% EPS CAGR (13‐18E)

CAPP.PA, Q4 IP, Q2 CROCI, 22% EPS CAGR (13‐18E)

SAPG.DE, Q1 IP, Q1 CROCI, 16% EPS CAGR (13‐18E)



Exhibit 44: Overview of trading multiples US$ mn, $ per share data

Data based on share prices as at August 22, 2014; Source: Goldman Sachs Global Investment Research

Exhibit 45: Multiples at our price target


2015E 2016E 2017E 2018E 2019E 2020ESales 221 334 468 572 669 770 EBITDA 107 183 269 333 399 459 FCF 74 142 211 281 343 400 Net Income 95 164 243 302 365 421 Adj. EPS 0.40 0.68 1.01 1.26 1.52 1.76

2015E 2016E 2017E 2018E 2019E 2020EEV/Sales 39x 26x 19x 15x 13x 11xEV/EBITDA 81x 47x 32x 26x 22x 19xEV/FCF 117x 61x 41x 31x 25x 22xAdj. P/E 95x 55x 37x 30x 25x 21x

2015 PEG vs net income CAGR (2013-18) 1.7x2016 PEG vs net income CAGR (2014-19) 1.0x

2015E 2016E 2017E 2018E 2019E 2020EEV/Sales 47x 31x 22x 18x 16x 14xEV/EBITDA 98x 57x 39x 31x 26x 23xEV/FCF 141x 74x 50x 37x 30x 26xAdj. P/E 114x 66x 44x 36x 30x 26x

2015 PEG at 12m PT vs net income CAGR (2013-18) 2.0x2016 PEG at 12m PT vs net income CAGR (2014-19) 1.2x



Selected management biographies

Ziv Aviram

Co-Founder, President, CEO and a director

Co-founder, President and CEO of OrCam.

Prior to founding Mobileye, CEO of three private Israeli companies (Keter — Retail

Chain, Gali — Retail Chain and Attrakzia).

B.A. in Industrial Engineering and Management from Ben-Gurion University.

Professor Amnon Shashua

Co-Founder, CTO and Chairman and former Chairman of supervisory board.

Holds Sachs Chair in computer science at the Hebrew University of Jerusalem and

field of expertise includes computer vision and machine learning. He received the

MARR Prize Honorable Mention in 2001, the Kaye Innovation Award in 2004, and

the Landau Award in Exact Sciences in 2005.

Also co-founder, CTO and Chairman of OrCam, an Israeli company that recently

launched an assistive product for the visually impaired based on advanced

computerized visual interpretation.

Ofer Maharshak

Senior Vice President and CFO.

Prior to joining Mobileye in 2007, Corporate Finance Manager (FP&A) at Lipman

Electronics Engineering, Director of Finance at Atrica Inc., Corporate Controller for

Printlife and a managerial role at Ernst & Young Israel.

Bachelor’s degree in Business from the College of Management in Israel with a

specialty in accounting, and a licensed CPA in Israel.

Gaby Hayon

Senior Vice President of Research and Development.

Joined in August 1999 after working at Applied Materials in wafer inspection

division, where he developed algorithms for vision and image processing.

Ph.D. from the Center of Neural Computation of the Hebrew University and M.Sc.

in Physics from the Weitzman Institute of Science.

Elchanan Rushinek

Senior Vice President of Engineering at Mobileye.

Joined in November 2000 and has 20 years of experience in the very large scale

integrated (VSLI) circuits area.

Started as VLSI designer at Intel Israel and later joined Motorola Semiconductor

Israel, where he managed the VLSI DSP design group and Motorola Wireless

Handset Baseband’s System On Chip VLSI design group.



Key risks

Competition could lead to aggressive market share erosion

We see competition as one of the larger risks to the investment case. We are cognizant

players such as Continental and Bosch have significant scale and potentially the ability to

cross-subsidize ADAS solutions. That said, Mobileye’s win rate of RFQs indicates the

company benefits from significant technological and cost advantages with respect to the

functionalities encapsulated by Euro NCAP. As always in technology, it is not certain that

competitors will be unable to fight back with disruptive technologies. However, we believe

Mobileye may be viewed in a similar vein to Tesla, which managed to beat larger

competitors given a low bureaucracy, high innovation approach, in our view.

Blended ASPs could decline if underlying ASP declines are faster than we expect or

rise more rapidly if underlying declines are more moderate

We recognize automotive players may tend to drive down ASPs in their supplier base.

However, while pricing data within the automotive supply chain is limited, the rule of

thumb is that a doubling in unit volumes may typically be accompanied by a 10% fall in

pricing for suppliers. Thus given Mobileye’s OEM yearly unit growth is meaningfully lower

than 100% pa across our forecast period, and based on the high-value-add nature of

Mobileye’s core OEM product, we assume 5% underlying ASP deflation rates in the outer

years of our forecasts. However, given the evolving functionality roadmap of high-value-

add features the company offers, blended ASPs could rise faster than we anticipate.

The ADAS penetration story could play out faster or slower than we expect

We believe the historical case study of electronic braking technology penetration implies a

similar ramp in European front-facing camera ADAS units as that implied by our base case

(c.50% by 2020). We would view the risks here as more skewed to the upside, given

consumer pull factors; thus, the ramp we assume is slightly ahead of that seen for

electronic braking (c.40% by the corresponding year).

Incremental investment requirements could dampen EBITDA/FCF margins

We acknowledge additional R&D requirements could stem from requirements related to

development spend on autonomous driving. However, our forecasts already assume a net

R&D CAGR of 17% between 2013 and 2020.

Automotive sector growth could slow, affecting the company’s unit volumes

While typically tier one companies often state anticipated chip volumes at the time of an

RFQ, the actual volume of chips eventually shipped by Mobileye is dependent on the unit

sales of a particular car model in which the chip is integrated.

Penetration of semi-autonomous driving solutions could be faster than we forecast

We estimate that semi-autonomous driving solutions come at a significantly higher ASP

than regular ADAS units. As such, should consumer-pull factors be stronger than we

anticipate, this could have a meaningfully accretive impact on ASPs/gross margins/sales.

Our Aftermarket segment revenues assumptions could prove conservative

We assume that Aftermarket segment revenues grow at a 24% CAGR in 2013-20E,

meaningfully slower than OEM revenues (43% CAGR in 2013-20E). However, there could be

upside to this assumption for Aftermarket revenue growth, should potential regulation or

consumer pull factors prove to be more significant than we currently envisage.



Financials

Exhibit 46: Income statement

Note: Excludes share-based compensation.


Income Statement

($ mn) CY 2011 CY 2012 CY 2013 CY 2014E CY 2015E CY 2016E CY 2017E CY 2018E CY 2019E CY 2020ERevenueOEM Revenue (incl Hardware) 12.5 27.8 63.3 110.0 183.1 280.4 402.3 499.0 591.6 689.5

YoY Growth 121.9% 127.5% 73.8% 66.4% 53.1% 43.5% 24.0% 18.6% 16.5%Aftermarket Revenue 6.6 12.5 18.0 20.9 37.9 53.8 65.8 72.6 77.8 80.6

YoY Growth 87.9% 44.0% 16.6% 81.1% 41.8% 22.3% 10.4% 7.1% 3.7%Total Revenue 19.2 40.3 81.2 131.0 221.0 334.1 468.0 571.5 669.4 770.1

YoY Growth 110.2% 101.7% 61.2% 68.8% 51.2% 40.1% 22.1% 17.1% 15.1%

COGSOEM COGS (incl Hardware) -4.2 -8.1 -15.9 -27.1 -44.5 -63.7 -92.6 -114.0 -136.0 -157.0

% Gross Margin 66.7% 70.8% 74.9% 75.4% 75.7% 77.3% 77.0% 77.2% 77.0% 77.2%Aftermarket COGS -2.7 -4.1 -5.2 -6.5 -11.8 -15.9 -18.0 -20.1 -20.7 -21.5

% Gross Margin 59.5% 67.5% 71.0% 68.9% 68.9% 70.4% 72.6% 72.3% 73.4% 73.3%Total COGS -6.9 -12.2 -21.1 -33.6 -56.3 -79.6 -110.6 -134.1 -156.7 -178.5

Gross profit 12.3 28.1 60.1 97.4 164.7 254.5 357.4 437.4 512.7 591.6% Gross Margin 64.2% 69.7% 74.0% 74.3% 74.5% 76.2% 76.4% 76.5% 76.6% 76.8%

OpexNet R&D -14.6 -14.7 -20.0 -33.2 -37.7 -46.6 -58.0 -71.6 -83.8 -98.5

% of revenues 76.1% 36.6% 24.6% 25.4% 17.1% 13.9% 12.4% 12.5% 12.5% 12.8%General & Administrative -2.5 -7.3 -5.3 -7.1 -9.7 -10.6 -14.0 -14.2 -14.1 -16.0

% of revenues 13.2% 18.1% 6.6% 5.4% 4.4% 3.2% 3.0% 2.5% 2.1% 2.1%Sales & Marketing -5.8 -5.9 -6.5 -10.3 -13.1 -17.1 -19.7 -22.4 -20.0 -23.5

% of revenues 30.5% 14.6% 8.0% 7.9% 5.9% 5.1% 4.2% 3.9% 3.0% 3.1%Total Opex -23.0 -27.9 -31.8 -50.6 -60.5 -74.3 -91.7 -108.2 -117.9 -138.0

YoY Growth 21.5% 14.0% 59.1% 19.6% 22.8% 23.4% 18.0% 9.0% 17.0%EBIT -10.7 0.2 28.3 46.8 104.2 180.2 265.7 329.2 394.8 453.6

EBIT margin (%) -55.6% 0.5% 34.9% 35.7% 47.2% 53.9% 56.8% 57.6% 59.0% 58.9%Interest Income/(Expense) -1.2 1.9 2.4 1.3 1.3 2.4 4.3 6.0 8.0 12.0Profit Before Tax -11.8 2.1 30.8 48.1 105.5 182.6 270.0 335.2 402.8 465.6Tax Provision -0.4 -0.3 2.3 -5.6 -10.6 -18.3 -27.0 -33.5 -38.3 -44.2

% Tax Rate NM NM NM 11.7% 10.0% 10.0% 10.0% 10.0% 9.5% 9.5%Net Income -12.3 1.8 33.0 42.4 95.0 164.4 243.0 301.7 364.5 421.4

% Net Income Margin -64.0% 4.5% 40.7% 32.4% 43.0% 49.2% 51.9% 52.8% 54.5% 54.7%

EPS (diluted, $/share) N/M N/M N/M 0.18 0.40 0.68 1.01 1.26 1.52 1.76

EBITDA summaryD&A in Opex 1.0 1.2 1.7 2.2 2.7 2.7 3.3 4.0 4.7 5.4

% of Revenue 5.4% 3.1% 2.1% 1.7% 1.2% 0.8% 0.7% 0.7% 0.7% 0.7%EBITDA -9.6 1.4 30.0 49.0 106.9 182.9 269.0 333.2 399.5 459.0

% EBITDA Margin -50.2% 3.6% 37.0% 37.4% 48.4% 54.7% 57.5% 58.3% 59.7% 59.6%



Exhibit 47: Cash flow statement


Exhibit 48: Balance sheet summary


Cash Flow Statement

($ mn) CY 2013 CY 2014E CY 2015E CY 2016E CY 2017E CY 2018E CY 2019E CY 2020E

Cash Flow from OperationsNet Income 42.4 95.0 164.4 243.0 301.7 364.5 421.4Depreciation & Amortisation 2.2 2.7 2.7 3.3 4.0 4.7 5.4Change in Liability for Severance Pay 2.9 3.3 3.8 4.5 5.2 6.0 6.0Change in Long-Term Receivables and Long term payables 0.0 0.0 0.0 0.0 0.0 0.0 0.0Increase / (Decrease) in Long Term Liabilities -0.0 0.0 0.0 0.0 0.0 0.0 0.0

Change in Accounts Receivable - Trade -6.2 -12.8 -14.5 -18.0 -12.0 -14.0 -15.0Change in Accounts Receivable - Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0Change in Inventories -11.8 -13.5 -13.9 -21.2 -15.3 -14.7 -14.2Change in Accounts Payable - Trade -5.6 3.7 3.8 5.1 3.9 3.7 3.6Change in Accounts Payable - Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Change in Non-Cash Working Capital -23.6 -22.6 -24.6 -34.1 -23.4 -25.0 -25.6Total Cash Flow from Operations 28.2 23.9 78.4 146.3 216.7 287.5 350.2 407.2

Cash Flow from Investing ActivitiesNet (Investment) / Sale in Marketable Securities 0.0 0.0 0.0 0.0 0.0 0.0 0.0(Increase) / Decrease in Long Term & Restricted Deposits -2.3 -2.8 -3.2 -3.7 -4.0 -4.0 -4.0Capital Expenditure -2.6 -3.9 -4.3 -4.8 -5.4 -6.1 -6.8 -7.7Total Cash Flow from Investing Activities -8.9 -6.2 -7.1 -8.0 -9.1 -10.1 -10.8 -11.7

Cash Flow from Financing ActivitiesIssuance of Shares 0.0 193.7 0.0 0.0 0.0 0.0 0.0 0.0Total Cash Flow from Financing Activities 38.0 193.7 0.0 0.0 0.0 0.0 0.0 0.0Exchange rate differences on cash and cash equivalents 0.3Total Increase / (Decrease) in Cash 57.6 211.4 71.2 138.3 207.6 277.5 339.4 395.5Beginning Cash Balance 15.0 72.6 283.9 355.2 493.5 701.1 978.5 1,318.0Ending Cash Balance 72.6 283.9 355.2 493.5 701.1 978.5 1,318.0 1,713.5

Free Cash Flow 25.6 20.0 74.0 141.5 211.3 281.5 343.4 399.5% FCF Margin 32% 15% 33% 42% 45% 49% 51% 52%

Balance Sheet

YE December ($ mn) CY 2012 CY 2013 CY 2014E CY 2015E CY 2016E CY 2017E CY 2018E CY 2019E CY 2020ECurrent AssetsCash & Cash Equivalents 15.0 72.6 283.9 355.2 493.5 701.1 978.5 1,318.0 1,713.5Short -Term Deposits & Marketable Securities 46.0 51.8 51.8 51.8 51.8 51.8 51.8 51.8 51.8Accounts receivable - Trade 7.1 12.5 18.7 31.5 46.0 64.0 76.0 90.0 105.0Accounts receivable - Other 2.9 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0Inventories 9.3 11.4 23.2 36.7 50.6 71.8 87.1 101.7 115.9Long Term AssetsLong-Term Receivables 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3Long-Term & Restricted Deposits (Employee benefits) 4.9 7.0 9.3 12.1 15.3 19.0 23.0 27.0 31.0PP&E 4.5 5.7 7.4 9.0 11.1 13.2 15.3 17.4 19.7Total Assets 90.0 168.2 401.7 503.7 675.7 928.3 1,239.1 1,613.3 2,044.3

Accounts payable - Trade 6.8 11.1 5.5 9.3 13.1 18.2 22.0 25.8 29.3Accounts payable - Other 4.5 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.8Accrued Severance Pay 6.1 8.3 11.2 14.5 18.3 22.8 28.0 34.0 40.0Long Term Liabilities 1.0 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4Total Liabilities 18.4 25.6 22.9 29.9 37.6 47.2 56.2 65.9 75.5

Stock Capital 71.6 142.6 378.8 473.7 638.1 881.2 1,182.9 1,547.4 1,968.8

Total Liabilities and Shareholders's Equity 90.0 168.2 401.7 503.7 675.7 928.3 1,239.1 1,613.3 2,044.3



Appendix

Exhibit 49: Abbreviations and their meanings


Abbreviations Meanings

ACC Adaptive Cruise Control

AHC Adaptive High Beam Control

AEB Autonomous Emergency Braking

FCW Forward Collision Warning

NCAP New Car Assessment Program

NHTSA National Highway Traffic Safety Administration

Ped-AEB Pedestrian Autonomous Emergency Braking

PCW Pedestrian Collision Warning

TSR Traffic Sign Recognition

SLI Speed Limit Indicator

HMW Headway Monitoring and Warning

LDW Lane Departure Warning

LKS Lane Keeping and Support

AAA American Automobile Association

IHC Intelligent High Beam Control

LKA Lane Keeping Assistant



Disclosure Appendix

Reg AC

I, Alexander Duval, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or

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Coverage group(s) of stocks by primary analyst(s)

Alexander Duval: Europe-Communications Technology, Europe-Semiconductor & Tech Hardware.

Europe-Communications Technology: Alcatel-Lucent, Alcatel-Lucent (ADS), Ericsson, Ericsson (ADR), Gemalto, Nokia, Nokia (ADR), Spirent

Communications Plc, Technicolor.

Europe-Semiconductor & Tech Hardware: ARM Holdings plc, ASML Holding NV, Infineon, Ingenico SA, Mobileye N.V., Pace, STMicroelectronics,

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N.V. ($38.19)

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Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Mobileye N.V. ($38.19)

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Goldman Sachs had an investment banking services client relationship during the past 12 months with: Mobileye N.V. ($38.19)

Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Mobileye N.V. ($38.19)

Goldman Sachs has managed or co-managed a public or Rule 144A offering in the past 12 months: Mobileye N.V. ($38.19)

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