Rofin-Sinar (CDAX, Technology) C OMMENT Published 07.08.2015 1 Analyst Eggert Kuls [email protected]+49 40 309537 - 256 Value Indicators: EUR Share data: Description: DCF: 27.36 FCF-Value Potential 16e: 32.67 Bloomberg: RSI GR Reuters: RSTI ISIN: US7750431022 Rofin-Sinar is one of two world- leading manufacturers of industrial laser equipment Market Snapshot: EUR m Shareholders: Risk Profile (WRe): 2014/15e Buy EUR 30.00 (EUR 28.00) Price EUR 21.63 Upside 38.7 % Market cap: 606 No. of shares (m): 28 EV: 476 Freefloat MC: 606 Ø Trad. Vol. (30d): 3.27 m Freefloat 100.0 % Beta: 1.1 Price / Book: 1.1 x Equity Ratio: 79 % Strongly improved gross margin, new orders disappoint, sales guidance reduced Stated Figures Q3/2014/15: Comment on Figures: FY End: 30.9. in USD m Q3 14/15 Q3 14/15e Q3 13/14 yoy 9M 14/15 9M 14/15e 9M 13/14 yoy Sales 133 136 134 -1 % 378 381 384 -2 % EBIT 17 17 9 95 % 35 34 19 84 % Margin 12.8 % 12.3 % 6.5 % 9.1 % 9.0 % 4.9 % Net income 12 12 6 78 % 26 27 13 101 % Margin 8.7 % 8.7 % 4.8 % 7.0 % 7.0 % 3.4 % EPS 0.41 0.42 0.23 78 % 0.94 0.95 0.47 101 % Q3 order intake was somewhat disappointing, arriving at USD 130m, down 8% sequentially and some 10% below the previous year´s level Turnover and EPS missed our expectation only slightly. However, a 240bps rise in gross margin to 39.4% underpins that the company is clearly on the way back to levels above 40% Cash generation was rather strong in Q3. Rofin raised net cash to USD 148.6m, up USD 25.5m in the quarter driven by strong results. In addition, net working capital decreased by more than 10% so far this year, which was clearly better than expected Despite reduced earnings estimates for 2015 and beyond, we have slightly raised our price target for Rofin-Sinar shares to EUR 30.00, mainly because of the USD/EUR exchange rate and because we are now expecting net cash (incl. pensions) to amount to USD 147m. This is USD 30m higher than expected so far, mainly owing to lower net working capital. In our view, Rofin-Sinar´s figures were mixed as order intake plunged and sales and earnings missed our estimates slightly. As expected, the strength of the USD burdened the top line by 10% and orders by 13%. However the company delivered on its promise to bring the gross margin back in the direction of 40%+. Q3 margin improved to 39.4%, up 500bps yoy driven by a new generation of fibre and ultra-short pulse lasers as well as the ramp-up of in-house production of critical components for high-power fibre laser. Rofin’s growth areas showed a strong upswing with high-power fibre lasers up 29% and ultra-short pulse lasers up 50% sequentially. Quarterly EBIT margin almost doubled to 12.8% driven by gross margin and lower R&D. The company gave sales guidance for Q4 of USD 135–140m and EPS of USD 0.48–0.53 which indicates a further improvement in gross margin to more than 40%. Q4 guidance represents a miss of roughly 10% to our previous estimates on both figures. Furthermore, Q4 guidance includes the reduction in FY 2014/15 sales guidance from USD 515–535m to USD 513–518m, partly due to the postponement of a solar order worth some USD 5m from a Chinese customer into H1 2015/16. Changes in Estimates: Comment on Changes: FY End: 30.9. in USD m 2014/15e (old) + / - 2015/16e (old) + / - 2016/17e (old) + / - Sales 533 -3.0 % 554 -2.1 % 576 -3.0 % EBIT 58 -4.8 % 74 -0.4 % 80 -2.5 % EPS 1.53 -4.8 % 1.87 -0.8 % 2.02 -2.4 % DPS 0.00 0.0 % 0.00 0.0 % 0.00 0.0 % Net Debt -117 0.0 % -157 0.0 % -203 0.0 % We have reduced our FY 14/15 turnover estimate as Q3 sales missed our expectation by some 2% and order intake by 9% Lower turnover leads to a worsening of fixed-cost coverage while the gross margin should continue to benefit from new products. Overall, this year’s estimate for operating result is down by 4.8% compared to our previous estimate Net cash expectation sharply up due to stronger than expected progress in reducing working capital Rel. Performance vs CDAX: 1 month: -21.7 % 6 months: -6.2 % Year to date: -28.0 % Trailing 12 months: -2.9 % Company events: 10.08.15 Q3 12.11.15 FY 2015 FY End: 30.9. in USD m CAGR (13/14-16/17e) 2010/11 2011/12 2012/13 2013/14 2014/15e 2015/16e 2016/17e Sales 1.8 % 598 540 560 530 517 543 559 Change Sales yoy 41.1 % -9.6 % 3.7 % -5.3 % -2.5 % 5.0 % 3.0 % Gross profit margin 38.8 % 36.4 % 35.1 % 35.6 % 38.1 % 40.4 % 41.0 % EBITDA 23.0 % 97 64 67 54 77 95 101 Margin 16.2 % 11.9 % 12.0 % 10.2 % 14.8 % 17.5 % 18.1 % EBIT 31.9 % 84 50 49 34 56 73 78 Margin 14.0 % 9.3 % 8.8 % 6.4 % 10.8 % 13.5 % 14.0 % Net income 30.5 % 60 35 35 25 41 53 56 EPS 30.3 % 2.06 1.20 1.22 0.89 1.46 1.86 1.97 EPS adj. 30.3 % 2.06 1.20 1.22 0.89 1.46 1.86 1.97 DPS - 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Dividend Yield 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % FCFPS 0.76 -0.62 1.47 0.40 1.49 1.43 1.51 FCF / Market cap 3.0 % -0.8 % 6.0 % 3.7 % 6.4 % 6.0 % 6.3 % EV / Sales 1.4 x 1.1 x 1.1 x 1.1 x 1.0 x 0.9 x 0.8 x EV / EBITDA 8.7 x 9.2 x 8.8 x 10.6 x 6.8 x 5.2 x 4.4 x EV / EBIT 10.1 x 11.7 x 12.0 x 16.9 x 9.3 x 6.7 x 5.7 x P / E 15.7 x 18.8 x 19.5 x 26.8 x 16.2 x 12.7 x 12.0 x P / E adj. 15.7 x 18.8 x 19.5 x 26.8 x 16.2 x 12.7 x 12.0 x FCF Yield Potential 7.0 % 6.0 % 6.6 % 5.6 % 9.5 % 12.5 % 14.6 % Net Debt -90 -58 -94 -101 -147 -190 -236 ROCE (NOPAT) 16.0 % 8.1 % 7.8 % 5.2 % 9.0 % 11.6 % 12.0 % Guidance: FY 2014/15: Sales USD 513-518m, net profit margin 8%
12
Embed
Rofin-Sinar · Rofin-Sinar develops and produces laser sources and laser-based system solutions. The technology basis includes CO2 laser, lamp and diode-pumped solid-state lasers
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Rofin-Sinar is one of two world-leading manufacturers of industrial laser equipment
Market Snapshot: EUR m Shareholders: Risk Profile (WRe): 2014/15e
Buy
EUR 30.00 (EUR 28.00)
Price EUR 21.63
Upside 38.7 %
Market cap: 606
No. of shares (m): 28
EV: 476
Freefloat MC: 606
Ø Trad. Vol. (30d): 3.27 m
Freefloat 100.0 %
Beta: 1.1
Price / Book: 1.1 x
Equity Ratio: 79 %
Strongly improved gross margin, new orders disappoint, sales guidance reduced
Stated Figures Q3/2014/15: Comment on Figures: FY End: 30.9. in USD m
Q3 14/15
Q3 14/15e
Q3 13/14 yoy
9M 14/15
9M 14/15e
9M 13/14 yoy
Sales 133 136 134 -1 % 378 381 384 -2 %
EBIT 17 17 9 95 % 35 34 19 84 %
Margin 12.8 % 12.3 % 6.5 % 9.1 % 9.0 % 4.9 %
Net income 12 12 6 78 % 26 27 13 101 %
Margin 8.7 % 8.7 % 4.8 % 7.0 % 7.0 % 3.4 %
EPS 0.41 0.42 0.23 78 % 0.94 0.95 0.47 101 %
� Q3 order intake was somewhat disappointing, arriving at USD 130m, down 8% sequentially and some 10% below the previous year´s level
� Turnover and EPS missed our expectation only slightly. However, a 240bps rise in gross margin to 39.4% underpins that the company is clearly on the way back to levels above 40%
� Cash generation was rather strong in Q3. Rofin raised net cash to USD 148.6m, up USD 25.5m in the quarter driven by strong results. In addition, net working capital decreased by more than 10% so far this year, which was clearly better than expected
Despite reduced earnings estimates for 2015 and beyond, we have slightly raised our price target for Rofin-Sinar shares to EUR 30.00, mainly
because of the USD/EUR exchange rate and because we are now expecting net cash (incl. pensions) to amount to USD 147m. This is USD
30m higher than expected so far, mainly owing to lower net working capital.
In our view, Rofin-Sinar´s figures were mixed as order intake plunged and sales and earnings missed our estimates slightly. As expected, the
strength of the USD burdened the top line by 10% and orders by 13%. However the company delivered on its promise to bring the gross
margin back in the direction of 40%+. Q3 margin improved to 39.4%, up 500bps yoy driven by a new generation of fibre and ultra-short pulse
lasers as well as the ramp-up of in-house production of critical components for high-power fibre laser. Rofin’s growth areas showed a strong
upswing with high-power fibre lasers up 29% and ultra-short pulse lasers up 50% sequentially. Quarterly EBIT margin almost doubled to 12.8%
driven by gross margin and lower R&D. The company gave sales guidance for Q4 of USD 135–140m and EPS of USD 0.48–0.53 which
indicates a further improvement in gross margin to more than 40%. Q4 guidance represents a miss of roughly 10% to our previous estimates
on both figures. Furthermore, Q4 guidance includes the reduction in FY 2014/15 sales guidance from USD 515–535m to USD 513–518m,
partly due to the postponement of a solar order worth some USD 5m from a Chinese customer into H1 2015/16.
Changes in Estimates: Comment on Changes: FY End: 30.9. in USD m
2014/15e (old)
+ / - 2015/16e (old)
+ / - 2016/17e (old)
+ / -
Sales 533 -3.0 % 554 -2.1 % 576 -3.0 %
EBIT 58 -4.8 % 74 -0.4 % 80 -2.5 %
EPS 1.53 -4.8 % 1.87 -0.8 % 2.02 -2.4 %
DPS 0.00 0.0 % 0.00 0.0 % 0.00 0.0 %
Net Debt -117 0.0 % -157 0.0 % -203 0.0 %
� We have reduced our FY 14/15 turnover estimate as Q3 sales missed our expectation by some 2% and order intake by 9%
� Lower turnover leads to a worsening of fixed-cost coverage while the gross margin should continue to benefit from new products. Overall, this year’s estimate for operating result is down by 4.8% compared to our previous estimate
� Net cash expectation sharply up due to stronger than expected progress in reducing working capital
� The industrial laser sector has grown by some 10% p.a. over a cycle in the last decades.
� We expect CAGR of 8% over the next 10 years due to the higher basis reached meanwhile
� Capex at below 3% of sales is due to low vertical integration for an engineering company
Rofin-Sinar
CO M M E N T Publ ished 07 .08 .2015 4
Free Cash Flow Value Potential Warburg Research's valuation tool "FCF Value Potential" reflects the ability of the company to generate sustainable free cash flows. It is based on the "FCF potential" - a FCF "ex growth" figure - which assumes unchanged working capital and pure maintenance capex. A value indication is derived via the perpetuity of a given year’s “FCF potential” with consideration of the weighted costs of capital. The fluctuating value indications over time add a timing element to the DCF model (our preferred valuation tool). in USD m 2010/11 2011/12 2012/13 2013/14 2014/15e 2015/16e 2016/17e
This research report was prepared by the Warburg Research GmbH, a fully owned subsidiary of the M.M.Warburg & CO (AG & Co.) KGaA and is
passed on by the M.M.Warburg & CO (AG & Co.) KGaA. It contains selected information and does not purport to be complete. The report is based on
publicly available information and data ("the information") believed to be accurate and complete. Warburg Research GmbH neither does examine the
information to be accurate and complete, nor guarantees its accuracy and completeness. Possible errors or incompleteness of the information do not
constitute grounds for liability of M.M.Warburg & CO (AG & Co.) KGaA or Warburg Research GmbH for damages of any kind whatsoever, and
M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research GmbH are not liable for indirect and/or direct and/or consequential damages. In
particular, neither M.M.Warburg & CO (AG & Co.) KGaA nor Warburg Research GmbH are liable for the statements, plans or other details contained in
these analyses concerning the examined companies, their affiliated companies, strategies, economic situations, market and competitive situations,
regulatory environment, etc. Although due care has been taken in compiling this research report, it cannot be excluded that it is incomplete or contains
errors. M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research GmbH, their shareholders and employees are not liable for the accuracy and
completeness of the statements, estimations and the conclusions derived from the information contained in this document. Provided a research report
is being transmitted in connection with an existing contractual relationship, i.e. financial advisory or similar services, the liability of M.M.Warburg & CO
(AG & Co.) KGaA and Warburg Research GmbH shall be restricted to gross negligence and wilful misconduct. In case of failure in essential tasks,
M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research GmbH are liable for normal negligence. In any case, the liability of M.M.Warburg & CO
(AG & Co.) KGaA and Warburg Research GmbH is limited to typical, expectable damages. This research report does not constitute an offer or a
solicitation of an offer for the purchase or sale of any security. Partners, directors or employees of M.M.Warburg & CO (AG & Co.) KGaA, Warburg
Research GmbH or affiliated companies may serve in a position of responsibility, i.e. on the board of directors of companies mentioned in the report.
Opinions expressed in this report are subject to change without notice. All rights reserved.
COPYRIGHT NOTICE
This work including all its parts is protected by copyright. Any use beyond the limits provided by copyright law without permission is prohibited and
punishable. This applies, in particular, to reproductions, translations, microfilming, and storage and processing on electronic media of the entire content
or parts thereof.
DISCLOSURE ACCORDING TO §34B (1) OF THE GERMAN SECURITIES TRADING ACT (WHPG) AND THE ORDINANCE ON THE ANALYSIS OF FINANCIAL INSTRUMENTS (FINANV)
The valuation underlying the investment recommendation for the company analysed here is based on generally accepted and widely used methods of
fundamental analysis, such as e.g. DCF Model, Free Cash Flow Potential, Peer Group Comparison or Sum of the Parts Model. The result of this
fundamental valuation is modified to take into consideration the analyst’s assessment as regards the expected development of investor sentiment and
its impact on the share price.
Independent of the applied valuation methods, there is the risk that the price target will not be met, for instance because of unforeseen changes in
demand for the company’s products, changes in management, technology, economic development, interest rate development, operating and/or
material costs, competitive pressure, supervisory law, exchange rate, tax rate etc. For investments in foreign markets and instruments there are further
risks, generally based on exchange rate changes or changes in political and social conditions.
This commentary reflects the opinion of the relevant author at the point in time of its compilation. A change in the fundamental factors underlying the
valuation can mean that the valuation is subsequently no longer accurate. Whether, or in what time frame, an update of this commentary follows is not
determined in advance.
In accordance with § 5 (4) of the Ordinance on the Analysis of Financial Instruments (FinAnV) Warburg Research GmbH has implemented additional
internal and organisational arrangements to prevent or to deal with conflicts of interest. Among these are the spatial separation of Warburg Research
GmbH from M.M.Warburg & CO (AG & Co.) KGaA and the creation of areas of confidentiality. This prevents the exchange of information, which could
form the basis of conflicts of interest for Warburg Research in terms of the analysed issuers or their financial instruments.
The analysts of Warburg Research GmbH do not receive a gratuity – directly or indirectly – from the investment banking activities of M.M.Warburg &
CO (AG & Co.) KGaA or of any company within the Warburg Group.
All prices of financial instruments given in this financial analysis are the closing prices on the last stock-market trading day before the publication date
stated, unless another point in time is explicitly stated.
M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research GmbH are subject to the supervision of the Federal Financial Supervisory Authority,
BaFin.
SOURCES
All data and consensus estimates have been obtained from FactSet except where stated otherwise.
Rofin-Sinar
CO M M E N T Publ ished 07 .08 .2015 10
Additional information for clients in the United States
1. This research report (the “Report”) is a product of Warburg Research GmbH, Germany, a fully owned subsidiary of M.M.Warburg & CO (AG & Co.)
KGaA, Germany (in the following collectively “Warburg”). Warburg is the employer of the research analyst(s), who have prepared the Report. The
research analyst(s) reside outside the United States and are not associated persons of any U.S. regulated broker-dealer and therefore are not subject
to the supervision of any U.S. regulated broker-dealer.
2. The Report is provided in the United States for distribution solely to "major U.S. institutional investors" under Rule 15a-6 of the U.S. Securities
Exchange Act of 1934.
3. Any recipient of the Report should effect transactions in the securities discussed in the Report only through J.P.P. Euro-Securities, Inc., Delaware.
4. J.P.P. Euro-Securities, Inc. does not accept or receive any compensation of any kind for the dissemination of the research reports from Warburg.
Reference in accordance with section 34b of the German Securities Trading Act (WpHG) and the Ordiance on the Analysis of Financial Instruments (FinAnV) regarding possible conflicts of interest with the analysed company:
-1- The company preparing the analysis or any of its affiliated companies hold over 5% of shares in the analysed company’s equity
capital.
-2-
Within the last twelve months, the company preparing the analysis or any of its affiliated companies have participated in the
management of a consortium for the public offering of financial securities, which are (or the issuer of which) is the subject of
the analysis.
-3- The company preparing the analysis or any of its affiliated companies manage the securities of the analysed company on the
grounds of an existing contract.
-4-
On the grounds of an existing contract, the company preparing the analysis or any of its affiliated companies, have managed
investment banking services for the analysed company within the last twelve months, out of which a service or the promise of
a has service emerged.
-5- The company preparing the analysis and the analysed company came to an agreement regarding the preparation of the
financial analysis.
-6- The company preparing the analysis or any of its affiliated companies regularly trade in shares or derivatives of the analysed
company.
-7- The company preparing the analysis as well as its affiliated companies and employees have other important interests in
relation to the analysed company, such as, for example, the exercising of mandates at analysed companies.
Company Disclosure Link to the historical price targets and rating changes (last 12 months) Rofin-Sinar 3, 6 http://www.mmwarburg.com/disclaimer/disclaimer_en/US7750431022.htm
Investment recommendation: expected direction of the share price development of the financial instrument up to the given price target in the opinion of
the analyst who covers this financial instrument.
-B- Buy: The price of the analysed financial instrument is expected to rise over the next 12 months.
-H- Hold: The price of the analysed financial instrument is expected to remain mostly flat over the next 12
months.
-S- Sell: The price of the analysed financial instrument is expected to fall over the next 12 months.
“-“ Rating suspended: The available information currently does not permit an evaluation of the company.
WARBURG RESEARCH GMBH – RESEARCH UNIVERSE BY RATING
Rating Number of stocks % of Universe
Buy 112 61
Hold 64 35
Sell 6 3
Rating suspended 3 2
Total 185 100
WARBURG RESEARCH GMBH – ANALYSED RESEARCH UNIVERSE BY RATING I
I Looking only at companies for which a disclosure according to § 34b of the Germany Securities Trading Act and the FinAnV has to be made.
Rating Number of stocks % of Universe
Buy 94 65
Hold 45 31
Sell 3 2
Rating suspended 2 1
Total 144 100
PRICE AND RATING HISTORY ROFIN-SINAR AS OF 07.08.2015
The chart has markings if Warburg Research GmbH changed its
rating in the last 12 months. Every marking represents the date
and closing price on the day of the rating change.
Rofin-Sinar
CO M M E N T Publ ished 07 .08 .2015 12
EQUITIES Roland Rapelius +49 40 3282-2673 Head of Equities [email protected] RESEARCH Henner Rüschmeier +49 40 309537-270 Malte Räther +49 40 309537-185 Head of Research [email protected] Technology, Telco, Internet [email protected]
Lucas Boventer +49 40 309537-290 Jochen Reichert +49 40 309537-130 Renewables, Internet, Media [email protected] Telco, Internet, Media [email protected]
Christian Cohrs +49 40 309537-175 Moritz Rieser +49 40 309537-260 Engineering, Logistics [email protected] Real Estate [email protected]
Felix Ellmann +49 40 309537-120 Arash Roshan Zamir +49 40 309537-155 Software, IT [email protected] Engineering, Logistics [email protected]
SALES TRADING Oliver Merckel +49 40 3282-2634 Bastian Quast +49 40 3282-2701 Head of Sales Trading [email protected] Sales Trading [email protected] Thekla Struve +49 40 3282-2668 Jörg Treptow +49 40 3262-2658 Dep. Head of Sales Trading [email protected] Sales Trading [email protected] Gudrun Bolsen +49 40 3282-2679 Jan Walter +49 40 3262-2662 Sales Trading [email protected] Sales Trading [email protected] Michael Ilgenstein +49 40 3282-2700 Sales Trading [email protected]
MACRO RESEARCH Carsten Klude +49 40 3282-2572 Dr. Christian Jasperneite +49 40 3282-2439 Macro Research [email protected] Investment Strategy [email protected] Matthias Thiel +49 40 3282-2401 Macro Research [email protected]
Our research can be found under: Warburg Research research.mmwarburg.com/en/index.html Thomson www.thomson.com Bloomberg MMWA GO Reuters www.knowledge.reuters.com FactSet www.factset.com Capital IQ www.capitaliq.com For access please contact: