Einhell · Einhell COMMENT Published 03.06.2013 3 DCF model Detailed forecast period Transitional...

Einhell

(CDAX, Retail)

CO M M E N T Publ ished 03 .06 .2013 1

A n a l y s t

Thilo Kleibauer [email protected]

+49 40 309537-257

Value Indicators: EUR Share data: Description:

DCF: 41.52

FCF-Value Potential: 33.84

Bloomberg: EIN3 GR

Reuters: EING_p

ISIN: DE0005654933

Supplier of power tools and garden equipment for private household use.

Market Snapshot: EUR m Shareholders: Risk Profile (WRe): 2013e

Buy

EUR 42.00

Price EUR 30.70

Upside 36.8 %

Market cap: 115.9

No. of shares (m): 3.8

EV: 141.7

Freefloat MC: 115.9

Ø Trad. Vol. (30d): 8.31 th

Freefloat 100.0 %

Thannhuber AG (Ordinary sh.) 91.0 %

Others (Ordinary shares) 9.0 %

Beta: 1.3

Price / Book: 0.7 x

Equity Ratio: 63 %

Net Fin. Debt / EBITDA: 1.7 x

Net Debt / EBITDA: 1.9 x

Acquisition of power tool brand Ozito will strengthen business outside Europe

Acquisition in Australia: Einhell announced the acquisition of 100% of the shares of Australian company Ozito Industries. Similar to

Einhell’s assortment, Ozito offers power tool and garden tool products in the price entrance segment for the Australian and New Zealand

market. In the last fiscal year (June 30, 2012) Ozito generated sales of around EUR 70m, mainly with Bunnings, the clear market leader in the

Australian DIY market.

Purchase price mainly related to variable conditions: The purchase price includes a fixed payment of ca. EUR 13m and a variable

component. The variable purchase price depends on Ozito’s earnings in the next 4 years and is expected to be around EUR 20m. The

closing of the transaction is planned for July 1. Ozito’s senior management will stay with the company.

Takeover strategically rewarding: We regard the acquisition as a good strategic move. Einhell is already present in Australia (Sales 2012:

EUR 7m, 2013e: EUR 10m) and knows the market and competitors. With the strong relationship between Ozito and Bunnings, Einhell

can benefit from the further growth of Australia’s leading DIY chain. Bunnings (Sales >AUD 7bn) belongs to Wesfamers group and

operates more than 300 home improvement stores. By 2015 the group plans to open around 20 additional large format DIY stores per year.

With the integration of Ozito as well as ongoing organic growth in South America (Sales 2012: EUR 19m, 2013e: EUR 30m) Einhell will also

improve its regional sales diversification. The share of sales outside Europe will increase from 13% in 2012 to around 30% in 2014.

Moreover, the group can realise mid-term synergies in its sourcing activities in China.

Strong financial position: With its comfortable financial position (equity ratio >60%, gearing <20% on an absolute equity of EUR 160m),

Einhell is well prepared to refinance the takeover of Ozito. We have not yet included the impact of the acquisition in our estimates. The

profitability of Ozito is above Einhell’s margin level. So far, the potential impact from the purchase price allocation could not be finally

calculated. Nevertheless the consolidation of Ozito seems to be earnings accretive even after PPA write-downs. The rather long period of four

years for the variable price component reduces the risk that Ozito’s performance will not meet the current expectations.

Buy is being reiterated: We welcome Einhell’s announced acquisition. This deal, 12 months after the acquisition of kwb tools, shows that

Einhell can react flexibly to such opportunities thanks to its strong financial position. The integration of Ozito should underline Einhell’s growth

strategy and partially offset the current weakness in Europe. Therefore, we regard the transaction as a catalyst for the equity story. The

impact on Einhell’s numbers should become visible with the Q3 report at the latest. We are confirming the Buy recommendation with an

unchanged DCF-based price target of EUR 42.

Rel. Performance vs CDAX:

1 month: -1.9 %

6 months: -5.9 %

Year to date: -5.7 %

Trailing 12 months: -44.6 %

Company events:

21.06.13 AGM

FY End: 31.12. in EUR m

CAGR (12-15e) 2009 2010 2011 2012 2013e 2014e 2015e

Sales 6.1 % 315.7 365.4 365.3 379.9 398.0 425.0 454.0

Change Sales yoy -11.9 % 15.8 % 0.0 % 4.0 % 4.8 % 6.8 % 6.8 %

Gross profit margin 28.5 % 29.0 % 30.6 % 31.3 % 30.8 % 31.1 % 31.3 %

EBITDA 20.0 % 21.4 24.7 25.2 14.8 14.0 20.8 25.6

Margin 6.8 % 6.8 % 6.9 % 3.9 % 3.5 % 4.9 % 5.6 %

EBIT 23.5 % 18.0 21.5 22.7 12.1 11.3 18.0 22.8

Margin 5.7 % 5.9 % 6.2 % 3.2 % 2.8 % 4.2 % 5.0 %

Net income 40.2 % 10.8 16.2 14.5 5.8 6.1 12.4 15.9

EPS 40.2 % 2.87 4.30 3.85 1.53 1.62 3.29 4.22

EPS adj. 40.2 % 2.87 4.30 3.85 1.53 1.62 3.29 4.22

DPS 10.1 % 0.60 0.80 0.80 0.60 0.60 0.80 0.80

Dividend Yield 2.8 % 2.4 % 2.2 % 1.9 % 2.0 % 2.6 % 2.6 %

FCFPS 12.33 -4.40 -1.43 -2.59 1.52 2.31 2.47

EV / Sales 0.2 x 0.3 x 0.4 x 0.4 x 0.4 x 0.3 x 0.3 x

EV / EBITDA 3.2 x 5.1 x 5.9 x 10.1 x 10.2 x 6.6 x 5.1 x

EV / EBIT 3.8 x 5.9 x 6.6 x 12.3 x 12.6 x 7.6 x 5.8 x

P / E 7.5 x 7.8 x 9.6 x 20.9 x 19.0 x 9.3 x 7.3 x

P / E adj. 7.5 x 7.8 x 9.6 x 20.9 x 19.0 x 9.3 x 7.3 x

FCF Yield Potential 22.4 % 14.0 % 11.7 % 4.7 % 4.7 % 9.5 % 12.7 %

Net Debt -13.6 -0.7 9.6 28.6 25.8 20.7 15.3

ROE 8.8 % 12.0 % 9.6 % 3.6 % 3.8 % 7.5 % 9.0 %

ROCE (NOPAT) 10.3 % 13.1 % 10.8 % 3.7 % 3.6 % 7.0 % 8.7 % Guidance: Sales of EUR 390-400m, EBT margin 2-3% in 2013

Einhell


Sales development in EUR m

Source: Warburg Research

Sales by regions 2012; in %


EBIT development in EUR m


Company Background

� Einhell is the leading provider of power tools and garden equipment for household use. The products are sold under the Einhell brand

and as retailers' own brands.

� Value is created in the product development, quality control, sales, and after-sales services. The production is outsourced to external

factories in China.

� Einhell's main customers are large DIY chains (60% of sales) as well as specialised trade (25%), discounter chains (10%) and

Cash&Carry stores.

� The company was founded in 1964 by the current chairman of the supervisory board, Josef Thannhuber. The Thannhuber family

holds the majority of the non-listed ordinary shares.

Competitive Quality

� Einhell successfully differentiates itself from its competitors by undercutting brand products such a Bosch or Black&Decker in price at

a comparable quality level.

� At the same time the company stands out from low-cost providers thanks to its strong focus on quality and after-sales services.

� Einhell has high cost flexibility and generated clearly positive earnings even in economically challenging years.

� With its broad range of offers and the clear positioning (red line / blue line) Einhell is well on track for further market share gains.

� The continuation of the international expansion (South Amercia, Turkey) offers additional growth potential.

EBT development in EUR m


Sales by segments 2012; in %


Net income development in EUR m


Einhell


DCF model

Detailed forecast period Transitional period Term. Value

Figures in EUR m 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e

Sales 398.0 425.0 454.0 483.5 514.0 545.3 577.5 610.4 644.0 678.1 712.0 744.1 770.1

Sales change 4.8 % 6.8 % 6.8 % 6.5 % 6.3 % 6.1 % 5.9 % 5.7 % 5.5 % 5.3 % 5.0 % 4.5 % 3.5 % 2.0 %

EBIT 11.3 18.0 22.8 25.6 27.2 28.9 30.0 31.7 33.5 34.6 36.3 37.2 38.5

EBIT-margin 2.8 % 4.2 % 5.0 % 5.3 % 5.3 % 5.3 % 5.2 % 5.2 % 5.2 % 5.1 % 5.1 % 5.0 % 5.0 %

Tax rate (EBT) 39.0 % 25.0 % 25.0 % 24.0 % 24.0 % 24.0 % 25.0 % 25.0 % 25.0 % 25.0 % 25.0 % 25.0 % 25.0 %

NOPAT 6.9 13.5 17.1 19.5 20.7 22.0 22.5 23.8 25.1 25.9 27.2 27.9 28.9

Depreciation 2.7 2.8 2.8 4.8 5.1 5.5 5.8 6.1 6.4 6.8 7.1 7.4 7.7

in % of Sales 0.7 % 0.7 % 0.6 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 %

Changes in provisions 0.0 0.2 0.2 -0.5 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Change in Liquidity from

- Working Capital 1.6 4.0 8.0 5.9 8.7 8.7 8.7 8.6 11.8 11.9 11.9 11.2 9.1

- Capex 3.5 3.8 3.8 4.8 5.1 5.5 5.8 6.1 6.4 6.8 7.1 7.4 7.7

Capex in % of Sales 0.9 % 0.9 % 0.8 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 %

Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Free Cash Flow (WACC Model)

4.5 8.7 8.3 13.1 12.1 13.4 14.0 15.3 13.5 14.1 15.5 16.8 19.9 18

PV of FCF 4.3 7.7 6.7 9.8 8.3 8.4 8.1 8.1 6.6 6.4 6.4 6.4 6.9 94 share of PVs 9.91 % 40.07 % 50.02 %

Model parameter Valuation (m)

Derivation of WACC: Derivation of Beta: Present values 2025e 94

Terminal Value 94

Debt ratio 15.00 % Financial Strength 1.00 Financial liabilities 32

Cost of debt 3.8 % Liquidity 1.50 Pension liabilities 2

Market return 8.00 % Cyclicality 1.50 Hybrid capital 0

Risk free rate 2.50 % Transparency 1.00 Minority interest 3

Others 1.50 Market val. of investments 0

Liquidity 6 No. of shares (m) 3.8

WACC 8.77 % Beta 1.30 Equity Value 157 Value per share (EUR) 41.52

Sensitivity Value per Share (EUR)

Terminal Growth Delta EBIT-margin

Beta WACC 1.25 % 1.50 % 1.75 % 2.00 % 2.25 % 2.50 % 2.75 % Beta WACC -1.5 pp -1.0 pp -0.5 pp +0.0 pp +0.5 pp +1.0 pp +1.5 pp

1.51 9.8 % 32.84 33.37 33.94 34.55 35.19 35.88 36.62 1.51 9.8 % 13.80 20.72 27.63 34.55 41.46 48.38 55.29

1.41 9.3 % 35.74 36.38 37.06 37.79 38.57 39.41 40.31 1.41 9.3 % 15.55 22.96 30.38 37.79 45.20 52.61 60.03

1.35 9.0 % 37.33 38.03 38.78 39.59 40.45 41.38 42.39 1.35 9.0 % 16.52 24.21 31.90 39.59 47.28 54.96 62.65

1.30 8.8 % 39.03 39.81 40.63 41.52 42.48 43.51 44.63 1.30 8.8 % 17.57 25.55 33.54 41.52 49.51 57.49 65.48

1.25 8.5 % 40.86 41.71 42.62 43.61 44.67 45.82 47.08 1.25 8.5 % 18.70 27.00 35.31 43.61 51.91 60.22 68.52

1.19 8.3 % 42.82 43.76 44.77 45.87 47.05 48.34 49.74 1.19 8.3 % 19.92 28.57 37.22 45.87 54.51 63.16 71.81

1.09 7.8 % 47.19 48.35 49.61 50.98 52.46 54.09 55.89 1.09 7.8 % 22.69 32.12 41.55 50.98 60.40 69.83 79.26

� No structural EBIT margin change expected.

� Sales growth in line with Einhell's target of +5-10% p.a.

Einhell


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 by

discounting the “FCF potential” of a given year with the weighted costs of capital. The fluctuating value indications over time add a timing element to the

DCF model (our preferred valuation tool).

in EUR m 2009 2010 2011 2012 2013e 2014e 2015e

Net Income before minorities 10.9 16.0 14.4 5.6 6.0 12.5 16.1

+ Depreciation + Amortisation 3.4 3.3 2.5 2.7 2.7 2.8 2.8

- Net Interest Income -3.8 -1.3 -3.6 -2.0 -1.4 -1.3 -1.3

- Maintenance Capex 3.0 3.0 3.0 3.2 3.4 3.6 3.6

+ Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0

= Free Cash Flow Potential 15.1 17.6 17.5 7.0 6.7 13.0 16.6

Free Cash Flow Yield Potential 22.4 % 14.0 % 11.7 % 4.7 % 4.7 % 9.5 % 12.7 %

WACC 8.77 % 8.77 % 8.77 % 8.77 % 8.77 % 8.77 % 8.77 %

= Enterprise Value (EV) 67.6 125.9 148.9 149.0 141.7 136.6 131.2 = Fair Enterprise Value 172.5 200.4 199.4 80.3 76.5 148.4 189.6

- Net Debt (Cash) 26.6 26.6 26.6 26.6 23.8 18.5 12.9

- Pension Liabilities 2.0 2.0 2.0 2.0 2.0 2.2 2.4

- Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0

- Market value of minorities 0.0 0.0 0.0 0.0 0.0 0.0 0.0

+ Market value of investments 0.0 0.0 0.0 0.0 0.0 0.0 0.0

= Fair Market Capitalisation 143.9 171.8 170.8 51.7 50.7 127.7 174.3

No. of shares (total) (m) 3.8 3.8 3.8 3.8 3.8 3.8 3.8

= Fair value per share (EUR) 38.13 45.52 45.25 13.71 13.43 33.84 46.18

premium (-) / discount (+) in % -56.3 % 10.2 % 50.4 %

Sensitivity Fair value per Share (EUR)

11.77 % 26.48 31.98 31.79 8.29 8.26 23.82 33.38

10.77 % 29.65 35.66 35.44 9.76 9.67 26.54 36.85

9.77 % 33.45 40.08 39.84 11.53 11.36 29.82 41.04

WACC 8.77 % 38.13 45.52 45.25 13.71 13.43 33.84 46.18

7.77 % 44.01 52.35 52.05 16.45 16.04 38.90 52.65

6.77 % 51.63 61.20 60.85 19.99 19.42 45.46 61.02

5.77 % 61.89 73.12 72.71 24.77 23.97 54.29 72.30

� Double-digit FCF potential.

� Net debt level rather low.

Einhell


Valuation

2009 2010 2011 2012 2013e 2014e 2015e

Price / Book 0.6 x 0.9 x 0.9 x 0.8 x 0.7 x 0.7 x 0.6 x

Book value per share ex intangibles 31.12 35.44 40.21 38.90 39.75 42.32 45.66

EV / Sales 0.2 x 0.3 x 0.4 x 0.4 x 0.4 x 0.3 x 0.3 x

EV / EBITDA 3.2 x 5.1 x 5.9 x 10.1 x 10.2 x 6.6 x 5.1 x

EV / EBIT 3.8 x 5.9 x 6.6 x 12.3 x 12.6 x 7.6 x 5.8 x

EV / EBIT adj.* 3.8 x 5.9 x 6.6 x 12.3 x 12.6 x 7.6 x 5.8 x

P / FCF 1.7 x n.a. n.a. n.a. 20.2 x 13.3 x 12.4 x

P / E 7.5 x 7.8 x 9.6 x 20.9 x 19.0 x 9.3 x 7.3 x

P / E adj.* 7.5 x 7.8 x 9.6 x 20.9 x 19.0 x 9.3 x 7.3 x

Dividend Yield 2.8 % 2.4 % 2.2 % 1.9 % 2.0 % 2.6 % 2.6 %

Free Cash Flow Yield Potential 22.4 % 14.0 % 11.7 % 4.7 % 4.7 % 9.5 % 12.7 %

*Adjustments made for: -

Einhell


Consolidated profit & loss In EUR m 2009 2010 2011 2012 2013e 2014e 2015e

Sales 315.7 365.4 365.3 379.9 398.0 425.0 454.0

Change Sales yoy -11.9 % 15.8 % 0.0 % 4.0 % 4.8 % 6.8 % 6.8 %

Increase / decrease in inventory 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Own work capitalised 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Sales 315.7 365.4 365.3 379.9 398.0 425.0 454.0

Material Expenses 225.6 259.6 253.6 261.0 275.4 292.8 311.9

Gross profit 90.0 105.8 111.7 118.8 122.6 132.2 142.1

Gross profit margin 28.5 % 29.0 % 30.6 % 31.3 % 30.8 % 31.1 % 31.3 %

Personnel expenses 34.0 38.6 43.1 51.7 53.9 55.3 57.8

Other operating income 10.4 10.4 9.6 8.2 9.9 10.5 10.5

Other operating expenses 45.0 52.8 53.0 60.5 64.6 66.6 69.2

Unfrequent items 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBITDA 21.4 24.7 25.2 14.8 14.0 20.8 25.6

Margin 6.8 % 6.8 % 6.9 % 3.9 % 3.5 % 4.9 % 5.6 %

Depreciation of fixed assets 2.0 2.1 2.1 2.3 2.1 2.1 2.1

EBITA 19.4 22.7 23.1 12.5 11.9 18.7 23.5

Amortisation of intangible assets 1.4 1.2 0.5 0.4 0.6 0.7 0.7

Goodwill amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBIT 18.0 21.5 22.7 12.1 11.3 18.0 22.8

Margin 5.7 % 5.9 % 6.2 % 3.2 % 2.8 % 4.2 % 5.0 %

EBIT adj. 18.0 21.5 22.7 12.1 11.3 18.0 22.8

Interest income 0.5 0.4 0.5 0.8 0.2 0.2 0.2

Interest expenses 2.5 2.0 2.2 1.5 1.6 1.5 1.5

Other financial income (loss) -1.8 0.4 -1.8 -1.3 0.0 0.0 0.0

EBT 14.2 20.2 19.1 10.2 9.9 16.7 21.5

Margin 4.5 % 5.5 % 5.2 % 2.7 % 2.5 % 3.9 % 4.7 %

Total taxes 3.3 4.2 4.7 4.6 3.8 4.2 5.4

Net income from continuing operations 10.9 16.0 14.4 5.6 6.0 12.5 16.1

Income from discontinued operations (net of tax) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net income before minorities 10.9 16.0 14.4 5.6 6.0 12.5 16.1

Minority interest 0.0 -0.2 -0.1 -0.2 -0.1 0.1 0.2

Net income 10.8 16.2 14.5 5.8 6.1 12.4 15.9

Margin 3.4 % 4.4 % 4.0 % 1.5 % 1.5 % 2.9 % 3.5 %

Number of shares, average 3.8 3.8 3.8 3.8 3.8 3.8 3.8

EPS 2.87 4.30 3.85 1.53 1.62 3.29 4.22

EPS adj. 2.87 4.30 3.85 1.53 1.62 3.29 4.22

*Adjustments made for:

Guidance: Sales of EUR 390-400m, EBT margin 2-3% in 2013

Financial Ratios 2009 2010 2011 2012 2013e 2014e 2015e

Total Operating Costs / Sales 93.2 % 93.2 % 93.1 % 96.1 % 96.5 % 95.1 % 96.7 %

Operating Leverage 2.2 x 1.2 x -117.1 x -11.6 x -1.5 x 8.8 x 3.9 x

EBITDA / Interest expenses 8.4 x 12.1 x 11.6 x 9.7 x 8.7 x 13.9 x 17.1 x

Tax rate (EBT) 23.3 % 20.7 % 24.5 % 45.1 % 39.0 % 25.0 % 25.0 %

Dividend Payout Ratio 20.9 % 18.9 % 20.9 % 40.6 % 37.7 % 24.1 % 18.7 %

Sales per Employee 316,009 363,616 320,686 291,977 306,154 319,549 333,824

Sales, EBITDA in EUR m


Operating Performance in %


Performance per Share


Einhell


Consolidated balance sheet In EUR m 2009 2010 2011 2012 2013e 2014e 2015e

Assets

Goodwill and other intangible assets 9.2 9.0 9.0 10.5 10.4 10.1 10.1

thereof other intangible assets 1.8 0.8 0.7 1.3 1.2 1.0 1.0

thereof Goodwill 7.5 8.2 8.3 9.1 9.1 9.1 9.1

Property, plant and equipment 16.6 17.2 17.9 18.0 18.9 19.8 20.7

Financial assets 1.0 0.4 0.4 0.4 0.4 0.4 0.4

Other long-term assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Fixed assets 26.8 26.6 27.3 28.8 29.6 30.2 31.1

Inventories 74.6 95.6 110.4 125.7 124.0 125.0 130.0

Accounts receivable 48.2 62.5 62.2 66.3 68.0 73.0 78.0

Liquid assets 57.6 44.5 13.7 5.6 5.0 6.5 9.1

Other short-term assets 19.3 24.2 31.5 33.0 34.9 34.4 34.4

Current assets 199.7 226.8 217.9 230.6 231.9 238.9 251.5

Total Assets 226.5 253.4 245.2 259.4 261.4 269.1 282.7

Liabilities and shareholders' equity

Subscribed capital 9.7 9.7 9.7 9.7 9.7 9.7 9.7

Capital reserve 26.7 26.7 26.7 26.7 26.7 26.7 26.7

Retained earnings 84.2 92.9 120.7 123.2 117.9 121.1 130.2

Other equity components 6.1 13.5 3.7 -2.3 6.1 12.4 15.9

Shareholder's equity 126.7 142.8 160.8 157.3 160.4 169.8 182.4

Minority interest 3.0 2.2 2.4 3.0 3.2 3.4 3.6

Total equity 129.7 145.0 163.2 160.3 163.6 173.2 186.0

Provisions 12.4 15.5 11.5 11.3 13.4 14.6 16.8

thereof provisions for pensions and similar obligations 1.8 1.3 1.4 2.0 2.0 2.2 2.4

Financial liabilites (total) 42.2 42.5 22.0 32.2 28.8 25.0 22.0

thereof short-term financial liabilities 0.4 1.1 1.0 11.6 8.0 4.0 1.0

Accounts payable 27.5 27.8 27.7 32.6 31.0 33.0 35.0

Other liabilities 14.7 22.5 20.9 23.0 24.6 23.2 22.8

Liabilities 96.8 108.3 82.0 99.1 97.8 95.8 96.6

Total liabilities and shareholders' equity 226.5 253.4 245.2 259.4 261.4 269.1 282.7


Efficiency of Capital Employment

Operating Assets Turnover 2.8 x 2.5 x 2.2 x 2.1 x 2.2 x 2.3 x 2.3 x

Capital Employed Turnover 2.7 x 2.5 x 2.1 x 2.0 x 2.1 x 2.2 x 2.3 x

ROA 40.5 % 60.9 % 53.3 % 20.1 % 20.7 % 41.1 % 51.1 %

Return on Capital

ROCE (NOPAT) 10.3 % 13.1 % 10.8 % 3.7 % 3.6 % 7.0 % 8.7 %

ROE 8.8 % 12.0 % 9.6 % 3.6 % 3.8 % 7.5 % 9.0 %

Adj. ROE 8.8 % 12.0 % 9.6 % 3.6 % 3.8 % 7.5 % 9.0 %

Balance sheet quality

Net Debt -13.6 -0.7 9.6 28.6 25.8 20.7 15.3

Net Financial Debt -15.4 -2.0 8.2 26.6 23.8 18.5 12.9

Net Gearing -10.5 % -0.5 % 5.9 % 17.8 % 15.8 % 11.9 % 8.2 %

Net Fin. Debt / EBITDA -72.1 % -8.0 % 32.8 % 179.5 % 170.8 % 89.0 % 50.3 %

Book Value / Share 33.6 37.8 42.6 41.7 42.5 45.0 48.3

Book value per share ex intangibles 31.1 35.4 40.2 38.9 39.8 42.3 45.7

ROCE Development


Net debt in EUR m


Book Value per Share in EUR


Einhell


Consolidated cash flow statement In EUR m 2009 2010 2011 2012 2013e 2014e 2015e

Net income 14.2 20.2 19.1 10.2 9.9 16.7 21.5

Depreciation of fixed assets 2.0 2.1 2.1 2.3 2.1 2.1 2.1

Amortisation of goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Amortisation of intangible assets 1.4 1.2 0.5 0.4 0.6 0.7 0.7

Increase/decrease in long-term provisions -0.2 3.1 -4.1 -0.2 2.2 1.2 2.2

Other non-cash income and expenses -7.6 -4.2 -4.7 -4.6 -3.8 -4.2 -5.4

Cash Flow 9.7 22.4 12.9 8.1 10.9 16.5 21.1

Increase / decrease in inventory 37.8 -21.1 -14.8 -15.3 1.7 -1.0 -5.0

Increase / decrease in accounts receivable 13.3 -14.3 0.3 -4.1 -1.7 -5.0 -5.0

Increase / decrease in accounts payable -7.7 0.3 -0.1 4.9 -1.6 2.0 2.0

Increase / decrease in other working capital positions -2.0 0.0 0.0 0.0 0.0 0.0 0.0

Increase / decrease in working capital (total) 41.4 -35.1 -14.6 -14.4 -1.6 -4.0 -8.0

Net cash provided by operating activities 51.1 -12.7 -1.7 -6.3 9.2 12.5 13.1

Investments in intangible assets -0.9 -1.4 -0.5 -0.5 -0.5 -0.8 -0.8

Investments in property, plant and equipment -3.7 -2.5 -3.2 -3.0 -3.0 -3.0 -3.0

Payments for acquisitions -2.5 -1.0 0.4 -0.4 0.0 0.0 0.0

Financial investments 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Income from asset disposals 0.1 0.0 0.0 0.0 0.0 0.0 0.0

Net cash provided by investing activities -7.0 -4.9 -3.3 -3.9 -3.5 -3.8 -3.8

Change in financial liabilities -4.1 0.3 -20.5 10.3 -3.4 -3.8 -3.0

Dividends paid -2.3 -2.1 -2.9 -3.0 -3.0 -3.0 -3.3

Purchase of own shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Capital measures 0.1 0.0 0.0 0.0 0.0 0.0 0.0

Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net cash provided by financing activities -6.4 -1.8 -23.4 7.3 -6.4 -6.8 -6.3

Change in liquid funds 37.8 -19.4 -28.4 -2.9 -0.7 1.9 3.0

Effects of exchange-rate changes on cash -0.1 0.0 0.0 0.0 0.0 0.0 0.0

Cash and cash equivalent at end of period 57.6 38.2 16.0 10.8 5.0 6.9 9.5


Cash Flow

Free Cash Flow 46.5 -16.6 -5.4 -9.8 5.7 8.7 9.3

Free Cash Flow / Sales 14.7 % -4.5 % -1.5 % -2.6 % 1.4 % 2.1 % 2.1 %

Free Cash Flow Potential 15.1 17.6 17.5 7.0 6.7 13.0 16.6

Free Cash Flow / Sales 14.7 % -4.5 % -1.5 % -2.6 % 1.4 % 2.1 % 2.1 %

Free Cash Flow / Net Profit 429.1 % -102.4 % -37.2 % -169.5 % 93.9 % 70.2 % 58.6 %

Interest Received / Avg. Cash 1.3 % 0.8 % 1.6 % 8.6 % 3.8 % 3.5 % 2.6 %

Interest Paid / Avg. Debt 5.7 % 4.8 % 6.8 % 5.6 % 5.2 % 5.6 % 6.4 %

Management of Funds

Investment ratio 1.5 % 1.1 % 1.0 % 0.9 % 0.9 % 0.9 % 0.8 %

Maint. Capex / Sales 1.0 % 0.8 % 0.8 % 0.8 % 0.9 % 0.8 % 0.8 %

Capex / Dep 133.7 % 118.8 % 145.9 % 127.6 % 129.6 % 135.7 % 135.7 %

Avg. Working Capital / Sales 37.1 % 30.9 % 37.7 % 40.1 % 40.2 % 38.4 % 37.2 %

Trade Debtors / Trade Creditors 174.9 % 224.7 % 224.4 % 203.2 % 219.4 % 221.2 % 222.9 %

Inventory Turnover 3.0 x 2.7 x 2.3 x 2.1 x 2.2 x 2.3 x 2.4 x

Receivables collection period (days) 56 62 62 64 62 63 63

Payables payment period (days) 45 39 40 46 41 41 41

Cash conversion cycle (Days) 94 118 146 161 151 141 137

CAPEX and Cash Flow in EUR m


Free Cash Flow Generation


Working Capital


Einhell


LEGAL DISCLAIMER

This research report was prepared by the Warburg Research GmbH, a subsidiary of the M.M.Warburg & CO KGaA and is passed on

by the M.M.Warburg & CO KGaA. It contains selected information and does not purport to be complete. The report is based on

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and/or consequential damages. In particular, neither M.M.Warburg & 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,

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compiling this research report, it cannot be excluded that it is incomplete or contains errors. M.M.Warburg & CO KGaA and Warburg

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DISCLOSURE ACCORDING TO § 34B OF THE GERMAN SECURITIES TRADING ACT AND FINANV

The valuation underlying the rating of the company analysed in this report is based on generally accepted and widely used methods of

fundamental valuation, such as the DCF model, Free Cash Flow Value Potential, peer group comparison and – where applicable – a

sum-of-the-parts model.

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Valuations, ratings and price targets for the companies analysed by Warburg Research GmbH are subject to constant reviews and

may therefore change, if any of the fundamental factors underlying these items do change.

All share prices given in this equity analysis are closing prices from the last trading day before the publication date stated, unless

another point in time is explicitly stated.

Neither Warburg Research GmbH’s analysts nor M.M.Warburg & CO KGaA’s analysts do receive any payments directly or indirectly

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M.M.Warburg & CO KGaA and Warburg Research GmbH are under supervision of the BaFin – German Federal Financial Supervisory

Authority.

SOURCES

All data and consensus estimates have been obtained from FactSet except where stated otherwise.

Einhell


Section 34b of the German Securities Trading Act in combination with the FinAnV requires an enterprise preparing a securities analysis to point out possible conflicts of interest with respect to the company that is the subject of the analysis. A conflict of interest is assumed, in particular, when the enterprise preparing the analysis …

-1- … or companies affiliated with this enterprise holds 5% or more of the share capital of the analysed company

-2- … or companies affiliated with this enterprise was a member in a consortium which acquired the shares of the

analysed company within the last twelve months

-3- … or companies affiliated with this enterprise manages the securities of the analysed company on the basis of

an existing contract

-4- … or companies affiliated with this enterprise over the previous 12 months has been providing investment

banking services for the analysed company for which a compensation has been or will be paid

-5- … effected an agreement with the analysed company for the preparation of the financial analysis

-6- … or companies affiliated with this enterprise regularly trade in shares or derivatives of the analysed company

-7- … or the analyst responsible for this company has other important financial interests in relation to the analysed

company such as e.g. the performance of mandates for the analysed company

Company Disclosure Link to the historical price targets and rating changes (last 12 months)

Einhell 3, 5, 6 http://www.mmwarburg.com/disclaimer/disclaimer_en/DE0005654933.htm

http://www.mmwarburg.com/disclaimer/disclaimer_en/DE0005654933.htm

Einhell


INVESTMENT RECOMMENDATION

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 105 55

Hold 72 38

Sell 12 6

Rating suspended 3 2

Total 192 100

WARBURG RESEARCH GMBH – ANALYSED RESEARCH UNIVERSE BY RATING …

… 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 91 61

Hold 52 35

Sell 3 2

Rating suspended 2 1

Total 148 100

PRICE AND RATING HISTORY EINHELL AS OF 03.06.2013

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.

Einhell


RESEARCH Roland Rapelius +49 40 309537-220 Malte Räther +49 40 309537-185 Head of Research [email protected] Technology, Telco, Internet [email protected] Henner Rüschmeier +49 40 309537-270 Jochen Reichert +49 40 309537-130 Head of Research hrueschmeier @warburg-research.com Telco, Internet, Media [email protected] Christian Cohrs +49 40 309537-175 Christopher Rodler +49 40 309537-290 Engineering, Logistics [email protected] Utilities [email protected] Felix Ellmann +49 40 309537-120 Malte Schaumann +49 40 309537-170 Software, IT [email protected] Technology [email protected] Jörg Philipp Frey +49 40 309537-258 Susanne Schwartze +49 40 309537-155 Retail, Consumer Goods [email protected] Telco, Internet, Media [email protected] Ulrich Huwald +49 40 309537-255 Oliver Schwarz +49 40 309537-250 Health Care, Pharma [email protected] Chemicals, Agriculture [email protected] Thilo Kleibauer +49 40 309537-257 Marc-René Tonn +49 40 309537-259 Retail, Consumer Goods [email protected] Automobiles, Car Suppliers [email protected] Torsten Klingner +49 40 309537-260 Björn Voss +49 40 309537-254 Real Estate [email protected] Steel, Car Suppliers [email protected] Eggert Kuls +49 40 309537-256 Andreas Wolf +49 40 309537-140 Engineering [email protected] Software, IT [email protected] Frank Laser +49 40 309537-235 Stephan Wulf +49 40 309537-150 Construction, Industrials [email protected] Utilities [email protected] Andreas Pläsier +49 40 309537-246 Banks, Financial Services [email protected]

SALES SALES TRADING Holger Nass +49 40 3282-2669 Oliver Merckel +49 40 3282-2634 Head of Equity Sales, USA [email protected] Head of Sales Trading [email protected] Klaus Schilling +49 40 3282-2664 Gudrun Bolsen +49 40 3282-2679 Dep. Head of Equity Sales, GER [email protected] Sales Trading [email protected] Christian Alisch +49 40 3282-2667 Bastian Quast +49 40 3282-2701 Scandinavia, Spain [email protected] Sales Trading [email protected] Tim Beckmann +49 40 3282-2665 Patrick Schepelmann +49 40 3282-2700 United Kingdom [email protected] Sales Trading [email protected] Matthias Fritsch +49 40 3282-2696 Thekla Struve +49 40 3282-2668 United Kingdom [email protected] Sales Trading [email protected] Marie-Therese Grübner +49 40 3282-2630 Jörg Treptow +49 40 3262-2658 France [email protected] Sales Trading [email protected] Michael Kriszun +49 40 3282-2695 United Kingdom [email protected] Support Marc Niemann +49 40 3282-2660 Katharina Bruns +49 40 3282-2694 Germany [email protected] Roadshow/Marketing [email protected]

Dirk Rosenfelder +49 40 3282-2692 Austria, Switzerland [email protected]

Julian Straube +49 40 3282-2666

Small & Mid Caps [email protected]

Philipp Stumpfegger +49 40 3282-2635

Australia, United Kingdom [email protected]

MACRO RESEARCH

Carsten Klude +49 40 3282-2572 Macro Research [email protected]

Matthias Thiel +49 40 3282-2401 Macro Research [email protected] Dr. Christian Jasperneite +49 40 3282-2439 Investment Strategy [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

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