Rofin-Sinar

EQUITY RESEARCH
GERMANY
Rofin-Sinar Hold Price target: $ 25.90
Laser Technology
Bullet Points
Capital
Market capitalization $ 659.0 m
Number of shares 28.5 m
Subscribed capital $ 0.3 m
28
26
24
22
20
18
16
14
12
Apr
11
May
11
115
110
10 5
100
95
90
85
80
75
Apr May
11 11
Price / Relative strength to TecDAX
Jun
11
Jun
11
Jul 11 Aug
11
Jul 11 Aug
11
Sep
11
Sep
11
Oct
11
Oct
11
Nov
11
Nov
11
Source : FactSet Warburg Research
in $ 09/2011 09/2012e 09/2013e 09/2014e
EPS (current) 2.06 1.31 1.68 2.09
EPS (previous) 2.06 1.47 1.91 ---
CFPS 2.46 1.84 2.22 2.65
Dividend 0.00 0.00 0.00 0.00
in $ m 09/2011 09/2012e 09/2013e 09/2014e
Sales 597.8 555.9 594.8 654.3
EBITDA 99.7 74.4 90.0 107.8
EBIT 83.7 57.4 72.5 89.8
Net income 59.0 36.9 47.6 59.6
Cash flow 72.0 53.9 65.1 77.6
ROCE (EBIT/CE) 16.7% 10.8% 12.7% 14.3%
09/2011 09/2012e 09/2013e 09/2014e
PER 15.7 17.6 13.8 11.0
PCFR 13.2 12.6 10.4 8.7
Div. Yield 0.0% 0.0% 0.0% 0.0%
EV/Sales 1.41 1.01 0.88 0.75
EV/EBITDA 8.5 7.6 5.8 4.6
Dec
11
Dec
11
Jan
12
Jan
12
Feb
12
Feb
12
Mar
12
Mar
12
Apr
12
Apr
12
Bloomberg Code: RSI
ISIN: US7750431022
Ownership structure
Freefloat St./Freefloat ord. ord 100.0%
May
12
May
12
Price on 3 May 2012: $ 23.12
High/Low 12 month: $ 41.48/18.47
Upcoming events
2 Aug 2012 : Q3 report
8 Nov 2012 : Q4 report
Q2 results below expectation, but better orders
• Due to weaker than expected Q2 figures and a restrained outlook
for Q3 we have reduced our EPS estimates for fiscal 11/12 by
11% and for 12/13 by 12%. Our price target, based on a DCF
model, has been reduced from USD 29.2 to USD 25.9 accordingly.
The valuation with a PER of 17.6 and an EV/EBITDA of 7.6 based
on our updated assumptions for 2012 is not looking particularly cheap
in our view. Therefore, we keep our Hold rating for the time being.
RESEARCH
• Rofin-Sinar released Q2 11/12 (30.9.) figures below our
expectations. Sales (USD 129.4m, -5% yoy, expected USD 133m),
EBIT (USD 11.8m, -36% yoy, expected USD 12.9m) and EPS (USD
0.28, -35% yoy, expected USD 0.31) also missed previous year´s
levels. The only positive surprise was the order intake (USD 138.8m,
-13% yoy, expected USD 130m). Rofin stated that demand from the
machine tool industry has recovered. Thus, new orders improved for
the first time following two quarters of strongly deteriorating
demand. Compared to Q1 11/12 new orders increased by 13%. What
we also regard as positive is an improvement in the gross profit
margin of 200 basis points to 37.7% compared to Q1. Reasons are an
improved product mix and lower manufacturing costs.
INVESTMENT
• While Rofin-Sinar has given a restrained outlook for Q3 (sales
USD 130-135m, EPS USD 0.27-0.30), there seems to be somewhat
more optimism beyond the current quarter. This is based on the
development of demand during Q2. The management stated that new
orders in January amounted to USD 30m while February with USD
51m and March with USD 58m improved rapidly. In this connection
the company reiterated the outlook of FY sales of between USD 550
– 570m. Following Q2 we believe this target has become much more
ambitious as it requires Q4 sales of between USD 155 – 175m. We
have reduced our sales estimate from -6% compared to fiscal 2010/11
to -7% or USD 556m and are therefore more at the lower end of the
guidance. Rofin has also guided the market with a profit before tax
margin of between 9-10%. During H1 the PBT margin stood at 9.4%
and we believe that sales in H2 (Q3e: USD 134m, Q4e: USD 161m)
could be enough to slightly exceed the margin guidance. Based on
our sales estimate we have accounted for a PBT margin of 10.2%.
EGGERT KULS Tel.:+ 49 40 309537 - 256
Senior Analyst ekuls@warburg-research.com
PUBLISHED 04 MAY 2012

Rofin-Sinar EGGERT KULS, + 49 40 309537 - 256
09/2009 09/2010 09/2011 09/2012e 09/2013e 09/2014e
Income statement (in $ m)
Sales 349.6 423.6 597.8 555.9 594.8 654.3
Cost of goods -217.5 -257.3 -365.7 -347.4 -364.8 -394.0
Gross profit 132.0 166.3 232.1 208.5 230.1 260.4
SG&A expenses -88.9 -89.9 -107.5 -107.0 -111.3 -121.3
R&D expenses -31.5 -30.1 -38.3 -41.8 -43.9 -46.9
Other oper. income/expenses 6.6 1.9 3.5 0.0 0.0 0.0
EBITDA 21.1 55.9 99.7 74.4 90.0 107.8
Goodwill amortisation -3.6 -2.3 -2.6 -2.4 -2.4 -2.4
Depreciation -13.0 -11.6 -13.0 -17.0 -17.5 -18.0
EBIT 8.1 43.9 83.7 57.4 72.5 89.8
Operating profit (company definition) 8.1 43.9 83.7 57.4 72.5 89.8
Financial income --- --- --- --- --- ---
Pre-tax profit 14.4 45.3 86.1 56.5 71.5 88.7
Income taxes -5.2 -15.4 -26.1 -18.6 -22.9 -27.9
(Tax rate in %) 36.2 34.1 31.0 33.0 32.0 31.5
Net income 8.8 29.2 59.0 36.9 47.6 59.6
Net income after minorities 8.8 29.2 59.0 36.9 47.6 59.6
EPS ord. 0.32 1.04 2.06 1.31 1.68 2.09
Growth (in %) CAGR (09/14)
Sales 13.4 % -39.2 21.2 41.1 -7.0 7.0 10.0
EBITDA 38.6 % -81.3 165.3 78.2 -25.4 21.1 19.7
EBIT 61.8 % -91.6 443.7 90.4 -31.4 26.5 23.7
Net income
Cost ratios (in % of sales)
46.5 % -86.7 230.9 102.0 -37.4 29.0 25.2
Cost of goods / sales 62.2 60.7 61.2 62.5 61.3 60.2
SG&A / sales 25.4 21.2 18.0 19.2 18.7 18.5
R&D / sales
Cash flow (in $ m)
9.0 7.1 6.4 7.5 7.4 7.2
Gross cash flow 18.1 40.9 73.7 55.4 66.8 79.5
Operating cash flow 65.5 17.4 38.8 60.1 65.6 61.2
Cash flow from investing activities -20.1 -8.6 -21.8 -45.0 -16.0 -18.0
Free cash flow 45.4 8.8 17.0 15.1 49.6 43.2
Cash earnings
Productivity (in $ ts.)
21.8 40.8 72.0 53.9 65.1 77.6
Sales / employee 233.1 282.4 398.5 370.6 396.6 436.2
Personnel expense / employee --- --- --- --- --- ---
EBIT / employee
Returns (in %)
5.4 29.3 55.8 38.2 48.4 59.8
EBITDA / sales 6.0 13.2 16.7 13.4 15.1 16.5
EBIT / sales 2.3 10.4 14.0 10.3 12.2 13.7
Pre-tax profit / sales 4.1 10.7 14.4 10.2 12.0 13.5
Net income / sales 2.5 6.9 9.9 6.6 8.0 9.1
Return on equity 2.1 7.0 12.3 7.3 8.7 9.9
Return on total capital 1.6 5.2 9.0 5.4 6.5 7.5
ROCE
Balance sheet (in $ m)
1.8 10.0 16.7 10.8 12.7 14.3
Property, plant and equipment 55.7 52.7 65.6 73.0 77.0 79.0
Goodwill 93.8 0.0 0.0 0.0 0.0 0.0
Working capital 202.7 226.2 281.2 276.5 277.7 296.0
Current assets 354.9 387.4 467.3 467.8 509.8 565.0
Capital employed (CE) 453.1 438.5 501.5 531.7 572.8 625.9
Equity 421.7 417.8 478.6 508.8 549.9 603.0
Equity ratio in % 78.2 74.9 73.2 74.7 75.4 75.9
Net financial debt (+), liquidity (-) -87.6 -95.7 -107.5 -114.0 -154.0 -186.2
Total net debt (+), liquidity (-) -87.6 -95.7 -107.5 -95.5 -135.0 -166.2
Gearing in % -20.8 -22.9 -22.5 -22.4 -28.0 -30.9
Price ord. on 3 May 2012: $ 23.12
Valuation
EPS ord. ($) 0.32 1.04 2.06 1.31 1.68 2.09
CFPS ($) 0.75 1.42 2.46 1.84 2.22 2.65
Number of shares ord., (m) 28.9 28.8 29.3 29.3 29.3 29.3
P/E ord. 63.8 21.9 15.7 17.6 13.8 11.0
P/CF 26.8 16.0 13.2 12.6 10.4 8.7
EV / Sales 1.42 1.32 1.41 1.01 0.88 0.75
EV / EBITDA 23.6 10.0 8.5 7.6 5.8 4.6
EV / EBIT 61.5 12.7 10.1 9.8 7.2 5.5
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WARBURG RESEARCH GMBH – MAY 2012 PAGE 2