Rofin-Sinar

EQUITY RESEARCH
GERMANY
Rofin-Sinar Hold (previous: Buy) Price target: $ 40.70
Laser Technology
Bullet Points
Capital
Market capitalization $ 1,152.8 m
Number of shares 29.0 m
Subscribed capital $ 0.3 m
30
28
26
24
22
20
18
16
14
Jan
10
19 0
18 0
170
16 0
150
14 0
13 0
12 0
110
10 0
90
Jan
10
Feb
10
Feb
10
Price / Relative strength to TecDAX
Mar
10
Mar
10
Apr
10
Apr
10
May
10
May
10
Jun
10
Jun
10
Jul
10
Jul
10
Source : FactSet Warburg Research
in $ 09/2009 09/2010 09/2011e 09/2012e
EPS (current) 0.32 1.04 2.14 2.46
EPS (previous) 0.32 1.04 1.70 2.12
CFPS 0.75 1.43 2.67 3.02
Dividend 0.00 0.00 0.00 0.00
in $ m 09/2009 09/2010 09/2011e 09/2012e
Sales 349.6 423.6 567.6 607.3
EBITDA 21.1 55.9 106.9 122.0
EBIT 8.1 43.9 90.9 105.0
Net income 8.8 29.2 59.6 68.5
Cash flow 21.8 41.2 75.6 85.5
ROCE (EBIT/CE) 1.8% 10.0% 18.3% 18.8%
09/2009 09/2010 09/2011e 09/2012e
PER 63.8 21.9 18.6 16.2
PCFR 26.8 15.9 14.9 13.2
Div. Yield 0.0% 0.0% 0.0% 0.0%
EV/Sales 1.42 1.32 1.77 1.56
EV/EBITDA 23.6 10.0 9.4 7.8
Aug
10
Aug
10
Sep
10
Sep
10
Oct
10
Oct
10
Nov
10
Nov
10
Dec
10
Dec
10
Jan
11
Jan
11
Bloomberg Code: RSI
ISIN: US7750431022
Ownership structure
Freefloat St./Freefloat ord. ord 100.0%
Feb
11
Feb
11
Price on 3 February 2011: $ 39.75
High/Low 12 month: $ 40.76/19.59
Upcoming events
16 Mar 2011 : AGM
5 May 2011 : Q2 report
4 Aug 2011 : Q3 report
4 Nov 2011 : Q4 report
Extremely strong start into fiscal 10/11
• We are reducing our rating for Rofin-Sinar shares from Buy to
Hold but are raising our price target significantly from US-$ 33
to US-$ 40.70. Following very strong Q1 figures and a high order
intake we have raised our FY 10/11 estimates substantially (sales US-
$ 568m, up from US-$ 528m; EPS US-$ 2.14, up from US-$ 1.70).
Our new estimates imply that the company will come somewhat close
to the record sales and earnings seen in fiscal 07/08. Rofin´s
management has raised its guidance for fiscal 10/11 (30.9.) to sales of
US-$ 540-560m (up from US-$ 500 – 520m given 3 months ago).
• Rofin-Sinar released clearly better than expected Q1 10/11
quarterly numbers. Q1 sales were up 48% to US-$ 137.1m
(expected 130), EBIT came in at US-$ 21.5m (expected 17.3, up
276% yoy) and EPS reached US-$ 0.51 (expected 0.40, up 315%
yoy). The top line was boosted by strong demand from almost all
customer industries and especially consumer electronics. According
to Rofin only business with the semiconductor industry has
weakened. Furthermore, business in Asia reached a new record high
(up 93%) while North America was up by 62% and Europe by 19%.
• Rofin´s management has given a Q2 guidance for sales of US-$
132-137m. This looks quite cautious at first glance as the order
backlog at the end of a previous quarter is regularly a good indicator
for the next quarter´s sales. End of December Rofin´s order backlog
rose to US-$ 146.3m, the highest level since Q3 2007/08 and the
third-highest level ever. However, due to reduced business activities
around the Chinese New Year it seems possible that Q2 sales will not
exceed the level of Q1.
• During Q1 10/11 the net cash position decreased by roughly US-$
6m to US-$ 89.3m. This was mainly due to the acquisition and firsttime
consolidation of Swiss-based Lasag. Rofin paid US-$ 9.8m for
this company and had to consolidate some US-$ 6m debt in addition.
According to Rofin´s management Lasag has been earnings accretive
from the beginning onwards. Lasag has special expertise in highprecision
drilling and laser processing heads. Synergies will mainly
result from the usage of Rofin´s worldwide distribution network.
EGGERT KULS Tel.:+ 49 40 309537 - 256
Senior Analyst ekuls@warburg-research.com
PUBLISHED 04 FEBRUARY 2011
INVESTMENT RESEARCH

Rofin-Sinar EGGERT KULS, + 49 40 309537 - 256
09/2007 09/2008 09/2009 09/2010 09/2011e 09/2012e
Income statement (in $ m)
Sales 479.7 575.3 349.6 423.6 567.6 607.3
Cost of goods -276.4 -327.3 -217.5 -257.3 -333.2 -353.2
Gross profit 203.3 248.0 132.0 166.3 234.4 254.1
SG&A expenses -86.5 -103.8 -88.9 -89.9 -105.2 -109.4
R&D expenses -27.8 -41.1 -31.5 -30.1 -35.7 -37.1
Other oper. income/expenses 3.5 1.2 6.6 1.9 1.8 1.5
EBITDA 95.7 112.7 21.1 55.9 106.9 122.0
Goodwill amortisation -4.3 -6.8 -3.6 -2.3 -2.6 -2.6
Depreciation -11.0 -16.4 -13.0 -12.0 -16.0 -17.0
EBIT 84.7 96.3 8.1 43.9 90.9 105.0
Operating profit (company definition) 84.7 96.3 8.1 43.9 90.9 105.0
Financial income --- --- --- --- --- ---
Pre-tax profit 87.1 98.7 14.4 45.3 91.8 105.4
Income taxes -31.8 -33.5 -5.2 -15.4 -31.2 -35.8
(Tax rate in %) 36.5 33.9 36.2 34.1 34.0 34.0
Net income 54.2 66.4 8.8 29.2 59.6 68.5
Net income after minorities 54.2 66.4 8.8 29.2 59.6 68.5
EPS ord. 1.74 2.14 0.32 1.04 2.14 2.46
Growth (in %) CAGR (07/12)
Sales 4.8 % 14.0 19.9 -39.2 21.2 34.0 7.0
EBITDA 5.0 % 15.4 17.8 -81.3 165.3 91.1 14.1
EBIT 4.4 % 14.7 13.7 -91.6 443.7 106.9 15.5
Net income
Cost ratios (in % of sales)
4.8 % 11.1 22.7 -86.7 230.9 104.1 14.9
Cost of goods / sales 57.6 56.9 62.2 60.7 58.7 58.2
SG&A / sales 18.0 18.0 25.4 21.2 18.5 18.0
R&D / sales
Cash flow (in $ m)
5.8 7.1 9.0 7.1 6.3 6.1
Gross cash flow 64.7 80.0 18.1 40.9 76.0 86.3
Operating cash flow 43.9 51.3 65.5 17.4 61.2 77.3
Cash flow from investing activities -14.3 -44.6 -20.1 -8.6 -25.0 -15.0
Free cash flow 29.6 6.7 45.4 8.8 36.2 62.3
Cash earnings
Productivity (in $ ts.)
65.1 82.8 21.8 41.2 75.6 85.5
Sales / employee 342.6 396.7 233.1 282.4 378.4 404.9
Personnel expense / employee --- --- --- --- --- ---
EBIT / employee
Returns (in %)
60.5 66.4 5.4 29.3 60.6 70.0
EBITDA / sales 19.9 19.6 6.0 13.2 18.8 20.1
EBIT / sales 17.7 16.7 2.3 10.4 16.0 17.3
Pre-tax profit / sales 18.2 17.2 4.1 10.7 16.2 17.4
Net income / sales 11.3 11.5 2.5 6.9 10.5 11.3
Return on equity 12.1 16.5 2.1 7.0 12.7 12.9
Return on total capital 8.6 11.4 1.6 5.2 9.5 9.8
ROCE
Balance sheet (in $ m)
17.3 20.5 1.8 10.0 18.3 18.8
Property, plant and equipment 43.8 56.2 55.7 52.7 54.0 56.0
Goodwill 0.0 0.0 93.8 0.0 89.0 87.7
Working capital 221.3 250.0 202.7 226.2 261.0 270.0
Current assets 487.2 406.4 354.9 387.4 452.1 518.8
Capital employed (CE) 489.5 468.9 453.1 438.5 496.0 558.0
Equity 448.9 402.3 421.7 417.8 470.6 532.6
Equity ratio in % 71.7 68.9 78.2 74.9 75.2 76.6
Net financial debt (+), liquidity (-) -187.6 -49.8 -87.6 -95.7 -120.7 -176.4
Total net debt (+), liquidity (-) -187.6 -49.8 -87.6 -95.7 -102.6 -157.9
Gearing in % -41.8 -12.4 -20.8 -22.9 -25.6 -33.1
Price ord. on 3 February 2011: $ 39.75
Valuation
EPS ord. ($) 1.74 2.14 0.32 1.04 2.14 2.46
CFPS ($) 2.05 2.72 0.75 1.43 2.67 3.02
Number of shares ord., (m) 31.8 30.4 28.9 28.8 28.3 28.3
P/E ord. 18.5 18.2 63.8 21.9 18.6 16.2
P/CF 15.7 14.3 26.8 15.9 14.9 13.2
EV / Sales 1.74 1.98 1.42 1.32 1.77 1.56
EV / EBITDA 8.7 10.1 23.6 10.0 9.4 7.8
EV / EBIT 9.9 11.8 61.5 12.7 11.0 9.0
Disclaimer: The legal disclaimer as well as updated disclosures according to Section 34b of the German Securities Trading Act and German FinAnV on the
security/securities analysed in this report can be found on our internet pages at : http://www.mmwarburg.com/research/disclaimer/disclaimer.htm
The disclaimer and disclosures provided are considered a part of this report and should be taken into account when making investment decisions based on this report.
Copyright: 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.
WARBURG RESEARCH GMBH – FEBRUARY 2011 PAGE 2