MATELAN Research - ISRA VISION AG

MATELAN Research
Closing price as of 28/08/11: €17.4
In-Depth Report
01 September 2011
Company / Sector Fair Value Recommendation
ISRA VISION
€23.6
Buy
Technology (€23.0) (unchanged)
Shifting gears
Share price performance Investment case
Uncertainties regarding 2012 are currently weighing on equity
35
markets, thereby creating interesting investment opportunities.
30
25
20
At ISRA, operations are currently accelerating due to its strong
positions in a late cyclical market. Q3 orders suggest that
15
10
double-digit growth should last into 2012 and we have even
5
raised our estimates going forward. Already reflecting slower
0
05/05 05/06 05/07
ISRA
05/08 05/09 05/10
SDAX (Ind.)
05/11 growth beyond 2012 and using a higher risk premium, still
yields an upside of 35% to our fair value.
Share data
Reuters ISRG.DE
Bloomberg ISR.GY
No. of shares 4.33
Daily turnover 7,776
Free Float 70%
Market Cap. 75.4
EV 104.7
Valuation 2011 2012
EV/Sales 1.4 1.3
EV/EBITDA 5.0 4.4
EV/EBIT 7.6 6.3
PER 8.5 7.1
Div. Yield 1.2% 1.3%
RoCE 7.8% 8.6%
RoE 9.3% 10.0%
� MV MARKET GROWTH EXPECTED TO LAST
Following a strong recovery in 2010 and 2011, markets are now
worried about an economic slowdown in 2012. So far, a recession
should not be expected and due its late cyclical nature, the MV
market should still grow solidly. Beyond 2012, we price-in slower
growth but the market should still outpace the global economy due
to technological improvements, lower prices and new applications.
� ISRA PLAYING ON ITS STRENGTHS
On the back of its global presence, a broad product range, a strong
home base, a strong exposure to high growth regions and dominance
in many markets, ISRA is currently outpacing its competitors in key
divisions. Moreover, the company launches new products and
intends to consolidate the highly fragmented market further.
� 35% UPSIDE ON CONSERVATIVE ESITMATES
Q3 figures continued to show strong growth and orders suggest
double-digit growth also in 2012. We have thus raised our estimates
further while remaining conservative. Even including a higher risk
premium, we still arrive at a fair value of EUR23.6, which already
gives the stock an upside of 35% and leaves further headroom.
For additional disclosures please refer to the appendix
Analyst Forecasts 2010 2011e 2012e 2013e 2014e 2015e
Sales 64.85 74.88 82.37 87.31 92.55 98.10
EBITDA 17.65 20.82 23.70 25.36 27.62 29.96
EBIT 11.49 13.82 16.38 17.77 19.57 21.42
Dr. Anne Gronski Adj. EPS 1.62 2.06 2.46 2.68 2.97 3.27
Tel.: +49 228 227 99 238 Dividend 0.20 0.21 0.22 0.23 0.24 0.26
Anne.gronski@matelan.de Oper. CF 6.86 11.43 12.27 17.14 17.14 19.20
www.matelan.de Free CF -3.32 0.69 2.47 7.70 7.02 8.36

ISRA VISION In-Depth Report
TABLE OF CONTENTS
- 2 -
Executive Summary ........................................................................................ 3
Valuation .......................................................................................................... 5
Market Structure & Developments ............................................................ 10
Regional Macroeconomic Trends Stimulate Market .......................... 11
Revival of Traditional Customer Industries ........................................ 13
Discrete Inspection Systems Remain Key Application ..................... 15
Trend Towards Less Complex Products ............................................. 16
Numerous Drivers of Future Growth ................................................. 18
Company Profile and Strategy .................................................................... 20
Strongly Positioned in Key Growth Regions ...................................... 20
Broad Diversification Across Industries .............................................. 21
Differentiating from the Competition .................................................. 22
Strategic Expansion of Activities .......................................................... 25
Capitalizing on Growth Trends ............................................................ 27
Financial Analysis ......................................................................................... 29
Drawing a Conservative Growth Scenario .......................................... 29
Working Capital is the Main Balance Sheet Lever ............................. 31
Back to Positive Free Cash Flows ........................................................ 32
Q3 Sends Positive Signals for 2012 ...................................................... 33
ADDITIONAL DISCLOSURES ........................................................................ 40
DISCLAIMER ................................................................................................... 40
ADDITIONAL INFORMATION ....................................................................... 41
CONTACT DATA ............................................................................................ 41

ISRA VISION In-Depth Report
EXECUTIVE SUMMARY
Economic recovery
stimulating the
European machine
vision market - German
companies excellently
positioned
Numerous drivers of
growth: + 20% expected
for 2011
Order intake secures
sound development in
2012
ISRA attractively
positioned to benefit
from regional growth
trends while being
broadly diversified
across customer
industries
Broad product range and
global reach give ISRA
an edge over most
competitors
- 3 -
Following a sharp contraction during the recession year 2009, the European
market for machine vision technology showed a strong comeback in 2010 on
the back of a recovering global economy. This economic recovery was mainly
driven by the Asian markets, in particular China. Within Europe, Germany
experienced the strongest economic growth, while most other nations were
still struggling. This puts German machine vision companies in a favourable
position as they not only have the largest home market, but also an aboveaverage
exposure to China, the strongest growth driver worldwide.
Economic growth, particularly coming from the emerging markets, increasing
automation in the US and the strength of the German economy are clear
growth drivers for the machine vision market going forward. Looking at
customer industries, we see the traditional industries showing a strong
comeback. Automotive and electrical goods showed the highest growth rates
in 2010 and are expected to continue to do so in 2011. The pharma industry
has good prospects and is rather resistant to a potential economic slowdown.
In industries such as glass and metal, the industry background looks
somewhat more heterogeneous but some machine vision companies are still
reporting good order intake from these industries. We should continue to see
discrete inspection systems as the most important application but 3D systems
and new application should increasingly become drivers of growth. In terms
of products, there is currently a trend towards less complex systems, though
vision systems will continue to dominate the market as they become
increasingly powerful at lower prices. On the back of all these growth drivers,
the EMVA assumes a market increase of 20% for the current year.
Markets are currently worried about a potential slowdown of global economic
growth in 2012. However, most indicators are so far not pointing to a
recession. Growth must be expected to slow from the 2011 level but remain
positive. As a consequence of the late cyclical nature of the machine vision
industry, we would expect the economic slowdown to show only with a time
lag. In fact, order intake remains strong and suggests that the trends
described above will continue in 2012 at slightly lower rates.
Within a rather fragmented industry, ISRA counts among the leading
companies and is one of the few global players. Though Europe is still the
most important region for the company, overseas sales already account for
half of the business. In fact, China has become the second largest location
after Germany. Moreover, ISRA is broadly diversified across most customer
industries. Originating from the automotive industry, metal, paper and glass
now also account for major parts of the company’s sales. We thus feel that
the company should benefit strongly from regional growth trends, while
being in a position to even out the different cycles of the customer industries.
Looking at the competition, only Cognex matches ISRA’s broad
diversification across the industries and its global reach. Though dealing with
much larger customers is never easy, ISRA’s ability to serve its customers
globally with a broad product range gives the company a clear edge over most
competitors. Moreover, ISRA clearly dominates markets such as glass and

ISRA VISION In-Depth Report
Leveraging strong
market positions and
driving growth with new
product initiatives
Double-digit net profit
growth based on
conservative top-line and
margin assumptions
Further progress in
NWC could unlock
additional value –
positive free cash flows
from coming year
onwards
Q3 follows up on strong
Q2 numbers – doubledigit
growth also
expected for next year
Conservatively calculated
fair value of EUR23.6
CCA and CTA point at
further headroom.
- 4 -
metal with shares of 80% and 65%, respectively. This makes it hard for the
customer to find acceptable alternatives.
ISRA is clearly differentiating itself from the competition through is global
presence, its broad product range and technological leadership in many areas.
Moreover, the company is currently undertaking some initiatives to fuel
further growth in the industrial automation segment with new product
launches and we expect the company to continue its successful strategic
expansion in the surface vision segment.
Based on the positive developments that ISRA is currently experiencing as a
result of improving market dynamics as well as the company’s strong position
in its relevant markets, our current growth assumption of 8.6% over the
medium-term appears rather conservative and takes into account a potential
economic slowdown. In particular, we have not yet priced-in management’s
target of more than EUR100m in sales in the coming years. We also assume
only a slight margin increase. Still, net profit growth comes to a CAGR of
15.2%, which means a doubling over the coming 5 years.
One of the key financial drivers – apart from earnings development – is
working capital. ISRA clearly has above-average working capital needs and
improvements on this side could unlock substantial value for the company.
Against the background of its low capital intensity, ISRA is still earning its
cost of capital and shows an industry average RoCE, when excluding
goodwill. Despite the financing of numerous acquisitions, ISRA still shows a
low gearing. Although the company is likely to further consolidate the
market, we are not pricing-in any acquisitions. This leaves the company in a
position to produce positive free cash flows from the current year onwards.
The third quarter sustained the strong picture presented in the second
quarter, leaving our full year estimates too conservative. We have thus raised
our esitmates without becoming aggressive. Order intake accelerated further
and led to a further increase in the order book. A quarter of our sales forecast
for the coming year is already in the books and we expect this to double by
year-end. Against this background, management has not only reiterated its
guidance for the current year, it also expects double-digit growth in the
coming year, even in view of the current uncertainties regarding the
macroeconomic environment.
We value ISRA’s stock on the back of the financials described above. Our
DCF analysis arrives at a fair value of EUR23.6 when sticking to the
conservative approach that we had already used in estimating the company’s
financials and employing an increased market risk premium to reflect current
uncertainties on equity markets. A normalization of the risk perception would
even drive this value to EUR26.5. Our peer group analysis shows that ISRA
trades at a significant discount to the average multiples of its peers, in
particular on a PE basis. Implicit multiples on the base of our fair value bring
ISRA’s PE in line with the average of its closest peers. Applying average
multiples of all peers to ISRA’s earnings yields values in the range of
EUR20.8 to EUR30.2. Moreover, ISRA trades at PE discounts of 14.8% and
9.8% to the Elexis transaction even based on our valuation before the risk
adjustment. Our conservative DCF valuation thus not only gives the share an
upside of 35%, the comparable company analysis as well as the comparable
transaction analysis supports the view that there is still further headroom in
our valuation.

ISRA VISION In-Depth Report
VALUATION
DCF and peer group
valuation
Three stage DCF model
Conservative long-term
assumptions for growth,
margins …
… and WACC
calculation
Fair value of EUR23.6
- 5 -
For valuation purposes, we use a detailed DCF model and a peer group
comparison based on the most important valuation multiples. While the DCF
model is our main valuation tool, which allows for an in-depth discussion of
ISRA’s most important value drivers, the peer group comparison is used as a
validity check for our results.
Our DCF model calculates ISRA’s fair value by discounting the company’s
future free cash flows. In the first phase, we derive the free cash flows from
our detailed financial modelling, which is discussed in the financial section of
this report. The cash flows are then estimated via linearization of all
important value drivers to a normalized value. From the latter, the terminal
value is calculated.
As the terminal value assumptions in particular have a large impact on the
valuation, we have kept them conservative: We have, for example, set the
growth rate of total output to 1.5%, which is merely reflecting inflation. We
thus assume no real growth in ISRA’s total output in the terminal value. To
underline this, we have equated the depreciation rate with the rate of
investment, meaning that the company is only replacing its capital invested in
the business and not expanding it. In addition, we have set the EBITDA
margin slightly below its value in the last explicitly estimated period (i.e.
2014/15). Moreover, we have not assumed any further improvements in
ISRA’s working capital in the terminal value.
All free cash-flows are discounted with the company’s weighted average cost
of capital. This is based on the current forward rates of German government
bonds as risk-free rates. To determine the cost of debt, we add the credit
spread and adjust the tax shield. On the equity side, we add a market risk
premium, which is weighted with a beta factor. In order to reflect current
uncertainties with regard to the economic development in 2012, which is
documented in the recent sell-off on equity markets, we have raised the
market risk premium for small caps by 1pp to now 7%. The beta factor is
derived fundamentally, taking into account the company’s risk profile as
summarized below. In the case of ISRA, we see a higher risk compared to the
market in all risk categories, which results in a final beta factor of 1.2.
Weighting the cost of equity and debt with the market values of the
company’s equity and debt, we come to WACCs between 7.5% and 11.4%
for the years under review.
All assumptions of our valuation are detailed in the table below and result in a
fair value of EUR23.6, which provides the share with an upside of roughly
35% to the current price. It should be highlighted that under the same set of
assumptions our fair value would come to EUR26.5 if we had not raised the
market risk premium. This represents an additional upside if equity markets
start to normalise and ISRA delivers on the expected earnings streams.

ISRA VISION In-Depth Report
DCF model
EURm 01/09/2011 30/09/2011 30/09/2012 30/09/2013 30/09/2014 30/09/2015 30/09/2016 30/09/2017 30/09/2018 30/09/2019 30/09/2020 30/09/2021
Total Output 82.9 91.5 96.1 101.9 108.2 114.0 119.2 123.7 127.5 130.4 132.3
Growth 10.4% 5.0% 6.1% 6.1% 5.3% 4.6% 3.8% 3.0% 2.3% 1.5%
Operating costs -62.1 -67.8 -70.7 -74.3 -86.8 -91.6 -96.1 -100.0 -103.3 -106.0 -107.8
EBITDA 20.8 23.7 25.4 27.6 30.0 31.4 32.7 33.8 34.7 35.4 35.7
Margin 25.1% 25.9% 26.4% 27.1% 27.7% 27.6% 27.5% 27.4% 27.2% 27.1% 27.0%
Depreciation and amortisation -7.0 -7.3 -7.6 -8.1 -8.5 -9.1 -9.7 -10.1 -10.6 -11.0 -11.2
EBIT 13.8 16.4 17.8 19.6 21.4 22.3 23.1 23.7 24.1 24.4 24.5
Margin 16.7% 17.9% 18.5% 19.2% 19.8% 19.6% 19.4% 19.2% 18.9% 18.7% 18.5%
Operating cash-taxes -4.0 -4.8 -5.2 -5.8 -6.4 -6.6 -6.7 -6.8 -6.9 -6.9 -6.9
Other adjustments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
NOPLAT 9.8 11.6 12.5 13.8 15.0 15.7 16.3 16.8 17.2 17.5 17.6
Change 18.2% 8.2% 9.9% 9.2% 4.6% 3.9% 3.1% 2.3% 1.5% 0.7%
Depreciation and amortisation 7.0 7.3 7.6 8.1 8.5 9.1 9.7 10.1 10.6 11.0 11.2
Operating cash flow 16.8 18.9 20.1 21.8 23.6 24.8 26.0 27.0 27.8 28.4 28.9
Capital expenditure -10.7 -9.8 -9.4 -10.1 -10.8 -11.1 -11.3 -11.5 -11.5 -11.4 -11.2
Change in working capital -3.1 -5.9 -3.1 -4.0 -4.3 -4.0 -3.6 -3.1 -2.6 -2.0 -1.4
Free cash flow 3.0 3.2 7.5 7.7 8.5 9.7 11.1 12.4 13.7 15.0 16.3
Cost of capital 7.5% 8.1% 8.5% 8.9% 9.2% 9.5% 9.7% 9.9% 10.1% 10.2% 11.4%
Capital employed 104.5 105.8 117.4 125.9 134.4 140.4 145.6 150.1 153.6 156.0
RoCE 9.4% 10.9% 10.7% 10.9% 11.2% 11.2% 11.2% 11.2% 11.2% 11.2%
Spread 1.8% 2.9% 2.2% 2.0% 2.0% 1.7% 1.6% 1.3% 1.1% 1.0%
Present value of operating cash flows 132.8 3.0 2.9 6.5 6.0 6.1 6.4 6.7 6.8 6.9 6.9 74.6
Non operating assets 6.0
Enterprise value 138.8 Risk profile Assumptions for termial value
Debt -33.8 Cyclical exposure 25.0% 1.1 Long term growth rate 1.5%
Pension provisions -1.9 Transparency 35.0% 1.0 EBIT-margin 18.5%
Minorities -0.8 Size/Liquidity 10.0% 1.3 Risk free rate 5.5%
Equity Value 102.3 Leverage 30.0% 1.4 Risk premium 7.0%
Number of shares 4.3 Other 0.0% 1.0 Credit spread 1.5%
Value per share 23.6 Fundamental beta 1.2 Equity ratio 74.1%
Source: MATELAN Research
Consistent value
generation
Model appears to be
rather stable
- 6 -
The model also shows that ISRA is consistently producing a higher return on
capital employed compared to its cost of capital, thereby generating value
throughout the model. However, the spread between the ROCE and the cost
of capital is declining over time, which is mainly a result of our conservative
assumption of net working capital development. Here we see a source of
further potential upgrades in our valuation.
Apart from working capital, sustainable levels for growth, EBIT margin,
required capex levels and cost of capital are the most important variables in
our fair value calculation. Against this background, we have performed a
sensitivity analysis for a 1pp change in each of these variables. The following
chart shows that this leads to a change in the fair value of up to 7.6%. This
shows that the model is rather stable and leaves sufficient upside for the
share even if we saw a negative change in one of the variables. It should be
mentioned, that a 1pp change in the NWC-ratio is probably underrepresenting
the leverage here due to the high base value.
Sensitivity analysis
Growth
EBIT margin
Investments
Working Capital
Cost of Capital
Source: MATELAN Research, in EUR
21.6 22.6 23.6 24.6 25.6
+/- 100bp

ISRA VISION In-Depth Report
Building a broad peer
group
No peer fully
comparable to ISRA
Overview of the positioning of the peers
Fields of Business
Comment
Source: MATELAN Research
- 7 -
In addition to the DCF model, we have applied a peer group analysis based
on the most common multiples, EV/Sales, EV/EBITDA, EV/EBIT and PE
for the FY 2011 and 2012, respectively. Among the listed machine vision
companies, Basler and Viscom are probably the closest peers as they are also
listed in Germany and they are also pure machine vision companies. In order
to get a broader perspective of the valuation of machine vision companies,
we do also look at the companies listed abroad (Cognex, Perceptron and
Orbotech) and AVT, which has shifted focus to some extent following the
acquisition of GMI. In addition, we have looked at Elexis, which is also not a
pure machine vision company but offers a broad portfolio of automation
technologies to the steel, printing and plastics industry. Elexis is currently
being taken-over and thus yields decent transaction multiples.
A short overview of the competitors is provided in the table below. It shows
that companies vary greatly in the degree of diversification, ranging from
highly focused small players such as Viscom, AVT and Perceptron to large
players, such as Orbotech and Cognex. It has to be noted that none of the
players are fully comparable to ISRA as each one only partly matches ISRA’s
industry mix. More information as to what extent they compete with ISRA
can be found in the section on the competitive landscape.
Basler Viscom Cognex Perceptron Orbotech AVT Elexis
Approx. 80% of sales
come from MV
components,
particularly digital
cameras. Remainder
is achieved with
inspection solutions
for LCD glass.
Profits from strong
demand for
components. Weak
solutions business was
scaled down: Optical
Media Inspection,
Sealing Inspection &
Solar Wafer
Inspection were sold
to a strategic investor
Considering different
reporting years …
… and accounting
standards
Leading supplier of
inspection systems
for the electronics
industry
High dependency on
the electronics
industry as well as on
a few large
customers. Profits
from strong upswing
in demand from the
electronics industry
Worldwide #1 one
in optical inspection
components.
Leading supplier of
optical inspection
solutions to a broad
range of industries.
Profits from high
demand for
components and
compact 'ready to
use' vision systems
Supplier of
measurement and
inspection
applications for
automotive and
manufacturing
companies
Leading supplier of optical
inspection systems for the
production of printed
circuit boards and flat
panel displays
High dependency on Profits from strong
the automobile upswing in demand from
industry. Solutions the electronics industry
base on laser
technology. Profits
from high demand
from the automobile
industry.
Leading supplier of
advanced optical
inspection systems
for the packaging and
label printing
industry. Also a
leading supplier of
pressroom
automation systems.
High dependency on
the printing industry.
Company reports in
USD, while share
trades in Euro,
weakening of the
USD thus has a
negative impact on
valuation.
Supplier of factory
automation
technologies for the
steel, printing and
plastics industry.
Elexis is currently
being taken over by
SMS GmbH which
already holds an
84.4% equity stake in
the company.
For the interpretation of results from the peer group comparison it is
important to keep two points in mind that result from different accounting
practices: ISRA, as well as Cognex and Perceptron, have broken fiscal years.
In essence, this should lead to an increase of the premium for the fiscal year
under consideration that comprises more of the previous calendar year. That
means, this would justify multiples for Cognex (FY ends in June) being higher
than for ISRA (FY ends in September). ISRA’s multiples again should be
higher than Basler’s, where the fiscal year corresponds to the calendar year.
The second bias results from the companies’ different treatment of
development costs: while all companies reporting in accordance with IFRS
are required to activate development costs, those who report in accordance
with US GAAP are not. This effect can skew margins in favour of the
former. As activated development costs are being written down over a certain
period of time, the margin difference is highest with regard to EBITDA and
is somewhat mitigated at lower levels. Two main conclusions arise from this:
firstly, valuation-wise it justifies per se a certain premium for those reporting

ISRA VISION In-Depth Report
Higher margins justify
premium
Peer group comparison
- 8 -
in accordance with US GAAP, and secondly, the focus of this analysis should
be on EV/EBIT and PE rather than on the EV/EBITDA or EV/Sales
multiples.
Overview of the use of accounting standards
Company
Accounting
principles
Headquarters Listed in
ISRA Vision IFRS Germany Germany
Basler IFRS Germany Germany
Viscom IFRS Germany Germany
Cognex US GAAP USA USA
Perceptron US GAAP USA USA
Orbotech US GAAP Israel USA
AVT US GAAP Israel Germany
Elexis
Source: MATELAN Research
IFRS Germany Germany
For better comparability, the margins for ISRA are calculated on the basis of
net sales only (in contrast to the remainder of the report where we calculate
margins as a percentage of total output, i.e. including capitalized items). While
growth is roughly in line with the market, we find that ISRA has the second
highest margins among the peers, which clearly justifies a premium compared
to the other companies.
Basler Viscom Cognex Perceptron Orbotech AVT Elexis Average ISRA ISRA (FV)
Currency EUR EUR USD USD USD USD EUR EUR EUR
FY end Dec 31 Dec 31 Dec 31 June 30 Dec 31 Dec 31 Dec 31 Sept 30 Sept 30
Share price 10.8 7.0 35.4 6.0 11.5 4.9 20.4 17.4 23.6
No of share (m) 3.5 9.0 41.5 8.7 35.4 5.3 9.2 4.3 4.3
Market cap 37.7 63.0 1467.5 51.5 406.6 26.1 187.2 75.4 102.3
Net debt 19.5 -23.6 -33.2 -9.8 -56.8 -10.8 -11.0 26.5 26.5
Pension provisions 0.0 0.3 0.0 0.0 27.5 0.0 8.6 1.9 1.9
Minorities 0.0 0.0 0.0 0.0 1.9 0.0 2.9 0.8 0.8
Participations 0.0 -3.2 -249.9 -10.3 0.0 0.0 -2.8 0.0 0.0
Enterprise Value 57.2 36.6 1184.4 31.5 379.2 15.3 184.9 101.9 128.8
Sales 55.1 52.0 323.0 56.5 574.0 43.4 168.5 74.9 74.9
EBITDA 14.4 9.6 98.4 2.7 n.a. 3.5 27.6 20.8 20.8
Margin 26.1% 18.5% 30.5% 4.8% n.a. 8.1% 16.4% 27.8% 27.8%
EBIT 7.4 8.6 84.9 1.6 81.9 2.7 24.1 13.8 13.8
Margin 13.3% 16.6% 26.3% 2.9% 14.3% 6.2% 14.3% 18.5% 18.5%
Adj. Net Profit 4.0 6.9 66.7 1.4 67.6 2.9 14.7 8.9 8.9
EV/Sales 1.0 0.7 3.7 0.6 0.7 0.4 1.1 1.2 1.4 1.7
EV/EBITDA 4.0 3.8 12.0 11.7 n.a. 4.4 6.7 7.6 4.9 6.2
EV/EBIT 7.8 4.2 14.0 19.3 4.6 5.7 7.7 9.0 7.4 9.3
PE 9.5 9.2 22.0 37.1 6.0 9.1 12.8 15.1 8.4 11.5
Sales 56.6 58.0 361.0 62.0 622.0 48.5 179.5 82.4 82.4
Growth 2.7% 11.5% 11.8% 9.7% 8.4% 11.6% 6.5% 10.0% 10.0%
EBITDA 14.2 9.6 114.0 4.4 n.a. 4.8 29.5 23.7 23.7
Margin 25.1% 16.5% 31.6% 7.1% n.a. 9.9% 16.4% 28.8% 28.8%
EBIT 7.0 8.6 101.8 3.4 93.9 3.9 26.0 16.4 16.4
Margin 12.3% 14.9% 24.9% 5.4% 15.1% 8.0% 14.5% 19.9% 19.9%
Adj. Net Profit 3.8 6.5 79.1 2.4 78.4 3.6 16.3 10.7 10.7
EV/Sales 1.0 0.6 3.3 0.5 0.6 0.3 1.0 1.1 1.2 1.6
EV/EBITDA 4.0 3.8 10.4 7.1 n.a. 3.2 6.3 6.3 4.3 5.4
EV/EBIT 8.2 4.2 11.6 9.3 4.0 3.9 7.1 6.9 6.2 7.9
PE 9.9 9.7 18.6 21.5 5.2 7.3 11.5 12.0 7.1 9.6
Source: MATELAN Research, Bloomberg, company reports (last FY), closing prices and consensus estimates as of 28/08/11
2011e
2012e

ISRA VISION In-Depth Report
Strong discount on PE
basis
Peer group supports our
DCF valuation
Elexis transaction shows
that our valuation is still
not stretched
Peers point at additional
upside for ISRA
Risks to our valuation
- 9 -
Based on EV/Sales multiples, ISRA trades with a sizable premium compared
to its peers. More importantly, ISRA trades at a material discount to its peers,
even the close ones, on almost all earnings multiples.
We also find that the peer group analysis is perfectly consistent with our DCF
calculation. Looking at the multiples that are implied in our DCF valuation,
we find that our DCF calculation brings EV / EBITDA and EV/EBIT
multiples roughly in line with the industry average and PEs even in line with
the close peers.
It must also be highlighted that ISRA is currently trading substantially below
the transaction multiples that result from the current offer for Elexis.
Furthermore, even our DCF valuation arrives at multiples that are not yet
aligned with the Elexis offer, in particular on a PE basis. It should be kept in
mind that the Elexis offer took place before the recent sell-off in the equity
markets and is thus unaffected by the increased risk in the global economic
situation. However, even our DCF valuation of ISRA before the risk
adjustment would yield PE multiples 14.8% and 9.8% below the respective
Elexis multiples for the years 2011 and 2012.
In addition, we have applied the peer group multiples shown above to ISRA’s
earnings in order to arrive at a share price for ISRA that is consistent with the
current valuation of the peers. The following table shows a valuation range
for each multiple determined by the second highest and the second lowest
value and taking the average of the resulting values in the years 2011 and
2012. We have left out the highest and lowest multiple in order to eliminate
outliers. We also show the value determined by the average of the peer group.
The chart makes it clear that employing an EV/Sales multiple does not lead
to reasonable results, which can be explained by ISRA’s above average
profitability. Looking at average values shows a price range of EUR20.8-30.2
for ISRA across the earnings multiples. It should also be remembered that
this methodology does not yet take into account the FY and the margin bias.
Price ranges for ISRA based on peer group
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
EV / Sales EV / EBITDA EV / EBIT PE
Source: MATELAN Research, in EUR per share
Finally, it must be pointed out, that although the risk of an economic
downturn is already reflected in our DCF (increased risk premium) and our
peer group (reduced prices of peers) valuations, a major recession actually
materialising would lead to further adjustments. This is a remaining risk to
our analysis, though the upside appears to be higher at this point in time.

ISRA VISION In-Depth Report
MARKET STRUCTURE & DEVELOPMENTS
Key component of
automation processes
and beyond
Combining different
components to an entire
system
Market coming back to
double-digit growth rates
again
- 10 -
Machine vision is an interdisciplinary technology that combines in particular
lighting, optics, electronics, information technology, software and automation
technology in order to improve industrial but also non-industrial processes.
The main objective is to capture pictures within a production process and
analyse them according to previously defined patterns. This encompasses the
guidance of movements for robots or automated vehicles (robot vision),
controlling production processes e.g. for fast moving materials (surface
vision) or check for completeness (quality vision), and allows the machines to
work faster, in a more precise way and without human intervention. Apart
from these industrial applications, fields such as monitoring areas for security
purposes, controlling traffic flows or driver assistance systems are of
increasing importance.
The main components for a standard machine vision system are (1) lighting,
that ensures that the images captured by the cameras are optimal for the
subsequent analysis, (2) cameras that capture the images, (3) cables and
interfaces that bring the information to the computer and (4) the computer,
which does the final processing. In addition to these hardware components, a
software steering the processes is needed. Apart from such modular systems,
vision systems can be more compact, i.e. in the form of cameras that have
integrated processing and illumination.
Machine vision has become a core tool for further improving automation
processes in the industry and other areas of society and daily life. The market
has thus experienced strong growth since its break-through in the early 80s.
New applications in areas such as safety and security, life sciences,
entertainment, criminology, medical engineering are now likely to drive
growth further in the years to come. The following chart show that the
German machine vision market, one of the largest in the world and for which
a fair history has been recorded, has experienced an average growth rate of
8.4% over the past ten years. While the first half of the decade showed
consistently sound double-digit growth rates, growth had slipped to single
digit in the second half. Moreover, it shows that the financial and economic
crisis in 2009 has had a severe impact on the German machine vision
industry, driving down sales by 21%. The year 2010 brought, however, a
tremendous recovery, coming in even ahead of the previous peak year 2008.
Though growth in 2011 will not match the exceptional rate seen in 2010, it is
still expected to continue at a double-digit rate.

ISRA VISION In-Depth Report
Economic recovery has
driven the machine
vision market
Asian markets lead
global economic
recovery, Germany
shines in Europe
- 11 -
Growth of the German machine vision market
1600
1400
1200
1000
800
600
400
200
0
2000
2001
Source: VDMA, EURm
2002
2003
2004
2005
-10%
-20%
-30%
REGIONAL MACROECONOMIC TRENDS STIMULATE MARKET
The machine vision market tends to follow economic cycles as it is mainly
driven by capital expenditure of the users of this technology. These tend to
expand their capacities in good times but reduce their capital expenditure
when it is getting harder. Looking at the global economy, we find a stronger
than expected recovery in 2010 from the financial and economic crisis a year
earlier. This has had a very positive impact on the European machine vision
landscape, as we had already illustrated for the case of Germany.
GDP growth in key regions
2008 2009 2010 2011E 2012E
Germany 1.0% -4.7% 3.6% 3.5% 1.8%
France -0.2% -2.6% 1.4% 2.2% 1.4%
Italy -1.3% -5.2% 1.2% 0.8% 1.1%
UK -0.1% -4.9% 1.3% 1.1% 1.4%
EU 0.7% -3.9% 1.7% 1.8% 1.5%
USA 0.0% -2.6% 2.9% 1.5% 1.5%
Japan -1.2% -6.3% 4.0% -0.8% 2.7%
Brazil 5.2% -0.7% 7.5% 3.9% 3.5%
Russia 5.2% -7.8% 4.0% 4.4% 3.5%
India 4.9% 9.1% 8.8% 8.0% 8.0%
China 9.6% 9.2% 10.3% 9.0% 8.0%
World 2.7% -0.7% 4.9% 3.7% 3.5%
Source: WestLB as of 28/08/2011
The global economic recovery in 2010 has been driven predominantly by
Asian and other emerging countries, in particular China and India. China
grew by 10.3% mainly on the back of domestic economic activity, with strong
investments in the construction and real estate market. India grew at a rate of
8.8%, mainly driven by private consumption. Due to the higher base, the year
2011 should see as slower but still solid growth in global GDP and the
emerging markets are expected to continue underpinning global growth, with
China and India still showing high single digit growth rates. Within Europe,
Germany follows-up on its leading role, in particular on the base of its strong
exports. France is gaining speed in 2011 after a rather moderate development
2006
2007
2008
2009
Total Sales Growth (r.s.)
2010
2011E
50%
40%
30%
20%
10%
0%

ISRA VISION In-Depth Report
2012 should still see
solid growth, despite
weaker situation in some
countries
European machine
vision market increased
by 34.8% in 2010
Germany most
important market
- 12 -
in 2010. Italy remains weak, mainly as a result of sluggish private and public
consumption. In Spain, the restrictive fiscal policy along with the lasting crisis
in the real estate and banking sectors weigh on the recovery. The UK is also
losing ground, in particular because of fiscal measures such as the VAT
increase in order to reduce the national budget deficit. The US has recovered
by 2.7% in 2010 on the back of a number of governmental stimulus packages.
Due the current debt crisis, the country is expected to show weaker rates in
2011 and 2012. With a 4% GDP growth, Japan has seen a strong recovery in
2010, the current year will, however, be burdened by the tragic events in
Fukushima.
For 2012, a variety of indicators point at a major slowdown in economic
growth and equity markets have already reacted quite heavily on such
prospects. In fact, economic forecasts for a number of countries have been
lowered. Still, India and China should not fall materially short of 2011, Italy
and the UK should finally see some acceleration and the US is not going
down further from the 2011 level. Against this background, we should still
see solid single-digit global GDP growth, which is even ahead of the 2008
level. Within Europe, Germany is expected to defend its leading role.
Sales distribution and growth rates by region
400
350
300
250
200
150
100
50
0
Germany
France
Italy
UK & Ireland
Other Europe
2009 2010 Growth (r.s.)
Source: EMVA, sales of surveyed companies in EURm
Americas
160%
140%
120%
100%
80%
60%
40%
20%
0%
Based on the sound economic recovery the European machine vision market
has recovered much faster from the crisis in 2009 than most of the
companies had anticipated. While the industry expected at the beginning of
2010 to raise sales by 10%, a level of 35% was finally achieved, according to a
survey of 225 European machine vision companies undertaken by the
EMVA. It should be highlighted that roughly half of the companies included
in that report are based in Germany and that these companies account for
61% of the reported sales. Germany is thus playing an exceptional role in that
survey.
Looking at the results of the EMVA survey shows that not only 61% of the
sales of European machine vision companies were generated by machine
vision companies located in Germany, 32% of sales are also generated from
German customers. Germany is thus the largest market for European
machine vision companies. With a share of 8% the Italian market has
replaced France as the second most important European machine vision
market. In total, 72% of sales of the European companies are generated
within Europe. Just over 13% go to each, the Americas and Asia.
China
Japan
South Korea
Other Asia
Other World

ISRA VISION In-Depth Report
China driving growth
Economic development
should fuel growth in
the machine vision
industry further. German
companies excellently
positioned
Automotive and
Electrical show strongest
growth rates in 2010
- 13 -
In terms of growth, Asia (+62%) is even outpacing North America (which
already grew at a remarkable rate of 46%) mainly driven by China (+151%),
which reinforced its position as the most important Asian market for
European machine vision companies. Though much smaller markets, Taiwan
(132%) and South Korea (62%) also showed unmatched growth rates. It is
also noteworthy that these extraordinarily high growth rates are mainly a
result of the excellent links of German companies to these countries.
Excluding the German companies from the survey, shows much more
balanced growth among the Asian countries. With 28%, Europe grew underproportionately,
with the important German and French markets being up
“just” 24.8% and 19.7%, respectively.
Though at a lower rate than previously anticipated, the global economy is
expected to grow further in the coming years, predominantly driven by a
number of Asian countries. This should stimulate the development of the
machine vision industry further. Against this background, German machine
vision companies appear to enjoy a rather favourable position within the
European landscape as they can tap the largest home market, benefit from
the above average economic development of Germany compared to the
other European countries and have excellent relations to the highest growth
regions.
REVIVAL OF TRADITIONAL CUSTOMER INDUSTRIES
Looking at customer industries, we find that demand from the traditional
industrial customers sharply increased in 2010 as a result of the economic
upswing and accounted for 90% of total sales. Here the largest customer
sector, the automotive industry, saw the strongest increase (61%). Packaging,
the second most important customer group, grew roughly in line with the
market and thus maintained its market share. On the base of an 82% jump in
sales, the electrical/electronic industry has become the third largest customer
group for European machine vision companies. Also the medical and
pharmaceutical customers showed a strong upswing in their ordering activity.
In contrast, we still saw negative growth rates in food, semiconductors and
other manufacturing. Though the non-manufacturing customers show a
lower percentage of total sales in 2010 they have not declined in absolute
numbers and continue to represent an important and further growing part of
the market.
Market shares and growth rates by customer industry
25%
20%
15%
10%
5%
0%
Source: EMVA
Automotive
Packaging
Electrical
Pharma
Glass
Paper
Metal
Rubber/Plastic
Semiconductors
Medical
Printing
Food
Other Manuf.
2009 2010 Growth (r.s.)
Non Manuf.
120%
80%
40%
0%
-40%
-80%

ISRA VISION In-Depth Report
Automotive still on the
expansion trail
Glass market to show
more moderate growth
Metal benefiting from
relocation of capacities
Paper and pulp still off
peak levels
Pharma shows high
growth from BRIC
countries and new
regulatory requirements
Semiconductors growing
at solid rate again
- 14 -
Going forward we see the automotive industry taking the dynamic
development, which was predominantly driven by the four BRIC countries as
well as the US market, into 2011 and (to a slightly lesser extent) 2012, though
some European markets have cooled down somewhat. Investment spending
appears to continue, mainly in order to serve upcoming demand in Asia, in
particular China.
In the flat glass industry, China accounts for approximately 50% of global flat
glass production, followed by Europe (16% in 2009) and the US (8% in
2009). In 2010, sales showed declines in some instances in building products,
automotive as well as speciality glass. In 2011, the building sector now shows
a return to modest growth, the solar business is expected to continue growing
as are the automotive (see above) and display businesses. In fact, the glass
market is expected to grow on average by 6% through 2014. However, 2012
might be slightly below that rate and the industry might not come back to
pre-crisis production levels before 2013. We would thus expect to see
investments in machine vision systems rather as a result of productivity
measures than further capacity expansions.
The metal industry showed double-digit growth rates in all steel producing
countries in 2010. Aluminium production increased mainly as a result of new
smelters started and restarted, in particular in China but also Qatar and the
UAE. Copper production remained roughly stable. Going forward,
production might fall back again, leading to a lower utilisation of capacities.
Still, there is a trend to relocate capacities to higher growth regions, which
should be favourable for machine vision companies.
The production of paper and pulp has recovered to some extent from the
dramatic decline in 2009 but is still 8-10% short of the pre-crisis levels. The
year 2011 is expected to show further progress in a mid-single digit rate. The
industry should thus see its pre-crisis levels by 2012/13. Going forward, we
would thus expect investment activity to accelerate moderately.
The world pharmaceutical market was worth an estimated EUR597bn in
2010, with North America accounting for a 42% share, well ahead of Europe
(29%) and Japan (11%). Rapid growth is experienced in particular in
emerging economies such as Brazil, China and India. China and Brazil
showed growth rates of more than 20% compared with an average rate of
1.8% in the five major European markets and 3.3% for the US market.
Increasing regulatory requirements in many countries that aim at securing
drug safety despite increasingly globalized supply chains should additionally
fuel investment spending in track and tracing solutions. The European
Parliament, for example, has adopted a directive against falsified medicine in
February 2011, which must be implemented into national law until 2013.
In the semiconductor industry, all major product categories showed doubledigit
growth rates in 2010. With a 31.8% increase compared to the crisis year
2009, the industry recorded a record number of global chip sales last year.
With 54% of sales the Asia/Pacific region is the largest market for
semiconductors. For 2011, a moderate single digit growth is expected, though
the year has started with double-digit growth. Silicon wafers showed a slightly
lower growth (45%) compared to chips in 2010 so that solid demand (at a
more modest post-recovery rate) is expected for 2011. The global electric and
electronic industry followed the recovery of the semiconductor and silicon
wafer industry in 2010 and has compensated the losses during the global
crisis within a year. For 2011, the world market is expected to grow by 7%,
with the most dynamic development in the emerging markets. 2012 should
come in slightly below this rate.

ISRA VISION In-Depth Report
Automotive, electrical
and pharma could
become main drivers of
future growth, German
companies show strong
positioning in these
industries
Inspections systems for
discrete items still the
most important
application
Different products used
for different fields of
application
Symbol reading and
discrete inspection show
highest growth rates in
2010
- 15 -
On the back of current market developments at the major customers we
would expect further growth for the European machine vision industry to be
fuelled in particular from the important segments, automotive and electrical,
but also pharma and medical. Looking at the German machine vision
companies, we find them over-proportionately strong positioned in particular
in the automotive but also the pharma industries, which should give them an
edge over their European competitors. It should also be noted that some
machine vision companies are able to generate high growth in industries that
are growing more moderately as a result of for example their market
positioning or their product offering.
DISCRETE INSPECTION SYSTEMS REMAIN KEY APPLICATION
The applications of machine vision technology are as multifaceted as the
customer industries that use them. The most important applications can be
found in inspection, i.e. the inspection of discrete items and the inspection of
continuous materials, such as paper, plastic films or sheet metal, also known
as “web inspection”. Discrete systems accounted for 46.5% of all vision
applications in 2010. Together, both applications came to 59.5%. Metrology
is the second most important field of application. Here 3D metrology alone
accounts for 13% out of a total of 16%.
Separating the two product categories of vision systems, we find that the
distribution of applications varies significantly. Inspection systems are clearly
the most important application for more sophisticated application-specific
and configurable systems. Compact systems, such as smart cameras and
vision sensors, are more often used in metrology as well as in character
recognition, part recognition and symbol reading.
In terms of growth, we find the highest rate (49%) in symbol reading, i.e. bar
codes & dot-matrix codes. Growth here is particularly driven by the
industries’ increased efforts to make their supply and value added chains
consistently traceable. Given that regulations across the globe increasingly
require this, we expect their growth to remain above average. Discrete
inspection systems and 2D metrology also grew over-proportionately in 2010.
The strong development of others, might point at strong innovation, though
areas widely related to inspection or measuring tasks might be included in
here.
Market shares and growth rates by applications
60%
50%
40%
30%
20%
10%
0%
Source: EMVA
Inspection
(discrete)
Inspection
(continuous)
Metrology
Symbol
reading
Guidance
Character
recognition
Part
recognition
2009 2010 Growth (r.s.)
Other
200%
150%
100%
50%
0%
-50%
-100%

ISRA VISION In-Depth Report
Discrete inspection
systems, 3D systems and
new applications to drive
future growth
Systems vs. components
Vision systems still the
most important product
category …
… but cameras and
compact systems show
the highest growth rates
Sales growth mainly
driven by higher
volumes
Falling prices help
fuelling further growth
- 16 -
On the back of over-proportionate growth expectations coming from the
automotive and pharma industries, we would expect discrete inspection
systems to continue growing above average in the coming years. Moreover,
3D systems should gain pace again, and we would expect the number of new
application types to increase further. Interestingly, the German companies are
less well positioned in discrete inspection systems compared to the European
average, despite their strong links to the automotive and pharma industries.
They are, however, stronger in continuous processes.
TREND TOWARDS LESS COMPLEX PRODUCTS
Machine vision technology can be separated in two main categories, i.e. vision
systems and vision components. Vision systems cover the above mentioned
application-specific visions systems and configurable vision systems, as well
as smart cameras/compact systems and vision sensors. Vision components
include cameras, frame grabbers, lighting equipment, optics, vision software,
interfaces and cables, as well as other vision accessories.
The following chart shows that vision systems are still the most important
product category, accounting for 42.7% of sales in 2010. Including compact
systems, the share of systems comes to 50.7%. The sale of components
accounts for the remaining half of the market, with cameras being by far the
most important component (30.7%).
Cameras and compact systems showed the highest growth rates, with 61%
and 49%, respectively. With components (+50.5%) clearly outpacing systems
(+23.7%) there appears to be a trend towards lower value products. This is
also reflected in the systems segment, where compact systems grew more
than twice as fast compared to their more complex counterparts in 2010.
Sales and growth rates by product type
700
600
500
400
300
200
100
0
Vision
systems
Compact
systems
Cameras
Frame
Grabbers
2009 2010 Growth
Source: EMVA, sales of surveyed companies in EURm
Lighting
The following chart makes it clear that the sales trends described above
mainly follow the unit developments as price changes accounted for just 4-6
percentage points. In fact, averages prices were down between 4.0% and
5.5% for vision systems, compact systems and cameras, while price for frame
grabbers and Optics increased by 6.3% and 4.1%, respectively.
The graph also illustrates the huge pricing difference between vision systems
and the other product, which fall into a range of EUR130 to EUR1300
compared EUR23000 for an average vision system. As a general trend, we see
Optics
Vision
Software
Interfaces
and cables
Other
Asseccories
70%
60%
50%
40%
30%
20%
10%
0%

ISRA VISION In-Depth Report
Future growth at
compact systems and
components driven by
new application and
greater ease of use
Increasing share of endusers
- 17 -
key products becoming less expensive, while performance is further
increasing. This is an additional driver of volume growth.
Average prices of major products
40.000
35.000
30.000
25.000
20.000
15.000
10.000
5.000
0
2009
Source: EMVA, in EUR
2010 Growth
Though complex vision systems will remain an indispensible part of the
machine vision industry and the strong development of the automotive
industry will continue to support growth here, we see a trend towards
compact systems and single components, in particular cameras. This is in our
view driven by an increasing use in new field of application such as traffic
control or security as well as in increasing ease of use of machine vision
technology, allowing the customers to use the tools by themselves.
Market shares by customer type
60%
50%
40%
30%
20%
10%
0%
Source: EMVA
Vision
systems
OEM
Compact
systems
End-users
Cameras
Integrators
Frame
Grabbers
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
The latter trend can be observed in the development of market shares of the
different customer types. In 2010 end-users became again the strongest
customer type, accounting for 55% of sales. This back-shift to end-users
could also be observed in Germany, where end-users now accounted for 47%
of sales, and was even more pronounced in the other European countries.
The decline in OEM equipment is to a large extent a reflection of the
introduction of a new category, integrators.
Distributors
2009 2010
Optics
Others

ISRA VISION In-Depth Report
Positive impetus from
traditional industries and
new applications
Emerging countries on
the move, America to
increase level of
automation, Germany
with strong economic
development
Products becoming
more powerful at lower
prices
European machine
vision market expected
to show 20% growth in
2011
- 18 -
NUMEROUS DRIVERS OF FUTURE GROWTH
In total, the remarkable upswing in the automotive industry with a sharp rise
of demand in Asian countries, together with industries resilient to economic
fluctuations such as the pharma industry should ensure that the traditional
customer industries will remain the backbone of vision technology companies
in Europe. Moreover, turnover in the non-manufacturing sectors, such as life
science, security, medical equipment, entertainment and traffic, should gather
speed again.
Above all, Chinese manufacturers are increasingly automating their
production as demands for quality are rising in not only their export but also
the domestic markets. Car manufacturers in China are considerably
expanding their capacities. Other industries follow suit. Other Asian markets
such as South Korea, Thailand and Malaysia offer potential for increases in
turnover. The level of automation is rather low in growth regions such as
Brazil. Also the American market still has a low level of automation and
needs to improve productivity. In Europe, growth should be driven by the
Central and Eastern European countries. Though Germany ranks second in
terms of automation after Japan, the positive economic situation of the
country should drive growth here.
These developments are supported by the fact that products are getting
cheaper, more standardized, easier to use and more powerful. The latter
involves a continuous improvement of all vision systems components.
Computer-related developments that have particularly increased the
performance and applicability of machine vision systems are faster processors
and bus speeds, as well as the miniaturization of chips. Camera-related
developments include a trend toward increasing resolutions and the
introduction of faster sensor frame rates. Connection-related developments
have led to faster, digital interfaces, which are able to manage the higher
bandwidth signals generated by faster sensor frame rates and greater
resolution. Software-related developments are new or improved algorithms
and easier to use interfaces. The latter has particularly increased the
acceptance of machine vision systems on the factory floor. The impact of the
technological progress is two-fold: first, the efficiency of vision systems is
increasing continuously; making their use even more profitable for end users
and second, new fields of application are opening up.
Against this background, the EMVA expects the machine vision industry to
grow by 20% in 2011. In contrast to 2010, Europe is expected to show the
highest growth rate with 22%. The Americas should come to 19% and Asia,
mainly driven by China to 18%. The German industry association expects an
increase of 11% for its members, however, in view of recent trading this
appears to be more than conservative. The year 2012 should then show a
more normalised rate. As a result of the late cyclical nature of the industry,
some slowdown of economic growth expected for 2012 should rather be felt
in subsequent years.

ISRA VISION In-Depth Report
Further consolidation
likely to be an additional
source of growth
- 19 -
Outlook for the MV market by region
70%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
Source: EMVA
Europe
An additional source of growth is the hugely fragmented market structure.
The following chart shows that almost half of the surveyed companies have
only between 1 and 10 employees. Only 4% of the companies have more
than 100 employees. This leaves ample room for further consolidation, which
should take place for three reasons: (1) end users of machine vision tend to
be global manufacturers which prefer companies that can service them in
different countries, (2) price pressure in the industry is particularly hard for
smaller companies with less bargaining power and (3) the substitution of less
complicated machine vision application-specific vision systems by ‘off the
shelf’ solutions should particularly hit smaller providers with a limited
number of products on offer. Larger players should thus profit from the
continued consolidation of the market.
European machine vision companies by size
18%
Source: EMVA, no of employees
America
Asia
Other
2009 2010 2011E
20%
9%
4%
49%
1-10 11-20 21-50 51-100 101-500
Total

ISRA VISION In-Depth Report
COMPANY PROFILE AND STRATEGY
Global player with …
… strong positions in
key growth regions
- 20 -
STRONGLY POSITIONED IN KEY GROWTH REGIONS
ISRA Vision is one of the leading providers for machine vision systems. The
company was founded in 1985 and has its headquarters in Darmstadt,
Germany. In total, the company has more than 20 subsidiaries, of which 11
are located in Europe (Germany 7, UK 2, Finland 1 and Italy 1), 7 in Asia
(including two in China and one in India), 2 in North America and 1 in South
America (Brazil). The latest addition is the glass centre in Tianjin, China.
ISRA plans to open another subsidiary in Moscow soon. The company
employs nearly 440 people. With approximately 40 employees, China has
turned into ISRA’s second largest location after Germany.
ISRA’s international structures are reflected in its composition of sales.
Though Europe is still the most important market for the company with a
sales share of 42%, Asia’s importance has increased significantly over the
recent years, now accounting for approx. 38% of total sales. Overseas sales in
total already account for more than half of the business. This is a significantly
higher exposure to key growth regions compared to the market average
(North America 12% and Asia 16%). Though the European market is
expected to show a slightly higher growth rate in 2011, we would expect the
overseas share to increase further over the medium term. It should also be
noted that last year half of the European sales came from Germany, and half
of the Asia/ROW sales came from China, which both currently offer the
most interesting prospects in their respective regions.
Revenue composition by regions
38%
Source: MATELAN, FY2010/11e
20%
42%
Europe America Asia / ROW

ISRA VISION In-Depth Report
Global presence gives
competitive advantage
Expansion increased
importance of surface
vision
Metal, glass and plastics
have become ISRA’s
most important
segments
- 21 -
Basically there are four advantages arising from ISRA’s above average size
and its higher degree of internationalisation compared to most machine
vision companies. Firstly, development costs as percentage of total sales are
lower, which facilitates investment in R&D. Secondly, services can be offered
across the globe which is important as most manufacturer operate globally.
Then, production re-allocation trends – such as the move of the solar
industry to Asia can be followed and finally, the negotiation power towards
suppliers is better, though ISRA’s size compared to its end customers is still
small (which shows in still rather high receivables outstanding).
BROAD DIVERSIFICATION ACROSS INDUSTRIES
Within its organization, ISRA distinguishes between two segments: industrial
automation and surface vision. The company’s structure is illustrated in the
graph below. The first segment – industrial automation - encompasses ISRA’s
robot guidance and quality vision applications. Having refrained from
offering applications for the logistics and food industries where margins tend
to be lower, the segment is now focused on the automotive industry, which
used to be ISRA’s dominant activity before the company started the
systematic expansion of its second segment, surface vision, over the past ten
years. With a sales share of approximately 85%, surface vision today is clearly
the most important segment. It encompasses seven industries for which
ISRA is offering surface inspection systems at various points in their
production processes.
Company structure
Indust.
Autom.
Automotive
Glass
Source: ISRA VISION
Solar
Plastics
Surface
Vision
With a sales share of about 21% each, we expect the glass and the metal
industry to be ISRA’s most important customer groups followed by the
plastics industry, the automotive industry, the paper industry, the solar
industry and the print industry. The solar segment is ISRA’s most recently
formed business segment. It includes ISRA’s inspection applications for thinfilm
solar modules, for solar parabolic mirrors as well as for Si-solar cells and
modules. The latter encompasses the applications of Graphikon, which ISRA
acquired last year.
Print
Specialty Paper
Paper
Metal

ISRA VISION In-Depth Report
Strongly diversified
industry presence
Crisis has given
consolidation a further
push
Cognex is still ISRA’s
main competitor
- 22 -
Revenue composition by customer industry
13%
15%
8%
Source: MATELAN estimates, FY 2010/11e
16%
We had already pointed out that the industry outlook in segments such as
metal and glass is slightly less favourable compared to automotive or
electronics. ISRA is, however, performing excellently in these areas, which
might be a reflection of the company’s global presence, allowing it to follow
customers when re-locating capacities around the globe, and its strong market
position in these segments, allowing it to beat the competition. Moreover, the
strongly performing automotive industry still plays an important role for
ISRA and with the acquisition of Graphikon, ISRA has now a solid exposure
to the strongly growing solar industry. Overall, with its broad and rather
balanced industry mix we see ISRA well positioned to benefit from market
growth and somewhat protected against an economic downturn as the
different industries react a different points in time.
DIFFERENTIATING FROM THE COMPETITION
6%
The global economic crisis left its traces in the competitive landscape of the
machine vision markets. Particularly smaller companies were hit hard and the
market has experienced an increase in consolidation as some companies went
bankrupt, withdrew from market segments, or were taken over by larger
competitors. Some of the smaller companies are still struggling for survival.
With only limited funds left for the development and marketing of new
products, they mainly cause pressure on prices for older and less
sophisticated vision applications.
The following table shows ISRA’s main competitors in the relevant markets.
From this, it becomes clear that Cognex remains ISRA’s number one
competitor, addressing five of ISRA’s seven target markets. Competition of
the other companies confines to just one or two market segments.
21%
21%
Metal Glass Plastics Automotive Paper Solar Print

ISRA VISION In-Depth Report
Automotive Industry:
� Smaller companies
compete on prices
� Cognex offers simple,
Perceptron more
complex systems
� ISRA’s focus on
complex 3D system
seems to pay off
� Tackling Cognex with
new products
- 23 -
Main competitors in ISRA’s market segments
Indust.
Autom.
Automotive
Perceptron
Cognex
HGV
VMT
Quiss
Inos
Glass
Dr. Schenk
Takano
Kubotech
Orbotech
Metal
Cognex
VAI
Source: ISRA VISION, MATELAN Research
Plastics
Cognex
Electr. Sys.
Futec
OCS
Surface
Vision
Paper
ABB
Measurex
Cognex
Futec
In the automotive industry, ISRA competes in particular with Cognex,
Perceptron, VMT, HGV, Inos and Quiss. While Cognex and Perceptron
compete against ISRA on a global basis, VMT, HGV, Inos and Quiss are
local players in Europe. Their limited size and lower global reach made them
more crises prone and they compete currently rather on prices than new
product developments.
Cognex offers less specialized systems for robot guidance and quality control,
which can be either customized by system integrators or – because of their
improved ease of use – by end users themselves. Perceptron, on the other
hand is specialized on more complex three-dimensional applications. The
company’s unique selling proposition was its application for three
dimensional gauging which allows car manufacturers to compare the
digitalized manufactured parts with their CAD master. As opposed to ISRA’s
solutions, Perceptron’s applications base on laser technology, which is the
most common technique for 3D scanning. ISRA has a broader portfolio of
quality assurance and robot guidance applications along the whole production
line.
With price competition for the more simple applications increasing, ISRA has
stopped marketing these applications actively and is more concentrating on
the more complex, particularly three dimensional applications, which are
more interesting from a margin perspective. Most recently, ISRA has
managed to win a larger (‘in the double-digit million Euro range’) long-term
framework contract for the supply of three-dimensional applications to a
Southern German car manufacturer. According to mgmt, this contract
includes the supply of three dimensional car-body gauging, which is based on
ISRA’s digital image processing technology and - just like Perceptron’s -
allows car manufacturers to make the critical CAD comparison. ISRA uses its
two own sensors for this, which include a digital camera and a projector. The
software used was developed by Metronom, a company which ISRA had
taken over a few years ago just for this reason. We expect that ISRA will use
this first marketing success as entry ticket to win further customers and thus
tackle Perceptron on this side.
In addition, mgmt has announced that from FY2011/12 onwards it will offer
four ‘ready to use’ 3D applications for simpler tasks, which include a selfdeveloped
sensor as well as the software. These will compete against
Cognex’s applications and it will be interesting to see if ISRA will be able to
Solar
Dr. Schenk
Cognex
ATM Vision
GP Solar
KLA
Tecnor
Intego
Vitronic
Print
AVT
BST
Eltromat

ISRA VISION In-Depth Report
Glass inspection:
�More than 80%
market share
� Competing on size,
global presence and
technology
Metal industry:
� Market leader in
metal inspection
Plastics industry:
� Focus on new
production processes
drives growth
Paper industry:
� Technological
leadership
- 24 -
tackle Cognex’ core competence. What improves ISRA’s chances on this side
is that – as explained in some more details in the chapter in product
development – a long-term key manager of Cognex is responsible for the
development and marketing of these products.
In glass inspection, ISRA has managed – both via organic growth and several
acquisitions – to become the most dominant player in the market. ISRA’s
management estimates its market share in glass inspection to be more than
80%. As opposed to its competitors, ISRA offers inspection solutions for
different glass production methods (i.e. float and draw glass) and inspection
solutions for subsequent processing such as insulation and coating designed
for different purposes including automotive glass, architectural glass, glass for
flat panel displays and solar glass.
Among the competitors, Munich based Dr. Schenk is the closest, also
offering a broad portfolio of applications. ISRA’s main advantage here is size
and a higher degree of internationalisation. The other competitors, i.e. Basler,
Kubotech and Takano are specialized on different processing steps in the
FDP glass production and thus only have a marginal overlap in their field of
activity with ISRA. Compared to all competitors in glass inspection one of
ISRA’s competitive advantages is its patent for the Moiré technology, which
is vital for checking distortions in glass.
Also in the market for metal inspection, ISRA has a dominant position with a
current market share of about 65% (based on the inspection tasks it
provides). ISRA’s applications in this field are mainly enhancements of
Parystec’s inspection systems. Particularly the customisation time of
Parsytec’s applications were reduced. The main competitive advantage here is
the technological leadership in complex inspection tasks, particularly
inspection in the early stages of production on rough materials and under
difficult environmental conditions. With a market share of approx. 26%,
Cognex is the number two in the metal market. Cognex is more specialized in
simpler systems. Number three in this market is SiemensVAI, which provides
engineering and plant-building services to the metal industry and thus has the
advantage of being integrated in investment decisions right from their start.
In the plastics industry, ISRA’s competitors apart from Cognex are Futec,
Electronic Systems, and OCS. Having started to penetrate the market earliest,
Cognex has the largest market share in the non-woven industry. All others are
local players, among which the Japanese company Futec is the largest player
with a particularly good position in its home market. While, Futec has no
technological advantage, it is quite price aggressive in order to defend its
positioning in Asia. ISRA’s plastics segment, nevertheless, has been one of
the company’s main growth drivers in the past couple of quarters, which was
achieved mainly by addressing production processes of newly invented
products. Among other things, ISRA has sold its inspection solutions for the
production of films for touchscreen panels and Li-ion batteries. ISRA’s
market share in the inspection of plastics is approx. 35% with regard to the
applications it regards as interesting.
In the inspection of paper production, ISRA competes in particular with
ABB, Cognex and Futec. Behind ABB, ISRA is number two in this segment
with a market share of approximately 25%. ABB’s main competitive
advantage is that it offers inspection solutions as an add-on tool to its
production equipment. As an equipment provider, ABB is involved in the
investment process right from the start. Something similar applies to Cognex
that mainly acts as OEM partner to Honeywell/Measurex. ISRA’s systems,
which consist of a fusion of ISRA’s and Parsytec’s technologies, are regarded
to be technologically the most advanced. By recently taking on board the
founders of bankrupt competitor Viconsys ISRA was able to add further

ISRA VISION In-Depth Report
� Developing
interesting niches
Solar Industry:
� Graphikon
acquisition improves
competitive position
Printing industry:
� Still a small player
Applications for robot
guidance, surface vision
and quality vision
Industrial automation
mainly focuses on threedimensional
robot vision
applications
Breakthrough in 3D
applications
- 25 -
applications to its paper portfolio and further expand its customer base. As in
plastics, Futec’s competition is limited to Asia and again mostly is via prices.
None of the larger players is active in the segment ‘specialty paper’. There
had been a number of smaller players, which went bankrupt in the course of
the global recession. ISRA now sees no serious competition in this segment,
which is small but has interesting margins.
In the area of thin-film solar module inspection, ISRA’s solutions meet the
competition of Dr. Schenk, in particular. Again, ISRA’s main advantage is its
size and the higher degree of internationalisation. In the area of Si-solar cells
and module inspection, the number of competitors is not only relatively high
but a number of larger companies also entered the market by taking over
smaller market specialists (such as KLA Tencor taking over Icos or
Centrotherm acquiring GP solar). ISRA entered this market segment via the
acquisition of Graphikon last year and can now offer inspection solutions
along the value chain. Together with Graphikon’s products, ISRA also took
over the company’s connections to its German customer base.
In the printing industry, ISRA’s main competitors are AVT, BST (which is a
subsidiary of Elexis) and Eltromat. Of all these players, AVT has the most
advanced systems. BST and Eltromat’s systems are less advanced but
cheaper. All of ISRA’s competitors have the advantage of long-established
customer links. AVT clearly dominates the market for highly specialized
inspection systems for web-fed presses. ISRA has developed some inspection
solutions for sheet-fed presses. However, up to now ISRA still is a relative
small player in the market with – according to management - a market share
only approx. 10%. One advantage of ISRA is its co-operation with MAN
Roland which offers ISRA’s inspection solution as optional feature in its
printing machines.
STRATEGIC EXPANSION OF ACTIVITIES
ISRA’s declared core technology is optical image processing of images
captured via one or more digital cameras. The company is convinced that this
technology is most versatile and offers the most cost efficient solutions. The
products can be subsumed into two categories (1.) industrial automation and
(2.) surface inspection technologies. All consist of software and hardware
components. While software is developed in-house in Germany, hardware
are two a large extent standard components. Only components, which are
being regarded as strategically important (such as certain frame grabbers and
vision sensors) are developed and produced in-house. Product assembly is
done in-house on three locations (Germany, China and USA). In total, the
company holds approximately 100 patents on its developments.
In the segment ‘industrial automation’ ISRA possesses more than 30
applications. Due to the low margins achievable for vision applications
offered to the logistics and food industry mgmt has refrained from actively
offering such applications and concentrates on the development and
marketing of such applications in the automobile industry which meet
defined margin targets. As mgmt sees the best margin and growth potential in
three-dimensional applications, it is now focusing on the development and
marketing of such applications. Quality assurance applications, which are
simpler and have lower margins, are only offered as an add-on service for
customers.
The company’s 3D applications base on two sensors, which were developed
and are produced in-house. These consist of a smart camera and a projector,
which projects a grid pattern on the object, which is supposed to be

ISRA VISION In-Depth Report
Developing new markets
with ‘off-the-shelf’ 3D
applications
Continuous expansion
of surface vision
applications
- 26 -
measured. Via the technique of triangulation ISRA’s software can then fully
measure these objects in 3D and even enable a comparison with the CAD
master. ISRA obtained the critical software for this via the acquisition of
Metronom. ISRA is now able to implement 3D measurement without using
laser technology. The large long-term contract with a large Southern German
car manufacturer which includes a supply of this technologies provides it with
the needed seal of operability. Management now wants to use this
breakthrough as a marketing tool and start and intensified global sales.
In addition to the 3D application, which ISRA integrates at its customers’
sites, management has declared that it is currently developing four 3D
applications which are ‘ready to use’ and thus need no integration services
from ISRA staff. Mgmt thereby wants to profit from both, the perceived high
potential of 3D applications as well as the current trend towards more
compact and easy to integrate products. With this step, mgmt aims at
accelerating its growth path without having to expand the workforce. In a
first step, the company wants to target the following three markets with the
new ‘off the shelf’ products: ‘Automotive’, ‘Electronics’ and ‘General
Manufacturing’. In the medium term, mgmt also wants to expand the offer to
a broader range of industries. What, in our opinion, should increase ISRA’s
chance to get a foothold in this market, which is currently being dominated
by Cognex, is that ISRA managed to win Eric Ceyrole as head for the
development and marketing of these new products. Eric Ceyrole worked at
Cognex for more than 15 years and in his latest position as Executive Vice
President (from 2006 onwards) was responsible for managing Cognex’s direct
sales organization as well as all of its channel sales worldwide for the
company’s Modular Vision Systems Division.
While a realignment of the industrial automation division is now mgmt’s
focus, the expansion of the surface vision segments has been the focus within
the past ten years. Next to own development activities, ISRA made use of
acquisitions of smaller competitors in order to obtain interesting applications
in existing segments and/or obtain new technologies and an entry into new
markets or regions. As the table below shows, six out of the nine companies
acquired within the past ten years, were integrated in one of the surface vision
segments.
Acquisition history since 2001
2001
2010
•INNOMESS (Glass)
•RMV (Strategic hardware components)
•NANOsystems (Plastics)
•LASOR AG (Glass)
•Metronom (Industrial Automation)
•Image Automation (Glass)
•Parsytec (Metal, Paper)
•Vistec (Regional expansion into Turkey, middle East)
•Graphikon (Solar)
Source: MATELAN Research

ISRA VISION In-Depth Report
Addressing growing solar
market with Graphikon
acquisition
Consolidating the
market further
Good positioned to
benefit from global
growth
15.5% growth in
2010/11 and …
- 27 -
The most recent acquisition was Graphikon, a small Berlin based company
focused on the inspection of the production process of Si-based solar cells
and modules. Following the integration of Graphikon ISRA formed the
segment ‘solar’, which is thought to offer an entire spectrum of vision
applications to the solar industry. Next to inspection solutions for the
Si-based solar cell and module production, it encompasses inspection
solutions for the production of thin-film modules as well as inspection
applications for parabolic mirrors for solarthermal powerplants (both were
formerly part of the glass division).
We would expect ISRA to grow further through acquisitions. As illustrated,
ISRA has a quite successful track record of integrating companies and adding
new markets, new customers, new industries, new regions and new
technologies to its portfolio. We would see for example track and trace
solutions for the pharma industry as an attractive area of expansion due to
the regional growth prospects and upcoming regulatory changes.
CAPITALIZING ON GROWTH TRENDS
In summary, we see ISRA excellently positioned to benefit from the current
recovery of the machine vision market and to capitalize on the growth
prospects going forward. The company can tap a strong home base and has
built strategic bridgeheads in the core growth regions worldwide, in particular
the BRIC countries, which already account for a major share of the
company’s business. Moreover, the company has a rather broad exposure to
different customer industries, which protects it to some extent against cyclical
fluctuations. In some of these industries such as metal and glass, ISRA
possesses a dominant market share. A broad product range, a global presence
and technological leadership in many areas are further differentiators for the
company. The company is thus faring significantly better in particular in the
industries that show currently an under-proportionate market growth. This
becomes obvious, when looking at the growth drivers in ISRA’s segments
and management’s growth expectations for the current year. Both are
summarised in the following table.
Segment dynamics and expected growth rates for 2011
Automotive
(10-20%)
Glass
(>30%)
Solar
(20%)
Plastics
(>30%)
Paper
(>100%)
Specialty Paper
(~10%)
Print
(10-15%)
Metal
(~10%)
• Demand for more complex products increasing
• New sales personnel in China
• New framework contract with German car manufacturer
• Strong demand from China for different kinds of float glass
• Demand from European manufacturers which export to China
• New products (Floatscan 5D)
• High demand for Si-solar cells and modules, in particular coming from China
• High demand from Europe, China and North America resulting from sales initiatives and launch of new
applications
• New applications and broadened custormer base as a result fo Visconsys management joining ISRA
• New large custormer win
• Bancruptcy of former competitor brings new customers
• MAN Rosland is starting to market ISRA's applications as add-on feature more acitively
• Demand is slowly increasing, predominantly from Germany and Korea
• New large manufacturer won in the Americas
Source: MATELAN Research based on information provided by ISRA
On the base of the above analysis, we anticipate the following growth rates
for the different areas in which ISRA is active. With more than 15.5%, we
expect ISRA to grow higher than the anticipated growth for the German

ISRA VISION In-Depth Report
… 8.6% in the medium
term are conservative
estimates
- 28 -
machine vision companies (11%), though the industry forecast is probably
too low. In contrast, we remain below the more aggressive forecast for the
European machine vision market (20%). Moreover, we remain below
management’s expectations in most industries.
We purposely do not extrapolate current growth rates into the future. In fact,
we already account for the effects from a potential economic slowdown in
2012. However, we still arrive at an average sales growth of 8.6% over the
coming five years.
Expected growth by area of activity
30%
25%
20%
15%
10%
5%
0%
Automotive
Metal
Source: MATELAN Research
Glass
Plastics
Paper
2010/11e 2009/10 - 2014/15e
Solar
Print

ISRA VISION In-Depth Report
FINANCIAL ANALYSIS
Conservative growth …
… and margin
assumptions
- 29 -
DRAWING A CONSERVATIVE GROWTH SCENARIO
On the basis of the earlier described market analysis we have updated our
financial forecasts for ISRA. The chart below illustrates how ISRA’s
positioning in the different customer industries adds up to the group’s sales
growth. We had already pointed out that we work on rather conservative
assumptions for ISRA’s growth within its different industry segments. The
chart below now illustrates that we price-in a material slowing of growth over
the coming years. For 2012, we still anticipate a double-digit growth rate on
the back of ISRA’s strong order backlog and the late cyclical nature of the
industry. A potential economic slowdown should, however, show in
subsequent years. We still expect ISRA to outgrow the global economy but
staying conservative we only work with mid single-digit rates. Overall, we still
arrive at a CAGR of 8.6% for the period 2009/10 to 2014/15e and remain
below management’s target to reach more than EUR100m in sales in the
medium term. It must be mentioned that these assumptions not only leave
room for upward revisions, they are also based purely on organic growth. We
had already pointed out that there is an opportunity to consolidate the market
further.
Development of net sales
120
100
80
60
40
20
0
09/10 10/11e 11/12e 12/13e 13/14e 14/15e
Source: MATELAN Research, in EURm
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Metall Paper Print Plastics Solar Glass Automotive Overall growth (r.s.)
The following picture gives additional evidence of the conservative nature of
our model. Despite a continuous increase in sales and ISRA’s ongoing
optimisation efforts, we assume just a slight margin increase over the period
2010/2011e to 2014/2015e on gross profit as well as on EBIT level to 60%
and 19.8%, respectively. As already pointed out in the valuation part of this
report, we employ even lower rates for our terminal value calculation.

ISRA VISION In-Depth Report
Net profit almost
doubling until 2015
- 30 -
Development of sales and margins
Source: MATELAN Research, in EURm
The impact of our sales and margin assumptions on the development of EBT
and net profit is depicted in the graph below. Driven by strong sales growth
and a slight margin increase we expect an over-proportionate net profit
growth of 28% in the current business year. With margins expected to show a
slight rise until 2014/15e net profit CAGR 09/10-14/15e comes to 15.2%.
This means net profit will double over the five-year period, although we
remain 1pp below mgmt’s target to achieve a 20% EBT margin.
Development of EBT and net profit
25
20
15
10
5
0
120
100
80
60
40
20
0
09/10
10/11e
Source: MATELAN Research, in EURm
11/12e
12/13e
13/14e
14/15e
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Net Sales (l.s.) Gross Margin EBITDA Margin EBIT Margin
09/10
10/11e
11/12e
12/13e
13/14e
14/15e
EBT Net Profit Net Profit growth (r.s.)
50%
40%
30%
20%
10%
0%

ISRA VISION In-Depth Report
Low capital intensity
High net working capital
needs
Driving NWC further
down could unlock
additional value
- 31 -
WORKING CAPITAL IS THE MAIN BALANCE SHEET LEVER
The anticipated balance sheet development is geared in essence to past ratios.
Tangible assets only grow moderately as ISRA, being a software company,
needs little equipment to pursue the business. The growth of intangible assets
is linked to capitalized development, which usually accounts for 12% of net
sales and grows accordingly (ex depreciation).
Working capital has been a critical issue for ISRA for quite some time. The
following table shows that at the end of the financial year 2009/10 ISRA had
83% of the sales achieved in this year bound in working capital. This is
materially higher than all of the competitors listed here. We find that while
payable days outstanding even look very favourable and inventory turnover is
still acceptable, it is in particular outstanding receivables that is spoiling the
picture.
Comparison of net working capital
ISRA AVT Basler Viscom Cognex Perceptron Elexis Orbotech
Sales 64.8 39.7 51.0 40.0 290.7 52.1 136.7 529.4
Inventories 14.1 5.9 7.4 10.2 22.7 6.6 23.1 112.8
Inventory turnover 79.5 54.5 53.2 92.7 28.5 45.9 61.7 77.8
Trade Receivables 46.9 5.7 7.0 12.2 45.9 16.7 22.7 153.5
Days outstanding 263.8 52.4 49.8 110.8 57.6 117.2 60.7 105.9
Trade Payables 7.1 1.4 1.3 1.7 7.2 3.7 11.6 26.5
Days outstanding 39.7 12.7 9.4 15.3 9.0 26.2 30.9 18.3
Net Working Capital 53.9 10.2 13.1 20.6 61.5 19.5 34.3 239.8
% of sales 83.2% 25.8% 25.7% 51.6% 21.1% 37.5% 25.1% 45.3%
Source: Company reports of last financial year, in local currency (m)
The following chart illustrates that debtor days have in fact reached a new
high in the year 2009/10. Based on the improvements visible in 9M 10/11
and management’s intensified efforts to improve cash management we
already expect some improvement of all ratios in the current fiscal year.
Going forward, we stick to our conservative approach by assuming stable
debtor days and only marginal improvements in the other ratios. If the
company continues to drive down net working capital, and the competitor
analysis shows the leeway there is, this could unlock material value for the
company.
Development of key working capital ratios
250
200
150
100
50
0
2004/05
2005/06
2006/07
2007/08
Source: MATELAN Research, in days
2008/09
2009/10
2010/11e
2011/12e
2012/13e
2013/14e
Debtor days Stock turn Creditor days
2014/15e

ISRA VISION In-Depth Report
Earning cost of capital
despite working capital
needs and high goodwill
Balance sheet still shows
low gearing
ISRA uses options to
invest in the business
Free cash flow assumed
from current year
onwards
- 32 -
High working capital needs as well as high goodwill are the main constituents
of ISRA’s capital employed. This leads to a return on capital employed that
was somewhat below the industry average in the past financial year. Stripping
out intangibles already shows a much more favourable picture for ISRA.
Further progress on the working capital side would turn ISRA’s above
average sales margin into an industry leading return on capital employed. We
had already pointed out in the valuation section of this report that even on
the base of our conservative assumptions the company will earn its cost of
capital in the current financial year by a margin and will continue to do so
throughout our estimation period.
Comparison of capital employed
ISRA AVT Basler Viscom Cognex Perceptron Elexis Orbotech
Intangibles 80.4 1.4 11.3 2.3 105.3 0.0 24.1 78.4
PPE 2.8 1.4 21.3 1.2 29.6 5.9 18.1 24.8
Net Working Capital 53.9 10.2 13.1 20.6 61.5 19.5 34.3 239.8
Capital employed 137.1 13.1 45.6 24.2 196.4 25.5 76.5 343.1
EBIT 11.5 0.4 6.7 7.1 75.7 -3.4 4.0 57.7
RoCE 8.4% 2.7% 14.6% 29.5% 38.6% -13.5% 5.2% 16.8%
RoCE (excl. Goodwill) 20.2% 3.0% 19.4% 32.6% 83.1% -13.5% 20.1% 21.8%
Source: Company reports of last financial year, in local currency (m)
Looking at equity and liabilities we find that more than half of ISRA’s balance
sheet was covered by equity during the past financial year. This fits well into
the industry context, though some companies show even ratios in excess of
80%. As a result of the recent acquisitions, ISRA’s goodwill is almost as high
as equity and the company is one of two companies listed here that do not
possess a net cash position. Still, net debt comes to just 30% of equity.
Comparison of equity and debt
ISRA AVT Basler Viscom Cognex Perceptron Elexis Orbotech
BS Total 160.9 30.7 58.9 62.2 533.1 64.7 132.4 628.3
Equity 88.3 17.5 25.5 53.7 473.3 53.5 69.1 349.6
Equity ratio 54.8% 57.1% 43.4% 86.3% 88.8% 82.7% 52.2% 55.6%
Cash 8.0 10.8 9.1 26.1 33.2 9.8 31.7 184.8
Financial Debt 34.5 0.0 28.7 2.5 0.0 0.0 20.7 128.0
Net debt (-net cash) 26.5 -10.8 19.5 -23.6 -33.2 -9.8 -11.0 -56.8
Gearing 0.3 -0.6 0.8 -0.4 -0.1 -0.2 -0.2 -0.2
Source: Company reports of last financial year, in local currency (m)
BACK TO POSITIVE FREE CASH FLOWS
Despite the company’s high working capital needs, operating cash flow in the
past financial year was significantly positive. Moreover, the following table
illustrated that the industry left the companies sufficient room to produce
free cash flow. ISRA was only negative on the free cash flow side due to the
Graphikon acquisition, which shows that ISRA has still options to invest in
the business, as is Cognex.
Comparison of cash flows
ISRA AVT Basler Viscom Cognex Perceptron Elexis Orbotech
Operating Cash Flow 7.7 0.0 11.8 4.7 76.3 -1.5 14.4 49.1
Investments -10.0 -0.3 -6.1 -4.4 -176.5 -9.9 -3.4 -7.0
Free Cash Flow -2.2 -0.3 5.8 0.3 -100.1 -11.5 11.0 42.2
Source: Company reports of last financial year, in local currency (m)
As we are not pricing in any potential future acquisitions, we see free cash
flows rising over the forecast period. As already mentioned, this is only the
result of rather conservative growth and margin assumptions and not yet
pricing in any further working capital improvements.

ISRA VISION In-Depth Report
Double-digit sales and
earnings growth
continues in Q3
Industrial automation
driven by demand from
automotive industry
- 33 -
Free cash flow development
25
20
15
10
5
0
-5
-10
-15
-20
Source: MATELAN Research, in EURm
Q3 SENDS POSITIVE SIGNALS FOR 2012
The third quarter showed net sales increasing by 18%, which was better than
we had anticipated (e: +15%). Gross margin decreased slightly from last
year’s high level due to a different product mix, but gross profit nevertheless
remained slightly above our forecast. The contiuned implementation of the
cost optimization programme more than compensated the negative effect
from the product mix and led to an over-proportionate y-o-y growth of EBT
(+24%), which remained marginally ahead of our expectation. Due to a
slightly higher than anticipated tax payment, net income (EUR2.2m/+24%)
then came in fully in line with our forecast.
Q3 review
09/10
10/11e
11/12e
Cash earnings Changes in NWC Investments Free Cash Flow (r.s.)
Q3 10/11 Q3 09/10 % FY 10/11e
% Mgmt outlook
€ m estimated reported new old
Net sales 18.5 19.0 16.1 18.2% 74.9 71.4 4.9% significantly above EUR70m
Capitalized items 2.0 1.8 1.9 -3.0% 8.0 9.3 -13.8%
Total Output 20.5 20.9 18.0 16.0% 82.9 80.7 2.7%
Gross profit 12.3 12.4 10.8 14.9% 49.3 47.8 3.0%
Gross margin 59.9% 59.6% 60.1% 59.4% 59.3%
EBITDA 5.1 5.2 4.4 17.7% 20.8 21.1 -1.5%
EBITDA margin 24.7% 24.8% 24.4% 25.1% 26.2%
EBIT 3.3 3.4 2.8 22.6% 13.8 14.2 -2.7%
EBIT margin 16.3% 16.5% 15.7% 16.7% 17.6%
EBT 3.2 3.3 2.6 24.3% 13.0 13.2 -1.6%
EBT margin 15.5% 15.6% 14.5% 15.7% 16.4% approx. 15.7%
Net income 2.2 2.2 1.8 23.6% 9.0 9.1 -1.6%
Net margin 10.7% 10.6% 9.9% 10.8% 11.3%
EPS 0.51 0.51 0.42 22.2% 2.06 2.09 -1.6%
Source: MATELAN Research, ISRA VISION (reported figures and outlook)
Top line growth was driven by solid demand from all regions, with Europe
(+45%) and Asia (+36%) remaining the main pillars. Sales from the Americas
(+60%) benefitted strongly from ISRA’s increased sales and marketing
efforts in this region. The segment reporting in the table below shows that
both sales and earnings growth were higher in the industrial automation unit,
which profited from an increasing demand from the automotive industry for
ISRA’s 3D solutions, though from a low base. The surface vision unit also
grew sales at a double-digit rate (+16%), but EBIT growth developed underproportionately
(+6.5%). Mgmt stated that this was due to the mix of systems
delivered in Q3 and that inter-annual margin flucuation even out over the
quarters.
12/13e
13/14e
14/15e
10
8
6
4
2
0
-2
-4
-6
-8

ISRA VISION In-Depth Report
Full year forecasts still
conservative ...
Order backlog further
increases to ‘significantly
above EUR40m’
Highest order entry
from industries that
appear to be more
difficult
- 34 -
Segment reporting
Industrial Automation Surface Vision
Q3 10/11 Q3 09/10 % change Q3 10/11 Q3 09/10 % change
Net sales 2.98 2.37 25.8% 16.04 13.72 16.9%
EBIT 0.43 0.03 1600.0% 2.97 2.79 6.5%
Source: ISRA VISION, in EURm
The following chart illustrates that our full year estimates are still conservative
although we have raised our forecasts. In fact, the company just needs to
grow by 8% in the fourth quarter to reach our full year estimate, following a
plus of 19% in the first nine month. On the margin side, the company
showed some deterioration last year in the fourth quarter compared to the
nine-month period. This year, we expect a stable development due to the
better market situation and the finalization of the Graphikon acquisition.
Sales and margins
60
50
40
30
20
10
0
9M Q4e
Sales 09/10 Sales 10/11
EBIT margin 09/10 EBIT margin 10/11
Source: ISRA VISION (reported figures), MATELAN Research (estimates for Q4 10/11), margins shown as
percentage of sales (not total output), in EURm
This view is supported by a strong order backlog, which came in at
‘significantly above EUR40m’ after ‘above EUR40m’ at the end of Q2. This
suggests that order entry still exceeds billing. We would translate
management’s statement into approximately EUR44m, i.e. showing a q-o-q
increase of 10% in the backlog. Most importantly, the order book covers the
sales expected for the fourth quarter almost twice, thus building already a
strong base for the coming year. The following graph shows the development
of sales and orders in the course of the year. In fact, we even expect the order
book to increase slightly by the end of the financial year, which means that
more than half of our sales estimate for the coming year would already be in
the book.
Segment-wise, mgmt stated that order entry in the third quarter was highest
in the industrial automation unit (>50%, even excluding the framework
agreement announced recently), though from a relative low base. In the
surface vision business, demand from glass, plastics and paper industry was
highest. Mgmt stated that the dynamic of the order entry at present remains
high and that it cannot see any signs of a cooling down yet.
30%
25%
20%
15%
10%
5%
0%

ISRA VISION In-Depth Report
Order entry still
accelerating
FY outlook confirmed –
double-digit growth
expected for coming
year
- 35 -
Order development and sales
60
50
40
30
20
10
0
Source: ISRA VISION (reported figures), MATELAN Research
Region-wise, most orders come from Europe (+51%) but the growth of
order entry again is highest from the Americas (+60%). Thereby, both
regions experience a further acceleration from the Q2 level. Most
importantly, we are looking at growth rates in the order development that
largely outstrip our sales forecasts, which further indicates that there might be
some potential for upward revisions in our model.
Order entry growth by region
70%
60%
50%
40%
30%
20%
10%
0%
Source: ISRA VISION
Q1 HY 9M FY
Sales 09/10 Sales 10/11 Order intake Order book
Europe Americas Asia
Against the background of the strong third quarter and the positive
indications going forward, management has confirmed its full year targets of
‘double digit revenue growth to significantly more than EUR70m’ and
‘improving margins’. In view of the strong order development, management
has even indicated that sales in the coming year should grow at a double-digit
rate, irrespective of a potential economic slowdown. The late cyclical nature
of the MV market and ISRA’s new products should in our view help in this
respect.

ISRA VISION In-Depth Report
Mid-term growth targets
reiterated
Higher estimates but not
less conservative
Acquisitions still in the
pipeline
Free cash flow expected
to turn positive by yearend
- 36 -
For the mid-term, mgmt reiterated its target of achieving a net sales level of
‘+EUR100m in the next years’. The main elements of its growth strategy
remain (1) the expansion of its market share in its current markets, (2) the
sale of its products into new regions and sales channels as well as (3) the
innovation of new products for existing customers.
The next table illustrates that following good Q3 figures we have become
more optimistic with regard to ISRA’s financials in the coming years, without
leaving the conservative nature of our model behind and accounting for a
potential economic slowdown.
Changes in our model
FY 10/11e Change FY 11/12e Change FY 12/13e Change
€ m new old % new old % new old %
Net sales 74.9 71.4 4.9% 82.4 75.5 9.1% 87.3 80.1 8.9%
Capitalized items 8.0 9.3 -13.8% 9.1 9.3 -1.6% 8.7 9.9 -11.3%
Total Output 82.9 80.7 2.7% 91.5 84.8 8.0% 96.1 90.0 6.7%
Gross profit 49.3 47.8 3.0% 54.2 50.0 8.3% 56.9 53.3 6.7%
Gross margin 59.4% 59.3% 59.2% 59.0% 59.2% 59.2%
EBITDA 20.8 21.1 -1.5% 23.7 22.6 5.0% 25.4 24.1 5.1%
EBITDA margin 25.1% 26.2% 25.9% 26.6% 26.4% 26.8%
EBIT 13.8 14.2 -2.7% 16.4 15.3 7.2% 17.8 16.4 8.5%
EBIT margin 16.7% 17.6% 17.9% 18.0% 18.5% 18.2%
EBT 13.0 13.2 -1.6% 15.5 14.3 8.2% 16.9 15.5 9.3%
EBT margin 15.7% 16.4% 17.0% 16.9% 17.6% 17.2%
Net income 9.0 9.1 -1.6% 10.7 9.9 8.2% 11.7 10.7 9.3%
Net margin 10.8% 11.3% 11.7% 11.7% 12.2% 11.9%
EPS 2.06 2.09 -1.6% 2.46 2.27 8.2% 2.68 2.45 9.3%
Source: MATELAN Research, in EURm
In addition to this organic growth strategy, mgmt continues to work on a
couple of acquisition projects in order to gain access to further markets
and/or to add further technologies to its product portfolio. Management
made it clear that it expects one more acquisition to take place in the current
calender year.
Cash flow for the nine-month period was not as strong as in the first half. As
the graph below shows, gross operating cash flow (ex. changes in NWC)
increased by 12% from EUR12.4m in 9M 09/10 to EUR14.0m in 9m 10/11)
mainly driven by the increase in earnings. However, cash requirements for net
working capital increased over-proportionately (from EUR-8.4m to EUR-
9.9m/18%) due to the strong business expansion. Operating cash flow was
thus almost stable at EUR4m. Capex was just marginally below last year’s
level. Consequently, free cash flow showed a slight improvement from EUR-
3.0m to EUR-2.3m but remained negative. For the full year, free cash flow
should be positive.
Cash flow development
20.000
15.000
10.000
5.000
0.000
-5.000
-10.000
-15.000
-20.000
Source: ISRA VISION, in EURm
9M 09/10 9M 10/11
CAPEX Change in NWC Gross operating cash flow FCF

ISRA VISION In-Depth Report
Sales and EBIT-margin Adj. EPS and DPS
120
100
80
60
40
20
Source: MATELAN Research, EURm Source: MATELAN Research, EUR
Operating cash flow and free cash flow Capital expenditure and depreciation
Source: MATELAN Research, EURm Source: MATELAN Research, EURm
Equity and net debt RoCE and RoE
Source: MATELAN Research, EURm Source: MATELAN Research
- 37 -
0
25
20
15
10
5
0
-5
-10
-15
-20
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
2008
2008
2009
2010
2011e
2012e
2013e
2014e
2015e
Sales (l.s.) EBIT-margin (r.s.)
2009
2010
2011e
2012e
2013e
2014e
Opearting cash flow Free cash flow
2008
2009
2010
2011e
2012e
2013e
Equity Net debt
2014e
2015e
25%
20%
15%
10%
5%
0%
2015e
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
12
10
8
6
4
2
0
12%
10%
8%
6%
4%
2%
0%
2008
2008
2008
2009
2009
2010
2011e
2012e
2013e
Adj. EPS DPS
2010
2011e
2012e
2013e
2014e
Capex Depreciation
2009
2010
2011e
2012e
2013e
2014e
2014e
RoCE RoE
2015e
2015e
2015e

ISRA VISION In-Depth Report
PROFIT & LOSS ACCOUNT
EURm 2008 2009 2010 2011e 2012e 2013e 2014e 2015e
Sales 68.3 58.2 64.8 74.9 82.4 87.3 92.6 98.1
Growth 33.1% n.m. 11.5% 15.5% 10.0% 6.0% 6.0% 6.0%
Change invent. / intern. prod. assets 8.0 7.7 7.9 8.0 9.1 8.7 9.4 10.1
Total Output 76.3 65.9 72.8 82.9 91.5 96.1 101.9 108.2
Growth 30.3% n.m. 10.5% 13.9% 10.4% 5.0% 6.1% 6.1%
Cost of goods sold -32.0 -27.8 -30.2 -33.6 -37.3 -39.2 -41.1 -43.3
Gross profit 44.3 38.1 42.6 49.3 54.2 56.9 60.9 64.9
Gross-margin 58.0% 57.8% 58.6% 59.4% 59.2% 59.2% 59.7% 60.0%
Sales expenses -10.8 -10.0 -11.3 -12.7 -13.5 -14.2 -15.1 -16.0
Research and development expenses -10.8 -10.2 -11.0 -12.5 -13.3 -13.6 -14.4 -15.1
General and administrative expenses -4.3 -3.7 -3.8 -3.7 -4.1 -4.1 -4.3 -4.3
Other operating result 0.3 1.0 1.1 0.5 0.5 0.5 0.5 0.5
EBITDA 18.6 15.2 17.7 20.8 23.7 25.4 27.6 30.0
EBITDA-margin 24.4% 23.0% 24.3% 25.1% 25.9% 26.4% 27.1% 27.7%
Amortisation and Depreciation -5.7 -5.9 -6.2 -7.0 -7.3 -7.6 -8.1 -8.5
EBIT 12.9 9.3 11.5 13.8 16.4 17.8 19.6 21.4
EBIT-margin 16.9% 14.1% 15.8% 16.7% 17.9% 18.5% 19.2% 19.8%
Interest result -1.6 -1.0 -0.9 -0.9 -0.9 -0.8 -0.8 -0.8
Participation result 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other financial result 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Financial result -1.6 -1.0 -0.9 -0.8 -0.9 -0.8 -0.8 -0.8
Extraordinary result 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EBT 11.3 8.3 10.6 13.0 15.5 16.9 18.7 20.6
Income taxes -3.3 -1.8 -3.6 -4.0 -4.8 -5.2 -5.8 -6.4
Discontinued operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net profit 8.0 6.4 7.0 9.0 10.7 11.7 12.9 14.2
Growth 44.2% -19.7% 9.1% 28.1% 19.3% 9.1% 10.8% 9.9%
Minorities -0.4 0.0 -0.1 0.0 0.0 -0.1 -0.1 -0.1
Net profit after minorities 7.6 6.5 6.9 8.9 10.7 11.6 12.9 14.2
Average no. of shares (m) 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3
EPS (EUR) 1.76 1.52 1.62 2.06 2.46 2.68 2.97 3.27
Growth 48.8% -13.5% 6.4% 27.5% 19.3% 9.1% 10.8% 9.9%
Adj. EPS (EUR) 1.76 1.52 1.62 2.06 2.46 2.68 2.97 3.27
Growth 48.8% n.m. 6.4% 27.5% 19.3% 9.1% 10.8% 9.9%
DPS (EUR) 0.15 0.15 0.20 0.21 0.22 0.23 0.24 0.26
Payout Ratio 8.5% 9.9% 12.4% 10.2% 9.0% 8.6% 8.2% 7.8%
BALANCE SHEET
0001
EURm 2008 2009 2010 2011e 2012e 2013e 2014e 2015e
Intangible assets 69.7 71.5 80.4 83.5 85.3 86.5 87.8 89.3
thereof goodwill 38.7 37.6 37.3 39.4 39.4 39.4 39.4 39.4
Tangible assets 2.6 2.7 2.8 3.4 4.1 4.8 5.5 6.3
Financial assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other fixed assets 3.3 4.5 5.3 5.3 5.3 5.3 5.3 5.3
Fixed assets 75.6 78.6 88.5 92.2 94.7 96.5 98.6 100.9
Inventories 17.2 15.1 14.1 15.7 17.3 18.2 19.3 20.4
Accounts receivable 37.8 37.1 46.9 50.2 55.4 58.2 61.7 65.5
Cash and marketable securities 12.5 7.2 8.0 5.0 3.9 4.8 5.3 7.2
Other current assets 6.5 3.8 3.4 3.4 3.4 3.4 3.4 3.4
Current assets 74.1 63.2 72.5 74.3 80.0 84.6 89.7 96.6
TOTAL ASSETS 149.7 141.8 160.9 166.5 174.7 181.1 188.3 197.5
Subscribed capital 4.3 4.4 4.4 4.4 4.4 4.4 4.4 4.4
Reserves 37.2 37.8 38.1 38.1 38.1 38.1 38.1 38.1
Other equity capital 33.0 38.2 45.0 53.3 63.4 74.4 86.7 100.3
Minorities 1.2 0.8 0.8 0.8 0.8 0.8 0.8 0.8
Shareholder's equity 75.7 81.2 88.3 96.6 106.6 117.7 129.9 143.5
Equity ratio 50.6% 57.3% 54.8% 58.0% 61.0% 65.0% 69.0% 72.7%
Short term financial liabilities 13.5 2.2 10.7 9.2 7.8 6.7 5.8 4.9
Long term financial liabilities 24.9 26.9 23.8 22.3 20.6 15.6 10.7 5.7
Financial liabilities 38.4 29.2 34.5 31.4 28.5 22.4 16.4 10.6
Gearing 50.7% 35.9% 39.1% 32.5% 26.7% 19.0% 12.6% 7.4%
Pension and similar provisions 1.8 1.8 1.9 2.2 2.4 2.5 2.7 2.8
Other provisions 1.2 0.8 0.8 0.8 0.8 0.8 0.8 0.8
Provisions 3.0 2.6 2.6 2.9 3.2 3.3 3.4 3.6
Accounts payable 8.3 5.3 7.1 8.9 9.8 10.3 10.9 11.6
Advances received 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Trade liabilities 8.3 5.3 7.1 8.9 9.8 10.3 10.9 11.6
Other liabilities 24.4 23.5 28.5 26.7 26.7 27.6 27.6 28.2
TOTAL LIABILITIES 149.7 141.8 160.9 166.5 174.7 181.1 188.3 197.5
- 38 -

ISRA VISION In-Depth Report
CASH FLOW
0001
EURm 2008 2009 2010 2011e 2012e 2013e 2014e 2015e
EBIT 12.9 9.3 11.5 13.8 16.4 17.8 19.6 21.4
Depreciation and amortization 5.7 5.9 6.2 7.0 7.3 7.6 8.1 8.5
Change in other provisons 0.1 0.2 -0.2 0.3 0.2 0.1 0.2 0.2
Change in working capital -8.1 -0.3 -10.6 -3.1 -5.9 -3.1 -4.0 -4.3
Change in other assets & liabilities -2.5 -0.1 0.0 -1.7 -0.1 0.9 0.0 0.6
Financial result -1.5 -1.0 -0.9 -0.9 -0.9 -0.8 -0.8 -0.8
Extraordinary result 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Discontinued operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Taxes -1.7 1.4 0.9 -4.0 -4.8 -5.2 -5.8 -6.4
Cash flow from operating activities 4.91 15.36 6.86 11.43 12.27 17.14 17.14 19.20
Net investments in intangible assets -8.5 -8.3 -7.9 -8.0 -9.1 -8.7 -9.4 -10.1
Net investments in tangiblel assets -0.5 -0.7 -0.5 -0.6 -0.7 -0.7 -0.7 -0.8
Net investments in financial assets 0.0 0.0 -0.2 0.0 0.0 0.0 0.0 0.0
Net investments in other fix assets -13.5 -1.9 -1.6 -2.1 0.0 0.0 0.0 0.0
Cash flow from investing activities -22.5 -10.8 -10.2 -10.7 -9.8 -9.4 -10.1 -10.8
Change in financial liabilities 9.0 -9.2 4.7 -3.1 -3.0 -6.1 -5.9 -5.8
Change in shareholder's equity -0.5 0.0 -0.1 0.0 0.0 0.0 0.0 0.0
Change in pensions and similar prov. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Dividend payments -0.7 -0.6 -0.7 -0.7 -0.7 -0.7 -0.7 -0.7
Other / Consolidation / Currency 0.0 -0.1 0.2 0.0 0.0 0.0 0.0 0.0
Cash flow from financing activities 7.9 -9.9 4.2 -3.7 -3.6 -6.7 -6.6 -6.5
Cash at the beginning of period 22.3 12.5 7.2 8.0 5.0 3.9 4.8 5.3
Change in cash -9.7 -5.4 0.9 -3.0 -1.1 1.0 0.4 1.9
Cash at the end of period 12.5 7.2 8.0 5.0 3.9 4.8 5.3 7.2
GROWTH
2008 2009 2010 2011e 2012e 2013e 2014e 2015e
Sales 33.1% -14.8% 11.5% 15.5% 10.0% 6.0% 6.0% 6.0%
EBITDA 70.1% -18.4% 16.3% 17.9% 13.8% 7.0% 8.9% 8.5%
EBIT 110.3% -28.4% 24.0% 20.3% 18.5% 8.5% 10.1% 9.4%
Net profit 48.0% -14.7% 7.5% 28.0% 19.8% 9.1% 10.8% 9.9%
MARGINS
2008 2009 2010 2011e 2012e 2013e 2014e 2015e
Gross 58.0% 57.8% 58.6% 59.4% 59.2% 59.2% 59.7% 60.0%
EBITDA 24.4% 23.0% 24.3% 25.1% 25.9% 26.4% 27.1% 27.7%
EBIT 16.9% 14.1% 15.8% 16.7% 17.9% 18.5% 19.2% 19.8%
Net 10.5% 9.7% 9.6% 10.8% 11.7% 12.2% 12.7% 13.1%
PROFITABILITY
2008 2009 2010 2011e 2012e 2013e 2014e 2015e
RoE 10.6% 7.9% 7.9% 9.3% 10.0% 9.9% 9.9% 9.9%
RoA 7.5% 7.5% 7.7% 5.9% 6.6% 6.9% 7.3% 7.6%
RoCE 10.7% 10.1% 10.5% 7.8% 8.6% 9.0% 9.5% 10.0%
CAPITAL STRUCTURE
2008 2009 2010 2011e 2012e 2013e 2014e 2015e
Equity ratio 50.6% 57.3% 54.8% 58.0% 61.0% 65.0% 69.0% 72.7%
Gearing 34.1% 27.1% 30.0% 27.3% 23.0% 14.9% 8.6% 2.4%
Average interest 6.2% 4.5% 3.3% 3.4% 3.5% 4.9% 7.5% 23.8%
Asset turnover 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
Net working capital / sales 98.6% 118.5% 133.7% 122.2% 122.7% 121.5% 121.6% 121.7%
Receivables days outstanding 202 233 264 245 245 243 243 244
Payables days outstanding 44 33 40 43 43 43 43 43
VALUATION
2008 2009 2010 2011e 2012e 2013e 2014e 2015e
Share price 6.0 11.6 17.1 17.4 17.4 17.4 17.4 17.4
x No of shares 4.3 4.3 4.4 4.3 4.3 4.3 4.3 4.3
= Market Cap 25.9 49.4 74.9 75.4 75.4 75.4 75.4 75.4
+ Net debt 25.8 22.0 26.5 26.4 24.6 17.5 11.1 3.4
+ LT provisions 1.8 1.8 1.9 2.2 2.4 2.5 2.7 2.8
+ Minorities 1.2 0.8 0.8 0.8 0.8 0.8 0.8 0.8
- Participations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0
=Enterprise Value 54.7 73.9 104.0 104.7 103.1 96.2 90.0 81.4
EV / Sales 0.8 1.3 1.6 1.4 1.3 1.1 1.0 0.8
EV / EBITDA 2.9 4.9 5.9 5.0 4.4 3.8 3.3 2.7
EV / EBIT 4.2 8.0 9.1 7.6 6.3 5.4 4.6 3.8
PE 3.4 7.6 10.6 8.5 7.1 6.5 5.9 5.3
Dividend yield 2.5% 1.3% 1.2% 1.2% 1.3% 1.3% 1.4% 1.5%
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ISRA VISION In-Depth Report
ADDITIONAL DISCLOSURES
This report has been prepared by Matelan Research GmbH, Koblenzer Str. 79, 53177 Bonn.
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The analyst(s) responsible for the content of this research report hereby certifies that (1) all views expressed in this
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Stock ratings are defined as follows:
Strong Buy: In the next 6 to 12 months, we expect a potential absolute change in value of over 20% with
high forecast certainty.
Buy: In the next 6 to 12 months, we expect a potential absolute change in value of more than 10%.
Neutral: In the next 6 to 12 months, we expect a potential absolute change in value of over 0% up to a
maximum of 10%.
Reduce: In the next 6 to 12 months, we expect a potential absolute negative change in value of up
to -10%.
Sell: In the next 6 to 12 months, we expect a potential absolute negative change in value of over
-10 % with high forecast certainty.
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ISRA VISION In-Depth Report
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- 41 -
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