MATELAN Research - ISRA VISION AG

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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
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MATELAN Research - ISRA VISION AG

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