Template for HA Research Notes - ISRA VISION AG

ISRA Vision
Valuation
• Adjusted FCFY points to a fair value between € 21.40 and € 27.60 per
share.
• DCF yields a fair value of € 26.00 per share.
• A peer group comparison is not very meaningful. US competitor
Cognex is c. 2x larger in terms of sales compared to ISRA Vision and has
a different product mix which also includes key components and is much
more focused on the electronics and semiconductor industry. As a result,
margins are higher compared to ISRA Vision (of 26.1% EBIT margin in
2010 vis-à-vis ISRA Vision 2009/10 EBIT margin of 17.7%). AVT’s and
Perceptron’s earnings forecasts, which are based on very few analyst
estimates, suggest that both are going to generate artificially low profits in
the coming two years following several years of operating losses in the
recent past. ISRA Vision always generated 2-digit EBIT margins, even in
crisis years, pointing to a higher competitive quality.
• The price target of € 25 per share is based on adjusted FCFY half way
between 2010/11E and 2011/12E.
Theme
• Managements’ plans to carry out further acquisitions looks set to draw
attention to the stock. The main rationale is to gain market share and
industry-specific expertise. Unless it is a major target, the deals are
expected to be financed by additional debt rather than equity.
• Company founder and CEO Enis Ersü is major shareholder. CEO Mr
Ersü owns 25% of the shares, aligning his interests with that of other
shareholders.
• Guidance for the current year reiterated. 2010/11 sales are expected
clearly be above € 70m, EBIT margin to remain at least stable. By
2013/14, management is targeting a € 100m sales volume based on
organic growth. Acquisitions would come on top.
• Return to growth and higher margins. After sales troughed in Q4
2008/09, the return to the growth path of 2-digit sales growth (+28% yoy,
+15% yoy, +25% yoy) in the recent three quarters was stunning.
12 Hauck & Aufhäuser Institutional Research