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1 Solventis Wertpapierhandelsbank Research 25 th August 2014 Klaus Schlote Ulf van Lengerich Tel.: +49 (0) Tel.: +49 (0) Geratherm Medical AG apoplex worth 28 million Buy (Buy) Price target 9.65 (8.52) Price (22 nd August 2014) 8.30 ISIN DE Market capitalization ( million) 41.1 No. of shares (million) 4.95 Website Key figures and forecasts e 2015e 2016e Sales ( m) EBIT ( m) EBIT-margin 4.7% 10.3% 11.8% 14.1% EBITDA ( m) EBITDA-margin 9.5% 14.3% 15.8% 18.0% EPS ( ) DPS ( ) BVPS ( ) PER Price/book value EV/EBIT EV/EBITDA EV/Sales Dividend yield 3.48% 3.0% 3.6% 4.2% Geratherm reported in the H1 report 2014 via a share increase of 2% at apoplex a proceeds gain of 560 t. The valuation of apoplex is estimated at 28 m. Based on the valuation of apoplex (Geratherm s holding: 59.1%) less the book value at Geratherm, the holding s value is equal to a per share valuation of 3.27 for Geratherm. For the first time Geratherm achieved more than 5 m (+2% vs.prev. yr.) in quarterly sales and to a large extent the company was able to compensate for the disappointing Q1 (Brazil). For the H1 period EPS increased at an above-proportion rate to.14, thereof.10 was from Q2. We increase our share price target to 9.65 (old target: 8.52 ) and confirm our recommendation to buy the shares of Geratherm. With a sales increase of 77.8% the area Respiratory showed the best performance. The development was mainly influenced by the start-up (April 2014) of the Geratherm subsidiary, Sensor Systems. Sensor Systems manufactures filters and sensor systems for pulmonary function measurements. Against the background is the insourcing of these products due to strong growth in turnover with disposable products. Sales in South America (Brazil) clearly increased showing an improvement to 1.6 m (Q1:.6 m ) in H1, and the gap vs. the previous year was markedly reduced. We anticipate this trend will continue in H2. Geratherm received orders from Brazil to equip some 100 clinics with the Geratherm Medical Warming Systems. Order volume is approx. 5.2 m, we expect delivery (against cash advances) will take about 15 months. The area Warming Systems (Sales H1 2014: 310 t, prev. yr. 390 t ) was strengthened thru the takeover (100%) of the insolvent LMT Medical Systems, Lübeck, on 1 July LMT manufactures MRT capable incubator systems (patent secured) for infants born preterm. Now this company will market warming systems for pediatrics as well. We estimate sales for Warming Systems 2015 to be some 4 m. Cardio/Stroke (apoplex) sales H1 increased 7.5% to 228 t. The EBIT loss of 39 t was cut in half. With increasing sales the earnings leverage is large. We expect positive earnings for the first time in We anticipate further stroke center (hospitals) affiliation and progress with established doctors. Please note our disclaimer on pages Solventis Wertpapierhandelsbank GmbH, Am Rosengarten 4, Mainz; Tel (0)

2 Solventis Wertpapierhandelsbank - Research Page 2 Transformation gaining momentum Despite an improving Q2 development, sales for the largest division, Healthcare Diagnostic, in H1 14 (total sales %: 71, EBIT portion: 72%) came in about 1 m lower than the previous year - see table 1, page 4. For the full year we estimate sales in the division will not totally reach the level of 14.8 m. Beginning in 2015 we expect moderate growth thru the opening of new markets for gallium thermometers (China, Russia) as well as buildup of the product group Women s Care. Geratherm: Quarterly overview I/10 II/10 III/10 IV/10 I/11 II/11 III/11 IV/11 I/12 II/12 Sales ( million) III/12 IV/12 I/13 II/13 III/13 IV/13 I/14 EBIT-margin II/14 25% 20% 15% 10% 5% 0% -5% Source: Geratherm, Solventis Research In the figure set for 2015 we estimate one will be able to clearly recognize in the forefront higher value medical products with complex approvals and unique features. This transformation will complement growth and allow for increasing margins, in our opinion.

3 Solventis Wertpapierhandelsbank - Research Page 3 Medicin Technology increasing profitability The founding of Sensor Systems caused a one-off gain of.2 m (included in EBITDA) in H1. The adjusted EBITDA (after one-off gain) in H1 came in at 1.2 m (margin: 13% vs. 11.6% in 13), and the reported EPS.09 (prev. yr:.12 ). The EPS decline was mainly due to the lower financial results; in H1 14 no proceeds were realized from the sale of securities (prev. yr:.3 m ). The adjusted EPS in H1 13 amounted to.06. The profitability of Geratherm (excluding security sales) clearly improved in H1 14 in comparison to the previous year. For 2014 we do not expect any proceeds from security sales and we have not assumed this for coming years. Solid Financials With an equity ratio of 69% Geratherm continues to have a solid equity position. Liquidity and securities amounted to 12.7 m or 2.57 per share (prev. yr: 2.81 ) in H1. Financial debt outstanding with banks amounted to 4.9 m (prev. yr: 5.2 m ). Cash on hand includes 560 t realized from the capital increase at the apoplex medical technologies GmbH subsidiary (Geratherm s stake 59.1%). Valuation indicates further room for appreciation The book value of Geratherm at the end of June 2014 amounted to 7.26 per share according to our calculation. The apoplex valuation of 28 m is included in our calculation. The book value of Geratherm allows for a solid base, and further room for appreciation for the share price. Our DCF model confirms the conservative valuation and room for value appreciation. The DCF model applies planned estimates for all areas of business see page 5. Based on our dividend estimate for 2014 of.25 (prev. yr:.24 ) and the current share price of 8.30, the dividend yield of 3% is also attractive. After H1 reporting we come up with a new fair value of 9.65 per Geratherm share (old fair value: 8.52 ). We increase our price target to our new fair value and confirm our recommendation to buy the shares of Geratherm.

4 Solventis Wertpapierhandelsbank - Research Page 4 Geratherm: Segments Q Q2 14, ( k) Healthcare Diagnostic Segment revenue 3,765 3,769 3,971 3,292 3,121 3,285 Operating profit Thereof: Amortization of intangible assets and tangible assets Segment asset 11,265 10,986 10,909 10,153 10,896 10,929 Segment liabilities 7,535 7,416 8,239 7,341 7,424 6,723 Respiratory Segment revenue ,636 Operating profit Thereof: Amortization of intangible assets and tangible assets Segment asset ,465 Segment liabilities Medical warming systems Segment revenue Operating profit Thereof: Amortization of intangible assets and tangible assets Segment asset ,018 Segment liabilities Cardio/Stroke Segment revenue Operating profit Thereof: Amortization of intangible assets and tangible assets Segment asset Segment liabilities Consolidation/Reconciliation Segment revenue Operating profit Thereof: Amortization of intangible assets and tangible assets Segment asset 13,493 12,941 14,057 15,474 14,986 12,159 Segment liabilities Company Segment revenue 4,374 4,324 4,220 3,909 3,847 5,027 Operating profit Thereof: Amortization of intangible assets and tangible assets Segment asset 26,587 25,885 26,795 27,613 27,900 26,740 Segment liabilities 8,558 8,555 8,644 8,617 8,539 8,482 Source: Geratherm, Solventis Research

5 Solventis Wertpapierhandelsbank - Research Page 5 Geratherm: Performance of segments ( k) e 2015e 2016e 2017e 2018e 2019e 2020e Earnings Healthcare Diagnostic 14,797 13,750 14,094 14,446 14,807 15,177 15,557 15,946 Cardio/Stroke ,152 1,800 2,520 3,240 3,600 3,780 Medical w arming systems 815 2,500 4,000 4,400 4,840 5,324 5,856 6,442 Respiratory 1,754 3,750 4,200 4,704 5,268 5,901 6,609 7,402 Consolidation/Reconciliation ,089-1,198-1,318-1,449-1,594 16,827 19,892 22,456 24,261 26,238 28,324 30,173 31,975 EBIT Healthcare Diagnostic 913 1,375 1,409 1,445 1,481 1,518 1,556 1,595 Cardio/Stroke ,689 2,392 2,735 2,800 Medical w arming systems Respiratory ,110 Consolidation/Reconciliation ,044 2,645 3,418 4,276 5,149 5,682 5,958 EBIT-shares Healthcare Diagnostic 94.5% 60.9% 48.7% 39.2% 32.4% 27.8% 25.9% 25.3% Cardio/Stroke -6.3% 0.4% 12.2% 26.7% 37.0% 43.8% 45.5% 44.4% Medical w arming systems -6.9% 13.8% 17.3% 14.9% 13.3% 12.2% 12.2% 12.8% Respiratory 18.7% 24.9% 21.8% 19.1% 17.3% 16.2% 16.5% 17.6% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Company EBIT-margin 4.7% 10.3% 11.8% 14.1% 16.3% 18.2% 18.8% 18.6% Financial result EBT 1,285 1,844 2,445 3,218 4,076 4,949 5,482 5,758 Taxes EAT 1,138 1,475 1,932 2,510 3,139 3,761 4,112 4,261 Minorities Shareholders 1,334 1,400 1,802 2,230 2,739 3,161 3,312 3,461 No. of shares 4,950 4,950 4,950 4,950 4,950 4,950 4,950 4,950 EPS Source: Geratherm, Solventis Research

6 Solventis Wertpapierhandelsbank - Research Page 6 Geratherm: P + L, ( ) 2013 yoy 2014e yoy 2015e yoy 2016e yoy Sales 16,827, % 19,892, % 22,455, % 24,261, % Unfinished goods -936, % -1,107, % -1,250, % -1,350, % Inventory changes & own work cap. 27, % 72, % 72, % 72, % Other operating earnings 313, % 293, % 300, % 278, % Cost of goods 7,369, % 8,711, % 9,834, % 10,624, % Gross profit 8,862, % 10,438, % 11,744, % 12,636, % Personnel expenses 3,265, % 3,860, % 4,357, % 4,708, % Depreciation 807, % 800, % 909, % 960, % Ohter operating expenses 3,995, % 3,734, % 3,831, % 3,549, % EBIT (pre restruct. charges) 793, % 2,044, % 2,645, % 3,418, % EBIT-margin (pre restruct. charges) 4.71% -1.3 pp 10.28% 5.6 pp 11.78% 1.5 pp 14.09% 2.3 pp EBITDA 1,600, % 2,844, % 3,554, % 4,378, % EBITDA-margin 9.51% -1.2 pp 14.30% 4.8 pp 15.83% 1.5 pp 18.05% 2.2 pp EBIT 793, % 2,044, % 2,645, % 3,418, % EBIT-margin 4.71% -1.3 pp 10.28% 5.6 pp 11.78% 1.5 pp 14.09% 2.3 pp Net income from securities 726, % 36, % 36, % 36, % Interest income 20, % 16, % 15, % 15, % Interest expenses 255, % 251, % 251, % 251, % Financial result 491, % -199, % -199, % -200, % Earnings before taxes (EBT) 1,284, % 1,844, % 2,445, % 3,218, % EBT-margin 7.64% -1.4 pp 9.27% 1.6 pp 10.89% 1.6 pp 13.26% 2.4 pp Taxes 146, % 368, % 513, % 708, % Tax rate 11.44% -9.1 pp 20.00% 8.6 pp 21.00% 1.0 pp 22.00% 1.0 pp Earnings after taxes (EAT) 1,137, % 1,475, % 1,931, % 2,510, % Minorities -195, n.m. 75, % 130, % 280, % Group net Net income 1,333, % 1,400, % 1,801, % 2,230, % No. Of shares on (m) % % % % Earnings per share ( ) % % % % Source: Geratherm, Solventis Research

7 Solventis Wertpapierhandelsbank - Research Page 7 Geratherm: Balance sheet, ( ) 2013 yoy 2014e yoy 2015e yoy 2016e yoy Assets Cash and securities 11,112, % 10,486, % 10,194, % 10,202, % Accounts receivables 2,866, % 3,389, % 3,825, % 4,133, % Inventories 4,535, % 5,361, % 6,052, % 6,539, % Other current assets 296, % 296, % 296, % 296, % Tax claims 380, % 380, % 380, % 380, % Total current assets 19,192, % 19,913, % 20,750, % 21,552, % Fixed assets 3,332, % 3,232, % 3,302, % 3,487, % Intangible assets 617, % 617, % 617, % 617, % Goodwill 75, % 75, % 75, % 75, % Deferred taxes 1,083, % 1,083, % 1,083, % 1,083, % Tangible assets 4,346, % 4,346, % 4,346, % 4,346, % Other long-term assets 50, % 50, % 50, % 50, % Total fixed assets 9,505, % 9,405, % 9,475, % 9,659, % Total assets 28,697, % 29,319, % 30,225, % 31,211, % Equity Subscribed capital 4,949, % 4,949, % 4,949, % 4,949, % Capital reserves 10,711, % 10,711, % 10,711, % 10,711, % Retained earnings 5,043, % 5,206, % 5,523, % 6,021, % Accumulated other comprehensive income 0.00 n.m. 49, n.m. 296, % 544, % Shareholder's equity 20,704, % 20,917, % 21,481, % 22,227, % Minorities -624, % -624, % -624, % -624, % Shareholder's equity with minorities 20,080, % 20,293, % 20,857, % 21,602, % Long-term liabilities Accrued investment subsidies 697, % 697, % 697, % 697, % Financial debt 2,934, % 2,934, % 2,934, % 2,934, % Loans minorities 596, % 596, % 596, % 596, % Total long-term liabilities 4,228, % 4,228, % 4,228, % 4,228, % Short-term liabilities Trade accounts payable 1,406, % 1,662, % 1,877, % 2,027, % Financial debt 2,143, % 2,143, % 2,143, % 2,143, % Tax liabilities 84, % 99, % 112, % 121, % Other liabilities 754, % 891, % 1,006, % 1,087, % Total short-term liabilities 4,388, % 4,797, % 5,139, % 5,380, % Total liabilities 28,697, % 29,319, % 30,225, % 31,211, % Source: Geratherm, Solventis Research

8 Solventis Wertpapierhandelsbank - Research Page 8 Geratherm: DCF Model ( ) e 2015e 2016e 2017e 2018e 2019e Terminal Value Sales 16,827, ,892, ,455, ,261, ,237, ,324, ,172,585.2 % change 5.4% 18.2% 12.9% 8.0% 8.1% 8.0% 6.5% EBITDA 1,600, ,844, ,554, ,378, ,287, ,210, ,795,024.0 EBITDA-margin 9.5% 14.3% 15.8% 18.0% 20.2% 21.9% 22.5% EBIT 793, ,044, ,645, ,418, ,276, ,148, ,682,155.1 EBIT-margin 4.7% 10.3% 11.8% 14.1% 16.3% 18.2% 18.8% NOPLAT 702, ,635, ,089, ,666, ,292, ,913, ,261, ,261,581.0 Reinvestm ent Rate % 60.7% 47.1% 31.0% 30.5% 29.6% 27.9% 24.7% FCFF 2,288, , ,106, ,838, ,289, ,755, ,074, ,110,564.2 WACC 5.66% 5.59% 5.59% 5.60% 5.61% 5.65% 5.68% 6.83% Cumulative WACC % % % % % % % Net present value FCFF 609, , ,561, ,841, ,097, ,214, ,091,870.6 Total net present value FCFF 9,317,044.6 Net present value terminal value 31,091,870.6 as % of enterprise value 76.9% Enterprise value 40,408,915.2 Net financial debt -7,336,595.0 Walue of tax-loss carried forw ard 0.0 Minorities 0.0 Associates 0.0 Equity value 47,745,510.2 Value per share ( ) 9.65 Source: Solventis Research

9 Solventis Wertpapierhandelsbank - Research Page 9 Disclaimer, Notice according to 34b German Securities Trading Act (WpHG), potential conflicts of interest, company-specific disclosures and regulatory disclosures The following statements inform the reader of statutory requirements which have to be complied with when publishing investment research material. 1. Disclaimer The information herein is believed by us to be reliable and has been obtained from public sources believed to be reliable. We make no representation as to the accuracy or completeness of such information. Recommendations and/or projections made by us on the basis of this information constitute the nonbinding current judgement of the author as of the date of this report. Subsequent changes cannot be taken into account. We cannot accept any liability whatsoever for the completeness or correctness of this report. The report is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell shares. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situation and investment objectives. We are not in a position to determine whether the recommendations are in keeping with your personal investment strategies and objectives. This report is subject to copyright. It may only be reproduced with our consent. 2. Disclosures according to 34b WpHG a) Date first published: 25th August 2014 b) Conditions regarding updates: None planned. c) Regulatory authority: Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, Frankfurt/M. d) Previous research: No research has been published in the 12 months prior to publication of this report containing a recommendation for a given investment decision differing from the recommendation in this report. e) The report was made available to the company - within in the legally permitted framework - which is the subject of this research before publication and was not subsequently altered. f) Unless stated otherwise, all prices and price performances stated in this report are based on the closing prices. 3. Disclosures Neither Solventis Wertpapierhandelsbank GmbH nor a related undertaking nor a person who has assisted in the preparation of this report 1. holds 5 percent or more of the share capital of the company which is the subject of this report. 2. has been a member of a syndicate which, within the last twelve months, has issued, by way of a public offering, financial Instruments of the company which is the subject of this report. 3. makes a market in financial instruments of the company which is the subject of this report. 4. has entered into an agreement with the company which is the subject of this report for the provision of investment bankingservices or have received compensation or a promise of compensation by virtue of such an agreement. 5. has entered into an agreement with the company which is the subject of this report to prepare the report. Solventis Wertpapierhandelsbank GmbH or a related undertaking or a person who has assisted in the preparation of this report 1. holds individual securities as a position. 4. Preparation and distribution a) Responsible for the preparation and distribution of this report Solventis Wertpapierhandelsbank GmbH Registered office: Düsseldorf; HRB 34966, Düsseldorf District Court; Managing Directors Konrad Zorn, Joachim Schmitt, Klaus Schlote. b) Author Klaus Schlote, CEFA Analyst

10 Solventis Wertpapierhandelsbank - Research Page Explanatory remarks on the recommendation system Explanatory remarks on the recommendation system for equities: Buy: The stock is expected, in our estimation, to generate an absolute return of at least 10% during the next 12 months time horizon. Hold: The stock is expected, in our estimation, to show a price gain or a price loss not exceeding 10% during the next 12 months time horizon. Sell: The stock is expected, in our estimation, to show an absolute price loss of at least 10% during the next 12 months time horizon. Explanatory remarks on trend statements theme-based studies: Opportunities/winner/positive: In our estimation the company will profit from the assumed development. Threats/loser/negative: In our estimation the company will be adversely affected by the assumed development. Neutral/balanced: In our estimation the assumed development will have no significant impact on the company. Any ranking of the issuers indicates the relative strength of the impact which, in our estimation, the assumed development will have on the various issuers. 6. Sensitivity of the valuation parameters The figures derived from the profit & loss statement, cash flow statement and balance sheet underlying the company s valuation are estimates as of a specific date and therefore harbour risks. They can change at any time without prior notice. Irrespective of the method of valuation used, there is a significant risk that the target price/trend may not be achieved within the expected time frame. The risks include unforeseen changes in respect of competitive pressure, demand for the products of an issuer or the availability of essential materials required for production, or that the assumed development may not materialize. Such fluctuations can arise as a result of changes of a technological nature, changes in the macroeconomic environment, changes in the legal framework and changes in exchange rates. This discussion of valuation methods and risk factors does not claim to be exhaustive. 7. Principal sources of information Domestic and foreign media and information services (e.g. VWD, Thomson Reuters etc.), the financial press (e.g. Börsenzeitung, Handelsblatt, FAZ, Wallstreet Journal, Financial Times etc.), the trade press, published statistics, as well as publications, announcements, data and information of or provided by the issuers analyzed, and the Internet. 8. Summary of the techniques used for valuation Individual issuers: The companies are valued using common, generally accepted methods of valuation (such as the DCF method and peer group analysis). With the DCF method, the capitalized earnings value of the issuers is calculated, which represents the sum of the company s discounted anticipated future cash flows, i.e. the net present value of the issuer s future net distributions. The capitalized earnings value is therefore determined by the future cash flows which are anticipated and by the discount rate which is applied. With the peer group analysis, issuers are valued by comparison with valuation multiples (e.g. price/earnings ratio, price/book value ratio, enterprise value/sales, enterprise value/ebitda, enterprise value/ebit) of other listed companies. The comparability of the valuation multiples is determined primarily by the respective company s business activity and economic potential. Theme-based studies: The impact of a given development (e.g. EU enlargement in Eastern Europe, rising electricity prices) on various issuers is determined by applying the assumed development to the issuer s published business, income, cost and sales structure. 9. Internal organizational and regulative precautions to prevent or deal with conflicts of interest Employees of Solventis Wertpapierhandelsbank GmbH who are involved in the preparation and/or presentation of research are bound by its internal Compliance Rules. The internal Compliance Rules conform to the provisions contained in the Regulation Concretizing the Organizational Obligations of Investment Services Enterprises pursuant to Section 33 of the German Securities Trading Act (WpHG). In accepting receipt of this report the recipients acknowledge the foregoing restrictions.