Indra BUY HOW MUCH IS GROWTH WORTH? Last price 15,91. Target price 18, April Upside/Downside 17,9% Technology Spain

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1 D Indra Last price 15,91 Target price 18,75 Upside/Downside 17,9% BUY 16 April 2010 Technology Spain Analyst Juan Tuesta Vilanova Tel Evolution of Price 20,0 19,0 18,0 17,0 16,0 15,0 14,0 13,0 12,0 4/15/2009 7/15/ /14/2009 1/13/2010 4/14/2010 IDR IBEX Source: Bloomberg 1 month performance 4,0% 6 months performance -6,1% YTD performance -2,6% HOW MUCH IS GROWTH WORTH? Indra has not been involved in the sector rally in 2010 So far this year Indra has been completely excluded from the European IT sector rally. In just over three months the sector has gained an average of 23.2% vs. the 1.6% rise of the Eurostoxx-50 and a 3.3% decline in Indra s share price. Though Indra s fall mirrors that of the IBEX-35, which has been one of Europe s worst performing indices, all the European IT companies analysed have comfortably outperformed the indices of their respective countries. which makes no sense based on the guidance provided by the companies This underperformance does not seem logical if we look at Indra s growth targets vs. those of its peers, the growth in international vs. domestic revenues and other key factors such as the stability of the company s business and the reliability of its guidance in the past, when Indra has clearly outshone its peers. Target Price: 18.75/share. Recommendation: Buy. Our DCF valuation yields a target price for Indra of /share (vs /share since ), representing upside of 18%. We think the possible negative factors are already adequately priced in. Also, bearing in mind historical peer EV/EBIT and P/E multiples, the company should be trading around 30% higher than its current levels. Finally, following the recent sale of the 5% stake of Gas Natural, (which was relatively expected), we think the risk of stock overhang is now much lower since the remaining shareholders (Caja Madrid, Alba, Casa Grande de Cartagena and CajAstur) take a more long term investment profile. Therefore, we reiterate our BUY recommendation (in force since 30/10/07). Stock Data Number of shares (mn) 164,13 Market cap ( mn) Enterprise value Daily average stock turnover 896 (thous. Shares) Daily stock turnover 0,5% Bloomberg ticker IDR SM Ibex-35 weighting 0,65% DJ Euro Stoxx 50 weighting 52 weeks high ( ) 18,2 52 weeks low ( ) 13,3 Main shareholders Caja Madrid 20,0% Alba 10,0% Casa Grande de Cartagena 5,7% CajAstur 5,0% Free-float 59,3% Source: Bloomberg & datastream Financial Data Fiscal year as of December 31 st e 2011e Sales ( mn) 2.379, , , ,2 EBITDA ( mn) 308,2 327,4 338,4 354,9 Net profit ( mn) 182,4 195,6 206,4 218,0 EPS ( ) 1,11 1,19 1,26 1,33 DPS ( ) 0,49 0,63 0,72 0,75 % change in EBITDA 12,7% 6,2% 3,4% 4,9% % change in EPS 16,7% 7,2% 5,5% 5,6% EBITDA margin 13% 13% 13% 13% Leverage 17% 13% 12% 4% Ebitda / interest expenses ROCE 21,3% 20,7% 18,4% 18,4% P/E 15,0 13,0 12,7 12,0 P/E before extraordinaries 15,0 13,0 12,7 12,0 P/CF 12,5 10,7 10,5 9,8 P/BV 3,2 2,7 2,5 2,3 EV/Sales 1,2 1,1 1,1 1,0 EV/EBITDA 9,1 8,7 8,1 7,7 Dividend yield 2,9% 4,1% 4,5% 4,7% Source: company and Banesto Bolsa estimates For analyst certification and other important disclosured, please refer to the Disclosure Section, located at the end of this report.

2 CONTENTS 1.- Investment rationale Indra s performance by business and the company s outlook for Order intake and backlog IT sector guidance Shareholders situation Valuation Peer multiples DCF Appendix.- Income Statement, Balance Sheet and Cash Flow Statement Banesto Bolsa 2 Indra

3 1.- Investment rationale So far this year Indra has been completely excluded from the European IT sector rally. In just over three months the European sector (Atos, Cap Gemini, Logica, Tietoenator and Steria) has climbed by an average of 23.2% vs. the 1.6% rise of the Eurostoxx-50 and a 3.3% decline in Indra s share price. Though Indra s fall mirrors that of the IBEX-35, which has been one of Europe s worst performing indices, all the European IT companies analysed have comfortably outperformed the indices of their respective countries. IDR performance vs. Sector (2010) Atos 25,5% Cap Gemini 24,8% Logica 28,0% Tietoenator 19,4% Steria 18,1% Sector average ex-idr 23,2% IDR -3,3% Underperf. of IDR 26,5% IBEX -3,5% SX5E 1,6% Source: Bloomberg We think there are two factors behind this negative performance: 1) the defensive profile traditionally attributed to Indra within the sector which makes it underperform the market in years when the cycle is recovering (as forecast in 2010) and 2) the significant exposure of Indra s revenues to Spain (~64% in 2009), which is regarded as a negative factor in the current economic crisis, especially as the IT sector is a priori a more sensitive sector. In this report we will explain how we think these two factors have been exaggerated to such an extent that the premium at which Indra traditionally trades has been completely wiped out. Without ignoring possible negative factors, we think it is important to look at key factors such as Indra s growth targets vs. those of its peers, the growth in international vs. domestic revenues, the stability of its business and the reliability of its guidance in the past, when the company has clearly outshone its peers. Taking into account all of the above, we conclude that the correction in Indra s share price (-26.5%!) already amply reflects any possible negative differential (from its exposure to Spain and defensive profile) vs. its peers in 2010 and that the stock may therefore now start to pick up. Opinion: Our DCF valuation yields a target price for Indra of /share (vs /share since ), representing upside of 18%. We think the possible negative factors are already adequately priced in. Also, bearing in mind historical peer EV/EBIT and P/E multiples, the company should be trading around 30% higher than its current levels. Finally, following the recent sale of the 5% stake of Gas Natural, (which was relatively expected), we think the risk of stock overhang is now much lower since the remaining shareholders (Caja Madrid, Alba, Casa Grande de Cartagena and CajAstur) take a more long term investment profile. Therefore, we reiterate our BUY recommendation (in force since 30/10/07). Banesto Bolsa 3 Indra

4 2.- Indra s performance by business and the company s outlook for 2010 One of the market s biggest concerns in 2010 is Indra s exposure to the Spanish market. However, if we look at the breakdown between domestic and international of the company s different activities, we see that in 2009 its international business was the growth driver in all areas with the exception of its Financial and Insurance unit. Particularly striking is the Defence business, where the 8% fall in domestic revenues was almost completely offset by the international business, with total revenues virtually flat as a result. DOMESTIC/INTERNATIONAL BREAKDOWN BY BUSINESS 2008 % 2009 % Incr. % 09 Transport and Traffic 433,5 100% 497,6 100% 14,8% Domestic 299,1 69% 318,5 64% 6,5% International 134,4 31% 179,1 36% 33,3% Telecoms and Media 244,3 100% 270,2 100% 10,6% Domestic 171,0 70% 187,8 70% 9,8% International 73,3 30% 82,4 31% 12,4% Public Administrations and Health 331,7 100% 347,5 100% 4,8% Domestic 252,1 76% 263,4 76% 4,5% International 79,6 24% 84,1 24% 5,6% Financial and Insurance 312,4 100% 334,4 100% 7,0% Domestic 246,8 79% 271,9 81% 10,2% International 65,6 21% 62,5 19% -4,7% Energy and Industry 374,0 100% 381,6 100% 2,0% Domestic 261,8 70% 263,3 69% 0,6% International 112,2 30% 118,3 31% 5,4% Defence 683,7 100% 682,0 100% -0,2% Domestic 335,0 49% 306,9 45% -8,4% International 348,7 51% 375,1 55% 7,6% TOTAL 2.379,6 100% 2.513,3 100% 5,6% Domestic 1.565,8 66% 1.611,7 64% 2,9% International 813,8 34% 901,6 36% 10,8% Source: Banesto Bolsa based on company data. In 2010 we expect growth patterns to be very similar to those in The company forecasts +2%/+4% revenue growth which we expect to break down into growth of around 0.5% in Spain and of around 8.5% in international markets. Looking at the 0.5% forecast for Spain, if we bear in mind that the sharp drop in Spanish Security and Defence revenues last year (-8%) was due to delays (but not cancellations) in defence projects and therefore the unit s 2010 revenues could be still falling but more moderately than in Taking this into account, the overall target could be achieved with relative ease just by maintaining some revenue growth in the other divisions. Banesto Bolsa 4 Indra

5 On the international front, after three consecutive years of double-digit growth we don t see any problem in the company comfortably achieving our growth estimates. GEOGRAPHICAL BREAKDOWN OF INDRA'S BUSINESS 2006 % 2007 % 2008 % 2009 % 2010 % Domestic Market 1.350,9 69,3% 1.469,9 67,8% 1.567,3 65,9% 1.613,0 64,2% 1.620,9 62,4% Incr. % 8,8% 6,6% 2,9% 0,5% International 599,2 30,7% 697,8 32,2% 812,3 34,1% 900,2 35,8% 976,9 37,6% Incr. % 16,5% 16,4% 10,8% 8,5% * Europe 327,3 16,8% 357,2 16,5% 386,5 16,2% 448,5 17,8% 0,0% Incr. % 9,1% 8,2% 16,0% * US and Canada 46,0 2,4% 57,0 2,6% 53,4 2,2% 31,6 1,3% 0,0% Incr. % 23,9% -6,3% -40,8% * Latin America 163,0 8,4% 197,3 9,1% 229,3 9,6% 264,0 10,5% 0,0% Incr. % 21,0% 16,2% 15,1% * Other 62,9 3,2% 86,2 4,0% 143,1 6,0% 156,1 6,2% 0,0% TOTAL 1.950,1 100,0% 2.167,7 100,0% 2.379,6 100,0% 2.513,2 100,0% 2.597,8 100,0% Incr. % 11,2% 9,8% 5,6% 3,4% Source: Banesto Bolsa and Company By business lines, we forecast more modest growth from the Transport and Traffic business following the sharp rise in international revenues last year. Having said that, T&T will still be the business line with the best performance thanks to new contracts like the ones in Oman, India and China. Overall we forecast more modest performances from its other divisions with the exception of the Financial and Insurance unit, where the decline in international revenues in 2009 due to some contracts ending will not be repeated this year. As mentioned earlier, we do not expect a repeat of the sharp decline in domestic Security and Defence revenues seen in 2009 (only around 28% of Security and Defence revenues are linked to new Spanish defence market projects, where the most drastic cuts will be made). On the other hand, we do not expect a repeat of last year s growth in international revenues either. We therefore forecast a decline in both domestic and international Defence figures, but with a more moderate correction in the international area. Overall we expect revenue growth to easily come in around the middle of the +2% - +4% range estimated by the company. REVENUES BY BUSINESS 2007 % 2008 % 2009 % 2010 % Transport and traffic 394,2 18,2% 433,5 18,2% 497,6 19,8% 543,6 20,9% Incr. % 9,4% 10,0% 14,8% 9,2% Telecom and media 214,7 9,9% 244,3 10,3% 270,2 10,8% 283,7 10,9% Incr. % 12,2% 13,8% 10,6% 5,0% Public Administrations and Health 296,1 13,7% 331,7 13,9% 347,5 13,8% 357,9 13,8% Incr. % 19,3% 12,0% 4,8% 3,0% Financial Services 275,7 12,7% 312,4 13,1% 334,4 13,3% 357,8 13,8% Incr. % 17,8% 13,3% 7,0% 7,0% Energy and Industry 353,9 16,3% 374,0 15,7% 381,6 15,2% 389,2 15,0% Incr. % 7,7% 5,7% 2,0% 2,0% Defence 633,0 29,2% 683,7 28,7% 682,0 27,1% 665,5 25,6% Incr. % 7,7% 8,0% -0,2% -2,4% TOTAL REVENUES 2.167,6 100% 2.379,6 100% 2.513,3 100% 2.597,8 100% Incr. % 11,2% 9,8% 5,6% 3,4% Source: Banesto Bolsa and Company Indra expects to maintain its EBIT margin for the third consecutive year, while the rest of the sector has experienced average contractions of more than 100 bp over the same period. Maintaining this margin has been a priority for Indra, given that it is one of the Banesto Bolsa 5 Indra

6 clearest competitive advantages that it enjoys over its rivals (11.4% vs. a European sector average of ~6.5%). Indra prefers to rein in the growth of the business but maintain its margins rather than capture new business at the expense of profitability. 3.- Order intake and backlog One of the key factors for Indra, more so in years of uncertainty like the present, is the performance of its order book. This is because the strength of orders guarantees the stability of the business in the ensuing years. In 2009 order intake grew by 5% (domestic +3% and international +7%), underpinning 6% growth in the order book. The company has pledged to increase order intake by over 5% this year, so growth in the order book (the objective is for order intake to outpace revenues) should be even greater (growth is estimated at +7%/+9%). Indra s order book/revenue ratio has remained above 1x in recent years, and 2009 was no exception despite the economic crisis. This means there is good visibility at least for the coming year. EVOLUTION OF INDRA S ORDER INTAKE AND BACKLOG GROWTH IN ORDER INTAKE AND BACKLOG (%) BACKLOG / SALES LAST 12 MONTHS (x) 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% e10 ORDER INTAKE BACKLOG 1,20x 1,15x 1,10x 1,05x 1,00x 0,95x 0,90x 0,85x 0,80x Source: Indra & Banesto Bolsa IT sector guidance Although the pace of growth at Indra looks set to ease in the coming years, it should continue to outstrip the revenue and margin growth of its European peers. Below is a summary of the 2010 guidance of Indra s main European peers. Indra s 2010 growth forecasts vs. peers - Indra: revenue: +2%/+4%, EBIT margin: +11.4% (stable vs. 2009) - Atos: slight fall in 2010 revenues with a 0.5%-1% improvement in its operating margin (around 5.7% in 2009). - Cap Gemini: 2010 revenues: -2%/-4% and operating margin: between 6% and 6.5% (vs. 7.1% in 2009). Banesto Bolsa 6 Indra

7 - Logica: 2010 revenues: flat in constant currency. Operating margin stable vs (7.4%) - Tieto Enator: 2010 revenue growth in line with average of company s key IT markets (+50% of its business is generated in Finland and Sweden). A higher operating margin than in 2009 (4.4%). In its guidance the company emphasises that it considers IT markets to have hit bottom in Steria: The company forecasts a difficult first half, but expects organic revenues and margins to remain steady vs in the full year. With regard to consensus forecasts for revenue and margin growth, we have used consensus figures from both JCF and Bloomberg. Both sources present similar revenue figures, though there are significant differences with regard to operating margins. In any event, we conclude from the following tables that the market forecasts a decline of around 1% in sector revenues and expects margins to remain stable or fall slightly in the best case scenario. If so Indra s 2010 earnings could once again be among the best in the sector despite the doubts about Spain IT Sector Revenues ( mn) JCF Bloomb JCF Bloomb e 2010e Incr.% 10 Incr.% 10 Atos Origin SA ,2% -1,5% Cap Gemini SA ,9% -2,8% Logica ,4% 1,1% Tieto Oyj ,0% 0,9% Steria (Groupe) ,2% 0,5% Indra Sistemas SA ,2% 3,6% Sector average (ex-idr) ,0% -1,2% 2010 Sector Op. Income ( mn) Source: JCF, Bloomberg JCF Bloomb JCF Bloomb e 2010e Incr.% 10 Incr.% 10 Atos Origin SA ,2% -12,0% Cap Gemini SA ,9% -22,0% Logica ,3% -9,4% Tieto Oyj ,8% 16,7% Steria (Groupe) ,4% -1,2% Indra Sistemas SA ,1% 3,0% Sector average (ex-idr) ,6% -12,6% 2010 Sector Margin (%) Source: JCF, Bloomberg JCF Bloomb JCF Bloomb e 2010e Chg. p.p. Chg. p.p. Atos Origin SA 5,7% 5,8% 5,1% 0,2% -0,6% Cap Gemini SA 7,1% 6,5% 5,7% -0,6% -1,4% Logica 7,4% 6,6% 6,6% -0,8% -0,8% Tieto Oyj 6,3% 7,7% 7,3% 1,4% 1,0% Steria (Groupe) 7,0% 6,8% 6,9% -0,2% -0,1% Indra Sistemas SA 11,4% 11,2% 11,3% -0,1% -0,1% Sector average (ex-idr) 6,7% 6,5% 6,0% -0,2% -0,8% Source: JCF, Bloomberg Banesto Bolsa 7 Indra

8 5.- Shareholders situation Following the sale by Gas Natural of this 5% stake (which was relatively expected), we think the risk of stock overhang is now much lower since the remaining shareholders (Caja Madrid, Alba, Casa Grande de Cartagena and CajAstur) take a more long term investment profile. The shareholder that could raise most concern based on its size, Caja Madrid, does not look set to sell in the short term since it is the only one of the historic shareholders that has stayed the course over the years and at the end of 2008 it increased its stake by another 5%. Changes in ownership structure at Indra in the last few years are as follows. - CajAstur acquired a 5% stake in June 2006 for 14.8 per share - Casa Grande de Cartagena acquired a 5% stake in November 2006 for 17.9 per share - Caja Madrid raised its stake from 15% to 20% in November 2008 for 16.3 per share - Alba acquired 10% in July 2009 for 15 per share. Therefore, the shareholders of the company alter the Gas Natural selling remains as follows: INDRA SHAREHOLDERS Caja Madrid 20,0% Alba 10,0% C. G. de Cartagena 5,7% CajAstur 5,0% Freefloat 59,3% Source: Company 6.- Valuation Peer multiples There has been a sharp decline in the premium at which Indra traditionally trades and we see no obvious reason for this based on the market s forecasts for The table below shows that the premium of around 32% in recent years on EV/EBIT has been reduced to close to 0%, a level which has only been reached twice in the last six years. Banesto Bolsa 8 Indra

9 EV/EBIT HISTORIC EVOLUTION INDRA vs. IT SECTOR EUROPE 18,0x HISTORIC EV/EBIT INDRA vs. SECTOR 100% INDRA S HISTORIC PREMIUM IN EV/EBIT 16,0x 14,0x 12,0x 80% 60% 10,0x 40% AVERAGE 8,0x 20% 6,0x 0% 4,0x 30/04/ /04/ /04/ /04/ /04/ /04/ /04/201-20% 30/04/ /04/ /04/ /04/ /04/ /04/ /04/2010 INDRA SECTOR IT Source: Bloomberg & Banesto Bolsa We also reach a similar conclusion on P/E. From a historical premium of around 31% the company is currently trading at a discount for the first time since P/E HISTORIC EVOLUTION INDRA vs. IT SECTOR EUROPE 25,0x HISTORIC P/E INDRA vs. SECTOR 120% INDRA S HISTORIC PREMIUM IN P/E 20,0x 100% 80% 15,0x 60% 10,0x 40% 20% AVERAGE 5,0x 30/04/ /04/ /04/ /04/ /04/ /04/ /04/2010 0% INDRA SECTOR IT -20% 30/04/ /04/ /04/ /04/ /04/ /04/ /04/2010 Source: Bloomberg & Banesto Bolsa The table of Indra s current multiples vs. the sector shows that the company offers attractive multiples both on EV/EBIT and P/E, especially as we think it is probably one of the few IT companies likely to achieve more than 2/3% growth this year with stable margins. Indra is also one of the few sector companies that has always achieved its guidance, which means it at least merits the benefit of the doubt regarding its forecasts. INDRA PEER MULTIPLES EV/ EV/ EV/ EV/ Mkt cap 10 debt 10EBITDA 11EBITDA 10EBIT 11EBIT 10P/E 11P/E Atos Origin SA 2.808,3 147,6 5,7x 4,9x 10,0x 8,3x 17,2x 13,1x Cap Gemini SA 6.175, ,0 7,0x 5,7x 9,6x 7,6x 19,3x 15,7x Logica 2.659,8 353,5 8,1x 7,4x 10,8x 9,4x 17,7x 15,6x Tieto Oyj 1.247,4 29,3 6,5x 5,6x 9,6x 8,0x 14,4x 11,9x Steria (Groupe) 745,5 179,2 6,1x 5,2x 8,3x 6,9x 12,9x 10,7x Sector average (ex-idr) 6,7x 5,8x 9,6x 8,0x 16,3x 13,4x Indra Sistemas SA 2.611,3 124,9 8,1x 7,3x 9,3x 8,4x 13,0x 11,9x Indra premium (discount) Indra vs. average (%) 21% 28% -4% 5% -20% -11% Source: JCF, Bloomberg and Banesto Bolsa Banesto Bolsa 9 Indra

10 16 April DCF We have performed a DCF valuation of Indra using a two-stage model. For the first, a fiveyear period, we assume a WACC of 8.5%, and for the second, a 10-year period, we take a figure of 8.7%. Finally, we use a g of 1.5% to calculate the residual value from 2024 onwards. CALCULATION OF INDRA'S TARGET PRICE USING DCF METHODOLOGY Concepto (Eur mn) NAV FCF ,6 NAV FCF ,5 RV 2024 UPDATED 1.254,7 IDR TARGET EV: 3.205,9 WACC (stage 1): 8,5% (DEBT)/CASH 10: -125,4 WACC (stage 2): 8,7% IDR target mkt. cap: 3.080,5 G: 1,5% Shares (mn) 164,3 IDR target price using DCF ( ): 18,75 Current price 15,91 Upside (%) 18% Source: Banesto Bolsa This valuation yields a target price of 18.75/share, implying upside potential of 18%. This target price values the company at an EV/EBIT 2010 multiple of 10.9x and a P/E 2010 of 14.9x (vs. the current EV/EBIT 2010 of 8.9x and P/E 2010 of 12.7x). We think these are reasonable multiples given the track records of the IT sector and Indra. Banesto Bolsa 10 Indra

11 16 April 2010 Appendix.- Income Statement, Balance Sheet and Cash Flow Statement P&L 2009 % 2010(e) % 2011(e) % Revenues 2.513,3 100% 2.597,8 100% 2.693,2 100% Other revenues 60,6 2,4% 62,6 2,4% 64,9 2,4% Total revenues 2.573,9 102,4% 2.660,4 102,4% 2.758,1 102,4% Incr. % 7,3% 3,4% 3,7% Supply, ext. and oper. costs -1237,4-49,2% -1279,0-49,2% -1326,0-49,2% Personnel costs -1009,1-40,2% -1043,0-40,2% -1077,3-40,0% EBITDA 327,4 13,0% 338,4 13,0% 354,9 13,2% Incr. % 6,2% 3,4% 4,9% D&A. -42,0-1,7% -43,4-1,7% -47,7-1,8% EBIT 285,4 11,4% 295,0 11,4% 307,2 11,4% Incr. % 5,5% 3,4% 4,1% Financial result -24,9-1,0% -7,0-0,3% -3,0-0,1% Investee results 0,2 0,0% 0,2 0,0% 0,2 0,0% Ordinary profit 260,7 10,4% 288,2 11,1% 304,4 11,3% Incr. % 3,8% 10,5% 5,6% Extraordinary profit 0,0 0,0% 0,0 0,0% 0,0 0,0% Pre-tax profit 260,7 10,4% 288,2 11,1% 304,4 11,3% Tax -62,7-2,5% -79,3-3,1% -83,7-3,1% Tax rate -24,1% -27,5% -27,5% Consolidated profit 198,0 7,9% 208,9 8,0% 220,7 8,2% Incr. % 6,4% 5,5% 5,6% Minorities -2,4-0,1% -2,5-0,1% -2,6-0,1% Profit attributable to parent company 195,6 7,8% 206,4 7,9% 218,0 8,1% Incr. % 7,2% 5,5% 5,6% Nº of shares 164,3 164,3 164,3 EPS 1,19 1,26 1,33 Source: Company and Banesto Bolsa CONSOLIDATED BALANCE SHEET (e) 2011(e) Net P,P & E 140,4 148,5 154,1 Net intangible assets 133,6 141,3 146,6 Financial assets 41,4 43,8 45,4 Deferred tax assets 31,3 33,1 34,3 TOTAL ASSETS 346,7 366,6 380,4 Treasury stock 14,2 14,2 14,2 Goodwill 440,2 440,2 440,2 Working capital 1.561, , ,5 Short-term financial investments 67,8 63,8 21,5 Other assets 73,5 73,5 73,5 TOTAL ASSETS 2.503, , ,3 Equity 946, , ,2 Minorities 45,3 45,3 45,3 Provisions and other 16,9 16,9 16,9 L/t fin. Debt 101,9 95,9 32,3 Other l/t debts 39,2 39,2 39,2 S/t fin. Debt 99,2 93,3 31,5 Current liabilities 1.013, , ,8 Other liabilities 203,7 203,7 203,7 TOTAL LIABILITIES 2.503, , ,3 Source: Company and Banesto Bolsa CASH FLOW STATEMENT (e) 2011(e) NET PROFIT 206,4 218,0 + D & A AND OTHER 43,4 47,7 CASH FLOW 249,8 265,7 - CHANGE IN WORKING CAPITAL -61,2 2,7 -/+ OTHER CHANGES IN ASSETS AND LIABILITIES. 0,0 0,0 + CAPITAL INCREASES 0,0 0,0 - INVESTMENT -63,3-61,5 FREE CASH FLOW (PRE-DVD) 125,3 206,9 - DIVIDENDS -117,4-123,8 FREE CASH FLOW (POST-DVD) 7,9 83,1 (INCREASE) / DEBT REDUCTION -7,9-83,1 NET DEBT 133,3 125,4 42,3 Source: Company and Banesto Bolsa Banesto Bolsa 11 Indra

12 16 April 2010 P&L Statement ( mn) Year to Dec e 2011e 2012e Net sales 1.079, , , , , , , , ,2 % change in Sales 11,4% 17,0% 54,1% 9,8% 5,6% 3,4% 3,7% 4,1% other revenues 5,3 4,8 6,6 13,6 19,6 60,6 62,6 64,9 67,6 Gross margin 455,3 511,8 643,3 1113,8 1265,3 1336,5 1381,4 1432,1 1491,2 EBITDA 143,5 159,8 185,6 273,4 308,2 327,4 338,4 354,9 369,5 % change in EBITDA 11,4% 16,1% 47,3% 12,7% 6,2% 3,4% 4,9% 4,1% Amortization -20,9-17,5-20,8-49,9-37,7-42,0-43,4-47,7-49,7 EBIT 122,6 142,3 164,8 223,5 270,5 285,4 295,0 307,2 319,8 Net financial result 3,9 4,5-1,4-12,7-22,9-24,9-7,0-3,0 0,0 Good will amortization -3,5 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 Equity accounted result -0,5-1,5 0,5 1,1 3,5 0,2 0,2 0,2 0,2 Ordinary profit 122,5 145,3 163,9 211,9 251,1 260,7 288,2 304,4 320,0 Extraordinary items -7,5 0,0-0,5 0,3 0,0 0,0 0,0 0,0 0,0 Profit Before Taxes 115,0 145,3 163,4 212,2 251,1 260,7 288,2 304,4 320,0 Taxes -25,1-37,9-44,2-57,4-65,0-62,7-79,3-83,7-88,0 Minorities -4,6-3,4-3,8-7,0-3,7-2,4-2,5-2,6-2,7 Net profit 85,3 104,0 115,4 147,8 182,4 195,6 206,4 218,0 229,3 % change in Net Profit 21,9% 11,0% 28,1% 23,4% 7,2% 5,5% 5,6% 5,2% Net profit before extraordinaries 91,2 104,0 115,8 147,6 182,4 195,6 206,4 218,0 229,3 % change in Net Profit before extra. 14,1% 11,3% 27,5% 23,6% 7,2% 5,5% 5,6% 5,2% Cash Flow Statement (EUR m) e 2011e 2012e EBITDA 143,5 159,8 185,6 273,4 308,2 327,4 338,4 354,9 369,5 Extraordinaries (cash) and other items -7,5 0,0-0,5 0,3 0,0 0,0 0,0 0,0 0,0 Change in net working capital -5,5-74,4-103,5-199,9-66,3-49,7-61,2 2,7-0,4 Taxes paid -25,1-37,9-44,2-57,4-65,0-62,7-79,3-83,7-88,0 Net financial result 3,9 4,5-1,4-12,7-22,9-24,9-7,0-3,0 0,0 Operating Cash Flow 109,3 52,0 36,0 3,7 154,0 190,1 190,9 270,9 281,1 net CAPEX (investments/divestments) -13,4-131,9-148,1-364,1-96,8-46,5-60,9-59,9-58,5 Acquisitions/divestments (Financial 2,7 51,4 1,5-4,7-5,9 1,5-2,4-1,6-1,2 assets) Other consolidation changes -6,1 55,8 54,5 401,7 30,3-25,7-2,3-2,4-2,5 Free Cash Flow 92,5 27,3-56,1 36,6 81,6 119,4 125,3 206,9 218,9 Dividend paid -25,1-168,9-57,0-128,0-80,0-104,0-117,4-123,8-130,8 Share issues/buybacks 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 Increase (decrease) in net debt -67,4 141,6 113,1 91,4-1,6-15,4-7,9-83,1-88,0 Balance ( mn) e 2011e 2012e Net tangible fixed assets 55,0 93,4 128,2 166,0 171,5 171,7 181,6 188,4 193,4 Intangible fixed assets 84,7 122,3 213,9 487,2 519,1 573,8 581,5 586,8 590,7 Financial fixed assets 85,7 72,7 72,1 79,9 107,5 55,6 58,0 59,6 60,8 Inventories 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 Trade debtors 690,0 883, , , , , , , ,2 Other debtors 34,9 24,7 27,4 77,6 73,2 73,5 73,5 73,5 73,5 Cash & securities 276,1 139,0 42,3 32,0 23,1 67,8 63,8 21,5-23,3 Total Assets 1.226, , , , , , , , ,4 Shareholder's equity 396,3 322,0 385,6 739,5 846,0 946, , , ,7 Minorities 34,9 19,7 26,3 41,8 42,2 45,3 45,3 45,3 45,3 Provisions 16,3 54,1 59,6 68,1 35,3 56,1 56,1 56,1 56,1 Long-term interest bearing debt 68,8 52,3 54,2 46,5 46,4 101,9 95,9 32,3-34,9 Short-term interest bearing debt 11,5 32,5 47,0 135,8 125,4 99,2 93,3 31,5-34,0 Trade creditors 635,7 754,7 895, , , , , , ,2 Other creditors 62,9 100,2 143,4 243,1 297,5 242,0 242,0 242,0 242,0 Total Liabilities & Capital 1.226, , , , , , , , ,4 Enterprise Value (EV) 1.693, , , , , , , , ,3 Net Debt -195,8-54,2 58,9 150,3 148,7 133,3 125,4 42,3-45,7 Capital employed (avg.) 108,0 133,0 217,0 384,6 514,2 608,9 724,3 768,4 777,8 Good will 60,2 108,7 184,6 424,3 431,8 440,2 440,2 440,2 440,2 Capital Employed incl. goodwill (avg.) 168,4 217,5 363,6 689,1 942, , , , ,0 Net working capital 26,3 53,2 116,2 266,6 274,1 379,6 440,8 438,1 438,5 Source: company and Banesto Bolsa estimates Banesto Bolsa 12 Indra

13 16 April 2010 Per share data ( ) e 2011e 2012e Average. no. of shares (m) 154,3 150,2 146,2 155,2 164,1 164,1 164,1 164,1 164,1 EOY. no. of shares (m) 154,3 146,2 146,2 164,1 164,1 164,1 164,1 164,1 164,1 EPS 0,55 0,69 0,79 0,95 1,11 1,19 1,26 1,33 1,40 %change in EPS 25,2% 14,0% 20,7% 16,7% 7,2% 5,5% 5,6% 5,2% EPS before extra 0,59 0,69 0,79 0,95 1,11 1,19 1,26 1,33 1,40 %change in EPS before extra. 17,2% 14,4% 20,1% 16,8% 7,2% 5,5% 5,6% 5,2% Cash-flow 0,71 0,81 0,93 1,27 1,34 1,45 1,52 1,62 1,70 %change in cash-flow 13,7% 15,2% 36,8% 5,2% 8,0% 5,1% 6,4% 5,0% Gross dividend 0,16 1,16 0,39 0,78 0,49 0,63 0,72 0,75 0,80 %change in gross dividend 609,0% -66,2% 99,9% -37,5% 30,0% 12,9% 5,5% 5,6% Book value 2,57 2,20 2,64 4,51 5,15 5,76 6,31 6,88 7,48 Valuation e 2011e 2012e P/E (x) 19,8 22,2 20,7 19,4 15,0 13,0 12,7 12,0 11,4 P/E (x) before extraordinaries 18,5 22,2 20,6 19,4 15,0 13,0 12,7 12,0 11,4 P/CF (x) 15,4 19,0 17,5 14,5 12,5 10,7 10,5 9,8 9,4 P/FCF (x) 18,2 84,7-42,5 78,3 33,6 21,3 20,8 12,6 11,9 P/BV 4,3 7,0 6,2 4,1 3,2 2,7 2,5 2,3 2,1 Dividend yield (%) 1,5% 7,5% 2,4% 4,2% 2,9% 4,1% 4,5% 4,7% 5,0% EV/Sales (x) 1,6 2,0 2,0 1,4 1,2 1,1 1,1 1,0 1,0 EV/EBITDA (x) 11,8 15,1 14,9 11,1 9,1 8,7 8,1 7,7 7,4 EV/EBIT 13,8 17,0 16,8 13,6 10,4 9,9 9,3 8,9 8,6 EV/CE (incl. goodwill) (x) 10,1 11,1 7,6 4,4 3,0 2,7 2,4 2,3 2,2 Share price - High 12,79 18,45 19,12 20,73 18,38 17,65 Share price - Low 9,90 12,05 13,74 16,54 13,16 13,34 Share price - Average/current 10,92 15,37 16,31 18,48 16,70 15,51 15,91 15,91 15,91 Share price - Year end/current 12,57 16,51 18,61 18,58 16,19 16,43 15,91 15,91 15,91 Capital Efficiency/Solvability e 2011e 2012e Inventories/Sales (days) 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 Trade debtors/sales (days) 233,4 268,2 292,6 267,0 250,3 226,8 242,8 232,2 221,8 Trade creditors/sales (days) 368,8 396,2 424,4 394,5 364,9 298,9 319,3 304,7 290,1 CAPEX/Depreciation (%) 64% 754% 712% 730% 257% 111% 140% 125% 118% Net debt / (Equity+ minorities) -45% -16% 14% 19% 17% 13% 12% 4% -4% Ebitda / interest expenses 0,0 0,0 0,0 21,5 13,5 13,1 48,3 118, ,7 Net debt/ Ebitda (x) (1,4) (0,3) 0,3 0,5 0,5 0,4 0,4 0,1 (0,1) Payout 29% 162% 49% 87% 44% 53% 57% 57% 57% ROCE (incl. goodwill) (average,%) 56,93% 48,37% 33,06% 23,66% 21,28% 20,74% 18,37% 18,43% 19,04% ROE 21,5% 32,3% 29,9% 20,0% 21,6% 20,7% 19,9% 19,3% 18,7% Operating Efficiency Ratios e 2011e 2012e Average no. of employees 6.619, , , , , , , , ,1 Sales per employee ('000s) 163,0 145,2 97,2 92,2 98,8 101,8 102,7 103,8 105,5 Wage costs per employee ('000s) 47,1 42,5 31,6 35,8 39,7 40,9 41,2 41,5 42,2 EBIT per employee ('000s) 18,5 17,2 11,4 9,5 11,2 11,6 11,7 11,8 12,0 EBITDA margin (%) 13,3% 13,3% 13,2% 12,6% 13,0% 13,0% 13,0% 13,2% 13,2% EBIT margin (%) 11,4% 11,8% 11,7% 10,3% 11,4% 11,4% 11,4% 11,4% 11,4% Net margin (%) 7,9% 8,7% 8,2% 6,8% 7,7% 7,8% 7,9% 8,1% 8,2% Tax rate (%) 21,8% 26,1% 27,1% 27,0% 25,9% 24,1% 27,5% 27,5% 27,5% Source: company and Banesto Bolsa estimates Banesto Bolsa 13 Indra

14 0 Iberian Equity Research José Luis Barrera, CFA Head of Research Luis De Blas Small Caps, Health Care Elena Colombás Strategy Antonio Cruz-Guzmán Utilities Marta Gómez Motorways, Real Estate, Paper Robert Jackson Oil, Steel María Muñoz-Rojas, CFA Media, Hotels Marta Olba Construction Jaime Semelas Small Caps, Consumer products Ignacio Soto Palacios Banks and Insurances Juan Alberto Tuesta TMT Macroeconomic Research Concepción Sanz Chief Economist Ofelia Martín Mª Victoria Nuñez Laura Velasco Editing and Distribution Raquel Cáceres Domestic Equity Sales Enrique Aparicio Head of Domestic Sales José Luis Barrero Juan Pérez José Ramón Tapia Eduardo de la Torre International Equity Sales Jan Roos Head of Europe Olivier Laperche Dirk Paape Antoine Kendis Head of North America Sales Trading Cristina Serrano Head of Sales Trading Alexander King, CFA Paul Miguel Kendal Óscar Pérez Fernando Martín Direct Market Access - Connectivity (Help Desk btobldma@notes.banesto.es) Sabrina Bou sboubran@notes.banesto.es Torsten Lange tlangela@notes.banesto.es This report has been prepared by Banesto Bolsa, Sociedad de Valores, S.A. (an affiliate of the Banesto Group), an investment services company supervised by the Comisión Nacional del Mercado de Valores (the Spanish securities regulator or the CNMV ) and is provided for information purposes only. In the U.S., this report is prepared only to be distributed to U.S. Major Institutional Investors, according to SEC Rule 15a-6. In addition, it is hereby stated that Banco Español de Crédito, S.A. ( Banesto ) is regulated by the CNMV and by the Bank of Spain. All of the views expressed in this research report accurately reflect the research analysts personal views regarding any and all of the subject securities or issuers. The research analyst is not registered with FINRA, and may not be subject to FINRA rule 2711 restrictions on: communicating with the subject company, public appearances, and trading securities held in the research analysts account. 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Any decision by the recipient to buy or sell securities issued by the company or companies subject to this report should be based on publicly available information on the related security and, where appropriate, should take into account the content of the related prospectus filed with and available from the CNMV, the corresponding market regulator (Sociedad Rectora de la Bolsa) and the company issuing the security. The securities or instruments discussed in this report may not be suitable for all investors, their objectives or financial circumstances, and past performance should not be taken as a guarantee of future performance. The accuracy of an analyst s recommendations in the past is no indication of future success. This report does not take into account the investment objectives or financial circumstances of any particular investor; investors should obtain independent advice before making any investment. 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The frequency with which Banesto Bolsa, S.V., S.A. equity research reports are published depends on market trends and conditions, the news flow regarding the companies under coverage, announced M&A transactions and in general the occurrence of any event that is of interest to its clients. In general, equity research reports are published at least once a year. Banesto Group has no obligation to update, modify or amend this report or to inform the reader of any changes to information provided in this report. The information contained herein has been compiled from sources believed to be reliable, but while all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation that it is accurate or complete and it should not be relied upon as such. 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(or, in the United States, Banesto Securities.) This research is disseminated in Europe by Banesto Bolsa, Sociedad de Valores, S.A. All questions or comments from European Investors should be directed to Banesto Bolsa S.A., Mesena 80, Madrid, Spain, or by telephone at In North America, this research is disseminated exclusively for Major Institutional Inverstors by Banesto Securities, Inc., which accepts responsibility for this research report under U.S. law. All questions or comments from U.S. Investors should be directed to Banesto Securities Inc. Suite 701, 730 Fifth Avenue, New York, NY, USA 10019, or by telephone at (212)