Assa Abloy. Equity Research. (Unchanged) Key financials. Increased risk premium an entry point? We believe so. Post-results note 23 October 2016

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1 Equity Research Investment Research Assa Abloy Post-results note 23 October 2016 Buy (Unchanged) Increased risk premium an entry point? We believe so The issues in China have increased the risk premium, while we expect estimate revisions of SME Direkt consensus to be insignificant. We have confidence in management s statements that the situation is under control and view the drop in the share price as a buying opportunity. The profit drivers, Global Tech and Americas, have solid order books and we expect increased M&A activity. Impact on the investment case. The drop in the share was driven by an increased risk premium on the back of the accounting fraud in China. After having discussed the issues, actions taken and risk of similar problems with management, we are comfortable with our Buy recommendation. Disregarding China, constituting 3% of EBIT, the order backlogs in Americas and Global Tech, close to 50% of EBIT, are strong going into Q4. We also expect increased M&A activity to drive the share. Estimate changes. We have inched down our 2017E estimates by 1% on the back of lower earnings from Asia/Pacific. Looking at SME Direkt consensus, the growth assumption for Asia/Pacific in 2017 is already zero and there is minor FX tailwind, likely to offset minor underlying downgrades. Earnings growth troughing in Q3. With higher top-line growth in Q4, driven by organic growth, FX and M&A, we expect EBIT growth to accelerate from 2% to 9%. Over time, ASSA s share price is closely correlated with momentum in earnings. Valuation. The EV/EBIT multiple relative to peers has come down significantly and is now at a level not seen since early The balance sheet is strong, hence room for acquisitions is significant. We argue ASSA could digest a USD+1bn acquisition such as Stanley s US lock business. Key financials Year-end Dec (SEK) E 2017E 2018E Revenues (m) 56,843 68,099 71,503 76,532 79,875 Revenues growth 17.2% 19.8% 5.0% 7.0% 4.4% EBITDA (m) 10,420 12,512 11,558 14,482 15,492 EBIT, adj. (m) 9,257 11,079 11,641 12,688 13,559 EBIT growth 16.8% 19.7% 5.1% 9.0% 6.9% Pre-tax profit (m) 8,698 10,382 9,394 12,053 13,044 EPS (adj.) Key data Building Materials & Fixtures, Sweden Price (SEK)* 167 Target price, 12 mth (SEK) 200 Market cap (SEKm) 185,800 Market cap (EURm) 19,149 Reuters Bloomberg Price performance Source: FactSet 1M 3M 12M 5Y Estimate changes 16E 17E 18E Source: Danske Bank Markets estimates * Price as at close on 21 October 2016 Includes dividends ASSAb.ST ASSAB SS No. of shares (m) 1,112.6 Net debt (current Y/E) (m) 21,338 Free float 86.0% Avg. daily vol, 12M (000) 2, Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 ASSAb.ST STOXX 600/Constr.& Mat. rebased Absolute -4% -10% 7% 234% Rel. local market -6% -15% 4% 92% Rel. EU sector -5% -17% -3% 75% Sales -0.3% -0.4% -0.4% EBITDA -0.4% -1.0% -0.9% EBIT (adj.) -0.4% -1.1% -1.1% EPS (adj.) -0.3% -1.2% -1.1% Next event CMD 16-Nov DPS Dividend yield 1.6% 1.5% 1.7% 1.9% 2.0% FCF yield 3.5% 3.7% 3.6% 4.3% 5.0% EBIT margin (adj.) 16.3% 16.3% 16.3% 16.6% 17.0% Net debt/ebitda (x) ROIC 12.1% 12.6% 12.5% 13.2% 13.8% EV/sales (x) EV/EBITDA (adj.) (x) EV/EBIT (adj.) (x) P/E (adj.) (x) P/BV (x) Source: Company data, Danske Bank Markets estimates Analyst(s) Oscar Stjerngren osst@danskebank.com Max Frydén fryd@danskebank.com Björn Enarson bjena@danskebank.com 1 Important Assa disclosures Abloy Buy and certifications are contained from page 12 of this report.

2 Investment case Long term we expect ASSA s M&A- and restructuring-driven growth combined with a high stability in end-markets to enable the company to deliver an average EPS growth of around 10%. This is the key reason for justifying a premium valuation. The issues in China Management of Pan-Pan, the largest Chinese acquisition from 2009, boosted sales by some SEK500m in China by fraudulent invoicing. The bulk of the sales boost was in 2015 with a minor spill over into This has gradually been discovered and ASSA has fired all managers involved (it is a large scheme as it involves 10 entities and the largest company in China, Pan-Pan) and will continue to hire new managers in Q4. Besides the fraud, the issue will divert focus in the Chinese operations yet another couple of quarters, as new managers are coming up to speed. The key problem has been lack of good, electronic, control systems. These are now being installed and, according to management, there are very few other acquisitions that do not have appropriate IT systems to allow control from top management. In acquisitions with future earn-outs, control of local management has been increased throughout the group. China is currently some 7.5% of sales, constituting an estimated 60% of Asia/Pacific. Margins are inherently higher outside China, hence we estimate China to be some 3% of EBIT16E (underlying) with a margin of 5-6% (7-8% in the past). Although the China issue risks weighing on the share near term, it could actually trigger a higher M&A pace until the end of the year as management would want to show that the model is not broken. China accounts for some 3% of EBIT and revisions to SME Direkt consensus are likely contained at -1%, which are offset by the recent FX moves. Looking at current demand, growth in EMEA should pick up slightly in Q4, as the calendar effect was slightly negative in Q3 and several large markets are performing well. The CEO is confident about continued growth in the US on the back of high quotation activity and despite tough comps in Q4. Also, growth remains good in Global Tech. M&A activity set to increase M&A is a key driver for ASSA s EPS growth and a slightly slower pace has brought down EPS growth recently. However, we see a good chance that ASSA will buy Stanley Black & Decker s (SWK) lock business. SWK has put its Security division up for a strategic review and has explicitly said at conference calls that the lock business within the Security division is the most likely candidate for a divestment. Besides DormaKaba, ASSA is the obvious buyer of this business, while Allegion is likely to be prohibited for anti-trust reasons. The price paid is likely to be high, we have assumed 16x EBIT. As margins for SWK s locks business are, we estimate, some 10%-pp lower than ASSA s US lock margins, we see scope for high synergies. In the table below we have assumed synergies of 5% of sale. This would reduce the multiple from 16x pre-synergies to 12.5x post-synergies. With a >5% potential EPS effect if ASSA buys SWK s lock business, we see this as a possible share price driver. 2 Assa Abloy Buy

3 20-Jul Jul Jul Aug Aug Aug Aug Aug Aug Sep Sep Sep Sep Sep Sep Oct Oct Oct Oct-16 Table 1. Assa Abloy - Potential addition from an acquisition of SWK's lock business SWK locks (SEKm) Addition to Assa Abloy As is incl. synergies As is incl. synergies Sales 3,520 3, % 4.9% EBIT % 6.9% EPS 3.9% 5.3% Source: Danske Bank Market estimates After very strong momentum from 2012 to the start of 2015, the share has traded in the SEK range since early With accelerating EBIT growth in Q4 16, we see reasons for the share to trade in the high end of or slightly above the trading range. From a relative perspective, ASSA is one of the worst performers in the Swedish capital goods universe in the past three months, driven by cautious communication on nearterm growth. Chart 1. Swedish Capital goods - Relative performance R3m ABB (2) Alfa Laval (9) Assa Abloy (12) Atlas Copco (4) Autoliv (13) Electrolux (11) Hexagon (1) Husqvarna (10) Sandvik (6) SKF (8) Trelleborg (7) Volvo (5) Saab (3) Source: FactSet 3 Assa Abloy Buy

4 Nov/05 Apr/06 Sep/06 Feb/07 Jul/07 Dec/07 May/08 Oct/08 Mar/09 Aug/09 Jan/10 Jun/10 Nov/10 Apr/11 Sep/11 Feb/12 Jul/12 Dec/12 May/13 Oct/13 Mar/14 Aug/14 Jan/15 Jun/15 Nov/15 Apr/16 Sep/16 Slowing organic growth in Q3 16 has marked a trough in organic and, more importantly, EBIT growth. Looking at Q4 16, however, we expect the EBIT growth to resume, driven by higher organic growth, M&A and FX. Over time, earnings growth is the key driver for ASSA s share price. Chart 2. Assa Abloy - EBIT and EBIT growth per quarter 3,500 3,000 2,500 2,000 1,500 1, % 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Adj EBIT Adj EBIT, y/y Source: Danske Bank Markets ASSA s valuation is high from a historical perspective but in a low-growth environment the company s ability to drive a consistent double-digit EPS growth stands out. Valuation on EV/EBIT R12M fwd has come down recently and it is interesting to note that the recent re-rating of capital goods names has pushed down the relative EV/EBIT multiple significantly below the levels seen in recent years. In relative terms, the premium is the lowest since early Chart 3. Assa Abloy - R12M fwd EV/EBIT relative to Nordic mechanical engineers Source: FactSet 4 Assa Abloy Buy

5 Jan/05 Jul/05 Jan/06 Jul/06 Jan/07 Jul/07 Jan/08 Jul/08 Jan/09 Jul/09 Jan/10 Jul/10 Jan/11 Jul/11 Jan/12 Jul/12 Jan/13 Jul/13 Jan/14 Jul/14 Jan/15 Jul/15 Jan/16 Jul/16 maj/05 nov/05 maj/06 nov/06 maj/07 nov/07 maj/08 nov/08 maj/09 nov/09 maj/10 nov/10 maj/11 nov/11 maj/12 nov/12 maj/13 nov/13 maj/14 nov/14 maj/15 nov/15 maj/16 On P/E multiples the picture is similar but the valuation difference does not look quite as appealing. Important to note, however, that the strong cash generation in combination with slightly lower M&A growth recently has brought down the EV/EBIT multiple more than the P/E. If, as we believe, ASSA will step up the pace of acquisitions, the P/E ratio will be pushed down, or the share pushed up, by M&A-driven EPS growth. Chart 4. Assa Abloy - R12M fwd P/E relative to Swedish capital goods Source: FactSet Comparing ASSA with a peer group of similar, high-quality, M&A-driven peers, valuation has gone from a premium to a discount. In the peer group we use DormaKaba, Allegion, Atlas Copco, Kone, Nibe and Hexagon. Chart 5. Assa Abloy - R12M fwd P/E vs quality peers PE Premium/Discount Source: FactSet 5 Assa Abloy Buy

6 Valuation and methodology for deriving 12M target price We base our 12M target price on P/E18E of 23x. How do we justify the high multiple? The table below summarises how the acquisition model impacts growth and PE multiples. If we, on top of our organic growth assumptions, would include acquisitions and ASSA s proven ability to lift margins in acquired companies, we get the following effects on EPS growth. The organic EPS growth (17E-20E) averages 8% in our model and adding acquisitions, we get an EPS effect of 12% (17E-20E). Valuing ASSA at P/E20x 19E EPS including acquisitions, we get a share price of SEK204. The high likelihood of this model continuing to work, at least over the next five year period, is, besides stability, the key reason for the high multiple. Table 2. Assa Abloy - Simulation of acquisition impact on growth and multiples SEKm E 2017E 2018E 2019E 2020E comment Organic sales 46,619 48,481 56,843 68,099 71,503 73,891 80,854 88,346 96,541 Organic EBIT 7, ,251 13,725 15,361 17,173 Margin 16.1% 16.3% 16.3% 16.3% 16.3% 16.6% 17.0% 17.4% 17.8% Acquisition margins = group year 2 Acquired sales 3,819 2,049 4,484 1,807 2,011 3,575 3,695 4,043 4,417 Acquired EBIT % margin Accumulated acquired EBIT from ,018 1,416 Total sales incl. acquisitions 46,619 48,481 56,843 68,099 71,503 77,466 84,548 92, ,959 Total EBIT incl. acquisitions 7,501 7,924 9,257 11,079 11,641 12,572 14,058 15,725 17,571 Total margin 16.1% 16.3% 16.3% 16.3% 16.3% 16.2% 16.6% 17.0% 17.4% Net debt 14,761 19,595 22,327 22,269 21,175 20,160 18,387 15,507 12,508 Financials Tax -1,617-1,595-2,262-2,689-2,822-3,075-3,474-3,925-4,431 EPS (SEK) EPS growth 12.1% 8.5% 16.3% 19.5% 4.9% 9.0% 13.0% 13.0% 12.9% Forecast average 12.5% EPS ex acquisitions (SEK) EPS growth ex acquisitions 8.5% 16.3% 19.5% 4.9% 10.6% 8.2% 8.4% 8.4% Forecast average 8% Implied share price at P/E 18x Implied share price at P/E 20x Implied share price at P/E 22x Implied share price at P/E 24x Key assumptions Acquired growth 9% 4% 9% 3% 3% 5% 5% 5% 5% Organic growth 2% 2% 3% 5% 3% 3% 4% 4% 4% Acq. price (EBIT) 10.0 Interest cost 2.0% Source: Company data, Danske Bank Markets estimates Risks to achievement of 12M target price Key risks to achievement of 12M target price are failure to execute on the M&A-driven growth strategy or a weaker-than-expected US construction market. With a high USD exposure, a sharp depreciation of the USD versus the SEK is a risk. Also, the CEO leaving is a threat to the share price. 6 Assa Abloy Buy

7 Table 3. Assa Abloy - Key figures by quarter SEKm Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16E Sales EMEA 3,171 3,285 3,163 3,546 3,511 3,672 3,590 3,979 3,944 4,068 4,100 4,411 4,004 4,234 4,042 4,663 Americas 2,353 2,620 2,590 2,558 2,673 2,996 3,205 3,283 3,664 3,953 4,064 3,984 3,969 4,291 4,422 4,401 Asia Pacific 1,355 1,904 2,095 2,066 1,420 2,151 2,439 2,327 1,847 2,793 2,951 2,580 1,758 2,518 2,486 2,271 Global Technologies 1,426 1,711 1,645 1,690 1,519 1,722 1,889 2,076 2,071 2,315 2,210 2,504 2,147 2,424 2,439 2,783 Entrance Systems 2,762 2,960 2,900 3,615 3,405 3,703 3,861 4,440 4,041 4,325 4,494 5,097 4,291 4,767 4,960 5,906 Corporate/other Total sales 10,868 12,238 12,131 13,242 12,305 13,964 14,728 15,847 15,252 17,082 17,465 18,301 15,891 17,893 18,026 19,693 Organic growth EMEA -6% 0% 1% 1% 5% 3% 3% 2% 3% 5% 5% 5% 3% 6% 2% 3% Americas 5% 8% 7% 6% 2% 3% 5% 8% 8% 5% 6% 8% 6% 8% 5% 5% Asia Pacific 2% 3% 6% 4% 3% 7% 3% -7% -3% -2% -3% -4% -3% -6% -7% -7% Global Technologies 0% 6% 7% 13% 3% -6% 2% 5% 12% 10% 0% 8% 1% 5% 7% 6% Entrance Systems -3% -1% -1% 3% 4% 3% 5% 4% 5% 5% 6% 6% 3% 4% 4% 4% Total organic growth -1% 3% 3% 4% 4% 3% 4% 3% 5% 5% 3% 5% 3% 4% 3% 3% Acquired growth 5% 4% 3% 5% 8% 10% 11% 8% 3% 3% 4% 4% 3% 3% 2% 3% FX effect on sales -4% -5% -1% -1% 1% 2% 7% 9% 16% 15% 11% 7% -2% -3% -2% 2% Total sales growth 0% 2% 5% 8% 13% 14% 21% 20% 24% 22% 19% 15% 4% 5% 3% 8% EBIT EMEA Americas Asia Pacific Global Technologies Entrance Systems Corporate/other Restructuring , ,500 Total EBIT 1,662 1,970 2,090 1,202 1,857 2,219 2,499 2,681 2,329 2,742 2,970 3,038 2,411 2,910 3,020 1,800 Adjusted EBIT 1,662 1,970 2,090 2,202 1,857 2,219 2,499 2,681 2,329 2,742 2,970 3,038 2,411 2,910 3,020 3,300 Pre-tax profit 1,533 1,832 1,966 1,050 1,709 2,073 2,363 2,552 2,184 2,551 2,796 2,851 2,209 2,729 2,845 1,610 EPS (SEK) EBIT margin EMEA 16.1% 15.6% 17.2% 17.8% 16.1% 15.4% 16.9% 17.4% 15.9% 15.1% 16.5% 16.0% 15.8% 15.3% 16.7% 17.2% Americas 21.0% 21.8% 21.2% 20.5% 21.1% 22.1% 21.7% 21.0% 21.1% 22.0% 21.8% 21.0% 20.8% 22.1% 21.7% 21.1% Asia Pacific 11.1% 14.1% 15.8% 13.6% 10.6% 14.4% 15.9% 14.6% 10.2% 14.4% 15.7% 14.8% 9.9% 14.1% 12.3% 11.5% Global Technologies 17.0% 17.8% 19.8% 18.5% 17.1% 18.3% 20.0% 20.0% 17.4% 18.0% 18.6% 18.4% 16.9% 18.4% 18.1% 18.8% Entrance Systems 12.3% 13.5% 14.0% 16.2% 11.6% 12.6% 13.2% 15.4% 12.0% 12.9% 13.9% 15.1% 12.3% 13.2% 14.3% 15.5% Total EBIT margin 15.3% 16.1% 17.2% 9.1% 15.1% 15.9% 17.0% 16.9% 15.3% 16.1% 17.0% 16.6% 15.2% 16.3% 16.8% 9.1% Total adj. EBIT margin 15.3% 16.1% 17.2% 16.6% 15.1% 15.9% 17.0% 16.9% 15.3% 16.1% 17.0% 16.6% 15.2% 16.3% 16.8% 16.8% Source: Company data, Danske Bank Markets estimates 7 Assa Abloy Buy

8 Table 4. Assa Abloy - Key figures by year Divisional estimates (SEKm) E 2017E 2018E Sales EMEA 13,477 13,988 13,601 13,036 13,030 13,382 13,165 14,752 16,523 16,943 18,074 18,887 Americas 10,220 10,467 9,880 9,536 8,906 9,670 10,121 12,157 15,665 17,083 18,278 19,009 Asia Pacific 2,780 3,321 3,789 6,081 6,633 7,224 7,420 8,337 10,171 9,033 9,176 9,635 Global Technologies 4,922 4,884 4,766 5,015 5,756 6,262 6,472 7,206 9,100 9,793 10,714 11,250 Entrance Systems 2,987 3,173 3,733 4,072 8,278 10,979 12,237 15,409 17,957 19,924 21,594 22,457 Corporate/other ,017-1,316-1,272-1,304-1,363 Total sales 33,550 34,918 34,963 36,824 41,786 46,620 48,479 56,844 68,100 71,503 76,532 79,875 Organic growth EMEA 7% -2% -12% 2% 0% 1% -1% 3% 5% 3% 4% 5% Americas 5% 4% -19% -2% 2% 4% 7% 5% 7% 6% 4% 4% Asia Pacific 10% 0% -1% 14% 9% 3% 4% 1% -3% -6% 0% 5% Global Technologies 11% 0% -12% 10% 11% 6% 7% 1% 7% 5% 6% 5% Entrance Systems 6% 3% -3% -2% 5% -2% 0% 3% 6% 4% 3% 4% Total organic growth 7.0% 0.0% -12.0% 3.0% 4.3% 1.9% 2.4% 2.9% 4.5% 3.1% 3.3% 4.4% Acquisitions 5% 4% 3% 8% 17% 9% 4% 9% 3% 3% 1% 0% FX -4% 0% 9% -6% -7% 1% -3% 5% 12% -1% 3% 0% Total sales growth 7.7% 4.1% 0.1% 5.3% 13.5% 11.6% 4.0% 17.3% 19.8% 5.0% 7.0% 4.4% EBIT EMEA 2,295 2,289 2,056 2,174 2,203 2,279 2,196 2,432 2,621 2,758 2,980 3,174 Americas 1,995 2,101 1,925 1,886 1,812 2,007 2,139 2,612 3,364 3,661 3,941 4,130 Asia Pacific ,032 1,188 1,437 1,096 1,139 1,256 Global Technologies ,074 1,184 1,368 1,647 1,775 1,981 2,111 Entrance Systems ,197 1,546 1,733 2,053 2,435 2,781 3,109 3,368 Corporate/other Restructuring 0-1,257-1, , , , Total EBIT 5,458 4,269 4,374 6,046 5,204 7,502 6,924 9,256 11,079 10,141 12,688 13,559 Adjusted EBIT 5,458 5,526 5,413 6,046 6,624 7,502 7,924 9,256 11,079 11,641 12,688 13,559 EBIT margin EMEA 17.0% 16.4% 15.1% 16.7% 16.9% 17.0% 16.7% 16.5% 15.9% 16.3% 16.5% 16.8% Americas 19.5% 20.1% 19.5% 19.8% 20.3% 20.8% 21.1% 21.5% 21.5% 21.4% 21.6% 21.7% Asia Pacific 11.6% 10.7% 12.1% 13.9% 14.1% 13.5% 13.9% 14.2% 14.1% 12.1% 12.4% 13.0% Global Technologies 15.3% 14.9% 16.1% 17.2% 15.6% 17.2% 18.3% 19.0% 18.1% 18.1% 18.5% 18.8% Entrance Systems 14.5% 14.3% 15.7% 15.4% 14.5% 14.1% 14.2% 13.3% 13.6% 14.0% 14.4% 15.0% Total EBIT margin 16.3% 12.2% 12.5% 16.4% 12.5% 16.1% 14.3% 16.3% 16.3% 14.2% 16.6% 17.0% Total adj. EBIT margin 16.3% 15.8% 15.5% 16.4% 15.9% 16.1% 16.3% 16.3% 16.3% 16.3% 16.6% 17.0% Source: Company data, Danske Bank Markets estimates 8 Assa Abloy Buy

9 Company summary Sales breakdown, geographical areas Sales breakdown, divisions Latin America, 2% Middle East & Africa, 1% APAC, 21% North America, 39% Western Europe, 35% Eastern Europe, 2% Entrance Systems, 26% Global Technologie s, 13% EMEA, 24% Americas, 22% Asia, 15% Company description Main shareholders Assa Abloy is a leading producer of locks, automatic doors and access control products with a global presence and a market share of 10%, making it the largest company in the sector. The company has exposure to the institutional, residential and commercial buildings markets. Two thirds of sales are replacement sales. Name Votes (%) Capital (%) Latour 29.4% 9.5% BlackRock 3.7% 5.4% Capital 3.6% 5.3% MSAB 11.4% 3.9% Company information Management Assa Abloy Klarabergsviadukten 90, SE Stockholm Sweden CEO: CFO: IR: Johan Molin Carolina Dybeck Happe Niklas Ribbing Net sales and EBITDA margin (SEKm) EBIT and EBIT margin (SEKm) 100,000 30% 15,000 20% 50,000 20% 10% 10,000 5,000 15% 10% 5% E 17E 18E 0% E 17E 18E 0% Net sales EBITDA margin EBIT EBIT margin P/E - 12 months forward (x) P/BV - 12 months forward (x) Source: Company data, FactSet, Danske Bank Markets estimates [all charts and tables] 9 Assa Abloy Buy

10 Summary tables INCOME STATEMENT Year end Dec, SEKm E 2017E 2018E Net sales 34,963 36,823 41,786 46,619 48,481 56,843 68,099 71,503 76,532 79,875 Cost of sales & operating costs -29,575-29,782-35,560-38,084-40,564-46,423-55,587-59,945-62,050-64,384 EBITDA 5,388 7,041 6,226 8,535 7,917 10,420 12,512 11,558 14,482 15,492 EBITDA, adj 6,427 7,041 7,646 8,535 8,917 10,420 12,512 13,058 14,482 15,492 Depreciation ,186-1,174-1,559-1,706 EBITA 4,536 6,209 5,387 7,723 7,148 9,491 11,326 10,384 12,923 13,785 Amortisation EBIT incl eo, bef ass 4,374 6,046 5,204 7,501 6,924 9,257 11,079 10,141 12,688 13,559 EBIT, adj 5,413 6,046 6,624 7,501 7,924 9,257 11,079 11,641 12,688 13,559 Financial items, net Pre-tax profit 3,740 5,366 4,559 6,731 6,381 8,698 10,382 9,394 12,053 13,044 Taxes -1,081-1,286-1,095-1,617-1,595-2,262-2,689-2,441-3,122-3,378 Minorities Discontinued operations Net profit, rep 2,627 4,050 3,842 5,111 4,773 6,436 7,693 6,954 8,931 9,666 Net profit, adj 3,366 4,050 4,517 5,100 5,534 6,436 7,693 8,064 8,931 9,666 CASH FLOW SEKm E 2017E 2018E EBITDA 5,388 7,041 6,226 8,535 7,917 10,420 12,512 11,558 14,482 15,492 Change in working capital 1, , Net interest paid Taxes paid ,206-1,617-1,134-2,376-2,247-2,441-3,122-3,378 Other operating cash items , ,210-1,286 Cash flow from operations 5,924 5,729 5,203 5,983 6,224 6,679 8,572 8,231 9,685 10,972 Capex ,086-1,201-1,271-1,241-1,502-1,607-1,757 Free cash flow 5,260 5,021 4,357 4,897 5,023 5,408 7,331 6,730 8,078 9,214 Disposals/(acquisitions) -1,171-3,319-6,511-4,181-4,829-2,254-4,161-2, Free cash flow to equity 4,089 1,702-2, ,154 3,170 4,580 7,178 8,314 Dividend paid -1,317-1,317-1,472-1,657-2,007-2,110-2,407-2,948-3,171-3,449 Share buy-backs New issue common stock Incr/(decr) in debt -1,534-1,323 4, ,149 1, ,700-1, Minorities and other financing CF -1, ,019-2, Cash flow from financing -4,036-2,571 2,653-1, ,849-2, ,597-3,253 Disc ops and other 2,407 Incr/(decr) in cash ,332 2,581 5,061 BALANCE SHEET SEKm E 2017E 2018E Cash and cash equivalents 2,319 1,450 1,949 1, ,833 7,414 12,475 Inventory 4,349 4,825 5,704 5,905 6,498 7,845 8,348 8,765 9,382 9,792 Trade receivables 5,618 5,596 6,924 7,557 8,531 10,595 11,775 12,227 12,934 13,339 Other current assets 1,271 1,308 1,496 2,346 2,264 2,631 2,707 2,842 3,042 3,175 Goodwill 20,333 22,279 27,013 28,932 31,817 39,778 44,832 45,907 46,357 46,807 Other intangible assets 1,991 2,914 4,442 5,490 6,463 7,278 7,031 6,788 6,554 6,328 Fixed tangible assets 5,550 5,422 5,684 5,603 6,390 7,712 7,562 8,427 8,925 9,426 Associated companies ,211 1,519 1,675 1,861 1,910 1,910 1,910 1,910 Other non-current assets 1,148 1, ,459 1,763 1,631 1,511 1,511 1,511 1,511 Total assets 42,618 45,389 55,373 59,856 65,763 79,998 86,177 93,210 98, ,762 Shareholders' equity 19,334 20,821 23,735 26,726 28,812 36,098 41,579 44,884 50,645 56,861 o/w Minority interests Current liabilities 7,429 8,673 14,562 7,271 9,268 10,335 11,127 11,455 11,938 12,260 Interest bearing debt 12,249 10,926 15,179 14,582 18,731 20,048 20,009 22,709 21,283 21,479 Pension liabilities 1,118 1,078 1,173 1,224 1,226 2,946 2,761 3,461 3,461 3,461 Oth non-curr liabilities 2,704 4,694 4,480 3,801 5,027 6,159 5,970 5,970 5,970 5,970 Total liabilities 23,284 24,568 31,638 33,130 36,951 43,900 44,598 48,326 47,384 47,901 Total liabilities and equity 42,618 45,389 55,373 59,856 65,763 79,998 86,177 93,210 98, ,762 Net debt 11,048 10,554 14,403 14,761 19,595 22,327 22,269 21,338 17,330 12,465 Working capital 4,025 3,859 3,318 2,285 5,326 6,324 6,972 7,649 8,688 9,315 Source: Company data, Danske Bank Markets estimates 10 Assa Abloy Buy

11 Summary tables PER SHARE DATA E 2017E 2018E No. of shares, fully diluted YE (m) 1, , , , , , , , , ,112.6 No. of shares, fully diluted avg. (m) 1, , , , , , , , , ,112.6 EPS rep. (SEK) EPS adj. (SEK) DPS (SEK) CFFO/share (SEK) Book value/share (SEK) MARGINS AND GROWTH E 2017E 2018E EBITDA margin 15.4% 19.1% 14.9% 18.3% 16.3% 18.3% 18.4% 16.2% 18.9% 19.4% EBITA margin 13.0% 16.9% 12.9% 16.6% 14.7% 16.7% 16.6% 14.5% 16.9% 17.3% EBIT margin 12.5% 16.4% 12.5% 16.1% 14.3% 16.3% 16.3% 14.2% 16.6% 17.0% EBIT adj margin 15.5% 16.4% 15.9% 16.1% 16.3% 16.3% 16.3% 16.3% 16.6% 17.0% Sales growth 0.1% 5.3% 13.5% 11.6% 4.0% 17.2% 19.8% 5.0% 7.0% 4.4% EBITDA growth 3.8% 30.7% -11.6% 37.1% -7.2% 31.6% 20.1% -7.6% 25.3% 7.0% EBITA growth 2.9% 36.9% -13.2% 43.4% -7.4% 32.8% 19.3% -8.3% 24.4% 6.7% EPS adj growth 2.9% 21.6% 12.1% 13.4% 8.9% 16.1% 20.6% 4.8% 10.8% 8.2% PROFITABILITY E 2017E 2018E ROIC (after tax, incl. GW, adj.) 12.3% 13.4% 12.9% 13.1% 12.4% 12.1% 12.6% 12.5% 13.2% 13.8% ROIC (after tax, excl. GW, adj.) 32.3% 36.2% 35.6% 37.8% 34.0% 32.1% 35.5% 35.6% 36.3% 37.2% ROE (adj.) 17.6% 20.2% 20.3% 20.2% 19.9% 19.8% 19.8% 18.7% 18.7% 18.0% ROIC (adj.) - WACC 6.7% 7.8% 7.3% 7.6% 6.9% 6.5% 7.1% 6.9% 7.6% 8.2% MARKET VALUE E 2017E 2018E Share price (SEK) No. shares reduced by buybacks (m) 1, , , , , , , , , ,112.6 Mkt cap used in EV (m) 52,410 71,361 64,965 90, , , , , , ,800 Net debt, year-end (m) 11,048 10,554 14,403 14,761 19,595 22,327 22,269 21,338 17,330 12,465 MV of min. and ass. comp. (m) ,003-1,336-1,675-1,859-1,906-1,906-1,906-1,906 Enterprise value (m) 63,581 82,047 78, , , , , , , ,359 VALUATION E 2017E 2018E EV/sales (x) EV/EBITDA (x) EV/EBITA (x) EV/EBIT (x) P/E (reported) (x) P/E (adj.) (x) P/BV (x) EV/invested capital (x) Dividend yield 2.59% 2.09% 2.58% 2.08% 1.66% 1.55% 1.49% 1.71% 1.86% 2.04% Total yield (incl. buybacks) 2.59% 2.16% 2.61% 2.08% 1.66% 1.55% 1.49% 1.71% 1.86% 2.04% Free cash flow yield 10.04% 7.04% 6.71% 5.40% 3.95% 3.48% 3.70% 3.62% 4.35% 4.96% FINANCIAL RATIOS E 2017E 2018E Net debt/ebitda (x) Net debt/equity (x), year-end Dividend payout ratio 51.9% 37.0% 43.7% 37.0% 44.2% 37.4% 38.3% 45.6% 38.6% 39.1% Interest coverage (x) Cash conversion (FCF/net profit) 200.2% 124.0% 113.4% 95.8% 105.2% 84.0% 95.3% 96.8% 90.4% 95.3% Capex/sales 1.9% 1.9% 2.0% 2.3% 2.5% 2.2% 1.8% 2.1% 2.1% 2.2% NWC/sales 11.5% 10.5% 7.9% 4.9% 11.0% 11.1% 10.2% 10.7% 11.4% 11.7% QUARTERLY P&L Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16E Sales (m) 15,252 17,082 17,465 18,300 15,891 17,893 18,026 19,693 EBITDA (m) 2,660 3,116 3,330 3,406 2,787 3,305 3,426 2,040 EBIT before non-recurring items (m) 2,329 2,742 2,970 3,038 2,411 2,910 3,020 3,300 Net profit (adj.) (m) 1,616 1,888 2,069 2,120 1,639 2,020 2,122 2,283 EPS (adj.) (SEK) EBITDA margin 17.4% 18.2% 19.1% 18.6% 17.5% 18.5% 19.0% 10.4% EBIT margin (adj.) 15.3% 16.1% 17.0% 16.6% 15.2% 16.3% 16.8% 16.8% Source: Company data, Danske Bank Markets estimates 11 Assa Abloy Buy

12 Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ( Danske Bank ). The author of the research report is Oscar Stjerngren. Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. 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Sell: we expect the stock to generate a total return below 0% over the next 12 months. Rating Suspended: the rating is suspended due to a capital operation (e.g. takeover bid, share issue) where the issuer or a related party of the issuer is or could be involved or to a change of analyst covering the stock. Not Rated: Danske Bank Markets produces investment research on Danske Bank but does not have an investment recommendation to buy, hold or sell or any target price on the stock. 12 Assa Abloy Buy

13 As at 23 October 2016, Danske Bank Markets had investment recommendations on $Active$ securities. The distribution of recommendations is represented in the Securities ratings breakdown diagram below. The proportion of issuers corresponding to each of the recommendation categories above to which Danske Bank provided investment banking services in the past 12 months is shown below. Sell 33% Buy 34% Rating Investment banking relationships Buy 0% Hold 0% Sell 0% General disclaimer Hold 33% Changes in recommendations in the last 12 months: Date Old rec. New rec. This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) ( Relevant Financial Instruments ). The research report has been prepared independently and solely on the basis of publicly available information that Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report. The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These opinions are subject to change and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in the research report. This research report is not intended for, and may not be redistributed to, retail customers in the United Kingdom or the United States. This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank s prior written consent. Disclaimer related to distribution in the United States This research report was created by Danske Bank A/S and is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank A/S, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely to U.S. institutional investors as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the United States solely to U.S. institutional investors. Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA but satisfy the applicable requirements of a non-u.s. jurisdiction. Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in non-u.s. financial instruments may entail certain risks. Financial instruments of non-u.s. issuers may not be registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission. 13 Assa Abloy Buy