IMAX Corp (IMAX) Hard to see forecast upside. 15 March 2017 Americas/United States Equity Research Entertainment

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1 Americas/United States Equity Research Entertainment Rating NEUTRAL Price (13-Mar-17, US$) Target price (US$) (from 34.00) week price range (US$) Market cap (US$ m) 2, Target price is for 12 months. Research Analysts Omar Sheikh Lawrence Dann-Fenwick Share price performance Boyao Sun boyao.sun@credit-suisse.com A p r Ju l O c t Ja n IM A X.N S& P IN D EX On 13-Mar-2017 the S&P 500 INDEX closed at Daily Mar14, Mar13, 2017, 03/14/16 = US$32.05 Quarterly EPS Q1 Q2 Q3 Q4 2016A E E IMAX Corp (IMAX) DECREASE TARGET PRICE Hard to see forecast upside Reduce forecasts and TP, remain Neutral: We lower our 2017/18 EPS by 14%/5% to $1.06/$1.42, driven by 2% lower EBITDA and an incremental $17m operating expense in new initiatives (original content/vr) announced with Q earnings. We see balanced risk/reward at current levels, given stable domestic trends but the likely 1-2 year payback period on this year's investment; slowing growth in China; and the lofty multiple. We lower our TP to $33 (from $34) and remain Neutral. Strong installation activity, China growth remains key: IMAX ended Q4'16 with an installation backlog of close to 500 theaters, of which nearly 70% were in China. Management also provided guidance that close to 70% of 2017 installations will be full JV or hybrid JV systems, where IMAX's revenue is directly tied to box office receipts. The shift in mix towards JVs increases IMAX's exposure to volatile box office performance, particularly in China, and it remains unclear how much of a tailwind this will be in 2017 after a disappointing 2016, when Chinese box office revenues declined 5%. New growth initiatives likely to weigh on forecasts: We think IMAX's investments in Marvel/ABC's Inhumans series and in VR centers both look well placed to succeed long term. However, it is also far from clear that any material evidence of success will emerge this year, and we note that further investment in both initiatives is also possible in This suggests forecast revisions are unlikely to turn positive in the near term, without which we continue to believe the stock will struggle to outperform. Valuation: We value IMAX at $33, based on 14.5x 2017 EV/EBITDA, towards the top end of the stock's recent trading range. Our valuation is supported by our DCF model (WACC 9%, growth 0.25%). Stripping out the 68.5% stake in IMAX China at market value, "core" IMAX is trading at 10.6x 2017 EV/EBITDA, a c20% premium to peers. Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) EBITDA (US$ m) OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) ROIC (%) Number of shares (m) IC (current, US$ m) BV/share (Next Qtr., US$) - EV/IC (x) - Net debt (Next Qtr., US$ m) - Dividend (current, US$) - Net debt/tot eq (Next Qtr.,%) - Dividend yield (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

2 IMAX Corp (IMAX) Price (13 Mar 2017): US$33.25; Rating: NEUTRAL; Target Price: (from US$34.00) US$33.00; Analyst: Omar Sheikh Income Statement 12/16A 12/17E 12/18E 12/19E Revenue (US$ m) EBITDA Depr. & amort. (7) (8) (8) (8) EBIT (US$) Net interest exp (0) (0) 0 2 PBT (US$) Income taxes (16) (23) (31) (42) Profit after tax Other NPAT adjustments Cash Flow 12/16A 12/17E 12/18E 12/19E Cash flow from operations CAPEX (48) (56) (77) (70) Free cashflow to the firm Cash flow from investments (65) (41) (37) (34) Net share issue(/repurchase) (121) Dividends paid Cashflow from financing activities (124) Changes in Net Cash/Debt (111) Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Cash & cash equivalents Account receivables Other current assets Total fixed assets Investment securities Total assets ,091 1,238 Total current liabilities Shareholder equity Total liabilities and equity ,091 1,238 Net debt (177) (267) (407) (565) Per share 12/16A 12/17E 12/18E 12/19E No. of shares (wtd avg) CS adj. EPS Prev. EPS (US$) Dividend (US$) Free cash flow per share Earnings 12/16A 12/17E 12/18E 12/19E Sales growth (%) EBIT growth (%) (33.7) Net profit growth (%) (48.4) EPS growth (%) (27.8) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) Valuation 12/16A 12/17E 12/18E 12/19E EV/EBITDA (x) P/E (x) Returns 12/16A 12/17E 12/18E 12/19E ROIC (%) Gearing 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) (28.3) (36.6) (47.5) (56.2) Quarterly EPS 2016A Q Q Q Q E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background IMAX is a provider of entertainment technology, specializing in motion picture technologies. They install and maintain their IMAX theatre network worldwide in collaboration with local theatres. They also own a 69% stake in IMAX China. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) (from 37.00) Our Blue Sky valuation is $36, which equates to 15.5x 2017 EV/EBITDA, and includes a 200bp addition to domestic and international PSA growth. Our Grey Sky Scenario (US$) (from 32.00) Our Grey Sky valuation is $30, which equates to 13.5x 2017 EV/EBITDA, and includes a 200bp reduction in PSA growth Share price performance A p r Ju l O c t Ja n IM A X.N S& P IN D EX On 13-Mar-2017 the S&P 500 INDEX closed at Daily Mar14, Mar13, 2017, 03/14/16 = US$32.05 IMAX Corp (IMAX) 2

3 What's changed We trim our 2017/18 adj. EBITDA forecasts by 2% and our 2017/18 EPS forecasts by 14%/5% to $1.06/$1.42 (from $1.23/1.49). We summarize the changes to our forecasts in Figure 1 below. We lower our TP to $33 (previously $34), which values the stock at an unchanged 14.5x 2017 EV/EBITDA, towards the high end of the stock's recent trading range. Our valuation is supported by our DCF model (WACC 9%, growth 0.25%). Figure 1: IMAX summary Income Statement forecast changes E 2018E 2019E New Old % y/y % New Old % y/y % New Old % y/y % Revenue IMAX Systems $105,527 $79,753 $72,856 9% $75,803 $76,406-1% $69,303 $69,906-1% Theater System Maintenance $40,430 $47,221 $49,161-4% $49,064 $54,030-9% $53,717 $58,358-8% Joint Revenue Sharing $91,413 $123,687 $123,957 0% $138,989 $139,382 0% $151,636 $150,823 1% Films $120,530 $150,300 $144,762 4% $172,895 $165,042 5% $188,678 $179,915 5% Other $19,434 $20,406 $20,923-2% $20,406 $21,132-3% $20,406 $21,343-4% Total Revenues $377,334 $421,367 $411,657 2% 12% $457,157 $455,991 0% 8% $483,740 $480,345 1% 6% Gross Profit IMAX Systems $60,090 $55,128 $51,378 7% $53,277 $53,614-1% $49,182 $49,519-1% Theater System Maintenance $13,659 $15,583 $16,715-7% $16,191 $18,370-12% $17,727 $19,842-11% Joint Revenue Sharing $59,837 $85,100 $77,662 10% $97,621 $91,153 7% $108,384 $100,608 8% Films $69,016 $96,393 $102,090-6% $118,449 $121,517-3% $133,288 $135,520-2% Other $76 ($12,146) $461 ($11,146) $465 $854 $470 Total Gross Profit $202,678 $240,058 $248,305-3% $274,392 $285,120-4% $309,434 $305,958 1% Adjusted EBITDA $121,904 $144,300 $147,029-2% $172,091 $174,720-2% $198,298 $188,214 5% Operating Income $58,168 $94,338 $104,555-10% $127,126 $139,411-9% $159,807 $157,899 1% Adjusted Net Income $50,288 $71,090 $84,737-16% $95,813 $104,029-8% $112,114 $114,034-2% Adjusted EPS $0.74 $1.06 $ % 44% $1.42 $1.49-5% 34% $1.65 $1.62 2% 16% What we learned from Q4'16 Q4 gross profit came in at $55m, in line with consensus forecasts. IMAX Systems gross profit of $22m was 18% ahead of consensus, but the strength was offset by weak Distribution & Post-production results (-$2m vs consensus of $0.3m). Adjusted EBITDA of $37m was 16% above consensus, partially driven by a c$3m adjustment for write-downs, while adj. EPS of $0.22 was in line with consensus due to a higher than anticipated tax rate, driven by an unfavorable box office revenue mix and some onetime tax expenses. IMAX finished Q4'16 with 498 theaters in backlog, of which 334 theatres are in China. Among the backlog theaters, 71% of them are JV theaters, and 84% of the 2016 new signings in China are full JVs. Therefore, we would highlight IMAX's accelerating shift toward JV model, which naturally makes it more exposed to box office volatility. The company provided guidance regarding its new initiative investments for the first time: opex investment in new initiatives will be in the $16-18m range in 2017, with the majority of the investment in VR and Home. On VR, each VR site will cost $ K, with pricing at $1 per minute of customer experience. Lastly, management provided guidance for The company plans to install systems (50 sales type, 78 JVs, and 25 hybrid) during the course of the year and 10 theaters (3 sales, 7 JVs, 1 hybrid) in Q1. They expect DMR costs of $40-41m and stock comp. expense of $26m. IMAX's corporate operating expense is expected to grow mid-single digits in 2017, while total operating expense including the $16-18m net operating expense in new initiatives is expected to grow 10%. Management also noted that IMAX will benefit from c$4m of development credits before gross margin, and that its tax rate should be in the range of 23%-24%. IMAX Corp (IMAX) 3

4 Figure 2: IMAX Q4'16 results summary IMAX Q Q Q ('000s USD) Reported S/Acct. Cons Actual vs Cons. Δ vs. Cons. CS Reported Reported Total Revenue $106,913 $99, % $7,713 $98,251 $119,333 $86,550 IMAX Theatre Systems $40,059 $33, % $6,859 $32,191 $37,496 $25,687 Sales and sales-type leases $31,002 $22, % $8,802 $21,250 $33,010 $21,804 Ongoing rent, fees and finance income $4,017 $5, % -$1,083 $4,620 $4,486 $3,883 Theater System Maintenance $10,399 $10, % -$501 $10,710 $9,599 $10,293 Joint Revenue Sharing $24,473 $25, % -$627 $26,514 $31,861 $19,698 Films $31,982 $28, % $3,982 $28,835 $34,118 $25,968 Production & DMR $27,636 $25, % $1,736 $26,619 $31,945 $21,549 Distribution & Post production $4,346 $2, % $2,246 $2,216 $2,173 $4,419 $0 $0 Other $5,040 $5, % -$860 $6,322 $6,259 $4,904 Gross Profit $55,326 $55, % -$174 $56,159 $71,883 $44,899 IMAX Systems $22,165 $18, % $3,365 $19,062 $24,337 $16,743 Sales and sales-type leases $17,991 $14, % $3,891 $14,558 $20,070 $12,936 Ongoing rent, fees and finance income $3,847 $4, % -$853 $4,504 $4,267 $3,807 Theater System Maintenance $3,452 $3, % -$248 $3,534 $2,811 $3,398 Joint Revenue Sharing $15,121 $13, % $1,421 $13,208 $21,556 $10,980 Films $14,588 $19, % -$4,612 $19,648 $22,479 $13,709 Production & DMR $16,798 $18, % -$2,102 $19,162 $22,003 $12,448 Distribution & Post production -$2,210 $ % -$2,510 $486 $476 $1,261 $0 $0 Other $327 $707 $700 $69 Adjusted EBITDA $36,861 $31, % $5,061 $33,382 $48,147 $24,506 Adjusted EBITDA Margin 34.5% 32.1% 7.4% 2.4% 34.0% 40.3% 28.3% Adj. Diluted EPS $0.22 $ % 1% $0.22 $0.39 $0.12 Operating Metrics Q Q Q Reported S/Acct. Cons Actual vs Cons. Δ vs. Cons. CS Reported Reported Total Theater Signings Total Theater Installations % Total Theaters in Backlog % Y/Y Change Q Q Q Reported S/Acct. Cons Actual vs Cons. Δ vs. Cons. CS Reported Reported Total Revenue -10% -17% 6% -18% 16% 2% IMAX Systems 7% -11% 18% -31% 1% -15% Sales and sales-type leases -6% 0% -6% -36% -1% -18% Ongoing rent, fees and finance income -10% 0% -10% 3% 17% 10% Theater System Maintenance 8% 14% -5% 12% 11% 10% Joint Revenue Sharing -23% -21% -2% -17% 39% -1% Films -6% -18% 12% -15% 14% 15% Production & DMR -13% -19% 5% -17% 25% 3% Distribution & Post production 100% -3% 103% 2% 34% 156% Other -19% -6% -14% 1% 67% 52% Adjusted EBITDA -23% -34% 11% -31% 6% -7% Adj. Diluted EPS -43% -46% 3% -44% 12% -31% Source: StreetAccount, Company data, Credit Suisse estimates IMAX Corp (IMAX) 4

5 Valuation We value IMAX at $33, based on 14.5x 2017 EV/EBITDA, in line with the stock's recent trading range (see Figure 3 and Figure 4). Our valuation is supported by our DCF model (see Figure 5), which uses a 9% WACC and 0.25% terminal growth. Our Blue Sky valuation is $36, which equates to 15.5x 2017 EV/EBITDA, and includes a 200bp addition to Attendance per Avg. Screen growth. Our Grey Sky valuation is $30, which equates to 13.5x 2017 EV/EBITDA, and includes a 200bp reduction in Attendance per Avg. Screen growth (see Figure 6). Figure 3: IMAX 12m forward EV/EBITDA 20.00x 18.00x 16.00x 14.00x 12.00x 10.00x 8.00x 6.00x 4.00x 2.00x 0.00x 11/20/ /20/ /20/ /20/ /20/2016 IMAX 12m fwd EV/EBITDA Figure 4: IMAX 12m forward P/E 60.00x 50.00x 40.00x 30.00x 20.00x 10.00x 0.00x 11/20/ /20/ /20/ /20/ /20/2016 IMAX 12m fwd PE Source: Thomson Reuters Source: Thomson Reuters Figure 5: IMAX DCF valuation IMAX DCF ANALYSIS FY15 FY16 FY17E FY18E FY19E FY20E Revenue $373,805 $377,334 $421,367 $457,157 $483,740 $503,434 EBITDA $140,777 $121,904 $144,300 $172,091 $198,298 $209,490 Net Income $64,624 $39,320 $68,888 $94,351 $116,813 $131,184 + Depreciation & Amortization $42,803 $46,485 $49,593 $53,192 $57,112 $62,673 + Other Non-Cash Charges (Benefits) $12,836 $22,941 $14,645 $17,620 $21,816 $20,746 + Interest Expense (Income) $533 $227 $208 -$335 -$1,155 -$2,093 Change in Working Capital -$36,058 -$30,874 -$9,100 $7,386 -$7,397 -$5,157 = Unlevered Cash Flows $84,738 $78,099 $124,235 $172,214 $187,188 $207,352 - Capital Expenditures $43,257 $15,278 $8,427 $9,143 $9,675 $12,586 = Unlevered Free Cash Flows $41,481 $62,821 $115,807 $163,070 $177,514 $194,766 PV of Free Cash Flow $41,481 $62,821 $106,245 $137,253 $137,073 $137,977 Perpetual FCF Growth Rate ("G") 0.25% Weighted Average Cost of Capital 9.0% Value Drivers PV of Cash Flows $518,549 + PV of Terminal Value $1,580,828 = Enterprise Value $2,099,376 - Net Debt -$177,443 - Minority Interest $64,542 = Equity Value $2,212,277 / Diluted Shares Outstanding 67,227 = Equity Value Per Share $33 IMAX Corp (IMAX) 5

6 Figure 6: IMAX Blue and Grey Sky valuations Blue Sky Valuation 13.0x 13.5x 14.0x 14.5x 15.0x 15.5x 16.0x 2017 EBITDA ($) $148,907 $148,907 $148,907 $148,907 $148,907 $148,907 $148,907 EV $1,935,404 $2,009,858 $2,084,311 $2,158,765 $2,233,219 $2,307,672 $2,382,126 Net Cash ($) $177,443 $177,443 $177,443 $177,443 $177,443 $177,443 $177,443 Minority Interest ($) ($64,542) ($64,542) ($64,542) ($64,542) ($64,542) ($64,542) ($64,542) Equity value ($) $2,048,305 $2,122,759 $2,197,212 $2,271,666 $2,346,120 $2,420,573 $2,495,027 Equity value per share ($) $31 $32 $33 $34 $35 $36 $37 Grey Sky Valuation 13.0x 13.5x 14.0x 14.5x 15.0x 15.5x 16.0x 2017 EBITDA ($) $139,693 $139,693 $139,693 $139,693 $139,693 $139,693 $139,693 EV $1,815,641 $1,885,487 $1,955,333 $2,025,179 $2,095,026 $2,164,872 $2,234,718 Net Cash ($) $177,443 $177,443 $177,443 $177,443 $177,443 $177,443 $177,443 Minority Interest ($) ($64,542) ($64,542) ($64,542) ($64,542) ($64,542) ($64,542) ($64,542) Equity value ($) $1,928,542 $1,998,388 $2,068,234 $2,138,080 $2,207,927 $2,277,773 $2,347,619 Equity value per share ($) $29 $30 $31 $32 $33 $34 $35 IMAX Corp (IMAX) 6

7 Figure 7: IMAX summary Income Statements E IMAX Income Statement (YE Dec, '000s USD) E 2018E 2019E 2020E Revenues IMAX Systems $80,189 $72,992 $102,128 $105,527 $79,753 $75,803 $69,303 $58,903 Theater System Maintenance $31,978 $34,042 $36,944 $40,430 $47,221 $49,064 $53,717 $57,914 Joint Revenue Sharing $64,130 $68,418 $99,120 $91,413 $123,687 $138,989 $151,636 $163,282 Films $100,458 $102,935 $118,034 $120,530 $150,300 $172,895 $188,678 $202,930 Other $11,182 $12,154 $17,579 $19,434 $20,406 $20,406 $20,406 $20,406 Total Revenue $287,937 $290,541 $373,805 $377,334 $421,367 $457,157 $483,740 $503,434 Y/Y 1% 29% 1% 12% 8% 6% 4% Operating Expenses $123,334 $117,153 $154,517 $174,656 $181,309 $182,765 $174,306 $176,952 Gross Profit $164,603 $173,388 $219,288 $202,678 $240,058 $274,392 $309,434 $326,482 Gross Margin 57% 60% 59% 54% 57% 60% 64% 65% Selling, general and administrative expenses $82,669 $93,260 $115,345 $124,745 $124,749 $126,724 $128,738 $130,793 Research and development $14,771 $16,096 $12,730 $16,315 $17,131 $17,302 $17,648 $18,001 Depreciation & Amortization in Opex $35,067 $31,506 $39,927 $43,874 $46,774 $50,373 $54,293 $59,854 Stock Based Comp & Other Adjustments $10,923 $12,958 $9,637 $16,412 -$653 -$8,649 -$19,044 -$28,052 Adjusted EBITDA $113,153 $108,496 $140,777 $121,904 $144,300 $172,091 $198,298 $209,490 EBITDA Margin 39% 37% 38% 32% 34% 38% 41% 42% Y/Y -4% 30% -13% 18% 19% 15% 6% Additional Operating Costs $2,063 $6,162 $3,442 $3,450 $3,841 $3,241 $3,241 $3,241 Income from operations $65,100 $57,870 $87,771 $58,168 $94,338 $127,126 $159,807 $174,447 Net Interest Expense $1,290 $519 $693 $315 $274 -$441 -$1,561 -$2,829 Income Before Income Tax $63,810 $57,351 $87,078 $57,853 $94,064 $127,567 $161,368 $177,276 Income Taxes $16,629 $14,466 $20,052 $16,212 $22,575 $30,616 $41,956 $46,092 Net Income before Equity Income $47,181 $42,885 $67,026 $41,641 $71,488 $96,951 $119,413 $131,184 Loss from equity-accounted investments $2,757 $1,071 $2,402 $2,321 $2,600 $2,600 $2,600 $0 Net income from Continuing Operations $44,424 $41,814 $64,624 $39,320 $68,888 $94,351 $116,813 $131,184 Net income from discountinued operations -$309 $355 $0 $0 $0 $0 $0 $0 Net income $44,115 $42,169 $64,624 $39,320 $68,888 $94,351 $116,813 $131,184 Reported Diluted EPS $0.64 $0.57 $0.79 $0.42 $0.79 $1.09 $1.32 $1.45 Adjusted Diluted EPS $0.81 $0.75 $1.02 $0.74 $1.06 $1.42 $1.65 $1.77 IMAX Corp (IMAX) 7

8 Figure 8: IMAX summary Cash Flow Statements E IMAX Cash Flow Statement (YE Dec, '000s USD) E 2018E 2019E 2020E Operating Activities Net income $44,115 $42,169 $64,624 $39,320 $68,888 $94,351 $116,813 $131,184 Items not involving cash: Depreciation and amortization $37,172 $33,756 $42,803 $46,485 $49,593 $53,192 $57,112 $62,673 Write-downs, net of recoveries -$849 $5,294 $3,725 $5,940 $0 $0 $0 $0 Stock and other non-cash compensation $12,685 $15,467 $22,379 $31,586 $26,000 $26,000 $26,000 $26,000 Investment in film assets -$20,935 -$19,233 -$15,119 -$22,308 -$22,308 -$22,308 -$22,308 -$22,308 Other non-cash items $16,600 $3,095 $1,851 $7,723 $10,953 $13,928 $18,124 $17,054 Changes in other non-cash operating assets and liabilities -$33,755 $6,057 -$36,058 -$30,874 -$9,100 $7,386 -$7,397 -$5,157 Net cash (used in) provided by operating activities $55,033 $86,605 $84,205 $77,872 $124,026 $172,549 $188,344 $209,446 Investing Activities Purchase of property, plant and equipment -$13,016 -$40,104 -$43,257 -$15,278 -$8,427 -$9,143 -$9,675 -$12,586 Investment in joint revenue sharing equipment -$22,775 -$16,838 -$28,474 -$42,910 -$31,200 -$26,400 -$23,200 -$23,200 Investment in new business ventures -$4,000 -$2,500 -$2,000 -$1,911 $0 $0 $0 $0 Cash surrender value of life insurance $0 $0 $0 $0 $0 $0 $0 $0 Acquisition of other assets $0 $507 $0 $0 $0 $0 $0 $0 Acquisition of other intangible assets -$2,486 -$2,918 -$5,065 -$4,787 -$1,000 -$1,000 -$1,000 -$1,000 Net cash used in investing activities -$42,277 -$61,853 -$78,796 -$64,886 -$40,627 -$36,543 -$33,875 -$36,786 Financing Activities $0 Increase in bank indebtedness $12,000 $4,710 $25,290 $0 $0 $0 $0 $0 Repayment of bank indebtedness -$23,000 $0 -$333 -$2,000 $0 $0 $0 $0 Credit facility amendment fees paid -$2,151 -$427 -$1,533 $0 $0 $0 $0 $0 Common shares issued - stock options exercised $8,768 $6,981 -$8,667 -$121,294 $6,000 $4,000 $4,000 $4,000 Net cash provided by (used in) financing activities -$4,383 $52,259 $204,695 -$125,782 $6,000 $4,000 $4,000 $4,000 IMAX Corp (IMAX) 8

9 Figure 9: IMAX summary Balance Sheets E IMAX Balance Sheet (YE Dec, '000s USD) E 2018E 2019E 2020E Cash and cash equivalents $29,546 $106,503 $317,449 $204,759 $294,158 $434,164 $592,632 $769,292 Accounts receivables $73,074 $76,051 $97,981 $96,349 $119,621 $120,259 $128,596 $135,230 Financing receivables $107,110 $105,700 $117,231 $122,125 $122,125 $122,125 $122,125 $122,125 Inventories $9,825 $17,063 $38,753 $42,121 $29,728 $22,666 $20,189 $18,543 Film assets $7,076 $15,163 $14,571 $16,522 $19,432 $21,460 $22,522 $22,522 Property, plant and equipment $132,847 $183,424 $218,267 $245,415 $254,847 $257,479 $254,487 $249,908 Other assets $121,667 $117,629 $126,377 $130,043 $122,690 $112,362 $97,839 $81,785 Total Assets $481,145 $621,533 $930,629 $857,334 $962,601 $1,090,514 $1,238,390 $1,399,405 Bank indebtedness $0 $4,710 $29,276 $27,316 $27,316 $27,316 $27,316 $27,316 Accounts payable $19,396 $26,145 $23,455 $19,990 $21,769 $22,731 $21,195 $21,025 Accrued liabilities $65,232 $75,425 $95,748 $93,208 $93,208 $93,208 $93,208 $93,208 Deferred revenue $76,932 $88,566 $104,993 $90,266 $90,266 $90,266 $90,266 $90,266 Other Liabilities $0 $0 $0 $0 $0 $0 $0 $0 Total Liabilities $161,560 $194,846 $253,472 $230,780 $232,559 $233,521 $231,985 $231,815 Total Shareholder Equity $319,585 $426,687 $677,157 $626,554 $730,042 $856,993 $1,006,406 $1,167,590 IMAX Corp (IMAX) 9

10 Key Charts Figure 10: IMAX revenue by segment E Figure 11: IMAX adj.ebitda and margin E Total Revenue (in mm) $160, % $450,000 $140, % $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20, % 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% $ E $ E 0.0% IMAX Systems Theater System Maintenance Joint Revenue Sharing Films Other Adjusted EBITDA Adjusted EBITDA Margin Figure 12: IMAX number of screens Figure 13: IMAX number of JV theaters , , Q1 14A Q2 14A Q3 14A Q4 14A Q1 15A Q2 15A Q3 15A Q4 15A Q1 16A Q2 16A Q3 16A Q4 16A 0 Q1 14A Q2 14A Q3 14A Q4 14A Q1 15A Q2 15A Q3 15A Q4 15A Q1 16A Q2 16A Q3 16A Q4 16A Domestic China International Theaters under JV Figure 14: Domestic PSA E Figure 15: International PSA E $1,200,000 $1,600,000 $1,000,000 $1,400,000 $1,200,000 $800,000 $1,000,000 $600,000 $800,000 $400,000 $600,000 $400,000 $200,000 $200,000 $ E $ E GBO Per Screen (Domestic) GBO Per Screen (International) IMAX Corp (IMAX) 10

11 Companies Mentioned (Price as of 13-Mar-2017) IMAX China Hldg (1970.HK, HK$35.9) IMAX Corp (IMAX.N, $33.25, NEUTRAL, TP $33.0) The Walt Disney Company (DIS.N, $111.52) Disclosure Appendix Analyst Certification I, Omar Sheikh, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. 3-Year Price and Rating History for IMAX Corp (IMAX.N) IMAX.N Closing Price Target Price Date (US$) (US$) Rating 21-Apr O 05-Sep * 23-Feb Apr Jun Oct Feb Nov * 31-Jan N * Asterisk signifies initiation or assumption of coverage O U T PERFO RM N EU T RA L Target Price Closing Price IMAX.N 01- Jan Jan Jan The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts stock rating are defined as follows: Outperform (O) : The stock s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-japan Asia stocks, ratings are based on a stock s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock s absolute total return potential to its current share price and (2) the relative attractiveness of a stock s total return potential within an analyst s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products. Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts sector weightings are distinct from analysts stock ratings and are based on the analyst s expectations for the fundamentals and/or valuation of the sector* relative to the group s historic fundamentals and/or valuation: Overweight : The analyst s expectation for the sector s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst s expectation for the sector s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst s expectation for the sector s fundamentals and/or valuation is cautious over the next 12 months. *An analyst s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors. IMAX Corp (IMAX) 11

12 Credit Suisse's distribution of stock ratings (and banking clients) is: Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 45% (64% banking clients) Neutral/Hold* 39% (60% banking clients) Underperform/Sell* 14% (52% banking clients) Restricted 2% *For purposes of the NYSE and FINRA ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors. Important Global Disclosures Credit Suisse s research reports are made available to clients through our proprietary research portal on CS PLUS. Credit Suisse research products may also be made available through third-party vendors or alternate electronic means as a convenience. Certain research products are only made available through CS PLUS. The services provided by Credit Suisse s analysts to clients may depend on a specific client s preferences regarding the frequency and manner of receiving communications, the client s risk profile and investment, the size and scope of the overall client relationship with the Firm, as well as legal and regulatory constraints. To access all of Credit Suisse s research that you are entitled to receive in the most timely manner, please contact your sales representative or go to Credit Suisse s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. Target Price and Rating Valuation Methodology and Risks: (12 months) for IMAX Corp (IMAX.N) Method: Our $33 price target on IMAX is 14.5x our 2017 EV/EBITDA. Our Target Price and Neutral rating are supported by our DCF which utilizes a 0.25% terminal growth rate and 9.0% WACC. Risk: Key risks to our $33 Target Price and Neutral rating on IMAX include 1) short-term box office headwinds driven by a difficult comparison to the strong results in 2016; 2) a potential slowdown of Cinema expansion in China; 3) the rise of competing theater technologies. Please refer to the firm's disclosure website at for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (IMAX.N) within the next 3 months. For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: 2v7xv7seh5jfhvuo5d1bwjy57. Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. This research report is authored by: Credit Suisse Securities (USA) LLC...Omar Sheikh ; Lawrence Dann-Fenwick ; Boyao Sun For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at or call +1 (877) IMAX Corp (IMAX) 12

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