Sorin. Company update BUY (Unchanged) Target: 2.6 (prev. 2.40) Risk: medium. ITALY / Biomedical FROM RELAUNCH TO GROWTH

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1 Sorin ITALY / Biomedical Company update BUY (Unchanged) Target: 2.6 (prev. 2.40) Risk: medium STOCK DATA Price 2.1 Bloomberg code SRN IM Market Cap. ( mn) 999 Free Float 64% Shares Out. (mn) w eek range Daily Volumes (mn) 1.37 PERFORMANCE 1M 3M 12M Absolute 3.6% 0.6% 26.6% Rel. to FTSE all shares 4.0% -11.5% 5.3% MAIN METRICS E 2014E Rev enues EBITDA Net income Adj. EPS - cents DPS ord - cents MULTIPLES E 2014E P/E adj 16.5 x 17.1 x 16.4 x EV/EBITDA rep 10.7 x 8.2 x 7.3 x REMUNERATION E 2014E Div. Yield ord 0.0% 0.0% 0.0% FCF y ield 4.8% 4.5% 5.2% INDEBTEDNESS E 2014E NFP Debt/EBITDA 0.2 x 0.1 x 0.0 x Interests cov 7.1 x 17.3 x 69.3 x PRICE ORD LAST 365 DAYS FROM RELAUNCH TO GROWTH The business plan presentation was encouraging. Market launch of new technologies and emerging market penetration are the prerequisite to accelerate growth. We increase valuation to Encouraging business plan projections SRN business guidance was in line with expectations for P&L and with higher FCF generation. We increase the valuation to 2.60 (+8%) not only because of the lower risk free rate, but also because we are encouraged by: 1. planned FCF generation higher than our estimates; 2. positive developments of the New Ventures with planned commercial launches already in 2016 Moderate top line growth supporting double digit EPS trend Sorin presented the following targets: Sales cagr +3% / +5% (Equita +4%) in then accelerating +8%-10% (Equita 4%) as New Ventures products start to be commercialized Net Profit cagr >10% (Equita +10%) 2018 EPS > 20 cents (Equita 19.8 cents) FCF 350 / 400 mn (Equita 330 mn) Potential overall cash absorption for New Ventures 300 / 400 mn Our estimates still do not include the contribution of the New Ventures (6 ventures developing very new innovative technologies), which we consider as an option. In case of successful development of such ventures, EPS will be diluted by start-up costs. However 2018 (EPS 20 cents) is considered the first year of no dilution (same EPS with or without development of the New Ventures). We strongly believe that SRN management deserves our confidence about the ability to discern whether the investments will be appropriate (and remunerative). Product innovation and new market penetration SRN is expecting that within 2018: over 30% of sales will be driven by New Products in the Cardiac Surgery over 80% of sales will be driven by New Products in the CRM business 25% of sales will come from emerging markets (from current 15%) New Ventures in the Heart Failure and Percutaneous Mitral Valve will contribute mn additional sales in 2018 Sorin also announced: 1) a greenfield project to produce cardiopulmonary products in China; 2) CE mark approval for the new MRI compatible pacemaker; 3) first two countries (Belgium and Germany) to grant reimbursement for the Perceval valve. Buy confirmed. TGT 2.60 per share (+8%) ANALYSTS Stefano Lustig s.lustig@equitasim.it December 2, 2013 # 398 We appreciate: Management quality and reliability Double digit EPS growth even with moderate top-line progress the material FCF (around 40/60 mn) the strong commitment to future growth through R&D investment and through m&a activity to access to new products and new geographies Speculative appeal: SRN main shareholders are all financial investors Upside to our DCF valuation of 2.60 per share (see above). The implied 2015 PE is 17x in line with the one of main peers IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 1

2 MAIN FIGURES mn E 2014E 2015E Revenues Growth 8% 0% -2% 1% 5% 5% EBITDA Growth 21% 7% -21% 28% 7% 12% Adjusted EBITDA Growth 21% 7% -21% 28% 7% 12% EBIT Growth 39% 23% -58% 89% 26% 18% Profit before tax Growth 37% 42% -72% 175% 38% 21% Net income Growth 69% 48% -60% 116% 23% 21% Adj. net income Growth 52% 32% 5% -3% 4% 21% MARGIN E 2014E 2015E Ebitda Margin 16.1% 17.3% 13.9% 17.5% 17.9% 19.0% Ebitda adj Margin 16.1% 17.3% 13.9% 17.5% 17.9% 19.0% Ebit margin 9.6% 11.8% 5.0% 9.4% 11.3% 12.7% Pbt margin 7.6% 10.8% 3.1% 8.4% 11.1% 12.7% Ni rep margin 5.2% 7.8% 3.1% 6.7% 7.9% 9.0% Ni adj margin 5.9% 7.8% 8.3% 7.9% 7.9% 9.0% SHARE DATA E 2014E 2015E EPS - cents Growth 68.5% 46% -60% 116% 23% 21% Adj. EPS - cents Growth 51.5% 30% 5% -3% 4% 21% DPS ord - cents BVPS - cents VARIOUS - mn E 2014E 2015E Capital emloyed FCF Capex Working capital INDEBTNESS - mn E 2014E 2015E NFP D/E 1.07 x 0.82 x 0.86 x 0.54 x n.m. n.m. Debt/EBITDA 0.3 x 0.2 x 0.2 x 0.1 x 0.0 x 0.0 x Interests cov 10.4 x 16.9 x 7.1 x 17.3 x 69.3 x n.m. MARKET RATIOS E 2014E 2015E P/E ord 25.1 x 17.2 x 43.4 x 20.1 x 16.4 x 13.6 x P/E ord Adj 22.4 x 17.2 x 16.5 x 17.1 x 16.4 x 13.6 x PBV 1.7 x 1.6 x 1.5 x 1.5 x 1.5 x 1.4 x P/CF 11.9 x 10.4 x 9.7 x 9.3 x 8.9 x 8.0 x EV FIGURES E 2014E 2015E EV/Sales rep 1.5 x 1.5 x 1.5 x 1.4 x 1.3 x 1.2 x EV/EBITDA rep 9.2 x 8.6 x 10.7 x 8.2 x 7.3 x 6.1 x EV/EBIT 15.5 x 12.6 x 29.4 x 15.3 x 11.6 x 9.2 x EV/CE 1.9 x 1.8 x 1.7 x 1.6 x 1.5 x 1.4 x REMUNERATION E 2014E 2015E Div. Yield ord 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% FCF yield 4.3% 3.7% 4.8% 4.5% 5.2% 6.3% ROE 10.2% 11.9% 11.2% 10.0% 9.5% 10.4% ROCE 8.2% 10.5% 8.7% 9.4% 9.7% 10.1% Source: Company data and EQUITA SIM estimates IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 2

3 SORIN AT-A-GLANCE 9M13 REVENUES BREAKDOWN 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Cardiac Surgery 65% CRM 35% Heart Valves 17% Cardiopulm onary 48% 9M13 Source: EQUITASIM estimates on company data SHAREHOLDERS STRUCTURE Source: CONSOB website CP MKT SHARES LEADING CARDIOVASCULAR OPERATOR Every year 1 mn patients are treated with Srn products. Sorin Group is: the world leader in the production of cardiac surgery systems (Cardiopulmonary) (WW mkt share 35%-70%), with a significant and consolidated position (around 10% of the WW market) in the market for implantable prostheses (Heart Valves), with innovative therapies for cardiac rhythm dysfunctions (Cardiac Rhythm Management WW mkt share 4%). Cardiopulmonary: Systems for extracorporeal circulation during heart surgery and disposable biomedical devices in coronary surgery. SRN is by far the world market leader by controlling 70% of the Heart Lung Machines, 35% of the Oxygenator market and 35% of the Autotransfusion systems. CP market feature slight growth. SRN main driver will be: continue expansion into fast growing geographies (focus on China, Brazil, Russia, India) through organic growth and acquisitions increase in the market share in the Oxygenators business The Cardiac Rhythm Management: implantable devices to treat cardiac rhythm dysfunctions (Low Voltage Pacemakers, High Voltage Defibrillators and CRT). SRN controls around 4% of the WW market with strong position in EU and Japan but very low one in USA. In a slightly declining market SRN is forecasting a moderate growth driven by product innovations: since Q SRN Cardiac Resynchronisation Devices (12% of group sales) enjoy the SonR Technology which gave evidence of material improvement in clinical results by increasing by 33% the patient response. New features in the pacemaker area (MRI compatible and Sleep Apnea monitoring) will also be supportive enter in China (commercial development started recently) Heart Valves: implantable prostheses to replace or repair native heart valves. SRN is the second player WW for the Mechanical Valve and controls 12% of the WW market in the Tissue Valve. SRN is expected to expand the market share thanks to Perceval expected to grow from 14 mn euro in sales in 2013 to around mn in Perceval is the only bio valve that can be positioned without any suture. It reduces operation times and facilitate patient faster recovery. FDA approval expected Source: Company presentation Source: Company presentation CRM MKT SHARES Following a re-launch plan managed by Mr Ballester (CEO) and team, SRN experienced an exciting improvement in margins and FCF generation in despite the earthquake hitting a big portion of business in EXCITING RE-LAUNH OF THE BUSINESS Revenues EBITDA margin 11.0% 12.4% 14.4% 16.1% 17.3% 13.9% 17.5% Free Cash Flow Source: Company data Source: Company presentation HV MKT SHARES The organic revenue target is around +4% then accelerating to +9% in when New Ventures products should be commercialized. EPS is expected to grow 10% cagr till 2018 when it is expected to be >20 cents with or without the New Ventures contribution. LONG TERM TARGETS Source: Company presentation 2013E LT TARGETS Revenues growth* +5.0% 3-5% CAGR 8-10% CAGR Adjusted EPS** ( cents) ~12 >20 * At comparable FX rates, Includes Base Business & New Ventures ** Includes only Base Business. Data in Euro cents per share IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 3

4 Many things to do to evolve from relaunch to growth SRN business guidance was in line with expectations for P&L and with higher FCF generation. We increase the valuation to 2.60 (+8%) not only because of the lower risk free rate, but also because we are encouraged by: 1) planned FCF generation higher than our est.; 2) positive developments of the New Ventures with planned commercial launches already in 2016 Sorin presented the following targets: Sales cagr +3% / +5% (Equita +4%) in then accelerating +8%-10% (Equita 4%) as New Ventures products start to be commercialized Net Profit cagr >10% (Equita +10%) 2018 EPS > 20 cents (Equita 19.8 cents) FCF mn (Equita 330 mn) Potential overall cash absorption for New Ventures 300 / 400 mn LONG TERM TARGETS * At comparable FX rates, Includes Base Business & New Ventures ** Includes only Base Business. Data in Euro cents per share Our estimates still do not include the contribution (revenues and costs) of the New Ventures (6 ventures developing very new innovative technologies), which we still consider as an option. In case of successful development of such ventures, SRN could invest up to 300 / 400 mn (milestones and buy-out) and dilute EPS because of costs related to new projects and start-up costs EPS (20 cents) is considered the first year of no dilution (same EPS with or without development of the New Ventures). In conclusion, when compared to our current estimates, SRN actual EPS could result to be diluted until 2017 due to costs associated to the New Ventures. Obviously, in this case the growth after 2018 will be higher than our forecasts (only +2% in our DCF assumptions). SORIN TOP LINE EVOLUTION (OUR ESTIMATES) FY13E FY14E FY15E FY16E FY17E FY18E Cagr. CARDIAC SURGERY % Cardiopulmonary Heart-Lung Machines Oxigenators Autotransfusion Heart Valves Mechanical Tissue CRM % Low Voltage High Voltage TOTAL Group % Source: EQUITA SIM estimates IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 4

5 MAIN STRATEGIC ELEMENTS Cardiac Surgery (65% of group sales) For the Cardiac Surgery operations (Cardiopulmonary + Heart Valves) SRN is forecasting a top line +4% / +6% cagr in a market which is supposed to grow +2% cagr. Market over-performance will be driven by: penetration of the new Inspire oxygenator recently launched in Europe and US. The new Inspire oxygenator (this segment is worth some 27% of group sales) benefits from a semi-automatic production line that is much more efficient than the previous one and could lead to some 100bp increase in the group gross margin in 2 years. Moreover, Heartlink, a software computerising and expanding the functionalities of heart lung machines, has started to be sold. Through these innovations SRN aims to expand by at least some 5 pts its global market share in the Oxygenator market, (it is roughly 35% today). This is already a high level but expandable when considering that the market share controlled by SRN is around 70% for the Hearth Lung Machines (the machine using Oxygenators as a disposable product). establish Perceval as the aortic tissue valve chosen for all patients and reach a mn sales in 2018 ( 55 mn in our current estimates). Perceval is generating mn sales in Clinical performances continue to be very positive: benefits have been illustrated also by Prof. Bart Meuris of the University Hospital Leuven Belgium. Since November 2013 Perceval is reimbursed in Belgium (device on positive list) a country where neither TAVI nor other surgical valves are currently reimbursed. Starting from January 2014 Perceval will be reimbursed in Germany as well (upgrade DRG=Diagnosis Related Group for isolated sutureless procedures), the largest European country. FDA approval is expected within the end of 2015 GROWTH DRIVERS IN CARDIAC SURGERY PERCEVAL: THE AORTIC TISSUE VALVE OF CHOICE continue pursuing expansion into fast-growing geographies. In February 2013 SRN acquired Alcard, a Brazilian producer of Heart Lung Machines to serve the local market and expand in near Latin American countries with the full portfolio of SRN products. Yesterday SRN announced a greenfield project to start production of Cardiopulmonary products in China to serve the local market. The planned capex will be 18 mn over 7 years. Sales will not start earlier than in SRN is already n.1 player in Cardiopulmonary in China as well as in the rest of the world IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 5

6 Cardiac Rhythm Management (35% of group sales) In the Cardiac Rhythm Management business SRN forecast sales +2% / +3% cagr in a market expected to decline by -1% cagr. Over-performance of the market will be possible because of product innovations. CRT-D products adopting the SonR technology are still a quite limited portion of the CRM sales ( 50 mn cumulative sales since Q411) but it is confirming a steady double digit growth. The FDA approval for this technology is expected in GROWTH DRIVERS IN CRM SONR: PRODUCT INNOVATION DRIVES PERFORMANCE (*) Since launch at end of 2011 BASE BUSINESS GROW FASTER THAN THE MARKET The pacemaker Reply 200 has been recently launched. It features a new technology that allows monitoring `s sleep apnea. The latter is a disease that, only in Italy, affects a significant portion of the population (about 4% of men and 2% of women). It is estimated that among the patients who were prescribed a Pacemaker, at least 25% also suffer from an acute form of sleep apnea that may expose them to the risk of mortality 4x-5x higher than those of a traditional patient if not diagnosed. Reply 200 is one of the only two pacemakers marketed in the world, able to diagnose / monitor `s also sleep apnea. IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 6

7 SRN yesterday announced the CE approval of its MRI compatible pacemaker (magnetic resonance imaging). The lack of such a product is currently causing a decrease in sales in Japan (which is a quite sizeable market). The approval for the Japanese market is expected for the end of SRN BP forecast Emerging Markets to evolve from the current 15% sales to 25% in In 9M2013 EM grew by +28% for SRN, who opened the first direct legal entity in China, made an acquisition in Brazil, and announced a greenfield plan for Cardiopulmonary in China. GROWTH OPPORTUNITIES EMERGING MARKETS AND NEW VENTURES * Calculated on Base Business All in all SRN is expecting that within 2018: over 30% of expected sales will be driven by New Products in the Cardiac Surgery over 80% of sales will be driven by New Products in the CRM business 25% of sales will come from emerging markets (from current 15%) New Ventures in the Heart Failure and Percutaneous Mitral Valve will contribute mn additional sales VALUATION TO 2.60 (+8%) Our valuation is a blended value reflecting the result of a DCF model and multiples analysis: the DCF model valuation leads to a valuation of 2.60 per share multiple comparison suggests a valuation of around 17x 2015 earnings. It indicates a valuation of 2.57 per share. The valuation exceeds by 8% the previous one (2.40 per share) because of lower free risk rate and a rolling effect (explicit DCF till 2018 and Net Debt FY13 as a starting Net Financial Position). We are increasing the target not only because of the two mentioned mathematical issues but also because we are very much encouraged by 1) planned FCF generation higher than our estimates; 2) positive developments of the New Ventures with planned commercial launches already in We are confirming our previous estimates. It is clear that in case of success of the New Ventures, SRN will: 1) invest up to mn in some/all of the New Ventures. This will absorb cash and in a first phase dilute earnings as well. This will certainly cause an impact on our medium term estimates. As the investments will be done only in case of positive business IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 7

8 prospects, we believe that in the next quarters it is likely that we will cut short term estimates, while increasing the increasing the long term ones therefore without material theoretical impact on the valuation. We strongly believe that SRN management deserves our confidence about the ability to discern whether the investments will be appropriate (and remunerative). SRN TARGET PRICE Per Share Multiple Valuation (2015 PE 16.7x) 2.57 DCF Valuation 2.60 Avg Valuation 2.59 Source: EQUITA SIM estimates ASSUMPTIONS SORIN DCF g 2.0% 2013E 2014E 2015E 2016E 2017E 2018E Perpetuity WACC 7.63% Sales Change % 3.1% 4.8% 5.1% 3.6% 3.5% 3.6% EBITDA Change % 31.7% 6.7% 11.9% 7.6% 5.7% 7.1% Margin VALUATION Taxes on EBITA NPV of Free Cash Flows 286 Operating Cash Flow NPV of Terminal Value 1,059 Change % 9.7% -2.5% 10.6% 5.9% 4.2% 6.4% SRN Equity 1,345 Margin Net Debt -88 Total Equity 1,265 Capex (increase) decrease in WC Adj. # of shares 486 Free Cash Flow before minorities Discount Factor Target Price Ord PV of FCF Source: EQUITA SIM estimates DCF SENSITIVITY Growth 1.5% 2.0% 2.5% 4.9% free risk 4.4% % Source: EQUITA SIM estimates MULTIPLE COMPARISON EV/EBITDA PE 2013E 2014E 2015E 2013E 2014E 2015E MEDTRONIC INC JOHNSON&JOHNSON EDWARDS LIFE ST. JUDE MEDICAL BOSTON SCIENTIFC TERUMO Average Source: Company data and EQUITA SIM estimates STATEMENT OF RISK SRN could be negatively impacted by: Severe damages caused to patients treated by SRN products Lack of approval of new products by the Medical Authorities Material changes in macroeconomic scenario Material changes in interest rates IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 8

9 P&L E 2014E 2015E Revenues Growth 8% 0% -2% 1% 5% 5% Total opex Growth 6% -2% 2% -3% 4% 4% Margin -84% -83% -86% -82% -82% -81% EBITDA Growth 21% 7% -21% 28% 7% 12% Margin 16% 17% 14% 18% 18% 19% Depreciation& amortization Provisions na na na na na na Depreciation&provistion EBIT Growth 39% 23% -58% 89% 26% 18% Margin 10% 12% 5% 9% 11% 13% Net financial profit/expenses Profits/exp from equity inv na na na na na na Other financial profit/exp Total financial expenses Non recurring pre tax Profit before tax Growth 37% 42% -72% 175% 38% 21% Taxes Tax rate 31% 28% 0% 20% 29% 29% Minoritiy interests Non recurring post tax na na na na na na Net income Growth 69% 48% -60% 116% 23% 21% Margin 5% 8% 3% 7% 8% 9% Adj. net income Growth 52% 32% 5% -3% 4% 21% Margin 6% 8% 8% 8% 8% 9% CF Statement E 2014E 2015E Cash Flow from Operations (Increase) decrease in OWC (Purchase of fixed assets) (Other net investments) (Distribution of dividends) Rights issue Other (Increase) Decrease in Net Debt Source: Company data and EQUITA SIM estimates IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 9

10 INFORMATION PURSUANT TO ARTICLE 69 ET SEQ. OF CONSOB (Italian securities & exchange commission) REGULATION no /1999 This publication has been prepared by Stefano Lustig on behalf of EQUITA SIM SpA (licensed to practice by CONSOB resolution no of December 22nd 1998 and registered as no. 67 in the Italian central register of investment service companies and financial intermediaries) In the past EQUITA SIM has published studies on Sorin. EQUITA SIM is distributing this publication via to more than 700 qualified operators from December 3, 2013 The prices of the financial instruments shown in the report are the reference prices posted on the day prior to the date indicated on cover page. EQUITA SIM intends to provide continuous coverage of the financial instrument forming the subject of the present publication, with a semi-annual frequency and, in any case, with a frequency consistent with the timing of the issuer s periodical financial reporting and of any exceptional event occurring in the issuer s sphere of activity. The information contained in this publication is based on sources believed to be reliable. Although EQUITA SIM makes every reasonable endeavour to obtain information from sources that it deems to be reliable, it accepts no responsibility or liability as to the completeness, accuracy or exactitude of such information. If there are doubts in this respect, EQUITA SIM clearly highlights this circumstance. The most important sources of information used are the issuer s public corporate documentation (such as, for example, annual and interim reports, press releases, and presentations) besides information made available by financial service companies (such as, for example, Bloomberg and Reuters) and domestic and international business publications. It is EQUITA SIM s practice to submit a pre-publication draft of its reports for review to the Investor Relations Department of the issuer forming the subject of the report, solely for the purpose of correcting any inadvertent material inaccuracies. This note has been submitted to the issuer. EQUITA SIM has adopted internal procedures able to assure the independence of its financial analysts and that establish appropriate rules of conduct for them. Furthermore, it is pointed out that EQUITA SIM SpA is an intermediary licensed to provide all investment services as per Italian Legislative Decree no. 58/1998. Given this, EQUITA SIM might hold positions in and execute transactions concerning the financial instruments covered by the present publication, or could provide, or wish to provide, investment and/or related services to the issuers of the financial instruments covered by this publication. Consequently, it might have a potential conflict of interest concerning the issuers, financial issuers and transactions forming the subject of the present publication. Equita SIM S.p.A. in the last 12 months has placed financial instruments issued by Sorin S.p.A. Equita SIM S.p.A. performs, or has performed in the last 12 months, the role of intermediary in charge of the execution of the buy back plan approved by the shareholders' meeting of Sorin Equita SIM S.p.A. provides, or has provided in the last 12 months investment banking services for Sorin SpA In addition, it is also pointed out that, within the constraints of current internal procedures, EQUITA SIM s directors, employees and/or outside professionals might hold long or short positions in the financial instruments covered by this publication and buy or sell them at any time, both on their own account and that of third parties. The remuneration of the financial analysts who have produced the publication is not directly linked to corporate finance transactions undertaken by EQUITA SIM. The recommendations to BUY, HOLD and REDUCE are based on Expected Total Return (ETR expected absolute performance in the next 12 months inclusive of the dividend paid out by the stock s issuer) and on the degree of risk associated with the stock, as per the matrix shown in the table. The level of risk is based on the stock s liquidity and volatility and on the analyst s opinion of the business model of the company being analysed. Due to fluctuations of the stock, the ETR might temporarily fall outside the ranges shown in the table. EXPECTED TOTAL RETURN FOR THE VARIOUS CATEGORIES OF RECOMMENDATION AND RISK PROFILE RECOMMENDATION/RATING Low Risk Medium Risk High Risk BUY ETR >= 10% ETR >= 15% ETR >= 20% HOLD -5% <ETR< 10% -5% <ETR< 15% 0% <ETR< 20% REDUCE ETR <= -5% ETR <= -5% ETR <= 0% The methods preferred by EQUITA SIM to evaluate and set a value on the stocks forming the subject of the publication, and therefore the Expected Total Return in 12 months, are those most commonly used in market practice, i.e. multiples comparison (comparison with market ratios, e.g. P/E, EV/EBITDA, and others, expressed by stocks belonging to the same or similar sectors), or classical financial methods such as discounted cash flow (DCF) models, or others based on similar concepts. For financial stocks, EQUITA SIM also uses valuation methods based on comparison of ROE (ROEV return on embedded value in the case of insurance companies), cost of capital and P/BV (P/EV ratio of price to embedded value in the case of insurance companies). MOST RECENT CHANGES IN RECOMMENDATION AND/OR IN TARGET PRICE (OLD ONES IN BRACKETS): Date Rec. Target Price ( ) Risk Comment nil DISCLAIMER The purpose of this publication is merely to provide information that is up to date and as accurate as possible. The publication does not represent to be, nor can it be construed as being, an offer or solicitation to buy, subscribe or sell financial products or instruments, or to execute any operation whatsoever concerning such products or instruments. EQUITA SIM does not guarantee any specific result as regards the information contained in the present publication, and accepts no responsibility or liability for the outcome of the transactions recommended therein or for the results produced by such transactions. Each and every investment/divestiture decision is the sole responsibility of the party receiving the advice and recommendations, who is free to decide whether or not to implement them. Therefore, EQUITA SIM and/or the author of the present publication cannot in any way be held liable for any losses, damage or lower earnings that the party using the publication might suffer following execution of transactions on the basis of the information and/or recommendations contained therein. The estimates and opinions expressed in the publication may be subject to change without notice. EQUITY RATING DISPERSION AS OF SEPTEMBER 30, 2013 (art. 69-quinquies c. 2 lett. B e c. 3 reg. Consob 11971/99) COMPANIES COVERED COMPANIES COVERED WITH BANKING RELATIONSHIP BUY 44.9% 50.0% HOLD 46.0% 44.2% REDUCE 8.5% 5.8% NOT RATED 0.6% 0.0% IMPORTANT DISCLOSURES APPEAR AT THE BACK OF THIS REPORT 10