ISRA VISION Neutral

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Update Note Closing price as of 1/8/17: 142.8 4 September 217 Company / Sector Fair Value Recommendation ISRA VISION 128. Neutral Technology: Machine Vision ( 128.) (unchanged) Solid Q3 leaves company on track Share price performance 1 9 8 7 6 5 4 3 2 1 9/15 3/16 9/16 3/17 Volume Close 18 16 14 12 1 8 6 4 2 Investment case The swing in Q3 earnings was a bit less pronounced than we had forecasted but figures nonetheless were sound, particularly free cash generation. The only fly in the ointment was a marginal y-o-y decline in order backlog which mgmt explained with the expansion of the productive capacity. We therefore adjust our model only marginally and our fair value remains at EUR128. This is still below the current share price but as news flow on acquisitions should support the share price our rating remains Neutral. Share data Reuters ISRG.DE Bloomberg ISR.GY No. of shares (m) 4.38 Daily turnover (3m) 7,31 Free float 7% Market cap. (m) 635.7 EV (m) 643.8 Valuation 217e 218e EV/Sales 4.5 4.1 EV/ EBITDA 15.4 13.5 EV/EBIT 23.9 2.6 PER 34.5 3.2 Div. yield.3%.3% RoCE 11.7% 12.9% RoE 1.6% 1.9% Q3 RESULTS ROUGHLY IN LINE Q3 sales (EUR34.4m/+11%) were slightly higher than expected (e: EUR34m), which compensated for slightly higher operating costs so that EBITDA (EUR1m) came in bang in line. Mainly due to higher depreciation net earnings remained slightly below our forecast. Order backlog was lower than anticipated (EUR83m /-2% vs. e: EUR91m). STRONG FREE CASH GENERATION 9M OCF also came in solid (EUR23.3m/ +1%) of which EUR13.8m/+12% remained as free cash. MGMT REITERATES FY16/17 TARGETS Mgmt reiterated its FY16/17 targets of sales growth of approx. 1% and at least stable margins. In addition, mgmt stated that the decrease in order backlog is a result of the expansion of the productive capacity and that order intake is currently high. No acquisition project has yet been finalized but mgmt is still working on this side. OUR FAIR VALUE REMAINS EUR128 We stick to our top line forecast but slightly lower our bottom line expectation, mainly as a result of the higher depreciation. As this has no impact on our DCF model our fair value remains at EUR128. For additional disclosures please refer to the appendix Analyst Forecasts 22e Dr. Anne Gronski Sales 112.24 128.82 142.98 154.42 166.78 18.12 Tel.: +49 228 227 99 238 EBITDA 32.41 37.68 41.71 46.7 51.27 56.25 anne.gronski@matelan.de EBIT 22.56 25.59 26.88 3.63 33.87 37.44 Adj. EPS 3.39 4.1 4.21 4.8 5.32 5.88 Adrian Hopkinson CFA Dividend.41.48.48.48.48.48 Tel.: +44 79 993 4353 Oper. CF 12.19 34.3 34.38 31.47 34.58 37.98 adrian.hopkinson@matelan.de Free CF -4.45 18.66 2.27 15.66 17.18 18.86

Q3 16/17 review and changes in our FY16/17 forecast Q3 16/17 Q3 15/16 9M 16/17 9M 15/16 FY 216/17e m estimated reported reported % reported reported % new old % Net sales 34. 34.4 31. 11.% 93.3 84.3 1.7% 143. 143..% Capitalized items 2.7 3. 2.7 8.8 7.8 13.2 13.2.% Total Output 36.8 37.3 33.6 11.% 12. 92.1 1.8% 156.1 156.1.% Gross profit 22.6 22.8 2.6 1.8% 62.5 56.4 1.8% 95.5 95.5.% Gross margin 61.3% 61.% 61.2% 61.3% 61.3% 61.1% 61.1% EBITDA 1. 1.1 8.9 13.2% 28.5 25.2 12.9% 41.7 41.9 -.4% EBITDA margin 27.2% 27.1% 26.6% 27.9% 27.4% 26.7% 26.8% EBIT 7. 6.7 6. 11.% 18.4 16.6 1.5% 26.9 28.2-4.5% EBIT margin 19.1% 18.% 18.% 18.% 18.1% 17.2% 18.% EBT 6.9 6.6 5.9 12.6% 18.1 16.2 11.7% 26.5 27.8-4.6% EBT margin 18.8% 17.8% 17.5% 17.7% 17.6% 17.% 17.8% Net income 5. 4.6 4.1 12.% 12.5 11.4 9.4% 18.4 19.3-4.6% Net margin 13.6% 12.4% 12.3% 12.2% 12.4% 11.8% 12.4% EPS 1.12 1.6.95 11.9% 2.85 2.61 9.2% 4.21 4.41-4.6% Order backlog 91 83 85-2.4% Source: ISRA Vision, Matelan Research Segment reporting EURm Q3 16/17 Q3 15/16 % Sales Industrial Automation 9. 7.4 21% Surface Vision 25.4 23.5 8% Total 34.4 31. 11% EBIT Industrial Automation 1.8 1.6 16% EBIT-Margin 2.4% 21.2% Surface Vision 4.9 4.5 9% EBIT-Margin 19.2% 19.% Total 6.7 6. 11% Key cash flow figures 25. 2. 15. 1. 5.. -5. -1. -15. 9M 15/16 9M 16/17 Cash earnings Change of NWC Capex Free cash flow (r.s.) 2. 15. 1. 5.. -5. -1. -15. -2. 9M as %age of FY 9M as % of FY 216/17e 215/16 214/215 213/214 212/13 211/12 Net sales 65% 65% 68% 68% 63% 69% EBIT 66% 65% 64% 67% 69% 69% EBT 66% 64% 65% 67% 68% 68% EPS 65% 65% 65% 68% 65% 65% Source: ISRA Vision, Matelan Research - 2 -

Sales and EBIT margin Adj. EPS and DPS 18 16 14 12 1 8 6 4 2 25.% 2.% 15.% 1.% 5.%.% 6. 5. 4. 3. 2. 1.. 2% 18% 16% 14% 12% 1% 8% 6% 4% 2% % Industrial Autom. EBIT margin (r.s.) Surface Inspection Adj. EPS EPS growth (r.s.) DPS Cash Flow RoCE 35 15 18 8 25 2 15 15.% 12.% 9.% -5-2 1 6.% -25-12 5 3.% -45-22.% Cash Earnings Capex Change in NWC Free Cash Flow (r.s.) Intangibles NWC PPE RoCE (r.s.) Balance Sheet Shareholder structure 2 18 16 14 12 1 8 6 4 2 Assets Liabilities Intangibles Tangibles Working Cap. Other Assets Cash Equity Pensions Financial debt Working Cap. Other Liab. 4.2% 3.2% 3.1% 3.3% 4.7% 25.4% 5.% 4.9% 1.1% Ersü FMR Vision GbR CI Global Univers. Inv. Argos DWS Panamerica Other - 3 -

P & L EURm Sales 112.2 128.8 143. 154.4 166.8 Growth 9.5% 14.8% 11.% 8.% 8.% Material costs -37. -42. -47.5-5.9-54.7 Gross profit 75.3 86.8 95.5 13.6 112.1 Gross margin 67.1% 67.4% 66.8% 67.1% 67.2% Other operating costs -42.9-49.2-53.8-56.9-6.8 EBITDA 32.4 37.7 41.7 46.7 51.3 Margin 28.9% 29.2% 29.2% 3.2% 3.7% Depreciation -9.8-12.1-14.8-16.1-17.4 EBIT 22.6 25.6 26.9 3.6 33.9 Margin 2.1% 19.9% 18.8% 19.8% 2.3% Financial result -.7 -.4 -.3 -.3 -.3 EBT 21.8 25.2 26.5 3.3 33.5 Taxes -7.1-7.4-7.9-9. -1. Net profit 14.8 17.8 18.6 21.3 23.5 Minorities. -.2 -.2 -.2 -.3 Net profit a.m. 14.8 17.6 18.4 21. 23.3 Growth 14.% 18.5% 4.9% 14.1% 1.7% No of shares 4.4 4.4 4.4 4.4 4.4 EPS 3.39 4.1 4.21 4.8 5.32 Adj. EPS 3.39 4.1 4.21 4.8 5.32 Growth 14.2% 18.3% 4.9% 14.1% 1.7% Dividend.41.48.48.48.48 Balance Sheet EURm Intangible assets 15.4 19.6 17.9 16.6 15.5 Tangible assets 5.9 6.2 5.7 6.7 7.7 Participations... 1. 2. Other non-current assets 9.7 2.7 4.4 3.6 2.9 Non-current assets 12.9 118.5 118. 117.9 118.1 Inventories 3.7 33.7 35.3 38.1 41.1 Receivables 86.8 88.5 91.3 98.6 16.5 Cash 15.2 16.9 33.3 46.9 62. Other current assets 2.5 6.2 6.9 7.4 8. Current Assets 135.2 145.4 166.8 191. 217.6 Total assets 256.1 263.8 284.7 38.8 335.6 Equity 143. 157.8 172.9 191.8 213. Minorities 1.3 1.5 1.5 1.5 1.5 Total equity 144.3 159.3 174.4 193.3 214.5 LT financial liabilities..... Pension provisions 3.1 4.1 4. 4.4 4.7 Other LT liabilities 31.9 33.2 36.9 39.9 43. Non-current liabilities 35. 37.4 4.9 44.2 47.7 ST financial liabilities 5.1 36. 36. 36. 36. Payables 11.8 12.4 14. 15.3 16.8 Other ST liabilities 14.9 18.7 19.5 2.1 2.7 Current liabilities 76.8 67.1 69.4 71.3 73.4 Total liabilities 256.1 263.8 284.7 38.8 335.6 Cash Flow EURm EBIT 22.6 25.6 26.9 3.6 33.9 Depreciation 9.8 12.1 14.8 16.1 17.4 Other non-cash items 7. 3.4 3.3 2.6 2.8 Cash taxes -2.9-9.9-7.9-9. -1. Cash earnings 36.5 31.2 37.1 4.3 44.1 Change in NWC -24.3 3.1-2.7-8.8-9.5 CF from operations 12.2 34.3 34.4 31.5 34.6 Capex -14.4-15.6-14.1-15.8-17.4 Other investm./divestm. -2.2.... CF from investing -16.6-15.6-14.1-15.8-17.4 CF from fin. and other 8.4-16.9-3.8-2.1-2.1 Change in cash 3.9 1.8 16.4 13.5 15.1 Segments EURm Industrial Automation 26.6 31.1 35.5 39.4 42.6 Growth 6.2% 17.1% 14.1% 11.% 8.% Surface Inspection 85.6 97.7 17.5 115. 124.2 Growth 1.6% 14.1% 1.% 7.% 8.% Sales 112.2 128.8 143. 154.4 166.8 Growth 9.5% 14.8% 11.% 8.% 8.% Industrial Automation 5.3 6.2 5.8 7.6 8.3 Margin 2.1% 2.% 16.4% 19.4% 19.5% Surface Inspection 17.2 19.4 21.1 23. 25.6 Margin 2.1% 19.8% 19.6% 2.% 2.6% EBIT 22.6 25.6 26.9 3.6 33.9 Margin 2.1% 19.9% 18.8% 19.8% 2.3% Valuation multiples Share price 5. 97.2 145.2 145.2 145.2 x No of shares 4.4 4.4 4.4 4.4 4.4 Market Capitalisation 218.8 425.5 635.7 635.7 635.7 + Net financial debt 34.9 19. 2.6-1.9-26. + Pension provision 3.1 4.1 4. 4.4 4.7 + Minorities 1.3 1.5 1.5 1.5 1.5 - Participations... -1. -2. Enterprise Value 258.1 45.2 643.8 629.6 613.8 Sales 112.2 128.8 143. 154.4 166.8 Adj. EBITDA 32.4 37.7 41.7 46.7 51.3 Adj. EBIT 22.6 25.6 26.9 3.6 33.9 Adj. Net profit a.m. 14.8 17.6 18.4 21. 23.3 EV / Sales 2.3 3.5 4.5 4.1 3.7 EV / EBITDA 8. 11.9 15.4 13.5 12. EV / EBIT 11.4 17.6 23.9 2.6 18.1 PE 14.8 24.2 34.5 3.2 27.3 Source: MATELAN Research, margins are calculated as percentage of sales Key operational indicators Equity ratio 55.8% 59.8% 6.7% 62.1% 63.4% Gearing.3.2.2.2.2 Asset turnover.9 1.1 1.2 1.3 1.4 NWC / sales 94.2% 85.3% 78.7% 78.6% 78.4% Payable days outstanding 38.4 35.2 35.7 36.2 36.7 Receivable days outstandi 282.4 25.8 233. 233. 233. Fix operating assets 12.9 118.5 118. 116.9 116.1 NWC 15.7 19.8 112.5 121.3 13.8 Capital employed 226.7 228.3 23.5 238.2 246.9 RoE 1.3% 11.% 1.6% 1.9% 1.9% RoA 8.8% 9.7% 9.4% 9.9% 1.1% RoCE 1.% 11.2% 11.7% 12.9% 13.7% Gross margin 67.1% 67.4% 66.8% 67.1% 67.2% EBITDA margin 28.9% 29.2% 29.2% 3.2% 3.7% EBIT margin 2.1% 19.9% 18.8% 19.8% 2.3% Net profit margin 13.2% 13.6% 12.9% 13.6% 14.% - 4 -

ADDITIONAL DISCLOSURES This report has been prepared by MATELAN Research GmbH, Koblenzer Str. 79, 53177 Bonn. All rights are reserved. Copyrights and database rights protection exists in this publication. It may not be reproduced or redistributed without prior express permission of Matelan. (1) Analyst certification The analysts responsible for the content of this research report hereby certify that (1) all views expressed in this report accurately reflect their views about any and all of the subject securities or issuers and (2) no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or view(s) of this report. Matelan may have sent extracts of this research report to the subject company for the purpose of verifying factual accuracy. The information provided by the latter was taken into consideration in the report. However, this entailed no change of the assessment. (2) Disclosures about potential conflicts of interest MATELAN Research GmbH has/will receive(d) compensation for research and advisory services provided in the current calendar year from the following companies: ISRA Vision AG. (3) Rating definitions Security firms use a variety of rating terms and systems. Investors should carefully read the definitions of the rating system used in each research report. In addition, since the research report contains more complete information concerning analyst s views, investors should carefully read the entire research report and not infer its contents from the ratings alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor s decision to buy or sell a stock should depend on individual circumstances (such as the investor s existing holdings) and other considerations. MATELAN Research GmbH uses an absolute rating system, which varies considerably from relative rating systems (such as Overweight, Equal Weight or Underweight ). Stock ratings are defined as follows: Strong Buy: In the next 6 to 12 months, we expect a potential absolute change in value of over 2% with high forecast certainty. Buy: In the next 6 to 12 months, we expect a potential absolute change in value of more than 1%. Neutral: In the next 6 to 12 months, we expect a potential absolute change in value of over % up to a maximum of 1%. Reduce: In the next 6 to 12 months, we expect a potential absolute negative change in value of up to -1%. Sell: In the next 6 to 12 months, we expect a potential absolute negative change in value of over -1 % with high forecast certainty. The change in stock price results from the difference between the current share price and the analyst s performance expectations, which are generally based on a fair value calculation performed on the basis of a discounted cash flow model and a key comparison analysis but can also consider other effects such as market sentiment. (4) Rating distribution Stock ratings within the coverage universe of MATELAN Research GmbH as of the publication date of this report are distributed as follows: Strong Buy: 15.4% Buy: 53.8% Neutral: 3.8% Reduce:.% Sell:.% (5) Additional information for clients in Germany and other countries This research report has been produced in Germany. It was approved and distributed by MATELAN Research GmbH, which is authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Laws and regulations in other countries may also restrict the distribution of this report. Persons in possession of this document should inform themselves about possible legal restrictions and observe them accordingly. In particular, this document may not be distributed in the United States, Canada, Australia or Japan or to any U.S. person. - 5 -

(6) Recommendation history Stock ratings for the companies covered in this report have developed as follows: ISRA Date Rating 1/9/16 Neutral 7/8/15 Buy 2/3/15 Neutral 16/8/13 Buy 27/5/13 Neutral 18/3/8 Buy 29/8/7 Neutral 24/7/7 Str. Buy 14/5/7 Neutral 2/5/7 Buy DISCLAIMER This research publication has been prepared by MATELAN analysts based on publicly available data that is believed to be accurate and complete. While reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, MATELAN provides no representation or warranty in relation to its accuracy, completeness or reliability. Possible errors or incompleteness of the information do not constitute grounds for liability, either with regard to indirect or to direct or consequential damages. In particular, MATELAN is not liable for the statements, plans or other details contained in the information concerning the examined companies, strategies, economic situations, market and competitive situations, regulatory environment, etc. Neither MATELAN nor its employees are liable for the accuracy and completeness of the statements, estimates and conclusions derived from the information contained in this report. To the extent this research report is being transmitted in connection with an existing contractual relationship, e.g. financial advisory or similar services, the liability of MATELAN shall be restricted to gross negligence and wilful misconduct. In any case, the liability of MATELAN is limited to typical, foreseeable damages and liability for any indirect damages is excluded. This report does not constitute an offer to sell, or a solicitation of an offer to purchase, any security. MATELAN may perform services to other companies mentioned in this report. Directors or employees of MATELAN may serve on the board of directors of companies mentioned in this report. Any opinions contained herein are subject to change without notice. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. MATELAN does not accept any liability for any loss or damage out of the use of all or any part of this report. Additional information will be made available upon request. Past performance is not necessarily indicative of future results. Investors should make their own investment decisions without relying on this publication. Only investors with sufficient knowledge and experience in financial matters to evaluate the merits and risks should consider an investment in any issuers or market discussed herein and other persons should not take any action on the basis of this publication. Any investments referred to herein may involve significant risk, are not necessarily available in all jurisdictions, may be illiquid and not be suitable for all investors. The price of securities may decrease or increase and as a result investors may lose the amount originally invested. Changes in exchange rates may also cause the value of investments to decrease or increase. Any documents or information we provide is solely for informational purposes and directed only to persons we reasonably believe to be investment professionals. All such communications and any activity to which they relate are available only to such investment professionals; any activity arising from such communications will only be carried out with investment professionals. Persons who do not have professional experience in matters relating to investments shout not rely upon such communications. CONTACT DATA For further information please contact: Matelan Research GmbH Koblenzer Straße 79 53177 Bonn www.matelan.de Head Analyst: Dr. Anne Gronski Tel: +49 228 227 99 238 e-mail: anne.gronski@matelan.de - 6 -