Geratherm Medical AG Strong demand in Q3

Solventis Wertpapierhandelsbank Research Research 23 November 2009 Klaus Schlote Klaus Soer Tel.: +49 (0) 69-71589151 Tel.: +49 (0) 69-71589152 kschlote@solventis.de ksoer@solventis.de Ulf van Lengerich Tel.: +49 (0) 69 71589154 Ulengerich@solvents.de Geratherm Medical AG Strong demand in Q3 Buy (Buy) Price target 8.00 (4.45 ) Price (20.11.2009) 6.79 ISIN DE0005495626 Market capitalization (m ) 30.6 No. of shares (m) 4.50 Website Key figures www.geratherm.com 2008 2009e 2010e 2011e Sales (m ) 10.08 14.00 18.06 18.96 EBIT (m ) 0.59 2.31 3.25 3.79 EBIT margin 5.9% 16.5% 18.0% 20.0% EBITDA (m ) 0.90 2.63 3.65 4.32 EBITA margin 8.9% 18.8% 20.2% 22.8% EPS ( ) -0.65 0.46 0.60 0.68 DPS ( ) 0.00 0.40 0.50 0.60 BVPS ( ) 2.81 3.27 3.48 3.66 PER n.m. 14.6 11.3 9.9 Price/ book value 2.42 2.07 1.95 1.86 EV/EBIT 51.1 12.7 9.1 7.8 EV/EBITDA 33.8 11.1 8.1 6.8 EV/sales 3.01 2.09 1.65 1.56 Dividend yield (%) 0.0% 5.9% 7.4% 8.8% 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 GERATHERM MEDICAL (XET) 23/11/09 2.00 JAN FEB MAR APR MAI JUN JUL AUG SEP OKT NOV DEZ PRICE PRICE REL. TO TECDAX 'KURS' (XETRA) - PRICE INDEX Source: Thomson Datastream Geratherm nine-month report indicated good profitable growth. This has clearly exceeded company expectations. The sales and margin development have developed better than we expected. We increase our estimates and our target price to 8 (previous: 4.45) per share. We recommed buying the shares. After 1-9 months the sales of the company increased to 10.1 m (+37.9%). The reported Ebit margin for the period was 15.6% (prev. yr: 5.8%). The EPS reached the level of.33, a figure we previously expected for the full year. Growth mainly came from the largest area of health care diagnostics (89.6% of total sales) where the Gallium fever thermometers experienced good demand. With a relatively low amount of investments of.6 m Geratherm will have increased the thermometer capacities threefold (vs. 2008) beginning 2010. Beyond that no further capacity increases are foreseen for now. The still loss-making beacon of hope Cardio/Stroke and Respiratory have experienced three-digit sales percentage increases and for 2009 sales from these areas should reach (e) 1 m. An important step for the Cardio/Stroke area will be the results of a study that can further promote the stroke prevention business. The study is being carried out in 20 cardio centers and evaluation will take place in the beginning of 2010. Distribution partner for the German speaking regions will be Drägerwerk AG & Co. KGaA. Based on our increased estimates for the diagnostics area we increase the fair value of the stock to 8 (old: 4.45 ). We continue to recommend the stock a buy. Please note our disclaimer on page 5 f. Solventis Wertpapierhandelsbank GmbH, Rohmerplatz 35, 60486 Frankfurt am Main; Tel. 0 69-71 5 8 91 10 Online Research: www.solventis.de

Solventis Wertpapierhandelsbank - Research Page 2 Geratherm: P+L in 2008 yoy 2009e yoy 2010e yoy 2011e yoy Sales 10,079,487.00 14.5% 14,000,000.00 38.9% 18,060,000.00 29.0% 18,963,000.00 5.0% Unfinished goods -391,086.00 n.m. -543,202.65 38.9% -700,731.41 29.0% -735,767.98 5.0% Inventury changes & own work cap. 326,169.00 56.9% 196,490.75-39.8% 196,490.75 0.0% 196,490.75 0.0% Other operating earnings 328,908.00 81.3% 222,732.67-32.3% 243,335.70 9.3% 184,813.19-24.1% Cost of goods 4,249,732.00 1.8% 5,902,705.96 38.9% 7,614,490.69 29.0% 7,995,215.22 5.0% Gross margin 6,093,746.00 17.5% 7,973,314.81 30.8% 10,184,604.35 27.7% 10,613,320.73 4.2% Personnel expenses 2,556,609.00 13.3% 3,551,026.56 38.9% 4,580,824.26 29.0% 4,809,865.47 5.0% Depreciation 303,262.00-3.6% 324,665.40 7.1% 400,000.00 23.2% 527,569.10 31.9% Other operating expenses 2,639,772.00 32.0% 1,787,622.85-32.3% 1,952,980.10 9.3% 1,483,286.16-24.1% Ebit (prerestruct. charges) 594,103.00-3.6% 2,310,000.00 288.8% 3,250,800.00 40.7% 3,792,600.00 16.7% Ebit margin (prerestruct. charges) 5.89% -1.1 pp 16.50% 10.6 pp 18.00% 1.5 pp 20.00% 2.0 pp Ebitda 897,365.00-3.6% 2,634,665.40 193.6% 3,650,800.00 38.6% 4,320,169.10 18.3% Ebitda margin 8.90% -1.7 pp 18.82% 9.9 pp 20.21% 1.4 pp 22.78% 2.6 pp Ebit 594,103.00-3.6% 2,310,000.00 288.8% 3,250,800.00 40.7% 3,792,600.00 16.7% Ebit margin 5.89% -1.1 pp 16.50% 10.6 pp 18.00% 1.5 pp 20.00% 2.0 pp Earnings minorities 503,466.00-32.0% 47,761.00-90.5% 47,761.00 0.0% 47,761.00 0.0% Other financial income 4,000,000.00 n.m. 0.00 n.m. 0.00 0.0% 0.00 0.0% Interest result 32,509.00-65.5% 14,354.27-55.8% 16,598.00 15.6% 15,598.83-6.0% Interest expense 35,195.00 231.2% 13,444.51-61.8% 13,444.51 0.0% 13,444.51 0.0% Financial result -3,499,220.00 n.m. 48,670.76 n.m. 50,914.50 4.6% 49,915.32-2.0% Extraordinary earnings 0.00 0.0% 0.00 0.0% 0.00 0.0% 0.00 0.0% Earnings before taxes (EBT) -2,905,117.00 n.m. 2,358,670.76 n.m. 3,301,714.50 40.0% 3,842,515.32 16.4% EBT margin -28.82% n.m. 16.85% n.m. 18.28% 1.4 pp 20.26% 2.0 pp Taxes 117,120.00-19.0% 371,490.65 217.2% 594,308.61 60.0% 768,503.06 29.3% Tax rate -4.03% n.m. 15.75% n.m. 18.00% 2.3 pp 20.00% 2.0 pp Earnings after taxes (EAT) -3,022,237.00 n.m. 1,987,180.12 n.m. 2,707,405.89 36.2% 3,074,012.26 13.5% Minorities -101,620.00 4.7% -100,000.00-1.6% 0.00 n.m. 0.00 0.0% Group net Net income -2,920,617.00 n.m. 2,087,180.12 n.m. 2,707,405.89 29.7% 3,074,012.26 13.5% No. of shares on 18.11.2009 (mill.) 4.50 0.0% 4.50 0.0% 4.50 0.0% 4.50 0.0% Earnings per share ( ) -0.65 n.m. 0.46 n.m. 0.60 29.7% 0.68 13.5% Source: Geratherm, Solventis Research

Solventis Wertpapierhandelsbank - Research Page 3 Geratherm: Balance Sheet in 2008 yoy 2009e yoy 2010e yoy 2011e yoy Assets Cash and cash equivalents 1,373,438.00-34.1% 2,459,375.16 79.1% 2,014,505.15-18.1% 2,173,896.01 7.9% Accounts receivables 1,978,498.00 5.0% 2,750,000.00 39.0% 3,547,500.00 29.0% 3,724,875.00 5.0% Inventories 3,080,463.00 5.1% 3,000,000.00-2.6% 3,870,000.00 29.0% 4,063,500.00 5.0% Other noncurrent assets 100,387.00-12.0% 100,387.00 0.0% 100,387.00 0.0% 100,387.00 0.0% Tax claims 64,009.00-43.5% 64,009.00 0.0% 64,009.00 0.0% 64,009.00 0.0% Total noncurrent assets 6,596,795.00-7.5% 8,373,771.16 26.9% 9,596,401.15 14.6% 10,126,667.01 5.5% Fixed assets 1,763,632.00 2.4% 2,338,966.60 32.6% 2,338,966.60 0.0% 2,702,823.18 15.6% Intangible assets 968,716.00 62.9% 968,716.00 0.0% 968,716.00 0.0% 968,716.00 0.0% Goodwill 75,750.00 0.0% 75,750.00 0.0% 75,750.00 0.0% 75,750.00 0.0% Financial assets 2,991,346.00-49.2% 2,991,346.00 0.0% 2,991,346.00 0.0% 2,991,346.00 0.0% Deferred Taxes 2,664,208.00-3.5% 2,664,208.00 0.0% 2,664,208.00 0.0% 2,664,208.00 0.0% Total fixed assets 8,463,652.00-23.3% 9,038,986.60 6.8% 9,038,986.60 0.0% 9,402,843.18 4.0% Total assets 15,060,447.00-17.1% 17,412,757.76 15.6% 18,635,387.74 7.0% 19,529,510.19 4.8% Equity & Liabilities Subscribed capital 4,500,000.00 0.0% 4,500,000.00 0.0% 4,500,000.00 0.0% 4,500,000.00 0.0% Capital reserves 7,570,000.00 0.0% 7,570,000.00 0.0% 7,570,000.00 0.0% 7,570,000.00 0.0% Returned earnings 524,692.00-87.5% 811,872.12 54.7% 1,269,278.01 56.3% 1,643,290.26 29.5% Shareholder's equity 12,594,692.00-22.5% 14,681,872.12 16.6% 15,589,278.01 6.2% 16,413,290.26 5.3% Minorities 52,386.00-58.0% 52,386.00 0.0% 52,386.00 0.0% 52,386.00 0.0% Shareholder's equity with minorities 12,647,078.00-22.8% 14,734,258.12 16.5% 15,641,664.01 6.2% 16,465,676.26 5.3% Long-term debt Accrued investment cost 516,348.00-7.9% 516,348.00 0.0% 516,348.00 0.0% 516,348.00 0.0% Other long-term liabilities 405,329.00 58.7% 405,329.00 0.0% 405,329.00 0.0% 405,329.00 0.0% Total long-term debt 921,677.00 12.9% 921,677.00 0.0% 921,677.00 0.0% 921,677.00 0.0% Short-term debt Trade payables 363,247.00-21.7% 450,000.00 23.9% 580,500.00 29.0% 609,525.00 5.0% Financial debt 669,843.00 n.m. 669,843.00 0.0% 669,843.00 0.0% 669,843.00 0.0% Tax liabilities 36,028.00-21.4% 50,041.44 38.9% 64,553.45 29.0% 67,781.12 5.0% Other liabilities 422,574.00 6.4% 586,938.20 38.9% 757,150.28 29.0% 795,007.80 5.0% Erhaltene Anzahlungen 0.00-100.0% 0.00 0.0% 0.00 0.0% 0.00 0.0% Total short-term debt 1,491,692.00 53.5% 1,756,822.64 17.8% 2,072,046.74 17.9% 2,142,156.92 3.4% Total Equity & Liabilities 15,060,447.00-17.1% 17,412,757.76 15.6% 18,635,387.74 7.0% 19,529,510.19 4.8% Source: Geratherm, Solventis Research

Solventis Wertpapierhandelsbank - Research Page 4 Geratherm: DCF model ( ) 2008 2009e 2010e 2011e 2012e 2013e Terminal Value Sales 10,079,487.0 14,000,000.0 18,060,000.0 18,963,000.0 19,531,890.0 19,922,527.8 % change 14.5% 38.9% 29.0% 5.0% 3.0% 2.0% EBITDA 897,365.0 2,634,665.4 3,650,800.0 4,320,169.1 4,704,035.0 5,060,063.3 EBITDA margin 8.9% 18.8% 20.2% 22.8% 24.1% 25.4% EBIT 594,103.0 2,310,000.0 3,250,800.0 3,792,600.0 4,101,696.9 4,382,956.1 EBIT margin 5.9% 16.5% 18.0% 20.0% 21.0% 22.0% NOPLAT 618,054.3 1,946,175.0 2,665,656.0 3,034,080.0 3,076,272.7 3,068,069.3 2,844,937.0 Reinvestment Rate 122.2% 54.2% 55.8% 21.6% 16.7% 14.0% 19.9% FCFF -136,902.7 891,889.0 1,178,656.0 2,378,373.4 2,563,344.4 2,638,916.0 41,650,350.8 WACC 6.71% 6.66% 6.66% 6.66% 6.65% 6.64% 7.47% Cumulative WACC 106.66% 113.77% 121.34% 129.41% 138.01% 148.32% Net present value FCFF 836,177.4 1,036,020.4 1,960,014.7 1,980,723.1 1,912,141.3 28,081,327.5 Total net present value FCFF 7,725,076.8 Net present value Terminal Value 28,081,327.5 as % of enterprise value 78.4% Enterprise value 35,806,404.3 Net financial debt -187,247.0 Value of tax-loss carried forward 0.0 Minorities 0.0 Associates 0.0 Equity value 35,993,651.3 Value per share ( ) 8.00 Source: Geratherm, Solventis Research

Solventis Wertpapierhandelsbank - Research Page 5 Disclaimer, Notice according to 34b German Securities Trading Act (WpHG), potential conflicts of interest, company-specific disclosures and regulatory disclosures The following statements inform the reader of statutory requirements which have to be complied with when publishing investment research material. 1. Disclaimer The information herein is believed by us to be reliable and has been obtained from public sources believed to be reliable. We make no representation as to the accuracy or completeness of such information. Recommendations and/or projections made by us on the basis of this information constitute the nonbinding current judgement of the author as of the date of this report. Subsequent changes cannot be taken into account. We cannot accept any liability whatsoever for the completeness or correctness of this report. The report is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell shares. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situation and investment objectives. We are not in a position to determine whether the recommendations are in keeping with your personal investment strategies and objectives. This report is subject to copyright. It may only be reproduced with our consent. 2. Disclosures according to 34b WpHG a) Date first published: 23 November 2009 b) Conditions regarding updates: Once published, reports are not updated. c) Regulatory authority: Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt/M. d) Previous research: No research has been published in the 12 months prior to publication of this report containing a recommendation for a given investment decision differing from the recommendation in this report. e) The report was made available to the company - within in the legally permitted framework - which is the subject of this research before publication and was not subsequently altered. f) Unless stated otherwise, all prices and price performances stated in this report are based on the closing prices. 3. Disclosures Neither Solventis Wertpapierhandelsbank GmbH nor a related undertaking nor a person who has assisted in the preparation of this report 1. holds 5 percent or more of the share capital of the company which is the subject of this report. 2. has been a member of a syndicate which, within the last twelve months, has issued, by way of a public offering, financial instruments of the company which is the subject of this report. 3. makes a market in financial instruments of the company which is the subject of this report. 4. has entered into an agreement with the company which is the subject of this report for the provision of investment banking services or have received compensation or a promise of compensation by virtue of such an agreement. 5. has entered into an agreement with the company which is the subject of this report to prepare the report. Solventis Wertpapierhandelsbank GmbH or a related undertaking or a person who has assisted in the preparation of this report 1. holds individual securities as a position. 4. Preparation and distribution a) Responsible for the preparation and distribution of this report Solventis Wertpapierhandelsbank GmbH Registered office: Düsseldorf; HRB 34966, Düsseldorf District Court; Managing Directors Konrad Zorn, Joachim Schmitt, Klaus Schlote. b) Author Klaus Schlote, CEFA Analyst 5. Explanatory remarks on the recommendation system Explanatory remarks on the recommendation system for equities: Buy: The stock is expected, in our estimation, to generate an absolute return of at least 10% during the next 12 months time horizon. Hold: The stock is expected, in our estimation, to show a price gain or a price loss not exceeding 10% during the next 12 months time horizon. Sell: The stock is expected, in our estimation, to show an absolute price loss of at least 10% during the next 12 months time horizon.

Solventis Wertpapierhandelsbank - Research Page 6 Explanatory remarks on trend statements theme-based studies: Opportunities/winner/positive: In our estimation the company will profit from the assumed development. Threats/loser/negative: In our estimation the company will be adversely affected by the assumed development. Neutral/balanced: In our estimation the assumed development will have no significant impact on the company. Any ranking of the issuers indicates the relative strength of the impact which, in our estimation, the assumed development will have on the various issuers. 6. Sensitivity of the valuation parameters The figures derived from the profit & loss statement, cash flow statement and balance sheet underlying the company s valuation are estimates as of a specific date and therefore harbour risks. They can change at any time without prior notice. Irrespective of the method of valuation used, there is a significant risk that the target price/trend may not be achieved within the expected time frame. The risks include unforeseen changes in respect of competitive pressure, demand for the products of an issuer or the availability of essential materials required for production, or that the assumed development may not materialize. Such fluctuations can arise as a result of changes of a technological nature, changes in the macroeconomic environment, changes in the legal framework and changes in exchange rates. This discussion of valuation methods and risk factors does not claim to be exhaustive. 7. 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With the peer group analysis, issuers are valued by comparison with valuation multiples (e.g. price/earnings ratio, price/book value ratio, enterprise value/sales, enterprise value/ebitda, enterprise value/ebit) of other listed companies. The comparability of the valuation multiples is determined primarily by the respective company s business activity and economic potential. Theme-based studies: The impact of a given development (e.g. EU enlargement in Eastern Europe, rising electricity prices) on various issuers is determined by applying the assumed development to the issuer s published business, income, cost and sales structure. 9a. Internal organizational and regulative precautions to prevent or deal with conflicts of interest Employees of Solventis Wertpapierhandelsbank GmbH who are involved in the preparation and/or presentation of research are bound by its internal Compliance Rules. 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