Geberit (GEBN.VX) - Credit Suisse | PLUS

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, 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.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®

Client-Driven Solutions, Insights, and Access

03 November 2014

Europe

Equity Research

Capital Goods

Geberit (GEBN.VX) INCREASE TARGET PRICE

Coming out from behind the wall

■ Increase estimates and TP but maintain Neutral. We increase our 2015-16 estimates by c15% comprising a c5% underlying upgrade and c10% contribution by Sanitec acquisition (details on page 5). We raise our TP to CHF 310 based on 22% mid-cycle margin and 6% growth assumptions coupled with >90% expected cash conversion. We maintain a Neutral stance because although we continue to see a clear market penetration driven growth story in Geberit's core business, we fear that the addition of Sanitec would result in volatility of margins and cash generation and hence de-rating from the current still very high level.

■ Sanitec deal – major change in strategy. Firstly, it brings the company into the more fragmented 'in front of the wall' market where the decision maker is the final user rather than the installer / plumber as is the case with behind the wall products (that we estimate account for c90% of Geberit core business). Secondly, it results in a multi-brand route to market vs Geberit previous clear focus on single brand. Both of these moves were clearly ruled out by Geberit management in the past and it is the market developments over the past 12-24 months that led to the change. In-line with Geberit management, we see the move as primarily an offence play – gaining Geberit access to showrooms to push its technical products (especially in emerging European markets) and to develop future integrated solutions. However, we also see a substantial defensive element to this deal – protecting the behind the wall position from new entrants – which may result in excessive investment requirement and some near-term margin volatility.

■ Valuation. Geberit remains the most expensive stock in our coverage trading on 2015E P/E of 21.3x and EV/EBIT of 18x – a 45% premium to the Mechanicals sector and c25% premium to its high quality growth peers.

■ Catalysts. Sanitec offer 17 Nov-22 Dec. 1st info on 2013 on 13 Jan 2015.

Share price performance

186

236

286

Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14

Price Price relative

The price relative chart measures performance against the SMI

PRICE which closed at 8837.78 on 31/10/14

On 31/10/14 the spot exchange rate was SFr1.21/Eu 1. -

Eu .8/US$1

Performance Over 1M 3M 12M Absolute (%) 8.2 8.1 22.0 Relative (%) 6.4 1.7 14.5

Financial and valuation metrics

Year 12/13A 12/14E 12/15E 12/16E Revenue (SFr m) 2,291.6 2,427.0 3,464.9 3,670.6 EBITDA (SFr m) 592.80 655.76 800.19 873.23 Adjusted Net Income (SFr m) 435.80 491.33 579.97 642.15 CS adj. EPS (SFr) 11.58 13.07 15.42 17.08 Prev. EPS (SFr) — 12.71 13.71 — ROIC (%) 38.72 20.16 23.81 26.04 P/E (adj., x) 28.31 25.09 21.25 19.20 P/E rel. (%) 175.7 155.5 146.9 144.4 EV/EBITDA 19.8 19.6 15.9 14.3

Dividend (12/14E, SFr) 8.49 IC (12/14E, SFr m) 2,460.66 Dividend yield (%) 2.6 EV/IC 5.2 Net debt (12/14E, SFr m) 623.8 Current WACC 9.00 Net debt/equity (12/14E, %) 34.0 Free float (%) 87.00 BV/share (12/14E, SFr) 49.0 Number of shares (m) 37.33

Source: FTI, Company data, Thomson Reuters, Credit Suisse Securities (EUROPE) LTD. Estimates.

Rating NEUTRAL* Price (31 Oct 14, SFr) 327.80 Target price (SFr) (from 240.00) 310.00¹ Market cap. (SFr m) 12,235.40 Enterprise value (SFr m) 12,859.2

*Stock ratings are relative to the coverage universe in each

analyst's or each team's respective sector.

¹Target price is for 12 months.

Research Analysts

Andre Kukhnin, CFA

44 20 7888 0350

[email protected]

Patrick Laager

41 44 334 60 76

[email protected]

Simon Toennessen

44 20 7883 6893

[email protected]

Max Yates

44 20 7883 8501

[email protected]

Jonathan Hurn, CFA

44 20 7883 4532

[email protected]

Tiantian Li

44 20 7883 1552

[email protected]

Specialist Sales: Andrew Bell

44 20 7888 0479

[email protected]

03 November 2014

Geberit (GEBN.VX) 2

Geberit GEBN.VX Price (31 Oct 14): SFr327.80, Rating: NEUTRAL, Target Price: SFr(from 240.00) 310.00

Income statement (SFr m) 12/13A 12/14E 12/15E 12/16E

Revenue (SFr m) 2,291.6 2,427.0 3,464.9 3,670.6 EBITDA 593 656 800 873 Depr. & amort. (82) (79) (79) (79) EBIT (SFr) 511 577 721 794 Net interest exp. (6) (6) (23) (20) Associates — — — — Other adj, — — — — PBT (SFr) 505 571 699 774 Income taxes (69) (80) (119) (132) Profit after tax 436 491 580 642 Minorities — — — — Preferred dividends — — — — Associates & other — — — — Net profit 436 491 580 642 Other NPAT adjustments — — (91) (115) Reported net income 436 491 489 527

Cash flow (SFr) 12/13A 12/14E 12/15E 12/16E

EBIT 511 577 721 794 Net interest — (6) (23) (20) Cash taxes paid (56) (80) (119) (132) Change in working capital 2 (16) (37) 1 Other cash & non-cash items 103 79 79 79 Cash flow from operations 560 554 622 723 CAPEX (95) (100) (100) (100) Free cashflow adj. — — — — Free cash flow to the firm 465 454 522 623 Acquisitions — (1,290) — — Divestments — — — — Other investment/(outflows) — — — — Cash flow from investments (95) (1,390) (100) (100) Net share issue/(repurchase) (27) — — — Dividends paid (248) (319) (377) (417) Issuance (retirement) of debt (4) 1,000 — — Other (5) (996) 4 4 Cash flow from financing activities

(284) (314) (373) (413) Effect of exchange rates (1) — — — Changes in Net Cash/Debt 180 (1,150) 149 210 . Net debt at start (347) (526) 624 475 Change in net debt (180) 1,150 (149) (210) Net debt at end (526) 624 475 265

Balance sheet (SFr m) 12/13A 12/14E 12/15E 12/16E

Assets Cash and cash equivalents 538 388 537 747 Accounts receivable 115 146 209 221 Inventory 171 193 285 302 Other current assets 128 128 128 128 Total current assets 952 855 1,159 1,398 Total fixed assets 536 1,853 1,879 1,905 Intangible assets and goodwill 646 640 635 635 Investment securities — — — — Other assets 92 88 83 74 Total assets 2,226 3,436 3,756 4,011 Liabilities Accounts payable 208 233 332 352 Short-term debt 4 253 253 253 Other short term liabilities 67 80 98 108 Total current liabilities 280 566 683 713 Long-term debt 8 759 759 759 Other liabilities 275 275 275 275 Total liabilities 562 1,599 1,716 1,747 Shareholders' equity 1,664 1,837 2,040 2,265 Minority interest — — — — Total equity & liabilities 2,226 3,436 3,756 4,011 Net debt (SFr m) (526) 624 475 265

Per share data 12/13A 12/14E 12/15E 12/16E

No. of shares (wtd avg) 38 38 38 38 CS adj. EPS (SFr) 11.58 13.07 15.42 17.08 Prev. EPS (SFr) — 12.71 13.71 — Dividend (SFr) 7.53 8.49 10.02 11.10 Div yield 2.30 2.59 3.06 3.39 Dividend payout ratio 64.99 64.99 64.99 64.99 Free cash flow per share (SFr)

12.35 12.07 13.87 16.56

Key ratios and valuation

12/13A 12/14E 12/15E 12/16E

Growth (%) Sales 4.7 5.9 42.8 5.9 EBIT 11.9 13.0 25.0 10.0 Net profit 12.5 12.7 18.0 10.7 EPS 14.0 12.8 18.0 10.7 Margins (%) EBITDA margin 25.9 27.0 23.1 23.8 EBIT margin 22.3 23.8 20.8 21.6 Pretax margin 22.0 23.5 20.2 21.1 Net margin 19.0 20.2 16.7 17.5 Valuation metrics (x) EV/sales 5.1 5.3 3.7 3.4 EV/EBITDA 19.8 19.6 15.9 14.3 EV/EBIT 22.9 22.3 17.6 15.7 P/E 28.3 25.1 21.3 19.2 P/B 7.4 6.7 6.0 5.4 Asset turnover 1.0 0.7 0.9 0.9 ROE analysis (%) ROE stated-return on equity

28.2 28.1 25.2 24.5 ROIC 38.7 20.2 23.8 26.0 Interest burden 0.99 0.99 0.97 0.97 Tax rate 13.7 14.0 19.5 20.0 Financial leverage 0.01 0.55 0.50 0.45 Credit ratios (%) Net debt/equity (31.6) 34.0 23.3 11.7 Net debt/EBITDA (0.89) 0.95 0.59 0.30 Interest coverage ratio 92.9 103.0 31.9 39.6

Source: FTI, Company data, Thomson Reuters, Credit Suisse Securities

(EUROPE) LTD. Estimates.

186

236

286

Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14

Price Price relative

The price relative chart measures performance against the SMI PRICE which

closed at 8636.25 on 29/10/14

On 29/10/14 the spot exchange rate was SFr1.21/Eu 1. - Eu .79/US$1

03 November 2014

Geberit (GEBN.VX) 3

Key charts Figure 1: Geberit and Sanitec quarterly operating margin and organic growth profile 2012-2014

Figure 2: Geberit pre-Sanitec had best-in-class ROIC and cash conversion profile…

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Sanitec organic growth Geberit organic growth

Sanitec adjusted op. profit margin Geberit op. profit margin

0%

20%

40%

60%

80%

100%

120%

6%

11%

16%

21%

26%

31%

36%

GEBN ROIC (LHS) Sector ROIC (LHS)

GEBN Cash conversion (RHS) Sector Cash conversion (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 3: …and has delivered consistent organic growth and margin improvement

Figure 4: Consensus EPS of Geberit has been gradually increasing in the past two years

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014E

2015E

2016E

Revenues Organic Growth % Operating Margin %

10

11

12

13

14

15

16

Jan

-11

May-1

1

Se

p-1

1

Jan

-12

May-1

2

Se

p-1

2

Jan

-13

May-1

3

Se

p-1

3

Jan

-14

May-1

4

Se

p-1

4

2013 2014 2015 2016

Source: Company data, Credit Suisse estimates Source: Thomson Reuters consensus

Figure 5: Geberit has traded at a premium relative to the high-quality construction-exposed European industrials

70

80

90

100

110

120

130

Jan

-10

Ap

r-10

Jul-1

0

Oct-

10

Jan

-11

Ap

r-11

Jul-1

1

Oct-

11

Jan

-12

Ap

r-12

Jul-1

2

Oct-

12

Jan

-13

Ap

r-13

Jul-1

3

Oct-

13

Jan

-14

Ap

r-14

Jul-1

4

Oct-

14

EV/EBIT

Geberit Index (Legrand, Assa Abloy, Kone, Schindler)

80

85

90

95

100

105

110

115

120

125

130

Jan

-10

Ap

r-10

Ju

l-1

0

Oct-

10

Jan

-11

Ap

r-11

Ju

l-1

1

Oct-

11

Jan

-12

Ap

r-12

Jul-1

2

Oct-

12

Jan

-13

Ap

r-13

Ju

l-1

3

Oct-

13

Jan

-14

Ap

r-14

Ju

l-1

4

Oct-

14

P/E

Geberit Index (Legrand, Assa Abloy, Kone, Schindler)

Source: Bloomberg

03 November 2014

Geberit (GEBN.VX) 4

Summary of forecasts changes

Figure 6: Geberit: Summary of our and consensus forecasts and our forecasts changes

Old New Old New Old New

CHF M 2014E 2014E 2014E Change 2015E 2015E 2015E Change 2016E 2016E 2016E Change

Cons'us F'cast F'cast to f'cast Cons'us F'cast F'cast to f'cast Cons'us F'cast F'cast to f'cast

Total Revenue 2,422 2,443 2,427 (0.6%) 3,016 2,603 3,465 33.1% 3,170 2,755 3,671 33.2%

Change yoy, % 5.7% 6.6% 5.9% 24.5% 6.6% 42.8% 5.1% 5.8% 5.9%

Change ex-FX yoy, % 7.8% 7.2% 6.6% 43.0% 5.8% 5.9%

Group Operating Profit 574 563 577 2.4% 664 605 721 19.1% 717 646 794 22.8%

Operating Profit Margin, % 23.7% 23.1% 23.8% 22.0% 23.3% 20.8% 22.6% 23.5% 21.6%

Exceptionals & One off - - - - - -

EBITDA 653 645 656 1.7% 769 688 800 16.3% 823 730 873 19.6%

EBITDA margin, % 27.0% 26.4% 27.0% 25.5% 26.4% 23.1% 26.0% 26.5% 23.8%

Tax rate, % 15.0% 14.0% 15.0% 17.0% 15.0% 17.0%

Profit After Tax 488 478 491 2.7% 548 516 580 12.4% 594 552 642 16.4%

PAT margin, % 20.1% 19.6% 20.2% 18.2% 19.8% 16.7% 18.7% 20.0% 17.5%

CS operating EPS, CHF 13.0 12.7 13.1 2.8% 14.7 13.7 15.4 12.5% 16.0 14.7 17.1 16.5%

Change yoy, % 12.5% 9.8% 12.8% 12.5% 7.8% 18.0% 8.9% 6.9% 10.7%

DPS 8.3 8.3 8.5 2.8% 9.4 8.9 10.0 12.5% 10.3 9.5 11.1 16.5%

Change yoy, % 10.2% 9.8% 12.8% 13.4% 7.8% 18.0% 9.9% 6.9% 10.7%

Number of shares (diluted) 37.6 37.6 (0.1%) 37.6 37.6 (0.1%) 37.6 37.6 (0.1%)

Net debt / (cash) (662) 624 (194.3%) (821) 475 (157.8%) (1,001) 265 (126.5%)

Free Cash Flow 442 454 2.8% 491 522 6.3% 534 623 16.5%

Source: Company data, Inquiry Financial consensus, Credit Suisse estimates

Key drivers:

■ For the Geberit core business, we forecast 7% and 6% organic growth for 2015 and

2016 with operating profit margin expanding to 24.4% and 24.6% respectively (from

23.8% expected for 2014).

■ For Sanitec, we adopt the current Reuters consensus estimates that discount 3-4%

top line growth for 2015-16 (after flat 2014) and margin expanding gradually to 12% in

2016 (vs 10.6% in 2013). We also add CHF 15m of synergies for 2016 and expect

these to ramp up to CHF 45m in 2018 (in-line with Geberit's targets).

■ We treat the future acquisition costs of cCHF 22m and potential PPA amortisation as

non-operational and use 1.7% cost of debt and 30% tax rate for the acquired

business. We discount no sales or further cost synergies in our current forecasts.

Figure 7: Geberit + Sanitec pro-forma product split Figure 8: Geberit + Sanitec pro-forma geographic split

Bathroom ceramics

21%

Ceramics complementary products

7%

Sanitary Systems

41%

Piping Systems

31%

North Europe

11%

Central Europe

55%

South Europe

14%

UK & Ireland

4%

East Europe

9%

RoW7%

Source: Companies data

03 November 2014

Geberit (GEBN.VX) 5

Sanitec vs Geberit overview Figure 9: Geberit and Sanitec operate in adjacent markets in the sanitary product industry

Figure 10: Sanitec's core market is in bathroom ceramics which is a 1.6bn market in Europe

Sanitary technology products,

17.2

Bathroom equipment products,

21.5

Sanitary fittings

products, 13.3

Global sanitary product market size (bn EUR)

Geberit

Sanitec

Bathroom ceramics,

1.6

Shower, 1.4

Taps & Mixers, 2.5

Baths, 0.6

Pre-wall, 0.4

Furniture, 1.6

European bathroom fixtures market by type (bn EUR)

Source: BRG, Water technology market, data as of 2012 Source: Sanitec, data as of 2012

Figure 11: Sanitec has 76% of sales in bathroom ceramics and 24% in complementary products

Figure 12: Sanitec has a larger exposure in North and Eastern Europe as compared to Geberit

Bathroom ceramics

76%

Ceramics complementary

products24%

5%

25%

64%31%

13%

17%

3%7%

7% 16%

8% 3%

Geberit Sanitec

RoW

East Europe

UK & Ireland

South Europe

Central Europe

North Europe

Source: Company data. Note: Fig 16 uses Sanitec's definition - Central Europe refers to Germany, the Netherlands, Switzerland and Austria.

Figure 13: Central & South Europe are the largest segments of the European bathroom ceramics market…

Figure 14: …and Sanitec has the No.1 position in North, Central and East Europe

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

NorthEurope

UK &Ireland

CentralEurope

EastEurope

SouthEurope

Bathroom ceramics market (bn EUR)

61%

27%

36%

17% 17%

67%

18%

32%

17%21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

NorthEurope

UK &Ireland

CentralEurope

EastEurope

SouthEurope

2000 market share 2012 market share

Source: Sanitec, data as of 2012 Source: Sanitec

03 November 2014

Geberit (GEBN.VX) 6

Figure 15: European Bathroom equipment market is much more crowded as compared to Sanitary technology…

Figure 16: …with Top 3 concentration ratio of c60% on average

Sanitary

technology

Bathroom

equipment

Sanitary

fittings

Market

leadersGeberit

Ideal Standard,

Masco,

Sanitec, Roca

Grohe, Roca,

Masco, Ideal

Standard

Other

playersGrohe

Duscholux,

Kohler, Villeroy

& Boch

Kohler, Villeroy

& Boch

Niche

playersViega Jacuzzi Brands Hansa, Kludi

Source: Credit Suisse research. Note: Referring to European market Source: Sanitec

Figure 17: In contrast to Geberit, Sanitec has a multi-brand approach in different geographies…

Figure 18: … and a more complicated sales channels (Geberit mainly sells directly to plumbers in developed markets who act as decision makers for customers)

Source: Sanitec Source: Sanitec

Figure 19: Geberit generates 2.7x revenue per employee at a cost of 2.4x as compared to Sanitec…

Figure 20: …with a much higher margin and faster historic organic growth rate

0

50

100

150

200

250

300

Sanitec Geberit

Revenue per employee Cost per employee

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Sanitec organic growth Geberit organic growth

Sanitec adjusted op. profit margin Geberit op. profit margin

Source: Company data Source: Company data

03 November 2014

Geberit (GEBN.VX) 7

Deal maths – Multiples paid & Returns impact

Geberit has agreed to pay CHF 1.29bn for Sanitec. Using our forecasts for Sanitec based

on current consensus with CHF 15m of synergies in 2016, Geberit is paying 14x 2015

EBITA and 11.2x 2016 EBITA for the business. On our initial estimates (consolidating

Sanitec on pro-forma basis), the new Geberit group ROIC decline to c19-20% from c29%

average in the previous five years. For details on our ROIC calculation methodology

across the sector, please follow this link to a detailed report.

Key positives and our key concerns

We see the following key positives and potential opportunities arising from the

combination of Geberit and Sanitec:

■ Potential for future integrated product offering of ceramics together with Geberit's

technical products such as valves, mechanisms, cisterns and fittings.

■ Access to the showrooms network for Geberit's current and future in front of the wall

products (eg. Monolith, AquaClean).

■ Access for Geberit to the Eastern European emerging markets where the decision

maker for the behind the wall systems as well as in front of the wall products is the

end-user (rather than a plumber / installer for behind the wall as in Western Europe).

■ Scope for further cost synergies beyond the already targeted CHF 45m by 2018.

■ Potential for disposals of less core brands and assets within the acquired entity.

We also see the following key concerns

■ Sanitec's available history of financial performance demonstrates a substantial

volatility of earnings and cashflows with sizable restructuring charges taken in the

past. Geberit's high valuation, in our view, reflects the company's very high returns

and quality of earnings, which we fear may be impacted should we see any volatility

from Sanitec in the future.

■ Investment in new joint products and brand development, especially in Eastern

Europe, where Sanitec's positioning appears not as strong as in Nordics and

Germany, maybe prove substantial in the near term.

■ Building materials vs Technical products. Ceramics appears to be much closer to the

building materials category rather than to technical products where Sanitary Systems

belong. The business seems more capital and labour intense as a results and may

dilute the returns of Geberit beyond the initial acquisition-driven dilution. On the other

hand, we highlight that Geberit has a very successful Piping business (accounts for

c1/2 of group sales) that does not appear to meaningfully dilute the returns so far

despite rather unfavourable general environment in piping.

https://plus.credit-suisse.com/u/b6DboR

03 November 2014

Geberit (GEBN.VX) 8

Q3 2014 results analysis Figure 21: Geberit：Q3 2014 results summary

CHF M Q2 13 Q3 13 Q2 14 Q3 14E Q3 14E Q3 14 Act vs Act vs Change

Actual Actual Actual F'cast Cons'us Actual CS f'cast Cons'us Yoy

Total Revenue 591 593 618 634 614 613 (3.3%) (0.3%) 3.4%

Change yoy, % 3.0% 9.0% 4.5% 6.9% 3.7% 3.4%

Change ex-FX yoy, % 1.2% 8.1% 6.2% 8.0% 5.1%

Group Operating Profit 134 150 152 163 159 162 (0.8%) 1.7% 8.2%

Operating Profit Margin, % 22.6% 25.2% 24.7% 25.7% 25.9% 26.4%

Exceptionals & One off - - - - - #DIV/0!

EBITDA 154 170 172 184 180 182 (1.0%) 1.1% 7.0%

EBITDA margin, % 26.0% 28.7% 27.8% 29.0% 29.3% 29.7%

Tax rate, % 13.1% 13.6% 14.1% 14.9% 12.6%

Profit After Tax 114 128 131 139 136 141 1.7% 3.4% 10.6%

PAT margin, % 19.4% 21.5% 21.2% 21.9% 22.2% 23.0%

CS operating EPS, CHF 3.0 3.4 3.5 3.7 3.6 3.7 1.4% 3.1% 10.6%

Change yoy, % 1.5% 27.7% 14.3% 9.0% 7.3% 10.6% Source: Company data, Credit Suisse estimates

Conference call takeaways

Geberit management as always hosted a confident conference call on a very solid set of

Q3 results (2% beat, >100% cash conversion, 5% lfl growth). The details from the call

confirmed our view that company guidance for Q4 is conservative (as it has been the case

in last at least 3 years) with no specific headwinds anticipated to top line or profitability.

The outlook for the Geberit core business remains positive in our view as the company

continues to take share through product rollout in overall flat markets. However, with the

announced acquisition of Sanitec (bathroom ceramics), we see the investment case

changing with some potential uncertainties.

Key takeaways

■ Cost lines. Personnel costs expected at CHF 120m in Q4. Raw materials rather flat vs

9M / Q3 run-rate - would not commit to lower because the situation in metals is volatile

while plastics flat

■ Germany - very confident on the outlook

■ Inventory ramp up - in finished goods and as a result of one product line having

unsatisfactory delivery times so the company decided to increase stock. It is not yet clr

how much this has benefitted the profitability.

■ Pricing solid at +1.5% in 9M 2014. Positive price / mix in Q3 was primarily the result of

Sanitary outgrowing

■ AquaClean has continued to grow by >20%, in-line with the plan.

■ Sanitec questions. In terms of deal rationale, management stressed this would

preserve Geberit products competitiveness longer-term and would allow faster

penetration of Eastern European emerging markets where end-user is the decision

maker for both ceramics and behind the wall systems. Geberit expect to make some

use of Sanitec's tax credits but unlikely in full. Overall costs expected to be CHF 22m,

none taken in Q3 and unclear yet whether any will be in Q4.

03 November 2014

Geberit (GEBN.VX) 9

Q3 2014 Results summary

Geberit reported a very solid set of Q3 results with operating profit coming in 2-3% ahead

of consensus with sales growing 5% lfl. The results were backed by >100% cash

conversion. With YTD growth of 7.4% and EBITDA margin up 150bps yoy, management

guidance looks increasingly conservative (see below for details).

Results – 2% beat with 5% lfl growth, solid cash.

■ Sales came in at CHF 613m, 0.3% below consensus of CHF 614m (CS at CHF 634m).

■ Operating profit came in at CHF 162m, 2% above consensus of CHF 159m (CS at

CHF 163m).

■ Growth ex FX was 5.1% vs our forecast of 8% but in-line with consensus of c5%.

Operating margin was 26.4%, 190bps above consensus at 25.9% but slightly ahead of

our estimate of 25.7%.

■ Operating cashflow was solid at CHF 176.3m, suggesting a conversion ratio of >100%.

Key points

■ Guidance – unchanged. Management continue to expect growth for 2014 at the

upper end of their 4-6% mid-term target range and operating cashflow margin

(EBITDA) slightly above 2013 level. Consensus is currently discounting 6.3% organic

growth for 2014 and EBITDA margin increase of 90bps (to 26.8%). In 2014 YTD,

Geberit grew 7.4% lfl and its EBITDA margin is up 150bps yoy

■ Market colour – remains cautious. Management state that dampening of the hopes

of a global economic upturn is expected to directly impact the construction industry with

complex challenges remaining over medium term. Europe construction market

continues to contract but is expected to flatten out during 2014 (non-res not recovering

but res is flat to small up). In the US, Geberit is not seeing signs of a recovery in public

spending (our view is more constructive) while resi is growing well. China is showing a

downward trend (not clear whether slowing growth or slowing overall). Middle East and

South Africa outlook remains positive.

03 November 2014

Geberit (GEBN.VX) 10

Valuation

In Figure 22, we show our EV calculation for Geberit. We use an average share price for a

given year for historical EV and the current share price for forecasts.

Figure 22: Geberit: Enterprise value calculation CHF in millions, unless otherwise stated

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E

Share price, CHF 79.4 89.5 141.4 187.2 142.3 138.9 184.4 188.5 193.3 238.2 327.8 327.8 327.8

Number of shares (m) 42 43 42 41 40 39 39 39 38 38 38 38 38

Market capitalisation 3,347 3,832 5,931 7,742 5,624 5,461 7,278 7,373 7,374 8,964 12,326 12,326 12,326

Net debt 454 213 141 (176) (150) (296) (513) (379) (347) (526) 624 475 265

Pension deficit 125 142 153 157 155 183 203 257 206 189 189 189 189

Minority interest 0 - - - - - - - - - - - -

CS enterprise value 3,926 4,188 6,224 7,723 5,629 5,348 6,968 7,251 7,234 8,626 13,139 12,990 12,780

Source: Company data, Credit Suisse estimates

Multiples

Figure 23 shows Geberit’s historical and forward-looking valuation multiples.

Figure 23: Geberit: Valuation multiples history and forecasts CHF, unless otherwise stated

December y/e 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E

Average/Current 79.4 89.5 141.4 187.2 142.3 138.9 184.4 188.5 193.3 238.2 327.8 327.8 327.8

High 97.1 104.0 188.8 221.4 178.4 184.0 219.9 219.1 209.8 272.5

Low 60.8 78.5 104.0 144.1 98.7 92.8 160.4 150.0 176.4 201.4

P/E average (x) 13.0 14.7 16.7 18.7 12.1 13.7 17.9 19.2 19.0 20.6 25.1 21.3 19.2

P/E high (x) 15.9 17.1 22.3 22.1 15.1 18.2 21.3 22.3 20.7 23.5

P/E low (x) 9.9 12.9 12.3 14.4 8.4 9.2 15.6 15.3 17.4 17.4

EV/ Sales average (x) 2.06 2.18 2.85 3.11 2.29 2.45 3.25 3.42 3.31 3.76 5.41 3.75 3.48

EV/ Sales high (x) 2.45 2.50 3.76 3.67 2.87 3.27 3.90 3.98 3.59 4.33

EV/ Sales low (x) 1.65 1.93 2.13 2.39 1.59 1.62 2.80 2.71 3.01 3.16

Operating profit margin (%) 19.3% 19.1% 22.1% 22.3% 22.9% 24.1% 22.6% 21.2% 20.9% 22.3% 23.8% 20.8% 21.6%

EV/EBITDA average (x) 7.6 9.2 10.9 12.1 8.7 8.8 12.1 13.6 13.5 14.6 20.0 16.2 14.6

EV/EBITDA high (x) 9.0 10.5 14.4 14.3 10.9 11.7 14.6 15.9 14.7 16.7

EV/EBITDA low (x) 6.1 8.1 8.2 9.3 6.0 5.8 10.5 10.8 12.3 12.2

EV/EBIT average (x) 10.6 11.4 12.9 13.9 10.0 10.2 14.3 16.1 15.8 16.9 22.8 18.0 16.1

EV/EBIT high (x) 12.7 13.1 17.0 16.5 12.5 13.5 17.2 18.8 17.2 19.4

EV/EBIT low (x) 8.5 10.1 9.7 10.7 6.9 6.7 12.4 12.8 14.4 14.2

FCF yield average (%) 8.9% 7.8% 5.9% 4.6% 7.1% 6.4% 6.8% 5.5% 5.5% 5.2% 3.7% 4.2% 5.1%

FCF yield high (%) 11.6% 8.9% 8.0% 6.0% 10.2% 9.6% 7.8% 6.9% 6.1% 6.1%

FCF yield low (%) 7.3% 6.7% 4.4% 3.9% 5.6% 4.8% 5.7% 4.7% 5.1% 4.5%

Dividend yield average (%) 2.8% 2.8% 2.8% 2.8% 3.8% 4.6% 3.3% 3.3% 3.4% 3.2% 2.6% 3.1% 3.4%

Dividend yield high (%) 2.3% 2.4% 2.1% 2.3% 3.0% 3.5% 2.7% 2.9% 3.1% 2.8%

Dividend yield low (%) 3.6% 3.2% 3.8% 3.6% 5.5% 6.9% 3.7% 4.2% 3.7% 3.7%

EV/IC average 2.69 3.05 4.41 5.33 4.05 3.75 5.67 6.06 5.90 6.93 5.11 4.94 4.82

EV/IC high 3.20 3.50 5.82 6.31 5.08 5.00 6.82 7.06 6.41 7.96

EV/IC low 2.15 2.71 3.30 4.10 2.81 2.48 4.90 4.80 5.37 5.81 P/BV average 4.1 4.0 5.6 5.5 4.3 3.6 4.8 5.2 5.2 5.4 6.7 6.0 5.4

P/BV high 5.0 4.6 7.4 6.5 5.4 4.8 5.7 6.0 5.6 6.2

P/BV low 3.1 3.5 4.1 4.2 3.0 2.4 4.2 4.1 4.7 4.6 ROIC 19.2% 19.9% 26.0% 29.2% 33.2% 28.6% 34.1% 32.6% 32.1% 35.3% 19.3% 22.8% 24.9%

ROCE 22.1% 23.3% 30.5% 34.5% 39.8% 33.6% 41.6% 37.5% 36.3% 38.6% 20.2% 23.8% 26.0%

NB. EV-based multiples in this figure may not match the databoxes, which use a simple EV calculation (market capitalisation + current net debt)


03 November 2014


DCF

We use a Discounted Cash Flow (DCF) valuation as our primary tool for determining

Geberit’s fair value.

We use a three-stage DCF with the following method:

■ Stage 1—Years 1 to 3. We use our explicit model forecasts for free cash flow for the

first three years.

■ Stage 2—Year 4 to 10. We use broader assumptions for next seven years (Figure 24).

■ Stage 3—Terminal value. We base our terminal value on year-ten cash flow, a

terminal growth rate of 2% and an invested capital growth rate of 2%.

Figure 24: Geberit: Key DCF assumptions

Growth (years 4 to 10) 6.0%

EBIT margin (years 4+) 22.0%

NOPAT margin 18.7%

Invested capital 2,573

Invested capital growth (years 4+) 2.0%

Terminal growth rate 2.0%

10-year average FCF yield 17.7%

WACC 9.0% Source: Credit Suisse estimates

Our base-case DCF valuation for Geberit is CHF 240 per share. We find this valuation is

quite sensitive to: (1) our WACC; (2) the long-term (year-four onwards) operating profit

margin; and (3) mid-term (years four to ten) growth rate assumptions. We therefore

believe a useful application of this model is to show its sensitivity to these parameters.

In Figure 25, we show our DCF valuation sensitivity to the operating profit (EBIT) and mid-

term growth rate assumptions.

Figure 25: Geberit: DCF sensitivity EBIT margin and mid-term growth assumptions CHF in millions, unless otherwise stated

EBIT margin NOPAT margin Growth rate

3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5%

20.5% 17.0% 263 269 274 279 285 291 296 302 309 315 321 328 335

21.0% 17.4% 269 275 280 286 291 297 303 310 316 323 329 336 343

21.5% 17.8% 275 281 286 292 298 304 310 317 323 330 337 344 351

22.0% 18.3% 281 287 293 299 305 310 317 324 331 338 345 352 360

22.5% 18.7% 287 293 299 305 311 318 324 331 338 345 353 360 368

23.0% 19.1% 293 299 305 311 318 324 331 338 345 353 360 368 376

23.5% 19.5% 299 305 311 318 324 331 338 345 353 360 368 376 384

Source: Credit Suisse estimates

In Figure 26, we show our DCF valuation sensitivity to the WACC and mid-term growth

rate assumptions.

Figure 26: Geberit: DCF sensitivity to WACC and mid-term growth rate CHF in millions, unless otherwise stated

Growth rate

WACC 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5%

8.00% 329 336 343 351 359 366 375 383 391 400 409 418 428

8.50% 303 309 316 323 329 337 344 351 359 366 374 383 391

9.00% 281 287 293 299 305 310 317 324 331 338 345 352 360

9.50% 262 267 272 278 283 289 295 300 307 313 319 326 332

10.00% 245 250 255 259 264 269 275 280 285 291 297 303 309

Source: Credit Suisse estimates

03 November 2014


Financials

In this section we present our financial model for Geberit, including our key assumptions

for top-line growth rate components and margins. We also show summaries of financial

statements for Geberit.

Figure 27: Geberit: Growth rate components CHF in millions, unless otherwise stated

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E

Switzerland 227 253 285 293 283 292 295 282 291 308 333 359

Change yoy 8.1% 11.2% 12.8% 2.9% -3.7% 3.2% 1.3% -4.4% 2.9% 6.0% 8.0% 8.0%

Organic change yoy 8.8% 11.4% 12.7% 2.9% -3.7% 3.2% 1.4% -4.4% 2.9% 6.0% 8.0% 8.0%

Germany 634 748 823 778 739 724 723 768 842 903 962 1,020

Change yoy -1.6% 17.9% 10.1% -5.5% -5.0% -2.0% -0.2% 6.2% 9.6% 7.2% 6.6% 6.0%

Organic change yoy -1.0% 16.0% 5.4% -2.5% 0.0% 6.9% 12.3% 8.9% 7.4% 8.5% 7.0% 6.0%

Italy 256 265 295 278 227 217 199 180 175 177 185 194

Change yoy 1.4% 3.5% 11.1% -5.6% -18.4% -4.4% -8.3% -9.4% -2.9% 1.2% 4.6% 5.0%

Organic change yoy 3.3% 11.2% 6.3% -2.7% -14.2% 3.9% 2.9% -6.6% -5.0% 2.5% 5.0% 5.0%

Other major European Markets 423 474 533 535 485 459 465 488 501 526 556 596

Change yoy 2.9% 12.0% 12.4% 0.3% -9.4% -5.3% 1.3% 5.0% 2.7% 4.9% 5.7% 7.1%

Organic change yoy nm nm nm 10.1% -3.6% 2.9% 13.9% 6.8% 1.3% 5.5% 5.9% 7.1%

Other European Markets 220 260 351 371 273 266 261 276 290 309 331 349

Change yoy -2.4% 18.2% 35.0% 5.6% -26.3% -2.4% -2.2% 6.0% 5.0% 6.7% 7.1% 5.3%

Organic change yoy 15.3% nm 28.4% 7.6% -17.7% 3.2% 9.0% 8.2% 4.3% 9.0% 7.7% 5.3%

Other Markets 162 184 200 201 175 189 180 193 193 204 222 242

Change yoy -0.5% 13.8% 8.7% 0.2% -12.6% 7.7% -4.9% 7.3% -0.1% 5.7% 9.1% 8.9%

-5.1% nm 11.3% 10.0% -12.0% 9.8% 9.5% 2.9% 3.9% 9.9% 8.0% 8.9%

SANITEC 875 910

Change yoy 2.9% 4.0%

Total Revenue 1,923 2,184 2,487 2,455 2,181 2,147 2,123 2,188 2,292 2,427 3,465 3,671

Total change yoy 0.8% 13.6% 13.9% -1.3% -11.2% -1.6% -1.1% 3.1% 4.7% 5.9% 42.8% 5.9%

Organic 5.0% 14.4% 11.4% 3.2% -6.5% 5.0% 9.5% 4.5% 3.6% 7.2% 43.0% 5.9%

Acquired -4.5% -2.4% -1.3% -0.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 36.1% 0.0%

Currency 0.4% 1.6% 3.8% -3.6% -4.7% -6.6% -9.6% -1.0% 1.2% -1.3% -0.2% 0.0%


03 November 2014


In Figure 28, we show a summary of our forecasts and historical data for Geberit’s P&L.

Figure 28: Geberit: P&L summary CHF in millions, unless otherwise stated

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E

Revenue 1,923 2,184 2,487 2,455 2,181 2,147 2,123 2,188 2,292 2,427 3,465 3,671

Growth, % 0.8% 13.6% 13.9% -1.3% -11.2% -1.6% -1.1% 3.1% 4.7% 5.9% 42.8% 5.9%

Sales Deductions (283) (335) (281) (276) (250) (247) (255) (268) (292) (325) (347) (373)

Cost of Materials (580) (635) (783) (739) (574) (573) (588) (591) (597) (612) (653) (704)

Personnel Expenses (419) (442) (467) (460) (446) (447) (436) (469) (475) (484) (508) (533)

Depreciation and Amortisation (89) (87) (84) (86) (84) (88) (83) (80) (82) (79) (79) (79) Other operating income/(Expenses) (186) (203) (318) (331) (300) (306) (312) (323) (335) (350) (373) (392)

Geberit Core Reported EBIT 367 482 554 563 527 486 449 457 511 577 631 679

Operating profit margin, % 19.1% 22.1% 22.3% 22.9% 24.1% 22.6% 21.2% 20.9% 22.3% 23.8% 24.4% 24.6%

Sanitec EBIT contribution 91 115

Sanitec EBIT margin, % 10.4% 12.6%

Group Operating Profit 367 482 554 563 527 486 449 457 511 577 721 794 Group Operating Profit

margin, % 19.1% 22.1% 22.3% 22.9% 24.1% 22.6% 21.2% 20.9% 22.3% 23.8% 20.8% 21.6%

Underlying EBITDA 456 569 638 649 611 574 532 537 593 656 800 873

EBITDA margin, % 23.7% 26.1% 25.7% 26.4% 28.0% 26.7% 25.1% 24.5% 25.9% 27.0% 23.1% 23.8%

Net interest income / (expense) (17) (16) (11) 6 (14) (14) (7) (7) (6) (6) (23) (20)

Rate, %

Underlying PBT 350 466 542 569 513 472 442 449 505 571 699 774

Tax (90) (111) (128) (103) (116) (65) (58) (62) (69) (80) (119) (132)

Effective rate, %

Reported profit after tax 260 355 415 466 398 407 384 388 436 491 489 527

Minority interest - - - - - - - - - - - -

Capital Gain on Disc. operations 3 - 49 - - - - - - - - -

Reported Net Income 263 355 463 466 398 407 384 388 436 491 489 527

Operating Net Income 260 355 415 466 398 407 384 388 436 491 580 642

Net income margin, % 13.5% 16.3% 16.7% 19.0% 18.2% 18.9% 18.1% 17.7% 19.0% 20.2% 16.7% 17.5%

CS operating EPS, CHF 6.1 8.5 10.0 11.8 10.1 10.3 9.8 10.2 11.6 13.1 15.4 17.1

EPS growth, % 99.3% 39.4% 18.4% 17.8% -14.4% 1.9% -4.7% 3.5% 14.0% 12.8% 18.0% 10.7%

DPS, CHF 2.5 4.0 5.2 5.4 6.4 6.0 6.3 6.6 7.5 8.5 10.0 11.1

Dividend growth, % 13.6% 60.0% 30.0% 3.8% 18.5% -6.3% 5.0% 4.8% 14.0% 12.8% 18.0% 10.7%

Dividend Cover (x) 2.43 2.12 1.93 2.19 1.58 1.72 1.56 1.54 1.54 1.54 1.54 1.54

Diluted number of shares 43 42 41 40 39 39 39 38 38 38 38 38


Figure 29 shows a summary of our forecasts and historical data for Geberit’s balance

sheet.

03 November 2014


Figure 29: Geberit: Balance-sheet summary CHF in millions, unless otherwise stated

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E

PPE and intangibles 1,341 1,359 1,358 1,312 1,329 1,173 1,161 1,159 1,182 2,493 2,514 2,535

Deferred tax receivables 62 67 49 41 79 79 79 67 56 56 56 56

Other fixed financial assets 33 34 36 19 16 15 21 22 36 32 28 23

Fixed assets 1,436 1,461 1,443 1,372 1,425 1,267 1,262 1,248 1,274 2,581 2,598 2,614

Inventories 177 200 226 207 188 149 162 164 171 193 285 302

Receivables 153 168 179 173 194 169 157 173 168 200 262 275

Trade and other payables 210 236 237 223 200 206 221 199 208 233 332 352

Other current liabilities 89 79 79 79 85 57 62 70 67 80 98 108

Working capital 32 53 90 78 96 55 35 68 64 80 117 116

Working capital days 6 9 13 12 16 9 6 11 10 12 12 12

WC as % of sales 1.7% 2.4% 3.6% 3.2% 4.4% 2.6% 1.7% 3.1% 2.8% 3.3% 3.4% 3.2%

Cash 180 182 450 303 407 587 455 361 538 388 537 747

Short-term debt 49 15 3 40 29 3 65 4 4 253 253 253

Long-term debt 344 308 271 112 82 70 11 11 8 759 759 759

Net(debt)/cash 213 141 (176) (150) (296) (513) (379) (347) (526) 624 475 265

Other liabilities 297 307 305 288 307 314 344 293 275 275 275 275

Net assets 958 1,066 1,404 1,312 1,509 1,521 1,420 1,431 1,664 1,837 2,040 2,265


Figure 30 shows a summary of our estimates and historical data for Geberit’s cash flow.

Figure 30: Geberit: Cash flow summary CHF in millions, unless otherwise stated

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E

Net income 263 355 463 466 398 407 384 388 436 491 580 642

Depreciation & amortisation 89 87 84 86 84 88 83 80 82 79 79 79

Finance cost 17 16 11 (6) 14 14 7 7 6 6 23 20

Income tax expense 90 111 128 103 116 65 58 62 69 80 119 132

Reported EBITDA 458 569 687 649 611 600 549 569 614 656 800 873

Tax paid (81) (123) (127) (100) (161) (82) (48) (59) (56) (80) (119) (132)

Interest paid (17) (15) (13) (11) (7) - - - - (6) (23) (20)

Other (non-cash gains/ losses) 9 7 (53) 16 21 - - - - - - -

Gross cash flow 370 438 494 554 464 518 501 510 558 570 659 722

Working capital change 2 (10) (49) (10) (11) 52 (8) (16) 2 (16) (37) 1

Operating cash flows 372 428 445 544 452 570 493 494 560 554 622 723

Operating cash/operating profit 101% 89% 80% 97% 86% 117% 110% 108% 110% 96% 86% 91%

Net capex (73) (79) (90) (147) (104) (78) (89) (85) (95) (100) (100) (100)

% of sales 4.5% 4.3% 4.1% 6.7% 5.4% 4.1% 4.8% 4.4% 4.8% 4.8% 4.5% 4.2%

Free cash flow 299 349 355 397 349 492 404 409 465 454 522 623

FCF/net income 115% 98% 86% 85% 88% 121% 105% 106% 107% 92% 90% 97%

Acquisitions - (1) (15) (0) (0) (1) (88) - - (1,290) - -

Disposals 70 - 103 4 - - - - - - - -

Loans raised/ paid back (169) (66) (23) (3) (42) (8) (4) (81) (4) 1,000 - -

Shares issue/purchase (15) (188) (15) (310) 11 10 (196) (198) (27) - - -

Dividends (90) (102) (159) (207) (211) (253) (236) (242) (248) (319) (377) (417)

Other 1 1 11 12 (5) (12) (9) 19 (8) 4 4 4

Net cash flow 96 (6) 257 (107) 102 229 (129) (92) 178 (150) 149 210


03 November 2014


Share price performance

In Figure 31, we show Geberit's ten-year share price performance relative to the local

market. The stock is currently trading close to an all-time high relative to the market.

Figure 31: Geberit: Share price performance absolute and relative to local market

GEBERIT 'R' 02/11/14

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

50

100

150

200

250

300

350

PRICE

PRICE REL. TO SWISS MARKET (SMI) - PRICE INDEXHIGH 327.80 31/10/14,LOW 78.00 29/10/04,LAST 327.80 31/10/14Source: Thomson Reuters Datastream

Source: Thomson Reuters

Figure 32: Geberit: 2 year relative price performance Figure 33: Geberit: 5 year relative price performance

60

65

70

75

80

85

90

95

100

Oct-12 Apr-13 Oct-13 Apr-14 Oct-14

Price Relative 90d Moving Avg

90d Moving Avg (+10%) 90d Moving Avg (-10%)

50

60

70

80

90

100

110

Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14

Price Relative 90d Moving Avg

90d Moving Avg (+10%) 90d Moving Avg (-10%) Source: Thomson Reuters Source: Thomson Reuters

0

3 N

ov

em

be

r 20

14

Ge

be

rit (GE

BN

.VX

) 1

6

Figure 34: Geberit: Company Summary

Cost Mix Split Geographic Mix

Management

Chairman&CEO Albert M. Baehny

CFO Roland Iff

IR Roman Sidler

Division Products End Markets / Channels Main Competitors Revenue Split by Geo Key Drivers/ Themes Product Example

Sanitary Systems*

FY 2013 Sales CHF 1.30 Bn

3.3% YoY ex-FX growth

Installation Systems, Cisterns &

Mechanisms, Faucets & Flushing Systems

and Waste Fittings and Traps.

Growth in construction business;

Demand in the European

residential renovation business;

Investment in R&D

Piping Systems

FY 2013 Sales CHF 0.99 Bn

4.0% YoY ex-FX growth

Building Drainage Systems and Supply

Systems

Growth in construction business;

Demand in the European

residential renovation business;

Investment in R&D

Germany 37%, Switzerland 13%, Italy 8%,

Benelux 8%, Austria 7%, Central/Eastern

Europe 7%, Nordic Countries 5%, France

4%, Americas 4% and Others 9%

Air Water Inc, Cleanup Corp, Coop Costruttori

Scarl, Eagle Industries, Grohe, Kohler Co,

Sanitec Corp, Uponor, Viega, Wavin, Ideal

Standarad, Elkay Manufacturing

Renovation 66% & New Construction

34%. Geberit’s products are exclusively

distributed through wholesalers, which

subsequently sell to plumbers. The

shower toilet segment is the only part of

the group that operates a business– to

customer model.

Shareholding Structure

Free Float:91%

Top 5 shareholders

Capital Group Companies 9.7%, Barclays

PLC 5.5%, BlackRock 5.0%, Capital Group

4.5%, AKO Capital 3.1%

Ownership by country

United States 52%, UK 19%, Switzerland

8%, Luxembourg 8% ,Norway 4% and

Others

GEBERIT (GEBN.VX) - ANDRE KUKHNIN, CFA +44 20 7883 0350/ [email protected]

Note: * The Sanitary system division is more profitable than the Piping systems

Sales by product area Sales Mix

Cash Discounts

15%

Materials34%

Personnel Expenses

27%

Depreciation &

Amortisation

5%

Other Operating Expenses

19%

Sanitary Systems

57%Piping

Systems43%

Germany37%

Switzerland13%

Italy8%

Benelux8%

Austria7%

Central /Eastern Europe

7%

Nordic Countries

5%

France4%

Americas4%

Others9%

Installation Systems

36%

Cisterns & Mechanisms

11%

Faucets & Flushing Systems

6%

Waste Fittings and Traps

4%

Building Drainage Systems

14%Supply

Systems29%


03 November 2014


Companies Mentioned (Price as of 31-Oct-2014)

Assa Abloy (ASSAb.ST, Skr391.1) Geberit (GEBN.VX, SFr327.8, NEUTRAL, TP SFr310.0) Kone Corporation (KNEBV.HE, €34.3) Legrand SA (LEGD.PA, €42.94) Schindler-Holding AG (SCHP.VX, SFr134.4)

Disclosure Appendix

Important Global Disclosures

Andre Kukhnin, CFA, Patrick Laager, Simon Toennessen, Jonathan Hurn, CFA and Max Yates each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her 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 Assa Abloy (ASSAb.ST)

ASSAb.ST Closing Price Target Price

Date (Skr) (Skr) Rating

01-Nov-11 157.10 180.00 O

15-Feb-12 198.20 210.00

30-Jul-12 208.60 225.00

06-Nov-12 229.20 240.00

20-Feb-13 254.60 270.00

17-May-13 273.90 300.00

28-Oct-13 311.70 350.00

25-Nov-13 331.10 360.00

24-Oct-14 378.10 400.00

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

3-Year Price and Rating History for Geberit (GEBN.VX)

GEBN.VX Closing Price Target Price

Date (SFr) (SFr) Rating

31-Oct-11 180.50 135.00 U

08-Dec-11 177.40 160.00

11-Oct-12 206.30 185.00

11-Sep-13 239.90 240.00 N


U N D ERPERFO RM

N EU T RA L

03 November 2014


3-Year Price and Rating History for Kone Corporation (KNEBV.HE)

KNEBV.HE Closing Price Target Price

Date (€) (€) Rating

08-Dec-11 20.24 18.50 U

11-Oct-12 28.42 23.50

20-Feb-13 32.00 31.00 N

24-Oct-13 31.58 33.50

28-Aug-14 31.78 37.00 O


U N D ERPERFO RM

N EU T RA L

O U T PERFO RM

3-Year Price and Rating History for Legrand SA (LEGD.PA)

LEGD.PA Closing Price Target Price

Date (€) (€) Rating

21-Nov-11 22.94 24.80 N

08-Dec-11 24.26 24.00 U

04-May-12 26.22 25.00

20-Feb-13 34.35 30.00

04-Oct-13 40.74 38.00

24-Jan-14 39.60 40.00 N

23-May-14 46.30 44.00


N EU T RA L

U N D ERPERFO RM

3-Year Price and Rating History for Schindler-Holding AG (SCHP.VX)

SCHP.VX Closing Price Target Price

Date (SFr) (SFr) Rating

16-Jan-12 108.90 110.00 N

16-Apr-12 109.70 120.00

17-Apr-12 112.90 120.00 O

06-Nov-12 125.20 140.00

20-Feb-13 139.10 155.00

29-May-13 138.90 R

03-Jun-13 137.80 155.00 O

24-Oct-13 126.40 150.00

* Asterisk signifies initiation or assumption of coverage. N EU T RA L

O U T PERFO RM

REST RICT ED

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 attra ctive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as Europ ean 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

03 November 2014


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 attractiv eness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds r eplace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.

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.

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 cov er multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 46% (54% banking clients)

Neutral/Hold* 38% (51% banking clients)

Underperform/Sell* 13% (44% banking clients)

Restricted 3%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d 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 holdin gs, and other individual factors.

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: http://www.csfb.com/research and analytics/disclaimer/managing_conflicts_disclaimer.html

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.

Price Target: (12 months) for Geberit (GEBN.VX)

Method: Our TP is based on a DCF discounting a mid-cycle margin of 22%, medium term growth of 6% and a WACC of 9%. Our TP is supported by the company P/E and EV/EBIT multiples relative to it peers group and it own history.

Risk: Execution on Sanitec acquisition and potential subsequent earnings and cashflows volatility resulting from the acquisition. Longer and deeper than currently expected down-cycle. Raw materials exposure, especially industrial metals and plastics. Risk of adverse pricing behaviour from competitors.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

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 have not visited the material operations of the subject company (GEBN.VX, ASSAb.ST, KNEBV.HE, SCHP.VX, LEGD.PA) within the past 12 months

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

03 November 2014


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 http://www.csfb.com/legal_terms/canada_research_policy.shtml.

The following disclosed European company/ies have estimates that comply with IFRS: (ASSAb.ST, LEGD.PA).

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

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.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse Securities (Europe) LimitedAndre Kukhnin, CFA ; Patrick Laager ; Simon Toennessen ; Jonathan Hurn, CFA ; Max Yates ; Tiantian Li

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

03 November 2014


References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States and Canada by Credit Suisse Securities (USA) LLC; in Switzerland by Credit Suisse AG; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/ Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited, Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok 10500, Thailand, Tel. +66 2614 6000, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited (CIN no. U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

Copyright © 2014 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

Geberit Q3 2014 Post Result note.doc

https://www.credit-suisse.com/who_we_are/en/

Geberit (GEBN.VX) - Credit Suisse | PLUS

Documents

Transcript of Geberit (GEBN.VX) - Credit Suisse | PLUS