EFTA01385532.pdf

> TMT Deutsche Bank 0 Infineon — Johannes Schaller, BUY, close €24.1, €29 tgt, 20% upside ■ Automotive semiconductors is a growth sector, benefiting from A play on Auto semis, and thus ADAS, EVs and digitalisation exposure to autonomous vehicles (ADAS), electrification and digitalisation. This should all lead to meaningfully higher semiconductor content per car. Chip Card & Security, 10% ■ Infineon is the highest-quality large-cap play in the sector with a best-in- class technology portfolio and strong exposure to faster growing German Automotive. 43% premium manufacturers as well as strong direct exposure to Chinese brands and share gains across Asia (incl. Japan) Power Management & ■ A leader in tomorrow's technologies, with ambitions to drive share gains Multimarket. 30% through innovation in next-gen Auto applications such as radar, lidar, 32-bit high-performance microcontrollers and next-gen power semis. ■ 2018 guidance is for impressive 9% growth (13% in USD terms vs the Industrial Power Control. 17% semiconductor industry at 5%). Source: Doutsc.ho Bank ■ We believe long-term guidance is somewhat conservative at 17% through-the-cycle margins and 8% revenue growth, compared to 18.5% and 9%, respectively, in Q4. FX masks margin expansion and mid-teens EPS growth in 18E ■ We expect margin leverage from the Dresden 300mm fab ramp. This is 1.2 60% highly cost-effective (25% cheaper than the industry standard) and should Infineon EPS —% EPS growth (RI-IS) 1.0 50% lead to structurally higher margins. ■ Despite c40% performance YTD, at 24x CY18 PIE Infineon's 0.8 40% outperforrnance over the industry and share gains vs peers are not truly 0.6 30% reflected in valuation. See potential upside to >E30, reflecting long-term margin and growth potential in bull-case DCF. 0.4 20% ■ Catalysts: 15t CMD in a long time on 12th June 2018 in London where long- 0.2 10% term growth and margin potential should become much clearer 0.0 0% 2014 2015 2016 2017E 2018E 2019E Related DB Research: It is becoming increasingly evident... (Schalleq Source: Deutsche Bank. Company dala ctse.he, Bank Rth>earch. Etzopec:n Focus — .jar!LiaTy 2018 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0086818 CONFIDENTIAL SDNY_GM_00233002 EFTA01385532