EFTA01385541.pdf

> BLT Deutsche Bank 0 Vinci — Guillermo Fernandez-Gao, BUY, close €86.7, €94.1 tgt, 9% upside ■ Vinci is a large company (market cap > €50bn) with substantial absolute The Contracting segment is growing at a 12% EBIT CAGR to 2019E cash generation potential at E4.5bn FCF ex growth capex, implying a 9.3% yield (well above Ferrovial's at 4.5%). 1.800 6% r• EBIT (EURm. LHS) —EBIT margin (RHS) - Growth capex derives from stimulus programmes and construction of 1,600 5% new assets (which is M&A-like in nature). 1,400 hi ■ 8% EBIT CAGR to 2019E driven mostly by French construction market 1.200 4% 1.000 recovery boosting the late-cycle Contracting segment (c30% of value, 3% 800 growing at a 12% CAGR to 2019). 600 2% - Infrastructure should be an important driver, spurred by meaningful 400 contracts in railways (such as the Grand Paris Metro network). 200 ■ Earnings visibility in Autoroutes division (50% of Group valuation) due 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 to resilient and predictable cash flows. We expect a 4.1% EBIT CAGR to Source: Deutsche Bank, company dale 2019E — substantial for such mature assets ■ A takeover of ADP would be accretive from day one. Even if we assume no synergies at all and a 30% takeover premium, EPS would increase by Impressive FCF generation (2018E, EUR bn) — a 9.3% yield ex growth capex 11% in 2018E. This potential deal has seen escalating newsflow. 6.8 - This would also help reduce Vinci's overexposure to the French MIS economy. Domestic EBITDA would fall from 76% to 63% of the total (assuming ADP traffic mix, Intl 84% of its total). - 0.5 ■ - 1.4 0.1 4.3 ■ Vinci trades on 16.5x PIE. Our target implies an adjusted FCF yield of 8.5%. - 0.7 ■ Catalysts: FY 2017 Results on 07-Feb. We are 2% above consensus at 16 -1.3 EBIT level. - 1A Related DB Research: CF from Cost of Taxes Working Operating Operating Growth Dividends Net debt Vinci: How Vinci would look with ADP in it (Fernandez-Gao) operations Debt Capital Capex FCF Capex reduction Transportation Outlook 2018: Going Places (Chu) Souroo: Deutsche Bank. company data Var. (M&A) Deutsche Bank Research• European aptly Focus -January 2018 42 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0086827 CONFIDENTIAL SDNY_GM_00233011 EFTA01385541