Interpump Group BUY2 3 Consistent Growth in Revenues Huge M&A Opportunities Strong Resilience and High Diversification BUY 52-Weeks Target Price €34.17 +24.62% 34.17 27.42 15 17

Diletta Francesco Marco Patrizio Stefania

Interpump Group

BUYRECOMMENDATION

The Black Lily

2

3

Consistent Growth in Revenues

Huge M&A Opportunities

Strong Resilience and High Diversification

BUY

52-Weeks Target Price

€34.17 +24.62%

34.17

27.42

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MARKET DATA

Market Cap (€mln) 3.076

Free float 68%

No. of shares outst. (mln) 107

Average daily volume 186.372

52-week low/high 24.16/30.80

Dividend frequency Annual

Dividend yield 0.80%

Target Price

MAIN REASONS TO BUY

1

Upside Potential

High and Very-High Pressure PlungerPumps (HPP/VHPP)

Flow Handling for Food, Cosmetics & Pharma

▪ Worldwide leader▪ 40% market share▪ Mark-up (up to 25%)▪ 30% revenues from

after-sale services

Sales by Application Field Main Product Lines

▪ IPG a young player▪ Huge growth

opportunities

▪ High potential for further diversification

▪ New applications for HPP technology

▪ Reputable brands▪ No big competitors▪ Geographic expansion

18%

17%

13%

7%

6%

5%

4%

3%

3%

3%2%

19%

Food/ Pharma/ Cosmetics

Cleaning

Contractors

Construction

Automotive

OtherIndustries

Oil&Gas

Steel

Vehicles

Marine

Chemical

Other

COMPANY OVERVIEW INDUSTRY & COMPETITORS FINANCIAL ANALYSIS VALUATION RISK ANALYSIS

WATER-JETTING: Leader in a Mature Market but still Profitable Opportunities

Valves, Cylinders and Other Components

Power Take-Offs (PTOs)

7%

44%

18%

10%

7%

6%

6%2%

▪ Worldwide leader▪ Unparalleled

products range

Truck

Construction

Lifting

Tunnelling/Mining

Industry

Other

Earth Moving

Agriculture

▪ GS-Hydro a worldwide leader in non-welded piping systems

▪ Fast-growing global player even outside EU

▪ Widespread network of distributors

▪ Efficient customer services

HYDRAULICS: Growing Footprint in a Huge Market

Sales by Application Field Main Product Lines


81 subsidiariespresent in 26 countries.

Expansion of product range through M&A.

Increasing market share and competitive positioning

All customers are directly serviced througha local subsidiary or distributor

>20,000 customers over 130 countries.

Efficient value chainwith the parentmonitoring everyactivity

Continuously Expanding Global Presence


53

59

62

65

64

2013

2014

2015

2016

2017

Water-Jetting

Hydraulics

Group’s Sales by Division

66

2018

Huge market with countlessapplication fields

Lower margins offset by cross-sellingopportunities

End-market cyclicality dampened by diversification and M&A

Higher competition but continuousexpansion of product range and competitive position through M&A

Hydraulics Industry

Always Catching New Growth Opportunities


844

1,094

2018 2021E

435539

2018 2021E

Hydraulics Sales Water-Jetting Sales

Huge Benefits from Heavy

Trucks Registration’s

growth

Replacement Cycle in

Agricultural Equipment

Recovery of Construction

Activities from the Bottom

LevelHyd

rau

lics

Impressive 8.2% CAGR for Water-

Jet Cutting Systems Market

Supportive Long-Term

Trends for Flow Handling Market

Low Cyclicality

Wat

er-

Jett

ing

INDUSTRY & COMPETITORS FINANCIAL ANALYSIS VALUATION RISK ANALYSIS

Units Evolution (€ mln) Keys to Success

The Group’s Main Businesses still Exhibit Impressive Growth Rates

COMPANY OVERVIEW

0

5

10

15

20

25

30

10.80x2018

0

5

10

15

20

25

2019

0

5

10

15

20

25

0

5

10

15

20

25

10.50x12.3x

13.3x

0

10

20

30

40

17.7x

0

10

20

30

40

17.2x


EV / EBITDA EV / EBIT P / E

Interpump’s P/E pretty much in line among the Main Peers

12.05x

11.20x

14.95x

13.85x

17.65x

16.25x

COMPANY OVERVIEW

Rivalry within industry

Threat of substitutes Threats of entrants

Bargaining power of suppliers Bargaining power of buyers

1-very low, 2-low, 3-moderate, 4-high, 5-very high

1

2

3

4

5

Water-Jetting

High Technology Barriers

Long-Lasting Relationship Between Customers and Producer

Market Price up to 20% to Thwart new Entrants

No Substitutes for Pumps and Water-Jet Systems

Hydraulics

High Necessity of Economies of Scale

High Substitutability among Products

Wide Range of Distribution Channels

No Substitutability of Current Technologies


Multi-Strategic Positioning with Different Dimensions

Porter’s Five Forces

COMPANY OVERVIEW

Acquired Company Sector Year EV/EBITDA

Inoxpa Water-Jetting 2017 7.8x

Teknotubi Hydraulics 2016 2.9x

Inoxihp Water-Jetting 2015 4.5x

Bertoli Water-Jetting 2015 1.6x

Walvoil Hydraulics 2015 5.5x

Osper Hydraulics 2015 3.3x

IMM Hydraulics 2014 3.6x

Hydrocontrol Hydraulics 2013 3.3x

Galtech Hydraulics 2012 3.9x

MTC Hydraulics 2012 3.5x

Contarini Hydraulics 2008 5x

NLB Water-Jetting 2007 7.1x

Hammelmann Water-Jetting 2005 5.6x

Historical Acquisitions Optimal Synergies and Diversification Strategies

Purchasing at Discounted Prices

Increasing Presence in Promising Markets

Taking a Significant Competitive Advantage


The Group's Historical M&A...

COMPANY OVERVIEW

Interpump’s Screening Mechanism

Countryof Risk

Market Cap.

($ Mln)

EV/ EBITDA

EBITDA Margin(%) Debt/ EBITDA

1 Extremely risky 15-25 >7.0x 13.1 < 0.75x

Weight 30% 20% 20% 20% 10%

Score

Metrics


...through a Well-Proven Algorithm

COMPANY OVERVIEW

Countryof Risk

Market Cap.($ Mln) EV/ EBITDA

EBITDA Margin(%)

Debt/ EBITDA Score

Wpil Ltd. India $104.1 6.8x 11.2 1.83x 4.0

LOT Vacuum Co. Ltd. South Korea $83.2 5.5x 16.4 0.87x 3.6

Maezawa KyusoIndustries Co. Ltd. Japan $172.9 3.2x 12.7 0.60x 3.6

DMW Corp. Japan $82.9 3.4x 11.5 0.11x 3.4

Yoshitake Inc Japan $55.4 5.5x 15.6 0.37x 3.2

Model’s parameters

Can

did

ate

s

5-Highly Attractive

4-Attractive

3-Average

2-Unattractive

1-Very Unattractive


Our Model Found a Potential Target: Wpil Ltd.

COMPANY OVERVIEW

1/2

Forecast 3Y CAGR: 9%

Historical 10Y CAGR: 12.5%


Revenues

COGS

An Impressive Track Record of Growth…

Hydraulics

Water-Jetting

2013 2014 2015 2016 2017 2018 2019E 2020E 2021E0

40

80

120

160

200

12%

14%

16%

18%

20%

22%

▪ Consistent Revenues Growth▪ Solid Gross Margin

Strong Performance

SG&A (€ mln)

Revenues & COGS (€ mln)

2013 2014 2015 2016 2017 2018 2019 E 2020E 2021E200

400

600

800

1000

1200

1400

1600

1800

COMPANY OVERVIEW

10%

15%

20%

25%

30%

2013 2014 2015 2016 2017 2018 2019E 2020E 2021E

2/2

0%

5%

10%

15%

20%

25%

30%

2013 2014 2015 2016 2017 2018 2019E 2020E 2021E

ROE ROIC ROA

2%

3%

4%

5%

6%

2013 2014 2015 2016 2017 2018 2019 E 2020E 2021E0

20

40

60

80

100CAPEX (€mln) CAPEX/Sales


Profitability

EBITDA Margin

Capital Expenditures

…with Strong Persistence in Profitability…

COMPANY OVERVIEW

2/2

CFO covers CAPEX and Dividends

The Lowest Indebted Company compared to Peers Easy access to debt financing in case of acquisitions

15%

18%

21%

24%

27%

30%

33%

0

10

20

30

40

50

60

2013 2014 2015 2016 2017 2018 2019E 2020E 2021E

Interest Coverage Debt Ratio

Strong Ability to Pay Interest Expenses

CFO Breakdown 2019E (€ mln) Debt Ratio and Interest Coverage


…and High Cash Flow Generation

COMPANY OVERVIEW

DCF-Gordon growth Inputs

Forecasts of FCFO until 2028

• WACC 8.73%• Terminal growth rate 4%

DCF Valuation (EUR mln)

PV FCFOPV Terminal value

1,3242,695

Enterprise Value 4,019

Net debt and oth. liab.(.) Non controlling interests

(289)(1)

Implied Market Cap 3,729

N° Shares Outstanding (mln) 107,317

DCF target price 34.75

DCF-Gordon Model± 0.5% WACC

27.42Current price

24 26 28 30 32 34 36 38 40 42 44


DCF Valuation Yields Positive Upside

COMPANY OVERVIEW

31.14 39.15

34.75

Top Competitor EV/EBITDA EV/EBIT P/E

2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E

Eaton 9.6 9.7 9.5 12.5 12.6 12.1 12.7 13 11.9

Parker-Hannifin 9.6 9.6 9.4 11.5 11.7 11.3 13.6 13.5 13.1

Rotork 13.7 13.8 12.7 14.8 14.8 13.7 20 20 18.2

Deere 16.9 17.1 16.7 20.7 21.3 19.6 14.4 14.2 12.7

Alfa Laval 11.8 10.5 10 15.1 13.1 12.4 17.6 15.3 14.4

Flowserves 12.3 11.9 10.6 15.8 14.6 12.7 21.7 20.3 17.4

Gea 8.2 7.3 6.8 9.9 9,3 8.5 14.5 11.9 10.6

Bosch 24.5 20.1 19.3 29.7 23.5 22.5 37.5 30.7 26.5

Graco 15.3 15.3 14.4 16.9 17.1 16.2 22.3 21.9 20.2

Interpump 10.8 10.5 9.9 13.3 12.3 11.2 17.7 17.2 16

Average 12.59 15.02 17.7

29.68 34.22

Multiples Approach± Max-Min Multiples

34.17

Target Price


Interpump is a Good Investment

Multiples target price €32.80

24 26 28 30 32 34 36 38 40 42 44

32.80


27.42Current price

COMPANY OVERVIEW

31.14 39.15

34.75

29.68 34.22

Multiples Approach± Max-Min Multiples

34.17

Target Price


Interpump is a Good Investment

24 26 28 30 32 34 36 38 40 42 44

32.80


27.42Current price

COMPANY OVERVIEW

31.14 39.15

34.75

€32.80€34.75

70%DCF-Gordon

Growth

+

30%Multiples Approach

=

BUY24.62%Upside

€34.17

Target Price

Montecarlo Simulation

Variables Exp. Dev.

Revenues Growth 10% 8%

COGS Incidence 67% 2%

SG&A Incidence 10% 1%

Tax Rate 30% 2%

Change in Wk. Cap. 3% 1%

Depreciation 2.5% 2.5%

WACC 8.73% 0.5%

Tornado Chart

Sensitivity Analysis


Reinforcing Our Recommendation

COMPANY OVERVIEW

27.42Current Price

HOLDSELL BUY

Tornado chart

Most sensitive variables:

• Revenues Growth• COGS Incidence• CAPEX Growth• Tax rate• Oth. Expenses Incidence• Depreciation• Change in Working Capital



Revenues Growth ±4%

COGS Incidence ±4%

CAPEX Growth ±2%

Tax Rate ±3%

Oth. Expenses Incidence ±4%

Depreciation ±2.5%

Change in Working Capital ±1%

24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44


Understanding the Most Sensitive Variables

Tornado Chart

COMPANY OVERVIEW


Tornado Chart


2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00%

6.73% 38.14 40.60 43.71 47.79 53.35 61.42 74.14 97.21 151.90

7.23% 35.17 37.08 39.43 42.41 46.32 51.66 59.39 71.59 93.71

7.73% 32.73 34.24 36.06 38.32 41.18 44.92 50.04 57.46 69.16

8.23% 30.67 31.89 33.33 35.08 37.25 39.99 43.59 48.49 55.61

8.73% 28.93 29.92 31.09 32.47 34.17 36.22 38.86 42.31 47.02

9.23% 27.42 28.24 29.20 30.31 31.64 33.78 35.24 37.77 41.08

9.73% 26.12 26.80 27.59 28.50 29.57 30.85 32.39 34.31 36.73

10.23% 24.97 25.55 26.21 26.96 27.84 28.87 30.09 31.58 33.41

10.73% 23.96 24.45 25.00 25.63 26.36 27.20 28.19 29.36 30.78

Sell < -10%

Buy > +10%

Hold [-10% , +10%]


Sensitivity Analysis Reveals Consistent Upside

Perpetuity Growth Rate

W A

C C

∈

COMPANY OVERVIEW

Macro risks

Strategic risks

Financial risks

Regulatory risks

Global Trade &

GDP

IncreasingCompetition

CommoditiesVolatility

Exchange Rate

Credit exposure

M&A

TaxCompliance

Top MgmtChange

InterestRate

Low Medium High

Low

Me

diu

m

H

igh

L i k e l i h o o d

Imp

ac

t

Risk-Reward Analysis Shows Limited Downside


MAIN INVESTMENT RISKS

Macro Risk

Strategic Risk

Financial Risk

SOURCE OF RISK : Potentially global GDP slowdown could negatively affect IPG Hydraulics’ revenues given the end-marketscyclicality.MITIGATION STRATEGY : Business diversification by geographical areas and application fields.

SOURCE OF RISK : Competitors’ acquisitive strategy could threat IPG ‘s market share

SOURCE OF RISK : Increasing volatility of commodities price could threat the Group’sCOGS and EBIT stability.

MITIGATION STRATEGY : Contracting tecniques to pass on risk to customers & diversification of customers base.

MITIGATION STRATEGY : Significant M&A activities aimed at penetrating newermarkets & expand customer and productbase

Manageable Risks Prove Resilience


Board of Directors

✓ Borsa Italiana’s Corporate Governance Code

✓ Six Indipendent Directors out of nine

✓ Highly effective remuneration policy

✓ Environmental sustainability and social responsibility

✓ Full Compliance with the OECD Best Pratice

Excellent Quality of Interpump Corporate Governance


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35 34.17Target Price

27.42

Pump Up your Investments

feb-17 may-17 sep-17 dec-17 apr-18 aug-18 dec-18 apr-19 dec-19

Buy Interpump!

Diletta Francesco Marco Patrizio Stefania

Q&AThe Black Lily

Documents

Interpump Group BUY2 3 Consistent Growth in Revenues Huge M&A Opportunities Strong Resilience and High Diversification BUY 52-Weeks Target Price €34.17 +24.62% 34.17 27.42 15 17