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03 August 2017

Neutral
Siemens SIEGn.F, SIE GR
Price: 112.92
2018 EPS cut to 7.2, hard for stock to work until
Price Target: 128.00
consensus settles but valuation now more supportive Previous: 130.00

The investment case for Siemens for us has been challenged for some time by European Capital Goods
our view on Power Generation and below consensus view on 2018 earnings. Andreas Willi
AC
The more cautious language of the company in recent months, including with (44-20) 7134-4569
the Q3 results, may rebase investor expectations. While Euro/$ closing in on andreas.p.willi@jpmorgan.com
1.20 is a headwind for an exporter, we note it is easier to buy Siemens here Bloomberg JPMA WILLI <GO>
than when it was when the Euro was the low end of its long term trading Akash Gupta
range. Given negative consensus earnings momentum, portfolio is the key (44-20) 7742-7978
focus where the announced HC IPO vs earlier preference for a reverse merger akash.z.gupta@jpmorgan.com

reduces the near term upside but potentially also risks. The stock has valuation Glen Liddy
(44-20) 7134-4570
support but we need to get comfortable that the negative revision momentum
glen.liddy@jpmorgan.com
is done. Our 2018 EPS falls 6% to 7.2 vs standing consensus of 7.84
Andrew Wilson
(Bloomberg). We roll forward our TP to Dec 2018, now 128 (130 Dec (44-20) 7742-6332
2017). Our 2017 EPS remains largely unchanged as a provision release in andrew.j.wilson@jpmorgan.com
CMPA and a gain on a tax audit offset the lower operating earnings. William Ashman
2018 consensus in focus more cuts to come: 2018 reported EPS (44-20) 7742-5777
william.h.ashman@jpmorgan.com
consensus stood at 8.15 post the Q2 results but had declined to 7.85 ahead
J.P. Morgan Securities plc
of the results. Our prior estimate stood at 7.67. Updated FX and our
lowered SGRE estimates among others take this down to 7.2. For 2017, we For Specialist Sales advice, please
contact
expect 7.54, largely unchanged as operating cuts are offset by lower tax
and the Q3 CMPA gain. Siemens focuses on reported GAAP EPS in its Timm Schulze-Melander, CFA
(44 20) 7134-1331
guidance, refreshing in a world of "operating EPS focused companies but timm.schulze-melander@jpmorgan.com
we adjust for valuation purposes the drag from acquisition PPA which is
Antonia C Millard
about 90c per share for 2018. On adj. EPS, we look for 7.82 in 2017, (44-20) 7134-2652
growing by 4% to 8.13 in 2018. antonia.c.millard@jpmorgan.com

Siemens Gamesa (SGRE): The answers given by Siemens management Price Performance

today, somewhat distancing itself and putting the burden on the SGRE 135

management to deliver, were disappointing to us. This is a Siemens business 125

now mostly run by Siemens managers (top 3 management team of Gamesa 115

had departed within 4 months of closure). The standards that investors 105

expect from Siemens around communication, disclosure and accounting 95

Aug-16 Nov-16 Feb-17 May-17 Aug-17
rigor (capitalization of R&D) should also apply to SGRE, in our view. Two SIEGn.F share price ()
large orders for Q4 should help offset the recent weaker orders but MSCI-Eu (rebased)
YTD 1m 3m 12m
transparency around margin recovery for next year is limited. Abs -3.3% -7.9% -14.9% 16.6%
Rel -7.1% -7.7% -12.2% 3.8%
Siemens (SIEGn.F;SIE GR)
FYE Sep 2015A 2016A 2017E 2017E 2018E 2018E Company Data
(Prev) (Curr) (Prev) (Curr) Price () 112.92
Adj.EPS FY () 5.26 6.79 7.89 7.82 8.61 8.13 Date Of Price 03 Aug 17
Adj.P/E FY 21.5 16.6 14.3 14.4 13.1 13.9 Price Target () 128.00
Headline EPS FY () 8.84 6.74 7.65 7.54 7.67 7.20 Price Target End Date 31-Dec-18
Revenue FY ( mn) 75,636 79,644 85,040 83,448 89,100 86,136 52-week Range () 133.50-95.57
EBIT FY ( mn) 7,276 7,452 8,558 7,885 8,854 7,929 Market Cap ( bn) 92.03
EBIT Margin FY 8.8% 10.2% 10.5% 10.0% 11.3% 10.6% Shares O/S (mn) 815
Earning before tax FY ( 7,218 7,404 9,085 8,509 9,222 8,359
mn)
Net Att. Income FY ( mn) 7,282 5,450 6,195 6,124 6,215 5,870
Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 15 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan 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.

www.jpmorganmarkets.com
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(44-20) 7134-4569 03 August 2017
andreas.p.willi@jpmorgan.com

Power Gen better understood now? We have been structurally bearish

on Power Generation for some time and this view had made it difficult to be
more positive on Siemens despite other attractive assets, like Digital
Factory. The weak order (12m book to bill of 0.8x) and bearish commentary
may have gone some way to enabling investors to better appreciate the
challenges. Siemens today announced the launch of an upgraded H frame
with the target of 65% efficiency, to match what GE has already announced.
It had previously said that its not sure about the value creation potential of
incremental R&D for a new platform given a weak market but at the same
time, just leaving the field to competition is a tough decision to take. The
new turbine is an upgraded H with 80% of the content based on the exiting
platform and hence represents an intermediary step. The company said that
it may not be able to hold the 11% lower end of the margin target band in
the near term (pre restructuring) and expects a meaningful decline in
revenues in Q4, negatively impacting profitability.
Healthcare change to IPO, reducing the near upside, but also downside:
Siemens announced that it will proceed with the listing of Healthcare in H1
calendar 2018 in the form of an IPO. Siemens said in the past that an IPO,
Spin-off or reverse merger are options to achieve its previously stated goal
of a listing. While it did not exclude a merger, the sights are now firmly set
on an IPO which indicates that earlier ambitions on a reverse merger may
have not yielded the desired results. The company said that the business
could either be listed in Germany or the US, but indicated that the US may
be a more suitable location given the depth of the local capital market for
HealthTech stocks. A reverse merger may have resulted in more near term
upside/a catalyst (with the right partner and valuation metrics), while we
always saw a limited near-term impact from an IPO given the shares are
typically offered at some discount while the cash raised, until deployed, may
not get credited at face value with EPS impacted by dilution until the cash is
deployed. Healthcare delivered a solid Q3, inline with our expectations. FX
transaction headwinds may impact margins in 2018, in our view. Siemens
said that it aims to keep a majority of HC and continue to consolidate the
business. It did not quantify the size of the offering or the split of proceeds
between HC and the group.
Digital Factory with strong results: Organic sales growth at 11% beat our
estimate of 8% growth, driven by China where software sales grew >20%.
Factory automation and machine tools grew >40% in China while
automotive remained strong at a high level. The results easily beat
competitors with Dassault Systemes showing 6% like for like sales growth,
Schneider Industry reporting 6% (includes later cycle Process Automation)
and Rockwell at 8% growth. Software licenses grew 20% vs Dassault at 8%.
Excluding Mentor integration costs, restructuring and MindSphere (we are
not arguing that these should be stripped out in general but like to look at the
underlying performance) the business achieved a 21% margin with a 33%
drop-through, moderating from recent trends. Growth of >40% in China in
the product business indicates market share gains but probably also a run
rate that is not sustainable with comps getting tougher now in calendar H2.
Vision 2020+ in focus post CEO contract extension: As expected, CEO
Joe Kaeser's contract got extended to Jan 2021. With most of the measures
of Vision 2020 well on track, we expect the company to present over the
2
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next 6-9 month an updated plan for the remaining years of the CEO's tenure.
We would expect this to include measures to make the organization more
flexible, faster and customer focused with a further opportunity to reduce
complexity and support function costs. We expect a more flexible approach
with less of a one size fits all set up on structure and processes given the
diverse nature of its business. Portfolio also remains a focus, given the
planned listing of the Healthcare IPO and the discussions about rail
consolidation. Having made progress in turning around some of the
underperformers, we also look for an update on their future given that some
of them, while having improved margins, still lack the characteristics we
would like to see in a Siemens asset (leading market position, healthy
industry profit pool, sustainable long term competitive advantage).
2018E EPS cut by 6% to 7.2: The 45c reduction in EPS breaks down into
25c for Siemens-Gamesa (based on our earlier published forecasts), around
20c for FX (translation and transaction) with other changes mostly offset
each other (upside in DF and BT, downside in PG, EM and PD).
Target price of 128: At this time of the year, we roll forward our target
price which now stands at 128 set for Dec 2018 vs 130 from Dec 2017
before. The additional year of cash flow/earnings growth and lower pension
deficit is more than offset by the lower valuation of the stake in Gamesa (3
per share), the lower earnings (mostly FX related) and weaker cash flow.
Our target price is based on an SOP and implies ~12x cal. 2018E EV/EBIT
and 15x adj. P/E. We apply a 10% discount to the SOP to account for the
conglomerate nature but also the weaker cash conversion vs peers.
Relative stock preference: At the current share price, Siemens trades on
11x EV/EBIT and 14x adj. P/E 2018E which appears attractive vs ABB on
12.8x/17.7x and Schneider at 11.5x and 15x. We continue to prefer
Schneider over Siemens and ABB, which had delivered among the best
Q2/H1 results in the sector and in our view has a stronger set of assets with
less exposure to structurally challenged end-markets in terms of demand or
pricing. We also continue to prefer Philips to Siemens with Philips trading at
11.5x 2018 EV/EBIT vs our valuation of Siemens Healthcare in our SOP of
14x on 2019E.

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(44-20) 7134-4569 03 August 2017
andreas.p.willi@jpmorgan.com

Outlook and change in earnings

Siemens reiterated the EPS guidance for the year (2017) at 7.2-7.7, consensus of
7.56 and JPM of 7.54. If we update our Siemens model for the new published
Siemens-Gamesa estimates our EPS would be 7.42 but this is more than offset by
the Q3 gains and lower tax rate adding 35c. Siemens continues to expect an
Industrial Profit margin of 11-12%, which compares to consensus at 11.8% and JPM
at 11.9% (excluding the impact from Siemens Gamesa warning).

Table 1: Overview of EPS changes

million, year-end September 30
New Old Change
2017E 2018E 2019E 2017E 2018E 2017E 2018E
Orders 84,785 87,588 89,059 86,313 90,213 -2% -3%
Like for like order growth -3% 3% 2% -4% 3%
Sales 83,448 86,136 88,287 85,040 89,100 -2% -3%
Like for like sales growth 3% 3% 3% 3% 3%
Industrial profits 9,796 10,192 11,046 10,358 11,115 -5% -8%
Industrial margin 11.6% 11.6% 12.3% 11.9% 12.2%
Restructuring charges (359) (300) (280) (349) (360) 3% -17%
Project charges 0 0 0 0 0 NM NM
Gains and other (54) (300) 0 (31) (236) NM NM
Underlying industrial margin 10,149 10,755 11,279 10,670 11,651 -5% -8%
Underlying industrial margin 12.0% 12.3% 12.6% 12.3% 12.8%
Financial Services (SFS) 640 600 612 615 600 4% 0%
Centrally managed portfolio activities 500 0 0 400 (50) 25% -100%
Siemens Real Estate (SRE) 150 150 150 185 150 -19% 0%
Corporate items and pensions (1,225) (1,100) (1,133) (1,100) (1,050) 11% 5%
PPA (1,017) (1,163) (1,103) (973) (1,173) 5% -1%
Treasury & other (335) (320) (310) (400) (370) -16% -14%
PBT 8,509 8,359 9,262 9,085 9,222 -6% -9%
Income tax expenses (2,317) (2,257) (2,501) (2,607) (2,490) -11% -9%
Tax rate 27% 27% 27% 29% 27% -5% 0%
Minorities (90) (231) (314) (320) (517) -72% -55%
Net attributable income 6,139 5,870 6,447 6,195 6,215 -1% -6%
Free cash flow 5,309 6,381 6,492 6,482 6,816 -18% -6%
EPS 7.54 7.20 7.91 7.65 7.67 -1% -6%
Adj. EPS 7.82 8.13 8.78 7.89 8.61 -1% -6%
Like for like sales growth
Power and Gas -3% -5% -2% -2% -4% -150 bp -100 bp
Wind Power and Renewables 5% 3% 4% 6% 3% -100 bp 0 bp
Energy Management 5% 5% 3% 5% 4% -50 bp 150 bp
Building Technologies 7% 6% 4% 8% 6% -50 bp 0 bp
Mobility 3% 4% 3% 3% 4% 50 bp 0 bp
Digital Factory 9% 5% 2% 7% 5% 115 bp 0 bp
Process Industries and Drive -2% 2% 5% -1% 2% -50 bp 0 bp
Healthineers 3% 3% 4% 3% 3% 0 bp 0 bp
Reported PBT margin
Power and Gas 10.4% 9.7% 9.8% 10.9% 10.8% -54 bp -112 bp
Wind Power and Renewables 5.7% 6.8% 8.4% 8.9% 10.0% -317 bp -323 bp
Energy Management 8.0% 8.8% 8.8% 8.7% 9.3% -76 bp -50 bp
Building Technologies 12.2% 11.3% 11.4% 12.0% 11.0% 24 bp 25 bp
Mobility 9.1% 8.9% 8.3% 9.0% 8.7% 7 bp 21 bp
Digital Factory 19.0% 19.2% 21.3% 18.4% 18.4% 57 bp 80 bp
Process Industries and Drive 5.7% 7.0% 8.1% 6.0% 7.4% -29 bp -40 bp
Healthineers 18.3% 18.2% 18.9% 18.2% 18.7% 3 bp -50 bp
Profit margin ex restructuring
Power and Gas 10.8% 10.2% 10.0% 11.1% 11.0% -35 bp -80 bp
Wind Power and Renewables 7.1% 8.0% 8.7% 9.9% 10.9% -274 bp -290 bp
Energy Management 8.1% 9.0% 9.0% 8.9% 9.5% -80 bp -50 bp
Building Technologies 11.0% 11.5% 11.8% 10.7% 11.3% 30 bp 25 bp
Mobility 9.0% 9.0% 8.5% 9.0% 8.8% 0 bp 20 bp
Digital Factory 20.6% 21.2% 21.5% 20.0% 20.5% 67 bp 70 bp
Process Industries and Drive 6.1% 7.5% 8.5% 6.5% 8.0% -40 bp -50 bp
Healthineers 18.4% 18.3% 19.0% 18.4% 18.9% 0 bp -57 bp
Source: Company reports and J.P. Morgan estimates.

4
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(44-20) 7134-4569 03 August 2017
andreas.p.willi@jpmorgan.com

Valuation
At this time of the year, we roll forward our target price which now stands at 128
set for Dec 2018 vs 130 from Dec 2017 before. The additional year of cash
flow/earnings growth and lower pension deficit is more than offset by the lower
valuation of the stake in Gamesa (3 per share), the lower earnings (mostly FX
related) and weaker cash flow. The target price is based on an SOP and implies ~12x
cal. 2018E EV/EBIT and 15x adj. P/E. We apply a 10% discount to the SOP to
account for the conglomerate nature but also the weaker cash conversion vs peers. At
the current share price, Siemens trades on 11x EV/EBIT and 14x adj. P/E 2018E
which appears attractive vs ABB on 12.8x/17.7x and Schneider at 11.5x and 15x. We
continue to prefer Schneider, which delivered among the best Q2/H1 results in the
sector and in our view has a stronger set of assets with less exposure to structurally
challenged end-markets in terms of demand or pricing.

Table 2: Siemens SOP valuation on 2018 estimates

million-year-end September 30
Underlyin
Value of operations Sales g OP Margin EV/Sales EV/EBIT EV per share Comment
Power and Gas 14,246 1,425 10.0% 0.95 9.5 13,534 17 Structural decline
Share price, multiple would be 1x higher ex R&D
Wind Power and Renewables 11,224 979 8.7% 0.65 7.5 7,337 9 cap
Energy Management 13,030 1,173 9.0% 0.95 10.5 12,313 15 10% discount to sector average
Building Technologies 6,906 815 11.8% 1.36 11.5 9,371 12 Sector multiple
Mobility 8,428 716 8.5% 0.72 8.5 6,089 8 Alstom on 7x EBIT on weaker mix
Digital Factory 12,634 2,716 21.5% 3.02 14.0 38,101 47
- Industrial software (excluding investments) 3,486 558 16.0% 2.88 18.0 10,040 DS at 17.5x E on higher margins/lower cyclicality
- Industrial Automation 9,148 2,158 23.6% 3.07 13.0 28,060 Premium to sector
Process Industries and Drive 9,220 784 8.5% 0.94 11.0 8,620 11 Recovery potential but low quality/low margin
Healthineers 14,046 2,671 19.0% 2.66 14.0 37,397 46 Philips trades at 11x 2019
Normalized restructuring + charges 0 (400) NM NM 11.8 (4,720) (6)
Total Sectors 102,367 10,879 10.6% 1.25 11.8 128,042 158
Equity investments and other Share prices
- Osram stake 17.5% NM NM NM NM NM 1,256 2 69
- Metals JV 3,000 0 0.0% 0.20 NM 300 0
- Stake in Atos Origin (12%) NA NA NA NA NA 1,625 2 129
Corporate items (excl pension P&L as in
deficit) NM (633) NM NM 11.8 (7,469) (9)
Eliminations (2,434) (310) NM NM 11.8 (3,658) (5)
Book
Financial assets/ liabilities value PBT ROE P/Book P/E EV per share
Siemens Financial Services 2,700 612 15.9% 1.5 9.5 4,050 5
Net debt group NM NM NM NM NM(15,052) (18)
Debt to SFS third party 22,100 27
Industrial cash / (net debt) 7,048 9
Funded status pensions and OPEP (9,800) (12)
Nuclear liability (1,250) (2)
Minorities (excluding Gamesa) (2,250) (3)
Gamesa minorities (3,631) (4)
Equity value pre discount (Sep 2018) 114,262 139
Conglomerate discount 10% (11,426) (14)
Equity value (Dec year end 2018) 104,893 128
Source: J.P. Morgan estimates.

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(44-20) 7134-4569 03 August 2017
andreas.p.willi@jpmorgan.com

Summary of Q3 results
We see the Q3 of Siemens as a mixed quarter overall. Headline numbers missed,
mainly driven by the already reported poor results of Siemens-Gamesa (SGRE).
Excluding the impact of SGRE, orders and sales missed by 1% and Industrial Profits
missed by 2-3% vs consensus. Like-for-like orders were down 9% but the company
said that excluding SGRE and swings in large orders, base orders rose significantly.
EPS beat due to a CMPA gain and a lower tax rate, which more than offset the
SGRE miss. On an underlying basis vs our estimates, excluding charges, gains and
MindSphere investments and excluding Gamesa, Q3 was a touch above our estimates
operationally. Operating free cash flow (post interest and tax) at 0.7bn missed our
estimate of 1.9bn with the outflow at SGRE 0.7bn explaining the majority of the
miss. Digital Factory had an outstanding performance (underlying). Power & Gas
orders missed consensus by 25% with a 4q rolling book to bill of 0.8x, indicative of
material revenue pressure to come with orders weak in gas turbines and
compression/Dresser Rand. Healthcare results were in-line with 3% order growth.
The full year guidance was maintained in all aspects and the company expects a
strong order intake in Q4.

Table 3: Q3 EPS bridge to consensus

mn, except per share
Reported Consensus Difference at EPS level
Underlying operations (ex restructuring) * 2,344 2,491 -0.18
Restructuring (94) (116) 0.03
Financial services 161 146 0.02
Corporate, treasury, real estate, others (341) (308) -0.04
Centrally managed portfolio activities 120 (21) 0.17
PPA (339) (306) -0.04
Tax (373) (522) 0.18
Tax rate 20% 28%
Minorities and other (51) -86 0.04
EPS 1.75 1.58 0.17
Source: Company reports. Consensus is company sourced. Includes MindShere and integration costs.

Q3 orders and business commentary

Overall orders at 19.8bn were 8% short of consensus of 21.5bn and JPM at
21.6bn. Excluding Siemens Gamesa Renewable Energy, which reported weak
results last week, orders were 1% below consensus and JPMe. On a divisional basis,
the downside vs consensus was driven by Power and Gas (-25%), Energy
Management (-7%), offset by beat in Mobility (+35%) and Process Industries &
Drive (4%) where the company booked a large systems order. Overall like for like
orders were down 9% vs our estimate of -2% with the prior year representing a tough
comparable in Power Generation. Excluding SGRE like for like order growth was -
1%. Healthcare orders at +3% organic were slightly better than expected and show a
good performance after good orders at Philips DT (+7%) and GE +4%.

Q3 results
Sales at 21.4bn were 3% short of JPM and 2% below consensus with organic
revenue growth of +3% compared to our estimate of +1%. The Industrial Profit at
2,250mn was 8% short of JPM and 5% below consensus. Excluding Siemens
Gamesa, which reported weak results last week, Industrial profit was 4%/3% below
JPMe/consensus. The quarter included 157mn of charges, MindSphere investments

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andreas.p.willi@jpmorgan.com

and integration costs (19c on EPS) and 94mn of restructuring charges (consensus
116mn). On an underlying basis, industrial profits were 2,501mn or 3% short of
JPM (or 2% ahead ex SGRE). Below the line items a 34c tailwind to EPS compared
to consensus, mainly driven by gains in CMPA (17c) and lower taxes (18c).
Operating free cash flow (post interest expense, which Siemens excludes from
operating cash flow despite including interest income) was +705mn. This compares
to our estimate of 1,846mn, and reflects the weak results of SGRE which had a
0.7bn outflow on Siemens definition. This brings 9m operating free cash flow to
1.73bn vs 1.27bn last year.

Table 4: Siemens - summary of Q3 group results

million, FY ends Sept 30
Actual JPME Difference Consensus Difference Prior year Change
Orders 19,824 21,601 -8% 21,524 -8% 21,060 -6%
Like for like order growth -9% -2% 7%
Sales 21,413 22,063 -3% 21,751 -2% 19,804 8%
Like for like sales growth 3% 1% 7%
Industrial sales 21,703 22,479 22,177 -2% 20,263 7%
Industrial profits 2,250 2,458 -8% 2,375 -5% 2,192 3%
Industrial margin 10.4% 10.9% 10.7% 10.8%
Restructuring charges (94) (118) (116) (68) NM
Project charges 0 0 0 0 NM
Gains and other (157) (120) NA (6) NM
Underlying profit (ex charges, gains, Mindsphere) 2,501 2,575 -3% 2,249 11%
Underlying industrial margin 11.5% 11.5% 11.1%

Financial Services (SFS) 161 140 15% 146 10% 139 16%
Centrally managed portfolio activities 120 30 NM (21) -671% (107) -212%
Siemens Real Estate (SRE) 6 40 -85% 46 -87% 107 -94%
Corporate items and pensions (325) (220) 48% (252) 29% (169) 92%
PPA (339) (320) 6% (306) 11% (178) 90%
Treasury & other (22) (90) (102) -78% (130) -83%
PBT 1,852 2,037 -9% 1,885 -2% 1,853 0%
Income tax expenses (373) (550) -32% (516) -28%
Tax rate 20% 27% 28%
Income from continuing operations 1,479 1,487 -1% 1,363 9% 1,337 11%
Disc ops (15) 0 NM 35 NM
Net income 1,464 1,487 -2% 1,367 7% 1,372 7%
Minorities (51) (129) -60% (43) 19%
Net attributable income 1,413 1,359 4% 1,281 10% 1,329 6%
Source: Company reports and J.P. Morgan estimates. Consensus from Siemens

Divisional highlights (see also table below for details)

A key focus was on Digital Factory. Here we focus on organic sales growth rather
than orders, which can be influenced by the timing of booking of long term software
contracts. Organic sales growth was 11% which compares to our estimate of 8%. The
underlying operating margin (before investments and integration costs) of 21.0%
compared to our estimate of 19.9%. These are very strong results vs what peers
reported. Power & Gas orders disappointed, down -41% with organic growth were
also below our model. Despite the weak topline, margins ex restructuring were in-
line with JPMe. In Healthcare, orders were up 3% vs our estimate of 2%. Organic
sales growth at 4% was also slightly lower while the margin at 17.5% was in-line.
Energy Management margins declined by 140bps y/y despite 5% organic growth
with the company highlighting a negative mix

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andreas.p.willi@jpmorgan.com

Table 5: Siemens - Summary of Q3 segment results

million, FY ends Sept 30
Like for like sales growth Actual JPME Difference Consensus Difference Prior year Change
Power and Gas -11% -8% -300 bp 22%
Wind Power and Renewables 3% -3% 600 bp 30%
Energy Management 5% 5% 0 bp 2%
Building Technologies 4% 7% -300 bp 5%
Mobility 15% 8% 700 bp 2%
Digital Factory 11% 8% 300 bp 2%
Process Industries and Drive -3% -2% -100 bp -3%
Healthineers 4% 5% -50 bp 2%

Reported PBT margin

Power and Gas 9.7% 10.0% -25 bp 10.2% -51 bp 11.1% -141 bp
Wind Power and Renewables 6.1% 8.9% -278 bp 7.8% -172 bp 8.3% -220 bp
Energy Management 6.8% 9.0% -221 bp 8.3% -149 bp 8.3% -149 bp
Building Technologies 10.3% 9.8% 45 bp 9.6% 66 bp 9.1% 119 bp
Mobility 8.7% 8.3% 35 bp 8.8% -6 bp 8.8% -10 bp
Digital Factory 16.4% 15.4% 96 bp 15.2% 117 bp 15.7% 72 bp
Process Industries and Drive 4.7% 5.8% -107 bp 5.5% -82 bp 4.5% 21 bp
Healthineers 17.2% 17.1% 6 bp 17.1% 14 bp 16.6% 64 bp

Profit margin ex restructuring

Power and Gas 10.7% 10.6% 13 bp 10.8% -5 bp 10.0% 66 bp
Wind Power and Renewables 6.2% 10.1% -394 bp 8.5% -233 bp 8.0% -181 bp
Energy Management 7.1% 9.3% -224 bp 8.6% -152 bp 8.5% -143 bp
Building Technologies 10.5% 10.0% 50 bp 9.8% 67 bp 9.3% 119 bp
Mobility 9.1% 8.9% 24 bp 9.1% 2 bp 8.8% 30 bp
Digital Factory 17.4% 15.9% 146 bp 16.2% 116 bp 17.7% -35 bp
Process Industries and Drive 5.1% 6.0% -90 bp 6.1% -99 bp 6.2% -113 bp
Healthineers 17.5% 17.4% 7 bp 17.4% 11 bp 16.8% 72 bp
Source: Company reports and J.P. Morgan estimates. Consensus from Siemens

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(44-20) 7134-4569 03 August 2017
andreas.p.willi@jpmorgan.com

Summary financials
Table 6: Siemens - summary income statement
million, year-end September 30
2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E
Orders 81,163 85,582 76,913 82,345 78,350 82,338 86,478 84,785 87,588 89,059
Growth 3% 5% -10% 7% -5% 5% 5% -2% 3% 2%
Net sales 75,978 73,515 78,296 75,874 71,920 75,636 79,644 83,448 86,136 88,287
Growth -0.9% -3.2% 6.5% -3.1% -5.2% 5.2% 5.3% 4.8% 3.2% 2.5%

Gross profit 21,647 22,127 22,204 20,821 20,755 21,847 23,818 25,425 25,946 28,175
Gross margin 28.5% 30.1% 28.4% 27.4% 28.9% 28.9% 29.9% 30.5% 30.1% 31.9%

R&D expense (3,846) (3,925) (4,238) (4,291) (4,065) (4,483) (4,733) (5,174) (5,340) (5,474)
% of sales 5.1% 5.3% 5.4% 5.7% 5.7% 5.9% 5.9% 6.2% 6.2% 6.2%
SG&A expense (11,130) (10,297) (11,162) (11,286) (10,424) (11,409) (11,669) (12,267) (12,576) (12,890)
% of sales 14.6% 14.0% 14.3% 14.9% 14.5% 15.1% 14.7% 14.7% 14.6% 14.6%
Other operating income/(expense) (755) 53 516 76 461 476 (99) 164 0 0
Income from investments in other companies (40) 147 (266) 510 582 (389) 134 100 100 100
EBIT 5,877 8,105 6,778 5,838 7,310 7,276 7,452 7,885 7,929 9,712
EBIT margin 7.7% 11.0% 8.7% 7.7% 10.2% 9.6% 9.4% 11.0% 11.0% 11.0%
Underlying operating margin ex charges 13.3% 13.1% 11.3% 11.6% 11.3% 10.8% 11.1% 12.0% 12.3% 12.6%
Interest (expense) income 271 491 506 159 294 442 325 450 430 460
Pre-tax income 5,812 9,242 7,279 5,843 7,427 7,218 7,404 8,509 8,359 9,262

Income taxes (1,699) (2,231) (2,094) (1,630) (2,028) (1,869) (2,008) (2,317) (2,257) (2,501)
Effective tax rate 29.2% 24.1% 28.8% 27.9% 27.3% 25.9% 27.1% 27.2% 27.0% 27.0%
Minority interest (169) (176) (132) (126) (134) (98) (134) (90) (231) (314)
Net income from continued ops 3,944 6,835 5,053 4,087 5,265 5,251 5,262 6,102 5,870 6,447
Change 75.1% 73.3% -26.1% -19.1% 28.8% -0.3% 0.2% 16.0% -3.8% 9.8%
Source: Company reports and J.P. Morgan estimates.

Table 7: Siemens - summary balance sheet

million, year-end September 30
2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E
Cash and cash equivalents 10,159 14,108 12,468 10,891 9,190 8,013 9,957 10,604 11,996 14,637 12,677
Marketable securities 170 246 477 524 601 925 1,175 1,293 1,271 1,271 1,271
Receivables 14,449 14,971 14,847 15,220 14,853 14,526 15,982 16,287 16,690 17,227 17,657
Inventory 14,129 14,950 15,143 15,679 15,560 15,100 17,253 18,160 18,359 18,519 18,982
Deferred income taxes (st) 612 790 798 836 794 577 644 790 941 941 941
Other current assets 4,610 4,583 9,080 8,978 5,940 8,935 6,430 8,194 9,266 9,451 9,640
Long-term investments 4,679 4,724 4,966 4,436 3,022 2,127 2,947 3,012 3,193 3,243 3,293
Intangibles 20,847 20,732 20,150 21,664 22,940 22,343 31,243 31,901 36,129 35,008 33,949
Net fixed assets 11,323 11,748 10,477 10,763 9,815 9,638 10,210 10,157 11,017 11,168 11,344
Deferred income taxes (lt) 3,291 3,940 3,206 3,777 3,234 3,334 2,591 3,431 1,992 1,992 1,992
Other long-term assets 10,657 12,035 12,631 15,512 15,989 19,361 21,915 21,889 21,618 21,618 21,618
Total assets 94,926 102,827 104,243 108,282 101,936 104,879 120,348 125,718 132,471 135,076 133,364
Short-term debt 698 2,416 3,660 3,826 1,944 1,620 2,979 6,206 6,863 5,000 5,000
Accounts payable 7,593 7,880 7,677 8,036 7,599 7,594 7,774 8,048 8,762 9,044 9,270
Accrued liabilities 4,191 5,138 5,168 4,750 4,485 4,354 4,489 4,166 4,076 4,076 4,076
Deferred income taxes 1,936 1,816 2,032 2,204 2,151 1,762 1,828 2,085 2,431 2,431 2,431
Other current liabilities 22,587 23,341 25,023 23,820 21,689 21,268 22,492 22,410 22,015 22,675 23,129
Long-term debt 18,940 17,497 14,280 16,880 18,509 19,326 26,682 24,761 27,520 29,000 24,000
Pension plans 5,938 8,464 7,307 9,926 9,265 9,324 9,811 13,695 10,823 10,123 9,423
Deferred income taxes 776 577 595 494 504 552 609 829 1,205 1,205 1,205
Other accruals and provisions 4,980 6,602 6,345 7,043 7,165 7,565 8,628 8,700 8,220 8,220 8,220
Minority interest 641 750 626 569 514 560 581 605 495 427 426
Equity 26,646 28,346 31,530 30,733 28,111 30,954 34,474 34,211 40,061 42,875 46,184
Total liabilities and equity 94,926 102,827 104,243 108,282 101,936 104,879 120,348 125,716 132,471 135,076 133,364
Source: Company reports and J.P. Morgan estimates.

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Table 8: Siemens - summary cash flow statement

million, year-end September 30
2010 2011 2012 2013 2014 2015 2016 2017E 2018EE 2019E
Net income 3,944 6,835 5,053 4,087 5,265 5,251 5,262 6,102 5,870 6,447
Minority interest 169 176 132 126 134 98 134 90 231 314
Depreciation and amortization incl PPA 4,118 2,638 2,744 2,888 2,411 2,549 2,415 3,044 3,336 3,302
Deferred taxes 1,688 2,231 2,094 1,630 200 (436) 288 226 0 0
Gain on disposals of assets (378) (1,229) (146) (618) (527) (1,553) (220) (244) 0 0
Losses/(gains) on sale of marketable securities 13 0 0 0 (526) 0 0 0 0 0
(Income)/loss from equity investees, net of dividends 597 21 373 0 333 258 48 81 (50) (50)
Other, including interest paid and received (2,261) (2,041) (1,433) (1,097) (345) 786 (235) (700) (700) (700)
Operating cash flow 7,890 8,631 8,817 7,016 6,945 6,953 7,692 8,598 8,688 9,313
Total change in other assets and liabilities 1,459 (1,050) (2,324) (152) (462) (937) (1,241) (863) 59 (402)

Capex incl. Intangibles (2,336) (2,171) (2,206) (1,869) (1,831) (1,897) (2,136) (2,426) (2,366) (2,418)
Free cash flow post tax and interest 7,013 5,410 4,287 4,995 4,652 4,119 4,315 5,309 6,381 6,492

Acquisitions (485) (300) (1,314) (2,801) (31) (8,254) (922) (4,322) 0 0

Increase in receivables from financing activity (192) (1,770) (2,269) (2,332) (3,114) (2,000) (1,710) 146 0 0
Proceeds from disposals 726 2,285 846 2,463 947 7,086 1,503 947 0 0

Capital issuance/(share repurchase) 147 (764) (1,424) (1,409) (1,066) (2,700) (463) 218 0 0
Dividends (1,388) (2,356) (2,629) (2,528) (2,533) (2,728) (2,827) (2,914) (3,056) (3,138)
Dividends paid to minorities (199) (158) (155) (152) (125) (145) (236) (200) (300) (315)
Foreign exchange effect on cash 167 5 68 (108) 214 83 (98) (270) 0 0
Balancing item (inc. currency, accounting changes) (1,479) (899) (1,472) 847 45 (1,414) 352 (392) 0 0
Cash inflow/(outflow) 3,750 564 (4,296) (1,371) (1,346) (6,521) (541) (2,046) 3,024 3,039

Net debt/(cash) - beginning 9,309 5,559 4,995 9,291 10,662 12,008 18,529 19,070 21,116 18,092
Net debt/(cash) - ending 5,559 4,995 9,291 10,662 12,008 18,529 19,070 21,116 18,092 15,052
Cash inflow/(outflow) 3,750 564 (2,957) (1,371) (1,346) (6,521) (541) (2,046) 3,024 3,039
Source: Company reports and J.P. Morgan estimates.

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andreas.p.willi@jpmorgan.com

Table 9: Siemens - summary of divisional financials

million, year-end September 30
2013 2014 2015 2016 2017E 2018E 2019E
Sales
Power and Gas 14,016 12,720 13,194 16,472 15,830 14,537 14,246
Wind Power and Renewables 5,382 5,567 5,660 5,976 8,058 10,770 11,224
Energy Management 11,672 10,708 11,922 11,941 12,404 12,650 13,030
Building Technologies 5,754 5,569 5,999 6,156 6,472 6,672 6,906
Mobility 5,823 7,249 7,508 7,824 8,001 8,182 8,428
Digital Factory 8,950 9,201 9,956 10,171 11,503 12,386 12,634
Process Industries and Drive 9,834 9,645 9,894 9,038 8,842 8,781 9,220
Healthcare 11,983 11,736 12,931 13,535 13,687 13,563 14,046
Sales from Industrial Ops 73,414 72,396 77,063 81,113 84,798 87,541 89,733
Profits
Power and Gas 2,129 2,215 1,426 1,873 1,639 1,408 1,390
Wind Power and Renewables 7 7 159 463 461 727 940
Energy Management 254 (86) 570 894 987 1,116 1,150
Building Technologies 377 511 553 578 791 752 785
Mobility (232) 532 588 677 729 727 697
Digital Factory 1,320 1,681 1,738 1,738 2,185 2,381 2,691
Process Industries and Drive 510 773 536 244 504 619 744
Healthcare 2,123 2,072 2,184 2,327 2,500 2,462 2,649
Elimination 0 (2) 0 0 0 0 0
Profit from Industrial ops 6,488 7,703 7,754 8,794 9,796 10,192 11,046
Financial Services (SFS) 410 467 601 653 640 600 612
Centrally managed portfolio activities 119 281 714 (215) 500 0 0
Siemens Real Estate (SRE) 170 242 205 132 150 150 150
Corporate items and pensions (841) (839) (1,149) (888) (1,225) (1,100) (1,133)
Amortization of intangible assets acquired in business combinations (554) (497) (542) (674) (1,017) (1,163) (1,103)
Eliminations, Corporate Treasury and other reconciling items (70) (48) (366) (349) (335) (320) (310)
Income from continuing operations before income taxes 5,722 7,306 7,218 7,404 8,509 8,359 9,262
Power and Gas 15.2% 17.4% 10.8% 11.4% 10.4% 9.7% 9.8%
Wind Power and Renewables 0.1% 0.1% 2.8% 7.7% 5.7% 6.8% 8.4%
Energy Management 2.2% -0.8% 4.8% 7.5% 8.0% 8.8% 8.8%
Building Technologies 6.6% 9.2% 9.2% 9.4% 12.2% 11.3% 11.4%
Mobility -4.0% 7.3% 7.8% 8.7% 9.1% 8.9% 8.3%
Digital Factory 14.7% 18.3% 17.5% 17.1% 19.0% 19.2% 21.3%
Process Industries and Drive 5.2% 8.0% 5.4% 2.7% 5.7% 7.0% 8.1%
Healthcare 17.7% 17.7% 16.9% 17.2% 18.3% 18.2% 18.9%
Profit from Industrial ops 8.8% 10.6% 10.1% 10.8% 11.6% 11.6% 12.3%
Underlying operating margin
Power and Gas 16.5% 16.1% 12.3% 10.3% 10.8% 10.2% 10.0%
Wind Power and Renewables 5.2% 4.3% 2.6% 7.5% 7.1% 8.0% 8.7%
Energy Management 5.7% 4.6% 5.5% 7.9% 8.1% 9.0% 9.0%
Building Technologies 8.3% 9.2% 9.6% 9.7% 11.0% 11.5% 11.8%
Mobility 4.7% 6.7% 8.7% 8.7% 9.0% 9.0% 8.5%
Digital Factory 16.8% 18.2% 18.0% 17.3% 20.6% 21.2% 21.5%
Process Industries and Drive 7.8% 8.0% 7.1% 5.5% 6.1% 7.5% 8.5%
Healthcare 18.8% 16.9% 16.8% 17.5% 18.4% 18.3% 19.0%
Underlying operating margin 11.6% 11.3% 10.8% 11.1% 12.0% 12.3% 12.6%
Source: Company reports and J.P. Morgan estimates.

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andreas.p.willi@jpmorgan.com

Investment Thesis, Valuation and Risks

Siemens (Neutral; Price Target: 128.00)
Investment Thesis
We see the stock as well supported as the performance over recent periods was
driven by earnings upside and not a relative re-rating. Our 130 price target does not
indicate material upside but is more attractive than the low single-digit downside we
see in our coverage on average. We believe that the stock has downside support from
the dividend and reasonable relative valuation. Upside could come from further
portfolio moves, but this could be offset by the M&A risks, particularly in
Healthcare.

Valuation
Our SOTP-based Dec 2018 target price is 128. Overall, we value Siemens at ~12x
EV/EBIT for the operations, which results in a target price of 130 per share post a
10% conglomerate discount. We assume normalized restructuring and project
charges of 400mn per year or 50bp of sales.

Risks to Rating and Price Target

What could drive underperformance cycle, execution
Given its high fixed-cost structure and slow reaction to changes in the environment,
we believe Siemens has more than average earnings risk in a cycle slowdown. The
company may encounter additional project execution charges. It also has some of the
highest exposure to a strong euro, particularly against a weak yen. Its Power
Generation business is faced with structural headwinds of its utility customers.

What could drive outperformance? Siemens may announce further portfolio

measures that could drive the stock. It would also benefit from a further fall in the euro.

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andreas.p.willi@jpmorgan.com

Siemens: Summary of Financials

Income Statement FY15A FY16A FY17E FY18E FY19E Cash Flow Statement FY15A FY16A FY17E FY18E FY19E
Revenue 75,636 79,644 83,448 86,136 88,287 Cash flow from operating activities 6,949 8,041 8,598 8,688 9,313
COGS (53,789) (55,826) (58,023) (60,190) (60,112) o/w Depreciation & amortization 2,549 2,764 3,044 3,336 3,302
Gross profit 21,847 23,818 25,425 25,946 28,175 o/w Changes in working capital (937) (1,241) (863) 59 (402)
SG&A (11,409) (11,669) (12,267) (12,576) (12,890)
Adj. EBITDA 8,876 9,124 9,911 10,102 11,910 Cash flow from investing activities 3,189 (2,343) (1,333) (2,366) (2,418)
D&A (1,600) (1,672) (2,027) (2,173) (2,199) o/w Capital expenditure (1,897) (2,136) (2,426) (2,366) (2,418)
Adj. EBIT 6,646 8,126 8,321 9,092 10,815 as % of sales 2.5% 2.7% 2.9% 2.7% 2.7%
Net Interest (58) (48) 624 430 460
Adj. PBT 7,218 7,404 8,509 8,359 9,262 Cash flow from financing activities (6,983) (3,523) (3,288) (3,356) (3,453)
Tax (1,869) (2,008) (2,317) (2,257) (2,501) o/w Dividends paid (2,873) (3,063) (3,114) (3,356) (3,453)
Minority Interest (98) (134) (90) (231) (314) o/w Shares issued/(repurchased) (2,700) (463) 218 0 0
Adj. Net Income 4,377 5,564 6,441 6,719 7,252 o/w Net debt issued/(repaid) - - - - -
.
Reported EPS 8.74 6.65 7.44 7.11 7.81 Net change in cash 3,238 2,077 3,707 2,965 3,442
Adj. EPS 5.26 6.79 7.82 8.13 8.78
Free cash flow to firm 5,052 5,905 6,172 6,322 6,894
DPS 3.50 3.60 3.75 3.85 3.95 y/y Growth (1.6%) 16.9% 4.5% 2.4% 9.1%
Payout ratio 40.0% 54.1% 50.4% 54.2% 50.6%
Shares outstanding 809 809 815 815 815
.
Balance Sheet FY15A FY16A FY17E FY18E FY19E Ratio Analysis FY15A FY16A FY17E FY18E FY19E
Cash and cash equivalents 9,957 10,604 11,996 14,637 12,677 Gross margin 28.9% 29.9% 30.5% 30.1% 31.9%
Accounts receivable 15,982 16,287 16,690 17,227 17,657 EBITDA margin 11.7% 11.5% 11.9% 11.7% 13.5%
Inventories 17,253 18,160 18,359 18,519 18,982 EBIT margin 8.8% 10.2% 10.0% 10.6% 12.2%
Other current assets 7,074 8,984 10,207 10,392 10,581 Net profit margin 5.8% 7.0% 7.7% 7.8% 8.2%
Current assets 51,441 55,328 58,522 62,047 61,168
PP&E 10,210 10,157 11,017 11,168 11,344 ROE 13.4% 16.2% 17.3% 16.2% 16.3%
LT investments 4,947 5,012 5,193 5,243 5,293 ROA 3.9% 4.5% 5.0% 5.0% 5.4%
Other non current assets 53,749 55,221 57,739 56,618 55,559 ROCE 8.5% 9.2% 8.7% 8.8% 10.4%
Total assets 120,347 125,718 132,471 135,076 133,364 SG&A/Sales 15.1% 14.7% 14.7% 14.6% 14.6%
Net debt/Equity 56.2% 58.5% 55.2% 44.7% 35.0%
Short term borrowings 2,979 6,206 6,863 5,000 5,000 Net debt/EBITDA 222.0% 223.2% 225.9% 191.7% 137.1%
Payables 7,774 8,048 8,762 9,044 9,270
Other short term liabilities 28,809 28,661 28,522 29,182 29,636 Sales/Assets (x) 0.7 0.6 0.6 0.6 0.7
Current liabilities 39,562 42,915 44,147 43,227 43,906 Assets/Equity (x) 3.4 3.6 3.5 3.2 3.0
Long-term debt 26,682 24,761 27,520 29,000 24,000 Interest cover (x) 153.0 190.1 NM NM NM
Other long term liabilities 19,048 23,224 20,248 19,548 18,848 Operating leverage (266.2%) 420.2% 50.1% 287.9% 758.5%
Total liabilities 85,292 90,900 91,915 91,775 86,754 Tax rate 25.9% 27.1% 27.2% 27.0% 27.0%
.
Shareholders' equity 34,474 34,211 40,061 42,875 46,184 Revenue y/y Growth 5.2% 5.3% 4.8% 3.2% 2.5%
Minority interests 581 605 495 427 426 EBITDA y/y Growth (4.8%) 2.8% 8.6% 1.9% 17.9%
Total liabilities & equity 120,347 125,716 132,471 135,076 133,364 EPS y/y Growth (19.2%) 29.2% 15.2% 4.0% 7.9%
.
BVPS 42.61 42.29 49.15 52.61 56.67 Valuation FY15A FY16A FY17E FY18E FY19E
y/y Growth 15.1% (0.7%) 16.2% 7.0% 7.7% P/E (x) 21.5 16.6 14.4 13.9 12.9
P/BV (x) 2.6 2.7 2.3 2.1 2.0
Net debt/(cash) 19,704 20,363 22,387 19,363 16,323 EV/EBITDA (x) 10.1 10.3 10.9 9.8 9.2
Dividend Yield 3.1% 3.2% 3.3% 3.4% 3.5%
.
Source: Company reports and J.P. Morgan estimates.
Note: in millions (except per-share data).Fiscal year ends Sep. o/w - out of which

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andreas.p.willi@jpmorgan.com

Other Companies Discussed in This Report (all prices in this report as of market close on 03 August 2017)
Philips (PHG.AS/32.11/Overweight), Schneider Electric (SCHN.PA/67.37/Overweight)
Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research
analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per
KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or
intervention.
Important Disclosures

Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in
securities issued by Siemens, Philips, Schneider Electric.
Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Siemens,
Philips, Schneider Electric within the past 12 months.
Client: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients: Siemens, Philips, Schneider
Electric.
Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as investment
banking clients: Siemens, Philips, Schneider Electric.
Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following
entity(ies) as clients, and the services provided were non-investment-banking, securities-related: Siemens, Philips, Schneider Electric.
Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients, and
the services provided were non-securities-related: Siemens, Philips, Schneider Electric.
Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking services
from Siemens, Philips, Schneider Electric.
Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking
services in the next three months from Siemens, Philips, Schneider Electric.
Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services
other than investment banking from Siemens, Philips, Schneider Electric.
Other Significant Financial Interests: J.P. Morgan owns a position of 1 million USD or more in the debt securities of Siemens,
Philips, Schneider Electric.
J.P. Morgan Securities LLC and/or its affiliates is acting as financial advisor to The Spectranetics Corporation (NASDAQ: SPNC) in
connection with proposed acquisition by Royal Philips (NYSE: PHG; AEX: PHIA) as announced on June 28, 2017. The transaction is
structured as a cash tender offer by Philips for all of the issued and outstanding shares of Spectranetics, to be followed by a merger in
which each share of Spectranetics not tendered in the tender offer will be converted into the USD 38.50 per share price paid in the tender
offer. Pursuant to the merger agreement, the transaction is subject to customary closing conditions, including certain regulatory clearances
in the U.S. and in certain non-U.S. jurisdictions. The tender offer is not subject to any financing conditions.
Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for
compendium reports and all J.P. Morgancovered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406,
or e-mailing research.disclosure.inquiries@jpmorgan.com with your request. J.P. Morgans Strategy, Technical, and Quantitative
Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-
0406 or e-mail research.disclosure.inquiries@jpmorgan.com.

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Date Rating Share Price Price Target

() ()
12-Nov-06 N 74.90 84.00
27-Nov-06 N 72.10 83.00
15-Jan-07 N 77.55 84.00
25-Jan-07 OW 82.44 89.00
05-Mar-07 OW 77.88 90.00
26-Apr-07 OW 89.61 100.00
24-Jun-07 OW 105.05 113.00
07-Aug-07 OW 93.64 110.00
08-Oct-07 OW 99.10 115.00
12-Nov-07 OW 103.70 125.00
06-Dec-07 OW 105.34 122.00
24-Jan-08 OW 84.65 120.00
17-Mar-08 OW 66.99 102.00
21-Apr-08 OW 71.83 100.00
14-Jul-08 OW 69.75 93.00
30-Jul-08 OW 73.42 95.00
08-Oct-08 OW 50.10 87.00
Siemens (SIEGn.F, SIE GR) Price Chart
14-Nov-08 OW 42.48 64.00
08-Dec-08 OW 46.00 62.00
216 NOW
84100
OWOW115
120
OWOW93
OW64
OW
63OW
62OW
75
OW
89
OW
95
104
OW 115
OW N
87
86N N76
90 N 88
N 100NR
OW
NR 100N 100 N 105
N 110
N 130 14-Jan-09 OW 48.40 65.00
28-Jan-09 OW 46.46 63.00
180 NOW
83OW
90
OW
110
OW
122
100
OWOW 87
OW
65
OW
60OW
72OW
84
OW 94
OW100
117
OWN90
90N 73
N 86
N 92
N 98
OWOW
102
OW107
102N 103
N 100
N 97
N 109
N 126 06-Apr-09 OW 44.60 59.00
29-Apr-09 OW 51.55 60.00
144 NOW
84
OW
89
OW
113
OW
125
OW
102
OW
95
OW
62
OW
59OW
64OW
78
OW92
OW
104112
OWOW110
90
NN76
84N 94
N 92
N 102
OW
OW102
N107
100
N 96
N 101
N 98
NN107
122 08-Jun-09 OW 54.62 62.00

Price() 31-Jul-09 OW 55.94 64.00

108 05-Oct-09 OW 60.86 72.00
13-Nov-09 OW 63.96 75.00
72 07-Jan-10 OW 66.75 78.00
27-Jan-10 OW 66.85 84.00
36 29-Mar-10 OW 74.16 89.00
30-Apr-10 OW 73.61 92.00
0 08-Jul-10 OW 72.80 94.00
Sep Mar Sep Mar Sep Mar Sep Mar 29-Jul-10 OW 74.62 95.00
06 08 09 11 12 14 15 17
06-Aug-10 OW 78.00 104.00
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. 12-Oct-10 OW 77.30 100.00
Break in coverage Jun 11, 2014 - Jul 08, 2014.
12-Nov-10 OW 85.58 104.00
07-Jan-11 OW 90.00 112.00
26-Jan-11 OW 93.61 117.00
04-May-11 OW 97.00 115.00
28-Jul-11 OW 90.19 110.00
07-Sep-11 OW 66.45 90.00
04-Oct-11 OW 66.09 87.00
11-Nov-11 OW 74.09 90.00
09-Dec-11 N 73.37 90.00
24-Jan-12 N 77.22 86.00
22-Jun-12 N 65.80 76.00
26-Jul-12 N 66.45 73.00
07-Sep-12 N 76.25 76.00
21-Sep-12 N 79.00 84.00
30-Oct-12 N 77.41 86.00
09-Nov-12 N 79.65 90.00
09-Apr-13 N 81.48 94.00
02-May-13 N 79.20 92.00
09-Jul-13 N 78.28 88.00

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01-Aug-13 N 83.10 92.00

23-Sep-13 N 89.69 98.00
02-Dec-13 N 97.17 100.00
28-Jan-14 N 97.31 102.00
17-Mar-14 OW 93.57 102.00
11-Jun-14 NR 98.66 --
08-Jul-14 OW 96.24 102.00
31-Jul-14 OW 92.11 107.00
05-Aug-14 NR 89.34 --
07-Aug-14 OW 88.75 107.00
07-Oct-14 OW 89.77 102.00
30-Oct-14 OW 87.64 100.00
10-Nov-14 N 88.10 100.00
07-May-15 N 95.38 96.00
30-Jul-15 N 95.97 103.00
22-Sep-15 N 81.61 100.00
12-Nov-15 N 93.58 101.00
07-Jan-16 N 85.62 100.00
04-May-16 N 89.85 98.00
27-Jun-16 N 88.26 97.00
05-Aug-16 N 96.87 105.00
10-Nov-16 N 109.16 107.00
09-Dec-16 N 114.78 109.00
03-Jan-17 N 116.65 110.00
01-Feb-17 N 122.54 122.00
28-Mar-17 N 124.91 126.00
04-May-17 N 131.80 130.00

Date Rating Share Price Price Target

() ()
10-Feb-06 OW 27.67 32.50
10-Jan-07 OW 28.24 32.00
16-Apr-07 OW 30.96 33.00
Philips (PHG.AS, PHIA NA) Price Chart 05-Jul-07 OW 32.81 34.00
19-Sep-07 OW 31.49 33.00
09-Oct-07 OW 31.43 35.50
55 OW
OW34
OW
34.5
31
N 25
N 14
N 13
N 20
N 27.5
OW 30.5
N 24
N 16
N 16.5
N 18.5
N 23N 24
OW 29
OWOW
26.5
26
OWOW2729 OWOW
3032.5
OW 35
15-Oct-07 OW 32.15 34.50
06-Dec-07 OW 28.68 33.00
OWOW
33
OW
35.5
N32
28N 18
N 14
N 19
N 26 N 30
OW N
27
16.5
N 17
N 16.5
N 21
N 24.5
OW 28.5
OW 25.5
OW
OW27
25.5
OW 27 OW OW
25OW
32
OW33
38
44 08-Jan-08 OW 27.62 32.00
21-Jan-08 OW 24.18 31.00
OW 32.5
OW 32
OWOW
33
N
33
29N 21
N 15
N 15.5
N 24
N 30
N 31
OW N
28
20.5
N 17N 17
N 20
N 24
OW OW
28 28.5
OWOW28
OW2727.5
OW 27 NR
OWOW
31.5
OW
32 34
33
25-Mar-08 N 24.43 29.00
Price() 15-Apr-08 N 23.11 28.00
07-Jul-08 N 20.60 25.00
22
08-Oct-08 N 17.98 21.00
14-Oct-08 N 15.28 18.00
11 05-Dec-08 N 12.92 14.00
14-Jan-09 N 14.59 15.00
06-Apr-09 N 12.08 14.00
0
14-Apr-09 N 12.63 13.00
Sep Mar Sep Mar Sep Mar Sep Mar
06 08 09 11 12 14 15 17 14-Jul-09 N 13.95 15.50
17-Sep-09 N 17.65 19.00
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Break in coverage May 03, 2016 - Jul 06, 2016. 12-Oct-09 N 17.04 20.00
07-Jan-10 N 21.00 24.00
26-Jan-10 N 21.36 26.00
31-Mar-10 N 23.74 27.50
20-Apr-10 N 26.06 30.00
06-Aug-10 N 23.82 31.00

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12-Oct-10 N 23.24 30.00

07-Jan-11 OW 23.06 30.50
24-Jan-11 OW 24.57 28.00
08-Apr-11 OW 21.92 27.00
10-May-11 N 20.52 24.00
23-Jun-11 N 16.32 20.50
07-Sep-11 N 12.76 16.50
04-Oct-11 N 13.28 16.00
18-Oct-11 N 14.67 17.00
10-Jan-12 N 15.65 17.00
12-Apr-12 N 13.77 16.50
24-Apr-12 N 14.82 17.00
22-Jun-12 N 15.10 16.50
23-Jul-12 N 16.22 18.50
12-Sep-12 N 19.00 20.00
21-Sep-12 N 18.86 21.00
22-Oct-12 N 19.01 23.00
29-Jan-13 N 22.43 24.00
19-Mar-13 N 23.00 24.50
22-Apr-13 N 21.66 24.00
23-Jul-13 OW 23.90 28.00
21-Oct-13 OW 25.72 28.50
02-Dec-13 OW 26.30 29.00
29-Jan-14 OW 25.52 28.50
22-Apr-14 OW 23.76 25.50
21-Jul-14 OW 23.18 26.50
24-Sep-14 OW 25.06 28.00
20-Oct-14 OW 21.26 27.00
30-Oct-14 OW 21.76 26.00
11-Dec-14 OW 23.88 27.00
28-Jan-15 OW 24.96 25.50
07-Apr-15 OW 27.35 27.00
28-Apr-15 OW 26.27 27.50
26-Jun-15 OW 23.63 27.00
27-Jul-15 OW 24.48 29.00
16-Sep-15 OW 22.52 27.00
03-May-16 NR 23.32 --
06-Jul-16 OW 22.30 25.00
25-Jul-16 OW 23.78 30.00
24-Oct-16 OW 26.18 31.50
09-Dec-16 OW 28.02 32.00
22-Dec-16 OW 28.78 32.50
24-Jan-17 OW 27.88 32.00
24-Apr-17 OW 31.60 33.00
12-May-17 OW 32.86 35.00
30-Jun-17 OW 31.22 34.00
24-Jul-17 OW 30.99 38.00

17
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andreas.p.willi@jpmorgan.com

Date Rating Share Price Price Target

() ()
08-Oct-08 N 25.79 33.50
08-Dec-08 N 22.53 27.50
31-Jul-09 OW 30.11 35.00
05-Oct-09 OW 33.46 39.00
07-Jan-10 N 40.52 44.50
18-Feb-10 N 39.82 46.50
31-Mar-10 OW 43.42 50.00
14-May-10 OW 41.99 51.50
30-Jul-10 OW 44.25 55.00
06-Aug-10 OW 46.10 62.50
12-Oct-10 OW 48.16 60.50
20-Oct-10 OW 50.52 62.00
07-Jan-11 OW 57.58 72.50
Schneider Electric (SCHN.PA, SU FP) Price Chart
17-Feb-11 OW 57.52 74.00
132 07-Jul-11 OW 57.95 70.00
N 44.5
OW 51.5
OW 60.5
OW 74OW 54
OW 58
OW 60 OW 75
OW 72
OW 64
OW 56
OW 58 OW 73.5 01-Aug-11 OW 50.02 64.00
110 07-Sep-11 OW 42.10 54.00
N 27.5 OW 39
OWOW
5062.5
OW 72.5
OW OW
64 52OW 55 OW 70OW 71
OW 70
OWOW
6060 OW 72
OW 76 04-Oct-11 OW 39.45 50.00
88 09-Dec-11 OW 41.79 52.00
N 33.5 OW 35N 46.5
OWOW5562 OWOW
7050OW 53OW 65
NR OW 69OW 72OW 74
OWOW
6158
OW 68
OW 70
OW 72 23-Feb-12 OW 50.49 58.00
22-Jun-12 OW 42.14 53.00
Price() 66
01-Aug-12 OW 46.03 55.00
21-Sep-12 OW 48.85 60.00
44
21-Feb-13 OW 55.39 65.00
11-Jul-13 NR 58.06 --
22 20-Jan-14 OW 65.61 69.00
24-Apr-14 OW 65.09 70.00
0 30-Jul-14 OW 64.52 75.00
Sep Mar Sep Mar Sep Mar Sep 25-Sep-14 OW 60.87 72.00
08 10 11 13 14 16 17
11-Dec-14 OW 61.59 71.00
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. 11-Feb-15 OW 68.20 72.00
Break in coverage Jul 11, 2013 - Jan 20, 2014.
22-May-15 OW 70.02 74.00
07-Jul-15 OW 60.53 70.00
22-Sep-15 OW 52.86 64.00
29-Oct-15 OW 54.57 61.00
29-Dec-15 OW 54.31 60.00
10-Feb-16 OW 48.76 56.00
17-Feb-16 OW 48.03 58.00
21-Apr-16 OW 59.10 60.00
27-Jun-16 OW 49.72 58.00
28-Jul-16 OW 58.52 68.00
09-Dec-16 OW 64.93 70.00
16-Feb-17 OW 66.00 72.00
20-Apr-17 OW 68.00 73.50
30-Jun-17 OW 67.77 72.00
27-Jul-17 OW 68.60 76.00

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of

18
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andreas.p.willi@jpmorgan.com

the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research
website, www.jpmorganmarkets.com.
Coverage Universe: Willi, Andreas: ABB (ABBN.S), Andritz (ANDR.VI), Assa Abloy (ASSAb.ST), Electrolux (ELUXb.ST), Legrand
(LEGD.PA), Nexans (NEXS.PA), OSRAM (OSRn.DE), Philips (PHG.AS), Philips Lighting (LIGHT.AS), Prysmian (PRY.MI), Rexel
(RXL.PA), Schneider Electric (SCHN.PA), Siemens (SIEGn.F), Zumtobel (ZUMV.VI)

J.P. Morgan Equity Research Ratings Distribution, as of July 03, 2017

Overweight Neutral Underweight
(buy) (hold) (sell)
J.P. Morgan Global Equity Research Coverage 44% 45% 11%
IB clients* 52% 50% 31%
JPMS Equity Research Coverage 44% 50% 6%
IB clients* 68% 65% 46%
*Percentage of investment banking clients in each rating category.
For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table
above.

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INST MGMT AH

Andreas Willi Europe Equity Research

(44-20) 7134-4569 03 August 2017
andreas.p.willi@jpmorgan.com

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