MPJ

Europe Equity Research
6 February 2013
Top Stories
Diageo (DGE LN, N 1,877p, PT 1,915p) (Matthew Webb) Continuing to deliver Diageo continues to deliver operational performance in line with its medium-term guidance, or even slightly ahead of it in terms of profit growth. This is above its historical performance, reflecting its success in re-balancing the business towards growth markets, predominantly through organic growth, supplemented by acquisitions. This is now being fully supported by price increases, with overall group price/mix improvement of +4% in H113 having predominantly consisted of price rather than mix, with the US having seen the most significant improvement here. Nestle (NESN VX, OW SF63.4, PT SF72.00) (Celine Pannuti, CFA) FY12 preview: Valuation discount to narrow We expect a solid finish to the year (JPMe Q4 5.7% organic growth, +60bps H2 margin) as we factor a rebound in Zone AOA in Q4 and easing RM headwinds. A recovery in emerging markets coupled with improving momentum in the US should re-assure investors while we expect the market focus to shift to margin expansion, improving cashflow and potential cash returns. At 16.7x PE13e (ex-OR), Nestl trades at an 8% discount to Unilever which we expect to narrow on reassuring results and FY13 outlook. Global Small/Mid-Caps (Eduardo Lecubarri) Radar Adding Ipsen as "Investment Opportunity" We are today adding Ipsen (IPN FP/OW/25.96 2,184 M) to the Investment Opportunities section of our Radar (model portfolio). The stock is covered by our Pharma Biotech analyst, Richard Vosser, and, in our opinion, it represents an attractive BUY ahead of results (Feb 27th) offering +10/15% upside potential from pos revisions during the rest of 2013, as well as a free call option on events that could make it a 40% gainer.
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Link to Other FTMs page Link to Morgan Markets page Key Rating, Price Target & EPS Changes Daily Economic Briefing: A faster timetable for change at BoJ (David Hensley) BoJ Governor Shirakawa unexpectedly announced that he would resign on March 19 when his two deputy governors leave office, instead of finishing his term April 8 as previously expected. The spotlight now shifts to Prime Minister Abe, who has to decide on potential replacements and then get them confirmed in the Diet, where support from the opposition will be needed. Masaaki Kanno says the government is consulting with the opposition now and probably will announce his candidates in one to two weeks. With the new leadership team now set to be installed in March, the April 3-4 policy meeting comes in focus.
See end pages for analyst certification. For important disclosures, please refer to the disclosure section at the end of the individual linked notes.
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.
1
Recommendation Changes
Price Target and Estimate Changes, continued

MAPFRE (MAP SM - Underweight) (Andreas van Embden) Preview FY12e Results Qinetiq (QQ/ LN - Neutral) (Andrew J Wilson) Revising EPS estimates, but cash is the key to valuation Syngenta (SYNN VX - Neutral) (Neil C Tyler) Strong end to 2012 provides foundations for further progress. Recent re-rating dictates Neutral. Victrex (VCT LN - Neutral) (Martin Evans) IMS reveals a steady start - despite a challenging macro environment. Forecasts lowered to reflect softer volume growth. William Hill (WMH LN - Overweight) (Matthew Webb) 6% increase to FY13E EPS following FY12 IMS; still scope for rerating
Banco Espirito Santo (BES PL - Neutral)

(Jaime Becerril) Downgrading from OW to Neutral as asset quality offsets funding improvement init Transneft (TRNFP RX - Underweight) (Andrey Gromadin, CFA) Don't play monopoly through prefs. Initiating with an Underweight rating
Price Target and Estimate Changes

Alfa Laval (ALFA SS - Neutral) (Glen Liddy) Lower tax rate results in a small EPS upgrade ARM Holdings ADR (ARMH US - Neutral) (Sandeep Deshpande) ARM Holdings: Meets expectations and guidance keeps estimate creep in check. Multiple remains elevated Arm Holdings Plc (ARM LN - Neutral) (Sandeep Deshpande) ARM Holdings: Meets expectations and guidance keeps estimate creep in check. Multiple remains elevated Banco Espirito Santo (BES PL - Neutral) (Jaime Becerril) Downgrading from OW to Neutral as asset quality offsets funding improvement AFL BP (BP/ LN - Overweight) (Fred Lucas) Reducing 2013 EPS to reflect latest guidance - we stay OW in the countdown to a settlement with the DoJ Deutsche Brse (DB1 GY - Overweight) (Rae Maile) Preannouncement of 2012 headline results Diageo (DGE LN - Neutral) (Matthew Webb) Continuing to deliver Givaudan (GIVN VX - Overweight) (Celine Pannuti, CFA) Step up in dividend signals confidence in MT FCF target Hermes International (RMS FP - Underweight) (Melanie A Flouquet) FY 12 Sales preview and changes to estimates HMS Group (HMSG LI - Overweight) (Artem Konchin) Valuation should rerate in 2013 as margins recover, compressors contribution doubles London Mining (LOND LN - Overweight) (Roger Bell) Sierra Leone trip notes ramp-up to 5Mtpa remains on track, maintain OW recommendation
Results and Company Views

Beazley Plc (BEZ LN - Neutral) (Andreas van Embden) Preview 2012e Results Catlin (CGL LN - Overweight) (Andreas van Embden) Preview 2012e Results Nestle (NESN VX - Overweight) (Celine Pannuti, CFA) FY12 preview: Valuation discount to narrow Smith & Nephew (SN/ LN - Neutral) (David Adlington) Q4 2012 results preview ThyssenKrupp (TKA GR - Overweight) (Alessandro Abate) Q1'12/13 Preview Tryg (TRYG DC - Underweight) (Andreas van Embden) 4Q12 Preview: Eye on the Dividend
Strategy
Global Small/Mid-Caps (Eduardo Lecubarri) Radar Adding Ipsen as "Investment Opportunity" Pan-European Small/Mid-Caps (Eduardo Lecubarri) The SMid Trilogy - February 2013
European Analyst Focus List

05 February 2013
Appendix
Key Rating, Price Target & EPS Changes
Rating Changes Company Decreases Banco Espirito Santo Initiations Company Transneft Price Target Changes Price Target Company Increases Alfa Laval Arm Holdings Plc ARM Holdings ADR Deutsche Brse Diageo Hermes International Syngenta William Hill Decreases HMS Group Victrex Rating N N N OW N UW N OW OW N New 141.00 kr 625 p $30.00 48.00 1,915 p 185.00 SFr. 375.00 410 p $7.30 1,400 p Old 122.00 kr 540 p $26.00 41.80 1,775 p 174.00 SFr. 350.00 390 p $12.20 1,500 p Rating UW Price Target R56,000.00 New Rating N Old Rating OW J.P. Morgan EPS Estimate Changes Company Increases Alfa Laval ARM Holdings ADR Arm Holdings Plc Givaudan Syngenta William Hill Decreases Deutsche Brse Diageo HMS Group Victrex Revisions BP Hermes International London Mining MAPFRE Qinetiq Current FY +0.3% +10.9% +11.2% +0.8% +1.4% +6.6% -7.0% -0.5% -50.1% -4.5% +2.2% +2.9% -1.9% +8.7% Next FY +1.4% +12.8% +13.0% +1.1% +21.2% +6.1% -14.0% -2.7% -38.3% -6.9% -10.1% -1.3% -28.0% -6.3%
Source: J.P. Morgan estimates

06 February 2013
Diageo
Continuing to deliver
Neutral
DGE.L, DGE LN Price: 1,877p
Price Target: 1,915p

Previous: 1,775p
Diageo continues to deliver operational performance in line with its mediumterm guidance, or even slightly ahead of it in terms of profit growth. This is above its historical performance, reflecting its success in re-balancing the business towards growth markets, predominantly through organic growth, supplemented by acquisitions. This is now being fully supported by price increases, with overall group price/mix improvement of +4% in H113 having predominantly consisted of price rather than mix, with the US having seen the most significant improvement here. Diageo trades on 17.3x CY2013E PE, a small discount to the European beverages sector on 17.6x. We retain our Neutral recommendation but this should be seen within the context of our positive sector stance (see European Beverages: The partys not over, 17th January). We continue to prefer the fundamental investment case at SABMiller, Diageos main London-listed peer. However, we note that SABMs recent outperformance (+8% since mid-January versus Diageo +3%) has expanded SABMs PE premium versus Diageo to 11% which some might consider full given what are currently fairly similar profit growth profiles. Diageo produced a solid set of H113 results, in line with Bloomberg consensus in terms of actual sales and EBIT. Organic sales growth was marginally below consensus but organic EBIT growth was marginally ahead. EPS was in line with our forecast but 3% ahead of consensus. We make some minor changes to our EPS estimates to reflect updated currency assumptions and more cautious cash-flow forecasts given Diageos ongoing high level of investment in capex and maturing stock to ensure that it can meet future growth in demand. Our FY13 forecasts are broadly unchanged but our FY14 and FY15 forecasts fall by 2-3%. We increase our February 2014 (previously December 2013) price target to 1,915p (previously 1,775p) to reflect these estimate changes and the increased CY13E multiple of the European beverages sector (now 17.6x, previously 16.4x). We continue to believe that Diageo should trade in line with the peer group.
Diageo (DGE.L;DGE LN) 2012A Adj.EPS FY (p) Adj.P/E FY DPS FY (p) Dividend Yield FY EBITDA FY ( mn) Revenue FY ( mn) Net Income FY ( mn) Bloomberg EPS FY (p) 94.21 19.9 43.50 2.3% 10,762 10,762 9,532 92.10 2013E
(Prev)
European Beverages, Hotels & Leisure Matthew Webb

AC
(44-20) 7134-9743 matt.webb@jpmorgan.com
Mike J Gibbs
(44-20) 7134-5884 mike.j.gibbs@jpmorgan.com
Komal Dhillon
(44-20) 7134-5885 komal.dhillon@jpmorgan.com J.P. Morgan Securities plc
For specialist sales advice, please contact Sophie L Warrick

(44-20) 7779-3409 sophie.l.warrick@jpmorgan.com
Anoopreet K Rehncy
(44-20) 7742-4370 anoopreet.k.rehncy@jpmorgan.com
Price Performance
1,900 p 1,700 1,500 1,300
Feb-12 May-12 Aug-12 Nov-12 Feb-13
DGE.L share price (p) MSCI-Eu (rebased)
Abs Rel
YTD 3.2% 1.8%
1m 2.9% 4.3%
3m 4.7% 1.6%
12m 27.3% 20.4%
2013E
(Curr)
2014E
(Prev)
2014E
(Curr)
2015E
(Prev)
2015E
(Curr)
104.03 18.0 47.42 2.5% 3,962 11,942 2,560 -
103.50 18.1 47.42 2.5% 3,941 11,600 2,571 102.30
116.94 16.0 51.68 2.8% 4,409 13,378 2,929 -
113.82 16.5 51.68 2.8% 4,327 12,876 2,855 113.80
129.81 14.5 56.33 3.0% 4,749 14,281 3,258 -
125.66 14.9 56.33 3.0% 4,671 13,739 3,158 126.30
Company Data Price (p) Date Of Price Price Target (p) Price Target End Date 52-week Range (p) Market Cap ( bn) Shares O/S (mn) Fiscal Year End
1,877 05 Feb 13 1,915 28-Feb-14 1,929-1,436 46.8 2,495 Jun
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 11 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

06 February 2013
Nestle
FY12 preview: Valuation discount to narrow
We expect a solid finish to the year (JPMe Q4 5.7% organic growth, +60bps H2 margin) as we factor a rebound in Zone AOA in Q4 and easing RM headwinds. A recovery in emerging markets coupled with improving momentum in the US should re-assure investors while we expect the market focus to shift to margin expansion, improving cash-flow and potential cash returns. At 16.7x PE13e (ex-OR), Nestl trades at an 8% discount to Unilever which we expect to narrow on reassuring results and FY13 outlook. Solid FY12, top-line recovery in focus. We expect Nestl to exit the year at the top-end of its 5-6% organic growth guidance (JPMe Q4 5.7% vs. consensus 5.6%) as Zone AOA rebounds (JPMe +10.6% vs 4.7% in Q3) and US volumes improve sequentially. The easing of input cost inflation coupled with SG&A leverage and cost savings should lead to +60bps margin expansion in H2 and +20bps in FY12 (in-line with consensus). 2013 outlook. We expect Nestl to continue to deliver the Nestl model of 5-6% organic growth, margin improvement and improving underlying EPS at constant FX. For 2013 we forecast LFL growth of 5.5% and +40bps margin expansion leading to 8% EPS growth (post IAS19 FY12 restatement). We expect margin delivery to accelerate primarily driven by Pfizer Nutrition consolidation and synergies while the current RM outlook of flat to low-single-digit might provide additional upside to our numbers. Improving cash generation might lead to higher cash return. Managements focus on improving working capital (JPMe CHF1.1bn reduction in FY12) and capex should lead to better cash-flow yields and potential for higher cash return. Given Nestls low gearing (ND/EBITDA 13e 1.3x), a share buy-back could be an option in the coming years. We also expect capital allocation and the future of Nestls 30% stake in LOreal to become more prominent themes.
Overweight
NESN.VX, NESN VX Price: SF63.4 Price Target: SF72.00
European Consumer Goods Celine Pannuti, CFA

AC
(44-20) 7134-7123 celine.pannuti@jpmorgan.com
Alberto Lopez Rueda

(44-20) 7134-6909 alberto.lopezrueda@jpmorgan.com
Ankur Gupta
(44-20) 7134-9740 ankur.x.gupta@jpmorgan.com J.P. Morgan Securities plc
For Specialist sales advice, please contact: Sophie L Warrick

Anoopreet K Rehncy
Price Performance
65 60 SwF 55 50 45
NESN.VX share price (SwF) MSCI-Eu (rebased)
Valuation discount expected to narrow. Nestl trades on 16.7x PE13e (ex-OR), at an 8% discount to Unilever, following the disappointing results in Zone AOA in Q3 which eroded Nestls traditional valuation premium. Yet, we believe that the valuation gap will narrow should Nestl deliver a re-assuring set of results in Q412/Q113 while shifting the focus towards margin expansion and improving cash-flow generation in FY13.
Nestle (NESN.VX;NESN VX) FYE Dec Adj. EPS FY (SF) Revenue FY (SF mn) EBIT FY (SF mn) P/E FY EV/EBITDA FY FCF Yield FY Dividend Yield FY EV/Revenue FY 2010A 3.31 87,906 12,676 19.1 16.0 4.0% 2.9% 2.9 2011A 3.07 83,642 12,538 20.7 16.4 2.4% 3.0% 3.0 2012E 3.45 92,489 14,077 18.4 14.4 4.9% 3.2% 2.7 2013E 3.64 98,655 15,174 17.4 12.4 4.6% 3.4% 2.3 2014E 3.94 103,937 16,305 16.1 11.6 5.3% 3.7% 2.2
Nestl will report Q4/FY12 on 14February @ 6.15am UK, followed by a conference call at 7:00am UK.
Company Data Price (SF) Date Of Price Price Target (SF) Price Target End Date 52-week Range (SF) Mkt Cap (SF bn) Shares O/S (mn)
63.4 05 Feb 13 72.00 31 Dec 13 64.5 - 53.0 202.6 3,195
Source: Company data, Bloomberg, J.P. Morgan estimates. 2010 EPS includes discontinued operations.

06 February 2013
Global Small/Mid-Caps
Radar Adding Ipsen as "Investment Opportunity"
We are today adding Ipsen (IPN FP/OW/25.96 2,184 M) to the Investment Opportunities section of our Radar (model portfolio). The stock is covered by our Pharma Biotech analyst, Richard Vosser, and, in our opinion, it represents an attractive BUY ahead of results (Feb 27th) offering +10/15% upside potential from pos revisions during the rest of 2013, as well as a free call option on events that could make it a 40% gainer. Below is a summary of the rationale behind our investment decision. Ipsen in a nutshell: Ipsen is a global pharmaceutical company primarily focused on Specialty Care: neurology/Dysport (18% of sales), endocrinology/ Somatuline (23%), and uro-oncology/Decapeptyl/TASQ (25%). The company spends over 250m in R&D/yr and has sales of 1.3 Bill with the following geo exposure (Europe 71%, Asia 12%, NA 6%, RoW 12%). A good fit with our SMid strategy views: This yr, we are focusing on nonconsensus stocks with significant rerating upside within what we have labeled "Affordable Grw" and "Quality Value". Ipsen is a non-consensus "Affordable Grw" story 60% of all covering analysts rate it UW or N, despite the fact that mgmt announced a plan in Jun 11 to double revenue and triple EBIT through 2020, our analyst expects an easy 9% organic EPS CAGR ('13-'16), and the stock trades on a PE JPM 13E of just 12.1x. Likely to benefit from pos revisions to IBES ests at a time when PanEuropean SMid ests will see nothing but downside. Since Jan '11 we have argued that IBES ests are too aggressive. Jan marked the 22nd mth of consecutive downward revisions to IBES Yr+1 EPS ests. Are we done? Far form it current ests call for '13E EPG Grw of 19.5% vs the 4.5% & 9.4% of '12 & '11! Against this, Ipsen beat IBES ests on its Jan 30th sales release, and our analysts ests are 12% and 19% of consensus for 12 and 13 EPS. Valuation suggests 10-15% upside on our most conservative scenario When compared to its GICS sub-industry peer group, Ipsen's valuations (on JPM's 13 ests) imply +18%, +10.9%, and +23.0% upside to peer avg EV/Sales, P/E, and P/B ratios. with a free call option on events that could make Ipsen a 40% gainer. Upside to Ipsen share price would be significantly greater should a) mgmt deliver on its business plan to double sales 11 to 20 (our analyst ests only call for +23% sales grw 11 to 16); or if b) Ipsen's 2 risk assets materialize (neither Dysport nor TASQ are part of JPM's ests at present but, according to Mr. Vosser, TASQ alone has the potential to push Ipsen's value to 38/sh) The founders are still heavily invested: The Beaufour founding family still owns 68% of the shares outstanding.
Small/Mid-Caps Eduardo Lecubarri

AC*
(44-20) 7134-5916 eduardo.lecubarri@jpmorgan.com
Patrick J Pitcaithly
(44-20) 7134-8451 patrick.j.pitcaithly@jpmorgan.com
European Pharma & Biotech Richard Vosser

(44-20) 7742-6652 richard.vosser@jpmorgan.com J.P. Morgan Securities plc
Figure 1: Price Performance IPN FP vs
MSCI Small Cap Europe

130 120 Rebased (1 Jan 2011 = 100) 110 100 90 80
IPN FP MSCI Small Cap Europe
111.9 102.1
70 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
Source: Factset. Prices as of Feb 4, 2013.
Attractive entry point: the stock has sold off marginally during the last week and a half despite beating IBES sales ests and news of an agreement to sell one of Inspirations old assets (OBI-1).
* Registered/qualified as a research analyst under NYSE/FINRA rules. See page 5 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

06 February 2013
Neutral
Banco Espirito Santo

Downgrading from OW to Neutral as asset quality offsets funding improvement
We downgrade our recommendation on BES to Neutral from Overweight following the banks slightly disappointing 4Q12 results and after having outperformed its peers by 25% since end 2012. We still consider BES the best option to play the Portuguese recovery but would expect some profit taking as the stock appears now fairly valued. BES 4Q12 results were affected by one-offs and bond sales. The bank recorded important credit losses in its Angolan business and other items while 211mn trading gains allowed BES to make a profit in the quarter. The scenario for 2013 is looking however quite challenging. Funding and Portuguese macro should continue to drive the stock. BES 4Q12 results confirm our expectations that retail deposit costs have benefited substantially from public intervention and a more rational environment. Low rates however are having an impact on the asset side, a reason why BES disappointed on NIM vs. expectations. Asset quality in Portugal is the red herring, deteriorating further. Deleveraging and recession are having an impact on the banks asset quality, especially in the consumer and corporate sector. We expect NPAs will grow to 11% in 2013 from 9.5% as of 4Q12. On valuation, we see BES trading as an option in the long term. BES is trading at 0.6x P/TBV for a 7% ROTE in 2014. Our Dec-14 1.03 price target for BES implies no upside from current levels, supporting our Neutral view even if we consider BES the only attractive bank in Portugal to play a recovery due to a better mix of capital and funding. An improvement in credit quality or funding would help. Further improvements in the banks funding structure or asset quality in Portugal would help BES achieve higher returns making it attractive again long term, as the opportunities in Portugal remain untouched in our view.
Previous: Overweight BES.LS, BES PL Price: 1.04 Price Target: 1.03
European Banks Jaime Becerril

AC
(44-20) 7742-6449 jaime.becerril@jpmorgan.com J.P. Morgan Securities plc

Price Performance
1.6 1.2 0.8 0.4
BES.LS share price () MSCI-Eu (rebased)
Abs Rel
YTD 15.6% 14.2%
1m 6.2% 7.6%
3m 33.5% 30.4%
12m -23.3% -30.2%
Conference Call Details

Wednesday 6 February 2013 Webcast at 14:30 UK www.bes.pt/ir
REF # 9256839 Portugal: +351 21 120 11 29 Spain: + 34 917 889 649 UK: + 44 (0) 208 817 9301 USA: +1 718 354 1226
Banco Espirito Santo (BES.LS;BES PL) FYE Dec 2011A 2012E 2012A 2013E 2013E 2014E 2014E 2015E
(Prev) (Curr) (Prev) (Curr) (Prev) (Curr)
Adj. EPS FY () Headline P/E FY Dividend (Net) FY () P/NAV FY P/BV FY RoNAV FY NAV/Sh FY () Tier One Ratio FY
(0.04) 0.03 0.03 0.06 0.06 0.11 0.11 0.11 NM 34.2 34.7 16.2 18.7 9.4 9.5 9.3 0.13 0.01 0.01 0.03 0.02 0.04 0.04 0.04 0.5 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 -1.9% 1.6% 1.6% 3.8% 3.4% 6.2% 6.4% 6.2% 2.2 1.7 1.6 1.7 1.7 1.8 1.8 1.9 9.2% 10.6% 10.4% 11.4% 11.0% 12.1% 11.8% 12.5%
Company Data Price () Date Of Price Price Target () Price Target End Date 52-week Range () Mkt Cap ( bn) Shares O/S (mn)
1.04 05 Feb 13 1.03 31 Dec 14 1.19 - 0.43 1.2 1,167
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.morganmarkets.com
Russia Equity Research

06 February 2013
Initiation
Transneft
Don't play monopoly through prefs. Initiating with an Underweight rating
We initiate coverage on Transneft pref shares with an Underweight rating and a Dec-13 DCF-based PT of RUB56,000. After c.180% rally since mid-10, we think the shares are pricing in an excessively optimistic outcome from the proposed privatization of the common shares, the introduction of the RAB-tariff system and increase in dividend payout. Whether these developments materialize or not only time will tell; however, even in this positive scenario it appears far from certain that the prefs, as the orphans of the TRNF capital structure, would benefit in a similar way to the common shares. Uniquely positioned monopoly. Transneft is Russias oil and oil product trunk pipeline monopoly, transporting 90% of Russian crude oil and 12% of oil products to export and domestic markets. The business is highly profitable with 54% core EBITDA margin although strong OCF has been eaten by capex so far. Privatization requires tariff system change. The regulated crude transportation tariffs in place are set to cover opex, capex and financing costs; as these have ballooned, further increases look unsustainable. This setup has no regards to returns, suggesting the shares offer little economic value in our view. Privatization would require switching to a return-based tariff system, similar to RAB now being deployed in Russias electrical utilities. Our base case scenario of a $50 bn RAB tariff is more than priced in. Using utilities RAB rules and having estimated TRNFs fixed asset level, we forecast the average tariff to decrease by 26% in 16. On our estimates, material upside for pref shares is possible only if fixed asset replacement value is closer to $100 bn, an unrealistic amount, in our view, as it would result in an unsustainable level of transportation tariffs, we believe. Government value maximization favors commons it owns above freefloating prefs: it would appear to make sense to pay 90% and 10% of RAS net income on coms and prefs respectively, where RAS earnings should match the total IFRS dividend payout. This translates into a 60% discount in prefs DPS with up to 11% yield in the long-term.
Underweight
TRNFP.MM, TRNFP RX Price: R71,603.00 Price Target: R56,000.00
Russian Oil & Gas Andrey Gromadin, CFA

AC
(7-495) 967-1037 andrey.gromadin@jpmorgan.com J.P. Morgan Bank International LLC

Price Performance
70,000 60,000 50,000 40,000
Abs
YTD 3.6%
1m 3.6%
3m 11.9%
12m 25.0%
Figure 1: Transneft tariffs estimate

RUB/ 100 t km
75 JPM revenue forecasts RAB $50 bn RAB $100 bn Inflation/capex adj tariffs Cost + DD&A cover
50
25
0 2003 2006 2009 2012 2015E 2018E
Source: J.P. Morgan estimates.
Valuation does not look cheap. On 13 RAS (based on which dividends are paid), prefs are currently trading at 35x EV/EBITDA and 42x PE. Assuming a 60% discount in prefs value to coms, the implied 17 EV/EBITDA and PER (IFRS) under $50 bn RAB scenario are 5.6x and 9.1x, respectively.
Transneft (TRNFP.MM;TRNFP RX) FYE Dec 2010A Adj. EPS FY ($) 958.81 Revenue FY ($ mn) 14,736 EBITDA FY ($ mn) 7,866 Net Attributable Income 3,906 FY ($ mn) Dividend (Gross) FY (R) 314.73 EBITDA margin FY 53.4% Operating cashflow FY ($ 7,566 mn) ROE FY 15.4% 2011A 701.68 22,799 9,905 6,398 716.58 43.4% 7,037 21.4% 2012E 902.43 23,638 10,146 5,348 683.35 42.9% 7,737 15.6% 2013E 1,011.94 25,891 12,143 6,285 789.78 46.9% 10,503 15.5% 2014E 989.27 25,999 12,427 6,921 898.01 47.8% 10,604 14.7%
Table 1: Transneft IFRS valuation multiples

14E 40% Com = Pref EV/EBITDA 3.6 PER 5.3 15E
3.6 5.2
16E
6.0 10.8
17E
5.6 9.1
Source: J.P. Morgan estimates, Bloomberg (cob Feb 4)
Company Data Price (R) Date Of Price Price Target (R) Price Target End Date 52-week Range (R) Mkt Cap (R bn) Shares O/S (mn) Mkt Cap ($ bn)
71,603.00 05 Feb 13 56,000.00 31 Dec 13 71,675.00 40,125.00 111.3 2 3.7

05 February 2013
Alfa Laval
Lower tax rate results in a small EPS upgrade
Neutral
ALFA.ST, ALFA SS Price: Skr144.00
Price Target: Skr141.00

Previous: Skr122.00
Results for Q4 were broadly in-line with our expectations. We believe the group is at or close to the low point in its earnings/margin cycle. While we are not yet raising our earnings forecasts for the group, we believe the downside risk to our expectations has moderated significantly. As a result of these factors, we believe it is appropriate to base our price target on multiples above the historic average. Given the recent strong share price performance (up 22% in the last three months) and the shares trading at close to our price target, we are maintaining our Neutral recommendation. Q4 results broadly in-line with expectations. Sales at Sek8.1m were 1% higher than our forecast. Organic growth was +0.7% y/y in Q412 vs. -5.4% in Q312. Adjusted gross margin was 37% in-line with the level reported in Q312. The Adjusted EBITA at Sek1,316m was 1% weaker than consensus estimates with margin at 16.2% vs JPMe of 16.3% and consensus at 16.6%. The adj. EBITA does not include Sek51m of comparison distortion items, mostly goodwill write-down on the Onnuri acquisition. The proposed dividend for 2012 is Sek3.50 per share (up 8% y/y). 2013E EPS raised by 1% to Sek9.02. Our estimates for sales and adj. EBITA are unchanged. However, we adjust our forecasts for a lower tax rate, partly offset by higher interest costs. Our 2013E adj. EPS estimate is up 1% to Sek9.02 while the 2014 adj. EPS estimate is up 2% to Sek9.34. Price target raised to Sek141 from Sek122. We believe the earnings and margins for the group are at or close to a cyclical low. With downside risk to forecasts moderating, we believe one should be willing to pay above average EV/EBIT multiples. Hence, we are raising the EV/EBIT multiple for our price target to 11.0x from a mid cycle level of 10.0x. This together a lower than expected pension liability translates to a Dec-13 price target of Sek141, up from Sek122. Valuation. Based on our current forecasts, the group is trading on 2013E EV/EBIT and PE multiples of 12.2x and 16.0x respectively. This equates to a premium to our universe of between 10% and 15%. We believe this scale of premium is justified given the prospect of a reduction in the downside risk to our forecasts and the premium margin of Alfa Laval (17.0% in 2013E) relative to the our universe (12.2%).
Alfa Laval (ALFA.ST;ALFA SS) FYE Dec 2011A Adj. EPS FY (Skr) Revenue FY (Skr mn) EBIT FY (Skr mn) EBIT margin FY DPS (Net) FY (Skr) Adj P/E FY EV/Revenue FY EV/Operating Profit FY 8.82 28,652 4,691 16.4% 3.25 16.3 1.8 10.01 2012E
(Prev)
European Capital Goods Glen Liddy

AC
(44-20) 7134-4570 glen.liddy@jpmorgan.com
Joseph Peter
(44-20) 7134-4571 joseph.x.peter@jpmorgan.com
Andreas Willi
(44-20) 7134-4569 andreas.p.willi@jpmorgan.com
Alexander Whight
(44-20) 7134-4566 alexander.t.whight@jpmorgan.com J.P. Morgan Securities plc
For Specialist Sales advice, please contact Timm Schulze-Melander, CFA

(44 20) 7134-1331 timm.schulze-melander@jpmorgan.com
Price Performance
160 150 Skr 140 130 120 110
ALFA.ST share price (Skr) MSCI-Eu (rebased)
Abs Rel
YTD 3.3% 1.9%
1m 4.0% 5.4%
3m 21.7% 18.6%
12m -1.4% -8.3%
2012E
(Curr)
2013E
(Prev)
2013E
(Curr)
2014E
(Prev)
2014E
(Curr)
8.74 29,994 4,471 14.9% 3.41 16.5 2.0 12.19
8.77 29,813 4,372 14.7% 3.50 16.4 1.8 10.99
8.89 30,811 4,760 15.4% 3.47 16.2 1.6 9.34
9.02 30,811 4,747 15.4% 3.60 16.0 2.1 12.12
9.18 31,735 4,917 15.5% 3.58 15.7 1.7 9.78
9.34 31,735 4,904 15.5% 3.73 15.4 1.6 9.62
Company Data Price (Skr) 144.00 Date Of Price 05 Feb 13 Price Target (Skr) 141.00 Price Target End Date 31 Dec 13 52-week Range (Skr) 146.50 - 110.40 Mkt Cap (Skr bn) 60.4 Shares O/S (mn) 419

06 February 2013
ARM.L, ARM LN
ARM Holdings
Meets expectations and guidance keeps estimate creep in check. Multiple remains elevated
How strong the current semi cycle will be, will likely depend on the economic environment. However, we believe ARM is able to buck the economic environment due to its share gains in semi segments such as embedded markets where it was not exposed before but also the higher royalty it is now charging in the mobile mkt. Valuation remains elevated in our view, but as long as the company does not miss, we believe the stock will go up on upgrades. Managing consensus more closely by giving 1Q13 revenue guidance reduces estimates creep thus reduces near term risk, in our view. Solid results given soft semicon environment: While most semicon cos reported soft 2H12 results, ARMs 4Q12 results shine in comparison due to more favorable end markets exposure & market share gain. 4Q12 group rev. of US$262.8m (+15% Q/Q, +21% Y/Y) was ~9% higher than JPMe and co. consensus of ~$241.4m. Though bulk of the beat in revenue was from PD licensing, PD royalties were in line. PD royalty revenue at $121.8m, up 14% QoQ/up 21% YoY with PD royalty units up 15% QoQ/up 13% YoY. In the equivalent period or 3Q12, relevant semicon universe revenue fell 3% YoY while units rose 2% YoY. Thus, ARMs PD royalty rev. growth in 4Q12 outperf. industry rev. growth by 24% YoY, while ARMs PD royalty units growth outperformed industry growth by 11% YoY. For FY12, ARMs PD royalty growth of 17% outperf. industry growth by 19%. Increasing pervasiveness of ARMs technology means that ARMs outperf. of industry growth is likely to be above 10-15% in the past to nearer 15% or higher. Opex higher than expected but if company can achieve higher absolute profit despite lower operating margin, investors would likely not complain: ARM's opex in 4Q12 rose 21% YoY, vs revenue growth of 19% YoY and 1Q13 guidance implies opex growth of 15% with expected revenue growth of 20%+. Thus, ARM's opex run rate at present seems to have increased from the historical guidance of opex growth at half the revenue growth. ARM indicated that developing new technology is becoming more complex to build and harder to implement which is raising the R&D investment requirement. ARM also reiterated that it would not target a specific operating margin but would seek to maximize absolute operating profit by investing based on future growth opportunities.
Arm Holdings Plc (ARM.L;ARM LN) 2009A 2010A 2011A 2012A 2013E 2013E 2014E 2014E
(Prev) (Curr) (Prev) (Curr)
Neutral Price: 931p
Price Target: 625p ARMH, ARMH US

Neutral Price: $41.95
Price Target: $30.00
European Semiconductors Sandeep Deshpande

AC
(44-20) 7134-5276 sandeep.s.deshpande@jpmorgan.com J.P. Morgan Securities plc
Chetan Udeshi, CFA

(44-20) 7742 7034 chetan.x.udeshi@jpmorgan.com J.P. Morgan Securities plc
Vipul Hirani
(91-22) 6157-3335 vipul.v.hirani@jpmorgan.com J.P. Morgan India Private Limited
We have raised our TP to 625p (540p) based on ~25x our 2014E EPS.
Share price performance - Ord

Price Performance
1,000 900 800 p 700 600 500 400
Share price performance ADR

Price Performance
45 40 $ 35 30 25 20
Adj.EPS FY (p) Revenue FY ( mn) Adjusted EBIT FY ( mn) Adj. EBIT Margin FY Adj.P/E FY EV/Revenue FY EV/EBITDA (x) FY Bloomberg EPS FY (p)
5.46 9.37 12.46 14.73 18.36 20.41 22.11 25.00 305 407 492 577 658 690 765 803 95 164 222 263 327 342 396 417 31.2% 40.4% 45.1% 45.6% 49.6% 49.6% 51.8% 51.9% 170.4 99.4 74.7 63.2 50.7 45.6 42.1 37.2 42.2 30.7 25.4 21.7 17.6 18.1 15.1 15.6 123.4 72.1 53.8 45.0 33.6 34.1 28.2 28.9 5.00 8.70 11.80 14.20 - 17.90 - 22.40
Company Data Price (p) Date Of Price Price Target (p) Price Target End Date 52-week Range (p) Market Cap ( bn) Shares O/S (mn)
931 05 Feb 13 625 31-Dec-13 961-464 13.02 1,399

05 February 2013
BP
Reducing 2013 EPS to reflect latest guidance - we stay OW in the countdown to a settlement with the DoJ
Following our Alert earlier this morning, we downgrade our relatively cautious 2013-14 earnings by 10% and 2% respectively to reflect BPs latest points of guidance for a higher than expected tax rate of 36-38% and the adverse impact of IAS 19 (Employee Benefits). We also incorporate J.P. Morgans latest and lower US natural gas price forecasts. The cut to 2013 EPS is moderated to -7% if using the latest spot $/; this would actually turn the 2014 EPS change into a small 1% upgrade. No change to price target of 525p Although our PT is not immune to near term earnings (it now implies a 2013 PER of just over 10x), it is unchanged at 525 pence because it hinges primarily on our SOTP which is unchanged at around 800 pence. This is because (i) BP reported lower net debt at YE 2012 than we had forecast (ii) the aforementioned IAS 19 effects are non-cash (iii) the higher P&L tax rate was already factored in to our upstream DCF valuation (iv) the stronger $/ offsets the slight reduction to our long term US gas price, from $5.00 to $4.75 per mmbtu. We stay OW given valuation and catalysts Our positive view rests upon the following factors: (i) BPs 2013 PER remains below 10x and EV/DACF 5.6x with robust yield support of over 5.0% (ii) we remain hopeful of a fair settlement with the DoJ prior to the trial's start date on 25 Feb (though we acknowledge a risk that the trial could be delayed or indeed start before a settlement is confirmed) (iii) completion of the TNK-BP sale / Rosneft sale which remains on course for Q2 will confirm a healthy gain on the Rosneft purchase price agreement (BPs average purchase price of $7.4 compares to Rosnefts current share price of $8.6) (iv) at this time, we expect BP to clarify the scale and method of a sizeable return of capital to shareholders in 2013-14 (JPMe $8.2bn) (v) the operational improvement which will drive cash flow growth should become more visible in H2 2013.
Overweight
BP.L, BP/ LN Price: 469p Price Target: 525p
European Oil & Gas Fred Lucas

AC
(44-20) 7134-5943 fred.lucas@jpmorgan.com J.P. Morgan Securities plc
For Specialist Sales advice, please contact Jessica Saadat

(44-20) 7134-5941 jessica.saadat@jpmorgan.com
Price Performance
540 500 p 460 420 380
BP.L share price (p) MSCI-Eu (rebased)
Abs Rel
YTD 8.7% 7.3%
1m 3.4% 4.8%
3m 6.2% 3.1%
12m -4.3% -11.2%
BP (BP.L;BP/ LN) FYE Dec Adj EPS $ FY ($) Bloomberg EPS FY ($) EBIT FY ($ mn) Net Attributable Income FY ($ mn) Dividend (Net) FY (p) Net Yield FY Debt adjusted Cashflow FY ($ mn) EV/DACF FY
2011A 1.15 1.13 33,603 21,658 18.1 3.9% 29,076 5.9
2012E
(Prev)
2012E
(Curr)
2013E
(Prev)
2013E
(Curr)
2014E
(Prev)
2014E
(Curr)
0.91 27,107 17,301 21.3 4.5% 22,096 7.3
0.93 0.91 26,420 17,638 21.5 4.6% 20,741 8.1
0.88 26,076 16,495 22.8 4.9% 30,829 4.9
0.79 0.91 25,337 14,845 23.5 5.0% 29,096 5.6
0.97 28,102 17,742 24.7 5.3% 33,347 4.6
0.95 1.00 29,675 17,404 25.4 5.4% 32,608 5.0
Company Data Price (p) Date Of Price Price Target (p) Price Target End Date 52-week Range (p) Mkt Cap ( bn) Shares O/S (mn)
469 05 Feb 13 525 30 Jun 13 512 - 390 89.1 19,016

05 February 2013
Deutsche Brse
Preannouncement of 2012 headline results
Overweight
DB1Gn.DE, DB1 GY Price: 47.98
Price Target: 48.00

Previous: 41.80
Deutsche Boerse has preannounced headline figures ahead of its scheduled release of full year results on 19 February. The company indicates that net revenues for 2012 were around 1,930m and adjusted EBIT around 1.0bn compared with our previous adjusted EBIT estimate of $1.067bn. The company clearly saw a weak Q4 net revenue performance, with implied net revenues in the quarter of 445m compared with 510m in the year prior quarter and 471m in Q3'12. The company will maintain its dividend at 2.10, compared with Bloomberg consensus of 2.30 and our estimate of 2.40, while it will also seek to reduce costs. That said, the indication is that cost cutting will only ameliorate the impact of planned investment, and overall costs will modestly rise over time. Being precise on the impact of these various factors is difficult, but we would expect consensus to fall by 5-10% and we have reduced our own estimates. That our December 2013 price target increases from 41.80 to 48.00 is a reflection of the material rerating that peers in the market infrastructure subsector have seen over the last few months. Whether the promise of greater market activity can maintain optimism in ratings remains to be seen, but Deutsche Boerse remains our preferred play in a sub-sector where we struggle to see much value. Net revenues indicated at 1.93bn (2011 2.23bn). Implied net revenue for Q4'12 is 445m v 510m a year ago and down from 471m sequentially. No divisional information is given. Adjusted EBIT indicated at 1.0bn (2011 1.2bn). Implied Q4 EBIT is 186m v 259m a year ago and down from 247m sequentially. Dividend to be maintained at 2.10. Planned cost savings targeted at 70m per annum. Due to planned investment, the companys cost base will rise modestly over time despite the cost cutting.
General Financials Rae Maile

AC
(44-20) 7134-9738 rae.maile@jpmorgan.com J.P. Morgan Securities plc
For Specialist Sales advice, please contact: Harry Harutunian

(44-20) 7779-2695 harry.harutunian@jpmorgan.com
James Lloyd
(44-20) 7742-4267 james.d.lloyd@jpmorgan.com
Price Performance
52 48 44 40 36
Abs
YTD 3.8%
1m 1.6%
3m 13.0%
12m -0.9%
Deutsche Brse AG (DB1Gn.DE;DB1 GY) FYE Dec 2011A Adj. EPS FY () Bloomberg EPS FY () Adj P/E FY EBIT FY ( mn) Pretax Profit Adjusted FY ( mn) DPS (Net) FY () Net Yield FY NAV/Sh FY () 4.48 4.58 10.7 1,235 1,234 2.10 4.4% 17.9
2012E
(Prev)
2012E
(Curr)
2013E
(Prev)
2013E
(Curr)
3.77 12.7 1,067 951 2.40 5.0% 18.4
3.51 3.61 13.7 1,017 901 2.10 4.4% 18.1
4.01 12.0 1,118 1,026 2.50 5.2% 20.1
3.45 4.07 13.9 979 887 2.10 4.4% 19.6
47.98 04 Feb 13 48.00 31 Dec 13 50.91 - 36.25 9.3 193

06 February 2013
Givaudan
Step up in dividend signals confidence in MT FCF target
Givaudan delivered a solid finish to FY12 and management highlighted a good start to FY13. Even as our FY13 estimates are largely unchanged, improving profitability along with cash flow generation from better working capital and lower investments underpins our 11% earnings growth (CAGR12-15e) and FCF/Sales of 14.6% by 15e. At 11.2x EV/ EBITDA13e, Givaudan trades at a discount to staples peers at 11.7x which we see as unjustified given strong operational delivery and cash return. Good finish to FY12 and good start to 2013. Givaudan reported solid finish to FY12 with 6.6% LFL (ahead of JPMe 5.5%) and adj. EBITDA of CHF870m (ahead of company-compiled consensus CHF860m). Management highlighted 'good trading environment' so far in 2013 in both Fragrances and Flavours and did not see any destocking impact in Fine Fragrances. Raw material inflation is expected to be modest 1-2% increase for FY13 vs 2-3% in FY12. Higher dividend shows confidence in MT CF generation. Givaudan announced 64% increase in DPS to CHF36 thanks to strong FCF of CHF 512m (CHF117m in FY11) on better WC and EBITDA. We expect the cash flow generation to continue to improve (JPMe 14.6% FCF/Sales by 15e vs 12% in FY12) led by 1) improving WC and EBITDA benefitting from SAP and lower investments (CapEx expected to be below 4% MT). 2013 earnings supported by top-line and further margin increase. We broadly maintain our FY13 estimate of adj. EBITDA of CHF946m. We forecast 4.1% LFL growth in FY13 driven largely by volume. While the raw material inflation driven pricing helped FY12 top-line and margins, we expect volume leverage and savings should continue to support margin expansion in 2013e, JPMe +100bps to 21.4%. Valuation. Givaudan is trading at 11.2x EV/EBITDA13e, at a discount to staples peers at 11.7x and at a premium to F&F peers Symrise 9.9x and IFF at 10.9x. With strong earnings growth profile of 11% CAGR1215e, improving CF metrics and higher cash return, we continue to see Givaudan as a core pick in Consumer Ingredients.
Givaudan SA (GIVN.VX;GIVN VX) FYE Dec 2010A Adj. EPS FY (SF) Adj P/E FY EV/EBITDA FY Revenue FY (SF mn) Net Att. Income FY (SF mn) FCF Yield FY Net Yield FY EBIT FY (SF mn) 59.25 18.0 11.4 4,239 340 4.8% 2.0% 655 2011A 48.37 22.0 14.1 3,915 252 1.2% 2.1% 480 2012A 58.40 18.2 12.5 4,257 411 5.3% 3.4% 607 2013E
(Prev)
Overweight
GIVN.VX, GIVN VX Price: SF1,064.00 Price Target: SF1,120.00
Consumer Ingredients Celine Pannuti, CFA

AC
(44-20) 7134-7123 celine.pannuti@jpmorgan.com
Ankur Gupta
(44-20) 7134-9740 ankur.x.gupta@jpmorgan.com
Alberto Lopez Rueda

(44-20) 7134-6909 alberto.lopezrueda@jpmorgan.com J.P. Morgan Securities plc
For Specialist sales advice, please contact Sophie L Warrick

Anoopreet K Rehncy
Price Performance
1,050 950 SwF 850 750
GIVN.VX share price (SwF) MSCI-Eu (rebased)
Abs Rel
YTD 4.2% 2.8%
1m 3.7% 5.1%
3m 8.4% 5.3%
12m 15.3% 8.4%
2013E
(Curr)
2014E
(Prev)
2014E
(Curr)
65.51 16.2 10.8 4,407 456 5.2% 3.0% 650
66.04 16.1 11.2 4,425 459 5.9% 3.8% 651
72.82 14.6 10.0 4,604 519 6.8% 3.3% 715
73.59 14.5 10.4 4,623 521 6.7% 4.3% 715
Company Data Price (SF) Date Of Price Price Target (SF) Price Target End Date 52-week Range (SF) Mkt Cap (SF bn) Shares O/S (mn)
1,064.00 05 Feb 13 1,120.00 31 Dec 13 1,070.00 808.95 7.6 7

05 February 2013
Hermes International
FY 12 Sales preview and changes to estimates
Underweight
HRMS.PA, RMS FP Price: 244.00
Price Target: 185.00

Previous: 174.00
Herms is to report FY12 Sales on Tuesday 12th Feb before market open, followed by a conference call (in French) at 9am CET. We expect Herms to report FY12 Sales up 15% organically, 21% reported to 3,442m, implying a strong Q4 up 15% on an organic basis, encouraged by the recent comments from Hermes CEO Mr. Thomas, who noted the Company enjoyed a fantastic end of the year (Bloomberg, 20th Jan). We believe the all important Leather goods division to have remained robust in Q4, up 14% in constant currency, boosted by Herms iconic products and the growing sophistication of the consumer base that seems increasingly to prefer more understated products to the offerings more oriented to logos. We believe all other important divisions, notably Silk and RTW to have maintained their strong momentum, up double digits organically in Q4. We anticipate all regions bar Japan contributed to the robust growth posting double-digit increases in the quarter, with Far East leading the expansion up 23.5% ex-FX. We expect Americas up 15% in constant currency, France and Europe both up 12% and Japan up 7%. We have raised our FY12 forecasts by 3% to factor in better than previously anticipated Q4 12E Sales on the back of the positive comments from Herms CEO. On the other hand, we have lowered our FY13E EBIT by 1%, reflecting, in the main, more adverse forex. Our new Dec-13 DCF based TP is 185 (174) solely owing to a lower ERP.
European Luxury Goods Melanie A Flouquet

AC
(39-02) 88 95 21 33 melanie.a.flouquet@jpmorgan.com
Chiara Battistini
(44-20) 7134-5417 chiara.x.battistini@jpmorgan.com J.P. Morgan Securities plc
For Specialist Sales advice, please contact: Sophie L Warrick

Price Performance
320 280 240 200
HRMS.PA share price () MSCI-Eu (rebased)
Abs Rel
YTD 7.8% 6.4%
1m 5.7% 7.1%
3m 9.6% 6.5%
12m -11.9% -18.8%
Hermes International SCA (HRMS.PA;RMS FP) FYE Dec 2010A 2011A Adj. EPS FY () Revenue FY ( mn) EBIT FY ( mn) EBIT margin FY Net Att. Income FY ( mn) Adj P/E FY EV/Revenue FY EV/EBITDA FY 4.00 2,401 668 27.8% 422 60.9 10.6 33.9 5.68 2,841 885 31.2% 594 42.9 9.0 26.0
2012E
(Prev)
2012E
(Curr)
2013E
(Prev)
2013E
(Curr)
6.57 3,413 1,040 30.5% 687 37.1 6.7 20.1
6.76 3,442 1,070 31.1% 707 36.1 7.4 21.7
7.46 3,784 1,159 30.6% 780 32.7 6.1 17.8
7.36 3,699 1,144 30.9% 770 33.1 6.9 20.1
Company Data Price () 244.00 Date Of Price 04 Feb 13 Price Target () 185.00 Price Target End Date 31 Dec 13 52-week Range () 285.48 - 207.70 Mkt Cap ( bn) 25.5 Shares O/S (mn) 105
Russia Equity Research

05 February 2013
HMS Group
Valuation should rerate in 2013 as margins recover, compressors contribution doubles
We remain OW in the shares of HMS Group, while cutting our end-13 price target by 40% to $7.3/GDR, after a significant update to our model of the company based on the latest operating and financial disclosures and acquisitions completed last year. After earnings quality deteriorated on 2012 one-offs, we expect valuation to rerate on the back of forecast top line growth and margins recovery, with debt concerns easing and disclosure improving. Among near-term triggers we expect 2012 financial reports, and the related orders backlog update, with focus on the newly added compressors segment. With the latest M&As yet to be fully reflect in the earnings, we view the discounted valuation, dividend yield, declining capex, and extensive list of major O&G projects in the companys focus as supportive for the share price rerating. We see a number of reasons for the stocks underperformance last year: volatility of segments revenue and margins with poor P&L predictability, significant leverage increase after 2012 acquisitions, and one-offs hurting 2012 earnings quality. The share price also might have been pressured by changes in the shareholder base, we believe. Large contracts are lucrative, but related revenue and margins are volatile. The company aims to become a crucial link' technology provider with higher margin contracts and greater involvement of the other business units. On the flipside, this hurts the quality of disclosure and earnings transparency, in part due to NDAs limiting the potential reporting scope, but also due to information protectionism. Scale and diversity can alleviate this, yet we reflect this concern through higher cost of equity used in our DCF model (up by 100bp). 2012E bottom line hurt by M&A-related charges and one-offs. We cut our 12 margin estimate by 8bp after c.RUB0.5 bn in one-off costs were booked in 9M12, but forecast margins to recover in 2013. FCF and debt ratios remain reasonable, with low M&A appetite. Markets may have questioned the KKM deal (the companys most expensive acquisition to date), but initial valuations can be misleading: earnings CAGR averaged 18% among the acquired cos under HMSG mgmt, and KKM's top line can double with a single Gazprom EPC contract. HMSG has already joined exclusive compressors producers club, and the R&D center acquired with KKM looks well-appointed. Cheap valuation, declining capex trajectory, dividend yield of c.3%, reasonable leverage. HMSG trades at 27% EV/EBITDA discount to RU OFS, and a 61% discount to the domestic and international peers on P/E, due to its relatively high EV debt component. We forecast positive cash flow starting this year, and have few concerns over debt serviceability until 2015. Credit rating agencies raised HMSGs outlook to stable in Jan 13, in line with our view, while 2013 capex guided to be at or below last years level. Among near-term triggers, we see 2012 accounts publication and subsequent update to the orders backlog.
Hydraulic Machines and Systems Group (HMSGq.L;HMSG LI) FYE Dec 2012E 2012E 2013E 2013E
(Prev) (Curr) (Prev)
Overweight
HMSGq.L, HMSG LI Price: $4.20
Price Target: $7.30

Previous: $12.20
Russian Oil & Gas Artem Konchin

AC
(7-495) 937-7323 artem.v.konchin@jpmorgan.com
Andrey Gromadin, CFA

(7-495) 967-1037 andrey.gromadin@jpmorgan.com J.P. Morgan Bank International LLC
Price Performance
6.0 5.5 $ 5.0 4.5 4.0 3.5
Abs
YTD -0.5%
1m 1.2%
3m -0.9%
12m -14.1%
Figure 1: 12M fwd multiples valuation

10 9 8 7 6 5 4 3 2 1 0 Feb May Aug Nov Feb May Aug Nov 11 11 11 11 12 12 12 12
Running EV/EBITDA (r .s.) Running P/E (l.s.)
Source: Bloomberg, HMSG, J.P. Morgan estimates
(Curr)
2014E
(Prev)
2014E
(Curr)
Adj. EPS FY ($) Revenue FY ($ mn) EBITDA FY ($ mn) Net Att. Income FY ($ mn) EV/EBITDA FY Adj P/E FY EBITDA margin FY DPS (Gross) FY ($)
1.17 1,307 225 137 3.9 3.6 17.2% 0.3
0.58 1,107 181 68 5.3 7.2 16.4% 0.4
1.34 1,449 249 157 3.5 3.1 17.2% 0.3
0.83 1,280 223 97 4.3 5.1 17.4% 0.2
1.48 1,560 265 173 3.3 2.8 17.0% 0.4
0.95 1,346 229 111 4.2 4.4 17.0% 0.2
Company Data Price ($) Date Of Price Price Target ($) Price Target End Date 52-week Range ($) Mkt Cap ($ bn) Shares O/S (mn)
4.20 04 Feb 13 7.30 31 Dec 13 6.90 - 3.90 0.5 117

06 February 2013
London Mining
Sierra Leone trip notes ramp-up to 5Mtpa remains on track, maintain OW recommendation
Last weeks site visit confirmed to us that LOND's flagship Marampa project has made impressive progress in a relatively short space of time. We remain confident that the company can deliver its target of 5 Mtpa by 2014 for a compelling capital intensity of ~$65/t and competitive operating costs of <$50/t. We maintain our OW rating on LOND with the stock trading on 0.76x our end '13E NPV before considering any option value from a Marampa debottlenecking/expansion or the Isua project in Greenland. Expansion on track: the ramp up to 5Mtpa capacity by end FY13 remains on schedule. Commissioning of the 2nd plant should complete by Q2, increasing capacity to 3.6Mtpa, while construction of the milling & gravity circuits is on track to add a further 1.4Mtpa by Q4, with one ball mill & set of spirals already on site and another of each currently en route to Freetown. Base case now to optimise 5Mtpa project: LOND confirmed that its base case is now to optimise the 5Mtpa operation by extending Marampas mine life to include unweathered ore rather than pursuing an expansion. We now factor this into our estimates adding 55p/sh to our NPV. However our NPV of 214p/sh is unchanged due to higher opex assumptions and the application of a lower probability weighting on the value of the Wadi Sawawin project. Cost efficiencies are key: having recently signed a mining contract with Dawnus, LOND was able to outline cost guidance at 5Mtpa of ~$49/t (vs previous FY14/15E JPMe of $46/42 per tonne). We have increased our near-term cost assumptions accordingly, leading to 28/14% reductions in our FY13/14E EPS estimates to 35/51 USc/sh. Nonetheless with major international contractors increasingly comfortable operating in Sierra Leone after peaceful elections in November, we remain confident that costs can be reduced in the longer-term through renegotiation of contracts, as well as the transfer of skilled roles from ex-pats to the local workforce. Maintain OW: LOND remains our top pick among the SMid miners, with growth on track, the balance sheet de-risking and compelling valuation. The stock trades on an end FY13E P/NPV of 0.76x (ex Marampa debottlenecking/expansion & Isua). With iron ore prices having ticked up 6% in recent days to $154/t, MtM PERs remain attractive at 2.6/1.3x FY13/14E, while we calculate a cumulative MtM FCF yield for FY13/14E of >100%.
London Mining PLC (LOND.L;LOND LN) FYE Dec 2011A 2012E Adj. EPS FY ($) Adj P/E FY Adj EBITDA FY ($ mn) EV/EBITDA FY Revenue FY ($ mn) FCF FY ($ mn) EV/Revenue FY Bloomberg EPS FY ($) (0.54) NM -39 -9.8 0 (220) -0.45 (0.49) NM -30 -16.9 124 (247) 4.1 -0.28 2013E
(Prev)
Overweight
LOND.L, LOND LN Price: 170p Price Target: 215p
European Metals & Mining Roger Bell

AC
(44-20) 7134-5932 roger.m.bell@jpmorgan.com
Fraser Jamieson
(44- 20) 7742-5930 fraser.jamieson@jpmorgan.com
Ben Defay
(44-20) 7134-5936 ben.defay@jpmorgan.com
Dominic O'Kane
(44-20) 7742-6729 dominic.j.okane@jpmorgan.com
European Steel Alessandro Abate

(44-20) 7134-9744 alessandro.abate@jpmorgan.com J.P. Morgan Securities plc
For Specialist Sales advice, please contact James H McGeoch

(44-20) 7134-0690 james.h.mcgeoch@jpmorgan.com
Price Performance
350 300 p 250 200 150 100
Abs
YTD 12.9%
1m 5.0%
3m 10.5%
12m -44.3%
2013E
(Curr)
2014E
(Prev)
2014E
(Curr)
0.48 5.5 141 3.7 408 (2) 1.3 -
0.35 7.7 119 4.5 408 (16) 1.3 0.48
0.60 4.5 177 2.6 489 137 0.9 -
0.51 5.2 161 3.0 489 133 1.0 0.72
170 05-Feb-13 215 31 Dec 13 325 - 112 0.2 138

05 February 2013
MAPFRE
Preview FY12e Results
Mapfre reports FY 12 results on Wednesday, 6th Feb. We estimate a net profit of 925m in FY 12, down 4% yoy from 963m in FY 11. At the net operating level, we see results down 10% yoy to 1,009m. The decline can be mainly attributed to higher writedowns/provisions and lower capital gains this year. Excluding non-recurring items (capital gains, nat cat losses, writedowns etc), we expect net profit to be up 2.5% vs. FY 11. We forecast underlying net profit of 1,022m vs. 997m in FY 11. We expect improvement in underwriting performance with the P&C combined ratio moving from 97.1% in FY 11 to 95.7% in FY 12e. The Spanish non-life operations to remain under pressure due to reduced economic activity, loss creep from bodily injury claims and investments being made in the rollout of the Direct distribution channel. For the Spanish operations, our combined ratio forecasts are: at Mapfre Familiar, 91.9% (FY 11 90.8%); and at Mapfre Empresas, 83.4% (FY 11 83.7%). Full-year estimate changes: We have reduced our 2012 net profit estimate by c4% to 925m from 963m, due to lower investment income. Our net profit forecast for 2013 is 944m (966m before). We have reduced our dividend per share forecast to 12c from 15c for both 2012e and 2013e. Our BV per share has increased by 7% for 2012e to 2.65 due to unrealized gains arising from market movements in yields. We introduce our 2014e and 2015e estimates with this note. We maintain our price target of 1.85. The shares currently trade at almost 7x our 2014e P/E, 1.2x 13e P/TNAV supported by 2013e RoNAV of c17%. We remain Underweight.
Underweight
MAP.MC, MAP SM Price: 2.16 Price Target: 1.85
European Insurance Andreas van Embden

AC
(44-20) 7134-4574 andreas.vanembden@jpmorgan.com J.P. Morgan Securities plc
Rinki Melwani
(91-22) 6157-3349 rinki.melwani@jpmorgan.com J.P. Morgan India Private Limited
Price Performance
2.8 2.4 2.0 1.6 1.2
MAP.MC share price () MSCI-Eu (rebased)
Abs Rel
YTD -6.8% -8.2%
1m -13.2% -11.8%
3m 3.5% 0.4%
12m -16.9% -23.8%
MAPFRE S.A. (MAP.MC;MAP SM) FYE Dec 2011A Adj. EPS FY () Dividend (Gross) FY () Net Attributable Income FY ( mn) Combined Ratio FY P/NAV FY ROE FY Gross Yield FY Adj P/E FY 0.32 0.15 963 97.1% 1.4 14.2% 7.0% 6.8
2012E
(Prev)
2012E
(Curr)
2013E
(Prev)
2013E
(Curr)
2014E 0.32 0.12 971 96.4% 1.2 11.3% 5.6% 6.8
2015E 0.32 0.12 1,000 96.6% 1.1 11.3% 5.6% 6.6
0.31 0.15 963 95.8% 1.3 13.1% 7.0% 6.9
0.30 0.12 925 95.7% 1.2 12.2% 5.6% 7.2
0.31 0.15 966 96.6% 1.3 12.4% 7.0% 6.9
0.31 0.12 944 96.2% 1.2 11.4% 5.6% 7.0
2.16 04 Feb 13 1.85 30 Jun 13 2.65 - 1.29 6.6 3,080

05 February 2013
Qinetiq
Revising EPS estimates, but cash is the key to valuation
We are updating our EPS estimates following QinetiQs Q3 IMS this morning. We increase our EPS estimates for YE Mar 2013 by c9% to 17.7p. We reduce our EPS estimates for YE Mar 2014 by c6% to 14.7p and for YE Mar 15 by c7% to 15.0p. We also increase or estimate for QQs net cash position for YE Mar 2013 and we believe this is key to supporting the current share price. Raising EPS for YE Mar 2013: We believe we have been too cautious in our estimates for both UK Services (where we now expect an EBITA margin of c12.8% vs 11.9% previously) and on Global Products (where we now expect a FY EBITA margin of c21% vs c17% previously, due to a better revenue mix). Cutting EPS for YE Mar 2014 / Mar 2015 on tougher US outlook: Recent developments in the UK have been positive: last week QQ finalised a 5-year extension to its Long-Term Partnering Agreement with the UK MoD and this has enhanced visibility in this market. However, on January 8, 2013, our US Aero & Defence analyst, Joseph Nadol, published a sector outlook piece and forecast that companies exposed to US government services (CACI, SAIC) would see revenue declines in both calendar 2013 and 2014. We had been looking for growth in QQs US Services sales in YE Mar 14/Mar 15 but, in light of Joseph Nadols forecast, we now assume declining sales in QQs US Services division in the next two years. This is the reason for our lower EPS estimates in these two years. Cash is king and key to valuation: We now expect QQ to end Mar 13 with net cash of 66m, up from our previous est. of 37m. The reduction in our out-year EPS estimates leaves QQ trading on a cal. 2013 P/E of 12.7x. However, QQ is the least levered of all the European defence stocks (net cash and almost no pension deficit), so that it is now trading on a cal. 2013 EV/EBITA of c9x, lower than all its UK A&D peers.
Qinetiq Group plc (QQ.L;QQ/ LN) FYE Mar 2012A Adj. EPS FY (p) Bloomberg EPS FY (p) Revenue FY ( mn) EBIT FY ( mn) EBIT margin FY Pretax Profit Adjusted FY ( mn) DPS (Net) FY (p) Adj P/E FY Net Yield FY 13.64 17.50 1,470 160 10.9% 110 2.90 14.5 1.5%
Neutral
QQ.L, QQ/ LN Price: 197p Price Target: 180p
UK Small and Mid Caps Andrew J Wilson

AC
(44-20) 7742-6332 andrew.j.wilson@jpmorgan.com
Alexander Mees
(44-20) 7742-3681 alexander.c.mees@jpmorgan.com
Victoria Prior, CFA

(44-20) 7134-5912 victoria.prior@jpmorgan.com
Jolyon S Wellington
(44-20) 7134-5913 jolyon.s.wellington@jpmorgan.com
Xiao Lu
(44-20) 7742-2218 xiao.lu@jpmorgan.com J.P. Morgan Securities plc
Price Performance
210 190 p 170 150 130
Abs
YTD 7.5%
1m 6.6%
3m -3.0%
12m 45.1%
2013E
(Prev)
2013E
(Curr)
2014E
(Prev)
2014E
(Curr)
2015E
(Prev)
2015E
(Curr)
16.31 1,423 151 10.6% 134 3.30 12.1 1.7%
17.72 17.00 1,343 161 12.0% 145 3.50 11.1 1.8%
15.73 1,455 137 9.4% 129 3.50 12.5 1.8%
14.74 14.70 1,310 130 10.0% 121 3.90 13.4 2.0%
16.18 1,490 141 9.5% 134 3.70 12.2 1.9%
14.99 14.90 1,322 130 9.8% 123 4.30 13.2 2.2%
197 04 Feb 13 180 31 Dec 13 208 - 134 1.3 655

05 February 2013
Syngenta
Strong end to 2012 provides foundations for further progress. Recent re-rating dictates Neutral.
The signals from both agricultural markets and from Syngentas competitors point to a strong conclusion to FY2012. Monsanto, Dow and DuPont have all reported healthy early-season N Hemisphere demand in their equivalent businesses (+24% LfL avg. growth vs +10% in Q3), and we expect Syngenta to have enjoyed the same buoyant environment. This environment should in turn support selling prices into 2013, and as raw material headwinds ease and fixed cost efficiencies crystallize, the ingredients are in place to deliver double-digit earnings growth in 2013, despite modest (tax rate and license income) headwinds. We raise our FY2012/13 EPS by 8%/2% and our Dec13 DCF TP to SFr375/share (implying 16.9x 13e EPS pre-restructuring). Our maintained Neutral rating reflects the trade off between the relatively robust demand and pricing outlook and a 15.6x 2013E P/E, 20% above the 10 year average. Bouyant demand should provide price support. Crop protection pricing has limited structural support, and remains principally cyclically-driven in our view. However, it follows therefore, that strong demand will likely support further price inflation in 2013 and this should be underpinned further (particularly in herbicides) by recent glyphosate inflation. Unfavourable weather events remain the greatest short-term risk to demand and possibly pricing (and a repeat of 2010). Limited further FX/Raw materials headwinds into 2013. Syngenta has guided for a $300-350m negative impact in FY2012 from the combined effect of FX (delayed impact from SFr strength in FY2011) and rising input costs. However, 2013 should be largely free from similar pressures. Recent Euro strength should further support the FY2013 outlook, once the effects of ongoing currency hedging roll off.
Neutral
SYNN.VX, SYNN VX Price: SF392.40
Price Target: SF375.00

Previous: SF350.00
European Chemicals Neil C Tyler

AC
(44-20) 7134-9935 neil.c.tyler@jpmorgan.com
Martin Evans
(44-20) 7134-5958 martin.evans@jpmorgan.com
Ben Scarlett
(44-20) 7742-9678 ben.scarlett@jpmorgan.com J.P. Morgan Securities plc
Price Performance
400 360 SwF 320 280 240
SYNN.VX share price (SwF) MSCI-Eu (rebased)
Abs Rel
YTD 5.3% 3.9%
1m 5.3% 6.7%
3m 7.8% 4.7%
12m 35.3% 28.4%
Fixed cost inflation easing. The roll-out of Syngentas new regional structure over the past two years has produced meaningful fixed cost inflation (12% p.a.) as the company has invested in the necessary infrastructure (and headcount) to reach its ambitious medium and longterm revenue goals. We now believe the majority of this investment in growth' has been made, and expect fixed cost (Mktg & Dbn./Admin.) inflation to return to mid-single digit levels in 2013/14.
Syngenta AG (SYNN.VX;SYNN VX) FYE Dec 2011A Adj. EPS FY ($) Revenue FY ($ mn) EBITDA FY ($ mn) EBIT FY ($ mn) EV/Revenue FY EV/EBITDA FY Adj P/E FY FCF Yield FY 21.99 13,268 2,890 2,296 2.3 10.5 19.6 4.6% 2012E
(Prev)
2012A
(Curr)
2013E
(Prev)
2013E
(Curr)
2014E 30.82 16,027 3,821 3,161 2.5 10.6 14.0 5.4%
23.85 14041 3,128 2501 2.3 10.1 18.1 4.3
25.59 14,041 3,270 2,643 3.0 12.7 16.9 3.6%
27.48 15,120 3,519 2,879 2.0 8.8 15.7 6.1%
27.87 15,120 3,535 2,895 2.7 11.6 15.5 4.7%
Company Data Price (SF) 392.40 Date Of Price 04 Feb 13 Price Target (SF) 375.00 Price Target End Date 31 Dec 13 52-week Range (SF) 404.70 - 283.50 Mkt Cap (SF bn) 36.3 Shares O/S (mn) 92

05 February 2013
Victrex
IMS reveals a steady start - despite a challenging macro environment. Forecasts lowered to reflect softer volume growth.
Victrexs AGM and IMS statement covering Group sales volume for the four months from October 1, 2012 to January 31, 2013 revealed resilience in trading across both divisions with 2% year on year volume growth overall. Revenues in the Invibio business were broadly in line for the same period, and management remains confident in the potential for growth for the remainder of the year. Sales volumes for the four month period ending 31 January 2013 emerged 2% higher than last year at 887 tonnes (870 tonnes 2012 first four months) implying an average monthly run rate so far of 222 tonnes (217 tonnes 2012 first four months). For reference, the Q1 2012 monthly run-rate was 194 tonnes, and 258 tonnes in Q4 2012. FY 13 EPS reduced by 5% to reflect lower volume expectations. To make our earlier forecast of 3,057 tonnes FY 2013 from this level would require an average monthly rate of 272 tonnes versus the average monthly rate just reported of 222 tonnes. This appears demanding in the current mixed economic climate, and therefore we believe it prudent to reduce to 2,880 tonnes (versus 2012 2,904 tonnes). This new forecast, in turn, now requires an average monthly run rate for the remaining eight months of 249 tonnes with this period encompassing the middle two quarters which are seasonally stronger. Our 2013e underlying PBT figure falls as a result by 4% to 92.1m, EPS down 5% to 84.3p. 2014e is also reduced with EPS -7%. December 2013 DCF based TP cut to 1400p (from 1500p). We are -6%/-7% versus FY13 Bloomberg consensus EPS (89.8p)/ PBT (98.8m) respectively, -12%/-11% versus Bloomberg consensus 2014 EPS (98.6p)/ PBT (107.4m). Conference Call: Today, February 5, 2013 at 8.30am (UK). Please contact Rosa Smith at MHPC (020 3128 8560)/Rosa.Smith@mhpc.com for details. The trading update for the six months to 31 March 2013 will be released on 9 April, 2013.
Neutral
VCTX.L, VCT LN Price: 1,559p
Price Target: 1,400p

Previous: 1,500p
European Chemicals Martin Evans

AC
(44-20) 7134-5958 martin.evans@jpmorgan.com
Neil C Tyler
(44-20) 7134-9935 neil.c.tyler@jpmorgan.com
Ben Scarlett
(44-20) 7742-9678 ben.scarlett@jpmorgan.com J.P. Morgan Securities plc
Price Performance
1,700 1,600 1,500 p 1,400 1,300 1,200 1,100
Abs
YTD -3.7%
1m -4.9%
3m 9.1%
12m 11.2%
Victrex Plc (VCTX.L;VCT LN) FYE Sep 2012A Adj. EPS FY (p) Revenue FY ( mn) EBIT FY ( mn) Pretax Profit Adjusted FY ( mn) DPS (Net) FY (p) EV/EBITDA FY Adj P/E FY Net Yield FY 85.74 220 94 95 37.38 10.2 18.2 2.4%
2013E
(Prev)
2013E
(Curr)
2014E
(Prev)
2014E
(Curr)
2015E 91.21 234 99 100 43.00 8.3 17.1 2.8%
88.31 230 96 96 39.00 9.8 17.7 2.5%
84.32 217 92 92 39.00 9.4 18.5 2.5%
93.70 243 102 102 43.00 9.0 16.6 2.8%
87.25 224 95 95 43.00 8.8 17.9 2.8%
1,559 04 Feb 13 1,400 31 Dec 13 1,670 - 1,164 1.3 83

06 February 2013
William Hill
6% increase to FY13E EPS following FY12 IMS; still scope for re-rating
Following William Hills FY12 IMS, we increase our FY12 EPS forecast by 7% driven by the strong Online performance. For FY13, we increase our EPS forecast by 6% driven by the higher FY12E base and a lower tax rate assumption. William Hill trades on 13.7x our CY13E PE, an 18% premium to its long-term average and an 8% premium to LAD, on our estimates. We believe that this premium is more than justified by WMHs increasing exposure to the online channel and believe that the SBT deal and the potential buyout of the Playtech minority could drive a further re-rating over time. Outlook for gaming machines is a key point for us at FY12. At its IMS, WMH reported slightly weaker machines revenue growth than we had anticipated (5% vs. JPMe 6%). For UK retail revenue as a whole, the machines weakness was offset by stronger OTC in FY12 (driven by favourable sporting results). WMH believes that the higher OTC gross win margin led to less recycling of winnings. This is common in OTC, but has not previously been seen in machines, in our view. Overall, we still believe that sales growth in UK Retail will remain steady at c3% per year over the next three years, driven by continued innovation. We expect WMH to provide further detail of this at its FY12 results. Strong FY12 Online performance helped by sporting results. WMH reported FY12 Online EBIT 18% ahead of our forecast, helped by favourable sporting results and slightly lower marketing spend. We forecast flat online EBIT in FY13 (of 145m), held back by the return to a 52-week year, WMH's exit from some markets and a return to marketing spend at 28% of online sales (vs. 26% in FY12E).
Overweight
WMH.L, WMH LN Price: 388p
Price Target: 410p

Previous: 390p
European Beverages, Hotels & Leisure Matthew Webb

AC
(44-20) 7134-9743 matt.webb@jpmorgan.com
Victoria A Greer
(44-20) 7742-2509 victoria.a.greer@jpmorgan.com
Mike J Gibbs
(44-20) 7134-5884 mike.j.gibbs@jpmorgan.com J.P. Morgan Securities plc
Price Performance
400 350 p 300 250 200
Abs
YTD 9.9%
1m 10.2%
3m 17.0%
12m 68.5%
We increase our FY13 EPS forecast by 6% to 28.4p, driven by a 2% increase to our group EBITA forecast (from the higher Online base in FY12E) and a 300bps reduction to our tax rate assumption (from 18% to 15% in line with WMHs guidance). Due to the increase in our FY13 forecast, we increase our price target to 410p (from 390p).
William Hill PLC (WMH.L;WMH LN) FYE Dec 2011A Adj. EPS FY (p) Revenue FY ( mn) EBITDA FY ( mn) Operating profit FY ( mn) Pretax Profit Adjusted FY ( mn) DPS (Net) FY (p) Net Debt FY ( mn) Bloomberg EPS FY (p) Adj P/E FY 24.20 1,137 308 272 243 9.60 364 23.60 16.0
2012E
(Prev)
2012E
(Curr)
2013E
(Prev)
2013E
(Curr)
27.52 1,263 341 301 276 11.00 305 14.1
29.33 1,278 366 326 298 11.00 291 27.90 13.2
26.74 1,461 366 320 280 11.50 724 14.5
28.36 1,467 372 326 285 11.50 707 27.60 13.7
388 05 Feb 13 410 31 Jan 14 394 - 221 2.7 706

06 February 2013
Beazley Plc
Preview 2012e Results
Beazley is due to report its results on the 7th of February. We forecast profit before tax of $200m for the group in 2012e, up from $63m in 2011, mainly explained by lower nat cat losses this year as compared to last year. 2012s biggest cat loss was Hurricane Sandy ($90m) which was an earnings event for the company bringing the total nat cat loss tally for 2012e to $131m, well below 2011 levels (2011: $215m). Underwriting profitability: Overall, we expect the combined ratio to improve to 93.1% in 2012e (company guidance low nineties) from 98.8% in 2011, supported by lower nat cats and large losses, partly offset by a decline in reserve releases. The attritional combined ratio is expected to improve to 92.7% from 94.3% in 2011, supported by rate increases. No changes to full year estimates: We have maintained our 2012e PBT at $200m and TNAV at 133p per share (124pps JPMe adj). The 2012e RTNAV is 17.5%. We have not made any changes to our 2013e/14e/15e forecasts. Sensitivity to US casualty rates: We believe the main catalyst for the stock is a turn in the US casualty cycle. After a period of material softening of casualty rates, there are encouraging signs that US rates are stabilizing and the outlook remains positive. However, it is still not a hard market and in our view rates need to rise significantly before the casualty market becomes attractive. We estimate that a 5% increase in US insurance rates would add 18% to PBT and c3% to RTNAV. Despite Hurricane Sandy, we believe the Board may consider returning capital to shareholders depending on the 2013e outlook (we estimated a $50m special dividend of 6pps, 3% of market cap). The stock trades at P/TNAV 13e of 1.3x supported by a RTNAV of 16.6%. Our target price is 177p (unchanged). We remain Neutral.
Neutral
BEZG.L, BEZ LN Price: 188p Price Target: 177p

AC
Rinki Melwani
Price Performance
190 170 150 130
Abs
YTD 4.7%
1m 2.5%
3m 9.9%
12m 30.3%
Beazley Plc (BEZG.L;BEZ LN) FYE Dec Adj P/E FY EPS FY (p) Pretax Profit Adjusted FY ($ mn) Combined Ratio FY Gross Yield FY NAV/SH (price currency) FY (p) P/NAV FY ROE FY
2010A 7.3 26.08 251 88.3% 5.3% 124.42 1.5 23.5%
2011A 23.7 7.75 63 98.8% 4.2% 119.90 1.6 6.9%
2012E 9.0 20.49 200 93.1% 4.4% 132.78 1.4 17.5%
2013E 8.5 21.48 219 90.1% 4.4% 147.11 1.3 16.6%
188 05 Feb 13 177 30 Jun 13 196 - 132 0.9 505

06 February 2013
Catlin
Preview 2012e Results
Catlin is due to report its results on 8th Feb. We forecast profit before tax of $354m for the Co. in 2012e, up from $71m in 2011, mainly explained by lower nat cat losses this year ($200m) as compared to last year ($771m). 2012s biggest event was Hurricane Sandy ($200m loss) the only major nat cat loss for the group this year which turned out to be an earnings event for the group. Underwriting profitability: Overall, we expect combined ratio to improve to 94.9% in 2012e from 105% in 2011, supported by lower nat cats partly offset by decline in reserve releases and increase in man made losses. We estimate the attritional combined ratio to deteriorate to 88% from 85% in 2011, mainly due to c2% increase in the expense ratio. The attritional loss ratio is expected to remain stable at c51%, one of the best in the sector. No changes to full year estimates: We have maintained our 2012e PBT at $354m and TNAV at 406p per share (385pps JPMe adj). The 2012e RTNAV is 13%. We have not made any changes to our 2013e/14e/15e forecasts. Sensitivity to US Specialty rates: We believe the main catalyst for the stock is a turn in the US casualty cycle. After a period of material softening of casualty rates, there are encouraging signs that US rates are stabilizing and the outlook remains positive. We estimate that a 5% increase in US insurance rates would add 13% to PBT and c2% to RTNAV. So far we have not assumed a cycle hardening in our estimates. We believe Catlin is well positioned to benefit from a gradual improvement in US underwriting conditions in 2013, particularly if management decides to scale up the business (which is still not factored into our estimates). We see better prospects for organic growth at Catlin than at many of its peers and believe the stock is unjustifiably trading at a discount (1.2x PTNAV 13e) to the sector. We remain Overweight.
Catlin Group Ltd (CGL.L;CGL LN) FYE Dec 2011A Adj P/E FY 79.5 EPS FY (p) 6.85 NAV/SH (price currency) 373.84 FY (p) P/NAV FY 1.5 Dividend (Net) FY (p) 28.00 Gross Yield FY 5.2% Combined Ratio FY 105.0% Pretax Profit Adjusted FY 71 ($ mn)
Overweight
CGL.L, CGL LN Price: 538p Price Target: 520p

AC
Rinki Melwani
Price Performance
540 500 p 460 420 380
Abs
YTD 5.8%
1m 4.8%
3m 16.5%
12m 27.7%
2012E 10.5 51.03 385.49 1.4 29.83 5.5% 94.9% 354
2013E 8.3 63.13 411.24 1.3 31.73 5.9% 91.3% 462
2014E 7.3 70.92 451.62 1.2 33.75 6.3% 90.2% 546
538 05 Feb 13 520 30 Jun 13 533 - 397 1.8 343

05 February 2013
Smith & Nephew

Q4 2012 results preview
S&N reports Q4 results at 7am on Thursday 7 February. Detailed forecasts in fig 1. JPM updated thoughts set out previously. We published a detailed note setting out our latest thoughts last week here. Consensus expectations seem fair. We now have detailed Inquiry consensus for FY12 and FY13. Both seem fair to us. Focus on FY13 commentary and capital returns. We expect the company to maintain its historic non-quantitative guidance, instead guiding relative to market growth. It is reconstruction (i.e. hips and knees) where we believe the company could indicate it expects to grow less than the market in FY13 given where it is in the product cycle. We believe an announcement on a share buyback is unlikely at this stage. Conference call. 9am GMT. Meeting at UBS 1 Finsbury Avenue. Participant Telephone Numbers: UK/International: +44 (0)20 3364 5381 USA: +1 646 254 3362 Passcode: 3548180.
Neutral
SN.L, SN/ LN Price: 708p Price Target: 709p
European Healthcare (Medtech) David Adlington

AC
(44-20) 7134-5828 david.adlington@jpmorgan.com J.P. Morgan Securities plc
For Specialist Sales advice, please contact Marjan Daeipour

(44 20) 7325-3281 marjan.daeipour@jpmorgan.com
Price Performance
750 700 p 650 600 550
SN.L share price (p) MSCI-Eu (rebased)
Abs Rel
YTD 3.4% 2.0%
1m 2.8% 4.2%
3m 10.5% 7.4%
12m 10.1% 3.2%
Smith & Nephew plc (SN.L;SN/ LN) FYE Dec Adj. EPS FY ($) Revenue FY ($ mn) EBITDA FY ($ mn) Bloomberg EBITDA FY ($ mn) EPS Reported FY ($) Adj P/E FY Bloomberg EPS FY ($) EV/EBITDA FY
2011A 0.75 4,270 1,159 1,207 0.75 14.9 0.73 9.1
2012E 0.73 4,109 1,168 1,199 0.73 15.1 0.76 8.7
2013E 0.80 4,410 1,282 1,272 0.80 13.9 0.79 7.7
708 05 Feb 13 709 31 Mar 14 738 - 568 6.3 889

05 February 2013
ThyssenKrupp
Q1'12/13 Preview
Q112/13 results will be published on Tuesday, 12 February at 7:30am CET (6:30am UK). We expect headline EBIT from continued operations at 219m and EPS at 0.09 vs. current Bloomberg estimates of 194m and 0.03. Net debt at c5.3bn post 1bn cash inflow from Inoxum sale to Outokumpu (12/13E EV/EBITDA multiple to c9.3x (from 10.3x) post transaction) and effect of negative FCF from discontinued operations. Divisional adj. EBIT forecast: Steel Europe 29m (Q411/12: 63; Q111/12: 102m); Material Services 37 (Q411/12: 89; Q111/12: 40m); Elevators 163m (Q411/12: 166; Q111/12: 142m); Plants 120m (Q411/12: 140; Q111/12: 125m); Components 50m (Q411/12: 88; Q111/12: 103m); Marine Systems 31m (Q411/12: 29; Q111/12: 39m). Discontinued Operations: Steel Americas 188m (Q411/12: -232; Q111/12: -288m); Stainless Global -57m (Q411/12: -22; Q111/12: -56m). Conference call at 2pm CET (1pm UK time). Dial-in +44 (0) 20 7162 0077 (UK); +1 334 323 6201 (US); password: Thyssenkrupp. Next catalysts: 1) Steel Americas sale expected to close by FY12/13 leading to a stock rerating towards higher multiple of Capital Goods ; 2) organizational changes aiming to better shape TKS structure around the new management (first two steps implemented: a) divisional CEOs and CFOs reporting to TKS CEO and CFO; b) Plant Technology and Marine Systems to form the new Industrial Solution Business Area from Jan 1, 2013); 3) shift of capital employed towards Capital Goods divisions set to continue; 4) financial stability basis to get back investment grade as macro improves; 5) inorganic/organic growth (expansion of market position within the Capital Goods divisions). Stock: Sale of Steel Americas assets is around the corner (final offers by mid February with already some potential competition emerging from most recent bids reported by Bberg). Any weakness presents a buying opportunity.
ThyssenKrupp AG (TKAG.DE;TKA GR) FYE Sep 2012A Adj. EPS FY () (9.07) Revenue FY ( mn) 47,045 EBITDA FY ( mn) 1,544 EBITDA margin FY 3.3% EBIT FY ( mn) (4,370) EBIT margin FY -9.3% Adj P/E FY NM Net Income adjusted FY -4,668 ( mn) EV/EBITDA FY 13.9
Overweight
TKAG.DE, TKA GR Price: 17.58 Price Target: 22.00
European Metals, Mining & Steel Alessandro Abate

AC
(44-20) 7134-9744 alessandro.abate@jpmorgan.com J.P. Morgan Securities plc
For Specialist Sales advice, please contact James H McGeoch

(44-20) 7134-0690 james.h.mcgeoch@jpmorgan.com
Price Performance
26 22 18 14 10
TKAG.DE share price () MSCI-Eu (rebased)
Abs Rel
YTD -1.0% -2.4%
1m -3.6% -2.2%
3m -1.5% -4.6%
12m -21.2% -28.1%
2013E 0.60 39,080 2,095 5.4% 1,069 2.7% 29.1 310 10.3
2014E 1.41 41,009 2,708 6.6% 1,682 4.1% 12.4 727 7.8
17.58 04 Feb 13 22.00 30 Sep 13 23.29 - 11.45 8.4 477

06 February 2013
Tryg
4Q12 Preview: Eye on the Dividend
Tryg reports 4Q12 results on Thursday 7 February at 6:30am (7:30am CET), followed by a presentation at 8:30am (9:30am CET). The key issues we are looking out for are 1) progress on cost cutting measures, 2) investment income, and 3) the rebased dividend level post introduction of the new progressive dividend policy. We forecast PBT of DKK 581m (4Q11: DKK 447m) and net income of DKK 409m (4Q11: DKK 344). We forecast technical result of DKK 454m (4Q11: DKK 271m) and a combined ratio of 91.6% (4Q11: 95.4%). The improvement is driven by 1) improvements in the attritional loss ratio (4Q12e: 72.4% vs. 4Q11: 74.3%) and 2) lower large losses (4Q12e: 2.9% v s. 4Q11: 6.0%) given storms Berit and Dagmar (both Norway) in comparison quarter, slightly offset by lower reserve releases (4Q12e: -4.6% vs. 4Q11: -6.5%). We forecast dividend at the low end of new payout range. We expect Tryg to announce a 2012 DPS of DKK 21.2 (60% payout) at the low end of the recently introduced 60%-90% payout range. However, we note that consensus varies widely on this, with company-compiled analyst forecasts coming in between DKK 18.6 - 26.6 (average DKK 23). We move the results of the Finnish business below the line, but do not make historic pro-forma adjustments. As a reminder, the sale of the business to If P&C (Sampo) is due to be completed in 2Q13. The stock trades on 2.5x 2013e P/TNAV and 14.6x P/E. While Tryg offers a solid business model and attractive dividend policy, we see these as fully factored into its premium valuation. Despite an estimated 21.7% ROE for 2012e (23.8% RTNAV), we believe returns in excess of 20% will be hard to sustain, partly due to the low interest rate environment. We estimate returns coming down to 16.4% ROE in 2013 (17.6% RTNAV) and 17.3% in 2014 (18.6% RTNAV). The shares trade at a 34% premium to our PT - we are UW the stock.
Underweight
TRYG.CO, TRYG DC Price: Dkr436.20 Price Target: Dkr325.00

AC
(44-20) 7134-4574 andreas.vanembden@jpmorgan.com
Daniel Do-Thoi
(44-20) 7742-5377 daniel.do-thoi@jpmorgan.com J.P. Morgan Securities plc
Price Performance
450 400 Dkr 350 300 250
TRYG.CO share price (Dkr) MSCI-Eu (rebased)
Abs Rel
YTD 1.2% -0.2%
1m -1.1% 0.3%
3m 15.6% 12.5%
12m 36.9% 30.0%
Conference call: 7 February, 8:30am London time (9:30am CET): UK: + 44 (0) 844 571 8957 DK: + 45 327 280 18 US: + 1 866 682 8490 International: + 44 (0) 1452 555131
Tryg (TRYG.CO;TRYG DC) FYE Dec Adj. EPS FY (Dkr) Headline P/E FY Combined Ratio FY ROE FY NAV/Sh FY (Dkr) P/NAV FY Dividend (Net) FY (Dkr) Gross Yield FY
2011A 18.88 23.1 93.4% 13.1% 133.4 3.3 6.52 1.5%
2012E 35.35 12.3 89.2% 21.7% 163.9 2.7 21.21 4.9%
2013E 29.69 14.7 89.3% 16.4% 172.4 2.5 22.27 5.1%
2014E 33.03 13.2 87.7% 17.3% 183.1 2.4 23.38 5.4%
2015E 34.29 12.7 87.3% 17.0% 194.0 2.2 24.55 5.6%
Company Data Price (Dkr) 436.20 Date Of Price 05 Feb 13 Price Target (Dkr) 325.00 Price Target End Date 01 Jul 13 52-week Range (Dkr) 445.50 - 289.20 Mkt Cap (Dkr bn) 26.4 Shares O/S (mn) 61
Source: Company data, Reuters, J.P. Morgan estimates.

06 February 2013
Pan-European Small/Mid-Caps
The SMid Trilogy - February 2013
The MSCI SC Europe delivered a 22% return in 2012, despite a year-long recession, fears of a US fiscal cliff, 3 country elections, and year-long downward revisions to IBES ests We stick to our YTD motto Yield will continue to get arbitraged away in this low-yield environment and European SMid-Caps are one of the highest yielding asset classes in the world today. In this report we provide our top-down allocation recommendations on how to tackle this 2,000+ stock universe; along with screening tools and 1-pg profiles on each of the 21 stocks in our model portfolio. How to Position? Focus on Non-Consensus Excess Yld Remain OW Smaller Caps... YTD SMid is +110 bps vs Large; Small is +30 bps vs Mid. Smaller-Caps offer more attractive valuations, more rerating upside, and far more opportunity at the stock level. At the sector level, we reiterate our a) OW Industrials vs Staples (-180 bps YTD) due to their more attractive valuations vs hist avgs, stronger balance sheets, & welcomed exposure to corporate vs consumer balance sheets; b) OW Telecom vs Utilities (+480 bps YTD) as consensus is very negative on Telecom but Telecom benefits from less aggressive grw ests, far better valuations & stronger balance sheets; c) OW Tech (+630 bps YTD) which, in a world most concerned with credit and grw, offers a debtfree balance sheet, a believable grw outlook, and discount valuations; d) OW Cons. Discretionary (+690 bps YTD) as it offers some of the biggest discounts to hist avg valuations, on some of the least aggressive grw expectations, with some of the least leveraged balance sheets... and all with disposable income benefiting from declining inflation. At the Country Level: Remain OW on Periphery vs Core (through our OW of Spain, Portugal, and Italy 3 best performing SMid countries in Europe YTD). We don't expect grw to surprise on the upside, but believe that the improving credit outlook of peripheral sovereigns has not yet been priced in. Within core: we continue to OW Austria and UK small-caps. By Theme (stick to our 4 theme screens: all up vs the MSCI SC Europe YTD): 2 Affordable Grw screens (Investing with Style and Grown Cheap), and 2 Quality Value screens (Sunken Treasures and Putting the Cap on Capex). At the stock Level: 1 new addition to our Radar (model portfolio) Ipsen. Other top ideas from the Radar: 11 affordable grw plays (Ageas, Debenhams, Computacenter, G4S, Inchcape, Prosegur, Hays, Babcock, Jupiter, Quintain, RPC) and 5 quality value stocks (Antena 3, Mediaset Espana, Deutsche Lufthansa, Voestalpine, Zumtobel).
Figure 1: 2013 Recs by Conviction
Conviction Med Directionally + OW (12 Mth) By Mkt Cap + OW SMid vs Large + OW Small vs Mid By Sector + OW Industrials UW Staples + OW Telecom UW Utilities + OW Tech + OW Cons Discretionary N Energy N Materials N Healthcare N Financials By Country + OW Italy + OW Portugal + OW Spain + OW UK + OW Austria By Theme Sunken Treasures Investing with Style Grown Cheap Putting Cap on Capex High
Small/Mid-Cap Strategy Eduardo Lecubarri

AC*
(44-20) 7134-5916 eduardo.lecubarri@jpmorgan.com
Patrick J Pitcaithly
(44-20) 7134-8451 patrick.j.pitcaithly@jpmorgan.com J.P. Morgan Securities plc
* Registered/qualified as a research analyst under NYSE/FINRA rules. See page 104 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

05 February 2013
European Analyst Focus List

Daily Update
The European Analyst Focus List (AFL) comprises Overweight-rated stocks that our analysts believe will provide an annualised return of more than 20% over the next 6, 12 or 18 months. If you have questions regarding stocks on the AFL, please contact your salesperson or the covering analyst. Past performance may not be indicative of future performance. Full details of previous AFL recommendations and performance are available on request.
J.P. Morgan AFL 5th February 2013
Latest Focus List Closing Rating Ccy Add Price Price
OW p OW OW p OW OW OW p OW OW OW p OW p OW Sfr OW p OW p OW Skr OW Skr OW p OW p OW OW OW OW p OW OW OW 1668 25.4 307.3 58.5 39.175 212.8 39.07 104.45 458.45 188 10.46 625.5 1267 75.22 94.7 970 1680 15.8 3.388 58.29 121.5 15.37 170.8 129.85 3280.50 24.26 349.00 106.34 36.23 401.10 60.25 134.09 462.05 329.60 15.62 1045.00 1647.50 99.95 92.55 1185.00 1633.00 23.30 1.90 69.68 156.10 17.88 180.18 138.15
Director of Europe Equity Research Paul Huxford

AC
(44-20) 7742 -2998 paul.x.huxford@jpmorgan.com J.P. Morgan Securities plc
Company Name
Brit. American Tob. Ageas Centrica Brenntag Vinci Aberdeen Asset Mgmt SAP Munich Re BP Jupiter Fund Mgmt UBS Babcock Standard Chartered Elekta Volvo IMI Petrofac Erste Bank PostNL Sanofi Afren ENI Volkswagen Iliad
Ticker
BATS LN AGS BB CNA LN BNR GR DG FP ADN LN SAP GR MUV2 GR BP/ LN JUP LN UBSN VX BAB LN STAN LN EKTAB SS VOLVB SS IMI LN PFC LN EBS AV PNL NA SAN FP AFR LN ENI IM VOW3 GR ILD FP
Sector
Tobacco Insurance Utilities Business Services Contractors General Financials Software & Services Insurance Energy General Financials Banks Business Services Banks Healthcare Equipment Capital Goods Capital Goods Energy Banks Logistics & Freight Pharmaceuticals Energy Energy Automobiles & Components Telecommunications
Analyst
Rae Maile Ashik Musaddi Edmund Reid Robert Plant Elodie Rall Rae Maile Stacy Pollard Michael Huttner Fred Lucas Rae Maile Kian Abouhossein Robert Plant Raul Sinha David Adlington Alexander Whight Glen Liddy Andrew Dobbing Paul Formanko Chris Combe Richard Vosser James Thompson Nitin Sharma Jose Asumendi Hannes Wittig
Price Target
4,209.0 32.29 365.0 113.0 49.0 498.0 65.0 150.0 525.0 361.0 21.0 1,120.0 1,900.0 106.0 120.0 1,210.0 2,215.0 32.0 5.45 78.0 210.0 21.5 230.0 160.0
Total SH Return Price Potential since Target Upside Addition to End /Downside* AFL Date
28% 33% 5% 6% 35% 24% 8% 12% 14% 10% 34% 7% 15% 6% 30% 2% 36% 37% 187% 12% 35% 20% 28% 16% 132% 10% 27% 78% 7% 106% 54% 46% 9% 87% 50% 69% 38% 29% 1% 26% 1% 48% -39% 30% 27% 17% 4% 8% Dec-13 Dec-13 Dec-13 Jan-14 Oct-13 Dec-13 Apr-14 Dec-13 Jun-13 Dec-13 Dec-13 Jan-14 Dec-13 Mar-13 Dec-13 Dec-13 Dec-13 Dec-13 Dec-13 Dec-13 Dec-12 Jun-13 Dec-13 Dec-13
Focus List Add Date

Jun-09 Jan-10 Jun-10 Aug-10 Nov-10 Jan-11 Jan-11 Mar-11 Apr-11 Aug-11 Sep-11 Sep-11 Nov-11 Jan-12 Feb-12 Mar-12 Mar-12 Apr-12 Apr-12 May-12 May-12 May-12 Dec-12 Jan-13
Source: Bloomberg, J.P. Morgan estimates. Share price data as at COB 4th February 2013. *From Latest Closing Price
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 www.morganmarkets.com
Paul Huxford (44-20) 7742 -2998 paul.x.huxford@jpmorgan.com
Europe Equity Research 06 February 2013
Companies Recommended in This Report (all prices in this report as of market close on 05 February 2013) Ageas (AGES.BR/24.43/Overweight), Antena 3 TV (A3TV.MC/4.05/Overweight), Babcock International (BAB.L/1044p/Overweight), Computacenter (CCC.L/464p/Overweight), Debenhams (DEB.L/99p/Overweight), G4S (GFS.L/278p/Overweight), Hays (HAYS.L/90.80p/Neutral), Inchcape (INCH.L/480p/Not Covered), Jupiter (JUP.L/338p/Overweight), Lufthansa (LHAG.DE/14.36/Overweight), Mediaset Espaa (TL5.MC/5.08/Neutral), Prosegur (PSG.MC/4.38/Overweight), Quintain Estates & Development (QED.L/62p/Overweight), RPC Group (RPC.L/432p/Overweight), Voestalpine (VOES.VI/26.88/Overweight), Zumtobel (ZUMV.VI/10.38/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.
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Europe Equity Research

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Price Target and Estimate Changes, continued

Banco Espirito Santo (BES PL - Neutral)

Price Target and Estimate Changes

Results and Company Views

European Analyst Focus List

Source: J.P. Morgan estimates

Europe Equity Research

Price Target: 1,915p

European Beverages, Hotels & Leisure Matthew Webb

(44-20) 7134-9743 matt.webb@jpmorgan.com

For specialist sales advice, please contact Sophie L Warrick

DGE.L share price (p) MSCI-Eu (rebased)

YTD 3.2% 1.8%

12m 27.3% 20.4%

104.03 18.0 47.42 2.5% 3,962 11,942 2,560 -

103.50 18.1 47.42 2.5% 3,941 11,600 2,571 102.30

116.94 16.0 51.68 2.8% 4,409 13,378 2,929 -

113.82 16.5 51.68 2.8% 4,327 12,876 2,855 113.80

129.81 14.5 56.33 3.0% 4,749 14,281 3,258 -

125.66 14.9 56.33 3.0% 4,671 13,739 3,158 126.30

1,877 05 Feb 13 1,915 28-Feb-14 1,929-1,436 46.8 2,495 Jun

Source: Company data, Bloomberg, J.P. Morgan estimates.

Europe Equity Research

European Consumer Goods Celine Pannuti, CFA

(44-20) 7134-7123 celine.pannuti@jpmorgan.com

Alberto Lopez Rueda

For Specialist sales advice, please contact: Sophie L Warrick

NESN.VX share price (SwF) MSCI-Eu (rebased)

63.4 05 Feb 13 72.00 31 Dec 13 64.5 - 53.0 202.6 3,195

Europe Equity Research

Small/Mid-Caps Eduardo Lecubarri

(44-20) 7134-5916 eduardo.lecubarri@jpmorgan.com

European Pharma & Biotech Richard Vosser

Figure 1: Price Performance IPN FP vs

MSCI Small Cap Europe

IPN FP MSCI Small Cap Europe

70 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13

Source: Factset. Prices as of Feb 4, 2013.

Europe Equity Research

Banco Espirito Santo

Previous: Overweight BES.LS, BES PL Price: 1.04 Price Target: 1.03

European Banks Jaime Becerril

(44-20) 7742-6449 jaime.becerril@jpmorgan.com J.P. Morgan Securities plc

BES.LS share price () MSCI-Eu (rebased)

YTD 15.6% 14.2%

12m -23.3% -30.2%

Conference Call Details

1.04 05 Feb 13 1.03 31 Dec 14 1.19 - 0.43 1.2 1,167

Source: Company data, Bloomberg, J.P. Morgan estimates.

Russia Equity Research

Russian Oil & Gas Andrey Gromadin, CFA

(7-495) 967-1037 andrey.gromadin@jpmorgan.com J.P. Morgan Bank International LLC

Figure 1: Transneft tariffs estimate

0 2003 2006 2009 2012 2015E 2018E

Source: J.P. Morgan estimates.

Table 1: Transneft IFRS valuation multiples

Source: J.P. Morgan estimates, Bloomberg (cob Feb 4)

71,603.00 05 Feb 13 56,000.00 31 Dec 13 71,675.00 40,125.00 111.3 2 3.7

Source: Company data, Bloomberg, J.P. Morgan estimates.

Europe Equity Research

Price Target: Skr141.00