EFTA01385523

> Energy, Materials & Industrials DSM - Virginie Boucher-Ferte, BUY, close €81.8, €100 tgt, 22% potential upside • We see Nutrition (68% of EBITDA) as a key growth driver. We forecast a 9% EBITDA 2018-20E CAGR driven by cost cutting, innovation and leverage of its broad portfolio. - A greater proportion of the Nutrition portfolio is in higher-value and faster-growing ingredients and 'solutions' rather than just vitamins. • Up to 30% upside to 18E EBITDA forecast if vitamin price increases are sustained. - Prices are unlikely to revert fully: China's environmental policies are should give structural support in the long term. ■ Full exit from Materials likely, driving portfolio shift towards becoming a pure play in higher-value ingredients. ■ M&A should drive the next phase of development. DSM is likely to use its strong balance sheet (0.5x 17E net debt/EBITDA) to broaden its ingredients portfolio. Deutsche Bank Gil DSM Nutrition organic growth now compares well to peers 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% • • I DSM Nutntion organic growth — — Food Ingredients organic growth average 2009 2010 2011 2012 2013 2014 2015 2016 2017E Source: Deutsche Bank. Company Data Lots of firepower for accretive M &A (DBe synergies 6% of sales) - This would unlock >E20/share of value from EPS accretion and re- 3000 rating. • Trades on 16x 19E PIE, in line with chems but a 33% discount to 2 ingredients. We believe the portfolio shift should prompt re-rating. 15000 ■ Our €100 tgt implies a 20x 19E PIE — still a 15% discount to ingredients. 1000 • Catalysts: Upside through higher value and fast growing ingredients and 500 - "solutions". Portfolio shift optionality. Related DB Research: -500 ()SPA: The path to E100 (and potentially more): upgrade to BUY (Boucher-Fenel nI gredients: 2018 Outlook: Recipe for successi_Boucher-Fertel 2500 - Net Debt (LHS) 2007 2009 2011 Source: DIPUISCI10 Bank, Company Data —Net Deb/EBITDA (RHS) 2013 2015 2017E 2019E 2.50 2.00 1.50 1.00 0.50 0.00 -0.50 :),,ean Equity Focus -January 2018 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0086809 SDNY_GM_00232993 EFTA01385523