EFTA Document EFTA01385526

> Energy, Materials & Industrials ED Linde — Tim Jones, BUY, close €186.1, €227 tgt, 22% upside. ■ Key driver #1: improving gas industry fundamentals from cost efficiencies, investment discipline, consolidation and end-market stabilisation. Capex to sales has fallen from c14% in 2012/13 to c12% in 2016, and consolidation should drive price discipline and margin expansion. ■ Key driver #2: macro tailwinds. Improvements in Europe and Asia (c60% of Linde Gas), and continued strength in the US, should provide support to a later-cycle business from 2018 onwards. Industry growth should improve from 2015-16's 2%. ■ Key driver #3: Praxair merger will create a global leader in the gas industry. Our analysis of the combined firm suggests large synergies ($1.2bn — over 20% of pro-forma EBIT - of which $1bn is cost savings and $200m capex savings). - The key logic is diversification (geographical and end-user), given complementary regional and end-market exposures. ■ Anti-trust risks should be manageable, with divestments of $2.5-3bn. Demand for these assets is likely high. ■ We forecast E4.3bn net income in 2020. implying a fair value of €245/share using peer multiples. We discount this back, implying our €227 target. ■ Trades on 21.6x 2018E P/E, in line with peers. ■ Catalysts: greater visibility on merger execution and timing Related DB Research: Linde - Gases growth accelerating. Still on track to E245. BUY (Jones) Pan European Chemicals: 2018 Outlook: A "super" sector Wiriest Deutsche Bank Linde-Praxair combination a clear market leader Others 18% TNS 4% Air Products 11% Praxan 13% Air Liquide 30% Linde 24% Source: Deutsche Bank estimates. Spirdus Consulting. TNS • Taiyo Nippon Sanyo. Data includes share of sales from associate pailipipations and JVs. Note: Air Liquide includes Airgas acquisition Linde-Praxair price target bridge 15 15 35 MIS 180 245 10 20 25 ti 300 Current Cost Berating to Price Mid term Lower Relating to Top line Blue sky share pnce synergies industry discipline target price taxes industry synergies scenario average leader Source: Deutsche Bank. Company Data Deutsche Bank Research• European Equity Focus —January 2018 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0086812 SDNY_GM_00232996 EFTA01385526