NOT FOR DISTRIBUTION TO ANY US PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES OF AMERICA v

NOT FOR DISTRIBUTION TO ANY US PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES OF AMERICA v - Description

080 MARKET UPDATE Poland Construction Building Materials Small Mid Cap 16 December 2014 Elektrobudowa Attractively priced ahead of recovery We r eiterate our BUY recommendation but cut our FV to 1029 from PLN 1083 giving upside potential of 44 O ID: 36959 Download Pdf

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NOT FOR DISTRIBUTION TO ANY US PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES OF AMERICA v

080 MARKET UPDATE Poland Construction Building Materials Small Mid Cap 16 December 2014 Elektrobudowa Attractively priced ahead of recovery We r eiterate our BUY recommendation but cut our FV to 1029 from PLN 1083 giving upside potential of 44 O

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NOT FOR DISTRIBUTION TO ANY US PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES OF AMERICA (v1.0.8.0 MARKET UPDATE Poland | Construction & Building Materials Small & Mid Cap | 16 December 2014 Elektrobudowa Attractively priced ahead of recovery We r eiterate our BUY recommendation but cut our FV to 102.9 from PLN 108.3) , giving upside potential of 44 On the back of an expected margin recovery in the industry contracts segment, we forecast the group EBIT margin to increase by 1.8 p.p. to 4.7% in 2015E, implying an EBIT of PLN 55m (up 73% y/y ). This is despite expect

ing Elektrobudowa to miss slightly its 2014 guidance 11% on the top line but only 4% on the bottom line . This is m ainly as a result of realization delays on contracts for the PSE (Polish Transmission Grids) and falling export sale . This leads us to cut revenues for 2015E and 2016E by 10% and 13 respectively. Overall, t he company still looks undervalued to us (P /E 15 at 7.9 x, EV/EBITDA 15 at 5.1x vs. peers of 10.7x/5.6x respectively ) as the market has heavily priced in a ri sk of rising receivables f rom construction contracts. I n our opinion , this risk is limited and the multiples

discount is unwarranted Outlook: forecasting a recovery in results . We believe that termination of loss making industry contracts should make the industry segment profitable in 2015 (exp. EBIT margin of 2% in 2015E vs. 7.1% in 2014E) and should lead to an improvement in the Group margins from 2.9% in 2014E to 4.7% in 2015E. EBIT in 2015E should reach PLN 55m (up 73% y/y) with net income of PLN 43m (up 95% y/y), making its valuation of P/E 15 at 7.9x attractive to us. Top line mid term forecasts reduced (OHNWUREXGRZDVH[SRUWVDOHVKDYHIDOOHQ

more than we expected. The slump in 1 3Q14 of 73% y/y was partly explained by the termination of the Olkiluoto contracts in Finland and an expected fall in sales to Russia. The company has also struggled with realization delays in the Byczyna contract (worth PLN 215m net). This is why we expect Elektrobudowa to miss slightly its 2014 financial guidance, r evenues by 11% and net income by 4% This leads us to reduce revenues for 2015E and 2016E by 10% and 13%, respectively. At the same time we note that Elektrobudowa has historical ly strong backlog that should reach around PLN 1.6bn 2014 YE,

according to comp DQ\VHVWLPDWHV Growing receivables from construction contracts . Over the last 12M Elektrobudowa has increased its receivables from long term construction contracts by 108% (from PLN 135m in 3Q13 to PLN 282m in 3Q14). According to Elektrobudowa the stro ng increase is a result of sale growth and unfavourable payment conditions in the high value PSE contracts. According to our own market research , infrequent PSE payments with barely any pre payments option should be consider ed the norm and a real problem with PSE contracts This is why we believe that although

the risk should be taken into consideration by investor s, it looks limited and is overestimated by the market. Lower than expected net debt position . Despite the higher working capital requirements r elated to the PSE contracts, (OHNWUREXGRZDVQHWGHEWLVVWLOO close to 0. Given the ongoing PSE projects and relatively warm winter to date in 4Q14 that allows constant construction work, we expect net debt to reach PLN 17m at the end of 2014 vs. PLN 49m expected b efore Attractive discount to domestic peers . Elektrobudowa is trading on a P/E 15E of 7.9x and

EV/EBITDA 15E of 5.1x, implying attractive discounts of 26% and 9 % respectively to domestic peers that in our opinion are unjustified given the strong results recovery we forecast. BUY 44% upside Fair Value PLN 102.90 Bloomberg ticker ELB PW Share Price PLN 71.40 Market Capitalisation PLN 338.98m Free Float 100% PLN m Y/E 31 Dec 2013A 2014E 2015E 2016E Revenues 905.6 1104.0 1161.6 1207.0 Gross profit 63.1 57.7 81.2 90.6 EBITDA 38.7 42.0 64.9 71.7 EBIT 24.6 28.9 50.4 57.7 Net profit 17.2 22.1 43.1 49.1 EPS (PLN) 3.6 4.7 9.1 10.3 DPS (PLN) 2.0 2.0 1.2 2.7 Net debt (74.5) 16.9 14.0 0.1 Y/E 31

Dec 2013A 2014E 2015E 2016E P/E (x) 30.3 15.3 7.9 6.9 EV/EBITDA (x) 11.6 7.9 5.1 4.5 P/BV (x) 1.6 1.0 0.9 0.8 P/CFO (x) 8.5 (3.8) 9.2 4.8 DY (%) 1.8 1.8 1.8 1.8 Net debt / EBITDA (x) (1.9) 0.4 0.2 0.0 ROE (%) 5.1% 6.7% 12.1% 12.5% Cash conversion cycle (days) 37.5 39.8 60.7 66.5 All share price data as at close on 15 Dec 2014 Source: BESI Research, Company Data, Bloomberg 40 60 80 100 120 Jan 2014 Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014 Aug 2014 Sep 2014 Oct 2014 Nov 2014 Dec 2014 ELB PW vs WIG Index Share Price Performance Analysts Konrad Strzeszewski +48 22 347 4042

kstrzeszewski@espiritosantoib.pl Banco Esprito Santo de Investimento, S.A. Warsaw Branch Poland 59 Zlota Street, 00 120 Warsaw
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Page of 10 Valuation Metrics (Year end Dec) 2012 2013 2014E 2015E 2016E 2017E Rating BUY Recurrent P/E (x) 11,3 15,2 11,6 7,9 6,9 6,6 Fair Value (PLN): 102,9 Reported P/E (x) 12,8 30,3 15,3 7,9 6,9 6,6 EV / Sales (x) 0,5 0,5 0,3 0,3 0,3 0,3 71,4 EV / EBITDA (x) 8,5 11,6 7,9 5,1 4,5 4,1 44% EV / EBIT (x) 11,0 18,2 11,2 6,4 5,6 4,9 FCF Yield (%) 5,7% 18,7% -22,9% 2,6% 7,7% 13,6% 108,3 Dividend yield (%) 3,8% 1,8% 2,8% 1,6% 3,8% 4,3% -5% ELB PW

Key Ratios 2012 2013 2014E 2015E 2016E 2017E LBUD.WA EBITDA margin 5,4% 4,3% 4,1% 6,0% 6,2% 6,1% EBIT margin 4,2% 2,7% 2,9% 4,7% 5,0% 5,1% Capex / Revenue (x) 0,0 0,0 0,0 0,0 0,0 0,0 4,7 Capex / Depreciation (x) 1,8 1,0 1,2 1,2 1,2 1,2 339 Net Debt / EBITDA (x) (0,6) (1,9) 0,4 0,2 0,0 (0,4) (42) EBITDA / Net Interest (x) (334,4) 22,1 22,4 32,0 46,8 100,1 ROE 12% 5% 7% 12% 12% 12% 289 P&L Summary (PLN m) 2012 2013 2014E 2015E 2016E 2017E Revenue 1 029,4 905,6 1 104,0 1 161,6 1 207,0 1 239,8 2014 results Mar 2015 % change 8,9% -12,0% 21,9% 5,2% 3,9% 2,7% EBITDA 55,2 38,7 44,8 69,4 74,7 76,0 %

change -10,4% -29,8% 15,8% 54,8% 7,7% 1,6% % margin 5,4% 4,3% 4,1% 6,0% 6,2% 6,1% Depreciation & Amortisation 12,2 14,1 13,1 14,5 14,0 13,1 EBIT 43,0 24,6 31,7 54,9 60,8 62,9 Konrad Strzeszewski % change -12,7% -42,8% 29,0% 73,0% 10,7% 3,5% +48 22 347 4042 % margin 4,2% 2,7% 2,9% 4,7% 5,0% 5,1% kstrzeszewski@espiritosantoib.pl Associates 5,2 3,1 0,0 1,0 2,0 2,0 Operating Profit 48,2 27,7 31,7 55,9 62,8 64,9 Net Financials 0,2 (1,8) (2,0) (2,2) (1,6) (0,8) Other Pre-tax Income 0,0 0,0 0,0 0,0 0,0 0,0 Pre-Tax Profit 48,4 25,9 29,7 53,7 61,2 64,1 Income Tax Expense (8,5) (8,3) (7,5) (10,2) (11,6)

(12,2) Discontinued Operations 0,0 0,0 0,0 0,0 0,0 0,0 Minority Interests (0,3) (0,4) (0,1) (0,4) (0,4) (0,4) Net Income 39,5 17,2 22,1 43,1 49,1 51,5 Recurrent Net Income 39,5 17,2 22,1 43,1 49,1 51,5 Reported EPS (PLN) 8,33 3,63 4,66 9,08 10,34 10,85 Recurrent EPS (PLN) 8,33 3,63 4,66 9,08 10,34 10,85 DPS (PLN) 4,00 2,00 2,00 1,16 2,72 3,10 Payout Ratio 50% 24% 55% 25% 30% 30% Shares in Issue (Less Treasury) (m) Cash Flow Summary (PLN m) 2012 2013 2014E 2015E 2016E 2017E EBITDA 55 39 45 69 75 76 Taxes Paid (9) (8) (8) (10) (12) (12) Interest Paid / Received (2) (2) (2) (2) (1) Change in

Working Capital (5) 61 (120) (34) (21) (7) Associate & Minority Dividends (0) Other Operating Cash Flow (17) (30) 30 Operating Cash Flow 31 62 (55) 25 43 58 Capital Expenditure (22) (15) (15) (17) (17) (15) Free Cash Flow 47 (70) 26 43 Acquisitions & Disposals (12) Dividend Paid to Shareholders (19) (9) (9) (6) (13) (15) Equity Raised / Bought Back (0) Other Financing Cash Flow 11 (7) 50 (10) (20) Net Cash Flow 34 (41) (7) (6) 29 Balance Sheet Summary (PLN m) 2012 2013 2014E 2015E 2016E 2017E Cash & Equivalents 45 80 39 32 26 55 Tangible Fixed Assets 89 87 90 92 95 97 Goodwill & Intangibles 38

41 41 41 41 41 Associates & Financial Investments 31 27 27 27 27 27 Other Assets 496 540 637 668 680 698 Total Assets 699 776 834 860 869 918 Interest Bearing Debt 11 56 46 26 26 Other Liabilities 343 443 438 437 429 440 Total Liabilities 354 449 494 483 455 466 Shareholders' Equity 344 326 338 376 412 449 Minority Interests Total Equity 345 327 339 377 414 451 Net Debt (34) (75) 17 14 (29) Source: Elektorbudow a Group, Bloomberg, BESI Research for estimates Net cash - average of last 4 quarters (PLN m) Adjustments for Associates & Minorities (PLN m) Revenues Breakdown (2014E) Net profit (PLN

net) Gross and EBIT margin (%) Enterprise Value (PLN m) Forthcoming Catalysts ES Equity Research Analysts Bloomberg Reuters Shares in Issue (Less Treasury)(m) Market Cap (PLN m) ELEKTROBUDOWA Share Price (15/12/2014, PLN): Upside / Downside potential Previous Fair Value (PLN): % change to Fair Value Pow er generation 37% Industry 23% Pow er distribution 35% Automation 5% Other 0% 40 17 22 43 49 0,00 10,00 20,00 30,00 40,00 50,00 60,00 2012 2013 2014E 2015E 2016E 6,8% 7,0% 5,4% 6,6% 6,9% 4,2% 2,7% 2,9% 4,7% 5,0% 0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 6,0% 7,0% 8,0% 2012 2013 2014E 2015E 2016E Gross

margin EBIT
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Page of 10 Peers multiples valuation attractive discount Elektrobudowa is trading on a P/E 14E/15E of 15.3x and 7.9 x, respectively, implying a premium of 14 % and discount of 26 % to domestic peers. On EV/EBITDA , Elektrobudowa is trading at 7.9x/5.1 x in 14E/15E, implying premiums of 12 % and discount of 9 % to domestic peers . We believe that a forecasted discount in 2015E is unjustified given the significant resu lts recovery we forecast ahead. Table Foreign peers multiple valuation Source: BESI Research estimates for covered stocks, Bloomberg consensus

estimates for not rated stocks, Company Data Table Domestic peers multiple valuation Source: BESI Research for estimates, Company Data Company Ticker Rating FV Price Currency MCAP (local) (local) (EUR m) 2014E 2015E 2016E 2014E 2015E 2016E Balfour Beatty BBY LN 1,79 GBP 1 553 24,9 15,3 11,6 10,2 7,7 6,5 Bauer B5A GR 12,93 EUR 222 17,4 8,3 6,5 5,5 5,0 4,7 FCC FCC SM NEUTRAL 16,2 11,12 EUR 1 933 26,5 19,3 8,9 7,6 6,8 Hochtief HOT GR BUY 72,1 55,16 EUR 3 823 16,9 12,9 10,9 3,1 2,8 2,6 Kier KIE LN 13,96 GBP 971 11,3 10,2 8,9 6,6 6,0 5,4 OHL OHL SM NEUTRAL 33,1 18,02 EUR 1 797 6,3 6,1 5,1 5,9 5,6

n/a Sacyr Vallehermoso SCYR SM BUY 5,2 2,91 EUR 1 357 12,6 10,3 8,7 18,5 17,2 16,4 Skanska SKAB SS 157,20 SEK 6 801 18,0 15,5 14,5 10,0 8,9 8,3 Bouygues EN FP 28,37 EUR 9 058 15,0 16,6 14,7 5,1 5,0 4,7 ACS ACS SM NEUTRAL 34,2 26,49 EUR 8 335 11,7 11,1 10,0 4,7 4,4 4,1 Acciona ANA SM SELL 52,0 53,66 EUR 3 073 41,5 26,3 18,1 8,5 7,8 7,2 Ferrovial FER SM NEUTRAL 17,1 15,38 EUR 11 281 32,0 28,9 25,4 18,4 17,9 17,1 Eiffage FGR FP 37,74 EUR 3 375 11,9 10,3 8,8 7,3 6,9 6,4 Bilfinger Berger GBF GR 42,09 EUR 1 859 15,4 10,0 8,7 5,9 4,2 3,6 YIT OYJ YTY1V FH 4,68 EUR 587 8,6 8,1 6,2 10,6 9,5 7,9

Impregilo IPG IM 2,87 EUR 1 155 16,7 10,4 7,0 2,9 2,3 1,7 Vinci DG FP 41,25 EUR 24 820 11,7 11,3 10,6 6,8 6,6 6,2 Foreign Peers Median 15,2 11,1 10,0 6,8 6,6 6,3 Elektrobudowa ELB PW BUY 102,9 71,40 PLN 97 15,3 7,9 6,9 7,9 5,1 4,5 Premium / Discount to Peers (%) 1% -29% -31% 17% -22% -29% P/E (x) EV/EBITDA (x) Company Rating FV Price MCAP (PLN) (PLN) (PLN m) 2014E 2015E 2016E 2014E 2015E 2016E Budimex BUY 156,3 137,80 3 518 19,6 19,0 17,1 7,9 8,0 7,3 Elektrobudowa BUY 102,9 71,40 339 15,3 7,9 6,9 7,9 5,1 4,5 Trakcja PRKiI NEUTRAL 8,03 8,68 446 9,6 9,6 21,9 6,0 5,7 7,8 Unibep 8,39 302 13,3 11,6

10,2 7,1 5,6 5,2 Erbud 23,69 294 13,4 10,7 9,8 6,7 5,4 5,3 Polish Construction Median 13,4 10,7 10,2 7,1 5,6 5,3 Elektrobudowa 15,3 7,9 6,9 7,9 5,1 4,5 Premium 14% -26% -32% 12% -9% -15% P/E (x) EV/EBITDA (x)
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Page of 10 Table Elektrobudowa: DCF valuation Source: BESI Research for estimates, Company Data Table Elektrobudowa: Valuation sensitivity Source: BESI Research for estimates, Company Data Table Elektrobudowa: estimates: BESI vs. BBG Source: BESI Research for estimates, Bloomberg consensus estimates Table Elektrobudowa: Current BESI estimates vs. previous Source: BESI

Research for estimates (PLN m) 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Net sales 1 104 1 162 1 207 1 240 1 265 1 277 1 175 1 140 1 144 1 156 EBIT 32 55 61 63 64 65 60 58 58 59 Cash taxes on EBIT 11 12 12 13 13 12 11 11 12 NOPAT 24 44 49 51 52 52 48 47 47 47 + Depreciation 13 15 14 13 11 12 13 14 16 18 - Change in OWC 103 32 20 -19 -7 - Capital expenditure 15 17 17 15 13 14 15 17 19 21 Free Cash Flow -81 26 42 45 48 65 51 43 42 WACC (%) 8,4% PV of FCF 146 Terminal grow th (%) 1,0% Terminal Value 570 PV of Terminal Value 255 Enterprise Value 401 - Net debt (average of last 4

quarters) -42 - Dividend paid Value of Equity (1 Jan 2014) 451 Associate Minorities Number of shares (m) 4,7 Value / share (1 Jan 2014, PLN) 94,9 Fair Value (PLN) 102,9 Revenue grow th (%) 21,9 5,2 3,9 2,7 2,0 1,0 -8,0 -3,0 0,4 1,0 EBIT grow th (%) 29,0 73,0 10,7 3,5 2,0 1,0 -7,9 -3,0 0,5 1,0 NOPAT grow th (%) 46,4 85,8 10,4 3,6 2,0 1,0 -8,0 -3,0 0,5 1,0 FCF grow th (%) -197,3 -111,4 181,7 60,7 7,0 5,9 36,0 -22,0 -15,0 -2,8 EBIT margin (%) 2,9 4,7 5,0 5,1 5,1 5,1 5,1 5,1 5,1 5,1 NOPAT margin (%) 2,2 3,8 4,0 4,1 4,1 4,1 4,1 4,1 4,1 4,1 Capex / Revenues (%) 1,4 1,5 1,4 1,2 1,0 1,1 1,3 1,5 1,7

1,8 Ch. in WC / Revenues (%) 9,3 2,8 1,7 0,5 0,4 0,2 -1,6 -0,6 0,1 0,2 Ch. in WC / Ch. in revenues (%) 51,8 56,1 44,4 18,8 18,8 18,8 18,8 18,8 18,8 18,8 ##### 0,0% 0,5% 1,0% 1,5% 2,0% 9,9% 78 81 83 86 89 9,4% 84 86 89 92 96 8,9% 89 92 95 99 104 8,4% 96 99 103 107 113 7,9% 103 107 111 117 123 7,4% 111 116 121 128 136 6,9% 120 126 133 141 151 Terminal growth rate, g (%) WACC (%) 0,0% 0,5% 1,0% 1,5% 2,0% 9,9% -24% -22% -19% -17% -14% 9,4% -19% -16% -14% -11% -7% 8,9% -13% -10% -7% -4% 1% 8,4% -7% -4% 0% 4% 9% 7,9% 0% 4% 8% 14% 20% 7,4% 8% 12% 18% 24% 32% 6,9% 17% 22% 29% 37% 47% Terminal growth

rate, g (%) WACC (%) (PLN m) BESI BBG Difference BESI BBG Difference BESI BBG Difference Revenues 1104,0 1068 3% 1161,6 1191 -2% 1207,0 1167 3% EBITDA 44,8 49,4 -9% 69,4 66,2 5% 74,7 76,8 -3% EBIT 31,7 39 -19% 54,9 48,1 14% 60,8 41,7 46% Net income 22,1 23,2 -5% 43,1 35,3 22% 49,1 41,8 17% 2014E 2015E 2016E (PLN m) Now Previous Difference Now Previous Difference Now Previous Difference Revenues 1104,0 1213,7 -9% 1161,6 1296,4 -10% 1207,0 1385 -13% EBITDA 44,8 42 7% 69,4 64,9 7% 74,7 71,7 4% EBIT 31,7 28,9 10% 54,9 50,4 9% 60,8 57,7 5% Net income 22,1 22,7 -3% 43,1 40,4 7% 49,1 47,4 4% 2014E

2015E 2016E
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Page of 10 Table Elektrobudowa: P&L Source: BESI Research for estimates, Company Data Table Elektrobudowa: Balance sheet Source: BESI Research for estimates, Company Data PLN m 2011 2012 2013 2014E 2015E 2016E Revenues 945 1 029 906 1 104 1 162 1 207 COGS 879 959 842 1 044 1 085 1 123 Gross profit 66 70 63 60 77 84 SG&A 18 22 21 21 22 23 Other operating income, net -5 -17 -7 EBITDA 62 55 39 45 69 75 Operating profit 49 43 25 32 55 61 Net financial costs (income) Income from associates Profit before tax 49 48 26 30 54 61 Income tax 11 10 12 Net profit 38 40 17 22 43

49 (%) 2011 2012 2013 2014E 2015E 2016E Gross margin 7,0 6,8 7,0 5,4 6,6 6,9 EBITDA margin 6,5 5,4 4,3 4,1 6,0 6,2 EBIT margin 5,2 4,2 2,7 2,9 4,7 5,0 Pre-tax margin 5,2 4,7 2,9 2,7 4,6 5,1 Effective Income Tax Rate 22,4 17,6 32,1 25,3 19,0 19,0 Net margin 4,0 3,8 1,9 2,0 3,7 4,1 ROA 6,1 5,8 2,3 2,7 5,1 5,7 ROE 11,7 11,7 5,1 6,7 12,1 12,5 (%) 2011 2012 2013 2014E 2015E 2016E Revenues growth 20,1 8,9 -12,0 21,9 5,2 3,9 Gross profit growth -13,7 6,7 -10,2 -5,2 28,5 8,8 EBITDA growth -3,7 -10,4 -29,8 15,8 54,8 7,7 EBIT growth -7,1 -12,7 -42,8 29,0 73,0 10,7 Pre-tax profit growth -10,5 -1,5 -46,5

14,7 80,7 13,9 Net profit growth -15,8 4,3 -56,5 28,4 95,1 13,9 PLN m 2011 2012 2013 2014E 2015E 2016E Current assets 499 514 576 633 657 663 cash and equivalents 38 45 80 39 32 26 other short term investments accounts receivable 399 411 405 519 546 555 inventories 57 50 58 66 70 72 prepaid expenses 32 Fixed assets 159 183 197 199 202 204 PPE 86 89 87 90 92 95 long-term investments 31 31 27 27 27 27 intangibles 16 19 19 19 19 goodwill 22 22 22 22 22 22 long-term receivables 11 26 42 42 42 42 Long-term deferred charges Total assets 660 699 776 834 860 869 Current liabilities 307 322 404 444 431

402 bank debt 11 56 46 26 accounts payable 298 309 384 386 383 374 other current liabilities 14 Deferred income 12 18 25 31 33 34 Long-term liabilities 11 14 19 19 19 19 bank debt other long-term liabilities 11 14 19 19 19 19 Equity 329 344 326 338 376 412 Minority Interest Total liabilities and equity 660 699 776 834 860 869 2011 2012 2013 2014E 2015E 2016E Net debt (PLN m) -38 -34 -75 17 14 Net debt / Equity (%) -11,6 -9,9 -22,9 5,0 3,7 0,0 Net debt / EBITDA (x) -0,6 -0,6 -1,9 0,4 0,2 0,0
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Page of 10 Table Elektrobudowa: Cash flow statement Source: BESI Research for

estimates, Company Data PLN m 2011 2012 2013 2014E 2015E 2016E Net profit 38 40 17 22 43 49 Depreciation and amortisation 12 12 14 13 15 14 Change in working capital -46 -5 61 -120 -34 -21 inventories -31 -8 -8 -3 -3 receivables -89 -18 -1 -114 -27 -9 payables 74 70 -3 -9 Other -17 -30 30 Cash flow from operations 31 62 -55 25 43 Additions to PPE and intangibles -18 -22 -15 -15 -17 -17 Change in long-term investments -5 Other 37 -12 Cash flow from investment 15 -16 -11 -27 -17 -16 Change in debt 11 -5 50 -10 -20 Change in equity and profit distribution Dividends paid -28 -19 -9 -9 -6 -13 Other

-1 Cash flow from financing -29 -8 -16 41 -15 -33 Net change in cash and equivalents -9 34 -41 -7 -6 Ending cash and equivalents 38 45 80 39 32 26
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Page of 10 Valuation Methodology Our valuation is 100% based on a DCF method. We also provide a peer multiple based valuation (0% weighting) but only for comparison as the peer group seems to be heterogeneous with no sufficient number of relevant peers. We arrive at a fair value of PLN 102.9, implying 4 % upside potential to the current share pric e. DCF We use a 10 year forecast free cash flow period. The main assumptions in our

DCF model are as follows: The valuation is based on a FCF forecast from 2014 2023 Risk free rate during FCF projections is set at 3.4% Terminal growth rate of FCF at 1% and beta of 1.01 Due to high volatility in the cash position of construction companies throughout the year , we have decided to normalize the values. We calculate net cash position as the average value of the preceding 4 quarters, which we think gives us a mor e realistic picture of the FRPSDQ\VVWDQGLQJ . Figure Net cash position quarterly volatility Source: BESI Research, Company Data Risks to Fair Value Delays

in expected recovery of Industrial Sector margins ; Further increase in receivables from long term contracts might raise the level of net debt and mean some trouble getting approval of final construction work on the PSE contracts and therefore possible losses on those contracts Further deterioration of geopolitical conflict between Ukraine and Russia might fully suspend export sale to thos e count ies in the coming years. Bankruptcy of some investors could worsen cash flows; Rapid increase in construction material prices could hurt contract margins; Strong competition in public tenders could

put pressure on contract margins; Bad weather co nditions and unexpected ground conditions might cause additional costs and project delays; Administrative and legal constraints in terms of the necessary administrative and environmental permissions. 38,4 29,7 33,9 22,5 34,0 10,5 34,0 53,9 74,5 77,7 14,8 1,3 42,1 20 40 60 80 100 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Net cash (PLN) average of last 4 quarters
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Page of 10 Please visit our website at www.EspiritoSantoIB.co.uk for up to date recommendation charts. Elektrobudowa ELB PW Report date Recommendation

Fair value Share price 2014 May 28 Buy PLN 108.30 PLN 83.99 2012 December 14 Buy PLN 131.40 PLN 111.20 2011 December 16 Neutral PLN 99.00 PLN 91.00 Source: Bloomberg, BESI Research 70 80 90 100 110 120 130 140 150 160 170 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Buy Trading Buy Neutral Trading Sell Sell Restricted Dropped Coverage
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Page of 10 IMPORTANT DISCLOSURES 091214 This report was prepared by BESI Research, a global brand name for the equity research teams of Banco Esprito Santo de Investimento, S.A., with

headquarters in Lisbon, Portugal, of its Branches in Spain and Poland and of its affiliates BES Securities do Brasil, S.A Corretora de Cmbio e Valores Mobilirios, in Brazil, Execution Noble Limited, in the United Kingdom, and Espirito Santo Securities India Private Limited, in India, all authorized to engage in securities activities according to eac h domestic legislation. All of these entitie s are included within the perimeter of the financial group controlled by Novo Banco, S.A., a Portuguese bank authorised and regulated by Banco de Portugal (Portuguese Banking Regulator)

and Comisso do Mercado de Valores Mobilirios (the Portuguese Securit ies Market Authority), which was incorporated on the 3rd of August 2014 in the context of the resolution action taken on the former financial institution Banco Esprito Santo, S.A. Analyst Certification Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or

iss uers; the issuers were not previously informed about the content of the recommendation included in this research report and the assumptions were not validated by the issuers; (2) no part of his or her compensation is directly or indirectly related to: (a) the specific recommendations or views expressed by that research analyst in the research report; and/or (b) any services provided or to be provided by Banco Esprito Santo de Investimento, S.A. and/or by any of its affiliates to the issuer of the securitie s under recommendation. Moreover, each of the analysts hereby certifies that

he or she has no economic or financial interest whatsoever in the companies subject to his or her opinion and does not own or trade any securities issued by the latter. Ratings Di stribution BESI Research hereby provides the distribution of the equity research ratings in relation to the total issuers covered and to the investment banking clients as of end of September 2014. Explanation of Rating System Ratings Distribution 12 MONTH RATING DEFINITION BUY Analyst expects at least 10% upside potential to fair value, which should be realized in the next 12 months NEUTRAL Analyst expects

upside/downside potential of between +10% and 10% to fair value, which should be realized in the next 12 months SELL Analyst expects at least 10% downside potential to fair value, which should be realized in the next 12 months As at end September 2014 Total BESI Research Total Investment Banking Clients (IBC) Recommendation Count % of Total Count % of IBC % of Total 12 Month Rating: Buy 205 46. 31 86 Neutral 41 0.9% Sell 0. Restricted 0. 0. Under Review 0. 0.0% 0.0% TRADING RATING DEFINITION TRADING BUY Analyst expects a positive short term movement in the share price (max duration 3 months

from the time Trading Buy is announced) and may move out of line with the fair value estimate during that period TRADING SELL Analyst expects a negative short term movement in the share price (max duration 3 months from time Trading Sell is announced) and may move out of line with the fair value estimate during that period Trading Rating: Trading Buy 0. 0.0% 0.0% Trading Sell 0.0% 0.0% 0.0% Total recommendations 38 100% 100%

)RUIXUWKHULQIRUPDWLRQRQ5DWLQJ6\VWHPSOHDVHVHH'HILQLWLRQVDQGGLVWULEXWLRQRIUDWLQJVRQ http://www.espiritosantoib research.com Share Prices Share prices are as at the close of business on the day preceding publication, unless otherwise specified. Coverage Policy BESI Research reserves the right to choose the securities it expresses opinion s on. The main criteria to choose such securities are: 1) markets in which they trade 2) market capitalisation 3) liquidity, 4) sector

suitability. BESI Research has no specific policy regarding the frequency in which opinions and investment recommendation s are released. Representation to Investors BESI Research has issued this report for information purposes only. This material constitutes "investment research" for the purpos es of the Markets in Financial Instruments Directive and as such contains an objec tive or independent explanation of the matters contained in the material. Any recommendations contained in this document must not be relied upon as investment advice based on the recipient's personal circumstances. This

report is not, and should not be co nstrued as an offer or a solicitation to buy or sell any securities or related financial instruments. The investment discusse d or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial pos ition. The material in this research report is general information intended for recipients who understand the risks associated with investment. It does not take account of whether an investment, course of action, or associated risks ar e suitable for the re cipient. This research report does not purport

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LQYHVWRUVFXUUHQF\FKDQJHVLQUDWHVRIH[FKDQJHPD\KDYHDQDGYHUVHHIIHFWRQWKHYDOXHSULFHRIRULQFRPHGHULYHGIURPW he investment. Past performance is not necessarily a guid e to future performance. Income from investments may fluctuate. The price or value of the investments to which this report relates , either directly or indirectly, may fall or rise against the interest of investors. Any recommendation and

opinion contained in this report may become outdated as a consequence of changes in the environment in which the issuer of the securities under analysis operates, in addition to changes in the estimates and forecasts, assumptions and valuation methodol ogy used herein. The s ecurities mentioned in this publication may not be eligible for sale in some states or countries. All the information contained herein is based upon information available to the public and has been obtained from sources bel ieved to be reliable. However, BE SI Research does not guarantee the accuracy or completeness of the

information contained in this report. The opinions expressed herein are BESI Research present opinions only, and are subject to change without prior notice. BESI Research is not under any o bligation to update or keep current the information and the opinions expressed herein nor to provide the recipient with acces s to any additional information. BESI Research has not entered into any agreement with the issuer relating to production of this r eport. BESI Research does not accept any form of liability for losses or damages which may arise from the use of this report or its contents. This

communication has been issued and approved by Execution Noble Limited in the United Kingdom where it is bein g directed at persons who have professional experience in matters relating to investments . It is not intended for retail customer use Ownership and Material Conflicts of Interest Banco Esprito Santo de Investimento, S.A. and/or its Affiliates (including all entities within BESI Research) and/or their directors, officers and employees, may have, or have had, interests or qualified holdings on issuers mentioned in this report. Banco Esprito Santo de Investimento, S.A.

and/or its Affiliates m ay have, or have had, business relation ships with the companies mentioned in this report. However, the research analysts may not purchase or sell securities or have any interest whatsoever in companies subject to their opinion. Banco Esprito Santo de Investimento, S.A. and/or its Affiliates ha ve a qualified shareholding (1% or more) in Oi. Bradesco has a direct qualified shareholding (20%) in BES Investimento do Brasil, S.A., the parent company of BES Securities do Brasil S.A. CCVM. Pursuant to Polish Ministry of Finance regulations, we inform that neither

does Banco Esprito Santo de Investimento, S.A. nor its Affiliates have a ny qualified shareholding in the Polish Securities Issuers mentioned in this report in excess of 5% of its total share capital. Mr. Rafael Valverde, a member of the board of Banco Esprito Santo de Investimento, S.A., is a non executive board member of EDP Renovveis. Banco Esprito Santo de Investimento, S.A and/or its subsidiaries are liquidity providers or market makers for Altri, Usimina s and Vale. Banco Esprito Santo de Investimento, S.A. and/or its subsidiaries participate or

have participated in the last 12 months as a syndicate member in share offerings of 4imprint, Alumetal, Capital Park, CTT, EDP, Klabin, Liberbank, Mota Engil, Mota Engil Afri ca, NAHL Group, NOS, Oi, PGE, Prime Car Management, REN and SKS Microfinance. Banco Esprito Santo de Investimento, S.A. and/or its subsidiaries participate or have participated in the last 12 months as a syndicate member in the bond issues of the followin g companies: Abengoa, Altri, Bematech , EDP, Globe Trade Centre Kredyt Inkaso, Mota Engil and Sonae
Page 10
Page 10 of 10 Banco Esprito Santo

de Investimento, S.A. and/or its subsidiaries provided in the last 12 months investment banking services to the following companies: 4 imprint, Abengoa, Altri, Alumetal, Bematech , Burford Capital, Capital Park, Casino Guichard, EDP, EDP Renovaveis, Galp Energia, Globe Trade Centre, Inditex, IQE, Kcom Gro up, Klabin, Kredyt Inkaso, Kruk, Laird, Liberbank, Mota Engil, Mota Engil Africa, NAHL Group, NOS, Oi, Prime Car Management, REN, Semapa, SKS Microfinance, Sonae, Sonaecom, Sports Direct, SVG Capital and Ted Baker. Affiliates of Banco Esprito Santo de Investimento, S.A. are partner to

Mota Engil in the infrastructure business in Portugal and other countries. Mota Engil jointly with ES Concesses, S.G.P.S., S.A. (held by an Affiliate of Banco Espr ito Santo de Investimento, S.A.) ha created a joint holding company Ascendi for all stakes in transportation infrastructure concessions in P ortugal and abroad. Banco Esprito Santo de Investimento, S.A. provided, or continues to provide, investment banking services to Ascendi. Banco Esprito Santo de Investimento, S.A. and/or its subsidiaries do and seek to provide investment banking or other services

to the companies referred to in this research report. As a result, investors should be aware that a conflict of interest may exist. Market Making UK Execution Noble Limited is a Market Maker in companies covered and may sell to or buy from custom ers as principal in certain financial instruments listed or admitted to listing on the /RQGRQ6WRFN([FKDQJH)RULQIRUPDWLRQRQ&RPSDQLHVWRZKLFK([HFXWLRQ1REOH/LPLWHGLVD0DUNHW0DNHUSOHDVHVHH([HFXWLRQ

1REOH/LPLWHG8.0DUNHW0DNLQJRQ http://www.espiritosantoib research.com Confidentiality This report cannot be reproduced, in whole or in part, in any form or by any means, without BESI 5HVHDUFKVVSHFLILFZULWWHQDXWKRUL]DWLRQ7KLV report is confidential and is intended solely for the designated addressee. Therefore any disclosure, replication, distribution or any action taken in reliance on it, is p rohibited and unlawful. Receipt and/or review of this research report constitutes you r agreement not to

redistribute, retransmit, or disclose to others the contents, opinions, conclusion, or information contain ed in this report (including any investment recommendations, estimates or price targets without first obtaining express permission from an authorized officer of Banco Esprito Santo de Investimento, S.A. Regulatory Authorities Portugal: Banco Esprito Santo de Investimento, S.A. is regulated by the Comisso do Mercado de Valores Mobilirios (the Port uguese Securities Market Authority ); Spain: the branch in Madrid is regulated by the Comisin Nacional

del Mercado de Valores (the Spanish Securities Market Authority); Poland: the br anch in Warsaw is regulated by the Komisja Nadzoru Finansowego (the Polish Financial Supervision Authority) ; Brazil: BES Securities do Brasil, S.A. Corretora de Cmbio e Valores Mobilirios is regulated by the Comisso de Valores Mobilirios (the Brazilian Securities Market Authority); United Kingdom: Execution Noble Limited is authorised and regulated by the Financial Conduct Authority; India: Espirito Santo Securities India Private Limited is regulated by the Securities and Exchange

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