> TMT 0 Infineon — Johannes Schaller, BUY, close €24.1, €29 tgt, 20% upside ■ Automotive semiconductors is a growth sector, benefiting from exposure to autonomous vehicles (ADAS), electrification and digitalisation. This should all lead to meaningfully higher semiconductor content per car. ■ Infineon is the highest-quality large-cap play in the sector with a best-in- class technology portfolio and strong exposure to faster growing German premium manufacturers as well as strong direct exposure to Chinese brands and share gains across Asia (incl. Japan) ■ A leader in tomorrow's technologies, with ambitions to drive share gains through innovation in next-gen Auto applications such as radar, lidar, 32-bit high-performance microcontrollers and next-gen power semis. ■ 2018 guidance is for impressive 9% growth (13% in USD terms vs the semiconductor industry at 5%). ■ We believe long-term guidance is somewhat conservative at 17% through-the-cycle margins and 8% revenue growth, compared to 18.5% and 9%, respectively, in Q4. ■ We expect margin leverage from the Dresden 300mm fab ramp. This is highly cost-effective (25% cheaper than the industry standard) and should lead to structurally higher margins. ■ Despite c40% performance YTD, at 24x CY18 PIE Infineon's outperforrnance over the industry and share gains vs peers are not truly reflected in valuation. See potential upside to >E30, reflecting long-term margin and growth potential in bull-case DCF. ■ Catalysts: 15t CMD in a long time on 12th June 2018 in London where long- term growth and margin potential should become much clearer Related DB Research: It is becoming increasingly evident... (Schalleq Deutsche Bank A play on Auto semis, and thus ADAS, EVs and digitalisation Chip Card & Security, 10% Power Management & Multimarket. 30% Source: Doutsc.ho Bank Automotive. 43% Industrial Power Control. 17% FX masks margin expansion and mid-teens EPS growth in 18E 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2014 2015 2016 Source: Deutsche Bank. Company dala Infineon EPS —% EPS growth (RI-IS) 2017E 2018E 2019E 60% 50% 40% 30% 20% 10% 0% ctse.he, Bank Rth>earch. Etzopec:n Focus — .jar!LiaTy 2018 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0086818 SDNY_GM_00233002 EFTA01385532